The Weir Group PLC
Annual Report and Financial Statements 2019
FINANCIAL AND NON-FINANCIAL SUMMARY
ORDERS
£2.8bn
+8%6
2.4
2.5
256m
2.8
557m
1.9
1.9
TOTAL INCIDENT RATE3
0.49
+40% underlying
improvement
0.60
0.60
0.53
0.22
0.45
0.27
ESCO
ESCO
20152
20162
20172
20181
20191
20152
20162
20172
20181
20191
REVENUE
£2.7bn
+7%6
2.4
2.5
252m
2.7
572m
1.9
1.9
REVENUES FROM NEW SOLUTIONS5
£177m
+8%
168
165
177
110
ESCO
20152
20162
20172
20181
20191
N/A
2015
20162
20172
20181
20191
ADJUSTED PROFIT BEFORE TAX1,4
EMPLOYEE ENGAGEMENT
£303m
-2%
REPORTED LOSS
BEFORE TAX1
(£372m)
-532%
310
303
7.9/10
Employee NPS score
7.9
250
220
170
20152
20162
20172
20181
20191
N/A
2015
N/A
2016
N/A
2017
N/A
2018
2019
1 Continuing operations.
2 Total operations.
3 Total incident rate is an industry standard safety indicator that measures lost time
and recordable incidents per 200,000 hours worked. 2018 and prior years exclude ESCO.
4 Adjusted to exclude exceptional items and intangibles amortisation (note 2).
5 Defined as revenues from new products introduced in the last three years.
6 2018 restated at 2019 average exchange rates.
For more information visit our website
www.global.weir
The Weir Group PLC Annual Report and Financial Statements 2019
IN THIS REPORT
WHAT’S DRIVING
OUR MARKETS?
READ MORE
PAGES 8-9
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CHIEF EXECUTIVE’S
STRATEGIC REVIEW
READ MORE
PAGES 16-21
SUSTAINABILITY
OVERVIEW
READ MORE
PAGE 60
ZERO TIR
ENABLING
NET ZERO
LEADING
eNPS SCORE
50%
REDUCTION
IN CO2e
BY 2030
Strategic Report
‘We are Weir’
Our Business at a Glance
Our Markets
Chairman’s Statement
Our Business Model
Chief Executives Strategic Review
Our Key Performance Indicators
Section 172 Statement
Chairman and CEO Q&A
Financial Review
Operational Review
Risk Management
Principal Risks and Uncertainties
Sustainability Review
Non-financial Reporting
Corporate Governance
Chairman’s Introduction
Board of Directors
Group Executive
Governance Framework
Division of Responsibilities
Senior Independent Director Overview
Board Meetings
Board Inductions, Duties and Re-election
Board Activities
Engagement with our Shareholders
Governance in Action
Effectiveness and Evaluation
Board Statements
First Year as Non-Executive
Accountability
Viability Statement
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
Financial Statements
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Independent auditors’ report to the members of The Weir Group PLC 130
138
Consolidated Income Statement
139
Consolidated Statement of Comprehensive Income
140
Consolidated Balance Sheet
141
Consolidated Cash Flow Statement
142
Consolidated Statement of Changes in Equity
144
Notes to the Group Financial Statements
199
Company Balance Sheet
200
Company Statement of Changes in Equity
201
Notes to the Company Financial Statements
Additional Information
Subsidiary Undertakings
Shareholder Information
Glossary
216
224
227
1
SOLUTIONSCREATING SUSTAINABLEFOOTPRINTREDUCING OURZERO HARMCHAMPIONINGNURTURING OURUNIQUE CULTURE
The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
OUR ‘WE ARE WEIR’ STRATEGIC FRAMEWORK
MAKING OUR BUSINESS TRULY DISTINCTIVE
Our ‘We are Weir’ strategic framework is a simple guide to what makes
Weir unique. It includes a clear purpose, sets out our strategic priorities,
beliefs, way of working and how we deliver value for our stakeholders.
E
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O
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We deliver excellence
for all of our stakeholders,
through strong leadership,
performance culture
and rigorous standards
of governance.
We are a global family.
We are proud of our unique
blend of talent, technology
and culture. We are here to
inspire you to do the best
work of your life.
PEOPL E
here to enable the
sustainable and efficient
delivery of the natural
resources essential to
create a better future
for the world
C U STOMER
We will be the most
admired business in
our sector. Working in
partnership, we deliver
distinctive solutions and
compelling value.
2
We shape the next
generation of smart, efficient,
sustainable solutions with
cutting-edge science and
tradition of innovation.
T
E
C
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N
O
L
O
G
Y
TO UNDERSTAND MORE ABOUT HOW
WE ARE DELIVERING OUR STRATEGY:
SEE PAGES 16-25
The Weir Group PLC Annual Report and Financial Statements 2019
WE BELIEVE IN
S
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HIGH
TO UNDERSTAND MORE ABOUT
HOW WE LIVE OUR VALUES:
SEE PAGES 36-37
WE WORK THIS WAY
• We always seek to improve and innovate.
• We care for, challenge and encourage each other.
• We’re passionately, authentically ourselves.
• We work together to enhance our global communities.
• We speak up and take ownership for our shared success.
• We can’t wait.
TO UNDERSTAND MORE ABOUT
HOW WE OPERATE AS A BUSINESS:
SEE PAGES 14-15
WE DELIVER
TO UNDERSTAND MORE ABOUT
THE VALUE WE DELIVER:
SEE PAGES 30-31
R I T I C A L
N S
N-C
LU TI O
SIO
O
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M
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M
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SIVE
T CARE
HIGHLY E
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The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
‘WE ARE WEIR’ HIGHLIGHTS FROM 2019
MAKING
OUR PEOPLE
CO-OWNERS
We launched Weir ShareBuilder,
one of the most comprehensive
employee share plans in the world,
giving all our people the opportunity
to become co-owners of our business.
c.12,000
colleagues granted share awards in 2019
READ MORE
PAGE 12
MORE SUSTAINABLE MINING
The Minerals Division was awarded
a record £100m order to provide
energy-saving technology to the Iron
Bridge magnetite project in Western
Australia. The solution is 30% more
efficient than legacy systems.
30%
energy saving
READ MORE
PAGE 30
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The Weir Group PLC Annual Report and Financial Statements 2019
INSPIRING INNOVATION
We established the Weir Innovation
Network asking all our employees to help
solve some of our customers’ toughest
challenges. Our first winner, Peter Pavlin,
suggested a solution that could reduce
environmental waste in oil sands projects.
READ MORE
PAGE 65
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TAKING PEOPLE OUT
OF HARM’S WAY
The ESCO Division developed a toolhead
which automates ground engaging tools
change-outs. This removes people from
one of the most hazardous parts of a mine.
READ MORE
PAGE 42
LAUNCH OF ELECTRIC
FRACK PUMP
The Oil & Gas Division launched the
SPM® QEM 5000, its first electric-compatible
frack pump. It uses proven technology
to enable an alternative to diesel fuelled
pumping solutions and can reduce the
footprint of fracking operations by 60%.
60%
footprint reduction
READ MORE
PAGE 48
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The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
OUR BUSINESS AT A GLANCE
GLOBAL CAPABILITY AND LOCAL DELIVERY
Our Group is made up of three divisions that operate in natural resource markets.
Each has leading brands used in high abrasion applications and operate
an aftermarket-focused business model.
GROUP REVENUES BY DIVISION %
ORDERS BY OE/AM %
MINING REVENUES BY COMMODITY %
Minerals
ESCO
Oil & Gas
56%
21%
23%
Aftermarket (AM)
77%
Original
equipment (OE)
23%
Copper
Iron Ore
Gold
Oil & Gas
Coal
Other
28%
14%
14%
11%
10%
23%
TOTAL PEOPLE
EMPLOYEES BY GEOGRAPHY %
GROUP ORDERS BY GEOGRAPHY %
c.15,000
OPERATING COUNTRIES
50+
North America
Asia Pacific
Europe
South America
39%
12%
12%
15%
Middle East & Africa 13%
Australia
9%
North America
Asia Pacific
Europe
South America
38%
10%
9%
16%
Middle East & Africa 13%
Australia
14%
Minerals location
Minerals location
ESCO location
ESCO location
Oil & Gas location
Oil & Gas location
Weir Group Global HQ
(Glasgow)
Weir Group Global HQ (Glasgow)
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MINERALS
WEIR
ESCO
WEIR
OIL & GAS
The Weir Group PLC Annual Report and Financial Statements 2019
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WHAT WE DO
Weir Minerals’ products and technology
are used in mining, oil and gas and general
industrial markets around the world.
Common applications include; mining &
minerals processing (including comminution),
slurry transportation and mine dewatering,
and oil sands.
MARKET POSITIONS
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, infrastructure, oil and gas and general
industrial markets around the world.
WHAT WE DO
ESCO provides highly engineered ground
engaging tools (G.E.T) used in global mining
and infrastructure markets. Its equipment is
mission critical to the efficient extraction and
transport of materials.
MARKET POSITIONS
ESCO is the global leader in G.E.T for large
mining machines. The division also applies
its differentiated technology to infrastructure
markets including construction, dredging and
sand and aggregates.
WHAT WE DO
Weir Oil & Gas provides highly engineered
mission-critical solutions to upstream
energy markets. Products include pressure
pumping and pressure control equipment,
supported by Weir EDGE aftermarket
spares, equipment repairs, upgrades,
certification and asset management,
and field services to customers around
the world.
MARKET POSITIONS
Weir Oil & Gas is a global leader in the
provision of pressure pumping solutions
for shale operations and has a developing
presence in pressure control markets.
7
ADDRESSABLE MARKET £m
c.£7-8bn
2019 REVENUE1 £m
£1,478m
+4%
2019 ADJUSTED OPERATING PROFIT1 £m
£270m
+7%
1 2018 restated at 2019 average exchange rates
ADDRESSABLE MARKET £m
c.£2.5bn
2019 REVENUE1,2 £m
£572m
+4%
2019 ADJUSTED OPERATING PROFIT1,2 £m
£83m
+25%
1 2018 restated at 2019 average exchange rates
2 ESCO on proforma basis for 2018
ADDRESSABLE MARKET £m
c.£5-6bn
2019 REVENUE1 £m
£612m
-25%
2019 ADJUSTED OPERATING PROFIT1 £m
£37m
-64%
1 2018 restated at 2019 average exchange rates
The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
OUR MARKETS: ALIGNED TO LONG-TERM
STRUCTURAL GROWTH
DEMAND SUPPORTED BY GLOBAL MEGA-TRENDS
ALIGNING OUR STRATEGY TO
LONG-TERM FUNDAMENTALS
Our ‘We are Weir’ strategic framework is
designed to fulfil our purpose which is to
‘enable the sustainable and efficient delivery
of the natural resources essential to create a
better future for the world’. That purpose has
been specifically chosen to address some of
the biggest challenges in our markets, from
increasing productivity to support growing
demand for commodities like copper, to
reducing the environmental impact of both
our operations and those of our customers.
You can read more in the CEO statement
on page 16.
While our markets are underpinned by
long-term fundamentals, they are also
cyclical. We seek to mitigate this through
our aftermarket-focused business model.
It concentrates the Group on mission-critical
high abrasion applications that provide
ongoing demand for higher margin spares and
services. This robust model is also supported
by industry-specific trends such as ore grade
declines in mining that mean more rock needs
to be processed to produce the same amount
of ore, increasing the wear on our equipment
and subsequently generating higher
aftermarket demand. You can read more on
our business model on page 14 including
how we translate these market trends into
sustainable value for our stakeholders.
WE BELIEVE THE
SINGLE MOST
SIGNIFICANT
CONTRIBUTION
WE CAN MAKE TO
SUSTAINABILITY
IS THROUGH
INNOVATION.
JON STANTON
Chief Executive Officer
STRUCTURAL TREND
GLOBAL POPULATION AND
MIGRATION TRENDS
In 2019 the UN estimated there were
approximately 7.7bn people on earth. By 2030
they project that number will rise to 8.5bn,
and by 2050, almost 10 billion people.
Meanwhile, increased urbanisation means the
number of people living in cities is expected
to rise from c.50% to c.66% by 2050.
CLIMATE CHANGE
There is increased demand for commodities
that enable the world to move towards lower
carbon sources of energy and transport
including renewables and electric vehicles.
Increasingly, natural resources producers are
focusing on sustainability by reducing their
environmental footprint and improving safety.
TECHNOLOGY ACCELERATION
There is a growing focus in our markets
on automation and digitisation to support
safety, productivity and sustainability.
Our customers are looking to their
technology partners to help them adapt
and transform their operations to take
advantage of these advances.
GLOBALISATION
The global economy continues to grow but
the benefits of increased globalisation are
being called into question. This has been
reflected in the recent trade wars between
the USA and China. There is also a continuing
debate about the role of businesses in society
and how they generate value for a broad
range of stakeholders.
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The Weir Group PLC Annual Report and Financial Statements 2019
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STRUCTURAL TREND
HOW WE ARE
RESPONDING
CASE STUDIES
We serve markets that support global growth
by providing the natural resources needed
to build homes, cities, transportation and
energy networks. Our technology helps
customers operate more efficiently, enabling
them to meet increased demand through
improved productivity.
READ MORE
PAGES 38-49
Weir equipment is used to process the majority
of the world’s mined copper, giving us an
important role in making the industry more
sustainable. That is reflected in our technology
agenda which is focused on smarter, more
efficient solutions that reduce energy, water
and waste.
READ MORE
PAGES 60-71
We are developing digital solutions that use
big data, artificial intelligence and sensing
technology to improve performance and
automation to increase safety for our customers.
We are also deploying advanced manufacturing
technologies to improve our product
development and operational excellence.
READ MORE
PAGES 38-49
Our geographic and market diversity provide
increased protection from political uncertainty
while our ‘We are Weir’ strategy makes clear our
commitment to delivering excellent outcomes
for a range of stakeholders including making our
employees co-owners of our business.
READ MORE
PAGES 2-3
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SEE HOW OUR ESCO DIVISION’S N70
TECHNOLOGY IS SUPPORTING MINERS
TO PRODUCE ORE FOR A LOWER TOTAL
COST ON PAGE 45
SEE HOW WE ARE REDUCING FRACKING
OPERATIONS DEPENDENCE ON DIESEL-
POWERED OPERATIONS ON PAGE 48
YOU CAN ALSO READ OUR SUSTAINABILITY
STRATEGY ON PAGE 60 AND HOW WE
MANAGE RISKS ON PAGE 50
SEE HOW WE ARE USING AUTOMATION
TO MAKE GET MAINTENANCE SAFER AND
MORE EFFICIENT ON PAGE 43
READ MORE ABOUT OUR TECHNOLOGY
ADVANCES IN THE OPERATIONAL REVIEWS
FROM PAGE 38
READ ABOUT OUR COMPREHENSIVE SHARE
PLAN TO MAKE OUR PEOPLE CO-OWNERS
OF OUR BUSINESS FROM PAGE 12
YOU CAN ALSO SEE HOW WE MANAGE
RISKS FROM PAGE 50
The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
CHAIRMAN’S STATEMENT
MAKING A POSITIVE DIFFERENCE
TO OUR STAKEHOLDERS
DEAR SHAREHOLDER,
2019 saw your business make strong
progress in our mining-focused divisions,
which represent 77% of revenues. The
integration of ESCO, our largest ever
acquisition, was a real highlight. Change can
often be disruptive but the ESCO integration
was completed ahead of schedule while
delivering good growth and excellent
employee satisfaction. It means that Weir’s
mining-focused divisions now generate
more than £2bn in revenues with c.80%
of those from recurring aftermarket
sales, underlining our positive belief in the
long-term fundamentals of mining markets.
Conditions in unconventional oil and gas
markets, which represent 23% of revenues,
were challenging as oil producers in North
America significantly reduced activity to
conserve cash rather than invest in growth.
I would like to thank all of our people for
their hard work and commitment in 2019.
A CLEAR PURPOSE
With ESCO’s strong market position in
extraction and Minerals leadership positions
in comminution and mill circuit technology,
the Group is now uniquely placed as the only
provider of premium mining solutions from pit
to processing, making us even more relevant
to mining customers.
That is particularly important as we look to the
long-term. As the world continues to develop
and grow, demand for essential resources
like copper will continue to increase.
Miners are under enormous pressure to
reduce energy, water and waste and they
are looking to technology partners like Weir
to help. That is why sustainability is at the
heart of our strategy and why our purpose
is ‘to enable the sustainable and efficient
delivery of the natural resources essential to
create a better future for the world’.
That reflects our role in making our
customers more productive while reducing
their environmental impact as evidenced by
our record £100m order for energy-saving
High Pressure Grinding Rolls technology,
which you can read more about on page 31.
WEIR IS A VALUES-
LED BUSINESS THAT
BENEFITS FROM A
STRONG CULTURE
OF CONTINUOUS
IMPROVEMENT AND
INNOVATION.
CHARLES BERRY
Chairman
CHARLES BERRY
Chairman
The Board at a Weir Minerals facility
in Chile
10
The Weir Group PLC Annual Report and Financial Statements 2019
It also reflects our commitment to building
a business that is relentlessly future-focused,
with a clear vision of its role in the world,
as Jon Stanton sets out from page 16.
FINANCIAL RESULTS
Reported revenues increased to £2,662m,
up 9%. On a constant currency like-
for-like basis, revenues were down 6%
reflecting oil and gas market conditions.
Pre-tax profits from continuing operations,
before exceptional items and intangibles
amortisation, of £303m represent a 2%
decrease from the previous year. The reported
loss after tax of £353m from continuing
operations was primarily driven by the
£546m Oil & Gas impairment, reflecting
ongoing market dynamics in North America.
You can read more in the Financial Review on
page 32. We are proposing a final dividend
payment of 30.45p per share, making 46.95p
for the full year – the 36th year of stable or
growing dividends.
A STRONG CULTURE OF CHALLENGE
AND COLLABORATION
Weir is a values-led business that benefits
from a strong culture of continuous
improvement and innovation. We expect and
encourage open challenge and together take
responsibility for our shared success. We are
proactive in listening to and learning from
our stakeholders and we use their insights to
inform the Board’s deliberations. You can read
more on page 84.
To further enhance our employee voice
activities, Mary Jo Jacobi was appointed
as the designated Non-Executive Director
responsible for employee engagement.
We introduced a new programme of ‘Meet
the Board’ sessions, the first of which
were held in the United States and Chile
during 2019. These gave employees a direct
opportunity to have face-to-face discussions
with Board members and to share their
views on the topics most important to
them. This also allowed the Board to gain
key insights about life as a Weir employee.
You can learn more about these efforts on
page 85. In addition to ‘Meet the Board’,
Non-Executive Directors undertook individual
visits to facilities in Dubai and Venlo.
In addition to putting sustainability at the
heart of our purpose and strategy we also
work hard to ensure we make a positive
difference to the communities we operate
in. This includes promoting STEM education
from primary to secondary education,
apprenticeships, direct and indirect
employment, working with local charities and
many more initiatives across the world that
recognise the need for companies like Weir
to play our part in inclusive growth.
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ALIGNING OUR PEOPLE AND
INVESTORS’ INTERESTS
We were delighted to give every eligible
employee a greater stake in the business
with the introduction of the Weir ShareBuilder
programme. It is one of the most
comprehensive employee share plans in the
world and gives our people in more than 50
countries the opportunity to build a long-term
holding in the Group. It was challenging to
implement as in many countries there is no
culture of employee share ownership, but
we worked with local authorities to create
solutions that ensured that in every country
that it was possible to gift shares, we did so,
and in the single example where that wasn’t
possible we provided cash equivalents to
compensate. This is an important initiative in
aligning everyone to our strategy and through
the gifting of free initial shares, promoting
inclusion so that everyone can benefit from
Weir’s long-term success.
BOARD AND GOVERNANCE
CHANGES
As previously announced, Rick Menell will
step down as a Non-Executive Director
after the 2020 AGM. Rick has made a major
contribution to the Board in his 11-year tenure
including serving as Senior Independent
Director from February 2015 to January
2020 when he was succeeded by Barbara
Jeremiah. On behalf of the Board and
everyone at Weir I would like to thank Rick for
his hard work and wise counsel and wish him
every success in the future.
The Board was also strengthened with the
appointment of Ebbie Haan in February of
2019. Ebbie has extensive experience leading
global businesses in extractive industries
including Royal Dutch Shell plc, Sasol Group
and Maersk.
Looking ahead to the rest of 2020 the
Board will continue to focus on supporting
Jon Stanton and the rest of the team
as they execute our strategy and build an
ever-stronger Weir.
CHARLES BERRY
Chairman
READ MORE IN CORPORATE GOVERNANCE
Corporate Governance Report
Our Board of Directors
Our Group Executive
Nomination Committee Report
Audit Committee Report
Remuneration Committee Report
Directors’ Report
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WE
Everything
we do as a
BELIEVE
company
IN
stems from
our core values:
O
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A facility tour in October 2019
The Weir Group PLC Annual Report and Financial Statements 2019
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Strategic Report
CO-OWNERS
OF OUR
BUSINESS
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The Weir Group PLC Annual Report and Financial Statements 2019
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In June 2019, the Group launched one of the
world’s most ambitious and comprehensive
employee share plans: Weir ShareBuilder.
The premise behind the plan was to:
• Make every employee a shareholder and give them a way
to build up long-term share ownership.
• Reinforce our ‘We are Weir’ culture and increase
employee engagement.
• Provide one common benefit for all employees.
In 2019, all eligible employees received £300 of free shares,
with the same to follow in 2020, and for all new hires thereafter.
At Weir, we believe that we will achieve great things if we
can combine our common goals as set out in our ‘We are
Weir’ framework with the uniqueness that each of us bring
as individuals. By giving all eligible employees their own
shares in Weir at no cost it means that whatever role they play,
in whatever part of the business, and wherever they are in the
world, they can help shape our future together.
Image: Colleagues all across the globe were
awarded an initial share award to the value
of £300 in 2019
WEIR HAS ALWAYS FELT
LIKE A GLOBAL FAMILY BUT
THAT FEELING IS EVEN
STRONGER,NOW THAT WE
ARE ALL CO-OWNERS OF
OUR BUSINESS.
NYAMSUREN ARIUNBUYAN
Weir Minerals Service Centre Manager, Mongolia
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The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
OUR BUSINESS MODEL
OUR PURPOSE
To enable the sustainable and efficient delivery of the natural resources
essential to create a better future for the world.
KEY RESOURCES WE RELY ON
WHAT WE DO?
We want to deliver excellent outcomes for
all our stakeholders but to achieve that aim
we rely on a number of resources. These are
transformed into tangible outcomes by our
aftermarket-focused business model.
PEOPLE
Highly engaged people with c.15,000
colleagues around the world.
FINANCE
Support from Shareholders and debt
investors to provide the capital to invest in
growth initiatives.
GOODS & SERVICES
The reliable supply of raw materials and
support services that enable efficient
business operations.
COMMUNITIES & INFRASTRUCTURE
We rely on local communities to provide
highly-skilled employees, protect
innovation with strong laws and enable our
products to get to our customers using
good infrastructure.
What we do is driven by our purpose and informed by our core values. All three divisions
operate an installed base of highly engineered original equipment that is used in abrasive
operating environments. This, in turn, drives demand for aftermarket spares and services,
providing resilience through the cycle.
R I T I C A L
N S
N-C
LU TI O
SIO
O
IS
S
M
A
F
T
I
E
N
R
T
M
E
N
HIGHLY E
EQ
N
U
IP
G
I
M
N
E
E
N
E
T
R
E
D
E
V
T
SI
R
O
N
P
R E HE
L S UP
A
A
R
K
E
SIVE
T CARE
C O M P
G L O B
HIGHLY
ENGINEERED
EQUIPMENT
We produce
highly engineered
equipment that
is designed to
solve some of our
customers toughest
operating challenges.
MISSION-
CRITICAL
SOLUTIONS
Our equipment is
mission-critical to our
customers. If it fails,
their production can
stop, making us vital
technology partners.
INTENSIVE
AFTERMARKET
CARE
Our technology is
used in high abrasion
applications such
as crushing rock
that generates
recurring demand for
aftermarket spares
and services.
COMPREHENSIVE
GLOBAL SUPPORT
Our customers rely
on us to provide them
with the technology
they need quickly and
efficiently, supported
by our global
service network.
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WHAT MAKES US UNIQUE
THE LONG-TERM VALUE WE CREATE
PEOPLE
We are a global family. We are
proud of our unique blend of
talent, technology and culture.
We inspire our people to do the
best work of their lives.
CUSTOMERS
We aim to be the most admired
business in our sector by
working in partnership with
customers to deliver distinctive
solutions and compelling value.
TECHNOLOGY
We shape the next generation
of smart, efficient and
sustainable solutions with
cutting-edge science and
tradition of innovation.
PERFORMANCE
We deliver excellence for all
our Shareholders, through
strong leadership, performance
culture and rigorous standards
of governance.
EMPLOYEES:
GOOD JOBS
c.£700m
paid in employee benefits in 2019
READ A CASE STUDY
ABOUT OUR EMPLOYEES
PAGES 12-13
CUSTOMERS:
TECHNOLOGY PARTNER
£2.8bn
in orders in 2019
READ A CASE STUDY
ABOUT OUR CUSTOMERS
PAGES 30-31
SUPPLIERS:
VALUABLE PARTNER
£1.6bn
invested by Weir to support our operations
READ MORE ABOUT OUR SUPPLIERS
PAGE 27
SHAREHOLDERS:
STRONG RETURNS
£122m
paid in dividends, 36 years of stable or
growing dividend returns
READ MORE ABOUT OUR
INVESTMENT CASE
PAGE 18
COMMUNITIES AND ENVIRONMENT:
SAVING ENERGY
GOVERNMENT AND
NGOS: TAX
30%
reduction in energy consumption provided by
our HPGR technology
READ MORE ABOUT OUR TECHNOLOGY
PAGE 38
£90m
paid in corporation taxes in 2019
READ MORE ABOUT OUR FINANCIAL RESULTS
PAGE 32
Our business model is supported by our ‘We are Weir’ strategic framework. See page 2.
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CHIEF EXECUTIVE’S STRATEGIC REVIEW
A MORE FOCUSED, PREMIUM-QUALITY WEIR
WE ARE BUILDING
A GLOBAL FAMILY
OF HIGHLY ENGAGED
AND TALENTED
PEOPLE.
JON STANTON
Chief Executive Officer
STRONG STRATEGIC PROGRESS
2019 was a year of significant progress in
creating a more focused, premium-quality
Weir capable of delivering longer-term
sustainable growth opportunities for all
stakeholders. We executed the portfolio
changes announced in 2018 with the
successful sale of Flow Control completed
in June and continuing delivery of the ESCO
integration benefits significantly ahead of
schedule. These changes have transformed
Weir into a leading mining equipment
business with Minerals and ESCO accounting
for nearly 80% of Group revenues and
underpinned by robust aftermarket demand
and strong original equipment order intake.
In addition, we have made considerable
progress in accelerating our core capabilities
in our core markets: people, customers,
technology and performance. We are building
a global family of highly engaged and talented
people who are now all co-owners of the
business. We are working more closely with
our customers by leveraging our unrivalled
site-level presence and strategic technology
alliances. This close partnership enables us
to develop new technologies that will help
our customers operate in a smarter, more
efficient and more sustainable way. And we
are evolving our high-performance culture that
is delivering results for all our stakeholders.
I would like to thank all of our 15,000
colleagues for their contribution in 2019.
KEEPING OUR PEOPLE SAFE
At Weir, our number one priority is to keep
our people safe. As a manufacturer we
operate factories and foundries where large
and complex products are made. It can be a
hazardous environment, but we work hard
to reduce risks and never compromise.
In 2019 we made excellent progress with
our underlying Total Incident Rate (TIR)
falling to 0.27, down 40%, making us one
of the safest industrial companies in the
world. Of particular note, Weir Oil & Gas did
not record a single Lost Time Incident (LTI)
throughout the year.
However, people occasionally have accidents,
with the most common incidents involving
people moving equipment and their hands
and fingers getting injured. By focusing on
JON STANTON
Chief Executive Officer
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Announcing a $15m investment in ESCO’s
Newton, Mississippi facility
from our higher margin mining businesses,
Minerals and ESCO, were up 4% (ESCO
on a pro forma basis) to more than £2bn,
reflecting our increased scale and relevance
to customers.
DEMAND UNDERPINNED BY
LONG-TERM GROWTH TRENDS
As the world’s population grows and
urbanises there continues to be increased
demand for natural resources. The Group’s
largest mining commodity exposures are
copper, iron ore and gold. But as demand
increases, new supplies are harder to
access with ore grade declines in mining
meaning more rock needs to be processed
to generate the same amount of ore.
This intensifies use of our equipment and
increases demand for spares and services.
It is one of the key reasons Minerals delivered
5% compound annual growth (CAGR) in
aftermarket revenues between 2014 and
2019, a period that included a significant
downturn in mining markets. That resilience
is also being supported by demand for the
enabling materials for lower-carbon energy
supplies. Weir technology is used to process
the majority of the world’s copper, which is
a key component in infrastructure for lower
carbon electricity generation and electric
vehicles, which typically require four times
the copper content of internal combustion
engine alternatives.
BENEFITING FROM SMARTER,
MORE EFFICIENT AND SUSTAINABLE
SOLUTIONS
And while mining has an important role to
play in providing the essential metals that will
enable the transition to lower carbon energy,
it also has a challenge to reduce its own
environmental impact, while meeting future
global demand. To meet this dual challenge
miners are increasingly turning to technology
17
partners like Weir to help them increase
productivity and lower emissions. That is why
we have focused our technology agenda on
making our customers’ operations smarter,
more efficient and sustainable, with a range
of innovations that significantly reduce
energy, water and waste. Our Enduron®
high pressure grinding rolls are an excellent
example of this in action. They reduce energy
consumption by 30% compared to traditional
alternatives in comminution, which is the
screening, crushing and grinding of rock and
is one of the most energy-intensive processes
in mining. These savings were instrumental
in Minerals securing the record £100m Iron
Bridge order for a new magnetite iron ore
development in Western Australia, where the
improved crushing performance supported
both the economics and environmental
ambitions of our customer.
MAXIMISING VALUE FROM
OIL & GAS
Since becoming CEO in 2016 the Group’s
clearly stated priority for capital allocation
has been on extending our premium mining
technology positions. We have made good
progress including the acquisition and
successful integration of ESCO, sale of Flow
Control and continued strengthening of
Minerals. The Oil & Gas Division shares many
of the same underlying characteristics as
Minerals and ESCO, but its market dynamics
have changed with shorter cycles and higher
levels of volatility leading to a very different
financial profile to our mining businesses.
As a result, we have recognised a £546m
impairment in our North American Oil & Gas
business. Our focus is now on becoming
a mining technology pure play and we are
looking for opportunities to maximise value
from the Oil & Gas Division at the right time.
Today, the market backdrop is a challenge,
so we will continue to manage the business
changing behaviours and not just processes
we are helping more of our people return
home safely to their families. Our ambition
remains to become a zero-harm workplace
and I am confident we will get there, not
least because in many locations we already
have. What makes me most optimistic is not
the harm reduction programmes we have in
place, good as they are, but the culture of
looking after each other that helps define Weir.
OUR MARKETS IN 2019
2019 saw the business make good
progress in our mining markets which were
generally positive, supported by long-term
fundamentals and the lack of investment seen
in the capex downturn. Our mining customers
remain focused on cash generation and
returns but are also under significant pressure
to reduce their environmental impact and to
operate more safely. This is Weir’s sweet spot
– providing leading technology that makes
operations more efficient while also reducing
energy, water and waste – and both Minerals
and ESCO benefited from our customers’
focus on these areas. While mining markets
were positive, conditions in North American
oil and gas markets deteriorated through
2019. The industry has changed its focus from
growth to capital discipline with producers
fixing budgets at the beginning of the year,
drilling wells quickly to benefit from longer
streams of cash flow and then reducing
activity when their annual budgets are
exhausted. The downturn in activity in the
second half of the year exacerbated already
oversupplied frack fleet markets which in turn
reduced demand for our original equipment
and aftermarket spares.
A HIGH-QUALITY MINING
TECHNOLOGY BUSINESS
We continued to strengthen our market-
leading position in mining. Weir is the only
provider of premium solutions from pit to
processing, some of the most mission-critical
parts of the mining value chain. Our focus
on high abrasion applications, which drive
ongoing demand for aftermarket (AM) spares
and services, underpins the resilience of
our business. In 2019, these higher-margin
AM sales represented 79% of Minerals and
ESCO revenues. These sales were supported
by our unrivalled global service network that
means we have a presence in every major
mining region. Both ESCO and Minerals
made market share gains by leveraging each
other’s customer relationships and facilities,
supporting progress towards our medium-
term target of delivering $50m in revenue
synergies. Increasingly, we are being asked
by customers to co-locate on their mine
sites to guarantee security of supply for the
technology we provide. In total, revenues
The Weir Group PLC Annual Report and Financial Statements 2019
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CHIEF EXECUTIVE’S STRATEGIC REVIEW
CONTINUED
with a long-term perspective, including taking
continued action to optimise our footprint
for current market conditions whilst still
investing in technology to drive market share
gains and support long-term value. However,
we are taking actions so that whenever we
identify a clear solution to drive value for
our Shareholders, we will be ready and able
to capitalise.
WINNING THROUGH ‘WE ARE WEIR’
Our ‘We are Weir’ strategic framework
focuses on where we can deliver distinctive
value – People, Customers, Technology
and Performance. In 2019 we continued to
make good progress in strengthening our
core capabilities to support our position
as a winner in our markets. In addition to
an excellent safety performance we also
launched Weir ShareBuilder, one of the most
comprehensive employee share plans in the
world, giving all our people in more than
50 countries the opportunity to become
co-owners of our business. The response
throughout the Group has been fantastic with
people really excited about the opportunity to
build a long-term stake in our business.
Minerals delivered an additional £155m in
orders through their Integrated Solutions
Strategy which leverages their broad product
portfolio to deliver productivity gains for
customers. We also continued to increase
our relevance to customers with market share
gains by ESCO through the deployment of
their Nemisys® N70 lip system technology
among smaller mining machines.
Oil & Gas benefited from their large bore
simplified frack system which continued
to gain traction due to its increased safety
and efficiency. Its success contributed to
the £177m in revenues from new solutions
across the Group in 2019. And we took action
to right-size our North American Oil & Gas
business through an annualised £35m cost
reduction programme, supporting its financial
performance whilst Minerals also exited
lower margin comminution segments.
DELIVERING SECTOR-LEADING
PERFORMANCE THROUGH
THE MINING CYCLE
When we first announced the acquisition of
ESCO in 2018 we set out a target to achieve
annualised cost savings of $30m in the first
three years of ownership and to move the
division’s operating margins from 11.1%
towards 17% over the medium-term.
By the end of 2019, 18 months after
completion, we had achieved cost savings
of $25m supported by a range of measures
including removing duplicative corporate
costs, merging functions, leveraging our
increased scale to secure procurement
savings and consolidating overlapping
facilities. We now expect to reach our
original $30m cost saving target in 2020.
In addition to costs synergies there has also
been good progress in delivering revenues
synergies. Both ESCO and Minerals have
made market share gains by leveraging
each other’s customer relationships and
facilities, supporting progress towards our
medium-term target of delivering $50m
in revenue synergies.
EVOLVING THE GROUP EXECUTIVE
LEADERSHIP TEAM
In January 2020 we announced that
Jon Owens would retire as ESCO Division
President in July 2020 after more than
30 years’ service. Jon has been an excellent
leader of ESCO, particularly during its
transition into Weir following the 2018
acquisition. We wish him a happy retirement.
He will be succeeded by Andrew Neilson,
who is currently Regional Managing Director
of Weir Minerals Europe, Russia, Central
Asia and North Africa. Andrew is a graduate
engineer who has excellent experience across
the Group and led the successful ESCO
integration team. The Group Executive was
also strengthened with the appointments of
Paula Cousins and Garry Fingland as Chief
Strategy and Sustainability Officer and Chief
Information Officer respectively, reflecting the
increased importance of sustainability and
digital technology to our business. I would
also like to thank former Chief Technology
Officer Geetha Dabir who left the business
at the end of 2019 for her contribution to
developing our digital platforms.
OUTLOOK FOR 2020
Looking to the year ahead, there is uncertainty
over the impact of coronavirus (COVID-19) on
the global economy and demand for natural
resources. Assuming underlying demand
does not change, we expect further good
constant currency growth in our mining-
focused businesses to be offset by the
continued challenges in North American oil
and gas markets.
WEIR INVESTMENT CASE
Aligned to global structural trends
• End markets benefit from increasing
population, urbanisation and
economic growth
• Positioned to benefit from carbon transition
– Weir equipment used to process the
majority of the world’s mined copper
• Key role in developing technology that
makes our markets more sustainable
High barriers to entry
• Unique provider of premium mining
solutions from pit to processing
• Trusted technology leader in
conservative markets
• Comprehensive global service network
providing unrivalled security of supply to
need-it-now industries
Optimum business model for
cyclical markets
• Large installed base focused on
mission-critical solutions
• Aftermarket-intensive applications
supported by ore grade declines
• Strong returns through the mining cycle
A platform for future growth
• ‘We are Weir’ strategy driving
organic growth
• Flexible customer-focused operating model
providing global capability and local delivery
• Opportunities to consolidate in
attractive markets
OUR INVESTMENT
CASE IS UNDERPINNED
BY BEST IN CLASS
CORPORATE
GOVERNANCE
AND SOCIAL
RESPONSIBILITY
TOWARDS OUR
PEOPLE AND OUR
COMMUNITIES.
JON STANTON
Chief Executive Officer
26 February 2020
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OUR AMBITIOUS SUSTAINABILITY STRATEGY
A growing focus for many of our stakeholders is how we approach environmental, social and governance issues at Weir. Sustainability is an area
we have carefully considered in the last year and we have taken practical measures to demonstrate its importance within our business and how it
reinforces our ability to create value for all stakeholders.
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The foundation is a commitment to best in class governance – ensuring we are a well-run business that conducts itself with integrity at all times
– and also giving prominence to our social responsibilities, as reflected in our ‘We are Weir’ framework.
For example, in addition to giving all employees the opportunity to become co-owners of our business, we are very active in local employee and
community welfare, and we support STEM and broader education and diversity initiatives on a very wide front. In looking at everything that we
do I am very proud to say that we are playing a leading role in running our business in a fair, equitable and inclusive way.
In 2019 we worked with stakeholders to develop our new sustainability strategy that sets out our priorities and goals. We identified four key areas
where we can make the biggest difference. Our most significant contribution will be in reducing the environmental impact of our customers’
operations, but we also want to continue to lead by example in our own business, particularly in championing zero harm, creating sustainable
solutions, reducing our own footprint by 50% by 2030 and nurturing Weir’s unique culture.
We believe this provides an ambitious sustainability strategy, fully aligned to our purpose and group strategy, helping to build an ever stronger
Weir. You can read more in the Sustainability Review from page 60.
ZERO TIR
ENABLING
NET ZERO
LEADING
eNPS SCORE
50%
REDUCTION
IN CO2e
BY 2030
19
SOLUTIONSCREATING SUSTAINABLEFOOTPRINTREDUCING OURZERO HARMCHAMPIONINGNURTURING OURUNIQUE CULTURE
The Weir Group PLC Annual Report and Financial Statements 2019
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CHIEF EXECUTIVE’S STRATEGIC REVIEW
CONTINUED
PEOPLE
We are a global family. We are
proud of our unique blend of
talent, technology and culture.
We are here to inspire you to do
the best work of your life.
LINK TO KPIs
Sustainable Engagement and
Organisational Effectiveness
READ MORE
PAGES 22-23
CUSTOMERS
We will be the most
admired business in our
sector. Working in partnership,
we deliver distinctive solutions
and compelling value.
LINK TO KPIs
Increased market share
READ MORE
PAGES 22-23
WORLD CLASS SAFETY
PERFORMANCE
We have an ambition to be a zero-harm
workplace where everyone has a safe
start, safe finish and safe journey home to
their families. In 2020 we aim to continue
to reduce our Total Incident Rate through
a number of programmes to promote
behavioural safety. This will include additional
training for employees and continuing to
invest in ESCO facilities to accelerate the
division’s journey to zero-harm.
ORGANISATIONAL CAPABILITY
Having completed a strategic workforce
planning assessment in 2019 and established
externally benchmarkable organisational
effectiveness measures, we will design and
roll-out a new performance development
strategy in 2020, building capability in areas
where we have identified skills gaps. We will
also begin initial implementation of a new
human resources management system
which will improve efficiency across our
people processes.
EXTENDING OUR SERVICE
ADVANTAGE
We will continue to extend our
comprehensive global service network, which
is a key competitive advantage. This will
include expanding into new territories to grow
market share, building on our current footprint
which includes facilities within 200km of
every major mine in the world and a presence
in every major North American oil and gas
shale basin.
INCREASE CUSTOMER
PARTNERSHIPS
Our customers look to Weir to help them
solve some of their toughest operating
challenges. In mining this includes working
with a large global miner to develop our
Terraflowing® technology that can reduce
the water content of tailings allowing this
waste product to be cost effectively stored
or repurposed. ESCO will continue to
commercialise their automated toolhead
technology and extend their Nemisys® to
smaller machine classes. In Oil & Gas, we
will work with customers to field test our
new SPM® QEM 5000 electric frack pump
which significantly reduces the environmental
impact of fracking equipment.
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A HIGH PERFORMING CULTURE
We will build on the comprehensive employee
listening and engagement programmes we
have established which include implementing
an Inclusion and Diversity strategy in
response to employee feedback. We will
refresh and relaunch our ‘We are Weir’
strategic framework reflecting our new
purpose and focus on sustainability. And we
will seek to improve employee engagement
further, benchmarking our performance
against industry peers.
LISTENING AND LEARNING
FROM OUR CUSTOMERS
The better we understand our customers’
needs the more relevant we will be to
them. The Group will deploy new customer
relationship management technology to
improve the efficiency and effectiveness of
our ‘voice of customer’ processes. This will
include gathering more customer insights,
helping us optimise maintain or enhance
customer satisfaction and inform our
technology priorities.
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Through our new sustainability strategy we
are embedding best practice in sustainable
product development into our technology
roadmaps with appropriate key performance
indicators. In 2020 we will conduct a deep
assessment of the potential long-term
challenges and opportunities in our markets,
and use these insights to inform future
innovation programmes. We will further
leverage the Weir Advanced Research Centre
to promote increased collaboration across the
Group and with external partners.
IMPROVE SUSTAINABILITY
We have set ambitious targets to reduce our
impact on the environment and in 2020 we
will execute against our new sustainability
strategy. This will include: developing
division-wide programmes to help us achieve
our aim of reducing our emissions by 50% by
2030. This will involve assessing how we can
use renewable energy sources to power our
facilities including our foundries, which are the
heaviest consumers of energy.
The Weir Group PLC Annual Report and Financial Statements 2019
SMART SOLUTIONS
The Group’s digital capability includes our
Synertrex® IoT technology that provides
customers with condition monitoring data
to help optimise the performance of their
processes. In 2020, we will accelerate
deployment of digital technology to more
customers including new applications that
will support customers desire for increased
productivity. Each division will be able to
leverage common platforms and infrastructure
but design bespoke solutions for their
particular market segment.
EFFICIENT SOLUTIONS
Our technology is used in high abrasion
applications meaning the quality of our
materials science is crucial to maintaining and
extending our technology leadership. In 2020
we will continue to invest in research and
development to design new alloys that extend
product life, including our next generation
slurry pump. We will leverage our increasing
capability in additive manufacturing to bring
additional products to the market while
piloting so-called Smart Factory automation,
aiming to benefit from the operational
efficiencies these technologies bring.
REALISE THE BENEFITS OF
THE GROUP PORTFOLIO
When the Group acquired the ESCO business
in 2018 we set out a target of achieving $30m
in cost synergies in the first three years of
ownership. We will achieve that target in 2020
ahead of schedule. In addition, we will make
further progress towards our medium-term
aim of delivering $50m in revenue synergies
between ESCO and Minerals.
OPTIMISE OUR OPERATIONS
The Group has a diversified operating model
where local managers are empowered to
act in the best interests of their customers.
This is supported by common processes and
technologies that allow the Group to take
advantage of its global scale. In 2020 we
will successfully deliver our record £100m
Iron Bridge contract, complete upgrades
to ESCO’s largest foundry and continue to
implement new Enterprise Resource Planning
software across the Minerals business.
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TECHNOLOGY
We shape the next
generation of smart, efficient,
sustainable solutions with
cutting-edge science and
tradition of innovation.
LINK TO KPIs
Increased percentage of revenues
from new solutions
READ MORE
PAGES 22-23
PERFORMANCE
We deliver excellence for all
of our stakeholders, through
strong leadership, performance
culture and rigorous standards
of governance.
LINK TO KPIs
Sustainably higher margins through the cycle
READ MORE
PAGES 22-23
The Weir Group PLC Annual Report and Financial Statements 2019
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OUR KEY PERFORMANCE INDICATORS
FINANCIAL AND NON-FINANCIAL MEASURES
ALIGNED TO ‘WE ARE WEIR’
FINANCIAL
NON-FINANCIAL
PROFIT BEFORE TAX AND AMORTISATION
(PBTA) AND EXCEPTIONAL ITEMS
(CONTINUING OPERATIONS)
WORKING CAPITAL AS A PERCENTAGE
OF SALES
PEOPLE
310
303
26.4
26.9
25.6
22.8
23.1
250
220
170
2015
2016
2017
2018
2019
20151
20161
20171
20182
20193
1 Total Group
2 From continuing operations excl. ESCO
3 From continuing operations
2019 performance
Our working capital as a percentage
of sales increased 0.3% reflecting
investment in the growth in Minerals
and the impact of the market downturn
in Oil & Gas in North America.
You can read more in the Financial Review
on page 32.
Link to Remuneration
70% of Executive Director remuneration
is directly linked to progress against
financial KPIs. In 2019, the Remuneration
Committee awarded 0% out of a possible
20% for progress against working
capital targets. You can read more in the
Remuneration report on page 117.
Associated risks
• Market volatility
• Contract risk
• Political and social risk
• Technology and innovation
• Value Chain Excellence
• Competition
2019 performance
Continuing operations reported profit
before tax, amortisation and exceptional
items of £303m was down by £7m or 2%,
with strong profit growth in both Minerals
and ESCO more than offset by the
challenging conditions in North American
oil and gas markets.
You can read more in the Financial Review
on page 32 and the Operating Review
sections on pages 38-49
Link to Remuneration
70% of Executive Director remuneration
is directly linked to progress against
financial KPIs. In 2019, the Remuneration
Committee awarded 12% out of a possible
50% for progress against PBTA targets.
You can read more in the Remuneration
report on page 117.
Associated risks
• Market volatility
• Contract risk
• Political and social risk
• Technology and innovation
• Value Chain Excellence
• Competition
2019 performance
We continued to make good progress
towards becoming a zero-harm workplace
with a 40% reduction in our underlying
Total Incident Rate to 0.27. As part of our
programme to build a higher performance
culture we developed organisational
effectiveness metrics that will inform
future development programmes.
We also completed a strategic workforce
planning process to identify key skills
gaps and support future recruitment
and training initiatives in addition to
completing the initial design of a new
HR management system.
Link to Remuneration
30% of Executive Director remuneration
is directly linked to progress against
strategic priorities including people.
The Remuneration Committee awarded
6.9% out of a possible 7.5% for progress
against People priorities. You can read
more in the Remuneration Report on
pages 118-120.
Associated risks
• Safety, Health and Environment
• Staff recruitment, development
and retention
• Political and social risk
• Technology and innovation
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NON-FINANCIAL
CUSTOMER
TECHNOLOGY
PERFORMANCE
2019 performance
We extended our leading global service
network to new territories and increased
the number of engineers embedded
in our remote facilities. ESCO and
Minerals leveraged each other’s customer
relationships to grow market share making
good initial progress towards a $50m
revenue synergy target over the
medium-term. Oil & Gas strengthened
its position in the Middle East, expanding
in Saudi Arabia and signing pressure
pumping distribution agreements. All three
divisions worked in partnership with
customers to develop new technologies
and extend their field trial programmes.
Link to Remuneration
30% of Executive Director remuneration
is directly linked to progress against
strategic priorities including Customer.
The Remuneration Committee awarded
6.8% out of a possible 7.5% for progress
against Customer priorities. You can read
more in the Remuneration Report on
pages 118-120.
Associated risks
• Safety, Health and Environment
• Staff recruitment, development
and retention
• Political and social risk
• Technology and innovation
• Value Chain Excellence
• Competition
2019 performance
The Group focuses its technology
agenda on making customers operations
smarter, more efficient and sustainable.
This included developing new materials
to increase wear life. Minerals signed an
agreement with a customer to develop
their Terraflowing® technology that
enables tailings waste to be recycled
or repurposed. Oil & Gas introduced
an electric frack pump that significantly
reduces the operating footprint of frack
sites and the Group started work on
redesigning a selection of its products
using additive manufacturing.
Link to Remuneration
30% of Executive Director remuneration
is directly linked to progress against
strategic priorities including Technology.
The Remuneration Committee awarded
6.4% out of a possible 7.5% for progress
against Technology priorities. You can read
more in the Remuneration Report on
pages 118-120.
Associated risks
• Safety, Health and Environment
• Staff recruitment, development
and retention
• Political and social risk
• Technology and innovation
• Environment & sustainability
23
2019 performance
The Group achieved $25m in cost
synergies from the integration of ESCO,
ahead of the original schedule. It also
completed the successful sale of Flow
Control for an Enterprise Value of £275m.
Operational improvements included exiting
lower margin comminution markets and
improving on-time delivery. The Group also
completed a new sustainability strategy
including setting ambitious targets for
emissions reductions.
Link to Remuneration
30% of Executive Director remuneration
is directly linked to progress against
strategic priorities including Performance.
The Remuneration Committee awarded
6.3% out of a possible 7.5% for progress
against Performance priorities. You can
read more in the Remuneration Report on
pages 118-120.
Associated risks
• Safety, Health and Environment
• Staff recruitment, development
and retention
• Political and social risk
• Technology and innovation
• Value Chain Excellence
The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
SUCCESSFULLY
DELIVERING
OUR
STRATEGY
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The Weir Group PLC Annual Report and Financial Statements 2019
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AS PART OF A BIGGER
BUSINESS WE’RE ABLE
TO SOLVE MORE OF OUR
CUSTOMERS’ OPERATING
CHALLENGES.
SIMON MMETHI
Field Service Assistant, South Africa
In 2018, the Group made its largest ever
acquisition, purchasing ESCO for an enterprise
value of $1.3bn. ESCO’s leading positions in
Ground Engaging Tools (GET) for mining markets
coupled with their aftermarket-intensive business
model meant that the acquisition was one that
perfectly matched the Group’s criteria.
Over 2019, the Group has made strong progress in integrating
ESCO into the Group and leveraging key synergies between our
two mining-focused divisions. In 2018, ESCO increased operating
margins by 170 bps post acquisition whilst delivering operating
profits of £66m. This strong performance continued in 2019 as
the division increased operating profits by 25% to £83m with
operating margins up 240bps on a constant currency
pro-forma basis.
The division has made great strides in embedding our ‘We are
Weir’ strategic framework, with improvements made in safety
performance and improving employee engagement rates.
Image: An ESCO Nemisys® N70 tooth, shroud and lip system on an
ESCO Wheel Loader bucket
25
The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
SECTION 172 STATEMENT
STAKEHOLDER ENGAGEMENT
Our success depends on forging and nurturing
positive relationships with the people,
communities and organisations that have an
interest in our business and may be impacted
by the decisions we take. These stakeholders
are at the heart of ‘We are Weir’, the strategic
framework that sets out our purpose,
business model, strategic priorities, values
and culture. It makes clear that we want to be
a business that provides excellent outcomes
for our employees, customers, Shareholders,
suppliers, communities, environment,
government and non-governmental
organisations (NGOs).
The Group identifies its key stakeholders
through its strategic planning process
which is focused on delivering long-term
sustainable value. Stakeholder engagement
and analysis is also key to our approach to
risk management. We engage with these
important groups our stakeholders in a variety
of ways from direct discussions to surveys
and participating in community, industry and
government forums.
Effective engagement of stakeholder groups
supports the principles of Section 172 of the
Companies Act which sets out that Directors
should have regard to stakeholder interests
when discharging their duty to promote the
success of the company.
This provides valuable insights that inform
the Board’s deliberations. For example, in
developing the Group’s new sustainability
strategy the Board conducted a
comprehensive materiality assessment that
included input from customers, employees,
investors and NGOs. There was a common
consensus among these groups that
improving sustainability should include
both environmental and non-environmental
priorities and these are reflected in our
sustainability targets.
Page 27 sets out how we engage with our
main stakeholders, the issues most material
to them and how the Group has responded.
You can read more about our ‘We are Weir’
strategic framework on page 2. Our business
model sets out the value we generate for
stakeholders on page 14. Further information
on the Board’s approach to stakeholder
engagement is on page 27 and the Group’s
sustainability strategy is on page 60.
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The Weir Group PLC Annual Report and Financial Statements 2019
EMPLOYEES
How we engage
SUPPLIERS
How we engage
COMMUNITIES & ENVIRONMENT
How we engage
• Board member responsible for representing
• Clearly defined supplier quality policy
• Local open days to better understand
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employee voice
• All-employee survey
• ‘Meet the Board’ sessions
• Monthly ‘CEO Briefing’
• ‘Ask Jon’ CEO email address
• Global webcasts and social media channels
What do they care about most?
• Knowing their voice is heard
• Ensuring everyone is treated fairly
• No compromise on our Safety, Health or
Environmental standards
• Alignment between personal
and company values
How do we respond?
• Continuous prioritisation of safety above
all else to become a zero harm workplace
• ‘Employee Voice’ strategy
• Commitment to building a truly
inclusive culture
• Ongoing engagement with our ‘We are
Weir’ framework
CUSTOMERS
How we engage
• Key account management
• Voice of Customer insights
• Technology partnerships
What do they care about most?
• Safety
• Efficiency
• Quality and on-time delivery
• Smart technologies
• Sustainability
• Supplier visits
• Technology trials and collaborations
What do they care about most?
• Trusted partnerships
• Collaborative relationships
• Responsive communication
our operations
• Collaborations with local schools
and universities
• Supporting employment and
apprenticeship schemes
What do they care about most?
• Jobs and investment
How do we respond?
• That we are good neighbours, operating
• Face-to-face meetings with suppliers
• Key account support
• Equal opportunity policies for all suppliers
• Strong safety culture
SHAREHOLDERS
How we engage
• Annual Report and General Meeting
• One-to-one meetings
• Investor conferences
• Capital Markets Days
• Visits to company facilities
• Good environmental & social governance
What do they care about most?
• Clear strategy and good execution
• Strong returns and management
through the cycle
• Protecting and enhancing the reputation
of the Group
How do we respond?
• ‘We are Weir’ strategic framework
• We treat all our Shareholders equally
• Regular reporting of performance
• Growing ahead of our end markets
safely and ethically
• That we actively help and support
local communities
• Reducing environmental impact
How do we respond?
• Providing direct employment to
c.15,000 people
• Investing in our facilities to provide a safe,
nurturing and stretching environment
• Investing in school, graduate and
PhD programmes
• Developing and executing our
sustainability strategy
GOVERNMENT & NGOs
How we engage
• Direct engagement with national and local
politicians and officials
• Membership of industry bodies
• Supporting NGO efforts to improve STEM
education opportunities
What do they care about most?
• Creating and sustaining employment
• Investing in R&D and productivity
• Business contributing towards
educational opportunities
• Embedded sales and engineering teams
• Financial discipline
• Code of Conduct, risk assessments and
How do we respond?
• Trusted long-term partnerships
sustainability strategy
• Ever-present service
How do we respond?
• Investment in research and development
• Technology roadmaps developed through
Voice of Customer processes
• Sustainability materiality assessment
• Providing good jobs for c.15,000 people
• Investing 1.3% of sales in R&D including
partnerships with universities
• Investing in programmes that support STEM
education particularly amongst women and
other under-represented groups
27
The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
CHAIRMAN AND CEO Q&A
CHARLES BERRY
Chairman
JON STANTON
Chief Executive Officer
Q.
DID 2019 PLAY OUT AS
YOU EXPECTED?
A.
JS: In some ways yes, in others not quite.
If we look at our strategic progress,
I think there is a lot for us to be proud of,
particularly in terms of safety and increasing
our relevance to customers. If we look at
markets, mining, our largest market, largely
played out as we expected, and we delivered
good growth because customers want
technology partners like Weir to solve their
problems more efficiently and sustainably.
North American oil and gas was tougher than
the industry expected at the beginning of
2019, but we are used to operating in cyclical
markets and we were able to respond quickly
and effectively.
CB: As Jon says we operate in cyclical
markets and we need to see through
short-term challenges to the long-term
potential of the business. When the Board
does that, we find really solid foundations,
from our strong market leadership positions
to initiatives such as giving our global
workforce the opportunity to become co-
owners of the business. To me, that’s a sign
of a Group that has a clear sense of its place
in the world. I think we’ll see other companies
replicating it in the years ahead as they did
when we reformed remuneration policy,
moving away from inappropriate Long Term
Incentive Plans to more modest restricted
share awards with lengthy holding periods.
28
WE DELIVERED GOOD
GROWTH BECAUSE
CUSTOMERS WANT
TECHNOLOGY
PARTNERS LIKE WEIR
TO SOLVE THEIR
PROBLEMS MORE
EFFICIENTLY AND
SUSTAINABLY.
CHARLES BERRY
Chairman
The Weir Group PLC Annual Report and Financial Statements 2019
Q.
THE GROUP HAS STEPPED
UP ITS FOCUS ON
SUSTAINABILITY – WHY IS
THIS SO IMPORTANT FOR
THE BUSINESS?
A.
CB: If you think about sustainability in its
widest sense, Weir is a very sustainable
business. We have been around for almost
150 years and that has been achieved by
being relentlessly future-focused. It’s meant
that we have adapted when necessary and at
every turn we have been able to successfully
apply our culture of innovative engineering,
whether that is to steamships, nuclear energy
or mining. Among today’s great challenges are
how our markets respond to climate change
and the need for technology transformation
to provide the essential resources the world
needs more sustainably. And again, innovative
engineering will be a key part of the solution.
JS: We have been very thoughtful about
where we can make the biggest contribution
to improving sustainability. The main focus will
be on technology where we can significantly
reduce our customers’ environmental impact
but there is also opportunity internally to
reduce emissions and that’s why the Board
approved an ambitious 50% target for
2030. But as Charles suggests we think of
sustainability in a range of ways, from how
we keep our people safe and ensure their
voice is heard, to practicing the highest
standards of corporate governance, and
ensuring we make a positive difference
and ‘give back’ to our communities around
the world.
Q.
WHO DO YOU CONSIDER
AS WEIR’S MAIN
STAKEHOLDERS AND
WHAT ROLE TO THEY PLAY
IN SETTING STRATEGY?
A.
CB: Weir has never operated in isolation.
We depend on lots of different groups
to make Weir successful. That includes
governments who provide the environment
for enterprise to flourish. Employees who
use their talent and passion to differentiate
us from the competition. Customers who
depend on us to be their technology partners.
Investors who provide the capital for us to
deliver long-term growth. Suppliers who
are vital to supporting efficient operations,
and communities who welcome Weir as
a positive force in their neighbourhoods.
These relationships are crucial to our success
and that’s why we are proactive in seeking
out views of our stakeholders and factoring
them into Board deliberations. It’s what good
partners do and Weir wants to be a business
that people are proud to be associated with.
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JS: In one of my first investor meetings as
CEO a major shareholder told me to think
of his organisation as just one of many
stakeholders. It was reassuring because it
resonated with the Board’s view of how we
realise Weir’s potential. We do that by being
open to new voices and challenges because
we know that is how we continuously
improve. I am extremely proud of how
proactive we are in listening and learning from
our people, customers, investors, suppliers,
communities and others. It helps the Board
make better decisions and it makes Weir a
better business.
Q.
WHAT DO YOU SEE AS
THE GROUP’S MAIN
OPPORTUNITIES IN
THE YEAR AHEAD?
A.
JS: I have never been more excited
about our technology pipeline. We have
a range of solutions in development that
when fully realised will help lead the
technology transformation in our industries.
From a markets’ perspective, the fundamental
drivers of our business remain robust.
More immediately we will continue to pursue
growth opportunities in mining, benefiting
from our unique position as the only provider
of premium solutions from the pit to the
processing plant.
CB: I look forward to the sustainability
strategy being accelerated because I think
that’s an area where we can deliver real value
for all our stakeholders. One of my highlights
in 2019 was the introduction of our ‘Meet
the Board’ sessions where employees get
to share their views and discuss a range
of topics of their choosing with the Board.
It shows how open we are to challenge but
more importantly is a great opportunity to
learn more about the business and its people
and every time we do that, the whole Board
emerges even more confident about the
future of this business.
The Weir Board & Group Executive
teams meet colleagues in Santiago, Chile
29
The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
DELIVERING
INNOVATIVE
SOLUTIONS
FOR AN EVER
CHANGING
WORLD
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The Weir Group PLC Annual Report and Financial Statements 2019
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In September 2019, the Group was
awarded a record £100m order to provide
industry-leading energy saving solutions to
the Iron Bridge Magnetite Project, located
145km south of Port Hedland in the Pilbara
region of Western Australia.
The order comprised comminution and pump equipment
including Enduron® High Pressure Grinding Rolls (HPGR) and
GEHO® PD pumps. The innovative comminution circuit will reduce
energy consumption by more than 30% compared to traditional
milling technologies. It is also a dry processing solution, an
important innovation in areas where water resources are scarce.
By significantly reducing energy and water consumption in
the crushing of rock, not only is waste minimised, our HPGR
technology offers a step change in efficiency and environmental
performance. The Iron Bridge Project will be an important
reference site for the industry with the potential project pipeline
for HPGRs growing 40% in 2019 alone.
Our comminution offering is just one of a range of solutions
aimed at making our customers smarter, more efficient and
sustainable. You can read more in our operational reviews
from page 38.
BY SIGNIFICANTLY
REDUCING ENERGY
AND WATER
CONSUMPTION OUR
HPGR TECHNOLOGY
OFFERS A STEP CHANGE
IN EFFICIENCY AND
ENVIRONMENTAL
PERFORMANCE.
PETER LEMPENS
Integrated Solutions Manager,
Weir Minerals Netherlands
Image: Enduron® high pressure grinding rolls (HPGR.) HPGR’s set the
benchmark for energy efficient grinding and use dynamic skewing to
provide best-in-class wear life for mining applications.
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The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
FINANCIAL REVIEW
FINANCIAL REVIEW
DELIVERING STRONG REVENUE GROWTH
Growth in mining offset by challenging North American
oil and gas market conditions.
priorities and continue to see the benefit
of our leading global service network with
aftermarket orders at record levels while our
Integrated Solutions strategy is driving strong
project demand as evidenced by securing our
largest ever Mining order; the £100m energy
efficient crushing solution for the Iron Bridge
Magnetite project in Western Australia.
ESCO sees the same market backdrop
as Minerals and is benefiting from similar
customer proximity with good revenue growth
in the year. Integration has gone very well with
cost synergies driving strong margin progress
and initial revenue synergies being delivered.
North American Oil & Gas markets were
challenged with an industry-wide focus on
cash generation rather than growth across the
value chain. This, together with excess capacity
in the North American frack fleet resulted in
muted demand for both our original equipment
and aftermarket products and services. Orders,
revenues and despite significant restructuring
efforts, profits were all lower as a result.
These challenging market conditions together
with uncertainty about the timing of a market
recovery led to an exceptional impairment
charge being recognised in respect of our
North American Oil & Gas business.
REVENUE
£2,662m
+9%
OPERATING PROFIT 4
£352m
+1%
REPORTED LOSS AFTER TAX
(£379m)
OVERVIEW
2019 saw continued positive momentum in
our Mining businesses. At a Group level this
forward momentum was offset by challenging
market conditions and associated lower
revenues and profits in Oil & Gas.
In Minerals, our customers continue to focus
on maximising production from existing assets
while cautiously progressing responsibly with
expansion projects. We are aligned with these
IN 2019 WE SAW
CONTINUED POSITIVE
MOMENTUM IN OUR
MINING BUSINESSES
DELIVERING GOOD
REVENUE, PROFIT AND
MARGIN PROGRESSION,
WHILE NORTH
AMERICAN OIL AND
GAS MARKETS WERE
CHALLENGING.
JOHN HEASLEY
Chief Financial Officer
32
FINANCIAL HIGHLIGHTS
Continuing operations order input and
revenue increased by 8% and 7%
respectively on a constant currency basis with
a strong performance in Minerals and full year
of ESCO results (which was acquired in July
2018) being offset by the decline in Oil & Gas
as a result of challenging market conditions.
On a like-for-like basis, excluding ESCO,
order input and revenue decreased by 4%
and 6% respectively, with Minerals growth
being offset by Oil & Gas. On a reported
basis, including ESCO, revenues grew by 9%,
benefiting from a £46m foreign exchange
translation tailwind.
Continuing operations reported profit
before tax, amortisation and exceptional
items of £303m was down by £7m or 2%.
Operating exceptional charges of £596m
(2018: £158m) were incurred mainly in relation
to an impairment charge in Oil & Gas North
America, restructuring and rationalisation
costs in Oil & Gas and Minerals and ongoing
costs related to the integration of ESCO.
Earnings per share before amortisation and
exceptional items of 87.9p was 7% lower
reflecting the downturn in Oil & Gas and the
higher average number of shares in issue
following the ESCO acquisition in 2018.
Cash generated from operations decreased
by £3m to £408m mainly driven by the
downturn in the oil and gas market and
impact from disposal of Flow Control, offset
by a reclassification of lease costs under
IFRS 16 ‘Leases’, stronger Minerals cash
generation and full year positive impact of
ESCO. Our reported net debt increased from
£1,127m to £1,157m following the adoption
of IFRS 16 ‘Leases’, which resulted in £185m
of lease liabilities being classed as debt, and
a free cash outflow of £79m offset mainly by
proceeds of £263m from the sale of the Flow
Control Division. Adjusted net debt to EBITDA
on a covenant basis (excluding IFRS 16)
increased to 2.46 times (2018: 2.36 times).
CONTINUING OPERATIONS
ORDER INPUT
Order input at £2,792m increased 8% on a
constant currency basis but decreased by
4% on a like-for-like basis. Original equipment
orders were £742m. Aftermarket orders were
£2,050m.
Minerals orders increased by 10% on
a constant currency basis to £1,647m
(2018: £1,500m) with a book-to-bill of 1.11.
The Weir Group PLC Annual Report and Financial Statements 2019
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Original equipment orders were up 22%
as a result of the record £100m Iron Bridge
Project order in Australia. Excluding this
landmark order, underlying original equipment
orders were stable, and the division’s pipeline
remained strong driven by the long-term
structural growth drivers and the strength and
breadth of its technology offering allowing an
integrated solutions approach to customers.
Aftermarket orders increased by 5% to record
levels, with demand for spares and services
supported by structural trends including ore
grade declines. Aftermarket represented
67% of total orders (2018: 70%), reflecting
the strong original equipment order growth.
In total, mining end-market orders accounted
for 78% of the total (2018: 73%).
ESCO orders decreased 1% on a constant
currency pro forma7 basis to £557m
(2018: £564m) due to phasing of capital
and stocking orders with underlying
mining demand strong. Aftermarket orders
represented 95% of orders in line with
ESCO’s position as a provider of highly
engineered consumables to abrasive
applications. Construction markets in North
America were strong in the early part of the
year before slowing through the second half.
Oil & Gas orders of £588m (2018: £836m)
were down 30% on a constant currency
basis, reflecting the significant reduction in
refurbishment and replacement activity in
North America compared to the prior year
period. Aftermarket orders, which represented
71% (2018: 76%) of total orders, fell 34%
due to the reduced activity levels and
cannibalisation of existing equipment in North
America. Original equipment orders were
14% lower with declines in pump demand
partially offset by increased International
activity. North American orders were down
sequentially in the fourth quarter as markets
continued to soften. Orders from International
markets were higher year-on-year.
CONTINUING OPERATIONS REVENUE
Revenue of £2,662m showed growth of 7% on
a constant currency basis (down 6% like-for-like)
mainly reflecting strong input performance in
Minerals and a full year of ESCO, offset by lower
revenue in Oil & Gas due to the challenging
market conditions. Aftermarket accounted for
77% of revenues which is roughly in line with
the prior year. Reported revenues increased
9%, impacted by a foreign exchange translation
tailwind of £46m.
Minerals revenue was 4% higher on both
a constant currency and reported basis at
£1,478m (2018: £1,415m). Original equipment
sales accounted for 27% (2018: 28%) of
divisional revenues and were stable on the
prior year. Aftermarket revenues were up 6%
reflecting order trends.
ESCO revenue increased 4% on a constant
currency pro forma basis to £572m
(2018: £549m) reflecting previous order
growth and market and structural trends
consistent with those seen in our Minerals
Division with declining ore grades and
customers efforts focused on maximising
production from existing assets.
Oil & Gas revenue reduced by 25% on
a constant currency basis to £612m
(2018: £817m). Original equipment and
aftermarket revenues decreased by 8%
and 31% respectively, with aftermarket
accounting for 70% of total revenues
(2018: 76%). North American revenues
fell by 29% compared to the prior year
reflecting challenging market conditions.
International revenues were higher
year-on-year due to increased project
activity, particularly in the Middle East.
CONTINUING OPERATIONS PROFIT
Operating profit from continuing operations
(before exceptional items and intangibles
amortisation) increased by £4m (1%) to
£352m. Excluding a £9m foreign currency
translation tailwind the constant currency
decrease was £5m.
Minerals operating profit (before exceptional
items and intangibles amortisation) increased
by 7% on a constant currency basis to
£270m (2018: £253m), driven by good
underlying revenue growth and a favourable
product mix. Strong performances in our
Geho business driven by copper projects in
South America was partly offset by weak
demand in Central Africa as customers
curtailed activity significantly due to sales
RESULTS SUMMARY
Continuing operations1
Orders2
Revenue
Operating profit4
Operating margin4
Reported operating (loss) profit
Net finance costs
Profit before tax4
Reported (loss) profit before tax
Effective tax rate4
Earnings per share4
Total Group
Reported (loss) profit after tax
Cash generated from operations5
Net debt
(Loss) earnings per share
Dividend per share
2019
£2,792m
£2,662m
£352m
13.2%
(£322m)
(£50m)
£303m
(£372m)
24.4%
87.9p
(£379m)
£408m
£1,157m
(146.4p)
46.95p
2018
£2,592m
£2,450m
£348m
14.2%
£124m
(£38m)
£310m
£86m
25.3%
94.7p
£18m
£411m
£1,127m
7.4p
46.2p
As reported
n/a
9%
1%
-100bps
-360%
-32%
-2%
-532%
-90bps
-7%
-2,205%
-1%
£30m
-2,078%
2%
Constant currency2
8%
7%
-1%
-110bps
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Like-for-like1,3
-4%
-6%
-17%
-160bps
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
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.
1 Continuing operations excludes the Flow Control Division which was disposed of on 28 June 2019 and reported in discontinued operations.
2 2018 restated at 2019 average exchange rates.
3 2018 restated at 2019 average exchange rates and like-for-like excluding ESCO acquisition in 2018.
4 Adjusted to exclude exceptional items and intangibles amortisation.
5 Before exceptional cash flows. Net cash generated from operating activities was £264m (2018: £218m).
6 Calculation is on a covenant basis with net debt at average rates.
7 Pro forma figures for 2018 are provided for comparative purposes and are based on esco’s adjusted, unaudited us gaap management accounts.
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Strategic Report
FINANCIAL REVIEW
CONTINUED
tax changes and their own operational
issues. Operating margin on a constant
currency basis increased by 50bps to
18.3% (2018: 17.8%), due to product
mix and benefited from some delay to
phasing of lower margin original equipment
order shipments.
ESCO operating profit (before exceptional
items and intangibles amortisation) increased
by £50m reflecting a full year of results and by
£17m (25%) on a pro forma, constant currency,
basis to £83m (2018: £66m), as a result of
good revenue growth, operating leverage
and benefits from the post-acquisition cost
synergies. Cost synergies of US$25m were
realised in the year with a run rate of $27m
relative to our original target on acquisition
of US$30m. Operating margin of 14.5% was
up 240bps on a constant currency pro forma
basis (2018: 12.1%).
Oil & Gas operating profit (before exceptional
items and intangibles amortisation) including
joint ventures was £37m (2018: £101m) on a
constant currency basis. The decrease was
driven by lower activity in North American
markets, which also impacted pricing in
some product lines and operating leverage.
In response to the challenging market
conditions a restructuring exercise was
completed in the year which will deliver
£35m of annualised savings of which £11m
was realised in the year. Operating margin
at 6.0% was down 640bps on a constant
currency basis reflecting the challenging
market conditions.
Unallocated costs increased £7m from the
prior year to £38m supporting the ‘We are
Weir’ strategy with increased investment
in digital and advanced manufacturing
technology as well as share based
payments, including the all-employee Weir
ShareBuilder plan.
Reported operating loss for the year of
£322m was £446m adverse to the prior year
due to the increase in exceptional items and
intangibles amortisation of £450m combined
with the £4m increase in underlying
operating profit.
CONTINUING OPERATIONS NET
FINANCE COSTS
Net finance costs were £50m (2018: £38m).
The overall increase of £12m compared to
2018 was principally due to the adoption of
the IFRS16 ‘Leases’ standard which resulted
in an £8m interest charge in the year.
Net finance costs (excluding retirement
benefit related costs) were covered 7.9 times
by operating profit from continuing operations,
before exceptional items and intangibles
amortisation (2018: 10.3 times).
CONTINUING OPERATIONS PROFIT
BEFORE TAX
Profit before tax from continuing operations
(before exceptional items and intangibles
amortisation) decreased by 2% to £303m
(2018: £310m). The reported loss before tax
of £372m compares to an £86m profit in
2018 due to an increase in exceptional items,
including a £546m non-cash impairment of
our Oil & Gas North American assets.
CONTINUING OPERATIONS TAXATION
The tax charge for the year of £74m
(2018: £79m) on profit before tax from
continuing operations (before exceptional
items and intangibles amortisation) of
£303m (2018: £310m) represents an
underlying effective tax rate (ETR) of 24.4%
(2018: 25.3%). 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.
In terms of cash tax, the Group paid
income tax of £90m in 2019 across all
of its jurisdictions compared to £73m in
2018. The increase is due largely to timing
differences arising where 2019 cash tax
instalment payments (or refunds) are driven
partly by prior year current tax liabilities.
CONTINUING OPERATIONS
EXCEPTIONAL ITEMS AND
INTANGIBLES AMORTISATION
Exceptional items increased to £596m
(2018: £158m) with intangibles amortisation
increasing to £78m (2018: £66m). The increase
in amortisation reflects the impact of a full year
charge for ESCO.
An impairment charge of £546m was
recognised in the Oil & Gas North America
cash generating unit (CGU). The current
challenging market conditions and uncertainty
about the timing of market recovery resulted
in estimates of future cash flows featuring
lower revenue and margin assumptions.
This led to a review of specific assets which
were considered to be at risk and resulted in
impairment charges relating to brand names
of £40m, customer relationships of £144m,
inventory of £49m and property, plant &
equipment of £25m. Subsequent testing of the
remaining goodwill and intangible assets led
to further impairment totalling £288m and this
was charged against goodwill.
The current market conditions impacting our
Oil & Gas North America business result
in significant estimates being required in
the impairment testing of the intangible
assets associated with the Oil & Gas North
America cash generating unit. It is considered
appropriate to disclose this as an area of
significant estimation due to the size of the
34
balance, the relatively low discount rates
applied compared to recent years (due to
market driven bond yield data) and the current
levels of market uncertainty. Changes to these
areas of significant estimation could reasonably
lead to changes in the carrying value as a result
of future events within the next five years.
Exceptional items include costs of £11m
associated with the continued integration of
ESCO. These costs and associated benefits are
in line with our plans at the time of acquisition.
Restructuring and rationalisation charges in
the year of £31m comprise £15m in Oil & Gas
and £16m in Minerals. The Oil & Gas costs
reflect actions taken to mitigate the challenging
market conditions and include a 20% reduction
in workforce and closure of a number of sites.
Minerals £16m exceptional restructuring
and rationalisation costs primarily reflect the
decision to exit lower margin North America
sand and aggregate comminution markets
which included a write down of inventory and
tangible assets, and a further £6m charge for
the impairment of customer relationships.
The cash impact of the current year exceptional
income statement charge of £596m is
expected to be £24m, with £17m already
incurred in the year. The overall exceptional
cash outflow of £41m in 2019 includes £24m
related to exceptional items booked to the
income statement in prior years.
A tax credit of £92m has been recognised in
relation to exceptional items and intangibles
amortisation (2018: £46m).
After exceptional items and intangibles
amortisation, the reported loss for the year
from continuing operations is £353m (2018:
profit £53m).
DISCONTINUED OPERATIONS
The reported loss for the year from
discontinued operations is £26m
(2018: £35m), including an underlying loss
(before exceptional items and intangibles
amortisation) of £4m (2018: profit £16m).
The Group disposed of the Flow Control
Division on 28 June 2019 for an enterprise
value of £275m and a net consideration of
£263m, after customary working capital and
debt-like adjustments. In January 2020, the
final consideration was determined, as part
of the agreed completion accounts process,
resulting in the Group making a full and
final settlement to First Reserve of £4m.
This resulted in a pre-tax loss on disposal of
£8m being recognised at December 2019,
an increase of around £3m from the position
reported in June 2019.
The loss of £8m reflects final cash proceeds
of £259m, net assets at the date of disposal
of £270m, costs of disposal of £17m and a
gain of £20m from the recycling of cumulative
The Weir Group PLC Annual Report and Financial Statements 2019
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foreign exchange differences from the foreign
currency translation reserve to the income
statement. The income tax charge of £14m
primarily relates to the gain on disposal of
the US entities and assets resulting in a total
post-tax loss on disposal after tax of £22m.
IFRS 16 LEASES
IFRS 16 ‘Leases’ became effective from
1 January 2019. At December 2019
right-of-use assets were £178m, with
corresponding lease liabilities of £185m
resulting in an increase in net debt.
CAPITAL EXPENDITURE
Net capital expenditure for the Group,
including intangible assets, increased from
£85m in 2018 to £104m in the current year,
reflecting a continued investment in our
strategic priorities, together with investment
to enhance safety and operational efficiency
at ESCO. Net capital expenditure on property
plant and equipment (owned) of £81m was
1.3 times depreciation.
CASHFLOW AND NET DEBT
Cash from operating activities decreased by
£3m to £408m in the year which is mainly
driven by the downturn in the oil and gas
market and the (£75m) impact from disposal
of the discontinued Flow Control business,
offset by a reclassification of lease costs
under IFRS 16, stronger Minerals cash
generation and full year impact of ESCO.
Free cash flow from total operations
(contained within note 2) decreased by
£188m to an outflow of £79m (2018: inflow
£109m), before cash exceptional items
of £41m (2018: £142m). The decrease
was driven by operating cash flows from
discontinued operations £75m, tax £17m,
capital expenditure £19m, and £42m
increased dividend payment (due to a prior
year scrip option and an increase in shares in
issue following the ESCO acquisition).
Total Group exceptional cash items of £41m
relate to ESCO integration costs, legacy
warranty issues in Oil & Gas and restructuring
and rationalisation actions in both Oil & Gas
and Minerals.
The completion of the sale of Flow Control
Division on 28 June 2019 resulted in cash
proceeds, net of costs paid in the year and
cash deposits at the date of disposal of
£245m. In January 2020, a final payment of
£4m in respect of the sale was paid to reflect
the final consideration determined as part of
the agreed completion accounts process.
The above movements resulted in closing
Group net debt of £1,157m (2018: £1,127m),
which includes IFRS 16 lease liabilities of
£185m and a favourable foreign exchange
movement of £35m. Excluding IFRS 16
underlying financial debt reduced by £155m.
On a lender covenant basis, the ratio
of net debt to EBITDA was 2.4 times
(2018: including a pro forma full year of
ESCO 2.3 times) compared to a covenant
level of 3.5 times. Details of the Group’s
committed facilities are included in note 19.
In the Consolidated Income Statement,
for continuing operations, the lease charge
previously included in operating profit, is
replaced in the year by depreciation on the
right-of-use asset of £42m, an operating
expense of £17m relating to short-term leases
and low value assets which are exempt
from capitalisation, and an interest charge
of £8m included in Finance costs. The total
lease charge recognised in the Consolidated
Income Statement has increased to £67m
(2018: £54m) following growth in underlying
activity and the full year impact of ESCO.
There is also a change in presentation of cash
flows due to IFRS 16. Cash flows in respect
of leases for the total Group, now recognised
on the Consolidated Balance Sheet, totalling
£52m in the year, are included in financing
activities rather than operating activities.
Those leases exempt from capitalisation
result in cash outflows from operating
activities of £18m in the year, resulting in
a total cash outflow from leases of £70m
(2018: £59m).
PENSIONS
The Group has a mixture of defined
benefit pension plans and other employee
compensation or medical plans in both the
UK and North America.
The deficit of £139m compares to £149m
in 2018. For the legacy Weir Schemes, the
deficit decreased by £3m primarily due to
actuarial gains of £74m on the asset side,
updates to the mortality assumptions (£21m
gain) and the payment of £9m in deficit
reduction and one-off contributions, including
a special contribution following the disposal
of Flow Control. These gains are largely offset
by actuarial losses of £98m on the liability
side resulting from changes in financial
assumptions, primarily the discount rate, plus
a charge to the income statement of £2m.
For the ESCO schemes, the deficit decreased
by £7m due to gains of £15m on the asset
side, contributions of £10m in the year,
updates to the mortality assumptions
(£3m gain) and exchange rate movements
(£3m gain) offset by charges to the income
statement of £4m and changes in market
conditions, primarily relating to the discount
rate, leading to a £20m loss on the liabilities.
Insurance policy assets held for the two
largest UK schemes now cover 41%
(2018: 43%) of the Group’s total funded
obligation across all schemes, excluding
35
ESCO, reducing the Group’s exposure to
actuarial movements.
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 2019,
there were 1,551 asbestos-related claims
outstanding in the US (2018: 1,383).
Following our triennial review of estimated
future indemnity and defence costs in 2017,
we have continued to monitor our claims
experience and recognise a US asbestos
provision of £44m (2018: £48m) in line with
the actuarial decay model and the projected
claims. The Group has comprehensive
insurance cover in place for claims with a
pre-1981 date of first exposure and as a
result recognises a corresponding insurance
asset. Full details of the provision, plus related
insurance receivable, are provided in note 21.
KEY ACCOUNTING AND POLICY
JUDGEMENTS
The key accounting and policy judgements are
contained within note 2 to the Group financial
statements on page 144.
EARNINGS PER SHARE
Earnings per share from continuing operations
(before exceptional items and intangibles
amortisation) decreased by 7% to 87.9p
(2018: 94.7p). Reported loss per share
including exceptional items, intangibles
amortisation and loss from discontinued
operations was 146.4p (2018 earnings per
share: 7.4p). The weighted average number
of shares in issue increased to 259.5m
(2018: 244.1m) following the issue of 34.9m
shares during 2018 in respect of the ESCO
acquisition and scrip dividends.
DIVIDEND
The Board is recommending a final dividend
of 30.45p resulting in a total dividend of
46.95p for the year, a 2% increase on 2018.
Dividend cover (being the ratio of earnings
per share from continuing operations
before exceptional items and intangibles
amortisation, to dividend per share) is
1.9 times (2018: 2.1 times). If approved at the
Annual General Meeting, on 28 April 2020,
the final cash dividend will be paid on 5 June
2020 to Shareholders on the register as at
24 April 2020.
JOHN HEASLEY
Chief Financial Officer
26 February 2020
The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
WORKING
TOWARDS
BECOMING
A ZERO-HARM
WORKPLACE
36
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IT’S GREAT TO WORK FOR
A COMPANY THAT PUTS
SAFETY AS ITS NUMBER
ONE PRIORITY.
SUZANNE HARRISON
Iron Inspection Supervisor,
Weir Oil & Gas, Canada
At Weir, we want every one of our people to
have a safe start, a safe finish and a safe journey
home to their family or loved ones. This will
always be an area where we strive for continual
improvement and where we are making good
progress towards our ultimate goal for becoming
a zero-harm organisation. Our underlying total
injury rate is now 0.27 which makes us among
the safest industrial companies to work for in
the world.
During 2019, there were some exceptional safety performances
across our business, including our Oil & Gas Division which
recorded no lost time incidents over the year and recorded
a 49% reduction in its TIR.
Image: Weir Oil & Gas colleagues on site in
Canada in January 2020.
37
HIGHLIGHTS
• +5% aftermarket orders; original
equipment +22%
• Operating margins of 18.3%; +50bps
reflecting product mix
• Record £100m Iron Bridge order
demonstrates strength of differentiated
technology offering
The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
OPERATIONAL REVIEW
WEIR MINERALS
2019 MARKET REVIEW
Mining markets were positive in 2019
supported by commodity prices with copper
up 5%, iron ore up 29% and gold up 19%.
To take advantage of these conditions,
miners remained focused on productivity
improvements and cash generation.
There was also increased demand for more
sustainable solutions that reduce mining’s
environmental impact while also contributing
towards lower total costs. A number of large
greenfield developments were given final
approval although the majority of expansion
projects were focused on brownfield
extensions of current assets. All regions saw
good growth although Africa was impacted
by subdued demand in Central Africa.
Macro concerns led to some project delays
in the third quarter, but these abated towards
the end of the year as the US and China
reached a trade agreement.
These market trends were reflected in
demand for original equipment which was
principally from brownfield opportunities, with
particular demand for energy-saving solutions.
Aftermarket demand remained robust,
supported by long-term structural trends
including ore grade declines that mean that
miners need to process increased volumes
of harder rock to extract the same amount of
ore, increasing wear on equipment. Oil sands
demand remained robust.
In non-mining markets, industrial, power and
infrastructure markets were more challenging.
2019 OPERATING REVIEW
The division leveraged its strong market
positions to take full advantage of the growth
opportunities in 2019. This included its
Integrated Solutions Strategy, which utilises
its engineering expertise and broad product
portfolio to improve customer productivity,
delivering £155m in orders in 2019.
The division also continued to extend its
leading global service network with new
openings focused on high growth areas
including Russia, Central America, Central
Asia, Africa and Asia Pacific. The service
network gives the division the ability to rapidly
respond to demand for spares and services
and is a key differentiator in need-it-now
mining markets. The effectiveness of this
business model can be seen in the record
aftermarket orders received in 2019.
Technology development continued to focus
on expanding the product portfolio and
working with our customers in developing
smarter, more efficient and sustainable
solutions. This included the division’s
energy-saving Enduron® HPGR technology
which saw strong growth in demand through
the year including the record £100m Iron
Bridge order. The division is also working
with customers to develop innovative ore
hoisting technology that has the potential
to significantly improve the efficiency and
safety of transporting ore from underground
to the processing plant, reducing energy
consumption and costs. In addition, the
division signed an agreement with a major
customer to pilot its Terraflowing® solution
that reduces the water content of tailings
waste in a cost-effective manner enabling
it to be safely stored.
THE DIVISION
LEVERAGED ITS
STRONG MARKET
POSITIONS TO TAKE
FULL ADVANTAGE
OF THE GROWTH
OPPORTUNITIES
IN 2019.
RICARDO GARIB
Division President, Weir Minerals
RICARDO GARIB
Division President, Weir Minerals
A Cavex® hydrocyclone cluster
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The Weir Group PLC Annual Report and Financial Statements 2019
The division continued to optimise its
operating footprint including investment
in its larger foundries in Europe, South
America and Asia Pacific. It rationalised its
comminution offering, closing a number of
smaller facilities and exiting lower margin
segments to focus on higher margin, hard
rock mining opportunities. Longer-term
plans continued to be developed to optimise
global manufacturing and foundry capacity
to take full advantage of positive market
conditions and to support future growth and
margins. The division also implemented a
new customer relationship management
system and further automated tracking of its
extensive installed base.
2020 OUTLOOK
While the long-term fundamentals of mining
markets remain positive there is currently
uncertainty over the macro outlook for the
global economy, which is heightened by the
recent coronavirus (COVID-19) outbreak.
Assuming underlying demand does not
change, we expect the division to deliver
good growth in constant currency revenues
supported by delivery of the record Iron
Bridge order, with operating margins slightly
lower, reflecting product mix.
CAVEX® 800CVX HYDROCYCLONES
IMPROVE FLOW RATE BY 15% AT
MINERA CENTINELA, CHILE
Working with the team at Minera
Centinela, part of the Antofagasta
Minerals Group, Weir Minerals was
challenged to increase the mineral
recovery in the grinding area as
competitor hydrocyclones were
underperforming. Cavex® 800CVX
hydrocyclone clusters, to be powered
by the incumbent Warman® MCR®
650 slurry pump, were installed by the
team. After the installation, the Cavex®
hydrocyclones operated with a higher
flow rate of 5480m3/h, equating to a
15% improvement in mineral recovery
over the competitor hydrocyclones.
REVENUE1 £m
£1,478m
+4%
OPERATING PROFIT1,2 £m
£270m
+7%
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1,478
1,152
1,180
1,263
224
230
221
270
253
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
TOTAL INCIDENT RATE
HEADCOUNT (AVERAGE)
0.28
36% improvement
0.66
0.62
0.58
8,630
+1%
8,583
8,102
8,506
8,562
8,630
0.44
0.28
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
DIVISIONAL ORDERS BY END MARKET %
REVENUE BY ORIGINAL EQUIPMENT/
AFTERMARKET %
Mining
Industrial
Oil & Gas
Naval & Marine
Power Generation
Infrastructure
Water & Sewage
78%
8%
8%
2%
2%
1%
1%
Aftermarket
Original Equipment
73%
27%
DIVISIONAL ORDERS BY GEOGRAPHY %
NUMBER OF FACILITIES
North America
South America
Australasia
Asia Pacific
Africa
Europe
Middle East
22%
21%
21%
12%
12%
11%
1%
Europe
Asia Pacific
Australia
Middle East & Africa
South America
North America
51
31
27
27
22
22
1
Prior years restated at 2019 average exchange rates.
2 Adjusted to exclude exceptional items and intangibles amortisation.
39
The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
OPERATIONAL REVIEW
WEIR MINERALS
CONTINUED
SYNERTREX® ENABLED
WARMAN® MCR® 550
IMPROVES PUMP WEAR
LIFE BY 140%
INDUSTRY
Gold Mining
CUSTOMER
Evolution Mining,
Cowal Gold Operation
APPLICATION
Primary Cyclone Feed Pump
EQUIPMENT
Synertrex® enabled Warman® MCR®
550 pump
Evolution Mining is a leading
Australian gold producer. The Cowal
Gold Operation (CGO) is an open-pit
gold operation located 350km west of
Sydney. Working with CGO who were
looking to increase production, Weir
Minerals suggested installing a second
mill-pump to increase availability and a
Synertrex® enabled Warman® MCR® 550
was recommended as the best solution.
After 29 weeks of operation, analysis
showed that the pump would achieve
more than 40 weeks of operation, an
over 200% increase from the incumbent
pump and of over 60% from the
customer’s original goal of 24 weeks.
THIS RESULT ALLOWED
CGO TO REDUCE
SHUTDOWNS BY
EXTENDING THE LIFE
OF THE CYCLONE FEED
PUMP TO 40 WEEKS.
IMPROVED RECOVERIES
CONTRIBUTE TO
THE OVERALL
PROFITABILITY OF THE
CGO OPERATION.
RICARDO GARIB
Division President, Weir Minerals
The Synertex® enabled Warman®
MCR® 550
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HIGHLIGHTS
• Market share gains supporting 4%
increase in pro forma revenues
• Delivered annualised run rate
cost synergies of $27m, ahead of
original schedule
• Operating margins of 14.5%; 340bps
improvement post acquisition
The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
OPERATIONAL REVIEW
WEIR ESCO
2019 MARKET REVIEW
The division benefited from the same
macro mining trends as Minerals including
increased ore production and the focus by
mining customers on optimising productivity.
This supported demand for differentiated
technology that is proven to sustainably
increase efficiency. Regionally, there was
good demand growth in North America
and Asia Pacific, with most other markets
relatively stable with the exception of Africa
which was more subdued due to political
uncertainty and some customer-specific
operational challenges.
In infrastructure markets, North American
construction slowed as the year progressed
and dredge activity was also reduced.
2019 OPERATING REVIEW
The division continued to focus on
differentiating its offering through technology
leadership and close customer proximity.
This included market share gains by
extending its Nemisys® technology to
smaller machine classes including front
end loaders. The N70 improves customer
productivity by increasing wear life by more
than a third compared to competitor systems,
lowering fuel consumption and reducing
maintenance costs.
Additional new technology introductions
included GET Detect® which enables
customers to better monitor their G.E.T in the
field using digital sensors, helping prevent
costly unplanned downtime when teeth
become detached and enter downstream
processing operations. Operator safety is also
a big priority for its customers and the division
is developing GET Toolhead® an innovative
solution that automates G.E.T change-outs
reducing the need for personnel to be in
the pit, one of the most hazardous parts of
the mine.
Investment has been focused on improving
safety and upgrading foundry capacity
to meet future demand. The division
encountered some operational challenges at
our Newton, Mississippi, facility during this
upgrade process. These are temporary and
are being resolved, with significant production
improvement seen in Q4.
Annualised run rate cost synergies reached
$27m by the end of 2019, well on track to
deliver the division’s $30m target in 2020,
significantly ahead of the original schedule.
Good progress was also made toward the
medium-term $50m revenue synergy target.
This included expanding into new markets,
building on Mineral’s global network, with both
ESCO and Minerals collaborating to grow
market share in new or under-served territories.
THE DIVISION
CONTINUED TO FOCUS
ON DIFFERENTIATING
THROUGH
TECHNOLOGY
LEADERSHIP AND
CLOSE CUSTOMER
PROXIMITY.
JON OWENS
Division President, Weir ESCO
JON OWENS
Division President, Weir ESCO
ESCO’s new automated toolhead
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2020 OUTLOOK
ESCO shares many of the same market
drivers as Minerals. Assuming underlying
demand does not change, we currently
expect the division to deliver good growth
in constant currency revenues. Further full
year margin progression will be supported
by the ongoing delivery of cost and revenue
synergies and operational improvements.
REVENUE1,3 £m
OPERATING PROFIT1,2,3 £m
£572m
+4%
£83m
+25%
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2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
TOTAL INCIDENT RATE3
HEADCOUNT (AVERAGE)3
1.59
1% increase
2,338
-4%
1.57
1.59
2,444
2,338
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
DIVISIONAL ORDERS BY END MARKET %
REVENUE BY ORIGINAL EQUIPMENT/
AFTERMARKET %
Mining
Infrastructure
Oil & Gas
Industrial
58%
28%
9%
5%
Aftermarket
Original Equipment
96%
4%
DIVISIONAL ORDERS BY GEOGRAPHY %
NUMBER OF FACILITIES
North America
South America
Australasia
Europe
Africa
Asia Pacific
Middle East
56%
14%
11%
7%
6%
5%
1%
North America
27
South America
Asia Pacific
Australasia
Africa
Europe
9
8
6
6
5
1
2018 restated at 2019 average exchange rates and reported on a proforma basis.
2 Adjusted to exclude exceptional items and intangibles amortisation.
3 ESCO was acquired in July 2018 and fully comparable data is not available.
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TAKING WORKERS OUT
OF HARM’S WAY
Safety is a key priority for our customers
and our technology is helping take
workers out of harm’s way. Our new
automated toolhead does exactly that,
turning a hydraulic manipulator into
a robot arm.
It can securely grip and move GET,
allowing it to replace parts weighing up
to 500kg. The movement of the toolhead
is controlled remotely by a single
operator, compared to teams of up to
three people who would normally be
required for a manual change out.
The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
OPERATIONAL REVIEW
WEIR ESCO
CONTINUED
ESCO’s field proven Nemisys® N70 tooth system for
wheel loaders
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The Weir Group PLC Annual Report and Financial Statements 2019
NEMISYS® N70: LASTS UP
TO 36% LONGER THAN
THE COMPETITION
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Mineral extraction
CUSTOMER
Iron ore, North America
APPLICATION
Extreme duty-hard rock, large boulders
EQUIPMENT
Nemisys® N70 tooth system
Weir ESCO’s new Nemisys® N70 system
is focused for the wheel loader market.
In 2019, the technology was trialled on
a mine site with the success of the trial
resulting in the mine’s loader fleet being
upgraded to N70. The N70 lasted 4
times longer than the legacy competitor
system and because of ESCO’s unique
locking technology, change outs are far
simpler and quicker.
Analysis shows that the N70’s tooth
system is, on average, up to 21% harder
than the competition, while lasting
up to 36% longer and weighing less.
Such results have seen the division
make 31 conversions, against a target
of 25, with the system in 2019.
THE N70 TOOTH
SYSTEM REPRESENTS
A STEP CHANGE
IN THE MARKET
AND OUR 31
CONVERSIONS
IN 2019 REFLECT
THE VALUE IT
CREATES FOR OUR
CUSTOMERS.
JON OWENS
Division President of Weir ESCO
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HIGHLIGHTS
• Uncertainty and market volatility led to
£546m impairment of North American
Oil & Gas
• International markets continued to
show further improvement
• H2 modestly profitable supported
by a £35m annualised costs
saving programme
The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
OPERATIONAL REVIEW
WEIR OIL & GAS
2019 MARKET REVIEW
In 2019, despite WTI oil prices increasing
from $48 to $62 and averaging $57, the
North American land rig count fell 27%.
E&P operators in North American shifted their
focus to cash generation over growth, with
constrained capex budgets being exhausted
earlier in the year than usual as operators
priorities shifted to cash flow. This led to an
accelerated downturn in the second half
of the year which compounded already
over-supplied pressure pumping markets with
frack fleet utilisation estimated to be c.55%.
In contrast to the first half of 2018, when
oilfield service companies were refurbishing
and replacing their frack fleets, 2019 saw
significant levels of excess capacity, with
fleets being cold-stacked and cannibalised
for consumables, impacting both original
equipment and aftermarket demand. As a
result of these market conditions a number
of major oilfield service companies announced
they were significantly reducing their frack
fleets with an estimated 5m horsepower
(c.20%) withdrawn from the market.
International markets continued their steady
recovery with increased demand for services
and well-heads.
2019 OPERATING REVIEW
In response to these challenging market
conditions, the division completed a £35m
annualised cost savings programme.
This included reducing its workforce by
c.600 people or approximately 20%, facility
consolidations and asset write downs.
The division continued to extend its
technology leadership with market share
gains including its Simplified Large Bore
Frac System that significantly reduces the
complexity and improves the safety of
frack sites and delivered more than £20m
in revenues. It also benefited from its Weir
EDGE service offering to extend share
in pump consumables. The division also
launched the SPM® QEM 5000 pump which
is capable of supporting the development of
electric and gas turbine frack sites which have
the potential to reduce required fleet sizes
by 60%.
Internationally the division made good
progress with order wins from international
and national oil companies including a
four-year contract in Oman to provide
well-head equipment and services. It is also
developing plans to further expand its
well-head offering in the Middle East,
including increased manufacturing capability
in Saudi Arabia.
Operational improvements focused on supply
chain enhancements and leveraging shared
services to drive increased efficiencies across
the division. The division also opened its
Permian basin, Texas super centre providing
Pressure Pumping and Pressure Control
assembly, repair and testing facilities.
WHILST RIGHT SIZING
THE BUSINESS,
WE CONTINUED
TO EXTEND OUR
TECHNOLOGY
LEADERSHIP
IN 2019.
PAUL COPPINGER
Division President, Weir Oil & Gas
PAUL COPPINGER
Division President, Weir Oil & Gas
Weir Oil & Gas’ Large Bore Frack System
(in green)
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The Weir Group PLC Annual Report and Financial Statements 2019
2020 OUTLOOK
There is currently uncertainty over the
macro outlook for the global economy and
demand for oil which is heightened by the
recent coronavirus (COVID-19) outbreak.
In North America, industry expectations
are for a further reduction in Exploration &
Production expenditure in 2020, as operators
continue to focus on capital discipline over
growth. International markets are currently
expected to continue their steady recovery.
While visibility is limited, and assuming no
significant impact from coronavirus, we
expect the modest levels of profitability
seen in the second half of 2019 to continue
in 2020, with lower demand and pricing
pressure being offset by the benefits of our
restructuring actions.
GAINING MARKET SHARE
THROUGH OUR LARGE BORE
FRACK SYSTEM
The division saw good growth in its
large bore frack system which reduces
rig set-up time from up to 12 hours to
just two, compared to legacy systems.
It does this through equipment with
fewer leak paths providing a much
safer footprint.
Customised for any basin or condition,
this system is designed to improve
safety and performance, minimise
pressure-drop and erosion – thus
extending equipment life – reducing
non-productive time, rig-up time,
and material and labour costs.
REVENUE1 £m
£612m
-25%
OPERATING PROFIT1,2 £m
£37m
-64%
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2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
TOTAL INCIDENT RATE
HEADCOUNT (AVERAGE)
0.28
49% improvement
2,905
-5%
0.85
0.82
0.62
0.55
0.28
3,244
3,038
2,905
2,795
2,192
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
DIVISIONAL ORDERS BY END MARKET %
REVENUE BY ORIGINAL EQUIPMENT/
AFTERMARKET %
Oil & Gas
Other
99%
1%
Aftermarket
Original Equipment
70%
30%
DIVISIONAL ORDERS BY GEOGRAPHY %
NUMBER OF FACILITIES
North America
Middle East
Asia Pacific
Europe
South America
Australasia
Africa
68%
16%
9%
4%
1%
1%
1%
North America
Asia Pacific
Middle East & Africa
Australia
Europe
South America
27
12
8
2
1
1
1 Prior years restated at 2019 average exchange rates.
2 Adjusted to exclude exceptional items and intangibles amortisation.
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The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
OPERATIONAL REVIEW
WEIR OIL & GAS
CONTINUED
SPM® QEM 5000 E-FRAC
PUMP GIVES A C. 60%
REDUCTION IN
OPERATING FOOTPRINT
INDUSTRY
Oil & Gas
APPLICATION
Hydraulic Fracturing
EQUIPMENT
SPM® QEM 5000 e-Frac Pump
Frac site demands have dramatically
expanded since 2014, lateral lengths are
43% longer, the number of stages has
increased 94%, sand usage is up 85%
and horsepower-hours per well have
increased 200%. These factors push
conventional frac fleets to their limits.
Frac pumps are needed to provide
ever-increasing durability and
performance, but with the industry’s
goal to reduce its environmental impact,
adding horsepower alone doesn’t
fully meet operators’ needs. The SPM®
QEM 5000 E-Frac Pump’s compatibility
with non-standard drivers, including
electric and natural gas turbines, gives
operators the flexibility of tapping
into the electrical grid, remote power
generation or a natural gas turbine
generator. The pump minimises up-front
capital investment as it can reduce a frac
fleet from 20 conventional pumps to
just eight pumps. Engineered to reduce
maintenance, operators can experience
millions of dollars in maintenance
savings per year of use and reduce
maintenance personnel costs by
potentially 40%.
THE SPM® QEM
5000 E-FRAC PUMP
IS DESIGNED WITH
THE FUTURE IN
MIND, DELIVERING
CUSTOMERS A
LOWER TOTAL COST
OF OWNERSHIP
WHILE INCREASING
SUSTAINABILITY.
PAUL COPPINGER
Division President, Weir Oil & Gas
The SPM® QEM 5000 E-Frac Pump in testing in Texas
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The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
RISK MANAGEMENT
MANAGING RISK EFFECTIVELY
We operate in a complex global environment, where opportunities
come with corresponding risks. Because our markets are dispersed
and decentralised, our objective is to allow our people to be decisive,
so we can take advantage of attractive opportunities whilst ensuring
we are not exposing the organisation to excessive risk.
The 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 divisional
and Group levels. The gross 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 resulting net risk, and any further control
actions required. The dashboards themselves
have been enhanced as part of the greater
risk management process review.
The Risk Committee monitors quarterly risk
dashboard reports from the divisions. It 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. 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 89 and within the
Audit Committee Report on page 95.
The specific risks identified across the
business generally fall under one of the
categories within the ‘Risk Universe’ as
shown overleaf.
THE RISK AGENDA
During the year, the Board approved that the
risk management process be reviewed to
ensure its effectiveness and relevance in the
current climate. An external benchmarking
exercise to align with industry best practice
was carried out and input from the key
stakeholders was sought both resulting in
enhancements to the process.
Following this, the Board ran a workshop to
review the key principal risks and performed
horizon scanning to identify emerging
risks. These activities meet the Board’s
responsibilities in connection with Risk
Management and Internal Control set out in
the UK Corporate Governance Code 2018.
The aim of the Risk Appetite Statement
remains to highlight the risks that we should
be willing to take, as well as those that 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 the risk assertions
and the parameters taken together.
The parameters can apply to more than
one risk assertion; therefore, the individual
risk assertions should not be read in
isolation. As part of the aforementioned risk
management process review the risk appetite
of specific key principal risks were reviewed,
resulting in some updates to the risk appetite.
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 annually.
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 95.
RISK MANAGEMENT
Risk management 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.
Also, it allows the business to avoid
expending resources on mitigating controls
and actions, which have a negligible impact on
the risk assessment.
The impact of risks is quantified across a
range of factors including financial; strategy;
reputation; people and property; ability to
perform services; regulation; Safety, Health
and Environment; investors and funding.
The risk management policy includes defined
criteria for each risk impact all the way up to
Group level assessments, thereby providing
an integrated bottom-up and top-down
approach to risk management.
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 and divisional and
operational company management without
requiring escalation. This is articulated in
a series of Group policies and delegated
authority matrices, as well as the parameters
within the approved Risk Appetite Statement.
The Board and Committee structure can be
viewed on page 77.
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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
• 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.
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RISK RESPONSIBILITIES & REPORTING
BOARD AND SUB-COMMITTEES
GROUP EXECUTIVE
RISK COMMITTEE
DIVISIONAL MANAGEMENT
OPERATING COMPANY MANAGEMENT
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RISK MANAGEMENT CYCLE
MONITOR,
ASSURE AND
REPORT
IDENTIFY
FURTHER ACTIONS
AND CONTROLS
REQUIRED
IDENTIFY
THE RISK
QUANTIFY
THE NET RISK
QUANTIFY
THE GROSS
RISK
IDENTIFY
THE EXISTING
MITIGATING
ACTIONS AND
CONTROLS
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The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
RISK MANAGEMENT
CONTINUED
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.
2. Mergers and acquisitions (M&A)
We will actively pursue M&A opportunities that enhance our strategic
platform subject to meeting investment criteria.
3. Returns and profitability
We will not pursue growth at all costs, however, we expect high margins,
strong returns on capital and working capital discipline together with
cash generation.
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.
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.
6. Reputation and stakeholders
We will avoid/manage situations or actions that could have a negative impact
on our reputation and stakeholders. We aim to be transparent with all of our
stakeholders unless prejudicial to our collective interests.
Investment of resources will be consistent with divisional strategies and
expected divisional compound annual growth rates over five year plans.
Post-tax returns should exceed our cost of capital within three years of
the acquisition.
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.
Local country cash flow projections for investment appraisal purposes
discounted at country specific rates to account for risk weighted returns.
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.
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.
• Target zero harm through continuous improvement.
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.
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The Weir Group PLC Annual Report and Financial Statements 2019
ROLE AND RESPONSIBILITIES
The key roles and responsibilities for risk management are set out below.
Group
Risk management responsibilities
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Overall responsibility for the Group’s
risk management and internal control
frameworks, and strategic decisions within
the Group.
Audit Committee
Delegated responsibility from the Board to
review the effectiveness of the Group’s risk
and internal control frameworks.
Group Executive
Executive Committee with overall
responsibility for managing the Group to
ensure it achieves its strategic objectives.
• 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 three times a year.
• 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.
• Taking decisions in accordance with the delegated authority matrices.
• Annual assessment of the effectiveness of the risk management and internal control frameworks.
• Review of reports from the internal and external auditors.
• Review of the results from the six-monthly self-assessment compliance scorecards.
• 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.
Risk Committee
Management Committee responsible
for governance of the Group’s Risk
Management Policy and Framework.
• Review of the design and operation of the Group’s 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
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
• Group Compliance (sub-function of Legal)
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.
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.
• Design and administration of the Group’s compliance programme covering core areas including
anti-bribery, anti-corruption, anti-trust, privacy, trade controls and human rights.
• 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.
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Strategic Report
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 these keys risks.
The Board has conducted a robust
assessment of the principal risks, alongside
the Risk Appetite Statement set out on
page 52 meeting the Board’s responsibilities
in connection with Risk Management and
Internal Control details 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 a
detailed review of each principal risk has been
completed in the year.
The Group’s risk registers were reviewed
and validity of the existing prior year principal
risks were reassessed and consideration was
given as to whether any new principal risks
have emerged, or certain risks are no longer
considered to be a principal risk. This review
resulted in changes being made to the
principal risks in 2019.
The identified principal risks were subjected
to a detailed assessment based on the
following considerations:
• Severity of each risk relative to the Group’s
stated risk appetite;
• 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 weakness; and
• The extent to which each of the principal
risks could impact 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 54 to
59 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.
KEY
Strategy
People
Technology
Customers
Performance
Risk Trend
Increasing
No change
Decreasing
Viability Statement
V
Viability Statement
READ MORE
PAGE 90
MARKET VOLATILITY
V
Changes in key markets, including commodity prices affecting mining and oil and gas, have an adverse impact on customers’
expenditure plans. Fundamental market structure changes could alter the long-term economics of the business.
Impact on strategy Why we think this is important
How we are mitigating the risk
Changes during 2019
We need to remain sufficiently
flexible to allow us to anticipate
downturns, to allow us to adjust
our operations accordingly, and
equally to meet growth in demand
when our customers’ markets
are buoyant and therefore capital
investment is high. Otherwise, we
are at risk of incurring unnecessary
costs during downturns, and not
maximising our potential for growth
in buoyant markets.
We maintain regular engagement
with our customers to understand
their needs and challenges,
and ensure our business is
appropriately aligned.
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.
We continue to focus on customer
relationships, technology
development and Value Chain
Excellence to manage this risk.
The risk trend is increased to reflect
the shorter cycle nature of our North
American oil and gas markets and
the associated challenging market
conditions. We have responded
to this with a £35m cost saving
programme and our intention to
seek to maximise value from our Oil
& Gas Division at the right time.
Risk trend
54
The Weir Group PLC Annual Report and Financial Statements 2019
TECHNOLOGY
V
Failure of the Group to embrace technology and innovate and continue to develop and invest in both our core product offering and
technologically advanced next generation, sustainable solutions and services for our customers, leaves the Group exposed in the
defence of its market leading positions and ability to deliver on its growth ambitions.
Impact on strategy Why we think this is important
How we are mitigating the risk
Changes during 2019
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This risk was updated and expanded
to reflect the risk of failure to
embrace technology.
Risk trend
The Technology Vision & Strategy
is in place defining the strategic
technology innovation arenas and
Weir Innovation Network strategic
approach. External partnering
to provide horizon technology
scanning service.
Advanced Manufacturing Centres
established at key manufacturing site
to develop new intellectual property.
We need to continue to drive
innovation across the Group and
collaborate with research partners
to ensure there is a sustainable and
evolving product offering leveraging
new and adjacent technologies.
This can result in failure to
achieve and maximise the
expected sales opportunities
from new product launches and
technological advances.
Failure to adapt our business
model to capture economic value
from technological advances or
prevent economic loss from other
technological advances.
Failure to develop products meeting
the sustainable needs of our
customers and other stakeholders.
DIGITAL TRANSFORMATION
Failure to adapt to the digital transformation & changing business models in our end markets and adopt established digital
foundations across the Group, results in an uncompetitive, underperforming or an incompatible digital product offering which
negatively affect the Weir brand and loses connection with our customers.
Impact on strategy Why we think this is important
How we are mitigating the risk
Changes during 2019
The rapidly changing digital
landscape, rate of technological
advances and ever increasing
levels of automation will impact
the business, if we fail to anticipate
these changes and keep pace with
market and customer expectations.
Failure to manage this risk can
result in loss of market share due
to disruptive technologies and
advances in technology offerings
from competitors.
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 and respond
to their changing needs.
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 areas defined as
part of the innovation strategy.
Technological innovation continues
to be at the forefront of the business
due to the increasingly competitive
market and the pressure to provide
customers solutions to improve the
efficiency of their operations.
Further information on progress
made in this area is set out on
page 21.
Continued execution of the
Technology Vision and Strategy
through the year. The Innovation
Strategy process has been
defined, organisational structures
established, and Group and
divisional engineering strategies are
in place.
Risk trend
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Strategic Report
PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
COMPETITION
V
Increasing presence of low cost competitors with improving quality in our end markets leads to significant pricing pressure and
margin deterioration. Disruptive technologies or new entrants with alternative business models could also reduce our ability to
sustainably win future business, achieve operating results and realise future growth opportunities. Continuing threat from
third-party replicators.
Impact on strategy Why we think this is important
How we are mitigating the risk
Changes during 2019
Horizon scanning for competitor
threats including patent searches
and applications.
This risk is new in the current year.
Risk trend
Continued development of
operational efficiency and
improvement plans.
Technology solutions with
differentiation on engineering
expertise, aftermarket service
and price.
Increasing presence of low cost
competitors with improving quality
in our end markets can lead to
significant pricing pressures and
market deterioration.
Increased competition forces a
continual release of longer wear
life products resulting in reducing
our sales volumes with difficulty in
realising commercial benefits.
Disruptive technologies or new
entrants with alternative business
models could also reduce our ability
to sustainably win future business,
achieve operating results and realise
future growth opportunities.
VALUE CHAIN EXCELLENCE
V
Failure to achieve Value Chain Excellence improvements and the associated reduction in costs and enhanced capital efficiency.
Impact on strategy Why we think this is important
How we are mitigating the risk
Changes during 2019
Value Chain Excellence is a key
area of strategic focus for the
Group with Value Chain Excellence
initiatives continually developing
and the Group realising the benefits
of these.
Value Chain Excellence is embedded
into the divisions allowing for
Global and divisional supply chain
communities to share best practice
and leverage economies of scale.
Risk trend
If we fail to improve our value chain
management, we risk:
Regular KPI monitoring of the value
chain throughout the organisation.
• Failing to meet our customer
needs in terms of product
volume, quality and delivery,
through a failure in internal and
external supply chains resulting in
a loss of reputation and sales;
• Failure to optimise our inventory
thus inhibiting the Group
investment strategy and creating
slow moving and obsolete
inventory ultimately impacting
our results;
• Failure to manage potential
above inflationary increases in
procurement costs as commodity
prices increase thereby reducing
our cost competitiveness and
margins; and
• Failure to develop organisational
capability to sustain and improve
operational performance results.
Value Chain Excellence initiatives
have been operating throughout
the Group to drive value chain
improvements including expanding
production in best cost countries.
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.
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ENVIRONMENTAL SUSTAINABILITY
Adverse effect of climate change and environmental events including extreme weather impacting our business, our customers
and our supply chain. Failure to adapt to changes in legal, technological, social or market dynamics could affect our
competitiveness, reputation, and ability to attract and retain talent.
Impact on strategy Why we think this is important
How we are mitigating the risk
Changes during 2019
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This is a new risk in 2019.
A new Chief Strategy and
Sustainability Officer position
appointed to the Group Executive.
Risk trend
Failure to manage this risk could
have significant impacts on us, our
customers and our supply chain.
These impacts could be both
physical and transitional.
Furthermore, failure to manage
these risks may have political
and legal implications following
increased governmental focus.
Our Technology Strategy in place has
a significant environmental focus
and our new sustainability roadmap
further underpins our strategic
priorities with clear and appropriately
stretching goals.
We are continuing strong
engagement with stakeholders in
this area.
There are also wider implications
of this risk including loss of market
share, negative impact on reputation
and failure to attract talent into
the organisation.
We evolve our environmental
reporting processes and governance,
including external rating submissions
FTSE4Good, CDP, DJSI, etc to ensure
robust foundations.
INFORMATION SECURITY AND RESILIENCE
V
Failure to maintain the critical business systems and IT infrastructure required to meet the operational needs of the business.
Failure to minimise disruption to business operations because of changes to business systems, including during planned
transformation activities. Failure to adequately protect core business and stakeholders from cyber crime and other information
security risk.
Impact on strategy Why we think this is important
How we are mitigating the risk
Changes during 2019
Failure to adequately protect and
preserve the confidentiality, integrity
and availability of information and
systems from accidental, adversarial
or environmental threats could
lead to operational, reputational,
regulatory or financial impact.
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.
Security Incident Responder teams
monitor our various security systems.
IT security and continuity continues
to be a matter of strategic priority
for the Group in an environment
of increasingly sophisticated
cyber security threats. Progress to
strengthen the Group’s defences in
this respect is being made through
our IT transformational programme.
A new Chief Information Officer
position was appointed to the Group
Executive. We continually review
the effectiveness of our key IT
security controls in consultation with
external experts. We report upon
any unplanned outages and potential
security breaches, with lessons
learned across the Group.
There is also a continued focus on
the area from Internal Audit.
Risk trend
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PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
SAFETY, HEALTH AND ENVIRONMENT (SHE)
V
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
How we are mitigating the risk
Changes during 2019
We operate in hazardous
environments, and therefore have
a fundamental duty to protect our
people and other stakeholders
from harm whilst conducting our
business. As well as the personal
impact on our people resulting from
a failure to meet this obligation, we
would also be at risk of:
• Reputational damage leading to a
loss of customers;
• Legal action from regulators,
including fines and penalties; and
• Exclusion from markets important
for our future growth.
The Group continued to drive
its safety agenda in 2019 which
included the prioritisation of ESCO
being fully integrated and aligned to
the Weir global SHE standards.
SHE also featured prominently
in the Group’s global employee
engagement survey programme
which was rolled out in 2019.
The Group continues to monitor the
potential impact of the Coronavirus
(COVID -19), on its operations
and people.
Risk trend
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.
The SHE Excellence Committee
is responsible for monitoring
performance and compliance with
Group objectives, policies and
standards relating to SHE.
The Chief Executive’s Safety
Committee meets monthly and is
committed to achieving the highest
of SHE standards.
There is a formal SHE assurance
programme with issues
escalated as required through the
reporting structures.
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
How we are mitigating the risk
Changes during 2019
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.
The Talent Development and
Succession Planning process
is being further developed.
Global employee engagement
surveys were completed.
All-employee share ownership
plan was launched globally.
Global HR management system
being deployed.
Risk trend
Promotion of the Weir Group Values
& Behaviours, Code of Conduct
and HR Policies sets the standards
and expectations for all of our staff,
reinforcing our stated commitment
to attracting and retaining the very
best people.
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.
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.
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POLITICAL AND SOCIAL
V
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
How we are mitigating the risk
Changes during 2019
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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.
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 fore-
casting potential political and social
instability in regions.
Continued assessment of global tariffs.
Proactive monitoring of evolving policy
and development of contingency plans as
situations materialise.
The geopolitical risk landscape
remained unsettled throughout
2019 resulting in an increase
in the frequency and rigour of
the Group’s monitoring over a
range of exposures including
the political situation in the
Middle East and the potential
business impact of Brexit.
Risk trend
ETHICS AND GOVERNANCE
V
Interactions with our people, customers, suppliers and other stakeholders are not conducted with the highest standards of
integrity which devalues our reputation and/or introduces a level of contractual risk above our appetite.
Impact on strategy Why we think this is important
How we are mitigating the risk
Changes during 2019
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.
Policies continue to be updated
and rolled out including Data
Privacy and Anti-Corruption.
Compliance risk assessments
have been completed in several
high risk locations.
Risk trend
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
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.
a loss of customers;
• Increased scrutiny
from regulators;
• Legal action from regulators
including fines, penalties
and imprisonment;
• Exclusion from markets important
for our future growth;
• Failure to meet required social
standards to maintain licence to
operate in our communities; and
• Failure to comply with Group’s
process may lead to businesses
committing to onerous contract
terms or conditions.
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 procedures, and the highest
ethical standards.
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.
The compliance ’sub- function’ within
Group Legal continues to enhance global
focus on compliance.
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.
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SUSTAINABILITY REVIEW
EMBEDDING SUSTAINABILITY
Weir Group’s purpose is to enable the sustainable and efficient delivery of the
natural resources essential to create a better future for the world. This ensures that
sustainability is at the very core of our strategy.
SUSTAINABILITY IS
AT THE VERY CORE OF
OUR STRATEGY.
PAULA COUSINS
Chief Strategy and Sustainability Officer
The remaining issues formed the basis
of our sustainable foundations.
This enabled us to develop our sustainability
roadmap with transparent defined ambition
and goals for each strategic priority
underpinned by robust and transparent
sustainable foundations.
SUSTAINABLE DEVELOPMENT
GOALS (SDGS)
We support the UN Sustainable Development
Goals and our sustainability priority areas can
meaningfully support the achievement of
eight of the seventeen SDGs.
PAULA COUSINS
Chief Strategy and
Sustainability Officer
WHY SUSTAINABILITY
MATTERS TO WEIR
Embedding sustainability throughout our
organisation protects and creates long-term
value for all our stakeholders, both internal
and external, and will secure the long-term
future of Weir.
We have a meaningful role to play in making
our markets more sustainable through
innovation and technology. The positive
impact we can enable our customers to
achieve is significantly greater than that of our
own and is therefore where we can be truly
game changing.
OUR APPROACH TO SUSTAINABILITY
Sustainability is a wide, and expanding,
subject so we have chosen to focus diligently
on where we can create the biggest impact.
By aligning our organisation around clear
priorities and goals, we believe we can
deliver significant positive outcomes for all
our stakeholders.
We will continue to mature these
priorities and goals over time but will
maintain this focused approach to ensure
maximum impact.
SUSTAINABILITY ROADMAP
In early 2019, we started on our journey to
develop our first Sustainability Roadmap.
Our objective was to identify and embed our
most material sustainability priorities into our
core business strategy.
To achieve this we first conducted a
materiality assessment, consulting a range
of internal and external stakeholder groups.
This extensive engagement included
interviews and surveys with some of Weir
Group’s key customers, investors, employees
and senior leadership team.
The consultation allowed our stakeholders
to prioritise a set of 12 sustainability issues.
These issues were spread across three
thematic areas:
• Environmental & Technology
• Social & Human
• Governance & Economic
The stakeholders each assessed the most
significant actual or potential impacts for
Weir from their perspective.
The result of this materiality assessment
identified four clear strategic sustainability
priority areas for Weir Group where we
can deliver the most significant value.
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In 2019 we co-created our sustainability roadmap engaging all our key stakeholders to identify the highest business
value Group-wide priorities that will deliver tangible value across the Group, these are explained in more detail on
pages 62-65.
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ENABLING
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LEADING
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50%
REDUCTION
IN CO2e
BY 2030
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The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
SUSTAINABILITY REVIEW
CONTINUED
NURTURING OUR UNIQUE CULTURE
OUR GOALS
ENGAGEMENT
• Sustain leading eNPS in our
all employee surveys
INCLUSION AND DIVERSITY
• Foster equal opportunities for all
COMMUNITY PARTNERSHIPS
• Make a positive contribution
to the communities in which
we operate
IN SUPPORT OF UN SDGs
LEADING
eNPS SCORE
employee voice channels, is their desire to
see Weir become an even more inclusive
culture. In response, we created Weir’s first
global Inclusion & Diversity (I&D) Steering
Committee to help shape our approach to
diversity going forward. The Committee
comprises 15 diverse employees, who
represent many of Weir’s regions and
businesses. We also considered the insights
from a range of listening and learning
opportunities on I&D which allowed us to
develop strategic aims and objectives and
the creation of our first global I&D strategy.
In 2019, we had 2,245 female employees and
12,442 male employees1. Our gender pay
information can be found on page 117.
Community Partnerships
We believe that any investment in a
community should create a meaningful
and sustainable positive impact on that
community. It should be relevant to the local
needs, aligned with our business and carried
out in partnership with local organisations.
We are committed to focusing on projects
with strong educational, health and
community themes. In 2019 the total amount
of charitable donations made was £577,770.
CHARITABLE DONATIONS 2019
Community
Education
Health
54%
36%
10%
We support local communities through
charitable contributions and by encouraging
employees to donate their time to community
and charitable initiatives. To engage with
our wider communities, we hold family and
community days where we invite our local
community to join us on site so we can share
with them what we do. Some of our facilities
also run ‘Take Your Child to Work’ events
where we create an engaging,
hands-on experience for our employees’
children, introducing them to Weir, and
showing them what it’s like to work at a global
engineering company, and the possibilities
available for a STEM based career.
NEXT STEPS
Engagement
• Continue to foster genuine and meaningful
dialogue with employees
• Global roll-out of evolved ‘We are Weir’
• Continue to develop and implement
Weir ShareBuilder
Inclusion and Diversity
• Create a diverse workforce and truly
inclusive culture where all people have
equal opportunity
• Launch I&D engagement and
training campaign
Community Partnerships
• Develop local community partnership plans
KEY ACTIONS IN 2019
Engagement
We launched our first ever global survey
in late 2018, meaning that we entered into
2019 with valuable insights from our global
employee population on the areas they
think we do well on, and on what else we
can do to become an even better place to
work. We repeated the survey in June 2019,
receiving an excellent response rate with
some 86% of employees taking part. That’s
almost 12,700 Weir voices telling us what
they think about working here.
In total, across both surveys, we now have
over 200,000 comments from employees
which we’ve spent time exploring and acting
upon in our local teams across the globe.
To support this effort, we equipped leaders
with a range of resources to support them in
putting in place sustainable action plans that
will lead to positive changes for their teams.
We introduced ‘Meet the Board’ sessions, in
2019 which we held in Fort Worth, US (June)
and in Santiago, Chile (October). This allowed
deep and honest conversations between
local employees and Board members on
the issues that matter the most to our
employees. Furthermore, we introduced
a regular Employee Insights Report which
identifies key trends across all employee
voice channels. This Insights Report included
insights for Board consideration on a range
of topics including inclusion and diversity,
safety, sustainability and on a number of
other broader aspects relating to the overall
employee experience, such as our working
environments and our culture.
Inclusion and Diversity
One of the key areas of feedback from
employees, both in the survey and other
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The Weir Group PLC Annual Report and Financial Statements 2019
CHAMPIONING ZERO HARM
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OUR GOALS
SAFETY FIRST
• Aspire to Zero TIR
HEALTH AND WELLBEING
• Promote Health and Wellbeing
in line with local needs
ENVIRONMENTAL SAFEGUARDING
• Drive continuous
environmental improvement
ZERO TIR
IN SUPPORT OF UN SDGs
KEY ACTIONS IN 2019
Safety First
2019 has seen Weir make significant progress
towards our vision for a Zero Harm workplace.
A particular focus has been on accelerating
the maturity of ESCO Division’s Safety Health
and Environment (SHE) culture. The Minerals
and Oil & Gas Divisions have delivered
exceptional results, which given the Group’s
focus on ESCO, is a ringing endorsement
of the strength of our safety culture and the
overall effectiveness of our SHE management
system in delivering continuous improvement.
The year’s achievement has been further
reinforced by the results of our Employee
Engagement Survey, in which the two SHE
related drivers were the highest scoring for
the Group and demonstrated the belief our
people have in this priority.
Environmental Safeguarding
Managing environmental risk is key to our
operations. Weir SHE standards detail our
minimum standards for controlling risks to air,
land and water.
No significant environmental incidents,
penalties or fines were reported at sites under
the operational control of the Group during
the year ending 31 December 2019.
Across our sites we achieved an average
score of 73% across the environmental
section of our SHE management
system audit1.
NEXT STEPS
Safety First
• Support ESCO to further improve its safety
performance and integration into the Weir
SHE management system
• Continue to develop safety conversations
• Transition from OSHAS18001 to ISO45001
an international Health and Safety Standard
Health and Wellbeing
• Develop Group wellbeing framework
• Support local health and
wellbeing initiatives
Environmental Safeguarding
• Continuous improvement in safeguarding
our local environments
• Maintain local accreditation to ISO14001
The Group’s underlying Total Incident Rate
(TIR) fell by 40% to 0.27 in 2019. This included
reductions in numbers of both types of
recordable injuries (Lost Times and Medical
Treatments). A key component of this was
an exceptional performance by the Oil & Gas
Division which had zero Lost Time Injuries and
almost halved their TIR. Thankfully, this was
another year without fatality in our operations.
87% of our key businesses are accredited to
both OSHAS 18001/ISO45001 and ISO14001.
Engagement is a key part of our SHE strategy
and we continued to develop an environment
where people at all levels talk about safety
and speak up if they are not comfortable with
the way something is being done.
Health and Wellbeing
This year we more than doubled the number
of safety conversations recorded. The topics
of conversations went beyond safety with
a particular increase in conversations about
people’s health and wellbeing.
“Are you OK?” That’s the question at the
heart of an annual national day of action in
Australia dedicated to suicide prevention.
Born from a personal tragedy, R U OK? Day
is based on the idea that a conversation can
change a life. On 12 September, Weir ESCO
held R U OK? Day events across Australia,
including in Brisbane, Rutherford, Perth and
a joint event with Weir Minerals. Training was
conducted on how to recognise the signs that
someone may be struggling, and employees
received conversation cards outlining the
steps for starting an R U OK? conversation
– ask, listen, encourage action and check
in. Participants also learned how to respond
appropriately and safely to anyone who says,
“No, I’m not OK.”
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Strategic Report
SUSTAINABILITY REVIEW
CONTINUED
CREATING SUSTAINABLE SOLUTIONS
OUR GOALS
PRODUCTS IN USE
• Enable net zero through
innovative solutions
DESIGN AND SUPPLY CHAIN
• Embed sustainable product
design and procurement
CIRCULARITY
• Drive and capture opportunities
to shift from linear to a
circular model
IN SUPPORT OF UN SDGs
Circularity
Products embody carbon due to the
energy involved in their design, production,
distribution, use, maintenance and disposal
across their life cycle. Therefore, if we can
extend the wear lifetimes of our products or
find alternative uses then we can reduce their
environmental impacts. The Vulco® R67 mill
lining rubber compound increases product
efficiency and delivers a 20% increase in wear
life over comparable composite lifter bars.
Our service centre network supports the
refurbishment of our products to continue to
increase the lifespan of our products.
Our Industrial Internet of Things (IIoT)
Synertrex® platform offers predictive
maintenance feedback which can further
enhance the life of our products and reduce
environmental impacts. We are also improving
our recycling processes by purchasing our
scrap from customers and integrating those
materials back into our production process.
NEXT STEPS
Products in use
• Improve energy efficiency of products
• Improve water efficiency of products
• Increase safety of products
Design and Supply Chain
• Review and integrate sustainability into the
new product design process
• Deliver sustainable product design training
• Work with supply chain partners to ensure
sustainability across the supply chain
Circularity
• Continue to extend wear life
• Optimise circularity performance
• Review end of life product
treatment opportunities
ENABLING
NET ZERO
KEY ACTIONS IN 2019
Products in use
Our smart, efficient and sustainable technology
strategy ensures that our innovations are
always relevant to our customers.
In 2019 we focused on helping our customers
meet both their operational cost reduction goals
and their goals on reducing climate-related
impacts during product usage. For instance,
our technology helps customers to reduce
use phase energy consumption, waste and
associated GHG emissions. An example
of this is our High-Pressure Grinding Rolls,
which not only require up to 30% less energy
than traditional methods, but their wearable
components last much longer than those in
ball and rod mills.
A second example is our Terraflowing® technology
for tailings management. From dewatering to
transport, disposal, and the conversion of tailings
into a resource, we can provide customers with
an end-to-end tailings and pipeline solution.
This holistic, solutions-based approach to tailings
management strengthens our relationship with
customers and adds value to their operation
beyond pumping. Considering demand for water
conservation, operational sustainability and safe
deposition of tailings, we have invested in this
area to help solve crucial issues within the
mining sector.
Our Oil & Gas Division in 2019 launched the
SPM® QEM 5000 E-Frac Pump representing
two firsts: a frac pump designed from the
ground up for electric or gas turbine and
5,000-horsepower capacity in a single unit,
rated for service at 100% of rod load, 24
hours a day, even in extreme conditions.
With only eight SPM® QEM 5000 e-frac
pumps needed to match the output of 20
conventional pumps, maintenance, noise
pollution, safety hazards, emissions and
overall footprint are reduced.
Design and Supply chain
Our ESCO Division launched the GET Detect
smart product solution. It solves one of our
customer’s biggest challenges – the loss
of Ground Engaging Tools. This is important
because if a part makes its way to the
crushing circuit it can become stuck, stopping
production, causing expensive downtime
and putting people in harm’s way as they try
to retrieve it. The team developed exclusive
algorithms that identify if a part has become
detached and then alerts the machine
operator for early intervention to prevent
further damage.
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REDUCING OUR FOOTPRINT
OUR GOALS
CO2e
• 50% reduction in Scope 1 & 2
CO2e by 2030
WASTE
• Deliver against division specific
zero waste targets
WATER
• Develop water stewardship
programmes in all water
stressed locations
IN SUPPORT OF UN SDGs
50%
REDUCTION
IN CO2e
BY 2030
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• Fuel switching for both heat and power in
buildings, process and transportation
• Renewable generation and energy
purchasing reviews
Waste
Over 52,000 tonnes of scrap metal was
reused within our foundry operations during
2019, comprising 42% of all metal poured in
the foundries.
We conducted our No Time to
Waste Innovation Challenge (NTTW).
Hundreds of ideas were generated from
the NTTW challenge and shared across
the Group. The winning idea resulted in
investigation into the feasibility of converting
Mature Fine Tailings (MFT), a necessary
but unwanted by-product of the oil sands
extraction process, into an environmentally
friendly material. This is a pervasive issue
in the oil sands with over a trillion litres of
unprocessed MFT held in large tailings ponds.
In 2019 we worked in collaboration with
Natural Energy Systems (NES) to successfully
complete a Phase 1 study.
Water
Our Oil & Gas Division have reduced water
consumption at their sites in the Middle East,
one of the most highly water stressed regions
in which Weir operates.
By implementing a three step process of
removing oil contamination, solids and sludge
from steam remnants we allow this water to
be reused within the sites. Our sites within
Africa have continued to implement water
saving projects including water continuity,
harvesting and recycling.
NEXT STEPS
CO2e and Energy
• Expand advanced metering and
data collection
• Deliver further energy efficiency projects
• Launch behavioural change campaigns
• Develop renewables supply strategy
Waste
• Develop the phase 2 MFT study
• Conduct waste data detailed analysis
• Focus on highest impact waste reduction
and redirection projects
Water
• Pilot water stewardship programme
KEY ACTIONS IN 2019
CO2e and Energy
As an energy and carbon intensive business
operating 11 foundries worldwide in 2019,
we recognise the importance of measuring
and minimising our Greenhouse Gas (GHG)
emissions.
The Group’s total annual GHG emissions,
measured in tCO2e for the year ending
31 December 2019 were 226,292. This total
showed an absolute reduction of 8.3% in
comparison to 20181. The total includes
continuing and discontinued operations.
Our total GHG emissions from continuing
operations were 220,810 tCO2e, a reduction
of 6.9% from 20181. During 2019, our total
GHG emissions for our 11 foundries1 were
136,289 tCO2e which represented an absolute
reduction. Our full GHG emissions breakdown
can be found on page 70.
We conducted advanced metering
energy efficiency pilots at sites that
make up 17% of the Group’s total CO2e
footprint. These locations identified energy
reductions of between 11% and 25% per
site that collectively add up to ~£1m per
annum savings.
We completed the UK government required
Energy Saving Obligation Scheme audits and
identified potential energy costs savings of
10% which required little to no investment.
Across the sites we have seen emissions
reduction projects including:
• Lighting upgrades
• Heat recovery assessments
• Behavioural change campaigns
1 The 2018 figures have been recalculated to include the
ESCO Division for the whole of the 2018 year in order to
provide a like for like comparison across the years.
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WASTECO2eWATERFOOTPRINTREDUCING OUR
The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
SUSTAINABILITY REVIEW
CONTINUED
OUR SUSTAINABLE FOUNDATIONS
OUR SUSTAINABLE FOUNDATIONS
In addition to our four sustainability roadmap
strategic priorities we aspire to have the best
in class corporate governance across all areas
of sustainability.
Climate Change
We are committed to taking action to tackle
climate change. We have created goals to
support this commitment as a key component
of our Roadmap, within the Creating
Sustainable Solutions and Reducing Our
Footprint priorities. In addition to mitigating
climate change we are taking action to better
understand and prepare for the climate
related risks and opportunities that will
and are affecting our businesses.
We welcome and support efforts, such as
the Task Force on Climate-related Financial
Disclosures (TCFD), to increase transparency
and to promote investors’ understanding
of companies’ strategies to respond to
the risks and opportunities presented by
climate change.
We believe that companies should be
transparent about how they plan to mitigate
and be resilient in the face of climate change.
In 2019, we established Environmental
Sustainability as a principal risk across the
Group. This risk focuses on the potential
physical and transitional risks from climate
change and environmental events which may
impact our business, our customers or our
supply chain. In 2020 we will conduct our
first TCFD assessment and align with the
reporting requirements.
2019 CDP Climate Change Score
B
DISCLOSURE INSIGHT ACTION
We submit annually to CDP – Climate Change
to share our risk management approach to
climate change and our greenhouse gas
(GHG) emissions performance. In 2019,
we achieved a score of B.
As a business with operations around the
world we can be exposed to a wide range of
extreme weather events. In 2019, this has
included heavy rain, flooding and tornadoes
across South and Midwest USA, Cyclone Fani
in India, Cyclone Ann in Australia, extreme
flooding in China, severe heat-waves in India
and Europe, and heat-waves, bush-fires and
dust storms in Australia.
We were fortunate that none of our
employees have been harmed and very little
disruption has occurred at our sites due to
these incidents. In the case of such an event
occurring, we have put in place measures to
ensure operational resilience for ourselves
and our customers. We do recognise that
climate change will impact upon our business.
We will continue to develop our approach to
climate change relating to business strategy,
risk disclosure, opportunity disclosure and
emissions reduction initiatives aligning with
the TCFD recommendations.
Code of Conduct
We are dedicated to doing business in an
ethical and in a transparent manner, this
commitment has driven our legacy for
more almost 150 years. The Group’s Code
of Conduct (Code) is based on this simple,
fundamental value. The Code sets out the
Group’s commitment to promoting and
sustaining a strong ethical culture throughout
its operations, and provides direction on and
a framework for how we expect our people
to conduct themselves on a day-to-day basis.
All employees are expected to make decisions
in line with our values and behaviours as set
out in the Code of Conduct.
In May 2019, we published an updated
version of the Code that incorporates the
‘We are Weir’ framework. The updated Code
sets out our standard and expectations
for conducting business with integrity and
transparency; treating each other with
respect; promoting safe working conditions;
safeguarding the environment; and protecting
our data and assets.
Following the launch of the updated Code,
we provided online and in-person training
modules on the new Code, and over 9,000
employees have completed the training.
To accompany the updated Code, in 2019
we also updated the Group’s Anti-bribery
and Corruption Policy (ABC Policy) which
sets out in more detail than the Code the
Group’s position that it does not allow bribery
or corruption in any form, whether by Group
personnel or third parties acting on the
Group’s behalf.
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Both the Code and the ABC Policy are
available to the public on the Weir Group
internet site, and to all employees on the Weir
intranet. Both the Code and the ABC Policy
have been translated into ten languages.
Tax transparency
Our approach to tax is governed by five key
principles which are set and adopted by the
Board and are stated as follows:
• We are committed to compliance with
all applicable tax laws and regulations,
including timely submission of tax returns
and tax payments.
• We aim to develop and maintain effective,
collaborative and co-operative working
relationships with tax authorities in all
territories where we operate based on both
openness, honesty and transparency, and
by providing all relevant information in a
timely manner with a view to resolving any
disputes early.
• Our businesses make use of legitimate
tax incentives, exemptions and statutory
alternatives offered by governments.
Tax planning is undertaken only where it
is consistent with the substance of our
business and with full regard to the aims
of our stakeholders, our reputation and our
broader commercial and economic goals.
• We adhere to the standards for the
disclosure of tax information in our
published financial statements, in
accordance with industry and generally
accepted practice; and
• We ensure compliance with our tax
obligations by maintaining appropriate tax
management arrangements including the
roles and responsibilities taken on by our
people. These five principles are reflected
and more information about our approach
to tax are set out in our tax strategy which
can be found on our website.
www.global.weir/investors/ corporate-governance/matters-
reserved-to-the board/
Human Rights
We respect the human rights of all those
working for or with us, and of the people in
the communities where we operate. We will
not exploit anyone, wherever in the world we
are working. We will not do business with
companies, organisations or individuals that
we believe are not working to comparable
human rights standards. Our Human Rights
Policy communicates to our customers,
suppliers, investors, employees and the
communities where we operate the ethical
and social values we respect and our
commitment to uphold human rights.
Ethics Hotline
The Group maintains processes for persons
to raise concerns regarding unethical
behaviour. This includes the ability to
conduct whistleblowing through our Ethics
Hotline. The Ethics Hotline is a 24-hour,
multilingual service accessible via telephone
or online which allows concerns to be raised
confidentially and anonymously.
The Compliance function has responsibility
for acknowledging and investigating as
appropriate all matters raised through the
Ethics Hotline. The Group takes appropriate
action in respect of any matters raised via the
Hotline which are substantiated.
Weir does not tolerate retaliation against anyone
who raises concerns about ethical behaviour,
whether via the Ethics Hotline or otherwise.
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 the best performance, product
delivery, service and total cost in an ethical
and sustainable manner.
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
Modern Slavery
We understand our role in trying to eradicate
slavery or forced labour of any kind. Each year,
we publish on our website our Modern
Slavery Statement which details the steps
we have taken and are taking to try to ensure
that slavery and human trafficking do not take
place in any of our supply chains or in any part
of our business.
www.global.weir/site-information/modern-slavery-statement.pdf
FTSE4Good
The Weir Group PLC Annual Report and Financial Statements 2019
We have been a member of the
FTSE4Good index series for nine years.
FTSE4Good is designed to measure the
performance of companies demonstrating
strong Environmental, Social and Governance
(ESG) practices. We are proud to have been
able to meet the rigorous requirements to
be included within this series and to have
improved upon our previous years’ score.
This year we have put in place mechanisms
to be able to obtain and publish greater
levels of data related to our ESG actions
and are committed to further improving
our performance in 2020 and beyond.
Information Systems and Technology
Having robust, secure and efficient
Information Systems & Technology (IS&T)
capabilities are vital to effective operations
across the Group.
In 2019, as part of our continual improvement
programme, we looked in detail at how
our IS&T services and support were being
delivered. This resulted in the development of
the IS&T Transformation Programme which will:
• deliver an Operating Model which ensures
divisional teams can focus on delivering
Business Systems Transformation while
Group teams focus on Strategy, Policy
& Governance;
• mitigate operational and security risks; and
• implement a robust IT infrastructure
delivering secure, reliable and cost-effective
IS&T services across Weir.
Initial changes include reforms to IS&T
security practices including improved
monitoring, risk management and
response capabilities which have already
significantly increased our security rigour
and preparedness. These will be followed
by the introduction of a network operations
centre and 24x7 security monitoring across
the business, providing improved response
capabilities and visibility. Over the next two
years the IS&T Transformation Programme
will deliver improved network performance,
the implementation of more standardised
user experiences, consolidation of data
centres and the introduction of more
collaborative tools to leverage information
and knowledge sharing across the Group.
Safety Governance
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, Health and Environment Charter.
The Committee oversees Safety, Health and
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Environment (SHE) performance, ensuring the
Group systems and processes are best set up
to deliver our Zero Harm vision.
The Safety, Health and Environment (SHE)
Excellence Committee supports the CEO’s
Safety Committee and provides leadership, co-
ordination and support for the delivery of the
Group SHE objectives. 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. This applies equally
to existing operations and new projects.
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.
Building Organisational Capability
Our aspiration is to build a sustainable
workforce which enables employees and
leaders to continuously grow. This is our
vision at the heart of our learning and
development strategy which was developed
during 2019. We identified four priorities to
deliver this vision over the next three years:
• Build organisational capability:
To develop the five core capabilities
identified as being critical to the successful
delivery of ‘We are Weir’: leadership,
technical, digital, solutions-selling and
operational excellence. In 2019, over 1,500
employees graduated from the Minerals
Technical Learning Programme which
aims to build customer-facing employees’
knowledge of our products and solutions.
• Help employees grow their own way:
To provide all employees with tools and
resources to learn, develop and grow their
careers at Weir, enabling them to do the
best work of their lives.
• Doing the right thing today and
everyday: Ensuring that Weir employees
are trained appropriately in SHE, legal
and regulatory obligations to ensure they
always do the right thing.
• Brilliant basics (learning governance,
policies and systems): Learning
governance, policies and systems
will be the key enablers to delivering
our strategy. 2020 will see us deliver
a new learning platform through our
Workday implementation.
The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
SUSTAINABILITY REVIEW
CONTINUED
[Image caption]
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The Weir Group PLC Annual Report and Financial Statements 2019
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SUPPORTING
OUR COMMUNITIES
Weir Oil & Gas’ North American Pressure
Control facility in Houston donated 27,000
bottles of water to support replenishing
Salvation Army reserves recently used
during Tropical Storm Imelda. Major Zach
Bell, Area Commander for The Salvation
Army of Greater Houston. “As recovery
efforts continue across the region, their
donation will help The Salvation Army
provide a much-needed resource to
families and individuals working to put
their homes and lives back together”.
In response to the severe weather that
inundated the midsection of the US in
spring 2019, Weir ESCO made a $5,000
donation to the American Red Cross to
help the agency provide comfort and
support to disaster victims as more
storms and flooding threatened the
region. The Red Cross is a long-time
partner of Weir ESCO and we are proud
to support their humanitarian efforts.
Weir Minerals India donated temporary
roofs valued at £1,000 to families that
were impacted by cyclone Fani in the
state of Odisha.
AS RECOVERY
EFFORTS CONTINUE
ACROSS THE REGION,
THEIR DONATION
WILL HELP THE
SALVATION ARMY
PROVIDE A MUCH-
NEEDED RESOURCE
TO FAMILIES AND
INDIVIDUALS
WORKING TO PUT
THEIR HOMES
AND LIVES BACK
TOGETHER.
MAJOR ZACH BELL
Area Commander for The Salvation
Army of Greater Houston
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The Weir Group PLC Annual Report and Financial Statements 2019
Strategic Report
NON-FINANCIAL REPORTING
In the table below we outline our GHG emissions in line with the reporting requirement of the Companies Act 2006 (Strategic Reports and
Directors’ Reports) Regulations 2013. We have separated our continuing operations in order to provide a like-for-like emissions profile comparison
moving forward.
TOTAL ANNUAL GHG EMISSIONS
Scope 1 emissions: fuel combustion and operation of facilities
Scope 2 emissions: purchased electricity and heat
Total (continuing and discontinued operations)
Total (continuing operations)
Total (discontinued operations)
ANNUAL GHG EMISSIONS FROM FOUNDRIES
Global Annual GHG
emissions tCO2e
GHG emissions intensity
(tCO2e per £m revenue)
2019
81,631
144,661
226,292
220,810
5,482
2018
89,002
157,693
246,696
237,127
9,569
2019
29.0
51.4
80.5
83.0
36.5
2018
29.0
51.4
80.5
87.1
27.9
Scope 1 emissions: fuel combustion and operation
of facilities
Scope 2 emissions: purchased
electricity and heat
Total
Annual GHG emissions (tCO2e)
2019
2018
46,725
52,469
89,564
136,289
95,915
148,383
Proportion of Global
(continuing operations)
annual emissions (%)
GHG emissions intensity
(tCO2e per tonne of metal
poured)
2019
21.2
40.6
61.7
2018
22.1
40.4
62.6
2019
2018
0.4
0.7
1.1
0.4
0.8
1.3
Notes: 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.
Annual emissions figures for 2018 have been restated as they were materially different due to the acquisition of ESCO, to reflect the collation of more accurate consumption data and the
correction of emissions factors which had resulted in an understatement. The need to restate was identified during our standard review process.
We have included within the 2018 data the full year 2018 ESCO GHG emissions, revenue and tonnes of metal poured, our ESCO Division was only acquired in July 2018, to allow for like-for-like
comparison between the two years. We have provided data which separates our continuing and discontinued operations. Our continuing operations consists of our three remaining divisions
(Minerals, Oil & Gas and ESCO) and Group entities emissions. Our discontinued operations comprises our Flow Control Division which was sold in June 2019. For the total (continuing and
discontinued), total (continuing) and total (discontinued) emissions, the emissions for our Flow Control Division are only included up to the point of sale in June 2019.
Our Foundry GHG emissions do not contain any discontinued operations so no differentiation is required. Totals may not sum due to rounding.
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 2019’ and other region-specific emissions factors where available.
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The Non-Financial Reporting table below meets the requirement of the Companies, Partnerships and Groups (Accounts and Non-Financial
Reporting) Regulations 2016. The required information about the business model can be found on pages 14-15.
Non-Financial
Reporting
Requirement
Environmental
matters
Employees
Policies and standards which govern
our approach and due diligence
Relevant Group
Principal Risk
KPIs3
Safety, Health and
Environment (SHE)2
Environmental
Sustainability2
Staff recruitment,
development and
retention2
Safety, Health and
Environment (SHE)2
Code of Conduct1
SHE Charter1
SHE Management System1
Sustainability Roadmap1
SHE Excellence Committee
Risk Committee
Code of Conduct1
SHE Charter1
SHE Management System1
Sustainability Roadmap1
Diversity and Inclusion Policy1
Board Diversity Policy1
Inclusion and Diversity Committee
SHE Excellence Committee
Risk Committee
Rating within the
SHE performance
measurement process
GHG Emissions
CDP score
Rating within the
SHE performance
measurement process.
Total Incident Rate
Organisational effectiveness
measure
Gender pay gap results
Employee engagement
survey participation rates
Employee engagement
eNPS
Outcomes and additional
information
Sustainability Review
Pages – 60,61,63,
64,65,66 and 67
Sustainability Review
Pages – 60,61,62,63,
66,67 and 117
Human rights
Social matters
Anti-corruption
and anti-bribery
Code of Conduct1
Human Rights Policy1
Modern Slavery Statement1
Sustainability Roadmap1
Risk Committee
Code of Conduct1
Gifts & Hospitality Policy1
Anti-Corruption and
Bribery Policy1
Sustainability Roadmap1
Risk Committee
Code of Conduct1
Anti-Corruption and
Bribery Policy1
Gifts & Hospitality Policy1
Sustainability Roadmap1
Risk Committee
Ethics, governance
& control2
FTSE4Good score
Code of Conduct Training
completion
Sustainability Review
Pages – 60,61,66
and 67
Ethics, governance
& control2
Charitable Giving
FTSE4Good score
Sustainability Review
Pages – 60,61,62,66
and 67
Ethics, governance
& control2
FTSE4Good score
Code of Conduct Training
completion
Sustainability Review
Pages – 60,61,66
and 67
1 These policies are available on our website https://www.global.weir/sustainability/policies/.
2 More information about our principal risks can be found on pages 50-59.
3 More information about medium-term Key Performance Indicators and priorities which are aligned to our ‘We are Weir’ strategic framework and the Group’s remuneration policy can
be found on page 106.
The Strategic Report covering pages 1-71 of the Annual Report and Financial Statements 2019, 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
GRAHAM VANHEGAN
Chief Legal Officer and Company Secretary
26 February 2020
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The Weir Group PLC Annual Report and Financial Statements 2019
Corporate Governance
OVERVIEW OF GOVERNANCE
CHAIRMAN’S INTRODUCTION
TO GOVERNANCE
READ MORE
PAGE 73
BOARD ACTIVITIES
READ MORE
PAGE 82
BOARD PERSPECTIVES
READ MORE
PAGES 79
AND 88
Leadership and purpose
Overview of the Board of Directors and Group
Executive biographies.
Chairman’s Introduction to Governance
Board biographies
Group Executive biographies
Division of responsibilities
Explains the roles of the Board and its Directors, including:
Governance Framework
Division of Responsibilities
Senior Independent Director Overview
Board Statements
Effectiveness, evaluation and succession
Sets out Board activities during the year, key processes of the
Board and its Committees.
Board Meetings
Board Activity Timeline
‘Meet the Board’ Case Study
Board Effectiveness Evaluation
First Year as a Non-Executive Director Ebbie Haan
Board Inductions
Audit, risks and internal controls
Explains the role of the Board and the Audit Committee.
Accountability
Viability statement
Nomination Committee Report
Audit Committee Report
Relations with Shareholders
Provides an overview of the activities undertaken to maintain an
open dialogue with the Company’s Shareholder’s.
Engaging with Our Shareholders
Remuneration
Describes the Company’s remuneration arrangements in respect
of its Directors, and how these have been implemented:
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90
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Directors’ Remuneration Report
Remuneration at a Glance
Summary of policy and 2020 implementation
Directors’ Remuneration Policy
Directors’ Report
Statement of Directors’ Responsibilities
102
104
106
108
126
129
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The Weir Group PLC Annual Report and Financial Statements 2019
CHAIRMAN’S INTRODUCTION TO GOVERNANCE
THE BOARD IS
COMMITTED TO THE
HIGHEST STANDARDS
OF INTEGRITY AND
ACCOUNTABILITY. OUR
ROBUST CORPORATE
GOVERNANCE
FRAMEWORK ENSURES
PRUDENT OVERSIGHT TO
PROTECT STAKEHOLDER
VALUE.
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CHARLES BERRY
Chairman
OUR PURPOSE
We are here to enable
the sustainable and efficient
delivery of the natural resources
essential to create a better future
for the world.
The Company has complied in full
during 2019 and to the date of this
report with the provisions of the
UK Corporate Governance Code
published in 2018.
The Code is publicly available at the
website of the Financial Reporting
Council at www.frc.org.uk.
CHARLES BERRY
Chairman
DEAR SHAREHOLDERS,
I am pleased to present the Corporate
Governance Report for 2019. Under my
Chairmanship, I continue to ensure that the
Board leads by example to demonstrate
the values of the Company and to promote
a culture of transparency, sustainability
and accountability. The Board is committed
to the highest standards of integrity and
oversees a robust and effective system of
Corporate Governance controls to protect
stakeholder value.
This report describes our Corporate
Governance framework and explains how the
Board works with its Committees to ensure
that the framework remains appropriate and
effective. This prudent oversight is essential
to deliver the strategy and to create long-term
value for our stakeholders.
The Board continues to ensure ongoing
engagement with stakeholders throughout
the year and acknowledges the clear
responsibility it has to promote the long-term
success of the Company for its stakeholders.
This long-term approach defines how the
strategy is set and allows the Board to
assess risk and deliver sustainable value
for stakeholders. We have also continued
to focus on assessing and monitoring our
Company culture in order to ensure that
the voice of our employees is heard in
the Boardroom.
The Board operates effectively and each
Director continues to contribute the correct
balance of skills, experience, independence,
knowledge and the ability to commit sufficient
time to undertake their responsibilities.
The Board also ensures an open and
transparent remuneration policy for the
effective recruitment and retention of
Board members and employees. A formal
procedure exists to ensure the alignment
on remuneration with the culture and the
strategic plan.
UK CORPORATE GOVERNANCE
CODE 2018
The UK Corporate Governance 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 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 within the Directors’
Report on pages 126-128.
The following Corporate Governance Report,
including the Committee Reports and the
Directors’ Report, set out how we apply
our governance standards in practice and
demonstrates our compliance with the UK
Corporate Governance Code 2018.
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Corporate Governance
BOARD OF DIRECTORS
The Board considers that each Director standing for re-election at the AGM in 2020 continues to promote the long-term sustainable success of the Company by contributing a specialist skill
set that is valuable to the Company, its stakeholders and is complementary to the Board as a whole.
You can read more about the Directors individual skill sets in the Nomination Committee Report on page 93.
CHARLES BERRY
Chairman N*
JON STANTON
Chief Executive Officer
JOHN HEASLEY
Chief Financial Officer
BARBARA JEREMIAH
Senior Independent
Director A N R
CLARE CHAPMAN
Non-Executive Director
R*
CAL COLLINS
Non-Executive Director
Date of appointment:
1 August 2017
Date of appointment:
1 August 2017
Date of appointment:
12 July 2018
Senior Independent Director
since 1 January 2020
Independent:
Yes
Independent:
No
Date of appointment:
Chairman since
January 2014 and Non-
Executive Director since
1 March 2013
Independent:
Yes
Key strengths
and experience
Charles brings extensive
governance and leadership
experience to the
Board gained in senior
management positions
held within a variety of
sectors. Prior to joining Weir,
Charles was an Executive
Director of Scottish Power
plc and Chief Executive of
its UK operations. He is
a former Non-Executive
Director and Chairman of
Eaga plc, Drax Group plc,
Senior plc and Thus Group
plc, and a former Non-
Executive Director of Impax
Environmental Markets
PLC and Securities Trust of
Scotland plc.
His vast leadership and
management experience is
critical to lead the Board and
ensure it remains effective,
to monitor and uphold the
values and purpose of the
Company and to ensure
that a robust and effective
framework of Corporate
Governance exists to
protect stakeholder value.
Key external appointments
• Chairman and
Nomination Committee
Chair of Centrica plc
• Member of the steering
group of the Hampton-
Alexander Review
Date of appointment:
Chief Executive Officer
since October 2016.
Finance Director from April
2010 – October 2016
Date of appointment:
Chief Financial Officer
since October 2016
Independent:
No
Independent:
No
Key strengths
and experience
John is a seasoned
professional with significant
financial and operational
experience gained in
financial practice, energy
and mining sectors.
He contributes financial
expertise and significant
management, commercial
and operational skills to
execute the strategy across
each of the divisions, while
ensuring a robust and
effective financial control
environment which is
compliant with regulations.
John is also our Group
Executive Sponsor for
Inclusion & Diversity,
chairing the Group Inclusion
and Diversity Committee.
John is a Chartered
Accountant and a member
of the Institute of Chartered
Accountants of Scotland.
Key external appointments
• Non-Executive Director
of Royal Scottish
National Orchestra
Society Limited
Key strengths
and experience
Jon became CEO in 2016
and contributes a wealth
of experience to the Board.
Since becoming CEO, he
has led the Weir portfolio
transformation and oversees
the delivery of the ‘We are
Weir’ strategic framework to
create long-term sustainable
performance improvement.
He provides leadership
to deliver the strategy
and ensure it aligns
with our purpose and
values. Jon is committed
to regular engagement
with stakeholders and to
ensuring stakeholder views
and concerns are heard,
understood and considered.
Jon joined the Board as
Finance Director in 2010.
Prior to this he was a
partner with Ernst & Young,
where he led global board-
level relationships with a
number of FTSE-100 multi-
national companies.
He is a Chartered
Accountant and a member
of the Institute of Chartered
Accountants in England
and Wales.
Key external appointments
• Non-Executive Director
of Imperial Brands PLC
Independent:
Yes
Key strengths
and experience
Barbara contributes
considerable experience
to the Board having spent
over 30 years in a number
of senior leadership roles
within Alcoa Inc., the global
aluminium producer and as
the Chairwoman of Boart
Longyear Limited.
Barbara’s leadership and
governance experience
allows her to effectively
contribute to the Board as
Senior Independent Director
by providing support to
the Chairman in his duties
where necessary and
engaging with a range
of major Shareholders in
order to help develop a
balanced understanding of
their views.
Barbara has a BA in
political science and is a
qualified lawyer.
Key external appointments
• Non-Executive Director
and Remuneration
Committee Chair of
Aggreko plc
• Non-Executive Director
of Russel Metals Inc
• Non-Executive Director
and RemCo Chair of
Premier Oil plc
Key strengths
and experience
Cal was previously Chairman
and Chief Executive Officer
of ESCO Corporation which
Weir acquired in 2018.
He contributes a wealth
of international resource
markets experience which
allows him to support the
delivery of the strategy and
to work with the Board to
ensure that the Company
fulfils its purpose to enable
the sustainable and efficient
delivery of the natural
resources essential in
creating a better future for
the world.
Key external appointments
• Non-Executive
Director of Stimson
Lumber Company
• Non-Executive
Director of ENTEK
International LLC
Key strengths
and experience
Clare brings a wide range
of people, governance
and large scale business
transformation skills to the
Board which allow her to
contribute effectively in
her role as Remuneration
Committee Chair. She has
vast experience of Human
Resource Management
gained during her time
as Group People Director
of BT Group plc and
Tesco Plc and as Director
General of Workforce for
the NHS and Social Care.
Clare was also previously a
Non-Executive Director of
Kingfisher plc and TUI Travel
plc and Chairman of their
Remuneration Committees.
Clare was Group HR
Director of Tesco plc from
1999 to 2006 and HR Vice
President of Pepsi Cola’s
European operations from
1994 to 1999. Clare also
has experience of working
outside the UK with over
ten years as an executive
based in the USA and
mainland Europe.
Clare’s considerable
experience and expertise
allows her to contribute
and challenge as well as to
engage with stakeholders
to ensure that there is an
appropriate and transparent
Remuneration Policy which
is aligned with the Weir
culture and strategy.
Key external appointments
• Non-Executive Director
of Heidrick & Struggles
International, Inc.
• Non-Executive
Director and Chair of
the Remuneration
Committee of G4S plc
• Commissioner on the
Low Pay Commission
BOARD DIVERSITY BY TENURE
BOARD DIVERSITY BY GENDER
Male
Female
8
3
• Steering Group Member
and Co-Chair of
Purposeful Company
0-3 years
Male
Female
3-5 years
Male
Female
5-10 years
Male
Female
5
3
2
2
2
0
4
3
1
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BOARD OF DIRECTORS
EBBIE HAAN
Non-Executive Director
A R
Date of appointment:
18 February 2019
Independent:
Yes
Key strengths
and experience
Ebbie contributes
considerable Oil & Gas
and engineering expertise
to the Board. He spent 26
years working on global
projects for Royal Dutch
Shell including holding
senior leadership positions
in the Middle East, Africa,
Europe, Asia and the
US, where he gained
extensive international
management experience.
He was previously
Managing Director of Sasol
Petroleum International
before being appointed
as Chief Growth Officer
for Maersk Oil, in 2015.
Since 2018 Ebbie has run
his own advisory firm.
Ebbie’s valuable knowledge
of the Group’s core
markets assists the Board
to ensure that the Group
operates in an efficient
way to maximise long-term
growth for its stakeholders.
His experience of SHE best
practice and commitment
to safety is also extremely
valuable to the Company.
Ebbie has both an
undergraduate degree
and a Masters in Geology
from Utrecht University in
the Netherlands.
Key external appointments
• Non-Executive Director
of Orca Exploration
Group Inc
• External Energy Adviser
for AP Møller Capital
• Visiting lecturer at
Witts Business School
in Johannesburg
MARY JO JACOBI
Employee Engagement
Non-Executive Director
N R
Date of appointment:
Non-Executive Director
since 1 January 2014.
Employee Engagement
Non-Executive Director
since April 2018
Independent:
Yes
Key strengths
and experience
Mary Jo is an expert adviser
on international affairs and
reputation management and
contributes a unique skill
set to the Board. 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 and Mulvaney Capital
Management. Mary Jo was
Special Assistant to President
Ronald Reagan, Assistant
US Commerce Secretary
for President George
H.W. Bush, a British Civil
Service Commissioner and
a Member of the Advisory
Committee on Business
Appointments. Her vast
experience, trusted adviser
credentials and excellent
communication skills allow
her to effectively perform
her duties as Employee
Engagement Non-Executive
Director. Mary Jo ensures
engagement with employees
and that their voice is heard in
the Boardroom.
Key external appointments
• Advisory Board
of Rothermere
American Institute at
Oxford University.
• Board of Directors
of Foundation to
Restore Accountability
• International Advisory
Board, IE University
SIR JIM MCDONALD
Non-Executive Director
A N
Date of appointment:
1 January 2015
Independent:
Yes
Key strengths
and experience
Sir Jim is a highly regarded
expert in engineering and
technology and therefore
contributes specialist
technical knowledge to
the Board. He is currently
the Principal and Vice
Chancellor of the University
of Strathclyde and has held
the Rolls- Royce Chair in
Electrical Power Systems
since 1993. He holds a
number of Non-Executive
Director roles and co-chairs
the Scottish Energy Advisory
Board with the First
Minister. Sir Jim draws on
his extensive experience
to assist the Board to
approve the development
of the Group’s technology
agenda and to provide
oversight and guidance on
the sustainable engineering
solutions that promote the
success of the Company
and build on its legacy of
engineering excellence.
He is Chairman of the Royal
Academy of Research
Committee and Chairman
of the Scottish Engineering
and Energy Research Pools.
He is FREng, FRSE, FIET,
FInstP, FEI.
Key external appointments
• Non-Executive
Director of Scottish
Power Limited
• Non-Executive Director
of UK Offshore
Renewable Energy
Catapult Board
• Non-Executive
Director of National
Physical Laboratory
• President of the Royal
Academy of Engineering
• Member to the Prime
Minister’s Council for
Science and Technology
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Non-Executive Director
STEPHEN YOUNG
Non-Executive Director
A* R
GRAHAM VANHEGAN
Chief Legal Officer and
Company Secretary
S
Date of appointment:
1 April 2009
Date of appointment:
1 January 2018
Date of appointment:
1 May 2018
Independent:
Yes
Independent:
Yes
Independent:
N/A
Key strengths
and experience
Graham joined Weir as Chief
Legal Officer and Company
Secretary in 2018. He brings
extensive international legal
experience and is a trusted
adviser to the Board on
all Corporate Governance
matters. During his 24 year
career with international
exploration and production
company ConocoPhillips,
he held a number of senior
positions for the company
in Asia and North America.
A graduate of the University
of Glasgow, Graham is a
solicitor qualified to practice
in both Scotland and
England and is an attorney-
at-law before the State Bar
of New York, USA.
Key strengths
and experience
Stephen is a skilled and
experienced financial
professional. He was
previously Chief Executive
of Meggitt PLC between
2013 and 2017, having
previously served as
Group Finance Director
from 2004. Prior to joining
Meggitt, Stephen was
Group Finance Director of
Thistle Hotels plc and the
Automobile Association.
Stephen’s financial
background and his
leadership experience allow
him to contribute effectively
both as a Board member
and as Chair of the Audit
Committee. His oversight of
the Group’s Audit function
helps the Board to ensure
the ongoing integrity of
the financial information,
internal controls and risk
management frameworks.
He is a Fellow of the Royal
Aeronautical Society and
a council member of The
University of Southampton.
Key external appointments
• Non-Executive Director,
and Audit Committee
Chair of Mondi PLC
Key strengths
and experience
Rick contributes extensive
mining, international,
leadership and governance
skills to the Board. He was
Senior Independent Director
from February 2015 until
January 2020. As previously
announced, he will step
down from the Board after
the 2020 AGM.
Rick was previously Chief
Executive of Anglovaal
Mining and became
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 both the Australasian
and South African Institutes
of Mining and Metallurgy.
Key external appointments
• 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
EXECUTIVE/NON-EXECUTIVE
NON-EXECUTIVE NATIONALITY
COMMITTEE MEMBERSHIP KEY
Executive
Non-Executive
2
9
British
American
British/American
* Committee Chair
A* Audit Committee member
N* Nomination Committee member
R* Remuneration Committee member
4
2
1
South African/American 1
Dutch
1
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Corporate Governance
GROUP EXECUTIVE
PAUL COPPINGER
President of
Weir Oil & Gas
PAULA COUSINS
Chief Strategy and
Sustainability Officer
GARRY FINGLAND
Chief Information Officer
RICARDO GARIB
President of
Weir Minerals
ROSEMARY MCGINNESS
Chief People Officer
JON OWENS
President of
Weir ESCO Division
Experience:
Experience:
Experience:
Paula joined the Group
Executive in January 2020
as Chief Strategy and
Sustainability Officer.
She joined Weir in 2015 and
prior to this held a number
of strategy, commercial,
and engineering leadership
roles with Petroineos, BP,
McKinsey & Company,
ExxonMobil and Unilever.
Paula has a BEng Hons
in Chemical and Process
Engineering and an MPhil
in Chemical Engineering
Research, both from the
University of Strathclyde.
Garry joined Weir in April
2019 as Chief Information
Officer (CIO). He has more
than 25 years’ experience
with leadership roles in
complex global technology
organisations. Before Weir
he was CIO for healthcare
provider Bupa, serving on
its executive committee.
He has also held senior
roles with Serco PLC and
Diageo. A graduate of the
University of Glasgow, he
also holds an MBA from the
University of Strathclyde.
Garry joined Weir’s
Group Executive team on
1 January 2020 retaining his
title as CIO.
Paul is the President of the
Oil & Gas Division, based
in Fort Worth, Texas, USA.
He has held this position
since January 2015.
Paul 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
and Nominating/Corporate
Governance Committee
Chair of Now Inc.
He holds a Bachelor
of Science degree in
Petroleum Engineering from
Texas Tech University.
Experience:
Ricardo joined the Group
Executive in January
2016 and is President of
Weir Minerals.
Ricardo joined Baker
Hughes in 1980 and became
the Managing 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. Ricardo is
Vice President of the Mining
Suppliers Association and
an elected council member
of the Board of the Chilean
Federation of Industry.
He holds an MBA and is a
Civil Mechanical Engineer.
He holds a Bachelor
of Science degree in
Petroleum Engineering from
Texas Tech University.
Experience:
Experience:
Jon joined the Group
Executive in July 2018
on completion of the
acquisition of ESCO
Corporation and is President
of Weir’s ESCO Division.
Jon joined ESCO in 1986
and during his career with
the company held a number
of senior operational
and management roles
including responsibility for
the company’s European
division, Global Operations,
Global Supply Chain, Mining
Business Unit and Asia
Pacific Region. Jon became
Chief Operating Officer of
ESCO in 2014 and President
in 2016.
Jon is also a Non-Executive
Director of Columbia
Machine Inc.
Rosemary joined Weir as
Chief People Officer in 2017.
Rosemary was Group HR
Director of William Grant
& Sons, the international
premium spirits group, for
12 years. Having started her
career in line management
with Forte Hotels, 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 CEOs 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.
Jon Stanton, John Heasley and Graham Vanhegan are also members of the Group Executive. Their biographical information can be found on the
previous pages.
GROUP EXECUTIVE BY GENDER
GROUP EXECUTIVE BY NATIONALITY
Male
Female
7
2
British
American
Chilean
British/American
5
2
1
1
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GOVERNANCE FRAMEWORK
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COMPANY SECRETARY
The Company Secretary plays a leading role in ensuring the highest standards of governance
within the Company and ongoing compliance with the UK Corporate Governance Code 2018.
He works with the Chairman to monitor and review the governance processes of the
Company to ensure that they remain fit for purpose and to consider any improvements that
could strengthen the existing governance framework to align with best practice and to support
the delivery of the strategy. The Company Secretary is also the Secretary to the Board
Committees and provides oversight and support to allow them to function to the highest
standards and to consistently apply the provisions and principles of the UK Corporate
Governance Code 2018. The Board and Committee Framework is shown below.
GRAHAM VANHEGAN
Company Secretary
BOARD OF DIRECTORS
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 work of the Committees is essential to the effective operation of the Board. The Committees consider
matters in greater depth and detail on behalf of the Board. The Committee Terms of Reference are reviewed annually to ensure their
continuing appropriateness. No one other than the Committee members are entitled to attend a meeting, but others may be invited by
the Committee to attend all or part of a meeting as and when appropriate and necessary. 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.
Board and Committee structure
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 information flows both up and down the reporting lines.
Nomination Committee
You can read more in the Nomination
Committee Report on pages 91-93.
Audit Committee
You can read more in the Audit Committee
Report on pages 94-101.
Remuneration Committee
You can read more in the Remuneration
Committee Report on pages 102-125.
Disclosure Committee
The Disclosure Committee is a sub-committee of the Board
which comprises the Chief Executive Officer, the Chief Financial
Officer and the Chief Legal Officer and Company Secretary.
General Administration Committee
The General Administration Committee is a sub-committee of
the Board which comprises any two Directors of the Company,
at least one of whom must be an Executive Director.
CHIEF EXECUTIVE OFFICER
GROUP EXECUTIVE
The Group Executive is responsible for ensuring that each of the Group’s businesses and functions are managed effectively and that the key
performance indicators of the Group, as approved by the Board, are achieved. Biographical details of the members of the Group Executive
can be found on page 76. The Group Executive is chaired by the Chief Executive Officer. The Group Executive’s role includes the preparation
of the Group budget for approval by the Board, management of business performance to achieve the Group budget, establishing and
maintaining reporting systems which provide clear and consistent information on all aspects of business performance, managing and
minimising corporate risk and ensuring that the necessary mechanisms are in place to achieve effective inter-divisional coordination in areas
such as purchasing, branding and career development planning. It also approves major items of capital expenditure within limits authorised
by the Board. In the period ended 31 December 2019, the Group Executive met 12 times.
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.
Risk Committee
SHE Excellence
Committee
Finance Excellence
Committee
Engineering Excellence
Committee
CEO’s Safety Committee
Group Information
Services Excellence
Committee
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Corporate Governance
DIVISION OF RESPONSIBILITIES
ROLES AND RESPONSIBILITIES
The Board of Directors has a collective duty to promote the long-term success of the Company for its stakeholders. The Board sets the
strategic aims of the Group and provides entrepreneurial and effective leadership. The Board provides oversight 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 responsibilities not just to Shareholders but to all the Company’s 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.
BOARD COMPOSITION
During 2019, the Board was comprised of two Executive Directors, and nine Non-Executive Directors including the Chairman. Engelbert Haan
was appointed to the Board on 18 February 2019. More than half of the Board are Non-Executive Directors who are considered to be
independent in character and judgement. The roles and responsibilities of the Chairman, Chief Executive Officer and Senior Independent
Director are set out in writing and available on the Company’s website. Biographical information on the Board of Directors, including their
relevant experience, continuing contributions to the Company, expertise and significant appointments, can be found on pages 74 and 75.
The key responsibilities of the Board and the Company Secretary are set out below.
CHAIRMAN
CEO
Charles Berry
• 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 the Board meetings
• Ensuring effective communication with Shareholders and
other stakeholders
Jon Stanton
• Planning the Group objectives and strategy for Board approval
• Ensuring the effective delivery of Board strategy
• Providing leadership to the Group and communicating the
Company’s culture, values and behaviours
• Day-to-day management of the Company
CFO
SENIOR INDEPENDENT DIRECTOR
John Heasley
• 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
• Day-to-day management of the Company
Barbara Jeremiah
• Supporting the Chairman in his duties where necessary
• Leading the annual review of the performance of the Chairman
• Being available to Directors and Shareholders with concerns
that cannot be addressed through the normal channels
NON-EXECUTIVE DIRECTORS
COMPANY SECRETARY
Clare Chapman, Cal Collins, Ebbie Haan, Mary Jo Jacobi,
Professor Sir Jim McDonald, Rick Menell, Stephen Young
• Contributing independent challenge and rigour
• Assisting in the development of the Company’s strategy
• Ensuring the integrity of financial information, controls and risk
management processes
• Monitoring the performance of the Executive Directors against
agreed goals and objectives
• Advising Senior Management
• Supporting succession planning for the Board and
Senior Management
Graham Vanhegan
• Advising the Board on governance, legislation and
regulatory requirements
• Ensuring the presentation of high quality information to the
Board and its Committees, in a timely manner
• Ensuring best practice in Board procedures
• Facilitating induction and development programmes
• Supporting the Chairman and other Board members as
necessary, including the management of the Board and
Committees and their evaluation
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SENIOR INDEPENDENT DIRECTOR OVERVIEW
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HOW DOES THE BOARD
USE THE COMPANY’S
EMPLOYEE ENGAGEMENT
MECHANISMS TO
MONITOR CULTURE?
A.
We have a range of ways of monitoring our
culture including employee surveys, ‘Meet
the Board’ sessions, our ethics hotline and
SHE data, including reports of any near
miss incidents. We use these to check on
the organisational health of the business,
ensuring we uphold our integrity and
demonstrate ethical values and leadership.
The Board also visits two Weir locations
each year which allows us to have direct
informal engagement with the workforce on
a regular basis. The Board defines the culture
of the organisation and communicates the
behaviours which are expected throughout
the Group, as you can see in the ‘We are
Weir’ strategic framework. That has included
redefining our purpose in 2019 but more
generally nurturing a culture of continuous
improvement, innovation and inclusion to
ensure a successful and sustainable business.
We understand not only the importance
of engaging with employees but of also
reviewing the engagement mechanisms
themselves to ensure that they function
effectively. The Board uses the feedback from
our people to assist our decision-making
processes and to ensure that the culture
and the strategy are aligned. This allows us
to understand the culture of the Company
and to determine if the desired behaviours
and the ‘We are Weir’ framework are being
adopted throughout the organisation.
Our Employee Engagement Non-Executive
Director, Mary Jo Jacobi also regularly
updates the Board on the effectiveness of
our engagement tools and any potential areas
of improvement. The Board also ensures
that its workforce policies and practices are
aligned with our values and are implemented
in order to promote the long-term success of
the Company.
You can read more about how we engage
with employees and other Stakeholders in the
Strategic Report on pages 26-27.
BARBARA JEREMIAH
Senior Independent Director
Q.
HOW DOES THE ROLE OF THE
SENIOR INDEPENDENT
DIRECTOR HELP TO ENSURE
BOARD EFFECTIVENESS?
A.
My role is a combination of providing support
to the Chairman and an independent ear for
my fellow Non-Executive Directors for any
issues that can’t be addressed through direct
conversations with the Chairman or CEO.
As such, it is an important role in making the
Board more effective through having multiple
lines of communication regarding Board
issues. For example, supporting the Chairman
includes providing assistance with the annual
Board evaluation process and by developing
effective working relationships among
Board members.
This support ensures that there is a division
of responsibilities within the Board and that
the decision-making process is collaborative
with the full participation of all Directors. I also
ensure that at least once a year, there will
be a meeting of the Non-Executive Directors
without the Chairman present to review the
Chairman’s performance and on such other
occasions as are deemed appropriate.
Q.
THE UK CORPORATE
GOVERNANCE CODE 2018
INTRODUCED NEW
REQUIREMENTS FOR LISTED
COMPANIES. HOW DOES WEIR
ENSURE ONGOING
COMPLIANCE WITH THE
NEW CODE?
A.
We take good corporate governance
very seriously and Weir has been quietly
leading the way in this area in recent years.
We welcomed the changes introduced by
the UK Corporate Governance Code 2018
including its focus on purpose and ensuring
stakeholders views are appropriately
considered as part of the decision-making
process. As Senior Independent Director,
I also work to ensure that there is effective
and transparent engagement with our
Shareholders in order to listen to their
views and to help to develop a balanced
understanding of any issues or concerns.
This engagement allows any potential issues
to be communicated to the Board and
addressed accordingly and in a timely manner.
You can read more about our Board’s
effectiveness and the evaluation process on
page 86.
You can read more about how we ensure
ongoing compliance with the UK Corporate
Governance Code 2018 on pages 72-90.
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Corporate Governance
BOARD MEETINGS
The Board meets regularly in order to effectively discharge its duties. Board meetings are held in person or by video-conferencing. During 2019
there were eight scheduled meetings. The table below details the attendance at Board meetings of each Director during their term of office
for the period to 31 December 2019. Due to business requirements, on occasion unscheduled Board meetings are required to be called at
short notice. This can result in some Directors being unable to attend due to prior commitments. Directors who are unable to attend still have
the opportunity to review the relevant Board papers and provide their feedback accordingly. In October 2019, the Board meeting was held in
Santiago, Chile. Full details of the Board’s visit to Chile can be found on page 85.
In addition to 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 met during the year without Executive Directors present. 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 2020
annual timetable was discussed at the Board meeting in 2018 and circulated as soon as it was finalised. The 2021 timetable was reviewed
during 2019. This process ensures that the Chairman can be comfortable that each Director is able to devote the time and resources required
to act as a Director during that period. The system for establishing the agenda items means that both the Chairman and the Board have the
confidence that all required items are included at the most appropriate time of the year and there is sufficient time allocated for discussion
by the Board, allowing the Directors to discharge their duties effectively.
During the year, the Chairman, supported by the Chief Executive Officer and 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 Chair 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.
BOARD MEETING ATTENDANCE 2019
Scheduled Board meetings
23-Jan-19
25-Feb-19
30-April-19
25-Jun-19
25-Jul-19
05-Sep-19
24-Oct-19
16-Dec-19
Total
Charles Berry
(Chairman)
Jon Stanton
John Heasley
Rick Menell
Clare Chapman
Cal Collins
Ebbie Haan
Mary Jo Jacobi
Barbara Jeremiah
Sir Jim McDonald
Stephen Young
–
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Scheduled Scheduled Scheduled Scheduled
Scheduled
Scheduled Scheduled Scheduled
100%
Location
Glasgow
London
Glasgow Fort Worth Video-conference Glasgow
Chile
London
100%
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BOARD INDUCTIONS, DUTIES AND RE-ELECTION
BOARD APPOINTMENTS
New appointments to the Board are subject
to a formal, rigorous and transparent
appointment procedure. Directors are
recommended and considered on merit
against objective criteria and with due regard
for the benefits of diversity on the Board and
their existing time commitments to ensure
they can effectively discharge their duties.
BOARD INDUCTIONS AND TRAINING
When a new Director is appointed to the
Board, they receive a tailored induction
programme which is designed to reflect
the Non-Executive Director’s background,
experience, knowledge and their appointment
to the relevant Board Committee.
The induction covers the Company’s history,
culture, strategy, structure, operations,
policies and other relevant documentation.
The induction process also covers the
Corporate Governance Framework, the Board
and Committee process, Board calendars
and training on the Code of Conduct and
Directors’ Duties. As part of their induction,
new Directors also meet with Senior
Management of the Company, receive a
formal briefing on legal and governance
matters from the Company Secretary or
his Deputy, and undertake visits to the
Company’s operations. 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 as appropriate. Following on from
the induction period, the Board receives
additional training and development
opportunities at regular intervals throughout
the year. These include deep dives, site
visits, Board dinners and breakfast meetings,
training and information sessions, briefing
materials on the Board portal and meetings
with Senior Management on key topics
affecting the Company. In addition to their
duties enshrined in the Companies Act 2006,
Directors are informed of important changes
to laws and regulations affecting the Group’s
businesses and their duties as Directors.
The Board is supplied with information in a
timely manner 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 that
Non-Executive Directors have the ability to
communicate with the Chairman at any time.
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relation to the relationship between the Group
and the University of Strathclyde, whether in
relation to WARC or otherwise.
RE-ELECTION TO THE BOARD
The Board was pleased that the resolution
put forward at the 2019 AGM to re-appoint
Rick Menell received votes in favour of
over 75%, but noted that support for his
re-election was not as strong as that shown
for other Directors. The reasons behind the
decision to propose Rick’s re-election beyond
the nine-year term were explained in our
2018 Annual Report which highlighted the
benefits of his continued service during a
time of change to both Board composition
and portfolio transformation. As required by
the Corporate Governance Code 2018, the
Board thought very carefully about Rick’s
independence when assessing whether
to propose that he serve a further year
and specifically considered the matter of
Rick’s tenure in considering the extension
of his appointment as Senior Independent
Director. The Board maintains a programme
of active engagement with our Shareholders
and will continue to take their views into
account. Board Committee composition and
succession planning for the role of Senior
Independent Director was already a pre-
planned agenda item to be discussed at the
June 2019 Nomination Committee meeting,
prior to the AGM 2019 results. As previously
announced, Rick Menell stepped down from
all Board Committees on 25 June 2019, as
Senior Independent Director in January 2020
and will step down from the Board at the
2020 AGM.
In accordance with the Company’s Articles
of Association and good practice, all other
Directors on the Board at 31 December
2019 will seek re-election at the Company’s
AGM in April 2020, in compliance with the
Code. 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
the Director must have to the Company.
Further details can also be found in the
Directors’ Remuneration Report on pages
102-103. Details of the Directors’ service
contracts, emoluments, the interests of the
Directors in the share capital of the Company
and options to subscribe for shares in the
Company are disclosed in the Directors’
Remuneration Report on pages 102-125.
DIRECTORS AND THEIR
OTHER INTERESTS
The Board recognises that it is important
for Directors to have a diverse range of
experience and the benefit that external
appointments in other companies can
provide for both the individual Director and
to the Board as a whole. In light of this,
Directors may be permitted to take up
external appointments and directorships in
other companies upon having requested
and received prior written approval from
the Board. When considering new external
appointments for existing Directors, the Board
takes into account a range of considerations,
including the Directors’ current commitments,
the time requirement involved, the role
and responsibilities of the external position
and the potential impact on the Company.
The Board also considers the benefits that
the external appointment may bring such
as greater commercial experience, gaining
expanded Board level experience and a
broader perspective from being in a new
environment. If the external appointment is
considered to be beneficial to the Company’s
stakeholders by allowing the Director to
gain experience and new skills which will
ultimately promote the success of the
Company, it may be approved by the Board.
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 with, or may possibly
conflict with the interests of the Company.
The Company has a formal procedure in place
to manage the disclosure, consideration and,
if appropriate, the authorisation of any such
possible conflict. Each Director is aware of
the requirement to notify the Board, via the
Company Secretary, as soon as they become
aware of any possible future conflict or a
material change to an existing authorisation.
Upon receipt of any such notification, the
Board, in accordance with the Company’s
Articles of Association, will consider the
situation before deciding whether to
approve the perceived conflict. Overall, the
Board is satisfied that there are appropriate
procedures in place to deal with conflicts
of interest and that they operate 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 in
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Corporate Governance
BOARD ACTIVITIES
The undernoted timeline summarises
the Board’s activities during the course
of the year ended 31 December 2019.
Although this is by no means exhaustive, the
timeline provides a flavour of our Boardroom
activities, discussions and debates.
The ‘We are Weir’ framework was launched
in 2016 and in light of learnings and the new
governance standards, this was re-evaluated
in 2019 ready for relaunch in 2020. The Board
was extensively engaged throughout the
process of this redevelopment.
The Board also had two ‘Meet the Board’
sessions during the year to engage with
employees, in Fort Worth, USA and in
Santiago, Chile. The Non-Executive Directors
also carried out site visits during the year.
Barbara Jeremiah visited our facilities in
Dubai, UAE, in June 2019 and Ebbie Haan
visited our facilities in Venlo, Netherlands
in August 2019. The Board Agenda is
split between standing items, which are
discussed at the start of every meeting and
the timeline below shows the other items
for discussion during the year.
Standing items at the start of every
Board Meeting:
• Updates from the relevant
Committee Chairs
• Business Reports from the CEO and CFO
• Conflicts
• Reminder of s.172 duties
• Balanced Scorecard Report
• Corporate Services Report (this is
where the Board routinely reviews the
reports arising from the whistleblowing
mechanism – the ethics hotline)
• Shareholder & Market Analysis
READ MORE ABOUT OUR GOVERNANCE IN ACTION ON PAGE 85
BOARD ACTIVITY TIMELINE 2019
JANUARY
Safety
• SHE Update
Governance
• Annual Report Update
• Gender Pay Report
Finance
• Dividend Considerations
Risk
• Risk Committee Update
FEBRUARY
Finance
• Q1 Forecast Update
Governance
• Annual Report and Financial Statements
• Notice of Meeting
• 2018 Annual Results Announcement
• Global Compliance – Updated Code of
Conduct – Ethics Hotline Annual Review
– Modern Slavery Statement Update
Employee Engagement
• Employee Engagement Survey Results
82
APRIL
Strategy
• Technology Update
• Investor Perception Study
Governance
• AGM
Employee Engagement
• Employee Voice
• Employee ShareBuilder
BOARD ACTIVITY TIMELINE 2019
The Weir Group PLC Annual Report and Financial Statements 2019
SEPTEMBER
Strategy
• Intellectual Property Strategy
Governance
• ABC policy and outline of
policy framework
• Employee Engagement
• Legal and Governance
Education Session
Stakeholder Engagement
• IR Feedback on 2019 Interims
JUNE
Strategy
• Q1 IMS Update
Governance
• 2021 & 2022 Board Calendar
Stakeholder Engagement
• Divisional Reviews
• Investor Perception Survey
Employee Engagement
• People/Succession Planning
• ‘Meet the Board’ session in Fort Worth,
USA
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DECEMBER
Strategy
• ‘We are Weir’
• Sustainability Roadmap
• People/Succession/Inclusion/Diversity
Governance
• Conflicts of Interest Annual Review
• Board Evaluation
• Balanced Scorecard 2020 priorities
Finance
• Viability Statement
• 2020 Budget
• NED fees
Stakeholder Engagement
• Q3 IMS feedback
OCTOBER
Strategy
• Q3 IMS
• Strategy Session
Risk
• Risk Workshop
Stakeholder Engagement
• ‘Meet the Board’ session in Santiago,
Chile
• ‘Meet the Board’ session feedback
JULY
Safety
• SHE update
Strategy
• Group Executive Strategy Outputs
Governance
• Sir John Parker Review
• Board Calendar 2020
Finance
• Interim Dividend Proposal
Risk
• Risk Reporting Framework
• Global Insurance Programme Update
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Corporate Governance
ENGAGEMENT WITH OUR SHAREHOLDERS
2
0
1
9
FEBRUARY
• Full Year results
• Investor roadshow London
• Equity sales force
meetings x2
APRIL
• Q1 IMS
• Annual General Meeting
JUNE
• Investor roadshows Helsinki,
Paris and Frankfurt
• Conference JP Morgan
(London)
AUGUST
• Investor roadshow, London
• Equity sales force briefing
DECEMBER
• Capital Markets Day, Venlo
SHAREHOLDER ENGAGEMENT
The Board recognises that the ongoing
success of the Group depends on developing
establishing and maintaining strong
relationships with all our 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
289 investors in 2019 either face-to-face
or via telephone or video-conferencing.
The Company also engages with its
Shareholders through its attendance at
investor conferences held by the financial
community and roadshows and investor
relations events held by the Company, of
which there were 21 during the year, held in
The Netherlands, Canada, Finland, France,
Germany, Sweden, the UK and the USA.
The primary means of communicating with
the Company’s Shareholders are the Annual
and Interim Reports. Both are available on
the Company’s website. The website also
contains information on the business of the
Company, Corporate Governance, Group
press releases, Company news, key dates
in the financial calendar, investor factsheets
and other important Shareholder information.
The Board is committed to the constructive
use of the AGM as a forum to meet with
Shareholders and to hear their views and
answer their questions about the Group
and its business. The Board including the
Senior Independent Director and Chairs of
the Board Committees will be available to
answer questions relevant to the work of
the Board and the Committees. During 2019
the Chairman, Chief Executive Officer, Chief
Financial Officer, Senior Independent Director
and Chair of the Remuneration Committee
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. During the year,
the Group appointed Rothschild & Co to
complete an Investor perception study on
its behalf. The survey covered both existing
Shareholders and potential holders, providing
the Group with detailed feedback on how
investors perceive it across a broad number
of key areas including strategy, financial
performance and structure, valuation,
corporate governance and ESG, management,
investor relations and communications.
The results of this feedback have now been
incorporated back into the Group’s strategy,
planning and investor communications.
WHAT WE DID IN 2019
MARCH
• Investor roadshows in
Edinburgh, New York, Boston
and Toronto
• Conference Bank of America
Merrill Lynch (London)
MAY
• Sell side analysts lunch
with CFO
• Equity sales force briefing
JULY
• Half year results
• Investor roadshow, London
• Equity sales force briefing
SEPTEMBER
• Investor roadshows in
Edinburgh, Toronto, Boston
and New York
• Conference Morgan Stanley,
London
NOVEMBER
• Q3 IMS
• Investor roadshows
in Frankfurt, Paris
and Stockholm
• Sell side analysts dinner with
CEO and CFO
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GOVERNANCE IN ACTION: ‘MEET THE BOARD’ SESSION
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Meet the Board, Chile
At the core of our ‘We are Weir’ framework
lies our commitment to developing and
sustaining mutually-successful relationships
with all our stakeholders.
As a global organisation, creating
environments where equal opportunities
can be fostered and shared is of the utmost
importance. We seek to continuously build
engagement with our people and promote
an open and transparent culture, fostering
genuine and meaningful dialogue.
We already have in place a broad range of
ways to engage with employees and we
continue to develop and enhance these
channels on an ongoing basis to ensure
employees feel that their voice counts and
that they can make a positive impact both
on their individual and our collective success
at Weir.
The most recent channel to be introduced is
‘Meet the Board’; an opportunity for a
face-to-face discussion between employees
and the Board, where participating employees
can discuss the most important topics
to them.
The first ‘Meet the Board’ session was held
in Fort Worth, Texas in June 2019 with 20
colleagues from across the USA taking part.
This was led by Mary Jo Jacobi, our Non-
Executive Director with Board responsibility
for employee engagement and was also
attended by our Chairman (Charles Berry),
our Senior Independent Director (Rick Menell)
and our Chief Executive Officer (Jon Stanton).
In October 2019, our second ‘Meet the
Board’ session took place in Santiago, Chile.
Led again by Mary Jo Jacobi, 18 employees
from our site in Santiago engaged with a
selection of the Weir Board Members.
During both sessions, Board Members and
participants spent two hours in discussions,
with the employees getting the chance to
share insights and ideas with the Board.
Participants found the session highly engaging
and the Board Members valued the insights
provided. The key insights gathered are
currently being considered both locally and
at Board level.
Further ‘Meet the Board’ sessions will be
rolled out in 2020, including a UK-based
session amongst others across the globe,
in line with the Board meeting schedule.
Meet the Board, Chile
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The Weir Group PLC Annual Report and Financial Statements 2019
Corporate Governance
EFFECTIVENESS AND EVALUATION
BOARD EFFECTIVENESS
The review of the Board’s effectiveness helps the Board continuously improve its own performance and in turn the performance of the
Company. The Board is committed to performing to a high standard and it considers that it has the right combination of skills, experience,
independence and knowledge to be effective in meeting the needs of the Group. The combination of individuals’ skills and style 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 and accountabilities within the Board and its Committees.
BOARD EFFECTIVENESS REVIEW
The Board Effectiveness Review operates on a three-year cycle. This year, we carried out an internal evaluation of the Board and its
Committees led by the Chairman and the Company Secretary and facilitated by The Effective Board LLP. The process is detailed in the table
below. The findings of this year’s Review have been positive and confirmed that the Board and its Committees operate effectively and that
each Director contributes to the overall effectiveness and success of the Group.
Year 1 – 2018
Internal Evaluation
Year 2 – 2019
Internal Evaluation
• Circulate findings report from
• Circulate findings and review
previous year
• Online confidential
bespoke questionnaire
recommendations from previous year
• Online confidential
bespoke questionnaire
• Analysis and discussion at Board
• Analysis and discussion at
meeting
Board meeting
Year 3 – 2020
External Evaluation
• Interviews
• Observation
• Analysis and discussion at
Board meeting
• Individual meetings with Chairman
and Directors post evaluation
The process was divided into four stages:
Stage 3
The Board Effectiveness
report was sent to the
Chairman and the Committee
Effectiveness reports were
provided to each of the
Committee Chairs.
The effectiveness reports
of the Chairman and
Company Secretary
were sent to the SID and
Chairman respectively.
Follow up meetings were
held with the Chairman.
Stage 4
The Chairman presented
the findings from the
Review to the Board at
the December 2019 Board
meeting and actions for the
forthcoming year agreed.
The Committee Chairs
presented the Committee
Effectiveness Reports at
their Committee meetings
in December 2019 and
January 2020.
Progress against outcomes from 2018
• The talent development and succession planning processes
were further developed. Succession Planning is a standing item
on every Nomination Committee Agenda and regular Board
Agenda item.
• The Board has made significant efforts on diversity, but further
scope to improve ethnicity remains work in progress. You can read
about our progress on Diversity on page 92.
Key Areas of Focus for 2020/2021
• Increasing improvements on succession planning for Group
Executive and Senior Management.
• Increasing focus on wider aspects of Diversity.
Stage 2
The online questionnaire
was completed by
the Board and the
Company Secretary.
Stage 1
The questionnaire was split
into various categories;
Success, Strategy, Board
Composition, Executive
Team, Financial and
Operational Resources,
Communication with
Employees, Shareholders
and other Stakeholders,
Performance Measurement
Systems, Risk Management
Systems and Board’s
processes, procedures
and resources.
Outcomes from 2018
• Continue to focus on Succession Planning below Executive level.
• Support the further enhancement of Diversity.
Findings from 2019
• There was an increase in positive views of the Board’s
effectiveness overall. In particular, the positive relationship
between Board members and Board discussions are viewed as
open, rigorous and constructive.
• The Board has made significant efforts on Diversity, but further
scope to improve ethnicity remains work in progress.
• The Board currently supports and monitors the development and
implementation of the Sustainability Strategy however it should
consider a new Committee of the Board for the oversight of the
Sustainability Strategy.
• It was agreed that there was a marked improvement in the Board’s
employee engagement, with processes for listening to employees’
views and appropriate response procedures and action plans.
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BOARD STATEMENTS
COMPLIANCE WITH THE UK CORPORATE
GOVERNANCE CODE 2018
VIABILITY STATEMENT
The Company has fully complied with all the principles of the
Code for the year ended 31 December 2019, and from that date
to the date of approval of this Annual Report.
READ MORE IN OUR CORPORATE
GOVERNANCE REPORT PAGES 72-90
GOING CONCERN BASIS
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 29 to the Group
financial statements on pages 190-196. Each of these items
has been considered in relation to the Group’s banking facilities
described in note 19 on pages 174-175.
In accordance with provision 31 of the UK Corporate Governance
Code 2018, 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 50-59 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 2022.
READ MORE IN OUR RISK REVIEW:
HOW WE MANAGE RISK PAGES 50-59 AND IN OUR
VIABILITY STATEMENT ON PAGE 90
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 2018.
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READ MORE IN OUR DIRECTORS’
REPORT PAGES 126-128
READ MORE IN OUR RISK REVIEW:
HOW WE MANAGE RISK PAGE 50
FAIR, BALANCED AND UNDERSTANDABLE
MODERN SLAVERY STATEMENT
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.
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 Modern Slavery Act, the Company
prepares an annual Modern Slavery Statement and has developed
a training programme.
READ MORE IN OUR STATEMENT OF DIRECTORS’
RESPONSIBILITIES PAGE 129
A COPY OF THIS STATEMENT CAN
BE FOUND ON OUR WEBSITE:
www.global.weir/site-information/
modern-slavery-statement.pdf
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Corporate Governance
FIRST YEAR AS NON-EXECUTIVE
EBBIE HAAN
Non-Executive Director
Q.
HOW WOULD YOU SUM UP
YOUR FIRST YEAR AS A
NON-EXECUTIVE DIRECTOR
AT WEIR?
A.
In two words, excited and energised.
I am excited about what Weir stands for,
it is rich in history, and to be part of the
Group’s ongoing transition is very exciting.
I was energised from my first interview,
when I researched Weir and learned about
the ‘We are Weir’ framework. My specific
attention was drawn to the place people
play in that framework as I believe people
create and give energy. Weir has a large
pool of human talent to leverage, with
different backgrounds, different skills and
this is something that energises me as
well as Weir’s ability to adapt itself to
continuing change.
With our heritage and history, we should
continue to be reflective, careful, and don’t
just change for change sake, but be thoughtful
about our change. With Weir’s 150th
anniversary coming up, we must continue to
keep our eye on the future and the present.
Q.
AT WEIR WE CONTINUE
TO FOCUS ON ESG, WHAT
ARE YOUR THOUGHTS
AROUND GOVERNANCE?
A.
Governance is fundamental and it can
sometimes be used as a buzz word, however,
I like to keep it simple. I believe sticking to
the rules and doing the right thing is the
simplest form of governance. That means
having the processes and procedures in
place that guide decision-making, and on the
‘softer’ side, having social, ethical and cultural
frameworks, which are all part of governance.
It is about doing the right thing in all areas.
Good governance starts with the Board, and
just like safety, is everyone’s responsibility.
We are a global company with a UK listing and
we need to find a balance with governance.
Given the cultural diversity in Weir, where we
are operating in over 50 countries, we should
always ensure we do the right thing and that
rules are not broken whilst also making sure
we keep governance in the correct context.
For me Governance is not about a tickbox or a
checklist, in a world that is adaptive we should
seek open dialogue to make things better, be
open and chat about it and make it an even
better place.
Q.
WHAT DO YOU THINK THE
CHALLENGES ARE FOR WEIR?
A.
The biggest challenge for any business is to
stay relevant to its customers. If you do that
success will follow. It is something I know Jon
Stanton and the management team spend a
lot of time thinking about as you can see in
the ‘We are Weir’ strategy. Fundamentally,
Weir is in the business of finding solutions
to customers’ toughest challenges. That’s
what engineers do and Weir has been doing
it successfully for almost 150 years. But no
business should ever get complacent. For me,
the key to longevity is leading the change in
your markets because standing still is rarely
an option. And that’s where we go back to
Weir’s culture. If challenging the status quo
is part of your DNA, you have an excellent
chance of long-term success.
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The Weir Group PLC Annual Report and Financial Statements 2019
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 94-101. 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
2019. More information on how the Group
seeks to manage risk can be found on
pages 50-59.
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
2019, as detailed on page 95.
Functional and front line controls
This includes a wide spectrum of controls
as seen in most organisations, including,
for example: standard operating procedures
and policies; a comprehensive financial
planning and reporting system, including
quarterly forecasting; regular performance
appraisals and training for employees;
restricted access to financial systems and
data; delegated authority matrices for review
and approval of key transactions; protective
clothing and equipment to protect our people
from harm; IT and data security controls;
business continuity planning; and assessment
procedures for potential new recruits.
Monitoring and oversight controls
There is a clearly defined organisational
structure within which roles and
responsibilities are articulated. There are
monitoring controls at operating company,
regional, divisional and Group level,
including standard key performance
indicators, with action plans to address
underperforming areas.
OUR INTERNAL CONTROL FRAMEWORK HAS FOUR KEY LAYERS:
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ETHICAL AND CULTURAL ENVIRONMENT
3
ASSURANCE ACTIVITIES
2
MONITORING AND OVERSIGHT CONTROLS
1
FUNCTIONAL AND FRONT LINE CONTROLS
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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.
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.
As shown in the Board and Committee
structure set out on page 77, various internal
and external sources of assurance report to
the Board and to management. These sources
of assurance were reviewed by the Board
during the year, and principally comprise
external audit, internal audit, SHE audits, legal
and intellectual property audits, engineering
audits and IT audits.
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 59 within the Risk
Review provides more details on the Group’s
activities to promote ethical behaviour.
The Group’s internal control procedures
described on page 95 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 PLC Annual Report and Financial Statements 2019
Corporate Governance
VIABILITY STATEMENT
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 demonstrated
in recent years, 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.
LONG-TERM PROSPECTS
AND VIABILITY
In accordance with provision 31 of the UK
Corporate Governance Code 2018, 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 54-59 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 2022.
The Directors have determined that a
three-year period to 31 December 2022 is an
appropriate period over which to provide its
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 2020 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 and
then further stress-tested that scenario.
The Audit Committee, on behalf of the Board,
have reviewed the underlying processes
and key assumptions underpinning the
Viability Statement.
In making this statement, in addition to
considering the work of the Audit Committee,
the Board considered the longer-term
prospects of the Group, as detailed in the
Strategic Report, and 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 volatility,
modelled by applying downturn scenarios
and major customer shocks; technology,
competition and Value Chain Excellence,
modelled by significant loss of market share
and pricing pressure in key markets; Value
Chain Excellence and information security,
modelled by major site shutdown scenarios;
and, a regulatory shock scenario in response
to the ethics and governance or safety,
health and environmental risks. We believe
that the stress-testing adequately covers
risks associated with the recent outbreak
of Coronavirus. We also considered, but did
not model the impact of Brexit. While these
situations remain uncertain, they are not
expected to have a material impact on the
Group’s viability. Refer to pages 54-59 for the
Group’s principal risks, specifying those risks
considered during this review.
The resulting scenarios were modelled
as a series of individual one-off ‘shocks’,
in combination with commodity price
based market downturn scenarios with the
assessment taking into consideration the
potential impact on the Group’s profits and
cash flows and resulting impact on banking
covenants as well as the likelihood of bank
and other debt facilities continuing to be
available to the Group as existing committed
facilities mature over the next three years.
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NOMINATION COMMITTEE REPORT
THE NOMINATION
COMMITTEE PLAYS
A VITAL ROLE. THE
BOARD BELIEVES
THAT EFFECTIVE
SUCCESSION
PLANNING IS VERY
IMPORTANT FOR
THE LONG-TERM
SUCCESS OF THE
COMPANY AND THAT
THERE IS A CLEAR LINK
BETWEEN SUCCESSION
PLANNING, DIVERSITY
AND THE STRATEGY
AND CULTURE OF
THE COMPANY.
CHARLES BERRY
Chair of Nomination Committee
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Chair of Nomination Committee
ROLE OF THE COMMITTEE
The Nomination Committee has responsibility for considering the size, structure and
composition of the Board, for reviewing Director and Senior Management succession plans,
overseeing the development of a diverse pipeline for succession, retirements and appointments
of 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.
NOMINATION COMMITTEE MEETING ATTENDANCE
Members
Charles Berry
Mary Jo Jacobi
Barbara Jeremiah1
Sir Jim McDonald
Rick Menell2
22-Jan-19
25-Jun-19
18-Dec-19
–
–
Scheduled
Scheduled
–
Scheduled
Total
100%
100%
100%
100%
100%
1 Barbara Jeremiah was appointed to the Committee on 25 June 2019.
2 Rick Menell stepped down from the Committee on 25 June 2019.
NOMINATION COMMITTEE AT A GLANCE
Main activities of the Nomination
Committee during 2019
• Recommended Board and Committee
changes; appointment of Barbara
Jeremiah as Senior Independent
Director and member of Nomination
Committee, appointment of Ebbie Haan
as Audit and Remuneration Committee
member, extension of tenure of
Rick Menell and stepping down as a
member of Remuneration, Audit and
Nomination Committees, and extension of
appointment of Chairman.
• Undertook Board skills assessment and
gap analysis.
• Ensured Board and Senior Management
succession planning aligned with our
strategy and culture.
• Reviewed Director re-election at
• Monitoring the succession planning for
Group Executive and Senior Management.
Committee Membership and attendance
The Nomination Committee is entirely made
up of Independent Non-Executive Directors
and the Chairman of the Board as Chair
of the Committee. The members of the
Committee are set out in the table above.
The Company Secretary, Graham Vanhegan,
acts as Secretary to the Committee.
There were three Committee meetings
held during the year. Members of Senior
Management and Advisers are invited to
attend meetings as appropriate. Jon Stanton,
Chief Executive Officer, attended all three
meetings by invitation.
forthcoming AGM in line with the UK
Corporate Governance Code 2018.
• Reviewed the Nomination Committee
Terms of Reference in line with the UK
Corporate Governance Code 2018.
• Considered the Hampton-Alexander
Review in line with our strategy,
succession plans and Inclusion and
Diversity policies.
Areas of Focus for 2020
• Continuing to focus on monitoring and
assessing our culture.
• Further enhancing and overseeing of
the leadership and talent framework
and pipeline.
• Supporting the work of the team
established to look at diversity across
the Group.
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Corporate Governance
NOMINATION COMMITTEE REPORT
CONTINUED
DEAR SHAREHOLDERS,
I am pleased to introduce our Nomination
Committee report for 2019 which explains
the Committee’s focus and activities during
the year, and also highlights the Committee’s
key priorities for 2020. I continue to ensure
that the Committee focuses on Inclusion
and Diversity, 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 2018, continue to be met.
BOARD COMPOSITION AND SKILLS
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 candidate and on
the time they are able to devote to the
role in order to promote the success of
the Company. The Nomination Committee
have reviewed the Board and Committee
composition and considers that the Board
and Committees consists of individuals with
the right balance of skills, diversity, time
commitments, experience and knowledge to
provide strong and effective leadership of the
Group. During the year the Board consisted
of up to nine Non-Executive Directors and
two Executive Directors, who together
bring a diverse and complementary range
of backgrounds, personal attributes and
experience. The Board skills and experience
matrix, as detailed on page 93 is reviewed
by the Nomination Committee annually,
bearing in mind the future requirements
of the Board. Committee membership is
periodically refreshed and the Nomination
Committee recommended some changes to
the composition of the Board Committees, as
highlighted on page 91 and in the respective
Committee Reports.
BOARD APPOINTMENT AND TENURE
Engelbert (Ebbie) Haan was appointed to the
Board on 18 February 2019. The details of the
appointment process were published in the
2018 Annual Report. You can read more on the
Board’s appointment process on page 81 and
Ebbie’s first year as a Non-Executive Director
on page 88 of this Annual Report.
SUCCESSION PLANNING
The Nomination Committee continues to
give full consideration to succession planning
for the Board and Senior Management,
with a pro-active approach taking into
account the challenges and opportunities
facing the Company, and what skills and
expertise are therefore needed on the Board.
Succession Planning is an agenda item
at every Nomination Committee meeting
and annually reviews the schedule on the
length of tenure of the Chairman and
Non-Executive Directors and the mix of skills,
strengths and experience of the Directors.
The Committee will continue to keep under
review succession planning for the Board, and
Senior Management.
APPOINTMENT OF SENIOR
INDEPENDENT DIRECTOR (SID)
As part of the Board succession plan
Barbara Jeremiah was identified as a
potential successor to the role of SID.
The Nomination Committee recommended
that Barbara Jeremiah, Non-Executive
Director be appointed as SID on 1 January
2020. This allowed a transition prior to the
retirement of the previous SID, Rick Menell,
on 28 April 2020. Barbara joined the Board
in 2017 and her experience and knowledge
of Weir meant that she was the perfectly
qualified person for the role. You can read
more about Barbara in her role as SID on
page 79.
INCLUSION AND DIVERSITY
The Board acknowledges the benefits
that a diverse pool of talent can bring.
The Committee takes an active role in
meeting Inclusion and Diversity objectives.
We are committed to ensuring that a third
of the Board, Group Executives members
and their direct reports are female.
Our objective of driving the benefits of
a diverse board, Senior Management
team and wider workforce is underpinned
by our Board Diversity Policy and our
Inclusion, Diversity & Equality Policy.
These policies can be viewed on our website
at https://www.global.weir/investors/
corporate-governance/boarddiversitypolicy.
The Nomination Committee reviewed the
Board Diversity Policy in light of the UK
Corporate Governance Code 2018 and Board
Effectiveness Guidance and recommended to
the Board for approval in January 2020.
The Board keeps the policies under review
to ensure that they remain an effective
driver of diversity in its broadest sense,
fully taking account of gender, ethnicity,
social background, skillset and breadth
of experience. We continue to work
towards achieving the Hampton-Alexander
Review targets and to improving the
gender diversity in the Senior Leadership
population. Goals have been incorporated
into the balanced scorecard of the Company.
I continue to be a member of the steering
group of the Hampton-Alexander Review.
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The current levels are noted below.
As at 31 December 2019
Board
27%
(3 females, 8 males)
28%
(16 females, 42 males)
Group Executive
Committee and
direct reports
Further information regarding our approach
and initiatives on Inclusion and Diversity can
be found on page 62.
INDEPENDENCE AND RE-ELECTION
OF DIRECTORS
During the year the Committee recommended
the re-appointment of the Chairman to the
Board for a further three-year term, subject
to annual re-election by Shareholders.
In December 2019, the Board conducted its
annual review of individual Director conflict
authorisations as recorded in the Conflicts
of Interest Register. The Conflicts of Interest
Register is maintained by the Company
Secretary and sets out any actual or potential
conflict of interest situations which a Director
has disclosed to the Board in line with their
statutory duties. This is in addition to Conflicts
as a regular standing item on every Board and
Committee Agenda.
In order to form a view surrounding
Director independence, the Committee
review the above conflict authorisations
and consideration was also given to other
appointments held by each Director.
The Nomination Committee also reviewed
and considered the independence of each
Non-Executive Director in line with the
UK Corporate Governance Code 2018
and Guidance on Board Effectiveness.
With the exception of Cal Collins, the
Nomination Committee considers that all of
the Non-Executive Directors are independent.
The Nomination Committee discussed the
re-election of Directors and how the Directors
have contributed to the long-term success of
the Company and why each Director should
be re-elected. The skills matrix as well as the
relevant outcomes of the annual individual
Director evaluations.
COMMITTEE EFFECTIVENESS
The Committee’s effectiveness was reviewed
during the year as part of the internal
Board Effectiveness Review facilitated by
The Effective Board LLP. Their report was
presented to the Board in December 2019.
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, process and
findings on page 86.
The Weir Group PLC Annual Report and Financial Statements 2019
BOARD APPOINTMENT AND TENURE
Length of tenure at 31 December 2019
Director
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
Re-election
John Heasley
3 years, 2 m
Barbara Jeremiah
2 years, 5 m
Cal Collins
1 year, 5 m
Charles Berry1
6 years, 10 m
Clare Chapman
2 years, 5 m
Engelbert Haan
10 m
Jon Stanton2
9 years, 8 m
Mary Jo Jacobi
6 years
Rick Menell3
10 years, 9 m
Sir Jim McDonald
5 years
Stephen Young
2 years
3 October 2016
28 April 2020
1 August 2017
28 April 2020
12 July 2018
28 April 2020
1 March 2013
28 April 2020
1 August 2017
28 April 2020
18 February 2019
28 April 2020
19 April 2010
28 April 2020
1 January 2014
28 April 2020
1 April 2009
–
1 January 2015
28 April 2020
1 January 2018
28 April 2020
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Notes
1 Charles Berry was appointed to the Board as a Non-Executive Director on 1 March 2013. He became Chairman on 1 January 2014.
2 Jon Stanton was appointed to the Board as Finance Director on 19 April 2010. His tenure as Finance Director was six years, five months.
3 Rick Menell steps down from the Board post AGM on 28 April 2020.
Previous appointment
Current appointment
BOARD SKILLS AND ATTRIBUTES
Director
Independence Engineering
Mining
Oil & Gas
Governance
Environment &
Sustainability
Banking
and Finance International
Leadership
Charles Berry
Jon Stanton
John Heasley
Clare Chapman
Cal Collins
Engelbert Haan
Mary Jo Jacobi
Barbara Jeremiah
Sir Jim McDonald
Rick Menell1
Stephen Young
1 Rick Menell steps down from the Board post AGM on 28 April 2020.
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Corporate Governance
AUDIT COMMITTEE REPORT
THE AUDIT COMMITTEE
HAS CONTINUED TO
MEET ITS PRIMARY
OBJECTIVE OF
PROVIDING EFFECTIVE
GOVERNANCE OVER THE
GROUP’S FINANCIAL
REPORTING DURING THE
YEAR AND ENSURING
THE SYSTEMS
SUPPORTING INTERNAL
CONTROLS REMAIN
EFFECTIVE.
STEPHEN YOUNG
Chair of Audit Committee
STEPHEN YOUNG
Chair of the Audit Committee
AUDIT COMMITTEE MEETING ATTENDANCE
Members
Stephen Young (Chair)
Ebbie Haan1
Barbara Jeremiah
Sir Jim McDonald2
Rick Menell3
22-Jan-19
20-Feb-19
25-July-19
24-Oct-19
—
—
—
Scheduled
Scheduled
Scheduled
Scheduled
—
—
Total
100%
100%
100%
75%
100%
1 Ebbie Haan joined the Audit Committee on 25 June 2019.
2 Sir Jim McDonald could not attend the Audit Committee on 20 February 2019 due to a short illness.
3 Rick Menell stepped down from the Audit Committee on 25 June 2019 but attended subsequent meetings by invitation.
KEY MATTERS DISCUSSED BY THE COMMITTEE
Committee membership
• Ebbie Haan joined the Committee
replacing Rick Menell on 25 June 2019.
• Committee members considered to
provide wide range of financial and
commercial expertise.
Main activities
• We reviewed and challenged interim
and annual financial reporting, including
the impact of the new UK Corporate
Governance Code 2018 and IFRS 16
‘Leases’ standard.
• We reviewed processes supporting
risk management including compliance
scorecard and received presentations
from Divisional Finance Directors and
internal audit.
• We reviewed the results of internal audits
in the year, including greater focus on the
results for the recently acquired ESCO
Division. We agreed the 2020 internal
audit plan and welcomed Tayo Oyinlola,
new Head of Internal Audit, to the Group.
• We approved the external audit plan
presented by PwC, reviewed the
effectiveness of the external audit and
held independent discussions with the
lead audit partner.
Independence
• We confirmed the external auditor, PwC,
remains independent and that non-audit
fees remain minimal.
Committee Effectiveness
• The Committee was subject to an internal
evaluation and no significant areas of
concern were raised.
Areas of focus 2020
• Reviewing the Group’s procedures in
relation to maintaining high standards
across all Ethics and Compliance matters.
• Supporting the recently appointed Head
of Internal Audit in her first full year in the
role and increasing the use of technology
in the internal audit process.
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INTRODUCTION
I am pleased to present our report
to Shareholders for the year ended
31 December 2019 which outlines how the
Committee has fulfilled its key objective
of providing effective governance over the
Group’s financial reporting during the year,
and also highlights the Committee’s key
priorities for 2020.
AREAS OF FOCUS
Our key objective is achieved by focusing on,
amongst other things:
• 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.
MEMBERSHIP
The members of the Committee, other
than myself, are Sir Jim McDonald, Barbara
Jeremiah and Ebbie Haan, all of whom are
independent Non-Executive Directors. Sir Jim
McDonald, Barbara Jeremiah and I have
been members of the Committee for the
full year. Ebbie Haan replaced fellow Board
member Rick Menell on the Committee
on 25 June 2019. The Company Secretary,
Graham Vanhegan, acts as Secretary to
the Committee.
We have recent and relevant financial
experience from myself as Audit Committee
Chair, having been Group Finance Director
of Meggitt PLC. The remaining 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 74 and 75.
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.
We met twice with the external auditors
without any Executive management present.
This provides us with the opportunity for any
issues of concern to be raised by, or with,
the auditors. We also met once with the
Head of Internal Audit without any Executive
management present.
We have the ability to call on Group
employees to assist in our work and to obtain
any information required from Executive
Directors in order to carry out our roles and
duties. We are also able to obtain outside
legal or independent professional advice
if required.
The table below details the Board members
and members of Senior Management
who were invited to attend meetings
as appropriate during the calendar year.
In addition, PricewaterhouseCoopers LLP
(PwC) attended the meetings by invitation
as auditors to the Group.
Committee membership in 2019
Stephen Young (Committee Chair)
Ebbie Haan
Barbara Jeremiah
Sir Jim McDonald
Rick Menell
Other regular attendees (by invitation)
Charles Berry, Chairman
Jon Stanton, Chief Executive Officer
John Heasley, Chief Financial Officer
Kirsten McCargo, Group Financial Controller
Tayo Oyinlola, Head of Internal Audit
Lindsay Gardiner (PricewaterhouseCoopers
LLP, Group Audit Partner)
MAIN ACTIVITIES
Over the course of the year since the last
Annual Report, our work was focused in the
following areas:
(i) financial reporting;
(ii) internal control and risk management;
(iii) internal audit; and
(iv) external audit.
The 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;
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compliance with accounting standards and
relevant financial and governance reporting
requirements, including an assessment of
the 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 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
2019 meeting and Annual Report during our
January and February 2020 meetings.
We received and reviewed details of the
significant exceptional items in the year,
including the impairment charges taken
in relation to Oil & Gas North America.
In addition, we received regular updates in
respect of the new accounting standard, IFRS
16 ‘Leases’, during the year and amendments
to other standards where relevant.
In September 2019, as part of their regular
programme of reviews, the Group received
a letter from the Financial Reporting Council
(FRC) requesting information in relation to
specific disclosures in the Group’s 2018
Annual Report. The FRC’s role in such reviews
is to consider compliance with reporting
requirements. Due to inherent limitations
in their review, these are not intended to
provide assurance that corporate accounts are
materially correct. However, we are pleased
to report that the FRC enquiries were brought
to a satisfactory close in January 2020.
The financial reporting matters discussed in
the current year and recurring agenda items
are summarised in the table on pages 98
to 101.
(ii) Internal control and risk management
While overall responsibility for the Group’s risk
management and internal control frameworks
rests with the Board, the Audit Committee
has a delegated responsibility to keep under
review the effectiveness of the systems
supporting risk management. Further details
on accountability for Risk Management are
provided in the Corporate Governance Report
on page 89.
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,
The Weir Group PLC Annual Report and Financial Statements 2019
Corporate Governance
AUDIT COMMITTEE REPORT
CONTINUED
from Senior Management covering any
investigations into known or suspected
fraudulent activities. We continue to note the
work undertaken for the Board on a review of
the sources of assurance which are mapped
against the principal risks (see (iii) Internal
audit below) and the outputs from the Board
risk workshop held during the year.
The Committee also receives regular reporting
on the Group’s compliance-related activities
from the Chief Legal Officer and Company
Secretary and also the Head of Internal Audit.
This includes reviewing compliance with the
Group’s Ethics Helpline programme which
provides a mechanism for employees with
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.
The Committee also received presentations
from each of the three divisional Finance
Directors (DFDs). These presentations
included a review of the divisional risk
dashboards, 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 to share good practice;
and
3. the quality of the discussion around
divisional risk dashboards.
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.
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
In September 2019, Tayo Oyinlola was
appointed as Head of Internal Audit,
replacing David Kyles. Tayo is a member
of the Association of Chartered Certified
Accountants, has an MBA from Oxford
Brookes Business School and has completed
the Risk Leadership programme with Cass
Business School.
She joins us from Intu Properties plc, a
FTSE 250 company, where she was Head of
Internal Audit.
The Committee has a responsibility to monitor
the effectiveness of the Group’s internal audit
function. During the year, the Head of Internal
Audit provides me with copies of all internal
audit reports, and presents the results of audit
visits and progress against the internal audit
plan to the Committee, 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 at least once a year with the
full Committee.
The above activities provide broad coverage 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. As part of
the Group’s risk management procedures,
key sources of assurance are mapped against
the Group’s core processes and this is used
to ensure internal audit planning considers
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wider internal assurance risk indicators.
Planning is assisted by a risk modelling tool
which is subject to ongoing refinement as
the risk landscape changes. The resulting
2020 plan continues to focus the largest
proportion of resource on financial assurance
whilst incorporating wider risk assurance
coverage, both financial and non-financial,
as described below.
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.
For 2020, the IT assurance programme is
focused on the Group’s IS transformation
strategy and programme assurance and
IT-enabled change programmes.
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 2020 Internal Audit Strategy and Plan
including the resource model, which will
include additional resource supplemented as
necessary by guest auditors from across the
Group, including Group Finance, Tax and other
functions as appropriate. Further progress
on embedding data analytics into the audit
process is included in the 2020 plan.
(iv) External audit
The Audit Committee is responsible for the
appointment and role of the external auditor,
for reviewing the effectiveness of the audit
process and monitoring their independence.
The external auditors are PwC who were first
appointed for the financial year commencing
1 January 2016 following a competitive
tender process.
The Group applied the principles of the
2018 Code in its 2018 Annual Report and
has continued to embed the changes in this
report. The provisions in Section 4 of the 2018
Governance Code on audit and risk are largely
the same as before. The key addition to the
reporting requirements is a new obligation for
companies to carry out a robust assessment
of emerging risks as well as principal risks,
explaining what procedures are in place to
identify these risks and how these are being
managed or mitigated. Further details of
the Board workshop held to review the key
principal risks and identify emerging risks are
provided in the Risk Review on pages 50-51.
Our focus for 2020
In addition to our routine business, in 2020
our focus will be on:
1. Reviewing the Group’s procedures in
relation to maintaining high standards
across all Ethics and Compliance matters;
and
2. Supporting the recently appointed Head of
Internal Audit in her first full year in the role
and increasing the use of technology in the
internal audit process.
STEPHEN YOUNG
Chair of Audit Committee
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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 year identifying their assessment of the
key risks, amongst other matters.
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 at least once 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. We 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.
INDEPENDENCE POLICY AND
NON-AUDIT SERVICES
A formal policy exists (see www.global.weir)
which provides guidelines on any non-audit
services which may be provided and 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
Chair. 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 2019 of £3.3m
(2018: £3.8m) 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. The reduction in level of fees in
2019 is due to the removal of Flow Control
related fees and work in relation to the ESCO
opening balance sheet in 2018.
Non-audit fee work conducted by PwC in the
year of £0.1m (2018: £0.4m) represented 3%
(2018: 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 2019 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 internal
evaluation process during the year as part of
the overall Board Effectiveness Review which
operates on a three-year cycle. The evaluation
was carried out using confidential online
questionnaires in conjunction with
‘The Effective Board LLP’.
The evaluation concluded that the
Committee was performing well and no
significant areas of concern were noted.
Several recommendations were made which
have since been discussed by the Committee
and actions taken where necessary.
OUR FOCUS FOR 2019
In last year’s report we said that, in addition
to our routine business, we would increase
focus on the following two areas:
1. Assurance and controls in the newly
acquired ESCO Division as integration
progresses; and
2. Responding to changes in the UK Corporate
Governance Code 2018.
The ESCO Division was subject to three
separate financial assurance focused internal
audit visits during 2019 with results from
each demonstrating a strong overall control
environment. The vast majority of findings
were of low significance and fully closed
out by the end of the financial year with the
remaining few actions outstanding on track
for completion in 2020.
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Conclusion
The Committee agrees
with the accounting
treatment and disclosure
of these items in the
Annual Report.
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Corporate Governance
AUDIT COMMITTEE REPORT
CONTINUED
CURRENT YEAR MATTERS
Area of focus
Issue
Role of the Committee
Exceptional
items
(see notes
5 and 21 of
the financial
statements)
Management exercises
judgement on the
classification of certain
items as exceptional.
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) analysis of the exceptional impairment charge booked in
relation to Oil & Gas North America and explanation of the work
undertaken by management to assess the carrying value of the
assets held;
(iii) analysis of the ESCO integration costs;
(iv) analysis of restructuring and rationalisation charges and related
provisions; and
(iv) 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.
With specific regard to Oil & Gas North America, we carefully
considered the total exceptional impairment charge of £546m in
light of current market uncertainty and future outlook and the related
impact on future revenues and profitability of the business.
We considered the impairment of inventory of £49m to be
reasonable given the prolonged market downturn, and uncertain
timing of market recovery and the associated increased risk of
technological obsolescence.
We reviewed details of the property, plant & equipment impairment
of £25m and considered this appropriate based on the low levels
of asset utilisation due to the prolonged market downturn and
uncertain timing of market recovery.
We reviewed the impairment of £184m booked in relation to
specific intangible assets (brand names and customer relationships)
within Pressure Control North America and determined this
to be appropriate based on the lower levels of revenue due to
the prolonged market downturn and uncertain timing of market
recovery.
Finally, we reviewed the impairment of goodwill (see ‘Impairment’
section) before concluding that the accounting treatment in respect
of Oil & Gas North America was appropriate.
We noted the items reflected the way in which we, as members of
the Board, reviewed the underlying performance of the Group and
were disclosed appropriately. We also received confirmation from
PwC that management’s treatment was appropriate.
Consideration was also given to the current balance sheet position
of all related exceptional provisions, including both new provisions
and those remaining from previous years, with management
providing details of the remaining liabilities and expected utilisation.
Discontinued
operations
(see note 8 of
the financial
statements)
Following initial disclosure
as a discontinued
operation in 2018, the
Group disposed of
Flow Control in 2019
recognising a loss on sale.
We have received detailed reporting from the Chief Financial Officer
covering:
(i) accounting treatment of Flow Control as a discontinued operation;
(ii) calculation of the loss on sale; and
(iii) related presentation and disclosures in the Annual Report.
We considered the accounting treatment, the loss on sale and
related disclosures. PwC confirmed the treatment and related
disclosures were appropriate.
The Committee agrees
with the discontinued
operations accounting
treatment, the loss on
sale calculation and the
related disclosures in the
Annual Report.
New
accounting
standards
(see note 2 of
the financial
statements)
The introduction of new
accounting standards
has required changes
in accounting policy,
treatment and disclosures.
We have received detailed reporting from the Chief Financial Officer
covering the impact of adopting IFRS 16 ‘Leases’ and related
changes to policy and disclosures in the Annual Report.
We considered the impact and reviewed related disclosures in the
Annual Report. We have received confirmation from PwC that they
are in agreement with the disclosures.
The Committee agrees
with the transition
statement and related
disclosures in the Annual
Report.
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The Weir Group PLC Annual Report and Financial Statements 2019
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.
Particular attention has been
paid this year to the Oil &
Gas North America CGU in
light of current prolonged
market downturn.
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 cash flow models and market conditions supporting the
goodwill impairment of £288m and resulting sensitivity analysis
prepared for Oil & Gas North America CGU.
Business plans and budgets were Board-approved and underpin the
cash flow forecasts.
We have reviewed the disclosures in the financial statements and the
related narrative, including the sensitivity analysis performed for the
Oil & Gas North America CGU. We also received confirmation from
PwC that they are in agreement with management’s conclusions.
RECURRING AGENDA ITEMS
Area of focus
Issue
Role of the Committee
Provisions
(see note 21
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 focus of the Audit Committee was on the exceptional
provisions, including the linkage to the 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, following the
triennial actuarial review in 2017, the Committee’s focus was centred
on gaining an understanding of:
(i) the actual claims and settlement data and their relation to the
assumptions that underpin the discounted cash flow model;
(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 21.
PwC 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.
Conclusion
We are satisfied that the
goodwill impairment charge
in the Oil & Gas North
America CGU is supported
by the underlying analysis
and the carrying value of
the underlying assets in
other CGUs is maintained.
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Conclusion
We are satisfied that
the current provisioning
levels and approach
are appropriate, as is
the recognition of an
insurance asset in relation
to the US asbestos
provision.
Pensions
(see note 23
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 received from management details of 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 and
consider them appropriate.
The Committee was
satisfied with the
assumptions and related
pension disclosures.
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The Weir Group PLC Annual Report and Financial Statements 2019
Corporate Governance
AUDIT COMMITTEE REPORT
CONTINUED
Conclusion
Based on the work we
have undertaken, we are
satisfied that the position
presented in these
financial statements,
including the disclosures,
is appropriate.
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.
Area of focus
Issue
Role of the Committee
Tax charge and
provisioning
(see notes
7 and 22 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.
Management applies
estimates on inventory
valuation and provisioning.
Inventory
valuation
(see note 16
of the financial
statements)
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 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 work done,
and conclusions reached, by PwC in this area. From 2020, the
Committee will in addition directly receive an annual presentation
on tax strategy and risk, given by the Group Head of Tax.
Given the significant investment in inventory, and being cognisant
of the impact of 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.
Specific consideration was given to the exceptional provisions
recognised in relation to Minerals exit from the lower margin sand
and aggregates market as well as the inventory impairment in Oil &
Gas North America.
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 proof reader.
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Area of focus
Issue
Role of the Committee
Going Concern The Committee’s role,
as delegated by the
Board, is to carry out
an assessment of
the adoption of the
going concern basis of
accounting and report to
the Board accordingly.
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.
Viability
Statement
We fulfilled our responsibilities in this area through the review and
discussion of reporting received from management, which covered
the following areas:
(i) assessment of borrowing facilities available to the Group;
(ii) review of budget and latest forecast information, including debt
covenants;
(iii) liquidity and credit risk; and,
(iv) the existence of contingent liabilities.
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;
(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.
Conclusion
The successful
completion of this work
has been reported to
the Board. The Group’s
statement on going
concern is included on
page 128.
The successful
completion of this work
has been reported to
the Board. The Group’s
Viability Statement is
reported on page 90.
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Corporate Governance
DIRECTORS’ REMUNERATION REPORT
OUR REMUNERATION
FRAMEWORK IS
FOCUSED ON
LONG-TERM VALUE
CREATION, AND
REWARDS EXECUTIVES
FOR CREATING
SUSTAINABLE
VALUE.
CLARE CHAPMAN
Chair of Remuneration Committee
CLARE CHAPMAN
Chair of Remuneration Committee
REMUNERATION COMMITTEE MEETING ATTENDANCE
Members
Clare Chapman (Chair)
Ebbie Haan
Mary Jo Jacobi
Barbara Jeremiah
Rick Menell
Stephen Young
25-Feb-19
05-Sep-19
16-Dec-19
–
–
–
Scheduled Scheduled Scheduled
Total
100%
100%
100%
100%
100%
100%
DEAR SHAREHOLDER
I am pleased to introduce our Directors’
Remuneration Report for the year ended
31 December 2019.
I would like to start by thanking our
Shareholders for their resounding support for
our Directors’ Remuneration Report at the
2019 AGM. In recent years, Weir has received
strong support from our Shareholders for our
approach to pay. Our current Remuneration
Policy was approved in 2018 with over 92%
support. At last year’s AGM, over 93%
of votes were in favour of our Directors’
Remuneration Report. In light of this strong
endorsement, and as both the Committee and
management are of the view that the current
structure remains fit for purpose, we are not
proposing to make any major changes to our
pay arrangements this year.
The remuneration framework approved
by Shareholders in 2018 is focused on
long‑term value creation by significantly
reducing award sizes, extending time horizons
and making executives meaningful long‑term
Shareholders, while also ensuring that we are
able to reduce payouts if necessary to avoid
paying for failure. The key parameters of the
restricted share awards continue to be in line
with best practice guidance:
• Significantly lower award sizes – annual
restricted share awards of 125% (CEO)
and 100% (CFO) – these represent a 50%
discount on the LTIP awards levels that
were last granted in 2017.
• Extended time horizons – for each award,
50% is released to participants 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.
• Underpin: safeguarding against payment for
failure – an underpin applies to the awards
which includes a set of key metrics with
pre‑disclosed performance thresholds.
• Enhanced shareholding guidelines,
including extending in post‑employment
– the shareholding guidelines for the
CEO and CFO are 400% and 300% of
salary respectively. These have also been
extended into a post‑employment period
(at least 50% of normal level, tapering to
0% after two years).
2019 BONUS AND LTIP OUTCOMES
Full details of our key performance indicators,
business performance and the link to
remuneration are set out on pages 22‑23 of
the Annual Report.
Following consultation with Shareholders
in 2018, and in order to better align our
framework with the reward principles and
delivery of our strategy, we changed the
design of our annual incentives, with 70%
of the bonus based on performance against
financial measures: PBTA and working capital
as a percentage of sales, and the remaining
30% aligned to improvement in Weir’s
strategic levers. This includes the improved
percentage revenue from new solutions,
services and products. 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.
This 30% of the annual bonus on the strategic
measures provides a simple, transparent
and effective way to appropriately incentivise
shared success and build a business for the
long‑term.
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For performance delivered in 2019 the
Committee has awarded a bonus of 58%
and 48% of salary for the CEO and CFO
respectively, 30% of which will be deferred
into Weir shares for three years. Full details
of achievement against targets are provided
on page 119.
Shareholders. The Board members were
in Fort Worth for our first ‘Meet the Board’
session at the same time employees received
their Free Share Awards. We witnessed
first‑hand employees’ positive reactions
and celebrations on their first step of
becoming Shareholders.
These bonus awards are below those of
last year influenced by performance within
our Oil & Gas Division given the challenging
market conditions in North America.
Performance against the strategic measures
was stronger as we build the market
differentiating capabilities as demonstrated
by the successful award of the order to
provide energy‑saving technology to the Iron
Bridge magnetite project in Western Australia
(the full scorecard is disclosed on pages
120‑122). The Committee had the opportunity
to apply positive discretion this year but chose
not to on this occasion. We do, however,
recognise management’s flawless execution
of important portfolio changes, which includes
the cost savings realised following the
acquisition of ESCO and the divestment of
Flow Control as committed.
Whilst our remuneration framework does not
include a traditional LTIP, the final LTIP award
was granted under our previous remuneration
policy in 2017. The vesting period for those
awards ended on 31 December 2019, and
45% of the original award will vest in March
2020. Full details are provided on page 122.
The first tranche of restricted share awards
will vest in 2020 and will be disclosed in our
2020 Directors’ Remuneration Report.
WORKFORCE REMUNERATION
AND SHARING IN SUCCESS
Given the importance of fairness in working
practices, the Remuneration Committee
spends considerable time on matters relating
to remuneration in the wider organisation.
Details of pay trends for the wider employee
base provide important context when
making decisions regarding remuneration for
Executive Directors. In 2019 we strengthened
the link between employees and the Board
with the appointment of our Employee
Engagement Non‑Executive Director and
the introduction of our ‘Meet the Board’
sessions, giving employees an opportunity to
have face‑to‑face discussions with the Board.
Further details can be found on page 85 of the
Annual Report.
We are committed to enabling all our
employees to actively contribute to and
have a positive impact on the success of our
business. This year we granted the first award
of Free Shares under our global all employee
share plan, Weir ShareBuilder, as part of
our ambition of making all Weir colleagues
To help ensure that all our employees can
have a positive influence on our future
success, management have also enhanced
two‑way dialogue aimed at supporting
organisational effectiveness. This has always
been important at Weir given that employee
engagement is so key to a culture of
innovation. There is more rigour being brought
to the process, however, and to inform
decision‑making at the Board an Employee
Insights Report now gives us the key themes
coming through from employees.
2020 DECISIONS
With effect from April 2020, the salaries
for Executive Directors will increase by 3%
in line with the average increase for UK
employees. No other changes are being
made at this time to the pay arrangements
for Executive Directors. Whilst at the time
the 2020 restricted share award levels were
discussed by the Committee the share price
movement from April 2019 restricted share
award grant was not above threshold where
investors typically expect companies to
consider reducing awards, the Committee
still considered whether any adjustments
should be made to the 2020 award levels.
The Committee determined that a 2020
restricted share award of 125% of salary for
the CEO and 100% of salary for the CFO
remains appropriate in the context of wider
business performance, individual performance
and the overall remuneration package.
The Committee also reviewed the Chairman’s
fees, and with effect from April 2020 is
proposing an increase of 3%.
The Executive Directors receive a pension
contribution of 12% per annum in line with
other senior UK employees. 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. The average pension rate available
to the UK wider workforce is c.8% of salary.
At Weir, whilst the pension value of 12% is
just above that of the wider workforce, it is
very much at the lower end of market practice
and aligns with our senior roles within the UK.
I therefore believe that our pension practice is
currently in line with good practice. However,
we will review pension arrangements,
including those for new hires, alongside the
rest of the remuneration package as part of
the Policy review for 2021.
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70% of the annual bonus is based on two
financial measures covering profit and
working capital. For 2020 we have decided
to change the latter measure from working
capital as a percentage of sales to absolute
third‑party working capital. The proposed
target allows for a greater focus on absolute
cash generation and is actionable at all levels
in the organisation. In addition, recognising
that there may be the situation where we
have stronger than forecast sales and need to
invest in working capital, business units will
have the option to apply for an exemption and
be assessed on third‑party working capital
as a percentage of sales as an alternative to
ensure there is no disincentive to growth.
Both target measures will be set in advance.
LOOKING AHEAD
We welcome the FRC’s publication of the
new UK Corporate Governance Code, and
last year the Committee undertook an initial
review of the remuneration framework to
ensure it was appropriate in light of the
new Code. In this year’s report we have
provided detail as to how we comply with
the remuneration provisions of the new UK
Corporate Governance Code.
Under the normal three‑year renewal cycle,
our Remuneration Policy will be presented
to Shareholders for approval at the 2021
AGM. During the year we will therefore be
taking a comprehensive review of our current
remuneration arrangements in light of our
business goals as well as evolving market
and best practice.
We are keen to maintain an open and
transparent dialogue with our investors on
pay matters and we intend to consult with
Shareholders regarding our proposals ahead
of the 2021 AGM.
The Remuneration Committee has sought
to take a simple and responsible approach
to executive pay, with a close focus on
the strategic priorities of the business and
the interests of the wider stakeholders.
We hope that this approach is clear in our
Remuneration Report. The Committee
appreciated the strong endorsement of last
year’s Directors’ Remuneration Report and I
look forward to receiving their support at the
2020 AGM.
CLARE CHAPMAN
Chair of Remuneration Committee
26 February 2020
The Weir Group PLC Annual Report and Financial Statements 2019
Corporate Governance
REMUNERATION AT A GLANCE
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. Our remuneration policy is aimed
at providing a simple, transparent and effective way to appropriately incentivise shared
success and build a business for the long‑term.
STRATEGIC ALIGNMENT OF REMUNERATION
The Committee believes it is important that, for Executive Directors and Senior Management, a significant proportion of the remuneration
package should be aligned to the business in a way that exposes executives to upside and downside risk, and that performance conditions
applying to incentive arrangements support the delivery of Group strategy.
REWARD PRINCIPLES – APPROPRIATELY REWARDING THE DELIVERY OF SUSTAINABLE VALUE OVER TIME IN A
CYCLICAL BUSINESS
EMPLOYEES AS
SHAREHOLDERS
REWARDING LONG-TERM
VALUE CREATION
SUPPORTING
OUR CULTURE
Encouraging and enabling
substantial long‑term share
ownership for all employees.
Bringing focus to sustainable
improvement in the
underlying business via our
strategic framework.
Focusing incentives on team
performance to create collective
accountability and becoming an
employer of choice by offering a
motivating and fair package.
SIMPLIFYING &
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.
STRATEGY AND ITS LINK TO PERFORMANCE BASED PAY
In 2018 we changed our annual bonus framework to better align with our reward principles and delivery of strategy. 30% of the annual bonus
is based on target priorities aligned to our strategic framework and the underlying headline metrics set out below. The balanced scorecard
provides a clear line of sight on how our remuneration policy supports successful execution of our strategy and the unlocking of long‑term value.
Further details on our performance is set out on pages 22‑23.
HOW DO WE MEASURE PROGRESS AGAINST OUR OBJECTIVES?
HOW DO WE MEASURE PROGRESS AGAINST OUR OBJECTIVES?
PEOPLE
CUSTOMER
TECHNOLOGY
PERFORMANCE
Improved sustainable
engagement and
organisation
effectiveness
Increase market share
Improved percentage
revenue from new
solutions, services,
products
Sustainably higher
margins through cycle
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ANNUAL BONUS OUTTURN FOR THE YEAR ENDING 31 DECEMBER 2019
Further details, including information on the performance assessment of the strategic metrics are set out on pages 120–122 in the Annual Report
on Remuneration.
Profit before tax and
amortisation
Working capital as a
% of sales
Strategic measures
Total
Entry
(20% payable)
£296m
Target
£345m
Maximum
(100% payable)
£394m
Payout
% of maximum
12%
Actual £302m
24.8%
22.6%
20.3%
0%
Actual 25.5%
18%
30%
26%
Actual 26.4%
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Jon Stanton
Actual
£395,119
John Heasley
Actual
£202,736
38%
2017 LTIP OUTTURNS
Further details are set out on page 122 in the Annual Report on Remuneration. As the awards do not vest until 29 March 2020, in accordance
with UK regulations, the values below are calculated using the average market price for the fourth quarter of 2019, being £14.25.
Relative TSR
EPS growth p.a.
Improvement in average ROCE p.a.
Total
Threshold
(25% vesting)
Median
5%
1%
Maximum
(100% vesting)
Upper quintile
Actual
Below Median
15%
Actual 20.4%
5%
Actual 1.6%
Percentage
vesting
0%
33%
12%
45%
Jon Stanton
Value
£558,130
John Heasley
Value
£274,769
EXECUTIVE DIRECTORS’ SHAREHOLDINGS AS AT 31 DECEMBER 2019
Full details of shares owned outright and scheme interests are set out on page 124 in the Annual Report on Remuneration.
Jon Stanton
John Heasley
Notes:
1 The values of the scheme interests without performance conditions are on an estimated net‑of‑tax basis.
Current shareholding
including scheme
interests without
performance
conditions
(% of salary)1
294%
Current shareholding
(% of salary)
190%
Shareholding
requirement
(% of salary)
400%
157%
239%
300%
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The Weir Group PLC Annual Report and Financial Statements 2019
Corporate Governance
SUMMARY OF POLICY AND 2020 IMPLEMENTATION
30% of annual bonus
deferred into shares
for three years.
Vesting of restricted
share awards phased
over five years,
with an additional
two-year holding
period applying to
each tranche.
CORE ELEMENTS
Malus and clawback
provisions apply
to both the annual
bonus and restricted
share awards.
Shareholding
guidelines continue
post-employment.
Maximum pension
provision of 12%
per annum.
The table below summarises the key components of our remuneration framework and indicates how we intend to operate the policy in 2020.
Operation
2020 implementation
Fixed
Salary
Pension
Fixed remuneration which
reflects role, skills, and
responsibilities.
For 2019:
• CEO – £687,000
• CFO – £423,000
Executive Directors receive
pension contributions of
12% per annum in line with
other senior UK employees.
Increases for 2020 aligned to the average increase for UK employees of 3%:
• CEO – £708,000
• CFO – £436,000
No change.
Benefits
Car allowance, health care
and life assurance.
No change.
Variable Annual bonus Maximum opportunity:
• CEO 150% of base salary
• CFO 125% of base salary
30% deferred into shares for
three years. Annual bonus
awards will also be subject
to malus and clawback
provisions.
Measures and weightings
in 2019:
• 50% PBTA (see
definition on
page 119)
• 20% Working capital as
a percentage
of sales
• 30% Strategic measures
• Full retrospective
target disclosure
(see pages 120‑122 in
respect of 2019)
Measures and weightings in 2020 – working capital as a measure of sales will be
replaced by third‑party working capital. In addition, recognising that there may be the
situation where we have stronger than forecast sales and need to invest in working
capital, business units will have the option to apply for an exemption and be assessed
on third‑party working capital as a percentage of sales target as an alternative. Both
targets will be set in advance. The weighting will remain unchanged at 20%.
Set out below are the underlying headline metrics to be achieved over the next three
to five years, as well as the target priorities for 2020. Underlying targets will be fully
disclosed in next year’s report.
People
Improved sustainable engagement and organisation effectiveness
• High standards of leadership driving a best in class behavioural safety culture
• Improve organisational effectiveness
• Continue to extend the Weir culture and further develop the voice of
the employee
Customer
Increase market share
• Enhance global service capabilities
• Increase customer focused partnerships and field trials
• Respond to Voice of the Customer (VOC)
Technology
Improved percentage revenue from new solutions/services/products
• Protect and extend our core through materials manufacturing and
process advancement
• Progress commencement of Weir Digital offering
• Innovate products and solutions that address our customers’ biggest challenges
Performance
Sustainably higher margins through cycle
• Improve operational performance
• Realise benefits of Group portfolio
• Action sustainability roadmap and deliver tangible value across the Group
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Operation
2020 implementation
Restricted
share awards
Maximum award size:
• 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 have
not been met, it would
trigger the Committee
to consider whether a
discretionary adjustment
was required.
Restricted share awards will
also be subject to malus and
clawback provisions.
No change.
Underpin:
Balance sheet health
• Dividend
– Maintain average absolute dividend per share over the vesting period at least
in line with the 2019 declared dividend per share.
• Breaching covenants
– No breach of debt covenant or re‑negotiation 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.
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Other
Shareholding
guidelines
NED fees
• CEO – 400% of
No change.
base salary
• CFO – 300% of
base salary
In addition, shareholding
requirements will continue
post‑employment.
Fees reflect responsibilities
and time commitments for
the role.
Chairman and NED fees will increase by 3% in line with the wider
employee average, effective 1 April 2020. In 2019 we also appointed an
Employee Engagement Director to strengthen our existing employee
engagement mechanisms.
• Chairman’s fee – £324,000
• NED base fee – £64,800
• Chair of Committee fee – £16,900
• Senior Independent Director fee – £13,600
• Employee Engagement Director fee – £16,900
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Corporate Governance
DIRECTORS’ REMUNERATION POLICY
The remuneration policy was approved by Shareholders in 2018 and is intended to apply for three years.
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.
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.
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.
Maximum value
12% of base salary per annum in line with other
senior UK employees.
BENEFITS
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.
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ANNUAL BONUS
Purpose
To incentivise the delivery of our strategic plan and to reward the achievement of
stretching performance on an annual basis.
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.
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Maximum value
• CEO 150% of base salary
• CFO 125% of base salary
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.
SHARE REWARD PLAN (SRP)
Purpose
To encourage and enable substantial long‑term share ownership.
To reward the delivery of sustainable value over time in a cyclical business.
Operation
The Committee may grant awards under the SRP on an annual basis.
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, 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 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; and
• 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.
Maximum value
The Committee will determine the grant level each
year. The maximum value of award which may be
granted in respect of a financial year is:
• 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 also have general
discretion to reduce vesting levels if it believes this
will better reflect the underlying performance of
the Company over the period.
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Corporate Governance
DIRECTORS’ REMUNERATION POLICY
CONTINUED
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 award
shares.
Shareholding requirements continue post‑employment:
• The requirement will fall to half the normal level on leaving.
• The requirement would then taper down to zero after two years.
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.
Operation
Employees will be awarded Free Shares in 2019 and 2020 to the value of £300. From
2021 onwards, only new employees will be eligible to receive Free Shares. For all
other employees, awards of 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); and
• 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 includes the vesting of any awards granted under the LTIP.
Maximum value
shareholding guidelines
• CEO 400% of base salary
• CFO 300% of base salary
Maximum value
The maximum amount that can be contributed
to purchase shares will be £200 per month. The
maximum share match basis will be one share for
every three shares purchased.
Maximum value
In line with existing commitments and
arrangements.
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CHAIRMAN AND NON-EXECUTIVE DIRECTORS’ FEES
Purpose
To attract and retain experienced and skilled Non‑Executive Directors and to reflect
the responsibilities and time commitment involved.
Fees are reviewed by reference to companies of similar size and complexity,
economic and labour market conditions.
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.
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.
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 or LTIP up to 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.
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Corporate Governance
DIRECTORS’ REMUNERATION POLICY
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 market positioning of the package against
the local market. We will not pay more than necessary to facilitate the recruitment.
Component
Remuneration
Buy-out Awards
Other
Internal promotion to Executive Director
Policy and operation
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 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 than the awards being forfeited.
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.
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 OF 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.
If 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
Unexpired term
Change of control
Notice period
Contractual payments
Policy
The unexpired term of Executive Directors’ contracts is 12 months.
Executive Directors have rolling contracts.
No provisions in service contracts relate to a change of control.
Refer to the relevant sections below for annual bonus and share plans provisions.
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; and
• payment of reasonable reimbursement of professional fees in connection with
such agreements.
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Provision
Policy
Annual bonus and deferred bonus awards
Outstanding share plan awards
All employee share plans
Relocation
Chairman and Non-Executive Directors
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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.
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 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.
The rules of any all employee share plans will apply in the event of termination of
employment or change in control.
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.
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.
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Corporate Governance
DIRECTORS’ REMUNERATION REPORT
CONTINUED
SERVICE AGREEMENTS AND LETTERS OF APPOINTMENT
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 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
Non-Executive Director
Charles Berry
Clare Chapman
Cal Collins
Ebbie Haan
Barbara Jeremiah
Mary Jo Jacobi
Sir Jim McDonald
Rick Menell
Stephen Young
Contract commencement date
28 July 2016
3 October 2016
Unexpired term (months)
12
12
Date of appointment
1 January 2014
1 August 2017
12 July 2018
18 February 2019
1 August 2017
1 January 2014
1 January 2015
1 April 2009
1 January 2018
Date when next subject to appointment or re-election
28 April 2020
28 April 2020
28 April 2020
28 April 2020
28 April 2020
28 April 2020
28 April 2020
–
28 April 2020
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 plays 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 our focus is 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.
Although we do not specifically consult employees on executive remuneration, we have in place a variety of employee voice channels, such as
our global employee engagement survey and our ‘Meet the Board’ sessions, which provide employees with an opportunity to provide feedback
on any topics that interest or concern them. Outputs from these channels are provided to the Board, and any remuneration concerns would be
flagged to the Remuneration Committee for separate consideration.
CONSIDERATION OF SHAREHOLDER ENGAGEMENT
Shareholders and their representative bodies played a very active role in the development of our current remuneration policy, which was put to
vote at the AGM in 2018. The Committee remains committed to ongoing dialogue and will seek input from Shareholders when considering any
further changes.
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COMPLYING WITH UK CORPORATE GOVERNANCE CODE
The following table summarises how the Remuneration Policy fulfils the factors set out in provision 40 of the 2018 UK Corporate
Governance Code.
Clarity
Remuneration arrangements should be transparent and promote
effective engagement with Shareholders and the workforce.
Simplicity
Remuneration structures should avoid complexity and their rationale
and operation should be easy to understand.
Risk
Remuneration arrangements should ensure reputational and other risks
from excessive rewards, and behavioural risks that can arise from
target‑based plans, are identified and mitigated.
Predictability
The range of possible values of rewards to individual Directors and any
other limits or discretions should be identified and explained at the time
of approving the policy.
Proportionality
The link between individual awards, the delivery of strategy and the
long‑term performance of the Company should be clear. Outcomes
should not reward poor performance.
Alignment to culture
Incentive schemes should drive behaviours consistent with Company
purpose, values and strategy.
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The Committee is committed to providing open and transparent
disclosures to Shareholders and the workforce with regards to executive
remuneration arrangements.
The 2019 Directors’ Remuneration Report sets out the remuneration
arrangements for the Executive Directors in a clear and transparent way.
There is also an AGM where Shareholders can ask any questions on the
remuneration arrangements.
Our remuneration arrangements for Executive Directors, as well as
those throughout the organisation, are simple in nature and understood
by all participants.
The structure for Executive Directors consists of fixed pay (salary,
benefits, pension), annual bonus scheme and a restricted share plan.
The Committee considers that the structure of incentive arrangements
does not encourage inappropriate risk‑taking.
Under the annual bonus, discretion may be applied where formulaic
outcomes are not considered reflective of underlying Company
performance. There are robust underpins in place for restricted share
awards.
Malus and clawback provisions also apply to variable incentives.
The annual bonus scheme is the only scheme currently in operation
for Executive Directors where there is variability in payouts depending
on the performance of the Company. The restricted share awards
are subject to share price movements and therefore aligned with the
Shareholder experience.
The potential value and composition of the Executive Directors’
remuneration packages at below threshold, target and maximum
scenarios are provided in the Directors’ Remuneration Report.
Payments from annual bonus require robust performance against
challenging conditions. Performance conditions have been designed
to link with Group strategy and consist of financial and non‑financial
metrics.
The Committee has discretion to override formulaic outturns to ensure
that they are appropriate and reflective of overall performance.
This year we granted the first award of Free Shares under Weir
ShareBuilder, our global all employee share plan, as part of our ambition
of making all Weir colleagues Shareholders.
The variable incentive schemes and performance measures and
underpins are designed to be consistent with the Company’s purpose,
values and strategy.
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Corporate Governance
DIRECTORS’ REMUNERATION REPORT
CONTINUED
PAY AT WEIR
APPLICATION OF REMUNERATION POLICY
Jon Stanton
Illustration of Package
John Heasley
Illustration of Package
Minimum
100%
£814,026
On Target
35%
£814,026
Maximum
29%
£814,026
27%
£637,200
38%
£885,000
38%
£1,062,000
32%
£885,000
Minimum
100%
£506,355
On Target
40%
£506,355
Maximum
34%
£506,355
26%
£327,000
34%
£436,000
37%
£545,000
29%
£436,000
Fixed pay
Annual bonus
SRP
Fixed pay
Annual bonus
SRP
NOTES TO APPLICATION OF REMUNERATION POLICY CHARTS
The above charts illustrate the potential total future remuneration for the Executive Directors under our remuneration policy. The illustrations do
not assume any share price growth, as our executive pay outcomes are not linked to performance periods of more than one financial year, or
dividend equivalent payments on share awards.
Element of package
Fixed Pay
Annual bonus
SRP
Assumptions used
Base salary: effective 1 April 2020
Benefits: as disclosed in single total figure of remuneration
Pension: 12% cash allowance
Minimum: no bonus is earned
On target: 60% of maximum is earned
Maximum: 100% of maximum is earned
Minimum: no vesting
On target: 100% vesting
Maximum: 100% vesting
CEO PAY RATIO
The table below shows our CEO pay ratio at 25th, median and 75th percentile of our UK employees as at 31 December 2019. The ratios for 2019
have been determined using Option A of the regulations. In 2018 the ratios were calculated based on the single total figure for remuneration for
Jon Stanton and the total pay for the employees based on our gender pay gap data under Option B of the regulations. The reduction in the pay
ratio is a result of the lower annual bonus and long‑term incentive awards for Jon Stanton compared with last year.
Financial year
2019
2018
Total pay
Base Salary
Notes
25th percentile pay ratio
56:1
75:1
Median pay ratio
44:1
66:1
75th percentile pay ratio
34:1
53:1
Jon Stanton
£1,738,491
£682,300
25th percentile
£30,977
£28,308
Median
£39,772
£19,453
75th percentile
£51,374
£23,158
Total pay for the percentile employees includes the following pay elements: base salary, holiday pay, annual leave adjustment, shift premium and allowance, sick pay, overtime pay, first aid
allowance, living allowances, employer pension contribution and the provision of life assurance. No annual bonus or long‑term incentive award was payable to the employees at the percentiles.
We have pro‑rated pay for part‑time employees and new joiners accordingly to calculate full‑time equivalent total pay.
We offer competitive and fair rates of pay across the organisation, and employees are eligible to participate in our all employee share plan, Weir ShareBuilder.
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GENDER PAY
For 2019, our mean gender pay gap has moved from 6% to ‑3%. Although our pay gap has moved in favour of females, we recognise that
this is largely due to the number of males who are working in lower paid operational roles as opposed to increasing the number of females in
management and leadership roles. We remain committed to continuing with our efforts to encourage more females to study STEM subjects and
work in our sector. A copy of the full Gender Pay report can be found on our website www.genderpay.weir
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 is one employing entity required to publish this data, but we have taken the opportunity to publish the
consolidated data for our UK employees as this is more representative of our UK organisation.
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.
MEAN AND MEDIAN PAY AND BONUS GAP
Gender pay gap
Gender bonus gap
PROPORTION OF MALES AND FEMALES RECEIVING A BONUS
Male
Female
PROPORTION OF MALES AND FEMALES IN EACH PAY QUARTILE BAND
Upper
Upper middle
Lower middle
Lower
Mean
‑3%
22%
Male
77%
82%
90%
76%
Median
‑4%
‑25%
18%
27%
Female
23%
18%
10%
24%
HISTORICAL PERFORMANCE AND CEO PAY
The graph below shows Weir’s TSR performance against the performance of the FTSE 350 over the nine‑year period to 31 December 2019,
as well as the total and vested received remuneration for the CEO over the same period.
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400
300
200
100
0
Long‑term incentive
Short‑term incentive
Fixed elements
The Weir Group Plc
FTSE 350
£5m
£4m
£3m
£2m
£1m
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
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Corporate Governance
DIRECTORS’ REMUNERATION REPORT
CONTINUED
CHANGE IN CHIEF EXECUTIVE’S REMUNERATION OVER 10 YEARS
The table below shows the total remuneration over the period 31 December 2010 to 31 December 2019, as well as outcomes under the annual
bonus and long‑term incentive plans.
Single total figure £000
Jon Stanton
Keith Cochrane
Annual bonus
(% of maximum)
Jon Stanton
Keith Cochrane
Long‑term incentive
(% of maximum)
Jon Stanton
Keith Cochrane
Notes
2010
–
2,913
2010
–
100%
2010
–
100%
2011
–
4,728
2011
–
100%
2011
–
100%
2012
–
3,363
2012
–
54%
2012
–
100%
2013
–
1,787
2014
–
1,456
2015
–
1,065
2016
2811
1,0122
2017
1,441
–
2018
2,4003
–
2019
1,738
–
2013
–
10%
2013
–
43%
2014
–
61%
2014
–
0%
2015
–
20%
2015
–
0%
2016
38%
40%
2016
0%
0%
2017
70%
–
2017
0%
–
2018
62%
–
2018
75%
–
2019
38%
–
2019
45%
–
1 Relates to the period Jon Stanton was CEO from 1 October 2016.
2 Relates to the period Keith Cochrane was on the Board to 30 September 2016.
3 Restated to reflect actual LTIP vesting price.
PERCENTAGE CHANGE IN CEO REMUNERATION
The table below shows the percentage change in elements of remuneration for the CEO and UK employees between 2018 and 2019. 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.
Financial year
Base salary
Taxable benefits
Bonus
CEO
% change
2.8%
‑20.6%
‑36.2%
RELATIVE IMPORTANCE OF SPEND ON PAY
The table below shows the change in total staff pay between 2019 and 2018, and dividends paid out in respect of 2019 and 2018.
Financial year
Overall spend on pay for employees
Profit distributed by way of dividend
2019
£m
701.2
121.7
2018
£m
629.8
110.8
UK employees
% change
‑2.8%
85.4%
‑7.8%
Percentage
Change
11.3%
9.8%
Details of the dividends declared and paid are contained in note 10 to the Financial Statements on page 165. Details of the overall spend on pay
for employees can be found in note 4 to the Financial Statements on page 159.
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ANNUAL REPORT ON REMUNERATION
This section sets out how the Remuneration Policy was applied for the year ending 31 December 2019.
SINGLE TOTAL FIGURE OF REMUNERATION FOR EXECUTIVE DIRECTORS (AUDITED)
Base Salary
Pension
Benefits
Total Fixed Pay
Annual bonus
LTIP
Total Variable Pay
Total Pay
Jon Stanton
John Heasley
2019 (£)
682,300
81,876
21,066
785,242
395,119
558,130
953,249
1,738,491
2018 (£)
663,650
79,638
26,535
769,823
618,993
1,011,460
1,630,453
2,400,276
2019 (£)
420,050
50,406
18,035
488,491
202,736
274,769
477,505
965,996
2018 (£)
408,400
49,008
18,206
475,614
317,432
620,206
937,638
1,413,252
NOTES TO THE TOTAL FIGURE OF REMUNERATION FOR THE EXECUTIVE DIRECTORS (AUDITED)
Base salary – corresponds to the amount received during the year ended 31 December 2019.
Pension – corresponds to the cash allowance provided to the Executive Directors during the year ended 31 December 2019. This equates to 12% of salary.
Benefits – corresponds to the value of benefits in respect of the year ended 31 December 2019, as follows:
Car allowance
Group healthcare
Life assurance
Total
Jon Stanton
John Heasley
2019 (£)
17,000
1,499
2,566
21,066
2019 (£)
13,970
1,499
2,566
18,035
Annual bonus – corresponds to the amount earned in respect of the year ended 31 December 2019. 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. As the award does not vest until 29 March 2020, in accordance with UK regulations, the vesting price is the average market price for
the fourth quarter of 2019, being £14.25. Further details are set out on page 122. The 2018 LTIP, total variable pay and total amounts have been
restated to reflected the LTIP vesting price on 29 April 2019.
ANNUAL BONUS PLAN (AUDITED)
Details of remuneration to be awarded to the Executive Directors as part of the 2019 annual bonus plan are set out below. The annual bonus
plan is currently based on the achievement of financial metrics and strategic measures. 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 were PBTA (50%), working capital as a percentage of sales (20%) and strategic measures (30%).
PBTA is defined as profit before tax, amortisation and exceptional items from continuing operations. The performance targets and achievements
are calculated using January 2019 exchange rates.
BONUS OUTCOMES (AUDITED)
The following table illustrates the performance achieved against the targets. As a result of this performance, a bonus of 38% of maximum was
payable to the Executive Directors. Jon Stanton was awarded 58% of salary and John Heasley was awarded 48% of salary.
Maximum Achievement
Target
60%
£345m
22.6%
100%
£394m
20.3%
Further details set out below
£302.5m
25.5%
Payout
% of
Maximum
12%
0%
26%
38%
Payout % of maximum
PBTA
Working capital as a % of sales
Strategic measures
Entry
20%
£296m
24.8%
Weighting
50%
20%
30%
100%
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Corporate Governance
DIRECTORS’ REMUNERATION REPORT
CONTINUED
FINANCIAL MEASURES
Our performance against our financial measures was as follows:
Profit before tax and amortisation at £302m was £43m below target. This was driven by performance within the Oil & Gas Division, who were
£42m below target due to challenging market conditions for Pressure Pumping in North America.
Working capital as a percentage of sales at 25.5% was below entry of 24.8%, partly impacted by oil and gas market conditions.
STRATEGIC MEASURES
The strategic measures were introduced for the first time in 2018 to better align with our reward principles and delivery of our strategy.
The strategic measures are aligned to the strategic framework (People, Customers, Technology and Performance). Each measure has an
underlying metric to be achieved over three to five years as well as target priorities which were set for 2019. Target components are awarded
a score of between 0% and 2.5%. The results and aggregate scores for each area are set out below.
PEOPLE
Improved sustainable engagement and organisation effectiveness
Priority for 2019
High standards of
leadership driving
a best in class
behavioural safety
programme and
culture.
Improve
organisational
effectiveness.
Target
• Reduce TIR to at least 0.61.
• SHE Level 2 assessment in >50% of ESCO
manufacturing sites.
Result
• TIR 0.27. +40% underlying improvement.
• 100% of ESCO sites at level 2.
• Increase in scoring on employee survey
Score out
of 7.5%
6.9%
• Improved scoring on SHE specific questions in
SHE questions.
employee engagement survey.
• Implement organisational effectiveness measure
and track against external benchmarks, with an
improvement in measures in second half of 2019
compared with first half.
• Organisational effectiveness measures
established including external benchmarking.
Second half improvements achieved.
• Strategic workforce planning complete and
• Establish capability gap through strategic
workforce planning with capability build in
two key areas of the business prioritised from
gap analysis.
• Mobilise global HRMS programme with phase 1
under way in line with implementation plan.
capability gaps identified, with capability build
in two areas of the business.
• Global HRMS design phase completed and
reviewed with significant progress towards
implementation in 2020.
Continue and
extend the Weir
culture and develop
the voice of the
employee.
• Implement priority actions from first employee
survey. Improvement in employee survey
participation rates and employee net promoter
score (eNPS).
• Work under way on priority actions and
measures. Sector leading employee
engagement with participation rates and
eNPS up on previous survey.
• Launch ‘We are Weir’ phase 2, and continuous
listening strategy (including employee voice
at Board).
• Two ‘Meet the Board’ sessions held in 2019.
• Employer brand developed.
• Inclusion & Diversity strategy finalised
• Articulate and communicate Inclusion &
and communicated.
Diversity strategy.
• Graduate gender diversity 50% or more.
• Graduate diversity reached 52% female
by quarter three 2019, but dipped to 49%
in quarter four due to reductions in Oil &
Gas workforce.
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CUSTOMER
Increase market share
Priority for 2019
Expand service
network and
enhance global
capabilities.
Target
• Strengthen Oil & Gas Eastern Hemisphere
business with completion of Pressure Pumping
distribution agreements.
• Expand Minerals Service Centre footprint.
Capture incremental Integrated Solutions input
of £95m.
Result
• Pressure Pumping distribution
agreement signed.
• Expanded service centre network into new
and under‑represented territories.
• £155m in additional orders from
Integrated Solutions.
• Consolidate ESCO and Minerals service centres
• 12 service centre consolidations and 13
and expand regional offering.
regional expansions.
Score out
of 7.5%
6.8%
Increase customer
technology and
partnerships and
field trial.
• Deliver additional Oil & Gas sales/rental fleet
• Increase in market share with additional
population from customer field trials.
customers added.
• Installation of new Minerals Mill Circuit trials with
• First Terraflowing pilot purchase
potential value >$500K. Commence flagship
process technology pilots with customers.
order secured.
• N70 Nemisys technology gaining
• Grow ESCO presence in new classes.
market share.
Enhance Voice of
Customer (VoC)
and its use.
• Launch CRM surveys within Oil & Gas and test
survey effectiveness with evidence of tangible
VoC feedback.
• Surveys launched for all three businesses
with feedback being implemented.
• New CRM live in all regions.
• Roll out CRM system to at least 60% of
Minerals Division.
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TECHNOLOGY
Improved percentage revenue from new solutions, services, products
Priority for 2019
Protect our core
through technology
and material
advancement.
Target
• Product roadmap strategic priorities in all
Result
• Technology partnerships with customers
three divisions.
across all three divisions.
• Develop and field trial new materials for traditional
• New steel alloy and stainless steel alloy
or AM applications.
developed within AM facilities.
Score out
of 7.5%
6.4%
• Process technology solutions development.
• Capture business value from digital/big data.
• First order for Terraflowing Tailings solution.
• Commencement of field trials, with
all new HPGRs being shipped with
Synertrex solution.
• Increase products developed using AM.
• Significant progress in developing
AM capability.
Extend beyond
the core – disrupt
from product to
solutions.
Grow Advanced
Manufacturing
(AM) and
Innovation
capability.
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Corporate Governance
DIRECTORS’ REMUNERATION REPORT
CONTINUED
PERFORMANCE
Sustainably higher margins through cycle
Priority for 2019
Improve
operational
performance.
Realise benefits of
Group portfolio.
Build sustainability
roadmap to deliver
tangible value
across the Group.
Total Achievement
Target
• Optimise current manufacturing footprint.
Result
• Significant increase in Oil and Gas Batam
plant utilisation.
• Minerals OTD increased by 4%.
• Operating improvements at ESCO’s
Newton foundry.
• $25m cost savings realised in 2019.
• Flow Control sale completed in June 2019.
• Complete ESCO integration and first stage of
value delivery with >$18m realised cost savings.
Capture ESCO/Minerals revenue synergies of
>$4m from customer facing collaboration.
• Complete Flow Control divestment.
• Created sustainability strategy roadmap in
• Sustainability strategy developed with key
collaboration with key stakeholders and experts.
stakeholders and approved by Board.
• Deliver tangible and replicable cost or impact
• Successful completion of pilots.
reduction results from energy and waste pilots to
justify business case for scaling across Group and
enable robust reduction target setting in 2020.
Score out
of 7.5%
6.3%
26.4 out of
30%
LONG-TERM INCENTIVES VESTING IN 2019 – ACTUAL PERFORMANCE (AUDITED)
The 2017 performance share awards are due to vest on 29 March 2020. The table below sets out a summary of the performance conditions and
performance against these conditions.
Relative TSR
EPS growth p.a.
(Base EPS 50.4p)
Improvement in average ROCE p.a.
(Base ROCE 7.6%)
Straight‑line vesting in between these points
Weighting
33%
33%
33%
Threshold
(25% vesting)
Median
5%
(58.3p)
1%
(Actual ROCE to 8.6%)
Maximum
(100% vesting)
Upper quintile
15%
(76.7p)
5%
(Actual ROCE 12.6%)
Actual
Performance
Below median
20.4%
(88p)
1.6%
(Actual ROCE 9.2%)
Total vesting:
Percentage
Vesting
0%
33%
12%
45%
The relative TSR performance was measured against the following companies: AMEC Foster Wheeler, Atlas Copco AB, Caterpillar, Dover
Corporation, Fenner Plc, FLSmidth & Co A/S, Flowserve Corporation, Forum Energy Technologies Inc, Hunting, IMI Plc, ITT Corporation, John
Wood Group Plc, Joy Global Inc, Komatsu, Metso Corporation, National Oilwell Varco, Outotec Oyj, Petrofac, Rotork Plc, Sandvik AB, Smiths
Group Plc, SPX Corporation, Sulzer Ltd, TechnipFMC.
During the performance period, AMEC Foster Wheeler was acquired by John Wood Group which was already in the comparator group and the
combined entity was used as a comparator. During 2018 Fenner was acquired by Michelin, and Atlas Copco underwent a restructure. For Atlas
Copco, it was agreed to replace Atlas Copco with Epiroc AB as at the date of the demerger. At the time of making these changes the forecasted
outcomes showed that the impact of the chosen treatment was small and that the performance condition was no less challenging to meet.
These are the final performance shares to vest under the LTIP as the plan was replaced with the Share Reward Plan in 2018. The first tranche of
restricted shares under the Share Reward Plan will vest in 2020 and will be disclosed in our 2020 Directors’ Remuneration Report.
Notes
1 TSR is the increase in the net return index (the index that reflects movements in share price over a period and dividend reinvested net of any associated tax credit in shares on the ex‑dividend
date) for a company as calculated by Datastream (or such other financial information provider as selected by the Committee) over the performance period.
2 EPS is adjusted earnings per fully paid ordinary share in the capital of the Company calculated on such basis as the Committee may specify. In addition, the EPS figure used to calculate the
award may be adjusted for changes in accounting standards to ensure a consistent measurement basis across the performance period. Following the introduction of IFRS 16 EPS was adjusted
to determine the vesting of the LTIP award. The EPS performance target was also adjusted to eliminate Flow Control.
3 ROCE is defined as earnings before interest and tax divided by capital employed. Earnings before interest and tax is taken as Group continuing operations after intangibles amortisation but
before exceptional items for the relevant financial year. Capital employed is taken as the average of opening and closing Group net assets excluding net debt/cash and pension deficit (net of
deferred tax asset) for the relevant financial year. To eliminate the impact of movements in foreign exchange rates over the period of the plan, the average foreign exchange rates for the base
year are held constant throughout the plan period. With regard to acquisitions, those acquisitions made in the base year are included, based on a full year’s ownership for the purposes of target
setting. Where acquisitions are made in subsequent years of the plan period, these are excluded from the assessment of performance relative to the target. Where there are disposals during
the plan period, the base and target ROCE calculations will be restated to eliminate the contribution from the disposed business in the period of ownership. Following the introduction of IFRS
16 ROCE was also adjusted for consistency.
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SCHEME INTERESTS AWARDED DURING 2019 (AUDITED)
The following table sets out awards granted to the Executive Directors in the year ending 31 December 2019. The closing market price of the
Company’s ordinary shares at 31 December 2019 was £15.09 and the range during the year was £12.44 to £18.14.
Share award1
Restricted Share (Conditional)
Bonus (Deferred)
Restricted Share (Conditional)
Bonus (Deferred)
Award basis
125% salary
30% bonus
100% salary
30% bonus
Grant date
9 Apr 19
9 Apr 19
9 Apr 19
9 Apr 19
Face value of award
at maximum vesting2
£858,828
£97,650
£423,036
£49,132
No of shares
granted
50,969
5,734
25,106
2,885
Jon Stanton
John Heasley
Notes
1 There are no performance periods associated with the Restricted Share Awards or the Bonus Share Awards. Vesting of the Restricted Share Awards will be phased in four equal tranches over
a five‑year period: 25% after two, three, four and five years following grant. 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.
2 The face value of the Restricted Share Award is based on the average of the closing price for the three days prior to the date of grant, being £16.85. The value of the Bonus Share Award is
calculated as the share price at the date of grant, being £17.03.
RESTRICTED SHARE AWARD UNDERPIN
Vesting of the Restricted Share Award is subject to continued employment and assessment of 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.
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health
Investor
returns
Corporate
Governance
Dividend
Maintain average absolute dividend per share over the vesting period at least in line with 2018 declared dividend
per share.
Breaching covenants
No breach of debt covenant or renegotiation of covenant terms outside a normal refinancing cycle.
ROCE
Maintain average ROCE over the vesting period above the average Weighted Average Cost of Capital for that period.
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.
SINGLE TOTAL FIGURE OF REMUNERATION FOR CHAIRMAN AND NON-EXECUTIVE DIRECTORS (AUDITED)
Charles Berry
Clare Chapman
Cal Collins
Ebbie Haan1
Mary Jo Jacobi
Barbara Jeremiah
Sir Jim McDonald
Rick Menell
Stephen Young
Notes
Basic Fee (£)
SID/EED/Committee Chair
Taxable Benefits (£)
Total Fees (£)
2019
312,876
62,475
62,475
54,393
62,475
62,475
62,475
62,475
62,475
2018
304,375
60,775
28,795
–
60,775
60,775
60,775
60,775
60,775
2019
–
16,275
–
–
16,275
–
–
13,100
16,275
2018
–
15,800
–
–
–
–
–
12,725
10,630
2019
27
–
–
–
4,245
–
–
–
–
2018
2,209
–
–
–
1,330
–
–
–
–
2019
312,903
78,750
62,475
54,393
82,995
62,475
62,475
75,575
78,750
2018
306,584
76,575
28,795
–
62,105
60,775
60,775
73,500
71,405
1 Ebbie Haan was appointed to the Board on 18 February 2019.
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Corporate Governance
DIRECTORS’ REMUNERATION REPORT
CONTINUED
STATEMENT OF DIRECTORS’ SHAREHOLDINGS AND SHARE INTEREST (AUDITED)
Shares owned
outright
Scheme Interests
As at 31 December 2019
With
performance
conditions
87,038
Without
performance
conditions
89,442
Vested and
exercised
In 20191
63,641
Current
shareholding
(% of salary)2
190%
42,849
–
–
–
–
–
–
–
–
–
44,046
–
–
–
–
–
–
–
–
–
59,910
–
–
–
–
–
–
–
–
–
157%
–
–
–
–
–
–
–
–
–
86,293
44,049
2,145
456
348,015
0
5,000
250
500
1,024
3,939
Shareholding
requirement
(% of salary)
400%
300%
Current
shareholding
including
scheme
interests
without
performance
conditions
(% of salary)3
294%
239%
–
–
–
–
–
–
–
–
–
Jon Stanton
John Heasley
Charles Berry
Clare Chapman
Cal Collins
Ebbie Haan
Mary Jo Jacobi4
Barbara Jeremiah
Sir Jim McDonald
Rick Menell
Stephen Young
Notes
1 Vested and exercised in 2019 reflects the activity in the year.
2 Current shareholding percentage is calculated using the share price of £15.09 as at 31 December 2019.
3 The values of scheme interests without performance conditions are on an estimated net‑of‑tax basis.
4 Mary Jo Jacobi’s interest in 5,000 shares shown above is through her holding of 10,000 American Depository Receipts (ADRs). One ADR being equivalent to 0.5 ordinary shares.
EXTERNAL APPOINTMENTS
During the year Jon Stanton was a Non‑Executive Director of Imperial Brands plc. He received £54,330 in fees. John Heasley was a
Non‑Executive Director of Royal Scottish National Orchestra Society Ltd. He received no fees.
THE REMUNERATION COMMITTEE
The Remuneration Committee in 2019
There were three Committee meetings during 2019 and all Committee members attended the meetings they were eligible to attend. Although Rick
Menell stepped down as a Committee member in June 2019 he attended the meetings in September and December at the invitation of the Chair.
Role
Chair and members
Internal attendees
Name
Title
Clare Chapman
Ebbie Haan (from June 2019)
Mary Jo Jacobi
Rick Menell (until June 2019)
Stephen Young
Charles Berry
Jon Stanton
Rosemary McGinness
Geraldine Pamphlett
Graham Vanhegan
Independent Non‑Executive Directors
Chairman
Chief Executive Officer
Chief People Officer
Group Head of Reward and Recognition
Chief Legal Officer and Secretary to the Committee
Committee’s external adviser
Deloitte
Adviser to Committee
Internal advisers 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 2019. Fees paid to Deloitte LLP for work that materially
assisted the Committee were £80,850. 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.
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MAIN ACTIVITIES
Over the course of the period since the last Annual Report, the Committee’s work has been focused on:
• Annual bonus plan outturns
• Annual bonus plan metrics and targets
• LTIP outturns
• Restricted Share Awards grant levels and assessment of underpins
• Update on progress against annual bonus plan metrics
• Projected 2017 LTIP outturns
• Fairness and pay at Weir, including review of wider workforce trends
• External environment – market and governance review
• 2020 salary review for Executive Directors and Group Executives
• 2020 Chairman’s fees
• 2020 annual bonus plan metrics and targets
• Group Executive shareholdings
COMMITTEE’S PERFORMANCE
The Committee’s Terms of Reference are reviewed on an annual basis and were last updated in December 2018. A copy can be found on our
website www.corporategovernance.weir
The Committee was evaluated as part of the 2019 Board Effectiveness Review, and it was concluded that the Committee was fulfilling its terms
of reference effectively.
SHAREHOLDING VOTING
The table below sets out the voting by Shareholders on the resolution to approve the Directors’ Remuneration Report at the AGM held in
April 2019.
Remuneration Report
For
198,708,685
(93.09%)
Against
14,750,923
(6.91%)
Total Votes Cast
213,459,608
(83.23%)
Withheld
1,833,024
ANNUAL GENERAL MEETING
This report will be submitted to Shareholders for approval at the Annual General Meeting to be held on 28 April 2020.
CLARE CHAPMAN
Chair of the Remuneration Committee
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Corporate Governance
DIRECTORS’ REPORT
The Directors present their report for the year
ending 31 December 2019.
The Directors’ Report includes the Corporate
Governance Report from pages 72‑90,
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 2‑72:
• 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
(page 62).
• Information on greenhouse gas emissions
(pages 65‑66).
• Principal risks and uncertainties
(pages 54‑59).
• In compliance with their duties under
s.172 of the Companies Act 2006, the
Directors have described how they have
worked to foster the company’s business
relationships with suppliers, customers and
others, and the effect of that on principal
decisions taken, in the Strategic Report
(pages 26‑27).
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
Waiver of dividends
(LR 9.8.4(12))
Page reference
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Paragraphs (1), (2), (4), (5), (6), (7), (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‑looking in nature. Please refer to the
cautionary statement on page 227.
COMPANY NUMBER
The Weir Group PLC is registered in Scotland
under company number SC002934.
2020 ANNUAL GENERAL MEETING
The Annual General Meeting will be held on
Tuesday 28 April 2020 at 2.30 pm.
The Notice of Meeting, along with an
explanation of the proposed resolutions, are
set out in a separate circular to Shareholders
which accompanies this Annual Report and
can be downloaded from the Company’s
website. 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 30.45p per share for the period
ended 31 December 2019. Payment of this
dividend is subject to shareholder approval at
the 2020 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 2019:
Shareholder
BlackRock, Inc.
Maverick Capital,
Ltd
Black Creek
Investment
Management Inc.
Number of
voting rights
16,367,278
Number of
voting rights
6.30%
13,093,815
5.04%
8,161,884
3.14%
Between 31 December 2019 and 26 February 2020, the
Company was notified of the following changes to the
table above.
TR‑1 received from Maverick Capital, Ltd. on 8 January 2020.
Number of voting rights 12,810,895. Percentage of voting
rights 4.93%.
TR‑1 received from BlackRock Inc. on 21 January 2020.
Number of voting rights 16,557,031. Percentage of voting
rights 6.37%.
TR‑1 received from BlackRock Inc. on 27 January 2020.
Number of voting rights 16,542,978. Percentage of voting
rights 6.37%.
TR‑1 received from BlackRock Inc. on 13 February 2020.
Number of voting rights 15,426,147. Percentage of voting
rights 5.94%.
TR‑1 received from BlackRock, Inc. on 18 February 2020.
Number of voting rights 15,440,238. Percentage of voting
rights 5.94%.
TR‑1 received from BlackRock, Inc. on 20 February 2020.
Number of voting rights 15,455,846. Percentage of voting
rights 5.95%.
TR‑1 received from Black Creek Investment Management
Inc. on 20 February 2020. Number of voting rights 10,438,047.
Percentage of voting rights 4.02%.
TR‑1 received from BlackRock, Inc. on 21 February 2020.
Number of voting rights 15,469,979. Percentage of voting
rights 5.95%.
EMPLOYMENT POLICY AND
INVOLVEMENT
The average number of employees in the
Group during the period is given in note 4 to
the Group financial statements on page 159.
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. At Weir, we
strive to build an inclusive culture in which all
employees have the opportunity to succeed
and to be able to do the best work of their
lives. The Group remains committed to the
fair treatment of people with disabilities
regarding recruitment, training, promotion
and career development. Meaningful dialogue
with our employees is actively encouraged.
Further details are included on pages 26‑27.
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 29
to the Group financial statements on pages
190‑196.
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 24 to the Group financial statements
on page 184. 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.
During the period, no ordinary shares
were issued.
The Group has a nominee arrangement with
Computershare Investor Services PLC (the
‘Computershare Nominee’) and an employee
benefit trust with Estera Trust (Jersey) Limited
(the ‘Estera EBT’).
During the period, the Estera EBT purchased
652,000 shares in the market at an aggregate
value of £10,030,661.59, on behalf of the
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The Weir Group PLC Annual Report and Financial Statements 2019
Company for satisfaction of any future vesting
of the awards granted under the LTIP, the SRP
and the ESCO Plan.
On 19 December 2019, 141,105 shares held
in the Estera EBT were transferred to the
Computershare Nominee.
During the period, the Long Term Incentive
Plan (the ‘LTIP’) vested and the trustees
of the Estera EBT transferred 619,180
ordinary shares to employees to satisfy the
LTIP awards.
During the period, the Share Reward Plan (the
‘SRP’) vested and the trustees of the Estera
EBT transferred 147, 845 ordinary shares to
employees to satisfy the SRP rewards.
During the period, the ESCO Stock Incentive
Plan 2010 (the ‘ESCO Plan’) vested and the
trustees of the Estera EBT transferred 86,035
ordinary shares to employees to satisfy the
ESCO awards.
Both the Estera EBT and Computershare
Nominee 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
Computershare Nominee and Estera EBT
are set out in note 24 to the Group Financial
Statements on page 184.
The 141,105 shares held in the
Computershare Nominee are the shares
in respect of which dividends have not
been waived.
The Estera EBT held, through nominee
account CGWL Nominees Ltd, 0.01% of the
issued share capital of the Company as at
31 December 2019. This is held in trust on
behalf of the Company for satisfaction of any
future vesting of the awards granted under
the LTIP, the SRP and the ESCO Plan.
The Computershare Nominee held 0.05%
of the issued share capital of the Company
as at 31 December 2019.This is held in trust
for the benefit of certain senior executives of
the Group.
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 Estera EBT 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 2019 Annual General Meeting,
Shareholders renewed the Company’s
authority to make market purchases of up
to 25.9m 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 2019. 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.
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APPOINTMENT AND REPLACEMENT
OF DIRECTORS
The provisions about the appointment and
re‑election of Directors of the Company are
contained in the Articles of Association.
POWERS OF DIRECTORS
The business of the Company is managed
by the Directors who may exercise all the
powers of the Company, subject to the
provisions of the Company’s Articles of
Association, any special resolution of the
Company and any relevant legislation.
DIRECTORS’ INDEMNITIES
The Company has granted indemnities
to each of its Directors in respect of all
losses arising out of or in connection with
the execution of their powers, duties and
responsibilities as Directors to the extent
permitted by the Companies Act 2006 and the
Company’s Articles of Association. In addition,
Directors and Officers of the Company and
its subsidiaries and trustees of its pension
schemes are covered by Directors’ and
Officers’ liability insurance.
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 2019 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.
The Weir Group PLC Annual Report and Financial Statements 2019
Corporate Governance
DIRECTORS’ REPORT
CONTINUED
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 the foreseeable
future. For this reason, they continue to adopt
the going concern basis in preparing the
financial statements. In forming this view, the
Directors have reviewed the Group’s budgets,
plans and cash flow forecasts, including
market downturn sensitivities. In addition,
the Directors have considered the potential
impact of credit risk and liquidity risk detailed
in note 29 to the Group financial statements
on pages 190‑196. Each of these items has
been considered in relation to the Group’s
banking facilities described in note 19 on
pages 174‑175.
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
GRAHAM VANHEGAN
Chief Legal Officer and
Company Secretary
26 February 2020
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$950m multi‑currency
revolving credit facility (the ‘Facility’) with
a syndicate of 12 banks due to mature in
September 2021 and a GBP 300m Term Loan
from four banks due to mature in December
2020. Under the terms of these Facilities, 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, then 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$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.
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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
JON STANTON
Chief Executive Officer
26 February 2020
JOHN HEASLEY
Chief Financial Officer
26 February 2020
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.
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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 Company financial
statements (the ‘financial statements’)
give a true and fair view of the state of the
Group’s and of the Company’s affairs as at
31 December 2019 and of the Group’s loss
and cash flows for the year then ended;
• the Group financial statements have been
properly prepared in accordance with
International Financial Reporting Standards
(IFRSs) as adopted by the European Union;
• the 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 Company Balance Sheets as at
31 December 2019; the Consolidated Income
Statement and Consolidated Statement of
Comprehensive Income, the Consolidated
Cash Flow Statement, and the Consolidated
and Company Statement 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.
Overview
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 Company.
Other than those disclosed in note 4 to the
financial statements, we have provided
no non-audit services to the Group or the
Company in the period from 1 January 2019
to 31 December 2019.
Our audit approach
Context
The Group is organised into three continuing
operating divisions: Minerals, Oil & Gas and
ESCO. During the year the Group completed
the sale of its Flow Control Division which
was accounted for as a discontinued
operation. Each division conducts its business
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 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.
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.
Capability of the audit in detecting
irregularities, including fraud
Based on our understanding of the Group,
we identified that the principal risks of
non-compliance with laws and regulations
related to the wide variety of jurisdictions in
which the Group operates and we considered
the extent to which non-compliance might
have a material effect on the financial
statements. We also considered those
laws and regulations that have a direct
impact on the preparation of the financial
statements such as the Companies
Act 2006. We evaluated management’s
incentives and opportunities for fraudulent
manipulation of the financial statements
(including the risk of override of controls),
and determined that the principal risks were
related to posting inappropriate journal entries
to increase revenue or profit. The Group
audit engagement team shared this risk
assessment with the component auditors
so that they could include appropriate audit
procedures in response to such risks in their
work. Audit procedures performed by the
group engagement team and/or component
auditors included:
Materiality
Audit scope
Key audit
matters
• Overall Group materiality: £15m (2018: £15.5m), based on 5% of profit before exceptional items, amortisation
and tax for continuing operations.
• Overall Company materiality: £1.5m (2018: £1.5m), which is based on an allocation of Group materiality.
• We conducted audit work on 16 components in nine countries. We conducted full scope audits on nine 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, Australia and the United Kingdom, covering five
components. In addition, members of the Group engagement team performed the audit of four components
based in the UK.
• The 16 components where we performed audit work accounted for 79% of Group revenue and 73% of profit
before exceptional items, intangibles amortisation and tax from continuing operations.
• Carrying value of goodwill and intangibles (O&G North America and International components).
• Accounting for asbestos-related claims.
• Accounting for exceptional items.
• Uncertain tax positions.
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• Discussions with management, internal
audit and Group General Counsel, including
consideration of known or suspected
instances of non-compliance with laws and
regulations and fraud or matters reported
on the Group’s whistleblowing helpline;
• Evaluation of management’s
controls designed to prevent and
detect irregularities;
• Review of Board minutes;
• Challenging assumptions and judgements
made by management in its significant
accounting estimates, in particular in
relation to the classification of costs
as exceptional;
• Identifying and testing journal entries,
in particular any journal entries posted
by Senior Management, postings to
exceptional items, unusual account
combinations and round sum accruals
or provisions.
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. Also, 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.
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 period
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.
Key audit matter
How our audit addressed the key audit matter
Valuation of goodwill and intangibles – Oil & Gas North America
and International CGUs
Refer to page 99 (Audit Committee Report), page 150 Accounting
Policies and page 170 (note 14).
Weir’s North America Oil & Gas CGU primarily provides equipment
and aftermarket service solutions to the onshore oil and gas industry
in shale fields.
During the second half of 2019, management identified indicators of
impairment to the Oil & Gas North America CGU’s assets as a result
of a deterioration in market conditions impacting trading performance
and a poor industry outlook.
Given current challenging market conditions and uncertainty around
the timing of market recovery, an impairment of £258.2m was made
to specific assets including inventory, customer relationships and
brand intangibles. An impairment review was subsequently performed
on the goodwill and remaining asset base. Based on management’s
estimate, an impairment of £288.0m was recorded against the
Oil & Gas North America goodwill.
Management also performed an impairment review of the Oil & Gas
International CGU and no impairment was identified.
The Group also incurred redundancy and other restructuring charges
which are discussed under ‘Accounting for exceptional items’ below.
Group
We have performed procedures to test the impairment of individual
assets within the CGUs. We have understood the nature of the individual
impairments and have traced a sample to supporting documentation to
validate that assets have been appropriately written off in the year.
We have reviewed management’s estimate of the value in use of the
CGUs by:
• assessing the integrity and mathematical accuracy of
management’s models;
• involving PwC Valuation experts to assist in evaluating the
reasonableness of the key assumptions used by management,
including the discount rate, short term cash flow projections and
long-term growth rate through comparison to independent third-
party sources;
• performing sensitivity analysis to stress test the models to determine
the degree to which a change in assumptions would impact the value
of the impairment recognised; and
• considering third-party sources of industry outlook to compare with
management’s views, considering whether any contrary views
are appropriate.
We considered the assumptions used by management to be appropriate
in arriving at a reliable estimate of the each CGU’s carrying value.
We have assessed the disclosures in the financial statements to be
compliant with the requirements of IAS 1 ‘Presentation of Financial
Statements’ and IAS 36 ‘Impairment of Assets’.
As set out in note 14 on page 171, we agree with management that the
adverse change in assumptions used to determine the carrying value
of the Oil & Gas North America CGU would, in isolation, cause further
impairment losses to be recognised.
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The Weir Group PLC Annual Report and Financial Statements 2019
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
Accounting for asbestos-related claims
Refer to page 99 (Audit Committee Report), page 147 Accounting
Policies and page 177 (note 21).
Provision has been made as at 31 December 2019 for future asbestos
related claims of £47.6m (2018: £52.3m). This consists of a provision
of £44.4m (2018: £48.1m) for the Group’s liabilities arising from
asbestos related damages claims in the US and £3.2m in the UK
(2018: £4.2m).
The valuation of the liability involves significant estimation. In arriving
at the estimate of the liability, management is required to make
assumptions which include 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 mostly offset the US
provision (£43.4m included in other receivables between non-current
and current assets – note 17, page 173). Provision for the estimated
uninsured liability of £1.0m (2018:£nil) has been made. This was also
considered in our work.
Group
We have performed procedures on both the UK and US asbestos
liabilities. The US provision is the more significant and has a greater level
of estimation uncertainty.
Management obtains a triennial actuarial estimate of the asbestos
liability from an independent expert with the latest being received
in 2017. We involved our PwC actuarial experts to assess the
reasonableness of the methodology used by the independent expert.
We confirmed that the same methodology was appropriately applied
in 2019. Management assessed the claims received and those settled
in the year and compared them with the actuarial estimate in order to
calculate the provision required at 31 December 2019.
We evaluated management’s underlying assumptions used in its
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 number and value of claims to be
settled 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 10 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. We observed that the main
insurance policy remained active and was settling claims as expected.
We tested the reasonableness of the provision made for the estimated
uninsured liability.
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’ and considered them to be appropriate.
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.
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The Weir Group PLC Annual Report and Financial Statements 2019
Key audit matter
How our audit addressed the key audit matter
Accounting for exceptional items
Refer to page 98 (Audit Committee Report), page 146 Accounting
Policies and page 160 (note 5).
The Group incurred £596m (2018: £157.7m) of exceptional charges
in the period for continuing operations and £22.1m for discontinued
operations (2018: £51.6m).
The accurate presentation of costs and income as exceptional items
was considered an area of focus for all reporting units. This was
to assess the consistency and accuracy of the Group’s operating
profit as reported to shareholders and the application of the Group’s
accounting policy.
The North America Oil & Gas restructuring and Trio North America
Sand and Aggregates business closure were 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 100 (Audit Committee Report), page 153 Accounting
Policies and page 161 (note 7).
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.
Group
The exceptional charge relating to impairment of the Oil & Gas North
America CGU (£288.0m) has been addressed in the Valuation of goodwill
and intangibles key audit matter above.
We obtained a listing of the exceptional costs and income
incurred by both component and category and tested a sample to
supporting documentation.
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 assessed 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 also verified that provisions made in prior years were appropriately
utilised during the year.
We assessed the classification of items as exceptional for compliance
with the Group’s disclosed accounting policy.
From the audit work performed, we consider that the exceptional
items were appropriately recorded in compliance with the Group’s
accounting policy.
Group
We have used our internal tax specialists to 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;
• reading correspondence with relevant tax authorities in the
assessment of management’s calculation; and
• applying our knowledge of international tax legislation and practice.
In addition, we assessed the adequacy and appropriateness of the
disclosure of tax provisions for compliance with IAS 12 ‘Income Taxes’.
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.
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Financial Statements
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF THE WEIR GROUP PLC
CONTINUED
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 structure of the Group and the Company, the accounting processes and controls, and the industries in which
they operate.
The Group is organised into three continuing operating divisions: Minerals, Oil & Gas and ESCO; the latter was acquired on 12 July 2018.
The Flow Control Division was sold on 28 June 2019 and is therefore disclosed as a discontinued operation in comparatives. Each division
conducts its business 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 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.
The Group’s components vary significantly in size and we identified nine 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, four were based in the UK 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 five full scope component audits were performed by other PwC network firms. Other PwC network firms also performed
specific scope audits over a further seven 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 discussions during the audit also included divisional management.
Of the 16 components in scope, we deemed two to be financially significant to the Group and these were both visited in North America
and Australia in the current year. The group engagement partners also visited two other components in North America and one in the
United Kingdom.
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 79% 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:
Group financial statements
Company financial statements
Overall materiality
£15.0m (2018: £15.5m).
£1.5m (2018: £1.5m).
How we determined it
5% of profit before exceptional items, amortisation
and tax for continuing operations.
An allocation of Group materiality.
Rationale for benchmark applied
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.
The allocation of Group materiality was
determined based on the Company’s contribution
to the Group financial statements.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between £1m and £10m. Certain components were audited to a local statutory audit materiality
that was also lower than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.75m for the Group audit
(2018: £0.75m) and £0.75m for the Company audit (2018: £0.75m) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
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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 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 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 Company’s
ability to continue as a going concern. For example, as is the case for
all UK companies, the terms of the United Kingdom’s withdrawal from
the European Union are not clear, and it is difficult to evaluate all of the
potential implications on the Group’s and Company’s trade, customers,
suppliers and the wider economy.
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 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.
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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 2019 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 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)
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Financial Statements
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF THE WEIR GROUP PLC
CONTINUED
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 54 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 90 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 Company and their environment obtained in the course of the audit.
(Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the directors, on page 129, 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 Company’s position and performance,
business model and strategy is materially inconsistent with our knowledge of the Group and Company obtained in the course of performing
our audit.
• The section of the Annual Report on page 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 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 129, 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 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 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.
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Use of this report
This report, including the opinions, has been prepared for and only for the 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 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 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 year ended 31 December 2016 and subsequent financial periods. The period of total uninterrupted engagement is 4 years, covering the
years ended 31 December 2016 to 31 December 2019.
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LINDSAY GARDINER (SENIOR STATUTORY AUDITOR)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Glasgow
26 February 2020
137
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
Year ended 31 December 2019
Year ended 31 December 2018
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
Total
£m
3
2,661.9
–
2,661.9
2,449.9
–
2,449.9
15
6
6
7
8
9
345.9
6.2
352.1
(53.9)
4.3
302.5
(73.8)
(674.3)
–
(674.3)
–
–
(674.3)
92.2
(328.4)
6.2
(322.2)
(53.9)
4.3
(371.8)
18.4
345.7
2.4
348.1
(40.7)
2.7
310.1
(78.6)
(224.0)
–
(224.0)
–
–
(224.0)
45.9
121.7
2.4
124.1
(40.7)
2.7
86.1
(32.7)
228.7
(582.1)
(353.4)
231.5
(178.1)
53.4
(51.3)
(229.4)
(229.4)
–
(229.4)
(3.9)
224.8
224.3
0.5
224.8
87.9p
87.4p
(22.1)
(604.2)
(604.2)
–
(604.2)
(26.0)
(379.4)
(379.9)
0.5
(379.4)
(146.4p)
(136.4p)
(146.4p)
(136.4p)
16.3
247.8
247.4
0.4
247.8
94.7p
94.0p
(35.0)
18.4
18.0
0.4
18.4
7.4p
21.7p
7.3p
21.6p
Continuing operations
Revenue
Continuing operations
Operating profit (loss) before share of
results of joint ventures
Share of results of joint ventures
Operating profit (loss)
Finance costs
Finance income
Profit (loss) before tax from continuing
operations
Tax (expense) credit
Profit (loss) for the year from
continuing operations
(Loss) profit for the year from discontinued
operations
Profit (loss) for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Earnings (loss) per share
Basic – total operations
Basic – continuing operations
Diluted – total operations
Diluted – continuing operations
138
The Weir Group PLC Annual Report and Financial Statements 2019
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
(Loss) profit for the year
Other comprehensive (expense) income
(Losses) gains 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 losses on net investment hedges
Reclassification adjustments on cash flow hedges
Tax relating to other comprehensive (income) expense to be reclassified in subsequent periods
Items that are or may be reclassified to profit or loss in subsequent periods
Remeasurements on defined benefit plans
Remeasurements on other benefit plans
Tax relating to other comprehensive (expense) income not to be reclassified in subsequent periods
Items that will not be reclassified to profit or loss in subsequent periods
Net other comprehensive (expense) income
Total net comprehensive (expense) income for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Total net comprehensive (expense) income for the year attributable to equity holders of the Company
Continuing operations
Discontinued operations
Year ended
31 December
2019
£m
(379.4)
Year ended
31 December
2018
£m
18.4
Notes
7
23
7
(1.3)
(105.3)
(20.5)
(2.4)
0.7
(0.2)
(129.0)
(5.2)
(0.1)
0.8
(4.5)
(133.5)
(512.9)
(513.2)
0.3
(512.9)
(466.5)
(46.7)
(513.2)
0.8
76.1
–
(72.8)
(2.6)
3.0
4.5
53.7
0.3
(8.9)
45.1
49.6
68.0
67.5
0.5
68.0
153.3
(85.8)
67.5
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The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2019
ASSETS
Non-current assets
Property, plant & equipment
Intangible assets
Investments in joint ventures
Deferred tax assets
Other receivables
Derivative financial instruments
Total non-current assets
Current assets
Inventories
Trade & other receivables
Derivative financial instruments
Income tax receivable
Cash & short-term deposits
Assets held for sale
Total current assets
Total assets
LIABILITIES
Current liabilities
Interest-bearing loans & borrowings
Trade & other payables
Derivative financial instruments
Income tax payable
Provisions
Liabilities held for sale
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
2019
£m
31 December
2018
£m
Notes
11
12
15
22
17
29
16
17
29
18
8
19
20
29
21
8
19
20
29
21
22
23
24
571.2
1,573.0
36.6
61.2
77.1
4.4
2,323.5
642.9
557.9
16.5
37.6
273.8
–
1,528.7
3,852.2
534.1
589.6
24.8
22.6
42.2
–
1,213.3
896.2
–
0.3
61.3
29.0
138.7
1,125.5
2,338.8
1,513.4
32.5
582.3
332.6
(0.5)
0.5
(26.7)
0.7
590.6
1,512.0
1.4
1,513.4
427.1
2,166.6
36.6
36.0
78.5
1.4
2,746.2
692.7
597.7
18.3
32.5
263.0
394.4
1,998.6
4,744.8
662.5
629.9
40.8
25.3
50.5
134.0
1,543.0
740.9
0.8
0.2
69.7
92.2
149.1
1,052.9
2,595.9
2,148.9
32.5
582.3
332.6
(2.1)
0.5
101.3
1.5
1,095.0
2,143.6
5.3
2,148.9
The financial statements were approved by the Board of Directors and authorised for issue on 26 February 2020. The financial statements also
comprise the notes on pages 144-198.
JON STANTON
Director
JOHN HEASLEY
Director
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The Weir Group PLC Annual Report and Financial Statements 2019
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
Total operations
Cash flows from operating activities
Cash generated from operations
Additional pension contributions paid
Exceptional cash items
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisitions of subsidiaries, net of cash acquired
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 and disposal costs
Interest received
Dividends received from joint ventures
Net cash generated from (used in) investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Lease payments
Settlement of derivative financial instruments
Exceptional cash items – settlement of derivative financial instruments
Interest paid
Dividends paid to equity holders of the Company
Issue of shares, net of transaction costs
Purchase of shares for employee share plans
Net cash (used in) generated from financing activities
Net increase (decrease) 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
The cash flows from discontinued operations included above are disclosed separately in note 8.
Year ended
31 December
2019
£m
Year ended
31 December
2018
£m
Notes
25
407.6
(12.9)
(41.0)
(90.2)
263.5
(0.1)
(93.3)
(23.3)
12.3
244.7
2.7
3.5
146.5
1,673.7
(1,782.8)
(44.3)
(62.2)
–
(47.3)
(121.7)
–
(10.0)
(394.6)
15.4
277.2
(20.5)
272.1
410.8
(5.6)
(114.0)
(73.3)
217.9
(429.6)
(77.7)
(11.4)
3.9
0.3
3.0
1.6
(509.9)
1,438.4
(1,335.5)
–
(22.1)
(27.8)
(39.6)
(79.6)
355.5
(0.8)
288.5
(3.5)
284.5
(3.8)
277.2
F
i
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a
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25
25
15
10
24
18
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Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Share
capital
£m
28.1
–
Share
premium
£m
197.9
–
Merger
reserve
£m
9.4
–
Treasury
shares
£m
(5.9)
–
Capital
redemption
reserve
£m
0.5
–
Foreign
currency
translation
reserve
£m
98.1
–
Hedge
accounting
reserve
£m
0.3
–
Attributable
to equity
holders
of the
Company
£m
1,467.4
18.0
Retained
earnings
£m
1,139.0
18.0
Non-
controlling
interests
£m
1.3
0.4
Total
equity
£m
1,468.7
18.4
At 31 December 2017
Profit for the year
Gains taken to equity
on cash flow hedges
Exchange gains on
translation of foreign
operations
Exchange losses
on net investment
hedges
Reclassification
adjustments on cash
flow hedges
Remeasurements on
defined benefit plans
Remeasurements on
other benefit plans
Tax relating to other
comprehensive
income (expense)
Total net
comprehensive
income for the year
Acquisition of non-
controlling interest
through business
combination
Issue of shares, net of
transaction costs
Cost of share-based
payments inclusive of
tax charge
Dividends
Purchase of shares
Exercise of share-
based payments
At 31 December 2018
(Loss) profit for the
year
Losses taken to equity
on cash flow hedges
Exchange losses on
translation of foreign
operations
Reclassification
of exchange gains
on discontinued
operations
Exchange losses
on net investment
hedges
Reclassification
adjustments on cash
flow hedges
Remeasurements on
defined benefit plans
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.4
384.4
323.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
32.5
–
582.3
–
332.6
–
–
(0.8)
4.6
(2.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.8
0.8
–
0.8
76.0
0.1
76.1
(72.8)
(2.6)
53.7
53.7
0.3
0.3
3.0
(8.9)
(5.9)
–
–
–
–
–
(72.8)
(2.6)
53.7
0.3
(5.9)
76.0
(72.8)
–
–
–
–
3.2
1.2
63.1
67.5
0.5
68.0
–
–
–
–
–
–
–
–
–
–
–
–
8.3
(110.8)
–
–
3.5
3.5
712.0
8.3
(110.8)
(0.8)
–
–
–
–
712.0
8.3
(110.8)
(0.8)
–
0.5
–
101.3
–
1.5
(4.6)
1,095.0
–
2,143.6
–
5.3
–
2,148.9
–
(379.9)
(379.9)
0.5
(379.4)
–
–
–
–
–
–
–
–
–
–
–
(2.6)
–
–
(1.3)
–
–
–
0.7
–
(1.3)
–
(1.3)
(105.1)
(0.2)
(105.3)
(20.5)
(2.4)
0.7
–
–
–
–
(20.5)
(2.4)
0.7
(5.2)
(5.2)
(5.2)
–
–
(105.1)
(20.5)
(2.4)
–
–
–
–
–
–
–
–
–
142
The Weir Group PLC Annual Report and Financial Statements 2019
Share
capital
£m
Share
premium
£m
Merger
reserve
£m
Treasury
shares
£m
Capital
redemption
reserve
£m
Foreign
currency
translation
reserve
£m
Hedge
accounting
reserve
£m
Attributable
to equity
holders
of the
Company
£m
Non-
controlling
interests
£m
Retained
earnings
£m
–
–
–
(0.1)
(0.1)
(0.2)
0.8
0.6
–
–
Total
equity
£m
(0.1)
0.6
Remeasurements on
other benefit plans
Tax relating to other
comprehensive
expense (income)
Total net
comprehensive
(expense) income for
the year
Cost of share-based
payments inclusive of
tax charge
Dividends
Purchase of shares
Reduction in non-
controlling interests
Exercise of share-
based payments
At 31 December 2019
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
32.5
–
582.3
–
332.6
–
–
–
–
–
(10.0)
–
11.6
(0.5)
–
–
–
–
–
–
–
(128.0)
(0.8)
(384.4)
(513.2)
0.3
(512.9)
–
–
–
–
–
–
–
–
13.3
(121.7)
–
13.3
(121.7)
(10.0)
–
–
–
13.3
(121.7)
(10.0)
–
–
(4.2)
(4.2)
–
0.5
–
(26.7)
–
0.7
(11.6)
590.6
–
1,512.0
–
1.4
–
1,513.4
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The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
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 2019 (‘2019’) were approved and authorised for issue in accordance with a resolution of the Directors on 26 February 2020.
The comparative information is presented for the year ended 31 December 2018 (‘2018’).
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 interpretations issued by the IFRS Interpretations Committee (‘IFRS IC’) and applied in
accordance with the provisions of the Companies Act 2006.
The Weir Group PLC is a public limited company, limited by shares, incorporated in Scotland, United Kingdom 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 financial statements have been prepared on a historic cost basis except where measured at fair value as outlined in the accounting policies.
The accounting policies which follow are consistent with those of the previous period with the exception of the following standards, amendments
and interpretations which are effective for the year ended 31 December 2019:
IFRS 16 ‘Leases’;
i)
ii) Prepayment Features with Negative Compensation – Amendments to IFRS 9;
iii) Long-term Interest in Associates and Joint Ventures – Amendments to IAS 28;
iv) Annual Improvements to IFRS Standards 2015 – 2017 Cycle;
v) Plan Amendment, Curtailment or Settlement – Amendments to IAS 19; and
vi) Interpretation 23 Uncertainty over Income Tax Treatments
With the exception of IFRS 16 ‘Leases’, discussed below, the other new standards, amendments and interpretations listed above are not
considered to have a material impact on the Consolidated Financial Statements of the Group.
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 period covered by these
financial statements.
International Accounting Standards (IAS/IFRS)
Amendment to IFRS 3 ‘Business combinations’
Amendment to IAS 1 and IAS 8 regarding the definition of materiality
Amendment to IFRS 9 and IFRS 7 regarding interest rate benchmark reform
* Not yet endorsed for use in the European Union.
Effective date for periods commencing
1 January 2020*
1 January 2020
1 January 2020
The above amendments will be adopted in accordance with their effective dates and have not been adopted in these financial statements.
The amendments and improvements which have not yet been endorsed are not anticipated to have a significant financial impact.
IFRS 16 ‘Leases’
The Group adopted IFRS 16 on 1 January 2019. The standard has resulted in many operating leases being recognised as right-of-use assets and
lease liabilities on the balance sheet, as the distinction between operating and finance leases is removed. The Group has applied the modified
retrospective transition method, and consequently comparative information is not restated.
Within opening balances as at 1 January 2019, the Group has recognised £176.9m of continuing right-of-use assets. A corresponding continuing
IFRS 16 lease liability of £181.1m has been recognised, representing the obligation to make lease payments. Right-of-use assets were initially
valued as equal to lease liabilities, then adjusted to reflect prepayments, rent free periods and provisions including onerous lease contracts
recognised on balance sheet at 31 December 2018.
The balance sheet transition impact by line item on the closing 2018 Consolidated Balance Sheet is shown in the table opposite. Further IFRS 16
data review completed during the year identified additional transition adjustments which have also been reflected in the table.
144
The Weir Group PLC Annual Report and Financial Statements 2019
2. ACCOUNTING POLICIES continued
Impact of IFRS 16 transition on 2018 Consolidated Balance Sheet
Property, plant & equipment (note 11)
Trade & other receivables
Assets held for sale
Interest-bearing loans and borrowings (total) (note 19)
Trade & other payables
Provisions (current) (note 21)
Liabilities held for sale
Other
NET ASSETS
31 December 2018
£m
427.1
597.7
394.4
(1,403.4)
(629.9)
(50.5)
(134.0)
2,947.5
2,148.9
IFRS 16 impact*
£m
176.9
(1.2)
13.0
(181.1)
2.8
2.6
(13.0)
–
–
1 January 2019
£m
604.0
596.5
407.4
(1,584.5)
(627.1)
(47.9)
(147.0)
2,947.5
2,148.9
* The IFRS 16 impact includes adjustments to the position disclosed in the 2019 interim results. These adjustments are not considered material.
For each lease, the lease term has been calculated as the non-cancellable period of the lease contract, except where the Group is reasonably
certain that it will exercise contractual extension options.
The Group has elected to use the following practical expedients allowed by the standard:
• On initial application:
i) the use of hindsight when determining the lease term if the contract contains options to extend or terminate the lease;
ii) the exclusion of initial direct costs from the measurement of the right-of-use asset;
iii) IFRS 16 has only been applied to contracts that were previously classified as leases;
iv) reliance on previous assessments on whether leases are onerous instead of performing an impairment review; and
v) leases where the lease term ends within 12 months of the date of initial application of IFRS 16 are classified as short-term.
• Lease payments for contracts with a duration of 12 months or less and contracts for which the underlying asset is of a low value continue to
be expensed in the income statement.
For operating leases now recognised on the balance sheet, the operating lease expenses have been replaced by a depreciation expense on the
right-of-use assets recognised and an interest expense.
Where the interest rate implicit in the lease cannot be readily determined, the Group’s incremental borrowing rate is used. The Group’s
incremental borrowing rate is calculated by taking the government borrowing rate in any given currency and adding the estimated Group credit
spreads for a variety of tenors. An interpolation is performed to obtain one rate for each of the major lease currencies based on the weighted
average life of the lease book. The incremental borrowing rates applied at transition were:
F
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S
t
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m
e
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s
• Leases in AUD: 3.52%
• Leases in CAD: 3.50%
• Leases in GBP: 2.45%
• Leases in USD and other currencies: 4.20%
The adoption of IFRS 16 in the year to 31 December 2019 for continuing operations resulted in an increase in depreciation of £42.4m and finance
costs of £7.6m. Operating expenses decreased by £36.4m, with 2018 lease expenses of £53.6m offset by £15.1m of short-term lease costs,
£1.7m of low value asset costs and £0.4m of variable lease payments not included in liabilities.
Excluding the impact of ESCO acquired in H2 2018 for continuing operations, there was an increase in depreciation of £36.7m and finance costs
of £6.8m. Operating expenses decreased by £35.5m, with 2018 lease expenses of £49.8m offset by £13.1m of short-term lease costs, £1.0m
of low value asset costs and £0.2m of variable lease payments not included in liabilities. There is also a change in presentation of cash flows
for leases previously accounted for as operating leases, which are now presented as cash flows from financing activities rather than cash flows
from operating activities. The overall impact of lease cash flows on total operations for both the current and prior years, including the change in
presentation described, is shown in the table below.
145
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2. ACCOUNTING POLICIES continued
Cash flow impact on total operations of IFRS 16
Right-of-use depreciation
Operating lease expenses
Operating profit – total operations
Add back: right-of-use depreciation
Net cash generated from operating activities
Lease payments
IFRS 16 interest lease payments (included in ‘Interest paid’)
2018 finance lease payments (included in ‘Repayments of borrowings’)
Net cash used in financing activities
Net decrease in cash and cash equivalents
2019
£m
(42.4)
(18.1)
(60.5)
42.4
(18.1)
(44.3)
(7.7)
–
(52.0)
(70.1)
2018
£m
–
(58.4)
(58.4)
–
(58.4)
–
–
(0.8)
(0.8)
(59.2)
Variance
£m
(42.4)
40.3
(2.1)
42.4
40.3
(44.3)
(7.7)
0.8
(51.2)
(10.9)
The reconciliation from operating commitments disclosed under IAS 17 ‘Leases’ to the lease liability recognised on the balance sheet at
1 January 2019 is as follows:
Reconciliation from IAS 17 disclosure to IFRS 16 at 1 January 2019
Operating lease commitments at 31 December 2018 disclosed in Group Annual Report
Transfer of operating lease commitments
Impact of IFRS 16 data review*
Operating lease commitments at 31 December 2018
Impact of discounting
Discounted operating lease commitments at 1 January 2019
Finance lease liabilities recognised as at 31 December 2018
Recognition exemption for short-term leases
Recognition exemption for leases of low value assets
Extension and termination options reasonably certain
Lease liabilities reported at 1 January 2019
Total operations
£m
(212.3)
–
(14.4)
(226.7)
29.4
(197.3)
(2.5)
8.6
3.2
(8.6)
(196.6)
Discontinued
operations
£m
(15.0)
1.3
(0.7)
(14.4)
1.1
(13.3)
–
0.5
0.2
(0.4)
(13.0)
Continuing
operations
£m
(197.3)
(1.3)
(13.7)
(212.3)
28.3
(184.0)
(2.5)
8.1
3.0
(8.2)
(183.6)
* As part of the transition to IFRS 16, a number of operating lease commitments were identified that had not been included in the 2018 Annual Report operating lease commitments disclosure in
note 26.
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 period are included in the Group’s results from the effective date on which control is transferred
to the Group. The results of a subsidiary sold during the period are included in the Group’s results up to the effective date on which control is
transferred out of the Group. All intragroup transactions, balances, income and expenses are eliminated on consolidation.
Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries that are not held by the Group and are presented
within equity in the Consolidated Balance Sheet, separately from the Company Shareholders’ equity.
A full list of the Company’s related undertakings can be found on pages 216-223.
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 year 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 years and assessment of trends in financial performance. This split is consistent with how underlying
business performance is measured internally.
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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 is expensed in line with the other intangible assets policy and is shown separately to provide visibility over the impact of both:
i)
intangible assets recognised via acquisition, which primarily relate to items which would not normally be capitalised unless identified as part of
an acquisition opening balance sheet. The ongoing costs associated with these assets are expensed.
ii) ongoing multiyear investment activities, which currently include our IT transformation strategy and IoT product development as part of the
Group’s Industry 4.0 adoption and digitisation strategy.
Further analysis of the items included in the column ‘Exceptional items & intangibles amortisation’ is provided in notes 5 and 12 to the
financial statements.
Use of estimates and judgements
The Group’s significant accounting policies are set out below. The preparation of the Consolidated Financial Statements, in conformity with IFRS,
requires management to make judgements that affect the application of accounting policies and estimates that impact the reported amounts of
assets, liabilities, income and expense.
Management bases these judgements on a combination of past experience, professional expert advice and other evidence that is relevant to
each individual circumstance. Actual results may differ from these judgements and the resulting estimates which are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised.
Areas requiring significant judgement in the current year and on a recurring basis are presented to the Audit Committee, as summarised on page 94.
The areas where management considers critical judgements and estimates to be required, which are areas more likely to be materially adjusted
due to estimates and assumptions turning out to be wrong, are those in respect of the following:
i) Retirement benefits (estimate)
The assumptions underlying the valuation of retirement benefit assets and liabilities include discount rates, inflation rates and mortality
assumptions which are based on actuarial advice. Changes in these assumptions could have a material impact on the measurement of the
Group’s retirement benefit obligations. Sensitivities to changes in key assumptions are provided in note 23.
ii) Valuation of intangible assets and impairment (estimate)
IFRS requires companies to carry out impairment testing on any assets that show indications of impairment, as well as annually for goodwill and
other intangible assets with indefinite useful lives and so not subject to amortisation. This testing includes exercising management judgement in
estimating future revenues, margin, cash flows, discount rates, growth rates and other events which are, by their nature, uncertain. During 2019
impairment testing over the Group’s cash generating units (CGUs) was performed and the details and results of this exercise along with
appropriate sensitivities are reported in note 14.
iii) Provisions (estimate)
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 21.
iv) Taxation (estimate)
The level of current and deferred tax recognised in the financial statements is dependent on subjective judgements as to the interpretation of
complex international tax regulations and, in some cases, the outcome of decisions by tax authorities in various jurisdictions around the world,
together with the ability of the Group to utilise tax attributes within the 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 including transfer pricing which are by nature complex and can take a number of years to resolve. In all cases,
provisions are based on management’s interpretation of tax law in each country, as supported where appropriate by discussion and analysis
undertaken by the Group’s external advisers, and reflect the single best estimate of the likely outcome for each liability. Provisions for uncertain
tax positions are included in current tax liabilities and total £20.2m at 31 December 2019.
The Group believes it has made adequate provision for such matters although it is possible that amounts ultimately paid will be different from the
amounts provided, but not materially within the next 12 months.
Detailed tax disclosures are provided in notes 7 and 22.
v) Other
Acquisition accounting and discontinued operations were areas in the prior year that required significant estimate and judgement for the
acquisition of ESCO and the recognition of the Flow Control Division as a discontinued operation in 2018. The finalisation of the ESCO opening
balance sheet and the completion of the Flow Control disposal in 2019 did not give rise to any significant estimates or judgements in the year.
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Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2. ACCOUNTING POLICIES continued
Joint ventures
The Group has a number of long-term contractual arrangements with other parties 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 First-time
Adoption of International Financial Reporting Standards, 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 the consideration the Group expects to receive from customers in exchange for goods and services. Revenue is recognised in the
Consolidated Income Statement when control of goods and services is transferred to the customer. Transfer of control is deemed to be over
time where the following criteria are met:
• The customer concurrently receives and consumes the benefits from the Group’s performance;
• The Group’s performance creates or enhances a customer controlled asset; or
• The Group’s performance does not create an asset with an alternative use and the Group has a right to payment for performance completed
to date.
Where the above criteria are not met then revenue is recognised at a point in time when control is transferred to the customer.
Revenue is shown net of sales taxes, discounts and after eliminating sales within the Group. 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.
Variable consideration is recognised only if it is highly probable that there will not be a significant revenue reversal. The consideration is an
estimation based on the terms of the contract and other available information. Liquidated damage variable consideration will only be recognised
where there is a history of recurring liquidated damages for example for the same customer or product line with the value of consideration being
the most likely amount from a range of possible outcomes. Volume discounts are deducted from revenue based on the most reliable estimates
of volumes to be purchased.
The timing of payment from customers is generally aligned to revenue recognition, subject to agreed payment terms usually in line with industry
standards. Certain contracts may include milestones payments which do not necessarily align to revenue recognition: a contract asset is recorded
where revenue is recognised in advance of customer invoicing and where cash is received in advance of revenue recognition, a contract liability
is recognised.
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2. ACCOUNTING POLICIES continued
i. Sale of goods
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. Contracts for the provision of both original equipment and spare parts, and where required services, are combined if one or
more of the following is met:
• The contract achieves a single commercial objective and negotiated as a package.
• The price or performance of one contract influences the amount of consideration to be paid in the other contract.
• The goods or services in the separate contracts represent a single performance obligation.
Each cross-selling contract is reviewed to identify the performance obligations in relation to original equipment and spare parts with them only
being combined if they are not capable of being distinct and are not distinct in the context of the contract.
Revenue from the sale of goods is generally recognised at a point of time on despatch of goods, in line with incoterms. This reflects when the
customer obtains control of the product and can determine its future use and location. For larger orders where multiple units are delivered in
instalments as part of one performance obligation, revenue will be recognised over time in line with delivery. These items are a series of distinct
goods which have the same pattern of transfer of control being the fulfilment of the incoterm, providing the customer has control of the goods as
they are delivered.
Where the sale of product requires customer inspection, this is deemed to be part of the main performance obligation so revenue is not
recognised until the inspection has been completed and approved by the customer. In instances where commissioning is provided, the transfer
of control for the sale of goods is at the point of despatch where commissioning is a separate performance obligation or once commissioning
is complete where combined in the sale of goods performance obligation. A separate performance obligation for commissioning is identified
where a customer could obtain the same service from a third-party supplier with revenue in respect of commissioning being recognised once the
commissioning is complete.
ii. Provision of services
The revenue recognition of provision of services is dependent on the nature of the contracts. Shorter-term contracts tend to be for ‘one-off’
service provision which means the customer only consumes the benefit from the Group’s performance when the work is complete. Revenue is
therefore recognised at a point in time for such contracts. For other contracts, revenue from the rendering of services is generally recognised
over time where the customer concurrently receives and consumes a benefit from the Group’s performance over the period of the contract
duration. Revenue from services is recognised in proportion to the stage of completion of the performance obligations at the balance sheet date.
The stage of completion is assessed by reference to the transfer of control over time, which usually corresponds to the contractual agreement
with each separate customer and the costs incurred on the contract to date in comparison with the total forecast costs of the contract.
iii. Construction contracts
Revenue for construction contracts is recognised over time as the contracts usually contain discrete elements separately transferring control to
customers over the life of the contract and the Group’s performance does not create an asset with an alternative use.
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. Both these methods
are faithful depictions of the transfer of control given the Group has a right to payment for performance completed to date. The basis used is
dependent upon the nature of the underlying contract. For instances where the work is subject to formal customer acceptance procedures,
revenue will only be recognised once the customer review has been completed and approved by the customer as this is the point both parties
are in agreement that control has been transferred in line with contract terms. Losses on contracts are recognised in the year when such losses
become probable.
Property, plant & equipment
Property, plant & equipment comprises owned assets and right-of-use assets that do not meet the definition of investment property.
i. Owned assets
Owned 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
10 – 40 years
Plant & equipment
3 – 20 years
ii. Right-of-use asset and lease liability
Policy applicable from 1 January 2019
At inception of a contract, the Group assess whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys
the right to control the use of an identified asset, the Group assesses whether it has both the right to obtain substantially all of the economic
benefits from use of the identified asset and the right to direct the use of the identified asset throughout the period of use.
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Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2. ACCOUNTING POLICIES continued
The Group recognises a lease liability and right-of-use asset at the lease commencement date. The lease liability is initially measured as the
present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease, or
where the interest rate implicit in the lease cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its
incremental borrowing rate as the discount rate. The Group’s incremental borrowing rate is calculated by taking the government borrowing rate
in any given currency and adding the estimated Group credit spreads for a variety of tenors. An interpolation is performed to obtain one rate for
each of the major lease currencies based on the weighted average life of the lease book.
Lease payments consist of the following components:
• fixed payments, including in-substance fixed payments, less any lease incentives receivable;
• variable lease payments that depend on an index or a rate;
• amounts expected to be payable by the lessee under residual value guarantees;
• the exercise price of a purchase option (if the lessee is reasonably certain to exercise that option); and
• payments of penalties for terminating the lease (if the lease term reflects the lessee exercising the option to terminate the lease).
The right-of-use asset is measured as equal to the lease liability and adjusted for:
• lease payments made to the lessor at or before the commencement date;
• lease incentives received;
• initial direct costs associated with the lease; and
• an initial estimate of restoration costs.
The right-of-use asset is depreciated using the straight-line method over the lease term. In addition, the right-of-use asset is periodically reduced
by any impairment losses.
The Group has adopted the exemption available for short-term leases, with payments being recognised on a straight-line basis over the lease
term. Short-term leases are defined as leases with a lease term of 12 months or less.
The Group has adopted the exemption available for low value assets, with payments being recognised on a straight-line basis over the lease
term. Leases relating to laptops, desktop computers, mobile phones, photocopiers, printers and other office equipment, where the asset value
is less than £3,500 or the local currency equivalent have been treated as ‘low value’. Where the lease contract meets both ‘short-term’ and ‘low
value’ exemptions, the lease is reported within ‘expenses relating to short-term leases’.
For each lease, the lease term has been calculated as the non-cancellable period of the lease contract, except where the Group is reasonably
certain that it will exercise contractual extension options. In assessing whether a lessee is reasonably certain to exercise an option to extend a
lease, or not to exercise an option to terminate a lease, the Group shall consider all relevant facts and circumstances that create an economic
incentive for the lessee to exercise the option to extend the lease, or not to exercise the option to terminate the lease. In certain circumstances
the Group will refer to the five-year strategic plan period as an appropriate period to consider whether the ‘reasonably certain’ criteria are met.
Policy applicable before 1 January 2019
Under IAS 17 which transferred to the Group substantially all of the risks and rewards of ownership of the leased asset were classified as finance
leases. All other assets were classified as operating leases. Assets held under finance lease were 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 was recognised
within obligations under finance leases. Operating lease rentals and any incentives receivable were recognised in the Consolidated Income
Statement on a straight-line basis over the term of the lease.
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 that 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 or loss on disposal.
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2. ACCOUNTING POLICIES continued
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 – 30 years
4 – 8 years
6 – 15 years
up to 6 years
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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, trade
payables and leases 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, 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. Under IFRS 9, where the modification is not
substantial, any difference in the modified cash flows is recognised in profit or loss.
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Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2. ACCOUNTING POLICIES continued
Trade receivables
Trade receivables, which are generally of a short-term nature, are recognised at original invoice amount where the consideration is unconditional.
If they contain significant financing components, trade receivables are instead recognised at fair value. The Group holds trade receivables to
collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. Details of
the Group’s impairment policies and the calculation of the loss allowance are provided in note 17 and the policy in respect of invoice discounting
is included in note 29.
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 Group’s supply chain financing programme policy and assessment for
the period is provided in note 20.
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 IFRS 9 are met. Hedge accounting is applied in respect of hedge relationships where it is both permissible under IFRS 9
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 Consolidated 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 financial statements, the accumulated gains and losses recognised in other comprehensive income will be either recycled to the income
statement or, if the hedged item results in a non-financial asset, will be recognised as adjustments to its initial carrying amount.
The Group hedges the foreign currency risk of its commercial paper with cross currency swaps which are designated as hedging instruments in
cash flow hedges where the terms of the derivatives match the terms of the hedged exposure. The Group designates the spot component of the
contracts as the hedged risk, where the forward points element is excluded from the hedge designation and accounted for as costs of hedging
under IFRS 9 and transferred to profit or loss when the hedged transaction occurs. To the extent that the hedges are determined to be highly
effective, the effective portion is recognised in other comprehensive income within the hedge accounting reserve and any ineffective portion
recognised immediately in the Consolidated Income Statement.
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 through other comprehensive income is kept
in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss that was
reported in equity is immediately reclassified to the income statement in the period.
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2. ACCOUNTING POLICIES continued
Derivatives embedded in non-derivative host contracts, which are not already measured at fair value through profit or loss, 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.
Where items are recognised in the Consolidated Income Statement, these are presented within operating profit or finance costs dependent on
their nature.
Share-based payments
Equity settled share-based incentives are provided to employees under the Group’s Share Reward Plan (SRP), formerly the Long Term Incentive
Plan (LTIP), the Weir ShareBuilder Plan (WSBP) and as a consequence of occasional one-off conditional awards made to employees.
The fair value of SRP awards and one-off 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 SRP which took effect in 2018 are summarised in
the Directors’ Remuneration Policy, which can be found on the Company’s website at www.corporategovernance.weir.
The fair value of WSBP awards at grant date is calculated as the share price at the date of the grant less an adjustment for loss of reinvestment
return on the dividend equivalent. There are no performance conditions attached to these awards but participants who leave the Company
prior to vesting lose their right to the awards. The terms of the share awards granted under the WSBP are set out on the plan’s website at
www.sharebuilder.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.
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.
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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 hence reducing 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.
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.
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Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2. ACCOUNTING POLICIES continued
Deferred tax is recognised on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base
with the following exceptions:
i) Deferred tax arising from the initial recognition of goodwill, or of an asset or liability in a transaction that is not a business combination, that, at
the time of the transaction, affects neither accounting nor taxable profit or loss, is not recognised;
ii) Deferred tax is provided on temporary differences arising on investments in subsidiaries and joint ventures, except where the timing of the
reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable
future; and
iii) A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can
be utilised.
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.
Alternative performance 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 alternative performance 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. Alternative performance measures should
not be considered in isolation from, or as a substitute for, financial information in compliance with GAAP. Alternative performance 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 alternative performance measures and provide reconciliations to relevant GAAP measures.
Free cash flow
Free cash flow (FCF) is defined as cash flow from operating activities adjusted for income taxes, net capital expenditures, lease payments,
net interest payments, dividends paid, settlement of derivatives, purchase of shares for employee share plans 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 generated from
operations to FCF is as follows.
Cash generated from operations before exceptional cash items (note 25)*
Income tax paid
Net capital expenditure from purchase & disposal of property, plant & equipment and intangibles
Lease payments*
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 employee share plans
Additional pension contributions paid
Free cash flow
2019
£m
407.6
(90.2)
(104.3)
(44.3)
(44.6)
(121.7)
3.5
(62.2)
(10.0)
(12.9)
(79.1)
2018
£m
410.8
(73.3)
(85.2)
–
(36.6)
(79.6)
1.6
(22.1)
(0.8)
(5.6)
109.2
* Only short-term and low value lease cash outflows are included in cash generated from operations before exceptional cash items in 2019 compared to all operating lease cash flows in 2018.
Due to the adoption of IFRS 16 ‘Leases’, lease cash flows are reported under the financing activities of the Group in the Consolidated Cash Flow Statement. Furthermore, net interest paid
includes interest paid in relation to leases. The full cash flow impact of IFRS 16 is disclosed in the basis of preparation.
Cash flows from operating activities (operating cash flow)
Operating cash flow excludes additional pension contributions, exceptional cash items and income tax paid. This reflects our view of the
underlying cash generation of the business. A reconciliation to the GAAP measure ‘Net cash generated from operating activities’ is provided in
the Consolidated Cash Flow Statement.
Working capital as a percentage of sales
Working capital includes inventories, trade & other receivables, trade & other payables and derivative financial instruments as included in the
Consolidated Balance Sheet, adjusted to exclude insurance contract assets totalling £81.1m included in note 17 and £12.1m of interest accruals
included in note 20. This working capital measure reflects the figure used by management to monitor the performance of the business and is
divided by revenue, as included in the Consolidated Income Statement, to arrive at working capital as a percentage of sales.
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Underlying 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 (loss) profit
Adjusted for:
Exceptional items (note 5)
Underlying Earnings before interest and tax (EBIT)
Intangibles amortisation (note 5)
Underlying Earnings before interest, tax and amortisation (EBITA)
Depreciation of owned property, plant & equipment (note 11)*
Underlying EBITDA
2019
£m
2018
£m
(322.2)
124.1
596.0
273.8
78.3
352.1
62.4
414.5
157.7
281.8
66.3
348.1
61.8
409.9
* 2019 Underlying EBITDA excludes depreciation (£42.4m) and interest (£7.7m) costs related to the right-of-use assets following the adoption of IFRS 16 ‘Leases’.
Net debt
A reconciliation of net debt to cash & short-term deposits, interest-bearing loans and borrowings is provided in note 25. This includes the impact
of IFRS 16 ‘Leases’ which was adopted in the year.
3. SEGMENT INFORMATION
For management purposes, the Group is organised into three operating divisions: Minerals, ESCO and Oil & Gas. These 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. In 2019, for strategic reasons, a procurement entity was moved from Unallocated expenses into the Oil &
Gas Division and prior year comparatives in Minerals and Oil & Gas have been restated to reflect transactions between the segments.
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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 ESCO segment is the world’s leading provider of ground engaging tools
for surface mining and infrastructure. The Oil & Gas segment provides products and service solutions to upstream, production, transportation
and related industries.
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.
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The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
3. SEGMENT INFORMATION continued
The segment information for the reportable segments for 2019 and 2018 is disclosed below. Information for Flow Control is included in note 8.
Minerals
2019
£m
Restated
2018
£m
2019
£m
2018
£m
2019
£m
Restated
2018
£m
ESCO
Oil & Gas
Total continuing operations
Revenue
Sales to external customers
Inter-segment sales
Segment revenue
Eliminations
1,477.8
2.8
1,480.6
1,416.7
2.5
1,419.2
572.0
0.5
572.5
251.8
–
251.8
612.1
27.7
639.8
781.4
26.6
808.0
2019
£m
2,661.9
31.0
2,692.9
(31.0)
2,661.9
Restated
2018
£m
2,449.9
29.1
2,479.0
(29.1)
2,449.9
Sales to external customers – 2018 at 2019 average exchange rates
1,415.4
Sales to external customers
1,477.8
572.0
263.6
612.1
817.4
2,661.9
2,496.4
Segment result
Segment result before share of results
of joint ventures
Share of results of joint ventures
Segment result
Unallocated expenses
Operating profit before exceptional items & intangibles amortisation
Total exceptional items & intangibles amortisation
Net finance costs
Profit before tax from continuing operations
270.3
–
270.3
250.2
–
250.2
Segment result – 2018 at 2019 average exchange rates
Segment result before share of results
of joint ventures
Share of results of joint ventures
Segment result
Unallocated expenses
Operating profit before exceptional items & intangibles amortisation
270.3
–
270.3
252.6
–
252.6
81.6
1.5
83.1
32.5
0.2
32.7
32.1
4.7
36.8
94.0
2.2
96.2
81.6
1.5
83.1
34.2
0.2
34.4
32.1
4.7
36.8
98.8
2.4
101.2
384.0
6.2
390.2
(38.1)
352.1
(674.3)
(49.6)
(371.8)
384.0
6.2
390.2
(38.1)
352.1
376.7
2.4
379.1
(31.0)
348.1
(224.0)
(38.0)
86.1
385.6
2.6
388.2
(31.1)
357.1
Revenues from any single external customer do not exceed 10% of Group revenue.
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The Weir Group PLC Annual Report and Financial Statements 2019
Assets & liabilities
Intangible assets
Property, plant & equipment
Working capital assets
Investments in joint ventures
Segment assets
Unallocated assets
Continuing operations
Discontinued operations
Total assets
Working capital liabilities
Unallocated liabilities
Continuing operations
Discontinued operations
Total liabilities
Other segment information – total Group
Segment additions to non-current assets
Unallocated additions to non-current assets
Continuing operations
Discontinued operations
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
Unallocated depreciation & amortisation
Continuing operations
Discontinued operations
Total depreciation, amortisation & impairment
Minerals
ESCO
Oil & Gas
2019
£m
2018
£m
2019
£m
2018
£m
2019
£m
579.5
293.5
701.1
1,574.1
–
1,574.1
606.3
218.1
682.9
1,507.3
–
1,507.3
700.9
122.2
217.0
1,040.1
15.2
1,055.3
747.5
106.1
215.8
1,069.4
15.6
1,085.0
268.0
137.5
297.8
703.3
21.4
724.7
Restated
2018
£m
773.9
94.0
399.6
1,267.5
21.0
1,288.5
408.2
402.2
87.8
80.0
133.5
197.2
85.5
47.5
28.6
9.5
41.5
26.9
Total Group
Restated
2018
£m
2019
£m
1,548.4
553.2
1,215.9
3,317.5
36.6
3,354.1
498.1
3,852.2
–
3,852.2
629.5
1,709.3
2,338.8
–
2,338.8
155.6
7.5
163.1
7.4
170.5
2,127.7
418.2
1,298.3
3,844.2
36.6
3,880.8
469.6
4,350.4
394.4
4,744.8
679.4
1,782.5
2,461.9
134.0
2,595.9
83.9
3.9
87.8
5.9
93.7
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63.4
44.1
37.1
16.8
67.6
54.6
168.1
115.5
1.9
6.3
12.9
3.1
–
–
–
–
28.6
472.9
0.4
–
30.5
479.2
15.0
692.8
–
692.8
13.3
3.1
12.6
144.5
49.0
193.5
The assets and liabilities balances now include right-of-use assets and lease liabilities. The year-on-year movements have been impacted by IFRS
16 bringing all leases on balance sheet. Refer to note 11 for depreciation on right-of-use assets.
Unallocated assets are continuing operations and 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 are continuing operations and 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), but do include
right-of-use assets in the current year.
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Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
3. SEGMENT INFORMATION continued
Geographical information
Geographical information in respect of revenue and non-current assets for 2019 and 2018 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 2019
Revenue from continuing operations
Sales to external customers
Non-current assets
UK
£m
US
£m
Canada
£m
28.7
343.3
742.0
1,061.1
366.6
86.2
Year ended 31 December 2018
Revenue from continuing operations
Sales to external customers
Non-current assets
UK
£m
US
£m
Canada
£m
28.0
332.5
802.5
1,554.4
287.9
54.5
The following disclosures are given in relation to continuing operations.
Asia
Pacific
£m
298.0
234.3
Asia
Pacific
£m
285.7
285.4
Australia
£m
South
America
£m
Middle East &
Africa
£m
Europe &
FSU
£m
Total
£m
263.1
181.4
445.6
91.9
331.0
136.7
186.9
45.9
2,661.9
2,180.8
Australia
£m
South
America
£m
Middle East &
Africa
£m
Other
£m
Total
£m
227.7
152.8
370.3
87.3
305.0
124.1
142.8
39.3
2,449.9
2,630.3
An analysis of the Group’s revenue is as follows:
Original equipment
Aftermarket parts
Sales of goods
Provision of services
Construction contracts
Revenue
Timing of revenue recognition
At a point in time
Over time
Segment revenue
Eliminations
Minerals
ESCO
Oil & Gas
2019
£m
Restated
2018
£m
2019
£m
2018
£m
2019
£m
Restated
2018
£m
1,376.3
104.3
1,480.6
1,343.2
76.0
1,419.2
560.4
12.1
572.5
251.8
–
251.8
628.8
11.0
639.8
798.8
9.2
808.0
2019
£m
2018
£m
552.5
1,740.2
2,292.7
313.4
55.8
2,661.9
578.2
1,536.6
2,114.8
310.9
24.2
2,449.9
Total continuing
operations
2019
£m
Restated
2018
£m
2,565.5
127.4
2,692.9
(31.0)
2,661.9
2,393.8
85.2
2,479.0
(29.1)
2,449.9
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
2019
£m
2018
£m
2,661.9
(1,787.7)
874.2
14.6
(270.5)
(272.4)
6.2
352.1
2,449.9
(1,633.0)
816.9
6.2
(245.8)
(231.6)
2.4
348.1
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The Weir Group PLC Annual Report and Financial Statements 2019
Operating profit from continuing operations is stated after charging:
Cost of inventories recognised as an expense
Depreciation of property, plant & equipment (note 11)
Lease expenses (note 11)
Amortisation of intangible assets (note 12)
Exceptional items (note 5)
Net foreign exchange losses
Net impairment charge of trade receivables excluding additional restructuring action amounts (note 17)
2019
£m
1,787.7
104.8
16.5
78.3
596.0
10.6
1.6
2018
£m
1,633.0
61.8
–
66.3
157.7
14.9
5.2
Depreciation of property, plant & equipment (note 11) for discontinued operations was £nil (2018: £2.7m) and amortisation of intangible assets
(note 12) was £nil (2018: £1.0m).
Research & development costs
Research & development costs for continuing operations amount to £34.3m (2018: £37.3m) of which £32.3m (2018: £34.4m) was charged directly
to cost of sales in the income statement and £2.0m (2018: £2.9m) was capitalised (note 12). Research & development costs for discontinued
operations amounted to £1.8m (2018: £4.7m) of which £1.8m (2018: £4.5m) was charged to cost of sales in the income statement and £nil
(2018: £0.2m) was capitalised (note 12).
Leases
Minimum lease payments for continuing operations under operating leases recognised as an expense in 2018 were £53.6m. In 2019, expenses
for short-term and low value leases, variable lease payments not included in lease liabilities and income from sub-leasing right-of-use asset leases
amount to £16.5m (note 11).
Employee benefits expense
Wages & salaries
Social security costs
Pension costs
Defined benefit plans
Defined contribution plans
Share-based payments – equity settled transactions (note 27)
Details of Directors’ remuneration is disclosed in note 28.
The average monthly number of people employed by the Company and its subsidiaries is as follows:
Minerals
ESCO
Oil & Gas
Group companies
2019
£m
609.6
50.6
1.0
27.1
12.9
701.2
2018
£m
550.4
40.0
7.4
23.4
8.6
629.8
2019
Number
2018
Number
8,630
2,338
2,905
470
14,343
8,562
2,444
3,100
420
14,526
The following disclosures are given in relation to total operations.
At 31 December 2019, the number of people employed by the Group and including those under temporary contracts was 14,687 (2018: 17,515).
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
2019
£m
2018
£m
2.2
1.1
0.1
2.5
1.3
0.4
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Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
5. EXCEPTIONAL ITEMS & INTANGIBLES AMORTISATION
Recognised in arriving at operating profit from continuing operations
Intangibles amortisation (note 12)
Exceptional item – Oil & Gas North America impairment – intangibles and goodwill (note 12)
Exceptional item – Oil & Gas North America impairment – tangible assets (notes 11 & 16)
Exceptional item – other intangibles impairment (note 12)
Exceptional item – ESCO inventory unwind
Exceptional item – ESCO acquisition and integration related costs
Exceptional item – legacy product warranty
Exceptional item – restructuring and rationalisation charges
Exceptional item – pension equalisation (note 23)
Exceptional item – legal claims
Exceptional item – fair value adjustment to contingent consideration asset/liability
Recognised in arriving at operating profit from discontinued operations
Intangibles amortisation (note 12)
Exceptional item – intangibles impairment (note 12)
Exceptional item – disposal related costs
Exceptional item – restructuring charges
Exceptional item – legal claims
Exceptional item – related to prior disposal
2019
£m
(78.3)
(472.9)
(73.3)
(6.3)
–
(10.7)
(2.3)
(30.8)
–
0.3
–
(674.3)
–
–
–
(0.4)
–
–
(0.4)
2018
£m
(66.3)
–
–
(3.1)
(63.1)
(30.8)
(24.4)
(29.2)
(6.3)
(0.7)
(0.1)
(224.0)
(1.0)
(45.0)
(5.0)
0.1
(2.0)
0.3
(52.6)
Continuing operations
Due to challenging current market conditions in the North American oil and gas market and uncertainty over the timing of market recovery, an
impairment totalling £546.2m has been recognised within the Oil & Gas North America Cash Generating Unit (CGU). A review was performed
of the carrying value of specific ‘at-risk’ tangible and intangible assets within the CGU resulting in write-downs to inventory of £48.6m,
property, plant & equipment of £24.7m, brand names of £39.7m, customer relationships of £144.3m and purchased software of £0.9m.
Following completion of the review, testing was completed in respect of the remaining goodwill and intangible assets held in the CGU leading to
an additional impairment of £288.0m charged against goodwill.
Exceptional items in the year for continuing operations include costs of £10.7m associated with the integration of ESCO into the Group following
the acquisition in July 2018. The majority of costs relate to restructuring activities and project support staff costs. These costs are in line with
estimates made at the time of acquisition. The integration activities and associated costs are expected to complete during the year ended
31 December 2020.
An additional inventory provision of £2.3m was incurred in the year to reflect the final closing inventory position relating to the prior year Oil & Gas
legacy product warranty issue.
The total restructuring charge of £30.8m relates to strategic restructuring and rationalisation activities in Minerals of £17.8m and Oil & Gas of
£14.6m partially offset by credits of £1.6m in Minerals relating to prior year unutilised provisions and property disposals. The Minerals charge
relates to costs of £2.0m associated with political and social events in South America and £15.8m following withdrawal from the lower margin
sand and aggregates comminution market in North America including £9.4m inventory and £2.4m total property, plant & equipment impairments.
A charge of £6.3m is also included within intangibles impairment for the full write-down of customer relationships asset value which relates to
the North American sand and aggregates market. The Oil & Gas charges relate to restructuring efforts in response to current challenging market
conditions in North America. Efforts include a c.20% reduction in the workforce and a number of strategic initiatives which mainly cover the costs
and associated total property, plant & equipment impairments of £3.9m to consolidate and close a number of sites.
The legal claim credit of £0.3m is for the successful resolution of a legal claim associated with legacy Trio issues.
In the prior year, exceptional items comprised costs associated with the acquisition and integration of ESCO totalling £30.8m and an unwind to
the inventory fair value uplift in the ESCO opening balance sheet of £63.1m, Oil & Gas legacy product warranty issue of £24.4m and restructuring
and rationalisation charges of £29.2m relating to actions in Minerals North America and China as well as the exit from the Minerals Malaysia
foundry operations. Other exceptional charges included £6.3m in relation to UK pension GMP equalisation and £0.8m for legacy legal claims and
finalisation of contingent consideration.
Discontinued operations
Exceptional items in the current year, before tax and the loss on sale, of £0.4m relate to the impairment of inventory due to restructuring. In 2018,
exceptional items included the write down to Flow Control’s carrying value of £45.0m to reflect the agreed transaction enterprise value less
future costs to sell. A further £5.0m of disposal related costs was incurred along with legal claims of £2.0m partially offset by £0.4m for a receipt
in relation to a prior year disposal and a net release of an exceptional provision.
160
The Weir Group PLC Annual Report and Financial Statements 2019
6. FINANCE (COSTS) INCOME
The following disclosures are given in relation to continuing operations.
Finance costs
Interest payable on financial liabilities
Interest and finance charges payable on lease liabilities
Change in fair value of forward points in cross currency swaps and forward contracts
Finance charges related to committed loan facilities
Finance charges related to discounting of trade receivables
Other finance costs – retirement benefits
Finance income
Interest receivable on financial assets
7. TAX EXPENSE
Income tax credit (expense) from total operations
Consolidated Income Statement
Current income tax
UK corporation tax
Adjustments in respect of previous years
UK corporation tax
Foreign tax
Adjustments in respect of previous years
Total current income tax
Deferred income tax
Origination & reversal of temporary differences
Adjustment to estimated recoverable deferred tax assets
Effect of changes in tax rates
Adjustments in respect of previous years
Total deferred tax*
Total income tax credit (expense) in the Consolidated Income Statement
Total income tax credit (expense) is attributable to:
Profit (loss) from continuing operations
Loss from discontinued operations
*
Includes £84.9m of deferred tax credit relating to foreign tax (2018: £35.3m credit).
The total income tax (expense) credit is disclosed in the Consolidated Income Statement, and note 8, as follows.
Tax (expense) credit
– continuing operations before exceptional items & intangibles amortisation
– discontinued operations before exceptional items & intangibles amortisation
– exceptional items
– intangibles amortisation and impairment
Total income tax credit (expense) in the Consolidated Income Statement
The total deferred tax included in the income tax expense is detailed in note 22.
161
2019
£m
(37.4)
(7.6)
(1.6)
(1.9)
(0.6)
(4.8)
(53.9)
2019
£m
4.3
2019
£m
1.8
(5.9)
(4.1)
(87.7)
6.5
(85.3)
86.4
(3.9)
(3.0)
10.0
89.5
4.2
18.4
(14.2)
4.2
2019
£m
(73.8)
(0.5)
11.2
67.3
4.2
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
2018
£m
(34.8)
–
–
(1.3)
(0.3)
(4.3)
(40.7)
2018
£m
2.7
2018
£m
3.5
(1.3)
2.2
(71.3)
(3.5)
(72.6)
33.7
0.8
(1.8)
2.2
34.9
(37.7)
(32.7)
(5.0)
(37.7)
2018
£m
(78.6)
(6.3)
31.4
15.8
(37.7)
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
7. TAX EXPENSE continued
Tax relating to items charged or credited to equity from continuing operations
Consolidated Statement of Comprehensive Income
Deferred tax – origination & reversal of temporary differences
Deferred tax – effect of change in tax rates
Tax credit (debit) on actuarial losses on retirement benefits
Tax (debit) credit on hedge losses
Tax credit (charge) in the Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Deferred tax on share-based payments
Tax credit (charge) in the Consolidated Statement of Changes in Equity
2019
£m
1.0
(0.2)
0.8
(0.2)
0.6
0.4
0.4
2018
£m
(10.1)
1.2
(8.9)
3.0
(5.9)
(1.7)
(1.7)
Reconciliation of the total tax charge from continuing operations
The tax credit (2018: debit) in the Consolidated Income Statement for the year is lower (2018: higher) than the weighted average of standard rates
of corporation tax across the Group of 20.0% (2018: 37.2%). The differences are reconciled below.
(Loss) profit before tax from continuing operations
Loss before tax from discontinued operations
(Loss) profit before tax
At the weighted average of standard rates of corporation tax across the Group of 20.0% (2018: 37.2%)
Adjustments in respect of previous years – current tax
– deferred tax
Joint ventures
Unrecognised deferred tax assets
Overseas tax on unremitted earnings
Permanent differences
Tax effect of funding overseas operations
Effect of changes in tax rates
Exceptional items ineligible for tax
At effective tax rate of 1.1% (2018: 67.2%)
2019
£m
(371.8)
(11.8)
(383.6)
(76.7)
(0.6)
(10.0)
(1.3)
10.9
3.1
0.6
(7.7)
0.7
76.8
(4.2)
2018
£m
86.1
(30.0)
56.1
20.9
4.8
(2.2)
(0.4)
8.0
(4.2)
6.4
(9.8)
(0.4)
14.6
37.7
The decrease in permanent differences from a £6.4m addition in 2018 to a £0.6m addition in 2019 arises in part because of the release of tax
risk provisions in 2019 following the resolution of tax authority enquiries in various jurisdictions including Canada and Australia, together with
increased R&D credits in the US. The increase in the deferred tax adjustment in respect of prior years from a credit of (£2.2m) in 2018 to a credit
of (£10.0m) in 2019 primarily relates to a Research and Development claim within the US business, spanning a number of years, the benefit of
which is deferred for US tax purposes.
Exceptional items ineligible for tax includes the impact of a £288.0m impairment to Goodwill relating to US Oil & Gas Division.
The Group’s provision for overseas tax on unremitted earnings increased from a deduction of (£4.2m) in 2018 to an addition of £3.1m in 2019.
This is due to the non-recurrence of the 2018 release of provision in relation to unremitted earnings in Canada following repatriation of funds
through long-term loans from the Canadian entities to the UK group, together with an increase in 2019 of the provision in respect of unremitted
earnings in Chile and Peru.
On 25 April 2019 the European Commission (EC) released its full decision in relation to its State Aid investigation into the Group Financing
Exemption (GFE) included within the UK’s controlled foreign company (CFC) legislation. While it is narrower than the original concerns raised and
confirms that the CFC legislation as amended with effect from 1 January 2019 is compliant with EU State Aid rules, the decision concludes that,
up to 31 December 2018, aspects of the legislation constitute State Aid. In common with other international groups, the Group has benefited
from the GFE contained within the CFC legislation and may therefore be affected by the decision should it ultimately be upheld. The estimated
maximum contingent liability, excluding interest, is approximately £19m.
The UK Government, together with a number of affected taxpayers, including the Group, have lodged annulment applications with the General
Court of the European Union in response to this decision and there remains considerable uncertainty as to the outcome of both the appeals
process and any recovery mechanism. The Group considers that no provision is required in respect of this issue at present and will continue to
review this position.
162
The Weir Group PLC Annual Report and Financial Statements 2019
8. DISCONTINUED OPERATIONS
On 19 April 2018, the Group announced its intention to sell the Flow Control Division and, in line with IFRS 5 ‘Non-current Assets Held for Sale
and Discontinued Operations’, the Group classified the division as held for sale. Whilst part of the Group, the Flow Control Division designed and
manufactured valves and pumps as well as providing specialist support services to the global power generation, industrial and oil and gas sectors.
The Group disposed of the Flow Control Division on 28 June 2019 for an enterprise value of £275.0m and a net consideration of £263.4m,
after customary working capital and debt-like adjustments. In January 2020 the Group paid £4.5m to First Reserve and wrote off £0.2m
receivable from First Reserve to reflect the final consideration of £258.7m determined as part of the agreed completion accounts
process. Previously reported as an individual reporting segment, the results of the division are presented in the financial statements as
discontinued operations.
Financial information relating to discontinued operations for the period to the date of disposal is set out in the table below.
Financial performance and cash flow information for discontinued operations
Year ended 31 December 2019
Year ended 31 December 2018
Revenue
Operating (loss) profit
Finance costs
Finance income
(Loss) profit before tax from discontinued operations
Tax (expense) credit
(Loss) profit after tax from discontinued operations
Loss on sale of the subsidiaries after income tax
(see below)
(Loss) profit for the period from discontinued
operations
Reclassification of foreign currency translation reserve
Other comprehensive expense from discontinued
operations
Net other comprehensive expense from discontinued
operations
Before
exceptional
items &
intangibles
amortisation
£m
150.0
(2.9)
(0.5)
–
(3.4)
(0.5)
(3.9)
Exceptional
items &
intangibles
amortisation
(note 5)
£m
–
(0.4)
–
–
(0.4)
–
(0.4)
Before
exceptional
items &
intangibles
amortisation
£m
342.7
22.9
(0.4)
0.1
22.6
(6.3)
16.3
Exceptional
items &
intangibles
amortisation
(note 5)
£m
–
(52.6)
–
–
(52.6)
1.3
(51.3)
Total
£m
150.0
(3.3)
(0.5)
–
(3.8)
(0.5)
(4.3)
–
(21.7)
(21.7)
(3.9)
(20.5)
(0.2)
(20.7)
(22.1)
–
–
–
(26.0)
(20.5)
(0.2)
(20.7)
–
16.3
–
–
–
–
(51.3)
–
–
–
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
Total
£m
342.7
(29.7)
(0.4)
0.1
(30.0)
(5.0)
(35.0)
–
(35.0)
–
–
–
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net (decrease) increase in cash & cash equivalents from discontinued operations
Year ended
31 December
2019
£m
(29.0)
(7.5)
(2.2)
(38.7)
Year ended
31 December
2018
£m
38.7
(5.9)
(0.9)
31.9
163
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
8. DISCONTINUED OPERATIONS continued
Details of the sale of the subsidiaries
Consideration received
Cash received
Completion accounts
Total disposal consideration
Carrying amount of net assets sold
Costs of disposal
Loss on sale before income tax and reclassification of foreign currency translation reserve
Reclassification of foreign currency translation reserve
Loss on sale before income tax
Income tax charge
Loss on sale after income tax
The carrying amount of assets and liabilities as at the date of sale were as follows.
Property, plant & equipment
Intangible assets
Inventories
Trade & other receivables
Cash & short-term deposits
Trade & other payables
Provisions
Net assets
Non-controlling interest
Net assets attributable to Equity holders of the Company
Loss per share
Loss per share from discontinued operations was as follows.
Basic
Diluted
Year ended
31 December
2019
£m
263.4
(4.7)
258.7
(270.1)
(17.1)
(28.5)
20.5
(8.0)
(13.7)
(21.7)
Period ended
28 June 2019
£m
95.7
98.4
79.1
150.7
2.1
(140.5)
(14.9)
270.6
(0.5)
270.1
Year ended
31 December
2018
£m
75.9
98.8
71.2
132.4
16.1
(118.6)
(15.4)
260.4
(0.5)
259.9
2019
pence
(10.0)
(10.0)
2018
pence
(14.3)
(14.3)
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.
9. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share amounts are calculated by dividing net profit (loss) for the year attributable to equity holders of the Company
by the weighted average number of ordinary shares outstanding during the year. Diluted earnings (loss) per share is calculated by dividing the
net profit (loss) 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 (loss) and share data used in the calculation of earnings (loss) per share.
(Loss) 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 (loss) per share (number of shares, million)
Diluted earnings (loss) per share (number of shares, million)
2019
2018
(379.9)
(353.9)
228.2
259.5
261.2
18.0
53.0
231.1
244.1
245.8
164
The Weir Group PLC Annual Report and Financial Statements 2019
9. EARNINGS (LOSS) PER SHARE continued
The difference between the weighted average share capital for the purposes of the basic and the diluted earnings (loss) per share calculations is
analysed as follows.
Weighted average number of ordinary shares for basic earnings (loss) per share
Effect of dilution: employee share awards
Adjusted weighted average number of ordinary shares for diluted earnings (loss) per share
2019
Shares
million
259.5
1.7
261.2
2018
Shares
million
244.1
1.7
245.8
The profit (loss) attributable to equity holders of the Company used in the calculation of both basic and diluted earnings (loss) per share from
continuing operations before exceptional items and intangibles amortisation is calculated as follows.
Net (loss) profit attributable to equity holders from continuing operations**
Exceptional items & intangibles amortisation net of tax
Net profit attributable to equity holders from continuing operations before exceptional items & intangibles
amortisation
2019
£m
(353.9)
582.1
2018
£m
53.0
178.1
228.2
231.1
Basic (loss) earnings per share:
Total operations*
Continuing operations**
Continuing operations before exceptional items & intangibles amortisation**
Diluted (loss) earnings per share:
Total operations*
Continuing operations**
Continuing operations before exceptional items & intangibles amortisation**
2019
pence
(146.4)
(136.4)
87.9
(146.4)
(136.4)
87.4
* Adjusted for a profit of £0.5m (2018: profit of £0.4m) in respect of non-controlling interests for total operations.
** Adjusted for a profit of £0.5m (2018: profit of £0.4m) in respect of non-controlling interests for continuing operations.
There have been no share options (2018: nil) exercised between the reporting date and the date of signing of these financial statements.
Loss per share from discontinued operations is disclosed in note 8.
10. DIVIDENDS PAID & PROPOSED
Declared & paid during the year
Equity dividends on ordinary shares
Final dividend for 2018: 30.45p (2017: 29.0p)
Interim dividend for 2019: 16.5p (2018: 15.75p)
2019
£m
78.9
42.8
121.7
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
2018
pence
7.4
21.7
94.7
7.3
21.6
94.0
2018
£m
69.9
40.9
110.8
Proposed for approval by Shareholders at the Annual General Meeting
Final dividend for 2019: 30.45p (2018: 30.45p)
79.1
79.0
Up until May 2018, The Weir Group PLC Scrip Dividend Scheme allowed Shareholders on record the opportunity to elect to receive dividends
in the form of new fully paid ordinary shares. In 2018, participation in the Scheme resulted in shares with a value of £31.2m being issued and a
cash dividend of £38.7m for the 2017 final dividend. The 2018 interim and final dividends were only issued in cash following closure of the Scrip
Dividend Scheme.
The proposed dividend is based on the number of shares in issue, excluding treasury shares held, at the date that 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 1.9 times (2018: 2.1 times) as explained in the Financial Review.
165
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
11. PROPERTY, PLANT & EQUIPMENT
Property, plant & equipment comprises owned and right-of-use assets that do not meet the definition of investment property.
Owned land
& buildings
£m
Owned plant
& equipment
£m
Total owned
property,
plant &
equipment
£m
Right-of-
use land &
buildings
£m
Right-of-
use plant &
equipment
£m
Total right-of-
use property,
plant &
equipment
£m
Total
property,
plant &
equipment
£m
Cost
At 31 December 2017
Additions
Acquisitions
Disposals
Reclassifications from intangible assets
(note 12)
Reclassifications to inventory
Reclassifications
Transferred to assets held for sale (note 8)
Exchange adjustment
At 31 December 2018
Transfer to right-of-use asset
Transition adjustment (note 2)
At 1 January 2019
Additions
Disposals
Reclassifications to intangible assets
(note 12)
Reclassifications to inventory
Reclassifications
Reassessments and modifications
Exchange adjustment
At 31 December 2019
Accumulated depreciation & impairment
At 31 December 2017
Depreciation charge for the year*
Impairment during the year
Disposals
Reclassifications
Transferred to assets held for sale (note 8)
Exchange adjustment
At 31 December 2018
Transfer to right-of-use asset
At 1 January 2019
Depreciation charge for the year
Impairment during the year
Disposals
Reclassifications
Reassessments and modifications
Exchange adjustment
At 31 December 2019
Net book value at 31 December 2017
Net book value at 31 December 2018
Net book value at 31 December 2019
*
Includes depreciation in relation to discontinued operations of £2.7m.
208.5
3.9
35.6
(0.9)
–
–
(0.8)
(60.8)
3.7
189.2
–
–
189.2
5.6
(6.0)
–
–
1.1
–
(7.8)
182.1
53.5
7.4
4.8
(0.9)
(0.4)
(16.2)
1.3
49.5
–
49.5
6.4
1.4
(3.1)
0.3
–
(2.3)
52.2
155.0
139.7
129.9
657.3
79.2
66.5
(35.9)
0.4
(0.6)
0.8
(91.5)
12.5
688.7
(4.1)
–
684.6
86.9
(75.4)
(3.8)
(0.1)
(1.1)
–
(30.5)
660.6
419.0
57.1
8.8
(31.7)
0.4
(60.2)
7.9
401.3
(1.7)
399.6
56.0
26.6
(65.0)
(0.3)
–
(19.9)
397.0
238.3
287.4
263.6
166
865.8
83.1
102.1
(36.8)
0.4
(0.6)
–
(152.3)
16.2
877.9
(4.1)
–
873.8
92.5
(81.4)
(3.8)
(0.1)
–
–
(38.3)
842.7
472.5
64.5
13.6
(32.6)
–
(76.4)
9.2
450.8
(1.7)
449.1
62.4
28.0
(68.1)
–
–
(22.2)
449.2
393.3
427.1
393.5
–
–
–
–
–
–
–
–
–
–
–
149.2
149.2
34.4
–
–
–
(0.1)
3.4
(5.2)
181.7
–
–
–
–
–
–
–
–
–
–
30.3
2.5
–
–
–
(1.1)
31.7
–
–
–
–
–
–
–
–
–
–
–
–
4.1
27.7
31.8
12.5
(1.1)
–
–
0.1
(2.4)
(1.3)
39.6
–
–
–
–
–
–
–
–
1.7
1.7
12.1
–
(1.1)
–
(0.5)
(0.3)
11.9
–
–
–
–
–
–
–
–
–
–
–
–
4.1
176.9
181.0
46.9
(1.1)
–
–
–
1.0
(6.5)
221.3
–
–
–
–
–
–
–
–
1.7
1.7
42.4
2.5
(1.1)
–
(0.5)
(1.4)
43.6
–
–
150.0
27.7
177.7
865.8
83.1
102.1
(36.8)
0.4
(0.6)
–
(152.3)
16.2
877.9
–
176.9
1,054.8
139.4
(82.5)
(3.8)
(0.1)
–
1.0
(44.8)
1,064.0
472.5
64.5
13.6
(32.6)
–
(76.4)
9.2
450.8
–
450.8
104.8
30.5
(69.2)
–
(0.5)
(23.6)
492.8
393.3
427.1
571.2
The Weir Group PLC Annual Report and Financial Statements 2019
Owned property, plant & equipment
Finance leases are now recorded as ‘right-of-use assets’ in accordance with IFRS 16 ‘Leases’. The prior year balances transferred to right-of-use
assets for continuing operations are included in the analysis table above. In 2018 the carrying value of discontinued operations included buildings
held under finance leases of £0.7m and plant & equipment of £0.1m.
The carrying amount of assets under construction included in plant & equipment for continuing operations is £49.6m (2018: £30.4m).
Discontinued operations include assets under construction in plant & equipment of £nil (2018: £1.4m).
The impairment charges in the year primarily relate to the Oil & Gas Division with £24.7m in relation to the North America Cash Generating Unit
asset review and £3.3m for strategic restructuring and rationalisation initiatives to consolidate and close sites. In Minerals, an impairment of
£0.5m for the exit from the North American sand and aggregates market is offset by reversal of £0.5m on disposal of a property in Weir Malaysia
which was impaired in the prior year. See note 5 for further details.
The majority of impairment charges during 2018 were related to Weir Minerals Malaysia with buildings impairment of £4.8m and equipment
impairment of £7.6m.
Right-of-use assets
The Group leases many assets including buildings, vehicles, forklifts, photocopiers and printers, machinery and IT equipment. Building lease
terms are negotiated on an individual basis and contain a wide range of terms from 1–30 years. The average lease term is approximately seven
years. Plant & equipment lease terms range from 1–7 years, with an average lease term of approximately four years. The current and non-current
lease liabilities are disclosed in notes 19 and 29 respectively. The maturity analysis of contractual undiscounted cash flows is included in note 29.
The following table shows the breakdown of the lease expense between amounts charged to operating profit and amounts charged to finance
costs in the year.
The impairment charge of £2.5m recognised in the year relates to Minerals North America for the exit from the North American sand and
aggregates market for £1.9m and a restructuring and rationalisation lease write-down in Oil & Gas of £0.6m. See note 5 for further details.
Depreciation of right-of-use assets
Expenses relating to short-term leases
Expenses relating to leases of low value assets, excluding short-term leases of low value
Income from sub-leasing right-of-use assets
Expenses relating to variable lease payments not included in the measurement of lease liabilities
Charge to operating profit
Finance cost – interest expense related to lease liabilities
Charge to profit before tax from continuing operations
2019
£m
(42.4)
(15.1)
(1.7)
0.7
(0.4)
(58.9)
(7.6)
(66.5)
The total cash outflow in the year for continuing operations is £67.4m. Future cash outflows from leases not yet commenced to which the Group
is committed total £18.2m.
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Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
12. INTANGIBLE ASSETS
Cost
At 31 December 2017
Additions
Acquisitions
Disposals
Reclassifications to property, plant &
equipment (note 11)
Transferred to assets held for sale
(note 8)
Exchange adjustment
At 31 December 2018
Additions
Disposals
Reclassifications from property, plant &
equipment (note 11)
Reclassifications
Exchange adjustment
At 31 December 2019
(107.5)
69.7
1,620.3
–
–
–
–
(63.4)
1,556.9
Accumulated amortisation & impairment
At 31 December 2017
Amortisation charge for the year*
Impairment during the year
Disposals
Transferred to assets held for sale
(note 8)
Exchange adjustment
At 31 December 2018
Amortisation charge for the year
Impairment during the year
Disposals
Reclassifications
Exchange adjustment
At 31 December 2019
393.2
–
48.1
–
(45.0)
23.9
420.2
–
288.0
–
–
(27.2)
681.0
Goodwill
£m
Brand names
£m
Customer &
distributor
relationships
£m
Purchased
software
£m
Intellectual
property &
trade marks
£m
Development
costs
£m
1,263.5
–
394.6
–
231.7
–
128.6
–
627.1
–
104.6
–
78.6
6.5
3.3
(2.3)
–
–
–
(0.4)
92.8
0.4
40.8
–
–
(1.8)
4.0
136.2
–
(0.1)
–
–
(5.2)
130.9
48.7
10.0
–
–
(0.8)
2.5
60.4
12.8
–
(0.1)
(3.7)
(2.8)
66.6
44.1
75.8
64.3
52.9
3.1
–
–
–
(5.4)
(0.2)
50.4
2.0
(0.7)
–
–
(0.4)
51.3
14.0
8.9
–
–
(3.1)
(0.2)
19.6
8.8
–
(0.4)
–
(0.2)
27.8
38.9
30.8
23.5
Other
£m
25.7
0.6
60.7
–
Total
£m
2,372.3
10.6
732.6
(2.3)
–
(0.4)
(3.5)
2.7
86.2
–
–
–
(2.0)
(3.3)
80.9
23.9
1.3
–
–
–
0.5
25.7
6.2
–
–
(0.9)
(1.1)
29.9
1.8
60.5
51.0
(181.5)
131.2
3,062.5
23.7
(2.8)
3.8
–
(117.1)
2,970.1
821.6
67.3
48.1
(2.3)
(82.7)
43.9
895.9
78.3
479.2
(2.5)
–
(53.8)
1,397.1
1,550.7
2,166.6
1,573.0
(12.0)
17.9
366.2
–
–
–
–
(14.0)
352.2
8.0
2.0
–
–
–
0.8
10.8
1.8
39.7
–
–
(1.8)
50.5
(37.5)
36.6
730.8
–
–
–
–
(27.2)
703.6
290.9
38.3
–
–
(23.0)
15.8
322.0
40.5
150.6
–
3.7
(18.9)
497.9
336.2
408.8
205.7
(13.8)
0.5
72.4
21.7
(2.0)
3.8
2.0
(3.6)
94.3
42.9
6.8
–
(2.3)
(10.8)
0.6
37.2
8.2
0.9
(2.0)
0.9
(1.8)
43.4
35.7
35.2
50.9
Net book value at 31 December 2017
Net book value at 31 December 2018
Net book value at 31 December 2019
870.3
1,200.1
875.9
223.7
355.4
301.7
*
Includes amortisation in relation to discontinued operations of £1.0m.
The impairment charge recorded in 2019 of £479.2m includes write-downs totalling £472.9m relating to the Oil & Gas North America Cash
Generating Unit comprising goodwill £288.0m, brand names £39.7m, customer relationships £144.3m and purchased software of £0.9m.
These charges are a result of current challenging conditions in the North American oil and gas market and uncertainty over the timing of
market recovery.
In addition to these balances there was a £6.3m write-off of customer relationships in Trio North America following closure of the sand and
aggregates business in that region.
During 2018, impairment charges of £48.1m included £45.0m in relation to a write-down of goodwill in discontinued operations and a write-down
of £3.1m for goodwill associated with the decision to exit the Minerals Division’s Malaysia foundry operations.
Brand names have been assigned an indefinite useful life and as such are not amortised with the exception of those acquired during 2017 for
KOP Surface Products. These had a carrying value of £1.9m at 31 December 2018 and were fully amortised during 2019.
The carrying value of brand names with an indefinite life is tested annually for impairment (note 14). The Seaboard and Mathena brand names
were impaired during the year for the reasons noted above. There is no impairment charge in the prior year. The carrying value at the year end
was £301.7m (2018: £355.4m).
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The brand name value includes the brands of ESCO, Linatex, Warman, SPM and Multiflo, all of which are considered to be market leaders in their
respective markets. The allocation of significant brand names is as follows.
ESCO
Warman
Linatex
Seaboard
SPM
Trio
Gabbioneta
Mathena
Other
Gabbioneta included in assets held for sale
Other brands included in assets held for sale
Brand names
2019
£m
128.6
62.6
43.0
–
41.1
17.9
–
–
8.5
301.7
–
–
301.7
2018
£m
127.8
65.1
44.7
30.4
42.8
18.7
6.1
9.3
22.5
367.4
(6.1)
(5.9)
355.4
The allocation of customer and distributor relationships, and the amortisation period of these assets is as follows.
Remaining amortisation
period
Customer & distributor
relationships
ESCO
SPM
Seaboard
Mathena
Novatech
Trio
Other
2019
Years
26–29
12
n/a
n/a
6
2018
Years
27–30
13
9
7
7
5
Up to 11
6
Up to 12
Other customer and distributor relationships included in assets held for sale
n/a
Up to 12
2019
£m
98.8
64.3
–
–
23.2
4.7
14.7
205.7
–
205.7
2018
£m
106.8
75.9
85.2
78.5
29.2
14.2
33.5
423.3
(14.5)
408.8
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13. BUSINESS COMBINATIONS
Prior year business combinations
On 12 July 2018, the Group completed the acquisition of ESCO Corporation (‘ESCO’) for an enterprise value of US$1.3bn (£972.3m). In order to
part fund the acquisition, a placement of 16,699,763 ordinary shares was completed on 23 April 2018, raising £355.5m (net of £7.7m fees). As part
of the final consideration, a further 16,779,861 ordinary shares were issued directly to ESCO Shareholders on 12 July 2018 valued at £325.3m
with an additional equity consideration of £1.4m in relation to pre-acquisition cost of share-based payment awards (see note 27). ESCO is the
world’s leading provider of ground engaging tools for surface mining and infrastructure.
On 31 July 2018, the Group completed the acquisition of Ralph A. Hiller Company, a manufacturer of certain valve products for use in nuclear
power facilities, for a consideration of US$4.0m (£3.1m).
On 18 April 2018, the Group completed a trade and asset purchase of Davidson Sales & Engineering, Inc., a provider of marketing, distributing,
selling and servicing mining and other industrial equipment, for a consideration of US$4.1m (£2.9m).
In 2019, the provisional fair values of the opening balance sheets for the acquisitions noted above were finalised following a review over a
12 month period since the date of acquisition. No adjustments were made to the fair values reported in the 2018 financial statements.
Contingent consideration of £0.2m at 31 December 2018 relating to the purchase of ESCO was settled in the year, following a reduction in the
balance of £0.1m due to exchange movements in the year.
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Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
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 (brand names) with
indefinite lives annually for impairment, or more frequently if there are indications that these might be impaired.
The carrying amounts of goodwill and intangible assets with indefinite lives have been allocated as per the table below.
Minerals
ESCO
Oil & Gas International
Oil & Gas North America
Continuing operations
Goodwill
2019
£m
363.0
390.3
54.5
68.1
875.9
Intangibles
2019
£m
132.0
128.6
–
41.1
301.7
Goodwill
2018
£m
378.2
406.0
56.7
359.2
1,200.1
Intangibles
2018
£m
137.2
133.8
–
82.5
353.5
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.
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 2019.
ESCO
ESCO includes the ESCO and Bucyrus Blades brands. This CGU is a supplier of ground engaging tools (GET) and associated equipment and
services to the mining and infrastructure industries. Independent forecasts of expenditure in these sectors have been used to derive revenue
growth assumptions. These independent forecasts were prepared during the final quarter of 2019.
Oil & Gas International
Oil & Gas International comprises multiple service centre locations within the Middle East and Europe and 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 locations supply 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 2019.
Oil & Gas North America
Oil & Gas North America includes the Weir SPM brand. 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, the number of wells completed and gas well drilling rigs in operation which are in turn
dependent upon oil and natural gas prices and storage levels. Independent forecasts of North American oil and gas well drilling activity, which
take into account forecast oil and natural gas prices and storage levels, have been used to derive revenue growth assumptions during the final
quarter of 2019.
Impairment testing assumptions
Impairment testing requires an estimate of the value in use of the CGUs to which the goodwill and intangible assets are allocated. To estimate
the value in use, the Group estimates the expected future cash flows from the CGU and discounts them to their present value at a determined
discount rate, which is appropriate for the geographic location of the CGU. Forecasting expected cash flows and selecting an appropriate discount
rate inherently requires estimation.
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The basis of the impairment tests for the four CGUs, including key assumptions, are set out in the table below.
CGU
Basis of valuation Period of forecast Discount rate1
Real growth2
Minerals
Value in use
5 years
11.4% (2018: 15.2%) 1.2% (2018: 1.2%)
ESCO
Value in use
5 years
10.6% (2018: 14.6%) 1.2% (2018: 1.2%)
Oil & Gas International
Value in use
5 years
9.8% (2018: 14.5%) 1.2% (2018: 1.2%)
Oil & Gas North America Value in use
5 years
12.4% (2018: 14.6%) 0.0% (2018: 1.2%)
Key assumptions3
Revenue growth
EBITA margins
Revenue growth
EBITA margins
Revenue growth
EBITA margins
Revenue growth
EBITA margins
Source
External forecast
Historic experience
External forecast
Historic experience
External forecast
Historic experience
External forecast
Historic experience
1
2
3
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. The overall discount rates for the majority of countries have decreased due to reductions in the bond yields and
industry asset betas, albeit the latter remained consistent for the Oil & Gas North America CGU.
Real growth
For three of the CGUs the real growth beyond the five-year forecast period has been held consistent with the prior year at 1.2% (2018: 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. The real growth rate for the Oil & Gas North America CGU was reduced to nil (2018: 1.2%) to reflect the current market outlook and uncertain timing of recovery.
EBITA margins
EBITA margins have been forecast based on historic levels taking cognisance of the likely impact of changing economic environments and competitive landscapes on volumes and revenues,
and the impact of associated management actions.
Impairment testing and sensitivity analysis
The challenging current market conditions in the North American oil and gas market and uncertainty over the timing of market recovery has had
a substantial impact on the long-term forecast cash flows for our Oil & Gas North America CGU. This led to a specific review of the carrying
value of assets within the CGU and the impairment of both tangible and intangible assets as reflected in note 5. This included the impairment of
specific indefinite life intangible assets (brand names) totalling £39.7m.
Subsequent to these asset impairments the testing of the remaining goodwill and intangible assets with indefinite lives indicated an impairment
charge of £288.0m, resulting in a recoverable amount for goodwill and intangible assets with indefinite lives of £109.2m based on the value in
use. The full impairment charge has been allocated against goodwill.
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At the balance sheet date, the estimated recoverable amount of the Oil & Gas North America CGU is equal to its carrying value.
Consequently any adverse change in assumptions would, in isolation, cause further impairment loss to be recognised.
The discount rate has reduced 220bps in 2019 primarily as a result of low bond yields. An increase in the discount rate of 100bps would lead to an
increase in the impairment recognised of £49m. A reduction in the terminal growth rate by 100bps would lead to a further impairment of £39m.
Long-term future cash flows included in the impairment analysis reflect recent results and assume the market conditions seen through 2019
endure for longer. If these assumptions for future periods did not materialise or performance worsened then a further impairment could result.
As explained in other sections of this Annual Report (but specifically in the Financial Review on page 32), the Group has already reacted to
market conditions through the implementation of the Oil & Gas restructuring and rationalisation actions and management continue to review the
operational structure and business model to ensure we remain well placed to fully respond to the current market, while remaining prepared for
any upturn.
The Directors consider that the assumptions made represent their best estimate of the future cash flows generated by the CGU, and that the
discount rate used is appropriate given the risks associated with the specific cash flows. It is considered appropriate to disclose this as an area of
significant estimation due to the size of the balance, the relatively low discount rates compared to recent years and the current levels of market
uncertainty which could reasonably lead to changes in the carrying value as a result of future events within the next five years.
Forecasts for the Minerals, ESCO and Oil & Gas International CGUs show significant headroom above carrying value. No sensitivity analysis has
been undertaken for these CGUs as there is no reasonable possible change in key assumptions that would cause the carrying values to exceed
recoverable amounts.
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Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
15. INVESTMENTS IN JOINT VENTURES
The Group holds investments in five joint ventures as follows.
At 31 December 2017
Acquisitions
Disposals
Share of results
Share of dividends
Exchange adjustment
At 31 December 2018
Share of results
Share of dividends
Exchange adjustment
At 31 December 2019
Details of the Group’s share of the balance sheet, revenue and profit 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
Interest
Profit after tax
£m
19.2
15.8
–
2.4
(1.6)
0.8
36.6
6.2
(3.5)
(2.7)
36.6
2018
£m
4.1
28.0
16.8
(9.8)
(2.5)
36.6
29.1
(21.7)
(2.8)
(1.8)
(0.4)
–
2.4
2019
£m
4.0
27.0
17.2
(8.7)
(2.9)
36.6
44.7
(33.5)
(2.1)
(1.5)
(1.3)
(0.1)
6.2
The acquisition during 2018 relates to the Group’s investment in a joint venture acquired as part of ESCO on 12 July 2018. The Group’s
investments in joint ventures are listed on page 216.
16. INVENTORIES
Raw materials
Work in progress
Finished goods
2019
£m
76.3
54.0
512.6
642.9
2018
£m
125.0
71.2
496.5
692.7
In 2019, the cost of inventories recognised as an expense within cost of sales amounted to £1,787.7m (2018: £1,633.0m). In 2019, the
write-down of inventories to net realisable value amounted to £66.7m (2018: £13.7m), and the reversal of previous write-downs amounted
to £21.5m (2018: £27.4m). The write-down included £48.6m due to uncertainty in the market outlook for Oil & Gas North America and £9.4m
(2018: £4.8m) for Group restructuring actions in Minerals following the exit from the North American sand and aggregates market. A further
£2.3m (2018: £7.5m) was recognised in relation to warranty issues in Oil & Gas, as disclosed in note 5. There was no impact as at 31 December
2018 from the fair value uplift in ESCO (note 5) as this was fully unwound in 2018.
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17. TRADE & OTHER RECEIVABLES
Other receivables presented as non-current on the face of the Consolidated Balance Sheet of £77.1m (2018: £78.5m) are primarily in respect of
insurance contracts, including Trust Owned Life Insurance policy investments which provide a form of security for certain unfunded employee
benefit plans operated by ESCO, and insurance contracts relating to asbestos-related claims in the USA of £36.4m (2018: £39.0m). Further detail
on these claims is presented in note 21.
Current trade & other receivables are analysed in the following table.
Trade receivables
Loss allowance
Other debtors
Sales tax receivable
Prepayments
Contract assets
2019
£m
454.6
(14.4)
440.2
26.7
18.8
50.8
21.4
557.9
2018
£m
501.5
(18.2)
483.3
41.5
12.4
35.4
25.1
597.7
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The average credit period on sales of goods is 60 days (2018: 66 days excluding ESCO). Other debtors includes £2.1m (2018: £2.6m) in respect of
amounts due from joint ventures, and £7.0m (2018: £9.1m) in respect of insurance contracts relating to asbestos-related claims made in the USA
(note 21).
Impairment of trade & other receivables
The Group has two types of financial assets that are subject to IFRS 9’s expected credit loss model:
i) trade receivables for sales of products and services; and
ii) contract assets relating to construction contracts.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all
trade receivables and contract assets. To measure the expected credit losses, trade receivables and contract assets have been grouped based
on shared credit risk characteristics.
The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade receivables for the
same types of contracts. Due to the way in which these contracts are managed, expected credit loss is included within the loss allowance for
trade receivables.
Due to the diverse end markets and customer geographies within the Group, the methodology applied to arrive at the expected loss rate is
dictated by local circumstances. For short-term trade receivables, historical loss rates might be an appropriate basis for the estimate of expected
future losses. These are then adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the
customers to settle the receivables. As such, one methodology applied is the use of a provision matrix, where different loss rates are applied
depending on the number of days that a trade receivable is past due. Alternatively the expected credit loss is calculated on an individual customer
basis based on historical loss data for that customer, their receivables ageing, and any other knowledge of the customer’s current and forecast
financial position.
Trade receivables and contract assets are written-off when there is no reasonable expectation of recovery.
Impairment losses on trade receivables and contract assets are presented as net impairment losses within operating profit.
Subsequent recoveries of amounts previously written off are credited against the same line item.
The gross carrying amount of trade receivables, for which the loss allowance is measured at an amount equal to the lifetime expected credit
losses under the simplified method, is analysed below.
Analysis of gross carrying amount of trade receivables by days past due
Not past due
Up to 3 months past due
Between 3 & 6 months past due
More than 6 months past due
2019
£m
310.4
99.8
13.3
31.1
454.6
2018
£m
325.4
112.3
22.5
41.3
501.5
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Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
Reconciliation of opening to closing loss allowance for trade receivables
Balance at the beginning of the year
Transferred to assets held for sale
Impairment losses recognised on receivables
Amounts written-off as uncollectable
Amounts recovered during the year
Impairment losses reversed
Exchange adjustment
Balance at the end of the year
The Group has recognised the following assets in relation to contracts with customers.
Construction contract assets
Accrued income
Total contract assets
2019
£m
(18.2)
–
(4.3)
3.5
1.1
2.7
0.8
(14.4)
2019
£m
12.5
8.9
21.4
2018
£m
(23.6)
7.2
(6.2)
3.4
0.2
1.0
(0.2)
(18.2)
2018
£m
3.2
21.9
25.1
The increase in construction contract assets relates to the increase and timing of costs incurred on large ‘engineer to order’ projects which were
recognised over time, in advance of billings. The reduction in accrued income in the year is driven by the timing of contract shipments.
18. CASH & SHORT-TERM DEPOSITS
Cash at bank & in hand
Short-term deposits
For the purposes of the Consolidated Cash Flow Statement, cash & cash equivalents comprise the following:
Cash & short-term deposits
Bank overdrafts & short-term borrowings (note 19)
Cash & short-term deposits held for sale
Bank overdrafts & short-term borrowings held for sale
2019
£m
242.3
31.5
273.8
273.8
(1.7)
–
–
272.1
2018
£m
239.2
23.8
263.0
263.0
–
16.1
(1.9)
277.2
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 earns interest at the respective short-term
deposit rates.
19. INTEREST-BEARING LOANS & BORROWINGS
Current
Bank overdrafts
Fixed-rate notes
Bank loans
Commercial paper
Obligations under finance leases (note 26)
Lease liabilities
Non-current
Bank loans
Fixed-rate notes
Obligations under finance leases (note 26)
Lease liabilities
174
2019
£m
1.7
–
299.6
190.5
–
42.3
534.1
158.4
595.1
–
142.7
896.2
2018
£m
–
164.3
–
497.2
1.0
–
662.5
120.0
619.4
1.5
–
740.9
The Weir Group PLC Annual Report and Financial Statements 2019
Bank loans
Revolving credit facility
United States Dollar variable rate loans
Sterling variable rate loans
Other
Purchasing cards in discontinued operations
Sterling variable rate term loan
United States Dollar fixed-rate loan facilities
Less: current instalments due on bank loans
Purchasing cards in discontinued operations
Sterling variable rate term loan
Non-current bank loans
Maturity Interest basis
2021 US$ LIBOR
£ LIBOR
2021
2019
2020
2021
2019
2020
–
FIXED
£ LIBOR
FIXED
FIXED
£ LIBOR
–
Commercial paper
Commercial paper
United States Dollar variable rate commercial paper
Euro variable rate commercial paper
Maturity Interest basis
2019 US$ LIBOR
EUR LIBOR
2020
Less: current instalments due on commercial paper
United States Dollar variable rate commercial paper
Euro variable rate commercial paper
Non-current commercial paper
2019 US$ LIBOR
EUR LIBOR
2020
Weighted average
interest rate
2019
%
2.39
–
–
1.56
7.80
2018
%
–
1.08
24.00
–
–
Weighted average
interest rate
2019
%
–
0.03
2018
%
3.21
0.05
The weighted average interest rates include an applicable margin over and above the interest basis.
Fixed-rate notes
Private placement
United States Dollar fixed-rate notes
United States Dollar fixed-rate notes
United States Dollar fixed-rate notes
Maturity Interest basis
Fixed interest rate
2018
%
2019
%
2019
2022
2023
FIXED
FIXED
FIXED
–
4.27
4.34
3.69
4.27
4.34
Less: current instalments due on fixed-rate notes
United States Dollar fixed-rate notes
Non-current fixed-rate notes
2019
FIXED
2019
£m
158.3
–
–
299.6
0.1
458.0
–
(299.6)
158.4
2019
£m
–
190.5
190.5
–
(190.5)
–
2019
£m
–
444.6
150.5
595.1
–
595.1
2018
£m
–
120.0
0.3
–
–
120.3
(0.3)
–
120.0
2018
£m
19.6
477.6
497.2
(19.6)
(477.6)
–
2018
£m
164.3
462.7
156.7
783.7
(164.3)
619.4
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The disclosures above represent the interest profile and currency profile of financial liabilities before the impact of derivative financial instruments.
At 31 December 2019, £158.3m (2018: £120.0m) was drawn under the US$950.0m multi-currency revolving credit facility which matures in two
tranches between September 2020 and September 2021.
At 31 December 2019, £299.6m (2018: £nil) was drawn under a new term loan facility opened during 2019 and includes unamortised issue costs
of £0.4m. The term loan facility matures in December 2020.
At 31 December 2019, a total of £190.5m equivalent (2018: £497.2m equivalent) was outstanding under the Group’s US$1bn commercial
paper programme.
At 31 December 2019, a total of £595.1m (2018: £783.7m) was outstanding under private placement which includes total unamortised issue
costs of £0.5m (2018: £0.9m).
175
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
20. TRADE & OTHER PAYABLES
Current
Trade payables
Other creditors
Other taxes & social security costs
Accruals
Contingent consideration payable
Contract liabilities
Non-current
Other payables
2019
£m
306.7
12.7
12.5
191.6
–
66.1
589.6
–
–
2018
£m
347.0
8.9
11.4
216.8
0.2
45.6
629.9
0.8
0.8
Trade payables includes balances due to suppliers that have signed up to a supply chain financing programme, under which all invoices are settled
via a partner bank. This allows the suppliers to elect on an invoice by invoice basis to receive a discounted early payment from the partner bank
rather than being paid in line with the agreed payment terms. The value of the liability payable by the Group remains unchanged. The aggregate
limit of facilities available at 31 December 2019 was £95.0m and may be voluntarily cancelled under bilateral terms of 30 days notice.
The Group assesses the arrangement against indicators to assess if debts which vendors have sold to the partner bank under the supplier
financing scheme continue to meet the definition of trade payables or should be classified as borrowings. At 31 December 2019 and
31 December 2018 the payables met the criteria of trade payables and the arrangement had no impact on the results or the financial position of
the Group.
The Group has recognised the following liabilities in relation to contracts with customers.
Construction contract liabilities
Deferred income
Total contract liabilities
2019
£m
3.7
62.4
66.1
2018
£m
1.4
44.2
45.6
The increase in total contract liabilities in the year primarily relates to an order to provide equipment to the Iron Bridge Magnetite Project in
Western Australia.
Revenue recognised in relation to contract liabilities
The following table shows the revenue recognised in the current reporting period related to carried forward contract liabilities.
Revenue recognised that was included in the contract liability balance at the beginning of the year
2019
£m
26.4
2018
£m
38.9
Transaction price allocated to unsatisfied performance obligations
The transaction price allocated to performance obligations unsatisfied at the year end is £124.0m. This relates only to performance obligations
from contracts with a duration of over a year as permitted by the practical expedient in paragraph 121 of IFRS 15. The prior year comparative has
not been given as the majority of contracts in 2018 had a duration of one year or less.
The following table shows when revenue is expected to be recognised for unsatisfied performance obligations from contracts with a duration of
over one year.
Less than 1 year
After 1 year but not more than 5 years
Total value of performance obligations unsatisfied from contracts with a duration over 1 year
2019
£m
90.8
33.2
124.0
176
The Weir Group PLC Annual Report and Financial Statements 2019
21. PROVISIONS
At 31 December 2018
Additions
Utilised
Unutilised
Transition adjustment (note 2)
Exchange adjustment
At 31 December 2019
Current 2019
Non-current 2019
At 31 December 2019
Current 2018
Non-current 2018
At 31 December 2018
Warranties &
onerous sales
contracts
£m
21.5
14.4
(18.1)
(3.6)
–
(0.7)
13.5
Asbestos-
related
£m
52.3
7.0
(8.9)
(1.0)
–
(1.8)
47.6
Employee-
related
£m
15.6
14.3
(10.2)
(1.1)
–
(0.8)
17.8
Exceptional
rationalisation
£m
16.3
26.2
(26.9)
(0.8)
(1.5)
(0.5)
12.8
12.4
1.1
13.5
18.8
2.7
21.5
7.2
40.4
47.6
9.1
43.2
52.3
7.7
10.1
17.8
6.4
9.2
15.6
12.0
0.8
12.8
12.4
3.9
16.3
Other
£m
14.5
0.4
(1.3)
(0.3)
(1.1)
(0.4)
11.8
2.9
8.9
11.8
3.8
10.7
14.5
Total
£m
120.2
62.3
(65.4)
(6.8)
(2.6)
(4.2)
103.5
42.2
61.3
103.5
50.5
69.7
120.2
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.
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Asbestos-related claims
Certain of the Group’s US-based subsidiaries are co-defendants in lawsuits pending in the US 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. Due to the expiration of one of the Group’s insurance policies in the year, which
provided insurance cover for claims with a post-1980 first date of exposure, the Group has provided £1.0m in the year to reflect the small number
of claims experienced to date. There are currently no cash flows to or from the Group related to claims with an exposure date pre-1981 due to
insurance cover, 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 exposures. 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.
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 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 (2018: 10 years) of projected claims to provide a reliable estimate of the future liability.
Confirmation was also received from external advisers that the insurance asset remained sufficient to match the Directors’ best estimate of the
future liability and therefore a corresponding asset was recognised for insurance proceeds (note 17).
A review of the claims submitted and those settled during the year confirmed that the actuarial review completed in 2017 remains appropriate
subject to the additional provision for claims with an exposure date post-1980. As such, the liability provision and corresponding asset have been
updated accordingly to reflect the nature of the actuarial decay model and the projected claims profile a year further out. A provision of £44.4m
(2018: £48.1m) represents the Directors’ best estimate of the future liability, with a corresponding asset remaining appropriate.
177
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
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 reflecting reasonably probable scenarios has been conducted. This involved:
increasing/decreasing the number of projected future settled claims and estimated settlement value by 10%; or
i)
ii) 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 employer’s 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. 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 £3.2m (2018: £4.2m).
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 during the year led to additions of £26.2m which included £5.2m relating to withdrawal from the lower
margin sand and aggregates comminution market in North America and costs associated with political and social events in South America,
£10.8m for Oil & Gas restructuring activities and £10.2m for ESCO integration costs.
The closing provision of £12.8m includes £6.5m which has been retained for costs incurred to date on Oil & Gas restructuring and £2.3m
for Minerals.
Other
Other provisions include environmental obligations, penalties, duties due, legal claims and other exposures across the Group. These balances
typically include estimates based on multiple sources of information and reports from third-party advisers. Where certain outcomes are unknown,
a range of possible scenarios is calculated, with the most likely being reflected in the provision.
178
The Weir Group PLC Annual Report and Financial Statements 2019
22. 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 assets attributable to:
Continuing operations
Discontinued operations
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
Deferred income tax liabilities attributable to:
Continuing operations
Discontinued operations
2019
£m
2018
£m
28.1
1.3
1.0
154.2
(123.4)
61.2
61.2
–
61.2
(11.3)
(9.0)
(131.1)
(1.0)
123.4
(29.0)
(29.0)
–
(29.0)
30.7
7.6
2.4
144.0
(143.0)
41.7
36.0
5.7
41.7
(29.3)
(8.1)
(190.5)
(7.6)
143.0
(92.5)
(92.2)
(0.3)
(92.5)
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Net deferred income tax asset (liability)
32.2
(50.8)
The movement in deferred income tax assets and liabilities during the year was as follows.
At 1 January 2018
Acquisitions
(Charged) credited to the income statement (note 7)
Charged to equity (note 7)
Exchange adjustment
At 31 December 2018
(Charged) credited to the income statement (note 7)
Credited to equity (note 7)
Disposals
Exchange adjustment
At 31 December 2019
Post-
employment
benefits
£m
24.3
14.6
(0.2)
(8.8)
0.8
30.7
(2.0)
0.8
(0.8)
(0.6)
28.1
Accelerated
depreciation
for tax
purposes
£m
(10.1)
(8.6)
(1.6)
–
(1.4)
(21.7)
8.4
–
2.1
1.2
(10.0)
Overseas
tax on
unremitted
earnings
£m
(15.1)
(1.0)
7.8
–
0.2
(8.1)
(1.6)
–
–
0.7
(9.0)
Untaxed
reserves
& other
temporary
differences
£m
95.6
15.1
22.3
(1.4)
4.8
136.4
33.1
0.2
(11.3)
(5.2)
153.2
Intangible
assets
£m
(107.3)
(78.4)
6.6
–
(9.0)
(188.1)
51.6
–
4.1
2.3
(130.1)
Total
£m
(12.6)
(58.3)
34.9
(10.2)
(4.6)
(50.8)
89.5
1.0
(5.9)
(1.6)
32.2
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.
Deferred tax asset balances for unused tax losses of £21.7m (2018: £25.5m) 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 £5.8m (2018: £5.9m) have not been recognised but would be
available in the event of future capital gains being incurred by the Group.
179
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
22. DEFERRED TAX continued
The net deferred tax asset due after more than one year is £32.2 million (2018: liability of £50.8m).
Temporary differences associated with Group investments
A deferred tax liability of £9.0m (2018: £8.1m) has been recognised in respect of taxes on the unremitted earnings of the South American and
Canadian subsidiaries. As at 31 December 2019, 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 £2,430.7m (2018: £2,254.0m).
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 will be 19% from April 2017 and 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. Consequently, deferred tax has been provided on UK temporary differences at 17.1% (2018: 17.4%).
23. PENSIONS & OTHER POST-EMPLOYMENT BENEFIT PLANS
The Group operates various defined benefit pension plans in the UK and North America. All defined benefit plans are closed to new members.
The most significant defined benefit plan is the Main funded UK plan.
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 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 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 funded defined benefit pension plans in the US and Canada and certain unfunded arrangements (including
post-employment healthcare benefits for senior employees) in the US.
Following the acquisition of ESCO in 2018, these plans combined make up 18% of the Group’s pension and other post-employment benefit plan
commitments and 14% of the Group’s total associated assets.
The weighted average duration of these plans is around 11 years.
The Group completed the sale of its Flow Control business on 28 June 2019. Details of the defined benefit pension plans transferred as part of
the sale have not been included in the figures below. These assets and obligations were transferred to non-current liabilities in the discontinued
balance sheet disclosed in the 2018 financial statements.
The defined benefit plans in the UK and North America expose the Group to a number of risks.
• Uncertainty in benefit payments
• Volatility in asset values
• Uncertainty in cash funding
• Exchange rate movements
The value of the Group’s liabilities for the defined benefit plans will ultimately depend on the amount of
benefits paid out. This in turn will depend on the level of inflation (for those benefits that are subject to
some form of inflation protection) and how long individuals live. This risk is significantly reduced through
the insurance policies held in the UK.
The Group is exposed to future movements in the values of assets held in the funded defined benefit
plans to meet future uninsured benefit payments.
Movements in the values of the obligations or assets may result in the Group being required to provide
higher levels of cash funding, although changes in the level of cash required can often be spread over
a number of years. This risk is significantly reduced through the insurance policies held. In addition, the
Group is also exposed to adverse changes in pension regulation.
Movements in exchange rates will affect the value in GBP of the assets and obligations of the Group’s
North American defined benefit plans.
180
The Weir Group PLC Annual Report and Financial Statements 2019
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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 &
post-retirement healthcare
2019
2018
2019
2018
2.1
3.0
21.1
23.1
22.5
24.6
2.9
2.0
1.9
n/a
2.9
3.2
21.6
23.5
23.0
25.1
3.1
2.1
2.1
n/a
3.0
n/a
20.5
22.5
22.1
24.1
n/a
n/a
n/a
*
4.1
n/a
20.6
22.6
22.2
24.2
n/a
n/a
n/a
**
* Between -4.8% and 7.3% per annum decreasing to 4.5% per annum and remaining static at that level from 2031 onwards.
** Between 7.4% and 20.9% per annum decreasing to 4.5% per annum and remaining static at that level from 2031 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 above 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 2040 (in 20 years’
time).
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)
Property
Private debt (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 deficit
UK pensions
North American pensions &
post-retirement healthcare
2019
£m
193.8
62.5
41.1
114.1
364.7
–
9.8
28.4
814.4
(882.3)
(67.9)
(1.4)
(69.3)
(69.3)
2018
£m
177.5
55.5
37.3
109.2
360.9
–
–
8.7
749.1
(819.8)
(70.7)
(1.4)
(72.1)
(72.1)
2019
£m
35.2
2.4
52.0
32.5
–
5.0
–
0.3
127.4
(159.8)
(32.4)
(37.0)
(69.4)
(69.4)
2018
£m
30.5
2.0
51.5
25.7
–
5.0
–
1.1
115.8
(151.4)
(35.6)
(41.4)
(77.0)
(77.0)
2019
£m
229.0
64.9
93.1
146.6
364.7
5.0
9.8
28.7
941.8
(1,042.1)
(100.3)
(38.4)
(138.7)
(138.7)
Total
2018
£m
208.0
57.5
88.8
134.9
360.9
5.0
–
9.8
864.9
(971.2)
(106.3)
(42.8)
(149.1)
(149.1)
Of the government bonds held at 31 December 2019, 42% are fixed interest 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 benefits, the liabilities are backed by
insurance policies and suitable bonds.
181
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
23. PENSIONS & OTHER POST-EMPLOYMENT BENEFIT PLANS continued
The change in net liabilities recognised in the balance sheet is comprised as follows.
Opening net liabilities
Net liability transferred on acquisition
Expense charged to the income statement
Amount recognised in the Consolidated Statement of
Comprehensive Income
Employer contributions
Net liability transferred to held for sale
Exchange adjustment
Closing net liabilities
UK pension
North American pensions &
post-retirement healthcare
Total
2019
£m
(72.1)
–
(1.9)
(3.4)
8.1
–
–
(69.3)
2018
£m
(125.1)
–
(9.3)
59.2
3.1
–
–
(72.1)
2019
£m
(77.0)
–
(3.9)
(1.8)
10.5
–
2.8
(69.4)
2018
£m
(12.6)
(64.2)
(2.7)
(5.5)
6.5
4.8
(3.3)
(77.0)
2019
£m
(149.1)
–
(5.8)
(5.2)
18.6
–
2.8
(138.7)
2018
£m
(137.7)
(64.2)
(12.0)
53.7
9.6
4.8
(3.3)
(149.1)
The amounts recognised for total Group 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
Current service cost
Past service cost
Curtailment gain
Administrative expenses
Included in operating profit
Interest on net pension liability
Total expense charged to the income statement
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) gains recognised in the Consolidated
Statement of Comprehensive Income
UK pension
North American pensions &
post-retirement healthcare
Total
2019
£m
–
–
–
–
–
(1.9)
(1.9)
95.5
(21.4)
74.1
(97.9)
20.4
–
(3.4)
2018
£m
–
(6.3)
–
(0.1)
(6.4)
(2.9)
(9.3)
(22.7)
(19.1)
(41.8)
70.2
18.0
12.8
59.2
2019
£m
(1.0)
–
1.1
(1.1)
(1.0)
(2.9)
(3.9)
19.4
(4.6)
14.8
(19.9)
3.0
0.3
2018
£m
(0.5)
–
–
(0.6)
(1.1)
(1.6)
(2.7)
(5.7)
(2.6)
(8.3)
1.8
0.4
0.6
2019
£m
(1.0)
–
1.1
(1.1)
(1.0)
(4.8)
(5.8)
114.9
(26.0)
88.9
(117.8)
23.4
0.3
(1.8)
(5.5)
(5.2)
2018
£m
(0.5)
(6.3)
–
(0.7)
(7.5)
(4.5)
(12.0)
(28.4)
(21.7)
(50.1)
72.0
18.4
13.4
53.7
Current service cost, past service cost, curtailment/settlement gains and administration expenses are recognised in operating costs and interest
on net pension liability is recognised in other finance costs.
The Group’s largest North American plan is the US ESCO Corporation pension plan. The Group’s current funding policy for this plan is to pay
the minimum required contributions under US regulation. However, in the event the plan’s funding level is projected to fall below significant
thresholds, the Group will consider funding more than the minimum required contribution.
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 £12.9m in 2019 (2018: £5.6m) in addition to the Group’s regular contributions. This included
a special one-off contribution of £4.0m to the Main UK Plan in July 2019 following the sale of the Flow Control business in June 2019.
In 2015, the Group entered into a pension funding partnership structure under which it has contributed interests in a Scottish Limited Partnership
(‘SLP’) for the Main Plan. The Main Plan’s interests in the SLP 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 latest actuarial funding valuation of the Main Plan as at 31 December 2017 was completed in 2019. Under the agreed recovery plan,
the Group has agreed to contribute £4.3m in each year from 2019 to 2028 inclusive. These contributions are primarily funded by the income
payments from the SLP described above. The contributions are subject to an annual review mechanism, and will temporarily cease if the Main
Plan’s funding level on a funding basis exceeds 105%.
182
The Weir Group PLC Annual Report and Financial Statements 2019
The Trustees of the UK Executive Scheme entered into a full buy-in transaction with Scottish Widows 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
(expected to be £1.1m) due from the Trustees to Scottish Widows, which is now expected to be paid in 2020 following a data cleanse process to
finalise the insurance policy. The IAS 19 balance sheet at the 2019 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 with regard to recognition
of a current surplus and also recognition of a minimum funding requirement. This confirmed that there is no requirement to adjust the balance
sheet and that recognition of a current surplus is appropriate on the basis that the Group has an unconditional right to a refund of a current (or
projected future) surplus at some point in the future. For the same reason, there is no requirement for the Group to adjust the balance sheet to
recognise the future agreed deficit recovery contributions. 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.
The total Group contributions for 2020 (including those expected from the SLP in the UK) are expected to be £13.7m.
Sensitivity analysis
Changes in key assumptions can have a significant effect on the reported retirement benefit obligation and the Consolidated Income Statement
expense for 2020. 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
Decrease
Increase
Decrease
2019
£m
153.2
115.9
(99.1)
(65.5)
(37.0)
(21.1)
2019
£m
(183.3)
(141.4)
89.6
58.7
37.0
21.1
2018
£m
140.2
103.7
(91.0)
(57.9)
(34.0)
(18.2)
2018
£m
(167.1)
(126.0)
82.5
51.9
34.0
18.2
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
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
Obligations transferred on acquisition
Current service cost
Past service cost
Interest on benefit obligations
Benefits paid
Actuarial (losses) gains due to
Changes in financial assumptions
Changes in demographic assumptions
Experience on benefit obligations
Gains on curtailments
Obligations transferred to held for sale (note 8)
Exchange rate adjustment
Closing defined benefit obligations
UK pensions
North American pensions &
post-retirement benefits
Total
2019
£m
(821.2)
–
–
–
(23.3)
38.3
(97.9)
20.4
–
–
–
–
(883.7)
2018
£m
(936.8)
–
–
(6.3)
(22.0)
42.9
70.2
18.0
12.8
–
–
–
(821.2)
2019
£m
(192.8)
–
(1.0)
–
(7.5)
13.7
(19.9)
3.0
0.3
1.1
–
6.3
(196.8)
2018
£m
(26.1)
(183.3)
(0.5)
–
(4.2)
9.5
1.8
0.4
0.6
–
16.2
(7.2)
(192.8)
2019
£m
(1,014.0)
–
(1.0)
–
(30.8)
52.0
(117.8)
23.4
0.3
1.1
–
6.3
(1,080.5)
2018
£m
(962.9)
(183.3)
(0.5)
(6.3)
(26.2)
52.4
72.0
18.4
13.4
–
16.2
(7.2)
(1,014.0)
183
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
23. PENSIONS & OTHER POST-EMPLOYMENT BENEFIT PLANS continued
Changes in the fair value of plan assets are analysed as follows.
UK pensions
North American pensions &
post-retirement benefits
Total
Opening plan assets
Assets transferred on acquisition
Interest on plan assets
Employer contributions
Administrative expenses
Benefits paid
Actual return on plan assets less interest on plan assets
Assets transferred to held for sale (note 8)
Exchange rate adjustment
Closing plan assets
24. SHARE CAPITAL & RESERVES
2019
£m
749.1
–
21.4
8.1
–
(38.3)
74.1
–
–
814.4
2018
£m
811.7
–
19.1
3.1
(0.1)
(42.9)
(41.8)
–
–
749.1
2019
£m
115.8
–
4.6
10.5
(1.1)
(13.7)
14.8
–
(3.5)
127.4
2018
£m
13.5
119.1
2.6
6.5
(0.6)
(9.5)
(8.3)
(11.4)
3.9
115.8
Issued & fully paid share capital
At the beginning of the year
Issued during the year in respect of ESCO acquisition (note 13)
Issued during the year in respect of scrip dividends (note 10)
At the end of the year
Treasury shares
At the beginning of the year
Purchase of shares in respect of equity settled share-based payments
Utilised during the year in respect of equity settled share-based payments
At the end of the year
2019
£m
864.9
–
26.0
18.6
(1.1)
(52.0)
88.9
–
(3.5)
941.8
2018
£m
825.2
119.1
21.7
9.6
(0.7)
(52.4)
(50.1)
(11.4)
3.9
864.9
2019
Number
million
2018
Number
million
259.6
–
–
259.6
0.2
0.7
(0.9)
–
224.7
33.5
1.4
259.6
0.5
–
(0.3)
0.2
The Company has one class of ordinary share with a par value of 12.5p which carries no rights to fixed income.
Kleinwort Employee Benefit Trust (EBT) was wound up during the year with shares transferred to Estera Employee Benefit Trust and subsequently
transferred to Computershare Investor Services PLC.
As at 31 December 2019, Computershare Investor Services PLC held on behalf of individuals:
24,478 shares (2018: 47,207) for the ESCO restricted awards made under the ESCO 2010 stock incentive plan. These shares have a market value
of £0.4m.
61,418 shares (2018: nil) for the performance shares that have vested under the LTIP. These shares have a market value of £1.0m.
15,813 shares (2018: 25,828) for the Bonus shares awarded under the LTIP. These shares have a market value of £0.3m.
39,396 shares (2018: 21,128) for the Bonus shares awarded under the Share Reward Plan. These shares have a market value of £0.6m.
As at 31 December 2019, 24,045 (2018: 3,803) shares were unallocated and held by the Estera Employee Benefit Trust (EBT) with a market value
of £0.4m.
In the prior year, holdings were:
As at 2018, 3,803 shares were held by the Kleinwort Employee Benefit Trust (EBT) with a market value of £0.1m.
As at 2018, the Estera Employee Benefit Trust held:
6,549 shares for the performance and restricted awards made under the LTIP. These shares had a market value of £0.1m.
25,828 shares for the Bonus shares awarded under the LTIP. These shares had a market value of £0.3m.
21,128 shares for the Bonus shares awarded under the Share Reward Plan (SRP). These shares had a market value of £0.3m.
47,207 shares for the ESCO restricted awards made under the ESCO 2010 stock incentive plan. These shares had a market value of £0.6m.
184
The Weir Group PLC Annual Report and Financial Statements 2019
Reserves
The period movements on the below reserves are summarised in the Consolidated Statement of Changes in Equity.
Merger reserve
The shares issued directly to ESCO Shareholders on 12 July 2018 qualified for merger relief under Section 612 of the Companies Act 2006,
resulting in an increase to the reserve of £323.2m. 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. In the year, the balance relating to Flow Control entities was
recycled to the Consolidated Income Statement on disposal (note 8).
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
Finance costs
25. ADDITIONAL CASH FLOW INFORMATION
Total operations
Net cash generated from operations
Operating (loss) profit – continuing operations
Operating loss – discontinued operations
Operating (loss) profit – total operations
Exceptional items
Amortisation of intangible assets
Share of results of joint ventures
Depreciation of property, plant & equipment
Depreciation of right-of-use assets
Grants received
(Gains) losses on disposal of property, plant & equipment
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 in inventories
Decrease in trade & other receivables & construction contracts
Decrease in trade & other payables & construction contracts
Cash generated from operations before exceptional cash items
Additional pension contributions paid
Exceptional cash items
Income tax paid
Net cash generated from operating activities
Cash flows from discontinued operations included above are disclosed separately in note 8.
Exceptional items are detailed in note 5.
185
Notes
5, 8
5, 12
15
11
11
27
2019
£m
–
(0.2)
(0.5)
(0.7)
2019
£m
(322.2)
(3.3)
(325.5)
596.4
78.3
(6.2)
62.4
42.4
(1.1)
(2.0)
(4.9)
12.9
12.1
(1.8)
463.0
(36.8)
64.5
(83.1)
407.6
(12.9)
(41.0)
(90.2)
263.5
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
2018
£m
1.2
1.4
–
2.6
2018
£m
124.1
(29.7)
94.4
209.3
67.3
(2.4)
64.5
–
(1.5)
0.2
(2.5)
8.6
15.3
(2.9)
450.3
(53.2)
36.5
(22.8)
410.8
(5.6)
(114.0)
(73.3)
217.9
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
25. ADDITIONAL CASH FLOW INFORMATION continued
The employee-related provision and associated insurance asset in relation to US asbestos-related claims with an exposure date pre-1981
disclosed in note 21 will not result in any cash flows either to or from the Group and therefore they have been excluded from the table above.
The following tables summarise the cash flows arising on acquisitions and disposals (note 8 and 13).
Acquisitions of subsidiaries
Acquisition of subsidiaries – cash paid
Cash & cash equivalents acquired
Total cash outflow relating to acquisitions
Net cash inflow arising on disposals
Consideration received net of costs paid & cash disposed of
Prior period disposals completion adjustment
Total cash inflow relating to disposals
Net debt comprises the following
Cash & short-term deposits (note 18)
Current interest-bearing loans & borrowings (note 19)
Non-current interest-bearing loans & borrowings (note 19)
Assets and liabilities held for sale (note 8)
Reconciliation of financing cash flows to movement in net debt
2019
£m
(0.1)
–
(0.1)
244.6
0.1
244.7
2019
£m
2018
£m
(470.8)
41.2
(429.6)
–
0.3
0.3
2018
£m
273.8
(534.1)
(896.2)
–
(1,156.5)
263.0
(662.5)
(740.9)
13.9
(1,126.5)
Cash & cash equivalents
Third-party loans
Leases
Unamortised issue costs
Amounts included in gross debt
Opening
balance
at 31
December
2018
£m
277.2
(1,402.1)
(2.5)
0.9
(1,403.7)
Cash
movements
£m
15.4
Additions**
£m
–
Disposals
£m
–
Non-cash
movements
£m
–
FX
£m
(20.5)
Closing
balance
at 31
December
2019
£m
272.1
Transferred
to assets/
liabilities
held for
sale
£m
–
108.3
44.3
0.8
153.4
–
(244.7)
–
(244.7)
–
11.8
–
11.8
49.3
5.9
–
55.2
–
0.2
(0.8)
(0.6)
(1,244.5)
(185.0)
0.9
(1,428.6)
Amounts included in net debt
(1,126.5)
168.8
(244.7)
11.8
34.7
(0.6)
(1,156.5)
Financing derivatives
Contingent consideration
Other liabilities relating to financing activities
(18.3)
(0.2)
(18.5)
62.2
0.1
62.3
–
–
–
–
–
–
–
0.1
0.1
(47.7)
–
(47.7)
(3.8)
–
(3.8)
Total financing liabilities*
(1,422.2)
215.7
(244.7)
11.8
55.3
(48.3)
(1,432.4)
* Total financing liabilities comprise gross debt plus other liabilities relating to financing activities.
** Additions in the period include the transition impact of IFRS 16 ‘Leases’ in the opening balance sheet, totalling £194.1 (note 2).
186
Total
continuing
operations
£m
272.1
(1,244.5)
(185.0)
0.9
(1,428.6)
(1,156.5)
(3.8)
–
(3.8)
(1,432.4)
–
–
–
–
–
–
–
–
–
The Weir Group PLC Annual Report and Financial Statements 2019
Opening
balance
at 31
December
2017
£m
284.5
Cash
movements
£m
(3.5)
Additions/
acquisitions
£m
–
Disposals
£m
–
Non-cash
movements
£m
–
FX
£m
(3.8)
Closing
balance
at 31
December
2018
£m
277.2
Transferred
to assets/
liabilities
held for
sale
£m
14.2
Total
continuing
operations
£m
263.0
Cash & cash equivalents
Third-party loans
Leases
Unamortised issue costs
Amounts included in gross debt
(1,128.2)
(1.0)
1.5
(1,127.7)
(103.7)
0.8
–
(102.9)
(118.6)
(2.3)
–
(120.9)
Amounts included in net debt
(843.2)
(106.4)
(120.9)
Financing derivatives
Contingent consideration
Other liabilities relating to financing activities
(9.2)
(3.4)
(12.6)
(49.9)
–
(49.9)
–
(0.2)
(0.2)
Total financing liabilities*
(1,140.3)
(152.8)
(121.1)
* Total financing liabilities comprise gross debt plus other liabilities relating to financing activities.
–
–
–
–
–
–
–
–
–
(51.6)
–
–
(51.6)
–
–
(0.6)
(0.6)
(1,402.1)
(2.5)
0.9
(1,403.7)
(0.3)
–
–
(0.3)
(1,401.8)
(2.5)
0.9
(1,403.4)
(55.4)
(0.6)
(1,126.5)
13.9
(1,140.4)
–
(0.1)
(0.1)
40.8
3.5
44.3
(18.3)
(0.2)
(18.5)
–
–
–
(18.3)
(0.2)
(18.5)
(51.7)
43.7
(1,422.2)
(0.3)
(1,421.9)
26. COMMITMENTS & LEGAL CLAIMS
Lease costs, following the adoption of IFRS 16 ‘Leases’, are now disclosed in note 11. The lease disclosures below are given in relation to
continuing operations for the year ended 31 December 2018.
Operating lease commitments
Future minimum rentals payable under non-cancellable operating leases are shown in the table below.
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
Less than 1 year
After 1 year but no more than 5 years
More than 5 years
Transfer of operating lease commitments from discontinued operations
Impact of IFRS 16 data review*
2018
(restated)
£m
47.4
98.2
51.7
1.3
13.7
212.3
* As part of the transition to IFRS 16 ‘Leases’, a number of operating lease commitments were identified that had not been included in 2018 (see note 2).
Finance lease commitments
In 2018 the Group had 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 5 years
Total minimum lease payments
Less amounts representing finance charges
Present value of minimum lease payments
Minimum
payments
2018
£m
1.0
1.5
0.1
2.6
(0.1)
2.5
Present value
of payments
2018
£m
1.0
1.4
0.1
–
–
2.5
The weighted average outstanding lease term in 2018 was 3.08 years. For the year ended 31 December 2018, the weighted average effective
borrowing rate was 8.2%.
All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
Capital commitments
Outstanding capital commitments contracted but not provided for – property, plant & equipment
Outstanding capital commitments contracted but not provided for – intangible assets
The Group’s share of the capital commitments of its joint ventures amounted to £1.5m (2018: £2.1m).
2019
£m
18.0
0.5
2018
£m
17.9
2.5
187
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
26. COMMITMENTS & LEGAL CLAIMS continued
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.
27. EQUITY SETTLED SHARE-BASED PAYMENTS
Employee share plans
The Group’s 2018 Share Reward Plan (SRP) allows for Restricted shares and Bonus shares to be awarded to employees under the Plan.
This replaces the LTIP 2014 Rules (LTIP) under which the types of awards which were granted included: Performance shares, Restricted shares
and Bonus shares. Details of both the SRP and LTIP are outlined in the Remuneration Report on pages 102-125.
As part of the ESCO acquisition, certain Restricted Stock Units (RSUs) and Restricted Stock Awards (RSAs) issued by ESCO pre-acquisition were
rolled into Weir Group share awards. The pre-acquisition cost of these awards totalled £1.4m and was recorded in reserves, with a corresponding
increase in goodwill. These awards are treated in line with other restricted awards noted above.
During the year, the Global all employee Weir ShareBuilder plan (WSBP) launched. Awards granted under the WSBP are Free shares given to all
employees who meet the eligibility criteria. Awards vest in three equal tranches on the first, second and third anniversaries of the date of grant.
Dividend equivalents will be added in the form of shares at each vesting date.
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 SRP in the year or LTIP in prior years.
The following tables illustrate the number and weighted average share prices (WASP) of shares awarded.
Performance shares
Outstanding at the beginning of the period
Exercised during the period
Forfeited during the period
Outstanding at the end of the period
Restricted shares
Outstanding at the beginning of the period
Awarded during the period
Exercised during the period
Outstanding at the end of the period
Weir ShareBuilder Plan (WSBP)
Outstanding at the beginning of the period
Awarded during the period
Outstanding at the end of the period
2019
Number
million
0.6
(0.2)
–
0.4
2019
Number
million
1.1
0.6
(0.6)
1.1
2019
Number
million
–
0.2
0.2
2019
WASP
£15.09
£12.13
–
£17.46
2019
WASP
£18.13
£16.39
£16.42
£17.91
2019
WASP
–
£16.32
£16.32
2018
Number
million
1.1
–
(0.5)
0.6
2018
Number
million
0.8
0.6
(0.3)
1.1
2018
Number
million
–
–
–
2018
WASP
£16.34
–
£18.07
£15.09
2018
WASP
£14.89
£20.17
£14.41
£18.14
2018
WASP
–
–
–
In respect of awards issued in the year and revised estimates of previously issued awards, an amount of £12.9m has been charged (2018: £8.6m)
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, SRP, WSBP and one-off conditional share awards at the end of the period are as follows.
Year of award
2016
2017
2018
2019
2019
Number
million
0.1
0.4
0.3
0.9
Remaining
contractual
life
8 months
3 months
16 months
17 months
2018
Number
million
0.7
0.5
0.5
–
Remaining
contractual
life
8 months
12 months
23 months
–
188
The Weir Group PLC Annual Report and Financial Statements 2019
The fair value at date of grant of the conditional awards under the SRP has been independently estimated based on the type of award:
i) Restricted shares and WSBP
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 WSBP awards at grant date and occasional one-off conditional awards at grant date is also estimated on this basis.
ii) Performance shares
No performance shares were granted in 2019 or 2018.
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 SRP and LTIP Bonus shares are administered by Computershare Trust Company, N.A., CPU Share Plans Pty Ltd and Computershare Investor
Services PLC. The shares are acquired on market at the grant date and are held by Computershare Investor Services PLC until such time as they
are vested. Forfeited shares are reallocated in subsequent grants. Under the Rules of the Plans, Weir Group is required to provide 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 2019, 20,577 shares were awarded (2018: 21,128).
The fair value of the rights at grant date was estimated by taking the market price of the Company’s shares on that date.
28. RELATED PARTY DISCLOSURE
The following table provides the total amount of significant transactions which have been entered into by total operations 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
9.6
4.5
–
–
Sales to related
parties –
services
£m
0.2
0.4
–
–
Purchases from
related parties
– goods
£m
21.4
10.1
–
–
Purchases from
related parties
– services
£m
0.8
0.8
–
–
Amounts owed
to related
parties
£m
–
–
6.1
6.3
2019
2018
2019
2018
Contributions to the Group pension plans are disclosed in note 23.
Terms & conditions of transactions with related parties
Sales to and from related parties are made at normal market prices. Outstanding balances at the period end are unsecured and settlement occurs
in cash. There have been no guarantees provided or received for any related party balances. For 2019, the Group has not raised any provision for
doubtful debts relating to amounts owed by related parties (2018: £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.
F
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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
2019
£m
6.2
3.5
0.2
9.9
2019
£m
2.8
0.8
3.6
2018
£m
7.5
2.2
0.2
9.9
2018
£m
2.9
1.4
4.3
Key management comprises the Board and the Group Executive. Further details of the Directors’ remuneration are disclosed in the Directors’
Remuneration Report on pages 102-125.
189
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
29. 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 IFRS 9 compliant hedge relationships.
The table below summarises the types of derivative financial instrument included within each balance sheet category.
Included in non-current assets
Cross currency swaps designated as net investment hedges
Other forward foreign currency contracts
Included in current assets
Forward foreign currency contracts designated as cash flow hedges
Forward foreign currency contracts designated as net investment hedges
Other forward foreign currency contracts
Included in current liabilities
Forward foreign currency contracts designated as cash flow hedges
Forward foreign currency contracts designated as net investment hedges
Other forward foreign currency contracts
Included in non-current liabilities
Other forward foreign currency contracts
Net derivative financial liabilities – continuing operations
Net derivative financial liabilities held for sale
Net derivative financial liabilities – total Group
2019
£m
4.1
0.3
4.4
0.3
1.5
14.7
16.5
(10.3)
(0.6)
(13.9)
(24.8)
(0.3)
(0.3)
(4.2)
–
(4.2)
2018
£m
1.4
–
1.4
–
0.5
17.8
18.3
–
(26.4)
(14.4)
(40.8)
(0.2)
(0.2)
(21.3)
(0.4)
(21.7)
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 remeasured at fair value.
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 2018, the Group has classified contingent consideration as level 3. A summary of the movements in the contingent
consideration has been included in note 13.
During the periods ended 31 December 2019 and 31 December 2018, 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.
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 2019, cash & short-term deposits of £273.8m (2018: £279.1m) and current interest bearing loans & borrowings of £534.1m
(2018: £664.7m) were presented after elimination of debit and credit balances within individual pools of £0.2m (2018: £0.8m).
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 2019, the Group had derivative financial instruments of £2.9m which were subject to master netting
arrangements but not offset.
190
The Weir Group PLC Annual Report and Financial Statements 2019
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.
Financial assets – total Group
Derivative financial instruments recognised at fair value through profit
or loss
Derivative financial instruments in designated hedge accounting
relationships
Trade & other receivables excluding statutory assets, prepayments &
construction contract assets
Cash & short-term deposits
Financial liabilities – total Group
Derivative financial instruments recognised at fair value through profit
or loss
Derivative financial instruments in designated hedge accounting
relationships
Amortised cost
Fixed-rate borrowings
Floating-rate borrowings
Leases
Bank overdrafts & short-term borrowings
Trade & other payables excluding statutory liabilities & contract liabilities
Financial assets – total Group
Derivative financial instruments recognised at fair value through profit
or loss
Derivative financial instruments in designated hedge accounting
relationships
Trade & other receivables excluding statutory assets, prepayments,
contingent consideration & construction contract assets
Cash & short-term deposits
Financial assets held for sale
Financial liabilities – total Group
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
Trade & other payables excluding statutory liabilities & contract liabilities
Financial liabilities held for sale
Fair value measurement using
Carrying
amount
2019
£m
Fair value
2019
£m
Level 1
Quoted prices
in active
markets
£m
Level 2
Significant
observable
inputs
£m
Level 3
Significant
unobservable
inputs
£m
15.0
5.9
552.9
273.8
847.6
14.2
10.9
595.2
648.4
185.0
1.7
511.0
1,966.4
Carrying
amount
2018
£m
17.8
1.9
625.2
263.0
125.1
1,033.0
14.6
26.4
0.2
783.7
617.2
2.5
573.5
93.2
2,111.3
15.0
5.9
552.9
273.8
847.6
14.2
10.9
640.3
648.4
185.0
1.7
511.0
2,011.5
–
–
–
–
–
–
–
–
–
–
–
15.0
5.9
552.9
273.8
14.2
10.9
640.3
648.4
185.0
1.7
511.0
–
–
–
–
–
–
–
–
–
–
–
F
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Fair value measurement using
Level 1
Quoted prices
in active
markets
£m
Level 2
Significant
observable
inputs
£m
Level 3
Significant
unobservable
inputs
£m
Fair value
2018
£m
17.8
1.9
625.2
263.0
125.1
1,033.0
14.6
26.4
0.2
827.7
617.2
2.5
573.5
93.2
2,155.3
–
–
–
–
–
–
–
–
–
–
–
–
–
17.8
1.9
625.2
263.0
125.1
14.6
26.4
–
827.7
617.2
2.5
573.5
93.2
–
–
–
–
–
–
–
0.2
–
–
–
–
–
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.
191
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
29. FINANCIAL INSTRUMENTS continued
C. Hedging activities
The Group designates certain derivative financial instruments in either cash flow hedging or net investment hedging relationships in accordance
with IFRS 9.
Hedge relationship
Hedged risk
Hedging instruments
Cash Flow Hedge
Cash flow hedge of highly probable forecast foreign
currency purchases and sales
Transactional foreign exchange risk
Forward foreign currency contracts
Net Investment Hedge
Net investment hedge of foreign operations
Translational foreign exchange risk
Foreign currency debt
Cross currency swaps
Forward foreign currency contracts
For each type of derivative financial instrument, the net carrying amount and maturity date ranges are set out in the table below.
Year ended 31 December 2019
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 at fair value through profit or loss
Year ended 31 December 2018
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 at fair value through profit or loss
Net carrying
amount
£m
(10.0)
0.9
4.1
0.8
(4.2)
Net carrying
amount
£m
–
(25.9)
1.4
2.8
(21.7)
Maturity
dates
2020
2020
2021
2020 to 2023
Maturity
dates
2019
2019
2018 to 2021
2019 to 2020
For each type of derivative financial instrument, the amounts recognised for the period in profit or loss and equity are set out in the table below.
In the financial statements these amounts are offset by the retranslation of foreign currency denominated receivables and payables, the impact
of which is also set out in the table below.
Year ended 31 December 2019
Instruments measured at FVTPL
Designated in hedge accounting relationships
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
Not designated in hedge accounting relationships
Other forward foreign currency contracts at fair value through profit or
loss (FVTPL)
Total gains/(losses) on instruments measured at FVTPL
Amounts recognised
in profit or loss
Amounts recognised
in equity
Total
amounts
recognised in
profit or loss
£m
Hedge
accounting
reserve
£m
Foreign
currency
translation
reserve
£m
Losses
recycled to
inventory
£m
Other losses
£m
0.7
–
–
27.3
28.0
0.7
–
–
27.3
28.0
(1.3)
1.2
–
–
–
(1.3)
(21.7)
1.8
–
(18.7)
0.4
–
–
–
0.4
192
The Weir Group PLC Annual Report and Financial Statements 2019
Year ended 31 December 2018
Instruments measured at FVTPL
Designated in hedge accounting relationships
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
Not designated in hedge accounting relationships
Other forward foreign currency contracts at fair value through profit or
loss (FVTPL)
Total gains/(losses) on instruments measured at FVTPL
Amounts recognised
in profit or loss
Amounts recognised
in equity
Other (gains)/
losses
£m
Total
amounts
recognised in
profit or loss
£m
Hedge
accounting
reserve
£m
Foreign
currency
translation
reserve
£m
Losses
recycled to
inventory
£m
(2.6)
(2.6)
–
–
13.9
11.3
–
–
13.9
11.3
0.8
–
–
–
0.8
–
(0.1)
(52.1)
0.7
–
(51.4)
–
–
–
(0.1)
Hedge ineffectiveness
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to
ensure that an economic relationship exists between the hedged item and hedging instrument.
For hedges of foreign currency revenue and cost of sales, the Group enters into hedge relationships where the critical terms of the hedging
instrument match exactly with the terms of the hedged item. The Group therefore performs a qualitative assessment of effectiveness. If changes
in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging
instrument, the Group uses the hypothetical derivative method to determine whether an economic relationship remains, and so assess
effectiveness. As all critical terms matched during the year, the economic relationships were 100% effective.
Ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated, or if there are changes in the
credit risk of the Group or the derivative counterparty.
F
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The Group enters into fixed-for-fixed cross currency interest rate swaps which are designated as hedging instruments in net investment hedges
of the net assets of foreign operations. The swaps have similar critical terms as the hedged items, as the coupon and principal settlements
exchange currencies matching both denomination and amounts of the hedged net assets, for amounts denominated in the presentation currency
of the Group. The Group also utilises borrowings which are measured at amortised cost and denominated in the currency of the hedged net
assets, as hedging instruments in net investment hedges. The Group does not hedge 100% of its net assets of foreign operations, therefore the
hedged item is identified as a proportion of the net assets of the foreign operations up to the notional amount of the swaps and principal amount
of the borrowings. As all critical terms matched during the year, the economic relationships were 100% effective.
Hedge ineffectiveness for the cross currency interest rate swaps is assessed using the same principles as for hedges of foreign currency
revenue and cost of sales. It may occur due to the credit value/debit value adjustment on the cross currency interest rate swaps which is not
matched by the net assets retranslation.
There was no ineffectiveness during 2019 or 2018 in relation to the cross currency interest rate swaps or foreign exchange forwards.
Effects of hedge accounting on financial position and performance
The effects of the foreign currency related hedging instruments on the Group’s financial position and performance are as follows:
Cash flow hedging: foreign currency forwards
Carrying amount (£m)
Assets
Liabilities
Notional amounts (m)
USD
GBP
EUR
Average exchange rates
GBP:USD
USD:AUD
GBP:EUR
Maturity dates
Hedge ratios*
Change in fair value of outstanding hedging instruments since 1 January (£m)
Change in value of hedged item used to determine hedge effectiveness (£m)
* The foreign currency forwards are denominated in the same currency as the highly probable future transactions, therefore the hedge ratio is 1:1.
193
2019
(10.0)
0.3
(10.3)
12.5
–
210.0
–
1.45
1.12
01/2020
– 08/2020
1:1
(1.3)
1.3
2018
–
0.2
(0.2)
4.5
3.2
–
1.37
1.31
–
01/2019
– 09/2019
1:1
0.8
(0.8)
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
29. FINANCIAL INSTRUMENTS continued
Net investment hedging: foreign currency forwards, cross currency swaps and borrowings
Carrying amount (£m)
Assets
Liabilities – derivatives
Liabilities – borrowings
Notional amounts (m)
USD
ZAR
AUD
EUR
Average exchange rates
GBP:USD
GBP:ZAR
GBP:AUD
GBP:EUR
Maturity dates
Hedge ratios*
Change in fair value of outstanding hedging instruments since 1 January (£m)
Change in value of hedged item used to determine hedge effectiveness (£m)
2019
(371.6)
5.6
(0.6)
(376.6)
655.6
345.0
167.5
21.0
2018
(499.3)
1.9
(26.4)
(474.9)
1,689.2
345.0
176.2
117.6
1.32
18.39
1.81
1.13
01/2020
– 02/2022
1:1
(2.4)
2.4
1.35
19.04
1.84
1.28
01/2019
– 02/2022
1:1
(72.8)
72.8
* The derivatives and borrowings are denominated in the same currency as the highly probable future transactions, therefore the hedge ratio is 1:1.
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 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 IFRS 9. 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.
194
The Weir Group PLC Annual Report and Financial Statements 2019
Sensitivity to foreign exchange rates
The Group considers the most significant transactional foreign exchange risk relates to the Australian Dollar, Canadian 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 partially offset by the retranslation of foreign currency denominated receivables and payables.
Transactional foreign exchange
2019
Australian Dollar
Canadian Dollar
Euro
US Dollar
2018
Australian Dollar
Canadian Dollar
Euro
US Dollar
Increase in
currency rate
Effect on profit
gain (loss)
£m
Effect on equity
gain
£m
+25%
+25%
+25%
+25%
+25%
+25%
+25%
+25%
(8.2)
(32.2)
(54.1)
37.3
(10.2)
(29.6)
(79.9)
13.8
(17.7)
–
3.6
71.9
19.0
–
20.3
262.8
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
Canadian Dollar
Chilean Peso
Euro
Australian Dollar
Russian Rouble
Indian Rupee
Brazilian Real
South African Rand
United Arab Emirates Dirham
UK Sterling
Other
Operating profit from continuing operations before exceptional items & intangibles amortisation
2019
£m
206.7
53.9
43.2
34.2
30.1
9.9
8.9
6.2
4.1
2.3
(51.7)
4.3
352.1
2018
£m
224.6
48.7
40.5
22.1
29.8
4.9
7.2
4.7
5.9
7.3
(44.0)
(3.6)
348.1
F
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s
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 2019, 52%
(2018: 44%) 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
(158.3)
(190.5)
(300.0)
–
Fixed rate
£m
(595.7)
–
–
–
2019
Total
£m
(754.0)
(190.5)
(300.0)
–
Floating rate
£m
(19.6)
(477.6)
(120.0)
–
Fixed rate
£m
(784.6)
–
(0.3)
–
2018
Total
£m
(804.2)
(477.6)
(120.3)
–
Sensitivity to interest rates
Based on borrowings at 31 December 2019, a 1% increase in interest rates would have a £6.5m (2018: £6.7m) 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 period and that all other
variables are constant throughout the period.
195
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
29. FINANCIAL INSTRUMENTS continued
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 19.
The tables below show only the financial liabilities of the Total 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 2019
Total Group
Forward foreign currency contracts – net outflow
Cash flows relating to derivative financial liabilities
Trade & other payables excluding statutory liabilities & deferred income
Leases
Bank overdrafts & short-term borrowings
Bank loans
Commercial paper
Fixed-rate notes
Cash flows relating to non-derivative financial liabilities
Year ended 31 December 2018
Total Group
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
1 to 2 years
2 to 5 years
More than 5
years
£m
(8.9)
(8.9)
(511.0)
(46.9)
(1.7)
(310.5)
(190.8)
(25.6)
(1,086.5)
(1,095.4)
£m
0.4
0.4
–
(41.1)
–
(166.7)
–
(25.6)
(233.4)
(233.0)
£m
–
–
–
(62.5)
–
–
–
(615.0)
(677.5)
(677.5)
£m
–
–
–
(68.3)
–
–
–
–
(68.3)
(68.3)
Less than 1
year
1 to 2 years
2 to 5 years
More than 5
years
£m
(15.9)
(15.9)
(645.4)
(1.0)
(1.9)
(120.3)
(498.0)
(194.4)
(1,459.1)
(1,476.9)
£m
(0.3)
(0.3)
(0.8)
(0.9)
–
–
–
(26.6)
(28.3)
(29.6)
£m
0.4
0.4
–
(0.5)
–
–
–
(666.5)
(667.0)
(666.6)
£m
–
–
–
(0.1)
–
–
–
–
(0.1)
(0.1)
Total
£m
(8.5)
(8.5)
(511.0)
(218.8)
(1.7)
(477.2)
(190.8)
(666.2)
(2,065.7)
(2,074.2)
Total
£m
(15.8)
(15.8)
(646.2)
(2.5)
(1.9)
(120.3)
(498.0)
(887.5)
(2,154.5)
(2,172.2)
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 addition, applicable credit worthiness 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
balance sheet are net of the expected credit loss allowance. Refer to those notes for detail of the loss allowance calculation.
In certain circumstances, operating entities are permitted to make use of invoice discounting facilities to reduce counterparty credit risk.
The arrangements are assessed to ensure the entity has transferred substantially all the risks and rewards of ownership of the receivables,
allowing the derecognition of the receivables in their entirety. The cash when received is recognised as a working capital movement and
presented in cash generated from operations. The total amount of receivables invoices discounted at the year end and therefore derecognised
was £21.6m (2018: £38.8m) and this is reflected in the working capital cash flows section of note 25. The fees incurred as part of the invoice
discounting programme are as shown in note 6.
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.
196
The Weir Group PLC Annual Report and Financial Statements 2019
30. 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 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’s banking
arrangements include bi-annual financial covenants based on adjusted net debt to EBITDA (not greater than 3.5) and adjusted interest cover (not
less than 3.5). The Group has complied with these covenants throughout the reporting period and monitors capital using the following indicators.
Adjusted net debt to EBITDA cover
Net debt to EBITDA comprises net debt divided by operating profit from total operations before exceptional items, intangibles amortisation,
depreciation and excluding the impact of IFRS 16 ‘Leases’.
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 Consolidated 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 adjusted net debt to EBITDA is the key metric from a capital management perspective and seeks
to maintain the ratio below 2.0 times. Given the recent downturn in oil and gas markets, the metric is currently 2.4 times and remains
actively managed.
Net debt at average exchange rates (£m)
Adjusted operating (loss) profit (£m)
Exceptional items included in operating profit (£m)
Depreciation and intangibles amortisation (£m)
Adjusted EBITDA (£m)
Net debt to EBITDA cover (ratio)
2019
970.9
(329.1)
596.0
140.7
407.6
2.4
2018
1,085.6
125.2
161.1
187.6
473.9
2.3
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Adjusted interest cover
Interest cover comprises operating profit from total operations before exceptional items and intangibles amortisation divided by net finance costs
(excluding exceptional items and other finance costs), excluding the impact of IFRS 16 ‘Leases’.
Adjusted operating profit before exceptional items & intangibles amortisation (£m)
Net finance costs (excluding exceptional items and other finance costs) (£m)
Adjusted interest cover (ratio)
2019
345.2
37.2
9.3
2018
401.8
33.8
11.9
Gearing ratio
Gearing comprises net debt divided by total equity. Net debt comprises cash and short-term deposits and interest-bearing loans and borrowings
(note 25).
Net debt (£m)
Total equity (£m)
Gearing ratio (%)
2019
1,156.5
1,513.4
76.4
2018
1,126.5
2,148.9
52.4
197
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
31. 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
2019
1.28
1.84
1.14
1.69
4.69
897.37
18.43
5.03
82.53
2019
1.33
1.89
1.18
1.72
4.87
994.76
18.54
5.33
82.29
2018
1.34
1.79
1.13
1.73
4.89
855.87
17.65
4.87
83.66
2018
1.27
1.81
1.11
1.74
4.68
884.36
18.33
4.95
88.40
198
The Weir Group PLC Annual Report and Financial Statements 2019
COMPANY BALANCE SHEET
AT 31 DECEMBER 2019
ASSETS
Non-current assets
Intangible assets
Property, plant & equipment
Investments in subsidiaries
Deferred tax assets
Trade & other receivables
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
Provisions
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
2019
£m
31 December
2018
£m
Notes
3
4
5
6
7
9
7
9
10
9
12
11
9
12
6
8
13
0.2
12.0
3,725.0
14.0
39.5
4.7
3,795.4
128.3
23.5
31.5
183.3
3,978.7
1,663.4
31.0
0.2
1,694.6
959.9
0.3
0.1
–
69.3
1,029.6
2,724.2
1,254.5
32.5
582.3
332.6
(0.5)
0.5
1.8
305.3
1,254.5
0.1
3.7
4,435.2
12.3
41.6
2.1
4,495.0
229.7
27.6
36.1
293.4
4,788.4
2,422.8
54.8
0.8
2,478.4
911.7
0.6
0.3
3.4
72.1
988.1
3,466.5
1,321.9
32.5
582.3
332.6
(2.1)
0.5
1.8
374.3
1,321.9
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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 has not been separately presented in these financial statements. The profit of the Company was
£53.8m (2018: £22.8m).
The financial statements on pages 199-215 were approved by the Board of Directors on 26 February 2020.
JON STANTON
Director
JOHN HEASLEY
Director
199
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Share
capital
£m
28.1
–
–
–
Share
premium
£m
197.9
–
–
–
Treasury
shares
£m
(5.9)
–
–
–
Capital
redemption
reserve
£m
0.5
–
–
–
Special
reserve
£m
1.8
–
–
–
Retained
earnings
£m
409.5
22.8
59.2
(10.1)
At 31 December 2017
Profit for the period
Remeasurements on defined benefit plans
Tax relating to other comprehensive expense
Total net comprehensive income for
the period
Issue of shares
Cost of share-based payments inclusive of
tax charge
Dividends (note 2)
Purchase of shares
Exercise of share-based payments
At 31 December 2018
Profit for the period
Remeasurements on defined benefit plans
Tax relating to other comprehensive expense
Total net comprehensive income for the
period
Cost of share-based payments inclusive of
tax charge
Dividends (note 2)
Purchase of shares
Exercise of share-based payments
At 31 December 2019
–
4.4
–
–
–
–
32.5
–
–
–
–
–
–
–
–
32.5
Total
equity
£m
641.3
22.8
59.2
(10.1)
71.9
712.0
8.3
(110.8)
(0.8)
–
1,321.9
53.8
(3.4)
0.6
71.9
–
8.3
(110.8)
–
(4.6)
374.3
53.8
(3.4)
0.6
51.0
51.0
13.3
(121.7)
–
(11.6)
305.3
13.3
(121.7)
(10.0)
–
1,254.5
–
–
–
–
–
–
0.5
–
–
–
–
–
–
–
–
0.5
–
–
–
–
–
–
1.8
–
–
–
–
–
–
–
–
1.8
Merger
reserve
£m
9.4
–
–
–
–
323.2
–
–
–
–
332.6
–
–
–
–
384.4
–
–
–
–
582.3
–
–
–
–
–
–
–
(0.8)
4.6
(2.1)
–
–
–
–
–
–
–
–
–
–
582.3
–
–
–
–
332.6
–
–
(10.0)
11.6
(0.5)
200
The Weir Group PLC Annual Report and Financial Statements 2019
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 2019 (‘2019’) were approved and
authorised for issue in accordance with a resolution of the Directors on 26 February 2020. The comparative information is presented for the year
ended 31 December 2018 (‘2018’).
The Weir Group PLC is a public limited company limited by shares and incorporated in Scotland, United Kingdom 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:
i) Disclosures required by paragraphs 45(b) and 46-52 of IFRS 2 ‘Share-based payment’ can be found in note 27 to the Group
ii)
financial statements;
IFRS 7 ‘Financial Instruments: Disclosures’ exemption has been taken as a result of the disclosures in note 29 to the Group
financial statements;
IAS 7 ‘Statement of cash flows’;
iii)
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’;
vi) Paragraph 38 of IAS 1 ‘Presentation of financial statements’ comparative information requirements in respect of paragraph 79(a)(iv) of IAS 1;
paragraph 73(e) of IAS 16 ‘Property, Plant & Equipment’; and paragraph 118(e) of IAS 38 ‘Intangible Assets’;
vii) Paragraph 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and paragraphs 134-136, of IAS 1 ‘Presentation of financial
statements’; and
viii) Paragraphs 52 and 58 of IFRS 16 ‘Leases’.
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.
The accounting policies which follow are consistent with those of the previous period with the exception of IFRS 16: ‘Leases’, as discussed
below. The other new standards, amendments and interpretations listed below are not considered to have a material impact on the Financial
Statements of the Company.
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 Company, with an effective date after the period covered by
these financial statements.
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International Accounting Standards (IAS/IFRS)
Amendment to IFRS 3 ‘Business combinations’
Amendment to IAS 1 and IAS 8 regarding the definition of materiality
Amendment to IFRS 9 and IFRS 7 regarding interest rate benchmark reform
* Not yet endorsed for use in the European Union.
Effective date for periods commencing
1 January 2020*
1 January 2020
1 January 2020
The above amendments will be adopted in accordance with their effective dates and have not been adopted in these financial statements.
The amendments and improvements which have not yet been endorsed are not anticipated to have a significant financial impact.
IFRS 16 ‘Leases’
The Company adopted IFRS 16 on 1 January 2019. The standard has resulted in several current operating leases being recognised on the balance
sheet, as the distinction between operating and finance leases is removed. The Company has applied the modified retrospective transition
method, and consequently comparative information is not restated.
Within opening balances as at 1 January 2019, the Company has recognised £8.8m of continuing right-of-use assets. A corresponding continuing
IFRS 16 lease liability of £10.9m has been recognised, representing the obligation to make lease payments. Right-of-use assets have been
initially valued as equal to lease liabilities, with subsequent adjustments made to reflect rent free periods recognised on balance sheet at
31 December 2018.
The balance sheet transition impact by line item on the closing 2018 Company Balance Sheet is shown in the table.
201
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
1. ACCOUNTING POLICIES continued
Impact of IFRS 16 transition on 2018 Company Balance Sheet
Property, plant & equipment
Interest-bearing loans and borrowings (total)
Trade & other payables
Other
NET ASSETS
31 December 2018
£m
3.7
(911.7)
(2,422.8)
4,652.7
1,321.9
IFRS 16 impact
£m
8.8
(10.9)
2.1
–
–
1 January 2019
£m
12.5
(922.6)
(2,420.7)
4,652.7
1,321.9
For each lease, the lease term has been calculated as the non-cancellable period of the lease contract, except where the Company is reasonably
certain that it will exercise contractual extension options.
The Company has elected to use the following practical expedients allowed by the standard:
• On initial application:
the use of hindsight when determining the lease term if the contract contains options to extend or terminate the lease;
i)
ii) the exclusion of initial direct costs from the measurement of the right-of-use asset;
iii) IFRS 16 has only been applied to contracts that were previously classified as leases;
iv) reliance on previous assessments on whether leases are onerous instead of performing an impairment review; and
v)
leases where the lease term ends within 12 months of the date of initial application of IFRS 16 are classified as short-term.
• Lease payments for contracts for which the underlying asset is of a low value have continued to be expensed in the income statement.
For operating leases now recognised on the balance sheet, the operating lease expenses have been replaced by a depreciation expense on the
right-of-use assets recognised and an interest expense.
Where the interest rate implicit in the lease cannot be readily determined, the Company’s incremental borrowing rate will be used.
The Company’s incremental borrowing rate is calculated by taking the government borrowing rate in any given currency and adding the estimated
Company credit spreads for a variety of tenors. An interpolation is performed to obtain one rate for each of the major lease currencies based on
the weighted average life of the lease book. The incremental borrowing rate applied at transition was:
• Leases in GBP: 2.45%
The adoption of IFRS 16 in the year to 31 December 2019 resulted in an increase in depreciation of £0.9m and finance costs of £0.3m.
Operating expenses decreased by £0.8m, being the 2018 lease expenses.
For the period to 31 December 2019, the impact on profit before tax from continuing operations (before exceptional items and intangibles
amortisation) compared to the prior year is a reduction of £0.4m partly due to the front loading of interest costs.
The reconciliation from operating commitments disclosed under IAS 17 to the lease liability recognised on the balance sheet at 1 January 2019 is
as follows:
Reconciliation from IAS 17 disclosure to IFRS 16 at 1 January 2019
Operating lease commitments at 31 December 2018
Impact of IFRS 16 data review*
Operating lease commitments at 31 December 2018
Impact of discounting
Discounted operating lease commitments at 1 January 2019
Recognition exemption for leases of low value assets
Lease liabilities reported at 1 January 2019
* As part of the transition to IFRS 16, an operating lease commitment was identified that had not been included in the 2018 Company Financial Statements operating lease
commitments disclosure.
Total
£m
(12.5)
(0.8)
(13.3)
2.3
(11.0)
0.1
(10.9)
202
The Weir Group PLC Annual Report and Financial Statements 2019
Use of estimates and 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 bases 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 considers the more complex 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.
Revenue recognition
Revenue is the consideration received or receivable which reflects the amount expected to be received, mainly the transaction price.
Revenue will only be recognised when the fulfilment of performance obligations is achieved. Revenue mainly relates to transactions with other
entities within the Group, primarily in relation to management recharges.
Property, plant & equipment
Property, plant & equipment comprises owned assets and right-of-use assets that do not meet the definition of investment property.
i. Owned assets
Owned property, plant & equipment is stated at cost less accumulated depreciation and any recognised impairment losses. 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:
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Long leasehold land & buildings
Office & computer equipment
20 years
3–10 years
ii. Right-of-use asset and lease liability
Policy applicable from 1 January 2019
At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys
the right to control the use of an identified asset, the Company assesses whether it has both the right to obtain substantially all of the economic
benefits from use of the identified asset and the right to direct the use of the identified asset throughout the period of use. The Company
recognises a lease liability and right-of-use asset at the lease commencement date.
The lease liability is initially measured as the present value of the lease payments that are not paid at the commencement date, discounted using
the interest rate implicit in the lease, or where the interest rate implicit in the lease cannot be readily determined, the Company’s incremental
borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
Lease payments consist of the following components:
• fixed payments, including in-substance fixed payments, less any lease incentives receivable;
• variable lease payments that depend on an index or a rate;
• amounts expected to be payable by the lessee under residual value guarantees;
• the exercise price of a purchase option (if the lessee is reasonably certain to exercise that option); and
• payments of penalties for terminating the lease (if the lease term reflects the lessee exercising the option to terminate the lease).
The Company’s incremental borrowing rate is calculated by taking the government borrowing rate in any given currency and adding the estimated
Company credit spreads for a variety of tenors. An interpolation is performed to obtain one rate for each of the major lease currencies based on
the weighted average life of the lease book.
The right-of-use asset is measured as equal to the lease liability and adjusted for:
• lease payments made to the lessor at or before the commencement date;
• lease incentives received;
• initial direct costs associated with the lease; and
• an initial estimate of restoration costs.
The right-of-use asset is depreciated using the straight-line method over the lease term. In addition, the right-of-use asset is periodically reduced
by any impairment losses.
203
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
1. ACCOUNTING POLICIES continued
The Company has adopted the exemption available for low value assets, with payments being recognised on a straight-line basis over the
lease term. Leases relating to laptops, desktop computers, mobile phones, photocopiers, printers and other office equipment, where the asset
value is less than £3,500 or the local currency equivalent have been treated as ‘low value’. Where the lease contract meets both ‘short-term’
and ‘low value’ exemptions, the lease is reported within expenses relating to short-term leases.
For each lease, the lease term has been calculated as the non-cancellable period of the lease contract, except where the Company is reasonably
certain that it will exercise contractual extension options. In assessing whether a lessee is reasonably certain to exercise an option to extend a
lease, or not to exercise an option to terminate a lease, the Company shall consider all relevant facts and circumstances that create an economic
incentive for the lessee to exercise the option to extend the lease, or not to exercise the option to terminate the lease. In certain circumstances
the Company will refer to the five year strategic plan period as an appropriate period to consider whether the ‘reasonably certain’ criteria are met.
Policy applicable before 1 January 2019
Under IAS 17 leases which transferred to the Company substantially all of the risks and rewards of ownership of the leased asset were classified
as finance leases. All other assets were classified as operating leases.
Assets held under finance lease were included within property, plant and equipment, initially measured at their fair value or, if lower, the present
value of the minimum lease payments, and a corresponding liability was recognised within obligations under finance leases.
Operating lease rentals and any incentives receivable were recognised in the income statement on a straight-line basis over the term of the lease.
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
Investments
Investments in subsidiaries are held at cost less accumulated impairment losses.
Loans 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 period reflects the net interest on the net pension liability. This represents the change
in the net pension liability resulting from the passage of time, and is determined by applying the discount rate to the opening net liability, taking
into account employer contributions paid into the plan, and hence reducing the net liability, during the period.
Past service costs resulting from enhanced benefits are recognised immediately in the income statement. Actuarial gains and losses,
which represent differences between interest on the plan assets, experience on the benefit obligation and the effect of changes in actuarial
assumptions, are recognised in full in other comprehensive income in the period in which they occur.
The defined benefit liability or asset recognised in the balance sheet comprises the net total for each plan of the present value of the benefit
obligation, using a discount rate based on yields at the balance sheet date on appropriate high-quality corporate bonds that have maturity dates
approximating the terms of the 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 period in which they fall due.
Share-based payments
Equity settled share-based incentives are provided to employees under the Group’s Share Reward Plan (SRP), formerly the Long Term Incentive
Plan (LTIP), the Weir ShareBuilder Plan (WSBP) and as a consequence of occasional one-off conditional awards made to employees.
The fair value of SRP awards and one-off 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 SRP which took effect in 2018 are summarised in
the Directors’ Remuneration Policy, which can be found on the Company’s website at www.corporategovernance.weir.
The fair value of WSBP awards at grant date is calculated as the share price at the date of the grant less an adjustment for loss of reinvestment
return on the dividend equivalent. There are no performance conditions attached to these awards but participants who leave the Company
prior to vesting lose their right to the awards. The terms of the share awards granted under the WSBP are set out on the plan’s website at
www.sharebuilder.weir.
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Financial assets and 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. Under IFRS 9, where the modification
is not substantial, the modified cash flows are discounted at the original effective interest rate to determine a revised carrying amount of the
liability, with any difference in carrying amount recognised in the income statement.
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 and presented within operating profit or finance costs dependent on their nature.
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 period.
Deferred tax is recognised on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base
with the following exceptions:
i)
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.
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.
2. PROFIT ATTRIBUTABLE TO THE COMPANY
The profit dealt with in the financial statements of the Company was £53.8m (2018: £22.8m). The corporate tax credit dealt with in the financial
statements of the Company was £4.6m (2018: £14.5m).
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Dividends paid & proposed
Declared & paid during the period
Equity dividends on ordinary shares
Final dividend for 2018: 30.45p (2017: 29.0p)
Interim dividend for 2019: 16.5p (2018: 15.75p)
Proposed for approval by Shareholders at the Annual General Meeting
Final dividend for 2019: 30.45p (2018: 30.45p)
2019
£m
2018
£m
78.9
42.8
121.7
69.9
40.9
110.8
79.1
79.0
Up until May 2018, The Weir Group PLC Scrip Dividend Scheme allowed Shareholders on record the opportunity to elect to receive dividends
in the form of new fully paid ordinary shares. In 2018, participation in the Scheme resulted in shares with a value of £31.2m being issued and a
cash dividend of £38.7m for the 2017 final dividend. The 2018 interim and final dividends were only issued in cash following closure of the Scrip
Dividend Scheme.
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The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
2. PROFIT (LOSS) ATTRIBUTABLE TO THE COMPANY continued
The proposed dividend is based on the number of shares in issue, excluding treasury shares held, at the date that 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
2019
£m
21.6
3.1
–
0.6
12.9
38.2
2018
£m
20.1
2.8
6.4
0.5
8.6
38.4
During 2019, the average number of people employed by the Company was 246 (2018: 183).
Directors
Details of Directors’ remuneration, benefits and LTIP awards are included in the Remuneration Report on pages 102-125, and in note 28 to the
Group Consolidated 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
£21,630 (2018: £20,600). Fees paid to PwC for non-audit services to the Company itself are not disclosed in these financial statements as the
Group’s Consolidated Financial Statements, in which the Company is included, are required to disclose such fees on a consolidated basis.
Fees payable by the Company to Ernst & Young LLP for work performed in respect of the audit of the pension scheme were £36,550.
3. INTANGIBLE ASSETS
Cost
At 31 December 2018
Additions
At 31 December 2019
Aggregate amortisation
At 31 December 2018
Charge for period
At 31 December 2019
Net book value at 31 December 2018
Net book value at 31 December 2019
4. PROPERTY, PLANT & EQUIPMENT
Cost
At 31 December 2018
Transition adjustment (note 1)
At 1 January 2019
Additions
At 31 December 2019
Aggregate depreciation
At 31 December 2018
Charge for period
At 31 December 2019
Net book value at 31 December 2018
Net book value at 31 December 2019
Purchased
software
total
£m
1.0
0.2
1.2
0.9
0.1
1.0
0.1
0.2
Total
£m
6.1
8.8
14.9
0.7
15.6
2.4
1.2
3.6
3.7
–
–
–
0.2
0.2
–
–
–
–
0.2
12.0
Owned long
leasehold
land &
buildings
£m
Owned
office &
computer
equipment
£m
Right-of-
use land &
buildings
£m
Right-of-
use plant &
equipment
£m
3.7
–
3.7
–
3.7
0.5
0.2
0.7
3.2
3.0
2.4
–
2.4
0.5
2.9
1.9
0.1
2.0
0.5
0.9
–
8.8
8.8
–
8.8
–
0.9
0.9
–
7.9
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The Weir Group PLC Annual Report and Financial Statements 2019
Right-of-use assets
The Company leases buildings, a vehicle and IT equipment. The current and non-current lease liabilities are disclosed in note 11. The following
table shows the breakdown of the lease expense between amounts charged to operating profit and amounts charged to finance costs in
the year.
Depreciation of right-of-use assets
Charge to operating profit
Finance cost – interest expense related to lease liabilities
Charge to profit before tax from continuing operations
The total cash outflow in the year is £1.0m.
5. INVESTMENTS IN SUBSIDIARIES
Cost
At 31 December 2018
Additions
Disposal
Settlement
Exchange
At 31 December 2019
Impairment
At 31 December 2018
Impairment of investment in subsidiary
At 31 December 2019
Net book value at 31 December 2018
Net book value at 31 December 2019
2019
£m
0.9
0.9
0.3
1.2
Subsidiaries
shares
£m
Loans
£m
Total
£m
2,613.9
1,635.8
(674.9)
–
–
3,574.8
326.6
985.7
1,312.3
2,287.3
2,262.5
2,153.3
920.3
–
(1,552.4)
(53.3)
1,467.9
5.4
–
5.4
2,147.9
1,462.5
4,767.2
2,556.1
(674.9)
(1,552.4)
(53.3)
5,042.7
332.0
985.7
1,317.7
4,435.2
3,725.0
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The subsidiaries and joint ventures of the Company are listed on pages 216-223.
During the year the Company carried out a corporate restructure for internal financing purposes. This resulted in a series of equity investments of
£1,596.3m and disposals of £635.8m. Related to this the Company received a dividend of £940.0m from one of its subsidiaries and subsequently
impaired its investment in the subsidiary by £949.2m.
The Company carried out an exercise to rationalise the number of its legal entities. This involved an equity investment of £0.4m, dividends
received of £114.5m and a subsequent impairment of its investment in some of those entities by £36.5m.
There was a restructure of the Company’s investments related to the disposal of Flow Control, resulting in investment additions and disposals
to the value of £39.1m each.
Over the term of the loans, the Company accounts for its credit risk by appropriately providing for expected credit losses on a timely basis.
The majority of the Company’s loans are repayable on demand by the Company. In calculating the expected credit loss allowance of repayable
on demand loans, the Company considers the financial position and internal forecasts of each subsidiary and their ability to repay on request,
or over time. For those loans repayable on maturity, expected credit losses are calculated using market-implied probabilities of default and
loss-given-default estimations.
The Company considers the probability of default upon initial recognition of an asset and subsequently whether there has been a significant
increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk, the
Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition.
The primary indicators considered are actual or expected significant adverse changes in business and financial conditions that are expected to
cause a significant change to the borrower’s ability to meet its obligations.
Independent of the primary indicators above, a significant increase in credit risk is presumed if a debtor is more than 30 days past due in making
a contractual payment. A default on a financial asset is considered to occur when the counterparty fails to make contractual payments within 90
days of when they fall due. A write-off is considered to be required when there is no reasonable expectation of recovery, or when a debtor fails to
make contractual payments greater than 120 days past due. Where loans or receivables have been written-off, the Company continues to engage
in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognised in the income statement.
As at 31 December 2019 and 1 January 2019, the loss allowances for all loans to subsidiaries were measured at an amount equal to 12-month
expected credit losses. This did not result in a material change to the loss allowance on 1 January 2019 for the loans, and as such no adjustment
has been recorded and comparative figures have not been restated.
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Financial Statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
5. INVESTMENTS IN SUBSIDIARIES continued
The closing loss allowances for loans due from subsidiaries as at 31 December 2019 reconcile to the opening loss allowances as follows:
31 December 2018 – calculated under IAS 39
Amounts restated through opening retained earnings
Opening loss allowance as at 1 January 2019 – calculated under IFRS 9 (2018) / IAS 39 (2017)
At 31 December 2019
6. DEFERRED TAX
Deferred income tax assets
Other timing differences
Retirement benefits
Deferred income tax assets
Deferred income tax liabilities
Other timing differences
Retirement benefits
Deferred income tax
Deferred income tax assets
Recoverable after one year
Deferred income tax liabilities
Settled after one year
£m
5.4
–
5.4
5.4
2018
£m
–
12.3
12.3
(3.4)
(3.4)
12.3
8.9
12.3
12.3
(3.4)
(3.4)
2019
£m
2.2
11.8
14.0
–
2.2
11.8
14.0
14.0
14.0
–
–
7. TRADE & OTHER RECEIVABLES
Trade & other receivables presented as non-current on the face of the Company Balance Sheet of £39.5m (2018: £41.6m) 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
2019
£m
103.1
21.2
2.9
1.1
128.3
2018
£m
204.4
18.8
5.6
0.9
229.7
Amounts owed by subsidiaries relate to management recharges in respect of support services provided. Intercompany balances are typically
managed on a Group basis, and the Company’s credit risk management practices reflect this. The Group applies the IFRS 9 simplified approach
to measuring expected credit losses, which uses a lifetime expected loss allowance for all such trade receivables.
The amounts owed by subsidiaries do not carry an interest charge, and it is the Company’s expectation that materially all the amounts owed
by subsidiaries are fully recoverable over time. Expected credit losses at both 1 January 2019 and 31 December 2019 are therefore immaterial,
and there has been no material change to the expected loss allowance during the year.
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The Weir Group PLC Annual Report and Financial Statements 2019
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 defined benefit plans expose the Company to a number of risks:
Uncertainty in benefit payments
The value of the Company’s liabilities for the defined benefit plans will ultimately depend on the amount of benefits paid out. This in turn will
depend on the level of inflation (for those benefits that are subject to some form of inflation protection) and how long individuals live. This risk
is significantly reduced through the insurance policies held.
Volatility in asset values
The Company is exposed to future movements in the values of assets held in the defined benefit plans to meet future uninsured
benefit payments.
Uncertainty in cash funding
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 through the insurance policies held. In addition, the Company is also exposed to adverse changes in pension regulation.
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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)
2019
2018
2.1
3.0
21.1
23.1
22.5
24.6
2.9
2.0
1.9
2.9
3.2
21.6
23.5
23.0
25.1
3.1
2.1
2.1
The assumptions used to determine end-of-year benefit obligations are also used to calculate the following period’s cost.
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 2040
(in 20 years’ time).
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The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
8. RETIREMENT BENEFITS continued
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)
Private Debt (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 deficit
2019
£m
193.8
62.5
41.1
114.1
364.7
9.8
28.4
814.4
(882.3)
(67.9)
(1.4)
(69.3)
(69.3)
2018
£m
177.5
55.5
37.3
109.2
360.9
–
8.7
749.1
(819.8)
(70.7)
(1.4)
(72.1)
(72.1)
Of the government bonds held at 31 December 2019, 35% are fixed interest bonds. 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
2019
£m
(72.1)
(1.9)
(3.4)
8.1
(69.3)
The amounts recognised in the income statement and in the Statement of Comprehensive Income for the period are analysed as follows.
Recognised in the Income Statement
Past service cost
Administrative expenses
Included in operating 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
Experience on benefit obligations
Actuarial losses recognised in the Statement of Comprehensive Income
2019
£m
–
–
–
(1.9)
(1.9)
95.5
(21.4)
74.1
(97.9)
20.4
–
(3.4)
2018
£m
(125.1)
(9.3)
59.2
3.1
(72.1)
2018
£m
(6.3)
(0.1)
(6.4)
(2.9)
(9.3)
(22.7)
(19.1)
(41.8)
70.2
18.0
12.8
59.2
Past 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 £8.0m in 2019 (2018: £3.0m) in addition to the Company’s regular contributions.
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In 2015, the Company entered into a pension funding partnership structure under which it has contributed interests in a Scottish Limited
Partnership (‘SLP’) for the Main Plan. The Main Plan’s interests in the SLP reduce the deficit on a funding basis, although the agreement will not
affect the position directly on an 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, subject to conditions being met. The profits
to be shared with the Plan will be reflected in the Company’s financial statements as a pension contribution.
The latest actuarial funding valuation of the Main Plan as at 31 December 2017 was completed in 2019. Under the agreed recovery plan, the
Company has agreed to contribute £4.3m in each year from 2019 to 2028 inclusive. These contributions are primarily funded by the income
payments from the SLP described above. The contributions are subject to an annual review mechanism, and will temporarily cease if the Main
Plan’s funding level on a funding basis exceeds 105%.
The Trustees of the UK Executive Scheme entered into a full buy-in transaction with Scottish Widows 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
(expected to be £1.1m) due from the Trustees to Scottish Widows, which is expected to be paid in 2020 following a data cleanse process to
finalise the insurance policy data. The FRS 101 balance sheet at the 2019 year end therefore shows a deficit reflecting this payment due.
The Company has taken legal advice regarding its UK arrangements to confirm the accounting treatment under 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 legal advice received by the Company has confirmed that the above accounting
treatment will not be affected by the current exposure draft of the revised IFRIC 14.
The total Company contributions for 2020 (including those expected from the SLP) are expected to be £5.4m.
Sensitivity analysis
Changes in key assumptions can have a significant effect on the reported net retirement benefit obligation and the income statement expense
for 2020. The effects of changes in those assumptions are set out in the table below.
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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
2019
£m
Decrease
2019
£m
Increase
2018
£m
Decrease
2018
£m
132.4
95.2
(99.1)
(65.5)
(31.1)
(15.1)
(159.9)
(118.0)
89.6
58.7
31.1
15.1
120.4
83.9
(91.0)
(57.9)
(28.8)
(13.0)
(144.8)
(103.7)
82.5
51.9
28.8
13.0
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.
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Financial Statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
8. RETIREMENT BENEFITS continued
Changes in the present value of the defined benefit obligations are analysed as follows.
Opening defined benefit obligations
Past service cost
Interest on benefit obligations
Benefits paid
Actuarial (losses) gains due to
Changes in financial assumptions
Changes in demographic assumptions
Experience on benefit obligations
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
9. DERIVATIVE FINANCIAL INSTRUMENTS
Non-current assets
Cross currency swaps
Forward foreign currency contracts
Current assets
Forward foreign currency contracts
Current liabilities
Forward foreign currency contracts
Non-current liabilities
Forward foreign currency contracts
2019
£m
(821.2)
–
(23.3)
38.3
(97.9)
20.4
–
(883.7)
2019
£m
749.1
21.4
8.1
–
(38.3)
74.1
814.4
2019
£m
4.1
0.6
4.7
23.5
23.5
(31.0)
(31.0)
(0.3)
(0.3)
2018
£m
(936.8)
(6.3)
(22.0)
42.9
70.2
18.0
12.8
(821.2)
2018
£m
811.7
19.1
3.1
(0.1)
(42.9)
(41.8)
749.1
2018
£m
1.4
0.7
2.1
27.6
27.6
(54.8)
(54.8)
(0.6)
(0.6)
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)
Lease liability (note 11)
Amounts owed to subsidiaries
Other taxes & social security costs
Other creditors
Accruals & deferred income
212
2019
£m
490.0
1,125.8
1.1
14.3
1.2
7.6
23.4
1,663.4
2018
£m
662.0
1,683.6
–
30.9
1.4
15.2
29.7
2,422.8
The Weir Group PLC Annual Report and Financial Statements 2019
11. INTEREST-BEARING LOANS & BORROWINGS
Amounts due are repayable as follows
Less than one year
– bank loans
– fixed-rate notes
– commercial paper
– loans from subsidiaries
– lease liability
More than one year but not more than two years
– bank loans
– loans from subsidiaries
– lease liability
More than two years but not more than five years
– bank loans
– fixed-rate notes
– loans from subsidiaries
– lease liability
More than five years
– lease liability
Less current instalments due on
– bank loans
– fixed-rate notes
– commercial paper
– loans from subsidiaries
– lease liability
2019
£m
2018
£m
299.6
–
190.5
1,125.8
1.1
158.3
65.3
0.8
–
595.4
131.7
2.2
–
164.6
497.2
1,683.6
–
–
–
–
120.0
619.4
172.3
–
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
6.2
2,576.9
–
3,257.1
(299.6)
–
(190.5)
(1,125.8)
(1.1)
959.9
–
(164.6)
(497.2)
(1,683.6)
–
911.7
The loans from subsidiaries with a maturity date greater than one year and less than two years are repayable in 2021 and have an interest rate
of 6.25%. The loans from subsidiaries with a maturity date greater than two years and less than five years are repayable in 2023 and have an
interest rate of 5.65%.
Details of the interest and repayment terms of the bank loans, fixed-rate notes and commercial paper can be found in note 19 to the Group
financial statements.
12. PROVISIONS
At 31 December 2018
Additions
Utilised
At 31 December 2019
Current 2019
Non-current 2019
At 31 December 2019
Current 2018
Non-current 2018
At 31 December 2018
213
Exceptional
rationalisation
£m
1.1
0.9
(1.7)
0.3
0.2
0.1
0.3
0.8
0.3
1.1
The Weir Group PLC Annual Report and Financial Statements 2019
Financial Statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
13. SHARE CAPITAL & RESERVES
Allotted, called up & fully paid
Ordinary shares of 12.5p each
Shares allotted
Issued during the period in respect of ESCO acquisition
Issued during the period in respect of scrip dividends
Treasury shares
At the beginning of the period
Purchase of shares in respect of equity settled share-based payments
Utilised during the period in respect of equity settled share-based payments
At the beginning and end of the period
Equity settled share-based payments
Share awards outstanding at the end of the period
2019
£m
32.5
2018
£m
32.5
2019
Number
million
2018
Number
million
–
–
0.2
0.7
(0.9)
–
33.5
1.4
0.5
–
(0.3)
0.2
1.5
1.7
Merger reserve
The shares issued directly to ESCO Shareholders on 12 July 2018 qualified for merger relief under section 612 of the Companies Act 2006,
resulting in an increase to the reserve of £323.2m. The merger reserve was originally 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 a commercial lease for a building with a lease term of 20 years. Future minimum rentals payable under non-cancellable
operating leases are shown in the table below for the year ended 31 December 2018. In 2019 this lease has been accounted for under IFRS 16.
Lease commitments at 31 December 2019 are displayed in note 11.
Less than 1 year
After 1 year but no more than 5 years
More than 5 years
Impact of IFRS 16 data review (note 1)
2018
(restated
note 1)
£m
0.8
3.0
8.7
0.8
13.3
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 £819.3m
(2018: £967.1m) of which £217.1m (2018: £213.3m) was utilised at 31 December 2019. 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.
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.
214
The Weir Group PLC Annual Report and Financial Statements 2019
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 period end.
Related party
Weir ABF LP
Weir Minerals (India) Private Ltd
Vulco SA
2019
2018
2019
2018
2019
2018
Group charges
£m
–
–
–
0.1
1.3
(0.5)
Amounts
due by
£m
58.5
56.7
–
–
0.4
1.2
17. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The description of the Group’s financial risk management objectives and policies is provided in note 29 to the Group financial statements.
These financial risk management objectives and policies also apply to the Company.
F
i
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The Weir Group PLC Annual Report and Financial Statements 2019
Shareholder Information
SUBSIDIARY UNDERTAKINGS
Company Name
Country
Registered Office address
Aislación Sismica Perú SA
Peru
Av. Separadora Industrial, N° 2201 Urb Vulcano Ate, Lima, Peru
Aspir Pty Ltd
Australia
1-5 Marden Street, Artarmon NSW 2064, Australia
Class name
Ordinary
Ordinary
Bucyrus Blades de Mexico S.A.
DE C.V.
Mexico
Calle 14, Manzana 4, Lote 4, Parque Industrial, Apartado Postal 129,
Atlacomulco, Mexico
Fixed Capital,
Variable Capital
Bucyrus Blades Inc.
United States C T Corporation System, 4400 Easton Commons Way, Suite 125,
Common
Columbus, OH, 43219
Bucyrus Blades of Canada ULC
Canada
1800 - 510 West Georgia Street, Vancouver BC V6B 0M3, Canada
Ordinary-A
Capstead Systems Limited
England
and Wales
C/o Weir Minerals Europe, Halifax Road, Todmorden, Lancashire,
OL14 5RT, United Kingdom
CH Warman Asia Limited
Malta
93 Mill Street, Qormi, QRM3102, Malta
Comercializadora TEP Limitada
Chile
San José N° 815, San Bernardo, Santiago de Chile, Chile
Cunnington and Cooper Limited
England
and Wales
C/o Weir Minerals Europe, Halifax Road, Todmorden, Lancashire,
OL14 5RT, United Kingdom
Ordinary
Ordinary
N/A
Ordinary
Dongying Weir O&G Pump
Products Co., Ltd.
China
No. 69 Dengzhou Road, Dongying Area, Dongying City, Shandong,
China
N/A
Downhole Oiltools Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
Duhn Oil Tool, Inc.
United States CT Corporation System, 808 West Seventh Street, Suite 930, Los
Common A Stock
Angeles, CA, 90017
Electric Steel Foundry Co
United States 2141 NW 25th Avenue, Portland OR 97210, United States
Fixed Capital
EnviroTech (Pty) Limited
South Africa
31 Isando Road, Isando, Gauteng, 1600, South Africa
Ordinary,
Ordinary A
EPIX Power Systems, LLC
United States The Corporation Trust Company, 1209 Orange Street, Wilmington DE
Units
19801, United States
ESCO – Bucyrus Blades Canada
Canada
1800 - 510 West Georgia Street, Vancouver BC V6B 0M3, Canada
ESCO – Bucyrus Blades Financing
Ltd. Partnership (RH)
Canada
1800 - 510 West Georgia Street, Vancouver BC V6B 0M3, Canada
ESCO (Shanghai) Trading Co., Ltd.
China
ESCO (UK) Holdings Limited
ESCO (UK) Limited
England
and Wales
England
and Wales
25GH, Lekai Building, No. 660, Shangcheng Road, Pudong New
District, Shanghai, China
Ings Road, Doncaster, DN5 9SN, United Kingdom
Ings Road, Doncaster, DN5 9SN, United Kingdom
N/A
N/A
N/A
Ordinary
Ordinary
ESCO (Xuzhou) Wearparts Co., Ltd. China
DaZhai Road andCuiZhuan Nan Road, Tongshan Economic
Development Zone, Xuzhou City, Jiangsu Province, 221116, China
N/A
ESCO Australia Holdings
Pty Limited
Australia
25 Trade Street, Lytton, Queensland QLD 4178, Australia
Ordinary
ESCO Belgium SA
Belgium
Rue des Fours à Chaux, Zoning Industriel, Frameries, 7080, Belgium Ordinary
ESCO Canada Finance
Company Inc.
Canada
1800 - 510 West Georgia Street, Vancouver BC V6B 0M3, Canada
Common
ESCO Canada Ltd.
Canada
1800 - 510 West Georgia Street, Vancouver BC V6B 0M3, Canada
Ordinary
ESCO Dunedin Pty Ltd
Australia
25 Trade Street, Lytton, Queensland QLD 4178, Australia
Ordinary
ESCO Elecmetal
Fundición Limitada
ESCO Electric Steel Foundry
Company of Africa (Pty) Ltd
Chile
Calle Miraflores, Numero 222, Piso Veinticuatro, Santiago, Chile
N/A
South Africa
22 Chester Road, Parkwood, Johannesburg, 2193, South Africa
Ordinary
ESCO EMEA Holdings (UK)
Limited
England
and Wales
Ings Road, Doncaster, DN5 9SN, United Kingdom
Ordinary
ESCO Engineering Kingaroy
Pty Ltd
Australia
25 Trade Street, Lytton, Queensland QLD 4178, Australia
Ordinary
Directly
Held By
PLC*
% of
class
99.99
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
216
The Weir Group PLC Annual Report and Financial Statements 2019
Company Name
Country
Registered Office address
ESCO Engineering Pty Ltd
Australia
25 Trade Street, Lytton, Queensland QLD 4178, Australia
ESCO GmbH
ESCO GP Ltd.
Germany
Marie-Bernays Ring 1, Moenchengladbach, 41199, Germany
Canada
2500, 10175 - 101 Street, Edmonton, Alberta T5J 0H3, Canada
ESCO Group Holdings Pty Ltd
Australia
25 Trade Street, Lytton, Queensland QLD 4178, Australia
ESCO Group LLC
United States 1209 Orange Street, Wilmington DE 19801, United States
ESCO Hydra (UK) Limited
England
and Wales
Ings Road, Doncaster, DN5 9SN, United Kingdom
Australia
25 Trade Street, Lytton, Queensland QLD 4178, Australia
ESCO Indonesia Investco No 1
Pty Ltd
ESCO Indonesia Investco No 2
Pty Ltd
Class name
Ordinary
Ordinary
Ordinary
Ordinary
Membership
Units
Ordinary,
Ordinary A
Ordinary
Australia
25 Trade Street, Lytton, Queensland QLD 4178, Australia
Ordinary
ESCO International (H.K.)
Holdings Limited
Hong Kong
Suites 5801, 5804-06, Central Plaza, 18 Harbour Road, Wanchai,
Hong Kong
ESCO International Holdings SPRL Belgium
ESCO Japan, Inc.
Japan
122,Rue des Four à Chaux, Zoning Industriel, Frameries, 7080,
Belgium
Marunouchi Mitsui Building, 2-2-2 Marunouchi, Chiyoda-ku,
Tokyo, 100-0005, Japan
Ordinary
Ordinary
Common
ESCO LATIN AMÉRICA COMÉRCIO
E INDÚSTRIA LTDA.
Brazil
Rua Engenheiro Gerhard Ett, nº 1.215, Distrito Industrial Paulo Camilo
Sul, CEP 32669-110, Brazil
Ordinary
ESCO Limited
Canada
1800 - 510 West Georgia Street, Vancouver BC V6B 0M3, Canada
Ordinary-A
ESCO Moçambique S.A.
Mozambique
Avenida Kim Il Sung, no. 961, Maputo, Mozambique
ESCO Northgate Pty Limited
Australia
25 Trade Street, Lytton, Queensland QLD 4178, Australia
ESCO Peru S.R.L.
Peru
Av. Manuel Olguin 211, Suite 304, Surco, Lima, Peru
ESCO RUS Limited
Liability Company
Russian
Federation
69 Leningradskoe Shosse, Building 1, 125445, Moscow,
Russian Federation
ESCO S.A.S.
France
57 Rue d’Amsterdam, 75008, Paris, France
ESCO Servicios Mineros S.A.
Argentina
Tucuman 1, Piso 4, C1049AAA, Buenos Aires, Argentina
ESCO South Africa Wearparts (Pty)
Limited
South Africa
22 Chester Road, Parkwood, Johannesburg, 2193, South Africa
Ordinary
Ordinary
Common
Ordinary
Ordinary
Ordinary
Ordinary,
Cumulative
Reedemable
Preference,
Empowerment
Shares
ESCO Supply and
Service Kazakhstan
ESCO SUPPLY CARAJÁS
INDUSTRIA DE PECAS E
EQUIPAMENTOS LTDA
Kazakhstan
4th floor, 192/2 Dostyk avenue, Almaty city, 050051, Kazakhstan
Ordinary
Brazil
Rodovia PA-160, Loteamento Parque dos Carajas Il, Quadra 73,
Lotes 1, 2, 3, 4, 5, 6, 7, 22, 23 e 24 , Parauapebas, Brazil
Ordinary
ESCO Supply Ltd.
Canada
2500, 10175 - 101 Street, Edmonton, Alberta T5J 0H3, Canada
Ordinary-A
ESCO Turbine Components Europe,
sprl
Belgium
122, Rue des Fours à Chaux, Zoning Industriel, Frameries, 7080,
Belgium
Ordinary
ESCO Wearparts Supply and
Services (Namibia) (Proprietary)
Limited
Namibia
Private Bag 12012, Ausspannplatz, Windhoek, Namibia
Ordinary
ESCO Windber Inc.
United States 2141 NW 25th Avenue, Portland OR 97210, United States
Ordinary
Fabrica de Aisladores Sismicos de
Chile Limitada
Chile
San José N° 815, San Bernardo, Santiago de Chile, Chile
Fundición Vulco Ltda
Chile
San José N° 815, San Bernardo, Santiago de Chile, Chile
N/A
N/A
G. & J. Weir, Limited
England
and Wales
C/o Weir Minerals Europe, Halifax Road, Todmorden, Lancashire,
OL14 5RT, United Kingdom
Ordinary
217
Directly
Held By
PLC*
% of
class
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
S
h
a
r
e
h
o
d
e
r
l
I
n
f
o
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m
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t
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The Weir Group PLC Annual Report and Financial Statements 2019
Shareholder Information
SUBSIDIARY UNDERTAKINGS
CONTINUED
Company Name
Country
Registered Office address
Class name
Hurricane Investments Inc.
United States The Corporation Trust Company, 1209 Orange Street, Wilmington DE
Common
19801, United States
Inversiones ESCO Chile Limitada
Chile
Calle Miraflores, Numero 222, Piso Veinticuatro, Santiago, Chile
Inversiones Linatex Chile (Holdings)
Limitada
Chile
San José N° 815, San Bernardo, Santiago de Chile, Chile
JF (Jiangsu) Machinery Co. Ltd
China
East 188, Hutai Road, Liuhe Town, Taicang City, China
N/A
N/A
N/A
Linatex (H.K.) Limited
Hong Kong
Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong
Ordinary
Linatex Africa (Pty) Limited
South Africa
5 Clarke Street, Alrode, Alberton, Gauteng, 1449, South Africa
Linatex Asset Holdings Malaysia
Sdn. Bhd.
Malaysia
2nd Floor, No 2-4 Jalan Manau, 50460 Kuala Lumpur, Wilayah
Persekutuan, Malaysia
Linatex Australia Pty Limited
Australia
1-5 Marden Street, Artarmon NSW 2064, Australia
Ordinary
Ordinary
Class A Shares,
Class B Shares
Linatex Chile Limitada
Linatex Chile SpA
Chile
Chile
San José N° 815, San Bernardo, Santiago de Chile, Chile
N/A
Santa Catalina de Chena 850, San Bernardo, Santiago de Chile, Chile Ordinary
Nominative Share
Linatex Consolidated Holdings Ltd Virgin Islands,
Linatex Limited
Linatex Rubber Limited
British
England
and Wales
England
and Wales
Linatex Rubber Products Sdn. Bhd. Malaysia
Kingston Chambers, PO Box 173, Road Town, Tortola,
British, Virgin Islands
C/o Weir Minerals Europe, Halifax Road, Todmorden, Lancashire,
OL14 5RT, United Kingdom
C/o Weir Minerals Europe, Halifax Road, Todmorden, Lancashire,
OL14 5RT, United Kingdom
2nd Floor, No 2-4 Jalan Manau, 50460 Kuala Lumpur, Wilayah
Persekutuan, Malaysia
Linatex UK Holding Limited
England
and Wales
C/o Weir Minerals Europe, Halifax Road, Todmorden Lancashire
OL14 5RT, United Kingdom
Metalúrgica Vulco Ltda
Chile
San José N° 815, San Bernardo, Santiago de Chile, Chile
Multiflo Pumps Pty Limited
Australia
1-5 Marden Street, Artarmon NSW 2064, Australia
Overseas ESCO Corporation Ltd.
Virgin Islands,
British
The Lake Building, 1st Floor, Wickams Cay 1, P. O. Box 3152,
Road Town, Tortola, British, Virgin Islands
PT ESCO Mining Products
Indonesia
The Garden Centre #3-04, Cilandak Commercial Estate, JL Raya
Cilandak KKO, Jakarta, 12075, Indonesia
PT Weir Minerals Contract
Services Indonesia
Indonesia
Jl. Mulawarman Rt. 20 No. 20 Kelurahan Manggar, Kec, Balikpapan
Timur, Kota Balikpapan, 76116, Indonesia
PT Weir Minerals Indonesia
Indonesia
PT Weir Oil & Gas Indonesia
Indonesia
Jl. Mulawarman Rt. 20 No. 20 Kelurahan Manggar, Kec, Balikpapan
Timur, Kota Balikpapan, 76116, Indonesia
Jl. Mulawarman Rt. 20 No. 20 Kelurahan Manggar, Kec, Balikpapan
Timur, Kota Balikpapan, 76116, Indonesia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
N/A
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Ordinary
PT Weir Pressure Control Indonesia Indonesia
Suite 701B, 7th Floor, Setiabudi Atrium, JI. H.R. Rasuna Said Kav 62,
Jakarta 12920, Indonesia
Ordinary A, B
S.P.M. Flow Control, Inc.
United States CT Corporation System, 1999 Bryan St., Suite 900, Dallas, TX, 75201
Common
Seaboard Canada Ltd.
Canada
5233 49 Ave, Red Deer AB T4N 6G5, Canada
Common
Seaboard Holdings, Inc.
United States The Corporation Trust Company, 1209 Orange Street, Wilmington DE
Common
19801, United States
Seaboard International Holding
Company (Hong Kong) Limited
Hong Kong
Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong
Ordinary
Seaboard International Inc.
United States CT Corporation System, 1999 Bryan St., Suite 900, Dallas, TX, 75201
Common
Seaboard Real Estate, LLC
United States The Corporation Trust Company, 1209 Orange Street, Wilmington
Units
DE 19801
Shanghai JF Engineering
Equipment Co. Ltd
China
No.572, Yonghe Road, Jing'an District, Shanghai, China
N/A
Directly
Held By
PLC*
% of
class
100
99.99
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
95
100
100
100
100
100
100
100
100
218
The Weir Group PLC Annual Report and Financial Statements 2019
Company Name
Country
Registered Office address
Class name
Shanghai Vortex Engineering
Machinery Co. Ltd
Shanxi Changfeng Wearparts Co.
Ltd.
China
Building #3, No.4918, Liuxiang Road, Jiading District, Shanghai, China N/A
China
No. 53, Yuhe Street, Wanbailin District, Taiyuan, Shanxi, 030024, China N/A
Slurry Holdings Limited
Malta
93 Mill Street, Qormi, QRM3102, Malta
Soldering Comércio e indústria ltda. Brazil
Rua Engenheiro Gerhard Ett, nº 1.215, Distrito Industrial Paulo Camilo
Sul, CEP 32669-110, Brazil
Ordinary
Ordinary
Specialised Petroleum
Manufacturing Limited
Scotland
SPM House, Badentoy Crescent, Badentoy Industrial Park, Portlethen,
Aberdeen, AB12 4YD, United Kingdom
Ordinary
SPM Flow Control de Mexico, S.
de R.L. de C.V.
Mexico
Bosque De Ciruelos, 180 Bosques De Las Lomas, Bosque Hayas Y
Bosque De La Reforma Miguel Hidalgo, Dirstrito Federal, CP 11700,
Mexico
Serie A
SPM Flow Control Ltd.
Canada
5233 49 Ave, Red Deer AB T4N 6G5, Canada
SPM UK Limited
Cayman
Islands
PO Box 309, Ugland House, Grand Cayman, KY1-1104,
Cayman Islands
Class A Common
Ordinary
Thandilwa Training Centre (Pty) Ltd South Africa
22 Chester Road, Parkwood, Johannesburg, 2193, South Africa
Ordinary
The Weir Group Insurance
Company Limited
Isle of Man
1st Floor, Rose House, 51-59 Circular Road, Douglas, Isle of Man
Ordinary
The Weir Group International S.A.
Switzerland
Rue de Romont 35, c/o Daniel Schneuwly, 1700 FRIBOURG, Fribourg,
Switzerland
Ordinary
The Weir Group Pension
Trust Limited
Trio Engineered Products
(Hong Kong) Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom N/A
Hong Kong
Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong
Ordinary
Trio Engineered Products, Inc.
United States CT Corporation System, 818 West Seventh Street, Suite 930, Los
Common
Angeles CA 90017, United States
TWG Canada Holdings Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
TWG Cayman Limited
Cayman
Islands
M & C Corporate Services Limited, PO Box 309, Ugland House, South
George Street, George Town, Grand Cayman, KY1-1104, Cayman Islands
Ordinary
TWG Drilling Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
TWG Engineering (No.1) Limited
TWG Engineering (No.2) Limited
TWG Engineering (No.3) Limited
TWG Engineering (No.4) Limited
TWG Engineering (No.5) Limited
TWG Engineering (No.7) Limited
England
and Wales
England
and Wales
England
and Wales
England
and Wales
England
and Wales
England
and Wales
C/o Weir Minerals Europe, Halifax Road, Todmorden, Lancashire,
OL14 5RT, United Kingdom
C/o Weir Minerals Europe, Halifax Road, Todmorden, Lancashire,
OL14 5RT, United Kingdom
C/o Weir Minerals Europe, Halifax Road, Todmorden, Lancashire,
OL14 5RT, United Kingdom
C/o Weir Minerals Europe, Halifax Road, Todmorden, Lancashire,
OL14 5RT, United Kingdom
C/o Weir Minerals Europe, Halifax Road, Todmorden, Lancashire,
OL14 5RT, United Kingdom
C/o Weir Minerals Europe, Halifax Road, Todmorden, Lancashire,
OL14 5RT, United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
TWG Finance, Inc.
United States The Corporation Trust Company, 1209 Orange Street, Wilmington
Common
DE 19801
TWG Investments (No. 6) Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
TWG Investments (No. 7) Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
TWG Investments (No. 8) Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
TWG Investments (No.10) Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
TWG Investments (No.11) Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
TWG Investments (No.3) Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary,
Preference
Directly
Held By
PLC*
% of
class
100
54.43
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
S
h
a
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h
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f
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a
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i
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*
*
*
*
*
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The Weir Group PLC Annual Report and Financial Statements 2019
Shareholder Information
SUBSIDIARY UNDERTAKINGS
CONTINUED
Company Name
Country
Registered Office address
Class name
TWG Investments (No.4) Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary,
Directly
Held By
PLC*
% of
class
100
TWG Overseas Finance S.à.r.l
Luxembourg
20 Rue des Peupliers, L-2328, Luxembourg
Preference
Ordinary,
Preference
TWG South America
Holdings Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary,
Preference
TWG UK Holdings Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
TWG US Finance LLC
United States The Corporation Trust Company, 1209 Orange Street, Wilmington
DE 19801
Membership
Units
TWG US Holdings LLC
United States The Corporation Trust Company, 1209 Orange Street, Wilmington
Units
DE 19801
TWG Young Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
Vulco Peru SA
Vulco S.A.
Peru
Chile
Av. Separadora Industrial, N° 2201 Urb Vulcano Ate, Lima, Peru
Ordinary
San José N° 815, San Bernardo, Santiago de Chile, Chile
Ordinary
Nominative Share
99.17063
Warman Pumps Ltd
Australia
1-3 Marden Street, Artarmon NSW 2064, Australia
Waterloo West Limited
England
and Wales
C/o Weir Minerals Europe, Halifax Road, Todmorden, Lancashire,
OL14 5RT, United Kingdom
Ordinary
Ordinary
Weir ABF LP
Scotland
1 West Regent Street, Glasgow, G2 1RW, United Kingdom
N/A
Weir Arabian Metals Company
Saudi Arabia Makkah Street, Dammam 2nd, Industrial City, Al Khobar, Saudi Arabia Common
Weir B.V.
Netherlands
PO Box 249, 5900 AE, Venlo, Netherlands, Netherlands
Weir Brasil Comercio Ltda
Brazil
Rua Dona Francisca 8.300, Perini Business Park, Bloco C6, Joinville,
Santa Catarina, CEP 89.219-600, Brazil
Weir Canada, Inc.
Canada
2360 Millrace Court, Mississauga ON L5N 1W2, Canada
Weir Canadian Investments, Inc.
Canada
2360 Millrace Court, Mississauga ON L5N 1W2, Canada
Ordinary
Ordinary
Common
Common
Weir do Brasil Ltda
Brazil
Av Jose Benassi, 2151 - Condomini, FAZGRAN, CEP 13213-085 -, Brazil Nominal
Weir Drilling Services Limited
England
and Wales
C/o Weir Minerals Europe, Halifax Road, Todmorden, Lancashire,
OL14 5RT, United Kingdom
Ordinary A, B, C
Weir Engineering Products
(Shanghai) Co., Ltd
China
Room 318, Floor 3, No. 458, Fute North Road, Shanghai, China
N/A
Weir Engineering Services Limited Scotland
1 West Regent Street, Glasgow, G2 1RW, United Kingdom
Australia
1-5 Marden Street, Artarmon NSW 2064, Australia
Ordinary
Ordinary
Weir Group (Australian Holdings)
Pty Limited
Weir Group (Overseas Holdings)
Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
Weir Group African IP Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary £,$
Weir Group Engineering
Hong Kong Limited
Weir Group Executive SUURB
Trustee Limited
Hong Kong
Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong
Ordinary
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
Weir Group General Partner Limited Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
Weir Group Holdings Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
Weir Group Inc.
United States The Corporation Trust Company, 1209 Orange Street, Wilmington
DE 19801
Common,
Preferred
Weir Group Investments Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
Weir Group IP Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
Weir Group Machinery Equipment
(Shanghai) Co. Ltd.
Weir Group Management
Services Limited
China
No.4918, Liuxiang Road, Xuxing Town, Jiading District, Shanghai, China N/A
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
220
100
100
100
100
100
100
99.99
100
100
100
49
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
*
*
*
*
*
*
*
*
*
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Company Name
Country
Registered Office address
Class name
Weir Group Trading
(Shanghai) Co., Ltd.
China
Room 02,03, Longlife Level 14 No. 1566, West Yan'an Road, Shanghai,
China
N/A
Weir Group Trading Mexico, S.A.
de C.V.
Mexico
Av. Nafta No. 775, Col. Parque Industrial, Stiva Aeropuerto, Mexico
Ordinary
Nominative Share
Weir HBF (Pty) Ltd
South Africa
50 Strudebaker Street, Markman Industria, Port Elizabeth, South Africa Ordinary
Weir Holdings B.V.
Netherlands
PO Box 249, 5900 AE, Venlo, Netherlands, Netherlands
Ordinary
Weir Investments Two Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary A, B
Weir Malaysia Sdn. Bhd.
Malaysia
2nd Floor, No 2-4 Jalan Manau, 50460 Kuala Lumpur, Wilayah
Persekutuan, Malaysia
Weir Minerals (India)
Private Limited
Weir Minerals Africa
(Proprietary) Limited
India
Office Unit No 912 and 914, 9th Floor, DLF Tower- A, Plot No 10,
Jasola District Centre, New Delhi, 110025, India
South Africa
5 Clarke Street South, Alrode, Alberton, South Africa, 1149,
South Africa
Weir Minerals Armenia LLC
Armenia
Index 0069, 16/35 Kamarak Str, Yerevan, Armenia
Weir Minerals Australia Limited
Australia
1-3 Marden Street, Artarmon NSW 2064, Australia
Ordinary,
Preference
Ordinary
Ordinary
Ordinary
Ordinary
Weir Minerals Botswana
(Proprietary) Limited
Weir Minerals Caribe SRL
Botswana
Plot 5039/5040, Somerset East Industrial, Francistown, Botswana
Ordinary
Dominican
Republic
Kk 22,5 Autopista Duarte, Parque Industrial Duarte, Parque De Naves
Pid 4, Santo Domingo, Dominican Republic
Ordinary
Weir Minerals Central Africa Limited Zambia
Plot 3655, Chimbuluma Road, Kitwe, Zambia
Weir Minerals China Co., Limited
China
Weir Minerals Colombia SAS
Colombia
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 Czech & Slovak, s.r.o. Czech Republic Hlinky 118, 603 00 Brno, Czech Rep., Brno, Czech Republic
Weir Minerals East Africa Limited
Tanzania
Plot No. 137, Capri Point, Mwanza, Tanzania
Ordinary
N/A
Ordinary
Ordinary
Ordinary
Weir Minerals Europe Limited
Weir Minerals Finland Oy
Weir Minerals France SAS
England
and Wales
Finland
France
Askonkatu 9F, Lahti, FIN-15100, Finland
10 Rue Jacquard, Chassieu, 69680, France
Halifax Road, Todmorden, Lancashire, OL14 5RT, United Kingdom
Ordinary
Weir Minerals Germany GmbH
Germany
Lise-Meitner-Straße 12, 74074, Heilbronn, Germany
Ordinary
Ordinary
Capital
Weir Minerals Hungary Kft
Hungary
Teleki László utca 11 1/.3 Tatabánya, 2800-HU, Hungary
Issued Capital
Weir Minerals Isando (Pty) Ltd
South Africa
5 Clarke Street, Alrode, Alberton, Gauteng, 1449, South Africa
Weir Minerals Italy S.r.l.
Italy
Via F.lli Cervi 1/D, Cernusco sul Naviglio, 20063, Milan, Italy
Ordinary
Ordinary
Weir Minerals Kazakhstan LLP
Kazakhstan
4th Floor, 192/2 Dostyk Avenue, Almaty, 050051, Kazakhstan
Charter capital
Weir Minerals Kenya Limited
Kenya
Weir Minerals Madagascar Sarlu
Madagascar
LR No. 1870/1/569, Ring Road Parklands, P.O. Box 764 - 00606 -
Sarit Centre, Nairobi, Kenya
Immcuble Mining Business Center sis a Mamory Ivato, 10518 Ivato
Aeroport, Analamanga, Madagascar
Ordinary
Ordinary
Weir Minerals Mexico Servicios,
S.A. de C.V.
Mexico
Av. Nafta No. 775, Col. Parque Industrial, Stiva Aeropuerto, Mexico
Weir Minerals México, SA de CV
Mexico
Av. Nafta No. 775, Col. Parque Industrial, Stiva Aeropuerto, Mexico
Ordinary
Nominative Share
Ordinary
Nominative Share
Weir Minerals Mongolia LLC
Mongolia
205, 2nd Khoroo, Bayangol District, Ulaanbaatar, Mongolia
Ordinary
Weir Minerals Mozambique Ltd
Mozambique Mozambique, Maputo Cidade, Distrito urbano1, Bairro, Centrall,
Ordinary
AV. Zedequias, Manganhela, Mozambique
Weir Minerals Netherlands B.V.
Netherlands
PO Box 249, 5900 AE, Venlo, Netherlands, Netherlands
Weir Minerals North Africa SARL
Morocco
Boulevard Sidi Mohamed, Ben Abdellah, Im B, 1Er Etage N 29.,
Casablanca, 20160, Morocco
Ordinary
Ordinary
221
Directly
Held By
PLC*
*
% of
class
100
100
100
100
100
100
97.25
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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Shareholder Information
SUBSIDIARY UNDERTAKINGS
CONTINUED
Company Name
Country
Registered Office address
Weir Minerals Panama S.A.
Panama
Ciudad de Panama, Panama
Class name
Ordinary
Weir Minerals Poland Sp. z.o.o.
Poland
Ul. Ignacego Domeyki 2, 30-066, Krakow, Poland
Company Capital
Weir Minerals Processing
Equipment & Services LLC
United Arab
Emirates
EFCO Cement Products Factory, Plot No 597901, Dubai Investment
Park II, Dubai, United Arab Emirates
Ordinary
Weir Minerals Pump & Mining
Solutions Namibia (Proprietary)
Limited
Weir Minerals RFW LLC (OOO)
Namibia
54 Hidipo Hamutenya Avenue, Swakopmund, Namibia
Ordinary
Russian
Federation
Entrance 2, Floor 3, Business Center TRIO, Building 1, House 12,
8 Marta Street, 127083, Moscow, Russian Federation
N/A
Weir Minerals Shared Services
Proprietary Limited
South Africa
5 Clarke Street South, Alrode, Alberton, South Africa, 1149,
South Africa
Ordinary
Weir Minerals South Africa
Proprietary Limited
South Africa
5 Clarke Street, Alrode, Alberton, Gauteng, 1449, South Africa
Ordinary
Weir Minerals Sweden AB
Sweden
Metallvägen 6, 982 38 Gällivare, Sweden
A, B Class Shares
Weir Minerals Taiwan Corp. Ltd
Taiwan
4F, No 433, Ruiguang Road, Neihu Dist, TAIPEI, Taiwan
Ordinary
Weir Minerals Ukraine LLC
Ukraine
Blagoyeva 31 Str, Dnipro, Dnepropetrovsk Reg, 49054, Ukraine
Share Capital
Weir Minerals West Africa Limited Ghana
No.4, 3rd Close, Airport Residential Area, Accra Post Box CT3170,
Accra, Ghana
Weir Oil & Gas Australia Pty Limited Australia
1-5 Marden Street, Artarmon NSW 2064, Australia
Weir Oil & Gas Malaysia Sdn Bhd Malaysia
Level 16, Integra Tower, The Intermark 348 Jalan Tun Razak, Kuala
Lumpur, Malaysia
Weir Oil & Gas Singapore (Services)
Pte Ltd
Singapore
77 Science Park Drive, #04-01/08, Cintech III Building, 118256,
Singapore
Ordinary
Ordinary
Ordinary
Ordinary
Weir Oil & Gas Technical Service
(Tianjin) Limited
China
Room 312, Rongke Building, No. 8, Zhaofa Xincun, Tianjin Economic-
Technological Development Area, China
N/A
Weir Oil and Gas Colombia S.A.S.
Colombia
Cra 25 A N° 11- 64, Bogota D.c., 111411221 (No Lo Exigen Colocar En
Camara De Comercio), Colombia
Ordinary
Weir Pump and Valve Solutions, Inc United States The Corporation Company, 40600 Ann Arbour Road, Este, 201,
Common
Plymouth Mi 48170 4675, United States
Weir Pumps Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW, United Kingdom Ordinary
Weir Services Australia Pty Ltd
Australia
1-5 Marden Street, Artarmon NSW 2064, Australia
Weir Services Tanzania (Pty) Limited.Tanzania
Plot No.137, Capri Point, Mwanza, Tanzania
Ordinary
Ordinary
Weir Slurry Group, Inc.
United States CT Corporation System, 301 South Bedford Street, Suite 1, Madison,
Common
53703
Weir Solutions Caspian LLC
Azerbaijan
29 Zarifa Aliyeva Street, Apt 77/77A, Sabayil District, Baku, AZ1095,
Azerbaijan
Weir Solutions FZE
United Arab
Emirates
Office no. W 312, West Side 1, Dubai Airport Free Zone, Dubai,
United Arab Emirates
Weir Solutions LLC
Oman
PO Box 168, Postal Code 102, Muscat, Oman
Weir SOS Limited
Bahamas
Ocean Centre, Montagu Foreshore, East Bay Street, Nassau,
New Providence, Bahamas
Ordinary
Ordinary
Ordinary
Ordinary
Weir SPM do Brasil Comércio,
Locação e Instalação de Bombas
e Equipamentos Geradores de
Pressão Ltda.
Brazil
Rua Internacional s/n, Granja dos Cavaleiros, CEP 27933-420, Brazil
Nominal
Weir SPM Singapore Pte. Ltd.
Singapore
77 Science Park Drive, #04-01/06, Cintech III Building, 118256,
Singapore
Ordinary
Weir Sudamerica S.A.
Chile
San José N° 815, San Bernardo, Santiago de Chile, Chile
Ordinary
Nominative Share
Weir Turkey Mineralleri
Limited Sirketi
Turkey
Istanbul Tuzla Organize Sanayi Bölgesi, 2 Cadde No. 12, Tepeören Tuzla,
Istanbul, 34959, Turkey
Bearer
Directly
Held By
PLC*
% of
class
100
100
49
100
100
100
100
100
90
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
99.99
100
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The Weir Group PLC Annual Report and Financial Statements 2019
Company Name
Country
Registered Office address
Class name
Weir US Holdings Inc.
United States The Corporation Trust Company, 1209 Orange Street, Wilmington
Common
DE 19801
Weir Valves & Controls USA Inc.
United States CT Corporation System, 155 Federal Street, Suite 700, Boston
MA 02110
Weir Vulco Argentina S.A.
Argentina
Sarmiento 511 Sur 1°Piso A, San Juan, CP 5400, Argentina
Common,
Preferred
Ordinary
Weir Warman (U.K.) Limited
England
and Wales
Halifax Road, Todmorden, Lancashire, OL14 5RT, United Kingdom
Ordinary
Wesco LLC
United
Arab Emirates
Bin Hamoodah Towers, Floor 13, Khalifa Street, Abu Dhabi, United
Arab Emirates
Ordinary
WHW Group Inc.
United States The Corporation Trust Company, 1209 Orange Street, Wilmington
Common
DE 19801
Wokingham Finance
Company Limited
England
and Wales
C/o Weir Minerals Europe, Halifax Road, Todmorden, Lancashire,
OL14 5RT, United Kingdom
Ordinary
Wuxi Weir Minerals Equipments
Co., Ltd.
China
Lot 265, Wuxi-Singapore Industrial Park, Wuxi City, Jiangsu Province,
China
N/A
Directly
Held By
PLC*
% of
class
100
100
100
100
49
100
100
100
*
*
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Shareholder Information
SHAREHOLDER INFORMATION
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
Follow us
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.
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
including global payments 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.
COMPANY SECRETARY &
REGISTERED OFFICE
Graham Vanhegan
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.
ORDINARY SHAREHOLDER
ANALYSIS AT 31 DECEMBER 2019
By country
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
UK shareholders
Overseas shareholders
92.97% Total
7.03%
By shareholder category
Individuals
Bank or Nominees
Investment Trust
Insurance Company
Other Company
Pension Trust
Other Corporate Body
Total
224
No. of
Shareholders
2,756
1,223
223
378
166
39
48
%
0.42
1.03
0.61
4.88
15.14
10.43
67.49
4,833 100.00 259,613,517 100.00
% No. of Shares
1,089,884
57.02
2,670,108
25.31
1,577,635
4.61
12,670,996
7.82
39,309,782
3.43
0.81
27,089,097
0.99 175,206,015
3,162
1,593
13
1
47
1
16
1.82
97.09
0.01
0.02
0.20
0.00
0.87
4,833 100.00 259,613,517 100.00
65.43
4,724,139
32.96 252,054,247
27,343
41,711
506,492
1
2,259,584
0.27
0.02
0.97
0.02
0.33
The Weir Group PLC Annual Report and Financial Statements 2019
ANNUAL GENERAL MEETING 2020
Our Annual General Meeting will be held
at our Head Office, 1 West Regent Street,
Glasgow, at 2.30pm on Tuesday 28 April 2020.
Further details are contained in the Notice
of Annual General Meeting 2020 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 2020 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.
DIVIDENDS
2020 final dividend
The Directors have recommended a final
dividend of 30.45 pence per share, for the
year ended 31 December 2019. Payment of
this dividend is subject to approval at the 2020
Annual General Meeting. Key dates relating to
this dividend are given below.
Annual General Meeting
Ex-dividend date
Record date
Mandatory Direct Credit deadline
Payment date
DIVIDEND HISTORY – (PENCE PER SHARE)
28 April 2020
23 April 2020
24 April 2020
18 May 2020
5 June 2020
Interim
Final
Total
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
2018
15.75
30.45
46.20
2019
16.50
30.45
46.95
IMPORTANT – PAYMENT
OF DIVIDENDS BY MANDATORY
DIRECT CREDIT
From 2019, the Company simplified the way
in which pay our dividends to shareholders
and now pays cash dividends by direct credit
only. If our Registrar Computershare does
not have any bank/building society details on
record for you and you do not register these
with Computershare by 18 May 2020, the
forthcoming dividend and future payments
will remain unissued and you may then be
charged to have your payments issued at a
later date.
Paying dividends into a bank or building
society account is a quicker and more secure
way for your dividends to be paid directly
to you. In order to receive your dividends
directly into your bank account, you will need
to register your bank/building society details
on our Registrars’ website at investorcentre.
co.uk. You will need your ten digit Shareholder
Reference Number (SRN) which starts with
the letter C or G to log in.
This can be found on your share certificate(s)
and dividend confirmation. Alternatively, you
can call Computershare on the dedicated
Shareholder helpline 0370 707 1402, should
you have any questions about registering your
payment instruction.
An Annual Dividend Confirmation detailing
all payments made throughout the tax
year will be sent to you once a year either
electronically or to your registered address.
In 2020, the Dividend Confirmation will
be dispatched with the November 2020
dividend payment and contains the payment
information for dividends paid during the
2020/2021 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.
AMERICAN DEPOSITARY RECEIPT
(ADR) PROGRAMME
The Company has a sponsored level 1 ADR
programme in the United States. Each ADR
represents two 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.
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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
E-mail: citiadr@citi.com
DIVIDEND TAX ALLOWANCE
With effect from April 2018, the annual tax
free allowance on dividend income was
reduced from £5,000 to £2,000.
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 adviser.
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The Weir Group PLC Annual Report and Financial Statements 2019
Shareholder Information
SHAREHOLDER INFORMATION
CONTINUED
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.
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 (0800 to 1630 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.
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The Weir Group PLC Annual Report and Financial Statements 2019
GLOSSARY
Additive manufacturing
The process of joining materials to make
objects from 3D model data (3D printing)
AGM
Annual General Meeting
GAAP
Generally Accepted Accounting Practice
SME
Small and medium-sized enterprises
greenfield
A term used to describe new
mine developments
subsidiary
An entity that is controlled, either directly or
indirectly, by the Company
Board
The Board of Directors of The Weir Group PLC
Group
The Company together with its subsidiaries
tCO2e
Tonnes of carbon dioxide equivalent
bps
Basis points
HR
Human resources
Brownfield
A term used to describe current and
expanding mine sites
capex
Capital expenditure
CGU
Cash generating unit
Comminution
Crushing, screening and grinding of materials
in mining and sand and aggregates markets
Company
The Weir Group PLC
DBP
Deferred Bonus Plan
Director
A Director of The Weir Group PLC
EBIT
Earnings before interest and tax
EBITDA
Earnings before interest, tax, depreciation
and amortisation
emerging markets
Asia-Pacific, South America, Africa and the
Middle East
EPCMs
Engineering, Procurement and Construction
Management companies
EPS
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,
lease payments, net interest payments,
dividends paid, settlement of derivatives,
purchase of shares for employee share plans
and pension contributions
IAS
International Accounting Standards
IFRS
International Financial Reporting Standards
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
International Organisation for Standardisation
KPI
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
Long Term Incentive Plan
NPBTA
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
Payment in lieu of notice
Registrar
Computershare Investor Services plc
R&D
Research and development
RPI
UK Retail Prices Index
SHE
Safety, Health and Environment
227
TIR
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)
TSR
Total Shareholder Return comprising
dividends paid on ordinary shares and the
increase or decrease in the market price of
ordinary shares
WACC
Weighted average cost of capital
WTI
West Texas Intermediate
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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.
Designed and produced by Radley Yeldar www.ry.com
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Pureprint is a CarbonNeutral company.
Both Manufacturing mill and the printer are
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