The Weir Group Annual Report 2014

FY2014 Annual Report · The Weir Group

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The Weir Group PLC
Annual Report and Financial Statements 2014

Our mission is to be wherever and
whenever our global customers
need us delivering innovative
products and services

The Weir Group PLC is one of the world’s leading engineering businesses. Since our foundation in 1871, we have been committed
to creating innovative engineering solutions for our global customers and delivering long-term value to our shareholders.

Our strategy and business model
provides a robust platform for
sustainable growth across
the economic cycle.

Read more about Our Strategy and Business Model from page 8.

Our competitive advantage is sustained by
investing in the best people, products
and services to continue to make our
customers more efficient and ensure
we capture future growth opportunities.

Read more in our Chief Executive’s Strategic Review from page 10.

We have developed global leadership
positions in structurally strong markets
and used our scale to successfully
expand our range of products
and services.

Read more in our Operational Review from page 32.

We are committed to being a trusted
partner of choice to our customers,
suppliers and the communities in
which we operate around the world.

Read more in our Sustainability Review from page 52.

2014 Highlights

Revenue

£2,438m
0%

Profit before tax1

£409m
-2%

Operating profit1

Order input2

£450m
-4%

£2,473m
+9%

Dividend per share

Earnings per share1

44.0p
+5%

141.3p
-3%

Net debt

Cash from operations

£861m
-£114m

£421m
-11%

Strong constant currency growth.

14% increase in aftermarket orders and revenues.

Innovation: New products driving growth. Comminution
and premium fluid end input of £105m; R&D up 15%.

Collaboration: Second global customer agreement
secured with major mining house.

Value Chain Excellence: £46m in procurement savings
achieved in 2014.

Global Capability: Trio acquisition strengthening
presence in Chinese mining markets and US aggregates.

Total exceptional costs of £212m: Primarily in relation to
£49m of efficiency review costs and the non-cash £160m
oil price driven impairment of Pressure Control goodwill.

Strategic Report
1–68
2014 Highlights
Weir at a Glance
Understanding Our Markets
Chairman’s Statement
Our Strategy and Business Model
Chief Executive’s Strategic Review
Strategy in Action
Key Performance Indicators
How We Manage Risk
Operational Review
Financial Review
Sustainability Review

1
2
4
6
8
10
14
22
24
32
46
52

Corporate Governance
69–112
Group Executive
Board of Directors
Corporate Governance Report
Nomination Committee Report
Report of the Audit Committee
Remuneration Report
Directors’ Report

69
70
72
83
85
91
109

Financial Statements
113–182
113
Independent Auditor’s Report
Consolidated Income Statement
118
Consolidated Statement of Comprehensive Income 119
120
Consolidated Balance Sheet
121
Consolidated Cash Flow Statement
122
Consolidated Statement of Changes in Equity
123
Notes to the Group Financial Statements
170
Company Balance Sheet
171
Notes to the Company Financial Statements

Principal Companies of the Group
Shareholder Information
Glossary
Financial Calendar

183
185
187
188

1. Continuing operations adjusted to exclude exceptional items

and intangibles amortisation.

2. 2013 restated at 2014 average exchange rates.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Weir at a Glance

Global capability,
local delivery

The Weir Group consists of three complementary divisions which
operate in markets and share strong prospects for long-term
growth. Our products and services help meet the demands of
the world’s growing population for energy and natural resources.
You can learn more in ‘Understanding Our Markets’ on pages 4 and 5.

Minerals

Read more on page 20

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Chief Executive’s Strategic Review

A strategy to deliver
long-term growth

Keith Cochrane
Chief Executive

2014 showed the strength of our
strategy and business model which
continues to deliver sustainable
long-term value for our shareholders.

Weir has chosen to operate in the minerals,
oil and gas and power markets because
they each have excellent long-term growth
prospects: as the world’s population
continues to increase and urbanise,
it will need access to more energy and
natural resources. While our end markets
are subject to business cycles, they
fundamentally offer excellent structural
growth prospects and a solid platform from
which to deliver sustainable returns for
shareholders across the economic cycle.
This is achieved by the successful execution
of the Group’s clear strategy which relies on
the hard work and dedication of our 16,000
employees. I would like to thank them for all
their hard work and commitment in 2014.

A challenging year for commodity prices
A weaker than expected global economy
coupled with increases in supply contributed
to a very challenging year for most
commodity prices in 2014. In mining, iron
ore prices fell by almost 50%, and copper fell
by 14%. Gold prices were broadly flat over
the period and remained below the levels
required to drive higher capital investment.
However, growing ore production levels,
combined with declining ore grades,
supported increased aftermarket demand.

The trend among major mining companies
to reduce capital spending continued with
an estimated 17% reduction in industry
capital expenditure. There was a limited
number of new, or greenfield, projects
started and a cautious attitude towards

plant optimisation or brownfield expenditure.
These factors led to a further reduction
in demand for original equipment.

winter at the start of the year. The average
US onshore rig count increased 6% while
the average number of wells drilled rose
5% as a result of greater efficiencies.

More positively, a number of greenfield
projects in South America, which were
approved in earlier years, moved from
their construction phase to production
during the year. Global ore production
increased by around 3% in 2014 with
strong iron ore production growth in
particular. African mining markets were
impacted by the Ebola outbreak in West
Africa and by significant industrial action
in South Africa, particularly the platinum
miners’ strike through the first half of the
year. Overall, markets in Australia, Brazil and
China gained momentum. North America
remained subdued while weak demand
and geopolitical concerns in the east of
the continent reduced activity in Europe.

In oil and gas markets, a multi-year period
of stability lasted until the fourth quarter
of 2014 when oil prices experienced their
largest fall since 2009. This reflected
concerns that the global market would be
over-supplied in 2015, as a result of strong
production growth, particularly in North
America, combined with relatively weak
demand growth. International benchmarks,
Brent and WTI, both fell more than 40%
in the final three months of the year and
continued to fall steeply in early 2015.
Throughout 2014 North American natural
gas prices remained below incentive levels
despite a brief spike caused by the harsh

Pressure pumping markets benefited as
US customers worked through their excess
stocks, with frack fleet utilisation increasing
to an estimated 87% from 82%, stimulating
demand for original equipment, in contrast
to recent overcapacity. Aftermarket activity
was also supported by the trend towards
more intense shale well completions as
operators increased the number of frack
stages per well, ran 24/7 operations and
pumped higher volumes of water and sand
per stage, leading to greater wear and tear
on components.

The growing well count also ensured
growth in pressure control markets which
benefited from more complex drilling and
completion solutions in higher pressure
shale basins, with pad drilling techniques
now used on the majority of well sites.

Across pressure pumping and pressure
control markets there was a slowdown
in activity towards year end as customers
started to revise their spending plans
to reflect the reduction in oil prices.

Internationally, there were good activity
levels in Saudi Arabia and increased
production in southern Iraq. Mid and
downstream markets continued to grow
as a result of Liquefied Natural Gas (LNG)

The Weir Group PLC Annual Report and Financial Statements 2014Operating profit

£450m
-4%

Revenue

£2,438m
0%

and refinery developments, particularly in
emerging markets, although project delays
were a common feature in the second half
of the year.

North American hydro power markets saw
a recovery after difficult conditions in 2013.
Nuclear new build progress also increased
including the announcement of the first
development of a new nuclear power
station in the UK for almost 20 years.

Our financial performance in 2014
Overall, in a challenging year, order input
in constant currency was up 9% on 2013,
with each quarter ahead of the prior year
comparator. Aftermarket input was up
14%, driven by strong growth in Oil & Gas,
positive trends in Minerals and good growth
from Power & Industrial’s valve operations.
This was offset by flat original equipment
input across the Group reflecting sharp
declines in greenfield mining orders and
power project delays, offset by a 47%
increase in Oil & Gas as demand for
Pressure Pumping equipment recovered
from the depressed levels seen in 2012
and 2013. Aftermarket input accounted for
67% of total orders, up from 64% in 2013.

Group revenues were up 9% on a constant
currency basis while the proportion of
revenues from aftermarket sales increased
to 66% from 63% last year. In Minerals,
revenues were down 4% as aftermarket
growth was more than offset by lower
demand for original equipment. Both original
equipment and aftermarket revenues in
Oil & Gas increased by 32%, reflecting
higher average rig count, increasing frack
intensity and market share gains. Power &
Industrial revenues were broadly flat, on a
reported basis, following a £185m foreign
exchange headwind.

Group margins declined by 70bps on a
constant currency basis. This reflected
the impact of industrial actions in South
Africa on Minerals’ margins and operational
challenges in Power & Industrial. Combined
with flat reported revenues, this translated
into a 4% fall in underlying operating profits
to £450m. On a constant currency basis
operating profit increased by 5% and
pre-tax profits by 7%, reflecting a record
second half profit performance for the
Group. After a £35m foreign exchange

impact, chiefly as a result of the strength
of Sterling compared to the US Dollar and
emerging market currencies, reported
pre-tax profits of £409m were 2% down
on 2013. This foreign exchange exposure
was largely translational and had limited
impact on our competitive positioning.

Free cash flow decreased to £79m,
reflecting investment in the first half in
working capital to support record second
half activity levels and £101m capital
investment. Return on capital employed,
excluding 2014 acquisitions, increased
by 60bps to 18.1%.

Delivering our growth strategy
As the financial performance demonstrates,
the Group’s strategy delivered good
underlying constant currency revenue
and profit growth in 2014.

Our distinctive strategy and business
model is supported by our four strategic
pillars. Innovation, which has been part
of the Group’s DNA since it was founded
by two engineers almost 150 years ago.
Collaboration, which brings colleagues,
customers and suppliers together to help
achieve better engineering solutions.
Value Chain Excellence (VCE), which drives
greater efficiency in our own operations and
helps make our customers more effective.
And finally, Global Capability, ensuring we
are there wherever and whenever our
worldwide customers need us.

These strategic pillars have helped underpin
the Group’s past success and remain central
to our future growth. In 2014, I am pleased
to report we made significant strategic
progress in all four areas.

Innovation is critical to the future success
of a global engineering company. In recent
years we have significantly increased
research and development efforts to ensure
we maintain our market leadership positions.
In 2014, this has involved: the design,
manufacture and installation of the world’s
largest slurry pump in a mine in Chile; gaining
market share through our new premium fluid
end technology in oil and gas markets which
also supports the reduction in breakeven
costs in the unconventional industry; the
launch of a new vertical slurry pump, which
allows upgrades to take place at reduced

cost to customers; and the commercialisation
of a new turbine by-pass valve which was
developed by Power & Industrial.

You can read more about our approach to
innovation in the products and technology
section on page 59.

The Group’s commitment to Collaboration
is aimed at ensuring the best ideas are
shared among colleagues, customers
and suppliers. It also means working with
other companies, particularly where we
can benefit mutual customers. That was the
motivation for entering into a development
agreement with Rolls-Royce Holdings PLC
subsidiary MTU America. The agreement
will see our engineers jointly develop
purpose-built power systems for hydraulic
fracturing that will be entirely integrated so
that the engine, transmission and pump are
specifically designed to work together in a
complete packaged power system. This will
meet customer demands for technology
which increases flow and pressure rates
and provides longer run times.

Our collaboration with Anglo American,
one of the world’s largest diversified
mining and natural resources groups,
was recognised with the award of the
prestigious External Collaboration Award
at the 2014 Procurement Leaders Awards.
Our Global Framework Agreement (GFA)
is designed to provide improvements
in reliability and power savings by retro-
fitting Weir-developed technology to
existing pumps. In doing so, the life of key
components has doubled, and in some
cases trebled, while power consumption
has been reduced significantly. The division
added a further GFA in 2014 with Kinross
Gold Corporation, one of the world’s leading
gold mining companies, which will see Weir
Minerals become Kinross’ preferred supplier
of a range of mining equipment.

Value Chain Excellence (VCE) was
introduced as a strategic pillar to recognise
the importance of aligning our operations
more closely to the specific needs of our
customers – ultimately helping us achieve
our ambition of becoming their trusted
partner of choice.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Chief Executive’s Strategic Review continued

Delivering our growth strategy
(continued)
In 2014, our continued focus on streamlining
our operations and leveraging the Group’s
global scale, helped improve customer
responsiveness while at the same time
supporting the Group’s overall performance
through cost savings of £46m. A new VCE
management system was developed to
further integrate this approach across all
of the Group’s businesses to support our
culture of continuous improvement.

manufacturing and service operations
into larger facilities, improving efficiency
and customer responsiveness while also
maintaining appropriate capacity. It is
estimated these changes will produce
annualised savings of £35m; £20m of
this benefit will be realised in 2015,
with one-off exceptional costs of
£49m recognised in 2014. The Group
also recognised a non-cash £160m oil
price driven impairment of Pressure
Control goodwill.

Key to our success is the competitive
advantage we derive from our Global
Capability, ensuring Weir is wherever and
whenever our customers need us. In 2014,
this included extending our comminution
strategy which has seen the Minerals
division further expand its product offering
into the crushing, screening and grinding
segment of the mining mill circuit, which
helps separate rock from ore. In addition to
our own strong organic growth the Group
acquired Chinese-American equipment
provider Trio Engineered Products in
October 2014. Trio’s crushing technology
will extend Weir’s comminution product
portfolio and give real scale in the domestic
Chinese mining markets, while also
providing opportunities for growth in
the expanding US aggregates market.

The Oil & Gas division extended its
pressure control presence in Canada with
the acquisition of Metra Equipment Inc,
a small Saskatchewan-based wellhead
manufacturer. Carefully selected and
successfully integrated acquisitions are
an important part of the Group’s growth
plan and these acquisitions, along with
the Board’s approach to Metso Corporation,
demonstrate the range of large and small
opportunities we continue to pursue to
help accelerate our organic development.

The Group’s capacity in the growing
Middle East market was extended with
the opening of a new regional headquarters
for the Oil & Gas division in Dubai. This will
allow products to be manufactured locally
for the first time, capturing opportunities
as shale energy production internationalises,
while also serving the region’s conventional
wellhead market.

Good progress was made in the planning
for a best-cost campus in Malaysia which
will include construction of a new foundry,
machine shop and continuous rubber
processing plant. Work is also under
way to upgrade the Group’s Information
Technology capacity including the roll-
out of a common Enterprise Resource
Planning (ERP) across the Minerals division.

The Group undertook an efficiency review
to identify areas to further align resources
to capture future growth prospects. This
resulted in a programme which will see
the consolidation of a number of smaller

In addition, the Oil & Gas division
announced additional plans to reduce
around 550 posts as a direct response to
the sharp fall in oil prices and in anticipation
of the consequent reduction in activity.
When added to the efficiency review
and other measures taken earlier in 2014,
the Group will have reduced approximately
1,200 posts across the workforce with
the majority of these actions completed by
the end of the first quarter of 2015. These
have been difficult decisions but they are
necessary to closely align the Group to
current customer demand and position it to
take advantage of future growth prospects.
In 2015, additional exceptional costs of circa
£20m, based on current cost reduction
plans, are expected in relation to completion
of the Group-wide efficiency review and
additional measures taken subsequent to
the financial year end in response to oil
and gas market conditions.

Globally, Weir has also continued to
promote a working environment which
allows all of our employees to achieve their
potential. In 2014, we continued to offer
comprehensive professional development
opportunities and rolled out our refreshed
values to our global workforce.

I would also like to record my appreciation
to Steve Noon following his retirement as
Divisional Managing Director of the Oil &
Gas division. Steve was instrumental in
the development of the division and its
contribution to Weir’s growth story. He
has been succeeded by Paul Coppinger,
previously president of Weir Pressure
Pumping, the division’s biggest business unit.

In September, I was pleased to welcome
the UK Prime Minister, David Cameron,
to our facility in Yateley, Hampshire to
see the hard work of our employees in
serving the European minerals market.

Delivering on 2014 key priorities
In last year’s Annual Report, I set out
a series of key priorities for the year:

Increasing technical differentiation
through the pursuit of innovative
new products.
The Group continued to invest in
fundamental research and development,
extending our product portfolio. This has
included the development of new products

which meet the demands of our customers
including producing the world’s largest
slurry pump.

We have also increased academic
partnerships with some of the world’s
leading universities, including Imperial
College, London to develop research
programmes into new technologies.

Improving working capital performance
by further extending Value Chain
Excellence initiatives.
The Group continued to leverage its global
scale to deliver significant procurement
direct savings of £46m. Pressure Pumping
reduced its older inventory by more than
50% and there were significant reductions
in working capital in Weir Minerals North
America, but there remains more to do
across the Group.

Further embedding safety at the
heart of our culture.
The first stages of the Weir Behavioural
Safety Programme have been adopted
throughout the Group’s global businesses.
Total Injury Rate fell by 20% in 2014. While
I am pleased with this progress we must
continue to focus on doing even better until
we become a zero-accident workplace.

Fully capturing growing aftermarket
opportunities in Minerals and
accelerating progress in our
comminution strategy.
The Minerals division completed the
acquisition of Trio Engineered Products,
helping accelerate organic growth in its
comminution strategy. It also benefited
from the first aftermarket orders for its
recently introduced range of High Pressure
Grinding Rolls (HPGRs). Comminution
orders increased 63% year on year and
aftermarket orders were up 86%.

Driving growth in frack rentals, flowback
and broadening international oil and
gas opportunities.
Pressure Control frack rentals and zipper
manifolds gained market share. There was
strong growth in the Middle East, including
opening a new regional headquarters and
manufacturing facility. Pressure Pumping
opened two new service centres in China.
A large order was won in Australia for our
combined Pressure Pumping and Pressure
Control offering in the country.

Accelerate Valves growth, building on
a strengthened operational platform.
Aftermarket order input growth of 26%
followed increased targeting of the Power &
Industrial division’s installed base of original
equipment. There was good growth in some
markets but others were impacted by project
delays. Overall, orders were broadly flat.
A restructuring programme to save £10m
across the division and increase efficiency
in the supply chain and Valves operating
structure is being implemented.

The Weir Group PLC Annual Report and Financial Statements 20142014 demonstrated the strength of
Weir’s strategy and aftermarket-focused
business model as we captured good
growth opportunities in fast changing
markets. Significant progress was made
in developing new products, working in
partnership with customers, expanding
into new markets through the acquisition
of Trio, and streamlining our operations to
maintain cost competitiveness.

Outlook
Weir’s global market leadership positions
and the significant strategic progress the
Group has made in recent years mean it is
well placed to benefit from the structural
growth trends in our key end markets.
Long-term growth in demand for energy
and commodities will be driven by
increasing world population and accelerated
by greater urbanisation. In addition, the
Group will benefit from the need for more
complex engineering solutions to replace
depleting natural resources.

In 2015, global GDP is expected to
continue to increase. However, uncertainty
over the pace of that growth, combined
with growing supply, is expected to
lead to continued price volatility in many
commodities including copper and oil,
the Group’s two largest exposures.
We will continue to make progress in
delivering our strategy while remaining
agile in responding to market conditions
as they evolve. The Group has already
acted following steep price declines
in key commodities, particularly oil,
by taking additional measures to
reduce operating costs.

While visibility in oil and gas remains
limited, it is clear these initiatives will only
partly offset the impact of a substantial
reduction in demand and the associated
pricing pressure. As a result we are
planning for a significant reduction in
constant currency Group revenues and
lower operating margins in 2015. However,
we will continue to invest in extending
the Group’s global leadership positions
and increasing market share, supported
by a strong balance sheet and the cash
generative nature of the Group.

2015 priorities
1. Deliver benefits from the Minerals

facility restructuring programme, the
integration of Trio and the investment in
a common Enterprise Resource Planning
(ERP) platform.

2. Ensure agile response to oil and gas end

market conditions and maximise
opportunities from new product launches.

3. Drive improved performance in Power
& Industrial, including benefits from
divisional reorganisation.

4. Accelerate pace of new technology

developments.

5. Drive reductions in lead times and

working capital through application
of the Value Chain Excellence roadmap.

Keith Cochrane
Chief Executive
25 February 2015

UK Prime Minister David Cameron
visits Weir Minerals Yateley site
in Hampshire, UK.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014
14

The Weir Group PLC Annual Report and Financial Statements 2014Strategy in Action

Developing new products
and services which deliver
a competitive advantage.

How we do it:

– Invest in engineering skills,
research and partnerships
with leading universities.

– Invest in operational capability.
– Develop innovation as part of

our culture.

– Adopt a disciplined, four-stage

innovation process.

What we did in 2014:

– Continued to invest in the Weir
Advanced Research Centre.
– Continued the development of

our cone crusher range.

– Developed a new Gabbioneta

pump for sale in North America.

– Commenced roll-out of next

generation slurry pump range.
– Commissioned external innovation
management expertise to critique
our approach and provide guidance
for further enhancements.

Benefits to Weir:

– Technological advantage.
– Faster concept-to-market time.
– Higher proportion of revenue
generated by new products
(‘vitality index’).

– Maintain market leadership.
– Access to adjacent markets.
– Increased sales and returns.

Benefits to our customers:

– Greater operating efficiencies.
– Higher process reliability.
– Predictable maintenance cycles.
– Lower total cost of ownership.
– Lower environmental impact.
– Sustainable competitive advantage.

Case study:
Meeting the
changing demands
of our global
customers

As mine sites mature, the quality of the ore they
produce diminishes leading to the need to process
more volume. Over recent years this has led to
the demand for larger-scale equipment which
can operate for longer periods without downtime.

To address these customer needs, Weir Minerals
has introduced two of the world’s largest mill
circuit pumps. These pumps are the latest in a
series dating back to 1999. Back then, with an
inlet diameter of around 65cm, the original 550
model was seen as a big pump. Now, one of the
new pumps has an inlet diameter of around 90cm
and Weir has had to expand its manufacturing
capabilities in order to produce it.

This feat of engineering involved international
collaboration, with the pumps designed in the US
and Chile and with components coming from Weir
facilities around the world. In order to manufacture
the large rubber linings these pumps require, Weir’s
Chile plant had to rethink its manufacturing process
and, by innovating, design and manufacture the
largest rubber press in the world. The pumps are
designed specifically for hard rock copper mining,
meeting strict customer requirements to operate
continuously for over 100 days in harsh
environments; reinforcing Weir’s position as the
market leader in mill circuit pumps worldwide.

By the end of 2014, the pumps were already
supporting BHP Billiton’s operations at the
Escondida mine in Chile and a third pump is
on order to support Glencore’s operation at
Antappacay in the Peruvian Andes.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Innovation

The Weir Group PLC Annual Report and Financial Statements 2014Strategy in Action

Working with customers, suppliers,
communities and colleagues ensures
a better understanding of the markets
we serve, and their evolving technology
and support requirements.

How we do it:

– Work together to secure contracts,
develop products and expand globally.

– Develop deep relationships with

customers to provide engineering
and aftermarket solutions across
the product life cycle.

– Create industry alliances to support

growth into new markets.

What we did in 2014:

– Signed an agreement with MTU

to develop new, innovative
fracking equipment.

– Continued the development

of the Minerals’ Gladiator pump
for the oil and gas end market.

– Signed a Global Framework

Agreement (GFA) with Kinross
Gold Corporation.

– Won a Procurement Leaders Award
for the cost savings made through
our GFA with Anglo American.

Benefits to Weir:

– Customer intimacy.
– Providing Group capability across

all markets.

– Strong, sustainable relationships

with local communities.

– Maximising returns on assets

and intellectual capital.

Benefits to our customers:

– Greater efficiency and reduced

downtime.

– Technology and solutions partnerships.
– Anticipation of future needs.
– Reduction of operating complexity.
– Multi-end market knowledge.

Case study:
Working together
to benefit our
shared customers

In May, Weir’s Oil & Gas division signed an
agreement with Rolls-Royce Power Systems
company MTU to jointly develop power systems
specifically engineered for hydraulic fracturing.
The two companies are working together
to address the need for more reliable and
continuous duty equipment.

The companies will focus on developing a system
which integrates the three critical components
of a frack pump – the engine, transmission and
fracturing pump. The complete system will
use smart controls which provide continuous
performance monitoring, optimising performance
for the operator and reducing down-time during
fracking operations.

The two companies have a long history of
producing and supporting highly reliable and safe
products specifically for use in harsh fracturing
environments. Combining Weir’s expertise as a
leading manufacturer of frack pumps with MTU’s
market-leading knowledge of heavy-duty diesel
engines, the equipment will be used for hydraulic
fracking operations during the well completion
stage of shale oil and gas projects.

The agreement also provides for full service
and preventative maintenance of the entire power
system, which will be achieved by using Weir’s
market-leading service network combined with
MTU’s service capability, ensuring close proximity
to customers. The new system is expected to be
available to customers in mid-2015.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Collaboration

Strategy in Action

Developing an efficient operating
platform across the customer fulfilment
process, from order to delivery.

How we do it:

– Embedding customer needs
in technology development.
– Working with suppliers to

improve process effectiveness.

– Working with each other to
pool expertise across our
three end markets.

What we did in 2014:

– Expanded global manufacturing
facilities in best-cost locations.
– Rolled out a VCE Management

System.

– Achieved £46m of direct cost

procurement savings.

Benefits to Weir:

– Culture of continuous improvement.
– Reduces waste.
– Supply chain savings.
– Increased profitability, cash and

returns on capital.

– Improved on-time delivery.
– Reduced working capital.

Benefits to our customers:

– Enhanced product and service quality.
– Greater understanding of customer

operations.

– Competitively priced solutions.
– Reduced lead times and improved

on-time delivery.

Case study:
Improving efficiency
throughout the
value chain

Value Chain Excellence (VCE) is a strategic pillar
which underpins the future success of the Weir
Group. VCE is designed to improve performance
across the Group by aligning business processes
to the needs of Weir’s customers.

The Group has rolled out a VCE management system
throughout the organisation which sets out the five
primary components of Value Chain Excellence:
customer focus; engineering; planning; procurement;
and lean enterprise. The management system helps
Weir to segment customers’ needs and organise its
internal processes and resources in a way which
optimises performance.

Using its global network, Weir looks for the best
quality goods at the best possible price around the
world. Best cost sourcing is the preferred term over
a more traditional low-cost country sourcing strategy.
In one recent instance, sourcing goods from Western
Europe proved to be much more cost effective than
locally sourcing the same materials in the US due to
the technical capability of the supplier.

A combination of these efforts has resulted in over
£80 million of savings in two years. However, Value
Chain Excellence goes far beyond the supply chain.
The establishment of a VCE Management System
helps Weir’s global businesses to consistently
understand and respond to customer needs. By
identifying and addressing areas for improvement,
Weir can concentrate resources on areas which focus
on the needs of its customers. This helps the Group
sustain its competitive advantage while increasing
revenue, customer loyalty and reinforcing its position
as a trusted partner of choice.

The Weir Group PLC Annual Report and Financial Statements 2014Value Chain Excellence

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Strategy in Action

Providing uniform excellence in service
and solutions, wherever our customers
are, whenever they are needed.

How we do it:

– Establish global manufacturing

facilities.

– Grow global service centre capacity.
– Create strategic alliances to
strengthen the supply chain.

What we did in 2014:

– Opened new Dubai manufacturing

hub.

– Acquired Trio, a Chinese-American
manufacturer of crushing and
separation equipment.

– Acquired Metra Equipment Inc,
a niche provider of wellhead
equipment and services.

Benefits to Weir:

– Worldwide routes to market.
– Diverse revenues and growth

opportunities.

– Leveraging single solutions

worldwide.

– Developing cross-Group

best practice.

Benefits to our customers:

– Partnerships with solutions experts.
– Rapid response and support.
– Global consistency of products

and service.

– Trusted operational performance.

Case study:
A strong presence
in the domestic
Chinese mining
market

The acquisition of the Shanghai and California-
based Trio Engineered Products gives the Weir
Minerals division a strong presence in domestic
Chinese mining markets and growth opportunities
in the US aggregates sector. Trio manufactures
crushing and separation equipment for the mining
and aggregates markets.

The £138m acquisition extends Weir Minerals
product portfolio for mining customers, building
on its current comminution offering including
crushing, grinding and screening services,
and providing increased scale and presence
in aggregates markets.

The addition of Trio’s range of comminution
products allows Weir to provide a more complete
product and service offering to existing mining
customers, as well as leveraging Trio’s cost-
effective manufacturing platform.

Weir’s unrivalled global platform and existing
relationships across mining markets will also
boost Trio’s original equipment revenue growth,
and capture a greater proportion of the aftermarket
opportunity from the installed base of Trio equipment.

Weir Minerals will cross-sell its product range
in the sand and aggregates markets through
Trio’s well-established sales channels in North
America and China. Sand and aggregate markets
accounted for 56% of Trio’s revenues in 2013.

The Weir Group PLC Annual Report and Financial Statements 2014Global Capability

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Key Performance Indicators

Monitoring
and evaluating
our performance

The Board uses a range of financial and non-
financial metrics, reported on a periodic basis,
to monitor the Group’s performance over time.

Input1
(£m)

Operating
margin2 (%)

Free
cash
flow
(£m)

Return
on capital
employed3
(%)

Inventory
turns4

Total Incident
Rate (TIR)5

Key Performance Indicators

Strategic goals

Strengthen and extend
addressable markets in
minerals, oil and gas
and power sectors

Attain status of partner
of choice for engineered
products and services in
our chosen markets

Priorities

Innovation

Collaboration

Value Chain Excellence

Global Capability

The Weir Group PLC Annual Report and Financial Statements 2014

Input1 (£m)

£2,473m
+9%

2,204

2,274

2,473

3,000

2,000

1,000

Operating margin2 (%)

Free cash flow2 (£m)

18.4%
-80bps

19.1

19.2

18.4

£79m
-53%

200

100

168

2012

2013

2014

2012

2013

2014

2012

2013

2014

Input increased by 9% in a challenging
year, with each quarter ahead of the
prior year comparator.
– Strong input growth in Oil & Gas
more than offset declines in
Minerals and Power & Industrial.
– Aftermarket orders were up more
than 14% and represented 67% of
overall input.

– Each division continued to broaden its
portfolio through the development and
launch of new innovative products.

Group margins decreased
by 80 basis points.
– Minerals’ margins declined slightly
reflecting lower-margin product,
with Oil & Gas stable after the
strong flow through from Pressure
Pumping was offset by lower
margins in Pressure Control.
– Margins in Power & Industrial

declined as a result of operational
issues and product mix.

– Continuing focus on lean principles

Continuing to invest to support
growth over the long term.
– Free cash flow impacted by investment
in working capital, driven by the strong
growth in Oil & Gas.

– Cash outflows also impacted by

re-phasing of interim dividend and
higher cash tax.

– Capital expenditure of £101m was
committed to support the long
term growth plans of each division,
substantially ahead of depreciation.

and taking rapid action to align the cost
base to reflect the changing end market
conditions helped support margins.

Return on capital employed (ROCE)3 (%)

Inventory turns4

Total Incident Rate (TIR)5

18.1%
+60bps

2.8 times
-0.2 times

22.3

17.5

18.1

3.5

3.0

2.5

2.0

1.5

1.0

3.1

3.0

2.8

0.8
-20%

2.0

1.5

1.0

1.6

1.0

0.8

2012

2013

2014

2012

2013

2014

2012

2013

2014

Generating strong returns on capital
through the business cycle.
– Return on capital employed increased

Inventory turns fell as stock levels
increased faster than revenues.
– Inventory increase driven by strong

slightly year on year.

– Oil & Gas’ returns improved reflecting
strong Pressure Pumping performance.
– Minerals’ and Power & Industrial’s returns
fell reflecting lower activity levels and a
disappointing performance respectively.

growth seen in Oil & Gas year on year.
– Good progress in reducing underlying

slow moving inventory.

– Improvements expected in 2015 from
continued roll-out of Value Chain
Excellence initiatives.

Incident rate reduced by 20% over
the course of 2014.
– Weir EHS roadmap continues to be
implemented and is being updated
to ensure it continues to drive
further improvements.

– Progress made in the roll-out of

our ‘Weir Zero Harm’ Behavioural
Safety programme.

– Completed our target of having

all operational employees trained
in strand one.

1. Calculated at 2014 average exchange rates.
2. Adjusted to exclude exceptional items and intangibles amortisation.
3.

Continuing operations EBIT (excluding Trio EBIT and exceptional items) divided by average net assets excluding net debt,
pension deficit (net of deferred tax asset) and Trio net assets. 2012: As 2013/14 but also excluding Mathena and Wales.

4. As reported.
5. 2014 average v 2013 average measuring medical treatment of any kind required by employees divided by 200,000 hours worked.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014How We Manage Risk

Managing risk
effectively

We operate in a complex global environment, where risks
offer opportunities as well as challenges. Our objective is to
allow our people to be decisive, so we can take advantage of
attractive opportunities whilst ensuring we are not exposing
the organisation to excessive risk.

The risk agenda
During the year, the Board reviewed the Risk
Appetite Statement which was approved
in 2013. The Board determined that the
Group’s risk appetite remains consistent
and therefore the Risk Appetite Statement
was approved without amendment and is
set out below. The aim of the Risk Appetite
Statement remains to highlight the risks that
we should be willing to take, as well as those
which are unacceptable. The statement
includes a series of risk assertions which
are aligned to our strategy, together with
the risk parameters within which we expect
our people to work. The risk appetite is all of
the risk assertions and the parameters taken
together. The parameters can apply to more
than one risk assertion, and therefore the
individual risk assertions should not be
read in isolation. Compliance with the Risk
Appetite Statement is monitored through the
Group’s standard monitoring and reporting
mechanisms. The Board will continue to
review and update the Risk Appetite
Statement on an annual basis. Details of
the review of the internal control and risk
management systems undertaken during the
year are contained in the Audit Committee
Report on page 89.

Risk management
The management of risks is at the core of
the internal control framework. We have a
risk management policy which defines how
we expect risks to be identified, assessed
and managed throughout the organisation.

Risks are assessed, and quantified, in terms
of impact and likelihood of occurrence, both
before and after control mitigation. Assessing
the gross risk before control mitigation also
allows the business to review the relative
impact of the existing controls by comparing
the gross and net risk assessment.

onitor
d report
nitor
d report
M
o
M
n
n
a
a

I dentify
Identify
t h e risks
the risks

h
y

c
o
n

r
o

I
I
d
d
e
e
n
n

i
f

t
i

r
t

i
r

e
r

Quanti f y
Quantify
the net ri s k
the net risk

g
n
g
g
s
i
n
n
l
t
s
s
o
ti
ti
xis
ol
ol
r
xis
xis
t
ntr
ntr
n
o

e ntify the e
n tify the e
n tify the e
m itigating c
m itigating co
m itigating co

e
e

I d
I d
I d

Figure 1: Risk Management Cycle

This also allows the business to avoid
wasting resources on mitigating controls
and actions which have a negligible impact
on the risk assessment.

The impact of risks is quantified across
a range of factors including: financial;
reputation; people and property; ability to
perform services; regulation, environment
and health & safety; and investors and
funding. The risk management policy
includes defined criteria for each risk

impact factor, supporting a consistent
measurement approach. Risk management
takes place at the grassroots level, for
example in individual projects, all the way
up to Group level assessments, thereby
providing an integrated bottom-up and
top-down approach to risk management.

The Weir Group PLC Annual Report and Financial Statements 2014

The specific risks identified across the business generally fall under one of the categories within the ‘Risk Universe’ as shown below.

Strategic
risk

Industry and
market downturns.

Technological
advances.

Pricing pressures.

Acquisitions
and mergers.

Planning and
resource allocation.

Figure 2: Risk Universe

Hazard
risk

Political and
social instability.

Natural disasters
and other major
incidents.

External fraud
and corruption.

Operational
risk

People.

Delivery and
supply chain.

Quality.

Commercial.

Communication.

IT.

Compliance
risk

Laws and
regulations.

Financial
risk

Financial
management.

Code of Conduct.

Credit.

Environment,
health & safety.

Governance.

Intellectual
property.

Debt and
interest rates.

Foreign exchange.

Accounting
and reporting.

Taxation.

Internal fraud.

Not all risks are controllable or foreseeable, a key example being natural disasters. Our response to such risks is having controls which
lessen the impact to our business should they occur. For example, in the case of natural disasters, we have controls in place to reduce
the risk of harm to our people, as well as response planning protocols, with clear accountability, to minimise disruption to operations
and our customers.

Risk appetite statement
The Group is strategically positioned in markets with long term high growth potential. We will pursue ambitious growth targets, and we
are willing to accept a higher level of risk to increase the likelihood of achieving or exceeding our strategic objectives, subject to the
parameters below.

Risk assertions

Risk parameters

1. Organic growth: We will aggressively pursue divisional organic

growth strategies to meet our market growth objectives.

2. Mergers and acquisitions: We will actively pursue M&A
opportunities that enhance our strategic platform, subject
to meeting investment criteria.

Investment of resources will be consistent with divisional
strategies, and divisional compound annual growth rates
over five-year plans.

Post-tax returns should exceed our cost of capital within three
years of the acquisition.

3. Returns and profitability: We will not pursue growth at

all costs, and expect high margins, strong returns on capital,
and working capital discipline.

Short term margin dilution is acceptable in gaining market entry
but over the cycle we aim for top quartile operating margins and
returns on capital.

4. Capital allocation: We will encourage capital expenditure

(capex) in pursuit of our growth ambitions, subject to Internal
Rate of Return (IRR) and achievement of Group free cash
flow targets.

5. Capital structure: We are prepared to use leverage in pursuit
of our growth agenda and will actively seek low cost debt to
fund the Group but will maintain significant headroom against
our financial covenants.

6. Reputation and brand image: We will manage/avoid situations
or actions that could have a negative impact on our reputation
and brands.

Planned IRR on capital expenditure projects should not be less
than 20%.

We will seek to maintain the ratio of net debt/EBITDA below
2 times at any time (current financial covenants below 3.5 times).

Financing facility headroom of at least £150m.

No tolerance for breaches of:

Legislative/statutory requirements.

-
- Weir Code of Conduct.
International sanctions.
-
- Delegated authority levels.
- Group and divisional policies.

7. Environment, health and safety: We will not undertake
or pursue activities that pose unacceptable hazard or risk
to our people, the communities in which we operate,
or the broader environment.

Total Incident Rate ≤1 and EHS Audit Score >40%.

-
- Active community and environmental engagement is expected.
- No tolerance for breaches of Weir EHS system.

8. New entry to countries: We are prepared to enter new

No tolerance for breaches of:

countries which offer opportunities for growth consistent with
our overall strategy. We will not enter countries which present
a high risk of harm to our people, damage to our reputation,
or breach of international sanctions.

Legislative/statutory requirements.

-
- Weir Code of Conduct.
-
International sanctions.
- Delegated authority levels.
- Group and divisional policies.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014How We Manage Risk continued

Risk responsibilities
and reporting

Ultimately, the Board is responsible for the Group’s risk and
internal control framework. It has set out the decisions, and
hence the level of risk, which can be delegated to the Group
Executive, divisional and operational company management
without requiring escalation. This is articulated in a series of
Group policies and delegated authority matrices, as well as
the parameters within the approved Risk Appetite Statement.
The Board and committee structure can be viewed on page 77.

The bottom-up risk reporting approach
requires key risks identified, and reported,
at project level to be escalated to the
operating company management, which
in turn may be escalated to divisional
management, and ultimately to the Risk
Committee and the Board. This is achieved
through risk dashboard reports, which are
maintained at operating company, divisional
and Group level. The dashboards provide
a summary of the major net risks at each
respective level, as well as a summary
of the key mitigating controls and actions,
and further control actions required.

The Risk Committee monitors quarterly
risk dashboard reports from the operating
companies and divisions. In addition,
the Risk Committee has oversight of
the Group Risk Dashboard, providing an
update to the Board at each Board meeting.
The Board obtains assurance over risks
and risk management through the internal
control framework. More information on
the internal control framework can be found
within the Corporate Governance Report on
page 81 and within the Audit Committee
Report on page 89.

Reporting

Board and
sub-committees

Group Executive

Risk Committee

l
i

Divisional management

Operating company management

Figure 3: Risk responsibilities and reporting

The Weir Group PLC Annual Report and Financial Statements 2014

The key roles and responsibilities for risk management are set out below:

Risk management responsibilities

Board
Overall responsibility for the Group’s
risk management and internal control
frameworks, and strategic decisions
within the Group.

Audit Committee
Delegated responsibility from the Board
to review the effectiveness of the Group’s
risk and internal control frameworks.

Risk Committee
Management committee responsible
for governance of the Group’s Risk
Management Policy and Framework.

Group Executive
Executive committee with overall
responsibility for managing the
Group to ensure it achieves
its strategic objectives.

Excellence Committees
Engineering
Environment, Health & Safety
Finance
HR
IT
Value Chain

Management committees with
representatives from across the
Group in their respective areas
of focus. The committees govern
activities and performance in
the individual functional areas.

Divisional Management
Responsible for managing the businesses
within the divisions to ensure divisional
strategic objectives are achieved and
there is compliance with Group policies
and standards throughout their division.

Operating Company Management
Responsible for ensuring company
objectives are achieved and business
activities are conducted in accordance
with Group policies and standards.

- Annual review and ongoing monitoring of the effectiveness of the risk management and

internal control frameworks.

- Review of risks which have the potential to impact the delivery of the Group’s

strategic objectives.
Taking decisions in accordance with the delegated authority matrices.

- Annual assessment of the effectiveness of the risk management and internal

control frameworks.

- Review of reports from the internal and external auditors.
- Review of the results from the six-monthly self-assessment compliance scorecards.

- Review of the design and operation of the Group Risk Management Policy and Framework.
Identification and assessment of the key risks facing the Group, identification of the key
-
controls mitigating those risks, and identification of further actions where necessary.

- Review of the Divisional Risk Dashboards, considering the appropriateness of

management’s responses to identified risks, and assessing whether there are any gaps.

- Reporting key Group and divisional risks to the Board.

- Managing risks which have the potential to impact the delivery of the Group’s

strategic objectives.

- Monitoring business performance, in particular key performance indicators relating

to strategic objectives.
Taking strategic decisions in accordance with the delegated authority matrices.

-
- Escalating issues to the Board as required.

- Monitoring the management of key risks across the Group associated with the

respective remits of the Excellence Committees.

- Monitoring performance and compliance with Group objectives, policies and standards

related to the respective remits of the Excellence Committees.
Taking decisions in accordance with the delegated authority matrices.

-
- Escalating issues to the Group Executive as required.
- Reviewing the results from relevant assurance activities.

- Managing risks which have the potential to impact the delivery of the divisions’

strategic objectives.

- Monitoring performance and compliance with Group objectives, policies and standards

within the divisions with regard to the outputs from the Excellence Committees.
Taking decisions in accordance with the delegated authority matrices.

-
- Escalating issues to the Group Executive as required.
- Reviewing the results from relevant assurance activities.

- Managing risks which have the potential to impact the delivery of their company’s

strategic objectives.

- Monitoring performance and compliance with Group objectives, policies and standards

within their company.
Taking decisions in accordance with the delegated authority matrices.

-
- Escalating issues to divisional management and Excellence Committees as required.
- Reviewing the results from relevant assurance activities.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014How We Manage Risk continued

Principal risks
and uncertainties

As in any business, there are risks and uncertainties which could
impact the Group’s ability to achieve its objectives in the future.
However, we believe the Group’s risk management and assurance
framework makes this less likely. The principal risks set out below
are those which we believe to have the greatest potential to
impact our ability to achieve the Group’s strategic objectives.

Risk trend –
post mitigation

Increasing

Unchanged

Decreasing

Risk

Why we think this is important

How we are mitigating the risk

Global economic conditions

Changes in key
markets, including
commodity prices
affecting mining
and oil and gas,
have an adverse
impact on
customers’
expenditure plans.
This may include
delaying existing
expenditure
commitments.

We need to remain sufficiently flexible to allow us
to anticipate downturns, to allow us to adjust our
operations accordingly, and equally to meet growth
in demand when our customers’ markets are buoyant
and therefore capital investment is high. Otherwise,
we are at risk of incurring unnecessary costs during
downturns, and not maximising our potential for
growth in buoyant markets.

- We maintain regular engagement with our

customers to understand their needs and challenges,
and ensure our business is appropriately aligned.
- Our strategic planning utilises extensive market

intelligence to assist in forecasting opportunities
and dips in markets.

- We maintain contingency plans for downturns.

In challenging market conditions, our working capital
risks are increased. These are described in more
detail on page 29.

Changes during 2014
Market conditions have become more challenging during 2014, with commodity prices in oil and gas joining those in minerals markets at
recent historical lows. Necessary adjustments have been made to our operations to accommodate our customers’ responses to these
market conditions.

Technology and innovation

The strength of our business is built upon a history
of delivering innovative and sustainable solutions
for our customers. If we fail to keep abreast of
market needs or to innovate solutions, we are
at risk of losing market share to our competitors
and lowering margins as demand will reduce.

- Continual investment in research and development,

including the Weir Advanced Research Centre (WARC)
in conjunction with the University of Strathclyde.

- We have a dedicated governance team (Engineering
Excellence Committee) focused on the delivery of
our strategic objectives for technological advances
and innovation to meet the needs of our customers.

We fail to drive
innovation or to
react to emerging
technology
developments,
and therefore fail
to ensure that
the business
continues to deliver
sustainable and
attractive solutions
for our customers.

Changes during 2014
The pace of technological innovation continues to increase as we and our competitors seek to provide customers with solutions that improve
the efficiency of their operations. To ensure we continue to retain competitive advantage in this area, our existing research and development
initiatives within the business, at WARC, and at certain universities around the world, have been enhanced through our partnership with
Imperial College, London. This partnership will help the Group develop game-changing solutions to our customers’ challenges. We are also
devoting additional resources to reviewing and responding to developing technologies, including appointment into the new role of Head of
Engineering & Technology Development. Further information on progress made in this area is set out in the Products and Technology section
of the Sustainability Review on pages 59 and 60.

The Weir Group PLC Annual Report and Financial Statements 2014Risk

Why we think this is important

How we are mitigating the risk

Political and social risk

Adverse political
action, or political
and social
instability, in
territories in which
we operate may
result in strategic,
financial or
personnel loss
to the Group.

We operate across the globe and therefore have
to work within a wide range of political and social
conditions. Adverse events may occur in the
territories in which we operate that may require us
to act swiftly to protect our people, our property and
to maintain our competitiveness, and we need to be
flexible and able to anticipate such issues. Expansions
into new territories are only undertaken after rigorous
assessment of the risks, including the social and
political situation within the territory.

- Regular review of market attractiveness.
- Monitoring travel by Weir employees to higher

risk locations.

- External expert risk assessments and regular

monitoring in higher risk locations.

- Contingency plans and exit strategy planning.
- Our strategic planning assists in forecasting potential

political and social instability in regions.

Changes during 2014
In response to increased security risks, arising from changes in the political environment in certain countries where the Group has
operations, enhancements have been made to the Group’s access to expert risk assessments and plans to respond to adverse events
in higher risk locations. During the course of 2014, it became evident that the environment in which a number of the Group’s businesses
operate is becoming increasingly challenging and uncertain, especially from a security perspective. As the safety of our staff is of
paramount importance, a new position of Group Head of Security has been created to improve the ways in which these concerns are
addressed and mitigated. This position will report directly to the Group General Counsel. A Group Head of Security has now been
recruited and is due to start work in April 2015.

Supply chain and working capital

Failure to achieve
supply chain
management
improvements and
the associated
reduction in costs,
working capital and
enhanced flexibility.

If we fail to improve our supply chain management,
we risk:

losing the opportunity to invest capital which
is currently committed to working capital into
alternative value creating opportunities;
damaging our reputation and as a consequence
losing customers and market share;
incurring penalties as a result of late delivery
contractual clauses;
reducing margins by incurring unnecessary
additional costs associated with late remedial
actions taken to avoid missing delivery targets; and
holding excess inventory in the event of a market
downturn.

- Regular KPI monitoring of the supply chain

throughout the organisation.
The Group’s operations are currently implementing
Value Chain Excellence initiatives which are
intended to enhance operations’ working capital
management and shorten lead times, amongst
other business improvement objectives.
- Established Centres of Excellence drive cost
savings, efficiencies and enhance delivery
standards whilst maintaining quality.
The Group’s forward purchase commitments are
being closely monitored to manage inventories
at levels appropriate to market conditions.

- Our credit risk management procedures are under

continuous appraisal and their application is subject
to specific internal audit review.

Changes during 2014
Supply chain remains an area of strategic focus for the Group. Supply chain improvements continue to be recognised year on year as
the Group realises benefits from its focused approach to these matters. A programme of Value Chain Excellence initiatives has been
launched throughout the Group to drive supply chain improvements.

Environment, health and safety (EHS)

Failure to
adequately protect
our people and
other stakeholders
from harm
associated with
a breach in EHS
standards.

We operate in hazardous environments, and
therefore have a fundamental duty to protect our
people and other stakeholders from harm whilst
conducting our business. As well as the personal
impact on our people resulting from a failure to
meet this obligation, we would also be at risk of:

reputational damage leading to a loss
of customers;
legal action from regulators, including fines
and penalties; and
exclusion from markets important for our
future growth.

The Weir Behavioural Safety system is in place
to reduce the risk of safety incidents. In addition,
there are initiatives to prevent the most common
accident types. The Weir global EHS standards
are continually reviewed.
The EHS Excellence Committee is responsible for
monitoring performance and compliance with Group
objectives, policies and standards relating to EHS.
There is a formal EHS assurance programme
with issues escalated as required through the
reporting structures.

Changes during 2014
The Group is never complacent in relation to EHS matters. Committed to achieving the highest of standards, the Group continues to set
higher benchmarks for EHS compliance and roll out cohesive programmes to address EHS risks and drive safe and sustainable working
practices. Improvements have been made through the year to our EHS board reporting and assurance activities and our key performance
indicators in place to measure our success in mitigating EHS risks have shown an improvement on 2013.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014
How We Manage Risk continued

Risk

Why we think this is important

How we are mitigating the risk

We operate in an increasingly complex and
competitive environment where customers are
not only highly focused on price and service but
are also more challenging in contract negotiations.

As we offer a broader range of products and
services to our customers, including those that are
more technologically advanced, we risk exposing the
Group to reputational and financial loss should our
contract acceptance, negotiation and approval
processes fail to protect the Group accordingly.

The Group has policies and procedures for contract
acceptance and approval.
These are under continuous review and improvement
to ensure they are adequate for current and future
circumstances.
The tools and training available to employees
responsible for contract management are similarly
under continuous review.

Contract risk

We fail adequately
to manage contract
risk and as a
result commit to
obligations which
the Group is unable
to meet without
incurring significant
unplanned costs.

In addition, failure
to follow Group
policies and
procedures may lead
to commitments
without the desired
level of contractual
protections.

Changes during 2014
Contract management has become an area of increased focus for the Group, given the competitive environment and the breadth and
depth of our product offerings, and therefore during 2014 was identified as a principal risk. Amongst other initiatives, certain of the
Group’s policies and procedures have been reviewed and refreshed to provide employees with improved tools to assist them in their
contract management activities.

IT security and continuity

Up-to-date data allows us to make informed
decisions about our business. Therefore, we require
reliable and efficient IT systems and infrastructure
to provide our data requirements. Breaches of our
IT security could have serious consequences for
our business, including:

-
-

interruption to business operations; and
loss of intellectual property and other
sensitive data.

The Group is investing in a significant IT
transformation programme. If this is not managed
effectively, the consequences could include
interruption to business operations if data is
unavailable due to unsuccessful execution
of change, impacting our ability to compete
and our reputation in the market.

At present, the Group’s principal exposures to
cybercrime relate to the misappropriation of cash
and data. Our revenue streams are largely protected
as our products are not currently electronic in nature
and we do not, as a rule, transact over the internet.

- We continually review the effectiveness of our key IT
security controls in consultation with external experts.
There is regular reporting of unplanned outages and
potential security breaches, with lessons learned
across the Group.

- We have an IT Governance Framework with a focus
on structured change management techniques,
including setting project governance levels in line
with risk.

- External assurance being obtained on the Tier 1
IT transformation projects reporting through
Internal Audit.
The security arrangements around all of the Group’s
information assets will be revised following the
transition to the Weir Cloud infrastructure.
- Policies, procedures and baseline standards in

relation to cyber risk and IT security more generally
are continuously updated and rolled out to operations.
A programme of user training in relation to cyber risk
is being rolled out.

Failure to maintain
business systems
or technical
infrastructure
that serves the
business needs.

Failure to
successfully
execute changes
to these business
systems or
technical
infrastructure;
together with
failure to minimise
disruption and
maintain business
as usual activity
during technical
infrastructure or
business system
changes.

Failure to
adequately protect
the business
operations from
cybercrime.

Changes during 2014
IT security and continuity continues to be a matter of strategic priority for the Group. Progress to strengthen the Group’s defences in this
respect is being made according to plan as Tier 1 IT projects, such as Weir Cloud, and divisional IT improvements and other projects are
put in place.

The Weir Group PLC Annual Report and Financial Statements 2014Risk

Why we think this is important

How we are mitigating the risk

Cost competitiveness

Failure to deliver
cost competitive
products and
services, or
failure to deliver
sufficiently
differentiated
products and
services which
justify a price
premium through
lowest total cost
of ownership
value propositions.

Customers are increasingly focused on the price
competitiveness of products and services as they
seek to lower operating costs. If the Group fails to
demonstrate the value of our products and services,
it risks losing market position.

There is continual focus on maximising the
efficiency of our products to ensure the solutions
provided to customers deliver the best overall
value, allowing our customers to meet their cost
reduction strategies through lower energy costs
and improved productivity.
The key component Centres of Excellence are
driving cost efficiencies, whilst maintaining quality.

- Expansion of production in best-cost locations,
including foundry expansions in Malaysia and
South Africa.

- We regularly monitor market activity to ensure

we remain competitive.

Changes during 2014
Cost competitiveness remains a strategic priority for the Group. Initiatives to expand production in best-cost locations are developing
in South Africa and Malaysia and the procurement function continues to drive cost and quality improvements through the Group’s
supply chain.

Ethics and governance

Interactions
with our people,
customers,
suppliers and other
stakeholders are
not conducted
with the highest
standards of
integrity which
devalues our
reputation.

We are unwilling to accept dishonest or corrupt
behaviour from our people, or external parties acting
on our behalf, whilst conducting our business.
If we fail to act with integrity, we are at risk of:

The Code of Conduct, supplemented with Group
policies on related topics, provides a clear benchmark
for how we expect our business will be conducted.

- Regular training is provided using a range of

-
-

reputational damage leading to a loss
of customers;
increased scrutiny from regulators;
legal action from regulators including fines,
penalties and imprisonment; and
exclusion from markets important for our
future growth.

mechanisms including Town Hall style sessions,
online and induction training.
The financial control framework is continually
monitored for effectiveness.
Internal Audit’s remit includes regular review
of the anti-bribery and corruption and financial
controls across the Group. The Group Legal
team is responsible for monitoring compliance
with the Code of Conduct.

Changes during 2014
The governance and legislative environment in which the Group operates continues to evolve and become more complex. The Group
has further developed and grown its operations in geographies where ethical standards may not be as well established as in other
countries. The Group has reinforced its commitment to high standards of ethics and governance, having reviewed, updated and reissued
the Code of Conduct during 2014 and completed a programme of training for key individuals. In addition, the Group has developed and
issued a Group Competition Law Manual, which again is being accompanied by related training for those in relevant roles.

Acquisitions and expansion into new territories

Inadequate
planning and
management
of the integration
and expansion
processes impacts
the ability to
generate growth
opportunities,
synergies and
cost savings
within expected
timescales.

Acquisitions and expansions into new territories
are only undertaken after rigorous review and
identification of expected synergies, cost savings
and growth opportunities. However, there is a risk
that these benefits may not be achieved, or may
not be achieved within the anticipated timescales,
thereby tying up the Group’s funds in investments
with insufficient returns. There is also a risk that
we could be left liable for past acts or omissions
of the acquired businesses without adequate
right of redress.

The strategic planning process includes market
and competitive position assessments to drive
the acquisition agenda.

- Comprehensive due diligence is performed on

all potential acquisitions.

- We have a formal 100 day integration plan with
dedicated integration directors and managers
appointed to oversee and manage the full
integration programme.
The Group’s pre- and post-acquisition processes are
subject to continuous review and improvement based
on our experience of past acquisitions.

- We seek to secure appropriate legal protection

against potential liabilities and to secure rights of
redress against sellers where such liability arises.

Changes during 2014
With the acquisition of Trio in October 2014, the Group has continued to pursue its strategy of broadening its product offering through
the mining production cycle. This acquisition, together with those made in prior periods, continues to be successfully integrated in
accordance with the Group’s established processes.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Operational Review

Weir Minerals
Delivering in challenging
market conditions

The Weir Group PLC Annual Report and Financial Statements 2014Dean Jenkins
Divisional Managing Director

Our focus on enhanced service capability and forging
ever-stronger relationships with customers helped
to deliver a resilient performance in what continue
to be challenging end markets.

Key priorities and progress in 2014

Invest in comminution process
knowledge and materials
wear technology:

– Global Product Managers in place to lead crushing, grinding and screening initiatives.
– Development of cone crusher range continues, assisted by the acquisition of Trio.
– Several projects initiated focused on High Pressure Grinding Rolls (HPGRs) upgrades.
– Trials under way for new family of castings with positive early results.

Identify new platforms for potential
growth aligned to our core strategy
and competences:

– Acquisition of Trio further extends the product portfolio into the adjacent comminution
segment of the mill circuit, providing scale and presence in the growing aggregates
end market.

– Strong performance from recent acquisitions of R Wales (rubber and wear-resistant

linings for mining, minerals processing and oil sands industries) and Aspir (centrifuges).
– As part of the Group efficiency review, consolidation of manufacturing sites expected

to save £15m.

Reduce lead times and working
capital through global supply
chain initiatives:

– Achieved significant improvements in lead times and best-cost country sourcing.
– Global capacity plan and inventory management system implemented.
– Good progress was made in reducing working capital in North America.

Continue development of Minerals
and Oil & Gas product portfolios
through collaboration and innovation:

– Progress made in development of Gladiator pump for the oil and gas end market, and
in extending the range of swellable packers, using the division’s rubber technologies.

– Collaboration initiatives between Floway, Gabbioneta and Weir Specialty Pumps
proceeding well. A new Gabbioneta pump is available for Minerals to sell in
North America.

Help make our customers’ existing
operations more efficient by
continuous improvement of our core
products, wherever they need us:

– Commenced roll-out of next generation slurry pump range.
– Cost savings and efficiency gains achieved by Anglo American as a result

of strategic alliance recognised with Procurement Leaders award.
– Signed a Global Framework Agreement with Kinross Gold Corporation.
– New service centres opened or planned for Philippines, Mongolia and Russia.

Strategic Goals

Innovation

Collaboration

Value Chain Excellence

Global Capability

Market drivers
Price declines were experienced across
a number of key commodities in 2014,
as increased global supplies of iron ore, coal
and copper combined with slowing demand
growth, principally as a result of economic
conditions in China and other emerging
markets. Iron ore prices fell by almost 50%
in the year, resulting in a notable impact on
brownfield project activity. While copper
prices fell by 14%, brownfield investment
remained resilient. Gold prices were broadly
flat over the period and remained below
the levels required to drive higher capital
investment. Ore production from existing
mines continued to increase, supported by
the move from construction to full operation
of several new mines, particularly in South
America, and miners seeking to maximise
production from existing sites to partially
offset commodity price declines.

Both these trends supported aftermarket
demand with global ore production growing
3% in 2014.

Mining sector capital expenditure fell by
an estimated 17% in 2014. As a result
there were very few greenfield project
opportunities and customers displayed
caution in proceeding with brownfield
investment. Industrial action in South Africa
significantly impacted local production
levels, and the outbreak of the Ebola virus
also caused disruption in West Africa.
In Europe, weak economic conditions
and geopolitical unrest in Eastern Europe
impacted activity. Non-mining end markets
also declined with lower project activity
across power, oil and gas, although oil
sands aftermarket demand remained stable.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014

Operational Review continued

Strategic progress
The division’s comminution (crushing,
grinding and screening) strategy advanced
significantly with over 60% growth in order
input and the award of original equipment
contracts for High Pressure Grinding Rolls
(HPGRs) in North America and Europe. In
addition, the acquisition of Trio Engineered
Products expands the division’s product
offering and end market presence
into aggregates.

Investment in new product development
has continued with a focus on helping our
customers achieve their aim of increasing
efficiency. A new vertical slurry pump was
launched with retrofit capability for existing
customers, enabling upgrades to take place
at reduced cost. In addition, the division
designed, built and installed the world’s
largest mill circuit slurry pump at a mine
in Chile. Our Global Framework Agreement
with Anglo American has seen one of the
division’s key customers achieve immediate
gains in component life and power-saving,
by applying our technology to existing
pumps. A second Global Framework
Agreement was signed in 2014 with
Kinross Gold Corporation.

New service centre facilities were
established in Asia-Pacific and Europe,
further enhancing our global capability
and extending the division’s market-
leading service centre network. Planning
is continuing for a new best-cost campus
in Malaysia which will include a new
foundry, machine shop and continuous
rubber processing plant. In oil sands
markets, there was an increase in demand
for our barge products and aftermarket
performance was supported by growth
from the R Wales group of companies
which was acquired in early 2013.

The division’s Value Chain Excellence
initiatives included progress in the roll-
out of a best-in-class Enterprise Resource
Planning (ERP) platform to increase
efficiency, decrease working capital and
deliver lead time reductions to customers.
As part of the Group-wide efficiency
review the division announced in November
2014 the consolidation of four smaller
manufacturing units into larger facilities
across Europe, North America and
Australia, which combined with other
actions including workforce reductions
in Africa, Europe and South America,
is expected to contribute annualised
benefits of £15m by the end of 2015.

Order Input decreased by 4% to £1,127m
(2013: £1,180m), with strong aftermarket
growth more than offset by a material
fall in original equipment orders. Original
equipment orders were 22% lower year
on year, driven by a reduction in the
number of brownfield projects reaching the
procurement stage and lower orders from
non-mining markets, although a good level

of quotation was maintained. Although
down year on year, original equipment order
trends improved slightly through the year
with second half input up 3% compared
to the first half, despite the non-recurrence
of a large HPGR order received in H1.

Operating profit*

£226m
-7%

Aftermarket orders grew by 6%, at the
upper end of original expectations and
represented 69% of total input (2013: 62%).
This was supported by the benefits of a
large and growing active installed base,
underlying ore production trends and
the commissioning of greenfield sites.
Aftermarket growth of more than 4% was
achieved in three out of four quarters with
Q4 impacted by the cancellation of a large
£11m HPGR order, previously booked in Q3.

The division continued to make good
progress in comminution with input of £49m
(2013: £30m). Slurry pump orders were
materially lower year on year, reflecting
market conditions. Good progress was
made in growing the valves product line. In
oil sands markets, there was an increase in
demand for barge products and aftermarket
performance was supported by growth from
the R Wales group of companies.

Emerging markets accounted for 47% of
input (2013: 45%) with higher activity levels in
South America and the Middle East offsetting
the impact of industrial action in South Africa.
Orders from mining end markets were flat
year on year and accounted for 77% of input
(2013: 74%). Input from non-mining markets
declined by 16% compared to 2013, which
included large orders from coal bed methane
and wastewater projects which were not
repeated in 2014.

Revenue was 4% lower at £1,128m on a
constant currency basis (2013: £1,178m)
but with second half revenues showing
6% sequential growth. Original equipment
sales were 17% lower and accounted for
33% (2013: 38%) of divisional revenue.
Production-driven aftermarket revenues
increased by 4% with sequential growth
each quarter.

Double-digit growth in Asia-Pacific,
supported by the acquisition of Trio in
late October 2014, was offset by a £42m
reduction in African revenues, primarily
as a result of strikes in South Africa.
Revenues from European and South
American markets also fell, reflecting
subdued end market conditions although
output in Australasia increased slightly,
supported by strong aftermarket demand.
Reported revenues declined by 14%,
reflecting a 10% foreign exchange
headwind (2013 reported: £1,304m).

Operating profit decreased 7% on a
constant currency basis to £226m (2013:
£243m), as a result of lower revenues and
a fall in contribution from African operations
of £18m and investment in the comminution

2014

2013

2012

Revenue*

£1,128m
-4%

2014

2013

2012

£226m

£243m

£228m

£1,128m

£1,178m

* 2012 and 2013 restated at 2014 average exchange rates.

platform. One-off integration and acquisition
costs of £1m were incurred in relation to Trio,
largely offsetting its operating contribution in
the period. Reported operating profit fell by
16% after a 10% foreign exchange headwind
(2013 reported: £269m).

Operating margin declined by 50bps to
20.1% (2013: 20.6%), reflecting a higher
mix of lower margin products, increased
investment in the comminution platform
and a circa 30bps impact on a constant
currency basis from materially lower
revenues in Africa and the effects on
the division’s supply chain and operations,
of direct strike action in the second half.
These adverse factors were somewhat
offset by the benefit of cost reduction
and procurement initiatives and a higher
proportion of aftermarket revenues.

Investment
Capital expenditure of £45m (2013: £53m)
included investment in the initial development
of a new best-cost campus in Malaysia. The
division is also investing in a common ERP
platform over the next three years to support
global capacity planning. Research and
development spending of £11m (2013: £13m)
was focused on developing the division’s
materials technology, mechatronics capability
and expanding its product portfolio.

Outlook
Total mining capital expenditure is
expected to reduce for the third year in
succession in 2015, albeit at a lower rate
than 2014. Maintenance capital expenditure
is anticipated to remain broadly in line with
recent years; however, further reductions
are forecast in brownfield and greenfield
investment. The growth rate for global
ore production is expected to be in the

The Weir Group PLC Annual Report and Financial Statements 2014low single digits, supported by growing
global demand.

Oil sands capital expenditure is anticipated
to decline materially, reflecting recent oil
price reductions, although production
levels are expected to be resilient. The
impact on mining original equipment
revenues is expected to be largely offset

by a strengthening comminution presence,
particularly in the growing aggregates end
market and including a full year contribution
from Trio. Aftermarket revenues are
anticipated to benefit from increasing ore
production volumes and a growing active
installed base as customers commission
and continue to ramp up activity levels at
new mines, particularly in South America.

In addition, profits will be supported by the
first benefits from the previously announced
efficiency review and a more normalised
operating environment in South Africa.
Operating margins are expected to be
slightly lower year on year, as a result
of reduced profitability and volumes in
oil and gas markets.

Partners in production worldwide

Working with
our customers to
improve efficiency

Weir recently signed a Global Framework
Agreement with Kinross Gold Corporation
which will reduce operating costs and
increase productivity at Kinross’ mine
sites and operations.

The agreement covers all of Kinross’
global locations including North America,
South America, West Africa and Russia.

Kinross is a Canadian gold mining
company which maintains listings on
both the Toronto Stock Exchange and
the New York Stock Exchange. Founded
in 1993, Kinross has become one of the
world’s leading gold mining groups with
total annual gold equivalent production of
2.6 million to 2.7 million ounces forecast
in 2014.

The agreement will see the two
companies work together to identify
opportunities to reduce Kinross’s
operating costs, ensure security

of supply and identify solutions which
create value for both companies.
Weir Minerals will become Kinross’
preferred supplier of mining equipment,
including centrifugal slurry and positive
displacement pumps, hydrocyclones,
slurry valves, crushers, screens, rubber
and mill liners.

Weir’s reputation for delivering
innovative, highly engineered and
efficient mining equipment, supported
by its market-leading global service
centre network, complements Kinross’
operating model and will help to deliver
total cost of ownership reductions.
This builds on the agreement Weir
signed with Anglo American in 2013.

Key priorities in 2015

Execute comminution strategy
through effective integration of Trio.

Increase investment in research
and development to position the
division for future growth.

Strengthen interface with our
customers through enhanced
service capability and greater
on-site presence.

Progress implementation of
new divisional ERP system.

Increase efficiency and deliver
the benefits of the global
rationalisation programme.

Market input breakdown

Minerals 77%
Oil and gas 9%
Industrial 9%
Power 3%
Other 2%

Geographic input breakdown

South America 23%
North America 23%
Australasia 18%
Middle East/Africa 14%
Europe 12%
Asia-Paciﬁc 10%

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014

Operational Review continued

Weir Oil & Gas
Staying flexible
in dynamic markets

The Weir Group PLC Annual Report and Financial Statements 2014Paul Coppinger
Divisional Managing Director

2014 saw every business in the division grow by
swiftly reacting to increasing demands of customers
and leveraging its market-leading service centre
network to deliver a strong increase in constant
currency revenues and profits.

Key priorities and progress in 2014

Capitalise on growing international
opportunities across each business:

– China accounted for 29% of Asia-Pacific revenue.
– Expanded production and geographic presence in the Middle East and introduced

Accelerate customer uptake of recent
product and service launches:

Seaboard and Mathena products.

– Opened new Oil & Gas Services manufacturing facility in Dubai, UAE which will enable

the manufacturing of Pressure Control equipment in the region.

– More than 40% of all fluid end sales from new premium technologies.
– 260% growth in Seaboard zipper manifold sales.
– The SPM® 8 Station Manifold Skid with Safety Iron® connections launched provides

a compact footprint for easy transport and use.

– Seaboard NWH-C Overshot Connector launched and securing first orders in 2014.

Continue to grow share in the
pressure pumping market:

– Fluid end market share increased to 27% in 2014.
– Power systems strategic partnership formed with Rolls-Royce Holdings PLC

subsidiary – MTU America.

Expand maintenance services
capacity in Iraq, in support of
the LUKOIL contract awarded
in January 2014:

– API and ISO certified facility in Basra having API 6A, 16A, 5CT, 7-1 & ISO 9001,

14001 and 18001 certifications.

– Successful mobilisation and expansion of capabilities and capacity in Iraq in support

of US$100m two-year contract with LUKOIL.

– Acquired additional OCTG threading/machine shop facility Iraq, increasing capability

to serve Southern Iraq’s oil and gas industry.

Deliver benefits from upstream and
downstream oil and gas forums:

– £8m of revenues from the organically developed Swellable Packers range.
– Contract wins for bundled offering of centrifugal pump offering from across the Group.

Increase supply chain flexibility
and improve working capital ratios
through working Value Chain
Excellence Initiatives:

– Introduced maturity model and developed business unit improvement plans using

Value Chain Excellence methodologies.

– Excess pressure pumping inventories reduced by £53m.
– API certification awarded to Mathena.

Strategic Goals

Innovation

Collaboration

Value Chain Excellence

Global Capability

Market drivers
Global oil and gas markets continued to
grow strongly for the majority of the year
with average US rig count, an indicator
of activity in our Pressure Pumping and
Pressure Control operations, increasing
by 6% in 2014. A prolonged period of
stability in global oil prices ended in the
fourth quarter, as oil prices began to fall
dramatically with a subsequent pull back
in activity levels beginning at the very end
of 2014.

For the majority of the year, increased
investment supported strong growth in
North American oil production with a 5%
rise in the number of wells drilled in the US.
Production was supported by increased
intensity in operations which resulted in the
number of horizontal wells rising 11% and
the number of frack stages rising by 22%.
Alongside increasing intensity of completion
techniques, this contributed to strong
growth in aftermarket demand.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014

Operational Review continued

Market drivers (continued)
North American activity continued to
be dominated by oil and liquids which
accounted for 82% of North American
drilling and completion. Gas activity was
subdued as natural gas prices remained
below incentive levels, despite briefly
increasing early in the year as a result
of a harsh winter in the US.

In pressure pumping markets, demand for
original equipment increased from 2013
levels as frack fleet utilisation reached 87%
in North America, reflecting greater demand
and increased intensity of operations.
Internationally, Chinese frack fleet growth
was subdued but Australia grew strongly,
albeit from a low base.

Average rig count in the Middle East
continued to grow, increasing by 9% with
continued positive trends in Iraq and Saudi
Arabia in particular. Mid and downstream
markets were impacted by project delays
in the second half of the year.

Strategic progress
The division’s market-leadership position in
pressure pumping and developing a Tier 1
offering in pressure control ensured it was
able to gain market share as upstream
North American markets grew strongly. This
was supported by the division’s extensive
service centre network which captured
increased aftermarket demand for spare
parts, services and the cross selling of the
expanded product range. All business units
delivered strong organic order growth with
international expansion positioning the
Group to benefit from development in
markets such as China, Argentina, Brazil,
Australia and Indonesia.

Pressure Pumping further enhanced its lean
manufacturing and supply chain platform,
giving it the operational flexibility to increase
production rapidly as its markets expanded.
In flow control and fluid ends for instance,
this helped the business increase market
share by 4% and 5% respectively over
the last two years. There was strong organic
growth over the course of the year, with
fluid end sales nearly doubling and over
40% of orders coming from the business’
new premium range. Development of a
next generation frack pump, incorporating
patented design features, is progressing
well with field trials scheduled for the
first quarter of 2015. The division is also
partnering with MTU America – part of
Rolls-Royce Holdings PLC – to design the
industry’s first purpose built integrated
power system for hydraulic fracturing.

Pressure Control increased its market share
by launching new products such as its range
of zipper manifolds, a new hydraulic choke
and a well-overshot solution for subsea
applications. The business cross-sold its
full portfolio to existing customers and
leveraged the division’s market-leading

service network to attract new customers
to its core product range.

Internationally, a new Middle East
headquarters was completed in Dubai
alongside increasing service centre capability in
Azerbaijan and Iraq. The new Dubai facility will
meet regional demand for locally manufactured
wellhead and valve manufacturing, supporting
the internationalisation of Pressure Control,
while also expanding service centre capacity
to capture fast-growing regional opportunities.
This included a ramp-up of activity to support
the LUKOIL maintenance contract in southern
Iraq, which is utilising the division’s Basra
service capability – the first in the region to
secure API and ISO licenses.

As part of the Group-wide efficiency review,
the division announced the consolidation
of a Pressure Control manufacturing unit
in California into a larger Houston facility,
with a consequent reduction in workforce of
approximately 100. This and other measures
are expected to deliver annualised savings
of £10m. In addition, and in response to the
steep reduction in oil prices which began
in the fourth quarter of 2014, the Group
has taken further actions to reduce costs.
This includes an additional planned reduction
in the division’s workforce of approximately
550 by March 2015, the insourcing of
sub-contracted manufacturing and further
reducing operational costs.

Order input at £1,032m (2013: £768m)
was 34% higher with good growth from
each business in the division. Aftermarket
input was up 30% year on year, driven by
strong growth in Pressure Pumping and
accounted for 70% (2013: 73%) of divisional
orders. Original equipment input was 47%
higher, primarily driven by demand for new
Pressure Pumping equipment.

Pressure Pumping input increased by 50%,
with strong trading until almost the year end,
when there was a reduction in demand in
North America as customers started to
revise spending plans in response to the
steep fall in oil prices. This growth was
driven by a strong aftermarket performance
as the division’s comprehensive product and
service offering allowed it to gain market
share. Fluid end input was up nearly 90%
on 2013, supported by differentiated new
products. Flow control orders exceeded
their previous record in 2011 and accounted
for nearly 30% of Pressure Pumping input.
Original equipment orders more than
doubled from a low base in 2013, with
some initial signs in the second quarter
of a frack pump replacement cycle starting,
but this did not materialise in the second
half, as the oil price declined. Pressure
Control also benefitted from strong North
American demand and increased its share
of rigs, supported by the expansion of
its product and service offering including
launching a range of zipper manifolds, a new
hydraulic choke and a well-overshot system

Operating profit*

£225m
+32%

2014

2013

2012

Revenue*

£992m
+32%

2014

2013

2012

£225m

£171m

£202m

£992m

£754m

£810m

* 2012 and 2013 restated at 2014 average exchange rates.

for subsea applications. Input increased
by 20% over the year, although order rates
softened at the end of 2014, reflecting
changing market conditions.

Services enjoyed strong double-digit input
growth, supported by higher operations
and maintenance (O&M) activity as a result
of the LUKOIL contract in Iraq, which was
secured at the start of 2014. Downstream
orders also increased as Gabbioneta
secured a number of large LNG and refinery
contracts across the Middle East and Asia.

Revenue increased by 32% to £992m on
a constant currency basis (2013: £754m),
reflecting the strong order input trends
across the business. Original equipment
and aftermarket revenues both increased by
32% with aftermarket accounting for 72%
of output (2013: 72%). Revenues increased
sequentially each quarter with record
second half divisional sales.

Pressure Pumping delivered strong
revenue growth broadly mirroring input
trends and only slightly down on the
previous 2011 peak. Pressure Control
revenues also increased in line with
order trends, supported by positive North
American activity levels for the majority
of the year. Both operations saw a slightly
softer than expected finish to the year as
the result of oil price declines. Services
grew strongly although Gabbioneta was
down year on year as a result of a lower
opening order book and customers
delaying project delivery dates. Reported
divisional revenues increased by 25%
after a 5% foreign exchange headwind
(2013: £796m).

The Weir Group PLC Annual Report and Financial Statements 2014Operating profit including joint ventures
was 32% higher on a constant currency
basis at £225m (2013: £171m), primarily
driven by strong Pressure Pumping profit
growth. Reported operating profit increased
by 25% after a 5% foreign exchange
headwind (2013: £181m).

Key priorities in 2015

Respond with agility to changing
market dynamics and improve
overall business performance
through delivery of Value Chain
Excellence improvement plans.

Continue to globalise leadership
position in Pressure Pumping and
progress towards a Tier 1 offering
in Pressure Control.

Enhance product offerings in
Pressure Control and Pressure
Pumping.

Expand capabilities of Weir Oil
& Gas Services in the UAE, Iraq
and Saudi Arabia, including the
benefits of its new regional
manufacturing hub in Dubai.

Leverage Weir’s total centrifugal
pump capabilities to increase
share in the global oil and gas
processing markets.

Market input breakdown

Oil and gas 99%
Industrial 1%

Geographic input breakdown

North America 75%
Middle East/Africa 13%
Europe 5%
Asia-Paciﬁc 5%
Australasia 1%
South America 1%

Operating margin was unchanged at
22.7% (2013: 22.7%) reflecting positive
operating leverage in Pressure Pumping
offset by increased bonus costs and lower
margins in Pressure Control. Margins were
slightly below prior expectations as a result
of softer than anticipated trading at the
end of the year in higher margin Pressure
Pumping and Pressure Control operations.

Investment
Capital expenditure of £50m (2013: £38m)
included additional facilities for Services
in Iraq and Dubai, additional Pressure
Control rental assets, a new R&D facility
in Fort Worth, US and the commencement
of construction of a new facility in Milan,
Italy for Gabbioneta. Total research and
development expenditure of £8m was
focused on developing new frack pump
design and related sensor and control
technologies (2013: £5m).

Outlook
Oil prices are expected to remain
substantially below their average of the
last three years as a result of oversupply.
As such, the market is expected to take
longer to reach a balance than during the
demand driven downturns in 2008-9 and
2012-13. However, global demand continues
to grow and unconventional oil is well
positioned to react quickly when market
conditions improve.

Many Exploration and Production (E&P) and
service companies have already announced
plans to significantly reduce their capital
spending in response to lower oil prices –
a trend reflected in the fall in US onshore
rigs in the first two months of 2015. Visibility
in these upstream markets is limited as
customers continue to adjust their operations
to the evolving pricing environment, although
a significant fall in activity levels is anticipated
with resulting pricing pressure. Conditions
are also expected to be more challenging
in international and mid and downstream
markets, although the impacts will be
less pronounced.

The division has already acted to reduce
costs and increase efficiency and will
continue to monitor the need for further
actions to support operational performance.
However, these measures will not fully
offset market impacts with a substantial
reduction in divisional revenues and lower
operating margins expected in 2015.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014

Operational Review continued

Partners in production worldwide

Supporting
developing oilfields

In January 2014, the Group signed a contract with LUKOIL
Oil Company to provide general maintenance services for
the West Qurna-2 oilfield in Southern Iraq.

The agreement, worth around US$100m
(£60m), sees Weir engineers deliver
mechanical, electrical, maintenance
and pipeline services for the related
production facilities, including the
Mishrif Central Processing Plant.

Weir has significantly invested in
establishing its service centre in Basra,
Iraq and it is the first in-country location
to offer fully comprehensive maintenance
services for all kinds of rotating equipment,
valves and wellheads. The facility is also the
first in Iraq to obtain API and ISO licences.

West Qurna-2 is one of the largest
undeveloped oilfields in the world.
Mishrif began production in March 2014,
at which time Weir commenced work
under the terms of its contract.

By the end of the year production reached
a peak of around 400,000 barrels per day.

This substantial contract demonstrates
the importance of Weir’s long experience
of working in Iraq and its reputation
for delivering high-quality engineering
services in support of the country’s
developing oilfield infrastructure. It also
reflects the Group’s ability to capture
opportunities in high-growth markets
and be a partner of choice to its
worldwide customers.

In late 2014 Weir expanded its footprint
in Iraq by acquiring Weatherford OCTG’s
threading/machine shop and moving
into a purpose-built workshop facility
in North Rumaila, Basra, Iraq.

In-keeping with Weir’s safety culture, the
facility includes employee accommodation
on-site, reducing the need for travel in
the country and enhancing security for
our employees.

The new facility increases Weir’s capacity
in the country by adding new machines
and capabilities, enabling it to provide
wellheads and ‘Christmas trees’ to oil
and gas producers.

The Weir Group PLC Annual Report and Financial Statements 201441

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Operational Review continued

Weir Power & Industrial
Improving operations
to drive future growth

The Weir Group PLC Annual Report and Financial Statements 2014John Heasley
Divisional Managing Director

The division responded to mixed market conditions by
restructuring our operations to improve efficiency and
position Power & Industrial to take advantage of future
growth opportunities.

Key priorities and progress in 2014

Geographical expansion:

– Strong order growth in offshore oil and gas platforms in the Middle East and Asia.
– Expanded sales presence in Russia and Northern Europe.

Best-cost sourcing:

– Continued growth in manufacturing volumes in Korea, China, India and progressing

utilisation of assets in Malaysia.

Product development:

– Continued to develop Valve capabilities extending material ranges to deal with more

extreme environments.

– Commercialised turbine by-pass technology.

Aftermarket enhancement:

– Increased resource and capability in our aftermarket dedicated teams and, as a result,

Valve aftermarket orders increased 26% year on year.

Market expansion:

– Oil and gas orders increased by 20% with significant progress in LNG projects for our

safety valves product range.

– Enhanced application expertise with the addition of a number of specialist Valve and

application engineers.

Strategic Goals

Innovation

Collaboration

Value Chain Excellence

Global Capability

Market drivers
Uncertain global economic conditions
led to customer caution and subsequent
project delays in power, industrial and
downstream oil and gas projects,
with a few limited exceptions.

In the division’s core conventional power
markets, steady demand in the US and
China together with improving conditions
in India offset by weakness in Korea and
Europe. Nuclear activity gained some
momentum, including the announcement
of new developments in the UK but it will
be later in 2015 before many projects move
to the procurement stage. North American
Hydro markets recovered from a low point
in 2013 albeit not returning to peak levels.

There was weakness in mid and
downstream oil and gas projects with
customers cautious in allocating capital
expenditure and thereby delaying projects,
particularly in Europe and the Middle East.
In Liquefied Natural Gas (LNG), project
momentum continued for Australian and
Russian projects.

The slowdown in projects had a positive
effect on aftermarket orders with strong
demand across all geographies reflecting
more intense use of assets.

Aftermarket conditions were also supported
by the first major maintenance cycles
starting after the substantial increase in
Chinese power projects in the last decade.

Strategic progress
The division responded to mixed market
conditions and a consequently disappointing
margin performance by restructuring
operations as part of the Group-wide
efficiency review. The new structure will
more closely align resources to profitable
opportunities while reducing costs,
streamlining management and improving
accountability. The programme involves a
reduction of 90 posts and is expected to
generate annualised benefits of £10m by
the end of 2015. Value Chain Excellence
initiatives made progress and the division
will continue to support performance by
capitalising on its global manufacturing
capability in best-cost locations in
Malaysia, China and India.

Valves operational performance improved
throughout the year as a result of recent
investment. Hydro continued to use
its technology and deep end market
knowledge to develop strong partnerships
with customers.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014

Operational Review continued

Operating margin was down 360bps to
5.8% (2013: 9.4%) on a constant currency
basis, reflecting the disappointing operational
performance and product mix within Valves
and Services as higher-margin nuclear
revenues were replaced by lower-margin
commercial valve opportunities. Margins
also declined in Hydro, reflecting negative
operating leverage.

Investment
Capital expenditures of £9m (2013: £11m)
was primarily focused on expanding the
capacity of the division’s Valves facility
in South Korea.

Investment in research and development
declined slightly to £2.4m (2013: £2.9m)
with a new range of municipal pumps
progressing to field trials.

Outlook
Power end markets are expected to
remain subdued in 2015, with expenditure
in Europe impacted by low projected
economic growth rates and the majority
of project activity continuing to be located
in emerging markets. Mid and downstream
oil and gas markets will be impacted by
the recent fall in oil prices, with existing
and new projects subject to delays.

Supported by the opening order book and
good aftermarket opportunities, the division
is targeting constant currency revenue
growth and is expected to benefit from
measures taken at the end of 2014 to
improve the profitability of the business.

Operating profit*

£19m
-37%

2014

2013

2012

£19m

£30m

Revenue*

£318m
+1%

2014

2013

2012

£318m

£314m

£310m

* 2012 and 2013 restated at 2014 average exchange rates.

Market input breakdown

Power 58%
Industrial 15%
Oil and gas 14%
Other 12%
Minerals 1%

Geographic input breakdown

North America 33%
Europe 31%
Asia-Paciﬁc 26%
Middle East/Africa 8%
South America 2%

Strategic progress (continued)
There was further progress in oil and gas
markets with notable success in a number
of LNG projects and other severe service
applications.

In South Korea, we were pleased to
commission a number of turbine bypass
valves in the year which represents a
key strategic opportunity for our Control
Valve business.

Order input decreased by 4% to £314m
(2013: £326m) primarily due to a large
£20m one-off Services order in 2013 which
was not repeated and we withdrew from
low margin projects in Libya. Excluding this,
order input was up 3%. Original equipment
orders were down 3%, with strong growth
in Hydro more than offset by tougher end
market conditions and project delays in
Valves. Aftermarket input declined by 4%,
with strong double-digit Valves growth
offset by lower Services input. Total Valves
input was slightly down year on year.

Power markets represented 58% of orders
(2013: 61%) and the proportion of orders
from oil and gas markets increased to 14%
(2013: 12%), supported by the division’s
move into adjacent sectors such as LNG
and Floating Production, Storage and
Offloading (FPSO). Emerging markets
accounted for 35% of input (2013: 33%).

Revenue increased by 1% on a constant
currency basis to £318m (2013: £314m),
with aftermarket growth of 3% and original
equipment revenues broadly flat on the prior
year. Valves revenues were higher year on
year but slightly below expectations due
to customers delaying shipments and the
impacts of a four-week strike from late
November at its US facility. Hydro sales
fell as a result of the lower opening order
book. Full year divisional book-to-bill was
marginally negative at 0.99 (2013: 1.04).
Reported revenues fell by 3% after a 5%
foreign exchange headwind (2013: £330m).

Operating profit was down 37% at £19m
on a constant currency basis (2013: £30m)
as a result of margin declines across
Valves, Services and Hydro operations.
Valve operating profits were lower as a
result of £0.6m additional costs incurred
following strike action at its US facility in
December. Reported operating profits fell
41% after a 6% foreign exchange headwind
(2013: £31m).

The Weir Group PLC Annual Report and Financial Statements 2014Key priorities in 2015

Complete and deliver the benefits
of the division’s restructuring
programme.

Expand low-cost sourcing and
leverage VCE to deliver further
operational efficiency benefits.

Continue to grow Valve
aftermarket revenues.

Expand application and
product range through
new product development.

Expand geographical reach.

Partners in production worldwide

Serving South Korea’s
growing need for
electricity

South Korea’s electricity suppliers have
historically relied on nuclear and coal power
generation to meet consumption needs
of a growing population.

Liquefied natural gas (LNG) combined
cycle generation is an attractive and
fast-growing application in the region
due to its high-efficiency and cleaner
performance.

In 2014, the Power & Industrial division
delivered turbine bypass valves to two
new combined cycle LNG power plants
located in South Korea. The project
represented the successful execution
of the division’s strategy to serve global
power generation customers with newly
developed engineering solutions.

The new valves allow safer, more flexible
operation of combined cycle turbines.
During power plant commissioning, the
product allows the boiler to be tested
without running the turbine, saving
significant fuel costs and time in the
process. Weir International South Korea
delivered the valves to the 950 megawatt
Shin-Ulsan power plant in February
and then the same set of valves to the
Shin-Pyeongtaek power plant in March.
The project marked a breakthrough in

the country’s domestic power market
as they were the first valves of their
type manufactured locally for use in
the South Korean domestic market.

The technical expertise and product
innovation involved in turbine bypass
valves is market leading. The valves
use high alloy steels to cope with
operating temperatures up to 605
degrees Celsius and have a forged-
body design incorporating a number
of key features which enable safe and
reliable operation at high temperatures
and extreme pressures.

Since delivering the project Weir has
continued to develop the product
further and is now engaging with
Korean engineering, procurement and
construction companies involved in the
global power market including North
American and European customers.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014

Financial Review

Good underlying
performance in fast
changing markets

Jon Stanton
Finance Director

The Group performed well in 2014 in what were
fast changing markets. On a constant currency
basis, operating profit (before exceptional
items and intangibles amortisation) of £450m
represented an increase of 5% year on year
which clearly demonstrates the strength
of our operating model and the continued
benefits of the diverse end markets and
geographies in which we operate.

Operating profit (before exceptional items
and intangibles amortisation) on a reported
basis was down 4% on the previous year
and was after an adverse foreign exchange
impact of £37m.

Order input at £2,473m increased 9% on a
constant currency basis. Original equipment
orders were flat with the impact of lower
mining capex in Minerals offset by a recovery
in upstream Oil & Gas. Aftermarket orders
were up 14% supported by strong growth in
Oil & Gas and continued progress in Minerals.
Aftermarket orders represented 67% of
overall input (2013: 64%). Minerals order
input was £1,127m, slightly down on 2013
with the decline in original equipment orders
outweighing the growth in aftermarket.
Input in Oil & Gas of £1,032m was 34%
up on 2013 driven by a strong performance
in both Pressure Pumping and Pressure
Control. Input in Power & Industrial was
down 4% to £314m due to a weakening
project environment in the second half
of the year and with 2013 including a
£20m, one-off order.

Revenue of £2,438m was 9% up on
a constant currency basis. Aftermarket
accounted for 66% of revenues, a three
percentage point increase over the prior
year. Minerals revenues were down 4%
at £1,128m (2013: £1,178m) on a constant
currency basis, impacted by the industrial
action in South Africa and challenging
original equipment markets. Oil & Gas
revenues increased by 32% to £992m

as a result of strong growth in both original
equipment and the aftermarket. Power
& Industrial revenues increased by 1%
to £318m in 2014. The 2014 acquisitions
of Trio and Metra contributed £12m in
revenue. On a reported basis revenue
was flat following a £185m (8%) foreign
exchange headwind.

Operating profit from continuing
operations (before exceptional items and
intangibles amortisation) decreased by 4% to
£450m on a reported basis. The movement
in the average exchange rates year on year
resulted in a significant adverse translational
impact of £37m; the main driver being the
US Dollar which moved from an average of
$1.56:£1 in 2013 to $1.65:£1 in 2014. On a
constant currency basis, operating profit
increased by £20m (5%), with strong growth
in Oil & Gas partly offset by decreases in
Minerals and Power & Industrial. One-off
costs incurred in the period, excluding
exceptional items, were £2m (2013: £8m)
and related solely to acquisition and integration
costs, compared to the equivalent charge
of £3m in 2013. Acquisitions contributed
operating profit of £2m, before integration
costs. Unallocated costs were £20m (2013:
£14m), reflecting increased investment in our
strategic initiatives of Value Chain Excellence
and Innovation.

Operating margin from continuing
operations (before exceptional items
and intangibles amortisation) was 18.4%,
a decrease of 80 basis points on the prior

year (2013: 19.2%; 19.1% on a constant
currency basis). Minerals reported an operating
margin, on a constant currency basis, of 20.1%
(2013: 20.6%) for the full year reflecting a
higher mix of lower margin products and
investment in our comminution platform. The
Oil & Gas full year operating margin was in line
with the prior year at 22.7% (2013: 22.7%
constant currency) with strong flow-through on
revenue in Pressure Pumping offset by lower
margins in Pressure Control and the impact of
higher bonus costs compared to the prior year.
The operating margin in Power & Industrial
was 5.8% (2013: 9.4% constant currency) and
declined as a result of operational issues and
the impact of the different product mix within
Valves compared to 2013.

Earnings before Interest, Tax,
Depreciation and Amortisation (‘EBITDA’)
Depreciation of property, plant and equipment
in the period was £61m (2013: £59m)
resulting in EBITDA of £511m (2013: £526m).

Exceptional items and intangibles
amortisation
An exceptional charge of £212m (2013:
gain of £71m) and intangibles amortisation
of £45m (2013: £47m) resulted in total
Group operating profit for the year of £193m
(2013: £490m). The primary components
of the exceptional items in the current year
were the charge relating to the Group-wide
efficiency review announced in November
of £49m and the impairment of intangible
assets within the Pressure Control Cash
Generating Unit (CGU) of £160m.

The Weir Group PLC Annual Report and Financial Statements 2014The purpose of the efficiency review was
to identify opportunities to reduce costs,
increase customer responsiveness and
efficiency while aligning resources globally
to capture end market opportunities. The
total charge comprised an anticipated cash
cost of £30m, of which £8m was reflected
in the current year cash flow statement, and
an impairment of tangible assets of £19m.

The main components of the Group-wide
efficiency review within the Minerals division
were (i) rationalisation of the North American
businesses; (ii) closure and downsizing of
certain sites in Europe; and (iii) reductions in
headcount in response to market conditions
in a number of other operations including
Africa, Europe and South America. In the Oil
& Gas division the actions were primarily in
the Pressure Control business in anticipation
of changing market conditions. Within Power
& Industrial, the review will result in a
new operating structure to bring clearer
accountability for satisfying customers’
needs and improved profitability through
reductions in headcount and the exit from
low margin contracts, product lines and
activities. As a result of the continued
decrease in the oil price subsequent to the
year end, further actions have been identified
and are expected to lead to additional
exceptional costs of circa £20m in 2015.

The very significant decline in the oil price
towards the end of 2014 and at the start
of 2015, and the resultant impact on the
North American rig count and related activity
levels, has had a substantial impact on the
short to medium term forecasts of our
upstream oil and gas business. The Group
has already reacted to market conditions
through implementation of actions under
the Group-wide efficiency review and is well
placed to manage the current downturn.

The cash flow forecasts underpinning the
impairment testing reflect the current oil
price and depressed activity levels enduring
for the next two years, with pressure on
both volumes and pricing, and a measured
return to more ‘normal’ levels thereafter.
With regard to impairment testing of the
Pressure Pumping CGU, this business is
more mature than Pressure Control and
had significant levels of headroom between
net asset value and value in use prior to the
current market downturn. On this basis and
even under the stress testing undertaken,

no impairment has been assessed in
respect of the carrying value of assets
in this CGU. The impact on the Pressure
Control CGU is such that an impairment
charge of £160m has been recognised
at the end of the year, allocated entirely
against goodwill. Of the total impairment
charge, £60m relates to goodwill remaining
on the balance sheet post release of the
contingent consideration liability in 2013
and is essentially consideration that will
ultimately not be paid. Further detail is
presented in note 14. No impairment has
been identified in relation to any of the
other CGUs.

The other exceptional costs in the period
(note 5) relate to: (i) costs associated with the
proposed acquisition of Metso Corporation of
£2m; and (ii) an uplift of £1m in the net present
value of contingent consideration payable in
respect of the Weir International acquisition.

The exceptional gain in the prior year
related to the release of the contingent
consideration liability for Weir Mathena
of £68m and the curtailment gain of £3m
recorded following the decision to close
our main UK pension scheme to future
accrual with effect from 30 June 2015.

Amortisation decreased to £45m from £47m
in the prior year as a result of favourable
foreign exchange movements, partly offset
by the impact of the Trio acquisition.

Net finance costs
Total net finance costs, including exceptional
items, were £43m (2013: £59m). There were
four components of this net charge, the most
significant being the interest cost of £44m
(2013: £48m) on the Group’s borrowings
(including amounts in relation to derivative
financial instruments). The other elements
were finance income of £6m (2013: £3m),
a charge of £3m (2013: £4m) in relation to the
Group’s defined benefit pension plans and an
exceptional cost of £2m (2013: £11m) being
the unwind of the discount on contingent
consideration liabilities.

The unwind of the discount on the
contingent consideration liability is lower
than the prior year due to the non-recurring
impact of Mathena in 2013. The total
contingent consideration liability recorded
on the balance sheet in respect of all
acquisitions is £35m (2013: £28m).

Net finance costs (excluding retirement
benefit related amounts and exceptional
items) were covered 11.7 times by operating
profit from continuing operations, before
exceptional items and intangibles
amortisation (2013: 10.4 times).

Profit before tax from continuing
operations (before exceptional items and
intangibles amortisation) decreased by 2%
to £409m (2013: £418m). Taking foreign
exchange into consideration, the 2013 result
on a constant currency basis would have
been £35m lower with 2014 representing
growth of 7% year on year. Reported profit
before tax from continuing operations
decreased by 65% to £149m (2013: £431m).

The tax charge for the year of £106m
(2013: £108m) on profit before tax from
continuing operations (before exceptional
items and intangibles amortisation) of
£409m (2013: £418m) represents an
underlying effective tax rate of 25.8%
(2013: 25.7%). The Group’s policy with
regard to tax matters is discussed later
in this report.

Discontinued operations
The Group has recognised income from
discontinued operations of £1m (2013: £nil)
representing the release of unutilised
provisions in relation to previous disposals
on expiration of the tax warranty periods.

Earnings per share
Earnings per share from continuing
operations (before exceptional items
and intangibles amortisation) decreased
by 3% to 141.3p (2013: 145.4p). Reported
earnings per share including exceptional
items, intangibles amortisation and profit
from discontinued operations was 33.8p
(2013: 157.2p). The weighted average
number of shares in issue increased
slightly to 213.3m (2013: 213.0m).

Cash flows
Cash generated from operations before
working capital movements was down
£12m at £503m (2013: £515m). Cash
generated from operations decreased by
11% from £474m to £421m representing
an EBITDA to cash conversion ratio of
82% (2013: 90%). Working capital cash
outflows of £82m (2013: £41m) reflect an
outflow in the first half of £79m but only
£3m in the second half.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014
Financial Review continued

Operating margins1 (%)

Profit before tax1, 2 (£m)

19.1

19.2

18.4

500

400

300

200

100

440

418

409

2012

2013

2014

2012

2013

2014

1. Continuing operations excluding exceptional

items and intangibles amortisation.

2. 2012 restated to reflect the impact of IAS 19R

on pension costs.

Cash flows (continued)
Outflows in relation to both inventory and
receivables were driven by the strong
growth seen in Oil & Gas year on year.
Exceptional items in the period resulted
in cash outflows of £11m in relation to
the Group-wide efficiency review and the
Metso proposed acquisition (2013: £nil).

Net capital expenditure increased slightly
from £97m in 2013 to £101m in 2014,
reflecting strategic investments in production
capacity in Malaysia and Information Systems
across the Group, as well as building new
facilities for our Middle East services business
and a new R&D facility in SPM. The
settlement of financing derivatives resulted
in a net cash outflow of £3m (2013: £5m)
and additional pension contributions of £11m
(2013: £12m) were paid in the year in respect
of agreed deficit recovery contributions.

Free cash flow from continuing operations,
before cash exceptional items and after
dividends of £103m (2013: £83m), was
£79m (2013: £168m). Outflows in respect
of the acquisition of subsidiaries of £138m
resulted in a closing net debt of £861m
(2013: £747m, £791m constant currency).
On a reported basis, the ratio of net debt
to EBITDA was 1.7 times and on a debt
covenant basis was 1.6 times.

Return on Capital Employed (ROCE)
The Group’s ROCE of 18.1% for 2014
(on a constant currency and like for like
basis, excluding Trio) was slightly higher
than the prior year (2013: 17.5%).

Dividends
The Board is recommending a 5% increase in
the full year dividend, with a final dividend of
29.0p (2013: 33.2p). This reflects a rephasing
of the dividend such that the final payment
will represent approximately two-thirds of the
full dividend for 2014, making a total of 44.0p
for the year (2013: 42.0p). Dividend cover
(being the ratio of earnings per share from
continuing operations before exceptional
items and intangibles amortisation to
dividend per share) is 3.2 times. If approved
at the Annual General Meeting, the final
dividend will be paid on 29 May 2015 to
shareholders on the register on 1 May 2015.

Acquisitions and disposals
On 22 October 2014, the Group completed
the acquisition of Trio Engineered Products
(‘Weir Trio’) for a total consideration of
US$236m (£146m) inclusive of net cash
balances and a contingent consideration of
US$13m (£8m). Details of the contingent
consideration and related accounting are
presented in note 13. During the year the
Group also acquired 100% of the voting
shares of Metra Equipment Inc, (‘Weir Metra’)
for a cash consideration of CAD$6m (£3m).

Tax policy
The Group’s strategic tax objectives are to:
– comply with all applicable tax laws
and regulations, including the timely
submission of all tax returns and tax
payments; and

– develop and maintain strong working
relationships with local tax authorities
and undertake all dealings with them
in a professional and timely manner.

The Group has strong controls and clear
policies and procedures covering tax, which
must be followed by all finance personnel.
We take a conservative approach to all tax
planning with the overarching aim of paying
the right amount of tax at the right time in
each tax jurisdiction in which we operate.
As a large multi-national, we conduct our
business affairs in a way which is efficient
from a tax perspective, for example by
looking to take into account available global
tax incentives and allowances, but we do
not undertake tax planning for its own sake.

In terms of cash tax, the Group paid
income tax of £94m in 2014 across all of
its jurisdictions compared to £72m in 2013.
Net cash tax paid in the UK in 2014 across
corporation tax, VAT and payroll taxes was
approximately £41m (2013: £45m).

Treasury management
The Group is financed through a combination
of bank debt, fixed rate private placement
notes and equity. The capital structure is
managed centrally with the objectives of
optimising capital efficiency, diversifying the
investor base, achieving an orderly maturity
of funding yet maintaining a good degree
of financial headroom.

The principal financial risks faced by
the Group are those relating to liquidity,
foreign currency and credit risk. The Group’s
treasury policies and procedures, which are
reviewed and updated on a regular basis,
seek to reduce these financial risks. Within
this framework, the Group uses financial
assets and liabilities including derivatives
to hedge certain foreign exchange and
interest rate risks.

Funding and liquidity
The Group’s objective is to maintain a
balance between continuity of funding
and flexibility through the use of bank
overdrafts, bank loans and long term fixed
rate notes. During the year, the Group
obtained public credit ratings from Moody’s
(Baa1) and Standard & Poor’s (BBB+)
to expand the range of financing options
available. The Group held net cash balances
of £167m at the end of 2014 (2013: £69m)
representing operating balances held by
the Group’s subsidiaries.

In September 2014, the Group amended the
US$800m multi-currency revolving credit
facility, which was previously refinanced in
July 2013 and due to mature in July 2018.
The amendment extended the maturity date
to July 2019, with the option of two one-year
extensions. At 2 January 2015, US$210m
was drawn under the revolving credit facility.
Total unamortised issue costs at 2 January
2015 were £5m (2013: £5m).

On 12 January 2015, the Group repaid
US$90m fixed rate notes and £12m fixed
rate notes as these fell due. These were
refinanced using existing facilities including
the US$800m multi-currency revolving
credit facility and various uncommitted
Sterling borrowing facilities in place.

All covenants were met at 2 January 2015
with significant headroom under each
financial ratio.

The Group has additional committed and
uncommitted bonding facilities under which
guarantees are issued in order to support
commercial activities.

The Weir Group PLC Annual Report and Financial Statements 2014Credit management
The Group’s credit risk is primarily attributable
to its trade receivables with risk spread over
a large number of countries and customers.
There is no significant concentration of credit
risk. Credit worthiness checks are undertaken
before entering into contracts with new
customers and credit limits are set as
appropriate. We also use trade finance
instruments such as letters of credit and
insurance to mitigate any identified risk.
The Group’s exposure to the credit risk
of financial institutions is limited by the
adherence to counterparty limits and by
only trading with counterparties that have
a strong credit standing based on ratings
provided by the major credit rating agencies.

Interest rate risk management
The Group’s debt is in a combination of
fixed and variable rates of interest. It is
our policy to maintain a proportion of debt
at fixed rates of interest subject to the
future outlook for the level of interest rates.
As at the end of 2014, the proportion of
the Group’s debt at fixed rates was 78%
compared to 92% as at the end of 2013
due to additional borrowing on the revolving
credit facility and uncommitted facilities
during the year.

Foreign exchange
The Group is exposed to movements in
exchange rates for transactions undertaken
in non-functional currencies of the operating
companies concerned and the translation
of foreign currency denominated net assets
and profit and loss items.

All material transactional currency exposures
are hedged, usually by means of forward
contracts thereby ensuring certainty over
revenue and costs. Subject to local exchange
controls, foreign exchange transactions are
executed by the central treasury function.
No speculative transactions are undertaken.
Although hedging is carried out for all
material economic exposures, only five
subsidiaries applied cash flow hedge
accounting under IAS 39 during the period.

In respect of translational risk, the Group
has a policy to partially hedge United
States Dollar (US$), Australian Dollar
(AUD) and South African Rand (ZAR) net
asset exposures. This is achieved through
designating an element of foreign currency
borrowings, forward foreign currency
contracts and cross currency swaps as
net investment hedges against the Group’s
investments. The Group does not hedge
the foreign currency translational exposure
arising from profit and loss items.

The strengthening of Sterling relative to
2013 against most main currencies resulted
in a net gain on translation of net assets of
£45m, including the effect of the balance
sheet hedging programme. The fair value
of derivatives designated as net investment
hedges at 2 January 2015 was a liability of
£3m (2013: net £nil).

Further information on financial risk
management objectives and policies
can be found in note 30 to the Group
financial statements.

Retirement benefits
The Group has four defined benefit pension
plans, the largest of these being the two UK
plans. The Group has sought to pro-actively
manage its exposure to its pension plans
and more than half of the liabilities of the
main plan are hedged using insurance
policies, providing significant protection
against changes in market conditions.
During the period to 3 January 2014,
agreement was reached with the Trustees
of the main plan to close the plan to future
accrual of benefits with effect from 30 June
2015 and accordingly a curtailment gain of
£3m was recorded in 2013 as an exceptional
item in the Income Statement. With regard
to the key assumptions underpinning the
IAS 19 (Revised) valuation, the discount
rate applied to the pension liabilities has
decreased from 4.4% to 3.5% with RPI
inflation also decreasing from 3.4% to 3.0%
since 2013.

These changes have led to increases in the
liabilities which are only partially offset by
the returns on net assets and contributions
in excess of benefit accrual. Combined
these have led to an increase in the net
deficit in the Group’s retirement benefit
obligations from £70m to £94m over
the year.

Net assets
Net assets at the end of 2014 were £1,482m,
a decrease of £5m on the prior year (2013:
£1,487m). This decrease is driven by the total
net comprehensive income for the year of
£93m less dividends paid of £103m.

Litigation
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 or claims, either individually or
in aggregate, will have a material adverse
effect on the Group’s financial position.
All actions are robustly defended.

i) Asbestos-related claims
Certain of the Group’s US-based
subsidiaries are co-defendants in lawsuits
pending in the United States in which
plaintiffs are claiming damages arising from
alleged exposure to products previously
manufactured which contained asbestos.
The Group has comprehensive insurance
cover for these cases and since the
inception of the litigations in 2002 all claims
have been directly managed by the Group’s
insurers who have, in the intervening period,
made settlements totalling approximately
£10m as well as meeting all associated
defence costs. The insurers and their legal
advisers agree and execute the defence
strategy between them and there are no
related cash flows to or from the Group. We
expect this to continue for the foreseeable
future as long as the litigation arises.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Financial Review continued

Free Cash Flow (£m)

Return on Capital Employed1 (%)

200

150

100

168

22.3

17.5

18.1

2012

2013

2014

2012

2013

2014

Litigation (continued)
i) Asbestos-related claims (continued)
At the end of 2014, there were 1,503
asbestos-related claims outstanding in
the US (2013: 1,129). In light of the recent
significant increase in claims, a review was
completed to assess the adequacy of the
Group’s insurance policies to meet future
settlement and defence costs. As a result of
this review we have estimated settlement
and defence costs for existing and projected
claims which may be received in the next
five years and recorded a provision of
£28m within ‘employee related provisions’
(note 22) with an equivalent receivable
for insurance proceeds recognised in
‘other receivables’.

This provision represents the Directors best
estimate of the future liability at this time
although given the lack of consistent claims
and settlement history, these estimates and
the period over which they are assessed
will continue to be refined.

Due to the inherent uncertainty associated
with estimating future costs in respect of
asbestos-related diseases, there can be
no guarantee that the assumptions used
to estimate the provision will result in an
accurate prediction of the actual costs that
may be incurred. However, we do not expect
there to be a net financial exposure to the
Group given the comprehensive insurance
cover in place.

ii) Contingent liabilities
A claim has been made by Philippines Gold
Processing & Refining Corporation against
Weir Services Australia Pty Limited (WSA),
a subsidiary of the Company, in arbitration
proceedings in respect of two contracts
relating to the refurbishment and installation
of a mill undertaken by WSA in 2007-2008
and 2008-2009, respectively. The amount
claimed, which totals approximately £58m
plus interest, seeks damages for the cost of
repair and subsequent replacement of the
mill together with business interruption loss
at the processing plant. The original value
of the contracts was around £1m. WSA is
contesting the claim on multiple grounds.
The claim is being vigorously defended
although the outcome remains uncertain.
The arbitration process is expected to
conclude by the end of 2015. A contingent
liability has been disclosed in note 27.

The Directors are of the view that the
outcome of legal proceedings in 2014 in
relation to the UN Oil for Food programme
is such that a contingent liability no longer
exists in relation to this matter.

Critical accounting policies
The financial statements have been
prepared in accordance with IFRS and
the material accounting policies are set
out on pages 123 to 129 of this report.
There have been no significant changes
to the accounting policies adopted in 2014.

In the UK, there are 26 (2013: 26) outstanding
asbestos-related claims which are not the
subject of insurance cover. The expected
settlement costs of these and anticipated
future claims in the UK are fully provided
for within ‘employee related provisions’ in
note 22.

In the process of applying the Group’s
accounting policies, management has
applied certain judgements, assumptions
and estimates. These estimates and
assumptions are based on historical
experience, information available at the
time and other factors considered relevant.

1. Continuing operations EBIT (excluding Trio EBIT

and exceptional items) divided by average net assets
excluding net debt, pension deficit (net of deferred
tax asset) and Trio net assets. 2012: As 2013/14 but
also excluding Mathena and Wales.

Those with the most significant effect on
the amounts recognised in the financial
statements are set out below. Further
judgements, assumptions and estimates
are set out on page 123.

Acquisition accounting
On the acquisition of a business management
assess: (i) the Purchase Price Allocation (PPA)
in order to attribute fair values to separately
identifiable intangible assets providing they
meet the recognition criteria; (ii) the fair
values of other assets and liabilities; and (iii)
compliance with the disclosure requirements
of IFRS 3, ‘Business Combinations’.

The fair values of these intangible assets
are dependent on estimates of attributable
future revenues, margins and cash flows,
as well as appropriate discount rates.
In addition, the allocation of useful lives
to acquired intangible assets requires the
application of judgement based on available
information and management expectations
at the time of recognition. The valuation of
other tangible assets and liabilities involves
aligning accounting policies with those of
the Group, reflecting appropriate external
market valuations for property, plant &
equipment, assessing recoverability of
receivables and inventory and exposures to
unrecorded liabilities. In deriving appropriate
fair values the process will inevitably involve
the use of estimates and the application of
management judgement. The disclosure
in relation to the acquisition of Trio in the
current year is provided in note 13.

The Weir Group PLC Annual Report and Financial Statements 2014Taxation
Uncertainties exist with respect to the
interpretation of complex tax regulations
and the amount and timing of future
taxable income. Given the wide range of
international business relationships and the
long term nature and complexity of existing
contractual arrangements, differences
arising between the actual results and the
assumptions made or future changes to
such assumptions could result in future
adjustments to tax income and expense
already recorded. Provisions are established
based on reasonable estimates for possible
consequences of audits by the tax
authorities of the respective countries in
which the Group operates. Management
judgement is used to determine the amount
of such provisions taking into account that
differences of interpretation may arise on
a wide variety of issues depending on the
conditions prevailing in the respective
Group company’s domicile. Detailed tax
disclosures are provided in notes 7 and 23.

Jon Stanton
Finance Director
25 February 2015

Impairment
IFRS requires companies to carry out
impairment testing on any assets that
show indications of impairment as well as
annually for goodwill and other intangible
assets with indefinite lives and so not
subject to amortisation. This testing
includes exercising management judgement
about future cash flows and other events
which are, by their nature, uncertain.
During 2014, we completed impairment
testing over the Group’s cash generating
units (CGUs) and the details of this
exercise are disclosed above and reported
in note 14.

Retirement benefits
The assumptions underlying the valuation
of retirement benefits assets and liabilities
are important and based on actuarial advice.
Changes in these assumptions could have
a material impact on the measurement of
the Group’s retirement benefit obligations.
Sensitivities to changes in key assumptions
are provided in note 24.

Provisions
Provisions are recognised where the Group
has an obligation, as a result of a past event,
that can be measured reliably and where an
outflow of economic benefit is considered
probable. Management judgement is used
to determine the amount of such provisions,
taking into account the commercial drivers
which gave rise to them, the Group’s
previous experience of similar obligations
and the progress of any associated legal
proceedings. Provisions for inventory and
trade receivables are assessed along with
those provisions set out in note 22. With
regard to inventory provisioning, historical
usage, as well as anticipated future demand
is considered (note 16). Where changes to
these factors occur during the period this
may impact on the assumption integral to
management’s assessment of the provision
and the overall valuation. Any changes are
recognised in the income statement in
the period.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Sustainability Review

Sustainability: Essential
for business success

The Weir Group PLC Annual Report and Financial Statements 2014The Group seeks to balance the broad societal benefits of our growing
business with potential environmental and social impacts arising from
our operations. Our business strategy is created with a fundamental
premise that acting responsibly and sustainably is unconditional.

The Group has six sustainability priorities:

Environment

Our People

Health and safety

Our Communities

Products and
technology

Ethics

Engagement with stakeholders during 2014

Engaging with stakeholders

Employees

Investors

Communities

Suppliers and
customers

Government
and regulators

- Code of Conduct
- Global intranet
- Formalised staff

meetings
(‘Town Halls’)
- Net Promoter®

surveys
- Personal

- Calls and face-to-
face meetings

- AGM
- Reports and

announcements

- Website
- Roadshows
- Capital

Development Plans

- Training

programmes
- Weir University

Markets Day
Investor Relations
app for mobile
devices

(e-learning facility)

- Social media

- Fundraising events
- Sponsorship
- Partnerships

with educational
institutes
- Trainee and
mentorship
programmes
- Volunteering
- Armed Forces

Covenant
- Social media

- Face-to-face
meetings

- Weir customer
experience
programme
- Global supplier
scorecard for
strategic suppliers

- Code of Conduct
-

ISO 14001
certification

- Trade shows and
industry events

- Social media

- Consultation
responses

- Commissioning

of reports
- Face-to-face
meetings
- Visits to sites
- Briefing papers
Industry events
-

We believe that acting responsibly and
sustainably aligns with our core ethos
and creates long-term value for all key
stakeholders. Our goal is to operate
efficiently, minimise our environmental
impact, work in an ethically and socially
considerate manner and build confidence
and trust with our stakeholders.

Sustainability underpins the Group’s
strategic priorities outlined on pages 8
and 9 and is inherent in the Company’s
purpose and values.

Launched in 2013, our fourth strategic pillar
of Value Chain Excellence (VCE) recognises
the vital importance of ongoing sustainability.
In the VCE system, we consider not only our
own operations, but in addition assess those
of our customers and suppliers.

Our sustainability approach is embedded
in our business through six key areas:
environment, health and safety, products
and technology, our people, our communities
and ethics.

This Sustainability Review outlines
the importance of these six areas to
the business, our performance in these
areas over the past year and the policies
and practices applied to help monitor and
manage this performance.

During 2014, we reviewed how
sustainability priorities are identified and
assessed at a Group level. We are in the
process of completing a formal materiality
assessment to confirm those issues with
the greatest importance for our business.

Following the outcomes of our materiality
assessment, the changes which we believe
need to be made to our existing processes
will be incorporated into our management
systems.

The materiality assessment is being
conducted in line with the Global Reporting
Initiative G4 guidelines, which are generally
considered to comprise global best practice
for sustainability reporting.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Sustainability Review continued

Environment

Gavin Nicol
Director of Operations,
Support & Development

We continue to incorporate environmental sustainability
into both our strategic decision making and our daily
operational activities.

those sustainability issues with the greatest
importance for our business, and will reflect
the outcomes in our existing processes and
management systems.

Managing environmental risk
Environmental, Health & Safety (EHS)
Management System
Identifying and managing environmental
risks is a key component of Weir’s
internal control framework. The Weir
EHS Management System sets out the
11 priorities for assessing and measuring
potential environmental impacts and
details required control measures. These
include, for instance, the use of registers
to support compliance with permit and
authorisation requirements, adherence
to storage, containment and management
criteria to mitigate potential impact on
soil and groundwater, and assessment
of environmental noise for all operations.
Together, these measures are designed
to enable conformance with all applicable
legislation.

ISO 14001: Environmental
Management System
ISO 14001 is an internationally recognised
standard which sets out a framework for
effective environmental management
systems. Certification to ISO 14001 not
only provides the mechanism to adequately
manage environmental considerations
but also demonstrates our ongoing
environmental performance in terms of legal
and environmental policy requirements.

Under the Weir EHS Management System,
all continuing operations are required to
maintain ISO 14001 accreditation. As part
of the integration process, new acquisitions
are expected to implement an environmental
management system and to seek external
ISO 14001 accreditation.

Monitoring impacts
The Group operates an EHS audit
programme which assesses compliance
against a set of globally applicable EHS
standards. A minimum standard has been
prescribed against each of the criteria within
the 76 EHS standards and ensures that
there is both a leading EHS indicator of
performance and an assurance process for
all relevant stakeholders that EHS risks are
adequately controlled across our operations.
The 2014 audit programme gave an average
14% increase across our subsidiaries.

Environmental incidents and fines
No significant environmental incidents
were reported at sites under the operational
control of the Group during the 52 weeks
to 2 January 2015. A minor environmental
incident was reported at a Weir Seaboard
customer site in Pennsylvania on 5 January
2014. No injuries were sustained, however
natural gas and production fluid were
released during the disassembling of
equipment. A well control contractor repaired
the well, removed contaminated soil and
monitored the groundwater. A formal field
complaint report was completed with root
cause and corrective action analysis. There
was also a minor non-conformance in relation
to the reporting of environmental data from
one of the Group’s subsidiary companies.

We operate under an awareness not just
of the potential impact our business can
have on the environment, but equally the
risk to our operations from extreme weather
or other environmental events. One incident
of adverse business impact relating to
a climatic event during 2014 has been
reported: tropical cyclones in Southern India
caused landslides and affected transport
infrastructure, impacting operations of key
customers. More details on risk can be
found on pages 24 to 31.

The Group’s strategy for environmental
management is three-fold:
1. Identify and quantify key potential

risks within the business;

2. Manage and minimise potentially
adverse impacts arising from its
operations; and

3. Track and report on the potentially

most significant impacts.

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Where we acquire or open new sites,
we assess the means by which potentially
material environmental risks can be minimised
and look to adopt new technologies and
recognised good practice to help achieve this.

We also strive to innovate and enhance the
positive benefit of our products and services.

Identifying potential risks and impacts
Risks are assessed, and quantified, in terms
of impact and likelihood of occurrence, both
before and after control mitigation. Risk is
assessed across a range of factors, one
of which is environment. As noted in the
introduction to this Sustainability Review,
we are in the process of completing a
formal materiality assessment to identify

The Weir Group PLC Annual Report and Financial Statements 2014

Greenhouse gas emissions
We are a growing business and the markets
that we work in mean the majority of our
businesses are energy, and thus carbon,
intensive. However, we also have operations
in the hydro, wind and nuclear energy
industries which are contributing to the
production of cleaner, low-carbon energy.
Weir Minerals Africa provides high efficiency
WRT impeller technology for both new and
existing slurry pumps. This reduces energy
input for the pumps and increases the
operating life of the equipment. The result
is a smaller overall carbon footprint, due to
fewer parts being replaced less frequently,
as well as fewer parts being manufactured.
Recycled high chrome iron scrap is used
to manufacture these parts.

A review of our approach and systems for
measuring our global greenhouse gas (GHG)
emissions was undertaken in 2013 to evolve
best practice and to enable compliance with
the new carbon reporting requirements
under The Companies Act 2006 (Strategic
Report and Directors’ Report) Regulations
2013. In our last report, we reported that
we had procured a new software solution
to enable more complete data collation
and accurate emissions calculation.

Implementation of the system, including
user training and data entry, was completed
during 2014. Regular review of our data
management system, processes and
procedures is planned in order to maintain
and improve the relevance, accuracy and
scope of our reporting over time.

Our calculation methodology remains
aligned with the principles of the
‘Greenhouse Gas Protocol: A Corporate
Accounting and Reporting Standard’
developed by the World Business Council
for Sustainable Development and the
World Resources Institute.

The Group has chosen to follow the
‘operational control’ approach, whereby it
accounts for 100% of the GHG emissions
from operations over which it has control.
This is consistent with our approach to
financial accounting and reporting. On this
basis, all subsidiary companies are included
in reported annual GHG emissions, whilst
our joint ventures which are not under our
operational control are not. However, in
reviewing our reporting, we have excluded
some sites on the basis of materiality or
because of the type of site. The Group
GHG Inventory Management Plan provides
guidance on our operational control approach.

The UK government GHG Conversion
Factors 2014 have been used to calculate
UK emissions. Factors from other credible
sources have been used for overseas
operations, specifically those published by
the US Environmental Protection Agency,
the International Energy Agency and the
Intergovernmental Panel on Climate Change.

All elements considered likely to make a
material contribution to Scope 1 and Scope 2
emissions have been included. Scope 1
sources are those emissions for which the
Group is directly responsible, i.e. combustion
of fuel for the operation of our facilities.

Scope 2 sources comprise those emissions
for which the Group is indirectly responsible,
i.e. from the electricity, heat, steam and
cooling we purchase to use in our operations
or equipment.

Activities in recent years have focused on
improving systems for GHG data capture and
reporting across our global business, with a
focus on Scope 1 and 2 emissions. We do
not currently measure or report Scope 3
emissions, which relate to sources not within
our direct control, third-party warehouses and
transport in vehicles not owned by the Group.
However, we have conducted a high level
qualitative assessment of which sources of
Scope 3 emissions may be more material
for our business. Those identified include
purchased goods and services, transportation
and distribution and use of sold products,
and we are considering how to manage
these in the future.

The Group’s GHG data collection process
is subject to ongoing review, resulting
in improvements in the consistency and
accuracy of the reported data. In particular,
2013 was the initial year of implementing
our comprehensive global GHG reporting
system. During the course of updating the
system with 2014 data, and conducting
a review and assessment of data with our
external consultants, we have enhanced
the methodology and therefore the quality
and consistency of the 2013 data set,
enabling us to report an updated baseline as
217,772 tonnes of Carbon Dioxide equivalent
(tCO2e) for 2013. This compares against the
reported total emissions of 212,000 tCO2e,
representing a variance of 2.7%.

Total Annual GHG emissions and emissions intensity by scope

Scope 1: On-site combustion of fuel

Scope 2: Purchased electricity, heat, steam and cooling for own use

Total

2013 versus 2014 – Foundry Emissions

Total annual GHG emissions
(tCO2e)

Emissions intensity
(tCO2e per £m revenue)

2014

2013

76,418

85,245

132,339

132,527

208,757

217,772

2014

31.3

54.3

85.6

2013

35.1

54.5

89.6

Scope 1: On-site combustion of fuel – all foundries

Scope 2: Purchased electricity, heat, steam and cooling
for own use – all foundries

Annual GHG emissions
(tCO2e)

Proportion of total global
annual GHG emissions

2014

2013

19,769

22,545

2014

9.5%

2013

10.4%

65,109

66,946

31.2%

30.7%

GHG emissions intensity
(tCO2e per tonne
of metal poured)

2014

0.6

2.0

2013

0.6

1.9

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Sustainability Review continued

Monitoring impacts (continued)
Greenhouse gas emissions (continued)
The restatement has been applied in
accordance with recognised international
standards, including the World Resources
Institute, and in line with the principles set
out in our Inventory Management Plan,
approved in 2013 and revised and updated
in 2015 to promote best practice in the
collection of data across the Group.

The Group’s total annual GHG emissions
in tCO2e for the 52 weeks ended 2 January
2015 and the updated data for the 53 weeks
ended 3 January 2014 are set out on page 55.

GHG emissions figures for 2013 (as
updated) are presented as the baseline
against which year on year performance
is measured.

The Group now operates seven foundries,
which are the most energy intensive areas
of the business. We have presented foundry
GHG emissions separately to enable closer
performance review in a separate table,
also on page 55.

Case study: Environment

As with total global GHG emissions,
restated 2013 emissions figures for
the foundries have been provided as
a performance baseline.

For the first time in four years, we are
reporting a reduction in absolute GHG
emissions across the Group. It is very
encouraging to see a change in the trend
in both absolute emissions and emissions
normalised by revenue. This suggests that
the results of our energy efficiency and
carbon reduction projects are now being
reflected in performance. Our foundries
account for approximately 40% of our total
GHG emissions and therefore monitoring
foundry performance is particularly important
for driving onward performance. We have
started to analyse the GHG emissions from
these on an emissions per tonne of cast
weight and between 2013 and 2014 there
has been a marginal increase in carbon
intensity of energy at the foundries. This is
to be expected, given a slight reduction in
throughput but a minimum energy base
load required to maintain operations.

Minimising potential impacts
Energy/GHG reduction measures
One of our sustainability improvement
priorities is to reduce our energy use and in
relative terms associated GHG emissions.
Our focus to date has been to set and
manage targets at an operating company
level. We have aspirations to define carbon
and potentially broader sustainability
performance goals across the business to
supplement the site level process. We will
review this following completion of the
sustainability materiality assessment.

Details of some of the sustainability
improvement measures undertaken
and targets set during 2014 are:
– Weir Minerals Africa implemented power
factor correction at the Isando foundry,
delivering a predicted reduction in
electricity usage of some 80 to
100 Megawatt hours (MWh) per month.

– Weir Gabbioneta replaced fluorescent
light tubes with LED light fittings and
this project has saved over £10,000 and
51 tonnes of CO2e in the first year.

Rubber as an
engineering material

Natural rubber is an engineering material
with unique properties.

Natural rubber is used in many Weir
products, including seals for valves, liners
for pumps and cyclones, as well as linings
for process vessels and pipes. Natural
rubber is preferred due to its outstanding
toughness which gives it superb abrasion
resistance properties, exemplified by
Weir Minerals’ Linatex® Premium Rubber
known throughout the mining industry
due to outstanding performance as well
as its familiar red colour.

The primary rubber tree species cultivated
as a crop is the Hevea Brasiliensis tree
with the main producers of natural rubber
latex being Thailand, Indonesia, Malaysia
and India. Over 12 million metric tonnes
of natural rubber were produced globally
in 2013.

Natural rubber’s unique physical properties
are due to its inherent molecular structure
created by nature. For 90 years, Weir
Minerals Malaysia, the home of Linatex®
production, has perfected the art of
optimising the properties of Linatex® and
maximising its abrasion resistance by
uniquely processing directly from latex.

Linatex® Premium Rubber is a 95%
natural rubber that exhibits outstanding
resilience, strength and resistance to
cutting, tearing and abrasion. In addition,
natural rubber is a highly sustainable
crop. Rubber plantations not only provide
employment but rubber trees are also
an important raw material source for
furniture, manufacturing and as a bio-fuel.
More importantly, rubber trees can be
used to ‘sequester’ carbon dioxide from
the atmosphere.

The Kyoto Protocol (1997) requires
developed nations to cut their
greenhouse gas emissions in order to
tackle climate change. Carbon dioxide
(CO2) is one of the major greenhouse
gases created due to economic activity
but each rubber tree can ‘fix’ one metric
tonne of CO2 during its 30 year economic
life. It is estimated that one hectare of
natural rubber plantation can sequester
up to 30 metric tonnes of CO2 per year.
Carbon is also returned to the ground
as leaves fall and is also captured in
natural latex itself. Rubber trees have
an optimum period of productive life

after which they are cut down and
a new tree planted. Weir Minerals
Malaysia only uses natural rubber
from such a sustainable source.

Developing products that use natural
rubber as an engineering material helps
increase the sustainability of our products
and practices.

The Weir Group PLC Annual Report and Financial Statements 2014UK Energy Savings Opportunity Scheme
Following a regulatory review, it has been
determined that the Group will be required
to participate in Phase 1 of the Energy
Saving Opportunities Scheme (ESOS)
Regulations 2014. ESOS is part of the UK’s
implementation of the EU Energy Efficiency
Directive 2012 (EED), which requires EU
member states to introduce a framework of
measures for promoting energy efficiency.
The purpose of ESOS is to measure the
energy consumption of large organisations
from buildings, transport and industrial
processes, determine participants’
significant areas of energy consumption
and identify cost effective energy saving
measures though auditing a representative
sample of key areas of consumption.

The Group is in the process of determining
the most effective means of meeting
the requirements of these regulations,
which are to be complied with by early
December 2015.

– Weir Minerals Europe in Todmorden

reduced gas usage for space heating
by 45% in the machine shop and
25% in the main office by improving
employee awareness. Overall, this saved
603MWh of gas energy, equivalent to
over 111 tonnes of CO2e.

– Weir Minerals India installed electric
heated thermic fluid rather than a
diesel fired boiler for the rubber plant
in Bangalore. CO2e emissions were
reduced by 27% from 916 tonnes to
670 tonnes.

The Group continues to install and make
use of telepresence video-conferencing
facilities at its major sites worldwide.
There are now 16 sites in eight countries
with dedicated telepresence conference
rooms. These allow meetings to be held
throughout the Group as though attendees
were in the same location. The facilities
were used for both Board and Group
Executive meetings as well as budget
review meetings during the year, and their
use has resulted in a notable reduction
in air travel and related GHG emissions.
We estimate that the use of telepresence
has saved over 1,300 tonnes of CO2e.

Recycling
As part of our environmental sustainability
strategy, our businesses also focus on
improving resource efficiency; for instance,
increasing the proportion of waste materials
that are recycled and reducing the total
quantity of waste going to landfill.

Foundry recycling (’000 tonnes)

12.9

11.9

13.2

3.1

2.6
2.5

4.5

3.6

3.8

0.7
0.6
1.0

Foundry Metal
Reused Internally
Tonnes

Foundry
Scrap Metal
Purchased from
Customer
Tonnes

Foundry Metal
Recycled to Third
Party
Tonnes

Foundry Timber
Recycled
Tonnes

2012

2013

2014

Nearly 13,000 tonnes of metal were reused
internally in our foundry operations in 2014.
39% of all metal poured in the foundries in
2014 was reused internally, compared to
34% in 2013. The increase in the amount
of metal being reused compared to the prior
year is a reflection of the full year recycling
data for the foundries acquired during 2013
in Malaysia and South Africa being included
in the 2014 data.

Additional reporting mechanisms
CDP Climate Change Initiative
The CDP scheme (formerly known as
the Carbon Disclosure Project) is a global,
voluntary initiative for major companies to
measure, disclose and share information
about sustainability performance and
associated risk management and
performance with transparency
and accountability.

In 2014, we achieved a disclosure score
of 90 out of a possible 100 and a ‘C’ rating
for our sustainability performance relative
to that of other participants. This notable
improvement on our 2013 score (77 D)
reflects our ongoing commitment to
continued improvement for all aspects
of environmental sustainability.

UK Carbon Reduction Commitment
Energy Efficiency Scheme
Having met the qualification criteria, the
Group was required to participate in Phase
1 of the UK Carbon Reduction Commitment
Energy Efficiency (‘CRC’) Scheme. The
mandatory scheme aims to encourage large
organisations to reduce GHG emissions
through energy efficiency interventions.

During specific scheme years, participants
are required to purchase and surrender
sufficient CRC allowances for their relevant
GHG emissions. In 2014, the Company
purchased and surrendered 3,437 CRC
allowances at a cost of £41,244. A legal and
technical assessment has confirmed that
the Group does not qualify as a participant
in Phase 2 of the scheme and was therefore
no longer obligated to participate in the CRC
Scheme after Phase 1 ended in March 2014.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Sustainability Review continued

Health and Safety

The Weir Group is committed to a
zero harm environment. Every Board
meeting begins with a discussion
of the Group’s progress towards
its ambition of achieving a Total
Incident Rate (TIR) of zero.

In order to achieve that ambition, the Group
has a range of initiatives to keep our people,
customers, suppliers, sub-contractors and
the environments in which they operate
safe. In 2014, no fatalities were reported.

EHS Excellence Committee
The action towards a zero-accident workplace
is led by the Environment, Health & Safety
(EHS) Excellence Committee. Its remit is to
set and monitor rigorous standards to improve
EHS performance across the Group. In 2014,
the committee continued to implement the
Weir Group EHS Roadmap, which charts
the path to a safer workplace and which
is now in its third year of implementation.
The committee has started the process of
updating the roadmap to ensure it continues
to drive progress in further years.

Weir EHS Management System
The Weir EHS Management System
establishes a common set of EHS standards
and expectations for addressing the risks
that our operations face. Its purpose is to
embed health and safety within our culture,

behaviours and actions. The Duty of Care
System provides an unbroken chain of
accountability from the Chief Executive to
our newest apprentice and details individual
responsibilities for managing EHS risks.
The EHS standards cover nine primary
areas of risk, from supply chain to field
operations, and provide step-by-step
guidance on the minimum requirements
expected at all of Weir’s operations
anywhere in the world. Each division has a
dedicated EHS director and they are jointly
responsible for developing and delivering
EHS strategy across the Group. In addition,
they lead the implementation of the Weir
EHS Management System and delivery of
our EHS objectives. In 2014, employees
in every Weir business received training
in the standards.

Individual business units and all employees
are engaged in delivering health and safety
improvements. This includes employee
safety committees, hazard and near miss
reports and intra-departmental auditing.

It consists of three major strands:
i) Safe Start; ii) climate surveys; and
iii) participant observations. In 2014,
we have completed our target of having all
operational employees trained in strand one.
Overall, Weir Zero Harm promotes a culture
that values behaviours which continually
improve EHS performance. The system
involves face to face training in identifying
behavioural types and behavioural states,
and the critical errors that these can cause.
The training is designed to promote safe
behaviours and to increase awareness
of how personal behaviours and habits
influence risks.

Measuring progress
These efforts contributed to a reduction
in the Group’s TIR which measures lost
time and recordable incidents divided by
200,000 hours worked. The results for 2014
show that our incident rate reduced by 20%
compared to the previous year.

TIR performance

Weir Zero Harm Behavioural
Safety System
Progress continued in the roll-out of the
Behavioural Safety System, known as Weir
Zero Harm. The Weir Zero Harm programme
is focused on establishing demonstrable
behavioural change across the entire Group.

2.0

1.5

1.0

0.5

1.6

1.0

0.8

2012

2013

2014

Case study: Health and safety

A critical priority
for Weir

Weir’s products are designed to operate
in some of the world’s harshest environments,
supported by a global service centre network.

At the heart of this operation is safety.
Weir assesses its safety performance
using a Total Incident Rate (TIR) which
measures medical treatment of any kind
required by employees, excluding first aid
injuries, divided by 200,000 hours worked.

In the last three years, the Group has
implemented the Weir Environmental,
Health and Safety (EHS) Management
System. This has resulted in a significant
improvement in the Group’s TIR
performance of nearly 80%,
from 3.4 in 2011 to 0.8 in 2014.

Safety is discussed at every Board
meeting which helps to set a culture of
continuous improvement throughout the
business. The EHS management system
sets minimum standards of performance
and, through a stringent audit process,
safety compliance is carefully monitored.
Through continuous improvement,
compliance scores have increased by
over 30% since 2012, despite increases in
the scope and level of standard required.

The EHS management system focuses on
improving safety through the publication of

best practice and protocols for high-risk
activities. The system encourages visibility
and transparency of all incidents, with rigorous
reviews and corrective actions being taken
as appropriate. This work is complemented
by ongoing training and education
programmes throughout the organisation.

The Board is committed to maintaining
EHS as a critical priority for the Weir
Group and does not tolerate complacency.
Weir continues to target a TIR of ≤1 and
an EHS audit score of >40% throughout
the organisation.

The Weir Group PLC Annual Report and Financial Statements 2014Products and Technology

Case study: Products and technology

Duralast™
Fluid End system

Hydraulic fracturing, the process of creating
fractures in oil and gas bearing rock formations
to release trapped hydrocarbons, requires large,
robust reciprocating pumps that operate in
adverse environments.

The last few years have seen a rise in
pumping pressures due to rock formations
becoming increasingly difficult to access.
Gradually, the mechanical stresses in the
pump components have approached their
design limits.

The Weir Advanced Research Centre
embarked on a programme to extend
pump longevity. Three primary failure
modes were identified and separate
research projects were initiated to
address each. Once the wear mechanisms
and failure modes were fully understood,
an innovative approach was taken to
create and assess options to extend
the operating life by reducing the peak
mechanical stresses in the critical
areas of the highly loaded components.
A number of solutions were selected for
detailed analysis, then prototype testing.
The final combination of improvements
selected was determined using a
scientific approach, combining advanced
finite element analysis and computational
fluid dynamics with controlled prototype
testing. Field testing in collaboration with
some of the Group’s customers was
conducted to validate the changes
before a full market launch.

The most significant and yet simplest
change was to offset the valve and plunger
bore axes in the fluid, or wet end of the
pump, resulting in a reduction in peak
stress of over 30%. This increased the
service life of the fluid end to nearly twice
the life of conventional technology. Design
and utility patents have been granted for
this feature. Combined with advanced
materials, the offset bores extend the
service life by more than five times that
of previous products.

Other enhancements delivered by this
programme, resulting in a fluid end with
superior life, include optimisation of
the design of the valve and seat, and
further enhancements to the advanced
manufacturing processes used by the
Group in the preparation of the critical
components. Together, these have enabled
our customers to be more efficient by
improving the service life of fluid ends.
By utilising finite element stress analysis
and fluid dynamics, the Weir Advanced
Research Centre and the Group’s Pressure
Pumping engineering team optimised the
geometrical design of the fluid end system
specifically for today’s pressure pumping
applications. The results have been publicly
recognised by many of Weir’s customers
and development of the Duralast™ Fluid
End system continues into 2015.

As one of the world’s leading
engineering businesses, we are
committed to developing sustainable
products and technology. We continue
to target our innovation efforts on
products and services which make
our customers more efficient by
improving performance, durability
and safety, as well as reducing
potential environmental impacts.

The Group recognises the benefits of
collaborating with a wide range of partners
to turn the best ideas into effective
products and services for our customers.
In 2014, this involved working with some
of the world’s leading universities to
help us develop and exploit emerging
technologies that create new products for
our end markets and provide competitive
advantages to our customers. During 2014,
Weir invested resources in building a
collaborative relationship with Imperial
College, London, a world-renowned
research establishment. This culminated
in the recent commitment to a partnership
to develop radical, new solutions to some
of the most aggressive challenges
experienced by our customers.

Engineering Excellence Committee
Weir’s Engineering Excellence Committee
comprises senior engineering and
technology leaders from around the
business, including the Group Head of
Technology, technology directors from
each of our three divisions, the business
head of our Bangalore-based engineering
services team and the director and project
manager of the Weir Advanced Research
Centre. Its role is to ensure that through
collaboration we are sharing and implementing
best practice across all of our engineering
teams, and, specifically, driving leading
edge technology and innovation.

The Committee drives the product
innovation strategy across the Group
and during 2014 defined four key areas
of focus to support the growth and
development ambitions of the business.
Firstly, three core technologies have been
identified that are critical to the current
and future product portfolio. These will
attract increased focus during 2015.
Secondly, resources will be assigned
to the development of a Weir engineering
system. Thirdly, the further development
and enhancement of our engineering talent,
building on demonstrable improvements
in the last three years. Finally, some fine
tuning of the Weir engineering culture
to ensure an even greater engagement
with our customers to ensure an increased
and better understanding of their future
technical challenges.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Product stewardship
Effective product stewardship ensures that
every aspect of our products and services
is incorporated in the design process. This
includes environmental, health and safety
and social considerations, from the drawing
board to decommissioning and 2014 saw
significant progress being made on the
product stewardship initiative launched
the previous year. Risk assessments have
now been completed on the majority of
the existing product portfolio. This involved
taking an objective and systematic approach
to the assessment of potential hazards
associated with each product family,
then determining an appropriate mitigation
strategy for each. Product stewardship
has now been embedded in the Weir
New Product Introduction (NPI) process,
making it a business-as-usual activity.

In product stewardship, Weir Minerals
Netherlands is currently participating in a
three year sustainability research project
with the objective of determining the
metrics of product design to review the
environmental impact throughout the life
cycle of a product. In parallel, the company
is establishing a roadmap for business
development in which the environmental
benefits of its applications are considered
as an integral aspect of the product offering
alongside the technical and durability
requirements of the market.

During 2014, product stewardship was
also formally integrated into the Weir
Environmental, Health and Safety system.

Sustainability Review continued

Weir’s operating companies work with
their customers to optimise the design
and benefits available in their products.
For example, in 2014, Weir Minerals
India’s mill circuit optimisation initiative
for customer Hindustan Zinc resulted in
an estimated increase in recovery of 10%.
For Trimex Sands, truck transportation of
sand for two kilometres was replaced by
pumping slurry through a pipeline, thereby
resulting in an estimated saving of 15% of
fuel consumed. In the same year, another
customer, Gujarat Industries Power
Company, benefited from an optimisation
of the hydraulic design of the rotor of their
boiler feed pumps which resulted in an
estimated power consumption reduction
of 65 kilowatt hours per pump.

Many of the Group’s products and services
are also used in low carbon applications
such as nuclear and renewables power
generation. For example, Weir American
Hydro creates state-of-the-art hydro-turbine
designs. Hydropower generates cleaner
energy that helps to offset carbon
emissions. In 2014, Weir American Hydro
developed and put into production new
turbine design software to improve the
efficiency and performance of its Francis
turbine designs. This software is called
AHRDS (American Hydro Runner Design
System) and the benefits realised during
this process include time-saving for other
departments in the value chain and a
reduction in lead time for our customers.

Weir Mathena identified the opportunity to
modify the design of its Shale Gas Separator
in 2014. The Shale Gas Separator has proven
to be a critical solution as energy operators
drill for liquids and natural gas utilising large
volumes of air verses traditional drilling fluid.
The purpose of the modification was to
extend the life of discharge piping; reduce
water usage related to plugging; and reduce
compressor use for discharge air jet. The
discharge assembly was re-engineered
to optimise the balance of pressure drop
without plugging. The result was a dramatic
decrease in the volume of compressed
air required to operate the unit and thus a
significant decrease in the diesel fuel required
to run the generator for the compressor.

Design and innovation
The Group spent £24.8m (2013: £21.5m)
on research and development during the
financial year. Weir has more than doubled
its spend on fundamental research and
development since 2009 and views
meaningful investment in this arena as an
essential element in supporting innovation,
one of our four strategic pillars. We expect
this growth in investment to continue as
we work towards developing products
and technologies which not only reduce
environmental impact but are also capable
of operating in the most challenging
conditions. Weir is recognised as a world
leader in the development and application
of wear resistant materials technology.

Now in its fourth year of operation, the
Weir Advanced Research Centre (WARC)
is Weir’s central research and development
hub, supporting each of the three divisions
and complementing the R&D activity
ongoing around the world by the individual
businesses. The Group has links with over 18
universities around the globe, each carrying
out fundamental and applied research into
the following areas: materials and surface
treatments, advanced manufacturing
processes, fluid flow and wear mechanisms.

As WARC continues to evolve and the
earlier projects near completion, the newly
developed technologies continue to bring
benefit to the businesses and support the
launch of innovative new products into the
market place. WARC is currently processing
two patent applications for innovative
technologies which are being developed
in the research centre.

Early in 2015, WARC will transition to the
newly built Technology and Innovation
Centre (TIC) based at the University of
Strathclyde in Glasgow, Scotland. TIC is a
hub for world-leading research, transforming
the way academics, business, industry and
the public sector collaborate. Construction
of the TIC building has been completed
following a total investment of £89m
from the University of Strathclyde,
Scottish Enterprise and the European
Development Fund.

During 2014, the Group, in collaboration
with the University of Strathclyde and other
strategic partners, has made a number
of applications for both UK and European
research funding. This includes Horizon
2020, which is the biggest EU Research
and Innovation programme ever. Leveraging
research grants such as these enables
the Group to maximise its investment
in research and development.

The Weir Group PLC Annual Report and Financial Statements 2014Our People

Pauline Lafferty
Director of Human Resources

Motivated, skilled and effective people
are imperative to our business.

those who have many years of experience
working with Weir. We mirrored our
geographical and cultural diversity and
conducted workshops in five geographical
territories. The results indicated that our core
values should remain the same, but that it is
now appropriate to re-express these values in
language more fitting with our business today.

In 2015, a further 30 senior managers will
join the programme which will run in North
America. Since its launch, over 20 members
of the senior management group have
become programme learning advisors to
their colleagues, giving substantial time
to help foster a peer learning culture.

We are committed to attracting and
retaining the best people, and developing
them to ensure they achieve their full
potential. In doing so, we seek to:
– ensure no form of prejudice stands in
the way of recruitment, development
or promotion opportunities;

– encourage, invest in and support our

employees to achieve their full potential;

– identify the training and development
needs of employees and find ways
to fulfil those requirements;

– use the Weir Group Personal Development
Plan (PDP) to address how we can support
the development of our employees;
– employ and retain people who share

our values and behaviours and actively
discourage those who do not;

– work to maintain a business environment

where individuals feel valued and
respected; and

– provide development opportunities to
internationally mobile employees by
encouraging overseas appointments.

Our values
The Weir Group believes in doing business
in an ethical and transparent manner at all
times. Our core values underpin this belief,
as follows:
– we value, support and care for

our colleagues working towards
a common purpose;

– we act with integrity and are

accountable to ourselves and others;

– we strive to make our customers

successful;

– we explore ideas and possibilities
to deliver innovative solutions; and
– we are committed to quality in all

that we do.

Our values are embedded within our
personal development planning process
through regular employee appraisals and
within all of our development programmes.
In 2015, we will focus on ensuring our
values are embedded within our businesses
to ensure that they remain an integral part
of our culture.

Weir Leadership Programme
As part of our leadership development
programme, we work to equip future
leaders with the skills necessary to lead
the Group. The programme aims to deliver
a sustainable step change in Weir leadership
capability, specifically addressing our drivers
of growth: Value Chain Excellence, Global
Capability, Innovation and Collaboration.

The nine-month programme consists
of residential events and monthly virtual
conferences. Participants are asked to bring
with them a strategic business objective to
progress along with a set of learning goals
for the programme. Pre-work includes
completion of a Weir Leader Feedback
Survey (360 degree), Myers-Briggs Type
Indicator® and pre-reading. The Group
Executive and members of the Weir
leadership team are involved in delivering
elements of the programme and in actively
supporting the learning process.

In 2014, we updated and refreshed our
values in consultation with our teams across
the Group. We conducted workshops with
a cross section of employees, from those
who have recently joined our team to

In 2014, around 60 senior managers took
part in the programme, with a total of 275
managers taking part since the programme
was launched in 2011.

Weir Business Management Programme
The Weir Business Management
Programme, run in conjunction with the
University of Strathclyde Business School,
puts in place a contextualised executive
education programme that provides our
leaders with the required management
skills and knowledge to succeed within
the Group.

Participants work towards the completion
of a post-graduate certificate in management
studies through modules including operations
management, commercial law and
innovation. As well as the academic benefits,
the programme promotes greater networking
and global collaboration by bringing together
a team of people from a mix of divisions,
regions and functional backgrounds,
who complete the programme together.

In 2014, around 40 managers took part
in the programme, with a total of 115
managers taking part since the programme
was launched in 2012. A further 25
managers will start the Weir Business
Management Programme in 2015.

Weir MBA
Participants of the Weir Business
Management Programme have the
opportunity to obtain a full Masters
in Business Administration (MBA)
qualification. In 2014, 24 ‘graduates’ of the
Weir Business Management Programme
started their Weir MBA journey. Modules
will continue throughout 2015 and they will
complete their MBA in the summer of 2016.
In 2016, we aim to start the second group
of managers on the Weir MBA.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Sustainability Review continued

Weir First Line Leadership Programme
During 2014, the Weir First Line Leadership
Programme was developed and rolled out
across the Group, targeted at our people
who are stepping up to their first line
management role (or are preparing to
do so). This programme has added to our
Management and Leadership Development
Framework and is a key building block
developing future managers and leaders to
ensure the ongoing success of our business.

The programme offers a blended solution
that is built around 12 key Weir leadership
attributes and is accessible via the Weir
University (see below), making it a flexible
development resource that first time
managers can fit round the demands
of their job.

Since its launch in June 2014, over 600
people have started the programme, with
over 1,000 learning modules accessed.

Weir University
The Weir University is an online learning
resource which provides all employees
with access to continuous professional
development materials such as e-learning
courses, presentations and reading material.
This online resource continues to evolve,
providing modules on topics such as health
and safety, engineering, procurement,
marketing, lean manufacturing principles,
planning and project management, diversity,
leadership, finance, IT and supply chain.

Access to the Weir University is available
to employees across the Group and user
numbers continue to increase. Since its
launch in 2011, over 7,700 hours of training
have been delivered. More content, aligned
to business requirements, will be added
to Weir University in 2015, including
‘Infosmart’: modules on information
security and intellectual property; and
further Code of Conduct online training.

Developing our graduates
Our graduate development programme
was established in 2011 and is designed
to provide people joining Weir as a graduate
with greater leadership understanding and
experience. It prepares our graduates to
take on more demanding roles as their
career within the Group develops. In 2014,
we recruited a total of 19 graduates from a
variety of professional disciplines. A further
17 graduates (from a previous intake) from
across the world attended the well-
established Weir Graduate Development
Programme in Scotland. In 2015, another
20 graduates will attend this programme.

During 2015, we will continue to improve
our Graduate Development Framework
to ensure that we provide a best-in-class
personal development offering to our
graduate population.

Supporting society and
developing our people
We undertake various initiatives across
the organisation in support of the needs
of local people within the regions in which
we operate.

Arkwright Scholarships: The Arkwright
Scholarships Trust is a registered UK charity
that identifies, selects and engages the
engineering industry in offering two-year
scholarships to 15-16 year old students
who are focused on pursuing a career in
engineering, either through apprenticeships,
further or higher education. We supported
three scholars in 2012 and 2013 and have
engaged with another two students in 2014.
In 2015, we will look to expand this type
of initiative into our international markets.

Armed Forces Covenant: The Weir Group
is among a growing list of organisations
which have signed the UK Government’s
Armed Forces Covenant. The document
is a written and publicised voluntary
pledge from businesses and charitable
organisations which wish to demonstrate
their concrete support for the armed forces
community. The covenant commits Weir to
supporting the armed forces and its alumni
by employing veterans, offering flexibility
to employees who are reservists and
supporting local cadet units. While the
document has been produced by the UK
Armed Forces community, the Group aims
to adopt these principles, where possible,
in every region in which it operates.

CSCLeaders: A number of our leaders
undertook specialist leadership development
programmes during the year. One such
programme was CSCLeaders, a global
leadership development conference run
by Common Purpose which “assembles
exceptional senior people from across
the Commonwealth to tackle challenges
that businesses, governments and society
face today”, with the aim of building global
relationships for the future.

Primary Engineer: Primary Engineer is a
UK not-for-profit organisation established
in 2005 which aims to encourage young
people to consider careers in Science,
Technology, Engineering and Mathematics
(STEM) related professions. In July 2014,
Weir became a founding member of
Primary Engineer’s Institution of Primary
Engineers and Institution of Secondary
Engineers which was launched at the
House of Lords in London.

33Fifty: 33Fifty is a Global Leader
Experience for young Commonwealth
leaders aged between 18 and 25.
The name comes from the fact that
33% of the world’s population lives in
the Commonwealth, and 50% of those
are under 25. In July, as the corporate

partner for the programme, Weir hosted a
group of students in Glasgow ahead of the
Commonwealth Games. The next event
is planned for the 2018 Games in the Gold
Coast, Australia.

Diversity and inclusion
We seek to recruit and develop people
regardless of background or personal
circumstance. All of our businesses operate
in compliance with the inclusion and diversity
laws and regulations in their respective
countries. The majority of our operating
companies have a diversity and inclusion
policy in place.

On 2 January 2015, we employed 16,347
people across the Group, an increase
of 1,127 since last year. Of our 16,347
employees, 14,317 are male and 2,030
are female. There are nine Directors of
The Weir Group PLC: seven males and
two females. The Board Diversity Policy
is to maintain a significant level of female
representation on the Board.

The Senior Management Group is made up
of 302 people, 269 of which are male and
33 are female. In addition, there are 99
individuals who are directors of subsidiary
companies of The Weir Group PLC, who are
not part of our Senior Management Group.
Of these, 90 are male and 9 are female.

A joint cross-business group is in place to
drive best practice in embracing diversity
and inclusion across the organisation
and our Finance Director, Jon Stanton,
is the executive sponsor for diversity
and inclusion.

In 2014, Jon and our customer EDF Energy
were interviewed about the importance
of diversity and inclusion in the customer/
supplier relationship. The video was
promoted internally to employees through
Weir’s internal employee blog and can
be viewed online at weir.co.uk/careers/
working-at-weir/diversity. In addition, we
developed a global project plan to address
diversity and inclusion issues, changing our
recruitment protocol accordingly, including
equal opportunity monitoring and engaging
our Group Executive in an unconscious
bias workshop.

We are a member of Race for Opportunity,
the race campaign from Business in the
Community, and Opportunity Now, the
women at work campaign from Business
in the Community. Race for Opportunity
is committed to improving employment
opportunities for ethnic minorities across
the UK. Opportunity Now empowers
employers to accelerate change for
women in the workplace.

The Weir Group PLC Annual Report and Financial Statements 2014our financial performance and highlighting
areas of focus, including safety. Videos
were also used to support Value Chain
Excellence communications, diversity and
inclusion, education and understanding of
our markets.

The Group publishes an online news-
letter, available at weir-bulletin.co.uk
in eight languages.

Employee engagement is measured
throughout the year using a combination
of methods, including Net Promoter®
scoring which assesses and evaluates
employee satisfaction.

Further information on our employment
policies and employee involvement and
feedback initiatives is contained in the
Directors’ Report section below at page 109.

Case study: Our people

Developing our
graduate network

Weir has recruited around 150 graduates
since its graduate development framework
was established in 2011.

The week included a tour of Weir’s facility
in Venlo which manufactures equipment
for the mining and aggregates market.
The graduates, who are based across
Weir’s global operations, had the
opportunity to learn more about the
Minerals division, the Venlo facility and
the products which are manufactured
locally. In 2015, around 30 graduates
who were recruited in 2013 will attend
this programme in Fort Worth, Texas.

In 2014, the inaugural Weir Graduate
Alumni Programme was held close to
Weir Minerals’ Venlo operational base
in the Netherlands and was attended by
24 graduates who were recruited in 2011
and 2012. The week-long event enabled
the graduates to continue their personal,
team and business learning and develop
their network with their peers.

Working as a group, the graduates
undertook a problem-solving exercise
relevant to the Weir Group and designed
to test their knowledge, skills and ability
to work together. With input from
external facilitators, the graduates were
given a refresher on essential business
skills including effective public speaking,
leadership and personal development.
There was also an opportunity to reflect
on their experience of the Weir Group
Graduate Development Programme
with Weir’s Head of Learning and
Development, Jim McHarg.

Succession planning
Over 140 years of knowledge and expertise
has enabled Weir to become the global
engineering solutions provider that it is today.
We recognise the absolute importance of
strong succession planning to identify our
engineers and leaders of the future. As such,
we have developed a robust management
and leadership development framework
which supports the succession planning
process across each of our businesses.

We recognise the importance of balance
in developing talent from within the Group,
as well as bringing in external expertise
in order to successfully compete in the
competitive markets of the future.

Initiatives at a local level seek to ensure
knowledge is retained within the business.
In various parts of our business, we pair high
potential employees with mentors who are
nearing retirement. This programme actively
supports succession planning and knowledge
transition from our highly-skilled workforce.

Employee engagement
We believe strong employee engagement
is an important attribute of a successful
and innovative organisation. In the past
12 months, we have been developing
our employee engagement channels.

At our offices, factories, workshops and
service centres across the globe, our
employees take part in regular meetings
known as ‘Town Halls’. These sessions
typically last 60 minutes and are designed
to educate, inform and share knowledge
and understanding of best practice and
occasionally include external speakers.
Topics regularly featured include safety,
conduct and operational performance.

An internal employee blog called
‘Talking Weir’ was introduced in late
2013 and is consistently one of the most
popular areas of our intranet. In 2014,
the blog featured articles on a range of
subjects including safety, diversity, working
with our communities, innovation, personal
development and ethics from employees
at all levels of the organisation. Comments
on articles are encouraged.

Members of the Group Executive meet
monthly to discuss operational issues
and Group strategy. In August, we began
publishing monthly blogs from members
of the Group Executive, highlighting what
is discussed at these meetings and
demonstrating openness and transparency
from the most senior level of the Group.

In 2014, the Group began to make greater
use of video to communicate internally.
In January, the Chief Executive published
a ‘start of the year’ message focusing
on safety and performance. In March and
July, an internal interview with the Chief
Executive was published, talking about

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014
Sustainability Review continued

Our Communities

Case study: Our communities

Weir Cares in
the community

Weir Cares is the name of the corporate social
responsibility (CSR) programme at Weir India,
which started in 2008 and is largely driven
by employee volunteers.

During 2014, Weir India undertook a
review of its CSR activities, with a CSR
committee being formed in March 2014.
The agreed budget and activities were
determined with the involvement of the
core volunteer groups at all the business
units in India.

During 2014, over 1,500 hours were spent
volunteering by employees at Weir India.
Weir Cares identifies underprivileged
groups and works alongside or in
partnership with non-governmental
organisations (NGOs) whose focus is
on education, health and sustainable
livelihoods. During the past six years,
the number of partners has increased
from two to eighteen. One of the main
projects undertaken includes responding
to the healthcare needs in Gokul Village,
Hubli. The Sanjeevini Health Clinic was
set up by Weir BDK in 2011 and employs
medical staff to provide highly subsidised
treatment to the community.

Weir BDK also adopted the Government
Higher Primary School, in Gokul, Hubli,
in 2011. Since then, the company has
supported infrastructure development
through the building of a new school block
with three classrooms, toilet facilities and
an activity centre. In addition, they have
invested in the educational needs of the
children through the provision of a full-time
computer teacher and English speaking

classes. The school received the award
of Best Regional School in 2014. Weir
volunteers also support the high school
in the same village, conducting health
education for the pupils and sponsoring the
development of a science activity centre.

In Peenya, an industrial area in Bangalore,
Weir India supports various initiatives
including working in partnership with
the local Government Industrial Training
Institute (ITI). Since 2008, Weir volunteers
have been coaching students at the ITI
on writing their resumes and interview
techniques, enhancing their chances of
employment. In 2014, volunteers also
explored a new livelihood enhancing
initiative to improve hands-on training
for students of the ITI, where Weir is
undertaking to repair and maintain five
turner section machines and provide
monthly hands-on training sessions for
groups of students using these machines.
In addition, in June 2014, Weir volunteers
and NGO staff at Bangalore Medical
Services Trust provided HIV/AIDS
education to over 500 students at
the ITI. In the wider community, Weir
Cares volunteers facilitated the STOP
Malnutrition initiative during 2014.
A health screening camp was set up to
help malnourished and underprivileged
children in Peenya and 40 children were
provided with free medication.

The Group is fortunate to be a part of
many communities around the world.
We value the contributions these
communities make to our businesses
and strive to make a positive impact
in return.

Wherever we operate, we aim to:
– be responsible employers and neighbours;
– respect the communities we operate in;
– strive to make a positive impact by the

responsible running of our operations; and

– invest in the communities for the long
term mutual benefit of the community
and Weir.

We believe the best people to look after
the interests of communities are those who
live and work there. That is why we devolve
responsibility for community relations to
the people who know them best – our local
businesses. Like any good neighbour, we
build close relationships by regularly having
open conversations so that local people are
well informed about any of our projects that
might affect them. Where issues do arise,
we listen carefully and do our best to help
find a solution.

We support our local communities through
charitable contributions and by being a
source of employment, education and
training. In addition, we support our
employees in their community initiatives
and fundraising activities. For instance, Weir
Gabbioneta in Italy participated in Green
Day which is part of an ongoing initiative
called Zero Impact. Employees planted
trees and helped maintain a local park in
order to reduce CO2 emissions. Weir Oil &
Gas Services in Aberdeen has also engaged
a local furniture manufacturing company
which employs individuals who receive
training in joinery and associated trades to
help them gain employment in those fields.

2014 marked the hundredth anniversary
of the outbreak of World War I and Weir
helped to commemorate the sacrifices
made by so many in that conflict by
sponsoring the UK’s Armed Forces Day
celebrations, which took place in June.

The interaction of our businesses is far
reaching but is governed by our desire
to support and improve the communities
in which we work. Key priorities are the
improvement of health and education
of both our employees and the local
community. It is viewed that contributing
to these two areas can have an enduring
effect on the wellbeing of the individuals
and the community as a whole.

The Weir Group PLC Annual Report and Financial Statements 2014As a 144 year old engineering company, we
are particularly keen to develop engineering
excellence. Weir was the first company
in Scotland to set up an apprentice school
and our commitment to training is as strong
in the 21st century as it was in the 19th.

Charitable giving
In 2014, the total amount of charitable
donations made by Group companies was
£597,700 (2013: £457,000). We do not
make any political donations. This includes
cash and non-cash items such as services,
materials, employee time and use of
corporate facilities.

Following its pilot run in 2013, the
Group continues to support the Primary
Engineer initiative, and also the Arkwright
scholarships, both detailed above in the
Our People section. 2014 also marked the
third successive year of support from the
Group towards a 3D printing programme,
run in partnership with Scottish Council
for Development and Industry and the
Department of Design, Manufacture and
Engineering Management at the University
of Strathclyde. Funding of £11,650 was
provided by Weir to cover the purchase
of ten 3D printers to selected secondary
schools and a contribution towards the
support provided by student mentors.

Charitable donations

Community 42%
Education 36%
Health 22%

In 2014, the Group agreed to a sustainable
partnership in the development and
operation of the Newlands Junior College
in Glasgow. This is a newly established
vocational school giving career opportunities
to young people who may be disengaged
with the traditional education system, and
who have the potential to excel in their field.

Weir SPM held a health fair in 2014 where
employees were offered free screenings,
including blood pressure, BMI and
cholesterol, by a health care provider.

Weir Minerals Brasil promoted a health
week which involved a variety of workshops,
nutritional advice and medical diagnosis
sessions at their plant in Jundiaí, São Paulo.
The event was for all employees and
contractors and approximately 380 people
took part.

As well as contributing funds or time towards
several non-profit organisations locally in
California, Weir Minerals Floway is partnered
with Valley Children’s Healthcare (formerly
Children’s Hospital Central California). ‘Big
Heart, Little Hands’ is a project the hospital
has created as an opportunity for volunteers
to donate a designated period of time to
conduct an activity for the hospitalised
children, which employees at Weir Minerals
Floway participate in each month during
working hours.

Community 42%
Education 36%
Health 22%

The Group continues to work in partnership
with AMAR International Charitable Foundation
(AMAR), a British not-for-profit organisation.
In 2013, we made a commitment to support
AMAR financially over the next three years to
improve health, education and training in Basra,
Iraq, where Weir has operations. In 2014, the
Group contributed approximately £100,000
to AMAR, which has been used to support
a health conference and the running of two
women’s training centres.

Education
Our businesses provide experience and
training to develop the next generation
of engineers. Whilst our focus may be
on engineering, we also provide work
placements and internships across all
sectors. Our placement projects allow
school children and young people from
around the world to see the opportunities
available to them by working for a
global business.

With the aim of promoting opportunities for
education and careers in engineering, the
Weir Group holds an Engineering in Schools
competition. For the third consecutive year,
secondary school pupils across Scotland
were asked to produce a report and present
on the topic ‘The importance of engineering
in Scotland’. This year’s winners were
a team from Arbroath High School, who
impressed the panel with their insights
into renewable energy and won £3,000
for their school.

In May 2014, the Group was one of the
main sponsors of the ‘Be Your Personal
Best’ campaign with 150 young school
pupils from all over Scotland being inspired
by Sir Chris Hoy and Katherine Grainger to
“be their personal best in life“. This was
run in partnership with The Winning
Scotland Foundation.

Employee activities
The Group is very proud of the charitable
work that our people undertake. Our
businesses operate their own policies for
supporting these, whether by matching
donations, providing support or equipment
or by allowing employees to participate in
charitable activities during working hours.

A small selection of the numerous projects
undertaken by our employees in 2014 is
highlighted below:
– Employees at Weir Specialty Pumps built a
patio at a home for adults with disabilities.
– Each month, employees at Weir SPM in
Texas, USA, cook meals for families with
sick children at nearby hospitals.
– At Weir SPM in Canada, employees

made a contribution of CAD$4,000 to
a local food bank.

– Employees at Weir Minerals Netherlands
dedicated 100 working hours to charitable
initiatives during the year.

– Weir Minerals Andean employees spent
a day building a local community garden.

– Employees at Weir Minerals Linatex
North America volunteer for a variety
of roles, including sitting on various
non-profit boards or as firefighters or
emergency medical technicians in
their communities.

Weir Minerals Multiflo supports the
Mechanical Engineering Scholarship at the
University of the Sunshine Coast in Australia,
by the provision of funds to the scholarship
winners. These individuals, along with others
from universities in Queensland, seek work
experience placements as part of their
engineering programme. Support for these
initiatives provides a career pathway into
engineering for the undergraduates and
develops an engineering employee pipeline
for our business.

Weir Minerals Latin America participates
in programmes in Brazil, Chile and Peru,
where students are invited from schools
and universities to work as apprentices
within the local businesses. At the end
of the apprenticeship, if they match the
required competencies they may be
offered a job with the Group.

Health
Being a truly global company, health can
play a key issue in the communities in
which we operate. The Group supports the
health of its employees, their families and
communities through various programmes
and initiatives, which are often run in
partnership with local service providers.
A small selection of the activities undertaken
by Weir companies is outlined below.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Sustainability Review continued

Ethics

Keith Ruddock
Group General Counsel
and Company Secretary

A critical feature of the Group operating
as a well-managed and sustainable company
is our commitment to doing business at all
times in an ethical and transparent manner.

All employees are expected to
maintain the highest standards
of integrity consistent with our
Code of Conduct.

A revised edition of the Code of Conduct
was launched in January 2014 and full
details are provided below on page 67.
As noted in the Our People section above,
we also redefined our values in consultation
with business teams across the Group.
As part of this process, we have also
created a set of behaviours which underpin
our values. These behaviours are not new
to us and are already demonstrated in our
operations across the world. By defining
these behaviours, however, we are clearly
setting out what we expect of our people
now and in the future. These behaviours
should be exhibited in all aspects of our
day to day business operations.

The Group has been a member of the
FTSE4Good Index since September 2013.
Created by the global index company FTSE
Group, FTSE4Good is an equity index series
that is designed to facilitate investment in
companies that meet globally recognised
corporate responsibility standards. FTSE
Group confirms that the Company has been
independently assessed according to the
FTSE4Good criteria, and has satisfied the
requirements to become a constituent of
the FTSE4Good Index Series.

Companies in the FTSE4Good Index Series
have met stringent environmental, social
and governance criteria, and are positioned
to capitalise on the benefits of responsible
business practice. The Company is very proud
to be included in the FTSE4Good Index.

The Company is also a member of
Transparency International UK’s Business
Integrity Forum, having joined in September
2011. Transparency International UK (TI-UK)
is the country’s leading anti-corruption

organisation and part of the global
Transparency International (TI) movement.
The Business Integrity Forum is the UK’s
leading anti-corruption forum for businesses
in all sectors, comprising companies and
professional firms of all sizes. Through their
membership, companies are demonstrating
their support for TI’s work, helping TI in its
mission to reduce corruption in both the
public and the private sector throughout
the world. All members sign up to a set
of principles and are dedicated to ensuring
their operations and business dealings
are corruption free. Through the Forum,
companies have the opportunity to have
well-informed discussions with peers
and experts, increasing their knowledge
in relation to risks, mitigating measures
and emerging trends, as well as making
a positive contribution to TI-UK’s thought
leadership and to the wider international
debate on corruption.

Code of Conduct
The Code of Conduct provides a clear
framework for decision-making, highlighting
the values and behaviours we expect our
people to demonstrate whilst making those
decisions. It provides details on how we
expect our people to conduct themselves
on a day-to-day basis and guidance on
where to go for help.

Supporting the second edition of the
Code of Conduct is a mandatory e-learning
programme. A new provider was appointed
during 2014, with the programme being
rolled out towards the end of the year.
The first wave of training was targeted
at head office and other Group functions,
Weir China, Weir India and Weir Africa
employees who are deemed to have
a potentially higher risk of exposure to
bribery and corruption as a consequence
of their decision-making responsibilities
with regard to third parties, including
customers, suppliers, and sales agents.

This includes the Senior Management Group,
as well as sales and marketing, purchasing
and finance employees within certain sectors
of the Company’s operations. Subsequent
training will be targeted at all divisional
business employees. Approximately 2,300
employees have already completed the
online compliance training programme, and
a further 1,700 are currently undertaking the
training. After completion of the assessment,
all participants are asked to complete a
compliance statement to confirm that they
have read, understood and comply with
the Code of Conduct in their work for Weir.
The completion of the e-learning programme
and online certification is monitored by the
Company Secretary.

The Code of Conduct is also reinforced
through various means of communications
with our employees, such as induction
training, Town Hall meetings, conferences,
training courses and our 100 day integration
plan for new acquisitions. The Code applies
to everyone who is employed by the Weir
Group and compliance is of the utmost
importance. Anyone found in breach of
the Code may be liable to disciplinary
action, up to and including termination of
employment or cancellation of contract.

Competition law
During 2014, the Company completed a
comprehensive review of its competition
law (anti-trust) policies and procedures.

As a result, the Weir Group Competition
Law Manual was produced and is accessible
to all employees via the Weir intranet.

The document was designed specifically
to meet our business needs in very close
cooperation with our businesses. It provides
an overview of competition law; a description
of how competition law is enforced across
the world; guidance with respect to dealings
and meetings with competitors; guidance

The Weir Group PLC Annual Report and Financial Statements 2014Case study: Ethics

Updated Code
of Conduct

The Code of Conduct (the ‘Code’) covers
a wide range of topics, including anti-bribery
and corruption, competition (anti-trust) law,
developing our people, health and safety,
use of Group property and resources,
and conflicts of interest.

A major review of the Code was
undertaken during 2013 with input
from various sectors of the Group.
The revised Code received Board
approval in January 2014 and was rolled
out during 2014. The revised edition
reflects developments in a number of
areas, both externally and within the
Group, since it was first introduced
in January 2011. In particular, these
changes address developments in the
areas of anti-bribery and corruption and
in relation to competition (anti-trust) law.

Reflecting the global nature of our business,
we have translated the document into 12
languages. The Code can be accessed by
our employees via our Global Intranet, as
well as being available to download from
our website. Copies are also shared with
our key suppliers, customers, agents and
distributors. As before, it reinforces our
shared core values and behaviours –
known to us all as the Weir Way.

The Code has three main purposes:
– firstly, to clearly set out the behaviour
we expect from all of our employees;

– secondly, to provide guidelines to help
our people follow the Weir Way; and
– thirdly, to enable all employees to raise
concerns or ask questions if they have
any doubts about someone’s actions
or activities.

The Code of Conduct provides our people
with a clear framework on which to base
decision making and ensure that the
Company consistently operates to a high
standard. It supports our teams to ensure
that they demonstrate both integrity in the
workplace and in conducting the Group’s
business activities while respecting
our working relationships and place
in the world.

If there is any doubt about their potential
conduct, employees are asked to consider
the following questions:
– Is what I am doing or being asked

to do legal?

– Does it comply with the Code

of Conduct?

– Am I setting a good example?
– Would I be comfortable reading about

this in the media?

on dealings with customers, distributors
and agents; a review of illegal and high risk
matters such as price fixing, bid-rigging
activities, market and territory sharing or
allocation agreements and abusing market
powers; and guidance on exchanging
information about competitors or customers.

Accompanying the manual, the Company
will be delivering both face to face and
e-learning competition law training during
2015, focusing in particular on employees
in roles which have been identified as
potentially high risk.

Human rights
As part of its human rights policy, the
Group has adopted a series of human
rights principles across all of its businesses.
These principles relate to anti-discriminatory
attitudes and respect for ethical values;
employee rights, which include health
and safety, living wages, working hours,
freedom of association and the right to
collective bargaining; and prohibition of
child labour.

By promoting sound ethical values and
human rights principles, Weir aims to be
a business with which people are proud
to be involved. The Weir Group Human
Rights Policy expresses the organisation’s
commitment to promoting and upholding
the “common standard of achievement for
all people and all nations”, as endorsed by
the Universal Declaration of Human Rights.
Other guiding principles include those
of the Conventions of the International
Labour Organisation and the United Nations
Convention on the Rights of the Child.
These manifest themselves in Weir’s
anti-discriminatory attitudes and respect
for ethical values, providing our people
with a safe and healthy working
environment and fairness in employment
terms. For example, national living wage
is applied and working hours determined
in accordance with applicable laws, as well
as the recognition and non-discrimination of
rights of association in collective bargaining.
In addition, the Group has a zero tolerance
of the employment of children in any of
its businesses.

We will not exploit anyone, wherever in the
world we are working. We will respect the
human rights of all those working for or with
us, and of the people in the communities
where we operate. We will not do business
with companies, organisations or individuals
that we believe are not working to
acceptable human rights standards.

We expect employees to maintain the
highest standards of conformity with these
principles and their adoption, and adherence
is contained within Weir’s Code of Conduct.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014All reports are investigated. During 2014,
51 reports were submitted via the Weir
Ethics Hotline and each report was fully
investigated. Confidentiality and anonymity
are important features of the Ethics Hotline,
and both elements are maintained where
requested by the reporting party. In 2014,
both anonymity and confidentiality
was sought in 73% of the cases, and
confidentiality only in 26% of the cases.
Complainants can receive updates and the
details of the outcome of the investigation
via the Ethics Hotline when it is possible
to provide this in adherence with privacy
or local legal restrictions.

The Strategic Report, covering pages 1
to 68 of the Annual Report and Financial
Statements 2014, has been approved by
the Board of Directors in accordance with
The Companies Act 2006 (Strategic Report
and Directors’ Report) Regulations 2013.

On behalf of the Board of Directors

Keith Ruddock
Company Secretary
25 February 2015

Sustainability Review continued

External sales agents
The Group engages a number of external
sales agents across the globe to act on its
behalf in locations where it does not have
a permanent sales presence, or in regard
to specific projects. The Group has a sales
agents’ manual which sets out the Group
requirements with regard to appointing and
reappointing agents, as well as the ongoing
monitoring requirements. Due diligence
is performed prior to all appointments and
reappointments and overseen by the legal
department. The standard Weir contract
must be used unless the legal department
has agreed modifications, but the terms of
the agreements always include stipulation
that agents must comply with the Code of
Conduct. The agents are required to confirm
in writing their compliance with the Code
of Conduct.

Gifts and hospitality
We recognise that gifts and hospitality have
the potential to create a conflict of interest,
or the perception of a conflict of interest.
As a result, there are Group policies with
regard to receiving and giving gifts and
hospitality from, and to, third parties. In no
circumstances should gifts or hospitality
be solicited, and they should not place the
recipient under any obligation.

All gifts and hospitality above the minimum
threshold must be pre-approved using an
online gifts and hospitality register. Our
Internal Audit team assess compliance
with the Group’s gifts and hospitality
policies during audit visits and undertake
monthly reviews of the register, which
are shared with senior management.

Reporting issues
The Group encourages our people to
discuss any ethical concerns they may
have with local management or the legal
department. In addition, the Weir Ethics
Hotline, an independent and confidential
telephone helpline and an online reporting
system is available for our employees,
partners and third parties to call or
email with any concerns that they have
concerning unethical behaviour. Calls to
the helpline are free and lines are open
24 hours a day, seven days a week.
Reports can be made in a wide range of
languages, reflecting our global footprint.
Online reporting remains the most common
form of reporting matters, with 76% of
reports being made in this way.

Human rights (continued)
To ensure this policy is upheld in practice, in
addition to Group wide assurance activity, all
operating companies complete a compliance
scorecard self-assessment twice per annum
which assesses compliance with Group
policies and procedures.

Suppliers and third parties
We source raw materials, components and
services across the globe. Our suppliers
play a critical role in our business and
our relationships with them are based
on achieving best performance, product,
delivery, service and total cost in an ethical
and sustainable manner. Embracing a
closer relationship with our key suppliers is
fundamental to our Value Chain Excellence
initiative. In 2014, we have introduced
a supplier business review programme
designed to fully engage our key suppliers
in performance reviews and mutually
agreed improvement programmes.

The Group recognises that its responsibilities
extend to our supply chain. We have a Supply
Chain Policy which sets out the minimum
standards we expect our suppliers to abide
by with respect to:
– how they treat their workforce;
– legal and regulatory compliance;
– health and safety;
– business ethics; and
– environmental standards.

During 2014, the Group has continued to
work on increasing the level of contractual
agreements in place with our supply base.
These now equate to over 50% of our
total spend. Weir has also joined the UK
Government sponsored Prompt Payment
Code, which is a scheme designed to
support on time payment to small and
medium sized suppliers (SMEs).

In addition, our Code of Conduct is issued
to our key suppliers. Assessments are
undertaken with regard to compliance
with Group standards as part of the
vetting process for new suppliers. We also
audit our key suppliers regularly to assess
ongoing compliance with the Supply Chain
Policy and other relevant Group standards.
Wherever possible, we work with our
suppliers to support them to address
weaknesses identified.

The Group is committed to working only
with third parties, including customers,
sub-contractors, suppliers and joint
venture and strategic alliance partners,
whose business ethics and behaviours are
consistent with our own Code of Conduct.

During 2015, we will be increasing our
focus in this area through the introduction
of a web based compliance tool, designed
to assess our key suppliers’ compliance
with our Code of Conduct.

The Weir Group PLC Annual Report and Financial Statements 2014Group Executive

Name and title

Biography

Name and title

Biography

Paul Coppinger
Oil & Gas Divisional
Managing Director (53)

John Heasley
Power & Industrial
Divisional Managing
Director (40)

Dean Jenkins
Minerals Divisional
Managing Director (43)

Keith Ruddock
Group General
Counsel and Company
Secretary (54)

Paul is the Divisional Managing
Director of the Oil & Gas
Division, based in Fort Worth,
Texas, USA. He has held this
position since January 2015.
Prior to this, he held the
position of President of the
Pressure Pumping business
within the Oil & Gas Division.
He joined Weir in 2011 as
President of SPM. Prior to
joining Weir, Paul was the
President of the Energy
Group for ten years at Circor
International, Inc., a diversified
manufacturer of valves and
related products. He has been
a director of the Petroleum
Equipment & Services
Association since 2007
and presently is the
Association’s Chairman.

John joined the Group
Executive in January 2014
as Divisional Managing
Director for Weir Power
& Industrial. He is based
at the divisional headquarters
in East Kilbride, Scotland.
A chartered accountant, he
has held a number of senior
financial, commercial and
operational roles. At PwC,
he worked in mergers and
acquisitions before joining
Scottish Power in business
development and financial
posts. John joined Weir in
2008 as Group Financial
Controller before becoming
Valves Managing Director in
the Power & Industrial Division.

Dean is the Minerals Divisional
Managing Director, based
in Melbourne, Australia.
He joined the Group in
November 2010, becoming
Power & Industrial Divisional
Managing Director in January
2011. He was appointed to his
current role in August 2012.
Dean previously worked
for Qantas Airlines and the
Australian listed infrastructure
services company UGL Ltd,
most recently as Chief
Executive of the latter’s
Rail Division.

Keith is Group General
Counsel and Company
Secretary and is based at
the Group’s Head Office
in Glasgow. He joined the
Group in April 2012 from
Royal Dutch Shell plc, where
he was General Counsel for
Upstream International, Shell’s
largest business unit, based in
The Hague. He has extensive
international commercial
and legal experience, having
worked in the Middle East,
North America, Africa,
Australasia and Europe.
He is also a member of
the Development Board
of the Bingham Centre
for the Rule of Law.

Pauline Lafferty
Director of Human
Resources (49)

Andrew Neilson
Director of Strategy &
Corporate Affairs (39)

Pauline is the Director of
Human Resources, based at
the Group’s Head Office in
Glasgow. She joined the Group
in 2011. Pauline was previously
in executive search with Miles
Partnership and Russell
Reynolds Associates in the
UK and Australia. Prior to this,
she held business planning and
operational roles for 11 years
with Motorola and Digital
Equipment Corporation (DEC)
in Scotland, Australia and Hong
Kong, ultimately becoming
Asia Pacific Director of Supply
for DEC. Pauline is also a
Non-Executive Director of the
Scottish Exhibition Centre.

Andrew joined the Group
Executive in January 2014
as Director of Strategy &
Corporate Affairs. He is based
at the Group’s Head Office
in Glasgow. Andrew holds a
Masters degree in engineering
from the University of
Strathclyde and is a qualified
accountant. Before joining
Weir in 2010, he held a variety
of senior roles with banking,
energy and professional
services companies, including
HSBC, HBOS, Scottish Power
and KPMG.

Gavin Nicol
Director of Operations,
Support &
Development (53)

Gavin is the Director of
Operations, Support &
Development, based at
the Group’s Head Office in
Glasgow. He was previously
President of Weir SPM for
two years, based in Fort
Worth, Texas, USA. Gavin
joined Weir in 2005 and was
managing director of the Weir
Pumps business prior to its
sale in 2007. Before joining
Weir, he worked for a number
of multinationals, including the
Terex Corporation, PwC and
Coats Viyella. Gavin is also
a member for the council of
the CBI in Scotland and has
recently been appointed to a
Visiting Professorship at the
University of Strathclyde.

Keith Cochrane and Jon Stanton are also members of the Group Executive Committee.
Their biographical information can be found on the pages overleaf.

Steve Noon held the position of Oil & Gas Divisional Managing Director until 31 December 2014.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Board of Directors

Charles Berry
Chairman (62)

Keith Cochrane
Chief Executive (50)

Alan Ferguson
Non-Executive
Director (57)

Melanie Gee
Non-Executive
Director (53)

Mary Jo Jacobi
Non-Executive
Director (63)

Professor Sir

Jim McDonald

Non-Executive

Director (57)

Menell

Non-Executive

Director (59)

Richard (Rick)

John Mogford

Jon Stanton

Non-Executive

Director (61)

Finance Director (47)

Lord Robertson

of Port Ellen

Former Non-Executive

Director (68)

Nationality

British

Date of appointment

Non-Executive Director since
March 2013 and Chairman
since January 2014.

Committee Membership

British

Dual American and
British citizenship

British

South African

British

Joined the Group as Finance
Director in July 2006 and
appointed Chief Executive
in November 2009.

December 2011.

May 2011.

January 2014.

January 2015.

April 2009.

June 2008.

April 2010.

Chairman of the
Nomination Committee.

Member of the
Nomination Committee.

Chairman of the Audit
Committee and Member of
the Remuneration Committee.

Chairman of the
Remuneration Committee.
Member of the Audit
Committee.

Expertise

Charles was an Executive
Director of Scottish Power
UK plc from 1999 to 2005
and Chief Executive of its UK
operations between 2000 and
2005. Prior to joining Scottish
Power, he was Group
Development Director of
Norwest Holst, a subsidiary
of Compagnie Générale des
Eaux and held management
positions within subsidiaries
of Pilkington plc.

He is a former Non-Executive
Director and Chairman of Eaga
plc and Thus Group plc, and a
former Non-Executive Director
of Impax Environmental
Markets PLC and Securities
Trust of Scotland plc.

Following a number of years
with Arthur Andersen, Keith
joined Stagecoach Group plc
in 1993. He was appointed
Finance Director in 1996 and
Group Chief Executive in 2000.
He joined ScottishPower plc
in 2003 where he became
Director of Group Finance.

He is a chartered accountant
and a member of the Institute
of Chartered Accountants
of Scotland.

Keith is also Chairman of the
selection group for CSCLeaders,
which is a senior leadership
programme for leaders from
across the Commonwealth.

Alan was Chief Financial
Officer and a Director of
Lonmin plc, one of the world’s
largest producers of platinum
group metals, from 2007 until
2010. Prior to his role with
Lonmin, he held the position
of Group Finance Director with
the BOC Group plc. Before
this, he spent 22 years working
for Inchcape plc in a variety
of roles, including six years
as Group Finance Director.

Alan is a member of the
Institute of Chartered
Accountants of Scotland
and sits on their Business
Policy Committee.

Melanie is a Senior Adviser at
Lazard & Co. Limited, having
worked for them since 2008.
Formerly, she spent a number
of years with S.G. Warburg
(now part of UBS) and was
appointed a Managing Director
of UBS in 1999. Between
2006 and 2008, she was a
Senior Relationship Director
of UBS.

She was an alternate member
of The Takeover Panel – LIBA
(CFC) between 2006 and 2013.

Melanie was reappointed as a
Council member and Trustee
of Fauna & Flora International
in 2013, having previously
served from 2008 until 2010.

Key external appointments

Non-Executive Chairman
of Drax Group plc (resigning
at its AGM in April 2015).

Non-Executive Director
of Royal Scottish National
Orchestra Society Ltd.

Non-Executive Chairman
of Senior plc.

Non-Executive Director
of Drax Group plc.

Senior Independent
Non-Executive Director and
Audit Committee Chairman
of Johnson Matthey plc.

Non-Executive Director and
Audit Committee Chairman
of Croda International plc.

Member of the
Remuneration Committee.

Member of the

Audit Committee.

Member of the Nomination and

Member of the Audit and

None.

Remuneration Committees.

Nomination Committees.

Mary Jo is currently the
Managing Director of her
own consultancy practice
and is also a member of
The Leadership Council and a
board mentor with CriticalEye.

She was formerly a Senior
Executive of Royal Dutch
Shell plc, BP America Inc.,
Lehman Brothers Inc.,
HSBC Holdings plc and
Drexel Burnham Lambert Inc.
She was a Non-Executive
Director of Tate & Lyle plc
between 1999 and 2004.

She served in the
administrations of Presidents
Reagan and George H.W. Bush
and was one of Her Majesty’s
Civil Service Commissioners
from 2005 to 2010. She is
currently a visiting Fellow
at Oxford University.

Non-Executive Director
of Mulvaney Capital
Management Limited.

Member, UK Government
Advisory Committee on
Business Appointments.

Advisory Board co-chair,
George Washington University
Institute for Corporate
Responsibility.

February 2004.

Retired 31 January 2015

(including as Senior

Independent Director).

Member of the

Nomination and

Remuneration Committees

until his retirement on

31 January 2015.

2006) and Deputy Chairman

of Cable & Wireless plc

(2004-2006) and TNK-BP Ltd

(2006-2013).

A member of Her Majesty’s

Privy Council, he is Chairman

of the Ditchley Foundation and

of the Commission on Global

Road Safety. He is honorary

Professor of Politics at Stirling

University, an honorary

Fellow of the Royal Society

of Edinburgh, an Elder Brother

of the Corporation of Trinity

House and is Chancellor

of the Order of St Michael

and St George.

Sir Jim McDonald has been

Rick worked as an investment

John is currently a Managing

Jon was formerly a partner

Principal and Vice Chancellor

banker before joining

Director for First Reserve,

with Ernst & Young, having

Lord Robertson is an

Adviser to Cable and

of the University of Strathclyde

Anglovaal Group in 1992. He

a large global energy focused

joined as a graduate trainee

Wireless Communications

since March 2009 and has

was appointed Chief Executive

private equity firm. As part

in their Birmingham office in

plc, Special Adviser to BP plc

held the Rolls-Royce Chair

of Anglovaal Mining in 1996,

of this role, he sits on

1988. He was appointed as a

and a Senior Counsellor with

in Electrical Power Systems

then Executive Chairman

several boards.

since 1993.

in 2002. In 2005, he left to

partner in their London office

The Cohen Group (USA).

in 2001 with lead responsibility

He was the Secretary of

become President and Chief

He was formerly an Executive

for the audit of a number of

State for Defence from 1997

Executive of TEAL Exploration

Vice President of BP plc, having

FTSE 100 multinational clients.

until 1999 before becoming

& Mining Inc. He was formerly

been with BP for over 30 years,

Secretary General of NATO

Chairman of Avgold Ltd

initially in their exploration

He is a chartered accountant

from 1999 until 2003. He

(1996-2004) and Bateman

division and progressively rising

and a member of the Institute

was formerly a Director of

Engineering BV (2005-2009)

to Executive Vice President

of Chartered Accountants in

Smiths Group plc (2004-

and Director of Mutual &

(Chief Operating Officer

England and Wales.

Senior Independent Director

from 1 February 2015.

Audit Committee Member –

January 2014 to January 2015.

Sir Jim is Chairman of both

the Institute for Energy and

Environment, the largest

power engineering and

energy systems research

group internationally,

and the Rolls-Royce

Technology Centre.

He is also a member of the

Scottish Enterprise Board,

Scottish Science Advisory

Council and has recently

become a member of the

UK Trade and Investment

Energy Excellence Board.

He co-chairs (with the

Federal Insurance Company

US Downstream & Head of

Ltd (1996-2010) and Standard

Refining). He held numerous

Bank Group Ltd (1997-2011).

positions in every area of

Rick is a Senior Advisor to

operations from gas and

renewables to upstream

Credit Suisse and Chairman

and downstream oil.

of Credit Suisse Securities

(Johannesburg) (Pty) Limited.

He was formerly Chairman

He serves as a Director on a

of Amromco Energy LLC in

number of unlisted companies

Romania, White Rose Energy

and non-profit organisations.

Ventures LLP in the UK and

a Non-Executive Director

First Minister of Scotland)

He is a fellow of the Geological

of Deep Gulf Energy LP

the Energy Advisory Board

Society (London), and both

in America.

in Scotland. He is a fellow

the Australasian and South

African Institutes of Mining

He was also formerly

and Metallurgy.

of the Royal Academy of

Engineering and of the

Institution of Engineering

and Technology.

a Non-Executive Director

of CHC Helicopters SA

in Luxembourg.

He is a fellow of the Institution

of Mechanical Engineers.

and Midstates Petroleum

Company, Inc. in America.

Non-Executive Director of

Glasgow Science Centre

Charitable Trust.

Non-Executive Director of UK

Offshore Renewable Energy

Non-Executive Director of

Catapult Board.

Gold Limited, both South

African companies listed

on the Johannesburg Stock

Exchange and the New York

Stock Exchange.

Rockwell Diamonds Inc., a

South African company listed

on both the Johannesburg

Stock Exchange and the

Toronto Stock Exchange.

Non-Executive Director of

None.

Allt Dearg Educational Trust.

Gold Fields Ltd and Sibanye

DOF Subsea AS in Norway

Non-Executive Director of

Western Ferries (Clyde) Ltd.

The Weir Group PLC Annual Report and Financial Statements 2014Charles Berry

Chairman (62)

Keith Cochrane

Alan Ferguson

Chief Executive (50)

Non-Executive

Director (57)

Melanie Gee

Non-Executive

Director (53)

Mary Jo Jacobi

Non-Executive

Director (63)

Professor Sir
Jim McDonald
Non-Executive
Director (57)

Richard (Rick)
Menell
Non-Executive
Director (59)

John Mogford
Non-Executive
Director (61)

Jon Stanton
Finance Director (47)

Lord Robertson
of Port Ellen
Former Non-Executive
Director (68)

British

South African

British

Dual American and

British citizenship

Non-Executive Director since

Joined the Group as Finance

December 2011.

May 2011.

January 2014.

January 2015.

April 2009.
Senior Independent Director
from 1 February 2015.

June 2008.

April 2010.

Chairman of the

Member of the

Chairman of the Audit

Chairman of the

Member of the

Nomination Committee.

Committee and Member of

Remuneration Committee.

Member of the
Audit Committee.

the Remuneration Committee.

Member of the Audit

Committee.

Member of the Nomination and
Remuneration Committees.
Audit Committee Member –
January 2014 to January 2015.

Member of the Audit and
Nomination Committees.

None.

Jon was formerly a partner
with Ernst & Young, having
joined as a graduate trainee
in their Birmingham office in
1988. He was appointed as a
partner in their London office
in 2001 with lead responsibility
for the audit of a number of
FTSE 100 multinational clients.

He is a chartered accountant
and a member of the Institute
of Chartered Accountants in
England and Wales.

Sir Jim McDonald has been
Principal and Vice Chancellor
of the University of Strathclyde
since March 2009 and has
held the Rolls-Royce Chair
in Electrical Power Systems
since 1993.

Sir Jim is Chairman of both
the Institute for Energy and
Environment, the largest
power engineering and
energy systems research
group internationally,
and the Rolls-Royce
Technology Centre.

He is also a member of the
Scottish Enterprise Board,
Scottish Science Advisory
Council and has recently
become a member of the
UK Trade and Investment
Energy Excellence Board.

He co-chairs (with the
First Minister of Scotland)
the Energy Advisory Board
in Scotland. He is a fellow
of the Royal Academy of
Engineering and of the
Institution of Engineering
and Technology.

Rick worked as an investment
banker before joining
Anglovaal Group in 1992. He
was appointed Chief Executive
of Anglovaal Mining in 1996,
then Executive Chairman
in 2002. In 2005, he left to
become President and Chief
Executive of TEAL Exploration
& Mining Inc. He was formerly
Chairman of Avgold Ltd
(1996-2004) and Bateman
Engineering BV (2005-2009)
and Director of Mutual &
Federal Insurance Company
Ltd (1996-2010) and Standard
Bank Group Ltd (1997-2011).

Rick is a Senior Advisor to
Credit Suisse and Chairman
of Credit Suisse Securities
(Johannesburg) (Pty) Limited.
He serves as a Director on a
number of unlisted companies
and non-profit organisations.

He is a fellow of the Geological
Society (London), and both
the Australasian and South
African Institutes of Mining
and Metallurgy.

John is currently a Managing
Director for First Reserve,
a large global energy focused
private equity firm. As part
of this role, he sits on
several boards.

He was formerly an Executive
Vice President of BP plc, having
been with BP for over 30 years,
initially in their exploration
division and progressively rising
to Executive Vice President
(Chief Operating Officer
US Downstream & Head of
Refining). He held numerous
positions in every area of
operations from gas and
renewables to upstream
and downstream oil.

He was formerly Chairman
of Amromco Energy LLC in
Romania, White Rose Energy
Ventures LLP in the UK and
a Non-Executive Director
of Deep Gulf Energy LP
in America.

He was also formerly
a Non-Executive Director
of CHC Helicopters SA
in Luxembourg.

He is a fellow of the Institution
of Mechanical Engineers.

February 2004.
Retired 31 January 2015
(including as Senior
Independent Director).

Member of the
Nomination and
Remuneration Committees
until his retirement on
31 January 2015.

Lord Robertson is an
Adviser to Cable and
Wireless Communications
plc, Special Adviser to BP plc
and a Senior Counsellor with
The Cohen Group (USA).
He was the Secretary of
State for Defence from 1997
until 1999 before becoming
Secretary General of NATO
from 1999 until 2003. He
was formerly a Director of
Smiths Group plc (2004-
2006) and Deputy Chairman
of Cable & Wireless plc
(2004-2006) and TNK-BP Ltd
(2006-2013).

A member of Her Majesty’s
Privy Council, he is Chairman
of the Ditchley Foundation and
of the Commission on Global
Road Safety. He is honorary
Professor of Politics at Stirling
University, an honorary
Fellow of the Royal Society
of Edinburgh, an Elder Brother
of the Corporation of Trinity
House and is Chancellor
of the Order of St Michael
and St George.

Non-Executive Chairman

Non-Executive Director

Senior Independent

Non-Executive Director

of Drax Group plc (resigning

of Royal Scottish National

Non-Executive Director and

of Drax Group plc.

at its AGM in April 2015).

Orchestra Society Ltd.

Key external appointments

Non-Executive Chairman

of Senior plc.

Audit Committee Chairman

of Johnson Matthey plc.

Non-Executive Director and

Audit Committee Chairman

of Croda International plc.

Non-Executive Director of
DOF Subsea AS in Norway
and Midstates Petroleum
Company, Inc. in America.

None.

Non-Executive Director of
Western Ferries (Clyde) Ltd.

Non-Executive Director of
Allt Dearg Educational Trust.

Non-Executive Director of
Glasgow Science Centre
Charitable Trust.

Non-Executive Director of UK
Offshore Renewable Energy
Catapult Board.

Non-Executive Director of
Gold Fields Ltd and Sibanye
Gold Limited, both South
African companies listed
on the Johannesburg Stock
Exchange and the New York
Stock Exchange.

Non-Executive Director of
Rockwell Diamonds Inc., a
South African company listed
on both the Johannesburg
Stock Exchange and the
Toronto Stock Exchange.

Nationality

British

Date of appointment

March 2013 and Chairman

Director in July 2006 and

since January 2014.

appointed Chief Executive

in November 2009.

Committee Membership

Expertise

Charles was an Executive

Following a number of years

Alan was Chief Financial

Melanie is a Senior Adviser at

Mary Jo is currently the

Director of Scottish Power

with Arthur Andersen, Keith

Officer and a Director of

Lazard & Co. Limited, having

Managing Director of her

UK plc from 1999 to 2005

joined Stagecoach Group plc

Lonmin plc, one of the world’s

worked for them since 2008.

own consultancy practice

and Chief Executive of its UK

in 1993. He was appointed

largest producers of platinum

Formerly, she spent a number

and is also a member of

operations between 2000 and

Finance Director in 1996 and

group metals, from 2007 until

of years with S.G. Warburg

The Leadership Council and a

2005. Prior to joining Scottish

Group Chief Executive in 2000.

2010. Prior to his role with

(now part of UBS) and was

board mentor with CriticalEye.

Power, he was Group

Development Director of

He joined ScottishPower plc

Lonmin, he held the position

appointed a Managing Director

in 2003 where he became

of Group Finance Director with

of UBS in 1999. Between

Norwest Holst, a subsidiary

Director of Group Finance.

the BOC Group plc. Before

2006 and 2008, she was a

She was formerly a Senior

Executive of Royal Dutch

of Compagnie Générale des

this, he spent 22 years working

Senior Relationship Director

Shell plc, BP America Inc.,

Eaux and held management

He is a chartered accountant

for Inchcape plc in a variety

of UBS.

positions within subsidiaries

and a member of the Institute

of roles, including six years

Lehman Brothers Inc.,

HSBC Holdings plc and

of Pilkington plc.

of Chartered Accountants

as Group Finance Director.

She was an alternate member

Drexel Burnham Lambert Inc.

of Scotland.

of The Takeover Panel – LIBA

She was a Non-Executive

He is a former Non-Executive

Alan is a member of the

(CFC) between 2006 and 2013.

Director of Tate & Lyle plc

Director and Chairman of Eaga

Keith is also Chairman of the

Institute of Chartered

between 1999 and 2004.

plc and Thus Group plc, and a

selection group for CSCLeaders,

Accountants of Scotland

Melanie was reappointed as a

former Non-Executive Director

which is a senior leadership

and sits on their Business

Council member and Trustee

She served in the

of Impax Environmental

programme for leaders from

Policy Committee.

Markets PLC and Securities

across the Commonwealth.

Trust of Scotland plc.

of Fauna & Flora International

administrations of Presidents

in 2013, having previously

Reagan and George H.W. Bush

served from 2008 until 2010.

and was one of Her Majesty’s

Civil Service Commissioners

from 2005 to 2010. She is

currently a visiting Fellow

at Oxford University.

of Mulvaney Capital

Management Limited.

Member, UK Government

Advisory Committee on

Business Appointments.

Advisory Board co-chair,

George Washington University

Institute for Corporate

Responsibility.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Corporate Governance Report

Corporate
Governance
Report

Charles Berry
Chairman

Dear Stakeholder
Achieving excellence in corporate governance remains vitally important to us as a Board, recognising that it is crucial to the overall
delivery of the Group’s strategy. I have now been Chairman of the Group for over a year, having been a Non-Executive Director for ten
months before that. I am very proud to set the tone of both the Board and the Company with regards to corporate governance and strive
to ensure that this is at the highest standard possible. I am supported in this endeavour by the committed individuals forming both the
Board of Directors and the senior executives of the Company, who establish and maintain business practices and policies that exemplify
best practice within the Group.

Within the Our People section of the Sustainability Review above at page 61, we detail the review of our core values undertaken in
2014. This consultation exercise across the Group confirmed our fundamental drive to do business in an ethical and transparent manner,
underpinned by core values which include acting with integrity, being accountable and committing to quality in all that we do. As a Board,
we work hard to deliver consistently in line with these values, demonstrating the behaviours in a manner which inspires our teams across
the world to do the same.

UK Corporate Governance Code
As Chairman, I am responsible for ensuring that under my leadership the Board operates effectively and in compliance with the UK
Corporate Governance Code (the ‘2012 Code’). In accordance with the Listing Rules, the Group is reporting on how it has applied the
main principles and whether we have complied with the relevant provisions of the 2012 Code.

I am pleased to report that the Group has complied fully with all the principles of the 2012 Code, for the 52 weeks to 2 January 2015, and
from that date to the date of approval of this Annual Report, with the exception of one part of a provision which is detailed on page 74.

In September 2014, a revised Code (the ‘2014 Code’) and related Guidance on Risk Management and Internal Controls were issued, and
these apply to accounting periods beginning on or after 1 October 2014. The amendments are welcomed by us as part of a move towards
further transparency and good reporting for the benefit of all our stakeholders. Key changes include disclosures with regards to longer-
term viability, risk management/internal controls, and also directors’ remuneration. Both the Audit and Remuneration Committees, along
with the Board, are reviewing current practices with a view to ensuring compliance with the 2014 Code during 2015, which fits with our
goal of continuous improvement in our governance arrangements.

Changes to the Board
Board and Committee changes during 2014 and early 2015 were as follows, and will enable fresh perspectives to be brought to different
aspects of the Group’s governance framework.
– I was appointed Chairman of the Board and Nomination Committee Chairman on 1 January 2014.
– Mary Jo Jacobi was appointed Non-Executive Director on 1 January 2014 and to the Remuneration Committee on 21 January 2014.
– John Mogford was appointed to the Nomination Committee on 21 January 2014.
– Sir Jim McDonald was appointed Non-Executive Director and as member of the Audit Committee on 1 January 2015.
– Lord Robertson resigned as a Non-Executive Director with effect from 31 January 2015. He therefore also ceased to be Senior

Independent Director, and a member of the Remuneration and Nomination Committees, on that date.

The Weir Group PLC Annual Report and Financial Statements 2014 – Rick Menell was appointed Senior Independent Director on 1 February 2015. He was appointed to the Audit Committee on 21 January

2014 and ceased to be a member of the Audit Committee on 1 January 2015.

– Alan Ferguson was appointed to the Remuneration Committee on 1 February 2015.

We review our composition and have spent time on succession planning to ensure that we continue to evolve as a Board, enabling us to
further enhance our leadership of the Group. The induction of our new Directors and Committee members remains an important focus,
and we continue to work hard towards a cohesive approach between the Executive Directors and the Non-Executive Directors, while
maintaining a robust challenge of matters presented for discussion.

Board effectiveness
During 2014, the Group submitted an indicative all-share acquisition proposal to the board of Metso Corporation which was subsequently
rejected. As a result of this proposed transaction, the Board of Directors held five additional meetings, as well as extended communications
by phone and email. I felt that the composition and time commitments of the various Board members were tested during this time and
found to be highly effective. I am confident that the Board and its Committees have the experience, skill and commitment to handle
additional responsibilities as and when they are required, and have an excellent range of talents which will enable us to respond to
challenges faced by the Group.

The Board of Directors and the Board Committees underwent an external evaluation by Independent Board Review during 2014,
and the review concluded that the Board was functioning well, with a strong combination of skills and experience being brought by
both Executive and Non-Executive Directors. It is recognised that the Non-Executive Directors are keen to contribute even more to
further support the Company’s continued growth, and there are aspects of the meeting cycle and agenda format which we can develop
to enhance the way we function as a Board. Further details of the Board evaluation are set out below at pages 80 and 81, and the reports
on the Nomination, Audit and Remuneration Committees are set out on pages 83, 86 and 103 respectively, each reflecting the progress
which those Committees have made over the course of 2014.

All of our stakeholders are important to us at Weir and contribute greatly to our continued strength as a Group. We will therefore
endeavour to maintain and enhance our high standards of corporate governance in order to protect your interests, and I welcome
this opportunity to report in detail on our activities as a Board and our progress during the past year.

Charles Berry
Chairman
25 February 2015

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Corporate Governance Report continued

The UK Corporate Governance Code
The UK Corporate Governance Code is published by the Financial Reporting Council and sets out standards of good practice in relation
to issues such as board composition and effectiveness, the role of board committees, risk management, remuneration and relations
with shareholders. Paper and downloadable versions can be obtained from the Financial Reporting Council via its website at frc.org.uk.

As a listed company, we must detail how we have complied with the Code and provide an explanation of instances where we have not.
This report, in addition to the Nomination, Audit and Remuneration Committee reports, details how the Company has applied the main
principles of the Code. For the 52 weeks ended 2 January 2015 and from that date to the date of approval of this Annual Report, except
in the instance of one part of a provision detailed below, the Board considers that the Company has complied fully with the UK Corporate
Governance Code 2012 (the ‘Code’).

Code provision E.1.1 states that the Senior Independent Director should attend sufficient meetings with a range of major shareholders
to listen to their views in order to help develop a balanced understanding of the issues and concerns of major shareholders. During 2014,
Lord Robertson undertook engagement with various stakeholders but he did not attend meetings with a range of major shareholders.
It is considered that the Company has a robust Investor Relations department who oversee such meetings and that there are sufficient
processes in place for the issues and concerns of major shareholders to be communicated to all members of the Board such that it is not
necessary for the Senior Independent Director to attend these meetings. He was of course willing to attend such meetings had the need
arisen. The Board does not feel that this in any way impeded its good corporate governance and believes that the practice was in compliance
with the main and supporting principles under section E of the Code regarding dialogue with shareholders. Further details of the Company’s
relations with its shareholders can be found on page 82.

Leadership
The Board of Directors
The current Directors of the Company as at the date of this report are as follows:

Table of the Board of Directors

Date of Appointment

Date of most recent re-election

Name

Charles Berry

Keith Cochrane

Alan Ferguson

Melanie Gee

Mary Jo Jacobi

Sir Jim McDonald

Rick Menell

John Mogford

Jon Stanton

Designation

Chairman

Chief Executive

1 March 2013

3 July 2006

Non-Executive Director

13 December 2011

Non-Executive Director

Finance Director

4 May 2011

1 January 2014

1 January 2015

1 April 2009

1 June 2008

19 April 2010

1 May 2014

–

1 May 2014

Biographical information on the Board of Directors, including their relevant experience and significant appointments, can be found
on pages 70 and 71. Their relevant skills and experiences are further detailed in the Board composition section below.

Sir Jim McDonald was appointed as a Non-Executive Director on 1 January 2015. Lord Robertson resigned as Senior Independent
Director and as a Non-Executive Director with effect from 31 January 2015. Lord Robertson was succeeded by Rick Menell as Senior
Independent Director.

The role and responsibilities of the Board
The Board of Directors has a collective duty to promote the long term success of the Company for its shareholders. The Board provides
leadership of the Company and sets the Group’s strategic aims. It ensures that the necessary resources are in place to achieve the agreed
strategic priorities and provides guidance to senior management. In determining the long term strategy and objectives of the Group,
the Board is mindful of its duties and responsibilities not just to shareholders but also to customers, employees and other stakeholders.
The Board reviews management and financial performance and monitors the delivery of strategy and the achievement of business
objectives. At all times, it works within a robust framework of internal controls and risk management. The Board both develops and
promotes the collective vision of the Group’s purpose, culture, values and behaviours.

Board composition
During the period, the Board has comprised two Executive Directors, the Chairman and six Non-Executive Directors. During January
2015, the number of Non-Executive Directors rose to seven on the appointment of Sir Jim McDonald before returning to six following
the resignation of Lord Robertson. There is a Company Secretary to the Board. More information on their respective positions and the
division of their responsibilities is outlined below.

Chairman and Chief Executive
Charles Berry was appointed Chairman of the Board on 1 January 2014. The Chairman leads the Board and is responsible for ensuring
conditions that allow for the effectiveness of individual Directors and the Board as a whole. The Chairman’s additional commitments are
summarised on page 70 and he will step down as chairman of Drax Group plc at its AGM in April 2015. The independent Board evaluation
carried out for 2014 confirmed that the Chairman is widely respected for his inclusive and highly professional approach to conducting meetings
and overseeing the business of the Board generally. His leadership demonstrates the values and behaviours at the core of the Group.

The Weir Group PLC Annual Report and Financial Statements 2014The Chairman, in consultation with the Chief Executive and the Company Secretary, sets the agenda for the Board’s meetings and
ensures that there is sufficient time available for the discussion of all items, in particular strategic issues, whilst giving the appropriate
weighting of time to their relative importance.

Keith Cochrane is the Chief Executive and is responsible for the day-to-day management of the Company. He provides leadership to the
Group to successfully plan and execute the objectives and strategy agreed by the Board. The Chief Executive is supported in his role by
the Group Executive and various management committees, known as ‘Excellence Committees’.

The roles of the Chairman and Chief Executive are separate, with each having clearly defined duties and responsibilities. Following
Charles Berry’s appointment as Chairman in January 2014, the division of responsibilities of the Chairman and Chief Executive was
reviewed and adopted by the Board in February 2014.

Non-Executive Directors
The Non-Executive Directors contribute independent challenge and rigour to the Board’s deliberations and assist in the development
of the Company’s strategy. In addition, they are responsible for monitoring the performance of the Executive Directors against agreed
goals and objectives. Their views are essential in overseeing the performance of the Company and ensuring the integrity of the financial
information, controls and risk management processes. In order to carry out these functions appropriately, the Non-Executive Directors
meet regularly with senior management and make periodic site visits. Senior managers are also regularly invited to Board meetings to
make business presentations to the Board. As encouraged by the Code, the Non-Executive Directors (including the Chairman) also met
during the year (in February 2014) without Executive Directors present.

Senior Independent Director
Rick Menell is the Senior Independent Director of the Company. He replaced Lord Robertson, who had held the role during 2014,
following his resignation from the Board with effect from 31 January 2015. The Senior Independent Director works alongside the
Chairman and is available to serve as an intermediary for the other Directors if necessary. He is also available to shareholders if direct
contact with the Chairman, Chief Executive or other Executive Directors has failed to resolve the concerns of shareholders or for which
such contact is inappropriate. As Senior Independent Director, he also leads the annual review of the performance of the Chairman.

Company Secretary
Keith Ruddock was appointed as Company Secretary in May 2012. He is secretary to the Board of Directors and to all of the Board
Committees. He is also Group General Counsel and a member of the Group Executive and his biography is set out on page 69.

The Company Secretary advises the Board on any changes in legislation, governance codes or regulatory requirements. He reports to
the Chairman on corporate governance matters and oversees, in parallel with the Chairman, the governance procedures of the Board.
The Company Secretary has a responsibility to ensure that these Board procedures are adhered to and periodically reviews them with
regards to best practice. The Company Secretary’s additional responsibilities include ensuring good information flows within the Board
and its Committees and between senior management and Non-Executive Directors, as well as facilitating induction and assisting with
professional development.

Board meetings
The Board’s scheduled meetings are held in person or by telepresence videoconferencing. During 2014, there were eight scheduled
meetings. Five additional meetings were also held in relation to proposals made to Metso Corporation. In October 2014, the Board
meeting was held in Dubai. This was part of a Board visit to view both the old and new facilities of the Company’s operations in Dubai.
More information on this can be found on page 80. In addition to the formal Board meetings, the Board maintains an open dialogue
throughout the year and contact by telephone occurs whenever necessary.

The table below details the attendance at Board meetings of each of the Directors during their term of office for the 52 weeks to
2 January 2015.

Name

Charles Berry

Keith Cochrane

Alan Ferguson

Melanie Gee

Mary Jo Jacobi

Rick Menell

John Mogford

Lord Robertson

Jon Stanton

Attendance

13 of 13

12 of 131

13 of 13

1. Rick Menell was unable to attend one of the Board meetings convened at short notice in connection with the Company’s approach to Metso Corporation, as he was travelling

on a flight at the relevant time.

There were no Board meetings held between the date of Sir Jim McDonald’s appointment to the Board on 1 January 2015 and
2 January 2015.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Corporate Governance Report continued

Leadership (continued)
Board meetings (continued)
During the year, the Chairman, supported by the Chief Executive and Company Secretary, continued the practice of maintaining a rolling
12 month agenda for Board and Committee meetings. At each meeting, the Board receives reports from the Chief Executive and other
members of the Group Executive, including information on safety, strategy, human resources, finance and legal. The Board also receives
periodic updates from the Committee Chairmen, who in particular report to the Board on Committee meetings. Other standing items
include reviewing the risk register and internal controls, strategy and succession planning.

The Board’s time during 2014 can be grouped into six key areas as outlined below. A portion of their time is also spent on
administrative matters.

Strategy

Risk

Governance

Finance

Setting strategy
targets.

Reviewing
potential mergers
and acquisitions.

Products and
technology.

Risk Appetite
Statement.

Group’s risk and
internal control
framework.

Crisis
management.

Legal updates and
new disclosure
requirements.

External Board
review.

Succession
planning.

Oversight of the
preparation and
management of
the financial
statements.

Dividend policy.

Pensions.

Safety

EHS Standards
and Management
System.

EHS Audit
System.

Stakeholder
engagement

AGM and other
shareholder
feedback.

Investor calls,
meetings and
roadshows.

Oversight of
remuneration
consultation
process.

Board activities during 2014
The Board receives presentations by members of the Weir Group senior management team and external advisors as required.

The annual timetable is discussed in May of the preceding year and circulated as soon as it is finalised, which ensures that the Chairman
can be comfortable that each Director is able to devote the time and resources required to act as a Director during that period. The system
for establishing agenda items means both the Chairman and the Board have the confidence that all required items are included at the most
appropriate time of the year and there is sufficient time allocated for discussion by the Board, allowing the Directors to discharge their
duties effectively.

Board and Group Executive meeting locations for 2009-2014

Board

Group Executive

The Weir Group PLC Annual Report and Financial Statements 2014Matters Reserved for Approval by the Board
The Board recognises that to ensure the long term success of the Company, certain specific matters should be reserved for the consideration and
decision of the Board alone. Other matters may be delegated by the Board to its committees or executive management. Decisions specifically
reserved for approval by the Board are formally recorded in a document entitled Matters Reserved for Approval by the Board, and include:
– annual and interim accounts and financial statements;
– dividend policy;
– Board appointments;
– Group strategy and the annual operating budget;
– changes relating to the Group’s capital structure;
– changes to the Group’s management and control structure;
– major capital expenditure, acquisitions and disposals;
– treasury policies;
– risk management strategy;
– Group corporate governance policy; and
– environmental, health and safety and sustainability policies.

The matters reserved for approval by the Board are reviewed by the Board on an annual basis to ensure they remain appropriate and adhered to.

Board committees

Board and committee structure

Board of Directors

Board
Committees

Audit Committee

Remuneration Committee

Nomination Committee

General Administration
Committee

Chief Executive

Management
Committees

Group Executive Committee

Risk
Committee

Engineering
Excellence
Committee

Finance
Excellence
Committee

EHS
Excellence
Committee

IT Excellence
Committee

HR Excellence
Committee

Value Chain
Excellence
Committee

The Board has established a number of committees to assist in the discharge of its responsibilities. The principal committees are the
Nomination Committee, the Audit Committee and the Remuneration Committee. The responsibilities of these Board committees are set
out in the individual Terms of Reference of each committee, which are available on the Company’s website. The roles and responsibilities
of the committees, along with the activities undertaken during the period, are outlined in each of their respective reports found on pages
83 to 108. The Company Secretary acted as secretary to the committees in 2014. In 2015, the Deputy General Counsel will act as
secretary to the Audit Committee.

Only committee members are entitled to attend meetings. However, other Directors may attend at any time, while professional advisors
and members of the senior management team may attend when invited to do so.

When the need arises, separate ad hoc committees may be set up by the Board to consider specific issues.

General Administration Committee
The General Administration Committee is a sub-committee of the Board which comprises any two Directors of the Company, at least
one of whom must be an Executive Director. The Committee is responsible to the Board as a whole and meets as required. The principal
duties of the Committee include attending to administrative and procedural matters in relation to existing bank and finance facilities and
the issue and allotment of shares under Group share plans. It also attends to other matters of a routine manner relating to the Company’s
share capital, including the administration of unclaimed dividends and the Company’s Dividend Reinvestment Plan. The Committee has
written Terms of Reference which are periodically reviewed to ensure their continuing appropriateness. Minutes of meetings of the
General Administration Committee are made available to all Directors.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Corporate Governance Report continued

Leadership (continued)
Group Executive
The Group Executive comprises the Chief Executive, the Finance Director, the Group General Counsel and Company Secretary, the three
Divisional Managing Directors, the Director of Operations, Support & Development, the Director of Strategy & Corporate Affairs and the
Director of Human Resources. Biographical details of the members of the Group Executive can be found on page 69. The Group Executive
is chaired by the Chief Executive, Keith Cochrane.

In the 52 weeks ended 2 January 2015, the Group Executive met 12 times. The Group Executive is responsible for ensuring that each
of the Group’s businesses is managed effectively and that the key performance indicators of the Group, as approved by the Board, are
achieved. The Group Executive’s 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 which provide 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 coordination in areas such as purchasing, branding and career development planning. It also
approves major items of capital expenditure within limits authorised by the Board.

Management committees
In addition to the committees detailed above at page 77, there exist several management committees, known as Excellence Committees.
These have been created to deal with specific areas and under their clearly defined remits they work across the Group promoting best
practice and information sharing. In 2014, the Manufacturing Excellence Committee (a sub-committee of the Value Chain Excellence
Committee) evolved into the Lean Enterprise Excellence Committee. This reflects the recognition and need to apply a lean philosophy
throughout the value chain following the success of deploying the lean based Weir Production System to the factories throughout the Group.

The Executive Directors and members of the Group Executive are able to delegate their responsibilities to these committees and utilise
the areas of expertise contained within them. The Excellence Committees report to the Group Executive and to the Board as required.

The composition of the various committees along with their accompanying terms of reference, the matters reserved for approval by the
Board, and delegated authority matrices combine to create a clear authority matrix across the Group for timely and effective decision-
making. This structure provides the Board with confidence that the appropriate decisions are being taken at the appropriate levels,
and information flows both up and down reporting lines.

Effectiveness
Board skills and attributes

Charles Berry1

Keith Cochrane

Alan Ferguson

Melanie Gee

Mary Jo Jacobi

Sir Jim McDonald

Rick Menell

John Mogford

Lord Robertson

Jon Stanton

Independence

Banking
& finance

Governance International

Leadership

Engineering

Mining

Oil and gas

Power

Skills and experience

Note
1. Charles Berry was considered independent on his appointment as Chairman in January 2014.

The Board considers that it has the right combination of skills, experience, independence and knowledge to be useful and effective
in meeting the needs of the business. More than half of the Board are independent Non-Executive Directors. All the Non-Executive
Directors are considered by the Board to be independent in character and judgement.

This combination of individuals and skills ensures that the Board is sufficiently balanced such that no individual or group of individuals
can dominate decision-making and allows for an effective division of responsibilities within the Board and its committees. The positions
of Chairman and Chief Executive are held separately. Each Director devotes sufficient time and attention as is necessary in order to
perform their duties.

The Board is supplied in a timely manner with the appropriate information to enable it to discharge its duties 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 issues arising at Board meetings and Non-Executive Directors have access
to the Chairman at any time.

The Weir Group PLC Annual Report and Financial Statements 2014

Appointment and tenure

Length of tenure at 2 January 2015

Name

1 year

2 years

3 years

4 years

5 years

6 years

7 years

8 years

9 years

10 years

11 years

Charles Berry

Keith Cochrane

Alan Ferguson

Melanie Gee

Mary Jo Jacobi

Sir Jim McDonald

Rick Menell

John Mogford

Lord Robertson

Jon Stanton

Date of
next election
or re-election

29 April 2015

–

29 April 2015

The Executive Directors have contracts of service with one year’s notice, whilst Non-Executive Directors’ appointments can be terminated
at any time with six months’ notice. The letters of appointment of the Chairman and the Non-Executive Directors, which are available for
inspection at the Company’s registered office, set out the required commitment to the Company. Further details can also be found in the
Directors’ Remuneration Report.

In accordance with the Company’s Articles of Association and good practice, Sir Jim McDonald will resign and offer himself for election
at the Company’s AGM on 29 April 2015. All other Directors on the Board at 2 January 2015, with the exception of Lord Robertson who
resigned on 31 January 2015, will seek re-election at the Company’s AGM in compliance with the Code.

Induction and ongoing training
When a new Director joins the Company, he or she is provided with information on the Group’s structure, operations, policies and other
relevant documentation. New Directors are able to attend the Group’s senior management induction programme which provides an
insight into the Group’s key processes and controls and includes presentations from the heads of departments located at the Group’s
Head Office in Glasgow. Following her appointment as a Non-Executive Director in January 2014, Mary Jo Jacobi attended such an
induction in April 2014. The induction process for Sir Jim McDonald has included introductory meetings with senior executives in the
Company and planned visits to the Company’s facilities in Todmorden in the UK and Fort Worth in the USA, in addition to a formal
briefing on legal and governance matters from the Company Secretary.

Directors are informed of relevant material changes to laws and regulations affecting the Group’s business and their duties as Directors.
The Company Secretary advises the Board on governance matters and is available to all Directors for advice as required. In addition,
the Board meets once a year or more at one of the Group’s operational sites, which includes presentations from key senior employees
and the opportunity to meet employees across the global operations.

The Chairman regularly reviews and agrees with each Director their training and development needs, and additional induction and training
is also available to new committee members as required.

During 2014, the Board received its annual training on competition law at the December Board meeting, which was provided by outside
counsel, to coincide with the roll out of the Group’s new Competition Law Manual.

Directors and their other interests
Under the Companies Act 2006, a director of a company must avoid a situation in which he or she has, or can have, a direct or indirect
interest that conflicts, or may possibly conflict, with the interests of the company. The Company has a formal procedure in place to manage
the disclosure, consideration and, if appropriate, the authorisation of any such possible conflict. Each Director is aware of the requirement
to notify the Board, via the Company Secretary, as soon as they become aware of any possible future conflict or a material change to an
existing authorisation. Upon receipt of any such notification, the Board, in accordance with the Company’s Articles of Association, will
consider the situation before deciding whether to approve the perceived conflict. At the outset of every Board meeting, the Chairman also
checks that no new conflicts have arisen. Only Directors who have no interest in the matter being considered are able to take the relevant
decision and Directors are able to impose limits or conditions when giving authorisation if they think this is appropriate. The Director in
question will then be notified of the outcome. Overall, the Board is satisfied that there are appropriate procedures in place to deal with
conflicts of interest and that they have operated effectively.

None of the Non-Executive Directors has any material business or other relationship with the Company or its management. Although
Sir Jim McDonald is the Principal and Vice Chancellor of the University of Strathclyde, he has no direct involvement on a day-to-day
basis in relation to the Weir Advanced Research Centre (‘WARC’) which is operated in conjunction with the University of Strathclyde.
In particular, he will offer to recuse himself from any discussions in relation to the relationship between the Group and the University
of Strathclyde, whether in relation to WARC or otherwise.

Details of the Directors’ service contracts, emoluments, the interests of the Directors in the share capital of the Company and options
to subscribe for shares in the Company are disclosed in the Directors’ Remuneration Report.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Corporate Governance Report continued

Effectiveness (continued)
Board evaluation
Following the internal effectiveness review undertaken in 2013, the Company Secretary implemented a number of logistical suggestions
from Directors in relation to the way in which Board and Committee papers were distributed and to enable the Board to receive market
and media information on a more regular basis. In addition, specific comments received on aspects of the operation of the Nomination
and Audit Committees were addressed during the course of the year.

An external review of the Board and its Committees in 2014 was undertaken by Independent Board Review, a division of Independent
Audit Limited. The most recent independent review was carried out by other external consultants in 2011, and Independent Audit Limited
had undertaken the previous review of Board effectiveness in 2010. Otherwise, Independent Audit Limited has no connections with
the Company.

Board site
visit to Dubai

In October 2014, the Board of Directors visited
Weir’s Oil & Gas Services facilities in Dubai.

The Middle East was chosen for the
visit because it is one of the fastest
growing areas of the Group’s business
and a key region for the success of the
Oil & Gas Division.

Given the complexities of the Middle
East, it was felt important for the Board to
gain direct experience of the environment,
and in particular to hear directly from local
customers and other stakeholders about
the opportunities, issues and challenges
of operating in the region.

A reflection of the Group’s success in the
Middle East is the construction of a brand
new facility and regional head office in Dubai.
The Group has been active in the region for
many years, and throughout its presence
there has recognised that establishing
strong relationships with local partners has
made a key contribution to its success.

The current facility which was visited by
the Board has been in use since 1982.
Due to the expanding requirements of
the business, it was determined in 2013
that a new, purpose built facility should be
created. The Board also visited this newly
constructed facility and Charles Berry
formally opened the site in the presence
of WESCO Abu Dhabi joint venture
partner, Mr Faraj Ali Bin Hamoodah,
Mr Samir Al Gharbi, Ms Salma Hareby,
CEO of Jebel Ali Free Zone (‘Jafza’),
and Mr Ibrahim Al Janahi, Deputy CEO
and COO of Jafza. The Board undertook
a tour of the new facility, which is due
to become fully operational in 2015.

Following the tour, Vikas Handa, the
Managing Director of Weir Oil & Gas
Services Middle East, presented an
overview on strategy for the Oil & Gas
Division in the Europe, Middle East

and Africa (EMEA) region. In addition,
Paul Coppinger, now Oil & Gas
Divisional Managing Director, provided
a presentation on the pressure pumping
business in the Asia Pacific and EMEA
regions. The scheduled Board meeting
was held later on that day in the new
facility, which included an Oil & Gas
Division strategy review.

The following day, the Board received a
presentation on the region from a senior
representative of Shell in Iraq, and then
met with the joint venture partner for its
Saudi Arabian business. In both cases,
the presenters provided invaluable insights
into the current political, security and
economic environment in the region,
which was extremely helpful to the Board.

The Weir Group PLC Annual Report and Financial Statements 2014Independent Board Review’s work consisted of a review of the Board papers, confidential interviews with all Directors, along with
selected executives and advisors who have significant interaction with the Board and its Committees. The evaluation considered the
balance of skills, experience, independence and knowledge of the Board, its diversity, including gender, how the Board works together
as a unit, and other factors relevant to its effectiveness. The review outcomes were discussed fully with the Chairman and subsequently
with the Board at its January 2015 meeting, with all Directors receiving a copy of the full report. The Board considered Independent
Board Review’s findings and their suggestions for improvement, and agreed an action plan to consider and, if agreed, implement these
proposed improvements. The Board considers the review to have been rigorous and fully independent. As is customary, Rick Menell,
as the new Senior Independent Director, oversaw the review of the Chairman.

Overall, the review concluded that the Board was functioning well, with a strong combination of skills and experience being brought by
both Executive and Non-Executive Directors. The report highlighted in particular a desire on the part of the Non-Executive Directors to
seek ways in which they can contribute even more to further support the Company’s continued growth. The main aspects of the Board’s
work which offer scope for further development include reviewing the current meeting cycle and agenda format, in particular with a view
potentially to increasing the time spent by the Board on considering wider ranging strategic matters and the balance between monitoring
financial outcomes and strategic KPIs.

The review also covered the operations of the Board Committees and, while concluding that they were each operating satisfactorily,
also made recommendations for their further improvement which the respective Committees are considering. In part, the findings of
the review in relation to the satisfactory operation of the Nomination and Audit Committees reflected improvements implemented in
the course of 2014 in response to areas for further improvement identified in the 2013 Board review. Further details of the evaluation
of the Board Committees are set out below in their respective reports.

Accountability
The Audit Committee and auditors
Details on the roles and responsibilities of the Audit Committee, and its members can be found in the Audit Committee Report on pages
85 to 90. Information on the Company’s external auditors is also contained within this section.

Internal control and risk management
In accordance with Internal Control: Guidance to Directors (formerly known as the Turnbull Guidance), the Group has an ongoing process for
identifying, evaluating and managing the significant risks through an internal control framework. This process has been in place throughout
2014, and the process for 2015 has been considered in light of the requirements of the 2014 UK Corporate Governance Code and the
accompanying Guidance on Risk Management and Internal Controls. The Board conducted a review of the effectiveness of the Group’s
systems of internal control and risk management during 2014 and more information can be found on risk management on pages 24 to 31.

Our internal control framework has four key layers:

h i c a l

a n d c ultural environment
A s s u r a nce activities

r i n g a n d oversight co
M o nit o
ctio n a l a n d front lin

e c

o
l

Risks

n
u
F

– Functional and front line controls
This includes a wide spectrum of controls as seen in most organisations, including, for example, standard operating procedures and
policies; a comprehensive financial planning and reporting system, including quarterly forecasting; regular performance appraisals and
training for employees; restricted access to financial systems and data; delegated authority matrices for review and approval of key
transactions; protective clothing and equipment to protect our people from harm; IT and data security controls; business continuity
planning; and assessment procedures for potential new recruits.

– Monitoring and oversight controls
There is a clearly defined organisational structure within which roles and responsibilities are articulated. There are monitoring controls
at operating company, regional, divisional and Group level, including standard key performance indicators, with action plans to address
underperforming areas.

A compliance scorecard self-assessment is completed and reported by all operating companies twice per annum. The scorecard
assesses compliance with Group policies and procedures.

Financial monitoring includes comparing actual results with the forecast and prior year position on a monthly and year-to-date basis.
Significant variances are highlighted to Directors on a timely basis, allowing appropriate action to be taken.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Corporate Governance Report continued

Accountability (continued)
Internal control and risk management (continued)
– Assurance activities
We obtain a wide range of assurance to provide comfort to management and the Board that our controls are providing adequate
protection from risk and are operating as we would expect. Following the Board and Committee structure set out on page 77, various
internal and external sources of assurance report to the Board and management. These are principally external audit, internal audit,
EHS audits, intellectual property audits, engineering audits, procurement audits, IT audits, and production system lean audits. The legal
function introduced a legal audit programme in 2014.

The various audit teams plan their activities on a risk basis, ensuring resources are directed at the areas of greatest need. Issues and
recommendations to enhance controls are reported to management to ensure timely action can be taken, with oversight provided from
the relevant governance committees, including the Audit Committee and the Excellence Committees.

– Ethical and cultural environment
We are committed to doing business at all times in an ethical and transparent manner. This is supported by the Weir values which are the
core behaviours we expect our people to live by in their working lives. The Weir Code of Conduct, updated and reissued during the year,
also contributes to our culture, providing a high benchmark by which we expect our business to be conducted. Any examples of unethical
behaviour are dealt with robustly and promptly. The Ethics section within the Sustainability Review on page 66 provides more details on
the Group’s activities to promote ethical behaviour.

The Group’s internal control procedures described on page 89 of the Audit Committee Report do not cover joint venture interests. We have
Board representation on each of our joint venture companies where separate, albeit similar, internal control frameworks have been adopted.

Remuneration
Details of the Company’s Remuneration Committee, including its roles, responsibilities and members are contained within the Remuneration
Report on pages 91 to 108. The Remuneration Report also details the Company’s approved remuneration policy table and the remuneration
received by Directors in 2014.

Relations with shareholders
The Board recognises the importance of establishing and maintaining good relationships with all of the Company’s shareholders.
The Company’s investor relations programme includes formal presentations of full year and interim results and meetings with individual
investors. Through this programme, the Company has directly engaged with 478 investors in 2014 either face-to-face or via telephone or
video-conferencing. Other areas where the Company engages with shareholders include attendance at investor conferences held by the
financial community and roadshows and Investor Relations events held by the Company, of which there were 23 during the year held in
Canada, Denmark, Finland, Germany, The Netherlands, Sweden, the UK, Singapore and the USA.

The Company holds an annual capital markets day, which in 2014 was held in London in June. This event allows shareholders to meet the
broader management team and to gain a more in-depth understanding of one business or one aspect of the business. The capital markets
day this year focused on progress in our Power & Industrial Division and initiatives relating to procurement and supplier development.

During the period under review, the Chief Executive, Finance Director, Chairman and Remuneration Committee Chairman have met with
analysts and institutional shareholders to keep them informed of significant developments and report to the Board accordingly on the
views of these stakeholders. Each of the other Non-Executive Directors is also offered the opportunity to attend meetings with major
shareholders and would do so if requested by any major shareholder.

Our brokers and public relation advisors undertake investor roadshow feedback which is shared with the Board, and the Group appointed
Goldman Sachs International in September 2014 as its joint brokers, alongside UBS. The Company Secretary is also charged with bringing
to the attention of the Board any material matters of concern raised by the Company’s shareholders.

The primary means of communicating with the Company’s shareholders are the Weir Group’s Annual Report and Financial Statements
and the Interim Report. Both are available on the Company’s website and the Annual Report is posted out to all shareholders who elect
to receive it. Copies are available upon request to the Company Secretary.

The Board recognises the importance of the internet as a means of communicating widely, quickly and cost-effectively and a Group
website is maintained to facilitate communications with shareholders. As well as the Interim and Annual Report, the website contains
information on the business of the Company and corporate governance, all Group press releases and Company news, key dates in the
financial calendar and other important shareholder information. The terms of reference for the Audit, Nomination and Remuneration
Committees can also be found on the website.

The Board is committed to the constructive use of the Annual General Meeting as a forum to meet with shareholders and to hear
their views and answer their questions about the Group and its business. The 2015 AGM is to be held on Wednesday 29 April 2015
at the Radisson Blu Hotel in Glasgow. Together with the rest of the Board, the Chairmen of the Remuneration, Nomination and Audit
Committees will be available to answer questions relevant to the work of the Board and the Committees. It is the Company’s practice
to propose separate resolutions on each substantive issue at the AGM. Details on proxy voting will be contained in the proxy form and
the Notice of Meeting sent to shareholders and the Chairman will also advise shareholders at the meeting. Electronic proxy voting is
available and details of this are also included in the Notice of Meeting.

The Weir Group PLC Annual Report and Financial Statements 2014Nomination Committee Report

Nomination Committee
Report

Charles Berry
Chairman of the
Nomination Committee

Current members

Charles Berry (Chairman)

Keith Cochrane

Rick Menell

John Mogford1

Name

Charles Berry

Keith Cochrane

Rick Menell

John Mogford

Lord Robertson2

Attendance

5 of 5

4 of 4

5 of 5

Notes
1. John Mogford was appointed to the Committee on 21 January 2014.
2. Lord Robertson retired from the Committee on 31 January 2015.

The Nomination Committee consists of the Chairman, the Chief Executive and two Non-Executive Directors. John Mogford joined the
Committee at the start of 2014, and Lord Robertson retired from the Committee on 31 January 2015. The Committee is chaired by
Charles Berry. Senior members of management and advisors are invited to attend meetings as appropriate.

There were three scheduled meetings and two additional meetings held during the year. Details of the attendance of the members
of the Committee for the 52 weeks to 2 January 2015 are contained in the table above.

The Chairman does not chair the meeting when the matters under consideration relate to him or his position. Similarly, should a matter
under discussion relate to any of the other Committee members, they would excuse themselves from the meeting.

Committee’s role
The Committee has responsibility for considering the size, structure and composition of the Board of the Company, for reviewing
senior management succession plans, retirements and appointments of additional and replacement Directors and making appropriate
recommendations so as to maintain an appropriate balance of skills and experience on the Board. The terms of reference of the
Committee are available on the Company’s website.

The Committee was evaluated as part of the 2014 Board evaluation process, conducted externally by Independent Board Review.
In particular, the process around Sir Jim McDonald’s appointment was highlighted as being smoothly handled, as well as the continued
progress towards enhanced transparency of decision-making.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Nomination Committee Report continued

Independence
The Nomination Committee reviewed and confirmed the independence of all Non-Executive Directors and in particular Lord Robertson
who, before his retirement in January 2015, had been a Non-Executive Director of the Company for a period of 11 years. In accordance
with the Code, a rigorous review was undertaken which examined his continued contribution to the Board and its Committees and his
external interests and roles. It was concluded that the Board still considered all of its Non-Executive Directors, including Lord Robertson
prior to his retirement, to be independent in character and judgement. The continued service as directors for both Rick Menell and John
Mogford was specifically reviewed, in light of their respective lengths of service, as noted above at page 79.

Processes are in place to identify any business relationships held by Non-Executive Directors or additional directorships or significant links
with other directors through involvement in other companies or bodies which may be of relevance in determining the independence of a
Non-Executive Director. The Nomination Committee is satisfied that all Non-Executive Directors continue to be independent in character and
judgement and that there are no relationships or circumstances which are likely to affect, or could appear to affect, the Directors’ judgement.

Board appointments
The Committee has established a process for Board appointments that it considers to be formal, rigorous and transparent and involves
the use of external executive recruitment agencies. This process includes drawing up a description of the role and capabilities required for
the particular appointment, together with a review of the skills, knowledge and experience of the existing Directors. The existing balance
of the Board and the time commitment required are also taken into consideration when assessing candidates.

A formal search process was undertaken in 2014 to recruit a new Non-Executive Director to succeed Lord Robertson. The Company
engaged an external search consultancy, The Inzito Partnership, to identify a successor. The Inzito Partnership has no other connection
with the Company. A sub-committee was formed to produce a short list of candidates from the long list produced by the Inzito Partnership
and the Committee recommended the appointment of Sir Jim McDonald to the Board.

Succession planning
The Committee continued to give significant meeting time and focus to senior executive succession planning, identifying the talent pool
for potential candidates and succession planning within the Group. During the year, the Director of Human Resources presented a review
of senior executive succession planning, containing details of ongoing or proposed talent development, the methods for identifying and
cultivating potential internal candidates, and the balance of internal and external recruiting for the most senior positions. Attention and
consideration was given in 2014 to developing a longer-term succession pool and establishing development roles to provide additional
experience and opportunities for high-potential talent. The Committee also spends time on succession planning for the various Board
level roles.

Boardroom diversity
The considerations to be taken into account in each appointment to the Board are stipulated in the terms of reference of the Nomination
Committee which are available on the Company’s website. Specifically, the Nomination Committee must ‘consider candidates on merit and
against objective criteria, and with due regard for the benefits of diversity on the Board, including gender’ in identifying and recommending
candidates. The Nomination Committee recommends appointments to the Board based on the existing balance of skills, knowledge and
experience on the Board, on the merits and capabilities of the nominee and on the time they are able to devote to the role in order to
promote the success of the Company.

The Board acknowledges the benefits a diverse pool of talent can bring to a boardroom. Among other things, a diverse board encompasses
diversity of experience, social background, education and training, life skills and personal attributes, as well as differences in age, nationality,
race and gender. The Board approved a policy with respect to Board diversity at its meeting in January 2014 and the Nomination Committee
has operated under and reported against this policy from this date.

The recent focus on Board diversity has centred on gender and the Board aspires to maintain a significant level of female representation on
the Board. At the end of the financial year, two of the ten Board members of the Company were female (20%). Following the resignation of
Lord Robertson at the end of January 2015, this percentage increased to 22%. The Board will continue to consider its policy with respect to
Board diversity on future appointments but will not place a higher regard for one form of diversity over any other. The appropriate composition
of the Board as a whole with regard to the size and activity of the Company will be taken into account at all times.

Charles Berry
On behalf of the Nomination Committee
25 February 2015

The Weir Group PLC Annual Report and Financial Statements 2014Report of the Audit Committee

Report of the
Audit Committee

Alan Ferguson
Chairman of the
Audit Committee

Introduction
As Chairman of the Audit Committee, I am pleased to present our report to shareholders in accordance with the UK Corporate Governance
Code (the ‘Code’). Through this report, I hope we will demonstrate our commitment, as an Audit Committee, to our responsibilities under
the Code and how we have discharged them effectively during the year. The revised Code issued by the Financial Reporting Council in
September 2014, effective for accounting periods starting on or after 1 October 2014, will be reflected in next year’s report.

Key objective
Our key objective is to provide effective governance over the appropriateness of the Group’s financial reporting. We do this by focusing
on, amongst other things:
– the adequacy of accounting policies, practices and disclosures;
– the performance of both the internal audit function and the external auditor; and
– oversight of the Group’s systems of internal control, framework for identification and management of business risks and related

compliance activities.

Membership
I chair the Committee with the current members being Melanie Gee, John Mogford and Sir Jim McDonald, all of whom are independent
Non-Executive Directors. Rick Menell was appointed to the Committee on 21 January 2014 and resigned from the Committee on 1 January
2015. Jim was appointed to the Committee coincident with his appointment to the Board on 1 January 2015. Both Melanie and John have
been members of the Committee for the full year and to the date of this report.

Each of the Committee members has, through their other business activities, significant experience in financial matters and has been
selected with the aim of providing the wide range of financial and commercial expertise necessary to fulfil our responsibilities. Summary
biographies have been presented on pages 70 and 71.

Responsibilities
As a Committee, we are responsible for:
– reviewing the announcements of the Group’s financial results, including the Interim Report and Annual Report and Financial

Statements, and monitoring compliance with relevant statutory and Listing Rules requirements;

– reporting to the Board on the appropriateness of the Group’s accounting policies and practices, including critical accounting policies

and those judgements and estimates with the most significant effect on the amounts recognised in the financial statements;

– advising the Board on whether the Committee believes that the processes underlying the compilation of the Annual Report and Financial
Statements are robust and supportive of the assertion reached by the Board that the document, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group’s performance, business model and strategy;
– overseeing the relationship with the external auditor, covering their appointment, audit quality and effectiveness, independence and fees;
– reviewing and approving the remit of the Internal Audit function, ensuring its independence and that there are the necessary resources

and access to information available in order for it to fulfil its mandate;

– reviewing the effectiveness of the Group’s systems for financial control, financial reporting and risk management, incorporating a

review of reports on any significant frauds, misappropriation of assets or unethical behaviour;

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Report of the Audit Committee continued

Responsibilities (continued)
– oversight of the Anti-Bribery & Corruption (AB&C) programme and providing input to the Board on ethics compliance; and
– reviewing treasury policy including foreign exchange exposure.

The terms of reference can be found on the Group’s website, weir.co.uk.

Committee evaluation
The Committee was evaluated as part of the 2014 Board evaluation process, conducted externally by Independent Board Review.
It concluded that the performance of the Committee has continued to improve over recent years, with good levels of challenge on
key issues, persistence and a comprehensive annual agenda. The Committee receives well-presented papers and good reports from
management and internal audit. However, there are always areas where improvements can be made, for example risk assurance will
be an area of focus in 2015; we can do more here and the revised Code places more responsibilities on boards and audit committees
in this regard.

Meetings
We met four times during the period. Each Committee meeting takes place prior to a Board meeting, during which I provide a report
on our activities.

There is at least one meeting each year when we meet with each of the Head of Internal Audit and the external auditors separately,
without any executive management present. This provides us with the opportunity for any issues of concern to be raised by, or with,
the auditors.

We have the ability to call on Group employees to assist in our work and to obtain any information required from Executive Directors
in order to carry out our roles and duties. We are also able to obtain outside legal or independent professional advice if required.

The table below details the Board members and members of senior management who were invited to attend meetings as appropriate
during the calendar year. In addition, Ernst & Young LLP (EY) attended the meetings as auditors to the Group by invitation.

Audit Committee attendees

Charles Berry

Keith Cochrane

Jon Stanton

Keith Ruddock

Chairman

Chief Executive

Finance Director

Attends by invitation

Group General Counsel & Company Secretary

Attends as secretary to the Committee

Christopher Morgan

Deputy General Counsel

Attends as nominee of Keith Ruddock (from 18/2/15)

Lindsay Dixon

Sarah Caldwell

Brian Gibson

Group Financial Controller

Head of Internal Audit (to 10/2/14)

Attends by invitation

Attended by invitation

Head of Internal Audit (from 10/2/14)

Attends by invitation

The Committee members’ attendance at the meetings held during the calendar year is summarised in the table below.

Current members

Alan Ferguson (Chairman)

Melanie Gee

John Mogford

Sir Jim McDonald1

Name

Alan Ferguson

Melanie Gee

John Mogford

Rick Menell

Attendance

4 of 4

Note
1. Sir Jim McDonald joined the Committee on 1 January 2015 and has attended both meetings held since that date.

Between the end of the calendar year and the date of this report, there were two meetings of the Audit Committee, both of which were
attended by all members of the Committee during that period.

Main activities
Over the course of the period since the last Annual Report, our work was focused in the following areas:
(i) financial reporting;
(ii) internal control and risk management;
(iii) internal audit; and
(iv) external audit.

The Weir Group PLC Annual Report and Financial Statements 2014The following sections provide more detail on our specific items of focus under each of these headings, explaining the work we,
as a Committee, have undertaken and the results of that work.

(i) Financial reporting
Our principal responsibility in this area is the review and challenge, where necessary, of the actions and judgements of management
in relation to the half year and annual financial statements before submission to the Board, paying particular attention to:
– critical accounting policies and practices, and any changes therein;
– decisions requiring judgements and estimates with the most significant effect or where there has been discussion with the

external auditor;

– the existence of any adjustments resulting from the audit;
– the clarity of the disclosures and compliance with accounting standards and relevant financial and governance reporting requirements; and
– the processes surrounding the compilation of the annual report and financial statements with regard to fair, balanced and understandable.

We received formal reports from the Finance Director and the external auditor, summarising the main discussion points for both the half
year and full year reporting and explored these in detail at our meetings in January, February and July.

The significant financial reporting issues discussed in the current year are summarised below.

Current period matters
(1) Accounting for the acquisition of Trio Engineered Products (‘Trio’) – note 13
The specific items we have discussed and reviewed with management and the external auditors, EY, in relation to the £146m acquisition of
Trio were: (a) the Purchase Price Allocation (PPA) exercise to attribute provisional fair values to separately identifiable intangible assets and
the related accounting for deferred tax; (b) the assessment of provisional acquisition fair values of other assets and liabilities, specifically
property, plant & equipment, inventory and provisions; and (c) compliance of the disclosures in the financial statements with IFRS 3,
‘Business Combinations’.

Management engaged with an independent external advisor to complete the PPA exercise and reported a summary of the underpinning
assumptions and related results to us. We reviewed that summary and also compared the assumptions used to those for other recent
acquisitions where appropriate. The accounting for deferred tax has included technical input from the Group Head of Tax. We examined
the nature and extent of provisional fair value adjustments to other assets and liabilities noting a rigorous process was being undertaken
and would be finalised, as required by IFRS 3, in 2015. Finally, we challenged management on the completeness of the related
disclosures and satisfied ourselves that they were complete, accurate, understandable and compliant with IFRS 3.

(2) Exceptional items – Group-wide efficiency review – note 5
The Group announced in November 2014 that it had undertaken a Group-wide review in the third quarter to identify opportunities to
reduce costs, increase customer responsiveness and efficiency while aligning resources globally to capture end market opportunities.
This programme was extended towards the end of the fourth quarter in response to the very significant decline in the oil price. The
financial impact of the initiatives underpinning the programme is a cost in 2014 of £49m, which has been reported as exceptional on
the face of the Income Statement. This figure comprises asset impairments of £19m and reorganisation costs (which have or will result
in a cash out flow for the Group) of £30m. Further detail in relation to the initiatives is provided in the Financial Review on page 46.

As well as being party to discussions at Board level on this subject, the Audit Committee has received detailed reporting from the Finance
Director covering the following aspects: (i) costs by initiative, by division; (ii) accounting treatment adopted in relation to recognition of
provisions and impairments; and (iii) disclosure of the amounts and related narrative reporting. The Committee has probed management
to understand and confirm that the requirements of IAS 37 ‘Provisions, contingent liabilities and contingent assets’ have been met in terms
of recognising a provision at the end of the year and received reporting from EY that confirms management’s treatment as appropriate.
Furthermore, we considered the nature of these costs in light of the Group’s accounting policy for exceptional items. The Committee
agrees with the accounting treatment and disclosure of these items in the 2014 Annual Report.

(3) Exceptional items – impairment of intangible assets – notes 5 and 14
At least once every year, as required, management undertakes a detailed, formal impairment review of goodwill and other intangible
assets and related reporting is provided to the Audit Committee. The most significant judgements are in setting the assumptions
underpinning the calculation of the value in use of the Cash Generating Units (CGUs), specifically the achievability of the long-term
business plan and macroeconomic assumptions underlying the valuation process. In the current year, and as a direct result of the recent
very significant drop in the oil price, specific focus has been given to the basis of the assumptions underpinning the business plans of the
Pressure Control and Pressure Pumping CGUs. In addition, consideration has been given to the long term growth rates and discount rates
used in the cash flow models for all the CGUs. Business plans and budgets were Board approved and underpin the cash flow forecasts.

Specifically in relation to Pressure Control, we have discussed the cash flow forecasts underpinning the impairment test with management
to understand the main assumptions around macroeconomic factors, volume/price effect and any strategic initiatives. We agreed that
the assumption of the current oil price of around US$50 a barrel, and consequent activity levels, enduring for the next two years with
a measured return to more ‘normal’ levels thereafter is the most appropriate one given what we know today. On that basis, we agree
with the best estimate impairment charge of £160m of the Pressure Control CGU and concur with its allocation against goodwill.

With regard to Pressure Pumping, this business is more mature and had significant levels of headroom between net asset value and
discounted cash flows going into the current market downturn. Management have included in their reporting to us the stress test scenarios
that have been applied and we agreed, following a detailed review, that no impairment charge is required. Although the Weir Gabbioneta CGU
is an Oil & Gas business, its focus is on downstream operations and so is not expected to be as adversely impacted by the current market
downturn. However a sensitivity analysis has been undertaken by management and we agreed that no impairment charge is required.

Finally, we have reviewed the disclosures in the financial statements and agree with the reporting of the impairment charge as an
exceptional item and the related narrative provided in note 14.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Report of the Audit Committee continued

Main activities (continued)
(i) Financial reporting (continued)
Current period matters (continued)
(4) Contingent liability – Philippines Gold Processing & Refining Corporation – note 27
A claim has been made by Philippines Gold Processing & Refining Corporation against Weir Services Australia Pty Limited (WSA),
a subsidiary of the Company as disclosed in note 27.

In relation to this claim, the Group has engaged external legal advisors to support and advise throughout the legal proceedings. These
external legal advisors have provided a letter to the Audit Committee setting out the current status of the claim and discussions have
been held with both management and EY with regard to the accounting treatment applied. On the basis of the external advice and these
discussions, the Committee agrees that the disclosure of a contingent liability is appropriate given the significant uncertainty surrounding
the outcome of the claim at the balance sheet date and at the date of this report.

Recurring agenda items
(1) Accounting for pensions – note 24
We have examined these disclosures and we are satisfied they are complete and accurate. In reaching this conclusion, we have challenged
management on the key assumptions used underpinning the valuation, taking assurance from the fact that external advice is taken by them.
During the current year, we gave specific consideration to the additional disclosure provided by management summarising the most recent
actuarial funding valuation deficits under the two main UK plans as well as the agreed future contributions under the respective schedules
of contributions. We consider that these disclosures enable users of the financial statements to better understand the risk and impact of
the agreed future contributions on the Group.

(2) Tax charge and provisioning – note 7
The Audit Committee receives a detailed report from the Finance Director every six months, which covers the following key areas: (i)
status of on-going enquiries and tax audits with local tax authorities; (ii) the Group’s effective tax rate for the current year; and (iii) the
level of provisioning for known and potential liabilities, including significant movements on the prior period. In addition, the Committee
takes comfort from the presentation to the main Board on tax strategy and risk, given by the Group Head of Tax, every year. A summary
of the Group’s tax policy is provided in the Financial Review on page 48. Based on the work we have undertaken in the current year,
we are satisfied that the position presented in these financial statements is reasonable and understandable.

(3) Accounting for provisions – note 22
Total provisions on the Group Balance Sheet are £113m (2013: £55m) at the end of the period with the breakdown by category presented
in note 22. The increase on 2013 is a direct result of two factors. Firstly the recognition of the provision in relation to obligations that existed
at the balance sheet date as part of the Group-wide efficiency review (£22m), which will result in cash outflows over 2015 and, secondly,
the recognition of a provision for US asbestos-related claims (£28m).

As explained in detail in the Financial Review on page 49, in light of the recent increase in the US of asbestos-related claims, a review
was completed by the Group to assess the adequacy of its insurance policies to meet future settlement and defence costs. The outcome
of this review was the recognition of a provision and equivalent receivable for insurance proceeds for £28m, the latter reported within
‘other receivables’ (note 17).

In addition to receiving Board reporting on this matter, we have challenged management on the assumptions underpinning the liability
assessment. We agree that, given the inherent uncertainty associated with estimating future costs in respect of asbestos-related diseases, the
current approach is appropriate. Furthermore, we agree that the matched receivable representing the insurance cover available is appropriate.

With regard to provisions in overall terms, we have examined the other key movements between the opening and closing provision balances
and challenged management on the commercial drivers which caused them. We have also examined, through discussion and updates provided
by the Group General Counsel (where it is relevant to do so based on the nature of the provision), the appropriateness of the closing positions.
Nothing arose from our work that gave the Committee any concern.

(4) Valuation of inventory – note 16
In the prior year, we reported on our work in this area as it related to the excess capacity remaining in certain pressure pumping equipment
sectors within the North American gas drilling market as a result of the shift to oil and liquids rich shale formations in Q1 2012 and the
related impact on customer activity. We received an update from management in the current year on this inventory and also considered the
implications for inventory valuation of the recent sharp decline in oil price, particularly in light of the increased activity that had been generated
in those businesses over the majority of 2014. Based on the information provided in the areas of inventory reduction initiatives, provisioning and
forward purchase commitments, we concluded that management action had been effective and that the level of provisioning was appropriate.

Fair, balanced and understandable
The Audit Committee has reviewed the contents of this year’s annual report and financial statements and the process that has been
followed in the preparation of the document. With regard to the latter, the Committee received a report from management summarising
the detailed approach that had been taken which covered, but was not limited to, the following:
– involvement of a cross section of management across the organisation, including the Group Executive, Group Communications,

Group Finance (including Group Tax and Group Treasury) and Company Secretariat;

– input and advice from appropriate external advisers, including the Company’s brokers and PR agency;
– use of available disclosure checklists for both Corporate Governance and financial statement reporting;
– regular research to identify emerging practice and guidance from relevant regulatory bodies, for example the Financial Reporting Lab;
– regular weekly meetings of the Disclosure Committee (from December to February inclusive), which comprises the key contributors

to the document, during which specific consideration was given to the fair, balanced and understandable assertion; and

– use of two cold readers; one an employee and member of the Senior Management Group and the other an external, independent proof reader.

The successful completion of this work has been reported to the Board.

The Weir Group PLC Annual Report and Financial Statements 2014(ii) Internal control and risk management
During the year, we reviewed the process by which the Group evaluated its internal control environment. Our work in this area was
supported by reporting from the Head of Internal Audit on the results of the programme of audit visits undertaken; the overall assessment
of the internal control environment; and the incidence of any significant frauds or any fraud that involved management or employees with
a significant role in internal controls.

The Committee also receives regular reporting on the Group’s compliance related activities from the Group General Counsel and
Company Secretary and Head of Internal Audit. In addition, reporting, either verbal or written, from senior management covering
any investigations into known or suspected fraudulent activities, including assertions of such via the Group’s whistleblowing
arrangements, is reviewed.

Since the last Annual Report and Financial Statements, there have been presentations from two of the three Divisional Finance Directors
(DFDs) on the divisional risk dashboards, the significant findings from the internal audit visits and the Compliance Scorecard process over
the last 12 months, as well as an overview of their divisional finance teams.

The Compliance Scorecard is a control mechanism whereby each operating company undertakes a self-assessment every six months
of their compliance with Group policies and procedures, including key internal controls across a range of categories including finance,
Anti-Bribery & Corruption, tax, treasury, Trade & Customs, HR, IT and legal. As far as the elements relating to finance are concerned,
these cover (but are not limited to) management accounts and financial reporting, balance sheet controls, employee costs and other
financial policies. The scorecard for the second half of the year was enhanced through the addition of new questions in relation to the
management of remote locations and treasury operations.

Operating companies are required to gather evidence and undertake sample testing to validate their self-assessment responses. Internal
Audit then has responsibility for confirming the self-assessment responses during planned visits. Any significant variances are reported to
local, divisional and Group management. Any companies reporting lower levels of compliance are required to prepare improvement plans
to demonstrate how they will improve over a reasonable period of time. The overall compliance scores (in percent) are tracked over time
and reported to the Audit Committee twice a year with the Committee paying particular attention to the variances between self-assessed
and Internal Audit assessed scores as well as trends and the performance of newly acquired companies.

Our role with regard to risk is to look at the process of formulating the risk matrix and the assurance provided over internal controls and
other mitigating factors. The ultimate responsibility for reviewing and approving the principal risks included in the Annual Report and
Financial Statements remains with the Board.

(iii) Internal audit
One of the main duties of the Committee is to review the annual internal audit programme and ensure that the internal audit function
is adequately resourced, effective (which includes assessing the independence of the function) and has appropriate standing within the
Company. As far as the scope of the Internal Audit programme is concerned, the aim is to carry out visits to each operating company in
the Group on a periodic, rotational basis. A risk based approach is taken when deciding which businesses to audit and the scope of each
audit. The factors considered are, amongst other things, the volatility of end markets, critical system or senior management changes
in the period, financial results, the timing of the most recent Internal Audit visit and any other assurance reviews undertaken, and whether
the business is a recent acquisition. In addition, the emergence of any common themes or trends in the findings of recent internal audits
or compliance scorecard submissions (see previous section) are taken into consideration. As part of the annual plan, Anti-Bribery &
Corruption reviews are undertaken, focusing on areas such as relationships with agents, accounting for employee expenses and
corporate hospitality/gifts.

The Internal Audit Plan is reviewed and approved by the Committee each year. Twice annually the Head of Internal Audit reports on
audit activities, progress against the plan and the results of audit visits with particular focus on high priority findings and the action plans,
including management responses, to address these areas.

Private discussions between me and the Head of Internal Audit are held during the year and once a year with the full Committee. I also
receive copies of all internal audit reports issued during the year.

(iv) External audit
Auditor effectiveness
The effectiveness of the external audit process is dependent on appropriate audit risk identification at the start of the audit cycle. EY present
their detailed audit plan to us each year identifying their assessment of these key risks. For the current period, the significant risks identified
were the carrying value of goodwill and intangible assets, valuation of inventory, adequacy of liability provisioning, including provisions for
legal obligations, exceptional items and the exposure to significant tax risks due to the inherent management judgement required in all these
areas. Our work in each of these areas has been covered in detail earlier in this report.

Our assessment of the effectiveness and quality of the audit process in addressing these matters is formed by, amongst other things,
a review of the reporting from the auditors to the Committee and also by seeking feedback from management on the effectiveness
of the audit process. During the first half of the year, management issued a detailed questionnaire to every Finance Manager/Director
and Divisional Finance Director to collect feedback on the 2013 audit process. This covered resource and expertise of the audit teams,
quality of planning, execution and deliverables as well as an assessment of overall performance.

Resultant themes and findings were discussed between ourselves, management and EY with both management and the auditors
reporting to us on the actions being implemented in response. In addition, on a periodic basis, the Finance Director and Group Financial
Controller meet with the overseas external audit teams.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Report of the Audit Committee continued

Main activities (continued)
(iv) External audit (continued)
Auditor effectiveness (continued)
The Committee discussed the Audit Quality Inspection report on EY issued by the FRC in May 2014 at its meetings in July and September
and I also had a separate meeting with the lead audit partner to discuss the report. Although the principal findings of the FRC report indicated
a deterioration on the previous year, the Committee agreed that this report, in itself, did not have an impact on our assessment of audit
effectiveness at Weir.

Overall management were satisfied that there had been appropriate focus and challenge on the primary areas of audit risk, although
there are of course some areas where improvements can be made, and assessed the quality of the audit process to be good. Based
on the input from management and discussions we have had with EY and key finance individuals, we also hold this view. This process
will be repeated in respect of the 2014 audit in advance of the Committee’s meeting in July 2015.

The Committee holds private meetings with the external auditor each year to provide additional opportunity for open dialogue and
feedback from the Committee and the auditor without management being present. Matters typically discussed include the auditor’s
assessment of business risks and management activity thereon, the transparency and openness of interactions with management,
confirmation that there has been no restriction in scope placed on them by management and how they have exercised professional
scepticism. I also meet with the lead audit partner outside the formal committee process as necessary throughout the year.

Independence policy and non-audit services
The Audit Committee is responsible for the appointment and role of the auditor. This includes keeping under review the auditor’s
independence by providing guidelines on any non-audit services that are to be provided by them. In addition, a formal policy exists
which ensures that the nature of the advice to be provided could not impair the objectivity of the auditor’s opinion on the Group’s
financial statements. All non-audit services require the approval of management and, where the expected cost of the service
is in excess of £75,000, the approval of the Audit Committee. No changes have been made to the policy in the current year.
The auditors confirm their independence at least annually.

Fees payable to EY in respect of audit and assurance services for 2014 of £2.0m (2013: £1.9m) were approved by the Committee after
a review of the level and nature of work to be performed, including the impact of acquisitions, and after being satisfied by EY that the
fees were appropriate for the scope of the work required.

Non-audit fee work conducted by EY over the past year for assurance services amounted to £0.1m, which represented 5% of the total
fees, including audit fees, and were incurred primarily in relation to other assurance services. We are of the view that the level and nature
of non-audit work does not compromise the independence of the external auditors.

Auditor choice, tenure, tendering and reappointment
The Committee considers the reappointment of the external auditor, including rotation of the audit partner, each year. The external auditor
is required to rotate the audit partner responsible for the Group audit every five years and the current lead audit partner has been in place
for three years, including 2014.

EY, or its predecessor firms, has been the Company’s external auditor, with no formal tender process, since prior to its stock market
listing in 1946. As part of our annual review of the objectivity and effectiveness of the audit, we conduct an in depth review of their
performance as noted above. There were no matters arising from the review in the current year, which we felt required the service
to be tendered immediately. We have considered the audit tendering provisions outlined in the Code of which we are supportive. We
have also reviewed the subsequent guidance provided by the European Commission and the Competition & Markets Authority (CMA).
The European transitional provisions relating to Mandatory Firm Rotation are likely to require rotation of the external auditor of the Group
within 6 years from July 2014, effectively the 2020 year end, which is also when the CMA mandates a tender process. However, we
intend to tender the external audit, at the latest, coincident to the next rotation of the incumbent lead audit partner, which would be for
the 2017 year end and are starting to plan for this process. Taking into account the circumstances noted above, this timing is viewed by
the Committee as being in the best interests of shareholders.

Having considered the relationship with the independent auditor, their qualifications, expertise, resources and effectiveness, the Committee
concluded that the external auditors remain independent and effective and recommended to the Board that EY be re-appointed as the
Company’s external auditors for 2015. There are no contractual obligations restricting the Group’s choice of external auditors.

A resolution to re-appoint EY as the Company’s auditor will be put to the forthcoming Annual General Meeting.

Our focus for 2015
In addition to our routine business, the Committee will increase its focus on risk assurance as part of the adoption of the revised
UK Corporate Governance Code and the FRC’s Guidance on Risk Management, Internal Control and Related Financial and Business
Reporting. In addition we will progress the audit tender plans so that we are well prepared for this important process.

Alan Ferguson
On behalf of the Audit Committee
25 February 2015

The Weir Group PLC Annual Report and Financial Statements 2014Remuneration Report

Directors’
Remuneration
Report

Melanie Gee
Chairman of the
Remuneration Committee

Dear Shareholder
As Chairman of the Remuneration Committee, I am pleased to present this 2014 Remuneration Report, incorporating our remuneration
policy table as approved at the 2014 AGM. This year, we have sought to make the detail of our remuneration arrangements easier to
follow by including an ‘At a Glance’ section at the beginning of the report.

Business context
2014 was a challenging year for most commodity prices, with the downward trend in mining company capital expenditure continuing and
oil prices, having been stable through the year, experiencing their biggest fall since 2009 in the fourth quarter. Against this background,
and as described more fully in the Chief Executive’s Strategic Review (at page 10), management has focused on accelerating operational
efficiencies through our four strategic pillars (as detailed on pages 15 to 21). This includes significant progress on Value Chain Excellence,
and we continue to build on our operational and strategic initiatives through Innovation, Collaboration and extending our Global Capability.

We remain confident in the long term growth trends in our key end markets. However, in 2015 we expect continued price volatility in many
commodities, including those to which we are most exposed, with our mining customers remaining focused on optimising their current
assets to support increased production. Many of our oil and gas customers have already significantly reduced their capital spending plans in
response to lower oil prices, and our visibility in these markets is limited as they adjust plans in the evolving pricing environment. In light of the
near term uncertainties and emerging pricing pressure in oil and gas markets, which represented nearly 50% of our 2014 revenues, senior
management undertook an efficiency review across all divisions in the third quarter of 2014, with a view to ensuring that the Group entered
2015 optimally placed to tackle what is expected to be a challenging year. The oil and gas division took further action at the start of 2015.

In this letter and in the report itself, we have demonstrated how the various elements of compensation link to the implementation of our
strategy and align Executive Directors with the long-term interests of our shareholders, in particular in these times of unpredictable oil
and gas markets.

2014 remuneration outcomes
As part of implementing our approved remuneration policy, the salaries of the Chief Executive and the Finance Director were unchanged
in 2014. During the year, the Company made changes to the pension arrangements for all UK staff in response to the introduction of
pension auto-enrolment and, as of July 2014, senior executives had the option to join the Company’s defined contribution scheme or
receive an equivalent cash amount. Prior to this, there had been no specific pension provision for senior executives. Both the Chief
Executive and the Finance Director have chosen to take the cash amount.

The 2014 annual bonus payout, as a percentage of maximum opportunity for both the Chief Executive and Finance Director, was 61.2%.
The 2014 bonus had two performance metrics – financial (80% of bonus entitlement) and personal (20% of bonus entitlement). The
financial element was based on the achievement of Normalised Profit Before Tax and Amortisation (NPBTA), and capable of being reduced
to the extent that Group working capital targets were not achieved. Given challenging markets, the relative performances of our two main
businesses were strong during the year and performance under the NPBTA measure was just below target. The Group working capital
target was not achieved and, as a result, the Committee has reduced the bonus entitlement under the financial performance element
by 10%.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Remuneration Report continued

2014 remuneration outcomes (continued)
The Committee reviewed personal performance of each of the Chief Executive and Finance Director against their respective individual
performance objectives, which were set at the beginning of the year and built around the Company’s KPIs. All individual performance
objectives were measurable and further details are set out in the report. The Committee concluded that all personal objectives were
achieved and the Chief Executive and Finance Director were awarded the maximum entitlement under this element.

No performance or matching shares will vest in March 2015 under the 2012 LTIP awards, as the performance conditions required were
not met. Awards were based on relative Total Shareholder Return (TSR) and growth in Earnings per Share (EPS) performance conditions
over the three year period to 31 December 2014. The Company’s TSR performance over the period was below median relative to the
comparator group, this being the threshold vesting level, and EPS growth was 2.55% per annum, also below the threshold level of 7%
per annum.

As part of our remuneration policy approved in 2014, the Company has the ability to operate malus and clawback in certain circumstances
for the cash bonus, the bonus shares and the LTIP. We have expanded on the disclosure of the details of our malus and clawback
arrangements on pages 95 and 96.

Implementation of remuneration in 2015
The Committee considered base pay increases for our Chief Executive and Finance Director, in line with our policy. We were comfortable
that the good relative performance of the business and the strong performance of the two individuals supported an increase. In April
2015, the salaries for the Chief Executive and the Finance Director will both be increased by 3.4%, which is broadly in line with salary
increases applied to UK employees.

The bonus opportunity and LTIP award levels are unchanged in 2015.

Considering the appropriate performance measures and setting the underlying calibration has been particularly challenging this year given
the external environment, as we seek to ensure the 2015 annual bonus and LTIP targets support the Group’s strategy, are compatible
with the Group’s appetite for risk (see page 25), and are stretching but achievable to provide appropriate incentivisation. The market
environment is discussed further in the Chief Executive’s Strategic Review (starting on page 10).

In relation to annual bonus incentives and pursuant to our remuneration policy, the Committee reviews the measures and sets the targets
each year, reflecting the relevant business context for the period. As a result of this year’s review, we are introducing a new cash flow measure
alongside NPBTA in the financial element of the 2015 bonus scheme targets. The Committee has carefully considered the targets for the 2015
annual bonus scheme, against the backdrop of uncertain, and potentially volatile, oil and gas markets. The Committee is comfortable that the
targets we have set are sufficiently stretching and appropriate for the year ahead, based on the range of assumptions in the Company’s internal
budget at that time.

The Committee has also set the three year targets for the 2015 LTIP awards, which has been equally challenging and compounded by the
relatively high EPS and Return on Capital Employed (ROCE) achieved in 2014, which forms the starting point for each measure’s growth target
over the three year period. The required growth targets are described below. In relation to the ROCE measure, the Committee considered the
2014 base figure and the uncertain business environment over the three year period ahead covered by the 2015 LTIP awards, and concluded
that there were exceptional circumstances making it appropriate to adjust the way we assess this performance measure. As a result of this
adjustment, 2017’s ROCE only will be assessed relative to the 2014 level, rather than taking a three year average per annum growth approach.
This decision has been taken to ensure that the ROCE measure for the 2015 LTIP award remains both incentivising and challenging. Overall,
after careful consideration and in light of the uncertain longer term outlook for oil and gas markets, the Committee is also comfortable that the
2015 LTIP targets are sufficiently stretching and appropriate for the three year period ahead.

In line with our policy, remuneration will be implemented as follows:

2015 bonus scheme
– Our new cash flow measure, alongside NPBTA, better aligns Executive Directors’ interests with our operational priorities and provides
a clearer link between performance and reward. 2015 bonus performance measures will therefore comprise 60% NPBTA, 20% cash
flow and 20% personal performance.

– The Committee will review performance against the 2015 bonus scheme targets on an interim basis, with appropriate input from

management, at its meetings in the second half of the year. In accordance with our policy, the Committee has the ability to exercise
discretion in exceptional circumstances to alter the payout levels of an award at the end of a performance period if it believes this will
better reflect the underlying performance of the Company.

– The Committee has taken particular care in reviewing the personal objectives for the Chief Executive and Finance Director, given the
market backdrop, and is comfortable that they are measurable and appropriately defined to support our growth strategy, including our
four strategic pillars, whilst also focusing on the effective management of the business in the shorter term.

2015 LTIP awards
– The equal weighting of our three long-term measures of TSR, EPS and ROCE remains unchanged and our relative TSR group remains

broadly the same.

– For all measures, threshold vesting remains unchanged at 25% of maximum vesting. For TSR, the performance required for threshold

and maximum vesting remains unchanged at median performance and upper quintile performance respectively.

– Against the backdrop of the recent significant fall in the oil price, emerging pricing pressure in our businesses exposed to oil and gas
markets, and also the uncertain medium term outlook for these markets, the Committee has been concerned to ensure that the EPS
element provides appropriate incentivisation that is both achievable and stretching for the next three years. Recognising the 2014 base
EPS of 141.3p, we have set the performance required for threshold EPS vesting to 2.5% per annum over the three year period (from
5% for the 2014 LTIP awards) and the level for maximum vesting to 7.5% per annum (from 11%) to ensure that Executive Directors
remain incentivised.

The Weir Group PLC Annual Report and Financial Statements 2014

– We introduced our ROCE measure last year, which is a KPI used within the business (as detailed in the Strategic Report on page 23).
Whilst it drives operational excellence, as it is calculated on a constant currency basis it is less influenced by external factors than
the other two measures. For the 2014 LTIP awards, the ROCE measure was expressed as a three year average percentage increase
per annum and the range was set at 0.5% per annum to 4% per annum. The Committee has decided that for the 2015 LTIP awards,
instead of using the average per annum growth for the ROCE measurement it will assess the comparable 2017 ROCE against the
base 2014 ROCE of 17.3%. This is different from the 2014 ROCE of 18.1% (as referred to on page 23) because, in accordance with
our remuneration policy, we have included our recent Trio acquisition in the base figure, in order to make an appropriate comparator
for our 2015 LTIP award ROCE targets. These targets have been set with a threshold ROCE of 18.8% (0.5% per annum improvement)
to a maximum of 24.8% (2.5% per annum improvement).

Shareholder engagement
The Committee welcomes the views of shareholders on remuneration on an ongoing basis. In 2013 and early 2014, the Committee
consulted extensively with shareholders on changes to our remuneration policy and received strong support for our proposals at the
2014 AGM. The Committee’s activities following the 2014 AGM have focused on implementing this approved policy. We continue to
value shareholders’ views on our remuneration arrangements and I can be contacted via the Company Secretary.

Further details of the implementation of the policy and the outturn for 2014 are set out in the rest of this Remuneration Report and
shareholders will be invited to approve the report in an advisory vote at the Company’s AGM on 29 April 2015. We look forward to
shareholders’ continued support.

Melanie Gee
Chairman of the Remuneration Committee
25 February 2015

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Remuneration Report continued

At a Glance
Implementation of remuneration policy in 2015

Element

Operation of the element

Maximum potential value

Performance metrics used

Base salary

Benefits
and pension

A competitive base salary to attract and
retain talented leaders.

£750,000 (3.4% increase) – CEO
£455,000 (3.4% increase) – FD

Not applicable.

A market aligned benefits package.
No specific provision for Executive Directors’
pensions. Standard auto-enrolment entitlement.

Value of benefits determined by
the cost of insured products.
12% of salary in lieu of provision
for auto-enrolment.

Not applicable.

Annual bonus

Bonus based on in-year performance against
financial and personal (including strategic) goals.

150% of salary – CEO
125% of salary – FD

NPBTA (60%)
Cash flow (20%)
Personal performance (20%)

Bonus shares

Bonus converted into shares with a restriction
on sale for three years.

30% of bonus.

Not applicable.

Performance
shares

Grant of performance shares subject to
a 3 year performance period followed by
a 2 year holding period.

250% of salary – CEO
200% of salary – FD

Shareholding
requirements

Requirement to build up a shareholding in
the Company over a five year period.

200% CEO requirement
150% FD requirement

EPS (33%)
TSR (33%)
ROCE (33%)

Not applicable.

Shareholding requirement targets for 2019 and actual shareholding at year end

Keith Cochrane

Jon Stanton

Shareholding requirement

Actual shareholding

Shareholding requirement

Actual shareholding

% salary

100%

200%

300%

400%

500%

600%

700%

800%

Performance achieved in 2014 against targets

Annual Bonus Performance Measures

Below
threshold

Threshold

Target

Maximum

NPBTA (after working capital adjustment)

£377.6m £410.8m £444.0m

Personal Performance

100%

Above
maximum

Percentage
as maximum
of payout

51.5%
(80% weighting)

100%
(20% weighting)

Bonus payout

2012 LTIP Performance Measures

EPS growth per annum

Relative TSR growth
against comparator group

LTIP payout

Below
threshold

Threshold

Target

Maximum

Above
maximum

Percentage
as maximum
of payout

Median

15%

Upper
Quintile

0%
(50% weighting)

Contribution
to payout as
percentage
of maximum

41.2%

20%

61.2%

Contribution
to payout as
percentage
of maximum

Single total figure of remuneration

Keith Cochrane

Jon Stanton

Maximum opportunity

2014 Single total figure

Maximum opportunity

2014 Single total figure

• Base salary

• Benefits

• Annual Bonus

• LTIP – performance shares and matching shares

• Retirement benefits

Value (£’000)

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

The Weir Group PLC Annual Report and Financial Statements 2014Annual Report on Remuneration
Note: certain sections of the report have been audited, which are identified either in text or with the ‘#’ symbol.

Statement of Implementation of Directors’ Remuneration Policy in 2015
In 2015, the approved Directors’ Remuneration Policy will be implemented as follows.

Executive Directors
Fixed elements – Base salary
The Committee made the following 2015 base salary decisions which are in line with the approved Directors’ Remuneration Policy:

Keith Cochrane

Jon Stanton

2015 salary
£

2014 salary
£

Percentage
change

750,000

725,000

455,000

440,000

3.4%

Salaries are effective from 1 April each year. The Committee has considered the broader employee context and economic factors in
determining salaries. In 2015, the increase in base salaries for UK employees will be up to 4%.

Fixed elements – Retirement and other benefits
The implementation of policy in relation to pension and benefits is in line with the approved Directors’ Remuneration Policy.

Short term incentives – Annual bonus
The implementation of policy in relation to annual bonus is in line with the approved Directors’ Remuneration Policy.

The annual bonus is based on in-year performance against targets. The performance measures are: 60% Group Normalised Profit
before Tax and Amortisation (NPBTA) measured over the financial period, 20% cash flow and 20% personal performance targets.

The cash flow measure is defined as cash generated from operations, including additional pension contributions paid and excluding
the impact of derivative financial instruments on working capital cash flows. The performance targets are determined annually by the
Committee. The performance targets for the cash flow measure are set at levels equivalent to the threshold, target and maximum levels
for the NPBTA measure, with similar pay out percentages at each. The performance target of cash flow is adjusted to match the actual
foreign exchange rates during the financial period and is also increased or decreased to reflect the impact of any acquisitions or disposals
made in the year that are of a size requiring Board approval. Exceptional items or extraordinary items as agreed by the Remuneration
Committee are excluded.

Targets are approved by the Remuneration Committee at the beginning of the performance year. As set out in the Directors’ Remuneration
Policy, the Company will disclose the NPBTA and cash flow targets and the main groupings of individual performance measures retrospectively
in the Annual Report on Remuneration. Performance targets will not be disclosed prospectively for commercial reasons.

30% of bonus payable will be converted into shares with a restriction on sale under the 2014 LTIP. There are no performance conditions
on the bonus shares.

Malus and clawback arrangements operate in respect of the annual bonus and bonus shares. These arrangements enable the Company
not to release any bonus shares before the end of the restriction period. This policy also enables the Company to clawback the annual
bonus after the payment date and the bonus shares (or their relevant value) after the restriction period has ended for a period of up to
three years. Malus and clawback may be applied in certain circumstances where there is found to be a material misstatement in the
audited accounts of the Group or a Group company accounts, where the executive’s action or conduct amounts to gross misconduct,
or where there is a significant detrimental reputational impact on the Company for which the executive is responsible.

Long term incentives – performance shares
The Committee has determined that the following awards be made for 2015, in line with the approved Directors’ Remuneration Policy.

Awards vest after three years, subject to performance conditions. Awards for Executive Directors are then subject to a two year
holding period.

Award type

Basis on which award made

Keith Cochrane

Performance shares

Jon Stanton

Performance shares

A grant of shares will be made
based on policy opportunity
levels, the salary of the
individual, and the share price
on the three days prior to grant.

Face value of award
at threshold vesting
(% of 2015 salary)

Face value of award
at maximum vesting
(% of 2015 salary)

62.5%

250%

50%

200%

Performance period

1 Jan 2015 –
31 Dec 2017

Note
The performance period for each LTIP award is based on calendar years. The TSR performance measure is calculated over calendar years. The EPS and ROCE measures are
calculated over the relevant financial periods.

In all cases, awards will only vest subject to the achievement of the performance conditions and if the Committee determines that the
underlying performance of the Company is sufficient to justify the vesting of the awards.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Remuneration Report continued

Annual Report on Remuneration (continued)
Statement of Implementation of Directors’ Remuneration Policy in 2015 (continued)
Executive Directors (continued)
Long term incentives – performance shares (continued)
The three performance measures for the 2015 award apply in equal weighting and their performance targets are:

TSR

EPS

Relative TSR growth
against comparator group

Percentage of TSR
proportion vesting

EPS growth
per annum

Percentage of EPS
proportion vesting

Upper quintile

Median

Below median

100%

25%

7.5%

2.5%

Less than 2.5%

100%

25%

2017 ROCE

24.8%

18.8%

Less than 18.8%

ROCE

Percentage of ROCE
proportion vesting

100%

25%

The TSR comparator group for the 2015 LTIP grant is:
Amec Foster Wheeler, Atlas Copco AB, Cameron International Corporation, Crane Company, Dover Corporation, Fenner PLC, FLSmidth
& Co. A/S, Flowserve Corporation, FMC Corporation, Forum Energy Technologies Inc, IMI PLC, ITT Corporation, John Wood Group PLC,
Joy Global Inc., Melrose Industries PLC, Metso Corporation, Outotec Oyj, Rotork PLC, Sandvik AB, Smiths Group PLC, Spirax-Sarco
Engineering Plc, SPX Corporation, Sulzer Ltd and Vesuvius Plc.

The base 2014 EPS and ROCE used for the purposes of the 2015 LTIP award are 141.3p and 17.3% respectively. 2017 figures will be
calculated on a consistent basis, in accordance with our approved Directors’ Remuneration Policy.

Malus and clawback arrangements operate in respect of performance shares. These enable the Company to reduce unvested awards and
to clawback the relevant value of the vested shares for a period of up to three years after the date of vesting. Malus and clawback may be
applied in certain situations where there is found to be a material misstatement in the audited accounts of the Group or a Group company
accounts, where the executive’s action or conduct amounts to gross misconduct, or where there is a significant detrimental reputational
impact on the Company for which the executive is responsible.

Non-Executive Directors
Annual fees for 2015
The implementation of the Non-Executive Director remuneration is in line with the approved Directors’ Remuneration Policy. The fees per
annum for Non-Executive Directors are set out in the table below. The fees for Non-Executive Directors, including those for additional
responsibilities, were not increased in 2014.

Chairman’s fee for all responsibilities

Non-Executive Directors’ base fee

Additional fee for Senior Independent Director

Additional fee for Audit Committee Chairman

Additional fee for Remuneration Committee Chairman

2015 fees

Percentage
change

2014 fees

290,000

5.5% 275,000

58,000

12,000

15,000

5.5%

55,000

20%

50%

10,000

Fees are effective from 1 April each year. Additional allowances are made available to Non-Executive Directors, where appropriate,
to reflect the additional time commitment in attending intercontinental Board meetings and operational visits.

Single total figure of remuneration for Executive Directors
Details of the remuneration for the 52 weeks ended 2 January 2015 and the 53 weeks ended 3 January 2014 received by the Executive
Directors who served on the Board during the 2014 financial period are set out in the table below. The summary table comprises a number of
key components which are set out in further detail in the relevant sections that follow. The table and accompanying notes have been audited.

Fixed elements

Short term incentives Long term incentives

Pension

Base salary (i)

Benefits (ii)

Annual bonus (iii)

LTIP – performance
shares and matching
shares (iv)

Retirement benefits
(v)

Total

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

Keith Cochrane

725,000

718,750

22,781

21,656

665,564

108,750

Jon Stanton

440,000

435,000

18,804

18,334

336,607

44,000

–

938,171

43,500

401,687

26,400

–

1,456,845

1,787,327

821,811

899,027

Notes to the single figure of remuneration for Executive Directors table
There were no other payments made during 2013 and 2014 and no Executive Director received remuneration for external appointments
during 2014.

i) Base salary
Corresponds to the amounts received during the 2014 financial year.
Salary is paid monthly to Executive Directors. No salary increases were made for Executive Directors in 2014.

The Weir Group PLC Annual Report and Financial Statements 2014
ii) Benefits
Corresponds to the taxable value of all benefits paid in respect of the 2014 financial year.

Life insurance cover

Car allowance

Group healthcare

Other benefits

Total

Keith
Cochrane
2014

Jon
Stanton
2014

4,143

4,336

17,015

13,970

498

1,125

498

–

22,781

18,804

iii) Short term incentives
Corresponds to the total bonus earned under the annual bonus in respect of 2014 performance and includes both the cash
element (70%) and the bonus to be converted into shares with a restriction on sale (30%).
The 2014 annual bonus was based on achievement of Group Normalised Profit before Tax and Amortisation (NPBTA) (80%), capable of being
reduced by 10% to the extent that Group working capital targets were not met, and personal performance targets (20%). Executive Directors’
2014 performance was assessed relative to both the financial targets and other performance considerations further outlined below.

2014 performance measures for Executive Directors

NPBTA

Based on the achievement of NPBTA
targets measured over the financial period.

2014 performance
required

Actual
performance

Threshold
Target
Stretch

£m

377.6
410.8
444.0

£m

£408.5

Payout as a
percentage of
maximum

57.2%
(before
adjustment*)

51.5%
(after
adjustment*)

Weighting as
percentage of
total bonus
opportunity

80%

Contribution to
payout as
percentage of
maximum bonus
opportunity

41.2%
(after
adjustment*)

Note
The performance measure is Normalised Profit before Tax and Amortisation as disclosed in the Group’s financial reporting for the relevant financial year. The targets are set at the
start of the period and are subsequently adjusted at the end of the period to ensure comparability. The adjustments are approved by the Remuneration Committee and include
restating targets on a constant currency basis and adjusting for certain other items, including to reflect the direct impact of industrial actions on Group facilities.

* Payouts under the NPBTA element may be reduced to the extent that Group working capital is above target. The Remuneration Committee considered the 2014 Group working

capital targets (20.8% of revenues) and actuals (22.1% of revenues) and determined a reduction of 10% was appropriate.

Individual performance objectives

2014 performance required

Individual performance objectives
are robustly set and are customised
for each individual. All objectives
are measurable and are objectively
determined. Individual objectives for
2014 were built around the Company’s
key performance indicators.

Keith Cochrane:
Objectives included areas such as
strategic growth of the Company,
stakeholder engagement, organisational
capability and innovation.

Jon Stanton:
Objectives included areas such as
delivery of IT strategy, optimisation
of capital structure, and finance
team succession planning and
talent development.

Payout as a
percentage of

maximum

Weighting as
percentage of
total bonus
opportunity

100%

20%

Contribution to
payout as
percentage of
maximum bonus
opportunity

Keith Cochrane:
20.0%

100%

20%

Jon Stanton:
20.0%

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014

Remuneration Report continued

Annual Report on Remuneration (continued)
Single total figure of remuneration for Executive Directors (continued)
iii) Short term incentives (continued)
2014 short term incentive awards
Based on the outcome of 2014 performance as outlined above, the Committee approved the following annual bonus awards under the
Executive Bonus Scheme to Executive Directors:

Payout as
percentage
of maximum
bonus
opportunity

Payout as
percentage
of salary

Payout
£

61.2%

91.8% 665,564

76.5% 336,607

Executive Director

Keith Cochrane

Jon Stanton

Notes
Includes 30% conversion into shares with restriction on sale over three years.
1.
2. Bonus award is based on salary as at 31 December in the relevant financial year.
3. Bonus to be paid in March 2015.

iv) Long term incentives
The value represents an estimate of the market value of the 2012 Performance and Matching Share awards at year end.

LTIP awards vesting in 2015
In accordance with The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013
(the ‘Regulations’), the single total remuneration figure for 2014 includes the vesting value of the performance and matching shares
made under the 2012 LTIP Award, with a performance period from 1 January 2012 to 31 December 2014.

The 2012 performance share and matching share awards for Keith Cochrane and Jon Stanton were due to vest on 9 March 2015.
The table below sets out a summary of the performance conditions, performance against these conditions as well as the resulting
gross vesting value using the share price over Q4 of 2014 in accordance with the Regulations.

The Committee reserves the right to make adjustments to the performance conditions to reflect significant one-off items which occur
during the performance period. No discretion was exercised in respect of the awards.

2012 performance
share awards

Keith Cochrane

Jon Stanton

2012 matching
share awards

Keith Cochrane

Jon Stanton

Performance conditions
and targets set

Performance
conditions set
out on page 100.

Maximum potential value

Shares with value
of 100% of salary
on the date of grant.

Performance period of
three years ended on
31 December 2014
due to vest on
9 March 2015.

Performance
conditions set
out on page 100.

Performance period of
three years ended on
31 December 2014
due to vest on
9 March 2015.

Shares with value of
200% of compulsory
and voluntary deferred
annual bonus on the
date of grant, subject to
continued employment
and retention of
compulsory investment
shares and voluntary
investment shares
where applicable.

Maximum number
of shares granted

Performance metrics, weighting
and period and method of
determining performance

35,953 Overall level of

vesting 0%.

50% of award is based on
EPS growth. Actual EPS
growth was 2.55% p.a.,
resulting in 0% vesting1.

21,572

45,573

12,327

50% of award is based
on TSR growth. Actual
TSR growth was 19%,
corresponding to below
median performance
relative to peers between
January 2012 and
December 2014,
resulting in 0% vesting.

Dividend equivalents
are paid on vested
shares based on dividend
payments over the
performance period.
Dividend equivalents to
be delivered in shares.

Resulting
vesting

–

Resulting
vesting

–

Note
1. The EPS outcome has been adjusted to remove the impact of IAS 19R on the 2014 result to ensure a consistent measurement basis across the performance period.

Note that compulsory and voluntary investment shares will be released in 2015 to individuals. The number of shares expected to be
released in 2015 is 19,166 for Keith Cochrane and 6,163 for Jon Stanton. The compulsory investment shares also have the right to receive
dividend equivalents in the form of shares to the value of 120.8p per share at the date of vesting. The value of these shares does not form
part of the single total figure table as they have not been subject to performance measures since they were granted.

LTIP awards vested in 2014
In accordance with the Regulations, the estimate shown in the Annual Report and Financial Statements 2013 of the value for 2013 for
the performance and matching awards under the 2011 LTIP has now been restated based on the actual share price at the date of vesting

The Weir Group PLC Annual Report and Financial Statements 2014

on 17 March 2014 of £25.06. Keith Cochrane received 37,437 shares, which included 1,845 shares in the respect of dividend equivalents,
and Jon Stanton received 16,029 shares, which included 790 shares in respect of dividend equivalents.

v) Retirement benefits
Represents the value of the cash allowance towards retirement benefit provision
In July 2014, the Company introduced an auto-enrolment provision for Executive Directors to receive a contribution to the pension plan
or a cash allowance of 12% of salary. Both the Chief Executive and the Finance Director have chosen to take the cash allowance.

The Group made no additional provisions for Executive Director pensions in 2014.

Payments for loss of office#
No payments were made for loss of office during the year.

Payments to past directors#
The following payments were made to Alan Mitchelson in 2014 in relation to his outstanding 2011 LTIP Award, details of which were
disclosed in the Company’s 2012 Remuneration Report.
– 15,522 Performance and Matching Shares which vested from the 2011 LTIP Award, and which included 613 dividend equivalent
shares, giving a taxable gain on exercise of £380,444.22, based on the closing market share price on 14 March 2014 of £24.51.
Options exercised in 2014 had zero exercise price. The award vested on 17 March 2014 with a closing market share price of £25.06.
– 6,508 Compulsory Investment Shares which vested from the 2011 LTIP Award, and which included 257 dividend equivalent shares,
giving a taxable gain on exercise of £159,511.08, based on the closing market share price on 14 March 2014 of £24.51. Options
exercised in 2014 had zero exercise price. The award vested on 17 March 2014 with a closing market share price of £25.06.

No further payments to Alan Mitchelson are due in 2015.

# Subject to audit.

Single total figure of remuneration for Non-Executive Directors and the Chairman
Details of the remuneration for the 52 weeks ended 2 January 2015 and the 53 weeks ended 3 January 2014 received by the
Non-Executive Directors and the Chairman who served on the Board during the 2014 financial period are set out in the table below.
The table and accompanying notes have been audited.

Charles Berry1

Alan Ferguson

Melanie Gee

Mary Jo Jacobi2

Sir Jim McDonald3

Rick Menell

John Mogford

Lord Robertson

Basic fee

2014

275,000

55,000

–

55,000

2013

45,416

53,750

–

53,750

Other fees

2014

–

10,000

–

2013

6,667

10,000

–

10,000

8,750

Total fees

2014

275,000

65,000

55,000

–

55,000

65,000

2013

52,083

63,750

–

53,750

62,500

Notes
1. Charles Berry joined the Board as a Director on 1 March 2013 and was appointed Chairman on 1 January 2014.
2. Mary Jo Jacobi joined the Board as a Director on 1 January 2014 and did not receive any remuneration during 2013.
3. Sir Jim McDonald joined the Board as a Director on 1 January 2015 and did not receive any remuneration during 2013 or 2014.

Scheme interests awarded during 2014
The following table sets out the interests of the Executive Directors in the Company’s share schemes, comprising awards of performance shares
under the LTIP, which were awarded during the 52 weeks ended 2 January 2015. The closing market price of the Company’s ordinary shares at
2 January 2015 was £18.83 and the range during the year was £16.39 to £28.48. The table and accompanying notes have been audited.

2014 LTIP awards

Award type

Keith Cochrane

Jon Stanton

Performance
shares

Type of
interest
awarded

Nil cost
options

Date of
award

Grant
share
price

Basis of award

Number
of shares
awarded

Face
value of
award at
threshold
vesting
£

Face value
of award at
maximum
vesting
£

Date of
vesting

Performance
period

29 May 14

£25.71

250% salary

70,489 453,068

1,812,272

29 May 17

29 May 14

£25.71

200% salary

34,223

219,968

879,873

29 May 17

1 Jan 14 –
31 Dec 16

Notes
1. The figures shown for performance share awards are maximum entitlements and the actual number of shares (if any) which vest will depend on the performance conditions

being achieved as set out on page 100. Threshold vesting equals 25% vesting. Maximum vesting equals 100% vesting. No performance and matching shares will vest for
below threshold performance.

2. The performance period for each LTIP award is based on calendar years. The TSR performance measure is calculated over calendar years. The EPS and ROCE measures

are calculated over financial periods.

3. The face value of the award is based on the share price at grant, which is calculated as the average of the closing share price for the three days prior to the date of grant.

The exercise price for performance shares is zero.

4. No additional shares were granted other than at the date of award set out above.

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014

Remuneration Report continued

Annual Report on Remuneration (continued)
Performance conditions for the LTIP

TSR

Weighting

Target structure

Maximum
performance

Threshold
performance

Below threshold
performance

2012

50%

2013

50%

2014

33.3%

Relative TSR
Growth against
comparator
group

Percentage of the
TSR portion of
the award that
vests

Relative TSR
Growth against
comparator
group

Percentage of the
TSR portion of
the award that
vests

Relative TSR
Growth against
comparator
group

Percentage of the
TSR portion of
the award that
vests

Upper quintile

100%

Upper quintile

100%

Upper quintile

100%

Median

25%

Median

25%

Median

Below median

25%

Comparator group Amec Foster Wheeler2, Cameron,

Crane, Dover, Dresser Rand,
FLSmidth, Flowserve, FMC, Halma,
IMI, Joy Global, Meggitt, Melrose,
Metso, Outotec, Rotork, Smiths
Group, Spirax Sarco, SPX, Sulzer,
Vesuvius3, Wood Group

Amec Foster Wheeler2, Cameron,
Crane, Dover, Dresser Rand, Fenner,
FLSmidth, Flowserve, FMC, Forum
Energy4, Halma, IMI, Joy Global,
Meggitt, Melrose, Metso, Outotec,
Rotork, Smiths Group, Spirax Sarco,
SPX, Sulzer, Vesuvius, Wood Group

Amec Foster Wheeler2, Atlas Copco,
Cameron, Crane, Dover, Dresser Rand,
Fenner, FLSmidth, Flowserve, FMC,
IMI, ITT, Joy Global, Melrose, Metso,
Outotec, Rotork, Sandvik, Smiths
Group, Spirax Sarco, SPX, Sulzer,
Vesuvius, Wood Group

EPS1

Weighting

Target structure

Maximum
performance

Threshold
performance

Below threshold
performance

ROCE1

Weighting

Target structure

Maximum
performance

Threshold
performance

Below threshold
performance

50%

EPS Growth
per annum

15%

Percentage
of EPS portion
of the award
that vests

100%

25%

50%

EPS Growth
per annum

11%

Percentage
of EPS portion
of the award
that vests

100%

25%

33.3%

EPS Growth
per annum

Percentage
of EPS portion
of the award
that vests

11%

100%

25%

Less than 7%

Less than 5%

33.3%

–

Improvement in
average ROCE
per annum

Percentage of
ROCE portion
of the award
that vests

0.5%

Less than 0.5%

100%

25%

Performance
periods

Single three year performance period
for both elements

Single three year performance period
for all elements

Notes
1. EPS and ROCE are subject to adjustments in line with policy.
2. AMEC has been renamed to Amec Foster Wheeler following its acquisition of Foster Wheeler in 2014.
3. Cookson Group demerged on 1 November 2012, with the new company Alent Plc being separated from the rest of the business, which has been renamed Vesuvius Plc.

Vesuvius Plc has succeeded Cookson Group in the comparator group.

4. Gardner Denver was acquired and delisted in 2013. It has been removed from the 2012 comparator group and replaced by Forum Energy Technologies in the 2013

comparator group.

5. Lufkin was acquired during 2013 and has been removed from the 2012 and 2013 comparator groups.

100

The Weir Group PLC Annual Report and Financial Statements 2014Statement of Directors’ shareholdings and share interests
The Committee believes that employee share ownership is an important means to support long term commitment to the Company
and the alignment of employee interests with those of shareholders.

The interests of the Executive Directors and other senior executives are closely aligned with those of shareholders in this regard through
the operation of the Company’s LTIP and the conversion into shares with restriction on sale of 30% of the annual bonus award for a
period of three years. These elements constitute a significant proportion of individual remuneration packages.

Following shareholder approval at the 2014 AGM, the shareholding guidelines outlined in the policy table on page 107 apply to all Executive
Directors. All shares beneficially owned by an Executive Director count towards achieving these guidelines. There is no shareholding
requirement for Non-Executive Directors.

Current shareholding levels for Directors are set out in the table below.

Summary of total number of interests in shares in the Company and scheme interests as at 2 January 2015
The table and accompanying notes have been audited.

Interests in shares in
the Company as at
2 January 2015

Scheme interests as at
2 January 2015

Scheme interests vested
and exercised in 2014
(2011 grant)1

Total
performance
shares and
matching
shares
(options
with
performance
conditions)2

Total
compulsory
investment
shares
(options
without
performance
conditions)

Total
performance
shares and
matching
shares
(options
with
performance
conditions)

Total
compulsory
investment
shares
(options
without
performance
conditions)

Total shares
contributing
to 2019
shareholding
target
(% of 2014
salary)

Shareholding
guidelines
(% of 2014
salary)

Security
type

Total shares

Total shares
(% of 2014
salary)

285,789

742% 198,328

22,113

37,437

13,844

30,614

131%

92,082

8,999

16,029

5301

742%

131%

200%

150%

2,000

2,730

2,500

2,000

–

1,000

12,031

10,650

–

Keith Cochrane

Jon Stanton

Charles Berry

Alan Ferguson

Melanie Gee

Mary Jo Jacobi10

Sir Jim McDonald

Richard Menell

John Mogford

Lord Robertson

Notes
1. On 17 March 2014, the 2011 Award under the LTIP for Keith Cochrane and Jon Stanton vested in part. On 29 May 2014, they exercised 42.8% of their performance and

matching shares and 100% of their compulsory shares as set out in the table above, selling 23,933 shares and 9,955 shares respectively to pay the relevant tax and National
Insurance and retaining the balance. The market price at date of exercise was £26.11. Options exercised in 2014 had zero exercise price.

2. Awards under the LTIP take the form of nil cost options and have no performance retesting facility.
3. The share awards have a right to receive dividend equivalents in the form of shares payable at vesting. The awards exercised by Keith Cochrane and Jon Stanton on 29 May 2014
include dividend equivalents of 134.0p per share, being the dividends paid between the date of award and the date of exercise, which equated to 2,527 shares and 1,051 shares
respectively.

4. No Director had, during or at the end of the year, any material interest in any contract of any significance in relation to the Group’s business, in any debenture stocks of the

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

5. Due to the vesting outcome of the 2011 LTIP, 47,569 shares under Keith Cochrane’s grant and 20,367 shares under Jon Stanton’s grant lapsed.
6. There are no unexercised vested options held by Executive Directors.
7. All scheme interests outstanding or vesting in the year were share options rather than shares.
8. Total shares as a percentage of salary is based on salary as of 31 December in the relevant financial year and on the market price of the Company’s ordinary shares at the

financial period end. For 2014, the closing market price at 2 January 2015 was £18.83.

9. There have been no changes to Directors’ interests between 2 January 2015 and 25 February 2015.
10. Mary Jo Jacobi’s interest in 2,000 shares shown above is through her holding of 4,000 of the Group’s unsponsored American Depositary Receipts (‘ADRs’), one ADR being

equivalent to 0.5 shares.

11. 30% of the annual bonus is converted into shares with a restriction on sale. This resulted in Keith Cochrane receiving 653 shares and Jon Stanton receiving 264 shares.

These shares are shown in the interests in shares column above.

101

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Remuneration Report continued

Annual Report on Remuneration (continued)
Performance graph and table for Chief Executive
The graph below shows the total shareholder return (TSR) for The Weir Group PLC, the FTSE 100 Index and the 2014 LTIP Comparator
Group over the six year period ending 31 December 2014. This is set out with the total vested and received remuneration for the Chief
Executive over the same period, which is set out numerically below the chart.

The Committee considers that these are the most relevant indices for a comparison of total shareholder return.

£’000

5,000

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0

2008

2009

2010

2011

2012

2013

2014

TSR Index

1,000

900

800

700

600

500

400

300

200

100

1000
900
800
700
600
500
400
300
200
100
0

Performance &
matching shares

Bonus

Fixed elements

The Weir Group PLC TSR
FTSE 100 Index TSR
2014 LTIP Comparator Group TSR

Remuneration history for Chief Executive between 2009 and 2014

Mark Selway

Keith Cochrane

20091

20092

2010

2011

2012

2013

2014

Fixed elements

£662,077

£95,384

£572,146

£646,645

£710,501

£740,406

£791,281

Bonus (percentage of maximum)

83.7%

100.0%

54.0%

10.0%

61.2%

Performance shares and matching
shares (percentage of maximum)

100.0%

42.8%

Total remuneration

£2,237,201

£217,746 £2,913,022 £4,728,338 £3,363,555 £1,787,327 £1,456,845

Notes
1. 2009 remuneration relates to the ten months Mark Selway was Chief Executive until his resignation in November 2009.
2. 2009 remuneration relates to the two months Keith Cochrane was Chief Executive from November 2009.

Total remuneration is calculated on the same basis as the 2014 remuneration summary in the single total figure of remuneration for
Executive Directors table on page 96. In particular, this includes the value of performance shares and matching shares that vest following
the end of each financial year, including dividends equivalents where appropriate. For 2014, the value of the share awards is estimated
based on the average share price in the last financial quarter. This will be restated next year once the share price at the date of vesting
is known. Prior year calculations are based on the actual share price at date of vesting and the 2013 value has been restated from that
disclosed in the 2013 Annual Report and Financial Statements accordingly.

Percentage change in Chief Executive remuneration
The percentage change in elements of remuneration for the Chief Executive between the 53 weeks ended 3 January 2014 and the
52 weeks ended 2 January 2015 is detailed below. The change in remuneration for UK employees for the same period is also provided.

Salary & Fees

Taxable Benefits

Bonus

Chief
Executive
Percentage
change

UK
Employees
Percentage
change

0.9%

5.2%

3.4%

15.4%

512.0% 284.3%

For the purposes of this section, remuneration has been calculated in accordance with the Regulations to include salary, fees, taxable
benefits (including emoluments) and certain performance-related pay for the relevant financial year (primarily bonuses but excluding
long term incentives). Pension and retirement benefits are not included. To help minimise distortions in the data, the UK employee
remuneration figures have been prepared on the basis of employees who were employed by Weir companies whose principal
reporting currency was pounds Sterling during 2013 and 2014.

102

The Weir Group PLC Annual Report and Financial Statements 2014

The increase in bonus for the Chief Executive reflects the figures in the single total figure table in 2013 and 2014. In 2013, the NPBTA
element of the bonus did not meet threshold and the bonus paid out at 10.0% of maximum. In 2014, the NPBTA element of the bonus
was just below target and the bonus paid out at 61.2% of maximum. The total of the single total figure for the Chief Executive decreased
by 18.5% from 2013 to 2014.

The UK employee population has been selected as it reflects a broad sample of employees which includes Head Office employees
and other individuals located in the same country as the Executive Directors.

Relative importance of spend on pay
The table below shows the expenditure of the Company on employee remuneration costs in the 2014 financial year and 2013 financial
year. In addition, it details the disbursements from profit made by way of dividend payments during the same periods.

Profit distributed by way of dividend

Overall spend on pay for employees

2014
£m

102.7

630.7

2013
£m

Percentage
change

82.6

24.3%

602.0

4.8%

Details of the overall spend on pay for employees can be found in note 4 to the Financial Statements on page 133. Employees include
Executive Directors but not Non-Executive Directors. The Company considers employee remuneration costs in the context of the general
financial performance and position of the Company, including when determining the salary increase budget, annual bonus funding, long
term incentive grant budget, and pension levels.

Consideration by the Directors of matters relating to Directors’ remuneration, Terms of Reference and Evaluation
To ensure reward arrangements support the Company’s philosophy, strategy and culture, the Committee reviews compensation and
benefit plans for the Executive Directors, senior leadership, and the broader employee population. In December 2014, the Committee
reviewed its Terms of Reference. The Remuneration Committee was evaluated as part of the 2014 Board evaluation process, conducted
externally by Independent Board Review, and it was concluded that the Committee continued to function strongly in accordance with
good corporate governance. The report highlighted that in a busy year involving the formulation of the new remuneration policy, there
had been a cohesive approach and in particular a significant amount of good work undertaken on shareholder consultation. Improvements
can always be made and the Committee has agreed a number of these for implementation in 2015.

More details of the Board evaluation can be found on pages 80 and 81. The Terms of Reference of the Committee are available on the
Company’s website.

Remuneration Committee membership and attendance

Current members

Alan Ferguson1

Melanie Gee (Chairman)

Mary Jo Jacobi2

Rick Menell

Remuneration Committee attendees

Charles Berry

Keith Cochrane

Keith Ruddock

Pauline Lafferty

Name

Melanie Gee

Mary Jo Jacobi

Rick Menell

Lord Robertson3

Attendance

5 of 5

4 of 4

5 of 5

Group Chairman

Chief Executive

Attends by invitation

Group General Counsel & Company Secretary

Attends as Secretary to the Committee

Director of Human Resources

Attends by invitation

PricewaterhouseCoopers LLP (‘PwC’)

Attends as adviser to the Committee

Notes
1. Alan Ferguson was appointed to the Committee on 1 February 2015.
2. Mary Jo Jacobi was appointed to the Committee on 21 January 2014.
3. Lord Robertson retired from the Committee on 31 January 2015.

There were five meetings held during the 52 weeks to 2 January 2015, and the attendance of the individual members of the Committee
during that period is detailed in the table above. All members of the Committee are considered to be independent Non-Executive Directors
and no Director plays a part in the determination of their own remuneration. Executive Directors and senior management attend committee
meetings at the invitation of the Committee Chairman. No member of the Committee has any personal financial interest, other than as a
shareholder, in the matters decided by the Committee.

103

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014

Remuneration Report continued

Annual Report on Remuneration (continued)
Remuneration Committee activities in 2014
In 2014, the Committee discussed the key agenda items set out in the following table:

Date

January

February

May

July

December

Agenda items

Approval of salaries and 2014 annual bonus targets/measures for Executive Directors/Group Executive; approval of
Chairman fee; review of internal operating guidelines for remuneration; review of draft 2013 Remuneration Report;
update on consultation process; review of terms of reference; feedback on Committee effectiveness review; change
of Committee members.

Approval of 2013 bonus payments for Executive Directors/Group Executive; note payment of 2013 bonuses
to senior managers; approval of vesting for 2011 LTIP; approval of new LTIP rules; approval of participants/
performance conditions for 2014 annual bonus and LTIP; finalisation of 2013 Remuneration Report.

Update on remuneration related matters with regards to current business strategy.

Approval of LTIP grants for new joiners; review outcome of Weir AGM and update on the AGM season; approval
of standing items for Remuneration Committee calendar; and consideration of the role of PwC as advisors to
the Committee.

Consideration of draft Directors’ Remuneration Report in context of current market practice; review of business
outlook and timing for approval of 2015 LTIP award performance targets and measures and targets for the 2015
annual bonus plan; review of initial proposals for 2015 salaries of Executive Directors and the wider Group; review of
the Remuneration Committee Terms of Reference; and review of the 2015 calendar for the Remuneration Committee.

Advisors to the Committee
In discharging its responsibilities in 2014, the Committee was materially assisted by the Director of Human Resources and the Company Secretary.

PwC was appointed following a review of providers by the Committee in 2011. In July 2014, the Committee considered the role of
PwC and agreed to extend their tenure as independent external advisor to the Committee. Fees paid to PwC in relation to remuneration
services provided to the Committee in 2014 totalled £50,815. This included advice on remuneration policy and practice, as well as
guidance to the Committee on corporate governance trends and best practice. PwC is a signatory to the Remuneration Consultants’
Group Voluntary Code of Conduct.

The Committee recognises the need to obtain independent advice and given that PwC provides additional services to the Group, the
Remuneration Committee Chairman has discussed this with PwC and management. The Committee is confident that any potential
conflicts are managed appropriately by the Company and PwC. For information, the additional services provided by PwC include advice
on pension schemes, IT project assurance, and global mobility services. PwC also provided advice on taxation, company secretarial
services, internal audit services and due diligence and corporate finance advice in relation to acquisitions.

Statement of voting at general meeting
The Company is committed to maintaining an open shareholder dialogue and takes an active interest in voting outcomes. In the event
of a substantial vote against the Directors’ Remuneration Report, the Company would explain when announcing the results of voting
what actions would be taken to understand the reasons for any such vote and would also set out in the following Annual Report actions
implemented in response.

At the Company’s last Annual General Meeting on 1 May 2014, the resolutions to approve the Directors’ Remuneration Report and the
Directors’ Remuneration Policy as contained in the Annual Report and Financial Statements 2013 were supported as follows:

Voting outcome

2013 Directors’ Remuneration Report
(excluding the Directors’ Remuneration Policy)

Votes
for

Percentage

Votes
against

Percentage

Votes
total

Votes
withheld

146,473,090

99.84% 227,564

0.16% 146,700,654

467,724

Directors’ Remuneration Policy

144,926,563

99.61% 564,376

0.39% 145,490,939 1,676,889

Directors’ Remuneration Policy
The full Directors’ Remuneration Policy, as approved at the 2014 AGM on 1 May 2014, is set out on the Company’s website in the
Remuneration Committee section. The Company is not proposing any changes to this policy.

Below and incorporated by reference into this Annual Report on Remuneration, we set out the Directors’ policy table for reference,
updated only to remove information which is now historic. This reflects the structure of remuneration for future awards and does not
replace or override the full approved Directors’ Remuneration Policy.

On behalf of the Board of Directors

Melanie Gee
Chairman of the Remuneration Committee
Signed and approved for and on behalf of the Board
25 February 2015

104

The Weir Group PLC Annual Report and Financial Statements 2014Directors’ policy table
The Group’s overarching remuneration policy is designed to ensure that remuneration supports the Group’s strategy and business
objectives. The policy and practice have been developed to support the creation of value for shareholders, drive appropriate behaviours
and incentivise outperformance, while being clearly linked to both individual and corporate performance. The Committee is mindful of
a broad range of stakeholders in setting this policy and has considered best practice guidelines from shareholders and representative
bodies. The Committee has adopted a set of principles which are used as the basis against which remuneration arrangements have
been established.

The Group’s remuneration principles are that reward should enable the Group to:
– attract, motivate and retain senior executives with the necessary abilities to manage and develop the Group’s activities successfully

for the benefit of shareholders;

– clearly align remuneration outcomes with the long term interests of the Group and its shareholders;
– drive appropriate behaviours that are in line with the culture of the Group and focus senior executives on the critical business

objectives by rewarding them against challenging performance criteria; and

– provide a significant part of potential reward through performance based incentive plans.

Base salary

How the element supports our strategic objectives
The provision of a competitive base salary as part of an overall
compensation package enables the Group to attract and retain
talented leaders.

Operation of the element
Reviewed annually with effect from 1 April. Set by reference to
market practice for a similar role in a peer group of global companies
of a similar size and complexity; personal performance; the wider
employee context; and economic and labour market conditions.

Benefits and pension

How the element supports our strategic objectives
To provide a market aligned benefits package.

Operation of the element
Benefits include, but are not limited to: Group health care; car
allowance; travel allowance; and death in service insurance.

The Company may also meet certain mobility costs and pay
additional tax arising due to an international assignment, and may
also provide for long term disability benefits. Additional benefits may
be provided where required by legislation or to align the package
with market practice where these are not significant in value.
Directors and Officers’ Liability insurance will also be provided.

The Group makes no specific provision for Executive Directors’
pensions. However, the Board has considered the implications
of the new UK government legislation on auto-enrolment for UK
employees and has adopted a policy for all UK employees to
be implemented when the auto-enrolment regulations come
into force.

Maximum potential value and payment at threshold
It is expected that salary increases for Executive Directors
will be made broadly in line with salary increases applied to
UK employees or the relevant jurisdiction if an Executive
Director is based outside the UK.

Higher increases may apply if there is a change in role or
responsibility, the individual is relatively new in role, or there is
significant variance to the market. Any significant salary increases
will be appropriately explained. The maximum salary level for each
Executive Director is set by reference to a peer group of FTSE 51-
100 companies and appropriate overseas comparators of similar
size and complexity.

The Remuneration Committee has the discretion to change the
peer group during the life of this policy.

Performance metrics used, weighting and time
period applicable
Not applicable.

Maximum potential value and payment at threshold
The value of relevant benefits will be determined by the cost of
the provision of insured products. As the cost of providing such
insurance benefits varies according to premium rates and the cost
of other benefits is dependent on market rates and other factors,
there is no formal maximum monetary value. Car allowance will
normally be no greater than £20,000 per annum. As part of the
Company’s provision in respect of auto-enrolment, at senior levels
individuals are eligible for a contribution into the pension plan
or a cash allowance of 12% of salary per annum from July 2014.

Performance metrics used, weighting and time
period applicable
Not applicable.

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Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Remuneration Report continued

Directors’ policy table (continued)

Annual bonus (see also notes 1 and 3)

How the element supports our strategic objectives
To reward the achievement of stretching Group performance for
the current year, supporting our strategy of delivering sustainable
growth in our key markets.

Maximum potential value and payment at threshold
150% of salary for Chief Executive.
125% of salary for other Executive Directors.

Operation of the element
The annual bonus (the Executive Bonus Scheme) is based on in-
year performance against financial, personal and strategic goals.
The annual bonus plan has two parts – a cash element (70%)
and an element converted into shares where there is a restriction
on sale for three years (30%). The size of both elements is
determined by performance in the year.

The achievement of stretch targets results in maximum bonus
payout. 20% of bonus will pay out for performance at threshold,
with payment on a straight line basis between threshold and stretch.

Performance metrics used, weighting and time
period applicable
The measures, as well as the weightings within these measures,
will depend on the strategic focus of the Company in any given year.

Targets are set at the beginning of the performance year which
runs from the start to the end of each financial period.

The financial element of the annual bonus is based on the
achievement of a Group Normalised Profit before Tax and
Amortisation (NPBTA) target measured over the financial period.

No more than 20% of the annual bonus will be based on personal
performance targets.

Payouts under the NPBTA element may be reduced to the extent
that Group working capital targets are not achieved.

The Committee has discretion in exceptional circumstances
to alter the measures and/or targets during the performance
period if it believes the original measures and/or targets are
no longer appropriate.

The Committee also has discretion in exceptional circumstances
to alter the payout levels of an award at the end of the performance
period if it believes this will better reflect the underlying performance
of the Company but in no circumstances will exceed the maximum
bonus potential.

Maximum potential value and payment at threshold
30% of any bonus payable is converted into shares.

Performance metrics used, weighting and time
period applicable
The Bonus shares are subject to a restriction on sale for three
years. No performance conditions apply.

Any changes to original targets, measures or payout levels will
be fully explained in the relevant Annual Report on Remuneration.

On change of control, the bonus payment will be pro-rated for
time and an assessment of performance over the appropriate
period, with the Committee having discretion to make
adjustments to this figure if appropriate.

Bonus shares subject to restriction on sale

How the element supports our strategic objectives
Bonus converted into shares with restriction on sale (Bonus
shares), which supplements the long term elements of pay
and further aligns executives to the interests of shareholders.

Operation of the element
30% of the annual bonus paid in respect of the performance
year is converted into shares with a restriction on sale.

Bonus shares are subject to malus and clawback which enables
the Company not to release any bonus shares before the end
of the restriction period, or to clawback the relevant value after
the restriction period has ended for a period of up to three years.

Malus and clawback may be applied in certain circumstances
where there is found to be a material misstatement in the audited
accounts of the Group or a Group company accounts, where
the executive’s action or conduct amounts to gross misconduct,
or where there is a significant detrimental reputational impact
on the Company for which the executive is responsible.

Bonus shares subject to a restriction on sale may vest on
a change of control and on certain other corporate events
in accordance with the rules of the 2014 LTIP.

Bonus shares are subject to a restriction on sale under the
rules of the 2014 LTIP.

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The Weir Group PLC Annual Report and Financial Statements 2014Performance shares (see also notes 2 and 3)

How the element supports our strategic objectives
To incentivise executives to achieve sustained growth
through superior long term performance and create
alignment with shareholders.

The performance share awards reward executives for performance
against key measures which are critical to delivering our strategy.

Operation of the element
Allows for annual grants of performance shares. Awards vest after
three years, subject to performance conditions. Vested shares for
Executive Directors are then subject to a two year holding period.

Participants are entitled to dividend equivalents between award
and vesting, paid in additional shares at vesting in respect of
awards that vest.

Malus and clawback arrangements operate in respect of
performance shares. These enable the Company to reduce
unvested awards and to clawback the relevant value of the vested
shares for a period of up to three years after the date of vesting.
Malus and clawback may be applied in certain situations where
there is found to be a material misstatement in the audited
accounts of the Group or a Group company accounts, where
the executive’s action or conduct amounts to gross misconduct,
or where there is a significant detrimental reputational impact
on the Company for which the executive is responsible.

Awards granted under the LTIP may vest on a change of
control and certain other corporate events, assessed (unless
the Committee in its discretion otherwise decides) against
performance conditions and on a time pro-rated basis in
accordance with the rules of the plan.

Shareholding guidelines

How the element supports our strategic objectives
To ensure the interests of the Executive Directors remain aligned
with those of shareholders.

Operation of the element
Executive Directors are required to build up a shareholding in the
Company over a five year period.

Under the 2014 LTIP, 30% of the annual bonus is converted into
shares with a restriction on sale. The Company requires Executive
Directors to retain 50% of performance shares received, after the
deduction of applicable taxes, from the 2014 LTIP and the bonus
shares subject to restriction on sale until the requirements are met.

Maximum potential value and payment at threshold
Awards may be made to Executive Directors at the following levels:
– Chief Executive: 250%.
– Other Executive Directors: 200%.
300% of salary may be awarded in exceptional circumstances.

Performance metrics used, weighting and time
period applicable
Performance conditions measured over three financial years.
Vested shares for Executive Directors are then subject to a two
year holding period.

Performance measures and relative weightings are:
– Earnings per share (EPS) growth (1/3 weighting).
– Relative total shareholder return (TSR) (1/3 weighting).

TSR relative to comparator group of global engineering
companies.
Threshold vesting at median. Maximum vesting at
upper quintile.

– Improvement in average return on capital employed (ROCE)

(1/3 weighting).

For all three measures, 25% of the maximum award vests at
threshold and 100% at maximum, with vesting calculated on
a straight line basis.

In exceptional circumstances, where the Committee believes
that the original performance measures and targets are no longer
appropriate, it has discretion to substitute or vary these measures
and targets. The Committee will only take such a course of action
where it considers it to be in the best interests of the shareholders.
In these exceptional circumstances, the Committee will make full
disclosure of the arrangements and their rationale in the following
year’s Annual Report on Remuneration.

All shares beneficially owned by an executive and shares subject
to a restriction on sale count towards achieving these guidelines.
The Committee reviews share ownership levels annually for this
group. The Committee has flexibility in the application of this
policy to take into account particular individual circumstances.

Maximum potential value and payment at threshold
The minimum shareholding requirement is as follows:
– Chief Executive: 200% of base salary.
– Other Executive Directors: 150% of base salary.

Performance metrics used, weighting and time
period applicable
Not applicable.

Non-Executive Directors’ fees

How the element supports our strategic objectives
To attract and retain experienced and skilled Non-Executive
Directors.

Operation of the element
Fees will be reviewed annually by reference to companies
of similar size and complexity, economic and labour market
conditions as well as time commitment and responsibilities.

Maximum potential value and payment at threshold
Increases are effective in April and any planned increases in fees
will take into account general increases across the Group along
with market practice.

The maximum fee level for each Non-Executive Director would be
set within the range of fee levels in our peer group of companies
of a similar size and complexity.

Additional allowances are made available to Non-Executive
Directors, where appropriate, to reflect the additional time
commitment in attending intercontinental Board meetings
and operational visits.

Performance metrics used, weighting and time
period applicable
The fees paid to the Chairman and the Non-Executive Directors
are not performance related.

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Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014

Remuneration Report continued

Directors’ policy table (continued)
Notes to the policy table
1. Annual bonus performance measures and targets
– The profit performance measure of Normalised Profit before Tax and Amortisation (NPBTA) was selected by the Company as
profitability is central to the Company’s overall strategy. The performance measure is adjusted to exclude items that are one
off in nature, subject to Remuneration Committee approval.

– The performance targets are determined annually by the Committee. The performance targets for the NPBTA performance measure

are set in the context of consensus forecasts and the internal budget.

– The performance required for maximum payout is typically set at a level that is above the level of the Company’s forecasts. If performance

is in line with the forecast then typically part of the annual bonus would pay out.

– The performance target of NPBTA is adjusted to match the actual foreign exchange rates during the financial period and is also increased or
decreased to reflect the impact of any acquisitions or disposals made in the year that are of a size requiring Board approval. For acquisitions,
the target is increased by the expected NPBTA from the acquired business. For disposals, the target is reduced by the budgeted NPBTA
from the business which was disposed of.

– The Committee is of the view that the performance target for the financial element under the annual bonus is commercially sensitive
and that it would be detrimental to the interests of the Company to disclose this before the end of the financial year. Disclosure of the
performance target of the financial element in advance could lead the Company to be at a competitive disadvantage as many competitors
are not listed in the UK and would not be subject to this requirement. The Company would be releasing potentially commercially sensitive
information which many of the Company’s direct competitors in its three end markets would not be required to disclose.

– The personal performance measures relate to achievement of personal and strategic goals.
– Personal performance measures and targets are set by the Chairman for the Chief Executive and by the Chief Executive for other

Executive Directors. The Committee discusses and approves these targets for Executive Directors in consultation with the Director
of Human Resources and they are linked to the Company’s annual appraisal process.

– The Committee is of the view that the performance targets for the personal element are commercially sensitive as they relate to

internal management projects and personal goals.

– The performance targets for the financial elements of the bonus and the main groupings of individual performance measures will

be retrospectively disclosed after the end of the relevant financial period in the Annual Report on Remuneration.

2. LTIP performance measures and targets
– The Committee selected the performance conditions for the LTIP as these are central to the Company’s overall strategy and are

intended to link reward to long term sustainable growth.

– The performance measures are EPS, TSR and ROCE:

- EPS is adjusted earnings per fully paid ordinary share in the capital of the Company calculated on such basis as the Committee

may specify. In addition, the EPS figure used to calculate the award may be adjusted for changes in accounting standards to ensure
a consistent measurement basis across the performance period.
TSR is the increase in the net return index (the index that reflects movements in share price over a period and dividend reinvested
net of any associated tax credit in shares on the ex-dividend date) for a company as calculated by Datastream (or such other
financial information provider as selected by the Committee) over the performance period.

- ROCE is defined as earnings before interest and tax divided by capital employed. Earnings before interest and tax is taken as Group
continuing operations after intangibles amortisation but before exceptional items for the relevant financial year. Capital employed
is taken as the average of opening and closing Group net assets excluding net debt/cash and pension deficit (net of deferred tax
asset) for the relevant financial year. To eliminate the impact of movements in foreign exchange rates over the period of the plan,
the average foreign exchange rates for the base year are held constant throughout the plan period. With regard to acquisitions,
those acquisitions made in the base year are included, based on a full year’s ownership, for the purposes of target setting. Where
acquisitions are made in subsequent years of the plan period, these are excluded from the assessment of performance relative to
the target. Where there are disposals during the plan period, the base and target ROCE calculations will be restated to eliminate
the contribution from the disposed business in the period of ownership.

– The performance targets are determined annually by the Committee. EPS, TSR and ROCE targets are set to ensure they are
sufficiently stretching but also motivational and consistent with the Company’s remuneration strategy. In setting targets the
Committee considers the Company’s operating environment, and internal and external growth forecasts.

– The performance required for maximum vesting is typically set at a level that is above the level of the Company’s forecasts. If performance

is in line with the forecast then typically part of the award would vest.

– EPS, TSR and ROCE targets are disclosed prospectively in the Annual Report on Remuneration for the relevant year.

3. Differences in remuneration policy for all employees
– The Company seeks to operate a locally driven approach to pay and benefits in all its locations.
– Employees in management roles are also eligible to participate in an annual bonus. The maximum opportunity available in the annual

bonus scheme is based on the seniority and responsibility of the role.

– The LTIP seeks to encourage a shared focus on our corporate goals within the senior management and executive populations. Grants
under the 2014 LTIP may be made to around 300 of the most senior managers in the Group. The nature of the award depends on the
individual’s location and seniority. When used, the performance conditions will be the same throughout the Group.

– In markets other than the UK, LTIP awards may be made in the form of a combination of performance shares and/or either restricted
shares or share appreciation rights with a corresponding reduction in award level. The restricted shares or share appreciation rights
are subject to a service condition of continued employment within the Group.

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The Weir Group PLC Annual Report and Financial Statements 2014Directors’ Report

The Directors present their report for the year ending 2 January 2015.

This Annual Report has been prepared for, and only for, the members of the Company, as a body, and no other persons. The Company,
its directors, employees, agents and advisors, do not accept or assume responsibility to any other person to whom this document is
shown or into whose hands it may come, and any such responsibility or liability is expressly disclaimed. This Annual Report may contain
statements which are not based on current or historical fact and/or which are forward looking in nature. Please refer to the cautionary
statement on page 188.

2015 Annual General Meeting
The Annual General Meeting will be held at 2.30pm on Wednesday 29 April 2015 at the Radisson Blu Hotel, Argyle Street, Glasgow.
The Notice of Meeting along with an explanation of the proposed resolutions are set out in a separate circular to shareholders which
accompanies this Annual Report and can be downloaded from the Company’s website.

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

Dividend
The Directors have recommended a final dividend of 29.0p per share for the 52 weeks ended 2 January 2015. Payment of this dividend
is subject to shareholder approval at the 2015 AGM.

Substantial shareholders
At 2 January 2015, the Company had been notified in accordance with the UK Listing Authority’s Disclosure Rules and Transparency
Rules that the following held, or were beneficially interested in, 3% or more of the Company’s issued share capital.

Shareholder

Aberdeen Asset Managers Ltd

AXA

Norges Bank

Number of
shares

10,797,589

10,637,959

8,503,919

Percentage of
issued share
capital

5.07%

4.99%

3.99%

Note
The entire shareholdings of AXA and Aberdeen Asset Managers Ltd are held indirectly.

No changes have been disclosed to the Company between 2 January 2015 and 25 February 2015. Since this date, the interest of any
shareholder listed above may have increased or decreased. Information provided to the Company pursuant to the relevant Disclosure
Rules and Transparency Rules is publicly available via the regulatory information services. No requirement to notify the Company of any
increase or decrease would have arisen unless the holding moved up or down through a whole number percentage level. The percentage
level may increase (if the Company cancelled shares pursuant to the power to purchase its own shares) or decrease (on the issue of new
shares under the LTIP).

Employment policy and involvement
The average number of employees in the Group during the period is given in note 4 to the Group financial statements on page 133.

Group companies operate within a framework of HR policies, practices and regulations appropriate to their market sector and country of
operation. Policies and procedures for recruitment, training and career development promote equality of opportunity regardless of gender,
sexual orientation, age, marital status, disability, race, religion or other beliefs and ethnic or national origin.

The aim is to encourage a culture in which all employees have the opportunity to develop fully according to their individual abilities and
the needs of the Group. The Group remains committed to the fair treatment of people with disabilities regarding applications, training,
promotion and career development.

Employee involvement and feedback is actively encouraged. A variety of ways are used to consult and inform employees including
a Groupwide bulletin, e-mail, intranet and local briefings. These are designed to facilitate dialogue while enabling the development
of a common awareness among employees of what affects business performance.

Further details of the Group’s employment policies and involvement are detailed in the Our People section of the Sustainability Review
on pages 61 to 63.

Greenhouse gas emissions
The Company is required to state the annual quantity of emissions in tonnes of carbon dioxide equivalent from activities for which
the Company is responsible, including the combustion of fuel and the operation of any facility. The Group’s global greenhouse gas
(GHG) emissions for 2014 and related disclosures required under The Companies Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013 are contained in the Environment section of the Sustainability Review on pages 54 to 57 and form part of the Directors’
Report disclosures.

Financial instruments
The information required in respect of financial instruments as required by Schedule 7 of The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008 is given in note 30 to the Group financial statements on pages 161 to 168.

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Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Directors’ Report continued

Share capital and rights attaching to the Company’s shares
Details of the issued share capital of the Company, which comprises a single class of ordinary shares of 12.5p each are set out in note 25
to the Group financial statements on page 156. The rights attaching to the shares are set out in the Company’s Articles of Association.
There are no special control rights in relation to the Company’s shares and the Company is not aware of any agreements between
shareholders that may result in restrictions on the transfer of securities and/or voting rights.

The Weir Group has two employee benefit trusts: one with the trustees Kleinwort Benson (Guernsey) Trustees Limited (the ‘Kleinwort
EBT’) and one with the trustees Appleby Trust (Jersey) Limited (the ‘Appleby EBT’).

During the period, the 2011 LTIP award vested and the trustees of the Kleinwort EBT transferred 36,239 ordinary shares to employees
to satisfy the LTIP awards using ordinary shares purchased by the Kleinwort EBT in the market. In addition, a total of 222,521 ordinary
shares, with an aggregate nominal value of £27,815.13, were allotted during the period in connection with the Company’s LTIP. The
222,521 shares were issued to senior managers of the Group pursuant to LTIP awards granted on 17 March 2011, on which date the
closing share price was £16.06. The allotments of these 222,521 shares were made as follows: 17 March 2014 – 94,612 shares at a
closing price of £25.06; 21 March 2014 – 10,042 shares at a closing price of £24.40; 1 April 2014 – 312 shares at a closing price of £25.18;
7 April 2014 – 1,930 shares at a closing price of £25.17; 25 April 2014 – 4,789 shares at a closing price of £26.62; 13 May 2014 – 3,022
shares at a closing price of £26.96; 15 May 2014 – 766 shares at a closing price of £25.98; 28 May 2014 – 942 shares at a closing price
of £25.84, 29 May 2014 – 85,035 shares at a closing price of £26.11; 13 June 2014 – 4,499 shares at a closing price of £26.59; 11 August
2014 – 10,093 shares at a closing price of £26.07; 18 September 2014 – 6,479 shares at a closing price of £26.30.

Both EBTs have agreed to waive any right to all dividend payments on shares held by them, with the exception of shares held in respect
of awards which have a dividend entitlement. Details of the shares held by the EBTs are set out in note 25 to the Group financial statements
on page 156. The 83,850 shares held in the Appleby EBT for the deferred element are the shares in respect of which dividends have not
been waived. The Kleinwort EBT holds, through its account nominee K.B. (CI) Nominees Limited, 0.03% of the issued share capital of the
Company, as at 2 January 2015, in trust for the benefit of certain Executive Directors and senior executives of the Group. The Appleby
EBT holds, through account nominee CGWL Nominees Ltd, 0.12% of the issued share capital of the Company as at 2 January 2015. 0.04%
of this is held in trust for the benefit of certain senior executives of the Group, and 0.08% is held in trust on behalf of the Company for
satisfaction of any future vesting of the Weir Group Deferred Bonus Plan. With the exception of the shares held for the benefit of certain
senior executives, the voting rights in relation to these shares are exercised by the trustees. The EBTs may vote or abstain from voting with
the shares or accept or reject any offer relating to shares, in any way they see fit, without incurring any liability and without being required
to give reasons for their decision.

Repurchase of shares
At the 2014 Annual General Meeting, shareholders renewed the Company’s authority to make market purchases of up to 21.3m ordinary
shares (representing approximately 10% of the issued share capital excluding treasury shares). No shares were purchased under this
authority during the 52 weeks ended 2 January 2015 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 at the same level.

Voting rights
The Company’s Articles of Association provide that on a show of hands at a general meeting of the Company, every holder of ordinary
shares present in person and by proxy and entitled to vote shall have one vote and on a poll, every member present in person or by proxy
and entitled to vote shall have one vote for every ordinary share held. The Notice of the AGM specifies deadlines for exercising voting
rights and appointing a proxy or proxies to vote in relation to resolutions to be passed at the AGM. The Company conducts the vote at the
AGM by electronic poll. All proxy votes are counted and the numbers for, against or withheld in relation to each resolution are announced
at the AGM and published on the Company’s website after the meeting.

The Articles of Association may only be amended by a special resolution passed at a general meeting of shareholders.

Transfer of shares
There are no restrictions on the transfer of ordinary shares in the Company, other than as contained in the Articles of Association:
– The Directors may refuse to register any transfer of any certificated share which is not fully paid up, provided that this power will

not be exercised so as to disturb the market in the Company’s shares.

– The Directors may also refuse to register the transfer of a certificated share unless it is delivered to the registrar’s office, or such

other place as the Directors have specified, accompanied by a certificate for the shares to be transferred and such other evidence
as the Directors may reasonably require to prove title of the intending transferor.

Certain restrictions may from time to time be imposed by laws and regulations, for example, insider trading laws, in relation to the
transfer of shares.

Appointment and replacement of Directors
The provisions about the appointment and re-election of Directors of the Company are contained in the Articles of Association.

Powers of Directors
The business of the Company is managed by the Directors who may exercise all the powers of the Company, subject to the provisions
of the Company’s Articles of Association, any special resolution of the Company and any relevant legislation.

Directors’ 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 2006 and the Company’s Articles
of Association. In addition, directors and officers of the Company and its subsidiaries and trustees of its pension schemes are covered
by directors and officers’ liability insurance.

110

The Weir Group PLC Annual Report and Financial Statements 2014Pension scheme indemnities
The Group operates two defined benefit pension schemes in the UK which provide retirement and death benefits for employees
and former employees of the Group. The corporate trustees of the pension schemes are The Weir Group Pension Trust Limited
and The Weir Group Senior Executives Pension Trust Limited, which are subsidiary companies of the Group. Qualifying pension scheme
indemnity provisions, as defined in section 235 of the Companies Act 2006, were in force for the financial year ended 2 January 2015 and
remain in force for the benefit of each of the directors of the corporate trustees of the pension schemes. These indemnity provisions cover,
to the extent permitted by law, certain losses or liabilities incurred as a director or officer of the corporate trustees of the pension schemes.

Change of control – significant agreements
The following significant agreements contain provisions entitling the counterparties to require prior approval, exercise termination,
alteration or similar rights in the event of a change of control of the Company.

The Group has in place a five year US$800m multi-currency revolving credit facility with a syndicate of 11 banks due to mature in
September 2019. Under the terms of this agreement, if there is a change of control of the Company, any lender may request, by not less
than 30 days’ notice to the Company, that its commitment be cancelled and all outstanding amounts be repaid to that lender at the expiry
of such notice period.

The Company has in issue fixed rate private placement notes with a range of maturities: US$70m at an interest rate of 5.03% due on
11 January 2018, £43m at an interest rate of 5.36% due on 11 January 2018, US$210m at an interest rate of 3.69% due on 16 February
2019, US$590m at an interest rate of 4.27% due on 16 February 2022 and US$200m at an interest rate of 4.34% due on 16 February
2023. Under the terms of the applicable note purchase agreements, if there is a change of control of the Company, the notes must
be offered for prepayment by the Company within seven days of the change of control. The prepayment date would be no later than
60 days after the offer of prepayment by the Company. Private placement notes for US$90m at an interest rate of 4.2% were repaid
on 11 January 2015 and £12m at an interest rate of 4.58% were repaid on 11 January 2015.

There are no agreements between the Company and its Directors or employees providing for compensation for loss of office or
employment (whether through resignation, purported redundancy or otherwise) that occurs because of a takeover bid.

Management report
The Strategic Report and the Directors’ Report constitute the management report as required under the Disclosure and Transparency
Rule 4.1.5R.

Directors’ Report disclosures contained in the Strategic Report
The Company has chosen to disclose the following information in the Strategic Report on pages 1 to 68:
– Particulars of any important events, if any, affecting the Company which have occurred since the end of the financial year.
– An indication of likely future developments in the business of the Company.
– An indication of the activities of the Company in the field of research and development.
– Details of Employee Involvement.
– Information on Greenhouse Gas emissions.

Corporate Governance Statement
The information which fulfils the requirements of the Disclosure Rules and Transparency Rules can be found in this Directors’ Report and in
the Corporate Governance sections on pages 69 to 108, which form part of this Directors’ Report and are incorporated into it by reference.

Disclosure of information under Listing Rule 9.8.4
The information that fulfils the reporting requirements relating to the following matters can be found on the pages identified.

Subject matter

Page reference

Allotment of shares for cash (LR 9.8.4(7))

Waiver of dividends (LR 9.8.4(12))

Page 110 – reference to allotment of 222,521 ordinary shares,
with an aggregate nominal value of £27,815.13.

Page 110 – reference to waiver of dividends by Kleinwort EBT and
Appleby EBT (as defined at page 110), referencing note 25 to the
consolidated financial statements on page 156.

Confirmations
So far as each of the Directors is aware, there is no relevant audit information (as defined by section 481 of the Companies Act 2006)
of which the Company’s auditors are unaware.

Each of the Directors has taken all of the steps that he or she ought to have taken as a Director to make themselves aware of any relevant
audit information and to establish that the Company’s auditors are aware of that information.

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Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Directors’ Report continued

Going concern
The Directors have a reasonable expectation that the Group has adequate resources to continue to operate for the foreseeable future.
For this reason, they continue to adopt the going concern basis in preparing the financial statements. In forming this view, the Directors
have reviewed the Group’s budgets, plans and cash flow forecasts, including market downturn sensitivities. In addition, the Directors
have considered the potential impact of credit risk and liquidity risk detailed in note 30 to the Group financial statements on pages 161
to 168. Each of these items has been considered in relation to the Group’s banking facilities described in note 20 on pages 147 and 148.

The Directors’ Report has been approved by the Board of Directors in accordance with the Companies Act 2006.

Statement of Directors’ Responsibilities
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared
the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union
and the Company financial statements in accordance with UK Accounting Standards and applicable law.

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.
– State that the Group financial statements have complied with IFRS as adopted by the European Union, subject to any material

departures being disclosed and explained.

– State for the Company financial statements whether the applicable UK Accounting Standards have been followed, subject to any

material departures being disclosed and explained.

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 2006 Act 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 Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of accounts may differ from legislation in other jurisdictions.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and
provide the information necessary for shareholders to assess the Group’s performance, business model and strategy.

Each of the Directors, as at the date of this report, confirms to the best of their knowledge that:
– The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the

assets, liabilities, financial position and profit of the Group.

– The Strategic Report and the Directors’ Report include a fair review of the development and performance of the business and the

position of the Group, together with a description of the principal risks and uncertainties that it faces.

On behalf of the Board of Directors

Charles Berry
Chairman
25 February 2015

Keith Cochrane
Chief Executive
25 February 2015

112

The Weir Group PLC Annual Report and Financial Statements 2014

Independent Auditor’s Report to the Members of The Weir Group PLC

Opinion on the financial statements
In our opinion:
– the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 2 January 2015

and of the Group’s profit for the 52 weeks then ended;

– the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs)

as adopted by the European Union;

– the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted

Accounting Practice; and

– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the

Group financial statements, Article 4 of the IAS Regulation.

What we have audited
We have audited the Group financial statements and Parent Company financial statements (together, the ‘financial statements’)
of The Weir Group plc for the 52 weeks ended 2 January 2015 which comprise:
– for the Group financial statements, the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income,

the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Equity and the
related notes 1 to 32; and

– for the Parent Company financial statements, the Company Balance Sheet and the related notes 1 to 17.

The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the
preparation of the Company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).

Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have
been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors;
and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual
Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit.
If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Our application of materiality
We set certain thresholds for materiality. These provide a basis for determining the nature, timing and extent of risk assessment procedures,
identifying and assessing the risk of material misstatement and determining the nature, timing and extent of further audit procedures.

Based on our professional judgement, we determined materiality for the Group to be £18.0m (2013: £20.0m), which is 5% of adjusted
profit before tax from continuing operations. We have considered profit before tax from continuing operations, adjusted for the impact
of exceptional items, as we consider this adjusted measure to be a key driver of business value and therefore a focus for shareholders.
The decrease in materiality applied from the prior year is reflective of the reduction in this adjusted measure.

On the basis of our risk assessments, together with our assessment of the overall control environment, our judgement is that performance
materiality was 75% (2013: 75%) of our materiality, namely £13.5 million (2013: £15.0 million). Our objective in adopting this approach was
to ensure that uncorrected and undetected audit differences in all accounts did not exceed our planning materiality level.

We agreed with the Audit Committee that we would report to the Committee all individual unadjusted audit differences and significant
judgemental items which either affect the Income Statement in excess of £0.5m (2013: £0.5m), or the Balance Sheet in excess of
£2.0m (2013: £2.0m), as well as differences below that threshold that, in our professional judgement, warrant reporting on qualitative
grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of
the financial statements.

Our assessment of risks of material misstatement
Changes from prior year
We no longer consider that the fair valuation assessment of contingent consideration is a risk that had the greatest effect on the audit
strategy, following the exceptional gain on release of Mathena Inc. contingent consideration liability in 2013.

We no longer consider that acquisition accounting is a risk that had the greatest effect on the audit strategy, following consideration
of the size and complexity of the acquisition fair values for current year acquisitions.

We have considered that a material misstatement arising from the presentation and consistency of costs and income within exceptional
items is a risk that had the greatest effect on the audit strategy, following the Group-wide efficiency review announced in the current year.

113

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014
Independent Auditor’s Report to the Members of The Weir Group PLC
continued

Our assessment of risks of material misstatement (continued)
Current year assessment
We identified the following risks of material misstatement that had the greatest effect on the audit strategy; the allocation of resources
in the audit; and directing the efforts of the engagement team:

Risk

How the scope of our audit responded to the risk

Exceptional items: Group-wide efficiency review
Refer to page 46 (Financial Review), page 87 (Audit Committee report) and page 134 (note 5 to the financial statements).

The presentation, consistency and recognition of costs and
income within exceptional items is a key determinant in the
assessment of the quality of the Group’s underlying earnings.

We have evaluated this as a risk of material misstatement, given
the increase in items presented as exceptional from prior years.

The primary components of the exceptional items in the current
year – and therefore the focus of our audit – were the charge
relating to the Group-wide efficiency review announced in
November 2014 (£49.4m) and the impairment of goodwill within
the Pressure Control Cash Generating Unit (CGU) (£160.0m).

We have considered the risk relating to the impairment of
goodwill later within this report.

We obtained and assessed management’s summary of charges
incurred under the Group-wide efficiency review, split by Division
and principal business unit. We looked to understand with
Management the rationale behind each business units’ charge,
then selected the seven key business units for further
consideration.

For these seven key business units, we obtained a breakdown
of the charges and obtained supporting source documentation,
rationale behind key assumptions or the estimation process
undertaken to confirm the appropriateness of charges recognised.

We further considered the nature of these charges, to assess
whether they are in line with the Group’s accounting policy for
exceptional items, and the Financial Reporting Council’s reminder
on consistency and clarity of presentation.

We also assessed whether the disclosures within the financial
statements in note 5 and related narrative reporting provide sufficient
detail for the reader to understand the nature of these items.

Carrying value of goodwill and intangible assets
Refer to page 46 (Financial Review), page 87 (Audit Committee report), page 134 (note 5 to the financial statements) and pages 143
to 144 (note 14 to the financial statements).

The key assumptions used in the assessment of the carrying
value of goodwill and intangible assets are determined with
reference to judgemental factors such as future projected cash
flows, growth rates and appropriate discount rates. This therefore
gives rise to inherent subjectivity in the carrying value of these
assets recorded in the financial statements.

In particular, the Pressure Control and Pressure Pumping CGUs are
noted as requiring specific focus as a direct result of the near-term
lower oil price environment those CGU’s operate in.

An impairment charge of £160.0m was noted as recognised
against Goodwill in the Pressure Control CGU at the year end.

We obtained and considered management’s impairment testing,
considering the calculation methodology, sources for key
assumptions and sensitivities applied.

We challenged the key assumptions behind the model, being
discount rate, long term growth rate, revenue growth and EBIT
margins; utilising our valuations specialists to assist in this review.
The significant assumptions and their rationale are disclosed in
note 14 to the financial statements.

We considered potential indicators of impairment for each
Group entity with associated intangible assets, focusing on
those businesses experiencing particularly challenging markets
and subject to restructuring under the Group-wide efficiency
review. We further considered the Group’s sensitivity analysis
showing the impact of a reasonable change in impairment
assumptions, to determine whether an impairment charge
was required.

For the Pressure Control and Pressure Pumping CGUs, given the
near-term lower oil price environment, we focused on the projected
cash flows for these businesses under a range of oil price assumptions
in the short and long terms, including scenarios generated from
external analyst reports and internal EY economic projections.

For the Minerals CGU, we focused on challenging the short to
medium term growth assumptions for these businesses through
sensitivity analyses, following the rationalisation of certain
businesses in that CGU as part of the Group-wide efficiency review.

Following management’s assessment of impairment, and related
sensitivities, an impairment charge of £160.0m was recognised
against Goodwill in the Pressure Control CGU at the year end.
The rationale behind this charge is described in note 14 to the
financial statements.

114

The Weir Group PLC Annual Report and Financial Statements 2014Risk

How the scope of our audit responded to the risk

Valuation of inventory
Refer to page 46 (Financial Review), page 88 (Audit Committee report) and page 145 (note 16 to the financial statements).

Following the shift of North American drilling activity from gas
to oil and liquids rich shale formations in Q1 2012, the North
American Oil and Gas pressure pumping business continues
to have excess capacity in certain pressure pumping equipment
sectors within that market.

Furthermore, the recent decline in oil prices leaving a near-term
lower oil price environment and corresponding effect on oil
rig count has increased the valuation risk within the Oil and
Gas Division.

Focusing on the North American Oil & Gas Pressure Pumping
business, we performed an aged analysis of the inventory, comparing
specific inventory lines against market activity as well as current and
forecast sales to identify excess or obsolete inventory exposures.

For full and specific scope business units within the Oil & Gas
division, we performed further inquiries of management, review
of the underlying product lines, detailed gross margin analysis
and review of booked sales orders.

We also considered the application of the inventory provisioning
accounting policy, including challenging the appropriateness
of assumptions made by management, through comparison
of the provisioning made against our analysis of excess or
obsolete inventory.

Adequacy of the Group’s liability provisioning
Refer to page 46 (Financial Review), page 88 (Audit Committee report), pages 149 to 150 (note 22 to the financial statements)
and page 159 (note 27 to the financial statements).

The recognition and valuation of the expected outcome of
employee related or other legal claims and exposures across
the Group requires the exercise of management judgement
in assessing the amounts recorded and the disclosures made
in the financial statements.

We evaluated and challenged the assumptions and methodologies
applied behind specific employee related provision calculations,
and compared against our expectations. Where applicable, we
have agreed projected costs against historical cost experience
or supporting external evidence.

For those exposures where provision is made, the use of estimates
within those provisions gives rise to inherent subjectivity in the
amounts recorded in the financial statements.

We have discussed the status of current litigation or regulatory
issues with Group Legal Counsel and external lawyers throughout
our audit process, reviewing correspondence with third parties
and related contractual agreements.

For those exposures where no provision has been made, the
obligation to disclose the nature and estimate of its financial
impact gives rise to further judgement in the disclosure within
the financial statements.

We considered the current status of the UN Oil for Food programme
and Philippines Gold contingent liability disclosures in note 27. This
included review of current correspondence relating to these cases,
meeting with Group Legal Counsel on several occasions and
obtaining confirmations from external legal advisors engaged
by management.

Following the increase in US asbestos-related claims during the
year, we have considered management’s review to assess and
estimate the settlement and defence costs associated with these
claims, and the adequacy of the Group’s related insurance policies.
This included review of correspondence with insurers and actuaries,
examination of the calculation behind the Directors’ best estimate of
the future liability and disclosure within note 22.

Exposure to significant tax risks
Refer to page 46 (Financial Review), page 88 (Audit Committee report) and pages 135 to 136 (note 7 to the financial statements).

The value of the tax provisions recorded in respect of a number
of uncertain tax positions which require judgements in respect
of the likely outcome of negotiations with and enquiries from
various tax authorities.

We have utilised internal national and appropriate international
taxation specialists to assist the Group team in the evaluation
and challenge of the assumptions and estimates in relation
to the level of provisions recognised for significant tax risks.

We have considered the movements in these provisions during
the period, and the closing balances against our expectations.
We also considered any penalty regimes that could apply should
any of the tax positions be successfully challenged.

115

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Independent Auditor’s Report to the Members of The Weir Group PLC
continued

Our assessment of risks of material misstatement (continued)
Current year assessment (continued)

Risk

How the scope of our audit responded to the risk

Revenue and profit recognition on construction contracts
Refer to page 125 (note 2 (iii) to the financial statements) and pages 129 to 132 (note 3 to the financial statements).

Auditing standards require that we consider the risk of fraud or
management override of internal controls in revenue recognition.

We have evaluated that the key risk of misstatement due to
management override, fraud and error specifically relates to:
– revenue recognition where construction contract accounting
principles are followed (as this involves judgement over
future cost elements and percentage of completion).

– manual journal adjustments to revenues made as a result

of overriding existing processes or controls.

In relation to construction contract accounting risk, we tested controls
around accounting for construction contracts at five specific scope
components, performed reviews of those contracts at those
components with operational management, and challenged the
appropriateness of assumptions made by management following
the outcome of similar assumptions made at the prior year end.

In relation to the revenue manual journal entry risk, we tested
reconciliation and manual journal entry authorisation controls
at those full scope and specific scope components where we
deemed there to be a higher country, control or management
risk. In our testing of revenue recognition at those components,
we considered the timing of revenue recognised and validity
of manual journal entries posted around the year end.
For transactions close to the period end we tested that
cut-off procedures were appropriately applied.

An overview of the scope of our audit
Following our assessment of the risk of material misstatement to the Group financial statements, we selected twenty one (2013: twenty
one) components which represent the principal business units within the Group’s three reportable segments.

Of the twenty one components selected we performed an audit of the complete financial information of three components (full scope
components), which were selected based on their size or risk characteristics. For the remaining eighteen selected components (specific
scope components) we performed audit procedures on specific accounts within the component that we considered had the potential
for the greatest impact on the amounts in the Group financial statements either because of the size of these accounts or their risk profile.
These twenty one components account for 74% (2013: 69%) of revenue, 78% (2013: 73%) of adjusted profit before tax from continuing
operations and 70% (2013: 75%) of net assets, although for components where a specific scope audit was performed, not all balances
that comprise these coverage percentages have been audited.

The audits of these components are performed at a materiality level calculated by reference to a proportion of the Group materiality
appropriate to the relevant account size, risk profile, changes in the business environment and other factors for the business concerned.
In the current year, the range of performance materiality allocated to components was £7.4m to £1.2m (2013: £7.5m to £1.5m).

In addition, certain central reporting entities and Group functions including those covering treasury, taxation, pensions and the Parent
Company were subject to a full scope audit. In order to support our conclusion that there were no significant risks of material misstatement
of the aggregated financial information of the remaining business units not subject to a full or specific scope audit, we tested the consolidation
process, carried out analytical procedures and performed selected substantive procedures for any significant balance sheet items in excess of
performance materiality at the Group level.

The Group audit team continued to follow a programme of planned visits and Video Conferencing that has been designed to ensure that
the Senior Statutory Auditor or his designate visits those components with greatest exposure to the risks of material misstatements
noted above. This year, visits included key business units in Australia, United States of America, Canada and the United Kingdom.
We also ensure we have on-going communication with component teams throughout the year.

Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
– the part of the Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and
– the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are

prepared is consistent with the Group and Parent Company financial statements.

116

The Weir Group PLC Annual Report and Financial Statements 2014Matters on which we are required to report by exception
We have nothing to report in respect of the following:

Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:
– materially inconsistent with the information in the audited financial statements; or
– apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course

of performing our audit; or

– is otherwise misleading.

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during
the audit and the Directors’ statement that they consider the Annual Report is fair, balanced and understandable and whether the
Annual Report appropriately discloses those matters that we communicated to the Audit Committee which we consider should
have been disclosed.

Under the Companies Act 2006 we are required to report to you if, in our opinion:
– adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received

from branches not visited by us; or

– the Parent Company financial statements and the part of the Remuneration Report to be audited are not in agreement with the

accounting records and returns; or

– certain disclosures of directors’ remuneration specified by law are not made; or
– we have not received all the information and explanations we require for our audit.

Under the Listing Rules we are required to review:
– the Directors’ statement, set out on page 112, in relation to going concern; and
– the part of the Corporate Governance Report relating to the Company’s compliance with the nine provisions of the UK Corporate

Governance Code specified for our review.

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 112, the directors are responsible for the preparation
of the Group financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the Group financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for
Auditors.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
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 auditor’s 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.

James Nisbet (Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Glasgow
25 February 2015

117

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Consolidated Income Statement
for the 52 weeks ended 2 January 2015

52 weeks ended 2 January 2015

53 weeks ended 3 January 2014

Before
exceptional
items &
intangibles
amortisation
£m

Exceptional
items &
intangibles
amortisation
(note 5)
£m

Notes

Before
exceptional
items &
intangibles
amortisation
£m

Exceptional
items &
intangibles
amortisation
(note 5)
£m

Total
£m

2,438.2

–

2,438.2

2,429.8

–

2,429.8

Continuing operations

Revenue

Continuing operations

Operating profit before share of results of joint ventures

Share of results of joint ventures

Operating profit

Finance costs

Finance income

Other finance costs – retirement benefits

439.8

10.0

(257.3)

182.5

458.1

–

10.0

8.4

23.8

–

481.9

8.4

449.8

(257.3)

192.5

466.5

23.8

490.3

(44.5)

(2.1)

(46.6)

6.0

(2.8)

–

6.0

(2.8)

(47.9)

3.0

(3.5)

418.1

(107.5)

310.6

–

(10.7)

(58.6)

–

13.1

12.0

25.1

–

3.0

(3.5)

431.2

(95.5)

335.7

–

310.6

25.1

335.7

309.8

0.8

310.6

25.1

334.9

–

0.8

25.1

335.7

145.4p

144.9p

157.2p

156.6p

Profit before tax from continuing operations

408.5

(259.4)

149.1

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

Non-controlling interests

Earnings per share

Basic – total operations

Basic – continuing operations

Diluted – total operations

Diluted – continuing operations

(105.5)

30.1

(75.4)

303.0

(229.3)

–

1.0

303.0

(228.3)

301.4

(228.3)

1.6

–

303.0

(228.3)

141.3p

140.9p

73.7

1.0

74.7

73.1

1.6

74.7

34.3p

33.8p

34.2p

33.7p

118

The Weir Group PLC Annual Report and Financial Statements 2014

Consolidated Statement of Comprehensive Income
for the 52 weeks ended 2 January 2015

Profit for the period

Other comprehensive income

(Losses) gains taken to equity on cash flow hedges

Exchange gains (losses) on translation of foreign operations

Exchange (losses) gains on net investment hedges

Reclassification adjustments on cash flow hedges

Tax relating to other comprehensive income (expense) to be reclassified in subsequent periods

Items that are or may be reclassified to profit or loss in subsequent periods

Remeasurements on defined benefit plans

Tax relating to other comprehensive (expense) income that will not be reclassified in subsequent periods

Items that will not be reclassified to profit or loss in subsequent periods

Net other comprehensive income (expense)

Total net comprehensive income for the period

Attributable to:

Equity holders of the Company

Non-controlling interests

52 weeks
ended
2 January
2015
£m

53 weeks
ended
3 January
2014
£m

74.7

335.7

Notes

(4.0)

61.3

(16.1)

0.9

0.3

42.4

(31.1)

6.8

(24.3)

0.1

(111.3)

16.5

0.2

0.3

(94.2)

8.0

(2.2)

5.8

18.1

(88.4)

92.8

247.3

90.7

2.1

92.8

246.5

0.8

247.3

119

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014
Consolidated Balance Sheet
at 2 January 2015

ASSETS

Non-current assets

Property, plant & equipment

Intangible assets

Investments in joint ventures

Deferred tax assets

Other receivables

Retirement benefit plan assets

Derivative financial instruments

Total non-current assets

Current assets

Inventories

Trade & other receivables

Construction contracts

Derivative financial instruments

Income tax receivable

Cash & short-term deposits

Total current assets

Total assets

LIABILITIES

Current liabilities

Interest-bearing loans & borrowings

Trade & other payables

Construction contracts

Derivative financial instruments

Income tax payable

Provisions

Total current liabilities

Non-current liabilities

Interest-bearing loans & borrowings

Other payables

Derivative financial instruments

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

Non-controlling interests

TOTAL EQUITY

Approved by the Board of Directors on 25 February 2015

Keith Cochrane
Director

Jon Stanton
Director

120

2 January
2015
£m

3 January
2014
£m

Notes

435.0

398.7

1,638.3

1,614.5

33.7

22.8

22.3

4.1

3.5

27.1

17.2

–

1.4

1.1

2,159.7

2,060.0

551.3

625.0

31.3

10.5

5.8

178.7

485.0

497.1

28.3

11.1

2.3

79.1

1,402.6

1,102.9

3,562.3

3,162.9

166.1

581.4

13.8

11.3

32.1

65.1

26.5

476.8

12.1

9.6

36.7

28.9

869.8

590.6

873.3

799.6

25.6

3.1

47.4

162.5

98.4

22.4

0.6

25.7

165.5

71.8

1,210.3

1,085.6

2,080.1

1,676.2

1,482.2

1,486.7

26.8

38.0

(5.8)

0.5

(12.6)

(2.0)

26.7

38.0

(5.8)

0.5

(57.3)

0.8

1,430.5

1,479.3

1,475.4

1,482.2

6.8

4.5

1,482.2

1,486.7

The Weir Group PLC Annual Report and Financial Statements 2014

Consolidated Cash Flow Statement
for the 52 weeks ended 2 January 2015

Continuing operations

Cash flows from operating activities

Cash generated from operations

Additional pension contributions paid

Exceptional cash items

Income tax paid

Net cash generated from operating activities

Continuing operations

Cash flows from investing activities

Acquisitions of subsidiaries

Disposals of subsidiaries

Investment in joint ventures

Purchases of property, plant & equipment and intangible assets

Other proceeds from sale of property, plant & equipment and intangible assets

Interest received

Dividends received from joint ventures

Net cash used in investing activities

Continuing operations

Cash flows from financing activities

Purchase of shares for equity settled share-based incentives

Proceeds from borrowings

Repayments of borrowings

Settlement of external debt of subsidiary on acquisition

Settlement of derivative financial instruments

Interest paid

Proceeds from increase in non-controlling interests

Dividends paid to equity holders of the Company

Net cash generated from (used in) financing activities

Net increase (decrease) in cash & cash equivalents from continuing operations

Cash & cash equivalents at the beginning of the period

Foreign currency translation differences

Cash & cash equivalents at the end of the period

Notes

52 weeks
ended
2 January
2015
£m

53 weeks
ended
3 January
2014
£m

421.3

(10.6)

(94.1)

473.9

(12.1)

–

(71.9)

306.0

389.9

(137.7)

(201.2)

–

(0.3)

(14.0)

(108.0)

(108.4)

6.7

6.2

6.0

11.1

2.8

6.1

(226.8)

(303.9)

(0.2)

(2.2)

404.0

312.5

(237.5)

(572.0)

–

(3.1)

(42.7)

0.2

(1.3)

(5.0)

(43.3)

0.6

(102.7)

(82.6)

18.0

(393.3)

97.2

68.6

0.8

166.6

(307.3)

384.2

(8.3)

68.6

121

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Consolidated Statement of Changes in Equity
for the 52 weeks ended 2 January 2015

Share
capital
£m

Share
premium
£m

Treasury
shares
£m

Capital
redemption
reserve
£m

Foreign
currency
translation
reserve
£m

Hedge
accounting
reserve
£m

Retained
earnings
£m

Attributable
to equity
holders
of the
Company
£m

Non-
controlling
interests
£m

Total
equity
£m

At 28 December 2012

26.7

38.0

(5.6)

0.5

37.5

0.2 1,209.8

1,307.1

3.2 1,310.3

Profit for the period

Gains taken to equity
on cash flow hedges

Exchange losses on translation
of foreign operations

Exchange gains on net
investment hedges

Remeasurements on
defined benefit plans

Reclassification adjustments
on cash flow hedges

Tax relating to other
comprehensive income

Total net comprehensive
income for the period

Proceeds from increase
in non-controlling interests

Cost of share-based payments
inclusive of tax charge

Dividends

Purchase of shares*

Exercise of LTIP awards

At 3 January 2014

Profit for the period

Losses taken to equity
on cash flow hedges

Exchange gains on translation
of foreign operations

Exchange losses on net
investment hedges

Remeasurements on
defined benefit plans

Reclassification adjustments
on cash flow hedges

Tax relating to other
comprehensive income

Total net comprehensive
income for the period

Proceeds from increase
in non-controlling interests

Cost of share-based payments
inclusive of tax credit

Dividends

–

26.7

38.0

–

(1.4)

1.2

(5.8)

–

(111.3)

16.5

–

334.9

0.8

335.7

0.1

–

0.2

–

8.0

–

0.1

(111.3)

16.5

8.0

0.2

0.3

(2.2)

(1.9)

–

0.1

(111.3)

16.5

8.0

0.2

(1.9)

(94.8)

0.6

340.7

246.5

0.8

247.3

–

0.5

12.6

(82.6)

–

(1.2)

12.6

(82.6)

(1.4)

–

12.6

(82.6)

(1.4)

–

0.5

(57.3)

0.8 1,479.3

1,482.2

4.5 1,486.7

–

73.1

1.6

74.7

–

60.8

(16.1)

–

(4.0)

–

0.9

0.3

–

(16.1)

(31.1)

–

6.8

0.9

7.1

(4.0)

–

(4.0)

60.8

0.5

61.3

–

(16.1)

(31.1)

0.9

7.1

44.7

(2.8)

48.8

90.7

2.1

92.8

–

5.2

–

5.2

(102.7)

(0.1)

–

0.2

–

0.2

5.2

(102.7)

–

Exercise of LTIP awards

At 2 January 2015

0.1

26.8

38.0

(5.8)

0.5

(12.6)

(2.0) 1,430.5

1,475.4

6.8 1,482.2

* These shares were purchased on the open market and are held by the Appleby EBT on behalf of the Group for satisfaction of any future vesting of the deferred bonus plan.

122

The Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements

1. Authorisation of financial statements and statement of compliance
The consolidated financial statements of The Weir Group PLC (the ‘Company’) and its subsidiaries (together, the ‘Group’) for the 52 weeks
ended 2 January 2015 (‘2014’) were approved and authorised for issue in accordance with a resolution of the directors on 25 February
2015. The comparative information is presented for the 53 weeks ended 3 January 2014 (‘2013’). 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 2006.

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

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

The accounting policies which follow are consistent with those of the previous period except for the adoption of the following standards and
interpretations. The standards listed below have not resulted in a change to the Group’s financial statements in the period of initial application.

IFRS 10, ‘Consolidated financial statements’ builds on existing principles by identifying the concept of control as the determining factor
in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides
additional guidance to assist in the determination where it is difficult to assess.

IFRS 11, ‘Joint arrangements’ focuses on the rights and obligations of the parties to the arrangement rather than its legal form. There are
two types of joint arrangement: joint operations and joint ventures. Joint operations arise where the investors have rights to the assets and
obligations for the liabilities of the arrangement, while joint ventures arise where the investors have rights to the net assets of the arrangement.

IFRS 12, ‘Disclosures of interests in other entities’ includes the disclosure requirements for all forms of interests in other entities including
joint arrangements, associates, structured entities and other off balance sheet vehicles.

There are several other standards and amendments which apply for the first time in 2014 which also do not impact the Group financial statements.

Exceptional items
In order to provide the users of the financial statements with a more relevant presentation of the Group’s underlying performance, profit
for each financial period has been analysed between:
i) profit before exceptional items and intangibles amortisation; and
ii) the effect of exceptional items and intangibles amortisation.

Exceptional items are items of income and expense which, because of the nature, size and /or infrequency of the events giving rise to
them, merit separate presentation to allow a better understanding of the elements of the Group’s financial performance for the period
and are presented on the face of the income statement to facilitate comparisons with prior periods and assessment of trends in financial
performance. Exceptional items may include but are not restricted to: profits or losses arising on disposal or closure of businesses;
the cost of significant business restructuring; significant impairments of intangible or tangible assets; adjustments to the fair value of
acquisition related items such as contingent consideration and inventory; other items deemed exceptional due to their significance,
size or nature; and the related exceptional taxation.

Intangibles amortisation has been shown separately to provide visibility over the impact of increased acquisition activity on intangible assets.

Further analysis of the items included in the column ‘Exceptional items & intangibles amortisation’ is provided in note 5 to the financial statements.

Use of estimates & judgements
The Group’s significant accounting policies are set out below. The preparation of the consolidated financial statements, in conformity
with IFRS, requires management to make judgements, estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets, liabilities, income and expense.

Management base these judgements, estimates and assumptions on a combination of past experience, professional expert advice
and other evidence that is relevant to each individual circumstance. Actual results may differ from these estimates, judgements and
assumptions, which 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.

The areas where management consider the more complex estimates, judgements and assumptions are required are those in respect
of acquired assets and liabilities – business combinations (note 13), exceptional items (above and note 5), retirement benefits (note 24),
taxation (note 7), inventory valuation (note 16), provisions (note 22), impairment of non-current assets (note 14) and legal claims (note 27).

Further commentary on areas of estimation uncertainty and critical judgements made in applying accounting policies that have the most
significant effect on the amounts recognised in the financial statements are provided in the Financial Review on page 50.

123

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

2. Accounting policies (continued)
Basis of consolidation
The consolidated financial statements include the results, cash flows and assets and liabilities of The Weir Group PLC and its subsidiaries,
and the Group’s share of results of its joint ventures. The financial statements of subsidiaries and joint ventures 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 achieved when the Group is exposed,
or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the
investee. The results of a subsidiary acquired during the period are included in the Group’s results from the effective date on which control
is transferred to the Group. The results of a subsidiary sold during the period are included in the Group’s results up to the effective date on
which control is transferred out of the Group. All intragroup transactions, balances, income and expenses are eliminated on consolidation.

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

Joint ventures
The Group has a number of long-term contractual arrangements with other parties which represent joint ventures. A joint venture is a
type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture.
Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities
require unanimous consent of the parties sharing control. The Group’s interests in the results and assets and liabilities of its joint ventures
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 Consolidated Statement of Comprehensive Income.

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

Foreign currency translation
The financial statements for each of the Group’s subsidiaries and joint ventures 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 and for differences on monetary assets and liabilities that form part of the Group’s net investment in a foreign
operation. These are recognised in other comprehensive income until the disposal of the net investment, at which time they are
recognised in profit or loss.

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 Consolidated Income Statement is determined
after taking into account the cumulative currency translation differences that are attributable to the operation. As permitted by IFRS 1,
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 Consolidated 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 measured at the fair value of the consideration received or receivable and to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured. Revenue is shown net of sales taxes, discounts and after
eliminating sales within the Group.

i. Sale of goods
Revenue from the sale of goods is recognised in the income statement when the significant risks and rewards of ownership have been
transferred to the buyer, usually on despatch of goods, and reliable measurement is possible. No revenue is recognised where recovery
of the consideration is not probable or there are significant uncertainties regarding associated costs, or the possible return of goods.
Transfers of risks and rewards vary depending on the nature of the products sold and the individual terms of the contract of sale.
Where the sale of product requires customer inspection, revenue is not recognised until the inspection has been completed and
approved by the customer.

This policy is applicable to the sale of both original equipment and spare parts, whether sold individually, in bulk or as part of a cross-
selling marketing strategy.

124

The Weir Group PLC Annual Report and Financial Statements 2014ii. Provision of services
Revenue from the rendering of services is generally recognised on completion if the service contract is short-term in nature. Where this
is not the case, revenue from services is recognised in proportion to the stage of completion of the service at the balance sheet date.
The stage of completion is assessed by reference to the contractual agreement with each separate customer and the costs incurred on
the contract to date in comparison to the total forecast costs of the contract. Revenue recognition commences only when the outcome
of the contract can be reliably measured otherwise it is recognised to the extent costs are incurred.

iii. Construction contracts
Construction contracts usually contain discrete elements separately transferring risks and rewards to the customer. 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. Losses on contracts are recognised in the period when such losses become probable. Construction contracts are
primarily entered into by the Group’s ‘Engineer to Order’ businesses.

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. Cost includes
borrowing costs for qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009. Prior to this date,
the Group recognised all borrowing costs as an expense immediately. 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, and 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

Goodwill
Business combinations are accounted for using the acquisition 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. Acquisition costs
are expensed in the period in which they are incurred. 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.

Any contingent consideration is recognised at the acquisition date. Subsequent changes to the fair value of the contingent consideration are
adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). All other subsequent changes
in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with the relevant IFRS.

The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and
circumstances that existed as of the acquisition date, and is subject to a maximum of one year.

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

Intangible assets acquired separately are measured at cost on initial recognition. 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 intangible asset with a finite life is amortised on a straight-line basis so
as to charge its cost, which in respect of an acquired intangible asset represents its fair value at the acquisition date, to the income statement
over its expected useful life. An 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.

125

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014

Notes to the Group Financial Statements continued

2. Accounting policies (continued)
Other intangible assets (continued)
Computer software that is not integral to an item of property, plant & 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.

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

Brand names
Customer & distributor relationships
Purchased software
Intellectual property & trade marks
Other

indefinite life
5 – 25 years
4 – 8 years
6 – 15 years
up to 6 years

Research & development costs
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 or technology 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 is amortised on
a straight-line basis so that it is charged to the income statement over the expected life of the resulting product.

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.

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.

Financial assets & liabilities
The Group’s principal financial assets and liabilities, other than derivatives, comprise bank overdrafts, short-term borrowings, loans and
fixed rate notes, 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 and contingent consideration in relation to acquisitions.

A financial asset 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.

Trade receivables
Trade receivables, which are generally of a short term 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 and short-term borrowings with a maturity on acquisition of three
months or less. Bank overdrafts are presented as current liabilities to the extent that there is no right of offset with cash balances.

Trade payables
Trade payables are recognised and carried at original invoice amount.

126

The Weir Group PLC Annual Report and Financial Statements 2014Interest-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. Borrowings are classified as current liabilities unless the Group has an unconditional right
to defer settlement of the liability for at least 12 months after the balance sheet date.

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.

Derivative financial instruments & hedge accounting
The Group uses derivative financial instruments, principally forward foreign currency contracts and cross currency swaps, to reduce its
exposure to exchange rate movements. The Group also uses foreign currency borrowings as a hedge of its exposure to foreign exchange
risk on its investments in foreign subsidiaries. Additionally, the Group uses interest rate swaps to manage its exposure to interest rate
risk. 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 foreign currency contracts is calculated as the present value of the estimated future cash flows based on spot and
forward foreign exchange rates and counterparty and the Group’s own credit risk. The fair value of interest rate swaps and cross currency
swaps is calculated as the present value of the estimated future cash flows based on interest rate curves, spot foreign exchange rates
and counterparty and own credit risk. Changes in their fair values have been recognised in the income statement, except where hedge
accounting is used, provided the conditions specified by IAS 39 are met. Hedge accounting is applied in respect of hedge relationships
where it is both permissible under IAS 39 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 that the hedge is effective,
changes in the fair value of the hedging instrument will be recognised directly in other comprehensive income rather than in the income
statement. When the hedged item is recognised in the financial statements, the accumulated gains and losses recognised in other
comprehensive income 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.

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 other comprehensive
income is kept in other comprehensive income until the forecasted transaction occurs. If a hedged transaction is no longer expected
to occur, the net cumulative gain or loss recognised in other comprehensive income is transferred to net profit or loss for the period.

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.

Share-based payments
Equity settled share-based incentives are provided to employees under the Group’s Long Term Incentive Plan (‘LTIP’) and as a consequence
of occasional one-off conditional awards made to senior executives. The last equity settled grant under the Executive Bonus Scheme (‘EBS’)
was during 2013, with no award being made in the current year.

The fair value of the LTIP 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 or performance conditions. The changes to the LTIP which took effect in 2014 are summarised in the
Directors’ Remuneration Report on page 91.

The previously granted equity settled incentives under the EBS were determined as a percentage of the annual bonus and were matched
by the Group with a share award that would vest on the third anniversary of the grant date provided the individual continued to hold
the original bonus shares awarded and continued to be employed by the company at the date of vesting. In addition the EBS included
a strategic bonus shares element for a limited number of senior employees. The fair value of the matching and strategic elements of
the EBS was determined at the date of grant of the bonus and the cost is recognised on a straight-line basis over the vesting period.
The Group recognises a compensation cost in respect of this plan that is based on the fair value of the awards granted. The fair value
was determined at the date of grant and is not subsequently re-measured unless the conditions on which the award was granted
are modified.

127

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

2. Accounting policies (continued)
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 total comprehensive income on the purchase,
sale, issue or cancellation of equity shares.

Post-employment benefits
Post-employment benefits comprise pension benefits provided to certain current and former employees in the UK, US and Canada and
post-retirement healthcare benefits provided to certain employees in the US.

For defined benefit pension and post-retirement healthcare plans, the annual service cost is calculated using the projected unit credit
method and is recognised over the future service lives of participating employees, in accordance with the advice of qualified actuaries.
Current service cost and administration expenses are recognised in operating costs and net interest on net pension liability is recognised
in finance costs.

The finance cost recognised in the income statement in the period reflects the net interest on the net pension liability. This represents
the change in the net pension liability resulting from the passage of time, and is determined by applying the discount rate to the opening
net liability, taking into account employer contributions paid into the plan, and hence reducing the net liability, during the period.

Past service costs resulting from enhanced benefits are recognised immediately in the income statement. Actuarial gains and losses,
which represent differences between interest on the plan assets, experience on the benefit obligation and the effect of changes in
actuarial assumptions, are recognised in full in other comprehensive income 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 yields at the balance sheet date on appropriate high quality corporate bonds that
have maturity dates approximating the terms of the Group’s obligations and are denominated in the currency in which the benefits are
expected to be paid, minus the fair value of the plan assets, if any, at the balance sheet date. The balance sheet amount recognised
is limited to the present value of economic benefits which the Group expects to recover by way of refunds or a reduction in future
contributions. In order to calculate the present value of economic benefits, consideration is also given to any minimum funding
requirements.

For defined contribution plans, the costs represent the Group’s contributions to the plans and these are charged to the income statement
in the period in which they fall due.

Leases
Leases which transfer to the Group substantially all of 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.

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:
i) 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;

ii) Deferred tax is provided on temporary differences arising on investments in subsidiaries and joint ventures, 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; and

iii) 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.

128

The Weir Group PLC Annual Report and Financial Statements 2014
New standards & interpretations
The International Accounting Standards Board and International Financial Reporting Interpretations Committee have issued the following
standards and interpretations, which are considered relevant to the Group, with an effective date after the date of these financial statements.

International Accounting Standards (IAS/IFRS)

IFRIC Interpretation 21 Levies

Defined Benefit Plans: Employee Contributions (Amendments to IAS 19)

Annual Improvements to IFRSs 2010–2012 Cycle

Annual Improvements to IFRSs 2011–2013 Cycle

Annual Improvements to IFRSs 2012–2014 Cycle

Amendment to IAS 1: Disclosure Initiative

Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate
or Joint Venture

Amendments to IAS 27: Equity Method in Separate Financial Statements

Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation

Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations

IFRS 15 Revenue from Contracts with Customers

IFRS 9 Financial Instruments

* Not yet adopted for use in the European Union.

Effective date
for periods

17 June 2014

1 July 2014

1 January 2016*

1 January 2017*

1 January 2018*

The above standards and interpretations will be adopted in accordance with their effective dates and have not been adopted in these
financial statements. There is not expected to be a significant impact on the 2015 financial statements as a result of these standards.
An exercise to assess the impact of standards applicable from 2016 and 2017 is due to commence during 2015.

3. Segment information
For management purposes, the Group is organised into three operating divisions: Minerals, Oil & Gas and Power & Industrial. These three
divisions are organised and managed separately based on the key markets served and each is treated as an operating and a reportable
segment under IFRS 8. The operating and reportable segments were determined based on the reports reviewed by the Chief Executive
which are used to make operational decisions.

The Minerals segment is the global leader in the provision of slurry handling equipment and associated aftermarket support for abrasive
high wear applications used in the mining and oil sands markets. The Oil & Gas segment provides products and service solutions to
upstream, production, transportation, refining and related industries. The Power & Industrial segment designs and manufactures valves,
pumps and turbines as well as providing specialist support services to the global power generation, industrial and oil and gas sectors.

The Chief Executive assesses the performance of the operating segments based on operating profit from continuing operations before
exceptional items (including impairments) and intangibles amortisation (‘segment result’). Finance income and expenditure and associated
interest-bearing liabilities and derivative financial instruments are not allocated to segments as all treasury activity is managed centrally by
the Group treasury function. The amounts provided to the Chief Executive with respect to assets and liabilities are measured in a manner
consistent with that of the financial statements. The assets are allocated based on the operations of the segment and the physical location
of the asset. The liabilities are allocated based on the operations of the segment.

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

129

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

3. Segment information (continued)
The segment information for the reportable segments for 2014 and 2013 is disclosed below.

Revenue

Sales to external customers

Inter-segment sales

Segment revenue

Eliminations

Minerals

Oil & Gas

Power & Industrial

Total continuing operations

2014
£m

2013
£m

2014
£m

2013
£m

2014
£m

2013
£m

2014
£m

2013
£m

1,127.9

1,304.3

3.9

4.4

992.1

14.6

1,131.8

1,308.7

1,006.7

795.9

15.7

811.6

318.2

329.6

2,438.2

2,429.8

8.5

7.3

27.0

27.4

326.7

336.9

2,465.2

2,457.2

(27.0)

(27.4)

2,438.2

2,429.8

Sales to external customers – 2013 at 2014 average exchange rates

Sales to external customers

1,127.9

1,177.7

992.1

753.6

318.2

314.0

2,438.2

2,245.3

Segment result

Segment result before share of results
of joint ventures

Share of results of joint ventures

Segment result

Unallocated expenses

226.4

268.7

–

226.4

268.7

214.9

10.0

224.9

172.1

8.4

180.5

18.6

–

18.6

31.3

–

31.3

Operating profit before exceptional items & intangibles amortisation

Total exceptional items & intangibles amortisation

Net finance costs before exceptional items

Other finance costs – retirement benefits

Profit before tax from continuing operations

Segment result – 2013 at 2014 average exchange rates

Segment result before share of results of
joint ventures

Share of results of joint ventures

Segment result

Unallocated expenses

226.4

243.1

–

226.4

243.1

214.9

10.0

224.9

162.8

8.0

170.8

18.6

–

18.6

29.6

–

29.6

Operating profit before exceptional items & intangibles amortisation

There are no material revenues derived from a single external customer.

2,438.2

2,245.3

459.9

10.0

469.9

(20.1)

449.8

(259.4)

(38.5)

(2.8)

149.1

459.9

10.0

469.9

(20.1)

449.8

472.1

8.4

480.5

(14.0)

466.5

13.1

(44.9)

(3.5)

431.2

435.5

8.0

443.5

(14.0)

429.5

130

The Weir Group PLC Annual Report and Financial Statements 2014Minerals

Oil & Gas

Power & Industrial

Total continuing operations

2014
£m

2013
£m

2014
£m

2013
£m

2014
£m

2013
£m

2014
£m

2013
£m

Assets & liabilities

Intangible assets

Property, plant & equipment

Working capital assets

536.9

214.6

504.6

397.0

198.7

449.6

991.3

167.0

532.4

1,109.4

147.2

390.9

1,256.1

1,045.3

1,690.7

1,647.5

Investments in joint ventures

–

33.7

27.1

102.0

52.3

178.4

332.7

–

101.6

50.9

1,630.2

1,608.0

433.9

396.8

176.2

1,215.4

1,016.7

328.7

3,279.5

3,021.5

–

33.7

27.1

Segment assets

Unallocated assets

Total assets

1,256.1

1,045.3

1,724.4

1,674.6

332.7

328.7

3,313.2

3,048.6

249.1

114.3

3,562.3

3,162.9

Working capital liabilities

286.0

243.4

242.8

149.9

113.8

87.3

642.6

480.6

Unallocated liabilities

Total liabilities

Other segment information

Segment additions to non-current assets

56.9

56.6

50.6

37.6

8.9

11.1

Unallocated additions to non-current assets

Total additions to non-current assets

1,437.5

1,195.6

2,080.1

1,676.2

116.4

3.7

120.1

105.3

6.3

111.6

Segment depreciation & amortisation

Impairment of property, plant & equipment

Impairment of intangible assets

37.7

4.0

–

35.3

–

54.7

5.2

160.0

Unallocated depreciation & amortisation

Total depreciation, amortisation & impairment

54.9

10.6

14.2

103.0

104.4

–

9.2

160.0

3.0

–

1.4

275.2

105.8

Unallocated assets primarily comprise cash and short-term deposits, derivative financial instruments, income tax receivable, deferred tax
assets and retirement benefit surpluses as well as those assets which are used for general head office purposes. Unallocated liabilities
primarily comprise interest-bearing loans and borrowings, derivative financial instruments, income tax payable, provisions, deferred tax
liabilities and retirement benefit deficits as well as liabilities relating to general head office activities. Segment additions to non-current
assets do not include those additions which have arisen from business combinations (note 13).

Geographical information
Geographical information in respect of revenue and non-current assets for 2014 and 2013 is disclosed below. Revenues are allocated
based on the location to which the product is shipped. Assets are allocated based on the location of the assets and operations. Non-
current assets consist of property, plant & equipment, intangible assets and investments in joint ventures.

52 weeks ended 2 January 2015

Revenue from continuing operations

UK
£m

USA
£m

Canada
£m

Europe &
FSU
£m

Asia
Pacific
£m

Australia
£m

South
America
£m

Middle
East &
Africa
£m

Total
£m

Sales to external customers

113.0

875.9

246.0

180.9

252.4

220.3

261.6

288.1 2,438.2

Non-current assets

144.7 1,130.5

59.0

144.6

304.6

163.0

49.5

111.1

2,107.0

53 weeks ended 3 January 2014

Revenue from continuing operations

UK
£m

USA
£m

Canada
£m

Europe &
FSU
£m

Asia
Pacific
£m

Australia
£m

South
America
£m

Middle
East &
Africa
£m

Total
£m

Sales to external customers

104.8

743.4

234.6

246.1

229.8

223.2

308.1

339.8 2,429.8

Non-current assets

102.8 1,251.5

58.1

141.7

180.3

157.5

50.2

98.2 2,040.3

131

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

3. Segment information (continued)
Geographical information (continued)
The following disclosures are given in relation to continuing operations.

An analysis of the Group’s revenue is as follows

Original equipment

Aftermarket parts

Sales of goods

Aftermarket services

Revenue from construction contracts

Revenue

Finance income

Total revenue

2014
£m

2013
£m

748.7

818.8

1,145.3

1,074.4

1,894.0

1,893.2

470.5

73.7

461.4

75.2

2,438.2

2,429.8

6.0

3.0

2,444.2

2,432.8

4. Revenues & expenses
The following disclosures are given in relation to total continuing operations and include exceptional items and intangible amortisation.

A reconciliation of revenue to operating profit is as follows

Revenue

Cost of sales

Gross profit

Other operating income*

Selling & distribution costs

Administrative expenses

Goodwill impairment

Share of results of joint ventures

Operating profit

* Other operating income in the prior year includes the £67.8m exceptional gain on release of the Mathena contingent consideration liability (note 5).

Operating profit is stated after charging (crediting)

Cost of inventories recognised as an expense

Depreciation of property, plant & equipment (note 11)

Amortisation of intangible assets (note 12)

Acquisition transaction costs

Other one-off costs*

Group-wide efficiency review**

Metso aborted acquisition costs

Net foreign exchange losses

Net impairment of trade receivables excluding Group-wide efficiency review amounts (note 17)

* Other one-off costs include acquisition integration costs.
** Details of the Group-wide efficiency review are detailed in note 5.

2014
£m

2013
£m

2,438.2

2,429.8

(1,632.2)

(1,557.2)

806.0

4.1

872.6

70.8

(213.5)

(222.6)

(254.1)

(238.9)

(160.0)

10.0

192.5

–

8.4

490.3

2014
£m

2013
£m

1,632.2

1,557.2

61.1

44.9

0.9

1.1

49.4

2.4

1.4

(0.6)

59.1

46.7

2.7

5.3

–

4.1

5.5

132

The Weir Group PLC Annual Report and Financial Statements 2014The 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 Company and its subsidiary companies during the period are
disclosed below.

Fees payable to the Company’s auditor for the audit of the Company & Group financial statements

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

The audit of the Company’s subsidiaries pursuant to legislation

Other assurance services

Fees payable in respect of the Group’s pension schemes

Audit

2014
£m

2013
£m

0.4

1.5

0.1

0.4

1.4

0.1

Research & development costs
Research & development costs amount to £24.8m (2013: £21.5m) of which £22.4m (2013: £17.6m) were charged directly to cost of sales
in the income statement and £2.4m (2013: £3.9m) were capitalised (note 12).

Operating leases
Minimum lease payments under operating leases recognised as an expense in the period were £42.7m (2013: £42.1m).

Employee benefits expense

Wages & salaries

Social security costs

Pension costs

Defined benefit plans (note 24)

Defined benefit plans exceptional item (note 5)

Defined contribution plans

Share-based payments – equity settled transactions

The average monthly number of people employed by the Company and its subsidiaries is as follows

Minerals

Oil & Gas

Power & Industrial

Group companies

2014
£m

2013
£m

552.5

52.2

523.0

52.7

2.1

–

19.5

4.4

2.6

(2.7)

17.7

8.7

630.7

602.0

2014
Number

2013
Number

8,271

3,923

3,015

7,699

3,234

2,752

15,288

13,750

At 2 January 2015, the number of people employed by the Group including those under temporary contracts was 16,347 (2013: 15,220).

133

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

5. Exceptional items & intangibles amortisation

Recognised in arriving at operating profit from continuing operations

Intangibles amortisation (note 12)

Exceptional item – Intangibles impairment (note 12)

Exceptional item – Group-wide efficiency review

Exceptional item – Metso aborted acquisition costs

Exceptional item – release of Mathena contingent consideration liability (note 13)

Exceptional item – pension curtailment gain (note 24)

Exceptional item – uplift in respect of contingent consideration liability

2014
£m

2013
£m

(44.9)

(46.7)

(160.0)

(49.4)

(2.4)

–

(0.6)

(257.3)

–

67.8

2.7

–

23.8

Recognised in finance costs

Exceptional item – unwind in respect of contingent consideration liability

(2.1)

(10.7)

Recognised in arriving at profit for the period from discontinued operations

Exceptional item (note 8)

1.0

–

A Group-wide efficiency review was undertaken in the third quarter to identify opportunities to reduce costs, increase customer
responsiveness and efficiency while aligning resources globally to capture end market opportunities. This review resulted in the Group
taking a number of actions including the closure of a number of small manufacturing facilities, consolidation of service centres, workforce
reductions in other areas and the exit from certain lower margin activities. The review was extended towards the end of the fourth quarter
to include additional workforce reductions in Oil & Gas in anticipation of reduced activity levels following the significant oil price decline.
Exceptional costs totalling £49.4m have been recognised in the Income Statement in relation to these actions, represented by £30.1m in
restructuring costs and impairment charges of £19.3m. The restructuring costs include £15.6m of termination costs and the impairment
charge includes £9.2m in relation to property, plant & equipment, £5.3m on inventory and £4.8m on trade receivables. The cash outflow
in 2014 was £8.2m in relation to the restructuring costs.

As a further consequence of the decline in oil prices an impairment of £160m has been recognised in the period in relation to goodwill held
in the Pressure Control CGU. Further details are provided in note 14.

Other exceptional items in the period include costs associated with the aborted acquisition of Metso, the uplift in the contingent
consideration payable on the acquisition of Weir International and the unwind of contingent consideration liabilities. Included within
discontinued operations is the release of unutilised tax warranty provisions regarding previous disposals.

The exceptional items in 2013 related to:
– release of the entire Mathena contingent consideration liability offset by the unwind of the contingent consideration liability which had

been recorded in that period.

– recognition of a curtailment gain in the Main Plan following a consultation process which ended in August 2013, concluding that the

Plan will close to future accrual of benefits effective from 30 June 2015.

6. Finance (costs) income

Finance costs

Interest payable on bank loans, fixed rate notes & overdrafts

Losses on financial assets & liabilities at fair value through profit & loss

Finance charges related to committed loan facilities

Unwind of discount in respect of contingent consideration – exceptional item (note 5)

Finance income

Interest receivable on financial assets

Gains on financial assets & liabilities at fair value through profit & loss

134

2014
£m

2013
£m

(36.2)

(39.1)

(6.2)

(2.1)

(44.5)

(2.1)

(46.6)

2014
£m

1.1

4.9

6.0

(2.9)

(5.9)

(47.9)

(10.7)

(58.6)

2013
£m

1.3

1.7

3.0

The Weir Group PLC Annual Report and Financial Statements 20147. Tax expense
Income tax expense

Consolidated Income Statement

Current income tax

UK corporation tax – continuing operations

Adjustments in respect of previous years

UK corporation tax

Foreign tax – continuing operations

Adjustments in respect of previous years

Total current income tax

Deferred income tax

Origination & reversal of temporary differences – continuing operations

Adjustment to estimated recoverable deferred tax assets

Effect of changes in tax rates

Adjustments in respect of previous years

Total deferred tax*

2014
£m

2013
£m

(3.1)

(12.1)

4.6

1.5

4.2

(7.9)

(89.2)

(81.2)

1.8

1.0

(85.9)

(88.1)

12.6

1.2

(0.2)

(3.1)

10.5

(1.9)

(1.2)

(1.3)

(3.0)

(7.4)

Total income tax expense in the Consolidated Income Statement

(75.4)

(95.5)

* Includes £12.1m of deferred tax credit relating to foreign tax (2013: £3.2m charge).

The total income tax expense is disclosed in the Consolidated Income Statement as follows.

Tax expense – continuing operations before exceptional items & intangibles amortisation

– exceptional items

– intangibles amortisation

Total income tax expense in the Consolidated Income Statement

The total deferred tax included in the income tax expense is detailed in note 23.

Tax relating to items charged or credited to equity

Consolidated Statement of Comprehensive Income

Current tax on pension contributions

Deferred tax – origination & reversal of temporary differences

Tax credit (charge) on actuarial losses (gains) on retirement benefits

Deferred tax credit on hedge losses

Tax credit (charge) in the Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Deferred tax on share-based payments

Current tax on share-based payments

Tax credit in the Consolidated Statement of Changes in Equity

2014
£m

2013
£m

(105.5)

(107.5)

16.0

14.1

(0.5)

12.5

(75.4)

(95.5)

2014
£m

1.7

5.1

6.8

0.3

7.1

0.9

–

0.9

2013
£m

3.9

(6.1)

(2.2)

0.3

(1.9)

0.8

3.1

3.9

135

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

7. Tax expense (continued)
Reconciliation of the total tax charge
The tax expense in the Consolidated Income Statement for the period is higher (2013: lower) than the weighted average of standard rates
of corporation tax across the Group of 22.9% (2013: 29.7%). The differences are reconciled below.

Profit before tax from continuing operations

Profit before tax from discontinued operations

Accounting profit before tax

2014
£m

2013
£m

149.1

431.2

1.0

–

150.1

431.2

At the weighted average of standard rates of corporation tax across the Group of 22.9% (2013: 29.7%)

34.3

128.2

Adjustments in respect of previous years – current tax

– deferred tax

Joint ventures

Unrecognised deferred tax assets

Overseas tax on unremitted earnings

Permanent differences

Tax effect of funding overseas operations

Effect of changes in tax rates

Exceptional items ineligible for tax

At effective tax rate of 50.2% (2013: 22.1%)

(6.4)

3.1

(3.1)

1.2

4.3

(2.7)

(19.1)

(0.2)

64.0

75.4

(5.2)

3.0

(1.2)

1.2

5.6

0.7

(17.6)

1.1

(20.3)

95.5

8. Discontinued operations
There were no disposals of core businesses during the current or prior period. As disclosed in note 5 an exceptional gain of £1.0m
(2013: £nil) has been recognised in the period in relation to the release of unutilised tax warranty provisions relating to previous disposals.

Earnings per share from discontinued operations were as follows.

Basic

Diluted

2014
pence

0.5

2013
pence

n/a

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

9. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the period attributable to equity holders of the Company by the
weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated by dividing the net
profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the period
(adjusted for the effect of dilutive share awards).

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

Profit attributable to equity holders of the Company

Total operations* (£m)

Continuing operations* (£m)

Continuing operations before exceptional items & intangibles amortisation* (£m)

Weighted average share capital

Basic earnings per share (number of shares, million)

Diluted earnings per share (number of shares, million)

* Adjusted for £1.6m (2013: £0.8m) in respect of non-controlling interests.

2014

2013

73.1

72.1

301.4

213.3

213.9

334.9

309.8

213.0

213.8

136

The Weir Group PLC Annual Report and Financial Statements 2014The 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: LTIP and deferred bonus awards

2014
Shares
Million

213.3

0.6

2013
Shares
Million

213.0

0.8

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

213.9

213.8

The profit attributable to equity holders of the Company used in the calculation of both basic and diluted earnings per share from
continuing operations before exceptional items and intangibles amortisation is calculated as follows.

Net profit attributable to equity holders from continuing operations*

Exceptional items & intangibles amortisation net of tax

Net profit attributable to equity holders from continuing operations before exceptional items & intangibles
amortisation*

Basic earnings per share:

Total operations*

Continuing operations*

Continuing operations before exceptional items & intangibles amortisation*

Diluted earnings per share:

Total operations*

Continuing operations*

Continuing operations before exceptional items & intangibles amortisation*

* Adjusted for £1.6m (2013: £0.8m) in respect of non-controlling interests.

2014
£m

72.1

229.3

2013
£m

334.9

(25.1)

301.4

309.8

2014
pence

2013
pence

34.3

33.8

141.3

34.2

33.7

140.9

157.2

145.4

156.6

144.9

There have been no share options (2013: nil) exercised between the reporting date and the date of signing of these financial statements.

10. Dividends paid & proposed

Declared & paid during the period

Equity dividends on ordinary shares

Final dividend for 2013: 33.2p (2012: 30.0p)

Interim dividend for 2014: 15.0p (2013: 8.8p)

Proposed for approval by shareholders at the annual general meeting

Final dividend for 2014: 29.0p (2013: 33.2p)

2014
£m

2013
£m

70.7

32.0

102.7

63.8

18.8

82.6

61.9

70.8

The dividend has been re-phased such that the final payment will represent approximately two thirds of the total dividend for 2014.

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.

137

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014
Notes to the Group Financial Statements continued

11. Property, plant & equipment

Cost

At 28 December 2012

Additions

Acquisitions

Disposals

Reclassifications from intangible assets (note 12)

Reclassifications

Exchange adjustment

At 3 January 2014

Additions

Acquisitions

Disposals

Reclassifications to intangible assets (note 12)

Reclassifications to inventory

Reclassifications

Exchange adjustment

At 2 January 2015

Accumulated depreciation & impairment

At 28 December 2012

Depreciation charge for the period

Disposals

Reclassifications from intangible assets (note 12)

Reclassifications

Exchange adjustment

At 3 January 2014

Depreciation charge for the period

Impairment

Disposals

Reclassifications to intangible assets (note 12)

Reclassifications to inventory

Reclassifications

Exchange adjustment

At 2 January 2015

Land &
buildings
£m

Plant &
equipment
£m

Total
property,
plant &
equipment
£m

145.3

444.9

590.2

17.4

6.9

(3.3)

–

4.1

(10.8)

159.6

23.9

5.2

73.0

19.5

90.4

26.4

(20.6)

(23.9)

1.0

(4.1)

(33.6)

480.1

72.1

5.7

1.0

–

(44.4)

639.7

96.0

10.9

(3.2)

(19.9)

(23.1)

–

0.6

4.0

(0.4)

(2.2)

(0.6)

5.8

(0.4)

(2.2)

–

9.8

190.1

540.6

730.7

34.2

182.0

6.1

(1.0)

–

0.7

(2.1)

37.9

6.0

1.6

53.0

(15.9)

0.4

(0.7)

(15.7)

203.1

55.1

7.6

216.2

59.1

(16.9)

0.4

–

(17.8)

241.0

61.1

9.2

(2.3)

(16.4)

(18.7)

–

0.2

0.6

(0.1)

(0.6)

(0.2)

3.2

(0.1)

(0.6)

–

3.8

44.0

251.7

295.7

Net book value at 28 December 2012

111.1

262.9

374.0

Net book value at 3 January 2014

121.7

277.0

398.7

Net book value at 2 January 2015

146.1

288.9

435.0

The carrying value of buildings held under finance leases is £1.0m (2013: £1.3m). The carrying value of plant & equipment held under
finance leases is £0.4m (2013: £0.4m). Leased assets are pledged as security for the related finance lease liabilities.

The carrying amount of assets under construction included in plant & equipment is £36.6m (2013: £29.2m).

The impairment charges in the year are related to actions undertaken as a result of the Group-wide efficiency review as outlined in note 5.

138

The Weir Group PLC Annual Report and Financial Statements 2014

12. Intangible assets

Customer
and
distributor
relationships
£m

Brand
names
£m

Purchased
software
£m

Intellectual
property &
trade marks
£m

Development
costs
£m

Goodwill
£m

Cost

At 28 December 2012

908.9

169.7

384.5

Additions

Acquisitions

Disposals

Reclassifications from property,
plant & equipment (note 11)

Reclassifications

Exchange adjustment

At 3 January 2014

Additions

Acquisitions

Disposals

Reclassifications from property,
plant & equipment (note 11)

Reclassifications

Exchange adjustment

At 2 January 2015

Accumulated amortisation & impairment

At 28 December 2012

Amortisation charge for the period

Disposals

Reclassifications from property,
plant & equipment (note 11)

Reclassifications

Exchange adjustment

At 3 January 2014

Amortisation charge for the period

Impairment

Disposals

Reclassifications from property,
plant & equipment (note 11)

Exchange adjustment

At 2 January 2015

–

95.5

–

(32.6)

971.8

–

77.1

–

9.7

–

129.2

–

(4.2)

(11.6)

175.2

502.1

–

14.7

0.1

21.9

–

42.4

1,091.3

11.5

201.4

29.3

553.4

–

160.0

–

160.0

–

67.4

37.0

–

1.0

(3.0)

102.4

30.6

–

6.3

139.3

33.2

6.6

–

(0.9)

(1.0)

(0.7)

(1.8)

35.4

20.7

0.1

(1.1)

0.4

0.2

(0.1)

55.6

18.8

3.8

(0.9)

(0.4)

0.4

(1.1)

20.6

6.0

–

(1.1)

0.1

0.2

25.8

58.0

10.4

0.2

–

(1.7)

66.9

0.8

7.2

–

(0.2)

3.6

78.3

19.9

4.4

–

(0.7)

23.6

6.1

–

1.5

31.2

Net book value at 28 December 2012

908.9

169.7

317.1

14.4

38.1

Net book value at 3 January 2014

971.8

175.2

399.7

14.8

43.3

Net book value at 2 January 2015

931.3

201.4

414.1

29.8

47.1

4.5

3.9

–

0.7

(0.7)

8.4

2.4

–

(0.2)

10.6

0.3

0.4

–

0.7

0.8

–

0.1

1.6

4.2

7.7

9.0

Other
£m

Total
£m

17.7

0.3

–

1,576.5

21.2

234.6

(0.9)

(1.0)

–

(1.0)

(53.6)

17.0

1,776.8

0.1

4.8

–

1.0

24.1

125.8

(1.1)

0.4

–

87.5

22.9

2,013.5

16.0

1.1

–

(1.4)

(0.7)

15.0

1.4

–

0.9

17.3

122.4

46.7

(0.9)

(0.4)

–

(5.5)

162.3

44.9

160.0

(1.1)

0.1

9.0

375.2

1.7

1,454.1

2.0

1,614.5

5.6

1,638.3

The impairment charge recorded in the period relates to the write down of goodwill in the Pressure Control CGU (note 14).

The increase in goodwill of £77.1m during 2014 is represented by the current year acquisitions of Trio and Metra (note 13).

139

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014
Notes to the Group Financial Statements continued

12. Intangible assets (continued)
Brand names have been assigned an indefinite useful life and as such are not amortised. The carrying value of £201.4m (2013: £175.2m)
is tested annually for impairment (note 14). The brand name value comprises the brands of Linatex, BDK, American Hydro, Warman, SPM,
Gabbioneta, Multiflo, Novatech, Mathena, Wales and Trio all of which are considered to be market leaders in their respective markets.

The allocation of significant brand names is as follows.

Gabbioneta

Linatex

Mathena

Seaboard

SPM

Trio

Warman

Other

Brand names

2014
£m

5.3

37.1

7.7

31.9

30.9

15.3

54.0

19.2

2013
£m

5.6

34.7

7.2

29.8

28.0

50.5

19.4

201.4

175.2

The allocation of customer and distributor relationships and the remaining amortisation period of these assets is as follows.

Remaining amortisation
period

Customer and distributor
relationships

Mathena

Novatech

Seaboard

SPM

Trio

Other

The amortisation charge for the period is included in the income statement as follows.

Cost of sales

Selling & distribution costs

Administrative expenses

Amortisation charge for the period

2014
Years

2013
Years

–

Up to 16

Up to 17

2014
£m

97.8

43.0

129.3

78.5

22.4

43.1

414.1

2014
£m

3.5

1.0

40.4

44.9

2013
£m

99.1

44.1

130.2

76.6

–

49.7

399.7

2013
£m

2.0

0.6

44.1

46.7

140

The Weir Group PLC Annual Report and Financial Statements 201413. Business combinations
On 25 July 2014, the Group completed the acquisition of 100% of the voting shares of Metra Equipment Inc, (Weir Metra) for a cash
consideration of CAD$6.0m (£3.4m) less cash acquired of CAD$0.7m (£0.4m). Based in Saskatchewan, Canada, Weir Metra is a niche
provider of wellhead equipment and services and will support and expand the existing Pressure Control business. The provisional fair
value of the net assets has been assessed as £2.0m, giving rise to goodwill on acquisition of £1.4m. No separately identifiable intangible
assets have been recognised in relation to the acquisition.

On 22 October 2014, the Group completed the acquisition of Trio Engineered Products (Weir Trio) a Chinese-American manufacturer
of crushing and separation equipment for the mining and aggregate markets, for a consideration of US$236.0m inclusive of net cash
balances held by Weir Trio. The consideration includes US$13.2m discounted contingent consideration deferred for up to 2 years
conditional on the realisation of certain working capital targets and the achievement of agreed management goals. The provisional fair
values are disclosed in the table below and are subject to change following completion of the fair value exercise during 2015. There are
certain intangible assets in the £75.7m of goodwill recognised that cannot be individually separated and reliably measured due to their
nature. These items include anticipated business growth, synergies and an assembled workforce.

Provisional fair values

Property, plant & equipment

Inventories

Intangible assets

– customer and distributor relationships

– brand name

– order backlog

– intellectual property

– purchased software

– other

Trade & other receivables

Cash & cash equivalents

Trade & other payables

Provisions

Current tax

Deferred tax

Fair value of net assets

Goodwill arising on acquisition

Total consideration

Cash consideration

Contingent consideration

Total consideration

The total net cash outflow on current year acquisitions was as follows

Weir Trio

– cash paid

– cash & cash equivalents acquired

Weir Metra – net cash outflow

Total cash outflow (note 26)

Trio
2014
£m

10.1

20.9

21.9

14.7

3.5

7.2

0.1

1.3

15.6

8.0

(20.0)

(10.9)

(1.2)

(1.0)

70.2

75.7

145.9

137.7

8.2

145.9

(137.7)

8.0

(3.0)

(132.7)

The fair value of the Weir Trio trade receivables amounts to £15.6m. The gross amount of trade receivables is £20.2m, of which £4.6m
have been impaired as it is expected that the full contractual amounts may not be collected.

141

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

13. Business combinations (continued)
Together, Weir Trio and Weir Metra contributed £11.7m to revenue and £1.1m to operating profit (including exceptional items and
intangibles amortisation) in the 52 weeks ended 2 January 2015. The contribution of the individual acquisitions to revenue and profit
for the period from continuing operations after exceptional items and intangibles amortisation of the Group was not material and so
has not been separately disclosed. If the acquisitions had occurred at the start of 2014 the combined revenue and profit for the period
from acquired operations after exceptional items and intangibles amortisation, would not have been materially different from the results
disclosed in the Consolidated Income Statement.

The fair values for Weir Mathena, Weir Wales and all other acquisitions during 2013 were finalised in the financial statements for the
period ended 3 January 2014. The 2013 cash flows in relation to these acquisitions are disclosed in note 26.

Contingent consideration
The purchase price of Trio included US$14.7m in respect of contingent consideration payable on the recovery of certain working capital
balances and the achievement of agreed management goals over the next 2 years. Expectations at the date of acquisition were that
the full amount will be payable and a discounted value of £8.2m was recognised. There has been no change in this view between the
date of acquisition and the period end, with unwind of the discount being recognised in the Income Statement in the period.

A significant increase (decrease) in the discount rate would result in a lower (higher) fair value of the liability. The discount rate applied
in the fair value calculation for Trio was 13.0%.

The acquisition of Weir International in 2011 included an earn out based on EBITDA achieved in 2013 and 2014, with further EBITDA
targets also extending to 2019. Weir International has met the 2013 and 2014 targets resulting in the settlement of contingent
consideration in line with expectations.

The estimated fair value of the contingent consideration at the date of acquisition was £13.9m. Based on trading performance the liability
was reassessed during 2012 and uplifted by a further £5.8m. During 2014 the fair value of the contingent consideration was uplifted by a
further £0.6m following agreement with the minority shareholder over additional working capital targets applicable in 2019. The unwind
of the discount has been recognised in the Income Statement in the period.

A significant decrease in the EBITDA of Weir International would result in a lower fair value of the contingent consideration liability,
while a significant increase (decrease) in the discount rate would result in a lower (higher) fair value of the liability. The discount rate
applied in the fair value calculation for Weir International was 11.2%.

During 2013 the full contingent consideration liability in relation to Mathena of £60.1m was recognised on a discounted basis, and the
unwind of the discount of £8.6m was recognised as an exceptional item. The contingent consideration was reduced to nil by 3 January
2014, with the release of the contingent consideration liability of £67.8m, after allowing for exchange movements in the period, recorded
as an exceptional item in the 2013 Income Statement.

A reconciliation of fair value measurement of the contingent consideration liability is provided below:

Opening balance

Liability arising on business combinations

Fair value changes in profit or loss

Exchange movements in the period

Contingent consideration paid

Unwind of discount

Closing balance

2014
£m

27.7

8.2

0.6

1.0

(5.0)

2.1

34.6

2013
£m

24.5

61.7

(67.8)

(1.1)

(0.3)

10.7

27.7

The contingent consideration in relation to other acquisitions is considered to be immaterial for further disclosure.

The contingent consideration liability for Weir Trio is due for final measurement in 2016, while the contingent consideration liability for
Weir International is due for final measurement in 2019.

142

The Weir Group PLC Annual Report and Financial Statements 201414. Impairment testing of goodwill & intangible assets with indefinite lives
Goodwill acquired through business combinations and intangible assets with indefinite lives have been allocated at acquisition to cash
generating units (CGUs) that are expected to benefit from the business combination.

The acquisitions during 2014, as described in note 13, have been allocated to these CGUs. Trio has been included within the Minerals
CGU, while Metra has been added to the Pressure Control CGU.

The carrying amount of goodwill and intangible assets with indefinite lives has been allocated as per the table below.

Pressure Pumping

Pressure Control

Gabbioneta

Minerals

Other

Goodwill
2014
£m

Intangibles*
2014
£m

Goodwill
2013
£m

Intangibles*
2013
£m

298.5

185.8

56.3

318.1

72.6

931.3

35.5

39.7

5.3

111.7

9.2

201.4

279.3

321.9

59.7

239.6

71.3

971.8

33.2

37.1

5.6

90.7

8.6

175.2

* Intangible assets with indefinite lives (brand names).

Impairment testing and sensitivity analysis
The very significant decline in the oil price towards the end of 2014 and at the start of 2015, and the resultant impact on the North American
rig count, has had a substantial impact on the short to medium term forecasts of our Pressure Control CGU such that an impairment charge
of £160m has been recognised at the end of the year. This has been entirely allocated against goodwill.

The estimated recoverable amount of the Pressure Control CGU is equal to its carrying value. Consequently, any adverse charge in key
assumptions would, in isolation, cause a further impairment loss to be recognised.

The following table shows the changes to assumptions used in the Pressure Control impairment model that would, in isolation, lead to an
(increase)/decrease in the impairment loss recognised in 2014.

Discount rate

Real growth rate

Forecast revenue growth*

EBIT margin

Increase by
50bps
£m

Decrease by
50bps
£m

Increase by
5%
£m

Decrease by
5%
£m

(27.4)

21.9

n/a

10.9

30.6

(19.7)

n/a

(10.3)

n/a

13.3

n/a

(12.8)

n/a

* Forecast revenue growth is expressed as the percentage increase/decrease in each of the initial five years used in the impairment testing.

As explained in other sections of this Annual Report (but specifically in the Financial Review on page 46 and in note 5), the Group has already
reacted to market conditions through implementation of actions under the Group-wide efficiency review and is well placed to manage the
current downturn.

The cash flow forecasts underpinning the impairment testing reflect the current oil price (and related activity levels) enduring for the next
two years, with pressure on both volumes and pricing, and a measured return to more ‘normal’ levels thereafter.

No impairment has been identified in relation to any of the other CGUs. With regard to the Pressure Pumping CGU, this business is more
mature and had significant levels of headroom between net asset value and discounted cash flows prior to the current market downturn.
A number of stress test scenarios have been modelled which do not result in any impairment being identified.

For the Gabbioneta, Minerals and Other CGUs, base case forecasts show significant headroom above carrying value. Sensitivity analysis
has been undertaken for each of these CGUs to assess the impact of any reasonable possible change in key assumptions. There is no
reasonably possible change that would cause the carrying values to exceed recoverable amounts.

A description of each of the CGUs is provided below along with a summary of the key drivers of revenue growth and EBIT margin.

Pressure Pumping
Pressure Pumping includes the Weir SPM, Weir Novatech and Weir Mesa brands. Pressure Pumping is a supplier of oil and gas well
service pumps, associated flow control equipment and services to the oil and gas production industry. Demand for Pressure Pumping
products and services is closely related to the number of conventional and unconventional oil drilling rigs and gas well drilling rigs which
is in turn dependent upon oil and natural gas prices and storage levels. Independent forecasts of North American oil and gas well drilling
activity, which take into account forecast oil and natural gas prices and storage levels, have been used to derive revenue growth
assumptions. These independent forecasts were updated during the first quarter of 2015 for the downturn in oil price.

143

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

14. Impairment testing of goodwill & intangible assets with indefinite lives (continued)
Pressure Control
Pressure Control includes the Weir Seaboard, Weir Mathena and Weir Metra brands. Weir Pressure Control is a supplier of oil and gas
wellhead solutions and associated rental equipment to the oil and gas production industry. A large proportion of the business’ revenues
are generated in North America with demand being closely related to the number of conventional oil drilling rigs and gas well drilling rigs
in operation which is in turn dependent upon oil and natural gas prices and storage levels. Independent forecasts of North American
oil and gas well drilling activity, which take into account forecast oil and natural gas prices and storage levels, have been used to derive
revenue growth assumptions. These independent forecasts were updated during the first quarter of 2015 for the downturn in oil price.

Minerals
Minerals includes the Weir Warman, Weir Linatex, Weir Multiflo, Weir Wales and Weir Trio brands. Weir Minerals companies supply
pumps and associated equipment and services to all global mining markets. The key drivers for revenues are (i) levels of mining capital
expenditure which drives demand for original equipment and (ii) levels of actual mining activity which drives demand for spare parts and
service. Independent forecasts of mining capital expenditure and activity have been used to derive revenue growth assumptions. These
independent forecasts were prepared during the final quarter of 2014. Weir Trio was excluded from the Group impairment test as a fair
value review of goodwill and intangible assets was performed in the final quarter of 2014 as part of the acquisition process. A breakdown
of Weir Trio’s goodwill and intangible assets are disclosed in note 13.

Gabbioneta
Gabbioneta is a supplier of heavy duty process applications to oil and gas refinery, petro-chemical and power generation industries. The
key drivers for revenues are capital expenditure within oil refinery and petro-chemical industries. Independent forecasts of expenditure
in these sectors have been used to derive revenue growth assumptions. These independent forecasts were prepared during the final
quarter of 2014.

Other
The amounts included in Other are not considered individually significant. There have been no changes in the period.

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 basis of the impairment tests for the four primary CGUs including key assumptions are set out in the
table below.

CGU

Basis of
valuation

Period of
forecast

Discount rate1

Real growth2

Key assumptions

Source

Pressure Pumping

Value in use

5 years

12.9% (2013:12.2%)

1.5% (2013:1.5%)

Pressure Control

Value in use

5 years

12.9% (2013:12.2%)

1.5% (2013:1.5%)

Gabbioneta

Value in use

5 years

11.8% (2013:13.6%)

1.5% (2013:1.5%)

Minerals

Value in use

5 years

13.7% (2013:14.7%)

1.5% (2013:1.5%)

Revenue growth
EBIT margins

External forecast
Historic experience

Revenue growth
EBIT margins

External forecast
Historic experience

Revenue growth
EBIT margins

External forecast
Historic experience

Revenue growth
EBIT margins

External forecast

Historic experience

1 Discount rate
The discount rates presented above reflect the pre-tax nominal weighted average cost of capital (WACC) in the most appropriate
geographic region. The WACC is the weighted average of the pre-tax cost of debt financing and the pre-tax cost of equity finance.
During the year, there have been reductions to the 10 year government bond yields for some countries, including Italy, which has led
to a decrease in the cost of equity, and as a result, the overall discount rates for those countries.

2 Real growth
Real growth beyond the five year forecast period of 1.5% is in line with 2013 reflecting the gradual return to a more stable economic environment.

EBIT margins
EBIT margins have been forecast based on historic levels taking cognisance of the likely impact of changing economic environments and
competitive landscapes on volumes and revenues and the impact of associated management actions on costs.

144

The Weir Group PLC Annual Report and Financial Statements 201415. Investments in joint ventures
The significant investments in joint ventures are as follows.

At 28 December 2012

Additions

Share of results

Share of dividends

Exchange adjustment

At 3 January 2014

Disposals

Share of results

Share of dividends

Exchange adjustment

At 2 January 2015

Details of the Group’s share of the balance sheet, revenue and profit of each of its joint ventures 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 & profits

Revenue

Cost of sales

Selling & distribution costs

Administrative expenses

Income tax expense

Profit after tax

The Group’s significant investments in joint ventures are listed on page 183.

16. Inventories

Raw materials

Work in progress

Finished goods

£m

12.0

14.0

8.4

(6.1)

(1.2)

27.1

0.3

10.0

(6.0)

2.3

33.7

2014
£m

2013
£m

12.7

33.4

4.3

(15.1)

(1.6)

33.7

56.2

(37.5)

(3.8)

(1.8)

(3.1)

10.0

11.8

19.9

3.3

(6.2)

(1.7)

27.1

36.8

(22.9)

(2.6)

(1.5)

(1.4)

8.4

2014
£m

171.6

120.9

258.8

551.3

2013
£m

150.8

112.8

221.4

485.0

In 2014 the cost of inventories recognised as an expense within cost of sales amounted to £1,632.2m (2013: £1,557.2m). In 2014 the
write-down of inventories to net realisable value amounted to £13.8m (2013: £9.0m), which included £5.3m in relation to the Group-wide
efficiency review, as disclosed in note 5. Write-downs in both years relate to on-going assessments of inventory obsolescence, excess
inventory holding and inventory resale values across all of the Group’s businesses.

145

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014
Notes to the Group Financial Statements continued

17. Trade & other receivables
Other receivables presented as non-current on the face of the Consolidated Balance Sheet of £22.3m (2013: £nil) are in respect
of insurance contracts relating to asbestos-related claims made in the US. Further detail is presented in note 22.

Current trade & other receivables are analysed in the following table.

Trade receivables

Allowance of doubtful debts

Other debtors

Sales tax receivable

Accrued income

Prepayments

2014
£m

530.9

(17.9)

2013
£m

437.9

(15.4)

513.0

422.5

47.9

12.9

24.1

27.1

22.8

11.4

21.8

18.6

625.0

497.1

The average credit period on sales of goods is 77 days (2013: 63 days). Other debtors includes £11.5m (2013: £0.3m) in respect of
amounts due from joint ventures, and £5.9m (2013:nil) in respect of insurance contracts relating to asbestos-related claims in the US
(note 22).

Analysis of trade receivables

Neither impaired nor past due

Past due but not impaired

Impaired

Ageing of past due but not impaired trade receivables

Up to 3 months

Between 3 & 6 months

More than 6 months

Movement in the allowance for doubtful debts

Balance at the beginning of the period

Impairment losses recognised on receivables

Amounts written off as uncollectable

Amounts recovered during the period

Impairment losses reversed

Exchange adjustment

Balance at the end of the period

2014
£m

346.9

166.1

17.9

530.9

2013
£m

286.6

135.9

15.4

437.9

2014
£m

2013
£m

114.6

100.8

24.5

27.0

21.1

14.0

166.1

135.9

2014
£m

(15.4)

(6.0)

1.4

0.3

1.8

–

2013
£m

(12.6)

(7.1)

1.5

0.3

1.6

0.9

(17.9)

(15.4)

Impairment losses recognised in 2014 include £4.8m as a result of actions taken following the Group-wide efficiency review, as disclosed
in note 5.

Ageing of impaired trade receivables

Up to 3 months

Between 3 & 6 months

More than 6 months

146

2014
£m

1.9

1.5

14.5

17.9

2013
£m

3.2

0.8

11.4

15.4

The Weir Group PLC Annual Report and Financial Statements 201418. 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)

Contract costs incurred plus recognised profits less recognised losses to date

Less: progress billings

2014
£m

31.3

(13.8)

17.5

99.4

(81.9)

17.5

2013
£m

28.3

(12.1)

16.2

94.4

(78.2)

16.2

The amount of retentions held by customers for contract work amounted to £nil (2013: £nil) and the amount of advances received from
customers for contract work amounted to £2.4m (2013: £4.9m).

19. Cash & short-term deposits

Cash at bank & in hand

Short-term deposits

For the purposes of the Consolidated Cash Flow Statement, cash & cash equivalents comprise the following

Cash & short-term deposits

Bank overdrafts & short-term borrowings (note 20)

2014
£m

160.4

18.3

178.7

(12.1)

166.6

2013
£m

70.9

8.2

79.1

(10.5)

68.6

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.

20. Interest-bearing loans & borrowings

Current

Bank overdrafts

Short-term borrowings

Fixed rate notes

Bank loans

Obligations under finance leases (note 27)

Non-current

Bank loans

Fixed rate notes

Obligations under finance leases (note 27)

2014
£m

2013
£m

10.7

1.4

12.1

70.6

83.3

0.1

166.1

135.2

737.9

0.2

8.1

2.4

10.5

–

15.8

0.2

26.5

40.3

759.0

0.3

873.3

799.6

147

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014

Notes to the Group Financial Statements continued

20. Interest-bearing loans & borrowings (continued)

Bank loans

Revolving credit facility

United States Dollar variable rate loans

Other

Uncommitted facility loan

United States Dollar buyer credit facility

South African Rand loan facility

Less: current instalments due on bank loans

Uncommitted facility loan

United States Dollar buyer credit facility

Non-current bank loans

Fixed rate notes

Private placement

Sterling fixed rate notes

United States Dollar fixed rate notes

Sterling fixed rate notes

United States Dollar fixed rate notes

Weighted average
interest rate

Maturity

Interest basis

2014
%

2013
%

2014
£m

2013
£m

2019 US$ LIBOR

2019

£ LIBOR

2015

£ LIBOR

2015 US$ LIBOR

2016

ZAR JIBAR

0.51

0.85

0.89

2.11

7.03

0.97

–

0.82

2.24

–

2015

£ LIBOR

2015 US$ LIBOR

42.8

91.0

83.2

0.1

1.4

218.5

(83.2)

(0.1)

135.2

39.9

–

15.8

0.4

–

56.1

(15.8)

–

40.3

Weighted average
interest rate

Maturity

Interest basis

2014
%

2013
%

2014
£m

2013
£m

2015

2018

2019

2022

2023

FIXED

4.58

4.20

5.36

5.03

3.69

4.27

4.34

4.58

4.20

5.36

5.03

3.69

4.27

4.34

12.0

58.6

43.0

45.6

136.4

383.0

129.9

808.5

(12.0)

(58.6)

737.9

12.0

54.8

43.0

42.6

127.5

357.8

121.3

759.0

–

759.0

Less: current instalments due on fixed rate notes

Sterling fixed rate notes

United States Dollar fixed rate notes

Non-current fixed rate notes

2015

FIXED

US$ LIBOR is the United States Dollar London Inter Bank Offer Rate and £ LIBOR is the Great British Pound London Inter Bank Offer
Rate. The weighted average interest rates include an applicable margin over and above the interest basis.

The disclosures above represent the interest profile and currency profile of financial liabilities before the impact of derivative financial
instruments.

In September 2014, the Group amended the US$800m multi-currency revolving credit facility, which was previously refinanced in
July 2013 and due to mature in July 2018. The amendment extended the maturity date to July 2019, with the option of two one-year
extensions. At 2 January 2015, US$209.8m was drawn under the revolving credit facility. Total unamortised issue costs at 2 January
2015 were £4.6m (2013: £4.9m).

On 12 January 2015, the Group repaid US$90m US Dollar fixed rate notes and £12.0m Sterling fixed rate notes as these fell due. These
were refinanced using existing facilities including the US$800m multi-currency revolving credit facility and various uncommitted Sterling
borrowing facilities in place.

148

The Weir Group PLC Annual Report and Financial Statements 201421. Trade & other payables

Current

Trade payables

Other creditors

Other taxes & social security costs

Accruals

Contingent consideration

Deferred income

Non-current

Contingent consideration

22. Provisions

At 3 January 2014

Additions

Acquisitions

Utilised

Unutilised

Exchange adjustment

At 2 January 2015

Current 2014

Non-current 2014

Current 2013

Non-current 2013

2014
£m

2013
£m

305.3

272.9

24.5

18.3

18.8

12.9

159.3

100.7

9.0

65.0

5.3

66.2

581.4

476.8

25.6

22.4

Other
£m

4.3

1.9

0.7

(1.8)

(1.2)

(0.2)

3.7

3.1

0.6

3.7

3.5

0.8

4.3

Total
£m

54.6

79.0

10.9

(26.9)

(5.2)

0.1

112.5

65.1

47.4

112.5

28.9

25.7

54.6

Warranties
& onerous
sales
contracts
£m

Employee
related
£m

Exceptional
rationalisation
£m

27.8

16.4

8.7

(15.2)

(3.1)

1.0

35.6

30.8

4.8

35.6

21.7

6.1

27.8

22.5

30.6

1.5

(1.7)

(0.9)

(0.4)

51.6

10.9

40.7

51.6

3.7

18.8

22.5

–

30.1

–

(8.2)

–

(0.3)

21.6

20.3

1.3

21.6

–

Warranties and onerous sales contracts
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.

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 exceed 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 majority of these costs will be incurred within one year of the balance sheet date.

Employee related
Employee related provisions arise from legal obligations, some of which are for asbestos-related claims.

Asbestos-related claims
Certain of the Group’s US-based subsidiaries are co-defendants in lawsuits pending in the United States in which plaintiffs are claiming
damages arising from alleged exposure to products previously manufactured which contained asbestos. The Group has comprehensive
insurance cover for these cases with all claims directly managed by the Group’s insurers who also meet all associated defence costs.
The insurers and their legal advisers agree and execute the defence strategy between them and there are no related cash flows to or
from the Group. We expect this to continue for the foreseeable future as long as the litigation arises.

149

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

22. Provisions (continued)
Employee related (continued)
Asbestos-related claims (continued)
At the end of 2014, there are 1,503 asbestos-related claims outstanding in the US (2013: 1,129). In light of the recent increase in claims, a
review was completed to assess the adequacy of the Group’s insurance policies to meet future settlement and defence costs. As a result
of this review we have estimated settlement and defence costs for existing and projected claims received in the next five years and
recorded a provision of £28m with an equivalent receivable for insurance proceeds (note 17).

This provision represents the Directors best estimate of the future liability at this time although given the lack of consistent claims and
settlement history, these estimates and the period over which they are assessed will continue to be refined.

Due to the inherent uncertainty associated with estimating future costs in respect of asbestos-related diseases, there can be no
guarantee that the assumptions used to estimate the provision will result in an accurate prediction of the actual costs that my be incurred.
However, we do not expect there to be a net financial exposure to the Group given the comprehensive insurance cover in place.

In the UK, there are 26 (2013: 26) outstanding asbestos-related claims which are not the subject of insurance cover. The Group provides
for both based on management’s best estimate of the likely costs given past experience of the volume and cost of similar claims brought
against the Group. It is expected that these costs will be incurred in the period up to 2025.

Exceptional rationalisation
As part of the Group-wide efficiency review announced in November 2014 the Group has provided £30.1m, of which £8.2m was utilised
in the year. The provision is based on expected costs for the closure of small manufacturing facilities, consolidation of service centres,
workforce reductions and the exit from certain lower margin activities. The majority of the provision will be utilised in the next year,
with the remainder utilised within the next 24 months.

Other
Other provisions relate to an environmental clean-up programme in the United States for a company acquired in 1992, the discontinued
operations and indemnity provision, and various other legal claims and exposures across the Group. 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 discontinued operations warranty and indemnity provision was reduced in the year (note 8) leaving a closing
balance of £0.3m (2013: £1.3m).

23. Deferred tax

Deferred income tax assets

Post-employment benefits

Decelerated depreciation for tax purposes

Intangible assets

Untaxed reserves

Offset against liabilities

Deferred income tax assets

Deferred income tax liabilities

Accelerated depreciation for tax purposes

Overseas tax on unremitted earnings

Intangible assets

Other temporary differences

Offset against assets

Deferred income tax liabilities

Net deferred income tax liability

150

2014
£m

2013
£m

21.4

10.2

5.4

60.8

(75.0)

22.8

15.7

13.8

–

47.0

(59.3)

17.2

(48.0)

(24.1)

(49.4)

(24.3)

(165.4)

(148.0)

–

75.0

(3.1)

59.3

(162.5)

(165.5)

(139.7)

(148.3)

The Weir Group PLC Annual Report and Financial Statements 2014The movement in deferred income tax assets and liabilities during the period was as follows.

Post
employment
benefits
£m

Accelerated
depreciation
for tax
purposes
£m

Overseas
tax on
unremitted
earnings
£m

Intangible
assets
£m

Untaxed
reserves
& other
temporary
differences
£m

At 28 December 2012

Acquisitions

(Charged) credited to the income statement (note 7)

Credited (charged) to equity

Exchange adjustment

At 3 January 2014

Prior year adjustments

Acquisitions

Credited (charged) to the income statement (note 7)

Credited to equity

Exchange adjustment

At 2 January 2015

23.0

–

(1.2)

(6.1)

–

(28.6)

(24.1)

(154.3)

(0.1)

(7.9)

–

1.1

–

(2.0)

–

1.8

(5.8)

9.7

–

2.5

15.7

(35.5)

(24.3)

(147.9)

–

0.2

5.1

0.4

21.4

0.2

–

(1.6)

–

(0.9)

(37.8)

–

(0.2)

–

0.4

–

(11.3)

8.2

–

(9.0)

Total
£m

(132.1)

(5.7)

(7.4)

(5.3)

2.2

(148.3)

–

(1.0)

10.5

6.0

(6.9)

51.9

0.2

(6.0)

0.8

(3.2)

43.7

(0.2)

10.3

3.9

0.9

2.2

(24.1)

(160.0)

60.8

(139.7)

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 occurs.

Deferred tax asset balances for unused tax losses of £5.8m (2013: £4.9m) 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 £5.8m (2013: £5.8m) 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
A deferred tax liability of £24.1m (2013: £24.3m) has been recognised in respect of taxes on the unremitted earnings of the South American
and Canadian subsidiaries. As at 2 January 2015, 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 or joint ventures which would result in a reversal
of deferred tax. The temporary differences associated with investments in subsidiaries and joint ventures, for which a deferred tax liability
has not been recognised, aggregate to £1,607.0m (2013: £1,513.2m).

There are no income tax consequences attaching to the payment of dividends by the Company to its shareholders.

24. Pensions & other post-employment benefit plans
The Group has four main defined benefit pension plans in the UK and North America. All defined benefit plans are closed to new
members. The most significant of the defined benefit plans are the two funded UK plans.

UK Plans
The Group has two funded defined benefit plans (the Main Plan and the Executive Plan) and an unfunded retirement benefit plan for
retired executive directors. The Group operates a defined contribution plan for new hires. Contributions to the defined contribution
arrangements are in addition to those set out below and are charged directly to the income statement.

For the defined benefit plans, benefits are related to service and final salary. Contributory salary in respect of the Main Plan is subject
to capped increases, with the cap being in line with RPI inflation up to a maximum of 5% per annum. Following a consultation process
which ended in August 2013, the Main Plan will close to future accrual of benefits effective from 30 June 2015 and an exceptional
curtailment gain of £2.7m was recognised in the previous period.

The weighted average duration of the expected benefit payments from the Main Plan is around 16 years and from the Executive Plan
is around 12 years.

The current funding target for the UK plans is to maintain assets equal to the value of the accrued benefits based on projected salaries
where relevant (subject to the cap above for the Main Plan). The Main Plan holds insurance policies in respect of a significant proportion
of deferred and retired pensioners.

The regulatory framework in the UK requires the Trustees and Group to agree upon the assumptions underlying the funding target,
and then to agree upon the necessary contributions required to recover any deficit at the valuation date. There is a risk to the Group
that adverse experience could lead to a requirement for the Group to make considerable contributions to recover any deficit. This risk
is significantly reduced for the Main Plan through the insurance policies held by the Plan.

151

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

24. Pensions & other post-employment benefit plans (continued)
North American Plans
The Group also sponsors two funded defined benefit pension plans in the United States and Canada and certain unfunded post-employment
healthcare benefits for senior employees in the United States.

These plans combined make up 4% of the Group’s pension and other post-employment benefit plan commitments and 2% of the Group’s
total associated assets. The weighted average duration of these plans is around 12 years.

Assumptions
The significant actuarial assumptions used for accounting purposes reflect prevailing market conditions in each of the relevant countries
in which the Group operates and are as follows.

Significant actuarial assumptions

Discount rate (% pa)

Retail Prices inflation assumption (% pa)

Post-retirement mortality (life expectancies in years)

Current pensioners at 65 – male

Current pensioners at 65 – female

Future pensioners at 65 – male

Future pensioners at 65 – female

Other related actuarial assumptions

Rate of increases for pensions in payment (% pa)

Pre 6 April 2006 service

Post 5 April 2006 service

Consumer Prices inflation assumption (% pa)

Rate of increase in healthcare costs

UK
pensions

North American
pensions

North American
post-retirement
healthcare

2014

2013

2014

2013

2014

2013

3.5

3.0

22.1

24.6

23.9

26.5

2.9

2.0

n/a

4.4

3.4

22.0

24.5

23.8

26.5

3.3

2.2

2.4

n/a

3.9

n/a

21.7

23.9

23.3

25.5

n/a

1.9

n/a

4.7

n/a

20.0

21.9

21.5

22.7

n/a

2.0

n/a

3.9

n/a

21.7

23.9

23.4

25.6

n/a

2.0

4.7

n/a

19.6

21.5

21.1

22.4

n/a

2.3

* 7.7% per annum decreasing to 4.5% per annum and remaining static at that level from 2028 onwards.

The assumptions used to determine end-of-year benefit obligations are also used to calculate the following period’s cost. For North
America, weighted average assumptions are shown where applicable.

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 a member retiring in 2035
(in 20 years time).

152

The Weir Group PLC Annual Report and Financial Statements 2014The assets and liabilities of the plans are as follows.

Plan assets at fair value

Equities (quoted)

Diversified Growth Funds (primarily quoted)

Corporate bonds (quoted)

Government bonds (quoted)

Insurance policies (unquoted)

Cash (quoted)

Fair value of plan assets

Present value of funded obligations

Net funded obligations

Present value of unfunded obligations

Net liability

Plan in surplus

Plan in deficit

Total

2014
£m

2013
£m

165.9

156.3

42.3

77.9

86.0

357.7

12.1

741.9

38.4

63.6

67.9

346.2

8.6

681.0

(827.0)

(744.0)

(85.1)

(9.2)

(94.3)

4.1

(63.0)

(7.4)

(70.4)

1.4

(98.4)

(71.8)

In 2013 the Plan in surplus was presented net against the Plan in deficit based on the size of the balance and the overall impact on the
Group Consolidated Balance Sheet. Given the increase in the Plan surplus over 2014, separate disclosure has now been made in both
the Consolidated Balance Sheet and the Segmental Information (note 3).

The government bonds held are primarily index-linked, with around only 7% of the total government bonds being fixed interest. The pension
plans have not directly invested in any of the Group’s own financial instruments, or in properties or other assets used by the Group.

In the UK, where the majority of the Group’s pension assets are held, the investment strategy is to hold equities and other return seeking
assets such as diversified growth funds and a mixture of bonds to meet the assessed value of the benefits promised for the current
active member employees and some deferred pensioners. For the remaining deferred pensioners and the bulk of pensioners currently
receiving their benefit, the liabilities are backed by insurance policies and suitable bonds.

The change in net liabilities recognised in the balance sheet is comprised as follows.

Opening net liabilities

Expense charged to profit and loss

Amount recognised in statement of comprehensive income

Employer contributions

Currency adjustment

Closing net liabilities

2014
£m

(70.4)

(4.9)

(31.1)

13.0

(0.9)

2013
£m

(90.4)

(3.4)

8.0

15.4

–

(94.3)

(70.4)

153

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

24. Pensions & other post-employment benefit plans (continued)
Assumptions (continued)
The amounts recognised in the Consolidated Income Statement and in the Consolidated Statement of Comprehensive Income for the
period are analysed as follows.

Recognised in the Consolidated Income Statement

Current service cost

Administrative expenses

Past service settlement credit

Past service curtailment gain

Included in operating profit

Interest on net pension liability

Total expense charged to profit & loss

Recognised in the Consolidated Statement of Comprehensive Income

Actual return on plan assets

Less: interest on plan assets

Other actuarial losses due to

Changes in financial assumptions

Changes in demographic assumptions

Experience on benefit obligations

Actuarial (losses) gains recognised in the Consolidated Statement of Comprehensive Income

2014
£m

(2.1)

(0.7)

0.5

0.2

(2.1)

(2.8)

(4.9)

2013
£m

(2.2)

(0.4)

–

2.7

0.1

(3.5)

(3.4)

84.6

(29.6)

55.0

49.5

(27.5)

22.0

(79.1)

(14.0)

(5.8)

(1.2)

(31.1)

–

8.0

Current service cost and administration expenses are recognised in operating costs and net interest on net pension liability is recognised
in other finance costs. The curtailment gain as a result of the Main Plan closing to future accrual with effect from 30 June 2015 was
recognised as an exceptional item in 2013. Deficit reduction measures in two small North American plans resulted in a settlement
credit of £0.5m and a curtailment gain of £0.2m in 2014.

Pension contributions are determined with the advice of independent qualified actuaries on the basis of regular valuations using the projected
unit method. The Group made special contributions of £10.6m in 2014 (2013: £12.1m) in addition to the Group’s regular contributions.

The most recent actuarial funding valuation of the Main Plan was as at 31 December 2011 when the funding shortfall was £81.4m.
The deficit recovery plan agreed with the Trustees at that time was for the Company to make recovery contributions of £8.0m per annum
up to 2020, subject to reassessment at future triennial valuations. The next funding valuation of the Main Plan, as at 31 December 2014,
is currently on-going.

The Executive Plan actuarial valuation at 31 December 2013 included a funding shortfall of £10.6m with agreed recovery contributions
of £2.4m per annum to 31 December 2017, also subject to reassessment at future triennial valuations.

The Group has taken legal advice regarding its UK arrangements to confirm the accounting treatment under IFRIC14 with regard to
recognition of a current surplus and also recognition of a minimum funding requirement. This confirmed that there is no requirement to
adjust the balance sheet and that recognition of a current surplus is appropriate on the basis that the Group has an unconditional right
to a refund of a current (or projected future) surplus at some point in the future. For the same reason, there is no requirement for the
Group to adjust the balance sheet to recognise the future agreed deficit recovery contributions.

154

The Weir Group PLC Annual Report and Financial Statements 2014Sensitivity Analysis
Changes in key assumptions can have a significant effect on the reported retirement benefit obligation and the income statement
expense for 2015. The effects of changes in those assumptions are set out in the table below.

Discount rate

Effect on defined benefit obligation of a 1.0% change

Effect on net liability of a 1.0% change

RPI inflation (and associated assumptions)

Effect on defined benefit obligation of a 1.0% change

Effect on net liability of a 1.0% change

Life expectancy

Effect on defined benefit obligation of a 1 year change

Effect on net liability of a 1 year change

Increase
2014
£m

Decrease
2014
£m

Increase
2013
£m

Decrease
2013
£m

121.4

87.0

(147.0)

(108.6)

106.0

73.4

(128.1)

(91.7)

(77.4)

(54.4)

(22.9)

(12.2)

72.8

49.9

22.9

12.2

(71.4)

(53.1)

(20.5)

(10.1)

71.2

47.6

20.5

10.1

The impact on the net liability is significantly reduced as a result of the insurance policies held. In the absence of such policies, the impact
on the net liability would be much closer to the significantly higher impact on the defined benefit obligation shown in the table.

These sensitivities have been calculated to show the movement in the defined benefit obligation and net liability in isolation and assume
no other changes in market conditions at the accounting date. In practice, for example, a change in discount rate is unlikely to occur
without any movement in the value of the invested (non-insurance policy) assets held by the plans.

Changes in the present value of the defined benefit obligations are analysed as follows.

Opening defined benefit obligations

Current service cost

Past service curtailment gain

Interest on benefit obligations

Benefits paid

Actuarial losses due to

Changes in financial assumptions

Changes in demographic assumptions

Experience on benefit obligations

Gains on curtailments and settlements

Exchange rate adjustment

Closing defined benefit obligations

2014
£m

2013
£m

(751.4)

(739.9)

(2.1)

0.2

(32.4)

34.6

(2.2)

2.7

(31.0)

32.6

(79.1)

(14.0)

(5.8)

(1.2)

2.9

(1.9)

–

0.4

(836.2)

(751.4)

The past service curtailment gain of £2.7m in the prior period arose as a result of the decision taken, following consultation, to close the
Main Plan to the future accrual of benefits with effect from 30 June 2015 onwards. This decision was announced to members in August
2013, at which point the curtailment gain was recognised under IAS 19 (R).

155

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

24. Pensions & other post-employment benefit plans (continued)
Sensitivity Analysis (continued)
Changes in the fair value of plan assets are analysed as follows.

Opening plan assets

Interest on plan assets

Employer contributions

Administrative expenses

Benefits paid

Actuarial return on plan assets less interest on plan assets

Assets distributed on settlements

Exchange rate adjustment

Closing plan assets

25. Share capital & reserves

Issued & fully paid share capital

At the beginning of the period

Issued during the period in respect of LTIP awards

At the end of the period

Treasury shares

At the beginning of the period

Issued during the period in respect of LTIP awards

At the end of the period

2014
£m

2013
£m

681.0

649.5

29.6

13.0

(0.7)

(34.6)

55.0

(2.4)

1.0

27.5

15.4

(0.4)

(32.6)

22.0

–

(0.4)

741.9

681.0

2014
Number
Million

2013
Number
Million

213.9

213.6

0.2

0.3

214.1

213.9

0.7

–

0.7

1.1

(0.4)

0.7

The Company has one class of ordinary share with a par value of 12.5p which carries no rights to fixed income.

As at 2 January 2015, 68,590 shares (2013: 90,827 shares) were held by the Kleinwort EBT with a market value of £1.3m (2013: £1.9m).

As at 2 January 2015, 220,952 shares (2013: 168,764) were held by the Appleby EBT for the strategic and matching elements of the
deferred bonus and 83,850 shares (2013: 82,667) for the deferred element. These shares have a market value of £5.7m (2013: £5.3m).

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 and the Group’s hedge of its net investment in 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. Net gains (losses) transferred from equity during the period are included in the following line items in the Consolidated Income
Statement and Consolidated Balance Sheet.

Revenue

Cost of sales

Interest

Inventory

156

2014
£m

–

(0.5)

–

(0.4)

(0.9)

2013
£m

0.3

(0.4)

0.4

(0.5)

(0.2)

The Weir Group PLC Annual Report and Financial Statements 201426. Additional cash flow information

Continuing operations

Net cash generated from operations

Operating profit

Exceptional items

Share of results of joint ventures

Depreciation of property, plant & equipment

Amortisation of intangible assets

Impairment of intangible assets

Gains on disposal of property, plant & equipment

Funding of pension & post-retirement costs

Employee share schemes

Net foreign exchange including derivative financial instruments

Decrease in provisions

Cash generated from operations before working capital cash flows

(Increase) decrease in inventories

(Increase) in trade & other receivables and construction contracts

Increase (decrease) in trade & other payables and construction contracts

Cash generated from operations

Additional pension contributions paid

Exceptional cash items

Income tax paid

2014
£m

2013
£m

192.5

52.4

(10.0)

61.1

44.9

160.0

(1.4)

(0.4)

4.4

1.4

(1.9)

503.0

(45.5)

(86.4)

50.2

421.3

(10.6)

(94.1)

490.3

(70.5)

(8.4)

59.1

46.7

–

(1.3)

(0.5)

8.7

4.1

(13.4)

514.8

1.6

(37.1)

(5.4)

473.9

(12.1)

–

(71.9)

Net cash generated from operating activities

306.0

389.9

Exceptional items are detailed in note 5.

The employee-related provision and associated insurance asset in relation to US asbestos-related claims disclosed in note 22 will not
result in any cash flows either to or from the Group and therefore they have been excluded from the table above.

The following tables summarise the cash flows arising on acquisitions.

Acquisitions of subsidiaries

Current period acquisitions (see below)

Prior period acquisitions contingent consideration paid

Acquisition of subsidiaries – cash paid

Cash & cash equivalents acquired

Acquisition of subsidiaries – current period acquisitions

Settlement of external debt of subsidiary on acquisition

Total cash outflow on acquisition of subsidiaries – current year (note 13)

Prior period acquisitions contingent consideration paid

Total cash outflow relating to acquisitions

Disposals of subsidiaries

Prior period disposals

2014
£m

2013
£m

(132.7)

(200.9)

(5.0)

(0.3)

(137.7)

(201.2)

(140.7)

(207.4)

8.0

6.5

(132.7)

(200.9)

–

(1.3)

(132.7)

(202.2)

(5.0)

(0.3)

(137.7)

(202.5)

–

(0.3)

The settlement of the external debt of Weir Mathena on acquisition in 2013 was classified as a financing cash flow in accordance with
IAS 7.

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Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

26. Additional cash flow information (continued)

Reconciliation of net increase (decrease) in cash & cash equivalents to movement in net debt

Net increase (decrease) in cash & cash equivalents from continuing operations

Net (increase) decrease in debt

Change in net debt resulting from cash flows

Lease inceptions

Loans acquired

Foreign currency translation differences

Change in net debt during the period

Net debt at the beginning of the period

Net debt at the end of the 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)

2014
£m

2013
£m

97.2

(307.3)

(166.5)

260.7

(69.3)

(0.4)

–

(44.0)

(46.6)

(0.1)

(1.5)

(9.9)

(113.7)

(58.1)

(747.0)

(688.9)

(860.7)

(747.0)

178.7

(166.1)

79.1

(26.5)

(873.3)

(799.6)

(860.7)

(747.0)

27. Commitments & legal claims
Operating lease commitments
The Group has entered into commercial leases for land and buildings, motor vehicles and plant & equipment. Land and building leases
have an average term of between two and ten years, motor vehicle leases have an average term of between two and four years and plant
& equipment leases have an average term of between three and five 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 shown in the table below.

Less than one year

After one year but no more than five years

More than five years

2014
£m

32.0

70.6

39.1

2013
£m

24.1

57.1

19.0

141.7

100.2

Finance lease commitments
The Group has finance leases for buildings and plant & equipment. Future minimum lease payments under finance leases together with
the present value of the net minimum lease payments are shown in the table below.

Less than one year

After one year but not more than five years

Total minimum lease payments

Less amounts representing finance charges

Present value of minimum lease payments

Minimum
payments
2014
£m

Present
value of
payments
2014
£m

Minimum
payments
2013
£m

Present value
of payments
2013
£m

0.1

0.2

0.3

–

0.3

0.1

0.2

0.3

0.2

0.4

0.6

(0.1)

0.5

0.2

0.3

0.5

The weighted average outstanding lease term is 3.64 years (2013: 4.04 years). For the 52 weeks ended 2 January 2015, the weighted
average effective borrowing rate was 4.60% (2013: 5.33%).

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

Outstanding capital commitments contracted but not provided for – intangible assets

The Group’s share of the capital commitments of its joint ventures amounted to £0.4m (2013: £0.5m).

158

2014
£m

19.6

3.5

2013
£m

11.0

–

The Weir Group PLC Annual Report and Financial Statements 2014Legal 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.

A claim has been made by Philippines Gold Processing & Refining Corporation against Weir Services Australia Pty Limited (WSA),
a subsidiary of the Company, in arbitration proceedings in respect of two contracts relating to the refurbishment and installation of a mill
undertaken by WSA in 2007-2008 and 2008-2009, respectively. The amount claimed, which totals approximately £58m plus interest,
seeks damages for the cost of repair and subsequent replacement of the mill together with business interruption loss at the processing
plant. The original value of the contracts was around £1m. WSA is contesting the claim on multiple grounds. The claim is being vigorously
defended although the outcome remains uncertain. The arbitration process is expected to conclude by the end of 2015.

The Directors are of the view that the outcome of legal proceedings in 2014 in relation to the UN Oil for Food programme are such that
a contingent liability no longer exists in relation to this matter.

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.

28. Equity settled share-based payments
LTIP
There are three types of award which may be made under the LTIP to senior executives: performance shares, matching shares and
investment shares. Details of each award are outlined in the Remuneration report on pages 91 to 108.

The following table illustrates the number and weighted average share prices (WASP) of shares awarded under the LTIP.

Outstanding at the beginning of the period

Awarded during the period

Exercised during the period

Forfeited during the period

Outstanding at the end of the period

2014
Number
Million

1.5

0.6

(0.3)

2014
WASP

£15.44

£26.20

£16.13

£16.78

1.5

£23.43

2013
Number
Million

1.7

0.4

2013
WASP

£14.57

£24.11

(0.6)

£7.57

–

1.5

–

£15.44

An amount of £3.1m (2013: £7.4m) has been charged to the Consolidated 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 £1.5m (2013: £2.4m) in respect of parent
company employees and £1.6m (2013: £5.0m) in respect of employees of subsidiaries.

Certain subsidiary companies made a cash contribution to the parent company of £4.9m (2013: £3.2m) in the period in respect of their
employees’ LTIP awards.

The remaining contractual lives of the outstanding LTIP awards at the end of the period are as follows.

Year of award

2011

2012

2013

2014

2014
Number
Million

2014
Remaining
contractual life

2013
Number
Million

2013
Remaining
contractual
life

–

0.5

0.4

0.6

–

0.6 3 months

3 months

0.5 15 months

15 months

27 months

0.4 27 months

–

The fair value of the conditional awards under the LTIP have been estimated using the Monte Carlo simulation model. The following table
gives the assumptions made during the 52 weeks ended 2 January 2015 and the 53 weeks ended 3 January 2014 in the calculation of the
fair value of awards made in those years.

Weighted average expected volatility (%)

Weighted average expected life (years)

Weighted average risk free rate (%)

Weighted average share price (£)

Weighted average fair value (£)

2014

34.88

3.00

1.22

26.20

23.62

2013

39.91

3.00

0.37

24.11

20.24

The expected life of the awards 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 volatility 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.

159

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

28. Equity settled share-based payments (continued)
Deferred Bonus Plan
There are three types of award which were made under the Deferred Bonus Plan: shares purchased on the employee’s behalf as part
of the annual bonus, matching shares and strategic shares for senior executives.

The following table illustrates the number of shares awarded under the Deferred Bonus Plan.

Outstanding at the beginning of the period

Awarded during the period

Outstanding at the end of the period

2014
Number
Million

2013
Number
Million

0.2

–

0.2

0.1

0.2

An amount of £1.3m (2013: £1.3m) has been charged to the Consolidated Income Statement in respect of the number of awards which
are expected to be made at the end of the vesting period.

29. Related party disclosure
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.

Related party

Joint ventures

Group pension plans

Sales to
related
parties –
goods
£m

Sales to
related
parties –
services
£m

Purchases
from related
parties –
goods
£m

Purchases
from related
parties –
services
£m

Amounts
owed to
related
parties
£m

2014

2013

2014

2013

26.7

5.6

–

0.5

–

8.2

2.7

–

0.5

1.7

–

1.8

2.3

Contributions to the Group pension plans are disclosed in note 24.

Terms & conditions of transactions with related parties
Sales to and from related parties are made at normal market prices. Outstanding balances at the period end are unsecured and settlement
occurs in cash. There have been no guarantees provided or received for any related party balances. For 2014, the Group has not raised
any provision for doubtful debts relating to amounts owed by related parties as the payment history has been excellent (2013: £nil). This
assessment is undertaken each financial year through examining the financial position of the related party and the market in which the
related party operates.

Compensation of key management personnel

Short-term employee benefits

Share-based payments

Post-employment benefits

Emoluments paid to the Directors of The Weir Group plc

Remuneration

Gains made on the exercise of Long Term Incentive Plan awards

2014
£m

6.3

4.0

0.2

10.5

2014
£m

2.9

1.9

4.8

2013
£m

4.6

3.2

–

7.8

2013
£m

2.0

2.8

4.8

Key management comprises the Board and the Group Executive. Further details of the Directors’ remuneration are disclosed in the
Directors’ Remuneration Report.

160

The Weir Group PLC Annual Report and Financial Statements 201430. Financial assets & liabilities
Financial risk management objectives & policies
The principal financial risks to which the Group is exposed are those relating to foreign currency, liquidity and credit risk. Foreign
currency transactional risk arises when operating subsidiaries enter into transactions denominated in currencies other than their
functional currencies. Translational risk arises on the translation of overseas earnings and investments into Sterling for consolidated
reporting purposes. Credit risk is the risk that a customer or counterparty fails to meet an obligation under a contract and liquidity risk
is the risk that the Group will be unable to meet its liabilities as they fall due. In addition, the Group is subject to a degree of interest rate
risk on its borrowings. The Group uses financial assets and liabilities, including derivatives, to hedge certain foreign exchange and interest
rate risks as set out below.

Foreign exchange risk policy
Foreign currency transactional and translational risk could result in volatility in reported consolidated earnings and net assets.

In respect of transactional foreign currency risk, the Group maintains a policy that all operating units eliminate exposures on material
committed transactions, usually by undertaking forward foreign currency contracts through the Group’s treasury function. In addition,
it is Group policy that those companies where a significant concentration of foreign exchange risk has been identified may also apply
hedge accounting in accordance with IAS 39. Therefore, some of the Group’s forward foreign currency contracts form part of an effective
cash flow hedge. Exchange rate fluctuations in respect of the forward foreign currency contracts which form part of a cash flow hedge
will have an impact on shareholders’ equity. Exchange rate fluctuations in respect of the other forward foreign currency contracts will
have an impact on profit or loss. It is Group policy not to engage in any speculative transaction of any kind.

In respect of translational risk, the Group has a policy to partially hedge United States Dollar (US$), Australian Dollar (AUD) and South
African Rand (ZAR) net assets exposure. This is achieved through designating an element of foreign currency borrowings, forward foreign
currency contracts and cross currency swaps as net investment hedges against the Group’s investments. The Group does not hedge the
translational exposure arising from profit and loss items.

Liquidity risk policy
Liquidity risk could impact negatively on the Group’s reputation, borrowing costs or ultimately its ability to continue as a going concern.
Liquidity risk is managed by monitoring forecast and actual cash flows and ensuring that sufficient committed facilities are in place to
meet possible downside scenarios. The Group’s objective is to maintain a balance between continuity of funding and flexibility through
the use of bank overdrafts, bank loans and fixed rate notes. Further details of the Group’s borrowing facilities are disclosed in note 20.

During the year, the Group obtained public credit ratings from Moody’s (Baa1) and Standard & Poor’s (BBB+) to expand the range
of financing options available.

Credit risk policy
Credit risk could have a negative impact on reported earnings and cash and consequently the liquidity of the Group.

The Group is exposed to credit risk to the extent of non-payment by either its customers or the counterparties of its financial instruments.
The Group’s credit risk is primarily attributable to its trade receivables with risk spread over a large number of countries and customers,
with 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 with external credit rating agencies before entering
into contracts with new customers and credit limits are set as appropriate and adhered to. As shown in note 17, the trade receivables
presented in the balance sheet are net of allowance for doubtful debts. 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. The Group’s exposure to the
credit risk of financial institutions is limited by the adherence to counterparty limits, and by only trading with counterparties that have an
investment grade credit rating or better at contract inception, based upon ratings provided by the major agencies. Exposures to those
counterparties are regularly reviewed and, when the market view of a counterparty’s credit quality changes, adjusted as considered
appropriate. Accordingly in normal market conditions, the probability of material loss due to non-performance by counterparties is
considered to be low.

Interest rate risk policy
The Group’s borrowings are in a combination of fixed and 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. Details of changes to the Group’s
loans and facilities has been included in note 20.

Net investment in foreign operations
As at 2 January 2015, US Dollar fixed rate notes of US$435.9m (2013: US$1,160.0m) and US Dollar variable rate loans of US$70.0m
(2013: US$70.0m), both included in interest-bearing loans and borrowings, cross currency swaps of US$89.4m and AUD151.0m (2013:
US$89.4m) and net forward foreign currency liability contracts of US$170.4m and ZAR345.0m (2013: US$170.4m) have been designated
as a hedge of the Group’s exposure to translational foreign exchange risk on its net investments in Weir SPM, Weir Warman, Weir
Seaboard, Weir Novatech, Weir Mathena, Weir Minerals Australia, Weir Multiflo, Weir Heavy Bay Foundry and Weir Warman Africa. Gains
or losses on the retranslation of the borrowings and contingent consideration and the fair value of the cross currency swaps and forward
foreign currency contracts are transferred to equity to offset any gains or losses on translation of the net investments in these subsidiaries.

161

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

30. Financial assets & liabilities (continued)
Carrying amounts & fair values
Set out below is a comparison by category of carrying amounts and fair values of the Group’s financial instruments that are reported
in the financial statements.

Fair Value measurement using

Financial assets

Derivative financial instruments recognised at fair value through profit or loss

Derivative financial instruments in designated hedge accounting relationships

Trade & other receivables excluding statutory assets & prepayments*

Cash & short-term deposits*

Financial liabilities

Derivative financial instruments recognised at fair value through profit or loss

Derivative financial instruments in designated hedge accounting relationships

Contingent consideration

Amortised cost

Fixed rate borrowings

Floating rate borrowings

Obligations under finance leases

Bank overdrafts & short-term borrowings*

Carrying
amount
2014
£m

Fair value
2014
£m

Level 1
Quoted
prices
in active
markets
£m

Level 2
Significant
observable
inputs
£m

Level 3
Significant
unobservable
inputs
£m

10.0

4.0

607.3

178.7

800.0

6.1

8.3

34.6

808.5

218.5

0.3

12.1

10.0

4.0

607.3

178.7

800.0

6.1

8.3

34.6

784.9

218.5

0.3

12.1

–

10.0

4.0

6.1

8.3

–

784.9

218.5

0.3

–

34.6

–

Trade & other payables excluding statutory liabilities & deferred income*

489.1

1,577.5

1,553.9

Financial assets

Derivative financial instruments recognised at fair value through profit or loss

Derivative financial instruments in designated hedge accounting relationships

Trade & other receivables excluding statutory assets & prepayments*

Cash & short-term deposits*

Financial liabilities

Derivative financial instruments recognised at fair value through profit or loss

Derivative financial instruments in designated hedge accounting relationships

Contingent consideration

Amortised cost

Fixed rate borrowings

Floating rate borrowings

Obligations under finance leases

Bank overdrafts & short-term borrowings*

Carrying
amount
2013
£m

Fair value
2013
£m

Fair Value measurement using

Level 1
Quoted
prices
in active
markets
£m

Level 2
Significant
observable
inputs
£m

Level 3
Significant
unobservable
inputs
£m

10.4

1.8

467.1

79.1

558.4

9.4

0.8

27.7

10.4

1.8

467.1

79.1

558.4

9.4

0.8

27.7

759.0

716.2

56.1

0.5

10.5

56.1

0.5

10.5

–

10.4

1.8

9.4

0.8

–

716.2

56.1

0.5

–

27.7

–

Trade & other payables excluding statutory liabilities & deferred income*

395.8

1,259.8

1,217.0

* The fair value of cash and short-term deposits, trade and other receivables and trade and other payables approximates their carrying amount due to the short-term maturities

of these instruments. As such disclosure of the fair value hierarchy for these items is not required.

162

The Weir Group PLC Annual Report and Financial Statements 2014
The Group enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade
credit ratings. The derivative financial instruments are valued using valuation techniques with market observable inputs including spot and
forward foreign exchange rates, interest rate curves, counterparty and own credit risk. The fair value of cross currency swaps is calculated
as the present value of the estimated future cash flows based on spot foreign exchange rates and counterparty and own credit risk. The
fair value of forward foreign currency contracts is calculated as the present value of the estimated future cash flows based on spot and
forward foreign exchange rates.

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2:

other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly
or indirectly;
techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

Level 3:

At 2 January 2015 and 3 January 2014 the Group has classified contingent consideration as level 3. A reconciliation of the movements
in the contingent consideration fair value has been included in note 13.

During the 52 weeks ended 2 January 2015 and the 53 weeks ended 3 January 2014, there were no transfers between level 1 and level 2
fair value measurements and no transfers into or out of level 3 fair value measurements.

The fair value of borrowings and obligations under finance leases is estimated by discounting future cash flows using rates currently
available for debt on similar terms, credit risk and remaining maturities. The basis for the calculation of the fair value of contingent
consideration is outlined in detail in note 13.

Derivative financial instruments
Set out in the table below is a summary of the types of derivative financial instruments included within each balance sheet category.

Included in non-current assets

Forward foreign currency contracts designated as cash flow hedges

Cross currency swaps designated as net investment hedges

Other forward foreign currency contracts

Included in current assets

Forward foreign currency contracts designated as cash flow hedges

Forward foreign currency contracts designated as net investment hedges

Other forward foreign currency contracts

Included in current liabilities

Forward foreign currency contracts designated as cash flow hedges

Forward foreign currency contracts designated as net investment hedges

Cross currency swaps designated as net investment hedges

Other forward foreign currency contracts

Included in non-current liabilities

Forward foreign currency contracts designated as cash flow hedges

Cross currency swaps designated as net investment hedges

Other forward foreign currency contracts

2014
£m

2013
£m

0.2

3.3

–

3.5

0.5

–

10.0

10.5

(2.3)

(2.4)

(0.7)

(5.9)

(11.3)

(0.2)

(2.7)

(0.2)

(3.1)

0.6

0.1

0.4

1.1

0.7

0.4

10.0

11.1

(0.1)

(0.2)

–

(9.3)

(9.6)

(0.2)

(0.3)

(0.1)

(0.6)

Net derivative financial (liabilities) assets

(0.4)

2.0

163

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014
Notes to the Group Financial Statements continued

30. Financial assets & liabilities (continued)
Liquidity & credit risk
The maximum exposure to credit risk at the balance sheet date is represented by the carrying value of each financial asset, including
derivative financial instruments. The liabilities which could impact liquidity risk are best represented by the carrying value and maturity
profile of each financial liability, including derivative financial instruments. The following tables include the undiscounted cash flows of
financial assets and liabilities based on the earliest date on which the Group can be required to receive or pay these financial assets or
liabilities and include both interest and principal cash flows. In respect of derivative financial instruments the net credit/liquidity risk
is best represented by the net inflows (outflows) shown below together with the Group’s headroom under the borrowing facilities as
disclosed in note 20.

52 weeks ended 2 January 2015

Trade & other receivables excluding statutory assets & prepayments

Cash & short-term deposits

Cash flows relating to non-derivative financial assets

Trade & other payables excluding statutory liabilities & deferred income

Obligations under finance leases

Bank overdrafts & short-term borrowings

Bank loans

Fixed rate notes

Cash flows relating to non-derivative financial liabilities

Less than
1 year
£m

585.0

178.7

763.7

(498.2)

(0.1)

(12.1)

(84.5)

(102.8)

(697.7)

1 to 2 years
£m

2 to 5 years
£m

More than
5 years
£m

4.0

–

4.0

(2.8)

(0.1)

–

13.1

–

13.1

(22.7)

(0.1)

–

(2.7)

(140.4)

7.1

–

7.1

–

Total
£m

609.2

178.7

787.9

(523.7)

(0.3)

(12.1)

(227.6)

(32.2)

(307.6)

(566.2)

(1,008.8)

(37.8)

(470.8)

(566.2)

(1,772.5)

Net cash flows relating to non-derivative financial assets (liabilities)

66.0

(33.8)

(457.7)

(559.1)

(984.6)

53 weeks ended 3 January 2014

Trade & other receivables excluding statutory assets & prepayments

Cash & short-term deposits

Cash flows relating to non-derivative financial assets

Trade & other payables excluding statutory liabilities & deferred income

Obligations under finance leases

Bank overdrafts & short-term borrowings

Bank loans

Fixed rate notes

Less than
1 year
£m

1 to 2 years
£m

2 to 5 years
£m

More than
5 years
£m

Total
£m

467.1

79.1

546.2

467.1

79.1

546.2

(401.1)

(0.2)

(10.5)

(16.7)

(33.1)

–

(4.4)

(0.1)

–

(1.0)

(97.0)

–

(0.3)

–

(42.8)

(27.7)

(433.2)

–

(0.6)

(10.5)

(60.5)

(171.7)

(678.0)

(979.8)

Cash flows relating to non-derivative financial liabilities

(461.6)

(102.5)

(214.8)

(705.7)

(1,484.6)

Net cash flows relating to non-derivative financial assets (liabilities)

84.6

(102.5)

(214.8)

(705.7)

(938.4)

–

Less than
1 year
£m

(20.1)

17.8

(2.3)

1 to 2 years
£m

2 to 5 years
£m

More than
5 years
£m

(7.1)

5.5

(1.6)

(131.3)

131.1

(0.2)

(615.7)

(18.1)

(5.7)

615.6

(0.1)

17.9

(0.2)

5.7

–

(635.8)

(25.2)

(137.0)

633.4

(2.4)

23.4

(1.8)

136.8

(0.2)

Total
£m

(158.5)

154.4

(4.1)

(639.5)

639.2

(0.3)

(798.0)

793.6

(4.4)

4.0

(0.4)

52 weeks ended 2 January 2015

Cross currency swaps – outflow

Cross currency swaps – inflow

Cross currency swaps – net outflow

Forward foreign currency contracts – outflow

Forward foreign currency contracts – inflow

Forward foreign currency contracts – net outflow

Derivative financial instruments – net outflow

Derivative financial instruments – net inflow

Derivative financial instruments – net outflow

Effect of discounting

Net derivative financial liabilities

164

The Weir Group PLC Annual Report and Financial Statements 2014

53 weeks ended 3 January 2014

Cross currency swaps – outflow

Cross currency swaps – inflow

Cross currency swaps – net inflow

Forward foreign currency contracts – outflow

Forward foreign currency contracts – inflow

Forward foreign currency contracts – net inflow

Derivative financial instruments – outflow

Derivative financial instruments – inflow

Derivative financial instruments – net inflow

Effect of discounting

Net derivative financial assets

Less than
1 year
£m

1 to 2 years
£m

2 to 5 years
£m

More than
5 years
£m

(2.8)

(14.5)

(48.4)

2.9

0.1

14.6

0.1

48.8

0.4

(642.1)

(18.4)

(16.7)

644.2

2.1

18.9

0.5

17.0

0.3

(644.9)

(32.9)

(65.1)

647.1

2.2

33.5

0.6

65.8

0.7

–

Total
£m

(65.7)

66.3

0.6

(677.2)

680.1

2.9

(742.9)

746.4

3.5

(1.5)

2.0

Interest rate risk & maturity profile
The following tables set out the carrying amount, by maturity, of the Group’s financial instruments that are exposed to interest rate risk
and the Group’s notional value of derivative financial instruments, by maturity, exposed to interest rate risk.

52 weeks ended 2 January 2015

Fixed rate debt

Fixed rate notes

Obligations under finance leases

Fixed rate derivatives

Notional cross currency swaps US Dollar leg

Notional cross currency swaps Australian Dollar leg

Notional cross currency swaps Sterling leg

Less than
1 year
£m

1 to 2 years
£m

2 to 5 years
£m

More than
5 years
£m

Total
£m

(70.6)

(0.1)

(70.7)

(12.7)

–

12.0

(0.7)

–

(225.0)

(512.9)

(808.5)

(0.1)

–

(0.3)

(225.1)

(512.9)

(808.8)

–

(45.5)

(79.7)

126.1

0.9

–

(58.2)

(79.7)

138.1

0.2

Net fixed rate financial instruments

(71.4)

(0.1)

(224.2)

(512.9)

(808.6)

Floating rate net debt

Cash & short-term deposits

Bank overdrafts & short-term borrowings

Bank loans

178.7

(12.1)

(83.3)

83.3

–

(1.4)

–

(133.8)

Net floating rate financial instruments

83.3

(1.4)

(133.8)

–

178.7

(12.1)

(218.5)

(51.9)

165

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

30. Financial assets & liabilities (continued)
Interest rate risk & maturity profile (continued)

53 weeks ended 3 January 2014

Fixed rate debt

Fixed rate notes

Obligations under finance leases

Fixed rate derivatives

Notional cross currency swaps US Dollar leg

Notional cross currency swaps Sterling leg

Less than
1 year
£m

1 to 2 years
£m

2 to 5 years
£m

More than
5 years
£m

Total
£m

–

(0.2)

–

(66.8)

(0.1)

(66.9)

(11.9)

12.0

0.1

(85.5)

(606.7)

(759.0)

(0.2)

–

(0.5)

(85.7)

(606.7)

(759.5)

(42.6)

43.0

0.4

–

(54.5)

55.0

0.5

Net fixed rate financial instruments

(0.2)

(66.8)

(85.3)

(606.7)

(759.0)

Floating rate net debt

Cash & short-term deposits

Bank overdrafts & short-term borrowings

Bank loans

79.1

(10.5)

(15.8)

52.8

–

(0.4)

–

(39.9)

Net floating rate financial instruments

52.8

(0.4)

(39.9)

–

79.1

(10.5)

(56.1)

12.5

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.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant,
of the Group’s profit before tax and equity through the impact on floating rate borrowings and cross currency swaps in respect of each
currency to which the Group has a significant exposure to interest rate risk.

2014

UK Sterling

US Dollar

Australian Dollar

2013

UK Sterling

US Dollar

Australian Dollar

A decrease of 100 basis points would have an equal and opposite effect.

Effect on
profit before
tax (loss)
gain
£m

Effect on
equity (loss)
£m

Increase in
basis points

+ 100

(1.6)

–

0.1

(0.1)

–

(0.4)

(0.2)

–

(0.7)

–

166

The Weir Group PLC Annual Report and Financial Statements 2014
Effect of hedge & derivative financial instruments included in the income statement & equity
The Group uses forward foreign currency contracts to hedge currency risk associated with expected future sales or purchases for which
the Group has firm commitments and on its net investments in foreign operations. The terms of the forward foreign currency contracts
are negotiated to match the terms of the commitments. During the period six subsidiaries within the Group have applied cash flow
hedge accounting to these forward foreign currency transactions. In addition the Group uses forward foreign currency contracts to hedge
translation currency risk associated with its net investments in foreign operations. During the period the Group had eight relationships
where net investment hedge accounting was applied to these forward foreign currency transactions. All other forward foreign currency
contracts, while representing commercial hedges, are not subject to cash flow or net investment hedge accounting with all fair value
movements being recognised in the income statement.

The net carrying amount, maturity dates and the amounts recognised for the period in profit or loss and equity for each derivative
financial instrument are set out below.

52 weeks ended 2 January 2015

Net carrying
amount
£m

Maturity dates

Gain (loss)
recognised
in profit or
loss
£m

Loss
recognised
in equity
£m

Loss
recognised
in inventory
£m

Forward foreign currency contracts designated as cash flow hedges

(1.8)

2014 to 2017

(0.5)

Forward foreign currency contracts designated as net investment hedges

(2.4)

2014

Cross currency swaps designated as net investment hedges

(0.1)

2014 to 2018

Other forward foreign currency contracts at fair value through profit or loss

3.9

2014 to 2017

53 weeks ended 3 January 2014

Forward foreign currency contracts designated as cash flow hedges

Forward foreign currency contracts designated as net investment hedges

(0.4)

Net carrying
amount
£m

1.0

0.2

Maturity dates

2014 to 2017

2014

Cross currency swaps designated as net investment hedges

(0.2)

2015 to 2018

Other forward foreign currency contracts at fair value through profit or loss

2014 to 2017

1.0

2.0

–

12.6

12.1

(3.2)

(6.1)

–

(0.4)

–

(9.3)

(0.4)

(Loss) gain
recognised
in profit or
loss
£m

Gain
recognised
in equity
£m

Loss
recognised
in inventory
£m

0.3

(0.1)

(10.6)

(10.1)

0.3

5.3

0.3

–

5.9

(0.5)

–

(0.5)

The net £nil (2013: £0.2m gain) recognised in profit or loss in respect of cross currency swaps and forward foreign currency contracts
designated as net investment hedges reflects the benefit of the US Dollar/Sterling interest rate differential. The Group’s forward foreign
currency contracts subject to cash flow hedge accounting which were deemed to be ineffective during the period resulted in a net charge
to the income statement of £nil (2013: £nil).

Foreign exchange risk
The Group considers the most significant foreign exchange risk relates to the Australian Dollar, Euro and United States Dollar. The following
table demonstrates the sensitivity to a reasonably possible change in these foreign currency exchange rates with all other variables held
constant. The sensitivity analysis shows the effect on profit or loss in respect of financial assets and liabilities denominated in foreign
currency, including payables, receivables, borrowings and forward foreign currency contracts but excluding all financial assets and liabilities
qualified as either cash flow or net investment hedges. The sensitivity analysis also shows the effect on equity in respect of financial assets
and liabilities denominated in foreign currency qualifying as either cash flow or net investment hedges including forward foreign currency
contracts, borrowings and cross currency swaps. The sensitivity analysis below has been presented to demonstrate the impact of a 25%
strengthening of the relevant functional currency against the currencies shown below and therefore give an indication of the transactional
foreign exposure that exists at a subsidiary level across the Group.

2014

Australian Dollar

Euro

US Dollar

2013

Australian Dollar

Euro

US Dollar

Increase in
currency
rate

Effect on
profit gain
(loss)
£m

Effect on
equity (loss)
£m

+25%

0.4

2.6

(4.5)

0.7

3.3

15.9

0.6

99.7

–

1.6

(3.7)

180.6

167

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Group Financial Statements continued

30. Financial assets & liabilities (continued)
Foreign exchange risk (continued)
As noted above, the Group does not hedge translational exposure arising from profit and loss items. The Group’s operating profit from
continuing operations before exceptional items and intangibles amortisation was denominated in the following currencies.

US Dollar

Australian Dollar

Euro

Canadian Dollar

United Arab Emirates Dirham

Chilean Peso

Russian Rouble

United Kingdom pound

Other

Operating profit from continuing operations before exceptional items & intangibles amortisation

2014
£m

2013
£m

262.3

241.3

41.1

26.5

42.3

16.6

27.8

10.6

(5.4)

28.0

449.8

46.2

44.5

42.6

14.3

33.8

8.3

0.2

35.3

466.5

31. Capital management
The primary objective of the Group’s capital management is to ensure that it maintains robust capital ratios in order to support its
business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust
the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
The Group monitors capital using the following indicators.

Net debt to EBITDA cover
Net debt to EBITDA comprises net debt divided by operating profit from continuing operations before exceptional items, depreciation,
intangibles amortisation and impairment. The Group considers that the ratio of net debt to EBITDA is the key metric from a capital
management perspective and seeks to maintain the ratio below two times.

Net debt (£m)

Operating profit (£m)

Exceptional items included in operating profit (note 5) (£m)

Depreciation, intangibles amortisation & impairment (£m)

EBITDA (£m)

Net debt to EBITDA cover (ratio)

2014

860.7

192.5

52.4

266.0

510.9

1.7

2013

747.0

490.3

(70.5)

105.8

525.6

1.4

Interest cover
Interest cover comprises operating profit from continuing operations before exceptional items and intangibles amortisation divided by net
finance costs (excluding exceptional items and other finance costs).

Operating profit before exceptional items & intangibles amortisation (£m)

Net finance costs (excluding exceptional items and other finance costs) (£m)

Interest cover (ratio)

2014

449.8

38.5

11.7

2013

466.5

44.9

10.4

168

The Weir Group PLC Annual Report and Financial Statements 2014Gearing ratio
Gearing comprises net debt divided by total equity. Net debt comprises cash and short-term deposits and interest-bearing loans and
borrowings (note 26).

Net debt (£m)

Total equity (£m)

Gearing Ratio (%)

2014

860.7

2013

747.0

1,482.2

1,486.7

58.1

50.2

The Group’s banking arrangements also require the calculation of net debt to EBITDA (not greater than 3.5) and interest cover (not less
than 3.5) as part of the bi-annual financial covenant certifications. For the purposes of the covenants required by the Group’s lenders,
the net debt is to be converted at the exchange rate used in the preparation of the Group’s income statement and cash flows, ie. average
rate. In addition, profits of businesses acquired in the financial year have to be included as if the acquisitions occurred at the start of the
financial year. The covenant calculations for the purposes of the Group’s lenders are shown below.

Net debt to EBITDA cover – lender covenants basis

Net debt at average exchange rates (£m)

Operating profit* (£m)

Exceptional item included in operating profit (note 5) (£m)

Depreciation, intangibles amortisation & impairment* (£m)

EBITDA* (£m)

Net debt to EBITDA cover (ratio)

Interest cover – lender covenants basis

Operating profit before exceptional items & intangibles amortisation* (£m)

Net finance costs (excluding exceptional items and other finance costs) (£m)

Interest cover (ratio)

* Adjusted for current year acquisitions.

32. Exchange rates
The principal exchange rates applied in the preparation of these financial statements were as follows.

Average rate (per £)

US Dollar

Australian Dollar

Euro

Canadian Dollar

United Arab Emirates Dirham

Chilean Peso

Russian Rouble

Closing rate (per £)

US Dollar

Australian Dollar

Euro

Canadian Dollar

United Arab Emirates Dirham

Chilean Peso

Russian Rouble

2014

819.8

204.5

52.4

267.2

524.1

1.6

2014

461.9

38.5

12.0

2013

775.9

491.4

(70.5)

105.8

526.7

1.5

2013

467.6

44.9

10.4

2014

2013

1.65

1.83

1.24

1.82

6.01

1.56

1.61

1.18

1.61

5.74

940.16

771.29

63.32

49.70

1.54

1.89

1.28

1.80

5.64

1.64

1.83

1.21

1.74

6.03

942.64

869.82

90.99

54.53

169

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Company Balance Sheet
At 2 January 2015

Non-current assets

Tangible assets

Intangible assets

Investments

Derivative financial instruments

Total non-current assets

Current assets

Debtors

Derivative financial instruments

Cash at bank & in hand

Total current assets

Creditors falling due within one year

Creditors

Derivative financial instruments

Total current liabilities

Net current liabilities

Total assets less current liabilities

Creditors falling due after more than one year

Loans

Derivative financial instruments

Total creditors falling due after more than one year

Provisions

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 25 February 2015.

Keith Cochrane
Director

Jon Stanton
Director

170

2 January
2015
£m

3 January
2014
£m

Notes

0.3

0.1

1.8

3.8

2,689.4

2,239.7

3.7

1.2

2,693.5

2,246.5

122.8

19.2

22.9

95.8

13.4

12.8

164.9

122.0

983.7

18.7

1,002.4

837.5

726.5

16.7

743.2

621.2

1,856.0

1,625.3

1,177.6

1,093.6

3.1

1.4

1,180.7

1,095.0

1.1

2.1

674.2

528.2

1.1

673.1

527.1

26.8

38.0

(5.8)

0.5

1.8

26.7

38.0

(5.8)

0.5

1.8

611.8

465.9

673.1

527.1

The Weir Group PLC Annual Report and Financial Statements 2014

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 United Kingdom accounting standards.

Change of GAAP
For the period ending 1 January 2016, the Company intends to adopt FRS 101 ‘Reduced Disclosure Framework’.

Foreign currency translation
The presentational 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 except when hedge accounting is applied.

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.

Intangible assets
Intangible assets are stated at cost and the cost is amortised over the estimated useful life by equal annual instalments at the rate of 25%.

Investments
Investments in subsidiaries 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 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 FRS 17, 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. 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.

Share-based payments
Equity settled share-based incentives are provided to employees under the Group’s Long Term Incentive Plan (‘LTIP’) and as a
consequence of occasional one-off conditional awards made to senior executives. The last equity settled grant under the Executive
Bonus Scheme (‘EBS’) was during 2013, with no award being made in the current year.

The previously granted equity settled incentives under the EBS were determined as a percentage of the annual bonus and were matched by the
Group with a share award that would vest on the third anniversary of the grant date provided the individual continued to hold the original bonus
shares awarded and continued to be employed by the company at the date of vesting. In addition the EBS included a strategic bonus shares
element for a limited number of senior employees. The fair value of the matching and strategic elements of the EBS was determined at the
date of grant of the bonus and the cost is recognised on a straight-line basis over the vesting period. The Group recognises a compensation
cost in respect of this plan that is based on the fair value of the awards granted. The fair value was determined at the date of grant and is not
subsequently re-measured unless the conditions on which the award was granted are modified.

171

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Company Financial Statements continued

1. Accounting policies (continued)
Financial assets & liabilities
The Company’s principal financial assets and liabilities, other than derivatives, comprise bank overdrafts, short-term borrowings, loans
and fixed rate notes, cash and short-term deposits.

A financial asset 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 de-recognition 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.

Derivative 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 as the present value of the estimated future cash flows based on spot and forward
foreign exchange rates. The fair value of interest rate swaps and cross currency swaps is calculated as the present value of the estimated
future cash flows based on interest rate curves and spot foreign exchange rates. Changes in their fair values have been recognised in the
profit and loss account, except where hedge accounting is used, provided the conditions specified by FRS 26 are met. Hedge accounting is
applied in respect of hedge relationships where it is both permissible under FRS 26 and practical to do so. When hedge accounting is used,
the relevant hedging relationships will be classified as a cash flow hedge or fair value hedge.

To the extent that the hedge is effective, changes in the fair value of the hedging instrument will be recognised directly in equity rather
than in the profit and loss account. When the hedged item is recognised in the financial statements, the accumulated gains and losses
recognised in equity will be either recycled to the profit and loss account or, if the hedged item results in a non-financial asset, will be
recognised as adjustments to its initial carrying amount.

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.

The Company has taken advantage of the exemption in FRS 29 and has not disclosed information required by that standard in relation to
derivative financial instruments as the Group’s consolidated financial statements, in which the Company is included, provide equivalent
disclosures for the Group under IFRS 7.

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 £243.5m (2013: £24.3m). In accordance with the concession granted under section
408 of the Companies Act 2006, the profit and loss account of the Company has not been separately presented in these financial statements.

Dividends paid & proposed

Declared & paid during the period

Equity dividends on ordinary shares

Final dividend for 2013: 33.2p (2012: 30.0p)

Interim dividend for 2014: 15.0p (2013: 8.8p)

Proposed for approval by shareholders at the annual general meeting

Final dividend for 2014: 29.0p (2013: 33.2p)

2014
£m

2013
£m

70.7

32.0

102.7

63.8

18.8

82.6

61.9

70.8

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.

Directors
Details of directors remuneration, benefits and LTIP awards are included in the Remuneration report on pages 91 to 108, and in note 29
to the Group financial statements.

172

The Weir Group PLC Annual Report and Financial Statements 2014
Auditors remuneration
The total fees payable by the Company to Ernst & Young LLP (EY) for work performed in respect of the audit of the Company were
£15,000 (2013: £14,000). Fees paid to EY for non-audit services to the Company itself are not disclosed in these accounts as the Group’s
consolidated financial statements, in which the Company is included, are required to disclose such fees on a consolidated basis.

3. Tangible assets

Cost

At 3 January 2014

Additions

Group transfers

At 2 January 2015

Aggregate depreciation

At 3 January 2014

Charge for year

Group transfers

At 2 January 2015

Net book value at 3 January 2014

Net book value at 2 January 2015

4. Intangible assets

Cost

At 3 January 2014

Additions

Group transfers

At 2 January 2015

Aggregate amortisation

At 3 January 2014

Group transfers

At 2 January 2015

Net book value at 3 January 2014

Net book value at 2 January 2015

Office &
computer
equipment
£m

2.7

0.1

(1.4)

1.4

0.9

0.4

(0.2)

1.1

1.8

0.3

Total
£m

4.7

2.5

(6.4)

0.8

0.9

(0.2)

0.7

3.8

0.1

Purchased
Software
£m

Development
Costs
£m

3.7

2.5

(5.4)

0.8

0.9

(0.2)

0.7

2.8

0.1

1.0

–

(1.0)

–

1.0

–

173

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Company Financial Statements continued

5. Fixed asset investments

Cost

At 3 January 2014

Additions

At 2 January 2015

Impairment

At 2 January 2015 and at 3 January 2014

Net book value at 3 January 2014

Subsidiaries
Shares
£m

Loans
£m

Total
£m

772.9

294.1

1,472.4

2,245.3

155.6

449.7

1,067.0

1,628.0

2,695.0

0.2

5.4

5.6

772.7

1,467.0

2,239.7

Net book value at 2 January 2015

1,066.8

1,622.6

2,689.4

The principal subsidiaries and joint ventures of the Company are listed on page 183.

2014
£m

2013
£m

116.7

1.9

3.6

0.6

122.8

2014
£m

288.0

609.7

53.2

5.5

1.4

3.2

22.7

983.7

91.2

1.5

2.4

0.7

95.8

2013
£m

144.0

509.3

49.6

0.9

1.4

4.6

16.7

726.5

6. Debtors

Amounts recoverable within one year

Amounts owed by subsidiaries

Deferred tax recoverable (note 14)

Other debtors

Prepayments & accrued income

7. Creditors

Bank overdrafts & short-term borrowings

Loans from subsidiaries

Amounts owed to subsidiaries

Tax payable

Other taxes & social security costs

Other creditors

Accruals & deferred income

174

The Weir Group PLC Annual Report and Financial Statements 20148. Loans

Amounts due are repayable as follows

Less than one year

– bank loans

– fixed rate notes

– loans from subsidiaries

More than one year but not more than two years

– bank loans

– fixed rate notes

– loans from subsidiaries

More than two years but not more than five years

– bank loans

– fixed rate notes

– loans from subsidiaries

More than five years

– fixed rate notes

Less current instalments due on

– bank loans

– fixed rate notes

– loans from subsidiaries

2014
£m

2013
£m

83.3

70.6

15.8

–

609.6

509.3

–

20.1

135.2

224.3

284.4

0.4

66.9

15.1

39.9

85.7

279.2

513.6

606.4

1,941.1

1,618.7

(83.3)

(70.6)

(15.8)

–

(609.6)

(509.3)

1,177.6

1,093.6

The loans from subsidiaries with a maturity date greater than two years and less than five years are repayable in 2019 and have an
interest rate of 6.23%. These loans are not secured.

Details of the interest and repayment terms of the bank loans and fixed rate notes can be found in note 20 to the Group financial statements.

9. Provisions

At 3 January 2014

Released – unutilised

At 2 January 2015

Discontinued
operations
warranty &
indemnity
£m

Subsidiaries
Shares
£m

1.1

–

1.1

1.0

(1.0)

–

Total
£m

2.1

(1.0)

1.1

Subsidiaries
As at 2 January 2015, a provision of £1.1m (2013: £1.1m) has been made against the deficiency of underlying net assets in certain subsidiaries.

Discontinued operations warranty & indemnity
The discontinued operations warranty and indemnity provision was released in full in June 2014, on expiration of the related tax
warranty periods.

175

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Company Financial Statements continued

10. Retirement benefits
The net pension liability in respect of the Company unapproved plan is reflected on the Company’s balance sheet. The liabilities of the
Company unapproved plan are shown below.

Present value of plan liabilities

Related deferred tax asset (note 14)

Net pension liability

Recognised in the profit & loss account

Interest cost on plan liabilities

Other finance costs

The major assumptions used by the actuary for the Company unapproved plan were as follows.

Rate of increase in pensions in payment

Discount rate

Inflation assumption

The mortality assumptions used as follows.

Post-retirement mortality

Current pensioners at 65 – male

Current pensioners at 65 – female

Future pensioners at 65 – male

Future pensioners at 65 – female

2014
£m

(1.4)

0.3

(1.1)

2014
£m

0.1

2014
%

2.9

3.5

3.0

2013
£m

(1.4)

0.3

(1.1)

2013
£m

0.1

2013
%

3.3

4.4

3.4

2014
Years

2013
Years

22.1

24.6

23.9

26.5

22.0

24.5

23.8

26.5

Changes in the present value of the defined benefit obligations are analysed as follows.

Opening defined benefit obligations

Interest cost

Employer contributions

Benefits paid

Actuarial losses

Closing defined benefit obligations

Changes in the fair value of plan assets are analysed as follows.

Opening plan assets

Employer contributions

Benefits paid

Closing plan assets

176

2014
£m

1.4

0.1

(0.1)

1.4

2014
£m

–

0.1

(0.1)

–

2013
£m

1.4

0.1

–

(0.1)

–

1.4

2013
£m

–

0.1

(0.1)

–

The Weir Group PLC Annual Report and Financial Statements 2014History of experience gains and losses

Present value of defined benefit obligation

Deficit in the plans

Changes in assumptions underlying plan liabilities

2014
£m

(1.4)

(0.1)

2013
£m

(1.4)

–

2012
£m

(1.4)

–

2011
£m

(1.4)

(0.1)

2010
£m

(1.3)

(0.2)

In addition, the Company also participates in the defined benefit plan arrangements within The Weir Group Pension & Retirement Savings
Scheme (Main Plan) and The Weir Group 1972 Pensions and Life Assurance Plan for Senior Executives (Executive Plan). These defined
benefit plans are funded 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 FRS 17, the Company
accounts for its contributions to these plans as if they were defined contribution plans. While assets and liabilities in respect of these
plans are not reflected on the Company’s balance sheet, details of these are set out below.

The most recent actuarial funding valuation of the Main Plan was as at 31 December 2011, when the funding shortfall was £81.4m. The
deficit recovery plan agreed with the Trustees at that time was for the Company to make recovery contributions of £8.0m per annum up
to 2020, subject to reassessment at future triennial valuations. The next funding valuation of the Main Plan, as at 31 December 2014,
is currently on-going.

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. The actual return on plan assets
in the year was a gain of £83.2m (2013: £46.7m).

The assets and liabilities of the plans and the long-term expected rates of return are as follows.

Equities

Bonds

Insurance policy

Other

Fair value of plan assets

Present value of plan liabilities

Net deficit in the plans

Amount not recognised due to asset limit

Net liability

2014
%

6.2

2.8

3.5

0.9

2014
£m

200.0

156.9

357.7

11.7

726.3

(805.0)

(78.7)

(4.1)

(82.8)

2013
%

7.4

3.9

4.4

1.3

2013
£m

185.2

124.6

346.2

8.1

664.1

(723.6)

(59.5)

–

(59.5)

177

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Company Financial Statements continued

10. Retirement benefits (continued)
History of experience gains and losses (continued)

Recognised in the profit & loss account

Current service cost

Past service curtailment gain

Expected return on plan assets

Restriction to expected return on assets (asset limit)

Interest cost on plan liabilities

Other finance costs

Taken to the statement of total recognised gains & losses

Actual return on plan assets

Less: expected return on plan assets

Other actuarial losses

Total actuarial (losses) gain on the net deficit

Adjustment to statement of total recognised gains & losses (asset limit)

Actuarial (losses) gains recognised in the statement of total recognised gains & losses

The curtailment gain of £2.7m in the 53 weeks ended 3 January 2014 arose as a result of a decision taken, following consultation,
to close the Main Plan to the future accrual benefits with effect from 30 June 2015. This decision was announced to members in
August 2013, at which point the curtailment gain was recognised under FRS 17.

The major assumptions used by the actuary were as follows.

Rate of increase in salaries

Rate of increase in pensions in payment

Pre 6 April 2006 service

Post 6 April 2006 service

Discount rate

Inflation assumption

Consumer Prices Inflation assumption

The mortality assumptions used were as follows.

Post-retirement mortality

Current pensioners at 65 – male

Current pensioners at 65 – female

Future pensioners at 65 – male

Future pensioners at 65 – female

2014
£m

2.0

–

2.0

2013
£m

2.1

(2.7)

(0.6)

(33.9)

(29.6)

0.5

31.1

(2.3)

83.2

(33.9)

49.3

(81.6)

(32.3)

(3.6)

(35.9)

2014
%

3.0

2.9

2.0

3.5

3.0

2.0

–

29.8

0.2

46.7

(29.6)

17.1

(16.6)

0.5

–

0.5

2013
%

3.3

2.2

4.4

3.4

2.4

2014
Years

2013
Years

22.1

24.6

23.9

26.5

22.0

24.5

23.8

26.5

178

The Weir Group PLC Annual Report and Financial Statements 2014Changes in the present value of the defined benefit obligations are analysed as follows.

Opening defined benefit obligations

Current service cost

Past service curtailment gain

Interest cost

Benefits paid

Actuarial losses

Closing defined benefit obligations

Changes in fair value of plan assets are analysed as follows.

Opening plan assets

Expected return on plan assets

Employer contributions

Benefits paid

Actuarial gains

Closing plan assets

History of experience gains and losses

Fair value of plan assets

2014
£m

2013
£m

723.6

708.5

2.0

–

31.1

(33.3)

81.6

805.0

2.1

(2.7)

29.8

(30.7)

16.6

723.6

2014
£m

2013
£m

664.1

634.0

33.9

12.3

29.6

14.1

(33.3)

(30.7)

49.3

726.3

17.1

664.1

2014
£m

2013
£m

2012
£m

2011
£m

2010
£m

726.3

664.1

634.0

591.7

580.6

Present value of defined benefit obligations

(805.0)

(723.6)

(708.5)

(660.9)

(632.6)

Deficit in the plans

(78.7)

(59.5)

(74.5)

(69.2)

(52.0)

Experience adjustments arising on plan obligations

Changes in assumptions underlying plan obligations

Experience adjustments arising on plan assets

(1.2)

(80.4)

49.3

–

(16.6)

17.1

14.5

(59.8)

33.1

0.9

(42.5)

(0.5)

(2.8)

(22.3)

24.0

The cumulative amount of actuarial losses recognised in the statement of recognised gains and losses is £300.5m (2013: £264.6m).

179

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014
Notes to the Company Financial Statements continued

11. Derivative financial instruments

Non-current assets

Cross currency swaps

Forward foreign currency contracts

Current assets

Forward foreign currency contracts

Creditors falling due within one year

Cross currency swaps

Forward foreign currency contracts

Creditors falling due after more than one year

Cross currency swaps

Forward foreign currency contracts

2014
£m

2013
£m

3.3

0.4

3.7

19.2

0.7

18.0

18.7

2.7

0.4

3.1

0.1

1.1

1.2

13.4

–

16.7

1.1

0.3

1.4

The figures in the above table are inclusive of derivative financial instruments where the counterparty is a subsidiary of The Weir Group PLC.

12. Share capital

Allotted, called up & fully paid

Ordinary shares of 12.5p each

Shares allotted

Issued during the period in respect of LTIP awards

Treasury shares

At the beginning of the period

Issued during the period in respect of LTIP awards

At the end of the period

Equity settled share-based payments

LTIP awards outstanding at the end of the period

2014
£m

2013
£m

26.8

26.7

2014
Number
Million

2013
Number
Million

0.2

0.3

0.7

–

0.7

1.1

(0.4)

0.7

1.5

Further details of the equity settled share-based payments and the associated cost for the period can be found in note 28 to the Group
financial statements.

180

The Weir Group PLC Annual Report and Financial Statements 2014
13. Reserves

At 28 December 2012

Profit for the period

Dividends

Cost of share-based payment inclusive of tax credits

Purchase of shares

Exercise of LTIP awards

At 3 January 2014

Profit for the period

Dividends

Cost of share-based payment inclusive of tax credits

Exercise of LTIP awards

At 2 January 2015

14. Deferred tax asset

At 3 January 2014

Included in profit for the period

Credit for the period included in equity

At 2 January 2015

Included in debtors (note 6)

Included in retirement benefits (note 10)

Other timing differences

Retirement benefits

Share
Premium

£m

38.0

Treasury
Shares
£m

Capital
Redemption
Reserve
£m

Special
Reserve
£m

(5.6)

0.5

1.8

–

38.0

–

(1.4)

1.2

(5.8)

–

0.5

1.8

–

Profit &
Loss
Account
£m

515.9

24.3

(82.6)

9.5

–

(1.2)

465.9

243.5

(102.7)

5.2

(0.1)

38.0

(5.8)

0.5

1.8

611.8

£m

1.8

(0.5)

0.9

2.2

2013
£m

1.5

0.3

1.8

1.5

0.3

1.8

2014
£m

1.9

0.3

2.2

1.9

0.3

2.2

15. Contingent liabilities & legal claims
Guarantees
The Company has given guarantees in relation to the bank and other borrowings of certain subsidiary companies. The net funds of the
companies party to these facilities as at 2 January 2015 amounted to £203.0m (2013: £134.1m).

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.

181

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Notes to the Company Financial Statements continued

16. Related party disclosures
The Company has taken advantage of the exemption in FRS 8 from disclosing transactions with related parties that are wholly owned
by a subsidiary of The Weir Group PLC. The following table provides the total amount of transactions which have been entered into with
non-wholly owned related parties for the relevant financial year and outstanding balances at the period end.

Related party

Weir Minerals (India) Private Ltd

Ynfiniti Engineering Services SL

Weir International Co. Ltd

Vulca SA

2014

2013

2014

2013

2014

2013

2014

2013

Management
charge
£m

Amounts
due by
£m

–

0.2

0.3

0.1

–

0.1

–

0.3

0.2

0.3

0.1

–

0.1

–

17. Financial risk management objectives and policies
The description of the Group’s financial risk management objectives and policies is provided in note 30 to the Group financial statements.

These financial risk management objectives and policies also apply to the Company.

182

The Weir Group PLC Annual Report and Financial Statements 2014Principal Companies of the Group

The principal subsidiaries and joint ventures of the Group are as follows.

Name

Subsidiaries

American Hydro Corporation

EnviroTech Pumpsystems, Inc.

Gema Industrigummi AB

Linatex Rubber Products Sdn Bhd

Mathena Inc.

Mesa Manufacturing, Inc.

Seaboard International Inc.

Shengli Oilfield Weir Highland Pump Company Ltd

SPM Flow Control, Inc.

SPM Flow Control Ltd

Vulco SA

Weir Canada Inc.

Weir do Brasil Ltda

Weir Engineering Services Ltd

Weir Floway, Inc.

Weir Gabbioneta SrL

Weir India Private Ltd

Weir International Co. Ltd

Weir Minerals Africa (Pty) Ltd

Weir Minerals Australia Ltd

Weir Minerals Europe Ltd

Weir Minerals Netherlands BV

Novatech, LLC

Weir Power & Industrial France SAS

Weir Slurry Group Inc.

Weir Solutions FZE

Weir SOS Ltd

Weir Valves & Controls UK Ltd*

Weir Valves & Controls USA Inc.

Weir Valves & Controls (Suzhou) Co. Ltd

Ynfiniti Engineering Services SL

Joint ventures

Weir Arabian Metals Company

Wesco LLC

Country of
registration or
incorporation

% equity
interest
2014

USA

Sweden

Malaysia

USA

China

USA

Canada

Chile

Canada

Brazil

Scotland

USA

Italy

India

South Korea

South Africa

Australia

England

Netherlands

USA

France

USA

Dubai

The Bahamas

England

USA

China

Spain

Saudi Arabia

UAE

100

* Companies whose shares are owned directly by The Weir Group PLC.

The Company has taken advantage of the exemption under section 410(2) of the Companies Act 2006 by providing information only in relation to subsidiary undertakings whose
results or financial position, in the opinion of the Directors, principally affected the financial statements.

Equivalent information as set out above for all the companies and joint ventures of the Group as at 2 January 2015 is available on the Company’s website at www.weir.co.uk.
A complete list of subsidiary and associated undertakings is also attached to the annual return of The Weir Group PLC filed at Companies House, correct as at the date stated.

On 15 October 2014, the Group completed the acquisition of the Trio Engineered Products group, a Chinese-American manufacturer. The contribution to the Group results post-
acquisition is not considered to have been significant in the period and therefore the entities acquired have not been included above, although will be considered for inclusion in 2015.

183

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014

Principal Companies of the Group continued

Group products
Some of the key product trade marks owned by the Principal Companies are set out below, most of which are registered in one or more countries:

WARMAN is a trade mark of Weir Minerals Australia Ltd and Weir Group African IP Ltd; ASPIR, CAVEX, HAZLETON and MULTIFLO are trade marks
of Weir Minerals Australia Ltd; LEWIS and LEWIS PUMPS are trade marks of Envirotech Pumpsystems Inc.; GEHO is a trade mark of Weir Minerals
Netherlands BV; FLOWAY is a trade mark of Weir Floway Inc.; VULCO is a trade mark of Vulco SA; ISOGATE is a trade mark of Weir do Brasil Ltda.;
LINATEX is a trade mark of Linatex Ltd; ENDURON is a trade mark of Weir Minerals Europe Ltd; TRIO is a trade mark of Trio China Ltd and Trio
Engineered Products, Inc.; KHD is a trade mark used under licence by companies forming part of The Weir Group; SPM and MESA are trade marks
of S.P.M. Flow Control, Inc.; SEABOARD is a trade mark of Seaboard International, Inc.; NOVATECH is a trade mark of Novatech, LLC; GABBIONETA
is a trade mark of Weir Gabbioneta Srl; BEGEMANN is a trade mark of Weir Minerals Netherlands BV; MATHENA is a trade mark of Mathena, Inc.;
ALLEN STEAM TURBINES is a trade mark of Weir Engineering Services Ltd; AMERICAN HYDRO is a trade mark of American Hydro Corporation;
ATWOOD & MORRILL and TRICENTRIC are trade marks of Weir Valves & Controls USA, Inc; BDK is a trade mark of Weir India Pvt Ltd; BATLEY,
BATLEY VALVE, BLAKEBOROUGH, HOPKINSONS and MAC VALVE are trade marks of Weir Valves and Controls UK Ltd; SARASIN-RSBD and
SEBIM are trade marks of Weir Power & Industrial France SAS; ROTO-JET is a trade mark of Envirotech PumpSystems, Inc.; WEMCO is a trade mark
used under licence by companies forming part of the Group; WEIR is a trade mark of Weir Engineering Services Ltd.

184

The Weir Group PLC Annual Report and Financial Statements 2014Shareholder Information

Shareholder enquiries
The Company’s registrars are:
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol, BS99 6ZZ
Website: www.investorcentre.co.uk
Telephone: 0870 707 1402

Shareholder enquiries relating to shareholding, dividend payments, change of address, loss of share certificate, etc. should be addressed
to Computershare.

Investor Centre
Investor Centre is a free, secure share management website provided by Computershare. This service allows you to view your
share portfolio and see the latest market price of your shares, check your dividend payment and tax information, change your address,
update payment instructions and receive your shareholder communications online. To take advantage of this service, please log in at
www.investorcentre.co.uk and enter the name of the company in which you hold shares, your Shareholder Reference Number (‘SRN’),
your postcode (or country if outside the UK or Channel Islands) and security code (provided on screen). For security purposes, Computershare
will send a unique activation code to your registered address. Your SRN can be found on your share certificate or dividend tax voucher.

Dividends
2015 final dividend
The directors have recommended a final dividend of 29.0 pence per share, for the 52 weeks ended 2 January 2015. Payment of this
dividend is subject to approval at the 2015 Annual General Meeting. Key dates relating to this dividend are given below:

Annual General Meeting
Ex dividend date
Record date
Final day for receipt of DRIP elections
Payment date

29 April 2015
30 April 2015
1 May 2015
7 May 2015
29 May 2015

Dividend payments
You can choose to receive your dividend in a number of ways. Dividends will automatically be paid to you by cheque and sent to your
registered address unless you have chosen one of the options below:

– Direct payment to your bank
Cash dividends can be paid directly to a UK bank or building society account. This is more convenient and helps reduce the risk of

cheques becoming lost or delayed in the post. To switch to this method of payment you can apply online at www.investorcentre.co.uk
or download a dividend mandate form from the FAQ section of the Company’s website (weir.co.uk), under ‘Shareholder Information’
in the ‘Investor’ section. Alternatively, you can contact Computershare, who will also be able to assist with any questions you may
have. A Consolidated Tax Voucher (‘CTV’) detailing all payments made throughout the tax year will then be sent you once a year
either electronically or to your registered address. In 2015, the CTV will be dispatched with the November 2015 dividend payment
and contain the tax and payment information for dividends paid during the 2015/2016 tax year.

– Dividend Reinvestment Plan (‘DRIP’)

The Company offers shareholders the opportunity to join the Computershare regulated DRIP to use their dividend to purchase further
Weir Group shares. Instead of receiving cash, shareholders receive as many whole shares as can be bought with their dividend, taking
into account related purchase costs. Any residual cash will be carried forward and added to their next dividend. If you wish to participate
in the DRIP, you can apply online at www.investorcentre.co.uk or alternatively, you can complete a DRIP mandate form obtainable from
Computershare.

– Global Payment Service

If you live overseas, Computershare offers a Global Payment Service which is available in certain countries. This may make it possible
to receive dividends direct into your bank account in your local currency. Please note that a payment charge would be deducted from
each individual payment before conversion into your local currency. This service can be set up at www.investorcentre.co.uk or by
contacting Computershare.

Capital gains tax
For the purpose of capital gains tax, the market value of an ordinary share of The Weir Group PLC as at 31 March 1982 was 29.75p.
This market value has been adjusted to take account of the sub-division of the share capital whereby each ordinary share of 25p was
sub-divided into two ordinary shares of 12.5p each on 28 June 1993. 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.

185

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014

Shareholder Information continued

Communications
Annual and Interim Reports
The Weir Group publishes an Annual and Interim Report every year. The Annual Report is sent to all shareholders who have elected to
receive a hard copy through the post as a printed document unless the shareholder has chosen to receive e-communications (see below).
The Interim Report is published on the Company’s website and a printed copy is available from the Company Secretary on request.

E-communications
The Company offers shareholders the opportunity to access shareholder documents, such as Annual Reports and Notices of the
AGM, via e-communications rather than receiving printed documents in the post. To sign up for e-communications, please register
at www.investorcentre.co.uk. In order to do this, you will need your SRN which can be found on your share certificate or on your
dividend tax voucher. Once registered, you will need to change your mailing preference to e-communications and provide your email
address. We will then be able to notify you by email as soon as shareholder documents are available on the Company’s website.

Company website
Shareholders are encouraged to visit the Company’s corporate website (weir.co.uk), which contains a wealth of information about the
Weir Group. The website includes information about the markets in which we operate, our strategy and business performance, recent
news from the Group and product information. The Investor section is a key source of information for shareholders, containing details on
the share price, our financial results, shareholder meetings and dividends, as well as a ‘Frequently asked questions’ section. Current and
past Annual and Interim Reports are also available to view and download.

Share dealing services
Computershare provides Weir Group shareholders with a quick and easy way to buy or sell Weir Group shares on the London Stock
Exchange. Internet share dealing commission is 1%, subject to a minimum charge of £30. In addition, stamp duty, currently 0.5%,
is payable on purchases. There is no need to open a trading account in order to deal. Real time dealing is available during market
hours (08:00 to 16:30 Monday to Friday excluding bank holidays). 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-uk.computershare.com/Investor/
ShareDealing.asp. Shareholders should have their SRN available. The SRN appears on share certificates and tax dividend vouchers.
Please note that, at present, this service is only available to shareholders in certain jurisdictions. Please refer to the Computershare
website for an up-to-date list of these countries.

Telephone share dealing commission is 1%, plus £35. In addition, stamp duty, currently 0.5%, is payable on purchases. You can contact
Computershare on 0870 703 0084. Shareholders should have their SRN ready when making the call. The SRN appears on share certificates
and tax dividend vouchers. Detailed terms and conditions are available on request by telephoning 0870 707 1402. Please note this service is,
at present, only available to shareholders resident in certain jurisdictions. Please refer to the Computershare website for an up-to-date list of
these countries.

These services are offered on an execution only basis and subject to the applicable terms and conditions. Computershare Investor
Services PLC is authorised and regulated by the Financial Conduct Authority.

This is not a recommendation to buy, sell or hold shares in The Weir Group PLC. 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.

Voting
Information on how you can vote electronically can be obtained through our registrars by visiting www.investorcentre.co.uk/eproxy.

Shareholder alerts
Unsolicited investment advice and fraud
Many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning
investment matters. Share scams are often run from ‘boiler rooms’ where fraudsters cold-call investors offering them worthless,
overpriced or even non-existent shares.

These callers can be very persistent and extremely persuasive and their activities have resulted in considerable losses for some investors.
Whilst usually by telephone, the high-pressure sales tactics can also come by email, post, word of mouth or at a seminar. Shareholders
are advised to be very wary of any unsolicited advice, offers to buy shares at a discount, sell your shares at a premium or offers of free
company reports.

If you receive any unsolicited investment advice:
– Make sure you get the correct name of the person and organisation and take a note of any other details they provide, such as

a telephone number or address.

– Check that the caller is properly authorised by the Financial Conduct Authority (‘FCA’) by visiting www.fca.org.uk.
– Report any approach from such organisations to the FCA using the share fraud reporting form at www.fca.org.uk/scams,

where you can also find out about the latest investment scams. You can also call the Consumer Helpline on 0800 111 6768.

– If calls persist, hang up.

Please note that if you deal with an unauthorised firm, you will not be eligible to receive payment under the Financial Services
Compensation Scheme.

186

The Weir Group PLC Annual Report and Financial Statements 2014Glossary

AGM

Appleby EBT

Board

bps

capex

Company

Director

EBIT

EBITA

EBITDA

EHS

Annual General Meeting

EBT Employee benefit trust (Appleby Trust (Jersey) Ltd)

The Board of Directors of The Weir Group PLC

Basis points

Capital expenditure

The Weir Group PLC

A Director of The Weir Group PLC

Earnings before interest and tax

Earnings before interest, tax and amortisation

Earnings before interest, tax, depreciation and amortisation

Environment, health and safety

emerging markets

Asia-Pacific, South America, Africa and the Middle East

EPS

Earnings per share

Excellence Committees

Weir Group Management Committees ensuring best practice

free cash flow

Net cash flow generated from continuing operations excluding the cash impact in relation
to acquisitions, disposals and net proceeds from/repayments of borrowings

Group

IAS

IFRS

The Company together with its subsidiaries

Human resources

International Accounting Standards

International Financial Reporting Standards

Independent auditors

Ernst & Young LLP

Input

ISO

Orders received from customers

International Organisation for Standardisation

Kleinwort EBT

Employee benefit trust (Kleinwort Benson (Guernsey) Trustees Ltd)

like for like

LTIP

mill circuit

NPBTA

operating margin

ordinary shares

PBTA

Registrar

R&D

ROCE

RPI

subsidiary

TIR

TSR

UK GAAP

WTI

On a consistent basis, excluding the impact of acquisitions

Long Term Incentive Plan

The various stages of extracting and processing ore

Normalised profit before tax and amortisation

Operating profit including our share of results of joint ventures divided by revenue

The ordinary shares in the capital of the Company of 12.5p each

Profit before tax and amortisation

Computershare Investor Services plc

Research and development

Return on capital employed

UK Retail Prices Index

An entity that is controlled, either directly or indirectly, by the Company

Total Incident Rate (medical treatment of any kind required by employees divided by 200,000
hours worked)

Total Shareholder Return comprising dividends paid on ordinary shares and the increase
or decrease in the market price of ordinary shares

United Kingdom Generally Accepted Accounting Practice

West Texas Intermediate

187

Strategic ReportFinancial StatementsCorporate GovernanceThe Weir Group PLC Annual Report and Financial Statements 2014Financial Calendar

Annual General Meeting
29 April 2015

Ex-dividend date for final dividend
30 April 2015

Record date for final dividend
1 May 2015
Shareholders on the register at this date will receive the dividend.

Final day for receipt of DRIP elections
7 May 2015

Final dividend paid
29 May 2015

Cautionary Statement
This Annual Report contains forward-looking statements with respect to the
financial condition, operations and performance of the Group. By their nature,
these statements involve uncertainty since future events and circumstances
can cause results and developments to differ materially from those anticipated.
The forward-looking statements reflect knowledge and information available
at the date of preparation of this Annual Report and the Company undertakes
no obligation to update these forward-looking statements. Nothing in this
Annual Report should be construed as a profit forecast.

Registered Office and Company Number
20 Waterloo Street
Glasgow G2 6DB
Scotland
Registered in Scotland
Company Number 2934

188

The Weir Group PLC Annual Report and Financial Statements 2014Printed on an FSC-recognised paper, produced from well-managed
forests. This publication was printed with vegetable oil-based inks by
an FSC-recognised printer that holds an ISO 14001 certification.

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

T: +44 (0)141 637 7111
F: +44 (0)141 221 9789
E: investor-relations@weir.co.uk

weir.co.uk