The Weir Group Annual Report 2017

FY2017 Annual Report · The Weir Group

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Delivering strong growth
and strategic progress

The Weir Group PLC
Annual Report and Financial Statements 2017

We have immense pride in our heritage and our
history of innovative engineering. We work together,
supporting and challenging each other, with a passion
to build a stronger legacy for the next generation.

See our Strategy at a Glance for more information.

People

Customers

Technology

Performance

Caring for our colleagues, our
neighbours and the environment
and inspiring them to flourish.

Working in partnership to provide
distinctive solutions that deliver
compelling value for money.

Driving the development of new
technologies and capabilities
that lead the market.

Delivering excellence for all our
stakeholders through strong
leadership, accountability and
a lean mindset.

Contents

Strategic Report
Highlights
Our Business Model
Our Market Drivers
Chairman’s Statement
Chief Executive
Officer’s Review
Strategy at a Glance
Strategy in Action
Key Performance Indicators
Financial Review
Operational Review
Risk Review
Principal Risks
and Uncertainties
Sustainability Review

01
02
04
06

08
12
14
22
24
28
46

50
57

Corporate Governance
Corporate Governance Report 68
70
Board of Directors
73
Leadership
78
Effectiveness
Accountability
82
Relations with Shareholders
and Stakeholders
Nomination Committee
Report
Audit Committee Report
Directors’ Remuneration
Report
Directors’ Report
Statement of Directors’
Responsibilities

95
116

85
88

119

126

Financial Statements
Independent Auditors’ Report 120
Consolidated Income
Statement
Consolidated Statement of
Comprehensive Income
127
Consolidated Balance Sheet 128
Consolidated Cash Flow
Statement
Consolidated Statement
of Changes in Equity
Notes to the Group
Financial Statements
Company Balance Sheet
Company Statement
of Changes in Equity
Notes to the Company
Financial Statements

131
186

188

187

130

129

Additional Information
Subsidiary Undertakings
Shareholder Information
Glossary
Financial Calendar

202
210
214
216

Keep up-to-date with all our
news at www.global.weir

Highlights
Decisive short-term actions
to capture opportunities

Orders1

£2,395m

+20%

Revenue2

£2,356m

+28%

Operating profit2,3

£292m

+36%

Profit before tax2,3

Reported profit after tax

Earnings per share2,3

£250m

+47%

£162m

+274%

86.7p

+42%

Reported earnings per share3

Cash flow from operations4

Revenues from new products

73.5p

+266%

Inventory turns

2.7x

up from 2.2x

£221m

–25%

£168m

+53%

Safety: total incident rate (TIR)5

Gender diversity

0.53

+20% improvement

30%

female Board
membership +8%

Financial highlights
– Minerals orders increased 11%
– Oil & Gas orders increased 67%
– Flow Control orders reduced by 6%
– ROCE increased 290 basis points

Strategic highlights
– Embedded behavioural safety

programme

– Invested in additional engineers

on customer sites

– Developed new technology

and people strategies

– Initiated more than 80 Value Chain
Excellence improvement projects

Read more on our strategic and
operational highlights on pages 12-45.

Read more about sustainability
on pages 57-67.

Notes:
2017 refers to the year from 1 January to 31 December 2017. 2016 refers to the period 2 January to 31 December 2016.
1. 2016 restated at 2017 average exchange rates.
2.
3. Continuing operations excludes American Hydro Corporation and Ynfiniti Engineering Services. Details of other non-GAAP measures are contained in note 2 of the financial statements.
4. Cash from operations includes continuing and discontinued operations.
5. Total incident rate is an industry standard safety indicator that measures lost time and recordable incidents per 200,000 hours worked.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information02

Our Business Model
Maximising value

Our vision

Our mission

To be the most admired engineering business in
our markets.

To enable our customers to sustainably and
efficiently deliver the energy and resources
needed by a growing world.

How we generate revenue

The Group has an aftermarket-focused
business model. It starts by building
a large installed base of original
equipment used in highly abrasive
operating environments. This, in turn,
drives demand for spares and services,
providing earnings resilience in the
diversified markets the Group serves. In
2017, 69% of revenues were generated
from aftermarket activity, with 31%
from original equipment. 39% were
generated in emerging economies.

Mission-critical solutions

Comprehensive global support

Highly engineered equipment

We focus on solutions that are essential
to our customers’ operations and where
our engineering expertise enables them
to achieve their business objectives
safely, efficiently and sustainably.

Our global service centre network is
the most extensive in our main markets,
delivering rapid support to customers in
the need-it-now industries we serve.

We are the technology leaders in our
main markets, supported by almost
150 years of innovative engineering
with leading brands that are known
for their reliability and performance.

Our distinctive competencies

The Group is committed to building
long-term value for all our stakeholders.
We rely on a range of resources
and relationships to be successful.
Developing and enhancing these are
at the heart of the Group’s strategy,
as expressed in our four distinctive
competencies.

The value we create

People

Customers

Technology

Caring for our colleagues, our
neighbours and the environment
and inspiring them to flourish.

Working in partnership to provide
distinctive solutions that deliver
compelling value for money.

Driving the development of new
technologies and capabilities that
lead the market.

Investors

Employees

Customers and suppliers

Communities

Strong returns from growth ahead of
our end markets enabled by a clearly
defined and well-executed strategy.

A safe and engaged workplace that
supports innovation, high performance
and continuing personal development.

A solutions mindset that is innovative,
collaborative and fosters enduring
strategic partnerships.

Supporting employment, education,
training and playing an active role
in the communities we operate in
around the world.

Dividends paid to
shareholders: £96.7m.

Amount paid in wages
and salaries: £632m.

Amount paid to suppliers of
materials and services: £1.35bn.

Donations made to
charitable causes: £533,603.

Intensive aftermarket care

We provide solutions that are used

in some of the world’s most

extreme operating environments.

These harsh conditions generate

continuing demand for aftermarket

spares and services that in turn

provide earnings resilience.

Performance

Delivering excellence for all our

stakeholders through strong

leadership, accountability and

a lean mindset.

Governments and regulators

Engaging with key stakeholders

openly and transparently and ensuring

we always do business the right way,

guided by our Code of Conduct.

£60.5m paid in

corporation tax.

Read more in our

Communities section

on page 64.

Read more in
Our Ethics section
on page 62.

Our three operating
divisions

Weir Minerals

Weir Minerals is a global leader in
the provision of mill circuit technology
and services as well as the market
leader in slurry handling equipment
and associated aftermarket support
for abrasive high wear applications.
Its differentiated technology is used
in mining, oil and gas and general
industrial markets around the world.

See more in the Minerals
Operational Review on page 28.

Weir Oil & Gas

Weir Oil & Gas provides highly
engineered and mission-critical
solutions to upstream markets.
Products include pressure pumping
and pressure control equipment and
aftermarket spares and services.
Internationally, we provide equipment
repairs, upgrades, certification and
asset management, and field services.

See more in the Oil & Gas
Operational Review on page 34.

Weir Flow Control

Weir Flow Control designs and
manufactures valves and pumps.
It also provides specialist support
services to the global power
generation, industrial, oil and gas
and other aftermarket-orientated
process industries.

See more in the Flow Control
Operational Review on page 40.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information04

Our Market Drivers
Responding to a changing environment

The Group’s diverse markets, including leadership positions
in mining and shale energy, mean it is positioned to benefit
from some of the major structural changes taking place in
the global economy.

Global population and migration trends

Climate-driven change

Socio-economic environment

Technology acceleration

The world’s population was estimated to be 7.4 billion
people in 2017, with the latest analysis from the United
Nations suggesting it could grow to 8.3 billion by 20301
– a growth rate of 83 million people annually.

Concerns over climate change has led a number of countries
to set long-term targets to ban the sale of cars powered only
by fossil fuels. The UK and France have said any ban would
take place after 2040, while China has not set a specific date.

While the pace of growth has slowed in recent years,
the upward trend continues. As a result, and supported
by increased urbanisation, demand for natural resources
and energy, which drives the Group’s primary markets,
is expected to continue to rise.

Moves to reduce emissions and increase the use of electric
vehicles is likely to have a long-term impact on commodities
such as oil, while also increasing demand on other sources
of energy, from natural gas to wind and solar.

Our response
As the global population grows, and more people move
from the countryside to cities, demand increases for the
commodities produced by our mining, oil and gas and
power customers.

Our response
The Group operates in a diverse range of markets that
have the potential to be impacted in different ways by
the growth in electric transportation and efforts to tackle
climate change.

As infrastructure investment increases, there will be
additional demand for commodities processed by Weir’s
equipment. The Group has also expanded into adjacent
markets, such as sand and aggregates, that have a more
direct relationship to infrastructure-led demand.

As consumption increases in emerging economies, there
will also be additional demand for commodities supported
by the Group’s equipment.

1. https://esa.un.org/unpd/wpp/Publications/Files/WPP2017_KeyFindings.pdf

While there is uncertainty about when demand for oil may
peak, it is likely to play a major role in the global energy
mix for decades to come. Meanwhile, natural gas, which
produces significantly lower emissions of carbon dioxide
than coal, is becoming an increasingly popular source of
energy in both advanced and emerging markets. Increased
use of solar energy and electric vehicle adoption will also
increase demand for metals such as copper, with solar
energy and electric vehicles requiring significantly more
copper, lithium and cobalt than traditional alternatives.

You can read more in
Operating Review on page 28.

Also see Principal Risks
and Uncertainties.

Also see Our Strategy
at a Glance on page 12.

The global policy environment is evolving with increased

political uncertainty in some regions as the benefits of

The digitisation of industrial products and services is a

major technology trend. It includes the so-called ‘Internet

globalisation are questioned and trade pacts are renegotiated.

of Things’ (IoT) that combines sensors, cloud computing

Global economic growth continues to increase with emerging

productivity and create new solutions.

economies such as India and China experiencing the largest

percentage increases. Meanwhile, many governments have

At the same time, advanced manufacturing techniques,

and big data analysis to offer opportunities to increase

made infrastructure investment, both domestically and

internationally, a priority.

including 3D printing, continue to improve offering

opportunities for factories and other industrial facilities

to become more efficient in the future. Innovation in

materials science also offers the potential to provide

alternative production methods.

Our response

The Group operates in more than 70 countries allowing

it to pursue opportunities on a global scale. We have an

established presence in many of the fastest-growing

economies, such as China and India, and are actively

engaged with key stakeholders in these countries to

understand the opportunities ahead. The diversity of

Our response

The Group has developed a new technology strategy that

incorporates how we will adapt and succeed using these

emerging technologies. Working in partnership with fellow

technology leaders Microsoft and Dell, we have developed

our own IoT platform that utilises sensor technology, cloud

computing and machine learning. Trials of Synertrex® are

our operations also mitigates political risk more widely.

currently underway in a number of global markets.

We are also committed to extending our capabilities in

advanced manufacturing, materials science and increasing

the sustainability of our markets through improving energy

and water efficiency. More details on our technology

strategy can be found on page 18.

The Weir Group PLCAnnual Report and Financial Statements 201705

Global population and migration trends

Climate-driven change

Socio-economic environment

Technology acceleration

The world’s population was estimated to be 7.4 billion

people in 2017, with the latest analysis from the United

Nations suggesting it could grow to 8.3 billion by 20301

– a growth rate of 83 million people annually.

Concerns over climate change has led a number of countries

to set long-term targets to ban the sale of cars powered only

by fossil fuels. The UK and France have said any ban would

take place after 2040, while China has not set a specific date.

While the pace of growth has slowed in recent years,

the upward trend continues. As a result, and supported

by increased urbanisation, demand for natural resources

and energy, which drives the Group’s primary markets,

is expected to continue to rise.

Moves to reduce emissions and increase the use of electric

vehicles is likely to have a long-term impact on commodities

such as oil, while also increasing demand on other sources

of energy, from natural gas to wind and solar.

Our response

As the global population grows, and more people move

from the countryside to cities, demand increases for the

commodities produced by our mining, oil and gas and

The Group operates in a diverse range of markets that

have the potential to be impacted in different ways by

the growth in electric transportation and efforts to tackle

power customers.

climate change.

As infrastructure investment increases, there will be

additional demand for commodities processed by Weir’s

equipment. The Group has also expanded into adjacent

markets, such as sand and aggregates, that have a more

direct relationship to infrastructure-led demand.

While there is uncertainty about when demand for oil may

peak, it is likely to play a major role in the global energy

mix for decades to come. Meanwhile, natural gas, which

produces significantly lower emissions of carbon dioxide

than coal, is becoming an increasingly popular source of

energy in both advanced and emerging markets. Increased

As consumption increases in emerging economies, there

use of solar energy and electric vehicle adoption will also

will also be additional demand for commodities supported

increase demand for metals such as copper, with solar

by the Group’s equipment.

1. https://esa.un.org/unpd/wpp/Publications/Files/WPP2017_KeyFindings.pdf

energy and electric vehicles requiring significantly more

copper, lithium and cobalt than traditional alternatives.

The global policy environment is evolving with increased
political uncertainty in some regions as the benefits of
globalisation are questioned and trade pacts are renegotiated.

Global economic growth continues to increase with emerging
economies such as India and China experiencing the largest
percentage increases. Meanwhile, many governments have
made infrastructure investment, both domestically and
internationally, a priority.

Our response
The Group operates in more than 70 countries allowing
it to pursue opportunities on a global scale. We have an
established presence in many of the fastest-growing
economies, such as China and India, and are actively
engaged with key stakeholders in these countries to
understand the opportunities ahead. The diversity of
our operations also mitigates political risk more widely.

The digitisation of industrial products and services is a
major technology trend. It includes the so-called ‘Internet
of Things’ (IoT) that combines sensors, cloud computing
and big data analysis to offer opportunities to increase
productivity and create new solutions.

At the same time, advanced manufacturing techniques,
including 3D printing, continue to improve offering
opportunities for factories and other industrial facilities
to become more efficient in the future. Innovation in
materials science also offers the potential to provide
alternative production methods.

Our response
The Group has developed a new technology strategy that
incorporates how we will adapt and succeed using these
emerging technologies. Working in partnership with fellow
technology leaders Microsoft and Dell, we have developed
our own IoT platform that utilises sensor technology, cloud
computing and machine learning. Trials of Synertrex® are
currently underway in a number of global markets.

We are also committed to extending our capabilities in
advanced manufacturing, materials science and increasing
the sustainability of our markets through improving energy
and water efficiency. More details on our technology
strategy can be found on page 18.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information06

Chairman’s Statement
Generating value for all our stakeholders

While 2017’s market trends provided
a welcome tailwind, they were
anticipated by the Group and Weir
was well positioned to act quickly
and take full advantage of the upturn
in both North American oil and gas
and global mining markets.

This led the Group to outperform these
markets and in doing so reaffirmed the
strength of its business model, the clarity
of its strategy and quality of our near
15,000 people around the world. The
Board experienced this directly on a visit
to South Africa, where the benefits of
Weir’s culture and commitment to being
an active partner in local communities
was a real highlight.

You can read more about the Board’s
visit on page 81.

On behalf of the Board, I wish to record
our gratitude to all Weir employees
for their efforts throughout the year
in delivering for our shareholders,
customers and communities.

Financial results
I am pleased to report a strong year
of growth for your Company. Reported
revenues increased to £2,356m, up 28%.
On a constant currency basis, revenues
were 19% higher year-on-year. Pre-tax
profits from continuing operations,
before exceptional items and intangibles
amortisation, of £250m represent
a 47% increase on the previous year.
Reported profit after tax of £162m
was up 274% from 2016.

You can read more in the Financial
Review on page 24.

Shareholder returns
We are proposing a final dividend
payment of 29.0p per share, making
44.0p for the full year.

Sustainable growth
By definition, Weir, with its heritage
stretching back to 1871, has proven
itself to be a sustainable business.
This has been achieved, amongst other
things, by aligning the interests of the
Group with those of the communities
in which we operate.

Charles Berry
Chairman

Dear Shareholder,
2017 saw the Group take full
advantage of the improvement
in our main markets by leveraging
our business model and effectively
delivering our strategy to produce
increased value for our stakeholders.

Corporate Governance

You can read more about
how we comply with the UK
Corporate Governance Code
in the sections opposite:

Corporate Governance Report

Our Board of Directors

Our Group Executive

Nomination Committee Report

Audit Committee Report

Remuneration Committee Report

Directors’ Report

116

The Weir Group PLCAnnual Report and Financial Statements 201707

Our culture
and values
Everything we
do as a company
stems from our
core values:

Think
‘safety first’

Delight our
customers

Deliver
quality

Do the
right thing

Explore
and innovate

Clare Chapman and Barbara Jeremiah
joined the Board as Non-Executive
Directors in August of 2017. Clare is
the former Group People Director of
BT Group plc and succeeded Melanie
Gee as the Chair of the Remuneration
Committee. Barbara, who is a former
Executive Vice-President of Alcoa, joined
the Audit and Remuneration Committees.
In January 2018, Stephen Young, former
CEO of Meggitt plc, joined the Board and
he will succeed Alan Ferguson as Audit
Committee Chairman from 28 April 2018.

Looking ahead to the rest of 2018, the
Board will focus on continuing to support
CEO Jon Stanton as he executes our
strategy and builds an even more
sustainable business.

Charles Berry
Chairman
28 February 2018

The Board recognises that
the business will be more
successful if it partners with
stakeholders and makes a
positive contribution to society.

Members of the Board
visited customers as
part of its meeting
in South Africa.

You can
read more in
Governance
in Action on
page 81.

A
d
d
i
t
i
o
n
a
l

n
f
o
r
m
a
t
i
o
n

The Board recognises that the business
will be more successful if it partners
with stakeholders and makes a positive
contribution to society. The Group does
this in a variety of ways from supporting
local employment and suppliers to
working with governments and local
communities to help educate the next
generation of engineers.

In the UK, this includes the Primary
Engineer programme that aims to
encourage young pupils from all
backgrounds to consider a career
in science, technology, engineering
or mathematics.

The Group is also promoting greater
diversity and inclusion in a sector that
has traditionally been male-dominated.
The best ideas come from a variety of
perspectives and, as a company that
relies on the innovation and ingenuity of
all our people, we need to be a workplace
that allows everyone’s talent to flourish.

The Board will reach its aim of ensuring
that at least a third of its members are
female following the 2018 Annual General
Meeting (AGM), two years ahead of our
original 2020 target.

While this is welcome progress, we
must increase diversity throughout the
organisation, from those starting out in
their careers to senior leaders, and each
business has plans in place to help them
achieve this aim.

Governance and Board changes
As previously announced, there were
some significant changes to the
composition of your Board in 2017.

On 30 September, Melanie Gee stood
down as a Non-Executive Director and
Chair of the Remuneration Committee,
having served for six years. John Mogford
and Alan Ferguson also announced during
the year that they would not be seeking
re-election at the 2018 AGM, having
served ten and seven years respectively.

I would like to formally record the
Group’s thanks to Melanie, John and
Alan for their exceptional service to
Weir during their terms.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial Statements

Chief Executive Officer’s Review
Delivering sustainable long-term performance

Strategic progress

People

Safety is our number one priority and
I am pleased to report excellent progress
in the past year. The Group’s total incident
rate (TIR), our primary measure of safety
performance, reduced from 0.66 to 0.53,
a 20% improvement. This has been
achieved by a clear commitment from the
top of the organisation through the Chief
Executive’s Safety Committee and other
initiatives, but more importantly by the
widespread adoption of a bottom-up
behavioural safety culture that focuses
on reducing harm and ensuring our
people have a safe start, safe finish and
safe journey home. There are parts of
the Group that consistently achieve zero
harm, but we won’t be satisfied until that
is consistent across all our businesses.

In addition to improving safety, we
have also re-invested in our people
development programmes. This was
an area where the business cut
back during the downturn and it was
important to rebuild in order to maintain
our strong record of execution. Having
leaders who can mentor and develop
the potential of their teams is vital. The
quality and passion of our people is a real
differentiator for Weir and ensuring we
have a highly skilled and fully engaged
workforce is critical to our future success.

Going forward, safety will continue to be
our number one priority. We have also
developed a new people strategy aimed
at strengthening our culture and inspiring
our people to reach their potential and
build a personal legacy. It includes
a new approach to strategic workforce
planning and reviewing the employee
experience to ensure it aligns with
our culture and allows us to recruit and
retain a diverse and vibrant workforce.

To help ensure our performance is fully
aligned to the interests of our investors
we’ll introduce an all-employee share
ownership plan in 2019. The success of
the Group depends on the efforts of all
our people and it is right that we give
them a real stake in our future. You can
read further details of our proposed plan
in our Remuneration Committee report
from page 95.

Jon Stanton
Chief
Executive
Officer

2017 saw the Group deliver strong
growth and strategic progress by
being proactive and leveraging our
leadership positions in increasingly
attractive markets.

This time last year I set out our new
‘We are Weir’ strategic framework.
It gave the Group a clear future
direction and articulated the distinctive
competencies – People, Customers,
Technology, and Performance – that
will help Weir achieve our vision of
being the most admired engineering
business in our markets.

As 2017 progressed, ‘We are Weir’ gained
real traction across the business with
teams from all over the world contributing
to a vibrant debate about how best to
execute our new strategy and deliver
strong returns for all our stakeholders.

That passion and shared sense of
purpose is extremely important and
powerful. As we look to the future,

we have a good sense of where we
want to go as a business and how we
are going to get there. That includes
agreeing new key performance indicators
to be delivered over the medium term,
starting in 2018. They are:

• Improved sustainable engagement
and organisational effectiveness

• Increased market share
• Improved percentage of revenues

from new solutions

• Sustainably higher margins through

the cycle

These indicators will guide our short-
to medium-term progress and will
require excellent execution of our
strategy, building on the good
progress delivered in 2017.

The Weir Group PLCAnnual Report and Financial Statements 201709

A CEO ‘Town Hall’
meeting in Jiading,
China.

(2016: £27m) representing 1.7% of
sales, up from 1.5% in 2016. Our next
generation frac pump, the SPM® QEM
3000, is on trial with a number of the
larger oilfield services companies,
positioning the Group to benefit from
any capital replacement cycle as frac
fleets are upgraded in the future.

More than 80 VCE projects were
initiated, supported by extensive training
programmes, and targeted at increasing
on time delivery and reducing inventory
turns. While overall working capital
increased during the year as the business
grew quickly, there was progress on
increasing inventory turns.

The Group’s Internet of Things (IoT)
technology, Synertrex®, was also
successfully trialled in a number of
regions, allowing customers to easily
monitor the performance of their
equipment and giving Weir valuable
data to support future innovation.

Alongside our established process of
product development, the Group has
developed a new technology strategy
that will ensure we continue to lead
the change in our markets and build
on our legacy of innovative engineering.
It includes increasing the digitisation
of our solutions and operations,
integrating advanced manufacturing into
our factories, reinforcing our materials
science leadership and developing ways
to reduce our customers’ energy and
water consumption; helping underpin
the sustainability of our end markets.

Performance

Operational excellence has been a
traditional strength of the Group and
in 2017 we took important steps to
reinvigorate our Value Chain Excellence
(VCE) initiatives across the business.
Reviews were conducted to assess
the potential of every business unit
to make improvements.

In 2018, we expect that progress to
accelerate as we see some of the
benefits of our renewed focus on
operational excellence come through.
In the longer term, we aim to significantly
improve working capital performance
supporting the Group’s ability to invest
in further growth opportunities.

Capital allocation
In July, the Group acquired leading
South East Asian wellhead manufacturer
KOP Surface Products for an equivalent
enterprise value of US$114m to support
growth of our pressure control offering
in the eastern hemisphere. KOP’s
technology complements Weir’s
existing Oil & Gas portfolio and will
help accelerate progress in attractive
Middle East and Asian markets.

2017 markets and business review
The Group’s financial performance in 2017
reflects the proactive approach taken by
the business to act early and invest in
extending our competitive advantages.
This, coupled with rapid improvement
in market conditions in North American
oil and gas and increased investment
by miners on brownfield assets,
contributed to a 20% increase in
constant currency orders.

Customers

Our customers are the reason we exist
and thrive. Every Weir colleague should
wake up each day thinking how we can
do more to help our customers do better.

Traditionally, we have taken a product-led
approach, but as part of the We are Weir
strategic framework, we are moving to an
integrated solutions mindset in which our
people spend more time on site, listening
to customers’ operational challenges and
then designing a package of solutions to
help them achieve their goals.

This approach helps embed Weir
even further into the operations of our
customers and differentiates us more
clearly from competitors. In Minerals, it
helped increase orders ahead of global
mining and sustaining capital spending. Oil
& Gas also outperformed North American
rig count growth, leveraging their key
account management programme to build
even closer relationships with leading
oilfield services companies. Flow Control
grew aftermarket orders in tough markets
and reshaped its sales and marketing
structure to increase its customer intimacy.

We will continue to build even closer
customer relationships in the future,
building on the competitive advantage
provided by our comprehensive service
network and seeking to continue to take
early advantage of market trends. We
will also work closely with customers
to jointly develop new technologies
that help them achieve their objectives
and further embed Weir at the heart
of their operations.

You can read more in our divisional
operational reviews beginning on
page 28.

Technology

The Group delivered revenues of
£168m from new solutions in 2017, a
53% increase, as we continued to benefit
from our commitment to research and
development (R&D) during the downturns
that affected both mining and oil and gas
markets. We also made progress towards
our aim of investing 2% of revenues in
R&D with 2017 expenditure of £40m

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information10

Chief Executive Officer’s Review continued

Strong order growth

£2,395m

+20%

Revenues from new products

£168m

+53%

The performance of the Oil & Gas
division in particular was excellent. It
moved from a £9m operating loss in
2016 to an operating profit of £92m in
2017. As the oil price and North American
rig count recovered through the year, the
division’s main manufacturing facility in
Fort Worth, Texas, flexed its operations
and significantly increased capacity,
moving from one shift to three. As a
result of previous reductions in fixed
costs, the facility delivered excellent
operating leverage that contributed
to its overall performance.

Minerals delivered double-digit order
growth as it captured opportunities
in global mining markets. Alongside
its integrated solutions strategy that
delivered £67m in revenues, the division
invested in additional sales and project
engineers to support future growth,
as confidence and quotation activity
in mining markets increased.

As orders grew there were some
limited operational issues in the
division as a result of plant and
supply chain reconfigurations.
While these were short-term, they,
alongside the additional investment
and some project delays, had an
impact on the division’s operating
margin, but it remained within its
normal long-term range.

Flow Control turned a corner in the
second half of the year after its first
half performance was impacted by
tough market conditions in power and
downstream oil and gas, while the
division also recorded a one-off charge
of £13m resulting from legacy contract
challenges in its Gabbioneta business.
This resulted in the division recording
a small operating loss of £3m for the
full year. As 2017 progressed, there
were early signs of recovery in mid
and downstream oil and gas markets
while nuclear activity in China and
South Korea continued to progress,
with the division delivering good
growth in its valves aftermarket
business. After a restructuring of
its sales and marketing capability,
the division is now clearly focused on
capturing future growth opportunities.

Outlook for 2018
Customers in our main markets are
expected to increase investment in 2018
with global mining expenditure expected
to increase after a prolonged downturn.
Investment by exploration and production
companies in upstream North American
markets is also expected to increase,
supported by commodity prices and
increased efficiencies in the industry.
Power, mid and downstream oil
and gas markets are showing initial
indications of improvement.

To fully benefit from these trends,
the Group will leverage the four
distinctive competencies at the
heart of our strategic framework;
People, Customers, Technology
and Performance.

Looking to 2018, assuming market
conditions remain supportive, we
expect to deliver strong constant
currency revenue and profit growth
and further balance sheet deleveraging.

Jon Stanton
Chief Executive Officer
28 February 2018

My Team

See biographies
on page 70.

Team priorities
The Group Executive was strengthened in 2017 with the appointment of
Geetha Dabir as Chief Technology Officer and Rosemary McGinness as Chief
People Officer. Our medium-term key performance indicators are shown below:

People

Improved sustainable engagement
score and increased organisational
effectiveness

Customers

Increased market share

Technology

Improved percentage of revenues
from new solutions

Performance

Sustainably higher margins
through cycle

The Weir Group PLCAnnual Report and Financial Statements 2017
Chief Executive Officer’s Q&A
Building a stronger legacy

Rosemary McGinness, to ensure we
promote a high-performance culture
and have the capabilities we will need
to succeed in the years ahead. We’ll
do more work to refine that strategy
throughout 2018. We are also further
integrating sustainability throughout the
business and we’ll establish baselines
in the next year in terms of our own
performance, in addition to helping our
customers operate more sustainably.

Jon Stanton
Chief Executive Officer

Q What are your reflections on

your first full year as Weir CEO?

The main highlight for me was the
adoption of the We are Weir strategy.
I’ve spoken to hundreds of our people
in the past year and there has been
great enthusiasm from across our
global operations. This is a Group with
a strong culture, great optimism and
a clear view of the role we all have to
play in building a stronger legacy for
future generations.

Another highlight is the decisiveness
we showed in responding to the rapid
improvement in our core markets. We
were aggressive during the downturn
and we were determined to be equally
proactive in the upturn. I think we’ve
done that well, particularly in Oil & Gas,
where the recovery was steepest. We
did that while at the same time making
good strategic progress that will deliver
value over the long term.

In terms of improvements, I think we
still have work to do to optimise our
operations. 2017 was about identifying
opportunities and the years ahead will
be about seizing those opportunities to
become more efficient and better serve
our customers.

Q How has the Group’s strategy

developed in the past year?

We’ve made good progress in defining
our technology strategy during the year.
The appointment of our new Chief
Technology Officer, Geetha Dabir,
whose career has been spent in Silicon
Valley, has brought a new perspective
and focus to the business, as we
increasingly digitise our offering. We’re
also developing a new people strategy
led by our new Chief People Officer,

Q The Group operates in cyclical

markets, how sustainable are

current conditions?
Industry expectations are also for a
multi-year upturn in the mining capital
cycle supported by anticipated demand
for commodities like copper as the world
invests more in infrastructure and the
move towards electric vehicles.

In oil and gas we’ve clearly seen a
structural change with shale oil and
gas becoming very competitive and
maturing into a dependable source of
global energy supply. North America and
the Middle East are the most attractive
oil and gas markets in the world and
they also happen to be where most of
our activity in this industry takes place.
So I think we are in the right places, with
good market positions.

Finally, conditions in mid and downstream oil
and gas and power – both served by Flow
Control – are showing some green shoots
of recovery after a prolonged downturn.

Overall, our markets are increasingly
attractive and we are well positioned
to take advantage of those improved
conditions.

Q What are the other main trends

you see impacting the Group

in the future?
As a truly global business that serves
natural resources and energy customers,
there are many issues we look at. Firstly,
the health of the global economy, which
improved in 2017 as growth picked up
in advanced and emerging economies,
driving demand for commodities.

Secondly, tackling climate change is
clearly a priority and we are investigating
how we can help customers reduce
their energy and water usage as well
as reducing our own environmental
impact. And thirdly, technology is
changing rapidly, with ‘big data’ and
advanced manufacturing increasingly
important in the markets we serve.

That is why we have a new technology
strategy to take advantage of these
changes. There are many more issues
I could highlight, but uniting them all
is the importance of being proactive
and agile as a business so that we can
respond to changes quickly and capture
opportunities wherever they are.

Q And how does this impact your

view on allocating capital?
We have some really strong market
positions and we are focused on using
those as a platform to grow in what are
increasingly attractive markets.

Take comminution (crushing, grinding
and screening), where we increased
capability with the acquisition of
Trio Engineered Products in 2014.
This allowed us to offer our mining
customers a wider portfolio of
products while also giving us access
to sand and aggregates markets.

Since the acquisition, the Minerals
division has applied its materials
science knowledge to develop new
crusher technologies and leveraged
its comprehensive service network to
globalise the Trio brand in both mining
and sand, and aggregates, markets. To
give a sense of the progress, in 2017,
comminution revenues for original
equipment increased by a third.

So where there are opportunities
to accelerate our strategy through
disciplined mergers and acquisition
activity, we’ll take them.

This is a Group with
a strong culture, great
optimism and a clear
view of the role we all
have to play in building
a stronger legacy for
future generations.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information12

Strategy at a Glance

Our four distinctive competencies

Our vision
To be the most admired
engineering business in
our markets.

Our mission
To enable our customers
to sustainably and efficiently
deliver the energy and
resources needed by
a growing world.

Strategy in action
To achieve the Group’s vision
and mission, we leverage our
business model and focus on
four distinctive competencies:
People, Customers,
Technology and Performance.

You can read more in Our
Strategy in Action on page 14.

You can read more in Principal Risks
and Uncertainties on page 50.

You can read more in KPIs on page 22.

People

Customers

Technology

Performance

What we said we would do in 2017

•

Implement a new safety charter
and embed behavioural safety.

• Re-invest in leadership and
development programmes.
Improve diversity and conduct an
employee engagement programme
to support the We are Weir strategy.

•

What we achieved in 2017

•

• 20% improvement in total incident rate
to 0.53 – implemented a new Safety
Charter and rolled out a Group-wide
behavioural safety programme.
Increased female representation at both
Board and senior management levels
with every business developing diversity
and inclusion improvement plans to
widen the Group’s talent pool.
• Refreshed leadership training and
undertook a global programme of
increased employee engagement
to embed We are Weir.

Priorities for 2018

• We will develop best-in-class

behavioural safety.

• We will build organisational capability.
• We will develop a culture of the future
that inspires our people to build a
personal legacy.

Medium term key performance indicators

•

Improved sustainable engagement
score and increased organisational
effectiveness.

Associated principal risks

• Safety, Health and Environment.
• Staff recruitment, development

and retention.

• Technology and innovation.
• Political and social risk.

• Pursue more long-term relationships

• Expand customer digital offering.

•

Improve operational performance

with customers.

• Broaden skills base to reflect digitisation

including on time delivery and

• Shift from product focus to solutions

of industrial products.

inventory turns.

mindset.

• Embed new innovation framework

• Reinvigorate lean disciplines and

•

Improve customer insights into new

throughout the organisation.

product developments.

simplify value chain excellence process.

• Embed customer and Weir sustainability

goals in value chain improvements.

• Minerals grew orders ahead of

sustaining capital spending and

increased its order book by spending

more time on customers’ sites and

• Completed a new technology roadmap

• Minerals reconfigured its manufacturing

to be implemented from 2018 with a

focus on digital solutions, advanced

facilities and supply chain to increase

capacity ahead of the anticipated upturn

manufacturing, materials science and

in the mining capital cycle.

investing in additional sales, project and

water and energy efficiency.

• Oil & Gas delivered an excellent

product management experts in addition

• Deployed Synertrex®, the Group’s

to opening eight new service centres.

Internet of Things (IoT) platform, to

• Oil & Gas leveraged its key account

system to further embed Weir among

initial customer sites within the

Minerals division to enable better

operational performance, ramping up

its supply chain and workforce to enable

its main manufacturing facility to double

manufacturing volumes while also

Tier-1 oilfield service customers in North

monitoring and maintenance of assets.

delivering significant operating leverage.

America and fully capture its share of

• Oil & Gas introduced the Simplified

• Baseline Value Chain Excellence scores

the North American market upturn.

Frac Iron System that increases safety

were established for each business with

• Flow Control restructured its sales and

and reduced downtime on frac sites.

improvement plans and training in place

to further improve inventory turns and

shorten lead times.

marketing capability to better leverage

its divisional product portfolio across a

greater number of international markets

and EPC customers delivering good

aftermarket order growth.

•

Increase revenues from service

• Progress commercialisation

•

Improve VCE score.

centre networks.

•

Increase number of customer

partnerships on technology

development and trials.

• Develop improved Voice of Customer.

of Weir digital agenda.

• Further develop additive

manufacturing capability.

• Progress IT infrastructure and

systems development.

• Begin to implement sustainability

• Develop Weir innovation framework.

strategy.

•

Increased market share.

•

Increased percentage of revenues from

• Sustainably higher margins through

new solutions.

the cycle.

• Market volatility.

• Contract risk.

• Political and social risk.

• Technology and innovation.

•

IT security and continuity.

• Ethics, governance and control.

• Value Chain Excellence.

• Market volatility.

• Contract risk.

• Safety, health and environment.

• Technology and innovation.

•

IT security and continuity.

• Political and social risk.

The Weir Group PLCAnnual Report and Financial Statements 2017

People

Customers

Technology

Performance

• Pursue more long-term relationships

with customers.

• Expand customer digital offering.
• Broaden skills base to reflect digitisation

• Shift from product focus to solutions

of industrial products.

•

mindset.
Improve customer insights into new
product developments.

• Embed new innovation framework

throughout the organisation.

•

Improve operational performance
including on time delivery and
inventory turns.

• Reinvigorate lean disciplines and

simplify value chain excellence process.
• Embed customer and Weir sustainability

goals in value chain improvements.

• Minerals grew orders ahead of
sustaining capital spending and
increased its order book by spending
more time on customers’ sites and
investing in additional sales, project and
product management experts in addition
to opening eight new service centres.

• Oil & Gas leveraged its key account

system to further embed Weir among
Tier-1 oilfield service customers in North
America and fully capture its share of
the North American market upturn.
• Flow Control restructured its sales and
marketing capability to better leverage
its divisional product portfolio across a
greater number of international markets
and EPC customers delivering good
aftermarket order growth.

• Completed a new technology roadmap
to be implemented from 2018 with a
focus on digital solutions, advanced
manufacturing, materials science and
water and energy efficiency.

• Deployed Synertrex®, the Group’s
Internet of Things (IoT) platform, to
initial customer sites within the
Minerals division to enable better
monitoring and maintenance of assets.

• Oil & Gas introduced the Simplified

Frac Iron System that increases safety
and reduced downtime on frac sites.

• Minerals reconfigured its manufacturing
facilities and supply chain to increase
capacity ahead of the anticipated upturn
in the mining capital cycle.
• Oil & Gas delivered an excellent

operational performance, ramping up
its supply chain and workforce to enable
its main manufacturing facility to double
manufacturing volumes while also
delivering significant operating leverage.
• Baseline Value Chain Excellence scores
were established for each business with
improvement plans and training in place
to further improve inventory turns and
shorten lead times.

•

Increase revenues from service
centre networks.
Increase number of customer
partnerships on technology
development and trials.

• Develop improved Voice of Customer.

• Progress commercialisation

of Weir digital agenda.
• Further develop additive
manufacturing capability.

Improve VCE score.

•
• Progress IT infrastructure and

systems development.

• Begin to implement sustainability

• Develop Weir innovation framework.

strategy.

•

Increased market share.

•

Increased percentage of revenues from
new solutions.

• Sustainably higher margins through

the cycle.

• Market volatility.
• Contract risk.
• Political and social risk.
• Technology and innovation.

• Technology and innovation.
IT security and continuity.
•

• Ethics, governance and control.
• Value Chain Excellence.
• Market volatility.
• Contract risk.
• Safety, health and environment.
• Technology and innovation.
IT security and continuity.
•
• Political and social risk.

Our four distinctive competencies

What we said we would do in 2017

•

Implement a new safety charter

and embed behavioural safety.

• Re-invest in leadership and

development programmes.

•

Improve diversity and conduct an

employee engagement programme

to support the We are Weir strategy.

What we achieved in 2017

• 20% improvement in total incident rate

to 0.53 – implemented a new Safety

Charter and rolled out a Group-wide

behavioural safety programme.

•

Increased female representation at both

Board and senior management levels

with every business developing diversity

and inclusion improvement plans to

widen the Group’s talent pool.

• Refreshed leadership training and

undertook a global programme of

increased employee engagement

to embed We are Weir.

Medium term key performance indicators

Priorities for 2018

• We will develop best-in-class

behavioural safety.

• We will build organisational capability.

• We will develop a culture of the future

that inspires our people to build a

personal legacy.

•

Improved sustainable engagement

score and increased organisational

effectiveness.

Associated principal risks

• Safety, Health and Environment.

• Staff recruitment, development

and retention.

• Technology and innovation.

• Political and social risk.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

Strategy in Action:

People
The Group is committed to delivering
a zero-harm workplace for all our
people. Everyone has the right and
responsibility to stop operations if
they have any safety concerns.

Keeping our people safe

Overview
The Group is committed to delivering
a zero-harm workplace for all our people.
This means ensuring they have a safe
journey to work, care for each other
and return to their families safe and
healthy each day. A safe Weir is
ultimately a more efficient and
productive organisation generating
value for all our stakeholders.

To achieve this we have a comprehensive
strategy based around our Weir Zero
Harm programme, which started in 2011
and since then has continually evolved,
delivering year-on-year improvements
in safety for all our people.

Progress achieved in 2017 was
enhanced by a focus on behaviours.
This saw a concerted Group-wide effort
to encourage people at every level of
the organisation to look for, demonstrate
and promote the behaviours that keep
them and their colleagues safe.

Overall, this emphasis on behavioural
safety helped achieve a 20%
improvement in total incident rate
to 0.53.

Roberto Kuahara, Divisional Vice President of
Operations and Value Chain Excellence at Weir
Oil & Gas, led the team that delivered behavioural
safety training to 90% of Weir Pressure Pumping.

The Weir Group PLCAnnual Report and Financial Statements 201715

It was seen as critical that
every person in the business
unit understood the Company’s
health and safety roadmap
and what role they could play
in improving their own working
space and environment.

Changing behaviours
In 2017, our new health and safety charter
and programme was rolled out across
all businesses. One of our units, Weir
Pressure Pumping, based in Fort Worth,
Texas, is our largest facility and over the
course of the year they have delivered
marked improvements across a number
of areas.

Sharing best practice
In early February 2017, Weir Pressure
Pumping rolled out initial pilot training
across a number of functional areas
including Supply Chain and Operations,
with the aim of embedding a new
behavioural approach within the
business towards health and safety
and hazard perception.

This was achieved by moving to a
more proactive approach when dealing
with health and safety issues, with all
employees empowered to call out safety
concerns to colleagues and managers.

To achieve a change in behaviour and
attitude within the business, it was
essential that all employees were
given the training and tools needed
to improve their safety and the welfare
of their colleagues.

It was seen as critical that every person
in the business unit understood the
Company’s health and safety roadmap
and what role they could play in improving
their own working space and environment.
Part of this training included teaching
managers to seek mentoring opportunities
that are designed to enable comfortable
conversations between colleagues about
reducing risk.

Around 90% of the workforce were
trained in 2017, and by the end of the
year, 694 mentoring opportunities had
been recorded, each one providing a
unique opportunity for management to
speak with an employee and discuss
potential improvements. The more of
these discussions that take place, the
less likelihood there is of an injury or
accident occurring. The business is also
ensuring that all observations are shared
globally online to allow the wider Group
visibility and the opportunity to learn
from these procedures.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information16

Strategy in Action:

Customers
The Group is moving from a traditional
focus on selling individual products to
a solutions mindset across our new
and established markets. This means
more deeply embedding Weir into the
operations of our customers to better
understand their challenges and help
them meet their objectives.

Increasing customer productivity

This approach, combined with the
division’s integrated solutions strategy to
focus on helping customers improve the
productivity of their existing or brownfield
assets, has increased Weir’s installed
base of original equipment in markets
that generate significant aftermarket
demand for spares and services.

Overview
Part of the Group’s strategy has been to
extend into adjacent markets where we
can leverage our technology leadership
and materials science expertise.
Comminution (crushing, grinding and
screening) is a process common to both
mining and sand and aggregates markets.
Since the acquisition of Trio Engineered
Products in 2014, the Minerals division
has developed new crusher products
and globalised Trio’s offering, leveraging
its customer relationships in markets
around the world.

CNC owner Carl Crous at his plant
in South Africa.

The Weir Group PLCAnnual Report and Financial Statements 201717

The challenge
Weir Minerals customer CNC
Crushers (Pty) Ltd operates a crushing
and screening plant in the North West
province of South Africa. The aggregates
plant, which has been operating since
2006, used older model crushers and
screens with outdated technology.
This led to high wear on crusher
liners, increased oil consumption
and costly unplanned downtime,
that all impacted productivity.

To support the future operations of
the plant, a service agreement was
signed between Weir Minerals and
CNC Crushers. Regular inspections
are now conducted by a Trio® product
support specialist and all machines are
well maintained. The service agreement
ensures best practice is adhered to in
operating and maintaining the equipment.
This helps the plant achieve maximum
availability and long operational life of
its equipment.

Our solution
The Weir Minerals team proposed
upgrading the secondary cone crusher
from an old technology to a new Trio®
TC51 standard hydraulic cone crusher.

The tertiary cone crusher was also
changed to a Trio® TC36 standard
hydraulic cone crusher. The new
technology Trio® cone crushers feature
a hydraulically adjusted closed side
setting and relief, allowing for quick
adjustment and providing added
protection by preventing uncrushable
material from entering the crusher and
causing damage. In addition, three Trio®
inclined screens were installed.

The results
Since the Weir team deployed an
integrated solutions approach:

• Plant production has improved by
60% as a result of the maximum
availability of equipment.

• Downtime for liner changes has

reduced by 13%.

• Start-up procedures are quick and
simple, while adjustment of the
crusher takes only 5 minutes
compared to 90 minutes with the
old technology crushers.

• Socket liner life has extended from
two months to over 12 months due
to the lubrication power unit system
used with the Trio® equipment.

• The payback period for the package
of solutions was just 24 months.

Crusher and screen performance
are now predictable, maintenance
is predictable and future planning
is possible without running
operations from day to day.
Working with Weir was one
of the best things I have ever
done and I should have done
this a long time ago.

CNC owner
Carl Crous

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information18

Strategy in Action:

Technology
The Group’s technology leadership in its
main markets is a significant competitive
advantage. As our markets evolve, we
are committed to leading the technology
change in our industries.

Our new technology roadmap

Overview
In 2017, the Group developed a new
technology roadmap aimed at ensuring
we continue to maintain and enhance
our market leadership positions to
take full advantage of emerging
technology trends.

These include improving customers’
digital experience and the increasing
digitisation of industrial products
through the so-called Internet of Things
(IoT). IoT deploys sensors on machines
and extracts and transmits the data
using cloud software. It also involves
the use of machine learning to analyse
the vast amount of ‘big data’ produced
by industrial products.

The strategy includes opportunities to
develop and deploy software platforms
that enhance Weir’s own operations
enabling the Group to achieve future
efficiencies. These include smart
factories and advanced manufacturing,
where we have already seen initial
benefits from the 3D printing of some
component parts.

And to enhance the sustainability of
our main markets such as mining, we
are examining how we can help our
customers reduce their energy and water
consumption using our engineering
and materials science expertise.

The Weir Group PLCAnnual Report and Financial Statements 2017
19

Synertrex® is designed
to provide better insight
into our products to
help reduce downtime,
enhance performance
and improve the safety of
our customers’ operations.

Helping optimise assets
Synertrex® will enhance our product
and service offering, enabling our
customers to better understand how
our products operate in real-time.
From the data collected, we can
advise our customers on how they
can make better use of our products.

Readings and critical extracts of the
real-time data are sent to the cloud
where it can be displayed on our
customers’ performance dashboard,
sent as an alert to their mobile device
or stored for further analysis using
analytical tools. Integrating data directly
into our customers’ existing operational
systems ensures ease of access anytime,
anywhere for operators, maintenance
teams and process engineers, to optimise
operational performance and reliability.

Synertrex®, Weir’s IoT platform
The Group’s Synertrex® IoT solution
was deployed to customer sites in 2017
following a significant development
stage of the technology that involved
partnerships with Microsoft and Dell.

Synertrex® is designed to provide
better insight into our products to
help reduce downtime, enhance
performance and improve the safety
of our customers’ operations.

Synertrex® uses expertly placed sensors
to capture data to identify ways to ensure
our equipment achieves its optimal
performance. For example, by capturing
vibration data on a mining screen, we can
gain detailed insights into the equipment’s
behaviour. This data can be captured by
computers placed in close proximity to
our equipment and analysed to determine
whether an alarm should be raised. This
alarm will notify one of our local engineers
who can go to the site and solve the issue
at hand, in many cases preventing
unplanned and expensive downtime.

The Group’s new technology strategy
builds on Weir’s leadership positions
in its main markets.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information20

Strategy in Action:

Performance
Utilising Value Chain Excellence (VCE)
to deliver improved efficiencies for
our customers and drive change
across the organisation.

Continuous improvement

Overview
VCE is a vital component in optimising
our business performance and delivering
improved efficiencies to our customers.
VCE uses a structured framework and
set of tools to drive change across the
organisation to add value, eliminate
waste and improve our bottom line.
There are five themes in our VCE
process: customer, procurement,
engineering, planning and lean
management. These look at ways to
eliminate all types of waste or non-value
added activities. By analysing and
evaluating our performance in each of
these areas against key performance
indicators, we are able to drive
improvements for customers.

In 2017, we took steps to re-focus
our VCE strategy, attempting to
improve our performance in three
key areas: increasing on-time delivery,
improving inventory turns and reducing
the cost of poor quality.

The Weir Group PLCAnnual Report and Financial Statements 201721

Adopting VCE in operations
Weir Malaysia identified an opportunity
to use VCE methods to increase
efficiency and customer satisfaction.

The business, which delivers rubber
sheets to customers’ specific
requirements, focused its efforts
on improving machine performance
to deliver higher output and reduce
waste. By adopting lean manufacturing
tools such as value stream mapping,
‘kaizens’ and a daily ‘war room’ for team
meetings, they identified opportunities
to increase productivity.

The value of VCE
By using VCE tools to identify and
improve operations, the business
has increased machine efficiency
and productivity. This has translated
into greater velocity and ultimately
improved on-time-delivery, which
has led to greater customer demand.

Weir Malaysia is now focusing on
maintaining its new standards and
achieving continual improvements.
The VCE lessons of 2017 are now
being shared across departments.

Key lessons include the value of
engaging a wide variety of stakeholders
to increase collaboration and deliver
improved performance for the business
and better outcomes for customers.

The opportunities were digitally
simulated to test the results of this
approach and analyse the potential
to reduce machine downtime and
increase throughput. The business
constantly evaluated performance
and focused on any deviation, putting
corrective actions in place quickly.

In addition, the business trained staff
to have the essential skills they need
to work across a set of machines,
all underpinned by appropriate safety
and risk assessments.

Utilising a variety of Value Chain
Excellence methods, Weir Malaysia
has consistently managed to improve
the on-time delivery rate of its rubber
sheet products.

VCE relies on our people,
customers and technology
working together to drive
improved performance at
the heart of our business.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information22

Key Performance Indicators
Measuring our progress

2017 Key
Performance
Indicators

2018 Key
Performance
Indicators

2015

2016

2017

KPI

Orders1

Description

£2,080m

2015

£220m

2015

£396m

£1,989m

2016

£170m

2016

£293m

£2,395m

2017

£250m

2017

£221m

KPI

Profit before tax2,3

Cash flow

Profit before tax2,3

Engagement and

Market share

New solutions

Margins

KPI

Cash

effectiveness

Description

Profit before tax.

Description

Working capital as a

percentage of sales.

Sustainable engagement and

Increased market share.

Improved percentage of

Sustainably higher margins

organisational effectiveness.

revenues from new solutions.

through the cycle.

Description

The Group delivered strong order
growth in both its Oil & Gas and
Minerals divisions as demand for its
solutions increased. Flow Control
orders were impacted by tough
market conditions in both power and
downstream oil and gas markets.

Profit before tax increased significantly
principally reflecting a return to growth
by the Oil & Gas division. Profitability in
Minerals was impacted by investment
in growth initiatives, project phasing
and plant reconfigurations. Flow
Control was impacted by one-off
charges in the first half.

Cash flow from operations reduced
as a result of increased investment
in working capital to support strong
growth, particularly in the Minerals
and Oil & Gas divisions. Flow Control’s
cash flow performance reflected its
reduced profitability.

Definition

Orders represent a confirmed
request from a customer to buy or
receive goods and services under
specified terms and conditions.
When accepted, an order becomes
a legally binding contract. Order
trends indicate market demand for
the Group’s solutions.

Profit before tax is the profit made
by the Group before the payment of
corporation tax. It is a good indicator
of performance, including the capital
structure of the Group, without being
influenced by the impact of different
tax regimes around the world.

Cash flow from operations included
both continuing and discontinued
operations. It is an indicator of the
Group’s ability to support its financing
requirements, including payment of
dividends to shareholders.

Working capital as a

Blended metric that

The proportion of an

New solutions are defined as

Delivering sustainably higher

percentage of sales is a

captures an evaluation of

addressable market’s total

having been commercialised

operating margins through

good indicator of operational

employee engagement and

sales that are captured by a

in the last three years.

process improvements and

efficiency in the business.

demonstrates increased

product, service or company.

elimination of waste.

organisational effectiveness.

Link to strategy

Order trends indicate the success
of the Group’s customer strategy in
growing market share by providing
distinctive solutions that deliver
compelling value for money.

Profit before tax indicates the value
generated by the Company in the
year and as such is an important
indicator of progress in executing
the Group’s strategy.

Positive cash flow indicates the ability
of the Group to generate the cash to
support investment in its strategy
and ensure it has sufficient liquidity
to meet its financial obligations.

Performance: delivering excellence
for all our stakeholders through
strong leadership, accountability
and a lean mindset.

Performance: delivering

People: caring for our

Customers: working in

excellence for all our

colleagues, our neighbours

partnership to provide

Technology: driving the

development of new

Performance: delivering

excellence for all our

stakeholders through strong

and the environment and

distinctive solutions

technologies and capabilities

stakeholders through strong

leadership, accountability

inspiring them to flourish.

that deliver compelling

that lead the market is one of

leadership, accountability

and a lean mindset.

value for money.

the Group’s four distinctive

and a lean mindset.

competencies.

Remuneration linkage

Order performance is directly linked
to the annual bonus awarded to
Executive Directors. Further details
can be found in the Remuneration
report on page 95.

Profit before tax is directly linked to
the annual bonus awarded to Executive
Directors. Further details can be found
in the Remuneration report on page 95.

Cash flow is directly linked to the
annual bonus awarded to Executive
Directors. Further details can be
found in the Remuneration report
on page 95.

Profit before tax is directly linked
to the annual bonus awarded
to Executive Directors.

Working capital as

a percentage of sales

is directly linked to the

annual bonus awarded

to Executive Directors.

Employee engagement

is directly linked to the

annual bonus awarded

to Executive Directors.

Increased market share

Revenues from new solutions

Sustainably increasing

is directly linked to the

annual bonus awarded

to Executive Directors.

is directly linked to the

annual bonus awarded

to Executive Directors.

margins is directly linked to

the annual bonus awarded

to Executive Directors.

Target

2018 Target

– The target for 2017 ranged from

– Financial targets will be disclosed

– Financial targets will be

– Drive a best in class

– Increase revenues from

– Progress commercialisation

– Improve VCE scores.

entry level at £2,138m to a
maximum award at £2,563m.

entry level at £194.9m to a
maximum award at £263.7m.

entry level at £314.6m to a
maximum award at £386.4m.

in the 2018 Annual Report.

disclosed in the 2018

behavioural safety culture.

service centre networks.

of Weir digital agenda.

– Progress IT infrastructure

1. 2016 restated at 2017 average exchange rates.
2.

Adjusted to exclude exceptional items and intangibles amortisation. Reported operating profit and profit before tax from continuing operations were
£223m (2016: £90m) and £181m (2016: £43m) respectively.
Continuing operations excludes American Hydro Corporation and Ynfiniti Engineering Services. Details of other non-GAAP measures are contained
in note 2 of the financial statements.

Annual Report.

– Build organisational

– Increase number of

– Further develop advanced

and systems development.

effectiveness through

customer technology

manufacturing technology.

– Begin implementation of

execution of the people

partnerships.

– Develop innovation

sustainability strategy.

strategy and diversity

– Progress Voice of

framework.

improvement.

Customer development.

– Define suitable baseline

measure of sustainable

employee engagement and

organisational effectiveness.

The Weir Group PLCAnnual Report and Financial Statements 20172018 Key

Performance

Indicators

KPI

Profit before tax2,3

Description

Profit before tax.

Profit before tax is the profit made

by the Group before the payment of

corporation tax. It is a good indicator

of performance, including the capital

structure of the Group, without being

influenced by the impact of different

tax regimes around the world.

Performance: delivering excellence

for all our stakeholders through

strong leadership, accountability

and a lean mindset.

Profit before tax is directly linked

to the annual bonus awarded

to Executive Directors.

We have updated our Key Performance Indicators for 2018 with a close alignment to the successful execution of our
We are Weir strategy and they are directly linked to Executive Director remuneration.

The six 2018 KPI targets are directly linked to Executive Director
remuneration. See page 102 for more details.

Strategic objectives

KPI

Cash

KPI

Engagement and
effectiveness

Market share

New solutions

Margins

Description

Working capital as a
percentage of sales.

Sustainable engagement and
organisational effectiveness.

Increased market share.

Improved percentage of
revenues from new solutions.

Sustainably higher margins
through the cycle.

Definition

Working capital as a
percentage of sales is a
good indicator of operational
efficiency in the business.

Blended metric that
captures an evaluation of
employee engagement and
demonstrates increased
organisational effectiveness.

The proportion of an
addressable market’s total
sales that are captured by a
product, service or company.

New solutions are defined as
having been commercialised
in the last three years.

Delivering sustainably higher
operating margins through
process improvements and
elimination of waste.

Link to strategy

Performance: delivering
excellence for all our
stakeholders through strong
leadership, accountability
and a lean mindset.

People: caring for our
colleagues, our neighbours
and the environment and
inspiring them to flourish.

Customers: working in
partnership to provide
distinctive solutions
that deliver compelling
value for money.

Technology: driving the
development of new
technologies and capabilities
that lead the market is one of
the Group’s four distinctive
competencies.

Performance: delivering
excellence for all our
stakeholders through strong
leadership, accountability
and a lean mindset.

Remuneration linkage

Working capital as
a percentage of sales
is directly linked to the
annual bonus awarded
to Executive Directors.

Employee engagement
is directly linked to the
annual bonus awarded
to Executive Directors.

Increased market share
is directly linked to the
annual bonus awarded
to Executive Directors.

Revenues from new solutions
is directly linked to the
annual bonus awarded
to Executive Directors.

Sustainably increasing
margins is directly linked to
the annual bonus awarded
to Executive Directors.

Target

2018 Target

– Financial targets will be disclosed

in the 2018 Annual Report.

– Financial targets will be
disclosed in the 2018
Annual Report.

– Drive a best in class

behavioural safety culture.

– Increase revenues from
service centre networks.

– Build organisational

– Increase number of

effectiveness through
execution of the people
strategy and diversity
improvement.

customer technology
partnerships.

– Progress Voice of

Customer development.

– Progress commercialisation

of Weir digital agenda.

– Further develop advanced
manufacturing technology.

– Develop innovation

framework.

– Improve VCE scores.
– Progress IT infrastructure
and systems development.

– Begin implementation of
sustainability strategy.

– Define suitable baseline
measure of sustainable
employee engagement and
organisational effectiveness.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information24

Financial Review
Delivering strong growth while investing
to fully capture market opportunities

2017 has been a year of significant
turnaround driven by our Oil & Gas
division which, against an improving
market backdrop, demonstrated great
execution to deliver a 67% increase in
revenues and a £101m increase in
operating profit without faltering on
customer commitments. With Minerals
markets at the beginning of a positive
upcycle, after a tough few years, we took
the opportunity to invest in people and
facilities to ensure that our Minerals
division is optimally placed to build upon
its market leading position and maximise
the opportunities for growth through the
upcoming market cycle.

Financial highlights
Order input and revenue (on a constant
currency basis) increased by 20% and 19%
respectively, primarily as a result of the
significant upturn in North American oil
and gas markets together with a strong
Minerals performance. Aftermarket input
growth was 22% and original equipment
orders grew by 16%. On a reported basis,
revenues grew by 28%, supported by a
£127m foreign exchange translation benefit.

Profit before tax, amortisation and
exceptional items of £250m was up by
47%, primarily driven by our Oil & Gas
division. Operating exceptional charges of
£13m were incurred, mainly in right-sizing
operations in later cycle markets. The
reported profit before tax from continuing
operations of £181m compares to £43m
in 2016. A £119m investment in working
capital to support current and future year
growth resulted in a free cash outflow of
£24m, leaving net debt £8m higher than
2016 at £843m with net debt to EBITDA
improving to 2.5 times.

Excellent Oil & Gas performance
Oil & Gas showed great operational
execution to respond to the improving
market conditions in North America by
delivering a 67% increase in constant
currency revenues and a 36% flow through
to profits, which resulted in operating
margins of 13% compared to a small loss
in 2016. This was achieved by leveraging
a significantly reduced overhead base
compared to the previous cycle which,
along with other industry players, is
contributing to the establishment of
shale as a highly cost-competitive
source of oil and gas for global markets.

John Heasley
Chief
Financial
Officer

Overview
Having delivered strong revenue and
profit growth in 2017, the positive outlook
for our Minerals and Oil & Gas markets,
together with our disciplined investment
in strategic priorities and improving
leverage ratios, mean that we look
forward with confidence.

Revenue growth

28%

as reported

PBT growth

47%

as reported
(excluding exceptionals
and amortisation)

You can read more in the Financial
Statements section on page 126.

The Weir Group PLCAnnual Report and Financial Statements 2017Results summary

Continuing operations1 £m

Orders2

Revenue

Operating profit3

Operating margin3

Net finance costs3

Profit before tax3

Reported profit after tax

Cash from operations4

Net debt

Net debt / EBITDA5

Effective tax rate

Earnings per share3

Dividend per share

ROCE6

2017

2016

As
reported

Constant
currency2

2,395

2,356

292

1,989

1,845

214

n/a

28%

36%

20%

19%

25%

12.4%

11.6% +80bps

+60bps

(42)

(44)

250

162

221

843

2.5

170

293

835

2.8

47%

274%

-25%

-£8m

11%

23.9%

22.5% +140bps

86.7p

44.0p

10.4%

61.2p

44.0p

42%

–

7.5% +290bps

32%

n/a

The Financial Review includes a mixture of GAAP measures and
those which have been derived from our reported results in order
to provide a useful basis for measuring our operational performance.
Operating results are for continuing operations before exceptional
items and intangibles amortisation as provided in the Consolidated
Income Statement. Details of other non-GAAP measures are
provided in note 2 of the financial statements.

2.
3.

Continuing operations excludes American Hydro Corporation
and Ynfiniti Engineering Services, which were disposed of
during H1 2016 and are reported as discontinued operations.
2016 restated at 2017 average exchange rates.
Adjusted to exclude exceptional items and intangibles amortisation.
Reported operating profit and profit before tax from continuing
operations were £223m (2016: £90m) and £181m (2016: £43m)
respectively. Reported earnings per share from total operations were
73.5p (2016: 17.8p).

5.
6.

Cash from operations includes both continuing and
discontinued operations.
Calculation is at covenant basis with net debt at average rates.
Continuing operations EBIT before exceptional items (excluding
KOP EBIT) divided by average net assets (excluding KOP net assets)
excluding net debt and pension deficit (net of deferred tax asset).

Order input
Order input at £2,395m increased 20%
on a constant currency basis. Original
equipment orders were £722m.
Aftermarket orders were £1,673m.

Minerals order input increased by 11%
to £1,347m (2016: £1,215m). Improved
commodity prices continued to support
the industry’s drive to increase production
and improve efficiency of current mining
operations. Original equipment orders
were up 14% year-on-year reflecting
increased brownfield wins driven by
our strong service and engineering
network in close proximity to mine
sites as well as a small number of initial
greenfield and major expansion projects.
Aftermarket orders, at 70% of total
input (2016: 71%), increased by 9%.
The division showed positive book
to bill of 1.05 for the full year.

the first part of the year before stabilising.
International markets were more subdued
although showed some initial signs of
increased quotation activity towards
the end of the year, especially in the
Middle East. A positive book-to-bill ratio
for the division of 1.04 for the full year
demonstrates the momentum that
we carry into 2018.

Flow Control order input decreased by
6% to £316m (2016: £336m), principally
driven by continued weakness in mid and
downstream oil and gas markets, with
input across the Power sector broadly
stable and Industrial markets showing
initial growth. Original equipment orders
were down 16% driven by lower project
activity while aftermarket input improved
by 6% due to increased focus and the
end of destocking activities by a number
of customers.

Oil & Gas input at £732m (2016: £438m)
was 67% higher (64% on a like for like
basis) reflecting the recovery in North
American upstream activity as oil prices
and technological advances supported
increased activity. These factors resulted
in an improving oil price throughout the
year and saw a 74% increase in North
American rig count, principally through

Group revenue
Revenue of £2,356m showed growth
of 19% on a constant currency basis
mainly reflecting the improvement in
orders in the Oil & Gas division and
continued strong input performance in
Minerals. Aftermarket accounted for 69%
of revenues, remaining consistent with
prior year. Reported revenues increased

28%, supported by a foreign exchange
translation benefit of £127m.

Minerals revenue was 7% higher on
a constant currency basis at £1,287m
(2016: £1,201m). Both original equipment
and aftermarket revenues were 7%
higher with strong growth across
South America, Africa and Asia Pacific.
Reported revenues increased by 16%
(2016: £1,112m), supported by a foreign
exchange translation benefit of £89m.

Oil & Gas revenue increased by 67%
to £704m on a constant currency basis
(2016: £421m) and 64% on a like-for-like
basis, reflecting order input trends.
Reported revenues increased by 75%,
after a £20m foreign exchange translation
benefit. North American revenues
increased sequentially throughout
the year, reflecting input trends while
International revenues stabilised during
the second half of the year.

Flow Control revenue increased by
4% on a constant currency basis to
£365m (2016: £350m), with aftermarket
revenues unchanged from the prior year
and original equipment revenues up 7%
driven by delivery of a large part of the
legacy order book for downstream oil

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information26

Financial Review continued

and gas projects. Reported revenues
rose by 10% reflecting an £18m foreign
exchange translation benefit.

Operating profit
Operating profit from continuing
operations (before exceptional items
and intangibles amortisation) increased
by £78m (36%) to £292m on a reported
basis. Excluding an £18m foreign
currency translation benefit, the
constant currency increase was £60m.

Oil & Gas delivered an excellent
operating performance, increasing
operating profits by £101m through
successfully leveraging workforce and
supply chain requirements to meet
increased North American demand. The
Minerals constant currency operating
profit reduction of £7m reflects strong
underlying growth offset by a £25m
investment in growth initiatives including
one-off costs of £10m associated with
reconfiguring operational capacity as
volumes increase. Flow Control saw
a £35m year-on-year constant currency
reduction primarily due to £13m of
one-off costs related to legacy contracts
in downstream oil and gas and associated
under-recoveries in that business.
Second half operating margins in Flow
Control returned to mid-single digits
following the one-off charges incurred
in the first half of the year.

Unallocated costs were unchanged
from the prior year at £24m.

Operating profit (including exceptional
items and intangibles amortisation) for
the year of £223m was £133m higher
than the prior year due to the £78m
increase in underlying operating profit
and a £55m reduction in exceptional
items and intangibles amortisation.

Net finance costs
Total net finance costs, including
exceptional items, were £43m (2016:
£48m). There were four components of
this net charge, the most significant being
the interest cost of £38m (2016: £41m)
on the Group’s borrowings (including
amounts in relation to derivative financial
instruments). The other elements were
a charge of £4m (2016: £3m) in relation
to the Group’s defined benefit pension
plans and an exceptional cost of £1m
(2016: £4m) being the unwind of the
discount on contingent consideration
liabilities. The overall decrease of £3m
compared to 2016 was principally due to
the favourable impact of foreign exchange
on US$-denominated interest payments.

Net finance costs (excluding retirement
benefit related amounts and exceptional
items) were covered 7.7 times (2016: 5.3
times) by operating profit from continuing
operations, before exceptional items and
intangibles amortisation.

Profit before tax
Profit before tax from continuing
operations (before exceptional items
and intangibles amortisation) increased
by 47% to £250m (2016: £170m).
The reported profit before tax from
continuing operations of £181m
compares to £43m in 2016.

Exceptional items and
intangibles amortisation
Exceptional items resulted in a reduced
charge of £13m (2016: £74m) with
intangibles amortisation at £55m
(2016: £50m).

Restructuring and rationalisation charges
of £13m in the current year predominantly
represent the continuation of programmes
to right-size operations and realign certain

activities, including the later cycle
international markets in Oil & Gas
and the downstream oil and gas
pump business in Flow Control.

The remaining elements of the
exceptional charge in the year are £2m
of costs associated with the finalisation
of historical legal claims, a £10m gain
on sale of our 49% share in the Energy
Products LLC joint venture and a fair
value adjustment of £9m to contingent
consideration, reflecting the final
settlement for the acquisition of the
remaining 40% of Weir International,
our Korean valves business.

The exceptional tax credit of £41m
includes £17m of tax on the exceptional
operating items and amortisation
described above. In addition it includes
a one-off £24m credit in respect of the
impact of US tax reform following the
signing into law on 22 December 2017 of
the Tax Cuts and Jobs Act. The one-off
credit arises from revaluing US deferred
tax assets and liabilities at the reduced US
federal corporate income tax rate of 21%
(previously 35%) and from the release of
previously held tax provisions for US tax
on unremitted overseas earnings which
will no longer be required.

Taxation
The tax charge for the year of £60m
(2016: £38m) on profit before tax
from continuing operations (before
exceptional items and intangibles
amortisation) of £250m (2016: £170m)
represents an underlying effective tax
rate (ETR) of 23.9% (2016: 22.5%).
Our ETR is principally driven by the
geographical mix of profits arising in
our business and, to a lesser extent,
by the impact of Group financing and
transfer pricing arrangements.

Operating profit to EBITDA

Continuing operations

Operating profit

Adjusted for:

Exceptional items (Note 5)

Earnings before interest and tax (EBIT)

Intangibles amortisation (Note 5)

Depreciation of property, plant & equipment (Note 4)

EBITDA

2017
£m

2016
£m

223.1

90.3

13.3

236.4

55.4

58.2

73.5

163.8

50.2

55.9

350.0

269.9

The Weir Group PLCAnnual Report and Financial Statements 201727

The Group has a robust framework
to mitigate tax risks, together with a
prudent and consistent approach to
tax provisioning. This is discussed
further in note 2.

In terms of cash tax, the Group paid
income tax of £61m in 2017 across all
of its jurisdictions compared to £16m
in 2016, the increase principally driven
by the non-repeat of cash tax refunds
received in the prior period in respect
of tax losses in the US.

Capital expenditure
We were able to increase investment
in our strategic priorities with net capital
expenditure increasing from £62m to
£81m, reflecting a return to previous
expenditure levels.

Cashflow and net debt
Free cash flow from continuing operations
was an outflow of £24m (2016: inflow
£130m), before cash exceptional items
of £29m. Cash from operating activities
reduced by £72m from £293m in 2016
to £221m in the current year which
mainly reflected the upturn in Oil &
Gas operating profit, offset by a £119m
investment in working capital in the
year mainly across Oil & Gas and
Minerals to support increased activity
levels in current and future years.

The reduction in free cash flow is further
explained by a £45m increase in cash tax
as noted above and a £28m increase in
cash dividends paid as a result of lower
uptake for the scrip dividend compared
to the prior year.

Our working capital efficiency was
demonstrated by working capital as a
percentage of sales reducing from 27.1%
to 25.7% and inventory turns improving
from 2.2 to 2.7.

Exceptional cash items include a
restructuring and rationalisation cash
outflow of £29m (2016: £58m outflow
offset by £36m proceeds relating to the
2016 asset disposal programme). Cash
proceeds of £32m from the disposal of
our 49% share in Energy Products LLC,
our non-core North American Oil & Gas
distribution joint venture, were offset by
our £37m purchase of the remaining 40%
of Weir International, our Korean valves
business. Our acquisition of KOP Surface
Products was financed via the issue of
share capital totalling £90m during the year.

The above movements resulted in closing
net debt of £843m (2016: £835m), which
includes a favourable foreign exchange

movement of £49m. On a lender covenant
basis, the ratio of net debt to EBITDA was
2.5 times (2016: 2.8 times) compared to a
covenant level of 3.5 times.

The key accounting and policy judgements
are contained within note 2 to the Group
financial statements on page 131.

Pension
The Group has four defined benefit
pension plans, the largest of which are
the two UK plans. During the course of
the year, the Trustees of the UK Executive
Scheme entered into a full buy-in
transaction with Scottish Widows, with
all of the benefit payments due from that
scheme now covered by an insurance
policy. As a result, insurance policy assets
held now cover 43% (2016: 40%) of the
Group’s total funding obligation across all
schemes, reducing the Group’s exposure
to actuarial movements.

The net deficit in the plans of £138m
represents a minor increase from £137m
in 2016. The increase in deficit is mainly
due to actuarial losses of £35m (following
a reduction in the UK discount rate to
2.4% from 2.6%), offset by actuarial gains
of £17m due to updated life expectancy
assumptions, gains of £15m on pension
scheme assets and £4m of Group
contributions. The remaining balance of
£2m comes primarily from experience
adjustments on liabilities.

Asbestos provision
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. At the end of 2017, there
were 1,657 asbestos-related claims
outstanding in the US (2016: 1,477).

During the year, and with the assistance
of external advisers, we completed
our triennial review of estimated future
indemnity and defence costs. As a
result of this review a US asbestos
provision of £53m (2016: £48m) has
been recognised. The Group has
comprehensive insurance cover for
these cases and as a result recognises
a corresponding insurance asset.

In the UK, there are 16 (2016: 18)
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.

Full details of the US and UK provisions,
plus related insurance receivable, are
provided in note 22.

Earnings per share
Earnings per share from continuing
operations (before exceptional items
and intangibles amortisation) increased
by 42% to 86.7p (2016: 61.2p). Reported
earnings per share including exceptional
items, intangibles amortisation and profit
from discontinued operations was 73.5p
(2016: 17.8p). The weighted average
number of shares in issue increased to
219.9m (2016: 215.6m) following the
issue of 6.2m shares during the year
in respect of the KOP acquisition and
scrip dividends.

Dividend
The Board is recommending a final
dividend of 29.0p resulting in a total
dividend of 44.0p for the year, in line
with 2016. Dividend cover (being the ratio
of earnings per share from continuing
operations before exceptional items
and intangibles amortisation, to dividend
per share) is 2 times. If approved at the
Annual General Meeting, on 26 April
2018, the final dividend will be paid on
4 June 2018 to shareholders on the register
as at 27 April 2018 with a scrip dividend
alternative continuing to be offered.

John Heasley
Chief Financial Officer
28 February 2018

The Strategic Report, covering pages 1
to 67 of the Annual Report and
Financial Statements 2017, 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

Christopher Morgan
Company Secretary and
General Counsel
28 February 2018

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information28

Operational Review
Weir Minerals
Building on our leadership
positions in improving markets

What we do

Mission-critical solutions
Our pumps, valves, hydrocyclones, rubber,
crushers and other solutions are crucial to the
processing of mined rock into valuable ore.

Comprehensive global support
The division has more than 140 service
centres close to customers in the world’s
main mining regions.

Intensive aftermarket care
Operating in highly abrasive
environments drives demand
for spares and services.

The Weir Group PLCAnnual Report and Financial Statements 201729

Ricardo Garib
Division President of Weir Minerals

The division invested early to take advantage
of increased market confidence and leverage
its technology leadership and extensive
service network.

Market review
In mining, ore production increased
slightly by 1% while average ore yields
continued to fall, requiring greater
levels of processing to maintain the
same volume of refined commodity to
support aftermarket demand growth.
While overall mining capital spending
was stable, sustaining expenditure
increased by 5% as miners sought to
optimise production from existing assets.

Regionally, Australasia saw increased
activity driven by gold and lithium
markets while coal remained challenging.
Similarly, Africa benefited from increased
activity in gold and copper, although there
was some disruption from government
actions in East Africa in the second half
of the year. North America and Europe
benefited from improved sentiment
and activity in hard rock mining markets,
although North American general industrial
and coal markets were relatively subdued.

In Latin America, mining activity
remained robust despite the impact
of industrial relations’ issues in the
first half for some of our customers.

In non-mining markets, aggregates
demand remained supportive in most
regions, with the US, in particular,
increasing its investment in infrastructure.
While there was no significant new
investment in oil sands projects, production
increased overall, supporting demand for
aftermarket spares and services.

Operational review
As part of its continued focus on
developing a broader solutions mindset,
more time was spent by all levels of
the organisation on customer sites.
This close customer intimacy gave the
division improved insight, allowing it to
anticipate additional demand, particularly
for integrated solutions that optimise
production of existing assets.

Highly engineered equipment
Through its technology leadership,
the division has built up a significant
installed base of original equipment.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information30

Operational Review: Weir Minerals continued

To take full advantage of these
positive trends the division was
proactive, investing in additional sales,
engineering and project management
capability. It also extended its global
service centre network with new
facilities in Canada, France, Poland,
Sweden, the Dominican Republic and
Russia, taking our total number of
service centres to approximately 100.
The division encountered some short-
term operational challenges in North
America and Europe as a result of plant
and supply chain reconfigurations to
meet demand growth, but these had
been substantially remediated by the
end of the year. Good progress was
made globalising newer product lines
such as the comminution offering and
Delta Valves while new technology
introductions included advanced spools
for oil sands applications.

Key priorities in 2018
• Safety – continue our strong
performance on safety and
embed next phase of Weir Zero
Harm programme.

• Strengthen our engineering
presence at service centres
and customer sites.

• Fully capture comminution,

brownfield, tailings and spares
opportunities.

• Execute operational excellence
and internal efficiency projects.

Outlook for 2018
Miners are expected to increase
sustaining capital expenditure in 2018,
supporting global ore production growth.
Assuming supportive market conditions
continue, it is anticipated the division
will deliver moderately higher constant
currency revenues and slightly higher
full year operating margins, with
performance supported by both the
strong order book and investment in
growth initiatives in 2017.

The Weir Group PLCAnnual Report and Financial Statements 201731

Divisional orders
by end market

Divisional orders
by geography

1 Mining
2 General Industrial
3 Oil & Gas
4 Sand & Aggregates
5 Power
6 Other

1 North America
2 Latin America
3 Europe
4 Africa and Middle East
5 Asia-Paciﬁc

74%
10%
6%
5%
4%
1%

Revenue by original
equipment/aftermarket

Number
of facilities

1 Original Equipment
2 Aftermarket

29%
71%

1 Africa and Middle East
2 Australia
3 Asia-Paciﬁc
4 Europe
5 Latin America
6 North America

1. 2015 and 2016 are restated at 2017 average exchange rates.
2. Adjusted to exclude exceptional items and intangibles amortisation.

Revenue1 £m

2015

2016

2017

1,140

1,201

1,287

Operating profit1,2 £m

22%
23%
10%
15%
30%

2015

2016

2017

Margin (%)

2015

2016

2017

Total incident rate

20
27
32
40
22
24

2015

2016

2017

Headcount

2015

2016

2017

220

234

227

19.3

19.5

17.7

0.61

0.66

0.58

8,400

8,000

8,200

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

Operational Review: Weir Minerals
continued

Integrated solutions:
a win-win strategy

Weir Minerals has the most extensive service
centre network in the minerals processing
industry with facilities located in major mining
regions around the world. This enables our
engineers to spend more time on customer
sites and gives the division early exposure to
emerging market trends, such as the drive by
miners to increase the productivity of their
current ‘brownfield’ assets to take advantage
of favourable commodity prices. In 2017, the
division invested in an integrated solutions
strategy that fully leverages its engineering
expertise and extensive product portfolio to
help the division outperform its markets.

GEHO®
GEHO® piston and piston
diaphragm pumps are designed
and manufactured for slurry, paste
and tailings applications. These
hardworking pumps can handle
a range of applications including
mine dewatering and backfill;
tailings disposal; autoclave,
gasifier, digester and reactor feed
types; and long distance slurry
pipelines of ores and minerals.

Warman®
Our Warman® range of pumps
is a comprehensive collection of
centrifugal slurry pumps for use
in mining, chemical and industrial
applications. The horizontal and
vertical slurry pumps are designed
for ultra-heavy-duty applications
such as mill discharge, process
plant and tailings, pipelines as
well as special applications.

Delta Industrial™ Knife Gate Valve
Designed to withstand the most
extreme, abrasive and corrosive
applications, our Delta Industrial™
range of valves are manufactured
using a range of superior materials
suited for mining, oil sands, chemical,
power and general industries.

The Weir Group PLCAnnual Report and Financial Statements 201733

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information34

Operational Review
Oil & Gas
Rapidly responding to
fast-moving markets

What we do

Mission-critical solutions
Our pressure pumping and pressure
control solutions are essential to the
successful extraction and processing
of shale energy.

Highly engineered equipment
The division is a leader in the provision
of pressure pumping solutions, delivering
superior performance, increased safety
and greater productivity.

Intensive aftermarket care
Wells can be fracked at pressures of
around 15,000psi using a mixture of
water, sand and chemicals. This intense
operating environment drives demand
for aftermarket spares and services.

Comprehensive global support
The division has extensive service
facilities close to its customers
in North America, Europe, the
Middle East and South East Asia.

The Weir Group PLCAnnual Report and Financial Statements 201735

Paul Coppinger
Division President of Weir Oil & Gas

The division delivered excellent financial
and operational performance as demand for
our solutions increased significantly.

Market review
Activity in North American upstream
markets was supported by increasing
oil prices through the year. This led to
increased industry investment, with
the US land rig count averaging 852, a
74% increase on 2016. Oilfield service
companies responded by refurbishing
frac fleets with effective utilisation of the
active US fleet running at approximately
80%. Production methods continued to
intensify with the number of frac stages
and volume of proppant used increasing
and driving increased demand for
aftermarket spares and services. As the
market tightened during 2017 there was
a modest improvement in pricing.

Later cycle international markets entered
the downturn after North America and
conditions remained challenging. While
the international rig count increased
2%, new investment was subdued,
with continued pricing pressure and
project delays.

Operational review
The division delivered an excellent
operating performance as demand
for its solutions increased rapidly in
North America. The divisional workforce
grew by approximately 1,000 with
its main manufacturing facility in Fort
Worth, Texas, moving from one shift
to three. Operating leverage benefited
from previous cost reductions and
good supply chain management. The
division continued to innovate including
introducing the simplified frac system,
which reduces the amount of iron
required on a frac site, improving
safety and uptime.

Internationally, the division continued
to develop its pressure control offering
in challenging market conditions
with the acquisition of KOP Surface
Products extending its geographical
reach into South East Asia and
accelerating its Middle East wellhead
penetration strategy.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information36

Operational Review: Weir Oil & Gas continued

Key priorities for 2018
• Further embed improved safety

culture and developing future leaders.

• Global expansion of capabilities
to further strengthen customer
partnerships.

• Develop technically advanced

solutions and strategic
technology roadmaps.
• Use VCE to enhance

customer experience and
key operational metrics.

Outlook for 2018
Assuming market conditions remain
supportive at or around current levels,
exploration and production (E&P) and
service companies are expected to
increase capital spending in North
American upstream markets. It is
anticipated international markets will
continue their modest recovery. In this
context, the division is expecting a strong
increase in constant currency revenues
and profits, driven by higher North
American completions activity levels.

The Weir Group PLCAnnual Report and Financial Statements 201737

Divisional orders
by end market

Divisional orders
by geography

2 3
1

Revenue1 £m

2015

596

2016

421

2017

704

1 General Industrial
2 Oil & Gas
3 Power

1%
98%
1%

1 North America
2 Latin America
3 Europe & Russia
4 Africa & Middle East
5 Asia-Paciﬁc

80%
1%
4%
9%
6%

Operating profit (loss)1,2 £m

2015

(9)

2016

2017

Revenue by original
equipment/aftermarket

Number
of facilities

Margin (%)

2015

9.6

(2.3)

2016

2017

13.0

Total incident rate

1 Original Equipment
2 Aftermarket

20%
80%

1 North America
2 Asia-Paciﬁc
3 Europe
4 Latin America
5 Africa & Middle East

35
8
4
2
9

2015

2016

2017

Headcount

2015

2016

2017

1. 2015 and 2016 are restated at 2017 average exchange rates.
2. Adjusted to exclude exceptional items and intangibles amortisation.

0.85

0.82

0.62

2,400

2,900

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

Operational Review: Weir Oil & Gas
continued

Reducing complexity
to increase safety
and productivity

Increased safety and productivity are key
priorities for our customers and so, after
extensive consultation, we designed the
Simplified Frac System which significantly
reduces the amount and complexity of iron
on a frac site.

Our solution provides a more streamlined,
fit-for-purpose system that can be tailored
to any condition or basin. In addition to
improving site safety, its linear flow-path
design also prevents directional fluid changes
that create accelerated wear, resulting in
longer product life and extended productivity.

Seaboard™ One Straight Line (OSL)
Frac Connection
Engineered for demanding frac
applications, the Seaboard™ One
Straight Line (OSL) Frac Connection
significantly reduces the amount of
iron and connections required on the
wellsite. This means a corresponding
reduction in non-productive time,
rig-up time, labour costs, potential
leak paths, and safety hazards.

SPM® Swivels
Weir SPM® robust swivels enable the
safe and efficient flow of fluids on a
frac site at pressures of up to 15,000
psi. All SPM® swivels feature uniform
wall thickness for consistent fluid
flow and extended life. SPM® ball
bearing connections combine
strength and consistent rotation
in the most severe applications.

SPM® QEM 3000 Frac Pump
The SPM® QEM 3000 is Weir’s
next generation frac pump. This
continuous-duty pump delivers
a 17% reduction in total cost
of ownership through reduced
downtime as fewer backup
pumps are required on site.

The Weir Group PLCAnnual Report and Financial Statements 201739

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information40

Operational Review
Flow Control
Preparing to capture
future growth

What we do

Mission-critical solutions
Our pumps and valves help power,
mid and downstream oil and gas,
and industrial customers process
liquids and chemicals efficiently.

Intensive aftermarket care
Given their importance to the
successful and safe operation
of our customers’ sites, our
solutions are regularly maintained,
supporting aftermarket demand.

The Weir Group PLCAnnual Report and Financial Statements 201741

David Paradis
Division President of Weir Flow Control

Highly engineered equipment
We have a significant installed base
of original equipment including
safety valves used in more than half of
the world’s nuclear power plants, where
reliability and performance are crucial.

Comprehensive global support
The division captures attractive
aftermarket opportunities through
its comprehensive service capability.

The division is moving towards a more
global structure where we can better leverage
our niche positions and build even closer
relationships with customers around the world.

Market review
Customers continued to be cautious
in both power and downstream oil
and gas markets. There was limited
project activity with competitive
market conditions and pricing pressure
a common feature. Nuclear projects in
China and South Korea continued to make
progress, but sentiment in the United
States and Europe was more subdued.
Aftermarket demand was supported by
ongoing maintenance schedules.

Downstream oil and gas markets,
which were later to enter the downturn,
remained challenging for original
equipment and aftermarket demand,
although there were signs of improvement
towards the end of the year. Industrial
markets were more positive, in line with
global economic growth.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information42

Operational Review: Flow Control continued

Operational review
In challenging market conditions,
the division successfully maximised
aftermarket opportunities and
expanded the geographic reach of
its wider product portfolio. Sales
and marketing operations were
reconfigured to support new global
and application-based initiatives while
competitiveness was enhanced by
Value Chain Excellence initiatives
and best-cost sourcing. While one-off
charges in the first half of £13m,
relating to legacy contract challenges
at Gabbioneta, impacted overall
performance, the division delivered a
better second half supported by higher
volumes and good operating leverage.
The division also made good strategic
progress in the development of new
technologies and the expansion of its
e-commerce offering.

Key priorities for 2018
• Improve safety performance
and embed safety culture.
• Globalise product portfolio.
• Expand aftermarket sales

and capabilities.

• Continue to drive Value

Chain Excellence.

Outlook for 2018
The division’s main power and
downstream oil and gas markets
have stabilised with some early signs
of improvement. The division entered
the year with a lower order book, but
is expected to deliver broadly stable
constant currency revenues for the full
year as it benefits from its new sales
and marketing structure. Operating
profits and margins are expected to
increase, with a return to mid single-digit
operating margins for the full year.

The Weir Group PLCAnnual Report and Financial Statements 201743

Divisional orders
by geography

Revenue1 £m

2015

2016

2017

379

350

365

Operating profit (loss)1,2 £m

1 North America
2 Latin America
3 Europe & Russia
4 Africa & Middle East
5 Asia-Paciﬁc

1%
14%
24%
44%
9%
8%

32%
1%
28%
12%
27%

2015

2016

(3)

2017

9.9

9.2

Divisional orders
by end market

1 Mining
2 General Industrial
3 Oil & Gas
4 Power
5 Other
6 Water and wastewater

Revenue by original
equipment/aftermarket

Number
of facilities

1 Original Equipment
2 Aftermarket

59%
41%

1 North America
2 Asia-Paciﬁc
3 Europe
4 Africa & Middle East

6
7
10
2

1. 2015 and 2016 are restated at 2017 average exchange rates.
2. Adjusted to exclude exceptional items and intangibles amortisation.

Margin (%)

2015

2016

(0.8)

2017

Total incident rate

2015

0.29

2016

0.57

2017

0.26

Headcount

2015

2016

2017

2,900

2,700

2,500

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

Operational Review: Flow Control
continued

Providing solutions
for the most extreme
conditions in record-
breaking time

Weir Flow Control was recently awarded
the contract to engineer and supply critical
service safety valves for Yamal LNG, a major
LNG project in northern Russia. The project
will develop one of the largest natural gas
reserves in the world which, following the
construction of an LNG plant, will supply
energy to Europe and Asia. The valves
developed by Weir for this project are
amongst some of the most advanced designs
ever produced by the business. A total of
638 highly specialised fast-track safety
valves were supplied, 185 of which were
‘superfast-track’ deliveries, to meet critical
installation and start-up schedules.

Starflow Spring Loaded Valves
These safety relief valves feature
a wide range of material options
and trim designs to meet the
demands of many processes and
applications. They are used in
vapour, gas, liquid or steam
applications in the oil and gas
industry as well as cryogenics
and the power industry. The
valves are designed to provide
high integrity performance.

Sarasin-RSBD™ 76 Series
The Sarasin-RSBD Pressure
Relief Valve is designed to meet
the rigorous process conditions
which are mandated by the power
industry. The valves are designed
to operate in high pressure and
high temperature environments.

The Weir Group PLCAnnual Report and Financial Statements 201745

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information46

Risk Review
Managing risk effectively

We operate in a complex global
environment, where opportunities
come with corresponding risks.
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.

Risk management cycle

Identify
the risks

Quantify
the gross risk

Monitor,
assure
and report

Identify
the existing
mitigating
actions and
controls

Identify if
further actions and
controls are required

Quantify
the net risk

The risk agenda
During the year, the Board has reviewed
the effectiveness of the systems of risk
management and internal control and
conducted a robust assessment of the
principal risks affecting the Group in line
with the Risk Appetite Statement. These
activities meet the Board’s responsibilities
in connection with Risk Management
and Internal Control set out in the UK
Corporate Governance Code.

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 functional and front
line controls including oversight 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 88.

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 allows the
business to review the relative impact
of the existing controls by comparing
the gross and net risk assessment.
This also allows the business to avoid
wasting resources on mitigating controls
and actions which have a negligible
impact on the risk assessment.

The Weir Group PLCAnnual Report and Financial Statements 201747

Risk Appetite Statement
The Weir Group is strategically positioned in markets with good long-term growth prospects.
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 priorities, subject to the
parameters below.

Risk assertions

Risk parameters

1. Organic growth
We will rigorously pursue divisional organic growth
strategies to meet our market growth objectives.

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

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

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 together with cash generation.

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 in pursuit
of our growth ambitions subject to Internal Rate
of Return (IRR) hurdles and capital structure targets.

Local country cash flow projections for
investment appraisal purposes discounted
at country specific rates to account for
risk weighted returns.

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, recognising cyclicality in our
end markets, will maintain significant headroom
against our financial covenants.

We will seek to maintain the ratio of net
debt/EBITDA below two times (current
financial covenants 3.5 times) and will
retain adequate headroom within our
debt facilities at all times.

6. Reputation and brand image
We will avoid/manage situations or actions that could
have a negative impact on our reputation and brands.
We aim to be transparent with all of our stakeholders
unless prejudicial to our collective interests.

No tolerance for breaches of:
• Legislative/statutory requirements.
• Weir Code of Conduct.
•
International sanctions.
• Delegated authority levels.
• Group and divisional policies.

7. Safety, Health and Environment (SHE)
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.

• No tolerance for breaches of Weir Group
Safety, Health and Environment Charter.

• Active community and environmental

engagement is expected.

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

No tolerance for breaches of:
• Legislative/statutory requirements.
• Weir Code of Conduct.
•
International sanctions.
• Delegated authority levels.
• Group and divisional policies.

9. Innovation
We will invest in technology, research and
development to innovate our customer offering
allowing us to maintain and expand our market share.

Target research and development spend
of 2% of revenues.

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

Risk universe

Strategic risk

Industry and market volatility.

Technological advances
or disruption.

Pricing pressures.

Acquisitions and mergers.

Planning and resource allocation.

Hazard risk

Political and social instability.

Natural disasters and other
major incidents.

External and internal fraud
and corruption.

Operational risk

People.

Delivery and supply chain.

Quality.

Commercial.

Communication.

IT.

Compliance risk

Laws and regulations.

Code of Conduct.

Safety, Health and Environment.

Governance.

Intellectual property.

Financial risk

Financial management.

Credit.

Debt and interest rates.

Foreign exchange.

Accounting and reporting.

Taxation.

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.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information48

Risk Review continued

The impact of risks is quantified across
a range of factors including: financial;
strategy; reputation; people and property;
ability to perform services; regulation;
safety, health and environment; 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 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 levels.
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.

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 76.

The Risk Committee monitors quarterly
risk dashboard reports from the divisions.
In addition, the Risk Committee has
oversight of the Group Risk Dashboard,
along with a routine review of key controls
identified to manage each risk and the
sources of controls assurance, 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 68 and within the Audit
Committee Report on page 88.

Risk responsibilities and reporting

Board and sub-committees

Group Executive

Risk Committee

Divisional management

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i
t
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o
p
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R

Operating company management

P
o

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i

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e
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a
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e
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s
o
n
s

The Weir Group PLCAnnual Report and Financial Statements 2017

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

Group

Risk management responsibilities

F
i
r
s
t

l
i

n
e
o
f
d
e
f
e
n
c
e

S
e
c
o
n
d

l
i

n
e
o
f
d
e
f
e
n
c
e

T
h
i
r
d

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i

n
e
o
f
d
e
f
e
n
c
e

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

• Annual review and ongoing monitoring of the effectiveness of the risk

management and internal control frameworks.

• Annual review of the Group’s risk appetite.
• Principal risks presented in every CEO report.
• On a bi-annual basis, receive a report from the Risk Committee which sets
out the current assessment of each principal risk, the effect of mitigating
controls on each risk, the direction of travel of each risk versus the prior
year, the extent to which each could potentially impact the Group’s
strategic goals and any relevant findings relating to significant control
failings or weaknesses which have been identified.

• Functional deep dive reports on each principal risk are summarised

in the biannual report.

• Taking decisions in accordance with the delegated authority matrices.

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

• 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.

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

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

Chief Executive’s Safety Committee
Safety Committee with responsibility to set
and monitor the Group’s SHE principles,
priorities and actions.

Excellence Committees
Engineering
Safety, Health and Environment
Finance
HR
Group Information Services
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.

• 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.

• 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.

• Executive Committee representation to drive improvements in our safety

performance throughout the Group.

• 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 division’s

strategic objectives.

• Monitoring performance and compliance with Group objectives, policies

and standards within the divisions and 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.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

Risk Review
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. The Group’s risk management
and assurance framework is designed to
make this less likely by clearly identifying
and seeking to mitigate key risks.

Strategy

People

Customers

Technology

Performance

Risk Trend

Increasing

Decreasing

No change

Viability Statement

The Board has conducted a robust
assessment of the principal risks,
alongside the Risk Appetite Statement
set out on page 47, meeting the
Board’s responsibilities in connection
with Risk Management and Internal
Control detailed in the UK Corporate
Governance Code. Each of the principal
risks is assigned an owner from amongst
the Board or Group senior management
team and is either a standing agenda
item at each Board meeting or subject
to formal periodic review by the Board.
A summary of principal risks and the
Group’s mitigating controls is presented
at every Board meeting.

The Directors reviewed the Group’s
risk register, reassessed the validity of
the principal risks identified in the prior
year and considered whether any new
principal risks have emerged or a risk
is no longer considered a principal risk.
The identified principal risks were
subjected to a detailed assessment
based on the following considerations:

• Severity of each risk;
• Existence and effectiveness of
actions and internal controls
which serve to mitigate the risk;
• The overall effectiveness of the
Group’s control environment,
including assurance and any identified
control weaknesses or failings; and

• The extent to which each of the

principal risks could impact upon
the Group’s viability, in financial
or operational terms, due to their
potential effects on the business
plan, solvency or liquidity.

The principal risks set out on pages 51
to 55 are those which we believe to
have the greatest potential to impact our
ability to achieve the Group’s strategic
objectives or which have the greatest
potential impact on the Group’s
solvency or liquidity.

The Weir Group PLCAnnual Report and Financial Statements 201751

Key
1 Technology

and innovation
2 IT security and

continuity
3 Value Chain
Excellence

4 Political and social
5 Ethics, governance

& control

6 Staff recruitment,
development &
retention

7 Market Volatility
8 Safety, Health &

Environment (SHE)

9 Contract risk

High risk
Medium risk

Mapping our risks
As part of the risk dashboard assessments
we map our risks in terms of likelihood
and impact, based on a defined rating of
1 (unlikely or minor) to 4 (almost certain
or critical). Likelihood ratings are defined
based on the period in which we expect
that a risk could materialise; impact ratings
consider factors including strategic; financial;
reputational; regulatory; people and property;
and safety, health and environment.

All risks are assessed, including an
assessment of any emerging risks, each
time the risk dashboards are reviewed.
The risk trend is monitored over time and
further mitigating controls identified where
appropriate. Consideration is also given to
the relative priority of each risk in the overall
risk dashboard.

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Minor (1)

Moderate (2)

Major (3)

Critical (4)

Impact

Risk Review: Principal risks and uncertainties
Technology and innovation

Failure to innovate 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.

Impact on strategy

Why we think this is important
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.

How we are mitigating the risk
Our existing research and development
initiatives within the business, at Weir
Advanced Research Centre, are enhanced
through partnerships with certain leading
universities around the world. These
partnerships are designed to help the
Group develop game-changing solutions
to our customers’ challenges.

We devote skilled resource to reviewing
and responding to developing technologies,
with our agreements with specialist
external parties to develop Internet
of Things (IoT) technology.

Engineering strategies are in place at
Group and divisional levels with strategic
innovation arenas defined as part of the
innovation strategy.

Changes during 2017
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.

Recognising the strategic importance of
technology and innovation we recruited
a Chief Technology Officer during the year
to define the Group’s Technology Vision
and Strategy.

Further information on progress made
in this area is set out in the Products and
Technology section of the Sustainability
Review on page 57.

Risk trend

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

Risk Review: Principal risks and uncertainties continued

IT security and continuity

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.

Impact on strategy

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

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 in place.

All security related incidents are reported
to the Group Executive.

Changes during 2017
IT security and continuity continues to be
a matter of strategic priority for the Group
in an environment of ever increasing cyber
security threats. Progress to strengthen the
Group’s defences in this respect is being
made through our IT Next programme.

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.

Security Incident Responder teams monitor
our various security systems.

Risk trend

Why we think this is important
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.

Value Chain Excellence

Failure to achieve Value Chain Excellence improvements and the associated
reduction in costs and enhanced flexibility.

Why we think this is important
If we fail to improve our value chain
management, we risk:

How we are mitigating the risk
Regular KPI monitoring of the value chain
throughout the organisation.

• Losing the opportunity to invest
capital into alternative value
creating opportunities;

• Damaging our reputation and as a

consequence losing customers and
market share;

• Losing market position if the Group

fails to demonstrate to customers the
value of our products and services;
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

• Failing to respond to market upturns or
downturns quickly enough to respond
to market demand or manage costs.

The Group’s operations are implementing
Value Chain Excellence initiatives 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 review.

We regularly monitor market activity to
ensure we remain competitive.

Impact on strategy

Changes during 2017
Value chain remains an area of strategic
focus for the Group. Value chain
improvements continue to be recognised
year on year as the Group realises benefits
from its focused approach to these matters.

An updated and more focused VCE model
has been successfully introduced.

A programme of Value Chain Excellence
initiatives has been operating throughout the
Group to drive value chain improvements.

All businesses now complete VCE
self-assessments, including value
stream segmentation, model design
and improvement project identification.

Initiatives to expand production in
best-cost locations are reviewed and
the procurement function continues
to drive cost and quality improvements
through the Group’s supply chain.

Risk trend

The Weir Group PLCAnnual Report and Financial Statements 2017

Strategy

Risk Trend

Viability Statement

People

Technology

Customers

Performance

Political and social

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.

Impact on strategy

Why we think this is important
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 and our property and regulatory
changes could impact our competitiveness.
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.

How we are mitigating the risk
Regular review of market attractiveness.

Monitoring travel by Weir employees
to higher risk locations in accordance
with the Weir Group travel policy.

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.

Proactive monitoring of evolving policy
and development of contingency plans
as situations materialise.

Changes during 2017
The US has approved significant corporate
tax reform. The new US tax code will
significantly change the tax profile of
the Group’s US operations and provide
opportunities for the Group resulting
from a lowering of the US Federal Tax
rate. We will continue to respond to any
further US tax clarifications this year.

We continue to monitor the direction of
Brexit negotiations and any potential impacts
directly on our UK manufacturing base.

Risk trend

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

Impact on strategy

Why we think this is important
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:

• 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.

We expect all areas of the business to do
the right thing and conduct business in
compliance with procedures, applicable
laws, Weir Group operating policies and
the highest ethical standards.

How we are mitigating the risk
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 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.

A Whistleblower hotline is available to all
members of staff. Reports are investigated on
a timely basis and summary reports provided
to Group Executive and Board.

Changes during 2017
The governance and legislative environment
in which the Group operates continues to
evolve and become more complex. We
routinely review 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
through the Code of Conduct and completed
a programme of training for key individuals.

Risk trend

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

Risk Review: Principal risks and uncertainties continued

Staff recruitment, development
and retention
Failure to recruit, develop or retain key management and staff may lead to
disruption to the Group’s operations, functions and processes.

Impact on strategy

Why we think this is important
Our people represent our biggest asset
and failure to attract, develop and retain
key management and staff would have a
detrimental impact on the Group’s ability
to deliver our key strategic objectives.

How we are mitigating the risk
Promotion of the Weir Group Values &
Behaviours, Code of Conduct and HR Policies
sets the standards and expectations for all our
staff, reinforcing our stated commitment to
attracting and retaining the very best people.

Changes during 2017
A new Chief People Officer was
appointed during the year and tasked
with the identification of key strategic
priorities for Weir’s go-forward people
strategy for the Group.

As markets improve we need to continue
to recruit high quality staff building on
existing capability while recruiting skilled
expertise in the right areas of the business
and at the right time.

High performer assessments are undertaken
to identify and develop our very best talent.

Succession plans are in place and periodically
reviewed for all of our key management.

Senior Leadership and Regional
Conferences were held during 2017
focused on the delivery of the four
strategic pillars.

Our new ENERGY performance
development framework was
introduced during the year.

Risk trend

Personal Development Plans are set and
reviewed for the effective development of
all of our staff.

We continue to offer competitive
compensation and benefits packages.

Personal development programmes including
Weir University and the Weir Leadership
Programme are open to participation by high
potential staff members and these continue
to attract high calibre individuals.

Market volatility

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. As markets improve
we may fail to effectively upscale operations to meet customer needs.

Impact on strategy

Why we think this is important
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.

In challenging market conditions, our
value chain risks are increased. These
are described in more detail on page 52.

How we are mitigating the risk
We maintain regular engagement with our
customers to understand their needs and
challenges, and ensure our business is
appropriately aligned.

Improved demand planning and forecasting
including Sales and Operations Planning
within VCE.

Our strategic planning utilises extensive
market intelligence to assist in forecasting
opportunities and dips in markets.

We maintain contingency plans for downturns.

Changes during 2017
Our core markets have seen continued
improvements during the year, with
customers planning for higher activity
levels. We continue to focus on technology
development, customer relationships and
Value Chain Excellence to meet increasing
demand from our key sectors.

Risk trend

The Weir Group PLCAnnual Report and Financial Statements 2017

Strategy

Risk Trend

Viability Statement

People

Technology

Customers

Performance

Safety, Health and Environment (SHE)

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

Impact on strategy

Why we think this is important
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.

How we are mitigating the risk
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 SHE standards are continually reviewed.

Changes during 2017
The Group continues to set higher
benchmarks for SHE compliance and
roll out cohesive programmes to address
SHE risks and drive safe and sustainable
working practices.

The SHE Excellence Committee is responsible
for monitoring performance and compliance
with Group objectives, policies and standards
relating to SHE.

Improved SHE incident reporting tools
have been piloted and rolled out across the
Group to provide visibility and responsive
actioning of any SHE related issues.

The Chief Executive’s Safety Committee
met 12 times during the year, committed
to achieving the highest of SHE standards.

Risk trend

There is a formal SHE assurance programme
with issues escalated as required through the
reporting structures.

Contract risk

Failure to adequately 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.

Impact on strategy

Why we think this is important
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.

How we are mitigating the risk
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.

Changes during 2017
Contract management continues to
be an area of focus for the Group, given
the competitive environment. Group
policies and procedures continue to
be reviewed and refreshed to provide
employees with improved tools to
assist them in their contract training
and management activities.

Risk trend

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

Viability Statement

In accordance with provision C.2.2 of
the UK Corporate Governance Code
2014, the Directors have assessed the
viability of the Group over a three year
period, taking into account the Group’s
current position and the potential impact
of the principal risks documented on
pages 50 to 55 of the Annual Report.
Based on this assessment, the Directors
confirm that they have a reasonable
expectation that the Company will be
able to continue in operation and meet
its liabilities as they fall due over the
period to 31 December 2020.

The Directors have determined that
a three-year period to 31 December
2020 is an appropriate period over
which to provide the viability statement.
The Group’s key markets are by nature
cyclical and therefore, while the Group
operates a five-year strategic planning
process, market cyclicality and the
related lack of visibility over commodity
prices, in particular, indicate that a period
of three years is appropriate. We believe
that this approach presents the Board
and readers of the Annual Report with
a reasonable degree of confidence over
this longer term outlook.

The strategic plan is a bottom up analysis
prepared annually and submitted to the
Board for consideration. The output of
this plan is used to perform central debt
and headroom profile analysis, which
includes a review of sensitivity to
‘business as usual’ risks, such as
profit growth, working capital variances
and return on capital investment. This
analysis, in conjunction with the current
year results and 2018 Budget, provides
the basis for the viability model on
which we have overlaid a number of
severe, but plausible events, to reflect
our risk assessment.

In making this statement, the Board
carried out a robust assessment of
the principal risks facing the Group,
including those that could threaten its
business model, future performance,
solvency or liquidity.

While the review has considered all
the principal risks identified by the
Group, the following risks were focused
on for enhanced stress-testing: market
downturn, major site and customer
shocks, significant loss of market share
in key markets and regulatory shock.
The resulting scenarios were modelled
as a series of individual one-off ‘shocks’,
in combination with commodity price
based market downturn scenarios. Refer
to page 50 for the Group’s principal risks,
specifying those risks considered during
this review.

The geographical and sector diversification
of the Group’s operations helps minimise
the risk of serious business interruption
or catastrophic damage to our reputation.
While the Group remains exposed to
the cyclicality of the markets in which it
operates, it continues to have a strong
balance sheet that provides capacity in
which to operate. In addition, our ability
to flex our cost base to reflect our existing
markets – as evidenced by our recent
cost reduction programmes – protects
our viability in the face of adverse
economic conditions and / or additional
risks highlighted.

While this review does not consider
all of the risks that the Group may
face, the directors consider that this
stress-testing based assessment of
the Group’s prospects is reasonable
in the circumstances of the inherent
uncertainty involved.

The Weir Group PLCAnnual Report and Financial Statements 2017Sustainability review
People
Inspiring our people to flourish

Chief Executive Officer’s
Safety Committee
The CEO’s Safety Committee was
established in 2016 to give Board-level
leadership to the Group’s ambition of
becoming a zero-harm workplace. The
Committee consists of senior leaders
from across the Group, including the
three divisional presidents and the
Chief People Officer and embodies
the priorities of our Safety Charter.
The Committee oversees Safety, Health
and Environment (SHE) performance,
ensuring the Group systems and
processes are best set up to deliver
our Zero Harm vision.

SHE Excellence Committee
The Safety, Health and Environment
(SHE) Excellence Committee supports
the Board and provides leadership,
co-ordination and support for the delivery
of the Group SHE objectives set by the
CEO’s Safety Committee. It is tasked by
the Board to drive continuous SHE
improvement across the Group through
setting and assessing rigorous standards
that are comprehensive, risk-based,
deliverable and built on the best practice
of our peers, customers and professional
bodies. The progress towards an
increasingly behavioural safety culture has
been the priority of the SHE Excellence
Committee and is evident in the focus
on the engagement elements of our
Zero Harm strategy.

SHE performance
2017 is a year that the Group should feel
proud of when it comes to SHE. Having
challenged ourselves to make a material
reduction in the number of lost-time
incidents as well as maintaining our
continuous positive trend regarding
overall recordable injuries as represented
by the Total Incident Rate, we delivered
an excellent performance. All three
Divisions made significant improvements
and contributed to a 33% reduction in
Lost Time Incidents from 30 to 20 and
a 20% reduction in the broader Total
Incident Rate to 0.53. In addition, the
injuries associated with the lost time
incidents were much less severe.

Introduction

People are at the heart of the
Group’s ‘We are Weir’ strategy with
our commitment to caring for our
colleagues, our neighbours and
the environment and inspiring
them all to flourish.

The quality and commitment of our
people has always been a competitive
advantage for the Group, from the
engineers that design our equipment to
the operations staff who manufacture it
and the on-site experts who support
our customers around the world.

As a business that relies on a high-
performance culture, we appreciate
the importance of offering our people
the opportunity to fulfil their potential
and provide a workplace that keeps
them safe, engaged and inspired to
do the best work of their lives.

To achieve that, we invest in
safety programmes, learning and
development opportunities and
leadership. We are also committed
to developing a new sustainable
engagement score to measure
our progress in developing an
even more effective organisation.

In addition to developing our
employees, the Group takes its
responsibility to developing the next
generation of employees seriously.
This includes supporting programmes
that encourage more young people
to consider engineering as a career.

The Weir Group’s vision is
a zero-harm workplace for
people and an environment
where everyone goes home
safe and healthy.

Bringing safety and
operations even
closer together

Weir Valves & Controls USA Inc.
(WVC USA) is proud of their current
safety record, but that doesn’t stop
the team from constantly looking for
areas for improvement.

The company based in Ipswich,
Massachusetts, has always had a
safety-centric culture and, in 2017
its President (Mark Claffey) and its
Director of Operations (Bert McGrath)
implemented a system which is
designed to capitalise on their
employees’ passion for safety and
empower them to implement change.

WVC USA took elements of the famed
Japanese system, Kaizen, and applied
it to areas of their business operations.
Kaizen translates as ‘continual
improvement’ and is a system which is
often used within lean manufacturing.
Weir Valves and Controls USA, taking
the key elements of Kaizen, now
encourages cross-functional teams to
review existing processes, products
and services to look for new, safer
methods and solutions.

The system has been successful
throughout its first year, with teams of
employees from different fields feeling
empowered to find solutions through
innovation and ‘out of the box’ thinking.
Mark Claffey stated: “I am proud of the
Ipswich plant employees who have
embraced and actively participated in
this safety process. As we continue
on the path to Zero Harm, a true safety
culture shift is only successful with
education, awareness and participation
of all shop and office employees.”

Bert McGrath added: “I am very
impressed with how everyone has
reacted to the safety Kaizens and the
results we have seen so far. Our
business has always been safety
focused and this new system
generates real enthusiasm for
safety and a mindset to innovate.”

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information58

Sustainability review: People continued

Total incident rate (TIR)

3.58

R
I
T

1.61

1.03

0.75

0.67

0.53

0.81

0 2011

2012

2013

2014

2015

2016

2017

Contributing to this performance
was a refresh of our Weir Zero Harm
strategy to reflect a more behavioural
approach to safety and our drive to
make safety a part of every conversation
within the third element of Weir Zero
Harm. Everywhere in the Group, people
are engaging with safety in a way that
is giving everyone the opportunity to
identify safer ways of working and
sharing the responsibility of looking
after each other in the workplace.

Strategic developments in SHE
2017 saw the introduction of the
Group’s Global e-management system,
SHIELD, dedicated to SHE. SHIELD
gives the Group a platform on which
every single employee has a presence.
It has streamlined the recording,
investigating and reporting of all
SHE-related activity across the whole
Weir footprint and it provides a timely
and accurate analytical tool to help
inform the wider SHE strategy.

Delivering our duty of care
Many of the Group’s employees travel
regularly and we have a comprehensive
process to ensure they stay healthy and
safe at all times. This includes offering
advice before, during and after any trip.
This provides our significant travelling
population with the reassurance that
wherever they are going and whatever
they may encounter, there is a world-
class system supporting them.

Diversity and Inclusion (D&I)
As a global company operating in over
70 countries, we benefit from a wide
diversity of talents and aim to ensure
everyone is given the opportunity to
flourish regardless of their gender,
race, beliefs or background.

Our commitment to becoming a more
diverse and inclusive workplace made
significant progress in 2017:

Gender diversity –
total employees

• A project team was re-formed to

work on Group-wide D&I initiatives.
• D&I plans were developed by every
business unit and there has been
good initial progress.

• Groups from our Senior Management
Team have worked on ‘D&I’ initiatives
throughout the year.

• Open innovation challenges have
been held throughout 2017, which
bring diverse teams together to
develop innovative solutions to
business challenges and opportunities.

• Weir Gabbioneta, based in Italy, took

part in a diversity day event, to
promote the diversity and inclusion of
disadvantaged people within the labour
market. People dealing with impaired
vision, deafness, motor disability and
Down syndrome were keen to seize
the opportunities that the world of
work can offer them.

Weir University, our online learning
platform, continues to offer a range
of modules to help our people
increase their knowledge and skills.

In 2017, we continued to encourage
more young people to consider STEM-
related careers in many of the countries in
which we operate. In the UK, for example,
we have continued our support and
involvement with Primary Engineer and
the Arkwright Scholarship Trust. As part
of our continued commitment to the
Arkwright Scholarship Programme,
we provided one week summer work-
experience placements in Canada and
the Netherlands for one scholar from
our 2015 intake and two scholars from
our 2016 intake respectively. The students
spent time learning about our businesses
in both countries, visiting the engineering,
operations and commercial teams. The
students reported on all aspects of their
trips and met with Jon Stanton at the end
of the year to share their experiences
with him. Weir has been supporting
Arkwright since 2012.

Male

12,891

Female

2,015

Gender diversity –
Board

Male

Female

Gender diversity –
senior management

Male

189

Female

Gender diversity –
graduate intake

Male

68%

Female

32%

The Weir Group PLCAnnual Report and Financial Statements 2017

These innovations were in addition
to more established communications
channels such as the Group intranet
and bulletin newsletter.

A communications survey of employees
received more than 1,400 responses
with the majority indicating they felt
employee engagement across the
Group had improved in 2017 and they
had a good understanding of the
We are Weir strategic framework.

role models; helping them achieve
their aspirations by motivating them
to reach their full potential; providing
a platform to discuss the needs of
female students and their role in South
Africa’s socio-economic development;
as well as to showcase the exciting
opportunities within the engineering
and manufacturing environments.
The event supports our ongoing
commitment to the development
of STEM programmes and attracting
talent into manufacturing and
engineering, in particular.

Employee engagement
Employee engagement enables our
employees to realise their potential
and contribute to improving
business performance.

During 2017, we embedded ‘We are
Weir’ throughout the Group including
hosting the first ever global CEO ‘Town
Hall’ meetings. These enabled employees
from every part of the Group’s operations
to gather and question the CEO on
any issue of their choice. The level of
engagement was high and the feedback
was very positive. This was followed
by regular CEO briefings and the
introduction of a direct ‘AskJon’ email
address via which employees can raise
any issues they may have.

In addition, the Group launched an internal
social network to allow employees to
share best practice across operations.
There was a strong uptake, with more
than 4,000 members regularly sharing
stories and collaborating across the world.

Leadership capability
We continue to invest in our leadership
development programmes, including
Weir Leader 4.0 and the Weir Business
Management and MBA programmes.
To complement this, we have introduced
a new Weir Leader framework which is
aligned with ‘We are Weir’.

The senior leadership of the Group has
been strengthened through a mix of
internal and external hires and a number of
key roles have been introduced in support
of our technology agenda, in particular.

Weir Leadership
Programme

Weir Minerals
Africa

In 2017, Weir Minerals Africa was
delighted to participate in the annual
Take-a-Girl-Child-to-Work Day® for the
second year in a row. Weir hosted
53 female learners and eight teachers,
from nine different schools, at both our
Isando and Alrode facilities. The event
had several objectives, including
providing an insight into the “world of
work” to give female students positive

In 2017, we launched the Weir Leader
4.0 Programme with 26 leaders from
across Weir coming together to embark
on a nine-month learning journey.

The programme has been designed
to build Weir Leaders’ capability and
commitment to deliver ‘We are Weir’
against the background of Industry 4.0.

The core of the programme is centred
around two four-day sessions where
the focus is on understanding ‘We are
Weir’ and leaders’ role in delivering
it successfully, being clear on the
expectations of them as a Weir Leader
and about the legacy they want to
create for Weir.

Through a framework that incorporates
strategic, performance, inclusive and
change leadership dimensions, the
participants completed a ‘360 feedback’
that will allow them to continue to work
on the capabilities and behaviours they
will need to achieve impact and success.

Further details of our people
development programmes can
be found at www.careers.weir

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information60

Sustainability Review:
People continued

Understanding our pay gap

Weir gender pay
gap report – 2017
Respecting equal
opportunity and promoting
diversity and inclusion

At Weir, we aim to be the most admired
engineering business in our markets
and we’ll achieve that ambition by being
the employer of choice everywhere we
operate. We are committed to attracting
and retaining the best people, and no
matter where we are in the world we
encourage fairness, respect and equal
opportunities for everyone.

We value differences and believe that
diversity of people, backgrounds, skills
and experience makes us stronger and
more effective.

In this report, we provide our gender
pay gap information for our consolidated
UK businesses, and we outline how
we are working to close the gap.

Although Weir operates within
industries which have been dominated
by men historically, we are committed
to making Weir a more diverse and
inclusive workplace and we will
continue to deliver opportunities for
women to develop their careers. By
2020, we have committed to ensuring
that one-third of the Board, the Group
Executive and their direct reports will
be female. In addition, the Board will
annually review our progress against
gender pay D&I initiatives.

The requirements and our outcomes
The UK Government’s Gender Pay Gap
Regulation requires legal employing
entities with 250 or more employees
to publish details of their gender pay
and bonus gap. In Weir, there are two
employing entities required to publish
this data, but we have taken the
opportunity to publish the consolidated
data for our four UK companies as this
covers our entire UK workforce.

How we calculate
the median difference

How we calculate
the mean difference

Lowest
hourly pay

Median
hourly pay

Highest
hourly pay

Number
of male
employees

Mean male
average pay

The
difference

Median pay
and hourly pay

The
difference

Mean
hourly gap

Number
of female
employees

Mean female
average pay

Proportion of employees receiving a bonus

Male

16%

We need to encourage and
attract more women at all levels
of the organisation. Here in Peru
we have a female Managing
Director and Finance Director,
which I believe is unique in Weir,
but I am sure it will become
increasingly common.

Jenny McGeough
Manufacturing Director,
Weir Minerals Netherlands

Female

18%

Karina Zevallos
Managing Director,
Weir Minerals Peru

There is a definite move to make
Weir more diverse and inclusive,
which is great. Personally, I have
found the Group to be a good
place to build a career irrespective
of gender, but of course we’d all
like to see more female role
models across the business.

The Weir Group PLCAnnual Report and Financial Statements 201761

two programmes: 1) Leaders’
Awards and 2) Institution of
Primary Engineers and Institution
of Secondary Engineers. Leaders’
Awards is a free-to-schools
programme, where pupils from
both primary and secondary schools
engage with engineers. As part of
the programme, pupils interview an
engineer and then, inspired by them,
use engineering to solve a problem.
They illustrate their invention and all
entries are marked by engineers or
those working in the industry.
Students at the Faculty of Engineering
at the University of Strathclyde then
select a winning entry to be turned
into a prototype each year. Through
the Institution of Primary and
Secondary Engineers, it is Primary
Engineer’s aim is to develop the
skills and confidence in teachers first
and then extend from this secure
foundation into the classroom,
with programmes focusing on skills
delivery and development. Weir’s
own engineers are also working with
Primary Engineer in schools where
they have a presence, attending
some of these sessions.

• Leadership development: we are

looking to expand our learning and
development programmes to provide
more support for women with the
establishment of mentoring groups.
As we roll out this initiative, we
will also pilot a reverse mentoring
programme to build awareness,
knowledge and empathy.

• Flexible working: we are working
with our local business leadership
teams to investigate ways we
allow employees to work to suit
their personal responsibilities
and circumstances.

• We are a member of Opportunity

Now which empowers employers
to accelerate change for women
in the workplace.

• We are a member of Race for

Opportunity which is committed to
improving employment opportunities
for ethnic minorities across the UK.
• Charles Berry, our Chairman, is on
the steering group of the Hampton-
Alexander Review which aims to
improve the representation of
women in leadership positions
of FTSE 350 companies.

Further details
A copy of the full report can be found
on our website www.genderpay.weir.

and these roles are male dominated.
It is expected that over the next few
years, the bonus gap will increase in line
with the vesting of our LTIP awards for
the leadership group, and also to reflect
the vesting outcomes of awards held by
our Executive Directors and UK-based
Group Executive Members.

Improving diversity and working
to close the gap
As a global company, we aim to reflect
the diversity of our customers, and we
seek to recruit, develop and promote
people regardless of background and
personal circumstances.

We are committed to making Weir
a more diverse and inclusive place to
work because we believe it improves
the performance of our teams and we
are committed to delivering current and
new initiatives to make Weir a more
diverse and inclusive place to work.

• Driving best practice: a cross-

business group working on Group-
wide D&I priorities including diversity
training. During 2017, we established
#Weirunitedindiversity, on Yammer,
which is being used by our
employees to share knowledge,
learning and best practice.

• On a regular basis, our businesses

undertake diversity audits against our
diversity maturity model. This enables
us to identify areas of best practice
and to develop action plans to address
areas needing improvement. Progress
of resulting actions and initiatives is
monitored by our Group Executive.
• Encouraging women into STEM: Weir
Flow Control France is working with
the French Ministry of Education to
promote diversity and inclusion in the
engineering sector, partnering with
the government on an initiative which
aims to boost the number of women
pursuing careers in mechanical
engineering. We have also founded
the Association of Female Engineers
to support and promote successful
women in engineering to students
in colleges and university.

• Weir Wise: we have partnered with
the University of Strathclyde to
inspire young female students to
become the next generation of
engineers. On a two-day programme,
participants learn about the benefits
of studying maths and physics,
participate in team-based challenges
and gain awareness of the university
and Weir.

• Targeting 50% female intake on
our global graduate programme.
• Primary Engineer – Weir Group
is supporting Primary Engineer
2017–2020 with funding towards

By 2020 we have committed
to ensuring that one-third of
the Board, the Group Executive
and their direct reports will
be female. In addition, the
Board will annually review
our progress against gender
pay D&I initiatives.

Weir UK1
Mean and median pay and bonus gap
Median

Mean

Gender Pay Gap
Gender Bonus Gap

8%
22%

10%
11%

Proportion of males and females
receiving a bonus

Male 16%

Female 18%

Proportion of males and females
in each pay quartile band
Pay Quartile

Male

Female

Upper
Upper Middle
Lower Middle
Lower

87%
88%
88%
76%

13%
12%
12%
24%

Gender pay and equal pay
The gender pay gap is different from
equal pay, which relates to men and
women being paid the same for similar
roles or work of equal value. Our pay
policies are designed to ensure equal
pay for equal jobs and we have
processes in place to ensure pay
levels are reviewed consistently.

Understanding our background and
what our pay gap tells us
In common with other companies within
the engineering sectors, the majority
of our employees are men (86.5% as at
31 December 2017). Although we are
taking actions to bring more women into
our companies and to promote internally,
they are currently under-represented in
our senior roles which is reflected in the
upper pay quartile outcomes. Globally,
we are making progress on increasing
our female leadership, but we need to
build more opportunities for women
in our UK businesses.

As regards the bonus gap, only our
leadership roles are eligible for
participation in our LTIP programmes

1. This represents the consolidated data for our four UK companies which covers our entire UK workforce.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information62

Sustainability Review
Ethics
Committed to business integrity

Introduction

At Weir, we are proud to be a business
which strives to achieve the highest
ethical standards and sound business
principles. This is firmly reflected in
our corporate values and in our Code
of Conduct. We understand our role
in the communities we work in, and
beyond, and the influence we can
have to drive change.

We also recognise the responsibilities
that we share with our suppliers and
we remain committed to establishing
open and transparent relationships
with them.

We are committed to business
integrity and high ethical standards.
We operate under a Code of Conduct
which promotes honest and ethical
behaviour and our aim is to ensure
that our customers, suppliers,
investors, employees, and the
communities where we operate
have the confidence to trust us.

FTSE4Good
We have been a member of FTSE4Good
for seven years, an equity index series
that is designed to facilitate investment in
companies that meet globally recognised
corporate responsibility standards. The
Company is proud to have been able
to consistently meet the stringent
environmental, social and governance
criteria set by FTSE4Good and we
remain committed to continuously
improving our performance in 2018.

Transparency International
We are a member of Transparency
International UK’s Business Integrity
Forum, the UK’s leading anti-corruption
forum for businesses in all sectors.
This membership enables us to support
Transparency International’s global
movement of seeking a world free from
corruption. We have signed up to a set
of principles and remain committed to
fight against corruption and ensure that
we are honest and accountable in the
business that we do and that we strive
to respect fundamental human rights
and freedoms.

Code of Conduct
Our Code of Conduct sets out the Weir
values in a clear and concise manner.
It promotes compliance with applicable
laws, rules and regulations and provides
details on how we expect our people
to conduct themselves on a day-to-day
basis, both internally and externally.
The Code of Conduct provides a clear
framework for decision-making in line
with our values and behaviours. It applies
to all Weir employees, agents and
suppliers. Various measures are taken to
ensure that we only enter into business
relationships with third parties who are
committed to applying similar standards.
We not only stress the importance of
complying with the Code of Conduct
but also encourage our employees to
promptly report any concerns or apparent
breaches that they may become aware
of without fear of retribution. Employees
can also choose to report concerns
anonymously through our Ethics Hotline.

Our current Code of Conduct is available
to download, in 13 languages, from
our website.

We provide targeted mandatory
e-learning training in respect of the
Code of Conduct to employees who are
deemed to have a potentially higher risk
of exposure to bribery and corruption as a
consequence of their geographic location
and/or decision-making responsibilities.

To date, 4,700 employees have completed
the anti-bribery and corruption compliance
training. All new employees who are
deemed to fall into the higher risk
category must undertake the training as
part of their induction. After completion
of the training, all participants are asked to
confirm that they have read, understood
and will comply with the Code of Conduct.

The Code of Conduct is reinforced
through various means of communication
with our employees, such as Town Hall
meetings, conferences, training courses
and our integration process in respect of
new acquisitions. We have an established
training programme in place and the Weir
legal team continues to provide face-to-
face training to employees of various
operating companies worldwide. In 2017,
the team conducted training in Trio USA,
Trio China, Weir Minerals Europe, Weir
Minerals Africa, Weir Gabbioneta and
Weir Dubai.

Any employee found in breach of
the Code of Conduct may be liable
to disciplinary action, up to and
including termination of employment
or cancellation of contract. We also
ensure that we have a right to
terminate any agency agreement in
the event that any agent is found to
be in breach of its ethical obligations.

Information on the Code of Conduct and
its application in the Company’s supply
chain can be found in the Suppliers and
third parties section below.

The Weir Group PLCAnnual Report and Financial Statements 201763

We have a number of measures in
place to protect human rights including
the Code of Conduct, Weir Supply
Chain Policy, Weir SHE Standards and
a programme of supplier audits and
reviews. Our Human Rights Policy has
also been updated to ensure it reflects
recent legal developments in this area.
In addition, a mandatory e-learning
training programme has been developed
and is, in the first instance, aimed at
employees who are located in identified
high-risk jurisdictions. The e-learning
programme aims to increase awareness
and compliance with the Modern Slavery
Act and Weir’s responsibilities.

General Data Protection Regulation
(GDPR)
With GDPR being applicable from
May 2018, we have been reviewing and
updating existing policies and procedures
and, where applicable, implementing new
practices to ensure compliance with the
new legislation.

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.

We recognise that our 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:

• business ethics;
• how they treat their workforce;
• legal and regulatory compliance;
• health and safety; and
• environmental standards.

Weir is a member of the UK government-
sponsored Prompt Payment Code (PPC),
which sets standards designed to support
on-time payment to small and medium
sized enterprises (SMEs) as well as wider
payment procedures. Best practice is
administered by the Chartered Institute
of Credit Management and compliance
with the principles of the PPC is closely
monitored and enforced by the PPC
Compliance Board.

In addition, 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.

Our Code of Conduct is issued to all
of our key suppliers. Assessments are
undertaken with regard to compliance
with Group standards and Group policies
as part of the vetting process for new
suppliers. In addition, key suppliers are
audited regularly to ensure ongoing
compliance. We are also implementing
a mandatory training programme for
our employees to improve their
understanding and ability to identify
signs of Modern Slavery within supply
chains to promote fair and honest
business practices. Wherever possible,
we work with our suppliers to support
them to address weaknesses identified.

Conflict Minerals Policy
We continue to monitor guidance and
legislation in relation to conflict minerals
and in particular the responsible sourcing
of tungsten, tantalum, tin and gold (the
‘3TG’ minerals). Along with internal
briefings and updates, we have prepared
a Conflict Minerals Policy in order to
ensure compliance as necessary. We
continue to work with our customers
to provide the supply chain information
when required.

Conflicts of interest
Our Conflicts of Interest Policy places
particular emphasis on outlining
what may constitute a conflict and
the correct process for disclosing any
perceived conflict to management.
The policy provides clear guidance
to all of our employees to assist them
with understanding the mandatory
requirements for the identification,
reporting and management of actual
or potential conflicts of interest.

Anti-bribery and corruption
As part of our commitment to continually
monitoring and improving anti-bribery
and corruption practices throughout our
global operations, we have reviewed
our anti-bribery policy and expect to
implement the update of this policy
in 2018. In addition, our internal audit
department regularly undertake anti-
bribery and corruption reviews. They
maintain a cyclical, risk-based plan with
four Code of Conduct reviews specific
to anti-bribery and corruption undertaken
during 2017 in addition to our standard
internal audit programme of both full
and limited scope reviews. No indicators
of any bribery or corruption were found
in 2017.

Gifts and hospitality
A review of our Gifts and Hospitality
Policy was undertaken in 2017 and the
focus in 2018 will be on training and
raising continued awareness of the
Gifts and Hospitality Policy.

Modern Slavery Act
We understand our role in eradicating
slavery of any kind. Following a review
of our existing policies and practices
and in light of the introduction of the
Modern Slavery Act in the UK, we
published our first annual Modern
Slavery Statement in March 2017 and
have subsequently developed a training
programme for specific employees on
this issue. A copy of our statement can
be found on our website at www.global.
weir/site-information/modern-slavery-
statement.pdf. This statement details
the steps we are taking to ensure that
slavery and human trafficking do not
take place in any of our supply chains
or in any part of our business.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information64

Sustainability Review
Our Communities
Building relationships with
our local communities

Introduction

Weir is a global business which
operates in over 70 countries. We set
clear expectations for how each of our
businesses should interact and engage
with people and other organisations.
Wherever we operate in the world,
we aim to:

• enhance the local community

by running our operations safely,
ethically and responsibly;
• respect the communities we

operate in; and

• invest in the communities for

the long-term mutual benefit of
the community and Weir.

We strive to build close relationships
in our communities by keeping local
people informed about projects which
might affect them. If issues arise, we
listen and do our best to help to find a
solution. Our Ethics Hotline is available
for any individual to use if they wish
to raise concerns about ethical and
compliance-related conduct involving
any Weir Group company.

In addition to approaching community
relations in an open and transparent
manner, we seek to support charitable
organisations through donations and
volunteering.

We recognise that as an organisation
with a global reach, our influence is not
insignificant, particularly in developing
countries. Our charitable and philanthropic
work focuses on the key priorities of
improving the health and education of
our employees and the local community.
We recognise that contributing to these
important areas can have an enduring
positive effect on the local area.

In addition to supporting charitable
organisations, Weir contributes to local
communities by being a source of
employment, education and training;
through the payment of taxes; and, in
many instances, the contribution to local
supply chains. This can make a substantial
positive contribution to 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.

Weir is a 147-year-old engineering
company, and our commitment to
training is as strong in the 21st century
as it was in the 19th. We are dedicated
to developing engineering excellence and
we were the first company in Scotland
to set up an apprentice school. Weir
is a founding member of the Institute
of Primary and Secondary Engineers,
an institution which seeks to promote
science, technology, engineering and
mathematics subjects to school children
of all ages in the UK.

Weir provides experience and training to
develop the next generation of engineers.
Although our focus is on engineering,
we also provide work placements and
internships across all sectors. Our
placements give young people from
around the world the opportunity to
experience working for a global business.

Charitable giving
In 2017, the total amount of charitable
donations made by Group companies
was £533,603 (2016: £456,000). We
do not make political donations. Our
charitable donations include cash and
non-cash items such as services,
materials, employee time and use
of corporate facilities.

In 2017 the Group continued to support
Newlands Junior College, a vocational
school that provides career opportunities
to young people who have become
disengaged from the traditional education
system. The College provides vocational
training and helps young people to
develop and reach their potential The
Group donated £100,000 to Newlands
Junior College in 2017.

The Group continues to support The
Arkwright Scholarships Trust following
initial engagement in 2012. Partnering
with organisations in industry and
professional engineering institutions,
the programme identifies and nurtures
high-potential students in UK schools,
encouraging them to pursue engineering
or technical design at university or
through a higher-level apprenticeship.
In 2017, the two scholars who were
recruited in 2016 undertook a five-day
summer placement at our facility in Venlo,
the Netherlands. We were delighted to
welcome another two scholars onto the
programme at an awards ceremony in
Edinburgh in October 2017.

The Group continued to support Primary
Engineer in 2017. Primary Engineer
is a not-for-profit organisation which

Charitable donations

1 Community
2 Education
3 Health

29%
56%
15%

The Weir Group PLCAnnual Report and Financial Statements 2017
65

We support the communities
that we operate in through the
payment of taxes, employment
and philanthropic efforts.

prototypes, through to showcasing
the final models, this comprehensive
competition gives competing students
real insight into the engineering design
process. Weir Minerals are very proud
to be a part of this reputable academic
competition and would like to thank every
university that has taken part over the last
30 years — the competition wouldn’t be
where it is today without their ongoing
support and participation.

Weir Marine Engineering
gives a helping hand to the
Montreal homeless
In 2017 a group of 15 Weir Marine
Engineering employees took part in
The Supper Experience at Montreal,

Canada’s Old Brewery Mission (OBM).
The OBM is a local charitable organisation
that helps Montreal’s homeless men and
women by providing hot meals, mental
health programmes, and social housing,
as well as finding permanent solutions
to re-integrate these men and women
back into society. It was a very humbling
experience for those that participated
and they all left the mission with a
greater sense of gratitude for their own
circumstances. In the month leading up
to the supper experience, the group held
a number of fundraising activities and
with the help of their colleagues, they
managed to raise over 2,000 CAD for
the OBM and surpassed their primary
goal of 1,500 CAD.

aims to encourage young people to
consider careers in science, technology,
engineering and mathematics (STEM)
by offering primary and secondary
schools a way to deliver practical
mathematics and science to design
and make activities. Moving forward,
the Group will support Primary Engineer
with the Scottish Engineering Leaders
Awards and continues to support the
Institute of Primary Engineers and
Institute of Secondary Engineers.

Employee activities
We are 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.

During 2017, our employees
undertook many charitable projects.
A small selection of these projects
is highlighted below.

Weir Minerals Peru tree planting
In August 2017, Weir Minerals Peru held
its second volunteer initiative, ‘Hands
of Solidarity – Tree Planting Campaign
2017’. The objective was to highlight
the importance of environmental care
and preservation by planting trees and
shrubs, while improving the appearance
of the park adjacent to the Weir Minerals
facility in Lima. More than 100 employees
volunteered and participated with great
enthusiasm and team spirit. Three groups
were organised: Air, Water and Land.
The ‘Air’ group participated in planting
90 trees and shrubs in the park. The
‘Water’ group planted more than 300
shrubs to create a hedge, and the ‘Earth’
group sowed more than 250 m2 of grass
seed. In total, 3,000 m2 of green space
was landscaped.

The Warman® Design
and Build Competition
The Warman® Design and Build
competition, established by Engineers
Australia and sponsored by Weir Minerals,
has been providing first and second
year mechanical engineering university
students in the Asia-Pacific region the
platform to apply their knowledge in a
practical application for the past 30 years.
From brainstorming of ideas and building

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information66

Sustainability Review
Environment
Creating opportunities to improve the
environmental performance of our
operations and those of our customers.

2017 performance highlights
Operational control
The Weir SHE Management Standards set
our expectations and provide a framework
for environmental risk management,
incorporating key elements such as
regulatory compliance, risk assessment,
self-audit, and employee engagement.

Our continued commitment to robust
environmental protection is well reflected
in the performance of our facilities.

We are pleased to report a 2.5% increase
in overall compliance with environmental
standards across our businesses during
2017, compared to that assessed in 2016.

Environmental protection
No environmental incidents, penalties or
fines were reported at sites under the
operational control of the Group during
the year ended 31 December 2017.

Operational resilience
As a business with global reach we
can be exposed to a wide range of
extreme weather events in different
geographic locations.

In 2017 ‘Hurricane Harvey’ landed in the
US, the most powerful hurricane to hit
the state of Texas in more than 50 years,
and one of the country’s costliest natural
disasters with damage estimated at
$125 billion (£90 billion).

Creating a more sustainable future

Our role in the circular economy
We are proud to play a role in helping
our partners and customers move
towards a more circular economy.

A circular economy seeks to design
out waste and pollution, keep resources
in use for as long as possible, extract
maximum value whilst in use, then
recover and regenerate at the end of
service life.

Circularity has clear environmental and
social benefits, reducing pressure on
natural finite resources by rethinking and
redesigning beyond the traditional linear
economy of ‘Take, make, and dispose’.

During 2017, Weir Minerals Europe
secured the perfect opportunity to support
regional ambitions for greater circularity
through a new waste recovery facility in
the Netherlands. The facility is being
built by ACCN (Ash Cleaning Company
Netherlands), a joint venture between
Boskalis Environmental and Inashco.

Introduction

We are committed to doing business
responsibly and sustainably. How we
operate is just as important as how
we deliver financial success.

We believe that acting in an
environmentally sustainable way
protects and creates long-term value,
not just for our shareholders, but for
all our stakeholders, and supports
the long-term future of our business.

In a competitive world with finite
resources, managing the environmental
performance of our operations makes
good business sense.

We actively invest in research and
development through our central
research and development hub as
well as through its network of
academic research partners in some
of the world’s leading universities.

This enables us to develop and
exploit emerging technologies to
create new products for our end
markets and provide competitive
advantages to our customers
through leading edge technology,
with improved operational efficiency
and environmental management,
reduced energy consumption,
emissions, water use and
waste production.

The Weir Group PLCAnnual Report and Financial Statements 201767

Seven sites within our Oil & Gas division
were affected to varying degrees.

Fortunately, our employees were
unharmed and our sites only suffered
temporary closures. Thanks to asset
resilience and a robust response from the
division, eventual business interruption
was minimised and the financial impact
was contained to £545k ($750k).

We continue to enable our customers to
protect their own operations and business
interests through our technical support
and innovative products.

For example, the total mine dewatering
solutions provided by Weir Minerals,
drawing on extensive engineering and
application expertise.

It is important, particularly where water
is in short supply that we continue to
develop technology to ensure that the
water drawn out by dewatering systems
becomes a resource for mining or even
for other uses by communities surrounding
the mine sites. Rather than it going to
waste, it is increasingly important to
manage and reuse the water effectively,
improving the resilience of mine site
processes and activities in increasingly
harsh environments.

Resource efficiency
Our foundries and manufacturing
facilities continually seek to improve
resource efficiency and to reduce costs;
delivering real results for our Value Chain
Excellence initiative.

Total annual GHG emissions

Over 15,100 tonnes of scrap metal were
reused within our foundry operations
during 2017, comprising 42% of all metal
poured in the foundries (2016: 34%).
This was a notable increase on 2016
figures and a great outcome from
efficiency-focused initiatives, such
as the Foundry Best Practice Forum.

CDP climate change initiative
We submit annual CDP reports to
share our risk management approach
to climate change and our greenhouse
gas (GHG) emissions performance.

In 2017, we achieved a score of ‘C:
Awareness’ for changes implemented
to business strategy and the reductions
in GHG emissions achieved.

2017 CDP score

Greenhouse gas emissions
As an energy and carbon intensive
business, operating seven foundries
worldwide, the Group recognises the
importance of measuring and minimising
the greenhouse gas (GHG) emissions
from operations over which it has control.

The Group’s total annual GHG emissions
in tCO2e for the year ended 31 December
2017 were 133,737 tCO2e (2016: 136,167
tCO2e). This comprises a 2% decrease
in total absolute GHG emissions for the
Group when compared with 2016 figures.

During 2017, total GHG emissions for
our seven foundries decreased by 3%.
Carbon intensity of the metals poured
improved marginally with the use of
lower carbon fuels.

With the Weir Minerals Europe (WME)
total solutions approach and its excellent
cross-team collaboration, we secured an
order for a range of equipment, including
Warman Slurry Pumps, submersible
Screw Flow Pumps, Cavex Cyclones,
a Linatex Dense Medium Separator,
Trio Coarse and Fine Material Washers
and a TRIO Impact Crusher.

Once built, our equipment will enable
the advanced washing installation to
recycle up to 500,000 tonnes of bottom
ash, a by-product from the incineration
of household waste in nearby waste-to-
energy plants, into valuable raw materials,
including metals, sand and gravels.

This follows technical advice and specialist
equipment provided by WME for the HVC
WASH facility in the same region, the
world’s first large-scale fully integrated
washing plant for incinerator bottom ash.
The facility diverts bottom ash from
landfill, provides recycled raw materials
for road construction and concrete
products, and also separates valuable
metals for reuse.

With expertise in innovative equipment
and industry-leading knowledge of waste
recovery and recycling, WME is proud
of the critical role it plays in solutions for
a more circular economy.

Global annual GHG emissions
(tCO2e)

GHG emissions intensity
(tCO2e per £m revenue)

2017

2016

Baseline:
2013

Scope 1 emissions: fuel combustion and operation of facilities

33,300

37,170

53,316

Scope 2 emissions: purchased electricity and heat

100,437

98,997

107,581

Total

133,737

136,167

160,897

Annual GHG emissions from foundries

2017

14.1

42.6

56.7

2016

20.1

53.7

73.8

Baseline:
2013

21.9

44.3

66.2

Annual GHG emissions
(tCO2e)

Proportion of global annual emissions
(%)

GHG emissions intensity
(tCO2e per tonne of metal poured)

2017

2016

Baseline:
2013

2017

2016

Baseline:
2013

2017

2016

Baseline:
2013

Scope 1 emissions:
fuel combustion and operation
of facilities

Scope 2 emissions: purchased
electricity and heat

Total

10,799

13,536

16,738

8.1

9.9

10.4

52,432

51,501

48,705

63,231

65,037

65,443

39.2

47.3

37.8

47.7

30.3

40.7

0.3

1.5

1.8

0.4

1.5

1.9

0.5

1.4

1.9

Scope 1 emissions: fuel combustion and operation of facilities. Scope 2 emissions: purchased electricity and heat.
We report on all emission sources required under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013. These sources fall within our consolidated financial statement. We do not have
responsibility for emission sources that are not included in our consolidated statement.
We have referred to the ‘GHG Protocol: Corporate Accounting and Reporting Standard’ (revised edition) and used emission factors from the UK Government’s ‘GHG Conversion Factors for Company Reporting 2017’
and other region-specific emissions factors where available.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information68

Corporate Governance Report
Contents

Leadership

Effectiveness

The Board sets the tone of the Company
with regards to corporate governance
and ensures the application of the
Company’s values and behaviours.
It demonstrates the clear division of
responsibilities and the constructive
challenge and development of strategy.

The Board operates effectively for
the long-term success of the Company.
The Board members demonstrate the
correct balance of skills, experience,
independence and knowledge and
are able to commit sufficient time
to undertake the duties and
responsibilities appropriately.

Relations with Shareholders
and Stakeholders

The Board maintains an open dialogue
with shareholders and Board members
attend investor events globally.

Engagement With Stakeholders
During 2017

Chairman’s Introduction
to Governance

Board of Directors

Group Executive

Leadership

Board Composition

Roles and Responsibilities
of Directors

Board and Committee structure

Management Committees

Board Meetings

Board Meeting Attendance

Matters Reserved for the Board

Board Activities During 2017

Nomination Committee Report

Board Skills and Experience

Board Effectiveness Review

Board Appointment and Tenure

Induction and Ongoing Training

Directors and Their Other Interests 80

Board Site Visit

Remuneration

The Board ensures an open and
transparent remuneration policy
for the effective recruitment
and retention of Board members
and Company employees.

Remuneration Committee Report

110

Directors’ Remuneration Policy

102

Accountability

The Board maintains sound risk
management and internal control systems
and has well-established committees to
assist it in the undertaking of its duties.

The Audit Committee and Auditors 82

Internal Control and Risk Management 82

Audit Committee Report

The UK Corporate Governance Code
The UK Corporate Governance Code
(the ‘Code’) is published by the Financial
Reporting Council and sets out the
standards of good practice in relation
to matters such as Board composition
and effectiveness, the role of Board
Committees, risk management,
remuneration and relations with
shareholders. The Code can be
obtained from the Financial Reporting
Council via its website at frc.org.uk.

As a listed company, we are required
to explain how we have complied with
the Code and applied its principles and
provisions. We must also provide an
explanation of any instances where we
have not. This Corporate Governance

Report, together with the Nomination,
Audit and Remuneration Committee
Reports, details how the Company has
applied the main principles of the Code
in 2017. For the year ended 31 December
2017 to the date of this Annual Report,
the Board considers that the Company
has complied fully with the Code.

The Financial Conduct Authority’s
Disclosure and Transparency Rule 7.2.6
(“DTR 7.2.6”) requires the corporate
governance statement to contain certain
information required by Schedule 7 to
the Large and Medium sized Companies
and Groups (Accounts and Reports)
Regulations 2008 (SI 2008/410). This
information relates to significant interests
in the securities of the Company,

securities carrying special rights with
regard to the control of the Company,
restrictions on voting rights, rules
regarding the appointment and
replacement of Directors, rules regarding
changes to the Company’s Articles of
Association and the Directors’ powers in
relation to the issuing or buying back by
the Company of its shares. The relevant
information can be found in within the
Directors’ Report on pages 116 to 118.

The following Corporate Governance
Report, including the Committee Reports
and the Directors’ Report, sets out how
we apply these governance standards
in practice and demonstrates our
compliance with the Code.

The Weir Group PLCAnnual Report and Financial Statements 2017

Corporate Governance Report
Chairman’s introduction to governance
Driving performance through culture

Q The Board is accountable for

the Group’s management of risk.

How does the Board monitor this?
The Board reviews the Group Risk
Dashboard at each Board meeting and
receives presentations from Executive
Directors, Divisional Presidents, Group
Executive members and functional
leaders which include aspects of the
Group’s principal and other risks together
with how they are being controlled or
otherwise mitigated. The Risk Committee
reports bi-annually to the Board with a
detailed assessment of each principal
risk, internal audit and compliance
scorecard results, developments in
risk management approaches and
any significant matters for the Board’s
consideration. On an annual basis,
the Board will also review the Group’s
Risk Appetite Statement.

Q What engagement with

shareholders has the Board

had during the year?
The Board is responsible for ensuring
that satisfactory dialogue with shareholders
takes places throughout the year. In order
to establish and maintain good relationships
with the shareholders of the Company,
the Directors meet with major shareholders
in order to keep them informed of
significant developments and to listen
to their views. You can read more about
how the Board members engaged with
shareholders during 2017 on page 83.

Charles Berry
Chairman
28 February 2018

Q As Chairman, what is your view

on the role of governance?
As Chairman, I focus on ensuring that
the Board delivers effective leadership
in order to ensure the long-term success
of the Company. The Board sets the tone
from the top by defining and demonstrating
the Company’s values and standards. The
Board recognises that a robust corporate
governance framework is essential to
deliver the strategy of the Group and
ensure the highest standards of integrity.

Q What role does the Board play in

setting the culture of the business?

The Board leads by example and works
diligently to ensure that the Weir values,
corporate strategy and business model
are embedded within our culture and at all
levels and aspects of our business. This
approach allows us to establish a culture
which is resilient and adaptive to change.
The Board remains committed to driving
the culture of the business and ensuring
that this is reflected in our Code of
Conduct and commitment to our people.

Q Sustainability is integral

to the business. What role
does the Board play in managing this?
Every member of the Board views
themselves as stewards of the business
with a clear responsibility to ensure its long-
term success. That long-term approach
defines how we develop the strategic
direction of the Group, assess risks and
opportunities and ultimately deliver
sustainable value for all our stakeholders.

Q The Board Effectiveness

Review was led externally

this year. What did it identify?
It identified that further enhancement of
the Non-Executive Directors’ engagement
with various levels of the business and
a more structured schedule of informal
site visits would be valuable. A review
and possible refinement of the annual
programme and schedule of meetings
was also recommended.

Charles Berry
Chairman

Dear Shareholders,
I am pleased to present the Corporate
Governance Report for 2017. As
Chairman, I continue to focus on
ensuring our governance structure
remains appropriate, whilst supporting
our strategy and culture and ensuring
that the Board delivers prudent and
effective leadership in order to discharge
its duties responsibly and effectively.

Good corporate governance is critical
to building a successful and sustainable
business and enabling us to create
long-term value more effectively. The
focus on corporate governance is forever
increasing and the Board is committed
to maintaining the highest standards of
corporate governance as this is the key
to the continued long-term success of
your Company.

In the Corporate Governance Report,
I describe our governance structure,
how the Board works and areas that
your Board has focused on during
the year as well as the work of the
Board Committees.

Statement of Compliance with the
UK Corporate Governance Code
I am pleased to report that the
Company has fully complied with all
the principles of the Code for the year
ended 31 December 2017, and from
that date to the date of approval of
this Annual Report.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
70

Board of Directors
The right skills and experience
to deliver long-term value

Committee membership key

Chair

A Audit Committee member
N Nomination Committee member
R Remuneration Committee member

Director

N R

A N

in June 2008

Nationality

Christopher Morgan

Melanie Gee

Company Secretary

and General Counsel

Former Non-Executive

Director

Left the Company in 2017

Secretary to the Board,

Audit, Nomination and

Remuneration Committees

A N R

in May 2011

Nationality

Charles Berry
Chairman

Jon Stanton
Chief Executive Officer

John Heasley
Chief Financial Officer

Clare Chapman
Non-Executive Director

Alan Ferguson
Non-Executive Director

Mary Jo Jacobi
Non-Executive Director

Barbara Jeremiah

Non-Executive Director

Professor

Richard (Rick)

Sir Jim McDonald

Menell

Non-Executive Director

Senior Independent

John Mogford

Non-Executive Director

A R

N R

A R

Independent?

Yes, since appointment
in March 2013

Yes, since appointment
in August 2017

Yes, since appointment
in December 2011

Yes, since appointment
in January 2014

Yes, since appointment

n/a

Yes, since appointment

in August 2017

in January 2015

in April 2009

Nationality

Tenure on Board

Tenure

Tenure on Board

4 years and 10 months

CEO – 1 year and 3 months
FD – 6 years and 5 months

1 year and 3 months

5 months

6 years

4 years

5 months

3 years

8 years and 9 months

9 years and 7 months

1 year and 8 months

6 years and 4 months

Experience

Charles was an Executive
Director of Scottish Power
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,
Drax Group plc and Thus
Group plc, and a former
Non-Executive Director
of Impax Environmental
Markets PLC and Securities
Trust of Scotland plc.

Jon joined the Board as
Finance Director in 2010
where he helped shape
the Group’s strategy
and developed Weir’s
finance, treasury, tax
and information
services capability.

Before joining Weir, he
was a partner with Ernst
& Young, one of the world’s
largest professional services
companies, where he
led global board-level
relationships with a
number of FTSE-100
multi-national companies.

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

Prior to his appointment
as Chief Financial Officer,
John was the Divisional
Managing Director for
Weir Flow Control.

Prior to joining Weir in 2008,
he held a number of senior
financial, commercial
and operational roles,
including positions at
PricewaterhouseCoopers
and Scottish Power.

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

Clare is the former Group
People Director of BT Group
plc and Director General
of Workforce for the NHS
and Social Care. Clare was
previously a Non-Executive
Director of TUI Travel plc
and Chairman of its
Remuneration Committee.

Clare was also Group
HR Director of Tesco plc
from 1999 to 2006 and
HR Vice President of
PepsiCo’s west and central
European operations
from 1994 to 1999.

Alan was Chief Financial
Officer and a Director of
Lonmin plc, from 2007
until 2010. Prior to this,
he was Group Finance
Director of the BOC Group
plc. Alan also 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 its Business
Policy Panel.

Mary Jo advises companies
on international affairs and
reputation management.

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

Mary Jo was Special
Assistant to President
Ronald Reagan, Assistant
US Commerce Secretary
for President George H.W.
Bush and a British Civil
Service Commissioner
from 2005 until 2010.

Barbara previously spent

Jim is Principal and

Rick was appointed Chief

John was formerly a

Christopher joined the

Melanie is a Senior

over 30 years in a number

Vice Chancellor of the

Executive of Anglovaal

Managing Director for

Group as Deputy General

Adviser at Lazard & Co.

of roles with Alcoa Inc.

University of Strathclyde

Mining in 1996, then

First Reserve, a large global

Counsel in 2014 and was

Limited, having worked

(now demerged into

and has held the Rolls-Royce

Executive Chairman in

energy-focused private

appointed as Company

Alcoa and Arconic Inc.), the

Chair in Electrical Power

2002. In 2005, he was

equity firm and an Executive

Secretary and General

global aluminium producer.

Systems since 1993. He

appointed President and

Vice President of BP plc.

Counsel in 2016.

Her roles in Alcoa included

is also Chairman of the

Chief Executive of TEAL

Executive Vice President,

Institute for Energy and

Exploration & Mining Inc.

Corporate Development

Environment.

and Chairman’s Counsel.

He is a member of the

Barbara also previously

UK Trade and Investment

He was formerly Chairman

of Avgold Ltd and Bateman

Engineering BV.

He was Chairman of

He is a qualified solicitor in

Amromco Energy LLC

both Scotland and England

and White Rose Energy

and a member of the Law

Ventures LLP and a

Society of Scotland and the

Non-Executive Director

Law Society of England

served as the Chairwoman

Energy Excellence Board.

Rick is a senior adviser

of Deep Gulf Energy LP.

and Wales.

of Boart Longyear Limited.

He co-chairs the Scottish

to Credit Suisse and

Barbara has a BA in

political science and

is a qualified lawyer.

Energy Advisory Board.

Chairman of Credit Suisse

He is a fellow of the Royal

Securities (Johannesburg)

Academy of Engineering,

(Pty) Limited.

He is a fellow of the

Institution of Mechanical

Engineers and a visiting

Professor at the University

of Strathclyde. John was a

the Royal Society of

Edinburgh, the Institution of

Engineering and Technology,

and the Institute of Physics.

He is a fellow of the

Geological Society (London),

Non-Executive Director of

and of both the Australasian

DOF Subsea AS.

and South African Institutes

of Mining and Metallurgy.

Key external appointments

Key external

None.

Charles is a Non-Executive
Chairman of Senior plc and
a member of the steering
group of the Hampton-
Alexander Review.

John is a Non-Executive
Director of Royal Scottish
National Orchestra
Society Limited.

Clare has been a
Non-Executive Director
of Kingfisher plc since
December 2010 and
of Heidrick & Struggles
International, Inc. since
February 2016.

Clare is a commissioner on
the Low Pay Commission.

Alan is a Senior Independent
Non-Executive Director and
Audit Committee Chairman
of Johnson Matthey plc and
Marshall Motor Holdings plc.

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

Mary Jo is a Non-Executive
Director of Mulvaney Capital
Management Limited.

Mary Jo also has the position
of Advisory Board co-chair,
George Washington
University Institute for
Corporate Responsibility.

Barbara is currently a

Jim is a Non-Executive

Rick is a Non-Executive

John is a Non-Executive

None.

Non-Executive Director

Director of Scottish

Director of Gold Fields Ltd

Director of ERM Worldwide

of Aggreko plc, Russel

Power Limited.

and Sibanye Gold Limited,

Group Limited and

Metals Inc and Allegheny

Technologies Incorporated.

both South African

BHP Bilton Plc.

companies listed on the

Johannesburg Stock

Exchange and the New York

Stock Exchange.

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.

Her executive career

has involved providing

corporate finance

advice to a broad range

of clients in both the

UK and overseas.

appointments

Non-Executive Director,

Remuneration Committee

Chairman and member

of the Risk & Capital

Committee and

Investment Committee

of Standard Life

Aberdeen plc. Melanie

is a Non-Executive

Director of Ridgeway

Partners Limited.

Melanie is also a member

of the steering committee

of the 30% Club.

Non-Executive Director

of UK Offshore Renewable

Energy Catapult Board,

Non-Executive Director of

National Physical Laboratory

and Non-Executive Director

of Glasgow Science Centre

Charitable Trust.

President of the Conference

of European Schools for

Advanced Engineering

Education and Research

(CESAER).

The Weir Group PLCAnnual Report and Financial Statements 2017

Board diversity by gender

Executive/Non-Executive

Non-Executive nationality

8 Male

3 Female

Board diversity by tenure

0-3 years

3-5 years

6-10 years

1 British

2 American

3 British/American

4 South African/
American

1 Chairman

2 Executive

3 Non-Executive

Charles Berry

Chairman

Jon Stanton

John Heasley

Clare Chapman

Alan Ferguson

Mary Jo Jacobi

Chief Executive Officer

Chief Financial Officer

Non-Executive Director

Barbara Jeremiah
Non-Executive Director

Professor
Sir Jim McDonald
Non-Executive Director

Richard (Rick)
Menell
Senior Independent
Director

John Mogford
Non-Executive Director

A R

N R

A R

N R

A N

Christopher Morgan
Company Secretary
and General Counsel

Secretary to the Board,
Audit, Nomination and
Remuneration Committees

Melanie Gee
Former Non-Executive
Director
Left the Company in 2017

A N R

Independent?

Yes, since appointment

in August 2017

in December 2011

in January 2014

Yes, since appointment
in August 2017

Yes, since appointment
in January 2015

Yes, since appointment
in April 2009

Yes, since appointment
in June 2008

n/a

Yes, since appointment
in May 2011

Nationality

in March 2013

Tenure on Board

Tenure

Tenure on Board

4 years and 10 months

CEO – 1 year and 3 months

1 year and 3 months

5 months

6 years

4 years

5 months

3 years

8 years and 9 months

9 years and 7 months

1 year and 8 months

6 years and 4 months

FD – 6 years and 5 months

Experience

Barbara previously spent
over 30 years in a number
of roles with Alcoa Inc.
(now demerged into
Alcoa and Arconic Inc.), the
global aluminium producer.
Her roles in Alcoa included
Executive Vice President,
Corporate Development
and Chairman’s Counsel.

Barbara also previously
served as the Chairwoman
of Boart Longyear Limited.

Barbara has a BA in
political science and
is a qualified lawyer.

Jim is Principal and
Vice Chancellor of the
University of Strathclyde
and has held the Rolls-Royce
Chair in Electrical Power
Systems since 1993. He
is also Chairman of the
Institute for Energy and
Environment.

He is a member of the
UK Trade and Investment
Energy Excellence Board.
He co-chairs the Scottish
Energy Advisory Board.
He is a fellow of the Royal
Academy of Engineering,
the Royal Society of
Edinburgh, the Institution of
Engineering and Technology,
and the Institute of Physics.

Rick was appointed Chief
Executive of Anglovaal
Mining in 1996, then
Executive Chairman in
2002. In 2005, he was
appointed President and
Chief Executive of TEAL
Exploration & Mining Inc.
He was formerly Chairman
of Avgold Ltd and Bateman
Engineering BV.

Rick is a senior adviser
to Credit Suisse and
Chairman of Credit Suisse
Securities (Johannesburg)
(Pty) Limited.

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

John was formerly a
Managing Director for
First Reserve, a large global
energy-focused private
equity firm and an Executive
Vice President of BP plc.

Christopher joined the
Group as Deputy General
Counsel in 2014 and was
appointed as Company
Secretary and General
Counsel in 2016.

He is a qualified solicitor in
both Scotland and England
and a member of the Law
Society of Scotland and the
Law Society of England
and Wales.

He was Chairman of
Amromco Energy LLC
and White Rose Energy
Ventures LLP and a
Non-Executive Director
of Deep Gulf Energy LP.

He is a fellow of the
Institution of Mechanical
Engineers and a visiting
Professor at the University
of Strathclyde. John was a
Non-Executive Director of
DOF Subsea AS.

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.
Her executive career
has involved providing
corporate finance
advice to a broad range
of clients in both the
UK and overseas.

Key external appointments

John is a Non-Executive
Director of ERM Worldwide
Group Limited and
BHP Bilton Plc.

None.

Rick is a 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.

Barbara is currently a
Non-Executive Director
of Aggreko plc, Russel
Metals Inc and Allegheny
Technologies Incorporated.

Jim is a Non-Executive
Director of Scottish
Power Limited.

Non-Executive Director
of UK Offshore Renewable
Energy Catapult Board,
Non-Executive Director of
National Physical Laboratory
and Non-Executive Director
of Glasgow Science Centre
Charitable Trust.

President of the Conference
of European Schools for
Advanced Engineering
Education and Research
(CESAER).

Key external
appointments

Non-Executive Director,
Remuneration Committee
Chairman and member
of the Risk & Capital
Committee and
Investment Committee
of Standard Life
Aberdeen plc. Melanie
is a Non-Executive
Director of Ridgeway
Partners Limited.

Melanie is also a member
of the steering committee
of the 30% Club.

Charles was an Executive

Jon joined the Board as

Prior to his appointment

Clare is the former Group

Alan was Chief Financial

Mary Jo advises companies

Director of Scottish Power

Finance Director in 2010

as Chief Financial Officer,

People Director of BT Group

Officer and a Director of

on international affairs and

plc from 1999 to 2005 and

where he helped shape

John was the Divisional

plc and Director General

Lonmin plc, from 2007

reputation management.

Chief Executive of its UK

the Group’s strategy

Managing Director for

of Workforce for the NHS

until 2010. Prior to this,

operations between 2000

and developed Weir’s

Weir Flow Control.

and Social Care. Clare was

he was Group Finance

and 2005. Prior to joining

finance, treasury, tax

Scottish Power, he was

and information

Group Development

services capability.

Prior to joining Weir in 2008,

he held a number of senior

financial, commercial

previously a Non-Executive

Director of the BOC Group

Director of TUI Travel plc

plc. Alan also spent 22 years

and Chairman of its

working for Inchcape plc

Remuneration Committee.

in a variety of roles,

Before joining Weir, he

and operational roles,

was a partner with Ernst

including positions at

Clare was also Group

& Young, one of the world’s

PricewaterhouseCoopers

HR Director of Tesco plc

including six years as

Group Finance Director.

largest professional services

and Scottish Power.

from 1999 to 2006 and

Alan is a member of the

He is a chartered accountant

and a member of the Institute

of Chartered Accountants

of Scotland.

HR Vice President of

Institute of Chartered

PepsiCo’s west and central

Accountants of Scotland

European operations

and sits on its Business

from 1994 to 1999.

Policy Panel.

She was formerly a senior

executive of BP America,

Royal Dutch Shell, Lehman

Brothers, HSBC Holdings

and Drexel Burnham

Lambert and a Non-

Executive Director of

Tate & Lyle plc.

Mary Jo was Special

Assistant to President

Ronald Reagan, Assistant

US Commerce Secretary

for President George H.W.

Bush and a British Civil

Service Commissioner

from 2005 until 2010.

companies, where he

led global board-level

relationships with a

number of FTSE-100

multi-national companies.

Jon is a chartered

accountant and a member

of the Institute of Chartered

Accountants in England

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,

Drax Group plc and Thus

Group plc, and a former

Non-Executive Director

of Impax Environmental

Chairman of Senior plc and

a member of the steering

group of the Hampton-

Alexander Review.

Markets PLC and Securities

Trust of Scotland plc.

and Wales.

Charles is a Non-Executive

None.

John is a Non-Executive

Clare has been a

Alan is a Senior Independent

Mary Jo is a Non-Executive

Director of Royal Scottish

Non-Executive Director

Non-Executive Director and

Director of Mulvaney Capital

National Orchestra

Society Limited.

of Kingfisher plc since

Audit Committee Chairman

Management Limited.

December 2010 and

of Johnson Matthey plc and

of Heidrick & Struggles

Marshall Motor Holdings plc.

Mary Jo also has the position

of Advisory Board co-chair,

International, Inc. since

February 2016.

Non-Executive Director and

George Washington

Audit Committee Chairman

University Institute for

Clare is a commissioner on

of Croda International plc.

Corporate Responsibility.

the Low Pay Commission.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

Group Executive
The right skills and experience
to deliver long-term value

Jon Stanton and John
Heasley are also members
of the Group Executive
Committee. Their
biographical information
can be found on the
previous pages.

Andrew Neilson held the
position of Director of
Strategy and Corporate
Affairs and was a member
of the Group Executive
until June 2017.

Pauline Lafferty held the
position of Chief People
Officer and was a member
of Group Executive until
July 2017.

Paul Coppinger
Division President
of Weir Oil & Gas

Ricardo Garib
Division President
of Weir Minerals

David Paradis
Division President of
Weir Flow Control

Rosemary
McGinness
Chief People Officer

Geetha Dabir
Chief Technology Officer

Tenure

3 years

Tenure

2 years

Tenure

11 months

Tenure

5 months

Tenure

9 months

Nationality

Experience

Paul joined the Group
Executive in January 2015.
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 has served as the
association’s Chairman.
Paul is presently a
Non-Executive Director
of Now Inc. He holds a
Bachelor of Science
degree in Petroleum
Engineering from
Texas Tech University.

Ricardo joined the Group
Executive in January 2016.
He joined Baker Hughes in
1980 and became the
Operations Director of
Weir Chile following the
purchase of Baker Hughes’
Minerals division in 1994
by the Weir Group. In
2001 he was promoted
to Regional Managing
Director of Weir Minerals
Latin America and MD
of Weir Minerals Chile.
Ricardo is Vice President
of the Mining Suppliers
Association, a Director
of SOFOFA Industrial
Schools Boards and an
elected council member
of the Board of the Chilean
Federation of Industry. He
holds an MBA and is a Civil
Mechanical Engineer.

David joined the Group
Executive in January 2017.
Prior to this he held the
position of President of
Pressure Pumping. Before
joining Weir, David spent
22 years in the flow control
industry with Keystone
International and Tyco
Valves and Controls.
He holds a Bachelor
of Science degree in
Mechanical Engineering
and a Masters of Business
Administration from Texas
A&M University, where
he currently serves on
the Masters of Science in
Marketing Advisory Board
in the Mays Business
School. In addition, he
is an Advisory Board
member of the Petroleum
Equipment & Services
Association.

Geetha was appointed
as Weir’s first Chief
Technology Officer
in March 2017.

Geetha is an electrical
and software engineer.
Prior to joining Weir
she was Vice President
and General Manager of
Internet of Things (IoT)
Applications ready
platform group at Intel
Corporation, having
previously worked for
Cisco Systems for
13 years, helping
lead their networking,
server and IoT efforts.
Geetha has been
recognised as one of
the 25 Powerful Women
Engineers in Technology
by Business Insider.

Rosemary joined Weir
as Chief People Officer
in July 2017.

Prior to joining Weir,
Rosemary was Group
HR Director of William
Grant & Sons, for 12 years.
Rosemary has held a
range of positions
covering all aspects of
human resources across
the globe, including
being based in New York
in her role as Senior
Vice President of HR for
document management
company Bowne
Business Solutions.

Rosemary is an Advisory
Board Member to the
School for CEO’s and an
Advisory Board Member
of the University of
Strathclyde Business
School. She is also a
Fellow of the Chartered
Institute of Personnel
and Development.

Group Executive by gender

Group Executive by tenure

Group Executive by nationality

5 Male
2 Female

0-3
years

3-5
years

6-9
years

1 British
2 American
3 Chilean

3
3
1

The Weir Group PLCAnnual Report and Financial Statements 2017
Corporate Governance Report
Leadership

Board statements

Requirement

Board statement

Where to find
further information

Compliance with the UK
Corporate Governance
Code (the ‘Code’)

The Company has fully complied with all the principles of the Code
for the year ended 31 December 2017, and from that date to the date
of approval of this Annual Report.

• Corporate Governance Report

on page 68.

Going concern basis

Viability statement

The Directors have a reasonable expectation that the Group has
adequate resources to continue to operate for a period of at least
12 months from the date of approval of the financial statements.
For this reason, they continue to adopt the going concern basis 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 177 to 183.
Each of these items has been considered in relation to the Group’s
banking facilities described in note 20 on pages 160 and 161.

In accordance with provision C.2.2 of the UK Corporate Governance
Code 2016, the Directors have assessed the viability of the Group over
a three-year period, taking into account the Group’s current position
and the potential impact of the principal risks documented on pages 50
to 55 of the Annual Report. Based on this assessment, the Directors
confirm that they have a reasonable expectation that the Company will
be able to continue in operation and meet its liabilities as they fall due
over the period to 31 December 2020.

• Directors’ Report on page 116.

• Risk review: How We Manage

Risk on page 46.

Robust assessment
of the principal risks
facing the Group and
annual review of systems
of risk management
and internal control

During the year, the Board has reviewed the effectiveness of the
systems of risk management and internal control and conducted a
robust assessment of the principal risks affecting the Group in line
with the Risk Appetite Statement. These activities meet the Board’s
responsibilities in connection with Risk Management and Internal
Control set out in the UK Corporate Governance Code.

•

Risk review: How We Manage
Risk on page 46.

Fair, balanced and
understandable

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.

• Statement of Directors’

responsibilities on page 119.

Modern Slavery Statement As a Company, we understand our role in eradicating modern slavery.

•

Following an extensive review of our existing policies and practices
in light of the introduction of the Modern Slavery Act, the Company
prepared an annual Modern Slavery Statement and has subsequently
developed a training programme.

A copy of this statement
can be found on our website
www.global.weir/sustainability/
ethics

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information74

Corporate Governance Report
Leadership continued

A view from the
Boardroom table

Mary Jo Jacobi
Non-Executive Director

Q You serve on both the

Remuneration and Nomination
Committees; what does membership
of these Committees entail?
The Board has several committees
dedicated to aspects of the Company,
and they require the same approach
in terms of scrutiny and support. The
Remuneration Committee seeks to
determine and recommend to the
Board the framework for the rewards
and incentives to Executives to
encourage them to enhance the
Company’s performance and ensure
delivery of sustainable value over the
long term. We do this by assessing
Weir against its peers, ensuring legal
and regulatory compliance, analysing
risk and consulting with shareholders
and other stakeholders to be sure there
are stretching targets for Executives
to meet. The Nomination Committee
consists of only Non-Executive
Directors and considers the structure
and composition of the Board and
ensures that the processes of
succession planning and nomination,
evaluation and selection for both
Board and senior management roles
are robust and inclusive, something
Weir has always taken very seriously.

Q You have Board and corporate

governance experience
in both the UK and USA. How
do the two regimes compare?
Traditionally, the US model has been
more “regulator led” while the UK
has been more “shareholder led”.
The financial crisis generated an array
of legislative and regulatory changes
in the US to make companies more
accountable and transparent. In the
UK, the Financial Reporting Council
is considering major changes to the
Corporate Governance Code to improve
the quality of governance of the UK’s
largest companies. The hallmark of both
approaches is the recognition of the
important impact that companies have
on the full array of stakeholders and on
society. I think that Weir is well placed
with its UK headquarters and extensive
US operations to build long-term value
for its stakeholders in both countries.

Q What do you feel your role

as a Non-Executive Director

is at the Weir Group?
It can best be described as a mixture
of counsel and constructive challenge.
As a Non-Executive Director, my job is
to bring my experience, objectivity and
independence to the Board and use it
to offer unbiased scrutiny and guidance,
particularly on matters such as strategy,
risk, remuneration, succession and
assessing the overall performance of
the business. To do that you need a
good understanding of the Group and,
in a very global business such as Weir,
that means getting out to operations
and meeting employees, customers
and other stakeholders. Ultimately, each
of us has a responsibility to contribute to
building a stronger Weir, just as previous
generations did for over a hundred years.
I know every member of the Board,
Non-Executive and Executive, takes
that responsibility very seriously.

Q The composition of the Board

has changed in the past year,

what difference has that made?
Naturally you miss colleagues who have
stepped down, but change opens the
door to new perspectives and input from
different experiences, which is beneficial
and refreshing. Melanie Gee, who left in
September, was a great Board member
and made very positive contributions
to our discussions, particularly on
remuneration and portfolio decisions.
Since they joined late in 2017, both
Clare Chapman and Barbara Jeremiah
have already made a significant impact.
Ultimately, a successful Board depends
on a balance of experienced points of
view. I think Weir has a good mix of
skills and abilities and, most importantly,
a shared understanding of responsibility
and purpose.

Q There is an increasing focus

on diversity and inclusion

on UK Boards. How important
an issue do you think this is?
I am passionate about equality of
opportunity and about the benefits
to businesses and society of diverse
and inclusive workplaces. This doesn’t
mean gender alone, but ethnicity,
race, age, personality, nationality and
experience. A well-functioning Board
– and company – is a blend of different
skills and perspectives operating in an
inclusive environment. That’s why I’m
delighted to see that building greater
diversity at all levels of the business
is a priority for the Group.

The Weir Group PLCAnnual Report and Financial Statements 201775

Board composition
During 2017, the Board comprised of
the Chairman, two Executive Directors
and up to eight Non-Executive Directors.

Barbara Jeremiah and Clare Chapman
were appointed to the Board in
August 2017. Melanie Gee stepped
down from the Board and as Chair
of the Remuneration Committee in
September 2017.

Biographical information on the Board
of Directors, including Directors’ relevant
experience and significant appointments,
can be found on pages 70 and 71.

Roles and responsibilities
of Directors
The key responsibilities of the
members of the Board of Directors
are set out below.

The Board of Directors has a collective
duty to promote the long-term success
of the Company for its shareholders.
The Board sets the strategic aims of
the Group and provides leadership and
guidance to senior management to
ensure that the necessary resources
are in place to achieve the agreed
strategy. 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, the
Board operates within a robust framework
of internal controls and risk management.
The Board also develops and promotes

the collective vision of the Group’s
purpose, culture, values and behaviours.

Each Director brings different skills,
experience and knowledge to the
Company, with the Non-Executive
Directors bringing additional independent
thought and judgement. The roles of the
Chairman and Chief Executive Officer
are separate, with each having clearly
defined duties and responsibilities which
are set out in writing and approved by
the Board. The roles and responsibilities
of the Senior Independent Director
are also set out in writing and both
documents are available to view
on the Company’s website at
www.corporategovernance.weir.

Directors

Responsibility

Charles Berry
Chairman

Jon Stanton
Chief Executive Officer

John Heasley
Chief Financial Officer

• Leading the Board in an ethical manner and promoting effective Board relationships.
• Building a well-balanced Board, considering succession planning and the Board’s composition.
• Ensuring the effectiveness of the Board and individual Directors.
• Overseeing the Board evaluation and acting on its results.
• Ensuring appropriate induction and development programmes.
• Setting the Board agenda and chairing Board meetings.
• Ensuring effective communication with shareholders and other stakeholders.

• Planning the Group objectives and strategy for Board approval.
• Ensuring the effective delivery of Group strategies.
• Providing leadership to the Group and communicating the Company’s culture, values and behaviours.
• Day-to-day management of the Company.
• Building Group Executive/Leadership team and succession planning
• Communications with external stakeholders: investors; governments; academia

• Ensuring an effective financial control environment which is compliant with regulations.
• Ensuring effective management of Group capital structure and financing needs.
• Provision of timely and accurate financial reporting.
• Assisting in formulating the Group objectives and strategy.
• Delivery of the Group Value Chain Excellence and IT strategies.
• Day-to-day management of the Company.

Rick Menell
Senior Independent Director

• Supporting the Chairman in his duties, where necessary.
• Leading the annual review of the performance of the Chairman.
• Being available to Directors and shareholders who have concerns that cannot be addressed through the

normal channels.

Non-Executive Directors
Clare Chapman

Alan Ferguson

Melanie Gee

Mary Jo Jacobi

Barbara Jeremiah

Professor Sir Jim McDonald

John Mogford

Christopher Morgan
Company Secretary

• Contributing independent challenge and rigour.
• Assisting in the development of the Company’s strategy.
• Ensuring the integrity of the financial information, controls and risk management processes.
• Monitoring the performance of the Executive Directors against agreed goals and objectives.
• Advising senior management.

• Advising the Board on governance, legislation and regulatory requirements.
• Ensuring the presentation of high-quality information to the Board and its Committees.
• Ensuring best practice in Board procedures.
• Facilitating inductions and development programmes.
• Facilitating the Board effectiveness review process.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information76

Corporate Governance Report
Leadership continued

Board Committees
The Board has a number of committees
to assist in discharging its responsibilities.
The principal committees are the
Nomination, Audit and Remuneration
Committees. The responsibilities of
these committees are set out in the
individual Terms of Reference, which
are available on the Company’s website
at www.corporategovernance.weir.
The roles and responsibilities of the
Board Committees, along with the
activities undertaken during the year,
are outlined in each of their respective
reports found on pages 85 to 118. The
Company Secretary is the Secretary
to the Board Committees and ensures
that the Committees adhere to the
highest standards of Corporate
Governance and apply the provisions
and principles of the Code.

Only Committee members are entitled
to attend meetings, however, other
Board members may attend at any time
if they choose to do so. Professional
advisers and members of the senior
management team attend Committee
meetings when they are invited to do so.

The Board may also set up separate
committees to consider specific issues,
when the need arises.

Disclosure Committee
The Disclosure Committee is a
sub-committee of the Board which

Board and Committee structure

comprises the Chief Executive Officer,
Chief Financial Officer and the Company
Secretary and General Counsel. The
Disclosure Committee was established
to ensure compliance with the Market
Abuse Regulation. The Committee
provides information to the Board in
order to assist with the identification
of inside information. The Committee
makes recommendations as to how
and when the Company should disclose
such information, in accordance with
all applicable legal and regulatory
requirements. The Terms of Reference
of the Disclosure Committee are
available on the Company’s website at
www.corporategovernance.weir set out
in writing and approved by the Board.

General Administration Committee
The General Administration Committee
is a sub-committee of the Board which
comprises two Executive Directors
of the Company.

The Committee is responsible to the
Board as a whole and meets as required.
The principal duties of the Committee
include attending to routine procedural
and administrative matters in relation
to existing banking and finance facilities,
the issue and allotment of shares and
matters relating to the Company’s share
capital, including the administration of
unclaimed dividends and the Scrip
Dividend Scheme. The Committee’s
Terms of Reference are reviewed

annually to ensure its continuing
appropriateness. Minutes of meetings
of the General Administration Committee
are made available to all Directors at
Board meetings.

Group Executive
The Group Executive comprises the
Chief Executive Officer, Chief Financial
Officer, Chief People Officer, Chief
Technology Officer and Divisional
Presidents. Biographical details of the
members of the Group Executive
can be found on page 72.

In the year ended 31 December 2017,
the Group Executive met 13 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 co-ordination
in areas such as purchasing, branding

Board of Directors

Audit
Committee

You can read
more on page 88.

Remuneration
Committee

You can read
more on page 95.

Nomination
Committee

You can read
more on page 85.

Disclosure
Committee

You can read
more above.

General Administration
Committee

You can read
more above.

Chief Executive Officer

CEO Safety Committee

You can read more on page 49.

Risk Committee

You can read more on page 49.

Group Executive

Finance Excellence Committee

Engineering Excellence Committee

Value Chain Excellence Committee

You can read more on page 49.

SHE Excellence Committee

You can read more on page 49.

Group Information Services
Excellence Committee

You can read more on page 49.

HR Excellence Committee

You can read more on page 49.

The Weir Group PLCAnnual Report and Financial Statements 201777

and career development planning.
It also approves major items of capital
expenditure within limits authorised by
the Board.

Management Committees
In addition to the Board Committees,
there are several management
committees, known as Excellence
Committees. The Excellence Committees
have clearly defined remits and work
across the Group to promote best
practice and information sharing. The
Executive Directors and members of
the Group Executive can 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 to
the Board for approval 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 important decisions are
being taken at the appropriate levels, and
ensures that information flows both up
and down the reporting lines.

Board meetings
The Board meets regularly in order
to effectively discharge its duties.
Board meetings are held in person
or by video-conferencing. During 2017,
there were eight scheduled meetings
and two additional unscheduled Board
meetings. In October 2017, the Board
meeting was held in South Africa and

full details can be found on page 81. In
addition to the formal Board meetings,
the Board maintains an open dialogue
throughout the year and contact by
telephone occurs whenever necessary.
As encouraged by the Code, the Non-
Executive Directors, including the
Chairman, met once during the year
without Executive Directors present.

The table below details the attendance
at Board meetings of each of the
Directors during their term of office
for the year to 31 December 2017.

The Board’s annual timetable is
discussed at least 12 months prior to
its commencement to allow the Directors
to plan their time accordingly. The 2018
annual timetable was discussed at the
Board meeting in April 2016 and January
2017 and circulated as soon as it was
finalised. This process ensures that the
Chairman is comfortable that each
Director is able to devote the time and
resources required. The Board agenda
process ensures that the Board has the
confidence that all items are scheduled
at the most appropriate time of the year
and there is sufficient time for discussion
by the Board, allowing the Directors to
discharge their duties effectively.

Matters reserved to the Board
The Board recognises that in order to
ensure the long-term success of the
Company, certain 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. In accordance with the
UK Corporate Governance Code, these

decisions are formally recorded in a
document entitled Matters Reserved to
the Board for Approval. This document
is reviewed annually to ensure that
it remains appropriate and that there
is an effective framework in place to
support the Board’s decision-making
process. The document is available
on the Company’s website at
www.corporategovernance.weir.

Board activities during 2017
During the year, the Chairman, supported
by the Chief Executive Officer and
the Company Secretary, maintained a
rolling 12-month agenda for Board and
Committee meetings. At each meeting,
the Board received reports from the Chief
Executive Officer and other members
of the Group Executive. This included
updates and information on safety,
strategy, legal and financial matters. The
Board also receives updates from each
Committee Chairman on items from the
most recent committee meeting as well
as periodic updates as required. Standing
items also included reviewing the Group’s
risk dashboard and internal controls,
safety, strategy and succession planning.

In order to effectively discharge their
duties, the Non-Executive Directors met
regularly with senior management and
received presentations by members of
the Group’s senior management team
and other external advisers as required.
The Board also received an annual review
on the following matters: asbestos,
insurance and risk management, the
Ethics Hotline, Value Chain Excellence,
HR, tax, treasury and agents.

Board meeting attendance

Director

Board meetings

18 January

21 February

27 April

26 May1

22 June

9 July1

21 July

5 September 25 October 12 December

Charles Berry

Jon Stanton

John Heasley

Alan Ferguson

Mary Jo Jacobi

Sir Jim McDonald

Rick Menell

John Mogford

Barbara Jeremiah2

Clare Chapman3

Melanie Gee4

–

% of
meetings
attended

100%

90%

100%

90%

100%

Notes
1. Additional meeting.
2. Barbara Jeremiah was appointed to the Board on 1 August 2017.
3. Clare Chapman was appointed to the Board on 1 August 2017.
4. Melanie Gee stepped down from the Board on 30 September 2017.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information78

Corporate Governance Report
Effectiveness

External Board Effectiveness Review
The Board Effectiveness Review
operates on a three-year cycle. 2017’s
review will be followed by two years of
internal evaluation carried out using an
on-line confidential online questionnaire.

This year, the external Board
Effectiveness Review was undertaken
by Independent Audit Limited, who
have no other connection with the
Company. The process is detailed
in the table below.

The Company Secretary is responsible
for ensuring all new Directors
receive a comprehensive tailored
induction programme.

When a new Director is appointed
to the Board, they are provided with
information on the Group’s structure,
operations, policies and other relevant
documentation. The induction process
also includes meetings with senior
Executives in the Company, a formal
briefing on legal and governance
matters from the Company Secretary
and visits to the Company’s operations.

Directors are informed of important
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, occasions
which include presentations from key
senior employees and the opportunity
to meet employees.

The Chairman regularly reviews and
agrees with each Director their training
and development needs. Additional
induction and training is also available
to new committee members as
required. Training is also built into
the Board meetings, with relevant
topics being covered.

External Board Effectiveness Review cycle

The Effectiveness Review operates on a three-year cycle. 2017’s externally led review will be followed by two years of internal
review carried out using an on-line questionnaire facilitated by an external provider.

Year One
Internal Evaluation
• Circulate findings report

from previous year

Year Two
Internal Evaluation
• Circulate findings report

from previous year

• Online confidential questionnaire
• Analysis and discussion at

Board meeting

Year Three
External Evaluation
• Interviews
• Observation
• Analysis and discussion at

Board meeting

• Individual meetings with Chairman

and Directors post evaluation

The External Effectiveness Review Process: this year the process was divided into four stages

Stage 1
Review of Board and
Committee papers.

Stage 2
Interviews held with 22 individuals, namely:
the Chairman, Chief Executive Officer,
Chief Financial Officer, Senior Independent
Director, all Non-Executive Directors,
Company Secretary and General Counsel,
all members of the Group Executive
Committee, Group Financial Controller,
Head of Internal Audit, PwC Audit Partner,
Remuneration Advisers EY and Deloitte.

The areas that were covered
in the interviews included:
• Board composition.
• The focus of the Board.
•

Non-Executive Directors’ interaction with
the business.

• The practical arrangements.
• Risk and controls.

Stage 3
Observation of the
Board meeting held
in September 2017.

Review of the
Chairman carried
out by the Senior
Independent Director.

Stage 4
Dedicated discussion analysing what
was learned and sharing of results at
the Board meeting in December 2017
with the reviewer present. Followed
by one-to-one discussions between
the Chairman and Directors.

Findings
• It was noted from the observation of the Board meeting
held in September that the Board is functioning well and
the composition sets the Board up well for good meeting
dynamics and debate. Overall, the atmosphere is collegiate
and collaborative.

• Succession planning for the Board is a well established

process and a strength of the Company.

• There is a thorough induction process for Directors.

Outcomes
• Further enhancement of Non-Executive Directors’

engagement with various levels of the business and
a more structured schedule of informal site visits.
• Continued increased focus of the Board on people
and culture, as the new Chief People Officer works
with the Executive team on succession planning, talent
management and employee engagement as well as
enhanced reporting to the Board in these areas.

• A review and possible refinement of the annual calendar

and schedule of meetings.

The Weir Group PLCAnnual Report and Financial Statements 201779

Inductions in action
Clare Chapman and Barbara Jeremiah

Induction programme
During 2017, tailored induction
programmes were designed for our two
newly appointed Non-Executive Directors,
Clare Chapman and Barbara Jeremiah.

As part of their inductions, both
Clare and Barbara attended a briefing
session with external legal counsel
on Directors’ Duties.

The Company Secretary delivered
the induction programme which was
designed to reflect the Non-Executive
Director’s background, experience,
knowledge and their appointment
to the relevant Committee.

The inductions covered the Company’s
history, culture, strategy, structure and
operations, as well as Corporate
Governance framework and policies,
Board and Committee process, calendars,
Code of Conduct and Directors’ Duties

It also included meetings with the
Chairman, Executive Directors, Non-
Executive Directors, Group Executive
Members, Group’s operation and
functional leaders, advisers and brokers.

Site visits are arranged to ensure that
newly appointed Directors have an
understanding of our business as early
as possible following appointment.

Barbara visited our operation in Fort
Worth, USA, and will undertake further
visits in 2018, including to Dubai.

Clare has a planned visit for Todmorden
with further site visits during the year.

Following the delivery of the induction
programme, the Company Secretary
seeks feedback on the programme to
continually improve its benefit.

Clare Chapman
Non-Executive Director

Barbara Jeremiah
Non-Executive Director

Training and professional development
Following on from the induction period,
there are other training and development
opportunities at regular intervals
throughout the year as indicated here.

Deep dives

Management
and one-to-one
meetings on
key topics

Site visits,
Board dinners
and breakfast
meetings

Briefing material
on Board portal

Training and
information
sessions

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information80

Corporate Governance Report:
Effectiveness continued

Directors in the share capital of the
Company and options to subscribe for
shares in the Company are also disclosed
in the Directors’ Remuneration Report.

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 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 checks that
no new conflicts have arisen. Only those
Directors who have no interest in the
matter being considered are able to take
part in 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
have any material business or other
relationship with the Company or its
management. Sir Jim McDonald is the
Principal and Vice Chancellor of the
University of Strathclyde, but he has
no direct involvement on a day-to-day
basis in relation to the Weir Advanced
Research Centre (WARC) which is
operated by the Company in conjunction
with the University of Strathclyde.
Nevertheless, he will offer to recuse
himself from any discussions regarding
the relationship between the Group and
the University of Strathclyde, whether
in relation to WARC or otherwise.

The Board considers that it has the
right combination of skills, experience,
independence and knowledge to be
effective in meeting the needs of
the Group. More than half of the
Board are Non-Executive Directors
who 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 and that no
individual or group of individuals can
dominate the decision-making process.
It also allows for an effective division
of responsibilities within the Board
and its Committees. The positions of
Chairman and Chief Executive Officer
are held separately and are clearly
defined in writing. Each Director devotes
sufficient time and attention in order
to perform their duties effectively.

The Board is supplied in a timely manner
with the appropriate information to enable
it to discharge its duties. The Chairman
ensures that Non-Executive Directors
are properly briefed on any issues arising
at Board meetings and Non-Executive
Directors have the ability to communicate
with the Chairman at any time.

Re-election
In accordance with the Company’s
Articles of Association and good
practice, Barbara Jeremiah and Clare
Chapman will offer themselves for
election at the Company’s AGM on
26 April 2018. As previously announced,
John Mogford and Alan Ferguson will
step down from the Board in April 2018
after the AGM. All other Directors on
the Board will seek re-election at the
Company’s AGM in compliance with
the Code. Stephen Young joined the
Board as a Non-Executive Director and
member of the Audit Committee from
1 January 2018. Stephen will succeed
Alan as Audit Committee Chairman
from 26 April 2018.

The Executive Directors have contracts
of service with one year’s notice, whilst
Non-Executive Directors’ appointments
can be terminated with six months’
notice. The letters of appointment of
the Chairman and the Non-Executive
Directors are available for inspection
at the Company’s registered office and
set out the required commitment to the
Company. Further details can also be
found in the Directors’ Remuneration
Report on pages 95 to 115. Details
of the Directors’ service contracts,
emoluments, the interests of the

The Weir Group PLCAnnual Report and Financial Statements 201781

Governance in action
Board visit to South Africa

As part of its regular programme of
site visits to get first-hand experience
of the Group’s operations, the Board
visited Weir Minerals Africa, which is
based in Johannesburg. During the
visit, the Board received presentations
on the business and its prospects
from local management and met, and
listened to views from, employees at
its manufacturing facilities in Isando and
Alrode. This included officially opening
a new moulding carousel at our foundry
which will support future growth.

Africa is home to some of the world’s
finest ore grades and consequently has
a vibrant mining market that is supported
by Weir from our regional headquarters in
South Africa. The business is also using
its technology to expand into adjacent
markets, such as sand and aggregates,
and the Board met and toured a customer
site to get direct input on the challenges
being faced by the industry and the
opportunities for Weir to help customers
meet their objectives.

In addition to serving its customers,
Weir Minerals Africa has made a positive
contribution to both developing its people
and improving safety and has taken a
very active role in its local communities.
This includes programmes to encourage
more young women in South Africa to
consider engineering as a future career.
You can read more about this initiative
on page 59.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information82

Corporate Governance Report
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 88 to 94.
Information on the Company’s external
auditors is contained within the Audit
Committee Report.

Internal control and risk
management
In accordance with the Code and
the accompanying Guidance on Risk
Management and Internal Controls,
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 2017. More
information on how the Group seeks
to manage risk can be found on pages
46 to 49.

The Board, in seeking to achieve the
Group’s business objectives, cannot
offer an absolute guarantee that the
application of a risk management
process will overcome, eliminate or
mitigate all significant risks. However,
by further developing and operating an
annual and ongoing risk management
process to identify, report and manage
significant risks, the Board seeks to
provide a reasonable assurance against
material misstatement or loss.

The Audit Committee conducted a
review of the effectiveness of the
Group’s systems of internal control
and risk management during 2017,
as detailed on page 89.

Our internal control framework has four key layers:

E t h i c a l

a n d cultural environment
A s s u r ance activities

n it o

Functio

r i n g a n d oversight controls
a l a n d front line c

t
r

Risks

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.

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 76, various internal and
external sources of assurance report
to the Board and management. These
sources of assurance were reviewed
by the Board during the year and are
principally external audit, internal audit,
SHE audits, legal and intellectual property
audits, engineering audits, Value Chain
Excellence and procurement audits, IT
audits and production system lean audits.

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.

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
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 on page 62 within
the Sustainability Review 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.

The Weir Group PLCAnnual Report and Financial Statements 201783

Corporate Governance Report
Relations with Shareholders and Stakeholders

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 325 investors in 2017 either face-to-
face or via telephone or video-
conferencing. Other ways in which 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 20 during the
year, held in Canada, France, Germany,
the UK and the USA.

During the period under review, the
Chairman, Chief Executive Officer, Chief
Financial Officer, Senior Independent
Director and Remuneration Committee
Chairman have met or had contact 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.

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
Company’s Annual Report and Financial
Statements and the Interim Report. Both
are available on the Company’s website
and the Annual Report is sent to
all shareholders who elect to receive it
in hard copy. Copies are available upon
request to the Company Secretary and
can be downloaded from the website.

Our brokers, Goldman Sachs International
and UBS, and public relation advisors
undertake investor roadshow feedback
which is shared with the Board. The
Company Secretary is also charged with

The Board also recognises the
importance of the internet as a
means of communicating widely,
quickly and cost-effectively and an
updated Group website was successfully

AGM voting results
The Annual General Meeting of The Weir Group PLC was held on Thursday 27 April 2017 at 2.30 pm. All resolutions were
passed on a poll. Resolutions 17 to 20 were passed as special resolutions.

Resolution

Votes for

Votes
against

Votes total

% of isc
voted

Votes
withheld

1 To receive and adopt the report and financial statements. 159,216,545

99.93

109,220

0.07

159,325,765

73.13% 11,403

2 To declare a final dividend.

159,331,067

100.00

6,101

0.00

159,337,168

73.13%

3 To approve the Directors’ Remuneration Report

158,523,983

99.52

767,999

0.48

159,291,982

73.11% 44,620

(excluding the Directors’ Remuneration Policy).

4 To approve the Directors’ Remuneration Policy.

150,752,869

94.65

8,525,321

5.35

159,278,190

73.10% 58,978

5 To elect John Heasley as a Director of the Company.

157,495,957

98.90

1,756,827

1.10

159,252,784 73.09% 84,384

6 To re-elect Charles Berry as a Director of the Company. 155,001,705

97.39

4,151,523

2.61

159,153,228 73.05% 183,940

7 To re-elect Jon Stanton as a Director of the Company.

158,988,485

99.84

262,399

0.16

159,250,884 73.09% 86,284

8 To re-elect Alan Ferguson as a Director of the Company. 156,938,557

98.61

2,209,147

1.39

159,147,704 73.04% 189,464

9 To re-elect Melanie Gee as a Director of the Company. 158,960,893

99.82

287,925

0.18

159,248,818 73.09% 88,350

10 To re-elect Mary Jo Jacobi as a Director of the Company. 158,971,027

99.83

277,106

0.17

159,248,133 73.09% 89,035

11 To re-elect Sir Jim McDonald as a Director of the

158,256,472

99.44

890,816

0.56

159,147,288 73.04% 189,589

Company.

12 To re-elect Richard Menell as a Director of the Company. 158,636,383

99.63

596,587

0.37

159,232,970 73.08% 104,198

13 To re-elect John Mogford as a Director of the Company. 158,972,645

99.83

264,714

0.17

159,237,359 73.08% 99,809

14 To re-appoint PricewaterhouseCoopers LLP as

159,244,715

99.97

49,809

0.03

159,294,524

73.11% 42,644

Auditors of the Company

15 That the Company’s Audit Committee be authorised

159,302,039

99.99

22,893

0.01

159,324,932

73.12% 12,236

to determine the remuneration of the Auditors.

16 To renew the Directors’ general power to allot shares

144,087,809

90.76 14,667,216 9.24

158,755,025 72.86% 579,509

17 To partially disapply the statutory pre-emption provisions. 158,844,315

99.73

434,370 0.27

159,278,685

73.10% 58,483

18 To partially disapply the statutory pre-emption
provisions in connection with an acquisition or
specified capital investment.

147,209,790

92.42 12,073,878

7.58

159,283,668

73.11% 52,900

19 To renew the Company’s authority to purchase

157,627,692

98.97

1,636,218

1.03

159,263,910

73.10% 73,008

its own shares.

20 To reduce the notice period for general meetings.

150,419,305

94.84

8,177,146

5.16

158,596,451 72.79% 738,634

a) Any proxy appointments which give discretion to the Chairman have been included in the “for” total.
b) At close of business on 26 April 2017, there were 217,880,699 relevant shares in issue (excluding treasury shares).

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information84

Corporate Governance Report
Relations with Shareholders and Stakeholders continued

launched in 2016, to better facilitate
communications with all of our
stakeholders. As well as the Interim
and Annual Reports, 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 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 2018 AGM is to
be held on 26 April 2018. Together
with the rest of the Board, the Senior
Independent Director and Chairmen
of the Remuneration, Nomination and
Audit Committees will be available to
answer questions relevant to the work
of the Board and the Committees.

Holders

Geographical

1 Domestic institutions
2 Foreign institutions
3 Domestic brokers
4 Private stakeholders/investors
5 Hedge funds
6 Corporate stakeholders
7 Employees etc.
8 Foreign brokers
9 Others

47.72%
43.40%
2.70%
2.57%
1.20%
0.23%
0.12%
0.08%
2.00%

1 UK
2 North America
3 Europe (ex UK)
4 Rest of World

50.56%
30.67%
10.54%
8.23%

Engaging with stakeholders
Stakeholder Why it is important to engage

Employees

Our people are our most important asset
and ensuring we have a safe, engaged and
effective workforce is essential to the
successful delivery of our strategy.

Communities We recognise that businesses need

to be active corporate citizens. Weir has
operations in more than 70 countries and
aims to make a positive difference in all
our local communities.

Investors

The Group is owned by its investors
and delivering strong returns is a key
part of our strategy.

Ways we engage

Stakeholder key interests

• Meeting with employees during

site visits.

• Regular interaction with

managers, including through
Board presentations.

• Working with local partners
to support programmes that
encourage improved health
and education.

• Encouraging greater diversity

and inclusion across the Group
to ensure we reflect the
communities we serve.

• Direct meetings with key investors to
discuss strategy and performance.
• Regular updates through earnings
announcements and investor
conferences.

• The strategy and business model.
• Future growth opportunities.
Impact of new technology.
•

• Employment and inspiring and

encouraging the next generation.

• Contributing to local causes
financially and through time
and expertise.

• The strategy and business model.
• Financial performance and prospects.

Customers

The Group exists to create value by
satisfying the needs of our customers.

• Board visits to customer sites.
• Broader programme of regular

• Technology.
• Service capability.

dialogue and customer research.

Suppliers

Developing strategic partnerships with
our suppliers is key to the operational
success of the business and our ability
to satisfy customers.

• Global agreements with

• Building long-term sustainable

key suppliers.

relationships.

• Supporting smaller suppliers
with advice and through
programmes such as the
UK Prompt Payment Code.

• Supporting cash flow through

prompt payments.

Government
and regulators

Engaging with policy makers to ensure
support for a business environment that
allows the Group to continue to create
long-term value.

• Meetings with government

ministers and officials.

• Participation in trade bodies locally

and internationally.

• Employment, skills and training.
Improving productivity and
•
encouraging research and
development.

The Weir Group PLCAnnual Report and Financial Statements 2017

Corporate Governance Report
Nomination Committee Report

Charles Berry
Committee Chairman

Committee membership in 2017
Charles Berry, Committee Chairman

Melanie Gee

Rick Menell

John Mogford

Mary Jo Jacobi

Other attendees (by invitation)
Jon Stanton, Chief Executive Officer

Christopher Morgan, Secretary

Mary Jo Jacobi, Non-Executive Director

(Mary Jo Jacobi attended by invitation
prior to her appointment as member
of the Nomination Committee)

Dear Shareholders,
I am pleased to introduce our Nomination Committee report for 2017. It has
been another busy year for the Nomination Committee, with the appointment
of three independent Non-Executive Directors. You can find details of the
recruitment process undertaken for the Non-Executive Directors on page 86.
This report explains the Committee’s focus and activities during the year, and
also highlights the Committee’s key priorities for 2018. I continue to ensure
that the Committee focuses on diversity and inclusion, succession planning
and on ensuring that the size, composition and structure of the Board is
appropriate for the delivery of the Group’s strategy and that all relevant
provisions of the UK Corporate Governance Code continue to be met.

Role of the Nomination Committee
The Nomination Committee has
responsibility for considering the
size, structure and composition of
the Board, for reviewing Director and
senior management succession plans,
retirements and appointments of
additional or replacement Directors; and
for making appropriate recommendations
of candidates to the Board so as to
maintain an appropriate balance of skills,
experience and diversity on the Board.

Membership and attendance
The Nomination Committee is entirely
made up of independent Non-Executive
Directors and myself as Chairman.
The members of the Committee are
set out in the table to the left and on
pages 70 and 71. Senior members of
management and advisors are invited
to attend meetings as appropriate. The
Company Secretary acts as Secretary
to the Committee.

There were five Committee meetings
held during the year of which two were
unscheduled. Details of the attendance
of the members of the Committee for
the year ended 31 December 2017 are
contained in the table below. I do not

Chair Committee meetings when the
matters under consideration relate to
me or my position. Similarly, should a
matter under discussion relate to any
of the other Committee members,
they would excuse themselves
from the meeting.

Main activities of the
Committee during 2017
• Board and Committee changes –

appointment of three Non-Executive
Directors and appointment of Mary Jo
Jacobi to the Nomination Committee

• Reviewed Board composition and
Non-Executive Director rotation
• Undertook Board skills assessment

and gap analysis

• Considered Hampton-Alexander

Review update

Areas of focus for 2018
• Further developing our approach
to diversity and inclusion across
the wider Group

• Further developing the leadership
and talent framework and pipeline
• Continuing our focus on ensuring
Board and senior management
succession planning are aligned
to our strategy and culture

Attendance table

Committee attendance in 2017

Member since

21 February

22 June

21 July

23 October

12 December

Percentage of eligible
meetings attended

Charles Berry

1 January 2014

Melanie Gee

Rick Menell

18 June 2015

14 June 2012

John Mogford

21 January 2014

Mary Jo Jacobi

1 August 2017

–

Terms of Reference are available on the Company’s
website at www.corporategovernance.weir

–

100%

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information86

Corporate Governance Report
Nomination Committee continued

Board composition and skills
The Nomination Committee considers
that the Board consists of individuals
with the right balance of skills, diversity,
experience and knowledge to provide
strong and effective leadership of
the Group. During the year the Board
consisted of the Chairman, up to eight
Non-Executive Directors and two
Executive Directors, who together
bring a diverse and complementary
range of backgrounds, personal
attributes and experience.

The Committee reviews the tenure of
individual Non-Executive Directors on
a regular basis in the context of length
of service, experience, independence,
contribution and skills. This is not only
from a current strategy perspective but
also takes into account potential future
strategic needs.

The Board skills and experience
matrix, based primarily on professional
background and executive roles held,
is detailed below. Detailed biographies
can be found on pages 70 and 71.

Board appointments
The Committee was responsible
for leading the process in appointing
three new independent Non-Executive
Directors in 2017.

The considerations to be taken into
account in each appointment to the
Board are stipulated in the Terms of
Reference of the Nomination Committee.
Specifically, the Nomination Committee
must consider candidates on merit
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
that 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, personal attributes,
as well as differences in age, nationality,
race and gender.

The recent focus on Board diversity
has centred on gender following the
2016 report of the Hampton-Alexander
Review on improving gender balance in
FTSE companies. We have committed
to ensure that a third of the Board,

Group Executive members, and their
direct reports are female by 2020. The
current levels are 27%, 29% and 20%
respectively. I continue to be a member
of the steering group of the Hampton-
Alexander Review.

Details of the recruitment process
are below.

Appointment of Non-Executive
Directors Barbara Jeremiah,
Clare Chapman and Stephen Young
External search advisers JCA Group1
were engaged in the recruitment process
and assisted the Nomination Committee
in its search for suitable candidates.

The Committee was informed of possible
candidates, put forward by JCA Group.
The selected candidates met with myself,
the Chief Executive Officer and two
Non-Executive Directors. Feedback was
provided to the Committee and it was
agreed that the preferred candidates
should proceed to the next stage. The
preferred candidates then met with the
remaining Directors.

Following the satisfactory conclusion of
the process, the Committee recommended
to the Board that Barbara Jeremiah and
Clare Chapman be appointed to the Board
on 1 August 2017.

Board skills and experience

Director

Independence

Banking and
finance

Governance

International

Leadership

Engineering

Mining

Oil and gas

Power

Charles Berry

Jon Stanton

John Heasley

Clare Chapman1

Alan Ferguson

Barbara Jeremiah2

Mary Jo Jacobi

Sir Jim McDonald

Rick Menell

John Mogford

Melanie Gee3

Stephen Young4

Notes
1. Clare Chapman was appointed to the Board on 1 August 2017.
2. Barbara Jeremiah was appointed to the Board on 1 August 2017.
3. Melanie Gee stepped down from the Board on 30 September 2017.
4. Stephen Young was appointed to the Board on 1 January 2018.

The Weir Group PLCAnnual Report and Financial Statements 201787

Subsequently the Nomination Committee
recommended that Stephen Young be
appointed to the Board on 1 January
2018. Stephen Young will be appointed
to the Chair of the Audit Committee in
April 2018.

Jeremiah, Clare Chapman and Stephen
Young, and for the re-election of all other
members of the Board, at the Company’s
forthcoming 2018 AGM. The Directors
biographies can be found on pages 70
and 71 and in the Notice of Meeting.

Processes are in place to identify
any business relationships held by
Non-Executive Directors or additional
directorships or significant links with
other companies or bodies which may
be of relevance in determining their
independence. The Board still considered
all of its Non-Executive Directors to be
independent in character and judgement.

Committee effectiveness
The Committee’s areas of responsibility
were reviewed during the year through
an external Board Effectiveness Review,
undertaken by Independent Audit
Limited. Their report was presented in
December 2017. I am pleased to confirm
it concluded that the areas of responsibility
of the Nomination Committee continued
to be performed well.

You will find more information on the
Board Effectiveness Review cycle and
process on page 78.

1. JCA Group have no other connection with the Company
and have signed up to the voluntary code of conduct on
matters such as diversity for executive search firms.
During 2017, JCA Group provided no other services to
the Company.

Independence and re-election
to the Board
The Nomination Committee reviewed
and confirmed the independence of all
Non-Executive Directors. The continued
service as Directors of both Rick Menell
and John Mogford was specifically
reviewed in light of their respective
lengths of service. During 2016, the
Committee invited John Mogford to
continue for a further year through
2017, given the nature of his sector and
management experience. He will step
down after the 2018 AGM. Rick Menell’s
experience is of particular importance
to the Company at this time of change
and it was therefore recommended that
his term should be extended for a further
year (subject to re-election by shareholders
at the 2018 AGM). This year’s review also
enabled the Committee to confirm its
support for the election of Barbara

Board appointment and tenure

Diversity and Inclusion
We recognise that Diversity and
Inclusion is a key element of our
strategic framework. To remain
competitive we need to further
develop a diverse and inclusive
workplace including the development
of our approach to increasing ethnic
minority representation at leadership
level in line with recommendations
of the Parker Review.

Our objective is to diversify thought
in The Weir Group and provide an
environment where values-based
inclusion prevails. You can read more
about Diversity and Inclusion and the
details of the initiatives that the Company
has been involved in on pages 58 to 61.

Charles Berry
Chairman of the
Nomination Committee
28 February 2018

Director

Charles Berry

Jon Stanton1

John Heasley

Clare Chapman

Alan Ferguson

Barbara Jeremiah

Mary Jo Jacobi

Sir Jim McDonald

Rick Menell

John Mogford

Melanie Gee2

Length of tenure at 31 December 2017

1
year

2
years

3
years

4
years

5
years

6
years

7
years

8
years

9
years

10
years

Date of
appointment

Date of next
election or
re-election

1 Mar 2013

26 Apr 2018

1 April 2010

26 Apr 2018

3 Oct 2016

26 Apr 2018

1 Aug 2017

26 Apr 2018

13 Dec 2011

–

1 Aug 2017

26 Apr 2018

1 Jan 2014

26 Apr 2018

1 Jan 2015

26 Apr 2018

1 Apr 2009

26 Apr 2018

1 Jun 2008

4 May 2011

–

1. John Stanton was Finance Director from April 2010 to September 2016.
2. Melanie Gee stepped down from the Board on 30 September 2017.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

Corporate Governance Report
Audit Committee Report

Introduction
As Chairman of the Audit Committee, I am pleased to present our report to
shareholders for the year ended 31 December 2017. This report will outline
how the Committee has fulfilled its key objective of providing effective
governance over the appropriateness of the Group’s financial reporting.

Alan Ferguson
Committee Chairman

Committee membership in 2017
Alan Ferguson, Committee Chairman

Areas of focus
Our key objective is achieved by focusing
on, amongst other things:

Membership
After six years this will be my final report
as the Chairman of the Committee.

Sir Jim McDonald

John Mogford

Barbara Jeremiah

Melanie Gee (to 30 Sept 2017)

Other regular Audit Committee
attendees (by invitation)

Charles Berry, Chairman

Jon Stanton, Chief Executive Officer

John Heasley, Chief Financial Officer

Christopher Morgan, Company
Secretary and General Counsel,
attends as secretary to the Committee

Steven Wallace,
Group Financial Controller

David Kyles, Head of Internal Audit

Lindsay Gardiner
(PricewaterhouseCoopers)
Group Audit Partner

Attendance table

Committee members

Alan Ferguson, Chairman

Sir Jim McDonald

John Mogford

• the adequacy of accounting

policies and disclosures, as well
as the areas requiring significant
estimates or judgements;
• the performance of both the
internal audit function and the
external auditor; and

• oversight of the Group’s systems

of internal control, and the
framework for identification and
management of business risks
and related assurance activities.

The members of the Committee,
other than myself, are Sir Jim McDonald,
John Mogford and Barbara Jeremiah, all
of whom are independent Non-Executive
Directors. With the exception of Barbara
Jeremiah, all have been members of the
Committee for the full year and to the
date of this report. Melanie Gee served
during the year prior to standing down
from the Board in September. Stephen
Young, who will take over as Chair when
I step down, joined the Committee in
January 2018.

The Committee members have,
through their other business activities,
significant experience in financial
matters. They have 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.

Member since

18 January

15 February

21 July

23 October

Percentage of eligible
meetings attended

13 Dec 2011

1 Jan 2015

1 Aug 2008

–

100%

75%

100%

Melanie Gee (to 30 Sept 2017)

4 May 2011

Barbara Jeremiah

1 Aug 2017

–

Terms of Reference are available on the Company’s
website at www.corporategovernance.weir

The Weir Group PLCAnnual Report and Financial Statements 201789

Meetings
We met four times during the year
and have met twice since the year end.
Each Committee meeting normally 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.

• the clarity of the disclosures and

compliance with accounting standards
and relevant financial and governance
reporting requirements, including an
assessment of adoption of the going
concern basis of accounting and a
review of the process and financial
modelling underpinning the Group’s
Viability Statement; and

• the processes surrounding the

compilation of the Annual Report
and Financial Statements with regard
to presenting a fair, balanced and
understandable assessment of the
Group’s position and prospects.

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.

We received formal reports from
the Chief Financial Officer and the
external auditor, summarising the main
discussion points for both the Interim
Report in our July 2017 meeting and
Annual Report during our January
and February 2018 meetings.

The table above details the Board
members and members of senior
management who were invited
to attend meetings as appropriate
during the calendar year. In addition,
PricewaterhouseCoopers LLP (PwC)
attended the meetings by invitation
as auditors to the Group.

Main activities
Over the course of the year since
the last Annual Report, our work was
focused in the following areas:

The financial reporting matters discussed
in the current year and recurring agenda
items are summarised in the table on
pages 90 to 92.

(ii) Internal control and
risk management
Overall responsibility for the Group’s
risk management and internal control
frameworks rests with the Board.
Further details on accountability
for Risk Management are provided
in the Corporate Governance Report
on page 82.

(i) financial reporting;
(ii) internal control and risk management;
(iii) internal audit; and
(iv) external audit.

The 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 of the actions
and judgements of management in
relation to the interim and annual financial
statements before submission to the
Board, paying particular attention to:

• critical accounting policies and

practices, and any changes therein;

• decisions requiring significant

judgements, areas of significant
estimate, or where there has been
discussion with the external auditor;
• the existence of any errors, adjusted

or unadjusted, resulting from the audit;

Our role with regard to risk management
has been delegated by the Board and is
to review the effectiveness of the Group’s
risk and internal control frameworks.

Our work in this area was supported
by reporting from the Head of Internal
Audit on the results of the programme
of internal audits completed; the overall
assessment of the internal control
environment; and in addition, reporting,
either verbal or written, from senior
management covering any investigations
into known or suspected fraudulent
activities. We also noted the additional
work undertaken for the Board on a
review of the sources of assurance which
were mapped against the principal risks
(see (iii) Internal audit below).

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. This includes
reviewing compliance with the Group’s

Ethics Helpline programme which
provides a mechanism for employees
with serious concerns about the conduct
of the Group or its employees to report
their concerns. The Committee ensures
that appropriate arrangements are in
place to receive and act proportionately
upon a complaint about malpractice.
The Committee takes a particular interest
in any reports of possible improprieties
in financial reporting.

Since the last Annual Report and
Financial Statements, there have been
presentations from the three Divisional
Finance Directors (DFDs) which included
a review of 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. Focus is given to:

1. the strength and depth of the finance

team’s capability;

2. the quality and efficiency of responses
to findings of internal audit visits,
including whether learning has been
shared more widely across the Group
to mitigate the risk of recurrence and
share good practice to; and

3. the quality of the discussion around

divisional risk dashboards.

In addition, we received a presentation on
the progress of the Minerals SAP rollout
and related controls.

The Compliance Scorecard is a control
mechanism whereby each operating
company undertakes self-assessments,
every six months, of their compliance
with Group policies and procedures,
including key internal controls across a
range of categories including finance,
anti-bribery and corruption, tax, treasury,
trade and 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.
Each operating company is expected
to prepare and execute action plans to
address any weaknesses identified as
part of the self-assessment process.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information90

Corporate Governance Report
Audit Committee Report continued

Current year matters

Area of focus

Issue

Role of the Committee

Conclusion

Exceptional items –
restructuring costs
and related provisions

(see notes 5 and 22 of
the financial statements)

Management
exercises judgement
on the classification
of certain items as
exceptional.

The Committee agrees
with the accounting
treatment and disclosure
of these items in the
Annual Report.

We have received detailed reporting from the Chief
Financial Officer covering the following aspects of
the exceptional charges:

(i)

charge/credit by Division, including the nature
of the items;

(ii) accounting treatment adopted in relation to

recognition of provisions and impairments; and

(iii) disclosure of the amounts and related

narrative reporting.

Our work has focused on ensuring that these items were
exceptional due to their size, nature and/or frequency,
taking cognisance where appropriate of multi-year
restructuring programmes. We also received confirmation
from PwC that management’s treatment was acceptable.

Consideration was also given to the classification of
the one-off charges incurred within the Flow Control
Division during the year as trading items rather than
exceptional.

Finally, consideration was given to the current
balance sheet position of the remaining restructuring
provisions, with a specific focus on the China provision
(created in 2016), with management providing details of
the remaining liabilities.

Acquisition
accounting for KOP

(see note 13 of the
financial statements)

Management
exercises judgement
on the type of
intangible assets
acquired and
estimates are made
of the fair value of all
assets and liabilities.

The Committee agrees
with the acquisition
accounting treatment
and disclosure of the
KOP acquisition in the
Annual Report.

We received a summary report from management
which outlined:

(i)

the purchase price allocation exercise which identified
and valued separately identifiable intangible assets;

(ii) the assessment of acquisition fair values, with a
particular focus on inventory carrying values; and

(iii) the related disclosures in the financial statements

displayed in note 13

We reviewed the resulting valuations, understood
the reasons behind the changes made and looked
at a comparison to other recent acquisitions where
appropriate. We also received confirmation from
PwC that management’s assumptions and calculation
methodology were acceptable.

US Tax Reform

(see notes 7 and 23 of
the financial statements)

Management
exercises judgement
on the potential
impact on the
Group tax assets,
liabilities and
corporate tax rate.

An assessment of the transitional impact of the recently
enacted US Tax Cuts and Jobs Act was presented by
the Group Head of Tax to the Committee, summarising
the key judgements underpinning the estimated financial
impact on the Group tax assets, liabilities and corporate
tax rate for the current year and potential tax implications
on future years, recognising that the practical application
and impact of parts of the Act remain unclear.

The Committee
agrees with
Managements’
judgements and
related disclosures.

We reviewed this in light of input from both Deloitte and
EY. PwC also provided confirmation that management’s
assumptions, calculation methodology and treatment of
transitional credits as exceptional items were acceptable.

The Weir Group PLCAnnual Report and Financial Statements 201791

Conclusion

We are satisfied that
the impairment analysis
supports the carrying
value of the underlying
assets in each CGU.

We are satisfied that
the current provisioning
levels and approach
are appropriate, as is
the recognition of a
matching insurance
asset in relation to the
US asbestos provision.

Recurring agenda items

Area of focus

Issue

Role of the Committee

Impairment

(see note 14
of the financial
statements)

Management
undertakes an
annual detailed,
formal impairment
review of goodwill
and other intangible
assets, with
judgements made
on the relevant Cash
Generating Units
and estimates of
available headroom.

Provisions

(see note 22
of the financial
statements)

Significant balance
sheet provisions
are underpinned
by management’s
key judgements
on obligating events
and timeframes
over which a
reliable estimate
for provision values
can be made.

The most significant estimates are in setting the assumptions
underpinning the calculation of the value in use of the Cash
Generating Units (CGUs). We specifically reviewed:

(i)

the achievability of the long-term business plan numbers
and macroeconomic assumptions underlying the valuation
process;

(ii) long-term growth rates and discount rates used in the

cash flow models for all of the CGUs; and

(iii) the rationale for the allocation of KOP to the Oil and Gas

EMEA Cash Generating Unit.

Business plans and budgets were Board-approved and
underpin the cash flow forecasts.

We have considered the sensitivity analysis supplied
by management.

We have reviewed the relevant disclosures in the financial
statements and the related narrative.

The focus of the Audit Committee was on the restructuring
provisions including the linkage to the exceptional charges
recorded in the Income Statement, and the employee-related
provisions, specifically the element in respect of US asbestos-
related claims.

The Committee’s work in relation to exceptional items is
discussed in the previous section.

With regard to the US asbestos-related provision, the
Committee noted the updated external advice in respect
of the actuarial assumptions underpinning the provision
and related insurance asset.

Our review and challenge was centred on gaining an
understanding of:

(i)

the claims and settlement assumptions that underpin
the discounted cash flow model and their relation to
recent historic experience;

(ii) the period over which the liability can be reasonably

estimated,

(iii) the position with regard to availability of insurance cover; and

(iv) the adequacy and transparency of the disclosures in note 22.

We challenged management on the assumptions underpinning
the liability assessment and the recording of a matching
receivable on the basis of the insurance asset. PwC also
provided confirmation that management’s assumptions
were reasonable.

With regard to other provisions (other than inventory – see
below), we examined the key movements between the
opening and closing provision balances and challenged
management on the commercial drivers which caused them.

Pensions

(see note 24
of the financial
statements)

The valuation of
pension liabilities
can be materially
affected by the
assumptions utilised
by management
on areas such
as discount and
inflation rates.

We challenged management on the key assumptions
underpinning the valuation, taking assurance from the
fact that external advice had been taken by the Company
and that PwC had benchmarked these assumptions to their
own internal ranges.

The Committee was
satisfied with the
assumptions and related
pension disclosures.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information92

Corporate Governance Report
Audit Committee Report continued

Area of focus

Issue

Role of the Committee

Tax charge and
provisioning

(see notes 7
and 23 of
the financial
statements)

The tax position
is complex, with
a number of
international
jurisdictions
requiring
management’s
judgement with
regards to effective
tax rates, tax
compliance and
tax provisioning.

The Audit Committee receives a detailed report from the
Chief Financial Officer every six months, which covers the
following key areas:

(i)

status of ongoing 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 annual
presentation to the main Board on tax strategy and risk,
given by the Group Head of Tax, and the work done by,
and conclusions of, PwC in this area.

Conclusion

Based on the work we
have undertaken, we are
satisfied that the position
presented in these financial
statements, including the
disclosures, is appropriate.

Inventory
valuation

(see note 16
of the financial
statements)

Management applies
estimates on
inventory valuation
and provisioning.

Given the significant investment in inventory within both the
Minerals and Oil & Gas Divisions, both of which are impacted
by commodity cycles, this remains a judgement for specific
consideration. Reporting has been received from management
on the business drivers behind movements in both gross
inventory and the related slow-moving and obsolete provision.
Specific consideration was given to a review of the accuracy
of inventory provisioning.

Based on the information
provided, the Committee
concluded that
management action had
been effective and that
the level of provisioning
appeared adequate.

The successful completion
of this work has been
reported to the Board.

Fair, balanced and
understandable

The Board is
required to state
that the Group’s
external reporting
is fair, balanced and
understandable.

The Audit
Committee is
requested by the
Board to provide
advice to support
the assertion.

The Committee received a report from management
summarising the detailed approach that had been taken to
ensure that the Group’s external reporting is fair, balanced
and understandable. This covered, but was not limited to,
the following:

(i)

involvement of a cross section of management across
the organisation during the preparation of the external
reporting, including the Group Executive, Divisional Finance
Directors, Group Communications, Group Finance (including
Group Tax and Group Treasury) and Company Secretariat;

(ii) input and advice from appropriate external advisers, including

the Company’s brokers and public relations agency;

(iii) use of available disclosure checklists for both corporate

governance and financial statement reporting;

(iv) regular research to identify emerging practice and guidance

from relevant regulatory bodies;

(v) regular weekly meetings (from December to February

inclusive) involving the key contributors to the document,
during which specific consideration was given to the fair,
balanced and understandable assertion; and

(vi) use of three ‘cold’ readers; two employees independent of the
preparation process (one a member of the senior management
group) and an external, independent proofreader.

Viability
Statement

The Committee’s
role, as delegated
by the Board,
is to review
the underlying
processes and
key assumptions
underpinning the
Viability Statement
and report to the
Board accordingly.

We fulfilled our responsibilities in this area through the review
and discussion of reporting received from management, which
covered the following areas:

(i)

overview of the construct of the financial model and base
case data underpinning the sensitivity and stress-test
scenarios;

The successful completion
of this work has been
reported to the Board.
The Group’s viability
statement is reported
on page 56.

(ii) results of financial modelling which reflected the

crystallisation of those principal risks identified by the
Board as having the greatest potential impact on the
Group’s viability, both individually and when taken
together in a severe but plausible stress-test scenario;

(iii) extent of mitigating actions included in the financial

modelling, relative to the population of such actions that
had been identified as within the control of management
and the Board; and

(iv) banking covenant calculations and assessment of facility

headroom in each of the downside and stress-test scenarios.

The Weir Group PLCAnnual Report and Financial Statements 201793

Our assessment of the effectiveness
and quality of the audit process covers
a number of other matters, including a
review of the reporting from the auditors
to the Committee, a review of the latest
FRC Audit Quality Inspection report on
PwC and also by seeking feedback from
management on the effectiveness of the
audit process. Overall, management were
satisfied that there had been appropriate
focus and challenge on the primary areas
of audit risk and assessed the quality of
the audit process to be satisfactory.

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.
These interactions are also important
in our assessment of audit quality.

Based on the work carried out, we
are of the view that the quality of the
audit process is satisfactory and that
our expectations set, when awarding
the audit to PwC in 2016, have been
largely met.

Operating companies are required to
retain evidence of their testing in support
of their self-assessment responses.
Internal audit has responsibility for
confirming the self-assessment during
planned visits. Any significant variances
are reported to local, divisional and
Group management. Any companies
reporting low 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 (as a percentage) 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.

(iii) Internal audit
Twice annually, the Head of Internal
Audit reports to the Committee on audit
activities, progress against the internal
audit 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 myself
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.

This gives us broad coverage of the
activities of the function and a good
sense of the control environment.
This also allows us to ensure the
function is effective (which includes
assessing the independence of the
function), adequately resourced and has
appropriate standing within the Company.

One of the main duties of the Committee
is to review the annual internal audit plan
and to ensure that internal audit remains
focused on providing effective assurance.
We undertook a deeper review of the
proposed scope and approach for the
2018 Annual Plan. This was helped by
an exercise which was conducted during
the year to map the key sources of
assurance against the Group’s core
processes. Whilst this demonstrated
good coverage, it was concluded that
there could be stronger linkage between
the conclusions from these assurance
outputs and the scope of work for internal
audit. The 2018 Internal Audit Annual Plan
has been developed considering these
wider internal assurance risk indicators

and in addition internal audit’s scope
and remit has been increased to allow
for the provision of additional assurance
over some non-financial areas.

The factors considered when deciding
which businesses to audit and the scope
of each audit, including consideration of
the number of visits to each operating
company in the Group on a cyclical basis
are, amongst other things, the volatility
of end markets, critical system or senior
management changes in the year, financial
results, the timing of the most recent
internal audit visit, assessments from
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) is taken into consideration.

An information technology risk profiling
exercise was also undertaking during
the year and forms the basis of the
IT risk assurance programme for the
2018 Annual Plan. This includes the
further development and utilisation
of data analytics techniques.

Also as part of the Annual Plan,
reviews are to be undertaken to assess
compliance with Weir’s Code of Conduct
procedures, including anti-bribery and
corruption. This includes areas such as
policy and procedures, employee training,
relationships with agents, accounting
for employee expenses and corporate
hospitality and gifts. Finally, an element of
the Annual Plan is reserved for assurance
coverage of any emerging risk areas.

The Committee considered and approved
the 2018 Internal Audit Annual Plan
including the resource model, which
shows a significant increase over that
for 2017, in line with the broader
scope agreed.

(iv) External audit
Auditor effectiveness
The effectiveness of the external
audit process is highly dependent on
appropriate audit risk identification at
the start of the audit cycle and the quality
of planning. PwC present their detailed
audit plan to the Committee each years
identifying their assessment of the key
risks, amongst other matters, and this
gets the appropriate degree of attention.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information94

Corporate Governance Report
Audit Committee Report continued

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 issuing guidelines on any non-audit
services that are to be provided by
them. A formal policy exists (see
www.global.weir) which ensures
that the nature of the advice to be
provided cannot impair the objectivity
of the auditor’s opinion on the Group’s
Financial Statements. The policy makes
it clear that only certain types of service
are permitted to be carried out by
the auditors. All permitted non-audit
services require the approval of the
Chief Financial Officer and, where the
expected cost of the service is in excess
of £75,000, the approval of myself, the
Audit Committee Chairman. If non-audit
fees approach £0.5m during a calendar
year, the Committee will consider
imposing additional restrictions on
non-audit services. The auditor confirms
their independence at least annually.

Fees payable to PwC in respect of
audit and assurance services for 2017
of £2.6m (2016: £2.2m) were approved
by the Committee after a review of
the level and nature of work to be
performed and after being satisfied
by PwC that the fees were appropriate
for the scope of the work required.

Non-audit fee work conducted by PwC
in the year of £0.3m represented 10%
of the audit fee. We are of the view that
the level and nature of non-audit work
does not compromise the independence
of the external auditor.

Having considered the relationship
with PwC, their qualifications,
expertise, resources and effectiveness,
the Committee concluded that they
remained independent and effective
for the purposes of the 2017 year
end. As a result, the Committee
recommended to the Board that PwC
should be reappointed as auditor at
the next AGM.

Committee evaluation
The Committee was subject to an
evaluation process in 2017, as part
of the Board’s triennial review process
conducted externally by Independent
Audit Board Review.

The evaluation concluded that the
Committee was performing well, with
a particular strength being the quality
and frequency of the Committee’s
interaction with the DFDs. No significant
areas of concern were noted. However,
with the impending change in the
Committee’s chair and other Board
changes, managing change should
be a focus for the Committee.

Our focus for 2018
In addition to our routine business in
2018, we will focus on two main areas.
The first will be to manage the significant
change in the members of the Committee
since September, including John Mogford
and my impending departures. I will hand
over the Chair to Stephen Young at the
conclusion of the AGM. The second will
be to review how the broadened internal
audit approach has bedded down within
the business.

Our focus for 2017
In last year’s report we said that, in
addition to our routine business, we
would increase our focus on three areas:

Alan Ferguson
Chairman of the Audit Committee
28 February 2018

1. Following the exceptional item arising
from issues in China, we will review
with management what we can do
to minimise the risk of a reoccurrence
of such exposures in the future;

2. We will increase our focus on the
IT control environment given that
the rollout of SAP in Minerals is
underway; and

3. In conjunction with the Board, we will
increase our focus on the matching of
our overall assurance structure against
our principal risks.

We have made good progress. With
regard to China, for example, we ensured
that internal audit will be involved with the
KOP acquisition at a much earlier stage
and we focused on management actions
to assess the control environment straight
after completion. The other two points
were covered by our work with internal
audit in the year (and are discussed above
in sections (ii) and (iii)).

The Weir Group PLCAnnual Report and Financial Statements 2017Directors’ Remuneration Report

Page

102

110

115

Page

100

110

Main structure

Directors’
Remuneration Policy

Annual Report on Remuneration

The Remuneration Committee

Key contents

Summary of Policy changes and
2018 implementation

Engaging with our investors

Single Figure Table

Rewarding performance in cyclical
and volatile markets
Given the exposure of our sectors to the
commodity markets, it makes it extremely
challenging to set robust and stretching
financial targets. As a result, we have
seen ‘all or nothing’ vesting outcomes
from our LTIP over the past ten years.
These outcomes are more reflective of
where the business is in the cycle than of
the underlying performance. The up-cycle
leads to vesting ‘windfalls’ and the
down-cycle penalises LTIP participants.
The potential for a negative impact on
executive pay is clear. Incentives are
unlikely to engage executives or motivate
the right behaviours if outcomes are
considered arbitrary. Windfall outcomes
will rightly appear unreasonable to
investors and unfair to employees and
other stakeholders. Penal outcomes
can disengage executives and, when
applicable over a number of cycles,
prevent the build-up of meaningful
shareholdings, which is one of the primary
objectives of share-based reward plans.

The Committee’s view is that this makes
a conventional LTIP inappropriate as a
mechanism for incentivising, retaining and
engaging the executives in the long-term
stewardship of the business. After testing
various alternatives, we concluded that
the best fit for the business was a
redesigned annual bonus and the
implementation of a Restricted
Shares Plan.

Dear Shareholders,
I am pleased to introduce our
Directors’ Remuneration Report for
the year ended 31 December 2017.
This is my first report as Chair of the
Remuneration Committee having
succeeded Melanie Gee in August 2017.
On behalf of the Board, I would like
to thank Melanie for her significant
contribution whilst in the role.

As committed to in our Report last
year, we have invested time during
this past year looking at how to align
our remuneration arrangements to
the Weir strategy so their design best
recognises the cyclical and volatile
nature of the sectors in which we
operate. The management team
emphasises creating long-term value
for customers in our end markets and
for shareholders: behaviours and a
culture which we also seek to reward.

The current LTIP suffers from ‘all or
nothing’ characteristics, so to move
from this, we have considered the best
evidence to help us evaluate alternative
reward constructs. This included
considering the recommendations from
the Investment Association Working
Group which called for Boards to explore
alternative solutions in markets where
traditional LTIPs do not work. Academic
evidence has also indicated that simpler
pay packages, with less reliance on
short-term performance conditions
and requiring large shareholdings,
have a positive impact on investment,
innovation, long-term decision making
and long-term value creation.

Based on the outcome of this review,
we are proposing changes to our
remuneration framework, notably the
replacement of our current LTIP with
Restricted Share awards under our
Share Reward Plan. We are unanimous
as a Board that this is the right thing
to do for the long-term interest of
the business and we lay out below
our rationale and how the parameters
of the award have been calibrated.

Reward principles
Rewarding the delivery of sustainable value over time in a cyclical business

Employees as
shareholders

Encouraging and enabling substantial long-term share ownership
for all employees

Rewarding long-term
value creation

Bringing focus to sustainable improvement in the underlying
business via our strategic framework

Supporting
our culture

Focusing incentives on team performance to create collective
accountability and becoming an employer of choice by offering
a motivating and fair package

Simplifying and
increasing
effectiveness

Simple and transparent reward linked to business success and
delivered in a way that reduces the impact of cyclical volatility
on reward outcomes and enables retention

Clare Chapman
Committee Chair

“We are refocusing remuneration
on long-term value creation by
using substantive equity holdings
to expose executives to both upside
and downside risk. Over the cycle,
this will best promote the value of
our company for shareholders and
the society in which we operate.”

Rewarding long-term
value creation
One of the strengths of ‘We are Weir’
is that it takes our strategic framework
and identifies how we will create value
from it for all our stakeholders.

People

Caring for our
colleagues, our
neighbours and
the environment
and inspiring
them to flourish.

Customers Working in

partnership to
provide distinctive
solutions that
deliver compelling
value for money.

Technology Driving the

development of
new technologies
and capabilities
that lead the
market.

Performance Delivering

excellence for all
our stakeholders
through strong
leadership,
accountability and
a lean mindset.

The Committee realised that to reinforce
the delivery of ‘We are Weir’, we needed
to be clear with our reward principles and
ensure these informed the design of the
new executive reward arrangements. These
principles have been refreshed and are
shown in the ‘Reward principles’ table.

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100

Directors’ Remuneration Report continued

Our LTIP outcomes have been ‘all or nothing’

The difficulty in forecasting commodity prices

Actual

Projected

$
140

120

100

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5

2 0 1 6

2 0 1 7

2 0 1 8 E

2 0 1 9 E

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5

2 0 1 6

2 0 1 7

Projected figures are based on a current forecast using public information. TSR element
– based on TSR performance measured to 31 Aug 2017; EPS element – based on
Bloomberg consensus forecasts; ROCE element – assumes the same vesting level
as EPS element. Actual outcomes may differ from these projections.

Chart shows rolling 12 month average oil price (blue line). For each year, the grey
marker plots the EIA projection from 3 years earlier (i.e. a typical LTIP period).

The Committee concluded that 2018
is the right time to be making the move
to Restricted Shares. The expected
vesting for ‘in-flight’ awards (using
publicly available market expectations)
as we head into the up-cycle is over
80% this year and over 60% next year.
Switching to Restricted Shares at this
point in the cycle is likely to be less
beneficial to management, but is
recognised as the right thing to do to
incent the delivery of long-term value.

Under the Restricted Shares proposal,
executives will receive a significantly
smaller award each year than under
the current LTIP, and these awards will
vest subject to an ‘Underpin’ as outlined
in the table below. Further details on
the underpin are set out on page 99.

The key parameters of the Restricted
Share awards are in line with best
practice guidance:

and 200% respectively). The
Committee carefully considered what
this ‘discount’ should be. Our starting
point for the conversion was to confirm
that the total compensation is positioned
around median against similarly sized
companies so it was clear we were not
embedding any excessive quantum.

To understand what a fair expectation
for LTIP pay-outs would be, we analysed
vesting outcomes over a long-term period
(ten years, being more representative
than just two or three recent years).
The average outcome has been 61%
of maximum and therefore a reasonable
expected value of the current LTIP
would have been 153% of salary
(CEO) and 122% (CFO) – current award
size multiplied by 61%. Therefore the
Committee concluded that setting
the discount at 50% is more than
sufficient. This is also consistent
with investor guidance.

• Significant reduction in award

size. Annual Restricted Share awards
will be 125% (CEO) and 100% (CFO),
half the current LTIP awards (250%

• Extended time horizons – shares
released between five and seven
years from grant. For each award,
50% will be released to participants

Vesting and holding timeline

Underpin metrics

Yr 1

Yr 2

Yr 3

Yr 4

Yr 5

Yr 6

Yr 7

Balance
sheet health

Dividend

25% of
award

25% of award

3 years

2 years

25% of award

2 years

25% of award

2 years

50% of vested shares released 5 years from grant
25% released after 6 years from grant
25% released after 6 years from grant

Breaching
covenants

Investor return

Return on Capital
Employed (ROCE)

Corporate
governance

Major governance
failure

after five years, 25% after six years
and the final 25% after seven years
from grant. This represents one of the
longest holding periods for Restricted
Share plans in the UK and is in excess
of the five years recommended in
investor guidance. Awards will vest as
follows – 50% after three years, 25%
after four years and 25% after five
years. In order to address a one-off
transitional risk of moving from an LTIP
to Restricted Shares, the first tranche
of awards made under the 2018
Policy will vest 25% after two years
(rather than three). These transition
arrangements will not apply to new
hires. We will also confirm in our Policy
statement in 2021 that we will revert
to a three-year vest for tranche one
since, by then, the transition issues
will largely be managed.

• Underpin – safeguarding against
payment for failure. Restricted
Share awards do not have conventional
performance conditions which might
apply to an LTIP, reflecting their
different purpose and design.
However, the framework includes
safeguards which can adjust vesting
in circumstances of significant
under-performance, in line with
investor best practice. The underpin
includes a set of key metrics with
pre-disclosed performance thresholds.
If any of these thresholds are not met,
or if an adjustment is required to better
reflect underlying performance, the
Committee retains discretion to reduce
the vesting outcome. The key metrics
for the underpin for 2018 awards are
as laid out in the ‘Underpin metrics’
table (with the detailed underlying
thresholds disclosed on page 99)
and it is our current intention that
this framework remains unchanged
for the forthcoming policy period.

The Weir Group PLCAnnual Report and Financial Statements 201797

• Enhanced shareholding guidelines,

including extending into post-
employment. The shareholding
guidelines for the CEO and CFO
will be doubled to 400% and
300% of salary, respectively. The
shareholding guidelines will also be
extended into a post-employment
period (at 50% of the normal level,
tapering to 0% after two years).

In developing these proposals, we have
engaged extensively with our major
shareholders, many of whom invest
in our business over the long term. We
have valued the consultation and the
Committee’s proposals on the elements
such as the discount, underpin, time
horizons and shareholding requirements
have been proposed to reflect the
messages we heard. I am conscious,
however, that programmes based on
Restricted Shares are not commonplace
in the UK market. I hope that I have
demonstrated in this letter why this
programme is appropriate for the
business and how the design of the
awards have been calibrated to address
the concerns of some shareholders
who are yet to build confidence in
Restricted Share programmes.

Going forward the Committee commit
to evolving these plans over time so
they stay aligned to business strategy.
When the Committee next reviews the
incentive framework ahead of our next
Policy approval in 2021, we will undertake
a similarly thoughtful and collaborative
review process as described in this letter
which would involve engaging early with
our major investors.

Changes to bonus framework
We are also proposing changes to
our annual bonus framework for 2018,
to better align with the reward principles
and delivery of our strategy.

The key change is the introduction of
strategic measures to represent 30%
of the bonus. This replaces the 40% of
the bonus that was driven by order input
and personal objectives, so we are also
simplifying the framework from four to
three measures. The strategic measures
will align to the strategic framework
(People, Customers, Technology, and
Performance). We will set stretching
targets aligned to a balanced scorecard
and use externally verified industry
standard measures wherever possible,
in particular around core operational
metrics and the Voice of the Customer
(VoC) and Employees. This will enable
benchmarking and facilitate learning. The
key measures for 2018 are disclosed on
page 98 and we will continue to provide

full retrospective disclosure of the
underlying targets in next year’s report.
Payment of any strategic component will
be subject to a discretionary underpin
(including individual performance).

Having listened to shareholders, the
remainder of the bonus will continue
to be assessed against key financial
measures for the year. PBTA1 will remain
the primary metric (with the weighting
increased from 40% to 50% for 2018).
Our cash-based measure will change
for 2018 from operating cash flow to
working capital as a percentage of sales,
better reflecting our growth agenda.
The weighting will remain at 20%.

NPBTA

Cash ﬂow/
working capital

Strategic

Order input

Personal

20%

40%

30%

20%

50%

Current

Proposed

There are no changes to bonus
opportunities, which will remain at 150%
(CEO) and 125% (CFO). These changes
do not represent a policy change but
since they are important to how the
whole reward package works, I wanted
to give investors full sight of them.

2017 bonus and LTIP outcomes
When determining the bonus pay-outs
in respect of 2017, the Committee took
into account the overall performance of
the business as well as the Executive
Directors’ performance.

80% of the bonus was based on
performance against three financial
measures: profit, order input and cash
flow. Profit increased significantly
reflecting a return to growth by our Oil
& Gas Division. We also delivered strong
order growth in both our Oil & Gas and
Minerals divisions as demand for their
solutions increased. Flow Control was
impacted by tough market conditions.
We had a disappointing performance
against the cash flow measure, with
cash flow from operations reducing as
a result of increased investment in
working capital to support strong growth,
and reduced profitability in Flow Control.

Although we failed to achieve the
cash flow measure, the performance
achieved against the profit and order
input measures was 98% and 76% of
maximum respectively. This resulted
in a total contribution to payout of 54%
of maximum for the financial measures.

Full details of achievement as well as
details of the performance of each
Executive Director are provided on
pages 111 and 112.

The 2015 LTIP awards lapsed as the
performance targets measured over the
three-year period to 31 December 2017
were not met.

2018 decisions
In addition to the key policy changes
outlined above, I can confirm the
following for 2018:

• With effect from April 2018, the

salaries for the Executive Directors
will increase by 2.8% in line with the
average increase for UK employees.

• Pension contributions will remain
at 12% of salary, in line with our
Policy. The Committee is aware
that a number of UK investors remain
concerned about executive pensions
which are significantly higher than
those in the wider workforce. At
Weir, the pension contribution of
12% is very much at the lower end
of market practice and aligns with
senior roles within the UK. I therefore
believe strongly that our pension
practice is in line with good practice.

2018 AGM
To implement the proposed changes we
will be seeking shareholder approval for a
new Remuneration Policy and this is set
out in pages 102 to 107 of this report. We
will also be seeking approval for the new
Share Reward Plan and new All-Employee
Share Ownership Plan, the full details of
which are included in the Notice of
Meeting. This is an important step
forward. One of the principles which has
guided our thinking as a Committee is a
commitment to a principle of ‘employees
as shareholders’ so we are keen to make
it possible for all colleagues to build up
long-term share ownership.

I would like to thank those who engaged
extensively on the proposals over recent
months and I look forward to receiving
your support at the AGM. As ever,
we remain committed to an open and
ongoing dialogue and I would be very
happy to hear the views of investors
on our proposals.

Clare Chapman
Chair of the Remuneration Committee
28 February 2018

1. PBTA is defined as continuing profit before tax, amortisation and exceptional items,

translated at 31 January 2017 average exchange rates.

Terms of Reference are available on the Company’s
website at www.corporategovernance.weir

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98

Directors’ Remuneration Report continued

Summary of policy changes and 2018 implementation
The table below summarises the key components of our proposed remuneration framework, illustrating how they differ from
our current policy and how we intend to operate the new policy in 2018. Full details of the policy are set out on pages 102 to 107.

Current arrangements

New policy and 2018 implementation

Fixed

Salary

Fixed remuneration
which reflects role, skills,
and responsibilities

For 2017:

• CEO – £650,000
• CFO – £400,000

No change to Policy.

Increases for 2018 aligned to the average increase for UK employees of 2.8%.

• CEO – £668,200
• CFO – £411,200

Pension

Executive Directors receive
a cash allowance of 12% per
annum in line with pension
contributions for other senior
UK employees

No change. The Committee believes that executive pensions which are
aligned to other employees in the business is consistent with emerging
investor best practice in this area.

Benefits

Car allowance, health care
and life assurance

No change.

Variable

Annual Bonus

Maximum opportunity:

No change to opportunities or deferral structure.

Greater
alignment to
our strategic
objectives

• CEO 150% of base salary
• CFO 125% of base salary

30% deferred into shares
for three years

Measures and weightings
in 2017:

– 40% Group PBTA
– 20% Operating cash flow
– 20% Order input
– 20% Personal

Full retrospective target
disclosure (see page 111
in respect of 2017).

Measures and weightings in 2018:

– 50% Group PBTA – increased from 2017 to reflect importance of profit

– 20% working capital as percentage of sales – changed the basis

of the cash measure to better reflect our growth agenda.

– 30% strategic measures – replacing order input and personal objectives
to better incent strategic objectives for the year. Measures will align
to the strategic framework (People, Customers, Technology, and
Performance) and set out below are the underlying headline metrics
to be achieved over the next three years, as well as the target priorities
for 2018. Targets will be stretching and aligned to a balanced scorecard.
Externally verified industry standard measures will be used where
possible. Underlying targets will be fully disclosed in next year’s report.

People
Improved engagement score and increase in organisational effectiveness

• Develop best in class behavioural safety culture
•
• Continue to extend the Weir culture and develop the voice of the employee

Identify and build the capabilities required to deliver the customer proposition

Customers
Increased market share

•
•

Increase revenues from service centre networks
Increase number of customer partnerships on technology development
and trials

• Voice of Customer (VoC) development

Technology
Improved percentage revenue from new solutions/services/ products

• Progress commercialisation of Weir digital agenda
• Further develop additive manufacturing capability
• Develop Weir innovation framework

Performance
Sustainably higher margins through cycle

Improved VCE score

•
• Progression on IT infrastructure and systems development
• Begin sustainability journey

The Weir Group PLCAnnual Report and Financial Statements 201799

Current arrangements

New policy and 2018 implementation

Long-term
share awards

Long Term Incentive Plan
(LTIP) awards:

Replacement
of LTIP with
Restricted
Shares

• CEO 250% of base salary
• CFO 200% of base salary

Vesting based on performance
over three years:

– One third EPS
– One third ROCE
– One third TSR

Two-year holding period.

Replacement of LTIP with Restricted Share awards, with the first awards
to be made following the approval of the Share Reward Plan at the 2018
AGM. Award parameters in line with best practice and investor guidance.

Maximum award size significantly reduced by 50% from previous LTIP
award levels (the rationale for this discount is discussed in more detail
in the next section):

• CEO 125% of base salary
• CFO 100% of base salary

Vesting phased over a five-year period, with vested shares released
between five and seven years from grant.

Vesting subject to the underpin. Prior to vesting, if any of the thresholds
set out below have not been met, it would trigger the Committee to
consider whether a discretionary adjustment was required.

Balance sheet health
• Dividend

– Maintain average absolute dividend per share over the vesting
period at least in line with the 2017 declared dividend per share.

• Breaching covenants

– No breach of debt covenant or renegotiation of covenant terms

outside of a normal refinancing cycle.

Investor returns
• Return on Capital Employed (ROCE)

– Maintain average ROCE over the vesting period above the average

Weighted Average Cost of Capital for that period.

Corporate governance
• Major governance failure

– No material failure in governance or an illegal act resulting in
significant reputational damage and/or material financial loss
to the Group.

Restricted Share awards will also be subject to malus and
clawback provisions.

The Committee will also retain discretion to determine the grant level
each year.

Other

Shareholding
guidelines

• CEO – 200% of base salary
• CFO – 150% of base salary

Significant
enhancement

Shareholding guidelines will be doubled from current levels:

• CEO – 400% of base salary
• CFO – 300% of base salary

In addition, shareholding requirements will continue post-employment.

NED fees

Fees reflect responsibilities and
time commitments for the role.

Fees will increase broadly in line with the wider employee average as
follows, effective 1 April 2018:

• Chairman’s fee by 2.8% to £306,500
• Non-Executive Director base fee by 2.9% to £61,200
• Chairman of Committee fee by 2.6% to £15,900
• Senior Independent Director fee by 2.4% to £12,800

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information100

Directors’ Remuneration Report continued

Engaging with our investors

In developing the proposals set out in
this report, we engaged extensively
with major investors and shareholder
bodies. A number of common themes
which emerged in discussion are set
out below.

Q Why are changes being

made at this time?

As flagged in last year’s report, during
the course of 2017, a comprehensive
review of our remuneration philosophy
and framework was undertaken to ensure
it continued to best support the delivery
of our strategy.

The Committee believes that a
‘hybrid’ approach (i.e. introducing
restricted shares whilst also maintaining
a performance-based LTIP) lacks a
coherent rationale and was the approach
which our investors strongly rejected
at our 2016 AGM.

Q In the context of the difficulty

of setting robust long-term

targets, could other solutions have
been considered (e.g. relative TSR
or a ‘hybrid’ with the existing LTIP)?
It is correct that relative targets can
be a solution to the challenge of setting
absolute targets. Most commonly, this
would be done via relative TSR. This relies
on the ability to construct a robust and
relevant peer group, which for a number
of reasons, the Committee considers is
not possible for Weir (given our exposure
to a range of different commodity end
markets and an insufficient number of
direct UK peer companies). Relative TSR
could also incentivise higher leverage as
a means of generating differential equity
performance against peers, which could
penalise companies looking to safeguard
a strong balance sheet through the cycle.

Change in maximum total compensation

24% reduction

23% reduction

Q How else does this proposal

differ from 2016?

Other key differences from 2016 are:

• Significantly enhanced shareholding
guidelines (including extending the
guideline into post-employment).
• This proposal has a much more

substantial underpin.
• Extended time horizons.

Q What is the change to

maximum total compensation?

As shown below, the maximum value
of the packages has been reduced by
over 20% as a result of the change in
award structure.

Q If the performance element

is removed from long-term

share awards, how will you
motivate performance?
The Committee is firmly of the view
that the Restricted Shares will act as
a more powerful driver of performance
than the LTIP. By increasing the direct
exposure to shares both during and post
employment, executives have wealth
at risk. This very visible exposure to
the share price, which is easily monitored
by executives, is therefore far more
motivating than long-term plans based
on relative TSR (which is seen as a
“lottery” so has little incentive effect).
With Restricted Shares, executives are
strongly incentivised to take actions that
will enhance long-term performance
rather than short-term shareholder
value given the phased vesting and
release profile.

In addition, the annual bonus will
continue to act as a powerful tool
to drive annual performance against
stretching targets built around our
annual financial and strategic objectives.

Salary

Pension

Bonus

LTIP

Current

Proposed

Current

Proposed

CEO

CFO

£3,500k

£3,000k

£2,500k

£2,000k

£1,500k

£1,000k

£500k

£k

The Weir Group PLCAnnual Report and Financial Statements 2017101

• Malus and clawback. These remain
in place in line with the provisions
which already existed in our LTIP.
Malus allows a reduction of awards
prior to vesting and clawback is the
ability to reclaim vested amounts
prior to the end of the holding period.
• Discretion on future award sizes.

In addition to the above, the
Committee would also retain full
discretion on future award sizes.
Although the maximum levels of
award are set for the Policy period
at 125%/100% of salary for the
CEO/CFO, these grant levels would
not be ‘automatic’ each year and the
Committee retains the discretion to
make a lower award if appropriate.

These additional provisions provide the
Committee with a wide range of ‘tools’
within the remuneration framework
which could be applied to ensure
appropriate outcomes.

Q Under the new bonus

framework, how will you
ensure the strategic objectives are
stretching and robustly assessed?
The strategic objectives will operate
under a robust architecture. For
each of the strategic priorities
(People, Customers, Technology, and
Performance), the Board has agreed
the key underlying headline metric to
be achieved over the next three to five
years, as well as the target priorities for
2018. Targets will be stretching and
assessed using a robust framework
comprising objective, measurable and,
where possible, externally referenced
targets. Underlying targets will be
fully disclosed in next year’s report.

Restricted Shares) which could create
an unintended retention risk at a critical
stage in the execution of the business
strategy. Recognising the need to be
mindful of the continuity of talent, the
Committee’s preferred solution was to
shorten the vesting of the first 25%
tranche from three to two years which
would allow executives to perceive a
greater build up in the vested value of
their awards over that critical period
of 2021 to 2023 as the transition from
LTIP to Restricted Shares occurs.

However, it should be noted that:

• This has no impact on when executives
receive any shares from the holding
period, which will continue to be
from five to seven years from grant.
It therefore does not compromise
the principle of long-term focus.
• In our 2021 Policy, we will revert to
three-year vesting for tranche one.
• New executives in the 2018 Policy
period will have three-year vesting.

Q How will the underpin work?

Does it provide the Committee

with the necessary tools in the
event of poor performance?
The Board considered the metrics
and the mechanics of the underpin
at length in developing the proposal.
The underpin provides investors with
transparency on a number of clearly
identified ‘failure scenarios’ which
would trigger the Committee to
consider, ahead of the vesting of
each tranche of each award, whether
a downward adjustment was required.
Full disclosure would be made at the
time should the underpin be invoked.

A number of additional safeguards and
discretions also exist in circumstances
not explicitly referenced in the underpin
framework. For example:

• General discretion. As included
in the Policy Table on page 104,
the Committee retains a general
discretion to adjust vesting outcomes
downwards for each tranche of the
Restricted Share awards if it believes
this will better reflect the underlying
performance of the Company over
the period.

Q How did you arrive at

the 50% discount from

LTIP award levels?
We recognise that the conversion rate
between LTIP and Restricted Shares is
a key issue for investors. Our ‘starting
point’ for the conversion was to confirm
that total compensation is positioned
around median against similarly sized
UK companies and therefore we were
not embedding any excessive quantum.

To understand LTIP payout expectations,
we analysed LTIP outcomes over a
long-term period (ten years) to provide
a robust view on the vesting outcomes
which executives might expect ‘through
the cycle’. This showed that the average
vesting has been 61% over that period
and therefore a reasonable ‘expected
value’ of the current LTIP would be
153% of salary (CEO) and 122% (CFO)
– being the current market competitive
award size multiplied by the long-term
expected vesting of 61% of maximum.
The proposed award sizes represent a
20% reduction to that expected value
and the Committee therefore believes
that 50% is a more than sufficient discount.

As shown in the chart on page 96,
recent vesting outcomes have been
zero. However, the expected vesting
for ‘in-flight’ awards (using publicly
available market expectations) as we
now head into the up-cycle is over
80% this year and over 60% next
year. Therefore, management will be
more financially disadvantaged under
the Restricted Shares proposal than they
would be under an LTIP if those types
of vesting levels continued through the
coming years. Switching to Restricted
Shares at this point in the cycle is likely
to be less beneficial to management,
but is recognised as the right thing to
do to incent delivery of long-term value.

Q Why does the first tranche

vest after two years? Is this

just a transitional solution?
Yes, the primary reason for this is to
address a sizeable ‘transition’ issue
as we shift from LTIPs to Restricted
Shares. The Committee modelled the
future release of shares which illustrated
a significant potential fall-off in released
value in 2023 (as the LTIP switches to

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information102

Directors’ Remuneration Report continued

Directors’ Remuneration Policy
The policy will be put to shareholders for approval at the AGM to be held on 26 April 2018. Subject to approval, the policy
is intended to apply for three years from the AGM.

There are three major differences between the proposed and the current policy approved in 2017: (i) replacement of the
Long Term Incentive Plan (LTIP) with the Share Reward Plan (SRP), (ii) increased shareholding requirements and extension
of the requirement post-employment, and (iii) implementation of an all-employee share plan.

Future policy table

Base salary

Purpose
To provide a salary which takes into account an individual’s role, skills and
responsibilities and enables the Group to attract and retain talented leaders.

Operation
Reviewed annually, with increases normally taking effect from 1 April.
Salaries are set by reference to market practice for similar roles in
companies of similar size and complexity. The Committee also takes
into account personal performance, the wider employee context,
and economic and labour market conditions.

Pension

Purpose
To encourage long-term saving and planning for retirement.

Operation
A contribution into the Company’s defined contribution pension plan or
an equivalent cash allowance, or any other arrangement the Committee
considers has the same economic benefit.

Benefits

Maximum value
While there is no stipulated maximum salary
increase, increases will not normally be greater
than the average salary increase for UK employees
(or the relevant jurisdiction if an Executive Director
is based outside the UK).

Different increases may be awarded at the
Committee’s discretion in instances such as where:

• there has been a significant increase in the size,

complexity or value of the Group;

• there has been a change in role or responsibility;
• the individual is relatively new in the role and
the salary level has been set to reflect this; and

• the individual is positioned below relevant

market levels.

Maximum value
12% of base salary per annum in line with other
senior UK employees.

Purpose
To provide cost-effective benefits valued by individuals.

Operation
Benefits include, but are not limited to, health care, car allowance, liability
insurance and death in service insurance.

Other benefits may be provided from time to time if considered reasonable
and appropriate, such as relocation benefits or long-term disability insurance.

Maximum value
• Car allowance – no greater than £20,000 per annum
• Life assurance – 5 x base salary

The cost of providing insurance and health care
benefits varies according to premium rates, so
there is no formal maximum monetary value.

The Weir Group PLCAnnual Report and Financial Statements 2017103

Annual bonus

Purpose
To incentivise the delivery of our strategic plan and to reward the
achievement of stretching performance on an annual basis.

Maximum value
• CEO 150% of base salary
• CFO 125% of base salary

To focus incentives on team performance to create collective accountability.

Operation
Measures, targets and weightings are reviewed and determined annually
at the start of each financial year to ensure they are appropriate and
support the Company’s strategy.

30% of any bonus will be deferred into an award of Weir Group shares
which will normally be released after three years.

Malus and clawback provisions may be applied in the event of a
material misstatement in the financial statements of the Group or a
subsidiary/division, the discovery that information used to determine
an award was materially incorrect, mistaken or misrepresented, gross
misconduct (leading to termination for cause), or reputational damage
causing significant damage to the Company and clearly attributable
to the individual.

Performance assessment
Annual bonuses will be subject to such targets
as the Committee considers appropriate each year.

Financial measures will normally be used to
calculate at least 50% of the bonus, with
the remainder being based on strategic and/or
personal objectives.

The performance targets for financial measures
are set in the context of the internal budget taking
into account other relevant factors such as
external forecasts.

All financial measures are calibrated with payment
on a straight line basis between threshold (up to
20% of maximum bonus payable) and stretch.

Payment of any strategic component will be
subject to a discretionary underpin (including
individual performance).

In exceptional circumstances, the Committee
has discretion 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 has discretion in exceptional
circumstances to amend the payout level if
it believes this will better reflect the Company’s
underlying performance.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information104

Directors’ Remuneration Report continued

Share Reward Plan

Purpose
To encourage and enable substantial long-term share ownership.

To reward the delivery of sustainable value over time in a cyclical business.

Maximum value
The Committee will determine the grant level
each year. The maximum value of an award which
may be granted in respect of a financial year is:

Operation
The Committee may grant awards under the SRP on an annual basis.

• CEO 125% of base salary
• CFO 100% of base salary

Performance assessment
No performance measures are associated
with the awards.

The underpin will consist of a ‘basket’ of
pre-determined key metrics which will best
reflect overall business health over the vesting
period. For each metric, a clearly defined and,
where relevant, quantifiable ‘threshold’ will be
set at the time of grant. Thresholds will be
disclosed on a prospective basis.

Prior to vesting, if any of the thresholds have
not been met, it would trigger the Committee
to consider whether a discretionary downward
adjustment was required.

In addition, the Committee will have general
discretion to reduce vesting levels if it believes
this will better reflect the underlying performance
of the Company over the period.

Maximum Value
• CEO 400% of base salary
• CFO 300% of base salary

Vesting
Vesting of awards will be phased in four equal tranches over a five-year
period. This will normally be split into four equal tranches of 25% (of the
total award) which vest after two, three, four and five years following grant.
For any Executive Director appointed after the effective date of this Policy
and from 2021 onwards for incumbent executives, 50% will vest after three
years, 25% after four years and 25% after five years.

Vesting will be subject to continued employment and assessment
of the underpin.

Following vesting, an additional two-year holding period will also apply
to each tranche, such that 50% of vested shares in an award are released
five years from grant, 25% are released after six years and the final 25%
is released after seven years.

Awards will normally be made in the form of conditional share awards,
but may be awarded in other forms if appropriate (e.g. as nil cost options).

Malus and clawback (applicable for three years from vesting) provisions
may be applied in the event of:

• A discovery of a material misstatement in the audited consolidated
accounts of the Group or audited accounts of any Group company;
• Action or conduct which can be considered as gross misconduct;
• Events or behaviour which have a significant detrimental impact on
the reputation of any Group company and which can be attributed
to the individual award holder;

• The information used to determine the number of shares over which

an award is granted or vests is found to be materially incorrect,
mistaken or misrepresented to the advantage of the award holder.

Shareholding requirements

Purpose
To ensure Executive Directors build and hold a significant
shareholding long term.

To align Executive Directors’ interests with shareholders.

Operation
Executive Directors are required to build up a shareholding in the
Company over a five-year period.

All beneficially owned shares, deferred shares and unvested Restricted
Share awards count towards an individual’s shareholding (on a net
of tax basis, where relevant).

Until the shareholding requirement is met, an Executive Director must
retain 50% of net Restricted Share awards, Performance Share awards
and deferred bonus awards.

Shareholding requirements continue post-employment:

• The requirement will fall to half the normal level on leaving.
• The requirement would taper down to zero after two years.

The Weir Group PLCAnnual Report and Financial Statements 2017105

All-employee share plans

Purpose
To enable long-term share ownership for all employees, and to increase
alignment with shareholders.

To provide one common benefit to all employees.

Maximum value
The maximum amount of shares that can be
purchased will be £200 per month. The maximum
share match basis will be one share for every three
shares purchased.

Operation
Employees will be awarded free shares in 2019 and 2020. From 2021
onwards, only new employees will be eligible to receive free shares. For all
other employees, awards of free shares will be contingent on the employee
purchasing shares with their own funds. Shares purchased using employees’
own funds will be matched by the Company.

Shares will vest no later than three years after grant.

Executive Directors will be excluded from receiving any free shares in 2019
and 2020, but they will be eligible to purchase and receive matching shares
from 2021 on the same terms as other employees.

In 2016, shareholders approved a Save As You Earn scheme for all employees
but this plan is not currently operated.

Legacy arrangements

Purpose
To honour payments and other remuneration related items due to
Executive Directors.

Operation
The Committee reserves the right to make any remuneration payments
and/or payments for loss of office, this includes exercising any discretions
available to it in connection with such payments (notwithstanding that they
are not in line with this policy) where the terms of payment:

• Came into effect before this policy was approved and implemented

(including where such payments are in line with a previously approved
policy);

• Were agreed at a time when the individual was not a Director of the
Company and, in the opinion of the Committee, the payment is not
in consideration for the individual becoming a Director.

This will include the vesting of any awards granted under the LTIP.

Chairman and Non-Executive Directors’ fees

Maximum value
In line with existing commitments and arrangements.

Purpose
To attract and retain experienced and skilled Non-Executive Directors
and to reflect the responsibilities and time commitment involved.

Fees are reviewed annually by reference to companies of similar size
and complexity, economic and labour market conditions.

Maximum value
Fees as prescribed in the Articles of Association.

Planned increases in fees will take into account
general increases across the Group, along with
market practice.

Additional fees may be made available to Non-Executive Directors where
appropriate to reflect any additional time commitment or duties.

The Company may reimburse Non-Executive Directors for any business
related costs (such as travel and accommodation costs incurred in connection
with their duties) and any associated tax on these costs.

Notes to the future policy table
Dividends
Executive Directors are entitled to receive the value of dividends payable on any deferred bonus awards under the Annual
Bonus or awards under the SRP and LTIP up the point of vesting This value may be calculated assuming that the dividends
were notionally reinvested in the Company’s shares.

Common award terms
Awards granted under the share plans may be adjusted in the event of any variation of the Company’s share capital or any
demerger, special dividend or other event that may affect the current or future value of the awards.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
106

Directors’ Remuneration Report continued

Recruitment policy
The Committee’s approach when considering the overall remuneration arrangements in the recruitment of an Executive
Director is to take account of all relevant factors, such as the individual’s remuneration package in their prior role and the
positioning of the package against the local market. We will not pay more than necessary to facilitate the recruitment.

Component

Policy and operation

Remuneration

Buy-Out Awards

The salary level, benefits, pension, annual bonus and annual SRP participation will be in line with the policy table.

The Committee will consider whether any buy-out awards are reasonably necessary to facilitate the recruitment
of an Executive Director, and if there are any other compensation arrangements that would be forfeited on
leaving the previous employer.

The Committee will seek to structure any buy-out award taking into account relevant factors including any
performance conditions, the form in which it is to be paid and the timeframe of the award.

Buy-out awards will generally be made on a like-for-like basis and will be no more generous in quantum and
timeframe than the awards being forfeited.

Other

The Committee may agree to meet certain mobility or relocation costs including, but not limited to,
temporary living and transportation expenses. The Committee may also agree to meet the costs of
relevant professional fees.

Reasonable expenses and associated tax incurred as part of their recruitment will be reimbursed to the
Executive Director.

Internal promotion
to Executive Director

The Committee will honour existing remuneration arrangements made prior to and not in contemplation of
promotion. The arrangements will continue to pay out in accordance with the respective rules and guidelines.

Service contracts and policy on payment for loss of office
It is the Committee’s policy that there should be no element of reward for failure. The Committee’s approach when considering
payments in the event of termination is to take account of the individual circumstances including the reason for termination,
contractual obligations of both parties as well as incentive plan and pension scheme rules.

In the event that an Executive Director’s service contract is terminated other than in accordance with its terms, the Committee
will give full consideration to the obligation and ability of the individual to mitigate any loss they may suffer as a result of the
termination of their contract.

Service contracts and letters of appointment are available for inspection at the Company’s registered office.

Provision

Policy

Unexpired term

The unexpired term of Executive Directors’ contracts is 12 months. Executive Directors have rolling contracts.

Change of control No provisions in service contracts relate to a change of control. Refer to the relevant sections below for annual

bonus and share plans provisions.

Notice period

Contractual
payments

Current Executive Directors have 12 months’ notice by either the Company or the individual. This would be the
normal policy for new appointments.

Termination with contractual notice or termination by way of payment in lieu of notice (PILON) at the
Company’s discretion.

Neither notice nor PILON will be given in the event of gross misconduct.

The calculation of PILON will be at 1.2 x gross salary to reflect the value of salary and contractual benefits.

PILON will be made where circumstances dictate that Executive Directors’ services are not required for their full
notice period. Contracts also allow for phased payments on termination which provides for mitigation, including
remuneration from alternative employment.

The Committee may authorise:

• payments for statutory entitlements in the event of termination;
• reasonable settlement of potential legal claims;
• payment of reasonable reimbursement of professional fees in connection with such agreements.

The Weir Group PLCAnnual Report and Financial Statements 2017107

Provision

Policy

Annual bonus
and deferred
bonus awards

At the discretion of the Committee, a pro-rated payment (payable in such proportions of cash and shares as the
Committee may determine) may be earned if employment ceases during the year. Any payment will be subject to
the assessment of bonus targets.

Dismissal for gross misconduct – all entitlements will be forfeited, including any unvested deferred bonus awards.

Outstanding share
plan awards

All other departure events – existing rights are normally retained in respect of any deferred bonus awards. Vesting
will take place at the normal vesting date unless the Committee determines otherwise.

Malus and clawback provisions will continue to apply.

Change in control – any bonus will normally be determined by the Committee up to the expected date of change
in control taking into account both performance and the period of the financial year which has elapsed. Deferred
bonus awards will vest on change in control.

The treatment of share awards will be governed by the rules of the relevant plan.

Where an individual leaves as a Good Leaver (which includes for reasons of death, retirement, ill-health, injury or
disability, redundancy, the sale of employing company or business, or other circumstances that the Committee
determines) unvested awards will normally continue and vest on the normal vesting date, taking into account the
assessment of any applicable underpins and pro-rated to reflect the proportion of the vesting period of each tranche
which has elapsed. For LTIP awards, vesting would also take into account any applicable performance conditions
over the normal performance period.

The Committee may exercise its discretion to apply a different pro-rata methodology or to dis-apply time
pro-rating completely.

Awards subject to a holding period will continue to be subject to that holding period as if employment had not
ceased, except in the case of death, or in such other circumstances as the Committee may determine, when
the holding period will end at that time.

The rules provide flexibility that in the case of the participant’s death (or such other exceptional circumstances
as the Committee considers appropriate), tranches will vest (and awards in the holding period will be released)
at the time of death/leaving.

If an individual leaves for any reason other than as a Good Leaver, any unvested awards will lapse on termination.

Leavers have a period of three months to exercise any options unless this period is extended by the Committee.
In the event of death, an option can be exercised for a period of 12 months by the deceased’s estate.

Awards will remain subject to the operation of malus and clawback provisions.

Change in control – the extent to which unvested awards vest will be determined by the Committee, taking into
account the performance conditions and/or underpins as applicable and the proportion of the vesting period that
has elapsed. Alternatively, awards may be exchanged for new equivalent awards in the acquiring company. The
holding period applicable to any awards will end at the time of change in control.

All-employee plans The rules of any all-employee share plans will apply in the event of termination of employment or change in control.

Relocation

The Committee may determine that share plan awards or deferred bonus awards should vest early if an Executive
Director is relocated to a country where they would suffer a tax or regulatory disadvantage by holding the award.

Chairman and
Non-Executive
Directors

Non-Executive Directors have letters of appointment. The letters do not contain any contractual entitlement to a
termination payment and the Non-Executive Directors can be removed in accordance with the Company’s Articles
of Association.

With the exception of the Chairman and Non-Executive Directors appointed prior to 2011, notice periods are six
months from the Company and no notice from the individual.

There are no change in control provisions in the letters of appointment.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information108

Directors’ Remuneration Report continued

The following table sets out the dates of each of the Executive Directors’ service agreements, the dates of the Non-Executive
Directors’ letters of appointment and the date on which the Non-Executive Director is subject to reappointment or re-election.
Directors are required to retire at each Annual General Meeting and seek re-election by shareholders.

Executive Director

Jon Stanton

John Heasley

Contract commencement date

Unexpired term (months)

28 July 2016

3 October 2016

Non-Executive Director

Date of appointment

Date when next subject to appointment or re-election

Charles Berry

Clare Chapman

Alan Ferguson

Barbara Jeremiah

Mary Jo Jacobi

Sir Jim McDonald

Rick Menell

John Mogford

Stephen Young

1 January 2014

1 August 2017

13 December 2011

1 August 2017

1 January 2014

1 January 2016

1 April 2009

1 June 2008

1 January 2018

26 April 2018

–

26 April 2018

–

26 April 2018

Application of Remuneration Policy
The charts below illustrate the potential total future remuneration for the Executive Directors under the new policy. In line with
current regulations, the illustrations do not assume any share price growth or dividend equivalent payments on share awards.

Jon Stanton
Illustration of package value under new policy

John Heasley
Illustration of package value under new policy

Minimum
100%

£775,274
On Target
35%

£775,274
Maximum
30%

£775,274

27%

38%

£601,380

£835,250

38%

£1,002,300

32%

£835,250

Minimum
100%

£478,374
On Target
40%

£478,374
Maximum
34%

£478,374

26%

34%

£308,400

£411,200

37%

£514,000

29%

£411,200

Fixed pay

Annual bonus

SRP

Fixed pay

Annual bonus

SRP

Notes to Application of Remuneration Policy charts

Element of package

Fixed pay

Annual bonus

SRP

Assumptions used

Base salary: effective 1 April 2018
Benefits: as disclosed in single total figure of remuneration
Pension: 12% cash allowance

Minimum: no bonus is earned
On target: 60% of maximum bonus is earned
Maximum: 100% of maximum bonus is earned

Minimum: no vesting
On target: 100% vesting
Maximum: 100% vesting

The Weir Group PLCAnnual Report and Financial Statements 2017109

Consideration of conditions elsewhere in the Group
As per our terms of reference, the Committee monitors the level of remuneration of employees below the Group Executive and
is regularly updated on pay and conditions across the Group. When determining remuneration for the Executive Directors, the
average salary increases and performance ranges applicable to all employees are taken into account as well as economic trends.
The wider employee group was not consulted when setting the remuneration policy.

Consideration of employee engagement
Meaningful engagement with customers and employees play a crucial role in both innovation and the continuous improvement
of the Weir business.

The Board recognises the importance of culture and effective employee relations to the creation of good work and good
workplaces. The role of the Board therefore is to ensure that mechanisms are in place, and monitored, for effective employee
engagement and that there is governance of the process for management standards and training to continue to assure
ourselves of the leadership skills required to do engagement well. Given the multi-national nature of our business, the
management team also recognise that their approaches to insight-gathering and dialogue need to reflect country practices
so that engagement can be led well locally and be mindful of circumstances and culture.

As a Board, we recognise the importance of a Group-wide framework for employee dialogue which is why the focus in 2018/19
(as reflected earlier in the Directors’ Remuneration Report in the section on Strategic Objectives) will be to ensure that we
broaden our Group-wide practices for gathering workforce views and engaging in meaningful dialogue and for measuring
and further strengthening employee engagement. Monitoring of progress will take place at the Board.

Consideration of shareholder engagement
Shareholders and their representative bodies have played a very active role in the development of the remuneration policies
outlined in this Report. An extensive consultation process has been undertaken in both the second half of 2017 and the beginning
of 2018. This began with meetings with our major shareholders to shape the proposals and then consultation was extended more
broadly to other large shareholders.

As demonstrated in the Q&A earlier in the Directors’ Remuneration Report, shareholders asked a broad range of questions
including how the underpin would work and how the Committee will avoid ‘paying for failure’. We were also asked about how
the Committee could be sure that the arrangements would aid motivation and retention. This engagement provided valuable
insight into issues of concern for shareholders and enabled the Committee to make adjustments to win support for our new reward
construct. The Committee Chair has also made it clear that she remains committed to open and transparent reporting against these
new remuneration arrangements and is available for continuous dialogue.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information110

Directors’ Remuneration Report continued

Annual Report on Remuneration
This section of the Report sets out how the previous Remuneration Policy was applied for the financial year ending 31 December 2017.
The overview of how the Committee is proposing to implement the new Remuneration Policy for 2018 is shown in the table on pages
102 to 107.

Single total figure of remuneration for Executive Directors (audited)

Base salary
£

Pension
£

Benefits
£

Annual bonus
£

LTIP
£

Total
£

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016

Jon
Stanton¹

John
Heasley²

650,000 503,750

78,000

60,450

26,890

21,830

686,037

255,838

400,000

99,999

48,000

5,333

17,830

4,329

351,814

52,157

–

– 1,440,927 841,868

–

817,644 161,818

Notes
1. The base salary and pension figures for Jon Stanton in 2016 reflect the increase in salary when he was appointed as CEO on 1 October 2016.
2. The figures for John Heasley in 2016 are in respect of the period from his appointment to the Board on 3 October 2016.

Notes to the total figure of remuneration for Executive Directors (audited)
Base salary – corresponds to the amount received during the year ended 31 December 2017.

Pension – corresponds to the cash allowance provided to the Executive Directors during the year ended 31 December 2017.
This equates to 12% of salary.

Benefits – corresponds to the value of benefits received in respect of the year ended 31 December 2017, as follows:

Car allowance

Group healthcare

Life assurance

Total

Jon

Stanton
2017
£

John
Heasley
2017
£

17,000

13,970

1,615

8,275

1,615

2,245

26,890

17,830

Annual bonus – corresponds to the amount earned in respect of the year ended 31 December 2017. 30% of the value shown
will be delivered in Weir shares which will be released after three years. Details of how the bonus outcome was calculated are
set out below

LTIP – corresponds to the level of award resulting from targets achieved over the relevant performance period ending in
respect of the financial year shown. Further details are set out below.

Annual bonus plan (audited)
Details of remuneration to be awarded to the Executive Directors as part of the 2017 annual bonus plan are set out below.
The annual bonus plan is currently based on the achievement of financial measures and personal objectives. This plan provides
a maximum bonus opportunity for Jon Stanton of 150% of salary and a maximum of 125% of salary for John Heasley. 30%
of any bonus earned must be deferred into shares for three years.

The annual bonus measures and weightings will be focused and simplified in 2018 and will be PBTA (50%), working capital
as percentage of sales (20%) and strategic measures (30%) as set out on page 98. There will be no change to maximum
opportunities or the deferral structure.

The Weir Group PLCAnnual Report and Financial Statements 2017111

Bonus outcomes (audited)
The following table illustrates the performance achieved against the targets. As a result of this performance, Jon Stanton
was awarded 106% of salary (70% of maximum) and John Heasley was awarded 88% of salary (70% of maximum).
As a comparison, the payout range for the executive team ranged from 54% to 92% of maximum.

Payout % of maximum

Group profit before tax and amortisation

Cash flow

Order input

Personal

Weighting

Entry

20%

Target

Maximum Achievement

Payout

60%

100%

£194.9m

£230.9m

£263.7m

£260.8m

£314.6m

£353.5m

£386.4m

£219.9m

£2,138m

£2,370m

£2,583m

£2,449m

40%

20%

100%

39%

15%

16%

70%

Notes
The performance targets and achievements are set using January 2017 average exchange rates and are 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, targets are increased by the expected performance from the acquired business. For disposals, the target is reduced
by the expected performance from the business which was disposed.

Financial measures
Our performance against our financial measures was as follows:

Profit – profit before tax increased significantly principally reflecting a return to growth by the Oil & Gas division. Profitability
in Minerals was impacted by investment in growth initiatives, project phasing and plant reconfigurations. Flow Control was
impacted by one-off charges in the first half.

Cash flow from operations was reduced as a result of increased investment in working capital to support strong growth,
particularly in the Minerals and Oil & Gas divisions. Flow Control’s cash flow performance reflected its reduced profitability.

Order input – the Group delivered strong order growth in both its Oil & Gas and Minerals divisions as demand for its solutions
increased. Flow Control orders were impacted by tough conditions in both power and downstream oil and gas markets.

Personal objectives
The personal objectives were chosen as they supported and reinforced our business strategy. The Committee assessed performance
using metrics where appropriate, but it also took into account the Executive Director’s overall performance in his job.

Jon Stanton

Objective

Performance achieved

Continuous improvement
in the safety and welfare
of our people

Total Incident Rate 0.53 compared with 0.67 in 2016. 20 LTIs compared with 30 in 2016 with a significant
reduction in severity.
Implementation of global safety system ‘Shield’

Execution and rollout
of strategy refresh

Successful internal and external roll out of ‘We are Weir’ with strong ownership and visibility at business level.
Phase 2 launched in January 2018 with focus on the strategic objectives and cultural change.

Employee engagement
and talent development

Development of a new people strategy which will drive improved organisational effectiveness in line with the
strategic objectives.
Progress in engagement agenda, specifically D&I strategy and values refresh.

Deliver operational
improvement agenda

Refresh and rollout of refreshed VCE with introduction of three-year targets.
Good progress made in resolving historical operational issues.
Minerals global capacity and capability assessment underway.

Drive technology agenda
including digital

Recruitment of Chief Technology Officer and new technology team.
Successful completion of Synertrex pilots leading into the initial ten commercial sites for delivery in 2018.

Based on the performance achieved, the Committee determined that a payment of 16% out of a maximum of 20% was appropriate.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
112

Directors’ Remuneration Report continued

John Heasley

Objective

Performance achieved

CFO transition

Establishing himself as a well-regarded and knowledgeable leader among the investor and analyst community.

Corporate finance
leadership

Demonstrated a good balance between core finance/control aspects of the role and commercial/
strategic contribution.

Full alignment of tax and treasury strategy across the Group including the impacts of US tax reform.

Broadening of internal audit scope and utilisation of analytical tools to scope internal audit plans.

Completed a buy-in of the Executive pension plan such that all scheme obligations are now fully insured.

IS strategy
and leadership

Development of clear Group-wide IS strategy to provide a Group infrastructure to support future digital
strategies and enhance user experience.

People development

Senior divisional and corporate finance appointments transitioned seamlessly. Improved oversight and
development of high potential employees across finance functions.

Leadership of Value
Chain Excellence,
including procurement

Revised VCE model developed and rolled out enabling businesses to deliver value-add improvements.

Group procurement team aligned with divisions and supporting the achievement of Group wide annual
purchasing savings.

Based on the performance achieved, the Committee determined that a payment of 16% out of a maximum of 20%
was appropriate.

Long-term incentives vesting in 2018 – actual performance (audited)
The 2015 performance share awards were due to vest on 12 March 2018. None of the performance conditions were met
in respect of the vesting criteria of relative TSR, EPS growth and improvement in average ROCE. Consequently, none of
the awards vested and they lapsed with immediate effect.

Scheme interests awarded during 2017 (audited)
The following table sets out awards granted to the Executive Directors in the year ending 31 December 2017. The closing market
price of the Company’s ordinary shares at 29 December 2017 was £21.23, and the range during the year was £21.63 to £16.96.

Share award

Award basis

Grant date

Face value of
award at
maximum
vesting¹

No of shares
granted

End of
performance
period²

Jon Stanton

Performance (conditional)

250% salary

29 Mar 17

£1,624,999

87,038

31 Dec 2019

Bonus (deferred)

30% bonus

27 Mar 17

John Heasley

Performance (conditional)

200% salary

29 Mar 17

Bonus (deferred)

30% bonus

27 Mar 17

£40,362

£799,991

£22,319

2,190

–

42,849

31 Dec 2019

1,211

–

Notes
1. The face value of the Performance Award is based on the average of the closing share price for the three days prior to the date of grant, being £18.67. The value of the Bonus Share

Award is calculated as the share price on the date of grant, being £18.43.

2. There is no performance period associated with Bonus Share Awards. The awards vest three years after grant.

Performance conditions for performance shares granted in 2017

Vesting criteria

33% based on relative TSR growth against comparator group

33% based on EPS growth p.a. The base EPS for the award is 61.2p per share

33% based on 2019 ROCE. The base ROCE for the award is 7.6%

Performance conditions over performance period

100% vesting if ranked in upper quintile or above
25% vesting if ranked at median (threshold)
0% vesting if ranked below median

100% vesting if EPS growth is 15%
25% vesting if EPS growth is 5% (threshold)
0% vesting if EPS growth is less than 5%

100% if 2019 ROCE is 12.6%
25% vesting if 2019 ROCE is 8.6% (threshold)
0% vesting if 2019 ROCE is less than 8.6%

Notes
Straight line vesting will occur between threshold and maximum.
The TSR comparator group: Atlas Copco Ab, Boart Longyear, Caterpillar, Dover Corporation, Fenner Plc, FLSmidth & Co A/S, FlowServe Corporation, Forum Energy Technologies Inc,
Hunting, IMI Plc, ITT Corporation, John Wood Group Plc, Komatsu, Metso Corporation, National Oilwell Varco, Outotec Oyj, Petrofac, Rotork Plc, Sandvik AB, Smiths Group, SPX FLOW,
Sulzer, TechnipFMC

The Weir Group PLCAnnual Report and Financial Statements 2017113

Single total figure of remuneration for Chairman and Non-Executive Directors (audited)

Charles Berry

Clare Chapman

Alan Ferguson

Melanie Gee

Mary Jo Jacobi

Barbara Jeremiah

Sir Jim McDonald

Richard Menell

John Mogford

Basic fee (£)

SID/Committee Chair (£)

Taxable benefits (£)

Total Fees (£)

2017

2016

296,000

290,000

2017

–

24,792

–

6,458

2016

–

59,125

58,000

15,375

15,000

2017

1,416

–

44,250

58,000

11,500

15,000

949

59,125

58,000

24,792

–

59,125

58,000

15,375

15,000

59,125

58,000

12,375

12,000

59,125

58,000

–

610

577

2016

2017

2016

1,258

297,416

291,258

–

31,250

–

615

74,500

73,615

1,545

1,591

56,699

74,545

59,125

59,591

–

24,792

–

763

74,500

73,763

4,207

1,403

72,110

74,207

59,702

59,403

Notes
Clare Chapman and Barbara Jeremiah joined the Board on 1 August 2017.
Melanie Gee stepped down from the Board on 30 September 2017. There were no other payments made above a de minimis threshold of £750.
Taxable benefits include travel to attend Board meetings in the UK (excluding international travel from America or South Africa).

Payments to past Directors (audited)
As disclosed in last year’s report, Keith Cochrane was eligible under the terms of his service contract to be considered for the
Company element of bonus in respect of the financial year ending 31 December 2017, pro-rated for the period to 28 July 2017.
This equates to a bonus value of £356,756 (subject to mitigation which may result in a lower amount being paid). 30% will be
subject to deferral into shares and held for period of three years.
No other payments have been made to past directors.

Statement of Directors’ shareholdings and share interests (audited)
The shareholdings of all Directors, including the shareholdings of their connected persons as at 31 December 2017, are set
out below. There have been no changes in the Directors’ interests from 31 December 2017 to the date of this report.

As at 31 December 2017

Scheme interests

Jon Stanton

John Heasley

Charles Berry

Clare Chapman

Alan Ferguson

Mary Jo Jacobi2

Barbara Jeremiah

Sir Jim McDonald

Richard Menell

John Mogford

Shares owned
outright

With performance
conditions

42,684

7,834

2,116

–

2,730

2,000

250

–

1,024

12,615

214,444

116,479

–

Without
performance
conditions

6,691

23,088

–

Vested and
exercised in 2017

Current

shareholding
(% of salary)1

Shareholding
Requirement
(% of salary)

–

139%

42%

200%

150%

–

Notes
1. Current shareholding percentage is calculated using share price of £21.23 as at 29 December 2017.
2. Mary Jo Jacobi’s interest in 2,000 shares shown above is through her holding of 4,000 American Depository Receipts (ADRs). One ADR being equivalent to 0.5 ordinary shares.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information114

Directors’ Remuneration Report continued

Historical performance and remuneration
The graph shows Weir’s TSR performance against the
performance of the FTSE350 over the nine-year period
to 31 December 2017 as well as the total and vested
received remuneration for the CEO over the same period.

The table below shows the CEO’s total remuneration
over the same period, as well as outcomes under the
annual bonus plans and long term incentive plans.

£’000
5,000

4,000

3,000

2,000

1,000

800

600

400

200

2008

2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Jon Stanton
2017
20161
Keith Cochrane
20162
2015
2014
2013
2012
2011
2010
20093
Mark Selway
20094

Long-term incentive

Short-term incentive

Fixed elements

The Weir Group

FTSE 350

Total single
figure
£000

Short-term
incentive
(% of
maximum)

Long-term
incentive
(% of
maximum)

1,441
281

1,012
1,065
1,456
1,787
3,363
4,728
2,913
218

70%
38%

40%
20%
61%
10%
54%
100%
100%
83.7%

0%
0%

0%
0%
0%
43%
100%
100%
100%
100%

2,237

83.7%

100%

Notes
1. Total single figure relates to the period Jon Stanton was CEO from 1 October 2016
2. Total single figure relates to the period Keith Cochrane was on the Board to 30 September 2016.
3. Total single figure relates to the period Keith Cochrane was CEO from November 2009.
4. Total single figure relates to the period Mark Selway was CEO until his resignation in November 2009.

External appointments
It is the Board’s policy to allow the Executive Directors to accept directorships of other companies. Any such directorships must
be formally approved by the Chairman.

During the year, John Heasley was a Non-Executive Director of Royal Scottish National Orchestra Society Ltd. He received no fees.

Percentage change in CEO remuneration
The table below shows the percentage change in elements
of remuneration for the CEO and UK employees between
2016 and 2017. The UK employee population has been
chosen as it reflects a broad sample of employees which
includes Head Office and other individuals located in the
same country as the CEO.

Relative importance on spend of pay
The chart below shows the change in total staff pay
between 2017 and 2016, and dividends paid out in
respect of 2017 and 2016.

Salary and fees

Taxable benefits

Bonus

CEO
% change

UK
employees
% change

-10.3%

8.7%

19.3%

49.4%

21.4%

21.3%

Overall spend on
pay for employees

Profit distributed
by way of dividend

2017
£m

2016
£m

Percentage
Change

632.4

558.7

13.2%

96.7

94.5

2.3%

Details of the dividends declared and paid are contained in note 10 to the Financial Statements on page 149. Details of the
overall spend on pay for employees can be found in note 4 to the Financial Statements on page 143.

The Weir Group PLCAnnual Report and Financial Statements 2017115

The Remuneration Committee
The Remuneration Committee in 2017
There were six Committee meetings during 2017 and all Committee members attended the meetings they were eligible
to attend. Calls were also held with members of the Committee in relation to shareholder consultation on the proposed
Remuneration Policy.

Role

Chairman and members

Internal advisors

Name

Title

Clare Chapman (From August 2017)
Melanie Gee (To August 2017)
Alan Ferguson
Mary Jo Jacobi
Barbara Jeremiah (from August 2017)
Richard Menell

Charles Berry
Jon Stanton
Pauline Lafferty (until July 2017)
Rosemary McGinness (from July 2017)
Christopher Morgan
Geraldine Pamphlett

Independent Non-Executive Directors

Chairman of the Board
Chief Executive Officer
Chief People Officer
Chief People Officer
Company Secretary
Group Head of Reward and Recognition

Committee’s External Advisor

Deloitte

Adviser to Committee

Internal advisors provided important information to the Committee and attended meetings. None of the individuals were
involved in any decisions relating to their own remuneration.

Deloitte LLP provided services to the Committee for the year ended 31 December 2017. Fees paid to Deloitte LLP for work
that materially assisted the Committee were £233,100. Deloitte LLP also provided other services to the Weir Group in the
year including tax, global employee services, risk advisory and financial advisory services. Deloitte is a signatory to the
Remuneration Consultants’ Group Voluntary Code of Conduct and the Committee is satisfied that Deloitte’s advice was
objective and independent.

Main activities
Over the course of the period since the last Annual Report, the Committee’s work has been focused on

• Working with the executive team to develop the new remuneration policy and framework
• Consulting with investors on the proposals for the Share Reward Plan and changes to the annual bonus
• Assessing performance of the Executive Directors

Committee performance
The Committee’s Terms of Reference are reviewed on an annual basis and were last updated in September 2017. A copy
can be found on our website www.corporategovernance.weir

The Committee was evaluated as part of the 2017 Board Effectiveness Review, and it was concluded that consideration
should be taken as to how the wider connectivity between the Committee and the Board could be improved.

Shareholder voting
The table below sets out the voting by shareholders on the resolution to approve the Directors’ Remuneration Report and the
Directors’ Remuneration Policy at the AGM held in April 2017.

Remuneration Report

Remuneration Policy

For

Against

Total Votes Cast

Withheld

158,523,983
(99.52%)

150,752,869
(95.65%)

767,999
(0.48%)

8,525,321
(5.35%)

159,291,982

44,620

159,278,190

58,978

Annual General Meeting
This report and our proposed remuneration policy will be submitted to shareholders for approval at the Annual General Meeting to
be held on 26 April 2018.

Clare Chapman
Chair of the Remuneration Committee
28 February 2018

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
116

Corporate Governance Report
Directors’ Report

The Directors present their report for
the year ending 31 December 2017.

looking in nature. Please refer to the
cautionary statement on page 216.

The Directors’ Report includes the
Corporate Governance reports from
page 68 to 94, together with the
sections of the Annual Report
incorporated by reference.

The Company has chosen to disclose
the following information in the Strategic
Report on pages 2 to 67:

• 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 policy and

involvement (Our People, pages
14 to 15).

• Information on greenhouse gas
emissions (Environment, pages
66 to 67).

• Principal risks and uncertainties

(pages 50 to 55).

The Strategic Report and the Directors’
Report constitute the management
report as required under the Disclosure
and Transparency Rule 4.1.5R.

Information to be disclosed under
the Listing Rule 9.8.4 is set out in
the table below.

Subject matter

Allotment of shares for cash
(LR 9.8.4(7))

Waiver of dividends
(LR 9.8.4(12))

Page
reference

170

117

Paragraphs (1), (2), (4), (5), (6), (8), (9),
(10), (11), (13) and (14) of Listing Rule
9.8.4 are not applicable.

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 advisers, 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

Company number
The Weir Group PLC is registered in
Scotland under company number
SC002934.

2018 Annual General Meeting
The Annual General Meeting will be held
on Thursday 26 April 2018. 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 which can be downloaded from
the Company’s website. The Company
conducts the vote at the AGM by 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 year
ended 31 December 2017. Payment of
this dividend is subject to shareholder
approval at the 2018 AGM.

Substantial shareholders
The Company has been notified in
accordance with the Financial Conduct
Authority’s Disclosure Rules and
Transparency Rules (DTR 5) that the
following held, or were beneficially
interested in, 3% or more of the voting
rights of the Company’s issued share
capital as at 31 December 2017:

Shareholder

Number of
voting rights

Percentage of
voting rights
%

BlackRock, Inc.

29,338,449

13.08%

Harbor
International
Fund

Universities
Superannuation
Scheme Limited

8,747,875

4.01%

7,056,781

3.15%

Between 31 December 2017 and
27 February 2018, the Company was
notified of the following changes to
the table above.

Shareholder

Date

BlackRock, Inc.

6 February 2018

FMR LLC

2 February 2018

BlackRock, Inc.

30 January 2018

BlackRock, Inc.

22 January 2018

Employment policy and involvement
The average number of employees in
the Group during the year is given in
note 4 to the Group financial statements
on page 143.

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. Further details
of the Group’s employment policies
and involvement are detailed in the
Our People section of the Sustainability
Review on pages 57 to 61.

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 177 to 183.

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 170. 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.

Number of
Voting Rights

Percentage of
Voting Rights
%

29,130,500

12.99%

11,630,611

29,540,996

29,687,082

5.18%

13.17%

13.24%

The Weir Group PLCAnnual Report and Financial Statements 2017117

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.

Pension scheme indemnities
The Group operates two closed 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,
a subsidiary of The Weir Group PLC,
and The Weir Group Senior Executives
Pension Trust Limited. Qualifying pension
scheme indemnity provisions, as defined
in section 235 of the Companies Act
2006, were in force for the financial year
ended 31 December 2017 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.

During the year a total of 6,249,373
ordinary shares with an aggregate
nominal value of £781,171.63 were
issued and allotted.

The Weir Group has two Employee
Benefit Trusts (EBT): one with the
trustees SG Kleinwort Hambros Trust
Company (CI) Ltd (the ‘Kleinwort EBT’)
and one with the trustees Estera Trust
(Jersey) Limited (the ‘Estera EBT’).

During the year, the trustees of the
Kleinwort EBT transferred 1,787 ordinary
shares to satisfy a one-off conditional
award. During the year, the trustees of
the Estera EBT transferred 246,184
ordinary shares to employees to satisfy
the vesting of LTIP awards.

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 170. The 42,875 shares held in
the Estera EBT for the LTIP bonus share
awards are the shares in respect of which
dividends have not been waived. The
Kleinwort EBT holds, through its nominee
account K.B. (CI) Nominees Limited,
0.002% of the issued share capital of the
Company, as at 31 December 2017. The
Estera EBT holds through its nominee
account CGWL Nominees Ltd, 0.03%
of the issued share capital of the
Company as at 31 December 2017.

Of this, 0.02% is held in trust for the
benefit of certain senior executives of
the Group, and 0.01% is held in trust on
behalf of the Company for satisfaction of
any future vesting of the awards granted
under the LTIP. 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 2017 Annual General Meeting,
shareholders renewed the Company’s
authority to make market purchases
of up to £21.7m ordinary shares
(representing approximately 10% of
the issued share capital excluding
treasury shares). No shares were
purchased under this authority

during the year ended 31 December 2017
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 poll and the result of the poll will be
released to the London Stock Exchange
and posted on the Company’s website
as soon as practicable 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.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information118

Corporate Governance Report
Directors’ Report continued

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 US$800m
multi-currency revolving credit facility
(the “Facility”) with a syndicate of
12 banks due to mature in September
2021. Under the terms of the Facility,
if there is a change of control of the
Company, the Company has 30 days
from the date of the change of control
to agree terms for continuing the
Facility. If at the end of the 30 days
no agreement is reached between
the Company and the banks, 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
18 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.

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.

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.

Going concern
The Directors have a reasonable
expectation that the Group has adequate
resources to continue to operate for a
period of at least 12 months from the date
of approval of the financial statements.
For this reason, they continue to adopt
the going concern basis 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
177 to 183. Each of these items has
been considered in relation to the
Group’s banking facilities described
in note 20 on pages 160 and 161.

The Directors’ Report has been approved
by the Board of Directors in accordance
with the Companies Act 2006.

On behalf of the Board of Directors

Christopher Morgan
Company Secretary and
General Counsel
28 February 2018

The Weir Group PLCAnnual Report and Financial Statements 2017119

Corporate Governance Report
Statement of Directors’ responsibilities

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
28 February 2018

Jon Stanton
Chief Executive Officer
28 February 2018

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 Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information120

Financial Statements
Independent auditors’ report to the
members of The Weir Group PLC

Report on the audit of the financial
statements
Opinion
In our opinion:

• The Weir Group PLC’s Group financial

statements and Parent company
financial statements (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 31 December 2017 and of the
Group’s profit and cash flows for
the year then ended;

• the Group financial statements
have been properly prepared in
accordance with IFRS as adopted
by the European Union;

• the Parent company financial

statements have been properly
prepared in accordance with United
Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards, comprising
FRS 101 “Reduced Disclosure
Framework”, and applicable law); 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.

We have audited the financial statements,
included within the Annual Report and
Financial Statements (the “Annual
Report”), which comprise: the
consolidated and Parent company
balance sheets as at 31 December 2017;
the consolidated income statement and
statement of comprehensive income,
the consolidated cash flow statement,
the consolidated and Parent company
statements of changes in equity for
the year then ended; and the notes
to the financial statements, which
include a description of the significant
accounting policies.

Our opinion is consistent with our
reporting to the Audit Committee.

Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK)
are further described in the Auditors’
responsibilities for the audit of the
financial statements section of our
report. We believe that the audit
evidence we have obtained is sufficient
and appropriate to provide a basis for
our opinion.

Independence
We remained independent of the
Group in accordance with the ethical
requirements that are relevant to our
audit of the financial statements in the
UK, which includes the FRC’s Ethical
Standard, as applicable to listed public
interest entities, and we have fulfilled
our other ethical responsibilities in
accordance with these requirements.

To the best of our knowledge and
belief, we declare that non-audit
services prohibited by the FRC’s
Ethical Standard were not provided
to the Group or the Parent company.

Other than those disclosed in note 4
to the financial statements, we have
provided no non-audit services to the
Group or the Parent company in the year
from 1 January 2017 to 31 December 2017.

Our audit approach
Context
The Group is organised into three
operating divisions: Minerals, Oil & Gas
and Flow Control, with each having
businesses in a number of locations
around the world. Many of the businesses
are of similar size, so we scoped our audit
to ensure we had appropriate coverage of
the Group covering all three divisions. We
included components which accounted
for the largest share of the Group’s results
or where we considered there to be areas
of significant risk. We also considered
the markets in which the Group operates
when we performed our assessment of
scope and areas of significant risk.

Materiality

Audit
scope

Key audit
matters

Overview
• Overall Group materiality: £12.4m

(2016: £8.5m), based on 5% of profit
before exceptional items, intangibles
amortisation and tax.

• Overall Parent company materiality:
£1.5m (2016: £1.5m), based on an
allocation of Group materiality.
• We conducted audit work in

20 components in 11 countries,
including six components in the UK.
We conducted full scope audits on
10 of these components and the
audit of specified balances and
classes of transactions for the
remaining components.

• The Group audit engagement team
visited the United States, China and
Italy, covering four components.
In addition, members of the Group
engagement team performed the
audit of the six components based
in the UK.

• The 20 components where we

performed audit work accounted for
approximately 84% of Group revenue
and 73% of profit before exceptional
items, intangibles amortisation and tax.

• Accounting for asbestos-related

claims (Group).

• Carrying value of goodwill and

intangibles (Group).

• Accounting for exceptional items

(Group).

• Valuation of uncertain tax provisions

(Group).

The scope of our audit
As part of designing our audit, we
determined materiality and assessed
the risks of material misstatement in
the financial statements. In particular,
we looked at where the Directors made
subjective judgements, for example
in respect of significant accounting
estimates that involved making
assumptions and considering future
events that are inherently uncertain.

We gained an understanding of the legal
and regulatory framework applicable
to the Group and the industries in which
it operates, and considered the risk of
acts by the Group which were contrary
to applicable laws and regulations, including
fraud. We designed audit procedures
at Group and significant component
level to respond to the risk, recognising
that the risk of not detecting a material
misstatement due to fraud is higher than
the risk of not detecting one resulting
from error, as fraud may involve deliberate
concealment by, for example, forgery
or intentional misrepresentations, or
through collusion. We focused on laws
and regulations that could give rise to a
material misstatement in the Group and
Parent company financial statements,
including, but not limited to, the Companies
Act 2006, the Listing Rules, Pensions

The Weir Group PLCAnnual Report and Financial Statements 2017
121

legislation, UK tax legislation and
equivalent local laws and regulations
applicable to significant component
teams. Our tests included, but were
not limited to, review of the financial
statement disclosures to underlying
supporting documentation, enquiries
of management, review of significant
component auditors’ work and review
of internal audit reports in so far as
they related to the financial statements.
There are inherent limitations in the
audit procedures described above and
the further removed non-compliance
with laws and regulations is from the
events and transactions reflected in
the financial statements, the less likely
we would become aware of it.

We did not identify any key audit matters
relating to irregularities, including fraud.
As in all of our audits, we also addressed
the risk of fraud in revenue recognition,
and the risk of management override
of internal controls, including testing
journals and evaluating whether there
was evidence of bias by the Directors
that represented a risk of material
misstatement due to fraud.

Key audit matters
Key audit matters are those matters that,
in the auditors’ professional judgement,
were of most significance in the audit of
the financial statements of the current
year and include the most significant
assessed risks of material misstatement

(whether or not due to fraud) identified by
the auditors, including those which had
the greatest effect on: the overall audit
strategy; the allocation of resources in
the audit; and directing the efforts of the
engagement team. These matters, and
any comments we make on the results of
our procedures thereon, were addressed
in the context of our audit of the financial
statements as a whole, and in forming our
opinion thereon, and we do not provide a
separate opinion on these matters. This
is not a complete list of all risks identified
by our audit. All key audit matters are
relevant to the Group only. None of them
apply to the parent Company.

Key audit matter

How our audit addressed the key audit matter

Accounting for asbestos-related claims
Refer to page 88 (Audit Committee Report),
page 131 Accounting Policies and page 162 (note 22).

We have performed procedures on both the UK and US asbestos
liabilities. The US provision is the more significant and uncertain and
therefore involved more judgement.

Provision has been made for future asbestos-
related claims as at 31 December 2017 of £58.0m
(2016: £52.7m). This consists of a provision of
£53.3m (2016: £47.5m) for the Group’s liabilities
arising from asbestos-related damages claims
in the US and £4.7m in the UK (2016: £5.2m).

The valuation of the liability involves significant
estimation. In arriving at the estimate of the
liability, management is required to make
assumptions including the number and value
of claims and the time period over which the
liability can be reliably measured.

As a result there is a high degree of uncertainty
in this estimate.

The Group has insurance cover in place to offset
the US provision (£53.3m included in other
receivables between non-current and current
assets – note 17, page 158). This was also
considered in our work.

During the year, management obtained an updated actuarial estimate of
the asbestos liability from an independent expert. We involved our PwC
actuarial specialists to assess the reasonableness of the methodology
used by management’s expert.

Management used the updated actuarial data to calculate the provision
required at 31 December 2017. We evaluated management’s underlying
assumptions used in their calculation. This included testing of:

• the mathematical accuracy of the underlying calculations in

management’s model;

• the input data to management’s model, such as the average cost
per claim and the number of settled claims to source data which
we verified directly with the Group’s external lawyers; and

• the reasonableness of forecast settlement numbers and amounts

to data provided by the Group’s external actuarial experts.

We evaluated the appropriateness of management’s assessment of the
timescale over which a liability can be reliably measured, which remains
at ten years.

We also examined the insurance cover held by the Group and modelled
the likelihood of the cover in place being sufficient to cover the period
and amount of the estimated liabilities.

Finally, we tested the disclosures in the financial statements and checked
for compliance with IAS 37 ‘Provisions, Contingent Liabilities and
Contingent Liabilities’ and IAS 1 ‘Presentation of Financial Statements’.

We considered the assumptions used by management to be appropriate
in arriving at a reliable estimate of the provision. We also assessed the
recognition of an offsetting insurance asset in the financial statements
and considered it to be appropriate.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information122

Financial Statements
Independent auditors’ report to the
members of The Weir Group PLC continued

Key audit matter

How our audit addressed the key audit matter

Carrying value of goodwill and intangibles
Refer to page 88 (Audit Committee Report),
page 131 Accounting Policies and page 155 (note 14).

We performed detailed testing over management’s Value in Use model
which included:

The Group has £869.5m (2016: £876.0m) of
goodwill on the balance sheet. We focused
on this area because the assessment of the
value in use of each Cash Generating Unit
(‘CGU’) involves judgement.

The key assumptions in management’s impairment
model are the forecast results of the business,
long-term growth rates and discount rates applied
to future cash flow forecasts.

The ongoing uncertainty in the Oil & Gas market
and the loss recorded by the Flow Control division
could suggest a higher risk of impairment in the
carrying value of goodwill.

• assessing the integrity and mathematical accuracy of the model;
• utilising PwC valuations specialists to assess the key assumptions

of growth rate and discount rate.

We also assessed the composition of CGUs, ensuring that these
accurately reflect the structure and operations of the business and
that the CGUs met the requirements of IAS 36 ‘Impairment of Assets’.

We assessed the headroom in each CGU, performing sensitivity
analyses for each, focusing in particular on the Flow Control CGU
where the headroom is lowest. We tested the disclosures in the
Financial Statements and checked compliance with IAS 36 and IAS 1.

From the procedures performed, we did not identify any material
misstatements.

Accounting for exceptional items
Refer to page 88 (Audit Committee Report),
page 131 Accounting Policies and page 144 (note 5).

We obtained a listing of the exceptional costs and income incurred
by both component and category and tested a sample to supporting
documentation.

The Group incurred £13.3m (2016: £73.5m)
of exceptional charges in the year.

The accurate presentation of costs and income
as exceptional items was considered an area of
focus for all reporting units. This was to check
the consistency and accuracy of the Group’s
underlying earnings as reported to shareholders.

The Group commenced a significant restructuring
plan during 2015 and this continued in 2016 and
2017. Further, there were other non-recurring,
material items which were significant in nature
and therefore required a higher level of focus.

Valuation of uncertain tax provisions
Refer to page 88 (Audit Committee Report),
page 131 Accounting Policies and page 164 (note 23).

The Group operates in multiple tax jurisdictions
and has a number of ongoing discussions
and investigations with tax authorities where
uncertain tax provisions and treatments may
be challenged. There is judgement in assessing
the level of provisions required to cover the risk
of successful challenge over certain of the
Group’s tax provisions.

We checked the nature of the costs and income to assess whether they
were treated appropriately and consistently as exceptional items within
the income statement. We checked the disclosures in the annual report
relating to exceptional items.

We considered whether there were other significant costs or income
which should have been included in exceptional items using our
knowledge of the business.

We assessed the appropriateness of the classification of items as
exceptional for compliance with both the Group’s accounting policy
and IAS 1.

We also verified that provisions made in the prior year were
appropriately utilised during the year.

Finally, we checked the disclosure in note 5 for consistency with
our understanding and for compliance with IAS 1.

From the audit work performed, we did not identify any material
misstatements.

We read the Group’s documentation of uncertain tax provisions and
tested the more significant provisions for appropriateness by:

• confirming the basis of provision;
• understanding the movements on the provision during the year; and
• reading correspondence with relevant tax authorities in the assessment

of management’s calculation.

This is an area which requires significant management judgement and
has a range of possible outcomes. However, the evidence we obtained,
including our testing of assumptions, was materially consistent with the
overall level of provisioning in respect of tax.

In addition, we assessed the adequacy and appropriateness of the
disclosure of tax provisions for compliance with IAS 12 ‘Income Taxes’.

The Weir Group PLCAnnual Report and Financial Statements 2017123

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the geographic structure of the Group, the accounting processes and controls,
the industries in which the Group operates and the areas of audit risk.

The Group is organised into three operating divisions: Minerals, Oil & Gas and Flow Control with additional centralised Head
Office functions. The Group financial statements are a consolidation of a large number of components which make up the
Group’s operating businesses within these divisions and centralised functions. In establishing the overall approach to the Group
audit, we determined the type of work that needed to be performed at the components either by us, as the Group engagement
team, or component auditors from other PwC network firms operating under our instruction.

The Group’s components vary significantly in size and we identified ten components that, in our view, required an audit of their
complete financial information due to their relative size or risk characteristics. Of these full scope component audits, six were UK
based and were performed by members of the Group engagement team. These covered trading components, central functions
and head office managed balances including treasury, uncertain tax provisions, post-retirement benefits, goodwill and intangibles.
The remaining four full scope component audits were performed by other PwC network firms. Other PwC network firms also
performed specific scope audits over a further ten components which covered all line items on the income statement and
specified line items on the balance sheet.

The scope of work at each component was determined by its contribution to the Group’s overall financial performance or
balance sheet and its risk profile. Where component audits were performed by teams from other PwC network firms,
members of the Group engagement team were involved in their work throughout the audit. We maintained regular
communication and conducted formal interim and year-end conference calls with all full and specific scope component
teams. The year end discussions also included divisional management.

Of the 20 components in scope, we deemed three to be financially significant to the Group. We visited all three locations
in the prior year and have commenced a rotational cycle of visits. The Group engagement leader visited the significant
component in the United States twice during the year. Senior members of the Group engagement team also visited
components in China and Italy.

Together these full and specific scope component audits gave appropriate coverage of all material balances at a Group level.
On a consolidated basis, these provided coverage of 84% of revenue and 73% of profit before exceptional items, intangibles
amortisation and tax.

Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect
of misstatements, both individually and in aggregate on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall
materiality

How we
determined it

Rationale for
benchmark
applied

Group financial statements

£12.4m (2016: £8.5m).

5% of profit before exceptional items, intangibles
amortisation and tax.

It is clear from the Annual Report that this profit
measure is used by shareholders in evaluating
the underlying business performance. We applied
a lower materiality to the audit of exceptional items
and intangibles amortisation.

Parent Company financial statements

£1.5m (2016: £1.5m).

An allocation of Group materiality.

For each component in our audit scope, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between £0.4m and £9.0m. We applied a specific lower materiality to the audit
of exceptional items and amortisation of intangibles. Certain components were audited to a local statutory audit materiality that
was also less than our overall Group materiality.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.6m
(Group audit) (2016: £0.4m) and £0.6m (Parent company audit) (2016: £0.4m) as well as misstatements below those amounts
that, in our view, warranted reporting for qualitative reasons.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information124

Financial Statements
Independent auditors’ report to the
members of The Weir Group PLC continued

Going concern
In accordance with ISAs (UK) we report as follows:

Reporting obligation

Outcome

We are required to report if we have anything material to add or
draw attention to in respect of the Directors’ statement in the financial
statements about whether the Directors considered it appropriate to
adopt the going concern basis of accounting in preparing the financial
statements and the Directors’ identification of any material uncertainties
to the Group’s and the Parent company’s ability to continue as a going
concern over a period of at least twelve months from the date of
approval of the financial statements.

We are required to report if the Directors’ statement relating
to Going Concern in accordance with Listing Rule 9.8.6R(3) is
materially inconsistent with our knowledge obtained in the audit.

We have nothing material to add or to draw
attention to. However, because not all future
events or conditions can be predicted, this
statement is not a guarantee as to the Group’s
and Parent company’s ability to continue as a
going concern.

We have nothing to report.

Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated
in this report, any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based
on these responsibilities.

With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.

Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006,
(CA06), ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and
matters as described below (required by ISAs (UK) unless otherwise stated).

Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and
Directors’ Report for the year ended 31 December 2017 is consistent with the financial statements and has been prepared
in accordance with applicable legal requirements. (CA06)

In light of the knowledge and understanding of the Group and Parent company and their environment obtained in the course
of the audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)

The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the
solvency or liquidity of the Group
We have nothing material to add or draw attention to regarding:

• The Directors’ confirmation on page 50 of the Annual Report that they have carried out a robust assessment of the principal
risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity.

• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The Directors’ explanation on page 50 of the Annual Report as to how they have assessed the prospects of the Group,

over what period they have done so and why they consider that period to be appropriate, and their statement as to whether
they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications
or assumptions.

We have nothing to report having performed a review of the Directors’ statement that they have carried out a robust
assessment of the principal risks facing the Group and statement in relation to the longer-term viability of the Group. Our
review was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors’
process supporting their statements; checking that the statements are in alignment with the relevant provisions of the UK
Corporate Governance Code (the ‘Code’); and considering whether the statements are consistent with the knowledge and
understanding of the Group and Parent company and their environment obtained in the course of the audit. (Listing Rules)

The Weir Group PLCAnnual Report and Financial Statements 2017125

Other Code provisions
We have nothing to report in respect of our responsibility to report when:

• The statement given by the Directors, on page 119, that they consider the Annual Report taken as a whole to be fair, balanced
and understandable, and provides the information necessary for the members to assess the Group’s and Parent company’s
position and performance, business model and strategy is materially inconsistent with our knowledge of the Group and Parent
company obtained in the course of performing our audit.

• The section of the Annual Report on pages 88 to 94 describing the work of the Audit Committee does not appropriately

address matters communicated by us to the Audit Committee.

• The Directors’ statement relating to the Parent company’s compliance with the Code does not properly disclose a departure

from a relevant provision of the Code specified, under the Listing Rules, for review by the auditors.

Directors’ remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006. (CA06)

Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 119, the Directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true
and fair view. The Directors are also responsible for such internal control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent company’s ability
to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or the Parent company or to cease operations, or have no
realistic alternative but to do so.

Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.

Use of this report
This report, including the opinions, has been prepared for and only for the Parent company’s members as a body in accordance
with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.

Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or
• 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

• certain disclosures of Directors’ remuneration specified by law are not made; or
• the Parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in

agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 28 April 2016 to audit the
financial statements for the period ended 31 December 2016 and subsequent financial periods. The period of total uninterrupted
engagement is two years, covering the period ended 31 December 2016 and year to 31 December 2017.

Lindsay Gardiner (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Glasgow
28 February 2018

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information126

Consolidated Income Statement
for the year ended 31 December 2017

Year ended 31 December 2017

Period ended 31 December 2016

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

Continuing operations

Revenue

2,355.9

–

2,355.9

1,844.9

–

1,844.9

Continuing operations

Operating profit before share
of results of joint ventures

Share of results of
joint ventures

Operating profit

Finance costs

Finance income

Profit before tax from
continuing operations

Tax (expense) credit

Profit for the year from
continuing operations

Profit (loss) for the year from
discontinued operations

Profit for the year

Attributable to:

Equity holders of the
Company

Non-controlling interests

Earnings per share

Basic – total operations

Diluted – total operations

Diluted – continuing
operations

280.9

(68.7)

212.2

206.8

(123.7)

10.9

291.8

(43.3)

1.6

250.1

(59.7)

190.4

–

190.4

190.6

(0.2)

190.4

–

(123.7)

(3.8)

–

(127.5)

38.8

(88.7)

(6.1)

(94.8)

–

(94.8)

–

(68.7)

(0.8)

–

(69.5)

40.6

10.9

223.1

(44.1)

1.6

180.6

(19.1)

7.2

214.0

(48.1)

4.4

170.3

(38.4)

(28.9)

161.5

131.9

–

(28.9)

–

(28.9)

1.1

133.0

133.1

(0.1)

133.0

61.2p

–

161.5

161.7

(0.2)

161.5

73.5p

73.1p

86.1p

73.1p

60.8p

83.1

7.2

90.3

(51.9)

4.4

42.8

0.4

43.2

(5.0)

38.2

38.3

(0.1)

38.2

17.8p

20.1p

17.7p

20.0p

Basic – continuing operations

86.7p

The Weir Group PLCAnnual Report and Financial Statements 2017

Consolidated Statement of Comprehensive Income
for the year ended 31 December 2017

Profit for the year

Other comprehensive income (expense)

Gains (losses) taken to equity on cash flow hedges

Exchange (losses) gains on translation of foreign operations

Reclassification of foreign currency translation reserve on discontinued operations

Exchange gains (losses) on net investment hedges

Reclassification adjustments on cash flow hedges

Tax relating to other comprehensive income (expense) to be reclassified in subsequent years

Items that are or may be reclassified to profit or loss in subsequent years

Remeasurements on defined benefit plans

Remeasurements on other benefit plans

Tax relating to other comprehensive income (expense) that will not be reclassified in
subsequent years

Items that will not be reclassified to profit or loss in subsequent years

Net other comprehensive (expense) income

Total net comprehensive income for the year

Attributable to:

Equity holders of the Company

Non-controlling interests

Total net comprehensive income (expense) for the year attributable to equity holders of the
Company

Continuing operations

Discontinued operations

127

Year ended
31 December
2017
£m

Period ended
31 December
2016
£m

Notes

161.5

38.2

0.4

(147.7)

–

54.0

(0.3)

0.8

(92.8)

(5.4)

(0.8)

1.5

(4.7)

(0.7)

377.4

0.8

(142.0)

1.9

0.2

237.6

(53.0)

–

8.6

(44.4)

(97.5)

193.2

64.0

231.4

64.2

(0.2)

64.0

64.2

–

64.2

228.9

2.5

231.4

233.0

(4.1)

228.9

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
128

Consolidated Balance Sheet
at 31 December 2017

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
Merger reserve
Treasury shares
Capital redemption reserve
Foreign currency translation reserve
Hedge accounting reserve
Retained earnings
Shareholders’ equity
Non-controlling interests
TOTAL EQUITY

31 December
2017
£m

31 December
2016
£m

Notes

11
12
15
23
17
24
30

16
17
18
30

20
21
18
30

20
21
30
22
23
24

392.3
1,549.9
19.2
45.3
43.0
–
0.3
2,050.0

586.8
613.3
23.6
16.7
18.5
284.6
1,543.5
3,593.5

388.4
613.2
2.6
25.8
31.1
52.6
1,113.7

739.4
0.5
0.7
72.0
58.4
137.7
1,008.7
2,122.4
1,471.1

28.1
197.9
9.4
(5.9)
0.5
98.1
0.3
1,141.4
1,469.8
1.3
1,471.1

402.0
1,628.8
40.5
42.1
39.2
9.8
–
2,162.4

551.6
481.8
23.8
24.0
21.5
258.6
1,361.3
3,523.7

144.0
548.1
4.2
30.2
43.8
83.2
853.5

949.1
14.9
14.9
60.2
100.5
147.0
1,286.6
2,140.1
1,383.6

27.3
86.2
9.4
(5.9)
0.5
191.8
(0.6)
1,066.4
1,375.1
8.5
1,383.6

The financial statements were approved by the Board of Directors and authorised for issue on 28 February 2018.
The financial statements also comprise the notes on pages 131 to 185.

Jon Stanton
Director

John Heasley
Director

The Weir Group PLCAnnual Report and Financial Statements 2017

Consolidated Cash Flow Statement
for the year ended 31 December 2017

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

Cash flows from investing activities

Acquisitions of subsidiaries, net of cash acquired

Investment in joint ventures

Purchases of property, plant & equipment

Purchases of intangible assets

Other proceeds from sale of property, plant & equipment and intangible assets

Disposals of discontinued operations, net of cash disposed

Disposals of joint ventures

Exceptional items included in asset disposal programme

Interest received

Dividends received from joint ventures

Net cash (used in) generated from investing activities

Cash flows from financing activities

Purchase of non-controlling interest

Proceeds from borrowings

Repayments of borrowings

Settlement of derivative financial instruments

Interest paid

Dividends paid to equity holders of the Company

Issue of shares

Purchase of shares for LTIP & other awards

Net cash generated from (used in) financing activities

Net increase in cash & cash equivalents

Cash & cash equivalents at the beginning of the year

Foreign currency translation differences

Cash & cash equivalents at the end of the year

129

Year ended
31 December
2017
£m

Period ended
31 December
2016
£m

Notes

220.5

(3.0)

(28.6)

(60.5)

128.4

(90.1)

(1.4)

(67.8)

(17.6)

4.6

3.5

31.8

–

1.5

8.0

(127.5)

292.6

(2.8)

(58.1)

(15.7)

216.0

(10.6)

–

(50.5)

(15.4)

3.5

31.4

–

35.7

6.5

7.3

7.9

(37.2)

964.4

(3.4)

1,328.1

(854.7)

(1,420.5)

6.6

(42.3)

(74.2)

90.0

–

52.6

53.5

257.0

(26.0)

284.5

(3.7)

(46.3)

(45.8)

–

(0.1)

(191.7)

32.2

179.3

45.5

257.0

The cash flows from discontinued operations included above are disclosed separately in note 8.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
130

Consolidated Statement of Changes in Equity
for the year ended 31 December 2017

Share
capital
£m
26.8
–

Share
premium
£m
38.0
–

Merger
reserve
£m
9.4
–

Treasury
shares
£m
(5.8)
–

Capital
redemption
reserve
£m
0.5
–

Foreign
currency
translation
reserve
£m
(41.8)
–

Hedge
accounting
Retained
reserve
earnings
£m
£m
(2.0) 1,166.5
38.3

–

Attributable
to equity
holders
of the
Company
£m
1,191.6
38.3

Non-
controlling
Total
interests
equity
£m
£m
6.2 1,197.8
38.2
(0.1)

–

–
0.5

–
–
–
27.3

–
48.2

–
–
–
86.2

–

–
0.8

–
111.7

–

–
–

–

–
–

–

–
–

–
–
–
9.4

–
–
(0.1)
(5.9)

–
–
–
0.5

–

–
–

–

–
–

–

–
–

–
–
28.1

–
–
197.9

–
–
9.4

–
–
(5.9)

–
–
0.5

–

(0.7)

–

(0.7)

374.8

2.6

377.4

–

1.9

–

0.2

8.6

1.4

–
–

(6.1)

(3.8)
–

(53.0)

0.8

(142.0)

1.9

8.8

–

0.8

(142.0)

(53.0)

1.9

8.8

228.9

2.5

231.4

(3.8)
48.7

(0.2)
–

(4.0)
48.7

–
–
–

4.3
(94.5)
–
(0.6) 1,066.4

4.3
(94.5)
(0.1)
1,375.1

–
–
–

4.3
(94.5)
(0.1)
8.5 1,383.6

–

161.7

(0.2)

161.5

0.4

–

(5.4)

(0.8)

0.4

(147.7)

54.0

(5.4)

(0.8)

(0.3)

–

(0.3)

0.8

1.5

2.3

–

0.4

(147.7)

54.0

(5.4)

(0.8)

(0.3)

2.3

374.8

0.8

(142.0)

–

233.6

–
–

–
–
–
191.8

–

(147.7)

54.0

–

(93.7)

0.9

157.0

64.2

(0.2)

64.0

–
–

–
–
98.1

–
–

7.0
–

7.0
112.5

(7.0)
–

–
112.5

–
–
0.3

7.7
(96.7)
1,141.4

7.7
(96.7)
1,469.8

–
–

7.7
(96.7)
1.3 1,471.1

At 1 January 2016
Profit (loss) for the period
Losses taken to equity
on cash flow hedges
Exchange gains
on translation of
foreign operations
Reclassification of
foreign currency
translation reserve on
discontinued operations
Exchange losses on
net investment hedges
Remeasurements on
defined benefit plans
Reclassification
adjustments on
cash flow hedges
Tax relating to other
comprehensive
income (expense)
Total net comprehensive
income (expense) for
the period
Acquisition of non-
controlling interest
Issue of shares
Cost of share-based
payments inclusive
of tax credit
Dividends
Purchase of shares*
At 31 December 2016
Profit (loss) for
the year
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
Remeasurements
on other benefit plans
Reclassification
adjustments on
cash flow hedges
Tax relating to
other comprehensive
income (expense)
Total net
comprehensive
(expense) income
for the year
Acquisition of non-
controlling interest
Issue of shares
Cost of share-based
payments inclusive
of tax credit
Dividends
At 31 December 2017

* These shares were purchased on the open market and are held by the Estera EBT on behalf of the Group.

The Weir Group PLCAnnual Report and Financial Statements 2017131

Notes 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 year ended 31 December 2017 (‘2017’) were approved and authorised for issue in accordance with a resolution of
the Directors on 28 February 2018. The comparative information is presented for the period commencing 2 January 2016
and ended 31 December 2016 (‘2016’).

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 Weir Group PLC is a public limited company incorporated in Scotland and is listed on the London Stock Exchange.
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. The following amendment applies for the
first time in 2017:

Disclosure Initiative – Amendments to IAS 7
The amendment requires disclosure of information that will allow users to understand changes in liabilities arising from financing
activities. This includes changes arising from: cash flows, such as drawdowns and repayments of borrowings; and non-cash
changes, such as acquisitions, disposals and unrealised exchange differences. Additional disclosure has been included in note 26.

There are no other new standards or interpretations, in addition to the above, which are considered to have a material impact on
the annual Consolidated Financial Statements of the Group.

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. For consolidation purposes, subsidiaries and joint ventures
prepare financial information for the same reporting period as the Company using consistent accounting policies.

A subsidiary is an entity controlled, either directly or indirectly, by the Company, where control is achieved when the Group is
exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns
through its power over the investee. The results of a subsidiary acquired during the year 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 year 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.

A full list of the Company’s related undertakings can be found on page 202.

Exceptional items & intangibles amortisation
In order to provide the users of the Consolidated Financial Statements with a more relevant presentation of the Group’s
underlying performance, on a like for like basis, profit for each period has been analysed between:

i) profit before exceptional items & intangibles amortisation; and
ii) the effect of exceptional items & 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. These specific items are presented on the face of the Consolidated Income Statement
to provide greater clarity and a better understanding of the impact of these items on the Group’s financial performance. In doing
so, it also facilitates greater comparison of the Group’s underlying results with prior periods and assessment of trends in financial
performance. This split is consistent with how underlying business performance is measured internally.

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 ongoing impact on the Group’s Income
Statement of prior and current period investment activities.

Further analysis of the items included in the column ‘Exceptional items & intangibles amortisation’ is provided in note 5 to the
financial statements.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information132

Notes to the Group Financial Statements continued

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

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

Areas requiring significant judgement in the current year and on a recurring basis are presented to the Audit Committee,
as summarised on page 90.

The areas where management consider critical judgements and estimates to be required are those in respect of:

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

ii. Provisions
Management judgement is used to determine when a provision is recognised 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.
The calculation of provisions typically involves management estimates of associated cash flows and discount rates. The key
provision which currently requires a greater degree of management estimate is the US asbestos provision, details of which are
included in note 22.

iii. Taxation
The level of current and deferred tax recognised in the financial statements is dependent on subjective judgements as to
the interpretation of complex international tax regulations and, in some cases, the outcome of decisions by tax authorities in
various jurisdictions around the world, together with the ability of the Group to utilise tax attributes within the limits imposed
by the relevant tax legislation.

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

The Group makes provision for open tax issues where it is probable that an exposure will arise including, in a number of
jurisdictions, ongoing tax audits and uncertain tax positions which are by nature complex and can take a number of years to
resolve. In all cases, provisions are based on management’s interpretation of tax law in each country, as supported, where
appropriate, by discussion and analysis undertaken by the Group’s external advisers, and reflect the single best estimate of
the likely outcome for each liability. Provisions for uncertain tax positions are included in current tax liabilities and total £26.6m
at 31 December 2017.

The Group believes it has made adequate provision for such matters although it is possible that amounts ultimately paid will
be different from the amounts provided.

The risk that the application of management judgements and estimates in tax provisioning in the financial statements fails to
present a true and fair view of the tax position is a risk which receives significant focus from management, tax advisers and
auditors. Actions to mitigate this risk include the following:

ii)

The Group has capable people and strong processes and controls in place in order to deliver tax filings and tax payments
in compliance with local tax requirements. This includes the recruitment and continued training and development of tax
and finance staff with recognised professional qualifications.
Local tax systems and controls are monitored by Group management via a compliance scorecard process and any companies
reporting a sub-standard level of performance are required to prepare and execute improvement plans.

iii) Regular training is organised by the Group in our key jurisdictions and encouraged elsewhere to ensure we maintain

appropriate standards of technical competence.

iv) All personnel involved in filing tax returns are encouraged to share knowledge and seek input on best practice across the Group.
v) External tax advisers either prepare or review the annual tax provisions and balances and are involved with the identification

and management of transfer pricing policies and related documentation and filing requirements.

vi) Standard operating procedures are in place to provide assurance at Group level that tax risks are being adequately managed

and issues are escalated to Group level as appropriate.

The Weir Group PLCAnnual Report and Financial Statements 2017133

vii) The Group tax team provides technical support on the progression and completion of tax audits and the resolution of issues

raised under audit is handled in an open and collaborative manner.

Detailed tax disclosures are provided in notes 7 and 23.

Joint ventures
The Group has a number of long-term contractual arrangements which represent joint ventures. 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 Consolidated Balance Sheet at cost plus post-acquisition changes in the Group’s share of
net assets less any impairment in value. The Consolidated 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 year 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 Consolidated 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 year 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 and in other comprehensive income.

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
that date.

In the Consolidated Cash Flow Statement, the cash flows of foreign operations are translated into Sterling at the average
exchange rate for the year.

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 Consolidated 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 a 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.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information134

Notes to the Group Financial Statements continued

2. Accounting policies continued
ii. 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, by reference to individual terms and conditions
within each service contract, and it is probable that the economic benefits associated with the contract will flow to the Group.

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 year when such losses
become probable. Construction contracts are primarily entered into by the Group’s ‘Engineer to order’ businesses.

Property, plant & equipment
Property, plant & equipment is stated at cost less accumulated depreciation and any recognised impairment losses. Freehold
land and assets under construction are not depreciated. Depreciation of property, plant & equipment is provided on a straight-line
basis so as to charge the cost less residual value, to the Consolidated 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
Goodwill arises on the acquisition of businesses 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 recognised in the Consolidated Income Statement in the year in which they are incurred. Goodwill in respect
of an acquired business is recognised as an intangible asset. Goodwill is carried at cost less any recognised impairment losses
and is tested at least annually or where there are indicators of impairment.

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.

Any contingent consideration is recognised at the date of acquisition or disposal. For acquisitions, subsequent changes to the
fair value of the contingent consideration are adjusted against the cost of acquisition where they qualify as measurement period
adjustments. 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. If the change
does not qualify as a measurement period adjustment, it is reflected in the Consolidated Income Statement. For disposals, any
subsequent change in contingent consideration is adjusted against the disposal proceeds and the gain/loss on disposal.

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.

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

Brand names
Customer & distributor relationships
Purchased software
Intellectual property & trademarks
Other

indefinite life*
5 – 25 years
4 – 8 years
6 – 15 years
up to 6 years

* Acquired brands which are considered to have a finite life are amortised accordingly.

The Weir Group PLCAnnual Report and Financial Statements 2017135

Research & development costs
All research expenditure is charged to the Consolidated Income Statement in the year in which it is incurred.

Development expenditure is charged to the Consolidated Income Statement in the year 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, 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 Consolidated Income Statement over
the expected life of the resulting product or technology.

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 and intangible assets with an indefinite life 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 Consolidated 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, commercial paper, 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, 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 & 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.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information136

Notes to the Group Financial Statements continued

2. Accounting policies continued
Interest-bearing loans & borrowings
Obligations for loans and borrowings are recognised when the Group becomes party to the related contracts and are measured
initially at fair value less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into
account any issue costs and any discount or premium on settlement. Borrowings are classified as current liabilities unless the
Group has an unconditional right to settle the liability at least 12 months after the balance sheet date.

Provisions
A provision is recognised in the Consolidated 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 are recognised in the
Consolidated 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 are classified as fair value hedges, cash flow hedges or net
investment hedges, as appropriate.

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 or 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. When the
hedged asset or liability is recognised in the Consolidated Financial Statements, the accumulated gains and losses recognised
in other comprehensive income will be either recycled to the Consolidated 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 is recognised in other comprehensive income, or recognised
in the Consolidated Income Statement in the year.

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 Consolidated 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.

The fair value of the LTIP or other conditional awards 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 conditions of the LTIP which
took effect in 2014 are summarised in the Directors’ Remuneration Policy which can be found on the Company’s website,
www.corporategovernance.weir.

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 retained earnings. No gain or loss is recognised in total comprehensive
income on the purchase, sale, issue or cancellation of equity shares.

The Weir Group PLCAnnual Report and Financial Statements 2017137

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 the net pension liability is recognised in finance costs.

The finance cost recognised in the Consolidated Income Statement in the year 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 the consequent
reduction in the net liability, during the year.

Past service costs resulting from enhanced benefits are recognised immediately in the Consolidated 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 year in which they occur.

The defined benefit liability or asset recognised in the Consolidated 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 asset 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 cost represents the Group’s contributions to the plans and these are charged to the
Consolidated Income Statement in the year in which they fall due, along with any associated administration costs.

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 & 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 over a period 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 Consolidated Income Statement while the capital element is applied to reduce the outstanding liability.

Operating lease rentals and any incentives receivable are recognised in the Consolidated 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 year.

Deferred tax liabilities represent tax payable in future years in respect of taxable temporary differences. Deferred tax assets
represent tax recoverable in future years 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 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.

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:

ii)

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;
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.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information138

Notes to the Group Financial Statements continued

2. Accounting policies continued
Current and deferred tax is recognised in the Consolidated Income Statement except if it relates to an item recognised directly
in equity, in which case it is recognised directly in equity.

New standards & interpretations
The International Accounting Standards Board and International Financial Reporting Interpretations Committee have issued the
following standards, amendments and interpretations, which are considered relevant to the Group, with an effective date after
the year covered by these financial statements.

International Accounting Standards (IAS/IFRS)

IFRS 9: Financial instruments

IFRS 15: Revenue from contracts with customers (including associated amendments*)

Amendments to IFRS 2: Share-based payments

Annual improvements 2014 – 2016

IFRIC 22 Foreign currency transactions and advance consideration

IFRS 16: Leases

IFRIC 23 Uncertainty over income tax treatments

* Not yet endorsed for use in the European Union.

Effective date for periods commencing

1 January 2018

1 January 2018*

1 January 2019*

The above standards and interpretations will be adopted in accordance with their effective dates and have not been adopted in
these financial statements. An impact assessment has been performed for each of the standards, amendments and interpretations
effective from 1 January 2018, with no significant financial impact being identified. Further details are provided below in relation
to the two new standards effective from 2018:

ii)

IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new
rules for hedge accounting and a new impairment model for financial assets. The Group has carried out an impact assessment
which has focused on the areas of classification, measurement and impairment. Internal procedures in these areas have been
updated as appropriate in response to the new standard. Implementing IFRS 9 is not expected to have a significant impact on
the financial statements of the Group.
IFRS 15 is based on the principle that revenue is recognised when control of a good or service transfers to a customer.
The standard permits either a full retrospective or a modified retrospective approach for the adoption. The Group intends
to adopt the full retrospective approach and will restate the 2017 comparative data accordingly in the 2018 Annual Report.
The Group has completed an extensive impact assessment which included submissions from each reporting entity. Based
on the assessment performed, it is expected that the new standard will have a limited impact on the results of the Group,
estimated at less than 1% of Group revenue, with the main change relating to the timing of revenue recognition, either over
time or point in time for certain ‘Engineer to order’ contracts.

Initial planning has commenced for an assessment of the impact of the other standards applicable from 2019.

Non-GAAP measures
The financial statements are 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. In measuring our performance,
the financial measures that we use include those which have been derived from our reported results in order to eliminate factors
which we believe distort period-on-period comparisons. These are considered non-GAAP financial measures. This information,
along with comparable GAAP measurements, is useful to investors in providing a basis for measuring our operational performance.
Our management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating
our performance and value creation. Non-GAAP financial measures should not be considered in isolation from, or as a substitute
for, financial information in compliance with GAAP. Non-GAAP financial measures as reported by the Group may not be
comparable with similarly titled amounts reported by other companies.

Below we set out our definitions of non-GAAP measures and provide reconciliations to relevant GAAP measures.

The Weir Group PLCAnnual Report and Financial Statements 2017139

Free cash flow
Free cash flow (FCF) is defined as cash flow from operating activities adjusted for income taxes, net capital expenditures,
net interest payments, dividends paid, settlement of derivatives, purchase of shares for LTIP and other awards and pension
contributions. FCF reflects an additional way of viewing our liquidity that we believe is useful to investors as it represents cash
flows that could be used for repayment of debt or to fund our strategic initiatives, including acquisitions, if any. The reconciliation
of cash flow from operating activities to FCF is as follows.

Cash generated from operations

Income tax paid

Net capital expenditure from purchase & disposal of property, plant & equipment and intangibles

Net interest paid

Dividends paid to equity holders of the Company

Dividends received from joint ventures

Settlement of derivative financial instruments

Purchase of shares for LTIP & other awards

Additional pension contributions paid

2017
£m

220.5

(60.5)

(80.8)

(40.8)

(74.2)

8.0

6.6

–

(3.0)

(24.2)

EBITDA
EBITDA is operating profit from continuing operations, before exceptional items, intangibles amortisation and depreciation.
EBITDA is used in conjunction with other GAAP and non-GAAP financial measures to assess our operating performance.
A reconciliation of EBITDA to the closest equivalent GAAP measure, operating profit, is provided.

Continuing operations

Operating profit

Adjusted for:

Exceptional items (note 5)

Earnings before interest and tax (EBIT)

Intangibles amortisation (note 5)

Depreciation of property, plant & equipment (note 11)

EBITDA

2017
£m

223.1

13.3

236.4

55.4

58.2

350.0

Net debt
A reconciliation of net debt to cash & short-term deposits, interest-bearing loans and borrowings is provided in note 26.

2016
£m

292.6

(15.7)

(62.4)

(39.8)

(45.8)

7.3

(3.7)

(0.1)

(2.8)

129.6

2016
£m

90.3

73.5

163.8

50.2

55.9

269.9

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information140

Notes to the Group Financial Statements continued

3. Segment information
For management purposes, the Group is organised into three operating divisions: Minerals, Oil & Gas and Flow Control. The three
divisions are organised and managed separately based on the key markets served and each is treated as an operating segment
and a reportable segment under IFRS 8. The operating and reportable segments were determined based on the reports reviewed
by the Chief Executive Officer 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 and related industries. The Flow Control segment designs and manufactures
valves and pumps, and provides specialist support services to the global power generation, industrial and oil and gas sectors.

The Chief Executive Officer 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 Officer
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.

The segment information for the reportable segments for 2017 and 2016 is disclosed below.

Minerals

Oil & Gas

Flow Control

Total continuing operations

2017
£m

2016
£m

Revenue

Sales to external customers

1,286.7

1,112.0

Inter-segment sales

Segment revenue

Eliminations

3.9

6.1

1,290.6

1,118.1

2017
£m

703.8

0.7

704.5

2016
£m

401.4

12.8

414.2

2017
£m

365.4

15.6

381.0

2016
£m

331.5

14.7

346.2

2017
£m

2016
£m

2,355.9

1,844.9

20.2

33.6

2,376.1

1,878.5

(20.2)

(33.6)

2,355.9

1,844.9

Sales to external customers – 2016 at 2017 average exchange rates

Sales to external customers

1,286.7

1,200.5

703.8

421.4

365.4

350.3

2,355.9

1,972.2

Segment result

Segment result before share
of results of joint ventures

Share of results of joint ventures

Segment result

Unallocated expenses

227.3

–

227.3

217.0

–

217.0

80.6

10.9

91.5

(16.2)

7.2

(9.0)

(2.8)

–

(2.8)

30.1

–

30.1

Operating profit before exceptional items & intangibles amortisation

Total exceptional items & intangibles amortisation

Net finance costs before exceptional items

Profit before tax from continuing operations

Segment result – 2016 at 2017 average exchange rates

Segment result before share
of results of joint ventures

227.3

234.2

Share of results of joint ventures

–

Segment result

Unallocated expenses

227.3

234.2

Operating profit before exceptional items & intangibles amortisation

80.6

10.9

91.5

(17.1)

7.6

(9.5)

(2.8)

–

(2.8)

32.2

–

32.2

Revenues do not exceed 10% of Group revenue for any single external customer.

305.1

10.9

316.0

(24.2)

291.8

(69.5)

(41.7)

180.6

305.1

10.9

316.0

(24.2)

291.8

230.9

7.2

238.1

(24.1)

214.0

(127.5)

(43.7)

42.8

249.3

7.6

256.9

(24.4)

232.5

The Weir Group PLCAnnual Report and Financial Statements 2017141

Minerals

Oil & Gas

Flow Control

Total Group

Assets & liabilities

Intangible assets

Property, plant & equipment

Working capital assets

2017
£m

603.0

221.3

623.9

2016
£m

652.4

226.1

523.0

2017
£m

762.3

89.3

379.1

2016
£m

815.2

90.9

290.2

1,448.2

1,401.5

1,230.7

1,196.3

Investments in joint ventures

–

19.2

40.5

2017
£m

137.5

72.1

218.8

428.4

–

2016
£m

137.5

75.4

248.0

460.9

–

2017
£m

2016
£m

1,502.8

1,605.1

382.7

392.4

1,221.8

1,061.2

3,107.3

3,058.7

19.2

40.5

1,448.2

1,401.5

1,249.9

1,236.8

428.4

460.9

3,126.5

3,099.2

Segment assets

Unallocated assets

Total assets

Working capital liabilities

352.3

311.6

182.2

150.6

122.3

169.4

Unallocated liabilities

Total liabilities

Other segment information – total Group

Segment additions to
non-current assets

43.5

33.0

25.0

10.3

6.2

15.6

Unallocated additions to non-current assets

Total additions to non-current assets

Other segment information – total Group

Segment depreciation
& amortisation

Segment impairment of property,
plant & equipment

Segment impairment
of intangible assets

Discontinued operations

Unallocated depreciation & amortisation

Total depreciation, amortisation & impairment

45.0

42.2

51.7

49.1

11.6

12.1

108.3

103.4

0.1

–

2.3

0.4

3.6

–

4.1

–

0.3

–

2.0

–

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).

467.0

424.5

3,593.5

3,523.7

656.8

1,465.6

2,122.4

631.6

1,508.5

2,140.1

74.7

11.0

85.7

58.9

18.9

77.8

4.0

–

5.3

117.6

8.4

0.4

2.7

115.3

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information142

Notes to the Group Financial Statements continued

3. Segment information continued
Geographical information
Geographical information in respect of revenue and non-current assets for 2017 and 2016 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.

Year ended 31 December 2017

Revenue from
continuing operations

UK
£m

US
£m

Canada
£m

Europe
& FSU
£m

Asia
Pacific
£m

Australia
£m

South
America
£m

Middle
East &
Africa
£m

Total
£m

Sales to external customers

Non-current assets

72.5

345.4

712.7

723.0

239.9

49.0

179.7

171.2

316.0

333.5

193.8

155.7

310.7

65.1

330.6

2,355.9

118.5

1,961.4

Period ended 31 December 2016

Revenue from
continuing operations

UK
£m

US
£m

Canada
£m

Europe
& FSU
£m

Asia
Pacific
£m

Australia
£m

South
America
£m

Middle
East &
Africa
£m

Total
£m

Sales to external customers

Non-current assets

74.9

366.5

474.5

847.7

180.8

44.1

153.9

168.1

257.7

290.1

178.3

157.4

261.2

63.8

263.6

133.6

1,844.9

2,071.3

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

Provision of services

Construction contracts

Revenue

2017
£m

2016
£m

666.9

1,280.5

1,947.4

350.4

58.1

523.2

982.8

1,506.0

282.1

56.8

2,355.9

1,844.9

4. Revenues & expenses
The following disclosures are given in relation to continuing operations and exclude exceptional items & intangibles 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

Share of results of joint ventures

Operating profit

Details of exceptional items and intangibles amortisation are provided in note 5.

2017
£m

2016
£m

2,355.9

1,844.9

(1,619.2)

(1,241.7)

736.7

5.2

(260.0)

(201.0)

10.9

291.8

603.2

5.6

(221.1)

(180.9)

7.2

214.0

The Weir Group PLCAnnual Report and Financial Statements 2017143

2017
£m

2016
£m

1,619.2

1,241.7

58.2

55.4

1.2

0.3

13.3

(0.4)

7.5

55.9

50.2

–

0.4

73.5

6.6

(1.0)

Operating profit from continuing operations 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

Acquisition integration costs

Exceptional items (note 5)

Net foreign exchange (gains) losses

Net impairment charge (credit) of trade receivables excluding additional restructuring action amounts (note 17)

Depreciation of property, plant & equipment (note 11) for discontinued operations was £nil (2016: £0.3m).

Amortisation of intangible assets (note 12) for discontinued operations was £nil (2016: £0.1m).

Research & development costs
Research & development costs amount to £40.4m (2016: £27.4m) of which £30.0m (2016: £25.9m) was charged directly to cost
of sales in the income statement and £10.4m (2016: £1.5m) was capitalised (note 12).

Operating leases
Minimum lease payments under operating leases recognised as an expense in the year were £53.1m (2016: £45.3m).

Employee benefits expense

Wages & salaries

Social security costs

Pension costs

Defined benefit plans (note 24)

Defined contribution plans

Share-based payments – equity settled transactions

Details of Directors’ remuneration is disclosed in note 29.

The average monthly number of people employed by the Company and its subsidiaries is as follows:

Minerals

Oil & Gas

Flow Control

Group companies

2017
£m

551.6

52.2

(3.0)

24.6

7.0

632.4

2016
£m

487.0

46.8

0.5

20.3

4.1

558.7

2017
Number

2016
Number

8,213

2,931

2,513

435

7,999

2,393

2,725

14,092

13,206

The following disclosures are given in relation to total operations.

At 31 December 2017, the number of people employed by the Group and including those under temporary contracts was 14,906
(2016: 13,687).

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

144

Notes to the Group Financial Statements continued

4. Revenues & expenses continued

Auditors’ remuneration

The total fees payable by the Group to our auditors for work performed in respect of the audit and other
services provided to the Company and its subsidiary companies during the year are disclosed below

Fees payable to the Company’s auditor for the audit of the Company and Consolidated Financial Statements

Fees payable to the Company’s auditor for other services

The audit of the Company’s subsidiaries

Audit-related assurance services

Other non-audit services

Fees payable in respect of the Group’s pension schemes

Audit (performed by Ernst & Young LLP)

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 – restructuring and rationalisation charges

Exceptional item – China operations

Exceptional item – gain on sale and leaseback of properties

Exceptional item – legal claims

Exceptional item – gain on sale of EPI joint venture

Exceptional item – fair value adjustment to contingent consideration liability

2017
£m

2016
£m

1.7

0.9

0.1

0.2

0.1

2017
£m

(55.4)

–

(12.5)

–

(2.1)

10.4

(9.1)

(68.7)

1.6

0.6

0.1

0.3

0.1

2016
£m

(50.2)

(0.4)

(63.8)

(17.0)

5.1

(1.1)

–

3.7

(123.7)

Recognised in finance costs

Exceptional item – unwind in respect of contingent consideration liability

(0.8)

(3.8)

Restructuring and rationalisation charges represent the committed costs of programmes to right-size operations and discontinue
certain activities. The restructuring and rationalisation exceptional cost of £12.5m comprises £13.4m of restructuring costs for
programmes commenced in 2016 offset by the release of unutilised restructuring provisions. These relate to headcount reduction
and service centre closures and comprise £4.3m net cash restructuring costs, £4.8m inventory write down and a net £3.4m
relating to plant & equipment.

An exceptional gain of £10.4m has been recognised on the sale of the 49% stake in the Energy Products LLC (EPI) joint venture
sold in November 2017.

An exceptional cost of £2.1m relates to the continuation of a prior period legal claim. A fair value adjustment to contingent
consideration liability of £9.6m related to the acquisition of the remaining 40% of Weir International, offset by a £0.5m credit
following the settlement of Delta Industrial Valves deferred consideration and £0.8m unwind of contingent consideration liability
for Weir International.

The Weir Group PLCAnnual Report and Financial Statements 2017

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

Other finance costs – retirement benefits

Unwind of discount in respect of contingent consideration – exceptional item (note 5)

Finance income

Interest receivable on financial assets

7. 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*

145

2016
£m

(41.7)

(0.9)

(2.5)

(3.0)

(48.1)

(3.8)

(51.9)

2016
£m

4.4

2016
£m

(0.1)

(1.4)

(1.5)

(43.4)

0.9

(44.0)

47.1

0.4

(1.0)

(2.1)

44.4

2017
£m

(38.2)

–

(1.4)

(3.7)

(43.3)

(0.8)

(44.1)

2017
£m

1.6

2017
£m

(2.5)

1.1

(1.4)

(57.8)

6.0

(53.2)

14.0

8.8

16.7

(5.4)

34.1

Total income tax (expense) credit in the Consolidated Income Statement

(19.1)

0.4

* Includes £30.3m of deferred tax credit relating to foreign tax (2016: £44.5m credit).

The total income tax (expense) credit is disclosed in the Consolidated Income Statement as follows.

Tax (expense) credit

– continuing operations before exceptional items & intangibles amortisation

– exceptional items

– intangibles amortisation and impairment

Total income tax (expense) credit in the Consolidated Income Statement

The total deferred tax included in the income tax expense is detailed in note 23.

2017
£m

(59.7)

22.9

17.7

(19.1)

2016
£m

(38.4)

21.0

17.8

0.4

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

146

Notes to the Group Financial Statements continued

7. Tax expense continued
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

Deferred tax – effect of change in tax rates

Tax credit on actuarial losses on retirement benefits

Current tax credit on hedge losses

Deferred tax credit on hedge losses

Tax credit in the Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Deferred tax on share-based payments

Tax credit in the Consolidated Statement of Changes in Equity

2017
£m

–

2.3

(0.8)

1.5

–

0.8

2.3

0.7

2016
£m

0.2

10.0

(1.6)

8.6

0.2

–

8.8

0.2

Reconciliation of the total tax charge
The tax debit (2016: credit) in the Consolidated Income Statement for the year is lower (2016: lower) than the weighted average
of standard rates of corporation tax across the Group of 33.1% (2016: 7.6%). The differences are reconciled below.

Profit before tax from continuing operations

Loss before tax from discontinued operations

Accounting profit before tax

At the weighted average of standard rates of corporation tax across the Group of 33.1% (2016: 7.6%)

Adjustments in respect of previous years – current tax

– deferred tax

Joint ventures

Unrecognised deferred tax assets

Overseas tax on unremitted earnings

Transitional impact of US Tax Reform

Permanent differences

Tax effect of funding overseas operations

Effect of changes in tax rates

Exceptional items ineligible for tax

At effective tax rate of 10.6% (2016: (26.9)%)

2017
£m

180.6

(0.1)

180.5

59.8

(7.1)

5.4

(1.0)

6.8

1.7

(22.6)

(4.0)

(22.5)

0.5

2.1

19.1

2016
£m

42.8

(12.7)

30.1

2.3

(2.6)

4.4

(1.6)

1.9

2.2

–

9.5

(22.3)

0.1

(2.0)

(8.1)

The decrease in permanent differences from a £9.5m addition in 2016 to a £4.0m deduction in 2017 arises in part from the release
of tax risk provisions following the resolution of tax authority enquiries in the UK, Canada and the US. Other key movements in
permanent differences include a credit in relation to non-taxable exchange gains/losses across various jurisdictions, a debit in
relation to provisions for tax risk including transfer pricing and credit for Research & Development incentives.

The United States Tax Cuts and Jobs Act was signed on 22 December 2017 and included a broad range of tax reform including a
reduction in the Federal rate of corporate income tax from 35% to 21% (effective 1 January 2018) as well as significant changes
to business deductions and other international tax provisions including changes to the rules governing interest deductibility.

US tax reform gives rise to a transitional one-off non-cash tax credit of £22.6m primarily due to the revaluation of the Group’s
aggregate US deferred tax assets and deferred tax liabilities following the reduction in the US Federal rate from 35% to 21%.

Finance arrangements are in place to fund the acquisition of business operations in overseas territories. This finance is provided
primarily to US operations through intragroup loans which provide a benefit to the Group effective tax rate. In addition, the Group
claims a partial exemption under the UK Controlled Foreign Companies legislation for profits from ‘qualifying loan relationships’.
The Group is monitoring the developments in relation to EU state aid investigations into this exemption, noting that at this stage
the final outcome of any investigation is unclear.

The Weir Group PLCAnnual Report and Financial Statements 2017

147

8. Discontinued operations
During the year ended 31 December 2017 there were no disposals of businesses which met the definition of a discontinued
operation under IFRS 5.

In 2016, the Group disposed of Ynfiniti Engineering Services (31 May 2016), American Hydro Corporation and the trade
and assets of the Montreal business of Weir Canada Inc. (30 June 2016) for a combined consideration of £38.4m of which
£3.6m was to be held in escrow for one year. The escrow balance was settled in 2017, with a £0.1m adjustment to deferred
consideration recorded in discontinued operations as an exceptional item in the year. Also included in 2016 was a maximum
contingent consideration of £1.9m with £0.8m initially recognised on disposal, with the balance being finalised in 2016.

Exceptional items and intangibles amortisation in the prior period related to intangibles amortisation of £0.1m and a charge
of £4.0m for reassessment of liabilities related to previous disposals.

Financial performance and cash flow information for discontinued operations

Year ended 31 December 2017

Period ended 31 December 2016

(Loss) profit before tax from
discontinued operations

Tax credit

Profit (loss) after tax from
discontinued operations

Loss on sale of the subsidiaries
after income tax

Profit (loss) for the year from
discontinued operations

Reclassification of foreign currency
translation reserve

Other comprehensive income
from discontinued operations

Before
exceptional
items &
intangibles
amortisation
£m

Exceptional
items &
intangibles
amortisation
£m

–

(0.1)

0.1

–

Before
exceptional
items &
intangibles
amortisation
£m

Exceptional
items &
intangibles
amortisation
£m

0.3

0.8

1.1

–

1.1

0.8

(4.1)

0.8

(3.3)

(2.8)

(6.1)

–

Total
£m

(0.1)

0.1

–

Total
£m

(3.8)

1.6

(2.2)

(2.8)

(5.0)

0.8

Cash flows from operating activities

Cash flows from investing activities

Net decrease in cash & cash equivalents from discontinued operations

Loss per share
Loss per share from discontinued operations were as follows.

Basic

Diluted

Year ended
31 December
2017
£m

Period ended
31 December
2016
£m

–

2017
pence

–

(4.4)

(0.4)

(4.8)

2016
pence

(2.3)

These loss 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.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information148

Notes to the Group Financial Statements continued

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

The following reflects the earnings 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)

2017

2016

161.7

190.6

219.9

221.3

38.3

43.3

132.0

215.6

216.9

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

Weighted average number of ordinary shares for basic earnings per share

Effect of dilution: LTIP awards

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

2017
Shares
million

219.9

1.4

221.3

2016
Shares
million

215.6

1.3

216.9

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

2017
£m

161.7

28.9

2016
£m

43.3

88.7

Net profit attributable to equity holders from continuing operations before exceptional items & intangibles
amortisation

190.6

132.0

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 a loss of £0.2m (2016: £0.1m) in respect of non-controlling interests.

2017
pence

73.5

86.7

73.1

86.1

2016
pence

17.8

20.1

61.2

17.7

20.0

60.8

There have been no share options (2016: nil) exercised between the reporting date and the date of signing of these financial statements.

Earnings per share from discontinued operations are disclosed in note 8.

The Weir Group PLCAnnual Report and Financial Statements 2017

10. Dividends paid & proposed

Declared & paid during the year

Equity dividends on ordinary shares

Final dividend for 2016: 29.0p (2015: 29.0p)

Interim dividend for 2017: 15.0p (2016: 15.0p)

Proposed for approval by shareholders at the Annual General Meeting

Final dividend for 2017: 29.0p (2016: 29.0p)

149

2016
£m

62.0

32.5

94.5

63.1

2017
£m

63.1

33.6

96.7

65.0

In 2016 and 2017, shareholders on record were provided the opportunity to receive dividends in the form of new fully paid ordinary
shares through The Weir Group PLC Scrip Dividend Scheme. Participation in the scheme resulted in a final dividend for 2016 of
£6.4m share issue and a cash dividend of £56.7m (final dividend for 2015: £29.6m share issue; £32.4m cash). The interim dividend
for 2017 was split £16.1m share issue and £17.5m cash dividend (interim dividend for 2016: £19.1m share issue; £13.4m cash).

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 this Annual Report and Financial Statements and the record date for the final dividend.

Dividends have been maintained in the year with dividend cover of 1.97 times (2016: 1.39 times) as explained in the Financial Review.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information150

Notes to the Group Financial Statements continued

11. Property, plant & equipment

Cost

At 1 January 2016

Additions

Disposals

Disposal of business

Reclassifications from (to) intangible assets (note 12)

Reclassifications

Exchange adjustment

At 31 December 2016

Additions

Acquisitions

Disposals

Group transfers

Reclassifications to intangible assets (note 12)

Reclassifications

Exchange adjustment

At 31 December 2017

Accumulated depreciation & impairment

At 1 January 2016

Depreciation charge for the period

Impairment during the period

Disposals

Disposal of business

Reclassifications from (to) intangible assets (note 12)

Reclassifications

Exchange adjustment

At 31 December 2016

Depreciation charge for the year

Impairment during the year

Disposals

Reclassifications to inventory

Reclassifications

Exchange adjustment

At 31 December 2017

Land &
buildings
£m

Plant &
equipment
£m

Total property,
plant &
equipment
£m

196.3

19.2

(41.5)

(10.5)

1.4

(1.3)

36.0

199.6

9.3

3.5

(4.5)

2.4

–

4.3

(7.1)

207.5

49.8

6.4

2.2

(15.6)

(1.5)

0.1

(1.0)

10.3

50.7

6.8

0.9

(2.2)

–

0.1

(2.8)

53.5

552.7

35.1

(33.1)

(16.7)

(1.6)

1.3

129.9

667.6

58.0

4.4

(24.9)

(2.4)

(1.8)

(4.3)

(39.3)

657.3

310.9

49.8

6.2

(27.0)

(8.5)

(2.2)

1.0

84.3

414.5

51.4

3.1

(22.2)

(0.1)

(27.6)

419.0

749.0

54.3

(74.6)

(27.2)

(0.2)

–

165.9

867.2

67.3

7.9

(29.4)

–

(1.8)

–

(46.4)

864.8

360.7

56.2

8.4

(42.6)

(10.0)

(2.1)

–

94.6

465.2

58.2

4.0

(24.4)

(0.1)

–

(30.4)

472.5

Net book value at 1 January 2016

146.5

241.8

388.3

Net book value at 31 December 2016

148.9

253.1

402.0

Net book value at 31 December 2017

154.0

238.3

392.3

The carrying value of buildings held under finance leases is £0.8m (2016: £0.9m). The carrying value of plant & equipment
held under finance leases is £1.8m (2016: £1.0m). Leased assets are pledged as security for the related finance lease liabilities.
The carrying amount of assets under construction included in plant & equipment is £24.6m (2016: £22.7m).
The impairment charges in the year are primarily related to actions undertaken as a result of the restructuring and rationalisation
actions as outlined in note 5. Depreciation charge from discontinued operations for the year amounted to £nil (2016: £0.3m).
During 2016, the Group disposed of land & buildings under sale and leaseback agreements in North America for £33.2m. The
gain on sale in relation to these disposals amounted to £5.1m. The Group restructuring and rationalisation charge included the
proceeds from a further property in North America which was disposed of outright for a consideration of £2.5m, resulting in
an exceptional gain on sale of £1.3m. These disposals were part of the Group’s 2016 asset disposal programme.

The Weir Group PLCAnnual Report and Financial Statements 2017
12. Intangible assets

Goodwill
£m

Brand names
£m

Customer &
distributor
relationships
£m

Purchased
software
£m

Intellectual
property &
trademarks
£m

Development
costs
£m

Cost

At 1 January 2016

1,131.2

211.5

573.8

Additions

Disposals

–

Disposal of business

(37.7)

(4.4)

(8.3)

Reclassifications from (to)
property, plant & equipment
(note 11)

Exchange adjustment

At 31 December 2016

Additions

Acquisitions

Disposals

Reclassifications from property,
plant & equipment (note 11)

Reclassifications

Exchange adjustment

At 31 December 2017

–

217.3

1,310.8

–

51.6

–

42.6

249.7

–

4.4

–

114.0

679.5

–

5.4

–

(99.7)

1,262.7

(22.4)

231.7

(57.8)

627.1

Accumulated amortisation & impairment

67.1

20.8

(1.8)

(0.7)

2.4

10.1

97.9

7.8

–

(0.9)

1.1

(25.0)

(2.3)

78.6

81.3

0.6

–

(6.9)

(0.9)

15.6

89.7

–

12.4

–

0.1

(2.9)

(6.5)

92.8

386.1

7.0

203.7

31.8

37.3

At 1 January 2016

Amortisation charge
for the period

Impairment during the period

Disposals

–

Disposal of business

(27.8)

Reclassifications from (to)
property, plant & equipment
(note 11)

Exchange adjustment

At 31 December 2016

Amortisation charge
for the year

Disposals

Reclassifications

Exchange adjustment

At 31 December 2017

–

76.5

434.8

–

(41.6)

393.2

–

1.4

8.4

0.5

–

(0.9)

8.0

36.8

–

(6.8)

–

42.9

276.6

38.1

–

(23.8)

290.9

Net book value at 1 January 2016

745.1

204.5

370.1

Net book value at
31 December 2016

Net book value at
31 December 2017

876.0

241.3

402.9

869.5

223.7

336.2

7.0

–

(1.8)

(0.5)

2.2

5.1

43.8

6.8

(0.9)

(5.5)

(1.3)

42.9

35.3

54.1

35.7

4.3

–

(1.8)

–

7.9

47.7

5.1

–

(0.4)

(3.7)

48.7

44.0

42.0

44.1

11.8

1.5

–

(0.2)

–

1.3

14.4

10.4

–

28.1

–

52.9

2.5

1.2

0.4

–

0.4

4.3

3.8

–

5.9

–

14.0

9.3

10.1

38.9

(0.2)

(3.0)

151

Other
£m

Total
£m

25.6

2,102.3

0.6

–

(3.0)

(1.3)

4.9

26.8

0.2

–

0.6

(0.2)

(1.7)

23.5

(1.8)

(61.2)

0.2

405.8

2,468.8

18.4

73.8

(0.9)

1.8

–

(190.4)

25.7

2,371.5

22.1

690.5

1.0

–

(0.1)

4.4

24.4

1.1

–

(1.6)

23.9

3.5

2.4

50.3

0.4

(1.8)

(40.1)

2.1

138.6

840.0

55.4

(0.9)

–

(72.9)

821.6

1,411.8

1,628.8

1.8

1,549.9

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information152

Notes to the Group Financial Statements continued

12. Intangible assets continued
The impairment charge recorded in 2016 of £0.4m relates to the write down of development costs in Minerals. No impairment
was recorded for the current year.

Brand names, with the exception of those acquired during the KOP Surface Products purchase, have been assigned an indefinite
useful life and as such are not amortised. The brand names acquired during 2017 will be amortised fully over the next two years.
The carrying value of brand names with an indefinite life is tested annually for impairment (note 14). There is no impairment
charge in the current or prior year. The carrying value at the year end was £223.7m (2016: £241.3m).

The brand name value includes the brands of Linatex, BDK, Warman, SPM, Gabbioneta, Multiflo, Mathena and Wales, all of
which are considered to be market leaders in their respective markets. The allocation of significant brand names is as follows.

Warman

Linatex

Seaboard

SPM

Trio

Gabbioneta

Mathena

Other

Brand names

2017
£m

61.4

42.1

28.6

40.3

17.6

6.0

8.8

18.9

223.7

2016
£m

67.9

46.6

31.7

38.8

19.5

5.8

9.7

21.3

241.3

The allocation of customer and distributor relationships, and the amortisation period of these assets, is as follows.

SPM

Seaboard

Mathena

Novatech

Trio

Other

Remaining
amortisation period

Customer and
distributor relationships

2017
Years

2016
Years

Up to 13

Up to 14

2017
£m

74.3

89.2

83.3

34.4

16.3

38.7

336.2

2016
£m

88.1

106.9

104.0

43.4

20.9

39.6

402.9

Amortisation from discontinued operations for the year amounted to £nil (2016: £0.1m).

The Weir Group PLCAnnual Report and Financial Statements 2017153

13. Business combinations
On 27 July 2017, the Group completed the acquisition of KOP Surface Products (KOP), a South Asian provider of advanced
pressure control wellhead technologies, systems and services for a consideration of $118.0m less cash acquired of $3.9m.
The acquisition was funded by the issue of shares totalling £90.0m. The provisional fair values, which are subject to finalisation
during the first half of 2018, are disclosed in the table below.

There are certain intangible assets included in the £51.6m 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.

KOP provisional fair values

Property, plant & equipment

Inventories

Intangible assets

– customer relationships

– brand name

– intellectual property

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

The total net cash outflow on current year acquisitions was as follows

– cash paid

– cash & cash equivalents acquired

Total cash outflow (note 26)

2017
£m

7.9

3.4

5.4

4.4

12.4

10.4

3.2

(7.0)

(4.1)

1.4

3.5

40.9

51.6

92.5

(92.5)

3.2

(89.3)

The gross amount and fair value of KOP trade receivables amounts to £10.4m. It is expected that virtually all the contractual
amounts will be collected.

KOP contributed £13.3m to revenue and an operating loss of £4.3m (including exceptional items and intangibles amortisation)
in the period from acquisition to 31 December 2017. If the acquisition had occurred at the start of 2017, the revenue and profit
for the year from acquired operations, after exceptional items and intangibles amortisation, would not have been materially
different from the results disclosed in the Consolidated Income Statement. Acquisition costs totalled £1.5m in the year (note 4).

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

154

Notes to the Group Financial Statements continued

13. Business combinations continued
Contingent consideration

Opening balance

Liability arising on business combinations

Asset arising on business disposal

Fair value changes in profit or loss (note 8 and note 5)

Contingent consideration (received) paid (note 8 and note 26)

Unwind of discount (note 5)

Exchange movements in the year

Closing balance

Asset

Liability

2017
£m

3.9

–

0.4

(0.1)

(3.5)

–

(0.3)

0.4

2016
£m

–

4.6

(0.4)

(0.6)

–

0.3

3.9

2017
£m

(31.0)

–

(9.1)

38.0

(0.8)

(0.5)

(3.4)

2016
£m

(35.9)

(0.6)

–

3.7

10.6

(3.8)

(5.0)

(31.0)

Any contingent consideration is recognised at the date of acquisition or disposal of a subsidiary.

i) Contingent consideration receivable
The disposal of American Hydro Corporation in 2016 included a final escrow payment of £3.6m due for settlement in 2017. This
balance was settled during the year with £3.5m cash received and a £0.1m adjustment recorded in discontinued operations.

An escrow receivable of £0.4m was booked in the year relating to the sale of the joint venture entity, Energy Products LLC (EPI).
The balance is to be received early 2018.

ii) Contingent consideration payable
The deferred consideration payable in relation to the acquisition of Weir International in 2011 has been settled in the year following
an agreement being reached to complete the purchase of the remaining minority interest. In 2017 a fair value adjustment of £9.6m
and an unwind of £0.8m was recorded with payment of the closing deferred consideration in December 2017 to complete the
purchase of the remaining minority interest for payment proceeds of £36.6m.

The remaining deferred consideration of £1.3m for the 2015 acquisition of Delta Valves was settled in the year. Based on final
negotiations, £0.8m was paid in cash with the remainder of the balance written off as a fair value adjustment.

The deferred consideration of £0.6m relating to the 2016 purchase of the remaining shareholding of Shengli Oilfield Weir Highland
Pump Company Ltd (Shengli) was paid during the year.

There is contingent consideration payable of £3.4m remaining in relation to the 2014 Weir Trio acquisition. This relates to working
capital balances and is now expected to be finalised in 2018. A reconciliation of fair value measurement of the contingent
consideration asset and liability is provided above.

The Weir Group PLCAnnual Report and Financial Statements 2017155

14. 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 Group tests goodwill and intangible
assets with indefinite lives annually for impairment, or more frequently if there are indications that they might be impaired.

KOP Surface Products, acquired during 2017 as described in note 13, has been allocated to the Oil & Gas International (formerly
Oil & Gas EMEA) CGU.

The carrying amounts of goodwill and intangible assets with indefinite lives have been allocated as per the table below.

Flow Control

Minerals

Oil & Gas International

Oil & Gas North America

Goodwill
2017
£m

Intangibles
2017
£m

Goodwill
2016
£m

101.5

372.9

57.1

338.0

869.5

12.1

130.0

–

77.7

219.8

98.7

396.0

6.6

374.7

876.0

Intangibles

2016
£m

12.1

143.2

–

86.0

241.3

Description of CGUs
A description of each of the CGUs is provided below along with a summary of the key drivers of revenue growth and EBITA margin.

Flow Control
Flow Control includes the Gabbioneta brand. Flow Control is a supplier of highly engineered pumps, valves and associated
aftermarket services to oil and gas refinery, petro-chemical and power generation industries. The key drivers for revenues are
capital expenditure within oil refinery, petro-chemical industries and power generation. 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 2017.

Minerals
Minerals includes the Weir Warman, Weir Linatex 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 2017.

Oil & Gas International
Oil & Gas International comprises multiple service centre locations within the Middle East and Europe and the recently acquired
wellhead locations across a number of countries in Asia Pacific. The service centre locations supply services including repair,
manufacture and certification of oilfield equipment, to a diverse portfolio of customers. The Asia Pacific location supplies surface
wellheads, surface trees, valves and actuators as well as providing support to customers including installation, maintenance,
rental and refurbishment services. The key drivers for revenues are oil and natural gas prices. Independent forecasts of these
commodity prices have been used to derive revenue growth assumptions. These independent forecasts were prepared during
the final quarter of 2017.

Oil & Gas North America
Oil & Gas North America includes the Weir SPM, Weir Seaboard and Weir Mathena brands. This CGU is a supplier of oil and gas
well service pumps, wellhead solutions, associated flow control equipment and services to the oil and gas production industry.
Demand in Oil & Gas North America is closely related to the number of conventional and unconventional 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 during the final quarter of 2017 to derive revenue growth assumptions.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information156

Notes to the Group Financial Statements continued

14. Impairment testing of goodwill & intangible assets with indefinite lives continued
Impairment testing assumptions
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

Flow Control

Value in use

5 years

13.6%
(2016: 13.5%)

1.2%
(2016: 1.2%)

Revenue growth
EBITA margins

Minerals

Value in use

5 years

14.8%
(2016: 16.3%)

1.2%
(2016: 1.2%)

Revenue growth
EBITA margins

Oil & Gas
International

Oil & Gas North
America

Value in use

5 years

12.0%
(2016: 13.7%)

1.2%
(2016: 1.2%)

Revenue growth
EBITA margins

Value in use

5 years

15.1%
(2016: 15.3%)

1.2%
(2016: 1.2%)

Revenue growth
EBITA margins

External forecast
Historical
experience

1 Discount rate
The pre-tax nominal weighted average cost of capital (WACC) is the basis for the discount rate, with adjustments made, as appropriate, for geographic risk.
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 changes in
the bond yields, equity market risk premium and industry asset beta, which have led to a decrease in the overall discount rate for the majority of countries.

2 Real growth
Real growth beyond the five year forecast period has been held consistent with the prior year at 1.2% (2016: 1.2%), reflecting the increasingly global nature
of these businesses, the long-term growth prospects in their end markets and the fact that they sell a significant proportion of their products to emerging
markets which also have strong long-term growth prospects.

EBITA margins
EBITA margins have been forecast based on historical 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.

Impairment testing and sensitivity analysis
Base case forecasts for all CGUs show significant headroom above carrying value. No sensitivity analysis has been undertaken as
there is no reasonable possible change in key assumptions that would cause the carrying values to exceed recoverable amounts.

The Weir Group PLCAnnual Report and Financial Statements 201715. Investments in joint ventures
The investments in joint ventures are as follows.

At 1 January 2016

Share of results

Share of dividends

Exchange adjustment

At 31 December 2016

Additions

Disposals

Share of results

Share of dividends

Exchange adjustment

At 31 December 2017

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

2017
£m

3.9

18.3

2.9

(4.5)

(1.4)

19.2

65.7

(48.0)

(4.3)

(1.5)

(1.0)

10.9

157

£m

33.4

7.2

(7.3)

7.2

40.5

1.4

(21.8)

10.9

(8.0)

(3.8)

19.2

2016
£m

15.9

33.2

4.7

(11.4)

(1.9)

40.5

47.3

(31.9)

(5.6)

(1.0)

(1.6)

7.2

The addition in the year relates to the Group’s investment in EPIX, a joint venture with MTU, on 24 March 2017. The disposal relates
to Energy Products LLC (EPI) which was divested on 30 November 2017 for proceeds of £31.8m and a deferred consideration
receivable balance of £0.4m (note 13). This resulted in a gain on sale of £10.4m which has been disclosed as an exceptional
item in the year (note 5). The Group’s investments in joint ventures are included in Subsidiary Undertakings on page 202.

16. Inventories

Raw materials

Work in progress

Finished goods

2017
£m

142.1

129.4

315.3

586.8

2016
£m

125.8

137.5

288.3

551.6

In 2017, the cost of inventories recognised as an expense within cost of sales amounted to £1,619.2m (2016: £1,241.7m). In 2017,
the write-down of inventories to net realisable value amounted to £5.7m (2016: £20.1m), which included £4.8m (2016: £7.9m) in
relation to Group restructuring actions, as disclosed in note 5. Write-downs in both years relate to assessments of inventory
obsolescence, excess inventory holding and inventory resale values across all of the Group’s businesses.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information158

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 £43.0m (2016: £39.2m) are
in respect of insurance contracts relating to asbestos-related claims in the US. Further detail is presented in note 22.

Current trade & other receivables are analysed in the following table.

Trade receivables

Allowance for doubtful debts

Other debtors

Sales tax receivable

Accrued income

Prepayments

Contingent consideration receivable

2017
£m

516.5

(23.6)

492.9

45.5

14.7

30.3

29.5

0.4

2016
£m

387.8

(17.7)

370.1

48.3

14.2

24.2

21.1

3.9

613.3

481.8

The average credit period on sales of goods is 76 days (2016: 73 days). Other debtors includes £2.4m (2016: £9.3m) in respect of
amounts due from joint ventures, and £10.3m (2016: £8.3m) in respect of insurance contracts relating to asbestos-related claims
made 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 year

Impairment losses recognised on receivables

Arising on disposal of business

Amounts written off as uncollectable

Amounts recovered during the year

Impairment losses reversed

Exchange adjustment

Balance at the end of the year

Impairment losses recognised in 2016 include £3.1m as part of Group restructuring actions.

2017
£m

322.4

170.5

23.6

516.5

2017
£m

122.0

25.6

22.9

170.5

2017
£m

(17.7)

(8.6)

–

0.5

1.1

0.6

(23.6)

2016
£m

262.7

107.4

17.7

387.8

2016
£m

76.1

9.0

22.3

107.4

2016
£m

(18.3)

(3.1)

0.1

4.1

0.9

1.0

(2.4)

(17.7)

The Weir Group PLCAnnual Report and Financial Statements 2017Ageing of impaired trade receivables

Up to 3 months

Between 3 & 6 months

More than 6 months

18. Construction contracts

Gross amount due from customers for contract work (included in current assets)

Gross amount due to customers for contract work (included in current liabilities)

Contract costs incurred plus recognised profits less recognised losses to date

Less: progress billings

159

2016
£m

0.8

2.2

14.7

17.7

2016
£m

23.8

(4.2)

19.6

76.5

(56.9)

19.6

2017
£m

0.6

0.5

22.5

23.6

2017
£m

23.6

(2.6)

21.0

92.1

(71.1)

21.0

The amount of retentions held by customers for contract work was £nil in both periods. The amount of advances received from
customers for contract work was £2.4m (2016: £1.3m).

19. Cash & short-term deposits

Cash at bank & in hand

Government securities & 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)

2017
£m

155.1

129.5

284.6

(0.1)

284.5

2016
£m

148.2

110.4

258.6

(1.6)

257.0

Cash at bank & in hand earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying
periods of between one day and three months depending on the immediate cash requirements of the Group and earn interest at
the respective short-term deposit rates.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information160

Notes to the Group Financial Statements continued

20. Interest-bearing loans & borrowings

Current

Bank overdrafts

Short-term borrowings

Fixed-rate notes

Bank loans

Commercial paper

Obligations under finance leases (note 27)

Non-current

Bank loans

Fixed-rate notes

Obligations under finance leases (note 27)

Bank loans

Maturity

Interest basis

Revolving credit facility

United States Dollar variable rate loans

2021

US$ LIBOR

Other

Weighted average interest rate

2017
%

1.09

2016
%

1.09

Argentinian Peso fixed-rate loan facilities

2019

FIXED

18.18

United States Dollar pre-shipment
credit in foreign currency

Indian Rupee working capital loan facility

Less: current instalments due on bank loans

United States Dollar pre-shipment
credit in foreign currency

Indian Rupee working capital loan facility

Non-current bank loans

2018

US$ LIBOR

FIXED

3.96

9.20

–

US$ LIBOR

FIXED

Commercial paper

Maturity

Interest basis

Euro variable rate commercial paper

2018

EUR LIBOR

Weighted average interest rate

2017
%

0.06

2016
%

0.17

2017
£m

0.1

–

0.1

94.0

0.6

293.4

0.3

388.4

–

738.7

0.7

739.4

2017
£m

–

0.4

0.2

0.6

(0.4)

(0.2)

–

2017
£m

293.4

2016
£m

1.2

0.4

1.6

–

142.1

0.3

144.0

31.1

917.5

0.5

949.1

2016
£m

31.0

0.1

–

31.1

–

31.1

2016
£m

142.1

Less: current instalments due
on commercial paper

Euro variable rate commercial paper

2018

EUR LIBOR

Non-current commercial paper

(293.4)

(142.1)

–

The Weir Group PLCAnnual Report and Financial Statements 2017The weighted average interest rates include an applicable margin over and above the interest basis.

Fixed rate notes

Private placement

Sterling fixed-rate notes

United States Dollar fixed-rate notes

Less: current instalments
due on fixed-rate notes

Sterling fixed-rate notes

United States Dollar fixed-rate notes

Non-current fixed-rate notes

Maturity

Interest basis

2018

2019

2022

2023

2018

FIXED

Fixed interest rate

2017
%

5.36

5.03

3.69

4.27

4.34

2016
%

5.36

5.03

3.69

4.27

4.34

161

2016
£m

43.0

57.2

171.7

482.1

163.5

917.5

–

917.5

2017
£m

43.0

51.0

155.0

435.9

147.8

832.7

(43.0)

(51.0)

738.7

The disclosures above represent the interest profile and currency profile of financial liabilities before the impact of derivative
financial instruments.

At 31 December 2017, a total of £293.4m equivalent (2016: £142.1m equivalent) was outstanding under the Group’s US$1bn
commercial paper programme.

At 31 December 2017, US$nil (2016: US$40.0m) was drawn under the revolving credit facility. The US$800m multi-currency
revolving credit facility matures in two tranches between September 2020 and September 2021.

Total unamortised issue costs at 31 December 2017 were £1.5m (2016: £2.5m).

21. Trade & other payables

Current

Trade payables

Other creditors

Other taxes & social security costs

Accruals

Contingent consideration payable

Deferred income

Non-current

Other payables

Contingent consideration payable

2017
£m

341.7

9.2

16.0

177.5

3.4

65.4

613.2

0.5

–

0.5

2016
£m

268.2

9.4

16.5

165.0

17.3

71.7

548.1

1.2

13.7

14.9

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information162

Notes to the Group Financial Statements continued

22. Provisions

At 31 December 2016

Additions

Acquisitions

Utilised

Unwind

Unutilised

Transfers

Exchange adjustment

At 31 December 2017

Current 2017

Non-current 2017

At 31 December 2017

Current 2016

Non-current 2016

At 31 December 2016

Warranties &
onerous sales
contracts
£m

Asbestos-
related
£m

Employee-
related
£m

Exceptional
rationalisation
£m

23.5

21.8

1.8

(17.4)

–

(4.3)

5.2

(1.0)

29.6

21.2

8.4

29.6

18.2

5.3

23.5

52.7

15.6

–

(6.4)

0.7

–

(4.6)

58.0

10.7

47.3

58.0

13.6

39.1

52.7

16.7

4.1

2.0

(3.4)

–

(0.3)

–

(0.6)

18.5

5.3

13.2

18.5

6.2

10.5

16.7

47.1

7.3

–

(32.8)

–

(0.9)

(5.2)

(1.9)

13.6

10.7

2.9

13.6

42.5

4.6

47.1

Other
£m

3.4

3.6

0.3

(1.7)

–

(0.3)

–

(0.4)

4.9

4.7

0.2

4.9

2.7

0.7

3.4

Total
£m

143.4

52.4

4.1

(61.7)

0.7

(5.8)

–

(8.5)

124.6

52.6

72.0

124.6

83.2

60.2

143.4

Warranties & 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.

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 cases of this nature with all claims directly managed by the Group’s insurers who also meet
associated defence costs. The insurers and their legal advisers agree and execute the defence strategy between them. There
are currently no related cash flows to or from the Group, and we expect this to continue for the foreseeable future.

There remains inherent uncertainty associated with estimating future costs in respect of asbestos-related diseases. Actuarial
estimates of future indemnity and defence costs associated with asbestos-related diseases are subject to significantly greater
uncertainty than actuarial estimates for other types of exposure. This uncertainty results from factors that are unique to the
asbestos claims litigation and settlement process including but not limited to:

i) The possibility of future state or federal legislation applying to claims for asbestos-related diseases;
ii) The ability of the plaintiff’s bar to develop and sustain new legal theory and/or develop new populations of claimants;
iii) Changes in focus of the plaintiff’s bar;
iv) Changes in the Group’s defence strategy; and
v) Changes in the financial condition of other co-defendants in suits naming the Group and affiliated businesses.

The Weir Group PLCAnnual Report and Financial Statements 2017163

A review of both the Group’s expected liability for US asbestos-related diseases and the adequacy of the Group’s insurance
policies to meet future settlement and defence costs was completed in conjunction with external advisers. The exercise
was originally completed in 2014 and has been repeated in 2017 as part of our planned triennial actuarial update. This review
estimated future claims experience based on an industry standard epidemiological decay model and Weir’s claims settlement
history. Due to the inherent uncertainty resulting from the changing nature of the US litigation environment as outlined above,
and in conjunction with the actuarial review, the Directors consider 10 years (2016: 10 years) of projected claims to provide
a reliable estimate of the future liability. A provision of £53.3m represents the Directors’ best estimate of the future liability,
although these estimates and the period over which they are assessed will continue to be refined as the claims history develops.
Confirmation was also received from external advisers that the insurance asset remains sufficient to match the Directors’ best
estimate of the future liability and therefore a corresponding asset continues to be recognised for insurance proceeds (note 17).

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. Sensitivity analysis has been conducted which involved:

i)
ii)

Increasing/decreasing the number of projected future settled claims and estimated settlement value by 10%; or
Increasing/decreasing the basis of provision by two years.

Application of these sensitivities would not lead to a material change in the provision.

In the UK, there are outstanding asbestos-related claims which are not the subject of insurance cover. The extent of the UK
asbestos exposure involves a series of legacy employers liability claims which all relate to former UK operations and employment
periods in the 1960s and 1970s. In 1989 the Group’s employer’s liability insurer (Chester Street Employers Association Ltd)
was placed into run-off which effectively generated an uninsured liability exposure for all future long tail disease claims with an
exposure period pre-dating 1 January 1972. All claims with a disease exposure post 1 January 1972 are fully compensated via
the Government established Financial Services Compensation Scheme (FSCS). Any settlement to a former employee whose
service period straddles 1972 is calculated on a pro rata basis. The Group provides for these claims 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.

The UK provision was reviewed and adjusted accordingly for claims experience in the year, resulting in a provision of £4.7m
(2016: £5.2m).

Employee-related
Employee-related provisions arise from legal obligations, the majority of which relate to compensation associated with periods
of service.

Exceptional rationalisation
Restructuring and rationalisation charges led to additions of £7.3m (2016: £63.0m) during the year which related to continued
costs from 2016 restructuring projects and additional costs of £2.1m as a result of an extension of a prior period legal claim.

During 2017, a transfer has been made from exceptional rationalisation to the warranties and onerous sales contract provision.
Included in the utilisation of the exceptional rationalisation provision in the year is non-cash utilisation items of £4.2m which led
to a cash outflow of £28.6m.

Other
Other provisions relate to penalties, duties due, legal claims and other exposures across the Group.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information164

Notes to the Group Financial Statements continued

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

2017
£m

24.3

6.2

1.4

109.3

(95.9)

45.3

(16.3)

(15.1)

(108.7)

(14.2)

95.9

(58.4)

2016
£m

26.4

2.9

5.1

131.8

(124.1)

42.1

(20.9)

(23.1)

(190.9)

10.3

124.1

(100.5)

Net deferred income tax liabilities

(13.1)

(58.4)

The movement in deferred income tax assets and liabilities during the year was as follows.

At 1 January 2016

Prior year adjustments

(Charged) credited to the Income Statement (note 7)

Credited to equity (note 7)

Exchange adjustment

At 31 December 2016

Prior year adjustments

Acquisitions

(Charged) credited to the Income Statement (note 7)

Credited to equity (note 7)

Exchange adjustment

At 31 December 2017

Post
employment
benefits
£m

Accelerated
depreciation for
tax purposes
£m

Overseas tax on
unremitted
earnings
£m

Untaxed
reserves &
other temporary
differences
£m

Intangible
assets
£m

17.3

1.7

(2.0)

8.4

1.0

26.4

–

(3.2)

1.5

(0.4)

24.3

(15.0)

(3.0)

3.0

–

(3.0)

(18.0)

2.9

(0.2)

3.9

–

1.3

(20.5)

(159.8)

–

1.6

–

(4.2)

(23.1)

–

7.1

–

0.9

–

5.4

–

(31.4)

(185.8)

–

65.3

–

13.2

(10.1)

(15.1)

(107.3)

82.9

2.1

36.4

0.2

20.5

142.1

(2.9)

3.7

(39.0)

0.8

(9.6)

95.1

Total
£m

(95.1)

0.8

44.4

8.6

(17.1)

(58.4)

–

3.5

34.1

2.3

5.4

(13.1)

Untaxed reserves primarily relate to temporarily disallowed inventory/receivable provisions and accruals/provisions for liabilities
where the tax allowance is deferred until the cash expense occurs. In relation to the untaxed reserves, £34.7m relates to carried
forward interest deductions in the US. The Tax Cuts and Jobs Act enacted in the US on 22 December 2017 maintained the rule
which allows surplus interest expenses to be carried forward indefinitely to be used against future earnings. Forecasts have been
prepared which indicate that this interest will be able to be substantially offset by 2022; therefore, it is considered appropriate to
continue to recognise a deferred tax asset in respect of this amount.

Deferred tax asset balances for unused tax losses of £18.2m (2016: £11.5m) 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 £5.9m (2016: £4.2m) have not
been recognised, but would be available in the event of future capital gains being incurred by the Group.

The Weir Group PLCAnnual Report and Financial Statements 2017165

Temporary differences associated with Group investments
A deferred tax liability of £15.1m (2016: £23.1m) has been recognised in respect of taxes on the unremitted earnings of the
South American and Canadian subsidiaries and the unremitted earnings of the Canadian subsidiary of the US subgroup. As
at 31 December 2017, 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 £1,971.9m (2016: £1,986.6m).

There are no income tax consequences attaching to the payment of dividends by the Company to its shareholders.

UK Corporation tax rate changes
Legislation was enacted on 26 October 2015 such that the main rate of UK corporation tax has been 19% since April 2017 and
will be 17% from April 2020. Consequently, UK deferred tax has been provided at the prevalent rates during the periods in which
the UK temporary differences are expected to unwind. As a result, deferred tax has been provided on UK temporary differences
at 17.8% (2016: 17.8%).

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 also operates a defined contribution plan, the contributions to which are in addition to
those set out below, and are charged directly to the Consolidated Income Statement.

For the defined benefit plans, benefits are related to service and final salary. The Main Plan closed to future accrual of benefits
effective from 30 June 2015.

The weighted average duration of the expected benefit payments from the Main Plan is around 17 years and from the Executive
Plan is around 14 years.

The current funding target for the UK plans is to maintain assets equal to the value of the accrued benefits. The Main Plan holds
two insurance policies which match the liabilities in respect of a significant proportion of deferred and retired pensioners. The
Executive Plan entered into an insurance contract in 2017 which matches the liabilities of the plan in full.

The regulatory framework in the UK requires the pension scheme 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 against these assumptions 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 and the Executive Plan
through the insurance policies held.

North American plans
The Group also sponsors two funded defined benefit pension plans in the US and Canada and certain unfunded post-
employment healthcare benefits for senior employees in the US.

These plans combined make up 3% 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 10 years.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information166

Notes to the Group Financial Statements continued

24. Pensions & other post-employment benefit plans continued
Assumptions
The significant actuarial assumptions used for accounting purposes reflect prevailing market conditions in the UK and
North America 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

2017

2016

2017

2016

2017

2016

2.4

3.2

22.1

24.0

23.5

25.5

3.1

2.1

n/a

2.6

3.3

22.2

24.3

24.0

26.2

3.1

2.1

2.2

n/a

3.4

n/a

20.6

22.6

22.2

24.2

n/a

3.9

n/a

20.8

22.8

22.4

24.9

n/a

3.4

n/a

20.6

22.6

22.2

24.2

n/a

3.9

n/a

20.8

22.8

22.4

24.9

n/a

* Between 6.2% and 8.7% per annum decreasing to 4.5% per annum and remaining static at that level from 2028 onwards.

** 7.2% 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 year’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 2038 (in 20 years’ time).

The Weir Group PLCAnnual Report and Financial Statements 2017

The 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

Plans in surplus

Plans in deficit

167

Total

2017
£m

196.7

56.8

82.1

74.7

414.1

0.8

825.2

(955.6)

(130.4)

(7.3)

(137.7)

–

(137.7)

2016
£m

216.7

51.5

85.6

97.2

379.2

2.0

832.2

(960.9)

(128.7)

(8.5)

(137.2)

9.8

(147.0)

The government bonds held at 31 December 2017 are all index-linked (2016: included 7% fixed interest government bonds).
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 non-insured 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 & loss

Amount recognised in Consolidated Statement of Comprehensive Income

Employer contributions

Currency adjustment

Closing net liabilities

2017
£m

(137.2)

(0.7)

(5.4)

4.2

1.4

2016
£m

(81.8)

(3.5)

(53.0)

3.9

(2.8)

(137.7)

(137.2)

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information168

Notes to the Group Financial Statements continued

24. Pensions & other post-employment benefit plans continued
The amounts recognised in the Consolidated Income Statement and in the Consolidated Statement of Comprehensive Income
for the year are analysed as follows.

Recognised in the Consolidated Income Statement

Past service credit

Administrative expenses

Included in operating profit

Interest on net pension liability (note 6)

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) gains due to

Changes in financial assumptions

Changes in demographic assumptions

Experience on benefit obligations

Actuarial losses recognised in the Consolidated Statement of Comprehensive Income

2017
£m

3.5

(0.5)

3.0

(3.7)

(0.7)

36.3

(21.2)

15.1

2016
£m

–

(0.5)

(3.0)

(3.5)

134.7

(26.5)

108.2

(35.1)

(172.3)

17.3

(2.7)

(5.4)

11.1

–

(53.0)

Current service cost and administration expenses are recognised in operating costs and interest on net pension liability is
recognised in finance costs.

A past service credit of £3.5m arose in 2017 in relation to certain members opting for a different benefit structure in one of the
Group’s US post-retirement medical arrangements.

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 £3.0m in 2017 (2016: £2.8m) in addition to the Group’s
regular contributions.

The most recent actuarial funding valuation of the Main Plan was as at 31 December 2014 when the funding shortfall was
£65.0m. Under the recovery plan agreed with the Trustees, the Group entered into a pension funding partnership structure
under which it will contribute interests in a Scottish Limited Partnership (SLP) for the Main Plan. The Main Plan’s interests in
the SLP will reduce the deficit on a funding basis, although the agreement will not affect the position directly on an IAS 19
accounting basis as the investments held do not qualify as assets for IAS 19 purposes. As a partner in the SLP, the Main Plan
is entitled to receive a share of the profits of the SLP once a year for 15 years, subject to conditions being met. The profits
to be shared with the Plan will be reflected in the Group’s financial statements as a pension contribution.

The Executive Plan actuarial valuation as at 31 December 2013 included a funding shortfall of £10.6m with agreed recovery
contributions of £2.4m per annum to 31 December 2017. The Trustees of the UK Executive Scheme entered into a full buy-in
transaction in the third quarter of 2017, meaning all of the benefit payments due from the Executive Scheme are now covered
by an insurance policy. There remains an outstanding premium payment (estimated to be £1.2m), which is expected to be paid
in 2018 following a data cleanse process to finalise the insurance policy. The IAS 19 Balance Sheet at the 2017 year end reflects
this expected payment due.

The Group has taken legal advice regarding its UK arrangements to confirm the accounting treatment under IFRIC 14 and the
current exposure draft of the revised IFRIC 14 with regard to recognition of a surplus in 2016 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 surplus in
2016 was 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. Having considered the position, taking account of the legal input received and noting
that the Trustees of the UK arrangements do not have discretionary powers to unilaterally wind up the schemes without cause,
the Directors of the Group have concluded that the Group has an unconditional right to a refund of any surplus. Amendments to
the current version of IFRIC 14 are currently being considered.

The total Group contributions for 2018 (including those expected from the SLP in the UK) are expected to be £6.2m.

The Weir Group PLCAnnual Report and Financial Statements 2017

169

Sensitivity analysis
Changes in key assumptions can have a significant effect on the reported retirement benefit obligation and the Consolidated
Income Statement expense for 2018. The effects of changes in those assumptions on the reported retirement benefit obligation
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
2017
£m

Decrease
2017
£m

Increase
2016
£m

Decrease
2016
£m

146.7

105.3

(95.8)

(62.2)

(29.2)

(14.0)

(178.7)

(132.1)

87.3

56.0

29.2

14.0

146.1

109.4

(90.3)

(64.2)

(29.5)

(15.5)

(177.4)

(136.5)

82.8

58.1

29.5

15.5

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

Past service credit

Interest on benefit obligations

Benefits paid

Actuarial gains (losses) due to

Changes in financial assumptions

Changes in demographic assumptions

Experience on benefit obligations

Exchange rate adjustment

Closing defined benefit obligations

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

Actual return on plan assets less interest on plan assets

Exchange rate adjustment

Closing plan assets

2017
£m

2016
£m

(969.4)

(809.2)

3.5

(24.9)

45.8

–

(29.5)

35.7

(35.1)

(172.3)

17.3

(2.7)

2.6

11.1

–

(5.2)

(962.9)

(969.4)

2017
£m

832.2

21.2

4.2

(0.5)

(45.8)

15.1

(1.2)

825.2

2016
£m

727.4

26.5

3.9

(0.5)

(35.7)

108.2

2.4

832.2

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

170

Notes to the Group Financial Statements continued

25. Share capital & reserves

Issued & fully paid share capital

At the beginning of the year

Issued during the year in respect of scrip dividends

Issued during the year in respect of KOP acquisition (note 13)

At the end of the year

Treasury shares

At the beginning of the year

Utilised during the year in respect of LTIP awards

At the end of the year

2017
Number
million

2016
Number
million

218.4

214.7

1.2

5.1

3.7

–

224.7

218.4

0.7

(0.2)

0.5

0.7

–

0.7

The Company has one class of ordinary share with a par value of 12.5p which carries no rights to fixed income.

5,060,237 ordinary shares of 12.5p each were issued on 19 July 2017, raising cash proceeds of £90m which were used to fund
the acquisition of KOP Surface Products.

As at 31 December 2017, 3,803 shares (2016: 5,590) were held by the Kleinwort Employee Benefit Trust (EBT) with a market
value of £0.1m (2016: £0.1m).

As at 31 December 2017, 28,181 shares (2016: 44,917) were held by the Estera Employee Benefit Trust for the performance
and restricted awards made under the LTIP. These shares have a market value of £0.6m (2016: £0.8m).

As at 31 December 2017, 42,875 shares (2016: 28,871) were held by the Estera Employee Benefit Trust for the bonus shares
awarded under the LTIP. These shares have a market value of £0.9m (2016: £0.5m).

Reserves
The period movements on the below reserves are summarised in the Consolidated Statement of Changes in Equity.

Merger reserve
The merger reserve was created by the issue of new equity in relation to the acquisition of Delta Industrial Valves Inc. during 2015.

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 year are included in the following line items in the Consolidated
Income Statement and Consolidated Balance Sheet.

Revenue

Cost of sales

Administrative expenses

2017
£m

(1.8)

2.1

–

0.3

2016
£m

0.1

(1.7)

(0.3)

(1.9)

The Weir Group PLCAnnual Report and Financial Statements 2017171

Notes

2017
£m

2016
£m

5, 8

5, 15

223.1

(0.1)

223.0

23.8

55.4

(10.9)

58.2

0.1

(1.2)

(0.1)

(10.4)

(4.8)

7.0

(0.4)

(0.5)

339.2

(64.2)

(117.8)

63.3

220.5

(3.0)

(28.6)

(60.5)

128.4

90.3

(3.8)

86.5

77.5

50.3

(7.2)

56.2

–

(1.1)

–

(0.6)

4.1

6.6

(11.3)

261.0

7.1

57.5

(33.0)

292.6

(2.8)

(58.1)

(15.7)

216.0

26. Additional cash flow information

Total operations

Net cash generated from operations

Operating profit – continuing operations

Operating loss – discontinued operations

Operating profit – total operations

Exceptional items

Amortisation of intangible assets

Share of results of joint ventures

Depreciation of property, plant & equipment

Impairment of property, plant & equipment

Grants received

Gains on disposal of property, plant & equipment

Gains on disposal of joint ventures

Funding of pension & post-retirement costs

Employee share schemes

Transactional foreign exchange

Decrease in provisions

Cash generated from operations before working capital cash flows

(Increase) decrease in inventories

(Increase) decrease 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

Net cash generated from operating activities

Exceptional items are detailed in note 5.

The 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 cash flows from discontinued operations included above are disclosed separately in note 8.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information172

Notes to the Group Financial Statements continued

26. Additional cash flow information continued
The following tables summarise the cash flows arising on acquisitions and disposals.

Acquisitions of subsidiaries

Current year acquisitions (see below)

Prior year acquisitions contingent consideration paid

Acquisition of subsidiaries – cash paid

Cash & cash equivalents acquired

Acquisition of subsidiaries – current year acquisitions

Total cash outflow on current year acquisitions

Prior period acquisitions contingent consideration paid

Total cash outflow relating to acquisitions

Net cash inflow arising on prior period disposals

Consideration received in cash & cash equivalents

Less: cash & cash equivalents disposed of

Prior period disposals completion adjustment

Total cash inflow relating to prior period disposals

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)

2017
£m

(89.3)

(0.8)

(90.1)

(92.5)

3.2

(89.3)

(0.8)

(90.1)

–

3.5

2017
£m

2016
£m

–

(10.6)

–

(10.6)

35.4

(4.0)

–

31.4

2016
£m

284.6

(388.4)

(739.4)

(843.2)

258.6

(144.0)

(949.1)

(834.5)

Reconciliation of financing cash flows to movement in net debt

Third party loans

Leases

Unamortised issue costs

Amounts included in gross debt

Cash & cash equivalents

Amounts included in net debt

Financing derivatives

Contingent consideration

Other liabilities relating to financing activities

Opening
balance
£m

Cash
movements
£m

(1,093.2)

(110.1)

(0.8)

2.5

(1,091.5)

257.0

(834.5)

(21.4)

(31.0)

(52.4)

0.4

–

(109.7)

53.5

(56.2)

6.6

38.0

44.6

Additions
£m

–

(0.6)

–

(0.6)

–

(0.6)

–

FX
£m

75.1

–

75.1

(26.0)

49.1

–

(0.5)

Non-cash
movements
£m

–

(1.0)

–

(1.0)

5.6

(9.9)

(4.3)

Total
£m

(1,128.2)

(1.0)

1.5

(1,127.7)

284.5

(843.2)

(9.2)

(3.4)

(12.6)

Total financing liabilities*

(1,143.9)

(65.1)

(0.6)

74.6

(5.3)

(1,140.3)

*Total financing liabilities comprise gross debt plus other liabilities relating to financing activities.

The Weir Group PLCAnnual Report and Financial Statements 2017173

27. Commitments & legal claims
Operating lease commitments
The Group has entered into commercial leases for land & buildings, motor vehicles and plant & equipment. Land & 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. Future minimum rentals payable under non-cancellable operating leases are shown in the table below.

Less than 1 year

After 1 year but not more than 5 years

More than 5 years

2017
£m

34.6

94.2

57.8

2016
£m

32.8

82.3

65.5

186.6

180.6

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 1 year

After 1 year but not more than 5 years

After five years

Total minimum lease payments

Less amounts representing finance charges

Present value of minimum lease payments

Minimum
payments
2017
£m

Present value
of payments
2017
£m

Minimum
payments
2016
£m

Present value
of payments
2016
£m

0.3

0.6

0.2

1.1

(0.1)

1.0

0.3

0.5

0.2

1.0

0.4

–

0.8

–

0.8

0.3

0.5

–

0.8

The weighted average outstanding lease term is 5.54 years (2016: 2.42 years). For the year ended 31 December 2017, the weighted
average effective borrowing rate was 5.98% (2016: 7.28%).

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

2017
£m

14.6

2.8

2016
£m

13.3

1.6

The Group’s share of the capital commitments of its joint ventures amounted to £1.5m (2016: £nil).

Legal claims
The Company and certain subsidiaries are, from time to time, parties to legal proceedings and claims which arise in the normal
course of business. Provisions have been made where the Directors have assessed that a cash outflow is likely and they believe
all other claims are remote.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information174

Notes to the Group Financial Statements continued

28. Equity settled share-based payments
Employee share plans
Under the Group’s LTIP 2014 Rules the types of awards which may be granted under this Plan to employees include: Performance
shares, Restricted shares and Bonus shares. Details of each award are outlined in the Remuneration Report on pages 95 to 115.

One-off conditional share awards are also occasionally granted to employees. These transactions fall under the scope of IFRS 2
and are treated in line with awards issued under the Group’s LTIP.

The following tables illustrate the number and weighted average share prices (WASP) of shares awarded.

Performance shares

Outstanding at the beginning of the year

Awarded during the year

Forfeited during the year

Outstanding at the end of the year

Restricted shares

Outstanding at the beginning of the year

Awarded during the year

Exercised during the year

Forfeited during the year

Outstanding at the end of the year

2017
Number
million

1.7

0.3

(0.9)

1.1

2017
Number
million

0.8

0.4

(0.2)

0.8

2017
WASP

£18.06

£18.58

£24.91

£16.34

2017
WASP

£12.91

£18.59

£14.75

£13.84

£14.89

2016
Number
million

1.5

0.6

(0.4)

1.7

2016
Number
million

0.2

0.7

–

(0.1)

0.8

2016
WASP

£22.14

£12.13

£23.74

£18.06

2016
WASP

£19.94

£11.16

–

£14.15

£12.91

An amount of £7.0m has been charged (2016: £4.0m) 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.

The remaining contractual lives of the outstanding LTIP and one-off conditional share awards at the end of the year are as follows.

Year of award

2014

2015

2016

2017

2017
Number
million

2017
Remaining
contractual life

2016
Number
million

2016
Remaining
contractual life

–

0.5

0.8

0.6

–

3 months

15 months

27 months

0.5

0.7

1.3

–

3 months

15 months

27 months

–

The Weir Group PLCAnnual Report and Financial Statements 2017175

The fair value at date of grant of the conditional awards under the LTIP has been independently estimated based on the
type of award:

i) Restricted shares
The grant date fair value of these awards is calculated as the share price at the date of grant less an adjustment for loss
of reinvestment return on the dividend equivalent. There are no performance conditions attached to these awards.

The fair value of occasional one-off conditional awards at grant date is also estimated on this basis.

ii) Performance shares
The grant date fair value of the performance share awards subject to the EPS and ROCE performance targets is calculated in
the same way as the restricted share awards except that a discount of 11% is applied to reflect the holding period which applies
to these awards. The EPS and ROCE performance targets are ‘non market’ vesting conditions for the purpose of IFRS 2 and so
their effect is not allowed for in the grant date fair values.

The valuation of performance share awards subject to the TSR-related performance targets is performed using a Monte Carlo
simulation model. The following table gives the assumptions made during the periods ended 31 December 2017 and 31 December
2016 in the calculation of the fair value of awards subject to the TSR-related performance targets 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 (£)

2017

37.00

3.00

0.30

18.58

8.17

2016

37.00

3.00

0.70

12.13

5.84

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 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.

Bonus shares
Under the Group’s annual bonus plan, Executive Directors and members of the Group Executive typically receive 30% of any
bonus deferred into an award of Weir Group shares which will normally be released after three years. These awards are entitled
to accrue the value of the dividends payable on any deferred bonus awards during the three year holding period.

The LTIP bonus shares are administered by the Estera EBT. The shares are acquired on market at the grant date and are held
in the Estera EBT until such time as they are vested. Forfeited shares are reallocated in subsequent grants. Under the terms
of the Trust Deed, Weir Group is required to provide the Estera EBT with the necessary funding for the acquisition of the shares
at the time of the grant.

The number of shares to be granted is determined based on the applicable annual bonus divided by the price at which the
Company’s shares are traded at the date of the grant. In 2017, 15,242 shares were awarded (2016: 9,338).

The fair value of the rights at grant date was estimated using the market price of the Company’s shares on that date.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information176

Notes to the Group Financial Statements continued

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 year 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

48.7

26.0

–

0.5

0.1

–

0.2

–

0.3

0.4

–

4.3

4.1

2017

2016

2017

2016

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 year end are unsecured and
settlement occurs in cash. There have been no guarantees provided or received for any related party balances. For 2017, the
Group has not raised any provision for doubtful debts relating to amounts owed by related parties (2016: £nil) as the payment
history has been excellent. 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

2017
£m

6.9

0.2

7.3

2017
£m

3.0

0.1

3.1

2016
£m

6.1

–

0.2

6.3

2016
£m

3.3

–

3.3

Key management comprises the Board and the Group Executive. Further details of the Directors’ remuneration are disclosed in
the Directors’ Remuneration Report on pages 95 to 115.

The Weir Group PLCAnnual Report and Financial Statements 2017177

30. Financial instruments
A. Derivative financial instruments
The Group enters into derivative financial instruments in the normal course of business in order to hedge its exposure to foreign
exchange risk. Derivatives are only used for economic hedging purposes and no speculative positions are taken. Derivatives are
recognised as held for trading and at fair value through profit and loss unless they are designated in IAS 39 compliant hedge
relationships.

The table below summarises the types of derivative financial instrument included within each Balance Sheet category.

Included in non-current assets

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

Cross currency swaps designated as net investment hedges

Other forward foreign currency contracts

Net derivative financial liabilities

2017
£m

0.3

7.5

8.9

16.7

(0.1)

(1.6)

(8.9)

(15.2)

(25.8)

(0.7)

–

(0.7)

(9.5)

2016
£m

–

24.0

(1.2)

(15.2)

(6.3)

(7.5)

(30.2)

(14.7)

(0.2)

(14.9)

(21.1)

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information178

Notes to the Group Financial Statements continued

30. Financial instruments continued
B. Financial assets and liabilities
Financial assets and liabilities (with the exception of derivative financial instruments) are initially recognised at fair value net
of transaction costs. Subsequently they are recognised at either fair value or amortised cost. Derivative financial instruments
are initially recognised at fair value and subsequently re-measured at fair value.

Carrying amounts and fair values
The table below shows the carrying amounts and fair values of the Group’s financial instruments that are reported in the
financial statements.

Fair value measurement using

Carrying
amount
2017
£m

Fair value
2017
£m

Level 1
Quoted prices in
active markets
£m

Level 2
Significant
observable
inputs
£m

Level 3
Significant
unobservable
inputs
£m

Financial assets

Derivative financial instruments recognised at fair value
through profit or loss

Derivative financial instruments in designated hedge
accounting relationships

Contingent consideration receivable

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 payable

Amortised cost

Fixed rate borrowings

Floating rate borrowings

Obligations under finance leases

Bank overdrafts & short-term borrowings*

Trade & other payables excluding statutory liabilities &
deferred income*

9.2

7.8

0.4

611.7

284.6

913.7

15.2

11.3

3.4

832.9

293.8

1.0

0.1

9.2

7.8

0.4

611.7

284.6

913.7

15.2

11.3

3.4

896.6

293.8

1.0

0.1

528.9

1,686.6

528.9

1,750.3

–

9.2

7.8

–

15.2

11.3

–

896.6

293.8

1.0

–

0.4

–

3.4

–

The Weir Group PLCAnnual Report and Financial Statements 2017

179

Fair value measurement using

Carrying
amount
2016
£m

Fair value
2016
£m

Level 1
Quoted prices in
active markets
£m

Level 2
Significant
observable
inputs
£m

Level 3
Significant
unobservable
inputs
£m

Financial assets

Derivative financial instruments recognised at fair value
through profit or loss

Contingent consideration receivable

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 payable

Amortised cost

Fixed rate borrowings

Floating rate borrowings

Obligations under finance leases

Bank overdrafts & short-term borrowings*

Trade & other payables excluding statutory liabilities &
deferred income*

24.0

3.9

481.8

258.6

768.3

7.7

37.4

31.0

917.5

173.2

0.8

1.6

443.8

1,613.0

24.0

3.9

481.8

258.6

768.3

7.7

37.4

31.0

1,012.7

173.2

0.8

1.6

443.8

1,708.2

–

24.0

–

3.9

7.7

37.4

–

1,012.7

173.2

0.8

–

31.0

–

* The fair value of cash & short-term deposits, trade & other receivables and trade & 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.

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 that have a significant effect on the recorded fair value are observable, either

directly or indirectly;

Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable

market data.

At 31 December 2017 and 31 December 2016 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 periods ended 31 December 2017 and 31 December 2016, 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 Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

180

Notes to the Group Financial Statements continued

30. Financial instruments continued
Offsetting
Financial assets and liabilities are offset and the net amount reported in the balance sheet where the Group currently has a legal
right to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability
simultaneously.

As at 31 December 2017, cash & short-term deposits of £284.6m (2016: £258.6m) and current interest bearing loans &
borrowings of £388.4m (2016: £144.0m) were presented after elimination of debit and credit balances within individual pools
of £1.3m (2016: £2.3m).

The Group has also entered into arrangements that do not meet the criteria for offsetting but still allow for the related amounts
to be offset in specific circumstances. As at 31 December 2017, the Group had derivative financial instruments of £10.2m which
were subject to master netting arrangements but not offset.

C. Hedging activities
The Group designates certain derivative financial instruments in either cash flow hedging or net investment hedging relationships
in accordance with IAS 39.

Hedge relationship

Cash flow hedge of highly probable forecast
foreign currency purchases and sales

Net investment hedge of foreign operations

Hedged risk

Transactional foreign exchange risk

Translational foreign exchange risk

Cash flow hedge

Net investment hedge

Hedging instruments

Forward foreign currency contracts

Foreign currency debt
Cross currency swaps
Forward foreign currency contracts

For each type of derivative financial instrument, the net carrying amount, maturity dates and the amounts recognised for the year
in profit or loss and equity are set out in the table below. In the Consolidated Financial Statements, these amounts are offset by
the retranslation of foreign currency denominated receivables and payables.

Net carrying
amount
£m

Gain (loss)
recognised in
profit or loss
£m

Gain
recognised in
equity
£m

Loss
recognised in
inventory
£m

Maturity

dates

Year ended 31 December 2017

Forward foreign currency contracts designated
as cash flow hedges

Forward foreign currency contracts designated
as net investment hedges

0.2

5.9

2018

Cross currency swaps designated as net investment hedges

(9.6) 2018 to 2021

Other forward foreign currency contracts at fair value
through profit or loss

(6.0) 2018 to 2019

(9.5)

0.3

–

(12.1)

(11.8)

0.4

22.4

6.5

–

29.3

(0.6)

–

(0.6)

Net carrying
amount
£m

Gain
recognised in
profit or loss
£m

Loss
recognised in
equity
£m

Loss
recognised in
inventory
£m

Maturity
dates

Period ended 31 December 2016

Forward foreign currency contracts designated
as cash flow hedges

Forward foreign currency contracts designated
as net investment hedges

(1.2)

2017 to 2018

(15.2)

2017

Cross currency swaps designated as net investment hedges

(21.0)

2017 to 2018

Other forward foreign currency contracts at fair value
through profit or loss

16.3

2017 to 2019

(21.1)

1.9

–

40.6

42.5

(0.7)

(0.4)

(53.6)

(26.6)

–

(80.9)

–

(0.4)

The Weir Group PLCAnnual Report and Financial Statements 2017181

D. Financial risk management
Financial risk management of the Group is carried out by Group Treasury in conjunction with individual subsidiaries. The principal
financial risks to which the Group is exposed are market risk, liquidity risk and credit risk.

Market risk
The Group is exposed to foreign exchange risk and interest rate risk in the ordinary course of business.

i) Foreign exchange risk
The Group is exposed to both transactional and translational foreign exchange risk. Transactional risk arises when subsidiaries
enter into transactions denominated in currencies other than their functional currency for operational or financing purposes
or when the Group’s Treasury function enters into transactions for financing or risk management purposes. Translational risk
arises on the translation of overseas earnings and investments into Sterling for consolidated reporting purposes. 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 foreign currency transactions, usually by entering into forward foreign currency contracts through the
Group’s Treasury function. Certain operating units apply cash flow hedge accounting in accordance with IAS 39. The Group
does not engage in any speculative foreign exchange transactions.

The Group has material foreign investments in the US, Australia, Europe and South Africa. In respect of translational risk,
the Group has a policy of partially hedging its net investment exposure to US Dollar (US$), Australian Dollar (AUD), Euro (EUR)
and South African Rand (ZAR) denominated subsidiaries. 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.

Sensitivity to foreign exchange rates
The Group considers the most significant transactional foreign exchange risk relates to the Australian Dollar, Euro and US Dollar.
The following table shows the impact of movements in derivative valuation as a result of a weakening of these currencies. In
the Consolidated Income Statement, these amounts are offset by the retranslation of foreign currency denominated receivables
and payables.

Transactional foreign exchange

2017

Australian Dollar

Euro

US Dollar

2016

Australian Dollar

Euro

US Dollar

Increase in
currency rate

Effect on profit
gain (loss)
£m

Effect on
equity gain
£m

+25%

11.1

32.4

0.7

6.2

8.0

(1.1)

19.5

20.9

130.1

18.5

12.8

124.6

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information182

Notes to the Group Financial Statements continued

30. Financial instruments continued
The Group is also exposed to translational foreign exchange risk as a result of its global operations and therefore the earnings
of the Group will fluctuate due to changes in foreign exchange rates in relation to Sterling. 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

South African Rand

Brazilian Real

Russian Rouble

UK Sterling

Other

Operating profit from continuing operations before exceptional items & intangibles amortisation

2017
£m

176.4

29.0

6.8

33.9

3.2

39.0

11.1

4.9

5.2

(21.6)

3.9

291.8

2016
£m

70.0

33.8

26.2

36.6

5.8

35.6

4.9

3.6

6.9

(11.2)

1.8

214.0

ii) Interest rate risk
The Group is exposed to interest rate risk on its outstanding borrowings. Changes in interest rates will affect future interest cash
flows on floating rate debt and the fair value of fixed rate borrowings.

The earnings of the Group are sensitive to changes in interest rates in respect of floating rate borrowings. As at 31 December
2017, 26% of the Group’s borrowings were at floating interest rates. The interest rate profile of the Group’s interest bearing
borrowings was as follows.

US Dollar

Euro

UK Sterling

Other

Floating rate
£m

(0.4)

(293.4)

–

2017

Fixed rate
£m

(791.2)

–

(43.0)

(0.2)

Total
£m

Floating rate
£m

(791.6)

(293.4)

(43.0)

(0.2)

(32.7)

(142.1)

–

2016

Fixed rate
£m

(875.2)

–

(43.0)

–

Total
£m

(907.9)

(142.1)

(43.0)

–

Sensitivity to interest rates
Based on borrowings at 31 December 2017, a 1% increase in interest rates would have a £2.9m impact on the profit before tax
and amortisation of the Group. This assumes that the change in interest rates is effective from the beginning of the year and that
all other variables are constant throughout the year.

Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its financial liabilities as they fall due.

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 fixed rate loan notes, bank loans, commercial paper and bank overdrafts. Further details of the
Group’s borrowing facilities are disclosed in note 20.

The Weir Group PLCAnnual Report and Financial Statements 2017183

The tables below show only the financial liabilities of the Group by maturity. The amounts disclosed in the table are undiscounted
cash flows and may therefore not agree to the amounts disclosed in the Consolidated Balance Sheet.

The Group manages its liquidity to ensure that it always has sufficient funding to grow the business and is able to meet its
obligations as they fall due.

Year ended 31 December 2017

Cross currency swaps – outflow

Cross currency swaps – inflow

Forward foreign currency contracts – net outflow

Cash flows relating to derivative financial liabilities

Trade & other payables excluding statutory liabilities
& deferred income

Obligations under finance leases

Bank overdrafts & short-term borrowings

Bank loans

Commercial paper

Fixed rate notes

Cash flows relating to non-derivative financial liabilities

Period ended 31 December 2016

Cross currency swaps – outflow

Cross currency swaps – inflow

Forward foreign currency contracts – net outflow

Cash flows relating to derivative financial liabilities

Trade & other payables excluding statutory liabilities
& deferred income

Obligations under finance leases

Bank overdrafts & short-term borrowings

Bank loans

Commercial paper

Fixed rate notes

Cash flows relating to non-derivative financial liabilities

Less than

1 year
£m

(58.1)

47.8

(1.8)

(12.1)

(531.7)

(0.3)

(0.1)

(0.7)

(293.4)

(126.5)

(952.7)

(964.8)

1 to 2 years
£m

2 to 5 years
£m

More than

5 years
£m

(4.9)

3.6

0.2

(1.1)

(0.5)

(0.2)

–

(183.2)

(183.9)

(185.0)

(87.6)

89.5

–

1.9

–

(0.3)

–

(502.0)

(502.3)

(500.4)

–

(0.2)

–

(151.1)

(151.3)

Less than

1 year
£m

1 to 2 years
£m

2 to 5 years
£m

More than
5 years
£m

(97.2)

88.5

(0.9)

(9.6)

(461.3)

(0.3)

(1.6)

(0.4)

(142.1)

(39.2)

(644.9)

(654.5)

(58.7)

44.2

(0.1)

(14.6)

(13.7)

(0.3)

–

(0.4)

–

(134.5)

(148.9)

(163.5)

–

(0.1)

–

(0.2)

–

(33.8)

–

(255.7)

(289.7)

(289.8)

–

Total
£m

(150.6)

140.9

(1.6)

(11.3)

(532.2)

(1.0)

(0.1)

(0.7)

(293.4)

(962.8)

(1,790.2)

(1,801.5)

Total
£m

(155.9)

132.7

(1.1)

(24.3)

(475.0)

(0.8)

(1.6)

(34.6)

(142.1)

(657.0)

(1,086.4)

(1,740.5)

(1,764.8)

Credit risk
The Group is exposed to credit risk to the extent of non-payment by either its customers or the counterparties to its derivative
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. In certain circumstances, operating entities are permitted
to make use of invoice discounting facilities to reduce counterparty credit risk. In addition, applicable creditworthiness checks
are undertaken with external credit rating agencies before entering into contracts with customers and credit limits are set as
appropriate and enforced. As shown in note 17, the trade receivables presented in the Consolidated 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 amounts due to the Group.

The Group’s exposure to the credit risk of financial instruments is limited by the adherence to counterparty credit 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 credit rating agencies. Exposures to those counterparties are regularly reviewed and, when the market
view of a counterparty’s credit quality changes, adjusted as considered appropriate.

The maximum exposure to credit risk is equal to the carrying value of the financial assets of the Group.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information184

Notes to the Group Financial Statements continued

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,
intangibles amortisation and depreciation.

The Group’s banking arrangements include bi-annual financial covenants of net debt to EBITDA (not greater than 3.5) and interest
cover (not less than 3.5). 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, i.e. average rate. In addition, results
of businesses acquired in the financial year have to be included as if the acquisitions occurred at the start of the financial year,
while the results of businesses disposed of in the year are to be excluded.

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. Given the recent downturn in oil and gas markets, the metric is currently 2.5 times but
is on a downward trajectory and remains actively managed.

Net debt at average exchange rates (£m)

Operating profit (£m)

Exceptional items included in operating profit (note 5) (£m)

Depreciation and intangibles amortisation (£m)

EBITDA (£m)

Net debt to EBITDA cover (ratio)

2017

873.7

218.2

13.3

115.4

346.9

2.5

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)

2017

286.9

38.0

7.6

2016

758.3

90.3

73.1

106.5

269.9

2.8

2016

214.0

40.7

5.3

Gearing ratio
Gearing comprises net debt divided by total equity. Net debt comprises cash & short-term deposits and interest-bearing loans &
borrowings (note 26).

Net debt (£m)

Total equity (£m)

Gearing ratio (%)

2017

843.2

2016

834.5

1,471.1

1,383.6

57.3

60.3

The Weir Group PLCAnnual Report and Financial Statements 201732. 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

South African Rand

Brazilian Real

Russian Rouble

Closing rate (per £)

US Dollar

Australian Dollar

Euro

Canadian Dollar

United Arab Emirates Dirham

Chilean Peso

South African Rand

Brazilian Real

Russian Rouble

185

2017

2016

1.29

1.68

1.14

1.67

4.73

1.36

1.83

1.22

1.80

4.98

835.52

918.59

17.15

4.11

75.17

1.35

1.73

1.13

1.69

4.97

20.00

4.75

91.20

1.22

1.70

1.17

1.65

4.49

832.26

813.76

16.76

4.48

77.86

16.63

3.97

73.89

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information186

Company Balance Sheet
At 31 December 2017

ASSETS

Non-current assets

Intangible assets

Property, plant & equipment

Investments in subsidiaries

Deferred tax assets

Trade & other receivables

Retirement benefit plan assets

Derivative financial instruments

Total non-current assets

Current assets

Trade & other receivables

Derivative financial instruments

Cash & short-term deposits

Total current assets

Total assets

LIABILITIES

Current liabilities

Trade & other payables

Derivative financial instruments

Total current liabilities

Non-current liabilities

Interest-bearing loans & borrowings

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

Merger reserve

Treasury shares

Capital redemption reserve

Special reserve

Retained earnings

TOTAL EQUITY

31 December
2017
£m

31 December
2016
£m

Notes

0.2

4.0

0.2

4.2

3,271.0

3,101.6

21.3

42.6

–

0.4

20.6

42.5

9.8

0.1

3,339.5

3,179.0

178.0

28.0

40.8

246.8

3,586.3

1,865.3

45.6

1,910.9

145.5

69.3

14.6

229.4

3,408.4

1,282.9

43.1

1,326.0

905.5

1,398.4

1.1

–

2.4

125.1

1,034.1

2,945.0

641.3

28.1

197.9

9.4

(5.9)

0.5

1.8

409.5

641.3

14.8

0.2

3.4

131.1

1,547.9

2,873.9

534.5

27.3

86.2

9.4

(5.9)

0.5

1.8

415.2

534.5

In accordance with the concession granted under section 408 of the Companies Act 2006, the Income Statement and Statement
of Comprehensive Income of the Company have not been separately presented in these financial statements. The profit of the
Company was £85.0m (2016: loss of £13.5m).

The financial statements on pages 186 to 201 were approved by the Board of Directors on 28 February 2018.

Jon Stanton
Director

John Heasley
Director

The Weir Group PLCAnnual Report and Financial Statements 2017

Company Statement of Changes in Equity
for the year ended 31 December 2017

187

Share
premium
£m

Merger
reserve
£m

Treasury
shares
£m

Capital
redemption
reserve
£m

Special
reserve
£m

Retained
earnings
£m

Total equity
£m

38.0

9.4

(5.8)

0.5

1.8

–

At 1 January 2016

Loss for the period

Remeasurements on
defined benefit plans

Tax relating to other
comprehensive expense

Total net comprehensive
expense for the period

Share
capital
£m

26.8

–

Issue of shares

0.5

48.2

Cost of share-based payments
inclusive of tax charge

Dividends (note 2)

Purchase of shares*

–

At 31 December 2016

27.3

86.2

9.4

Profit for the year

Remeasurements on
defined benefit plans

Tax relating to other
comprehensive expense

Total net comprehensive
income for the year

–

Issue of shares

0.8

111.7

Cost of share-based payments
inclusive of tax charge

Dividends (note 2)

–

(0.1)

(5.9)

–

0.5

1.8

–

563.5

(13.5)

634.2

(13.5)

(53.2)

8.6

(58.1)

–

4.3

(94.5)

–

415.2

85.0

(58.1)

48.7

4.3

(94.5)

(0.1)

534.5

85.0

(2.6)

0.9

83.3

–

7.7

(96.7)

409.5

0.9

83.3

112.5

7.7

(96.7)

641.3

At 31 December 2017

28.1

197.9

9.4

(5.9)

0.5

1.8

* These shares were purchased on the open market and are held by the Estera EBT on behalf of the Group.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information188

Notes to the Company Financial Statements

1. Accounting policies
Authorisation of financial statements and statement of compliance
The Company Financial Statements of The Weir Group PLC (the ‘Company’) for the year ended 31 December 2017 (‘2017’)
were approved and authorised for issue in accordance with a resolution of the Directors on 28 February 2018. The comparative
information is presented for the period commencing 2 January 2016 and ended 31 December 2016 (‘2016’).

The Weir Group PLC is a public limited company incorporated in Scotland and is listed on the London Stock Exchange.

The Company Financial Statements of The Weir Group PLC have been prepared on a going concern basis under the historic
cost convention and in accordance with FRS 101 and applied in accordance with the provisions of the Companies Act 2006.
The following disclosure exemptions from the requirements of IFRS have been consistently applied in the preparation of these
financial statements, in accordance with FRS 101:

ii)

Disclosures required by paragraphs 45(b) and 46-52 of IFRS 2 ‘Share-based payment’ can be found in note 28 to the Group
financial statements;
IFRS 7 ‘Financial Instruments: Disclosures’ exemption has been taken as a result of the disclosures in note 30 to the Group
financial statements;

iii) IAS 7 ‘Statement of cash flows’;
iv) Disclosure of key management compensation as required by paragraph 17 of IAS 24 ‘Related party disclosures’;
v) Disclosure of related party transactions with wholly owned subsidiaries as required by IAS 24 ‘Related party disclosures’; and
vi) Paragraph 10(d), paragraph 10(f), and paragraphs 134-136, of IAS 1 ‘Presentation of financial statements’.

The Company is the parent of the Weir Group PLC. Its principal activity is to act as a holding company for the Group and perform
the head office function.

Use of estimates & judgements
The Company’s significant accounting policies are set out below. The preparation of the Company financial statements, in
conformity with FRS 101, requires management to make judgements that affect the application of accounting policies and
estimates that impact the reported amounts of assets, liabilities, income and expense.

Management base these judgements and estimates on a combination of past experience, professional expert advice and
other evidence that is relevant to each individual circumstance. Actual results may differ from these judgements and estimates
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 area where management consider the more complex judgements and estimates are required is in respect of retirement
benefits. The assumptions underlying the valuation of retirement benefit assets and liabilities include discount rates, inflation
rates and mortality assumptions which are based on actuarial advice. Changes in these assumptions could have a material
impact on the measurement of the Company’s retirement benefit obligations. Sensitivities to changes in key assumptions are
provided in note 8.

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 Income Statement.

Property, plant & equipment
Property, plant & equipment is presented at historical cost.

Depreciation of property, plant & equipment is provided on a straight-line basis so as to charge the cost less residual value to the
Income Statement over the expected useful life of the asset concerned, and is in the following ranges:

Long leasehold land & buildings
Office & computer equipment

20 years
3 – 10 years

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

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

Purchased software

4 – 8 years

The Weir Group PLCAnnual Report and Financial Statements 2017
189

Investments
Investments in subsidiaries are held at cost less accumulated impairment losses. Loans and receivables are carried at amortised
cost using the effective interest method.

Post-employment benefits
Post-employment benefits comprise pension benefits provided to certain current and former employees in the UK.

For defined benefit pension 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 year 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 year.

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 year 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 Company’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 Company 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 cost represents the Company’s contributions to the plans and these are charged to the
Income Statement in the year in which they fall due.

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 employees.

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.

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, commercial paper, cash and short-term deposits. The Company also has other financial assets and
liabilities such as trade receivables and trade payables which arise directly from its operations.

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 or 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, spot foreign exchange rates and counterparty
and own credit risk. Changes in their fair values have been recognised in the Income Statement.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information190

Notes to the Company Financial Statements continued

1. 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 the total comprehensive
income on the purchase, sale, issue or cancellation of equity shares.

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

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:

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
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
laws that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the deferred
tax asset is realised or the deferred tax liability is settled.

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

The Weir Group PLCAnnual Report and Financial Statements 2017191

2. Profit (loss) attributable to the Company
The profit dealt with in the accounts of the Company was £85.0m (2016: loss of £13.5m). The corporate tax credit dealt with in
the accounts of the Company was £11.0m (2016: £12.4m).

Dividends paid & proposed

Declared & paid during the year

Equity dividends on ordinary shares

Final dividend for 2016: 29.0p (2015: 29.0p)

Interim dividend for 2017: 15.0p (2016: 15.0p)

Proposed for approval by shareholders at the Annual General Meeting

Final dividend for 2017: 29.0p (2016: 29.0p)

2017
£m

63.1

33.6

96.7

65.0

2016
£m

62.0

32.5

94.5

63.1

In 2016 and 2017, shareholders on record were provided the opportunity to receive dividends in the form of new fully paid ordinary
shares through The Weir Group PLC Scrip Dividend Scheme. Participation in the Scheme resulted in a final dividend for 2016 of
£6.4m share issue and a cash dividend of £56.7m (final dividend for 2015: £29.6m share issue; £32.4m cash). The interim dividend
for 2017 was split £16.1m share issue and £17.5m cash dividend (interim dividend for 2016: £19.1m share issue; £13.4m cash).

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 this Annual Report and Financial Statements and the record date for the final dividend.

Employee benefits expense

Wages & salaries

Social security costs

Pension costs

Defined benefit plans (note 8)

Defined contribution plans

Share-based payments – equity settled transactions

2017
£m

13.3

2.5

0.1

0.4

7.0

23.3

2016
£m

14.5

2.3

0.2

0.4

4.1

21.5

At 31 December 2017, the average number of people employed by the Company was 102 (2016: 89).

Directors
Details of Directors’ remuneration, benefits and LTIP awards are included in the Remuneration report on pages 95 to 115, and in
note 29 to the Group Financial Statements.

Auditors’ remuneration
The total fees payable by the Company to PricewaterhouseCoopers LLP (PwC) for work performed in respect of the audit of
the Company were £20,000 (2016: £20,000). Fees paid to PwC 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.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

192

Notes to the Company Financial Statements continued

3. Intangible assets

Cost

At beginning and end of the year

Aggregate amortisation

At beginning and end of the year

Net book value at 31 December 2016

Net book value at 31 December 2017

Purchased
software
total
£m

1.1

0.9

0.2

Outstanding commitments entered into on behalf of a subsidiary contracted but not provided for relating to intangible assets
amounted to £nil (2016: £0.9m).

4. Property, plant & equipment

Cost

At 31 December 2016

Additions

At 31 December 2017

Aggregate depreciation

At 31 December 2016

Charge for year

At 31 December 2017

Net book value at 31 December 2016

Net book value at 31 December 2017

Long
leasehold
land &
buildings
£m

Office &
computer
equipment
£m

4.2

0.1

4.3

0.3

0.2

0.5

3.9

3.8

1.7

–

1.7

1.4

0.1

1.5

0.3

0.2

Total
£m

5.9

0.1

6.0

1.7

0.3

2.0

4.2

4.0

Outstanding capital commitments entered into on behalf of a subsidiary contracted but not provided for relating to property,
plant & equipment amounted to £nil (2016: £2.0m).

The Weir Group PLCAnnual Report and Financial Statements 2017193

Subsidiaries
shares

Loans
£m

Total
£m

1,738.9

1,369.4

3,108.3

–

420.6

(187.9)

(63.3)

420.6

(187.9)

(63.3)

1,738.9

1,538.8

3,277.7

5. Investments in subsidiaries

Cost

At 31 December 2016

Additions

Settlement

Exchange

At 31 December 2017

Impairment

At 31 December 2017 and 31 December 2016

1.3

5.4

6.7

Net book value at 31 December 2016

1,737.6

1,364.0

3,101.6

Net book value at 31 December 2017

1,737.6

1,533.4

3,271.0

The subsidiaries and joint ventures of the Company are listed on pages 202 to 209.

6. Deferred tax

Deferred income tax assets

Retirement benefits

Deferred income tax assets

Deferred income tax liabilities

Other timing differences

Retirement benefits

2017
£m

21.3

2016
£m

20.6

(2.4)

(3.4)

(2.4)

21.3

18.9

(3.4)

20.6

17.2

7. Trade & other receivables
Trade & other receivables presented as non-current on the face of the Company balance sheet of £42.6m (2016: £42.5m) are in
respect of a prepayment recognised as a result of the pension funding partnership structure. Further information pertaining to this
arrangement can be found in note 8.

Amounts recoverable within one year

Amounts owed by subsidiaries

Tax receivable

Other debtors

Prepayments & accrued income

2017
£m

158.8

15.3

3.6

0.3

2016
£m

128.6

12.9

3.8

0.2

178.0

145.5

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information194

Notes to the Company Financial Statements continued

8. Retirement benefits
The Company has two funded defined benefit plans (the Main Plan and the Executive Plan) and an unfunded retirement benefit
plan for retired directors. The Company also operates a defined contribution plan. Contributions to the defined contribution
arrangement 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. The Main Plan closed to future accrual of benefits
effective from 30 June 2015.

The weighted average duration of the expected benefit payments from the Main Plan is around 17 years and from the Executive
Plan it is around 14 years.

The current funding target for the UK plans is to maintain assets equal to the value of the accrued benefits. The Main Plan holds
insurance policies in respect of a significant proportion of deferred and retired pensioners. The Executive Plan entered into an
insurance contract in 2017 which will match the liabilities of the plan in full.

The regulatory framework in the UK requires the Trustees and Company 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 Company that adverse experience could lead to a requirement for the Company 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.

Assumptions
The significant actuarial assumptions used for accounting purposes reflect prevailing market conditions 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)

2017

2016

2.4

3.2

22.1

24.0

23.5

25.5

3.1

2.1

2.6

3.3

22.2

24.3

24.0

26.2

3.1

2.1

2.2

The assumptions used to determine end-of-year benefit obligations are also used to calculate the following year’s cost.

The Weir Group PLCAnnual Report and Financial Statements 2017

The 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

195

2016
£m

206.9

51.5

82.3

97.2

379.2

1.6

818.7

(938.4)

(119.7)

(1.6)

(121.3)

9.8

(131.1)

2017
£m

190.3

56.8

75.4

74.7

414.1

0.4

811.7

(935.3)

(123.6)

(1.5)

(125.1)

–

(125.1)

The government bonds held in 2017 are all index-linked. The pension plans have not directly invested in any of the Company’s
own financial instruments, or in properties or other assets used by the Company.

The investment strategy for the UK 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 non-insured 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 & loss

Amount recognised in Statement of Comprehensive Income

Employer contributions

Closing net liabilities

2017
£m

(121.3)

(3.3)

(2.6)

2.1

2016
£m

(68.1)

(2.6)

(53.1)

2.5

(125.1)

(121.3)

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information196

Notes to the Company Financial Statements continued

8. Retirement benefits continued
The amounts recognised in the income statement and in the statement of comprehensive income for the year are analysed
as follows.

Recognised in the Income Statement

Administrative expenses

Included in operating profit (loss)

Interest on net pension liability

Total expense charged to profit & loss

Recognised in the Statement of Comprehensive Income

Actual return on plan assets

Less: interest on plan assets

Other actuarial (losses) gains due to

Changes in financial assumptions

Changes in demographic assumptions

Actuarial losses recognised in the Statement of Comprehensive Income

2017
£m

(0.1)

(3.2)

(3.3)

33.8

(20.7)

13.1

(32.9)

17.2

(2.6)

2016
£m

(0.2)

(2.4)

(2.6)

133.7

(25.9)

107.8

(171.6)

10.7

(53.1)

Current service cost and administration expenses are recognised in operating costs and interest on net pension liability is
recognised in other finance costs.

Pension contributions are determined with the advice of independent qualified actuaries on the basis of regular valuations
using the projected unit method. The Company made special contributions of £2.0m in 2017 (2016: £2.4m) in addition to the
Company’s regular contributions.

The most recent actuarial funding valuation of the Main Plan was as at 31 December 2014 when the funding shortfall was
£65.0m. Under the recovery plan agreed with the Trustees, the Company entered into a pension funding partnership structure
under which it contributed interests in a Scottish Limited Partnership (SLP) for the Main Plan. The Main Plan’s interests in
the SLP will reduce the deficit on a funding basis, although the agreement will not affect the position directly on a FRS 101
accounting basis as the investments held do not qualify as assets for FRS 101 purposes. As a partner in the SLP, the Main
Plan is entitled to receive a share of the profits of the SLP once a year for 15 years. The profits to be shared with the Plan
will be reflected in the Company’s financial statements as a pension contribution.

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. The Trustees of the UK Executive Scheme entered into a full buy-in
transaction in the third quarter of 2017, meaning all of the benefit payments due from the Executive Scheme are now covered
by an insurance policy. There remains an outstanding premium payment (estimated to be £1.2m), which is expected to be paid
in 2018 following a data cleanse process to finalise the insurance policy. The FRS 101 Balance Sheet at the 2017 year end reflects
this expected payment due.

The Company has taken legal advice regarding its UK arrangements to confirm the accounting treatment under IFRIC 14 and the
current exposure draft of the revised IFRIC 14 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 Company 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 Company to adjust the Balance Sheet
to recognise the future agreed deficit recovery contributions. Having considered the position, taking account of the legal input
received and noting that the Trustees of the UK arrangements do not have discretionary powers to unilaterally wind up the
schemes without cause, the Directors of the Company have concluded that the Company has an unconditional right to a refund
of any surplus. Amendments to the current version of IFRIC 14 are currently being considered.

The total Company contributions for 2018 (including those expected from the SLP) are expected to be £4.3m.

The Weir Group PLCAnnual Report and Financial Statements 2017

197

Sensitivity analysis
Changes in key assumptions can have a significant effect on the reported net retirement benefit obligation and the income
statement expense for 2018. 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
2017
£m

Decrease
2017
£m

Increase
2016
£m

Decrease
2016
£m

144.5

103.0

(95.8)

(62.2)

(28.0)

(12.8)

(176.2)

(129.5)

87.3

56.0

28.0

12.8

143.3

106.6

(90.3)

(64.2)

(28.1)

(14.1)

(174.3)

(133.3)

82.8

58.1

28.1

14.1

Changes in the present value of the defined benefit obligations are analysed as follows.

Opening defined benefit obligations

Interest on benefit obligations

Benefits paid

Actuarial (losses) gains due to

Changes in financial assumptions

Changes in demographic assumptions

Closing defined benefit obligations

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

Actual return on plan assets less interest on plan assets

Closing plan assets

2017
£m

(940.0)

(23.9)

42.8

(32.9)

17.2

(936.8)

2017
£m

818.7

20.7

2.1

(0.1)

(42.8)

13.1

811.7

2016
£m

(783.2)

(28.3)

32.4

(171.6)

10.7

(940.0)

2016
£m

715.1

25.9

2.5

(0.2)

(32.4)

107.8

818.7

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

198

Notes to the Company Financial Statements continued

9. Derivative financial instruments

Non-current assets

Forward foreign currency contracts

Current assets

Forward foreign currency contracts

Current liabilities

Cross currency swaps

Forward foreign currency contracts

Non-current liabilities

Cross currency swaps

Forward foreign currency contracts

2017
£m

0.4

28.0

(8.9)

(36.7)

(45.6)

(0.7)

(0.4)

(1.1)

2016
£m

0.1

69.3

(6.3)

(36.8)

(43.1)

(14.7)

(0.1)

(14.8)

The figures in the above table include derivative financial instruments where the counterparty is a subsidiary of The Weir Group PLC.

10. Trade & other payables

Bank overdrafts & short-term borrowings

Loans from subsidiaries (note 11)

Amounts owed to subsidiaries

Other taxes & social security costs

Other creditors

Accruals & deferred income

2017
£m

387.7

2016
£m

142.3

1,421.2

1,078.3

25.4

1.3

1.7

28.0

28.5

1.1

3.9

28.8

1,865.3

1,282.9

The Weir Group PLCAnnual Report and Financial Statements 201711. Interest-bearing loans & borrowings

Amounts due are repayable as follows

Less than one year

– fixed rate notes

– commercial paper

– loans from subsidiaries

More than one year but not more than two years

– 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

– fixed rate notes

– commercial paper

– loans from subsidiaries

199

2017
£m

2016
£m

94.4

293.3

1,421.2

155.0

4.4

–

435.8

162.5

–

142.1

1,078.3

100.2

340.6

31.4

171.7

108.9

147.8

2,714.4

645.6

2,618.8

(94.4)

(293.3)

–

(142.1)

(1,421.2)

(1,078.3)

905.5

1,398.4

The loans from subsidiaries with a maturity date greater than one year and less than two years are repayable in 2018 and have an
interest rate of 10.25%. The loans from subsidiaries with a maturity date greater than two years and less than five years are
repayable in 2020 and have an interest rate of 5.43%.

Details of the interest and repayment terms of the bank loans, fixed rate notes and commercial paper can be found in note 20 to
the Group Financial Statements.

12. Provisions

At 31 December 2016

Released – unutilised

At 31 December 2017

Exceptional
rationalisation
£m

0.2

(0.2)

–

As at 31 December 2017, a provision of £nil (2016: £0.2m) has been made in respect of an onerous contract for leased premises
over one year.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information200

Notes to the Company Financial Statements continued

13. Share capital & reserves

Allotted, called up & fully paid

Ordinary shares of 12.5p each

The value of treasury shares is £0.1m, being 473,912 shares at 12.5p.

Shares allotted

Issued during the year in respect of KOP acquisition

Issued during the year in respect of scrip dividends

Treasury shares

At the beginning of the year

Utilised during the year in respect of LTIP awards

At the end of the year

Equity settled share-based payments

LTIP awards outstanding at the end of the year

2017
£m

2016
£m

28.1

27.3

2017
Number
million

2016
Number
million

5.1

1.2

0.7

(0.2)

0.5

–

3.7

0.7

–

0.7

1.9

2.5

Further details of the equity settled share-based payments and the associated cost for the year can be found in note 28 to the
Group Financial Statements.

Merger reserve
The merger reserve was created by the issue of new equity in relation to the acquisition of Delta Industrial Valves Inc. during 2015.

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.

Special reserve
The premium of £1.8m arising on the issue of shares for the acquisition of the entire share capital of Liquid Gas Equipment Limited
in 1988 has been credited to a special reserve in accordance with the merger relief provisions of the Companies Act 1985.

14. Operating lease commitments
The Company has entered into a commercial lease for a building which has a lease term of 20 years. Future minimum rentals
payable under non-cancellable operating leases are shown in the table below.

Less than 1 year

After 1 year but not more than 5 years

More than 5 years

2017
£m

0.1

3.0

9.3

12.4

2016
£m

–

2.4

10.0

12.4

The Weir Group PLCAnnual Report and Financial Statements 2017201

15. Contingent liabilities & legal claims
Guarantees
The Company has given guarantees in relation to the bank and other borrowings of certain subsidiary companies amounting
to £628.7m (2016: £616.6m). These guarantees are treated as contingent liabilities until it becomes probable they will be called
upon. The likelihood of the guarantees being called upon is considered remote.

16. Related party disclosures
The Company has taken advantage of the exemption under paragraph 8(k) of FRS 101 not to disclose 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 year end.

Related party

Weir ABF LP

Weir Minerals (India) Private Ltd

Vulco SA

2017

2016

2017

2016

2017

2016

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.

Group

charges
£m

Amounts
due
£m

–

0.1

1.0

–

55.9

56.3

0.2

0.1

1.4

0.1

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information202

Subsidiary Undertakings

The subsidiary undertakings of the Company as at 31 December 2017 are noted below. Unless otherwise indicated,
the Company’s shareholdings are held indirectly.

^ Directly held by The Weir Group PLC.

Name

Country of
incorporation

Registered address

Class of shares

Percentage
held

Name

Country of
incorporation

Registered address

Class of shares

Percentage
held

Aislación Sismica
Perú SA

Peru

Aspir Pty Ltd

Australia

Autotork Controls
Limited

England
and Wales

Batley Valve
Company
Limited, (The)

England
and Wales

Blakeborough
Valves Limited

Scotland

Capstead Systems
Limited

England
and Wales

CH Warman Asia
Limited

Malta

Comercializadora
TEP Limitada

Chile

Cunnington and
Cooper Limited

England
and Wales

Av. Separadora Industrial
No. 2201
Urb Volcano Ate
Lima
Peru

1-5 Marden Street
Artarmon
NSW 2064
Australia

Weir Power & Industrial
– Emerging Markets
Britannia House
Huddersfield Road
Elland
West Yorkshire
HX5 9JR

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

Weir Power & Industrial
– Emerging Markets
Britannia House
Huddersfield Road
Elland
West Yorkshire
HX5 9JR

93 Mill Street
Qormi
QRM3102
Malta

San Jose 0815
San Bernardo
Santiago
Chile

Weir Power & Industrial
– Emerging Markets
Britannia House
Huddersfield Road
Elland
West Yorkshire
HX5 9JR

Dongying Weir
O&G Pump
Products Co., Ltd

China

No. 69 Dengzhou Road,
Dongying Area, Dongying
City, Shandong, China

Downhole Oiltools
Limited

Scotland

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

Ordinary 99.999%

Duhn Oil Tool, Inc.

USA

Ordinary

100%

EnviroTech (Pty)
Limited

Republic of
South Africa

Ordinary

100%

EnviroTech
Pumpsystems, LLC

USA

Ordinary

100%^

EPIX Power System,
LLC

USA

Ordinary

100%^

Ordinary

100%

Chile

Fabrica de
Aisladores
Sismicos de Chile
Limitada

Fundición Vulco
Ltda

Chile

G. & J. Weir, Limited England

and Wales

Ordinary

100%

Ordinary

100%

Hopkinsons Limited

Scotland

Ordinary

100%

Hurricane
Investments Inc.

USA

Inversiones
Linatex Chile
(Holdings) Limitada

Chile

n/a

100%

Ordinary

100%

JF (Jiangsu)
Machinery Co. Ltd

China

3912 Gilmore Avenue
Bakersfield
California
93308
USA

31 Isando Road
Isando
Gauteng
1600
South Africa
Republic of South Africa

Corporation Trust Center
1209 Orange St
Wilmington
New Castle
Delaware 19801
USA

Corporation Trust Centre
1209 Orange Street
Wilmington
Delaware 19801
USA

San Jose 0815
San Bernardo
Santiago
Chile

Weir Power & Industrial
– Emerging Markets
Britannia House
Huddersfield Road
Elland
West Yorkshire
HX5 9JR

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

Corporation Trust Center
1209 Orange St
Wilmington
New Castle
Delaware 19801
USA

San Jose 0815
San Bernardo
Santiago
Chile

East 188
Hu Tai Road
Liuhe Town
Taicang
China

Common

100%

Ordinary

100%

Common

100%

Units

50%

Ordinary

100%

Ordinary

100%

Ordinary

100%

Ordinary

100%^

Common

100%

Ordinary

100%

n/a

100%

The Weir Group PLCAnnual Report and Financial Statements 2017203

Registered address

Class of shares

Percentage
held

Name

Country of
incorporation

Registered address

Class of shares

Percentage
held

77 Science Park Drive
~04-01/08
Cintech 111 Building
118256
Singapore

10th Floor
1 West Regent Street
Glasgow
G2 1RW
Scotland

Level 16
Integra Tower
The Intermark 348 Jalan
Tun Razak
Kuala Lumpur

Level 54
Hopewell Centre
183 Queen’s Road East
Hong Kong

5 Clarke Road
Alrode 1541
PO Box 17872
Randhart
1457
South Africa

2nd Floor
No. 2-4, Jalan Manau
(PO Box 11379, 50744
K. Lumpur)
Kuala Lumpur
Wilayah Persekutuan
50460
Malaysia

1-5 Marden Street
Artarmon
New South Wales
2064
Australia

San Jose 0815
San Bernardo
Santiago
Chile

Santa Catalina De Chena
850
San Bernardo
Santiago
Chile

PO Box 173
Kingston Chambers
Road Town Tortola
British Virgin Islands

c/o Weir Minerals Europe
Halifax Road
Todmorden
Lancashire
OL14 5RT

Weir Power & Industrial
– Emerging Markets
Britannia House
Huddersfield Road
Elland
West Yorkshire
HX5 9JR

2nd Floor
No. 2-4, Jalan Manau
Kuala Lumpur
Wilayah Persekutuan
50460
Malaysia

Ordinary

100%

Linatex UK Holding
Limited

England
and Wales

Ordinary

100%

Metalúrgica Vulco
Ltda

Chile

Ordinary

100%

Multiflo Pumps Pty
Limited

Australia

Ordinary

100%

Ordinary

100%

Ordinary

100%

Nuchem Weir India
Limited

India

P.S.L. International
Limited

England
and Wales

PT KOP Surface
Products

Indonesia

Ordinary A,B

100%

PT Weir Minerals
Contract
Services Indonesia

Indonesia

Ordinary

100%

n/a

100%

PT Weir Minerals
Indonesia

Indonesia

100%

Ordinary
Series 1, 2
Preference

Ordinary

100%

Ordinary

100%

Ordinary

100%

PT Weir Oil & Gas
Indonesia

Indonesia

Seaboard Canada
Ltd.

Canada

Seaboard Holdings,
Inc.

USA

Hong Kong

Seaboard
International
Holding Company
(Hong Kong) Limited

Weir Power & Industrial
– Emerging Markets
Britannia House
Huddersfield Road
Elland
West Yorkshire
HX5 9JR

San Jose 0815
San Bernardo
Santiago
Chile

1-5 Marden Street
Artarmon
New South Wales
2064
Australia

E-46/12
Okhla Industrial Area
Phase-II
New Delhi
110020
India

Weir Power & Industrial
– Emerging Markets
Britannia House
Huddersfield Road
Elland
West Yorkshire
HX5 9JR

Suite 701B
7th Floor
Setiabudi Atrium
JI H.R. Rasuna Said Kav
62
Jakarta 12920
Indonesia

Jl Mulawarman RT. 20
Batakan
Kecil Kelurahan Manggar
East Kalimantan
76111
Indonesia

5233-49 Avenue Red Deer
Alberta
T4N 6G5
Canada

Corporation Trust Center
1209 Orange Street
Wilmington
County of New Castle
Delaware
19801
USA

Level 54
Hopewell Centre
183 Queen’s Road East
Hong Kong

Ordinary

100%^

n/a

100%

Ordinary

100%

Equity

33%

Ordinary

100%

Ordinary A,B

100%

Ordinary

100%

Ordinary

100%

Ordinary

95%

Common

100%

Common

100%

Ordinary

100%

Country of
incorporation

Singapore

Name

KOP Surface
Products
(Services) Pte. Ltd

KOP Surface
Products
(Services) UK Ltd

Scotland

KOP Surface
Products Sdn Bhd

Malaysia

Linatex (H.K.)
Limited

Hong Kong

Linatex Africa (Pty)
Limited

Republic of
South Africa

Linatex Asset
Holdings
Malaysia Sdn. Bhd.

Malaysia

Linatex Australia
Pty. Limited

Australia

Linatex Chile
Limitada

Chile

Linatex Chile SPA

Chile

Linatex
Consolidated
Holdings Limited

British Virgin
Islands

Linatex Limited

England
and Wales

Linatex Rubber
Limited

England
and Wales

Linatex Rubber
Products Sdn. Bhd.

Malaysia

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information204

Subsidiary Undertakings continued

Name

Seaboard
International Inc.

Country of
incorporation

USA

Seaboard Real
Estate, LLC

USA

Shanghai JF
Engineering
Equipment Co. Ltd

China

Shanghai JF
Industries Co. Ltd

China

Shanghai JF
Machinery Co. Ltd

China

Shanghai Vortex
Engineering
Machinery Co. Ltd

China

Slurry Holdings
Limited

Malta

Scotland

Specialised
Petroleum
Manufacturing
Limited

SPM Flow Control
de México, S. de R.L.
de C.V.

Mexico

CT Corporation System
1209 Orange Street
Wilmington
DE 19801
USA

Corporation Trust Center
1209 Orange Street
Wilmington
County of New Castle
Delaware 19801
USA

No.572, Yonghe Road
Jing’an District
Shanghai
China

Building No. 1
1268 Shuang Zhu Road
Huating Town
Jiading District
Shanghai
China

4918 Liuxiang Road
Xuhang Town
Jiading District
Shanghai
China

Building No. 3
4918 Liuxiang Road
Xuhang Town
Jiading District
Shanghai
China

93 Mill Street
Qormi
QRM3102
Malta

SPM House
Badentoy Crescent
Badentoy Industrial Park
Portlethen
Aberdeen
AB12 4YD

Bosque De Ciruelos
180 Bosques De Las
Lomas
Bosque Hayas Y Bosque
De La
Reforma Miguel Hidalgo
Dirstrito Federal
CP 11700
Mexico

Registered address

Class of shares

Percentage
held

Name

Common

100%

The Weir Group
International S.A.

Country of
incorporation

Switzerland

Units

100%

The Weir Group
Pension
Trust Limited

Scotland

n/a

100%

n/a

100%

Trio Engineered
Products
(Hong Kong)
Limited

Trio Engineered
Products, Inc.

Hong Kong

USA

TWG Canada
Holdings Limited

Scotland

TWG Cayman
Limited

Cayman
Islands

n/a

100%

n/a

100%

Ordinary

100%

TWG Drilling
Limited

Scotland

Ordinary

100%

TWG Engineering
(No.1) Limited

England
and Wales

Serie A

100%

TWG Engineering
(No.2) Limited

England
and Wales

SPM Flow Control
Ltd.

Canada

5233-49 Ave Red Deer
Alberta
T4N 6G5
Canada

A, B, C, D
Common
E, F
Preferred

100%

TWG Engineering
(No.3) Limited

England
and Wales

S.P.M Flow Control,
Inc.

USA

SPM UK Limited

Cayman
Islands

The Weir Group
Insurance
Company Limited

Isle of Man

1999 Bryan Street
Dallas
Texas 75201
USA

c/o Maples Corporate
Services Limited
PO Box 309
Ugland House
Grand Cayman
KY1-1104
Cayman Islands

Rose House
51-59 Circular Road
Douglas
IM1 1RE
Isle of Man

Common

100%

Ordinary

100%

TWG Engineering
(No.4) Limited

England
and Wales

TWG Engineering
(No.5) Limited

England
and Wales

Ordinary

100%

Registered address

Class of shares

Percentage
held

Ordinary

100%

100%^

Ordinary
Limited by
Guarantee

Ordinary

100%

Common

100%

Ordinary

100%

Ordinary,
Preference

100%

Ordinary

100%

Ordinary

100%

Ordinary

100%^

Ordinary

100%

Ordinary

100%

Ordinary

100%

c/o Daniel Schneuwly,
Rue de Romont
35 Avocat
1700 Fribourg
Switzerland

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

Level 54
Hopewell Centre
183 Queens Road East
Hong Kong

CT Corporation System
818 West Seventh Street
Suite 930
Los Angeles, CA 90017
USA

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

M&C Corporate Services
Limited
PO Box 309
Ugland House,
South Church Street
George Town
Grand Cayman
Cayman Islands

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

Weir Power & Industrial
– Emerging Markets
Britannia House
Huddersfield Road
Elland
West Yorkshire
HX5 9JR

The Weir Group PLCAnnual Report and Financial Statements 2017Registered address

Class of shares

Percentage
held

Name

Ordinary

100%

TWG US
Holdings LLC

Country of
incorporation

USA

205

Registered address

Class of shares

Percentage
held

Corporation Trust Center
1209 Orange Street
City of Wilmington
County of New Castle
Delaware 19801
USA

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

Av. Separadora Industrial
No. 2201
Urb Volcano Ate
Lima
Peru

San Jose 0815
San Bernardo
Santiago
Chile

Weir Power & Industrial
– Emerging Markets
Britannia House
Huddersfield Road
Elland
West Yorkshire
HX5 9JR

1-3 Marden Street
Artarmon
Sydney
New South Wales 2064
Australia

Weir Power & Industrial
– Emerging Markets
Britannia House
Huddersfield Road
Elland
West Yorkshire
HX5 9JR

1 West Regent Street
Glasgow
Scotland
G2 1RW

PO Box 2724
Makkah Street
Dammam Second
Industrial
City Al Khobar
31952
Saudi Arabia

Units

100%

Ordinary

100%^

Ordinary

100%

Ordinary

99%

Ordinary

100%

Ordinary,
Ordinary B

100%

Ordinary

100%

Ordinary

100%^

Partnership

100%

Common

49%

Ordinary

100%

Common,
Preference
– Class A

Common

100%

Common

100%

TWG Young Limited

Scotland

Vulco Peru SA

Peru

Vulco SA

Chile

W. Luff Limited

England
and Wales

Ordinary,
Preference

100%^

Ordinary,
Preference

100%^

Ordinary

100%

Ordinary

100%^

W.P.R. Marks
Limited

England
and Wales

Ordinary

100%

Warman Pumps Ltd

Australia

Ordinary

100%^

Waterloo West
Limited

England
and Wales

Ordinary,
Preference

100%

Ordinary,
Preference

100%

Weir ABF LP

Scotland

Ordinary

100%

Weir Arabian Metals
Company

Saudi Arabia

Ordinary

100%

Weir B.V.

The
Netherlands

PO Box 249
5900 AE Venlo
Netherlands

Weir Canada, Inc.

Canada

Ordinary

100%

Weir Canadian
Investments, Inc.

Canada

2360 Millrace Court
Mississauga
ON
L5N 1W2
Canada

Name

Country of
incorporation

TWG Engineering
(No.7) Limited

England
and Wales

TWG Finance, Inc.

USA

TWG Investments
(No.3) Limited

Scotland

TWG Investments
(No.4) Limited

Scotland

TWG Investments
(No.6) Limited

Scotland

TWG Investments
(No.7) Limited

Scotland

TWG Investments
(No.8) Limited

Scotland

TWG Investments
(No.10) Limited

Scotland

TWG Overseas
Finance S.à.r.l.

Luxembourg

TWG South America
Holdings Limited

Scotland

TWG UK Forex
Limited

Scotland

TWG UK Holdings
Limited

Scotland

TWG US Forex
Limited

Scotland

Weir Power & Industrial
– Emerging Markets
Britannia House
Huddersfield Road
Elland
West Yorkshire
HX5 9JR

Corporation Trust Center
1209 Orange Street
City of Wilmington
County of New Castle
Delaware 19801
USA

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

20, Rue des Peupliers
L – 2328
Luxembourg

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information206

Subsidiary Undertakings continued

Name

Country of
incorporation

Registered address

Class of shares

Percentage
held

Name

Weir Control Valves
(Suzhou) Co., Ltd

China

Weir do Brasil Ltda

Brazil

Weir Drilling
Services Limited

England
and Wales

Weir Engineering
Products (Shanghai)
Co., Ltd

China

Weir Engineering
Services Limited

Scotland

Weir Flow Control
(Hong Kong) Limited

Hong Kong

Weir Floway, Inc.

USA

Weir France SA

France

Weir Gabbioneta
Poland Sp Z.o.o

Poland

Weir Gabbioneta
S.r.l.

Italy

Australia

Weir Group
(Australian
Holdings) Pty
Limited

Weir Group
(Overseas Holdings)
Limited

Scotland

Weir Group
African IP Limited

Scotland

Weir Group
Energy Equipment
(Suzhou) Co., Ltd.

China

Chun Wang Road
Huangdai Town
Xiangcheng District
Suzhou
Jiangsu Province
China

Av Jose Benassi, 2151
Condominio
FAZGRAN – CEP 13213
085
Jundiai
SP

Weir Power & Industrial
– Emerging Markets
Britannia House
Huddersfield Road
Elland
West Yorkshire
HX5 9JR

Room 318, Floor 3
No. 458, Fute North Road
Shanghai
China

1st Floor
Avondale House
Phoenix Crescent
Strathclyde Business Park
Bellshill
Scotland
ML4 3NJ

Level 54
Hopewell Centre
183 Queen’s Road East
Hong Kong

1105 North Market Street
Suite 1300
Wilmington
Delaware 19899
USA

106 Boulevard Paul Raphel
Saint Victoret
13730
France

ul. Partyzantow, 4
42-300 Myszkow
Poland

Via M.G. Agnesi
1 20834 Nova Milanese
(MB)
Italy

1-5 Marden Street
Artarmon
New South Wales
2064
Australia

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

No.22 Chunwang Road,
Huangdai Town,
Xiangcheng District,
Suzhou, Jiangsu Province,
China

n/a

100%

Weir Group
Engineering
Hong Kong Limited

Country of
incorporation

Hong Kong

Weir Group General
Partner Limited

Scotland

Nominal

100%

Weir Group Holdings
Limited

Scotland

Ordinary A,
B, C

100%

Weir Group Inc.

USA

n/a

100%

Ordinary

100%

Ordinary

75%

Common

100%

Ordinary 99.999%

Ordinary

100%

Weir Group
Investments Limited

Scotland

Weir Group IP
Limited

Scotland

Weir Group
Management
Services Limited

Scotland

Weir Group Trading
(Shanghai) Co., Ltd.

China

Weir Group Trading
Mexico,
S.A. de C.V.

Mexico

Ordinary

100%

Weir HBF (Pty) Ltd

Republic of
South Africa

Ordinary

100%^

Weir Heat Exchange
Limited

Scotland

Ordinary

100%

Weir Holdings B.V.

The
Netherlands

Ordinary

100%

Weir India Private
Limited

India

n/a

100%

Registered address

Class of shares

Percentage
held

Ordinary

100%

Ordinary

100%^

Ordinary

100%^

Common,
Preferred

100%

Ordinary

100%^

Ordinary

100%^

Ordinary

100%^

n/a

100%

Nominative

100%

Ordinary

100%

Ordinary

100%^

Ordinary

100%

Ordinary

100%

Level 54
Hopewell Centre
183 Queen’s Road East
Hong Kong

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

Corporation Trust Center
1209 Orange Street
City of Wilmington
County of New Castle
Delaware 19801
USA

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

Room 02,03, Longlife
Level 14 No. 1566, West
Yan’an Road, Shanghai,
China

Av. Nafta 775
Parque Industrial
Stiva Aeropuerto
Apocada
66600
Mexico

Trollope Charles
Private Bag X14
Northlands
Gauteng
2116
South Africa

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

PO Box 249
5900 AE
Venlo
The Netherlands

Office Unit No 912 and
914
9th Floor
DLF Tower- A, Plot No 10
Jasola District
Centre New Delhi
110025
India

The Weir Group PLCAnnual Report and Financial Statements 2017207

Registered address

Class of shares

Percentage
held

Plot No. 137
Capri Point
Mwanza
Tanzania

Halifax Road
Todmorden
Lancashire
OL14 5RT

Askonkatu 9F
Lahti
Etela-Suomen
Laani
15100
Finland

7 Rue Edison
Europarc du Chene
69500 Bron Cede
France

Lise-Meitner-Straße 12
Heilbronn
D-74074
Badenwürtternberg
Germany

Teleki László utca 11
1/.3 Tábanya
2800
Hungary

Office Unit No 912 and
914
9th Floor
DLF Tower – A
Plot No 10
Jasola District Centre
New Delhi – 110025
New Delhi
India

Via F.lli Cervi 1/D
20063 Cernusco Sul
Naviglio Milano
Italy

134
Karagandinskoyeshosse str.
Temirtau
101403
Kazakhstan

Av. Nafta 775
Parque Industrial
Stiva Aeropuerto
Apocada
Nuevo Leon
66600
Mexico

205, 2nd Khoroo
Bayangol District
Ulaanbaatar
Mongolia

Ordinary

100%

Ordinary

100%

Ordinary

100%

Ordinary

100%

Ordinary

100%

Ordinary

100%

Ordinary

97%

Ordinary

100%

n/a

100%

Nominative

100%

Nominative

100%

Ordinary

100%

Registered address

Class of shares

Percentage
held

Name

Common

100%

Weir Minerals East
Africa Limited

Country of
incorporation

Tanzania

Name

Weir International
Co. Ltd

Country of
incorporation

South Korea

Weir Investments
One Limited

Scotland

Weir Investments
Two Limited

Scotland

Weir Investments
Three Limited

Scotland

Weir Investments
Four Limited

Scotland

Weir Malaysia
Sdn. Bhd.

Malaysia

Weir Minerals Africa
(Proprietary) Limited

Republic of
South Africa

Weir Minerals
Armenia LLC

Republic of
Armenia

Weir Minerals
Australia Ltd

Australia

Weir Minerals
Botswana
(Pty) Limited

Botswana

Weir Minerals
Caribe SRL

Dominican
Republic

Weir Minerals
Central
Africa Limited

Republic
of Zambia

Weir Minerals China
Co., Limited

China

Weir Minerals
Colombia SAS

Colombia

#151, Beomjigi-ro
Danwon-gu
Ansan City
Gyeonggi-do
425-852
South Korea

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

Tingkat 2
2-4, Jalan Manau
Kuala Lumpur
Wilayah Persekutuan
50460
Malaysia

5 Clarke Road
Alrode 1541
PO Box 17872
Randhart 1457
South Africa

Index 0069, 16/35
Kamarak Str, Yerevan,
Republic of Armenia

1-3 Marden Street
Artarmon
New South Wales
2064
Australia

Plot 5039/5040
Somerset East Industrial
Francistown
Botswana

KK 22,5 Autopista Duarte
Parque Industrial Duarte
Parque de Naves Pid 4
Santo Domingo
Dominican Republic

Plot 3655
Chimbuluma Road
Kitwe
Zambia

Factory #27
158 Hua Shan Road
Suzhou New District
Suzhou
215011 China

Carrera 43 B # 16 41
Office 904
Building Staff
Medellin Antioquia
Colombia

Weir Minerals
Europe Limited

England
and Wales

Weir Minerals
Finland OY

Finland

Weir Minerals
France SAS

France

Weir Minerals
Germany GmbH

Germany

Ordinary,
Preference

100%^

Ordinary,
Preference

100%^

Ordinary

100%

Ordinary

100%^

Weir Minerals
Hungary Kft

Hungary

Ordinary,
Preference

100%

Weir Minerals (India)
Private Limited

India

Ordinary

100%

Ordinary

100%

Weir Minerals
Italy Srl

Italy

Ordinary

100%

Weir Minerals
Kazakhstan LLP

Kazakhstan

Ordinary

100%

Weir Minerals
Mexico, S.A. de C.V.

Mexico

Ordinary

100%

Weir Minerals
Mexico Servicios,
S.A. de C.V.

Mexico

Ordinary

100%

n/a

100%

Weir Minerals
Mongolia LLC

Mongolia

Ordinary

100%

Weir Minerals
Mozambique Ltd

Mozambique Mozambique

Ordinary

100%

Maputo Cidade
Distrito urban1
Bairro Central
AV. Zedequias
Manganhela

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information208

Subsidiary Undertakings continued

Name

Country of
incorporation

Registered address

Class of shares

Percentage
held

Name

Country of
incorporation

Registered address

Class of shares

Percentage
held

Weir Minerals
Netherlands B.V.

The
Netherlands

Weir Minerals
North Africa SARL

Morocco

Weir Minerals
Poland Sp. z.o.o.

Poland

Namibia

Weir Minerals
Pump & Mining
Solutions Namibia
(Proprietary) Ltd

Weir Minerals RFW
LLC (OOO)

Russia

Weir Minerals
Sweden AB

Sweden

Weir Minerals
Taiwan Corp. Ltd

Taiwan

Weir Minerals
Ukraine LLC

Ukraine

Weir Minerals
West Africa Limited

Ghana

Weir Oil & Gas
Australia
Pty Limited

Australia

Weir Oil & Gas
Technical Service
(Tianjin) Limited

China

Weir Power &
Industrial
France SAS

France

Weir Power &
Industrial Singapore
Private Limited

Republic of
Singapore

Weir Pumps Limited

Scotland

P.O.Box 249
5900 AE
Venlo
The Netherlands

Boulevard Sidi Mohamed
Ben Abdellad
IM B
1ER Etage N 29.10160
Casablanca
Morocco

ul. Ignacego Domeyki 2
30-066 Krakow
Poland

54 Hidipo Hamutenya Ave
Swakopmund 9000
Namibia

Building 12
8 Marta Street
127083
Moscow
Russia

Metallvagen 6
982 38 Gallivare
Sweden

4F
No. 431 Ruiguang Rd
Neihu Dist
Taipei City
11492
Taiwan

31 Blagoyeva Street
Dnepropetrovsk
49054
Ukraine

No. 4, 3rd Close
Airport Residential Area
Post Box CT3170
Accra
Ghana

1-5 Marden Street
Artarmon
New South Wales 2064
Australia

Room 312
Rongke Building
No. 8
Zhaofa Xincun
Tianjin Economic-
Technological
Development Area
China

106 Boulevard Paul Raphel
Saint Victoret
13730
France

77 Science Park Drive,
#04-01/08, Cintech III
Building, 118256,
Singapore

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

Ordinary

100%

Weir Pump and
Valve Solutions, Inc.

USA

Ordinary

100%

Weir Services
Australia Pty Ltd

Australia

The Corporation Company
40600 Ann Arbor Rd
E Ste
201 Plymouth
MI 48170-4675
USA

1-5 Marden Street
Artarmon
New South Wales 2064
Australia

Ordinary

100%

Weir Services
Tanzania
(Pty) Limited

Ordinary

100%

South Africa

Plot No 137
Capri Point
Mwanza
Tanzania

Weir Slurry
Group Inc.

USA

Weir Solutions
Caspian LLC

Azerbaijan

n/a

100%

Class A,
Class B

100%

Ordinary

90%

Weir Solutions FZE

United Arab
Emirates

Ordinary

100%

Weir Solutions LLC

Oman

CT Corporation System
8020 Excelsior Drive
Suite 200
Madison
Wisconsin 53717
USA

Apt 77/77A House 29
Zarifa Aliyeva Street
Sabail District
Baku City
AZ1095
Azerbaijan

Office no. W 312
West Side 1
Dubai Airport Free Zone
Dubai
United Arab Emirates

PO Box 168
Postal Code 1202
Muscat
Sultanate of Oman

Common

100%

Ordinary

100%

Ordinary

100%

Common,
Preferred

100%

Ordinary 99.999%

Ordinary

100%

Common

100%

Ordinary

100%

Weir SOS Limited

The Bahamas Ocean Centre

Ordinary

100%

Ordinary

100%

n/a

100%

Brazil

Weir SPM do Brasil
Comércio, Locação
e Instalação
de Bombas e
Equipamentos
Geradores de
Pressão Ltda.

Weir SPM Singapore
Pte Limited

Republic of
Singapore

Ordinary

100%

Weir Sudamerica SA Chile

Ordinary

100%

Weir Support
Services Limited

Scotland

Ordinary

100%

Weir Turkey
Mineralleri
Limited Sirketi

Turkey

Montagu Foreshore
East Bay Street
Nassau
New Providence
The Bahamas

Rua Internacional s/n
Granja dos Cavaleiros
Macaé
Rio de Janeiro
CEP 27930-075
Brasil

15 Tukang Innovation
Drive
618299
Singapore

San Jose 0815
San Bernardo
Santiago
Chile

10th Floor
1 West Regent Street
Glasgow
Scotland
G2 1RW

Istanbul Tuzla Organize
Sanayi
Bolgesi
2. Cadde No. 12
Tepeoren Tuzla
Istanbul
34959
Turkey

Nominal

100%

Ordinary

100%

Ordinary 99.99%

Ordinary

100%^

Bearer

100%

The Weir Group PLCAnnual Report and Financial Statements 2017209

Name

Weir US
Holdings Inc.

Country of
incorporation

USA

Weir USA
Holdings, LLC

USA

Weir Valves &
Controls UK Limited

England
and Wales

Weir Valves &
Controls USA Inc.

USA

Weir Vulco
Argentina S.A.

Argentina

Weir Vulco
Venezuela S.A.

Venezuela

Weir Warman (U.K.)
Limited

England
and Wales

Registered address

Class of shares

Percentage
held

Name

Country of
incorporation

Registered address

Class of shares

Percentage
held

Corporation Trust Center
1209 Orange Street
Wilmington
County of New Castle
Delaware 19801
USA

29 Old Right Road
Ipswich
Massachusetts 01938
USA

Britannia House
Huddersfield Road
Elland
Halifax
West Yorkshire
HX5 9JR

155 Federal Street
Suite 700
Boston
Massachusetts 02110
USA

Sarmiento 511
Sur 1°Piso A
San Juan. CP 5400
Argentina

Zona Industrial UD321
Calle 6
instersección Transversal
‘E’
Parcela 12-01
Puerto Ordaz
Venezuela

Halifax Road
Todmorden
Lancashire
OL14 5RT

Common

100%

Weir YES Africa
(Pty) Ltd

Republic of
South Africa

Units

100%

Wesco LLC

United Arab
Emirates

Ordinary

100%^

WHW Group, Inc.

USA

Common,
Preferred

100%

Wilkinmark Limited

England
and Wales

Ordinary

100%

Ordinary

100%

Wokingham Finance
Company Limited

England
and Wales

Ordinary

100%^

Wuxi Weir Minerals
Equipments Co.
Limited

China

Ordinary

100%

Ordinary

49%

Common

100%

Ordinary

100%

Ordinary

100%^

n/a

100%

5 Clarke Street
Alrode
Alberton
Gauteng
1449
South Africa

Bin Hamoodah Towers
Floor 13
Khalifa Street
Abu Dhabi
United Arab Emirates

Corporation Trust Center
1209 Orange Street
City of Wilmington
County of New Castle
Delaware 19801
USA

Weir Power & Industrial
– Emerging Markets
Britannia House
Huddersfield Road
Elland
West Yorkshire
HX5 9JR

Lot 265
Wuxi-Singapore Industrial
Park
Wuxi City
Jiangsu Province
China

The Group has an interest in a partnership, the Weir ABF LP, which is fully consolidated into these statements. The Group has
taken advantage of the exemption conferred by Regulation 7 of the Partnerships (Accounts) Regulations 2008 and has, therefore,
not appended the accounts of this qualifying partnership to these financial statements. Separate accounts for the partnership are
not required to be, and have not been, filed at Companies House in the UK.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information210

Shareholder Information

Company Secretary &
Registered Office
Mr Christopher Morgan
The Weir Group PLC
1 West Regent Street
Glasgow
G2 1RW

Registered in Scotland.
Company No. SC002934.

Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol, BS99 6ZZ

Website: www.investorcentre.co.uk

Telephone: 0370 707 1402

Shareholder enquiries relating to
shareholding, dividend payments,
change of name or address, lost
share certificates or dividend cheques,
transfer of shares etc. should be
addressed to Computershare.

Shareholder communications
Online Communications
Shareholders are encouraged to visit
the Company’s corporate website
(www.global.weir), 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 ‘Shareholders
FAQ’ section.

E-Communications
We are encouraging our shareholders
to receive their information by email and
via our website. Not only is this quick, it
helps to reduce paper, printing and costs.

To register for e-communications, log on
to www.investorcentre.co.uk/ecomms

Managing your shareholding
online with Investor Centre
Investor Centre is a free, secure online
service run by Computershare, giving you
convenient access to information on your
shareholdings. Manage your shareholding
online and take advantage of all these
features and more:

• View share balances and market

values for all of your Computershare-
managed holdings

• Update dividend mandate bank
instructions and view dividend
payment history

• Register to receive company

communications online

• Cast your Proxy Vote online for
forthcoming General Meetings
• Update personal details, such as

your address

Registration is quick and easy. Just
visit www.investorcentre.co.uk with
your Shareholder Reference Number
(SRN) to hand.

After registering, you may be sent an
activation code in the post, used to
validate your account. Once activated,
you will have full access to Investor
Centre services.

Annual and Interim Reports
Our Annual Report is available online.
You can view or download the full Annual
Report and Interim Report from our
website at www.global.weir/investors/
reporting-centre. Current and past Annual
and Interim Reports are also available to
view and download.

The Weir Group PLCAnnual Report and Financial Statements 2017211

No. of
Shareholders

2,941

1,338

243

347

138

No. of Shares

57.78

26.29

4.77

6.82

2.71

0.75

1,175,218

2,909,897

1,756,935

11,358,895

33,008,161

27,233,284

0.88 147,248,638

0.52

1.30

0.78

5.06

14.69

12.12

65.53

5,090

100.00 224,691,028

100.00

Holdings

3,313

1,666

65.09% 4,780,710

2.13%

32.73% 215,057,368

95.71%

0.26%

0.45%

32,244

45,606

1.10% 1,542,355

0.02%

0.35% 3,232,744

0.01%

0.02%

0.69%

0.00%

1.44%

5,090

100.00% 224,691,028

100.00%

Ordinary shareholder analysis at 31 December 2017
By country

1 UK shareholders
2 Overseas shareholders

93.87%
6.13%

By holding size

Range

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 – 500,000

500,001 – 1,000,000

1,000,001 – 999,999,999

Total

By shareholder category

Individuals

Bank or Nominees

Investment Trust

Insurance Company

Other Company

Pension Trust

Other Corporate Body

Total

Annual General Meeting 2018
Our Annual General Meeting will be held at our Head Office, 1 West Regent Street, Glasgow, at 2.30pm on Thursday
26 April 2018. Further details are contained in the Notice of Annual General Meeting 2018 which is available to download
from our website at www.global.weir/shareholder-information/agm

Voting
Information on how you can vote electronically on the resolutions which will be put forward at our 2018 AGM can be obtained
through our Registrar by visiting www.investorcentre.co.uk/eproxy. You will need details of the Control Number, your SRN and
PIN which can be found on the Form of Proxy or email, if you have asked to be sent email communications.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

212

Shareholder Information continued

Dividends
2017 final dividend
The Directors have recommended a final dividend of 29.0 pence per share, for the year ended 31 December 2017. Payment
of this dividend is subject to approval at the 2018 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 Scrip elections
Payment date

26 April 2018
26 April 2018
27 April 2018
23 May 2018
4 June 2018

Dividend history – (pence per share)

Interim

Final

Total

2013

8.8

33.2

42.0

2014

15.0

29.0

44.0

2015

15.0

29.0

44.0

2016

15.0

29.0

44.0

2017

15.0

29.0

44.0

IMPORTANT – Future Payment of Dividends – Mandatory Direct Credit
From 2019, the Company is simplifying the way in which it pays dividends to shareholders by only paying cash dividends
directly into a shareholder’s nominated bank account. This is known as Mandatory Direct Credit. The Company will no longer
be issuing dividend cheques. Shareholders recorded on the register of members as receiving dividend payments by cheque
will be contacted by Computershare. Those shareholders will need to take the required action by selecting the appropriate
option as set out in the Computershare notification.

Shareholders on the register of members who already have their dividends paid by any of the options set out below are not
required to take any action unless they choose to withdraw from the Company’s Scrip Dividend Scheme (SCRIP).

Direct payment to your bank
The best way to ensure that dividends are received as quickly as possible is to have your dividends 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 register online or download a Dividend Mandate Form by selecting
Downloadable Forms at www.investorcentre.co.uk. The form can also be accessed via the FAQ section on the Company’s
website at www.global.weir/investors/shareholder-information/shareholders-faq. Alternatively, you can contact Computershare,
who will also be able to assist with any questions you may have.

An Annual Dividend Confirmation detailing all payments made throughout the tax year will then be sent to you once a year either
electronically or to your registered address. In 2018, the Dividend Confirmation will be dispatched with the November 2018
dividend payment and contain the payment information for dividends paid during the 2018/2019 tax year.

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 the fees applied for this service
will be automatically deducted from the proceeds before it is paid to you. For further details go to www.investorcentre.co.uk then
select the information tab followed by FAQs then select the Dividends and Payments tab and the Global Payment Service tab.

Scrip dividend scheme
Shareholders may elect to participate in the Company’s Scrip Dividend Scheme (SCRIP). The SCRIP provides shareholders
with the option to receive new fully paid ordinary shares in place of their cash dividend. Shareholders who participate in the
SCRIP will be able to increase their shareholding in a simple, cost effective way without incurring dealing costs or stamp duty.
All UK shareholders, including CREST members, can join the SCRIP, although certain restrictions apply to overseas shareholders.
Holders of the Company’s American Depository Receipts (“ADRs”) are not eligible to join the SCRIP.

The price for the SCRIP dividend will be announced on 3 May 2018. The final date for receipt of SCRIP elections will be
23 May 2018. The 2017 final dividend will be paid on 4 June 2018.

The Weir Group PLCAnnual Report and Financial Statements 2017
213

American Depositary Receipt
(ADR) programme
The Company has a sponsored level 1
ADR programme in the United States.
Each ADR represents 2 ordinary shares
of 12.5 pence each, in the Company.
The Company’s ADR programme is
administered by Citibank, who were
appointed in February 2016.

ADR investor contact
Telephone: +1 781 575 4555
Citibank representatives are available
from 8:30am to 6:00pm US Eastern
Standard Time (EST) Monday to Friday.
Email:citibank@shareholders-online.com

In writing
Citibank Shareholder Services
P.O. Box 43077
Providence,
Rhode Island 029403077

ADR broker contact
Telephone: +1 212 723 5435 /
+44 207 500 2030
citiadr@citi.com

E-mail:

Dividend tax allowance
Dividend tax credits were replaced in
April 2016 by an annual £5,000 tax free
allowance on dividend income across
an individual’s entire share portfolio.
Above this amount, individuals will pay
tax on their dividend income at a rate
dependent on their income tax bracket
and personal circumstances. We will
continue to provide registered shareholders
with confirmation of the dividends paid
and this should be included with any
other dividend income received when
calculating and reporting total dividend
income received. It is a shareholder’s
responsibility to include all dividend
income when calculating any tax liability.

This provision is enshrined in the Finance
Act 2016. If you have any tax queries,
please contact a financial advisor.

United Kingdom 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.

Share dealing services
Shareholders have the opportunity to
buy or sell The Weir Group PLC shares
using a share dealing facility operated
by our Registrar, Computershare. You will
need to register for this service prior to
using it. To access this service, go to
www.computershare.trade.

Internet share dealing – commission is
1% of the value of each sale or purchase
of shares, 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, go to www.computershare.trade.
Shareholders should have their SRN
available. The SRN appears on share
certificates and dividend documentation.
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% of the value of each sale or purchase
of shares, plus £35. In addition, stamp
duty, currently 0.5%, is payable on
purchases. You can contact Computershare
on 0370 703 0084. Shareholders should
have their SRN ready when making the
call. The SRN appears on share certificates
and dividend documentation. Detailed
terms and conditions are available at
www.investorcentre.co.uk or by contacting
Computershare. 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.

Shareholder warning alert
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/consumers/report-
scam-unauthorised-firm, 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.

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information

214

Glossary

Additive manufacturing

The process of joining materials to make objects from 3D model data (3D printing)

AGM

Board

bps

Annual General Meeting

The Board of Directors of The Weir Group PLC

Basis points

brownfield

A term used to describe current and expanding mine sites

capex

CGU

Capital expenditure

Cash generating unit

Comminution

Crushing, screening and grinding of materials in mining and sand and aggregates markets

Company

The Weir Group PLC

DBP

Director

EBIT

EBITDA

Deferred Bonus Plan

A Director of The Weir Group PLC

Earnings before interest and tax

Earnings before interest, tax, depreciation and amortisation

emerging markets

Asia-Pacific, South America, Africa and the Middle East

EPCMs

EPS

Engineering, Procurement and Construction Management companies

Earnings per share

Estera EBT

Employee benefit trust (Estera Trust (Jersey) Limited)

Excellence Committees

Weir Group Management Committees ensuring best practice

External auditors

PricewaterhouseCoopers LLP

free cash flow

Cash flow from operating activities adjusted for income taxes, net capital expenditures,
net interest payments, dividends paid, settlement of derivatives, purchase of shares
for LTIP and other awards and pension contributions

GAAP

Generally Accepted Accounting Practice

greenfield

A term used to describe new mine developments

Group

IAS

IFRS

The Company together with its subsidiaries

Human resources

International Accounting Standards

International Financial Reporting Standards

The Weir Group PLCAnnual Report and Financial Statements 2017215

Input

Orders received from customers

Internet of Things (IoT)

The network of physical objects (devices, vehicles, buildings and other items) that are
embedded with electronics, software, sensors and network connectivity, which enables
these objects to collect and exchange data

ISO

KPI

International Organisation for Standardisation

Key performance indicator

Kleinwort EBT

Employee benefit trust (SG Kleinwort Hambros Trust Company (CI) Ltd)

Like-for-like

On a consistent basis, excluding the impact of acquisitions

LTIP

NPBTA

Long Term Incentive Plan

Normalised profit before tax and amortisation

operating margin

Operating profit including our share of results of joint ventures divided by revenue

ordinary shares

The ordinary shares in the capital of the Company of 12.5p each

PILON

Registrar

R&D

Payment in lieu of notice

Computershare Investor Services plc

Research and development

ROCE (like-for-like)

Continuing operations EBIT before exceptional items (excluding KOP EBIT and exceptional
items) divided by average net assets (excluding KOP net assets) excluding net debt and
pension deficit (net of deferred tax asset)

RPI

SHE

SME

UK Retail Prices Index

Safety, Health and Environment

Small and medium-sized enterprises

subsidiary

An entity that is controlled, either directly or indirectly, by the Company

tCO2e

TIR

TSR

WACC

WTI

Tonnes of carbon dioxide equivalent

Total Incident Rate (rate of any Incident that causes an employee, visitor, contractor
or anyone working on behalf of Weir to require off site medical treatment per
200,000 hours worked)

Total Shareholder Return comprising dividends paid on ordinary shares and the increase
or decrease in the market price of ordinary shares

Weighted average cost of capital

West Texas Intermediate

The Weir Group PLCAnnual Report and Financial Statements 2017Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information216

Financial Calendar

Annual General Meeting
26 April 2018

Ex-dividend date for final dividend
26 April 2018

Record date for final dividend
27 April 2018

Shareholders on the register at this date will receive the dividend.

Final day for receipt of SCRIP elections
25 May 2018

Final dividend paid
4 June 2018

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.

The Weir Group PLCAnnual Report and Financial Statements 2017T

The Weir Group PLC
1 West Regent Street
Glasgow
G2 1RW