WEIR:
SEE THINGS DIFFERENTLY.
The Weir Group PLC
Annual Report and
Financial Statements 2020
CONTENTS
Strategic Report
Our Business at a Glance
Our ‘We are Weir’ Strategic Framework
Chairman’s Statement
150 years of Weir
Chief Executive’s Strategic Review
Our 2020 Key Performance Indicators
Iron Bridge Aftermarket Contract
Our Markets
Our Business Model
The Global Pandemic
Stakeholder Engagement
Safety in Mining
Financial Review
Sustainable Society
Operational Review
Risk Management
Principal Risks and Uncertainties
Our Sustainability Review
Non-financial Reporting
Corporate Governance
Introduction from the Chairman
Governance at a Glance
Board of Directors
Group Executive
Board Statements
Division of Responsibilities
Board Meetings
Board Activities and Governance in Action
Governance in Action - Meet the Board Session
Shareholder Engagement
Boardroom Practice
Board Effectiveness
Accountability
Viability Statement
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
Financial Statements
Independent Auditors’ Report to the Members of The Weir Group PLC
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Notes to the Group Financial Statements
Company Balance Sheet
Company Statement of Changes in Equity
Notes to the Company Financial Statements
Additional Information
Subsidiary Undertakings
Shareholder Information
Glossary
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1 Continuing operations.
2 Restated at 2020 average exchange rates.
3 Before adjusting items (note 2).
4 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.
5 Defined as revenues from new products introduced in the last three years.
6 eNPS (Employee Net Promoter Score) is an index used to measure employee satisfaction levels.
7 True Benchmark removes the effect of external demographic influences that are out of our
control but which all affect employee engagement (employee age, tenure, gender, department,
job level and office location).
8 Flow Control not included.
FINANCIAL &
NON-FINANCIAL
SUMMARY
ORDERS2
£1.9bn1
-13%
Total Group
Discontinued Operations
Continuing Operations
REVENUE
£2bn1
-4%
Total Group
Discontinued Operations
Continuing Operations
2.3
1.9
2.9
2.9
2.1
2.2
1.9
2016
2017
2018
2019
2020
2.3
1.9
2.8
2.8
2.3
2.0
2.0
2016
2017
2018
2019
2020
ADJUSTED PROFIT BEFORE TAX3
TOTAL STATUTORY LOSS AFTER TAX
£255m1
-5%
Total Group
Discontinued Operations
(£23m loss in 2020)
Continuing Operations
(£149m)
+61%
333
299
247
171
269
232
255
2016
2017
2018
2019
2020
TOTAL INCIDENT RATE4
0.37
+ 23% underlying
improvement
0.60
0.53
0.45
0.48
0.37
Total Group
2016
2017
2018
2019
2020
REVENUES FROM NEW SOLUTIONS5
£94m1
0%
Total Group
Discontinued Operations
Continuing Operations
168
176
180
110
114
94
97
2016
2017
2018
2019
2020
EMPLOYEE NET PROMOTER SCORE (eNPS)6
421
247 points ahead of the
True Benchmark for our
industry in 2020
Total Group
Continuing Operations
42
34
28
18
2019 (H1)8 2019 (H2) 2020 (H1)
2020 (H2)
HIGHLIGHTS FROM 2020
CHIEF
EXECUTIVE’S
STRATEGIC
REVIEW
READ MORE: PAGES 10-15
WEIR: SEE THINGS
DIFFERENTLY.
The Weir Group’s purpose is to enable
the sustainable and efficient delivery of
the natural resources essential to create
a better future for our world. We do this
by seeing things differently; challenging
the norm with innovative engineering,
and delivering excellent outcomes for all
our stakeholders. It is what has inspired
us for 150 years and why we’re so
optimistic about the future.
WHAT’S DRIVING
OUR MARKETS?
READ MORE: PAGES 18-19
CELEBRATING
150 YEARS
READ MORE: PAGES 8-9
IRON BRIDGE
CONTRACT WIN
READ MORE: PAGES 16-17
A HIGHLY RESILIENT
PERFORMANCE
READ MORE: PAGES 28-31
OUR STRONG
GOVERNANCE
READ MORE: PAGES 69-140
HOW WE ADAPTED
TO THE COVID-19
PANDEMIC
READ MORE: PAGES 22-23
For more information visit our website
www.global.weir
1
The Weir Group PLC Annual Report and Financial Statements 2020 OUR BUSINESS AT A GLANCE
A premium mining technology business with strong market positions
EXTRACTION:
ESCO®
#1 in Ground Engaging Tools
COMMINUTION:
Enduron®
#1 in High Pressure
Grinding Rolls
MILL CIRCUIT:
Warman®
#1 in Slurry Pumps
TAILINGS MANAGEMENT:
GEHO®
#1 in Positive
Displacement Pumps
FOCUSED ON ATTRACTIVE MARKETS
HIGHLY RESILIENT THROUGH THE CYCLE
80% OF REVENUES ARE FROM MINING APPLICATIONS
75% OF REVENUES FROM RECURRING AFTERMARKET
Mining applications
Infrastructure & Other
80%
20%
Aftermarket (AM)
Original Equipment (OE)
75%
25%
BROAD GLOBAL CUSTOMER BASE
BIASED TOWARDS FUTURE-FACING COMMODITIES
REVENUES BY GEOGRAPHY %
REVENUES BY COMMODITY
North America
South America
Australasia
Asia Pacific
Middle East & Africa
Europe
29%
21%
19%
11%
11%
9%
Copper
Iron Ore
Gold
Oil Sands
Coal
Other
22%
16%
12%
7%
6%
37%
2
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 WEIR MINERALS
WEIR ESCO
WHAT WE DO
Weir Minerals’ products and technology are used in mining
and infrastructure markets around the world. The Division
produces highly engineered original equipment and provides
comprehensive aftermarket support for mining and minerals
processing, slurry transportation and mine dewatering.
MARKET POSITIONS
Minerals has a number of market-leading brands including
Warman® Centrifugal Slurry Pumps, GEHO® Positive
Displacement Pumps, Enduron® High Pressure Grinding Rolls,
Cavex® Hydrocyclones and Linatex® Resistant Rubber.
READ MORE IN THE MINERALS OPERATIONAL REVIEW:
SEE PAGES 34-35
WHAT WE DO
ESCO provides highly engineered ground engaging tools (G.E.T)
which are used in global mining and infrastructure markets.
Its equipment is mission-critical to the efficient extraction and
transport of materials.
MARKET POSITIONS
ESCO has market-leading positions in G.E.T tooth systems for
surface mining and construction, lip systems for hydraulic mining
excavators and cable shovel buckets and cutterheads for hard
rock dredging.
READ MORE IN THE ESCO OPERATIONAL REVIEW:
SEE PAGES 36-37
ADDRESSABLE MARKET
c.£7.5bn
2020 REVENUE1
£1,469m
+4%
ADDRESSABLE MARKET
c.£2.5bn
2020 REVENUE1
£496m
-13%
2020 ADJUSTED OPERATING PROFIT1
2020 ADJUSTED OPERATING PROFIT1
£260m
0%
1 2019 restated at 2020 average exchange rates.
£81m
-3%
3
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 OUR ‘WE ARE WEIR’
STRATEGIC FRAMEWORK
Our ‘We are Weir’ strategic framework
is a simple guide to our purpose,
distinctive competencies and values.
We are a global family.
We are proud of our unique
blend of talent, technology
and culture. We are here to
inspire our people to do the
best work of their 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.
We shape the next
generation of smart, efficient,
sustainable solutions with
cutting-edge science and
tradition of innovation.
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READ MORE ON OUR STRATEGY AND
BALANCE SCORECARD: SEE PAGES 10-15
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We deliver excellence
for all of our stakeholders,
through strong leadership,
performance culture
and rigorous standards
of governance.
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 WE BELIEVE IN
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TO UNDERSTAND MORE ABOUT
HOW WE LIVE OUR VALUES:
SEE PAGES 20-21
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 36-38
WE DELIVER
TO UNDERSTAND MORE ABOUT
THE VALUE WE DELIVER:
SEE PAGES 20-21
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Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020
CHAIRMAN’S STATEMENT
OUR PURPOSE HAS
NEVER BEEN CLEARER
AND OUR PROSPECTS
HAVE NEVER BEEN
BRIGHTER.
CHARLES BERRY
Chairman
6
A year of challenge and transformation.
DEAR SHAREHOLDER,
Thank you for your support in 2020. It was an extraordinary year and
while it is still too early to fully assess the impact of Covid-19, there
are lessons I think we can draw upon, even as we continue to navigate
the pandemic.
TAKING CARE OF OUR PEOPLE AND WIDER
STAKEHOLDERS
The most significant lesson is to always be guided by your values
and at Weir, that means thinking safety first and taking care of our
people and wider stakeholders. Every business depends on a number
of internal and external partners to succeed and that is particularly
important when there is a high degree of uncertainty.
During the year the Board heard directly from a diverse range of Weir
colleagues through our ‘Meet the Board’ sessions and employee
engagement surveys, and this reaffirmed our commitment to the
safety of our people and communities. We increased the frequency of
Board meetings to ensure decision making was swift and agile and met
with fifty of the Group’s senior managers who provided a broad view
of the impact of the pandemic on individual teams and businesses.
Our customers also made clear their need for us to support them
through these challenging times, and our investors encouraged us to
prioritise our people and maintain a long-term perspective.
Our response to the pandemic included accelerating investment in
technology to ensure everyone who could work from home was able
to do so, reconfiguring our manufacturing and service facilities to
make them more Covid-19 secure and developing digital solutions
to support those customers we were unable to access in person.
Our commitment to communities included engineers deploying 3D
printing capacity to manufacture face masks for local health authorities
and employees donating food, time and money to help the most
vulnerable in the countries in which we operate.
While we saw some disruptions to our facilities, the benefits of our
regional operating model enabled us to fully serve the needs of our
customers. This resilience also meant we could offer support to our
supply chain including accelerated payments for those smaller partners
who were most vulnerable to the economic disruption caused by
Covid-19.
FINANCIAL PRUDENCE
Given the level of uncertainty the Board also moved quickly to protect
the business, including taking some difficult decisions. For the first
time in almost 40 years we did not recommend a final or interim
dividend to Shareholders. We took this decision as part of a range
OUR PURPOSE
To enable the sustainable and
efficient delivery of the natural
resources essential to create a
better future for the world.
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 S
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150 YEARS OF SEEING THINGS DIFFERENTLY
Weir’s ability to adapt and grow is brought into focus as the Group
celebrates its 150th anniversary in 2021. Few companies have reached
such a milestone, but Weir’s longevity is testament to the culture that
our founders, George and James Weir, instilled in the 19th Century and
which endures to this day. This is a business that has always sought to
see things differently, from the way we develop innovative solutions to
customers’ challenges through to the way we engage with our people,
ensuring every employee in every country is helped to become a co-
owner of the Group. It is an excellent foundation for the future.
BOARD AND GOVERNANCE CHANGES
As previously announced, Rick Menell retired from the Board following
the Annual General Meeting having served as Non-Executive Director
including as Senior Independent Director from 2015. Cal Collins also
stepped down from the Board as Non-Executive Director in September
2020 having joined the Board following the ESCO acquisition in 2018.
I would like to thank both Rick and Cal for their contributions and wise
counsel to the Group.
I was delighted to welcome Srinivasan Venkatakrishnan and Ben
Magara as Non-Executive Directors in January 2021. Both Srinivasan,
who is popularly known as Venkat, and Ben have extensive experience
leading global mining businesses. Venkat has previously served as
CEO of both Vedanta Resources plc, the diversified global natural
resources company, and AngloGold Ashanti Limited, one of the world’s
largest gold producers. Ben served as CEO of platinum producer
Lonmin plc, having previously held a number of senior roles for Anglo
American plc.
Looking ahead to the rest of 2021, we will continue to prioritise the
health and wellbeing of our people, customers and communities, as
we navigate through the Covid-19 pandemic. While visibility remains
uncertain in the short-term, our confidence in the long-term prospects
of the Group has strengthened in the past year. We have an effective
strategy, a resilient business model and a passionate and committed
global team who will continue to build an ever-stronger Weir that
benefits all our stakeholders.
CHARLES BERRY
Chairman
2 March 2021
of measures to support the business and exercise prudent financial
management. At the same time, we took a number of actions to
reduce costs including cancelling scheduled fee and pay increases for
the Board and Group Executive and significantly reducing travel and
discretionary spending.
DELIVERING STRATEGIC TRANSFORMATION
One of the Group’s strengths is its ability to execute effectively even
in extraordinary circumstances. This was demonstrated in the strong
strategic progress achieved while also dealing with the pandemic.
Since Jon Stanton became CEO in 2016, our strategy has been to
focus capital allocation on our mining technology businesses, reflecting
their core strengths and the long-term growth opportunities in this
market. That is the reason we acquired ESCO in 2018 and sold the
Flow Control Division in 2019. The next step in our transformation
into a mining technology pure play was to sell the Oil & Gas Division.
This was completed in early February 2021, when the business was
acquired by Caterpillar Inc., providing a secure home for employees
and maximising value for all our stakeholders.
These portfolio changes mean that Weir is now a simpler, stronger
and more sustainable business. Our purpose has never been clearer
and our prospects have never been brighter. As a premium mining
technology business our job is to enable the sustainable and efficient
delivery of the natural resources essential to create a better future
for the world. This means we have an important role in supporting
structural trends, from rising living standards to decarbonisation, that
will underpin our markets in the decades ahead. You can read more
about how we will maximise these opportunities in Jon Stanton’s
CEO Review on page 10. It is an honour to be part of this team and on
behalf of the Board I would like to thank the global Weir family for their
magnificent efforts in the past year.
FINANCIAL RESULTS
In 2020, the Group’s continuing operations delivered a highly resilient
financial performance. Reported revenues were down 4% to £1,965m
and 1% lower on a constant currency basis. Adjusted pre-tax profits
from continuing operations of £255m represented a 5% decrease
from the prior year. The statutory loss after tax of £149m reflected
the impairment of the Oil & Gas Division to its fair value. You can read
more in the Financial Review on page 28. As our markets continue to
recover from Covid-19 disruption and, to support further deleveraging,
the Board has decided not to recommend payment of a final dividend.
Future dividend payments will be aligned to the Group’s new capital
allocation policy, which is detailed in the Financial Review, and
includes a target to pay out 33% of adjusted EPS through the cycle.
Resumption of the dividend will depend on a combination of factors
including market outlook and leverage.
WE BELIEVE IN
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Nurses in York, UK, wearing
Weir manufactured visors.
7
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020
150 YEARS OF WEIR
We’ve come a long way since 1871.
From a start-up founded by two
brothers in the 19th Century to one
of the world’s leading engineering
businesses with 11,000 colleagues and
operations in more than 60 countries.
It is a journey fuelled by innovation,
agility and passionate people who
see things differently.
1871
1871-1900
1900
Founding Weir
From Glasgow to the world
Early investors in people and skills
George and James Weir
establish the firm as G & J Weir.
The brothers, both engineers,
produce ground-breaking
inventions including the Direct
Acting Feed Pump, pictured.
It made steamship travel more
efficient, requiring less coal and
enabling larger cargos. It also
established Weir’s reputation
for innovation and quality.
Glasgow’s position as a global
centre for shipbuilding excellence
combined with the technology
advances of Weir’s equipment
meant the business grew rapidly.
Its products were widely adopted
by navies and merchant fleets
from around the world with
its pumps synonymous with
reliability among generations
of marine engineers.
Weir was the first business
in Scotland to establish an
apprenticeship school in the
1900s. The school, with its own
schoolmaster, trained generations
of people in engineering practices,
including employees of shipping
companies. Many of its graduates
would become loyal customers in
the future.
8
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 PASSIONATE PEOPLE WHO
SEE THINGS DIFFERENTLY:
WILLIAM, 1ST LORD WEIR
In 1902 at the age of just 26,
William Weir became managing
director of the family firm.
He had a sparkling intellect and
an international outlook and,
on his early travels in America,
met Henry Ford and toured his
revolutionary car factory. As well
as adopting some of Ford’s
methodology, William was a car
enthusiast – the second person
ever in Scotland to own a car.
He even drove in early motor
races, including the French
Grand Prix.
During the First World War,
William was seconded to the
British Government, initially in
charge of munitions production
in Scotland and then taking
charge of the Royal Flying Corps
before becoming Secretary
of State for Air and part of the
War Cabinet – which facilitated
his elevation to Lord Weir.
While remaining Chairman of the
company, William’s extensive
public service continued after the
war. His 1926 report reorganised
the electricity supply industry
and created the National Grid.
He proposed the electrification
of the railways and helped
create the sugar beet industry.
He played a major role in the
building of the trans-Atlantic
ocean liners the Queen Mary
and the Queen Elizabeth and,
crucially, organised aircraft
rearmament and the growth of
the Royal Air Force ahead of the
Second World War.
1910-1950
1950-2010
2010-2020
Diversifying into new markets
Global growth and acquisitions
In the early part of the 20th
century the Group was
diversifying into new markets,
leveraging more of its technology
breakthroughs including the
first land-based desalination
plant. It also helped construct
the first Anglo-Persian pipeline
and pumping stations in the
earliest days of Middle East
oil production. Such were the
conditions, heavy equipment was
dropped in the sea and towed
ashore by rowing boats (pictured)
before being rolled 150 miles.
The Group remained diversified
but gradually began to focus
on primary markets, including
mining, power and upstream oil
and gas. Acquisitions included
Warman® giving the Group
a global leadership position
in mining markets while the
purchase of SPM® meant Weir
became the leading provider of
pressure pumping equipment to
US shale oil markets.
Transforming into a premium
mining technology business
The Group took the strategic
decision to focus on its core
mining markets including
completing its largest-
ever acquisition with the
$1.3bn purchase of ESCO.
It subsequently sold its Flow
Control and Oil & Gas Divisions to
become a mining technology pure
play aligned to structural trends
including decarbonisation of
energy and transport networks.
9
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 CHIEF EXECUTIVE’S STRATEGIC REVIEW
2020 was a year of strong execution
across the Group and we completed
our transformation into a premium
mining technology business.
We delivered a highly resilient performance in extraordinary
circumstances while also making significant strategic progress,
providing a strong platform for continued long-term growth. I would
like to thank my Weir colleagues for their commitment and hard work
and our many other stakeholders who have supported the business in
the past year.
The Group is now in its 150th year, having been founded in 1871
by two Scottish engineers, James and George Weir. The brothers
had a passion for seeing things differently and solving the big
challenges of the day through innovative engineering. That culture,
and the business they created, has never been more relevant. In this
review I will discuss how we responded to the Covid-19 pandemic,
the performance of the Group in 2020, the benefits of creating
a premium mining technology business and how we’ll maximise
value for all stakeholders, including setting out new medium-term
performance goals.
COVID-19: PROTECTING OUR PEOPLE, CUSTOMERS
AND COMMUNITIES
Our response to the unprecedented challenge of Covid-19 was based
on our core values, which start with safety first. In 2020, we achieved
a 23% reduction in our Total Incident Rate (TIR) to 0.37. In both March
and November there were no recordable incidents across our global
operations, the first time this has been achieved in the Group’s
recorded history and proof that our ambition of becoming a zero-harm
workplace is within reach. This performance benefited from our safety
culture and our highly devolved operating model where decisions
are made as locally as possible, within a clear strategic governance
framework. These were both key components in our response to
the Covid-19 pandemic, helping us to adapt quickly and effectively
to protect our people and fully serve our customers. In times of
uncertainty communication is critical and by having a regular dialogue
throughout the business we were able to reassure and share
knowledge across the organisation, generating record employee
engagement and strengthening our culture even further.
Our Covid-19 mitigation actions included requiring everyone who
was able to work from home to do so, adapting our manufacturing
and service facilities to support infection control procedures, and
prioritising mental health through local initiatives and our employee
HOW IS
WEIR MAKING
MINING MORE
SUSTAINABLE?
HELPING MINERS PRODUCE
MORE WHILE USING LESS
ENERGY AND WATER
READ MORE: PAGES 16-17
WE ARE A PREMIUM
MINING TECHNOLOGY
BUSINESS WITH A
CLEAR PURPOSE
AND STRATEGY TO
DELIVER EXCELLENT
OUTCOMES FOR ALL
STAKEHOLDERS.
JON STANTON
Chief Executive Officer
10
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 assistance programmes. However, like every community, the Weir
Group family has been directly impacted by the pandemic and where
people have contracted the virus we have been there to support
them and their families. Our teams have also played their part in
helping local communities. This included joining the efforts to supply
personal protective equipment to health authorities, providing financial
support to those areas where social programmes are either limited or
unavailable, and accelerating payments to smaller, local suppliers.
2020: A HIGHLY RESILIENT PERFORMANCE
The Group’s performance during the Covid-19 pandemic has also
reaffirmed the fundamental strength of the business. We maintained
operating profits from continuing operations despite the negative
impact of the pandemic on market activity that included ore production
falling by an estimated 15% in the second quarter and a significant
decline in infrastructure market demand due to construction
shutdowns. In response, we took early action to reduce costs with
c.£40m in continuing operations savings for the full year while also
investing in those areas that will fuel future growth including expanding
our service network and investing in innovation. New products
included the next generation of Cavex® hydrocyclones that offer 30%
more throughput alongside reduced water and energy consumption.
We won the first order for the new ToolTekTM system that significantly
improves operator safety in the pit. We also installed the first pilot
Terraflowing® plant which is designed to cost-effectively reduce
water in tailings, enabling this waste product to be safely stored
or repurposed. The Group also delivered a 13% reduction in CO2e
emissions from our operations as a proportion of revenues (tCO2e/£m),
making good progress towards a 30% reduction by 2024 and a 50%
cut by 2030. It was also pleasing to see the Group upgraded to an
A- by the climate rating agency CDP, recognising our leadership and
commitment to best practice particularly in governance, disclosure and
emissions reduction initiatives.
Revenues were broadly stable supported by the delivery of the
majority of the original equipment for the record c.£100m Iron Bridge
Project order for our High Pressure Grinding Rolls (HPGR) technology,
which eliminates water use and reduces energy consumption by up
to 40%. We also won a £95m order to provide HPGR aftermarket
service to the project, where production is expected to begin in 2022-
23. This demonstrates the long-term value of focusing on smarter,
more efficient and sustainable solutions. And despite Covid-19
related mine site access issues our Integrated Solutions strategy
also delivered £159m in additional orders, up 3% on the prior year.
In addition, ESCO’s Nemisys® solution continued to gain share in
mining attachments. As the second half progressed, we saw a gradual
improvement in order trends across mining and infrastructure markets
and our longer-term project pipeline has continued to strengthen,
reflecting the positive structural trends underpinning future demand in
our markets.
CREATING A PREMIUM MINING TECHNOLOGY BUSINESS
When I became CEO in 2016, we made mining our first priority for
capital allocation. Since then we have acquired ESCO, a leading
provider of highly engineered mining technology, and sold the Flow
Control Division. The next milestone in our strategic transformation
was the sale of our Oil & Gas Division which, despite an extremely
tough market backdrop, was successfully achieved when the business
joined Caterpillar Inc, at the beginning of February 2021. The sale, for a
total enterprise value of $405m subject to customary working capital
and debt-like adjustments, maximised value for stakeholders and
provided an excellent home for the Division’s employees.
Our decision to primarily focus on mining reflects the positive
prospects for the industry, the strength of our market-leading
positions, and the resilience of our aftermarket-focused business
model. Today, we are a premium mining technology business with
a clear purpose – to enable the sustainable and efficient delivery of
essential natural resources – and a strategy that will deliver long-term
sustainable growth.
Maximising long-term structural growth opportunities
Our decision to focus on mining is based on a combination of
supportive macro trends that will underpin the sustainable growth of
the market in the decades ahead. These include:
• The need for more natural resources to support population growth,
urbanisation and rising living standards.
• Increased demand for metals such as copper, the Group’s largest
commodity exposure, that enable the electrification of energy and
transport networks that is critical to decarbonisation.
• The requirement for a technology transformation in mining to meet
stakeholder requirements including making operations ‘Net Zero’
of CO2 emissions and reducing water consumption.
• Ongoing ore grade declines that mean more material needs to be
excavated and processed supporting aftermarket demand.
A robust business model: high barriers to entry and c.75% of
revenues from resilient aftermarket
To maximise value from our markets the Group has a highly resilient
business model that provides significant barriers to entry and delivers
consistent profitable growth through the cycle. It starts with providing
highly engineered technology that leverages our materials science
and foundry capability. This builds a large installed base of original
FULLY SUPPORTING OUR
CUSTOMERS THROUGH
THE PANDEMIC
KEEPING PEOPLE SAFE
THROUGH INNOVATION
A STRATEGY TO SUPPORT
A MORE SUSTAINABLE SOCIETY
READ MORE: PAGES 22-23
READ MORE: PAGES 26-27
READ MORE: PAGES 32-33
11
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 CHIEF EXECUTIVE’S STRATEGIC REVIEW
CONTINUED
equipment that is mission-critical to customers’ ongoing production.
Our products are focused on abrasive applications, such as hard
rock extraction and processing, that generate ongoing demand for
higher-margin spares and services, which represent around 75%
of revenues. This best-in-class aftermarket model is supported by a
comprehensive global service network that covers every major mining
region in the world and means the Group has an aftermarket-retention
rate of more than 90%. The embedded nature of our solutions,
alongside the disproportionately large cost of unplanned downtime
for customers, builds long-term relationships that in many cases
span decades. This combination provides Weir with a sustainable
competitive advantage that is reflected in the long-term aftermarket
sales performance of Minerals, our largest Division, which delivered a
7% revenue CAGR in the last decade.
Making mining operations, smarter, more efficient and sustainable
The need for mining to undergo a technology transformation to
reduce its energy, water and waste provides a significant commercial
opportunity for the Group. To improve productivity while meeting Net
Zero commitments miners will need to work in partnership with their
supply chain to develop innovations that make their operations smarter,
more efficient and sustainable. This is Weir’s sweet spot and is the
focus for our research and development activity. To assess the scale of
energy consumption in mining the Group commissioned independent
research that estimates the industry consumes c.3.5% of the world’s
total final energy, with comminution, or the grinding and crushing
of rock, one of the most energy-intensive process in a typical mine.
This is an area where Weir can make a significant impact through our
Enduron® HPGR technology that is up to 40% more energy efficient
than traditional ball mills. To illustrate the scale of the difference our
technology can make, we estimate the CO2e emissions savings for
our customers from our installed base of HPGRs, and those on our
order book, to be three times the total emissions generated by the
Group’s continuing operations in 2020. Creating sustainable solutions
is a key component of our Sustainability Roadmap, which was created
in consultation with stakeholders, and also includes a commitment
to zero-harm Weir operations, nurturing our unique culture, and as
indicated earlier, cutting our Scope 1 & 2 CO2e emissions in half
by 2030.
WINNING THROUGH ‘WE ARE WEIR’: NEW MEDIUM TERM
GROWTH TARGETS
To maximise the Group’s potential, we have refreshed our performance
goals to support execution of our strategy between 2021-2023.
These are based on the distinctive competencies that differentiate
Weir - People, Customers, Technology and Performance - and form the
basis of our ‘We are Weir’ strategic framework.
People: Improve TIR and eNPS
We’re making good progress towards becoming a zero-harm
workplace with a 77% reduction in TIR since 2012, when we first
introduced the measure. That makes us one of the safest industrial
businesses in the world, but we need to go further and will measure
progress through continuous improvement in our TIR. At Weir, we
believe that beyond the obvious imperative of “safe start, safe finish,
safe home” a deeply embedded safety culture is a key indicator of
organisational effectiveness. Alongside a safe workplace we also
want to ensure that we have access to a broad range of talent
and that colleagues choose Weir to do the best work of their lives.
Our employees tell us they want Weir to be more inclusive and diverse
and we are committed to achieving this. Excellent communication
throughout the organisation is one of our real strengths and we will
continue to prioritise engagement and seek to improve our employee
Net Promotor Score (eNPS) further, targeting top quartile performance
against an external benchmark.
Customers: Growing ahead of our markets through the cycle
The growth prospects for our markets are attractive and underpinned
by structural trends but we believe the distinctive value we offer will
enable us to grow ahead of the anticipated 3% annual growth in ore
production. We expect to deliver mid-to-high single-digit annual growth
through the cycle supported by our organic initiatives. These include:
• Working in partnership with customers, building on the success
of our Integrated Solutions strategy that provides productivity
upgrades, greenfield sub-systems and increased service
level agreements.
‘WE ARE WEIR’ DRIVING ORGANIC GROWTH
DISTINCTIVE COMPETENCY
STRATEGIC INITIATIVES
PEOPLE
CUSTOMERS
TECHNOLOGY
PERFORMANCE
• Zero-harm workplace
• Diverse and inclusive workforce
• Investing in talent and skills
• Strategic growth initiatives
• Expand service network
• Integrate digital experience
• Total Incident Rate (TIR)
• Employee NPS
• TIR of 0.41
• eNPS +42
• Growing ahead of our markets through the cycle:
• Ore production1 c.-3%; Minerals aftermarket revenues2 -2%
– AM > Ore production
• Machine utilisation -13%; ESCO revenues2 -13%
• Lowest Total Cost of Ownership and CO2e products
• Increase R&D as a percentage of revenues
• R&D represented 1.6% of sales
• Accelerate sustainable solutions
• Growth in sustainable solutions
• Integrated solutions orders +3%
• Enterprise-wide integration of big data and analytics
• Optimise operational leverage
• Lean and efficient functions
• Operating margin3 progression
• Expansion in ROCE
• Operating margin3 of 15.5%
• ROCE of 12.5%
1 Weir-weighted commodity exposure: source McKinsey 2021. 2 2019 restated at 2020 average exchange rates. 3 Based on profit before adjusting items (see note 2).
• Reduce total scope 1 & 2 CO2e emissions
• 30% reduction in CO2e by 2024
• 13% reduction in tCO2e to 75.7
12
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020
• Extending our geographic reach including delivering revenue
synergies between Minerals and ESCO, globalising ESCO’s
infrastructure offering and expanding our service network to capture
aftermarket opportunities in high growth areas such as Russia,
China, Central Asia and APAC.
• Expansion of our product range, leveraging our materials and
hydraulic expertise into adjacent markets and increasing our digital
capability to improve customer experience.
• Driving further market penetration of more sustainable solutions
including new downstream Scope 3 solutions that help our
customers meet their environmental objectives.
Technology: Increasing R&D as a percentage of revenues and
growth in sustainable solutions
Increasing long-term demand and the need for a social licence to
operate will drive a technology transformation in mining in the years
ahead. This will require radical change in an industry that has traditionally
been slow to adopt new technologies due to the significant upfront
costs of new mines and the high price of downtime once an operation
is running. To meet future environmental and productivity targets,
however, will require increased innovation which provides a significant
commercial opportunity for engineering partners like Weir. To reflect this,
we are focusing our research and development investment in making
mining operations smarter, more efficient and sustainable. This is the
lens through which we will measure progress building on our current
offering which includes HPGRs and the development of products
such as Terraflowing® and hydro-hoisting which have the potential to
significantly improve waste safety, management and reduce CO2e.
Performance: Operating margin progression and lower CO2e
And as we grow, we will stay focused on delivering attractive returns
through the cycle. In 2020, our continuing Group operating margin
was 15.5% but through a combination of increased volumes and
operational and functional efficiencies we are targeting a 150bps
expansion by 2023, assuming a broadly stable mix of higher margin
aftermarket and lower margin original equipment. We’ve already
made good progress with a more than 500bps improvement in ESCO
margins since we acquired the business in 2018 but we see further
opportunities to leverage our global platform and streamline functions
to support future progress. We will also deliver on our commitment
to reduce emissions from our operations by 30% by 2024, principally
through energy efficiency at our main foundries and increasing the
proportion of power supplied from renewable sources. This will all be
supported by a disciplined capital allocation policy that is set out in the
Financial Review on page 28.
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
OUTLOOK
We have had a good start to 2021 and we expect to deliver growth in
full year constant currency profits subject to any further disruption from
the ongoing Covid-19 pandemic. More broadly, underlying conditions
are favourable and with the strong platform we’ve created we’re
confident of outperforming our markets over the next three years and
delivering sustainable long-term profitable growth.
GROUP EXECUTIVE
I’d like to thank both Paul Coppinger and Jon Owens for their
magnificent contributions to the Group as President of Oil & Gas and
ESCO Divisions. Paul joined Caterpillar Inc. following completion of
the sale of Oil & Gas and Jon retired after more than 30 years with
ESCO. Jon was succeeded by Andrew Neilson, who successfully led
the ESCO integration team, and brings a wealth of experience from
across our business. 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. Paula has been key to developing our new Sustainability
Roadmap that focuses on how we help our customers significantly
reduce their environmental impact while also increasing productivity.
Garry has extensive experience in building Group-wide digital platforms
that deliver enhanced support for customers, while also improving
collaboration and innovation across the business.
JON STANTON
Chief Executive Officer
2 March 2021
MEDIUM-TERM KPIS
2020 BENCHMARK (CONTINUING OPERATIONS)
• Total Incident Rate (TIR)
• Employee NPS
• TIR of 0.41
• eNPS +42
• Growing ahead of our markets through the cycle:
• Ore production1 c.-3%; Minerals aftermarket revenues2 -2%
– AM > Ore production
• Machine utilisation -13%; ESCO revenues2 -13%
• Lowest Total Cost of Ownership and CO2e products
• Increase R&D as a percentage of revenues
• R&D represented 1.6% of sales
• Accelerate sustainable solutions
• Growth in sustainable solutions
• Integrated solutions orders +3%
• Enterprise-wide integration of big data and analytics
• Optimise operational leverage
• Lean and efficient functions
• Operating margin3 progression
• Expansion in ROCE
• Operating margin3 of 15.5%
• ROCE of 12.5%
1 Weir-weighted commodity exposure: source McKinsey 2021. 2 2019 restated at 2020 average exchange rates. 3 Based on profit before adjusting items (see note 2).
• Reduce total scope 1 & 2 CO2e emissions
• 30% reduction in CO2e by 2024
• 13% reduction in tCO2e to 75.7
13
• Zero-harm workplace
• Diverse and inclusive workforce
• Investing in talent and skills
• Strategic growth initiatives
• Expand service network
• Integrate digital experience
PEOPLE
CUSTOMERS
TECHNOLOGY
PERFORMANCE
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020
OUR 2020 KEY PERFORMANCE INDICATORS
2020 Financial and Non-financial measures aligned to ‘We are Weir’.
FINANCIAL
NON-FINANCIAL
ADJUSTED PROFIT BEFORE TAX
WORKING CAPITAL AS A PERCENTAGE
OF SALES
PEOPLE
333
26.9
25.6
23.9
247
269
255
21.7
22.9
171
20161
20171
20181
20192
20202
20161
20171
20182
20193
20203
1 Total Group
2 From continuing operations
2020 performance
Adjusted profit before tax from continuing
operations decreased by 5% to £255m
(2019: £269m) as the benefits of the
Group’s cost savings programme were
more than offset by market conditions and
translational foreign exchange headwinds
and higher net finance costs.
YOU CAN READ MORE IN THE FINANCIAL
REVIEW ON PAGE 28 AND THE OPERATING
REVIEW SECTIONS ON PAGES 34-37
1 Total Group
2 Total Group with proforma ESCO revenue
adjustment applied
3 Continuing operations
2020 performance
Working capital as a percentage of sales
increased from 21.7% to 22.9% on a
continuing operations basis. This reflected
the unwind of prior year advance payments
on the Iron Bridge original equipment order
and the decision to reduce the use of
invoice discounting facilities.
YOU CAN READ MORE IN THE FINANCIAL
REVIEW ON PAGE 28
2020 performance
• 23% improvement in the Group’s
Total Incident Rate (TIR) which fell to
0.37. Achieved two months with no
recordable incidents
• Conducted organisational capability
review and launched learning and
development strategy
• Maintained mean employee engagement
score in the upper quartile while
achieving further improvements in 2020
Link to Remuneration4
Link to Remuneration4
Link to Remuneration5
Associated risks
• Market volatility
• Contract risk
Associated risks
• Market volatility
• Contract risk
• Political and social risk
• Political and social risk
• Technology and innovation
• Technology and innovation
• Value Chain Excellence
• Value Chain Excellence
• Competition
• Competition
YOU CAN READ MORE IN THE
REMUNERATION REPORT ON PAGE 103
4 70% of Executive Director annual bonus is directly
linked to outcomes against financial KPIs. You can read
more in the Directors’ Remuneration Report on pages
103-127.
14
Associated risks
• Safety, Health and Environment
• Staff recruitment, development
and retention
• Political and social risk
• Technology and innovation
Focus for 2021
• Continue our journey to zero TIR
• Build further digital capabilities
• Increase number of women across all
management level bands and launch
global affinity groups to support inclusion
and diversity
5 30% of Executive Director annual bonus is directly
linked to progress against strategic measures which
include People, Customer, Technology and Performance
targets. You can read more in the Directors’
Remuneration Report on pages 103-127.
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 CUSTOMER
TECHNOLOGY
PERFORMANCE
2020 performance
• Grew orders from Integrated
2020 performance
• HPGR upgrades released, including
2020 performance
• Delivered majority of record Iron
Solutions by £159m through customer
focused partnerships
tyre wear monitoring and GET ToolTek®
commercialised
• Grew mining bucket bookings by 38%
• Successful field trials, including a
Terraflowing® pilot plant commissioned,
new slurry pump trials completed and
new cable shovel developed
• Further digitalisation of products including
Sensor Connect® APP, Syntertex® v2 and
TrackPro® expansion
• Sustainability embedded in new product
development process and sustainable
design training and measurement
processes developed
Bridge contract
• Realised ESCO acquisition cost synergies
• Launched Sustainability Roadmap,
embedded targets in businesses and
progressed execution see pages 52-64
Link to Remuneration5
Link to Remuneration5
Link to Remuneration5
Associated risks
• Safety, Health and Environment
Associated risks
• Safety, Health and Environment
Associated risks
• Safety, Health and Environment
• Staff recruitment, development
• Staff recruitment, development
• Staff recruitment, development
and retention
and retention
and retention
• Political and social risk
• Political and social risk
• Political and social risk
• Technology and innovation
• Technology and innovation
• Technology and innovation
• Value Chain Excellence
• Value Chain Excellence
• Value Chain Excellence
• Competition
• Competition
Focus for 2021
• Extend service capability to
new geographies
Focus for 2021
• Further expand digitalisation of our
Focus for 2021
• Complete Information
products and services
Systems & Technology (IS&T)
transformation programme
• Continue to leverage Integrated Solutions
• Grow pipeline of products and solutions
revenue and extend adoption of
Nemisys® technology further
that deliver sustainability benefits
• Complete successful execution of O&G
• Launch next generation versions of core
separation post close
• Support customers with solutions to their
flagship products
key sustainability challenges
• Reduce scope 1 & 2 CO2e footprint and
conduct scope 3 evaluation
15
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 IRON BRIDGE AFTERMARKET CONTRACT
HOW IS
WEIR HELPING
REDUCE MINING’S
ENVIRONMENTAL
IMPACT?
16
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 THIS IS ANOTHER
LANDMARK
ORDER FOR WEIR
AND IS A GREAT
EXAMPLE OF
OF THE VALUE
WE CREATE
FOR ALL OUR
STAKEHOLDERS.
RICARDO GARIB
President, Weir Minerals
Image: Weir’s Enduron®
High Pressure Grinding Rolls
(HPGR) technology.
THE LONG-TERM
VALUE OF MORE
SUSTAINABLE
SOLUTIONS
Mining has an essential role to play in the
decarbonisation of the global economy.
Commodities like copper are essential to enabling
electrification of energy networks and transport.
But while demand for resources is growing so is pressure
for these commodities to be produced more sustainably
and efficiently. Many of the world’s major miners have
set ambitious targets to reduce the environmental
impact of their operations, aiming to deliver net zero
emissions by 2050. To achieve this the industry will need
a technology transformation.
This offers a significant long-term opportunity for Weir
as we can provide solutions that reduce energy, water
and waste while also lowering miners’ total cost of
ownership. The Iron Bridge Project in Western Australia is
a great example of this where our grinding and crushing
technology is up to 40% more energy efficient than
traditional alternatives and protects water resources by
being a dry process. Having won a record £100m contract
in 2019 for original equipment the Group was awarded a
£95m contract in 2020 for ongoing aftermarket support
over a minimum of seven years.
Weir Minerals President Ricardo Garib described it as
“a landmark order for Weir and is a great example of the
value we create for all our stakeholders”.
WEIR: SEE THINGS
DIFFERENTLY.
17
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 OUR MARKETS
Our markets are supported by long-term structural trends
that will underpin growth in the decades ahead. But they
are also subject to cyclical influences that can impact
demand in the shorter-term, both positively and negatively.
STRUCTURAL TREND
GLOBAL
POPULATION
AND MIGRATION
BY 2030
8.5bn
DECARBONISATION
ELECTRIC VEHICLE SHARE OF NEW
CAR SALES BY 2040
c.58%
DECLINING ORE
GRADES
AMOUNT OF ORE NEEDED TO
PRODUCE 1KG COPPER IN 2018
200kg
18
In their latest analysis in 2020, the UN estimated there were
approximately 7.7bn people on the planet. By 2030 they project
that number will rise to 8.5bn, and reach 10bn by 2050 with cities
housing two-thirds of residents. At the same time economic
development is supporting a significant rise in the middle class,
particularly in Asia.
As living standards rise, demand for commodities is also likely
to increase, particularly those metals that are used in consumer
goods and infrastructure development such as copper and iron ore.
These trends will drive demand for resources and ultimately the
technology that helps to produce them.
As the world transitions to a low carbon economy it will require a
significant increase in future-facing commodities such as copper,
lithium and nickel that are essential to electrifying energy and
transport. An electric car for instance requires four times the copper
content of an internal combustion car engine. In contrast, coal
demand is declining as power generation increasingly develops
alternative sources of energy.
Miners are also setting targets to reduce their environmental impact
as they prioritise ‘Net Zero’ emissions from operations driving future
demand for technologies that reduce energy, water and waste.
As natural resources are produced they deplete current supplies
and mean further exploration is necessary. However accessing high
quality deposits is getting harder as ore grades decline meaning
more rock needs to be excavated and processed for any given
quantity of mineral.
The increased impact this has on equipment used in this highly
abrasive environment drives demand for aftermarket spares
and services.
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 WE BELIEVE THE SINGLE MOST SIGNIFICANT
CONTRIBUTION WE CAN MAKE TO SUSTAINABILITY
IS THROUGH INNOVATION.
JON STANTON
Chief Executive Officer
SHORTER-TERM TREND
COMMODITY
PRICES
MINING CAPEX
PRODUCTION
VOLUMES
Commodity prices are determined by a range of complex factors
including economic confidence and availability of supply. While this
can impact shorter-term sentiment and decision making, larger
investments by miners tend to be based on more structural trends.
c.75% of Weir’s revenues are from aftermarket sales that are linked
to ongoing production at current mines rather than new projects.
Further resilience is provided by the Group’s bias towards high-volume,
low cost producers in South America, Australia and Africa, which
account for 50% of revenues.
Supportive and sustained commodity prices incentivise miners to
expand and purchase new equipment while lower price environments
lead to a focus on maximising productivity of current assets. Weir can
increase its installed base under either scenario due to its lowest total
cost of ownership value proposition which applies to both expansion
projects and productivity upgrades. The Group’s operating margins
are also counter-cyclical increasing in low capex environments due to
an increased proportion of higher-margin aftermarket (AM) products,
whereas in high capex conditions mix is impacted by elevated original
equipment sales, which in turn drive future AM sales.
Ore production volumes at individual mines are subject to a number
of variables from geology through to technology and labour availability.
At a global level however they tend to reflect demand trends and
the impact of ore grade declines. Weir’s technology is primarily
production-focused and even in downturns miners tend to keep their
assets running to generate cash flow. Ore grade declines also support
aftermarket demand for spares and services as increased material
volumes lead to higher wear on equipment. As a result aftermarket
demand tends to grow in mid-single digits annually over the long-term.
19
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 OUR BUSINESS MODEL
Our business model shows how we transform resources
into long-term value for all our stakeholders.
OUR RESOURCES
WHAT WE DO
What we do is driven by our purpose and informed by our core
values. Our 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.
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.
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.
INTENSIVE AFTERMARKET CARE
Our technology is used in high abrasion applications such as crushing
rock that generates recurring demand for aftermarket spares
and services.
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
We want to deliver excellent outcomes for all our stakeholders
and to achieve that aim we rely on a number of resources.
These are transformed into tangible outcomes by our aftermarket-
focused business model.
OUR PEOPLE
The commitment, expertise and diversity of our people, who are
also the co-owners of our business, are the keys to our success.
RAW MATERIALS AND RESOURCES
We efficiently use sustainable methods of doing business and in the
delivery of natural resources to our customers around the world.
OUR CULTURE
We have a truly unique culture that is embedded through our ‘We
are Weir’ framework. We also actively engage with our customers,
communities, Shareholders, suppliers, government and regulators.
MANUFACTURING AND SERVICE FACILITIES
We safeguard, deploy and invest in our physical assets,
manufacturing resources and service facilities.
TECHNOLOGY AND IP
We use our proprietary technology, specialist insights and
technical skills to create leading-edge products and solutions for
our customers.
FINANCE
The strength of our balance sheet and our financial discipline provide
us with the capital to invest in long-term growth initiatives.
OUR PURPOSE
To enable the sustainable and efficient delivery
of the natural resources essential to create a better
future for the world.
OUR CULTURE
At Weir, we always seek to improve and innovate
and have a tradition where we care for, challenge
and encourage each other. We are passionately,
authentically ourselves and work together to
enhance our global communities. We speak up
and take ownership for our shared successes and
can’t wait for what the future brings.
20
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 WHAT MAKES US UNIQUE
THE VALUE WE CREATE FOR
OUR STAKEHOLDERS
Our key strengths rely on the ingenuity and skills of our people,
our long-standing relationships with our customers, our pursuit
of innovative technology and our high-performance culture of
governance and delivery of services and products.
We are a sustainable business by responding to the changing
needs of our customers, communities, partners and employees.
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.
EMPLOYEES:
GOOD JOBS
CUSTOMERS:
TECHNOLOGY PARTNER
c.£500m
paid in employee benefits in 2020
£1.9bn
in orders in 2020
READ HOW WE ARE KEEPING
OUR PEOPLE SAFE IN THE MOST
DANGEROUS PARTS OF THE MINE
PAGE 26
READ A CASE STUDY ABOUT
OUR SOLUTIONS MIND-SET AT
IRON BRIDGE ON PAGE 17
SUPPLIERS:
VALUABLE PARTNER
£1.2bn
invested by Weir to support
our operations
GOVERNMENT AND
NGOs: TAX
£63m
paid in corporation taxes
in 2020
READ A CASE STUDY ABOUT
MAINTAINING RELATIONSHIPS
WITH OUR SUPPLIERS PAGE 22
READ MORE ABOUT OUR
FINANCIAL RESULTS PAGE 28
PERFORMANCE
We deliver excellence for all
our Shareholders, through
strong leadership, performance
culture and rigorous standards
of governance.
COMMUNITIES AND ENVIRONMENT:
SAVING ENERGY
Up to 40%
reduction in energy consumption provided by our HPGR technology
READ MORE ABOUT OUR SUSTAINABILITY ROADMAP PAGE 33
Our business model is supported by our ‘We are Weir’ strategic framework. See page 2.
21
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 THE GLOBAL PANDEMIC
HOW HAVE WE
CONTINUED TO
SUPPORT OUR
STAKEHOLDERS
DURING THE
GLOBAL COVID-19
PANDEMIC?
22
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 IT IS AT
UNCERTAIN TIMES
LIKE THESE THAT
WE TURN TO OUR
VALUES TO GUIDE
US AND THAT
HAS BEEN OUR
APPROACH.
ROSEMARY MCGINNESS
Chief People Officer
THE GROUP’S
APPROACH TO
THE PANDEMIC
HAS REFLECTED
ITS CORE VALUES
Weir Minerals India came up with the innovative
idea to livestream the pre-dispatch inspection and
performance testing directly to key customers.
The performance test for six Warman® pumps was
conducted at our site’s facilities and the customer
was able to witness the tests and interact in real time.
By leveraging capabilities in product testing, data
analytics and latest technologies, Weir Minerals India
improved the order execution by ten days.
During the early stages of Covid-19, colleagues at
Todmorden, UK, used manufacturing capacity and
expertise, including two industrial printers, to produce
much needed face shield visors for frontline NHS
workers. The team then joined forces with one of the
foundry’s key suppliers, to manufacture and deliver
face shield visors to a range of local NHS hospitals
and GP surgeries.
The Group also provided increased support to our
suppliers, particularly the many small businesses
in our supply chain. This included earlier payment
terms, mentoring and providing key safety materials
where necessary.
WEIR: SEE THINGS
DIFFERENTLY.
23
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 STAKEHOLDER ENGAGEMENT
How we listen and engage with our stakeholders to forge positive
long-term relationships.
SECTION 172 OF THE COMPANIES ACT 2006
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. A director of a company
must act in the way he considers, in good faith, would be most likely
to promote the success of the company for the benefit of its members
as a whole, and in doing so have regard (amongst other matters) to:
(a) the likely consequences of any decision in the long term;
(b) the interests of the company’s employees;
(c) the need to foster the company’s business relationships with
suppliers, customers and others;
(d) the impact of the company’s operations on the community and
the environment;
(e) the desirability of the company maintaining a reputation for high
standards of business conduct; and
(f) the need to act fairly as between members of the company.
Our success depends on creating 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 in a
variety of ways from direct discussions to surveys and participating in
community, industry and government forums. This provides valuable
insights that inform the Board’s deliberations. The table below sets out
how we engage with our key 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 83. Our business model
sets out the value we generate for stakeholders on page 20 and the
Group’s sustainability strategy is noted on page 52. Further information
on the Board’s approach to stakeholder engagement is noted below
and in the Corporate Governance Report. The Board decisions table on
page 71, highlights the key decisions made by the Board during 2020,
the stakeholders and strategic factors taken into consideration when
making decisions, and the outcomes.
EMPLOYEES
HOW WE ENGAGE
• Board members responsible for
representing employee voice
• All-employee survey
• ‘Meet the Board’ sessions
• Monthly ‘CEO Briefing’
• ‘Ask Jon’ CEO email address
• Global webcasts and social
media channels
CUSTOMERS
WHAT MATTERS TO
THEM THE MOST?
OUR RESPONSE
• Knowing their voice is heard
• Ensuring everyone is treated fairly
• No compromise on our Safety,
Health or Environmental standards
• Alignment between personal
• Continuous prioritisation of safety
above all else to become a zero
harm workplace
• ‘Employee Voice’ strategy
• Commitment to building a truly
and company values
inclusive culture
• Ongoing engagement with our
‘We are Weir’ framework
HOW WE ENGAGE
• Embedded sales and engineering teams
• Key account management
• Voice of Customer insights
• Technology partnerships
WHAT MATTERS TO
THEM THE MOST?
• Safety
• Efficiency
• Quality and on-time delivery
• Smart technologies
• Sustainability
• Trusted long-term partnerships
• Ever-present service
OUR RESPONSE
• Investment in research and development
• Technology roadmaps developed through
Voice of Customer processes
• Sustainability Roadmap assessment
• Comprehensive global service network
covering every major mining region in
the world
24
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 SUPPLIERS
HOW WE ENGAGE
WHAT MATTERS TO
THEM THE MOST?
OUR RESPONSE
• Clearly defined supplier quality policy
• Supplier visits
• Technology trials and collaborations
• Trusted partnerships
• Collaborative relationships
• Responsive communication
• Face-to-face meetings with suppliers
• Key account support
• Equal opportunity policies for
all suppliers
• Strong safety culture
SHAREHOLDERS
HOW WE ENGAGE
WHAT MATTERS TO
THEM THE MOST?
OUR RESPONSE
• Annual Report and General Meeting
• One-to-one meetings
• Investor conferences
• Capital Markets Days
• Visits to company facilities
• Good environmental & social governance
• Strategy and execution
• Prospects for future growth
• Returns through the cycle
• Investment and capex plans
• Market and other risks
• Environmental, social and governance
(ESG) performance
• Regular communication of performance
• Providing guidance when appropriate
• Robust business model
• Developed Sustainability Roadmap
following consultation with investors
and other stakeholders
COMMUNITIES & ENVIRONMENT
HOW WE ENGAGE
WHAT MATTERS TO
THEM THE MOST?
OUR RESPONSE
• Local open days to better understand
our operations
• Collaborations with local schools
and universities
• Supporting employment and
apprenticeship schemes
• Jobs and investment
• That we are good neighbours,
operating safely and ethically
• Providing direct employment to
c.11,000 people
• Investing in our facilities to provide a safe,
• That we actively help and support
nurturing and stretching environment
local communities
• Investing in school, graduate and
• Reducing environmental impact
PhD programmes
• Developing and executing our
Sustainability Roadmap
GOVERNMENTS & 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 MATTERS TO
THEM THE MOST?
OUR RESPONSE
• Creating and sustaining employment
• Investing in R&D and productivity
• Business contributing towards
• Providing direct employment for
c.11,000 people
• Investing in R&D including partnerships
educational opportunities
• Environmental, social and
governance policies
with universities
• Investing in programmes that support
STEM education amongst women and
other under-represented groups
25
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 Strategic Report
SAFETY IN MINING
HOW DO WE
KEEP PEOPLE
SAFE IN THE MOST
DANGEROUS
PARTS OF
THE MINE?
26
The Weir Group PLC Annual Report and Financial Statements 2020 Image: The ESCO
ToolTek™ System
400kg
weight of some components
in a change-out
ESCO’S NEW
TOOLTEK™ SYSTEM
PROVIDES ENHANCED
SAFETY FOR
MAINTENANCE
PERSONNEL ON
MINE SITES
THE SAFETY OF
OUR PEOPLE
CONTINUES TO
BE OUR NUMBER
ONE PRIORITY.
ANDREW NEILSON
Division President,
Weir ESCO
Every month, hundreds of ESCO machine parts may need
to be replaced within a mine as part of regular aftermarket
maintenance. While crews are well trained on replacement
procedures and ESCO parts are engineered for worker
safety, there is an element of risk during maintenance
cycles where some components can weigh over 400kg.
During replacement of parts on just one bucket, a crew
is exposed to hundreds of touch-points, all of which are
eliminated with the ToolTekTM system.
The ToolTekTM system is a boom crane mounted tool head
that is remotely operated during replacement of worn
components. New parts are pre-staged on racks on the flat
bed truck outfitted with the boom crane. The flat bed truck
also features a scrap bin for safer disposal of the worn parts.
The maintenance cycle can now be completed without
personnel handling any of the heavy components during the
replacement process.
WEIR: SEE THINGS
DIFFERENTLY.
27
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 FINANCIAL REVIEW
THE GROUP DEMONSTRATED
GREAT RESILIENCE IN THE MOST
CHALLENGING OF CIRCUMSTANCES.
STRONG CASH GENERATION AND
THE AGREED DISPOSAL OF OIL &
GAS PROVIDES GOOD LIQUIDITY
AND BALANCE SHEET STRENGTH
TO MAXIMISE FUTURE MINING
OPPORTUNITIES.
JOHN HEASLEY
Chief Financial Officer
FINANCIAL HIGHLIGHTS
REVENUE
£1,965m
-4%
ADJUSTED OPERATING PROFIT
£305m
-3%
STATUTORY LOSS AFTER TAX
(£149m)
+61%
28
OVERVIEW
2020 demonstrated the high quality and resilience of our mining
businesses against the market, resource and logistical challenges
presented by Covid-19. We responded early in the year to protect the
financial position and performance of the Group with robust cost-
saving actions, cash preservation initiatives and extended liquidity.
In the most challenging of years, these actions, together with
excellent progress towards our ESCO margin target, ensured that
constant currency operating profit was in line with the prior year while
strong cash conversion supported a reduction in net debt. After the
challenges of customer mine site activity disruptions through Q2
and Q3, we saw good momentum in orders in Q4 with easing mine
site access restrictions driving aftermarket demand, while strong
commodity prices and improved logistics supported initial positive
signs on capital project conversion. The sale of the Oil & Gas Division
to Caterpillar Inc. for $405m was agreed in the year, with completion
happening just after the year end in February 2021. This successful
transaction completes the transformation of the Group into a mining
technology pure play and results in pro forma5 net debt to EBITDA of
1.7x at the end of the year, putting us on a strong footing to realise
the benefits of an exciting outlook for the Group from a market and
technology perspective.
CAPITAL ALLOCATION
As we look to the future we expect to deliver above-market growth and
progressive margin development through the cycle. This will be achieved
within a strict financial framework which will keep net debt to EBITDA
between 0.5x to 1.5x, with up to 2.0x for M&A and result in 33% of net
adjusted earnings being distributed by way of dividend. We believe that
this provides us with the financial strength necessary to be a leader in
cyclical markets while retaining sufficient capital flexibility to invest in the
exciting growth opportunities we see ahead.
FINANCIAL HIGHLIGHTS
Continuing operations order input decreased by 13% on a constant
currency basis partly due to the record Iron Bridge order received in
2019. Excluding this, order input was 9% lower, with strong mining
aftermarket resilience being offset by weaker infrastructure markets in
ESCO and customer caution on original equipment (OE) project spend
during the Covid-19 pandemic.
Continuing operations revenue decreased by only 1% on a constant
currency basis with a robust performance in Minerals, up 4% (down
2% excluding the Iron Bridge order shipped in the year), with ESCO
down 13% reflecting more significant Covid-19 disruptions, especially
in its infrastructure markets. On a reported basis revenue reduced by
4%, driven by a £63m foreign exchange translation headwind.
Continuing operations adjusted profit before tax of £255m was down
by £14m or 5% mainly due to adverse translational foreign exchange
and higher net finance costs with adjusted continuing operating profit
flat on a constant currency basis. Operating exceptional items of £19m
(2019: £33m) included £10m in relation to non-recurring Covid-19 costs,
mainly restructuring and rationalisation. Statutory loss after tax for the year
was (£149m) compared to (£379m) in the prior year due to the impairment
of the Oil & Gas Division in line with the agreed disposal value.
Operating cash flow decreased by £36m to £372m mainly driven by an
increase in continuing operations working capital cash outflows, due to
the unwind of prior year advance payments on the Iron Bridge OE order
and a decision to reduce the use of invoice discounting facilities to £7m
(2019: £22m). Our reported net debt reduced from £1,157m to £1,051m
following a free cash inflow of £132m and the decision to withdraw
the final 2019 dividend payments in the year. Net debt to EBITDA on a
covenant basis increased to 2.7 times4 (2019: 2.4 times) primarily due to
the impact of the Oil & Gas Division on Group EBITDA. On a pro forma5
basis, excluding Oil & Gas and reflecting the proceeds from the agreed
sale which completed on 1 February 2021, net debt to EBITDA was 1.7
times. These compare to a covenant level of 3.5 times.
The Weir Group PLC Annual Report and Financial Statements 2020Strategic Report
CONTINUING OPERATIONS ORDER INPUT
Order input at £1,860m decreased 13% on a constant currency basis.
Original equipment orders were £405m and aftermarket orders were
£1,455m.
Minerals orders decreased by 12% on a constant currency
basis to £1,392m (2019: £1,586m) with a book-to-bill of 0.95.
Original equipment orders fell 29%, with underlying orders down
11% excluding the record c.£100m Iron Bridge order in 2019. The rest
of the decline was driven by Covid-19 related project delays, but we
did see sequential improvement in Q4, which was also the strongest
OE quarter of the year. Aftermarket orders were down 4%, broadly
reflecting the disruption to mining operations from Covid-19 but were
also up sequentially in Q4. Aftermarket orders represented 73% of
total orders (2019: 67%). Mining applications accounted for 84% of the
total (2019: 83%).
ESCO orders decreased 15% on a constant currency basis to £468m
(2019: £553m), reflecting Covid-19 disruptions in certain mines,
destocking by distributors as our lead times reduced, and shutdowns
in North America and European infrastructure markets, most
significantly impacting Q2 and Q3. Conditions started to gradually
improve in Q4. Aftermarket represented 94% of orders in line with
ESCO’s position as a provider of highly engineered consumables used
in abrasive operating environments.
CONTINUING OPERATIONS REVENUE
Revenue of £1,965m decreased 1% on a constant currency
basis demonstrating the resilience of the mining operations in
unprecedented conditions, with Minerals also benefiting from
the record Iron Bridge order won in 2019. Aftermarket accounted
for 75% of revenues, marginally lower than the prior year (79%).
Reported revenues decreased 4%, impacted by a foreign exchange
translation headwind of £63m.
Minerals revenue was 4% higher on a constant currency basis at
£1,469m (2019: £1,418m), as the weaker order trends were more
than offset by the c.£80m benefit from the first deliveries to the Iron
Bridge project. As a result, original equipment sales accounted for 31%
(2019: 27%) of divisional revenues and were 19% up on the prior year.
Aftermarket revenues were down 2%, broadly reflecting order trends for
the year, but up sequentially in Q4.
ESCO revenue decreased 13% on a constant currency basis to
£496m (2019: £569m) with core G.E.T., more robust, down 11%.
Mining applications represented 68% of revenues, infrastructure was
28% and other industrial markets represented 4%.
CONTINUING OPERATIONS PROFIT
Adjusted operating profit from continuing operations of £305m
remained in line with the prior year on a constant currency basis with
a foreign currency translation headwind leading to a reduction of £10m
on a reported basis (2019: £315m).
Minerals adjusted operating profit was stable on a constant currency
basis at £260m (2019: £260m). The underlying revenue increase was
offset by the mix impact of the Iron Bridge order, with the delivery
of £30m of savings from temporary reductions to travel, restricted
discretionary spend and workforce reductions broadly offset by
incremental cost and overhead under-recoveries largely due to
Covid-19 disruptions to our operations. Adjusted operating margin on
a constant currency basis reduced by 70bps to 17.7% (2019: 18.4%)
driven by the negative mix impact of the Iron Bridge order.
ESCO adjusted operating profit decreased by 2% on a constant
currency basis to £81m (2019: £83m), with the impact of lower
revenues almost entirely offset by the delivery of the final acquisition
cost synergies, efficiency improvements from our foundry investments
and the delivery of £9m of Covid-related cost mitigation actions.
Adjusted operating margin of 16.3% was up 180bps on a constant
currency basis (2019: 14.5%). The Covid-19 actions included temporary
reductions to travel, restricted discretionary spend and workforce
reductions. With two-thirds of these cost savings temporary in
nature, and with relatively modest incremental Covid-19 costs or
under-recoveries, current year margins received a one-off benefit of
around 60bps.
Unallocated costs decreased £2m from the prior year to £36m
following restructuring activities to right-size certain functions in
response to the oil and gas market conditions and lower employee
costs related to share based payments and bonus.
Statutory operating profit for the year of £234m was £2m adverse to
the prior year due to a decrease in adjusted operating profit of £10m,
offset by a reduction in adjusting items of £8m.
CONTINUING OPERATIONS NET FINANCE COSTS
Net finance costs were £50m (2019: £46m). The overall increase of
£4m compared to 2019 was principally due to additional arrangement
and commitment fees following the successful refinancing of the
Group’s revolving credit facility (RCF) and term loan during the year.
Further details of the refinancing are included in the Cash flow and Net
debt section below.
Net finance costs (excluding retirement benefit related costs) were
covered 6.6 times by adjusted operating profit from continuing
operations on a lender covenant basis (2019: 9.3 times), compared to a
covenant level of 3.5 times.
CONTINUING OPERATIONS PROFIT BEFORE TAX
Adjusted profit before tax from continuing operations was 5% lower at
£255m (2019: £269m) due to translational foreign exchange headwinds
and higher net finance costs as described above. The statutory
continuing operations profit before tax including adjusting items as
described below reduced 3% to £184m (2019: £189m).
CONTINUING OPERATIONS TAXATION
The adjusted tax charge for the year of £62m (2019: £66m) on adjusted
profit before tax from continuing operations of £255m (2019: £269m)
represents an underlying effective tax rate (ETR) of 24.3%
(2019: 24.5%). Our ETR is principally driven by the geographical mix of
profits arising in our business and, to a lesser extent, by the impact of
Group financing and transfer pricing arrangements.
In terms of cash tax, the total Group paid income tax of £63m in 2020
across all of its jurisdictions compared to £90m in 2019. The reduction
is due to a combination of extended phasing of payments permitted
during Covid-19 in certain territories, and overall tax losses arising in
the United States.
CONTINUING OPERATIONS ADJUSTING ITEMS
Intangibles amortisation decreased to £39m (2019: £47m), with
exceptional items reducing to £19m (2019: £33m) and other adjusting
items totalling £12m (2019: £nil).
Intangibles amortisation relates to assets recognised via acquisition
and ongoing multi-year investment activities. Following the completion
of certain multi-year activities £5m of amortisation has been included
within adjusted operating profit in the year.
Due to the unprecedented Covid-19 pandemic, specific one-off and/or
short-term measures have been taken to protect the Group’s ability to
generate future cash flows, ensure the immediate health and safety of
the workforce and manage supply chain issues enabling us to continue
to meet customer needs. This has resulted in exceptional costs of
£10m which are deemed to be non-recurring in nature and as a direct
result of the Covid-19 pandemic, including £9m of severance costs
across the Minerals and ESCO Divisions.
29
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 FINANCIAL REVIEW
CONTINUED
RESULTS SUMMARY
Continuing operations1
Orders2
Revenue
Adjusted operating profit
Adjusted operating margin
Statutory operating profit
Net finance costs
Adjusted profit before tax
Statutory profit before tax
Adjusted effective tax rate
Adjusted earnings per share
Total Group
Statutory loss after tax
Operating cash flow3
Net debt
Loss per share
2020
£1,860m
£1,965m
£305m
15.5%
£234m
(£50m)
£255m
£184m
24.3%
74.4p
(£149m)
£372m
£1,051m
(57.6p)
2019
£2,139m
£2,050m
£315m
15.4%
£236m
(£46m)
£269m
£189m
24.5%
78.1p
(£379m)
£408m
£1,157m
(146.4p)
As reported
n/a
-4%
-3%
+10bps
-1%
-8%
-5%
-3%
-20bps
-5%
+61%
-9%
+£106m
+61%
Constant currency2
-13%
-1%
0%
+20bps
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. Adjusted results are for continuing operations before adjusting items as presented in the Consolidated Income Statement. Details of alternative performance measures are
provided in note 2 of the financial statements.
1 Continuing operations excludes the Oil & Gas Division, which was classified as held for
sale from 5 October 2020, and the Flow Control Division, which was disposed of on
28 June 2019. Both are reported in discontinued operations.
2 2019 restated at 2020 average exchange rates.
4 Calculation is on a lender covenant basis with net debt at average rates.
5 Pro forma figures for 2020 are for comparative purposes and are based on Oil & Gas being
excluded from EBITDA and net debt adjusted to reflect estimated net disposal proceeds,
which are subject to customary working capital and debt-like adjustments.
3 Operating cash flow (cash generated from operations) excludes additional pension
contributions, exceptional and other adjusting cash items and income tax paid. Net cash
generated from operating activities was £273m (2019: £264m).
The continued deep downturn in oil and gas markets, exacerbated
by Covid-19, resulted in further steps to right-size certain central
functions to protect short-term cash generation, leading to £2m of
severance costs.
Other exceptional costs included a £4m charge, primarily a non-cash
IFRS 2 share-based payment, related to the completion of a Broad-
based Black Economic Empowerment (B-BBEE) ownership transaction
by the Group’s subsidiary, Weir Minerals South Africa (Pty) Ltd, and
£3m (2019: £11m) of costs to complete the integration of ESCO into
the Group following its acquisition in July 2018.
The cash impact of the current year exceptional income statement charge
of £19m is expected to be £16m, with £13m already incurred in the year.
Other adjusting items include a £1m past service pension charge
related to Guaranteed Minimum Pension (GMP) equalisation following
the further Lloyds Banking Group High Court Judgement in November
2020, with the remaining charge associated with the Group’s legacy
US asbestos-related provision of £12m following completion of the
planned triennial actuarial review in December 2020. Further details
related to both items are included in the Pensions and Asbestos
Provision sections below.
A tax credit of £16m has been recognised in relation to adjusting items
(2019: £21m).
After adjusting items, the statutory profit after tax for the year from
continuing operations is £139m (2019: £145m).
DISCONTINUED OPERATIONS
The statutory loss for the year from discontinued operations is £288m
(2019: loss £524m). The adjusted result was a loss of £27m (2019:
profit £22m).
On 5 October 2020, the Group announced the proposed sale of the Oil
& Gas Division to Caterpillar Inc. and, in line with IFRS 5 ‘Non-current
assets held for sale and discontinued operations’, the Group has
classified the Division as held for sale and a discontinued operation.
30
The 2019 comparative period includes the results of the Flow Control
Division which was disposed of on 28 June 2019 (2019: adjusted
operating loss of £3m).
Oil & Gas orders of £306m (2019: £584m) were down 48% on a
constant currency basis, reflecting challenging market conditions and a
further significant reduction in refurbishment and replacement activity in
North America. Revenue reduced by 48% on a constant currency basis
to £314m (2019: £608m) in line with order trends and adjusted operating
loss including joint ventures was £21m (2019: profit £37m). The decrease
was driven by significantly lower activity levels and volumes in upstream
North American markets and reduced operating leverage. Net finance
costs of £3m primarily related to lease interest, and a tax charge of £3m
led to an adjusted loss after tax of £27m (2019: profit £22m).
Adjusting items in the year totalled £261m after a tax charge of £27m.
The balance includes intangible amortisation of £9m and exceptional
items of £225m, which primarily relate to an impairment charge of
£209m to reflect the write-down of carrying value of the Division to
estimated fair value less costs to sell, onerous purchase contracts of
£4m and disposal costs of £11m.
The sale of the Oil & Gas Division to Caterpillar Inc. was completed
on 1 February 2021, for an enterprise value of $405m, subject to
customary working capital and debt-like adjustments. Since the initial
announcement on 5 October 2020, the Group’s joint venture partner
in Saudi Arabia-based Arabian Metals Company (AMCO) has exercised
its pre-emption right, as set out in the Class 1 Circular published on
3 November 2020, to purchase Weir’s 49% stake in AMCO. Therefore,
the cash proceeds from the sale of the Division, subject to customary
working capital and debt-like adjustments, will be split between
$375m received from Caterpillar Inc. and $30m to be received on
completion of the sale of AMCO, which is expected to occur in the
first half of 2021.
The Weir Group PLC Annual Report and Financial Statements 2020Strategic Report CAPITAL EXPENDITURE
Net capital expenditure for the Group, including intangible assets,
decreased from £104m in 2019 to £75m in the current year, reflecting
only essential spend, given cash preservation actions taken in
response to Covid-19 uncertainty and £7m of capex in 2019 related to
Flow Control. Net capital expenditure on property, plant and equipment
(owned) of £56m was 1.1 times depreciation.
The deficit of £161m compares to £139m in 2019. For the UK schemes,
the deficit increased by £27m from £69m to £96m. This is due to
updates to the financial assumptions, primarily discount rate (£107m
loss) and demographic assumptions (£3m loss), and the net impact of
the income statement charge of £2m. These losses were partially offset
by gains of £79m on the asset side, and the payment of £6m in deficit
reduction and one-off contributions to the schemes over the year.
CASH FLOW AND NET DEBT
Operating cash flow decreased by £36m to £372m in the year
(2019: £408m), mainly driven by adverse working capital cash flows
in the Continuing Group of £30m. This reflects the unwind of prior
year advance payments on the Iron Bridge OE order and the decision
to reduce the use of invoice discounting facilities. The Group utilised
non-recourse invoice discounting facilities of £7m (2019: £22m) and
suppliers chose to utilise supply chain financing facilities of £41m
(2019: £46m). As a result, working capital as a percentage of sales
increased from 21.7% to 22.9% on a continuing operations as
reported basis.
Operating cash flows in discontinued operations remained flat year-
on-year, with the impact of the continued downturn in the oil and gas
market resulting in an adverse cash flow of £29m offset by the cash
flows in 2019 which related to the former Flow Control Division.
After additional pension contributions of £11m, exceptional and other
adjusting cash items and income tax payments, net cash generated
from operating activities was £273m (2019: £264m).
Free cash flow from total operations (contained within note 2)
increased by £89m to an inflow of £132m (2019: £43m), before
cash exceptional and other adjusting items of £24m (2019: £41m).
The increase reflects a reduction in tax paid of £27m, reduced
capital expenditure of £30m as spend was limited during Covid-19
uncertainty and reduced outflow on derivative financial instruments of
£67m, offsetting the £36m decrease in cash from operating activities
noted above.
Total Group exceptional and other adjusting cash items of £24m
includes £8m in relation to discontinued operations, with the balance
primarily relating to restructuring and rationalisation actions and ESCO
integration costs.
The above movements plus proceeds from the B-BBEE transaction
of £5m, offset by the final payment in January 2020 in respect of the
Flow Control disposal of £5m, combined with an adverse translational
foreign exchange movement of £3m, resulted in a reported decrease
in net debt of £106m to £1,051m (2019: £1,157m). This includes
£179m (2019: £185m) in respect of IFRS 16 ‘Leases’. Net debt
to EBITDA on a lender covenant basis was 2.7 times (December
2019: 2.4 times) compared to a covenant level of 3.5 times. On a
pro forma5 basis, excluding the Oil & Gas Division, net debt to EBITDA
was 1.7 times.
The Group completed the refinancing of its US$950m RCF and a
new £200m term loan in June 2020, extending maturity dates out to
June 2023 and March 2022 respectively, with the option to extend
the US$950m RCF for up to a further two years. Covenant terms
remain unchanged under the new arrangements. At 31 December
2020, the Group had c.£575m of immediately available committed
facilities and cash balances, with a further c.£80m in uncommitted
facilities available.
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.
For the North American schemes, the deficit decreased by £4m from
£69m to £65m. This is primarily due to gains of £16m on the asset
side, contributions of £10m paid by the Group to the plans over the
year, updates to the mortality assumptions (£1m gain) and a gain of
£2m from exchange rate movements. These gains were largely offset
by changes in market conditions, primarily discount rate, leading to a
loss of £21m, the net impact of the income statement charge of £3m
and plan experience leading to losses of £1m.
Allowances for GMP equalisation following the most recent Lloyds
judgement in November 2020 has led to an adjusting past service
charge of £1m. This follows the £6m charge initially recognised in
2018 and has been booked as an adjusting item in the Consolidated
Income Statement.
Insurance policy assets held for the two largest UK schemes now
cover 36% (2019: 41%) of the Group’s total funded obligation across
all schemes, excluding ESCO, reducing the Group’s exposure to
actuarial movements.
ASBESTOS-RELATED 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 2020,
there were 1,586 asbestos-related claims outstanding in the US
(2019: 1,551).
Following completion of our planned triennial actuarial review
of estimated future indemnity and defence costs in December
2020, we have recognised a US asbestos-related provision of
£65m (2019: £44m) in line with the actuarial decay model and the
projected claims. The Group has insurance cover in place for claims
with a pre-1981 date of first exposure and, as a result, recognises a
corresponding insurance asset of £52m (2019: £43m). The net result is
a £12m liability (2019: £1m). A charge of £12m has been recognised as
an other adjusting item in the year (note 5). Full details of the provision,
plus related insurance receivable, are provided in note 20.
KEY ACCOUNTING AND POLICY JUDGEMENTS
The key accounting and policy judgements are contained within note 2
to the Group financial statements on page 147.
EARNINGS PER SHARE
Adjusted earnings per share from continuing operations decreased
to 74.4p (2019: 78.1p). The statutory loss per share including adjusting
items and loss from discontinued operations was 57.6p (2019: loss
per share 146.4p). The weighted average number of shares in issue
remained at 259.5m (2019: 259.5m).
DIVIDEND
The Board is not recommending a dividend this year, which follows
the decision during 2020 to withdraw the 2019 final dividend due to
Covid-19 related uncertainty,
JOHN HEASLEY
Chief Financial Officer
2 March 2021
31
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 SUSTAINABLE SOCIETY
HOW DOES
OUR STRATEGY
SUPPORT A MORE
SUSTAINABLE
SOCIETY?
32
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 WE WILL
ACCELERATE
PROGRESS
IN THE
INDUSTRY.
PAULA COUSINS
Chief Strategy &
Sustainability Officer
HELPING LEAD
MINING’S TECHNOLOGY
TRANSFORMATION
Mining has a crucial role in supporting rising living
standards and the transition to a low carbon economy.
As an extractive industry, mining faces scrutiny.
In response, miners are increasingly setting climate
change targets, including committing to ‘Net Zero’
emissions by 2050. But to get there will require innovation
in a traditionally conservative industry. That is why Weir
has put sustainability at the heart of our strategy and
designed our technology roadmap around three core
themes: making our customers’ operations smarter,
more efficient and sustainable. By working together we
will accelerate progress in the industry and play our part
in leading mining’s technology transformation.
WEIR: SEE THINGS
DIFFERENTLY.
33
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 OPERATIONAL REVIEW
WEIR MINERALS
THE DIVISION LEVERAGED
ITS STRONG MARKET
POSITIONS TO TAKE FULL
ADVANTAGE OF THE GROWTH
OPPORTUNITIES IN 2020.
RICARDO GARIB
Division President,
Weir Minerals
CAVEX® 2 HYDROCYCLONE: A NEW AREA IN
SEPARATION TECHNOLOGY
The launch of Weir Minerals’ new Cavex® 2 hydrocyclone in
2020 marked a new era in separation technology. The product’s
innovative design allows it to classify up to 30% more feed
slurry while occupying the same footprint as the Cavex® 1 and
competitor cyclones. This enhanced performance is unmatched by
any known hydrocyclone in operation today.
The installation of the Cavex® 2 in trials, and purchases made since
the launch, provides us with the upmost confidence that this is
the highest performing hydrocyclone on the market, unmatched by
our competitors.
The shape of the liners in this new generation of Cavex® has
further minimised turbulence. The Cavex® 2 also comes with a
range of materials technology options including industry leading
Linatex® premium rubber and other robust Weir Minerals
natural rubbers, which have been proven to outlast competitors’
elastomers in similar applications.
Image: A Cavex® hydrocyclone cluster
REVENUE1£m
OPERATING PROFIT1,2 £m
£1,469m
+4%
£260m
0%
1,418
1,469
1,362
260
260
244
1,207
1,138
222
213
DIVISIONAL ORDERS
BY END MARKET %
DIVISIONAL ORDERS BY
GEOGRAPHY %
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
1
Prior years restated at 2020 average exchange rates.
2 Before adjusting items (note 2).
Mining
Industrial
Oil & Gas
Naval & Marine
Power Generation
Infrastructure
Water & Sewage
79%
9%
6%
2%
2%
1%
1%
North America
South America
Australasia
Asia Pacific
Africa
Europe
Middle East
21%
24%
18%
13%
11%
11%
2%
34
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 HIGHLIGHTS
• Robust aftermarket revenues (-2%); Q4 strongest quarter of 2020
• Commercialising the new Cavex® 2 hydrocyclone that offers up to
30% more capacity while lowering energy and water consumption.
• Operating margin of 17.7% (-70bps) reflecting higher original
• Delivering £30m in cost savings principally from lower expenditure
equipment mix and Covid-19 impact
on travel and variable compensation.
• Project pipeline continues to strengthen, particularly for more
sustainable solutions
2020 MARKET REVIEW
Commodity prices for copper, iron ore and gold all reached multi-
year highs supported by a mix of stimulus spending in China, supply
constraints and political uncertainty. This was a strong recovery
from their lows in the second quarter and supported the gradual
improvement in activity in the second half. Slower decision making
as a result of restrictions on face-to-face meetings and mine access
constraints impacted original equipment demand while aftermarket
was more robust with ore production estimated to have reduced by
c.3% in 2020 compared to the prior year. Aftermarket demand was
particularly strong in South America, Russia and Central Asia with
activity in Peru, Africa, North America and South East Asia impacted by
a number of mine shutdowns through the year. Thermal coal markets
were more challenging given reduced global power consumption while
oil sands’ demand remained relatively resilient.
2020 OPERATING REVIEW
The Division benefited from its broad exposure to attractive
commodities such as copper, gold and iron ore, the geographic
diversity of its customer base, and its regional operating model with
manufacturing and service facilities in every major mining region.
This meant it was able to fully capture opportunities in a challenging
market and continually service customer demand despite some
temporary Covid-19 related shutdowns to individual Weir plants.
This performance was achieved while also making significant strategic
progress that included:
• Improving safety with TIR reduced by 7% to 0.25.
• Establishing a new super centre in Turkey to capture growth
opportunities in Central Asia and North Africa, and opening a new
service centre in Panama to support a major copper development.
• Successfully delivering the majority of the Iron Bridge HPGR OE
contract and winning a £95m award to provide ongoing aftermarket
and service support.
REVENUE BY ORIGINAL
EQUIPMENT/AFTERMARKET %
NUMBER OF FACILITIES
Aftermarket
Original Equipment
69%
31%
Europe
Asia Pacific
Australia
Middle East & Africa
South America
North America
53
26
25
24
23
19
2021 OUTLOOK
Market fundamentals in mining remain positive. There is significant
near-term focus on maximising production given the strength of
commodity prices, which should support the continued improvement
in aftermarket trends. Likewise, the need for supply expansion and
deferral of smaller projects in 2020 has strengthened demand for
original equipment as reflected in the size of our project pipeline.
At this time we are cautiously optimistic of making progress in 2021
but the extent to which positive market sentiment translates into
orders and revenues in the near term will depend on the shape of the
economic recovery and the level of ongoing Covid-related disruption to
both customers and our own operations.
Image: Weir Minerals Africa who helped
deliver the African Industries Ltd project
WEIR MINERALS AFRICA DEMONSTRATES ITS
EXTENSIVE ENGINEERED-TO-ORDER CAPABILITY
Challenging process parameters on an African Industries Limited
Nigerian ore mine have showcased the design capability of
Weir Minerals Africa, as it developed an engineered-to-order
solution for its mining customer. Included in the order were
two of the largest screens ever built by Weir Minerals Africa.
The screens, two 51-tonne Enduron® double-deck banana
screens, 4.3m wide and 9.7m long, were built and optimised
based on the designs of Weir Minerals’ existing range and can
process 1,750 tonnes per hour.
The screens were also ready to be fitted with Weir’s IIoT
(Industrial Internet-of-Things) platform, Synertrex®, allowing
the machines’ performance to be monitored remotely.
The order for African Industries Ltd also included other
products from Weir Minerals comminution range, including
an Enduron® HPGR.
35
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 OPERATIONAL REVIEW
WEIR ESCO
THE DIVISION CONTINUED TO
FOCUS ON DIFFERENTIATING
THROUGH TECHNOLOGY
LEADERSHIP AND CLOSE
CUSTOMER PROXIMITY.
ANDREW NEILSON
Division President,
Weir ESCO
NEMISYS® TOOTH SYSTEM OUTPERFORMS
THE COMPETITION
The Nemisys® tooth system is increasing safety and productivity
at mine sites around the world. After upgrading their large
wheel loaders to the Nemisys® system, mine operators are
experiencing unmatched wear life and reliability – even in the most
demanding applications.
At an iron ore mine in Minnesota, after the safety and productivity
improvements experienced during the field trials, ESCO’s customer
chose to upgrade their entire wheel loader fleet to the Nemisys®
system.
The mine reported that the Nemisys® teeth lasted up to four times
longer than the competitor’s teeth during the trial period, while
maintaining better sharpness as they wore. Tooth replacement is
now also a faster and easier process. The customer also observed
that the Nemisys® system helps to protect their tyres by cleaning
the floor more thoroughly than prior G.E.T. systems.
Image: ESCO’s Nemisys® Tooth System for Wheel Loaders
OPERATING PROFIT1,2,3 £m
DIVISIONAL ORDERS
BY END MARKET %
£83m
HEADCOUNT (AVERAGE)3
DIVISIONAL ORDERS BY
GEOGRAPHY %
2,338
REVENUE1,3 £m
REVENUE1,3 £m
£496m
£572m
-13%
+4%
00.0
569
00.0
496
546
00.0
OPERATING PROFIT1,2,3 £m
TOTAL INCIDENT RATE3
£81m
1.59
-2%
1% increase
+25%
83
00.0
00.0
81
-4%
00.0
00.0
00.0
00.0
66
00.0
00.0
00.0
[CHARTS NEED DRAWING]
Mining
Infrastructure
Oil & Gas
Industrial
2016
2017
2018
2019
N/A
2016
2016
N/A
2017
2017
2018
2018
2019
2019
2020
2020
N/A
2016
2016
N/A
2017
2017
2018
2018
2019
2019
2020
2020
2018 restated at 2020 average exchange rates and reported on a proforma basis.
Prior years restated at 2020 average exchange rates.
1
1
2 Adjusted to exclude exceptional items and intangibles amortisation.
2 Before adjusting items (note 2).
3 ESCO was acquired in July 2018 and fully comparable data is not available.
3 ESCO was acquired in July 2018 and fully comparable data is not available.
36
56%
31%
8%
5%
2020
North America
South America
Australasia
Europe
2016
Africa
Asia Pacific
Middle East
2017
2018
2019
52%
13%
13%
10%
8%
3%
1%
2020
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 HIGHLIGHTS
• Record safety performance with 34% reduction in TIR to 1.05
• 13% reduction in revenues driven by temporary Covid-19 mine
shutdowns and lower mining machine utilisation; Infrastructure
more challenging and impacted by destocking
• Margins up 180bps supported by £9m cost savings programme.
2020 MARKET REVIEW
The Division saw similar mining trends to Minerals with ore production
volumes falling in the second quarter, impacting machine utilisation
before gradually improving through the second half of the year
although remaining below pre-Covid-19 levels. In North America,
the Division’s biggest market, iron ore demand was impacted by the
closure of automotive plants, while coal remained challenging and
oil sands was relatively resilient. In Central and South America there
were also a number of temporary mine shutdowns due to Covid-19
restrictions. As expected, infrastructure demand reflected lower
construction activity in North America and Europe and destocking by
some distributors as they reduced safety inventories.
2020 OPERATING REVIEW
While Covid-19 led to a number of temporary disruptions to the
Division’s facilities, ESCO maintained its ability to fully meet demand
supported by recent investment in safety and productivity upgrades.
This was achieved while also making significant strategic progress
which included:
• Achieving a record safety performance reducing TIR by 34% to
1.05 and achieving three consecutive months with no recordable
incidents for the first time in the history of the business.
• Improved customer responsiveness with significantly reduced lead
times, benefiting from prior investment in foundry operations.
• First orders for ToolTekTM which improves mine safety by enabling
remote G.E.T. change-outs.
• Strong progress in upgrading customers to the latest generation
Nemisys® system, which provides lower total cost of ownership
and emissions.
• 50% increase in mining attachments sales, despite customers
reducing capital budgets.
REVENUE BY ORIGINAL
EQUIPMENT/AFTERMARKET %
NUMBER OF FACILITIES
Aftermarket
Original Equipment
94%
6%
North America
South America
Asia Pacific
Africa
Europe
Australia
20
9
9
7
6
4
• Delivering 180bps margin improvement supported by early action
to reduce costs by £9m principally from lower expenditure on travel
and variable compensation.
• Good progress, despite Covid-19 restrictions, in delivering revenue
synergies including expanding sales in Africa, Central America
and Australia.
2021 OUTLOOK
The outlook for ESCO’s mining end markets is consistent with that
of the Minerals Division. Infrastructure markets have seen a greater
impact from Covid-19 disruptions but started to improve in the second
half of 2020. At this time, we are cautiously optimistic of making
progress in 2021 but the extent to which positive market sentiment
translates into orders and revenues in the near term will depend on
the shape of the economic recovery and the level of ongoing Covid-19
related disruption to both customers and our own operations.
The ESCO Production Master® Dipper
pictured on site.
ESCO PRODUCTION MASTER® DIPPER: A LEADER
IN GLOBAL MINING APPLICATIONS
Mines have relied on ESCO for industry leading lip and G.E.T.
systems for nearly 100 years. ESCO’s Production Master®
dippers are the latest in this offering, featuring best-in-class lip
technology with industry leading tooth systems, wear protection
and our wide range of lip profiles that can match customer
requirements and optimise bucket performance.
A recent customer comparison of an ESCO Production Master®
dipper versus a competitor’s resulted in the ESCO dipper
producing a sustained 5.7% hourly production rate increase,
using the same shovel in similar conditions as the competitor’s
equipment. The Production Master® also produced an over 70%
reduction in unplanned downtime for dipper maintenance when
compared to the other machine.
37
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 OPERATIONAL REVIEW
WEIR OIL & GAS
Weir Oil & Gas was previously
reported as an individual reporting
segment, the Division was classified
as held for sale from 5 October 2020
and was sold on 1 February 2021
to Caterpillar Inc.
2020 MARKET REVIEW
Upstream oil and gas markets were significantly impacted in the first
half of the year by the ending of the Saudi Arabia/Russia production
agreement and the impact of the Covid-19 pandemic. This led
to a steep reduction in capital spending by North American E&P
producers, with the US land rig count falling c.70% from peak to
trough, with frack activity seeing even more of an impact. The Division
took decisive action to right-size the business and protect financial
performance in these extreme market conditions including a £36m
cost saving programme.
2020 OPERATING REVIEW
Orders of £306m (2019: £584m) were down 48% on a constant
currency basis, reflecting market conditions and a further significant
reduction in refurbishment and replacement activity in North America.
Revenue reduced by 48% on a constant currency basis to £314m
(2019: £608m) in line with order trends.
Adjusted operating loss2 including joint ventures was £21m
(2019: profit £37m). The decrease was driven by significantly lower
activity levels and volumes in upstream North American markets
and reduced operating leverage.
The sale of the Oil & Gas Division was
completed in February 2021.
REVENUE1 £m
£314m
-48%
OPERATING LOSS1,2
(£21m)
-157%
1
Prior years restated at 2020 average exchange rates.
2 Before adjusting items (note 2).
38
The Weir Group PLC Annual Report and Financial Statements 2020Strategic Report RISK MANAGEMENT
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 RISK AGENDA
During the year, the Board has reviewed the effectiveness of the
systems of risk management and internal control and conducted a
robust assessment of the principal risks affecting the Group in line
with the Risk Appetite Statement. Following the Covid-19 pandemic,
the Board reviewed and monitored the effectiveness of the Group’s
response to Covid-19 in accordance with the March 2020 Financial
Reporting Council (FRC) guidance. The review found that whilst there
was no specific pandemic risk previously identified, the resultant
risks and mitigating actions were covered in existing risk categories.
All 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 93.
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 73.
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 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 88 and within the
Audit Committee Report on pages 93-102.
The specific risks identified across the business generally fall under
one of the categories within the ‘Risk Universe’ as shown overleaf.
39
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 RISK MANAGEMENT
CONTINUED
RISK RESPONSIBILITIES & REPORTING
BOARD AND SUB-COMMITTEES
GROUP EXECUTIVE
RISK COMMITTEE
I
G
N
T
R
O
P
E
R
DIVISIONAL MANAGEMENT
OPERATING COMPANY MANAGEMENT
RISK MANAGEMENT CYCLE
I
I
P
O
L
C
E
S
&
D
E
C
S
O
N
S
I
I
IDENTIFY
THE RISK
MONITOR,
ASSURE AND
REPORT
QUANTIFY
THE GROSS
RISK
IDENTIFY
FURTHER ACTIONS
AND CONTROLS
REQUIRED
IDENTIFY
THE EXISTING
MITIGATING
ACTIONS AND
CONTROLS
QUANTIFY
THE NET RISK
40
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, global pandemic (e.g. Covid-19)
and other major incidents
• External and internal fraud and corruption
Operational risk
• People
• Delivery and supply chain
• Quality
• Commercial
• IT, including cyber security
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.
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020
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. Safety, Health & Wellbeing
We will not undertake or pursue activities that pose unacceptable hazard
or risk to our people or the communities in which we operate or the
broader environment.
• No tolerance for breaches of Weir Group Safety, Health and
Environment Charter.
• Target zero harm through continuous improvement.
• Active community and environmental engagement.
2. People
We are committed to build an ever more high performing and inclusive
workplace which enables us to attract, develop and retain the very best
talent in an environment which is underpinned by our stated values of
respecting each other and doing the right thing.
No tolerance for breaches of:
• ‘We are Weir’ framework.
• Weir Code of Conduct.
• Group and divisional HR policies.
3. Environmental Sustainability
We will rigorously pursue our purpose – to enable the sustainable and
efficient delivery of the natural resources essential to create a better
future for the world and deliver our Sustainability Roadmap with integrity
and ambition.
Our sustainability strategy and goals are fully embedded in our organic
growth, M&A, capital allocation, and capital structure processes and
decision making.
We will deliver against and disclose our Reducing Footprint (RoF) and
Creating Sustainable Solutions (CSS) goals:
• RoF –30% reduction in Scope 1&2 CO2e by 2024 and 50% by 2030.
• CSS –Enabling Net Zero.
4. Reputation and stakeholders
We will avoid and 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.
5. 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.
6. Technology & Innovation
We will invest in technology, research and development to innovate our
customer offering allowing us to maintain and expand our market share.
7. Organic growth
We will rigorously pursue divisional organic growth strategies to meet our
market growth objectives.
8. Mergers and acquisitions (M&A)
We will actively pursue M&A opportunities that enhance our strategic
platform subject to meeting investment criteria.
9. 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.
10. 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.
11. 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.
No tolerance for breaches of:
• Legislative/statutory requirements.
• Weir Code of Conduct.
• International sanctions.
• Delegated authority levels.
• Group and divisional policies.
No tolerance for breaches of:
• Legislative/statutory requirements.
• Weir Code of Conduct.
• International sanctions.
• Delegated authority levels.
• Group and divisional policies.
• Input – Target R&D spend of 2% of revenues focused on Smart,
Sustainable Efficient strategy.
• Output – Robust innovation pipeline and revenue from new products.
• Impact – Quantify carbon and water saving benefit of our products
and solutions.
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 between 0.5 and
1.5 with up to 2.0 for M&A (current financial covenants 3.5 times) and will
retain adequate headroom within our debt facilities at all times.
41
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 RISK MANAGEMENT
CONTINUED
ROLE AND RESPONSIBILITIES
The key roles and responsibilities for risk management are set out below.
Group
Risk management responsibilities
Board
Overall responsibility for the Group’s
risk management and internal control
frameworks, and strategic decisions within
the Group.
• Annual review and ongoing monitoring of the effectiveness of the risk management and
internal control frameworks.
• Annual review of the Group’s risk appetite.
• Principal risks presented 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.
Audit Committee
Delegated responsibility from the Board to
review the effectiveness of the Group’s risk
and internal control frameworks.
• Annual assessment of the effectiveness of the risk management and internal
control frameworks.
• Review of reports from the internal and external auditors.
• Review of the results from the six-monthly self-assessment compliance scorecards.
Group Executive
Executive Committee with overall
responsibility for managing the Group to
ensure it achieves its strategic objectives.
• 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
• Weir Technology Excellence Committee
• Safety, Health and Environment
• Finance
• HR
• Group Compliance (sub function of Legal)
• Sustainability Excellence Committee
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.
E
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42
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020
PRINCIPAL RISKS AND UNCERTAINTIES
The Board has conducted a robust assessment of the principal risks,
alongside the Risk Appetite Statement set out on page 41, meeting
the Board’s responsibilities in connection with Risk Management and
Internal Control details in the UK Corporate Governance Code 2018.
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 2020.
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, reputation
or liquidity.
The principal risks set out on pages 44 to 51 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, liquidity or reputation.
Risk Trend
Increasing
No change
Decreasing
Viability Statement
V
Viability Statement
READ MORE: PAGE 89
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.
KEY
Strategy
People
Technology
Performance
Customers
Strategy impacted
Strategy not impacted
43
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
COVID-19 V
Risk of subsequent pandemic waves giving rise to further plant closures and heightened workforce exposures both for the Group
and its key customers and suppliers which could lead to a loss of productivity and/or loss of life.
Impact on strategy
Why we think this is important
How we are mitigating the risk
Changes during 2020
Subsequent waves of Covid-19 gives
rise to further plant closures resulting
in a material impact on the Group’s
productivity and ability to meet
customers’ demands.
Divisional and Group Covid-19
response plans developed for all
employees which are cognisant
of locality and ongoing local
authority restrictions.
This is a new risk in 2020.
Risk trend
Developed protocols and Group risk
mitigation plans are focused on key
control measures with particular
attention to employee safety.
Subsequent waves of Covid-19
gives rise to further lockdowns and
a resulting impact on the mental
health and wellbeing of the Group’s
global workforce.
Wider supply chain interruptions as
host Governments look to prioritise
and safeguard their citizens and
economies leading to increased
restrictions around the cross-border
movement of people and goods.
Risk of Covid-19 induced global
recession impacting commodity prices
and demand for mining equipment.
TECHNOLOGY V
Failure of the Group to embrace technology, innovate and continue to develop and invest in both our core and next generation solutions
and services for our customers, leaves the Group’s market leading positions and ability to deliver on growth ambitions exposed.
Impact on strategy
Why we think this is important
How we are mitigating the risk
Changes during 2020
Continued investment in our
technology strategy aligned on smart,
sustainable, efficient (SSE) priorities.
Hybrid R&D operating model
combining divisional R&D, Weir
Advanced Research Centre (WARC),
Weir Additive Manufacturing
Solutions (WAMS).
Strategic international research,
academic and technology scanning
partnerships and funding.
Strong governance around
intellectual property and new
material/product launches.
Further risk mitigation has been
updated to capture latest thinking
on key next priorities following the
strategic planning process
Engineering Excellence Committee
(EEC) replaced with Weir Technology
Excellence Committee (WTEC)
with a focus on horizon 2/horizon 3
technology strategy and associated
performance metrics.
Weir Innovation Network (WIN)
approach matured to further
promote, celebrate and reward
culture of innovation.
Risk trend
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.
Failure to identify and respond to
threats from disruptive technologies.
Failure to harness new technology
to reduce costs/improve efficiency
of our operations relative to peers
(digital, automation, big data etc).
44
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 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 2020
Further mitigations reflects the
ongoing plans to realise full
value from our mining pure play
platform including functional shared
service initiatives.
Risk trend
If we fail to improve our value chain
management, we risk:
Losing the opportunity 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 low 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 increasing thereby reducing
our cost competitiveness and
margins; and
Failure to develop organisational
capability to sustain and improve
operational performance results.
Regular KPI monitoring of the value
chain throughout the organisation.
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.
Improved demand planning and
forecasting including Sales and
Operations Planning within VCE.
Realising value from shared
service initiatives.
ENVIRONMENTAL SUSTAINABILITY
Failure to adapt to and mitigate climate change and the associated impact on our current or future business.
Impact on strategy
Why we think this is important
How we are mitigating the risk
Changes during 2020
Failure to manage this risk has
significant impacts on us, our
customers and our supply chain.
These impacts can be both acute
and chronic.
Furthermore, failure to manage
these risks may have political
and legal implications following
increased Governmental focus.
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.
Sustainability Roadmap developed
via extensive multi-stakeholder
materiality assessment
encompassing Environmental, Social
& Governance (ES&G).
2020 organisational changes
to bring new focus on delivery
of Sustainability Roadmap
priorities and further strengthen
governance foundations
Further risk mitigations updated to
capture proposed work arising from
the completion of the 1st pass Task
Force on Climate-related Financial
Disclosures evaluation process.
Risk trend
Two of the four Sustainability
Roadmap priority areas focus on
Environmental Sustainability.
Creating sustainable solutions: with
targets for increased sustainability
impact of our products in use,
sustainable design and supply
and end-of-life stewardship for
our products.
Reducing our footprint: with
targets for CO2 reduction (both
efficiency and renewable supply
optimisation), water stewardship,
waste elimination.
We are continuing strong engagement
with stakeholders in this area.
45
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
SAFETY, HEALTH AND WELL-BEING V
Failure to adequately protect our people and customers from harm presents a significant threat to the physical and mental well-
being of the Group’s existing and available workforce leading to a resultant impact on productivity and our ability to meet customer
demands and expectations.
Impact on strategy
Why we think this is important
How we are mitigating the risk
Changes during 2020
We operate in hazardous
environments, and therefore have
a fundamental duty to protect our
people and other stakeholders
from harm whilst conducting
our business.
Policies and processes must be
in place to ensure the continued
health, safety and wellbeing of
all employees, customers and
third parties.
Failure to ensure continued
environmental compliance
and/or contravention of
environmental legislations.
Failure of the Group to respond
to a significant risk to employees
resulting from a pandemic or
significant global health issue.
Failure of the Group to adequately
protect its workforce from both the
heightened stress on their well-
being and/or psychological fears
from changing work practices.
Failure to manage the security
and safety risks associated with
operating in higher risk location.
The Weir Behavioural Safety system
is in place to reduce the risk of
safety incidents.
Control measures updated to
track status and progress of safety
training for all employees.
In addition, there are initiatives
to prevent the most common
accident types. The Weir global SHE
standards are continually reviewed.
Risk title refined to include
employee’s wellbeing.
Risk trend
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.
Employee wellbeing support
(including dedicated mental health
first aiders, pandemic protocols
and expansion of existing health
training programme).
46
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 MARKET CYCLICALITY V
Changes in key mining markets, including commodity prices and macro economic conditions 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 2020
Cyclical nature of the Group’s
end markets, including continued
exposure to oil sands, giving rise to
downturns and resultant pricing and
operational pressures.
We maintain regular engagement
with our customers to understand
their needs and challenges,
and ensure our business is
appropriately aligned.
Risk of credit markets tightening
limiting access to capital.
Failure of the Group to maximise
upturn opportunities and meet
customer demands.
Our strategic planning utilises
extensive market intelligence to
assist in forecasting opportunities
and dips in markets.
We continue to focus on customer
relationships, technology
development and Value Chain
Excellence to manage this risk.
The risk trend has reduced to reflect
the sale of Oil & Gas.
Risk trend
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 2020
Risk trend reduced following the
sale of Oil & Gas.
Risk trend
Increasing presence of low cost
competitors with improving
quality in our end markets leads
to significant pricing pressure and
margin deterioration.
Alternatively, increased competition
forces a continual release
of longer wear life products
resulting in maintaining market
share but cannibalising our sales
volumes with difficulty in realising
commercial benefits.
Horizon scanning for competitor
threats including patent searches
and applications.
Collaboration with customers
on technology partnerships and
field trials.
Technology solutions with
differentiation on engineering
expertise, aftermarket service and
total cost of ownership.
Continued development of
operational efficiency and
improvement plans.
Continued investment in core
product design, process and
materials that provide high value.
47
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
DIGITAL STRATEGY AND ROADMAP V
Failure to both exploit ‘digitalisation’ opportunities impacting the Group’s ability to meet evolving customer expectations.
Impact on strategy
Why we think this is important
How we are mitigating the risk
Changes during 2020
Technological innovation continues
to be at the forefront of the business
due to more drive for financial and
environmental efficiency 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 15.
Risk updated to reflect IS&T digital
operating model changes.
Risk trend
Failure to embed ‘digitalisation’
as a priority within Group and
divisional strategies, leading
to underinvestment/delayed
development of the capabilities
needed to meet our medium-term
business performance goals.
Failure to identify and mitigate
potentially disruptive digital
technology trends as they appear
in mining or adjacent industries
and/or failing to adapt at the
required pace to gain/sustain
market competitiveness.
Failure to leverage digital capabilities
to drive automation and efficiency
across core business processes,
resulting in increased costs and/or
lower responsiveness.
Failure to converge across
Information Technology, Operational
Technology (IIOT, OT) and
Engineering Technology, leading
to fragmented architecture,
security exposure and inefficient
service models.
Failure to exploit current and
emerging data and analytics
capabilities to improved operational
performance for ourselves and
our customers.
Failure to develop, attract and retain
the talent need to underpin Weir’s
digitalisation journey and culture.
Digital and IT leadership embedded
in the Group and divisional strategic
planning processes.
Oversight and Governance
within Information Systems &
Technology (IS&T) Business
Management system.
Group-lead scenario planning
processes to identify and align on
the major emerging technologies
(including digital) as input to Group
and divisional strategies.
IS&T operating model, providing
clear governance framework
(Strategy, Policy and Governance)
and foundational platforms
(Core Services) for IT and Digital
investments across Group
and Divisions.
Customer requirements evaluated
through User Experience framework
as input to the investment in
development of processes, products
and solutions Oversight and
Governance within IS&T Business
Management system.
Assurance work to embed
Secure by Design within all Digital
Development activities.
Alignment of products, solutions,
technologies in line with IS&T
operating model to deliver scalable
solutions through Core, Common
and Distinct framework.
48
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 INFORMATION SECURITY & CYBER V
Failure to adequately protect Weir Group from cyber enabled fraud and other information security risks which can lead to operational
disruption, reputational damage, regulatory fines and/or financial impacts.
Impact on strategy
Why we think this is important
How we are mitigating the risk
Changes during 2020
Cybersecurity controls further
enhanced, including a 24/7 security
operations centre to monitor
cybersecurity threats and regular
crisis management rehearsals
linked to cyber security scenarios.
Risk trend
We have an IT Governance
Framework with a focus on
structured change management
techniques, including setting project
governance levels in line with risk.
IS&T Control Board provides
assurance and oversight.
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.
Security Incident Responder
teams monitor our various
security systems.
All security related incidents are
reported to the Group Executive.
Up-to-date data allows us to make
informed decisions about our
business. Therefore, we require
reliable and efficient IT systems
and infrastructure to support our
data requirements. Breaches of
our IT security could have serious
consequences for our business,
including: interruption to business
operations; and loss of intellectual
property and other sensitive data.
The Group is investing in a
significant IT transformation
programme. If this is not managed
effectively, the consequences could
include interruption to business
operations if data is unavailable
due to unsuccessful execution
of change, impacting our ability
to compete and our reputation in
the market.
At present, the Group’s principal
exposures to cybercrime relate to
the misappropriation of cash and
data. Our revenue streams are
largely protected as our products are
not currently electronic in nature and
we do not, as a rule, transact over
the internet.
49
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
PEOPLE
Failure of the Group to build an ever more inclusive and diverse culture, which gives rise to an inability to attract and retain the
very best workforce.
Impact on strategy
Why we think this is important
How we are mitigating the risk
Changes during 2020
The recruitment, talent
development and performance
enablement programme is being
further developed.
Inclusion and Diversity Training
Risk trend
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.
As markets improve we need to
continue to recruit high quality staff
building on existing capability while
recruiting skilled expertise in the
right areas of the business and at
the right time.
Promotion of the Weir Group Values
& Behaviours, Code of Conduct
and HR Policies sets the standards
and expectations for all our staff,
reinforcing our stated commitment
to attracting and retaining the very
best people.
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.
Inclusion and Diversity Training and
Steering Committee.
POLITICAL AND SOCIAL
Adverse political action, or political and social instability, in territories in which we operate may result in strategic, financial or
personnel loss to the Group.
Impact on strategy
Why we think this is important
How we are mitigating the risk
Changes during 2020
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 including contingency
plans and exit strategy planning.
Our strategic planning assists in
forecasting 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.
Existing controls updated to reflect
sale of minority B-BBEE interest.
Revised Strategic Planning Process
adjusted to address Covid-19 risks.
While the UK’s exit from the
European Single Market and
Customs Union did not have a
material impact on the Group,
mitigating actions were taken by
our local UK businesses ahead of
the transition.
Risk trend
50
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 ETHICS AND GOVERNANCE V
Interactions with our people, customers, suppliers and other stakeholders are not conducted with the highest standards of integrity
and in accordance with Group Policies & Procedures which devalues our reputation.
Impact on strategy
Why we think this is important
How we are mitigating the risk
Changes during 2020
We are unwilling to accept
dishonest or corrupt behaviour from
our people, or external parties acting
on our behalf, whilst conducting
our business. If we fail to act with
integrity, we are at risk of:
• Reputational damage leading to a
loss of business opportunity;
• 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.
We expect all areas of the business
to do the right thing and conduct
business in compliance with
applicable laws, Weir Group policies
and procedures, and the highest
ethical standards.
The Code of Conduct,
supplemented with Group policies
on related topics, provides a clear
framework for how we expect our
business will be conducted.
Completed in-depth review and
refresh of Group anti-corruption
risk assessment which underpins
compliance programme
risk mitigation.
Refreshed due diligence and
management process for third-party
intermediaries, which will be rolled
out across 2021.
Risk trend
Regular training and re-enforcement
of principles is provided using a
range of mechanisms including
Town Hall style sessions and online
and induction training.
The financial control framework
is continually monitored
for effectiveness.
Internal Audit’s remit includes
regular review of the anti-bribery
and corruption and financial controls
across the Group.
The compliance ’sub- function’
within Group Legal designs and
administers our global compliance
programme and assists Internal
Audit in monitoring adherance
to enhance global focus
on compliance.
An Ethics Hotline is available to all
members of staff and the public.
Reports are investigated on a timely
basis and summary reports provided
to Group Executive and Board.
51
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 OUR SUSTAINABILITY REVIEW
SUSTAINABILITY ROADMAP
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.
ZERO TIR
ENABLING
NET ZERO
LEADING
eNPS SCORE
50%
REDUCTION
IN CO2e
BY 2030
SUSTAINABILITY IS AT
THE VERY CORE OF OUR
PURPOSE AND THEREFORE
OUR STRATEGY.
PAULA COUSINS
Chief Strategy and Sustainability Officer
SUSTAINABILITY ROADMAP – KEY CLIMATE MILESTONES
2019
• Multi-stakeholder materiality assessment
• Roadmap design and key
goals commitment
• Weir’s first Chief Strategy
& Sustainability Officer role on the
Group Executive
2020
• Roadmap launch
• Global energy use in mining study
• Group-wide energy efficiency and
renewable supply studies
• Sustainable solutions
technology developments
2021
• Progress and disclosure against roadmap KPIs
• Continued focus on sustainable solutions R&D
and technology partnerships to address mining
industry’s biggest challenges
• Scope 3 study and first evaluation of Science
Based Targets and Net Zero pathways
• Energy efficiency pilots across
• First Task Force for Climate-related Financial
key operations
Disclosures evaluation
• Digitalisation of strategic
sustainability disclosures
52
SOLUTIONSCREATING SUSTAINABLEFOOTPRINTREDUCING OURZERO HARMCHAMPIONINGNURTURING OURUNIQUE CULTUREStrategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 MULTI-STAKEHOLDER AND VALUE DRIVEN APPROACH
WHY IS
SUSTAINABILITY
IMPORTANT
TO WEIR?
As the world develops, electrifies and
decarbonises, it needs more natural resources,
particularly copper and battery metals. We have
a clear role to deliver solutions that are smarter,
more efficient and sustainable to ensure these
critical resources are produced more sustainably.
We also have a role to be authentic agents of
social change, to truly care for our employees
and to enhance our global communities.
We have complete alignment from all our key
stakeholders on these priorities which enables us
to set a clear strategy – to be part of the solution
to address the greatest human challenge
That’s why, when we launched our refreshed
‘We are Weir’ framework and Sustainability
Roadmap at the end of 2019, we put sustainability
at the very heart of our strategy with our purpose,
“to enable the sustainable and efficient
delivery of the natural resources essential
to create a better future for the world”.
WHAT ARE YOU
COMMITTING TO?
Sustainability is a wide, and expanding, subject
so we have chosen to focus diligently on where
we can create the most significant impact for all
our stakeholders. In 2019 we took a considered
approach speaking to customers, investors and
employees to understand what really matters.
This engagement gave us deep insight and
enabled us to focus our roadmap on four strategic
priorities, each with a big ambitious goal:
• Championing Zero Harm
• Nurturing our Unique Culture
• Reducing our Footprint
• Creating Sustainable Solutions
These strategic priorities are underpinned by
robust governance, corporate responsibility
and transparency foundations.
HOW ARE
YOU GOING
TO DELIVER
THOSE
COMMITMENTS?
We have clear structures, processes and
accountabilities in place to ensure we can both
deliver against these ambitious goals and measure
and disclose our progress including:
• Strategy – Sustainability priorities are
embedded in core business strategy and
strategic planning.
• Accountability – Chief Strategy & Sustainability
Officer role was added to the Group Executive in
January 2020 and accountabilities for all areas of
the roadmap are embedded in our governance
structures (see page 62)
• Metrics and Policies – In addition to priority
roadmap goals, policies and standards and KPIs
are in place to underpin delivery (see page 68).
• Remuneration – Sustainability metrics have
been embedded in Group Executive balanced
scorecard and linked to remuneration for the
past three years (24% of scorecard metrics in
2019, 32% in 2020 and 33% in 2021).
The roadmap was developed in 2019 and launched
in 2020, so 2021 will be a significant year for us to
further deliver and disclose progress towards our
key goals.
We will continue our focused ‘now, next, later’
approach to ensure we prioritise our resources
on delivering the biggest impact opportunities for
all our stakeholders. See pages 55, 57, 59 and 61
for key 2021 next steps. We will actively avoid
tactical short-term activities that could distract
resources from delivering long-term sustainable
results. We will look for industrial and academic
partnership opportunities to create transformative
change for our industries and deliver our purpose.
WHAT ARE
YOUR NEXT
STEPS?
2024
• 30% reduction in
Scope 1& 2 CO2e
2030
• 50% reduction in
Scope 1& 2 CO2e
2050
• Net Zero
2021+
• Deliver against Reducing our Footprint goals
through a combination of strategic energy
efficiency and renewable supply actions
• Deliver against Creating Sustainable
Solutions goal through both sustainable
design embedded in core products and new
transformational solutions innovation
• Evaluate viable 2050 Net Zero pathways
53
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 W
SUSTAINABILITY REVIEW
CONTINUED
CHAMPIONING ZERO HARM
IN SUPPORT
OF UN SDGs
SAFETY STEP CHANGE IN ESCO DIVISION
In 2020 ESCO’s sustained commitment to the Weir Safety,
Health & Environment (SHE) Charter resulted in significant
performance improvements, despite the new challenges presented
by Covid-19. ESCO achieved a remarkable 34% reduction in total
injury rate (TIR) and a 52% reduction in the number of Lost Time
Injuries. Year-over-year, that equates to 19 fewer serious incidents
and 451 fewer days lost to injury.
ESCO prioritised SHE investments across global operations with
the aim of achieving world class safety performance (Zero Harm)
aligned to our ‘We Are Weir’ ambition. Capital allocation at site level
focused on improving worker safety through provision of specialist
training materials and process changes. Behavioural change was
supported through the teaching of Weir SHE Charter guiding
principles and ‘Think Safety First’ workshops. ESCO employees
personally committed to adopting new ways of working safely.
Over 18,000 safety conversations occurred, together with high
employee completion of online training focused on Weir’s 12 Life
Saving Behaviours.
Consistent and engaging leadership demonstrated by global
management teams helped several sites attain recordable
injury-free milestones, including operations in Xuzhou, China,
and Santiago, Chile, where each site achieved Zero Harm and
completed over one million hours working safely.
Priority implementation of the Weir SHE Management System will
continue in 2021, ensuring global compliance with SHE protocols
as ESCO builds upon 2020 improvements. Based on 2020 safety
performance, the outlook for the Division is very positive as it
targets Zero Harm.
ESCO made significant progress
towards achieving Zero Harm.
In 2020 we achieved a 23% reduction in our Total Incident Rate
to 0.37. In both March and November there were no recordable
incidents across our global operations, the first time this has been
achieved in the Group’s history and proof that our ambition of
becoming a zero-harm workplace is within reach.
This performance benefited from our safety culture and our highly
devolved operating model where decisions are made as locally as
possible. These were both key components in our response to the
Covid-19 pandemic, helping us to adapt quickly and effectively to
protect our people and fully serve our customers.
ZERO TIR
Our vision is a Zero Harm workplace for people
and the environment where everyone goes home
safe and healthy.
OUR GOALS
Safety First
• Aspire to zero TIR
Health and Wellbeing
• Promote Health and Wellbeing
tailored to local needs
Environmental Safeguarding
• Drive continuous
environmental improvement
TOTAL INCIDENT RATE (TIR)1,2,3
0.37
-23%
0.48
0.37
2019
2020
(No of Recordable Incidents x 200,000)/(Hours Worked).
Data shown includes Minerals Division, ESCO Division, Oil & Gas Division and
Group functions. Continuing operations TIR are shown on page 13.
Full five year comparative data for TIR is available on the graph on the inside
front cover.
1
2
3
54
WELLBEINGHEALTH &FIRSTSAFETYENVIRONMENTALSAFEGUARDINGZERO HARMCHAMPIONINGStrategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 SAFETY FIRST
2020 has seen Weir make significant progress towards our ambition
of being a Zero Harm workplace with a 23% reduction in our Total
Incident Rate (TIR1) to 0.37. There was a 12% increase in Lost Time
Injury severity rate2 in 2020 compared to 2019 although the number
of Lost Work Days is lower due to a 38% reduction in number of Lost
Time Injuries. There was also a 35% reduction in hand and finger
injuries from the previous year. In March, for the first time ever, the
Group achieved an entire month without any recordable incidents,
confirming that a workplace with Zero Harm is possible. Weir had a
second recordable incident free month in November. This performance,
in the context of a global pandemic, reflects the ‘Safety First’ culture
throughout our business and the commitment of colleagues around
the world to taking care of each other.
The overall Group performance was supported by a number of
initiatives including continued investment in both physical infrastructure
and behavioural change in the ESCO Division, which joined the
Group in 2018. This focused combination of ongoing practical and
behavioural changes resulted in a 34% reduction in ESCO’s TIR and
a 52% reduction in the number of Lost Time Injuries. The number of
safety conversations also increased from 923 to 18,450 since last year.
These peer-to-peer engagements are designed to create a culture
where everyone exercises care for each other at all times.
2020 also saw the launch of mandatory SHE eLearning modules for
all employees and leadership to: reinforce key behaviours including
recognising how our state of mind can change our behaviours and
increase the risk of errors; provide processes and information that can
support them; and encourage everyone to take a lead on safety.
Covid-19 caused new challenges in 2020 and our highly empowered
local management teams, along with employees involved in decision
making, were able to quickly reconfigure our workplaces and
processes to make them Covid-19-safe.
This excellent performance is down to commitment across the whole
Group to maintain safety as our priority, keeping our mind on task even
with the many extra distractions, stresses and pressures caused by
Covid-19. With our emphasis on a safe return to work and considerable
efforts to mark World Safety Week (with a focus on Covid-19 related
safety and hygiene), it has been business as usual on the safety front
and the figures are the evidence.
These focus on employee response towards SHE (“I feel empowered
to stop my work or that of a colleague in the interests of SHE and
to report incidents, near misses and hazards”). It also covers safety
leadership (“My leader never compromises our Health, Safety or
Environmental Standards to meet our objectives”). The scores and
feedback for these two SHE engagement questions track well above
the global benchmark for our industry according to Peakon, our global
engagement survey provider. In 2020, 71% of our manufacturing sites
are accredited to both ISO45001 and ISO14001.
HEALTH AND WELLBEING
In addition to the physical changes the Group made to protect
employees, we also prioritised mental health during a time
of increased uncertainty for colleagues and their families.
Employee engagement was instrumental in supporting the changes
in work and life due to Covid-19.
Along with the promotion of existing assistance and global support
lines, many health and wellbeing initiatives were launched throughout
the Group. A month of daily ‘Pause and Refocus’ throughout Minerals,
mindfulness and wellbeing sessions in Europe, a global Learning &
Development campaign with topics such as healthy living, resilience,
mindfulness, and the ‘Get Moving – Be Kind To Your Body’ programme
in Africa are examples of some of the health and wellbeing initiatives.
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 2020.
Across our sites we achieved an average score of 79% across the
environmental section of our SHE management system audit up
from 73% in 2019. We continue to act to protect and improve the
environment in which we operate. Examples include:
• In 2020 Weir ESCO China was one of only ten companies to
get an A level environmental rating based on the environmental
improvements to its foundry under the Environmental
Performance Classification Standard from China’s Ministry of
Environmental Protection.
• Our Weir Minerals Chile Foundry received 100% conformity from
The progress we’ve made in our overall safety performance sits
alongside strong, positive employee feedback on SHE matters,
as captured in our global employee survey. The two direct SHE
questions in our global survey are two of our most positive areas of
feedback across nearly 30 quantitative questions asked in the survey.
1
2
its 2020 Clean Production Agreement audit from the Chilean
Agency of Sustainability and Climate Change.
(No of Recordable Incidents x 200,000)/(Hours Worked)
(Days Lost)/(LTIs)
KEY NEXT STEPS
Safety First
Health and Wellbeing
Environmental Safeguarding
• Continue to drive Zero Harm.
• Build Group Health and Wellbeing
• Continuous improvement in safeguarding
• Improve leading indicators including
hazards and safety conversations
with greater understanding of trends
and causes.
strategic framework to address employee
wellbeing priorities.
• Establish and evaluate Health and
Wellbeing metrics.
our local environments.
• Ongoing review and improvement
of environmental section of SHE
management system.
• Deliver advanced SHE learning.
• Align local initiatives with the new
• Continuously improve SHE analytics
including integration with Workday, the
Group’s new digital HR management
system and implement updated Weir
SHE standards.
strategic framework.
• Develop and implement a new global
Occupational Health Policy to standardise
OH provision across the business.
55
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 SUSTAINABILITY REVIEW
CONTINUED
NURTURING OUR UNIQUE CULTURE
IN SUPPORT
OF UN SDGs
HARNESSING GREATER DIGITAL INCLUSION
In 2020 we reached an important milestone on our journey to
become a more inclusive business by ensuring that every Weir
employee around the globe was given improved access to digital
tools, information and resources.
Around 4,500 employees (c.1/3 our total 2020 workforce) gained
equal access to key digital resources, fostering a better employee
experience and helping us continue to move towards our strategic
goal of Nurturing Our Unique Culture.
Every colleague can now access a core range of digital resources
using their own individual network account. These resources
include Workday (our global HR system), Source (our global
intranet), and the Weir Innovation Network, a powerful platform
where people can share and support ideas for specific local and
global challenges more easily. In doing so, we prioritised training
and onboarding to support stronger online skills within our
business. One of the first emails newly connected colleagues
received was from CEO Jon Stanton personally welcoming them
to Weir’s digital world and introducing the benefits provided by
digital connectivity.
Crucially, an equal digital foundation for all has now made self-
directed learning resources available to all employees and will
allow them to participate in events such as online Town Halls
and our Global Employee Survey. These opportunities will be
further developed in 2021 as we strive towards an even more
inclusive workplace.
Kiosks supported greater digital
inclusion in key locations.
Employee Net Promoter Score (eNPS) is a widely-adopted measure
of engagement in organisations.
We have achieved considerable progress since our first global
survey, testament to the combined and dedicated action by our
teams across the globe who continue to take action that is making
a difference to how our people feel about working at Weir.
LEADING
eNPS SCORE
We are a global family. We are proud of our unique
blend of talent, technology and culture. We are
here to inspire our people to do the best work of
their life.
OUR GOALS
Engagement
• Sustain leading eNPS in our
all employee surveys
Inclusion and Diversity
• Foster equal opportunities
Community Partnerships
for all
• Make a positive contribution
to the communities in which
we operate
EMPLOYEE NET PROMOTER SCORE (eNPS)1
42
24 2 points ahead of the True
Benchmark for our
industry in 2020
28
18
42
34
2019 (H1)3
2019 (H2)
2020 (H1)
2020 (H2)
1 Continuing operations.
2 True Benchmark removes the effect of external demographic influences that are out
of our control but which all affect employee engagement (employee age, tenure,
gender, department, job level and office location).
3 Flow Control not included.
56
UNIQUE CULTURENURTURING OURPARTNERSHIPSCOMMUNITYENGAGEMENTINCLUSION &DIVERSITYStrategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 ENGAGEMENT
At Weir, we continue to develop a culture of listening, where
employees feel free to share their views, and where they can see their
feedback acknowledged and acted upon.
Throughout the disruption and uncertainty of 2020, we stepped up our
overall employee communications and engagement activities using
a range of communication channels such as our global all-employee
Town Hall sessions, CEO briefing videos, Covid-19 impact surveys,
virtual ‘Meet the Board’ sessions (page 83) and regular senior leader
calls, amongst others.
We recognised that the pandemic had a major impact on all of us
at Weir, affecting both how we all work, and for many of us, also
impacting on where we work too. We therefore took the decision to
continue to run our regular employee engagement surveys. We ran
two global employee surveys during 2020 to help us assess our
overall employee engagement and gain critical employee insights
and feedback.
For the past two years now, our global all-employee surveys have
provided us with immensely valuable insight into how our people feel
about working at Weir and 2020 was no different.
Our average survey completion rate in 2020 across both surveys was
85% and during the year we captured some 110,000 comments giving
us rich insights for teams to work with.
Despite the challenges of 2020, we were delighted to see an
ongoing improvement in our Employee NPS (eNPS) score, which has
risen steadily from 18 in our first survey, to 42 in our most recent
survey. This performance places Weir Group 24 points ahead of
the True Benchmark1 for our industry in 2020. We also saw strong
improvements in the majority of our engagement drivers; a strong
indication that despite tough challenges this year, our people have
adapted well and continue to not only perform well but remain
optimistic for the future.
The surveys have also been critical to initiating powerful local actions,
which have had a positive impact on our employees and our teams and
even in some cases on our families and in our communities around
the world.
INCLUSION & DIVERSITY
At Weir our core values drive us to continue to develop a culture
of equality and whilst we acknowledge that we must do more, the
feedback in our most recent employee survey shows that we are
making progress when it comes to Weir being a place where people
from all backgrounds are treated fairly. Far more of our employees than
ever before are now able to work from home, thereby ensuring greater
flexibility, avoiding commuting and allowing more time with family.
Further, the introduction of Workday, our new global HR management
system, has helped us lay the foundations for greater equality and
consistency across our people processes.
In 2020 we rolled out our global Inclusion & Diversity (I&D) learning
module aimed at helping all employees understand the role we can all
play in creating a more inclusive culture. This has been completed by
more than two thirds of employees.
We continue to make good progress on closing our gender pay gap in
the UK and earlier this year we celebrated International Women’s Day
with our ‘Women of Weir’ campaign. In 2020, we had 2,016 female
employees and 11,054 male employees. Further information about
gender pay gap can be found on pages 124.
In 2020 our Affinity Group, the Weir Women’s Network, expanded from
a divisional-level group to a Global group and it now comprises remote
chapters in even more countries we operate in. This has helped foster
inclusion for our geographically dispersed and remote employees.
We continue to engage with our I&D Steering Committee which
comprises a diverse range of 11 employees. During 2020 I&D Steering
Committee members helped colleagues within their local businesses
to better understand Weir’s I&D strategy so everyone is clear on
what we’re trying to achieve and what role they can play to progress
delivery. A particular area of focus for I&D Steering Committee
members during 2020 was the support they gave in helping review
and launch the global I&D online learning module. They also continued
to support teams and leaders locally by drawing actionable I&D-related
insights from the engagement survey feedback given in their areas.
We also once again delivered Weir ShareBuilder in 2020 as we aim to
make every employee a Shareholder.
COMMUNITY PARTNERSHIPS
We remain committed to focusing on projects with strong educational,
health and community themes. We support local communities through
charitable contributions and by encouraging employees to donate their
time to community and charitable initiatives.
By focusing on broad themes, we can allow local businesses the
flexibility to engage and support relevant causes that are close to the
hearts of local employees but which also support our overall community
partnerships agenda.
In 2020 the total amount of charitable donations made was £464,811 split
across Community (76%), Health (7%) and Education (17%).Additionally,
during 2020, in many of our communities around the world we provided
PPE and essential items for those in need during the Covid-19 pandemic.
1 True Benchmark® removes the effect of external demographic influences that are out of
our control but which all affect employee engagement (employee age, tenure, gender,
department, job level and office location).
KEY NEXT STEPS
Engagement
Inclusion and Diversity
Community Partnerships
• Continue to analyse our global survey
insights to address our priority areas at a
Group level.
• Support and encourage team-led action
• Encourage employees to self-declare
their diversity data on Workday to
give us a strong baseline for data-led
diversity insights.
planning at a local level.
• Launch Affinity Groups globally.
• Develop our survey approach to
• Ensure a continued focus on fairness
ensure it supports an enhanced overall
employee experience and improved
business outcomes.
and equality.
• Develop impactful local community
partnership plans.
• Continue support for employee-led local
community initiatives.
57
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 SUSTAINABILITY REVIEW
CONTINUED
CREATING SUSTAINABLE SOLUTIONS
IN SUPPORT
OF UN SDGs
ASSESSING GLOBAL ENERGY USE IN MINING
While mining has a crucial role in providing vital resources to
support decarbonisation it is also a large consumer of energy.
A number of the world’s largest mining companies have made
commitments to achieve Net Zero carbon emissions from their
operations. As a technology partner, Weir is well placed to help
them achieve these aims, but the first step is to understand the
scale of the challenge.
We commissioned a comprehensive assessment of energy
consumption in key mining processes and minerals, endorsed by
the Coalition for Energy Efficient Comminution (CEEC). The main
findings of the Energy in Mining Report were:
• The mining industry consumes approximately 12 EJ per year,
or 3.5% of total final energy consumption globally, equivalent
to the energy consumption of Germany.
• Comminution, the process of crushing and grinding rocks, is the
single most energy intensive process in mining, the equivalent
of over 7.5 times every home in the UK.
• Our study investigates energy consumption in the mining of five
commodities; Copper, Gold, Iron Ore, Nickel and Lithium.
These results confirm that there is a substantial opportunity for
process improvements to reduce energy consumption, with
technological innovation in comminution, where the Group has
established a market-leadership position in High Pressure Grinding
Rolls (HPGRs), a crucial step.
ENABLING
NET ZERO
We believe we can enable Net Zero for our
customers by shaping the next generation
of smart, efficient and sustainable solutions
with cutting-edge science and our tradition
of innovation.
OUR GOALS
Products in Use
Design and Supply Chain
• Enable Net Zero through
innovative solutions
• Embed sustainable product
design and procurement
Circularity
• Drive and capture opportunities
to shift from linear to a
circular model
ENDURON® HPGR
TERRAFLOW®
NEMISYS® N90
ULTRALIGHT™
In 2020 CEEC endorsed our Energy In
Mining study on energy consumption.
up to 40%
Energy savings
up to 82%
Water saving
44%
Reduced embodied CO2
2000
tCO2e annual saving
58
SOLUTIONSCREATING SUSTAINABLECIRCULARITYPRODUCTS IN USEDESIGN ANDSUPPLY CHAINStrategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 PRODUCTS IN USE
We target the use phase of our products because, as our global
energy use in mining study shows, this is where the greatest
environmental impact arises in the end-to-end lifecycle of our products.
Our smart, efficient, sustainable technology helps reduce energy and
water impact as well as improving operator safety.
Through energy savings of up to 40%, our Enduron® High-Pressure
Grinding Rolls (HPGR) can generate substantial reductions of operational
CO2 emissions, as well as further savings of embodied carbon because
HPGRs do not require grinding media used in traditional mills, which
combined saves up to tens of thousands of tonnes of CO2 annually.
HPGRs can also be used with air classification and other technologies
to transform the comminution process without a single drop of water,
supporting mining’s drive towards dry processing.
In 2020 we launched the Cavex® 2 as the world’s most sustainable
hydrocyclone, with design improvements leading to measurable water
and energy savings, as well as Synertrex® IIoT technology to ensure
it continually operates at optimum efficiency to deliver up to 30%
additional classification capacity.
In addition, our Terraflowing® solution, which reduces the water content
of tailings waste by up to 82% in a cost-effective manner enabling it
to be safely stored or repurposed, is now in operation at a pilot plant in
Australia. In a five-month study, our ESCO Division identified a 44% CO2
reduction in embodied CO2 per point for its Nemisys® N90 tooth system
versus a major competitor. The reduction is based on improved wear
life, which is more than double the competitor product, leading to fewer
replacement parts and less machine downtime. Further CO2 savings can
also be expected from improvements in machine performance.
ESCO’s Ultralight™ truck body weighs up to 34% less than the OEM
bodies. This leads to a 2% reduction in fuel consumption and 39
tonnes less CO2 emissions per truck per year. In addition productivity
improvements of 5% can save one truck from a 20-truck fleet, or 2,000
tonnes of annual CO2.
We also pursue continuous innovation to improve sustainability
performance in existing product lines. For example, Warman’s new
telescopic gland seal guards can be retrofitted easily to make pump
maintenance safer.
DESIGN AND SUPPLY CHAIN
Great design plays a key role in our long-term ambition to enable
customers to achieve Net Zero by reducing environmental impact and
increasing safety of our products. The benefits go beyond safety and
environment: more efficient technology and longer-lasting wear parts
mean Weir equipment is often already best-in-class for total cost of
ownership and our aim is to make it better.
KEY NEXT STEPS
In 2020, we systematically embedded sustainability throughout our
New Product Design (NPD) processes and developed new Sustainable
Product Design training with the Sustainable Mining Institute at the
University of Queensland. The training is targeted at engineering teams
to build understanding of global sustainability challenges and how they
relate to mining, provide tools to address these challenges through
product design, and build the business case for customers. We plan to
roll out the course from early 2021.
To help us prioritise the most relevant innovation, we often talk
to customers about the challenges they face in terms of energy
consumption, water usage and waste and brainstorm ways in
which we can help reduce their environmental impact by providing
new solutions.
We also look upstream into our supply chain to find ways to be
more sustainable. Under our sustainable foundations, we set out
our supplier expectations for business ethics, how they treat their
workforce, legal and regulatory compliance, health and safety and
environmental standards. We also pursue opportunities to improve
the sustainability of specific materials, such as our initiative to
rationalise and improve sustainability in our rubber supply, where we
are consolidating our latex and raw rubber supply to drive improved
traceability, assurance of supply and cost efficiency.
CIRCULARITY
Weir technology can help the mining sector find solutions to difficult
circularity challenges. In the Canadian Oil Sands, unprocessed Mature
Fine Tailings (MFT) are an unwanted by-product of the oil extraction
process. It is estimated that over a trillion litres of unprocessed
MFT is held in tailings ponds. An internal sustainability challenge
identified an opportunity to convert MFT into a carbon neutral fuel
and environmentally safe by-product, removing the contamination
risk. In 2019 we worked in collaboration with our development
partner Natural Energy Systems (NES) to successfully complete a
Phase 1 study. In 2020 we studied the option of adding additional
locally available energy rich waste streams, petroleum coke and
rubber tyres, to enhance the performance of the conversion process.
We are currently pursuing our Oils Sands customers for concept
engagement and test sample acquisition. Our plan for 2021 is to
perform corroborative testing in local lab and demonstration facilities,
to validate the process concept with real feedstock in actual process
operating conditions.
Products in Use
Design and Supply Chain
Circularity
• Continue to improve energy and water
• Roll out Sustainable Product Design
efficiency and product safety.
training to key employees.
• Review end-of-life product
treatment opportunities.
• Map data to track improved
• Continue to work with supply chain
• Optimise circularity.
product performance.
• Validate CO2 hot-spots outside own
partners to build sustainability across
the chain.
operations to inform future priorities.
• Further integrate Voice of Customer in
design process.
59
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 SUSTAINABILITY REVIEW
CONTINUED
REDUCING OUR FOOTPRINT
IN SUPPORT
OF UN SDGs
RENEWABLE STRATEGY DEVELOPMENT
In order to meet our Reducing Our Footprint goal of 30% reduction
in Scope 1&2 CO2e by 2024 and 50% reduction in Scope 1&2
CO2e by 2030 we will need to both reduce our demand for
energy and alter the sources of our energy supply. In 2020
we undertook group-wide studies to evaluate both of these
complementary pathways.
As a result of divisional energy efficiency deep dives we
have a portfolio and pipeline of energy efficiency projects in
progress and in review across all our businesses. Reducing our
energy consumption is our number one priority to reducing our
CO2e footprint.
In parallel, in 2020 we undertook, across all Divisions, an exercise
to deepen our knowledge of the portfolio of renewable supply
options available and consider the most advantageous approaches
which would support achievement of our CO2e targets.
We held a series of capacity building workshops with supply
chain, operations and SHE colleagues to broaden knowledge
and understanding of the instruments available. We then in
collaboration with a renewables specialist assessed price, return,
risk, environmental impact and cross divisional opportunities
to determine possible scenarios for each Division to meet
their targets.
We have intentionally committed to 2024 and 2030 targets and
not linear or year-on-year targets as we want to ensure we drive
long-term sustainable CO2e reduction with strategic actions.
In 2021 Divisions will begin to implement the strategies developed
to achieve this.
Mineral Mexico solar panels,
reducing consumption by 25%
In 2020 our continuing operations and market based GHG emissions
(relative to revenue) have reduced by 13.2% on a constant currency
basis compared to 2019.
This occurred due to reduction in output associated with Covid-19
related market changes, manufacturing efficiency improvements,
behavioural changes, process and technology upgrades, along with
an increase in renewable energy usage.
Our Scope 1&2 GHG emissions data for 2019 and 2020 has
been externally verified to a limited level of assurance by
Corporate Citizenship.
50%
REDUCTION
IN CO2e
BY 2030
We want to lead by example and will take actions
to reduce our own footprint including CO2e, waste
and water.
OUR GOALS
CO2e
Waste
Water
• 30% reduction in Scope
1&2 CO2e by 2024 and 50%
reduction in Scope 1&2 CO2e
by 2030
• Deliver against Division specific
zero waste targets
• Develop water stewardship
programmes in all water
stressed locations
CONTINUING OPERATIONS MARKET BASED TCO2E/£M1
75.7
-13.2%
87.2
75.7
1 Our continuing operations consists of our two remaining Divisions (Minerals and
ESCO) and Group functions.
2019
2020
60
WASTECO2eWATERFOOTPRINTREDUCING OURStrategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 CO2E AND ENERGY
Weir has committed to a 30% reduction in Scope 1&2 emissions
(CO2e) by 2024 and 50% by 2030 relative to revenue and a 2019
baseline. In 2020 we focused on targeted actions in the areas we can
make the biggest difference, reducing our overall energy intensity
and increasing the proportion of energy from renewables. Our global
foundry operations are the most energy-intensive portion of our
footprint, representing 63% of our total 2020 consumption, so our
CO2e reduction strategy focuses on harnessing energy consumption
data and rethinking how we approach heat treatment and melting
processes used in the production of mining equipment.
To deliver our CO2e goals, we’ll need to combine this focus on
efficiency with a change in the source of our energy. In 2020 we
developed our Renewables Strategy to improve the indirect footprint
involved in our energy supply sources. In 2020, 5% of our energy and
11% of our electricity was sourced from renewables including Power
Purchase Agreements (PPAs), Self-generation, Green contracts, and
Energy Attribute Certificates (EACs). These included the Weir Minerals
Australia PPA with ENGIE New Zealand and Australia. This partnership
decreased the carbon footprint of energy consumed by our Australian
operations by 20% per annum. The ENGIE-Weir PPA is one of the first
of its kind between a renewable energy provider and a major supplier
to the Australian resources sector.
The Group’s total (continued and discontinued operations) location
based annual GHG emissions, for the year ending 31 December 2020
were 177,442 tCO2e, and market based GHG emissions were 169,344
tCO2e. This total showed an absolute reduction of 15.6% for location
based GHG emissions, and a 17.3% reduction for market based GHG
emissions in comparison to 20191.
Our total location-based GHG emissions from continuing operations
were 157,173 tCO2e and market-based emissions were 148,707
tCO2e, which is a 12.3% and 14.2% reduction respectively compared
to 20191.
During 2020, for our ten owned foundries our total location based
GHG emissions were 109,260 tCO2e, and our total market based GHG
emissions were 102,094 representing an absolute reduction compared
to 20191. Our full GHG emissions breakdown can be found on page 67.
Whilst we recognise that this reduction in emissions is partly due to
the impact of Covid-19, we can also attribute meaningful reduction to
our energy efficiency and increased renewable energy usage actions.
WATER
We recognise the critical importance of water to human life,
healthy ecosystems, and its intrinsic value to local economies and
communities. Weir operates within, and supports customers in,
a number of water stressed regions of the world. Therefore reducing
both our and our customers water consumption in these regions is
a key priority.
Our water stewardship programme aligns with the Alliance for Water
Stewardship Standard (AWS) framework. It leverages our local service
presence and close understanding of the different regional issues,
within the context of surrounding catchments.
In our most water stressed locations water stewardship projects have
commenced including in Chile, where Weir Minerals are adopting
the AWS framework locally. We have aligned our water stewardship
programme to contribute to the site sustainability objectives of
our customers, proactively partnering with local communities and
engaging with environmental interest groups.
WASTE
Our foundry operations are material intensive parts of our business,
so each Division / region of Weir runs Best Practice groups, and has
embedded lean methodology through the value chain to pursue zero
waste targets. In 2020 we delivered against those targets by reusing
over 44,000 tonnes of scrap metal, comprising 49% of all metal
poured in our foundries.
We have also continued to harness our open innovation platform,
the Weir Innovation Network, to generate ideas to reduce waste.
Our second waste innovation challenge was targeted to the Asia
Pacific APAC region who had a 2020 focus to reduce their waste
by >10% across the region. The Challenge Team selected timber as
a specific waste stream to tackle through innovation as the potential
savings from time and materials combined was evaluated as c.$6m
AUD. The challenge was advertised to an audience of 1,700 colleagues
and the winning idea, of replacing wooden packaging with reusable,
foldable, easily storable plastic boxes, is currently being trialled.
In 2021 we will continue to gather more detailed waste data and focus
on the highest impact areas to progress.
1 The 2019 figures have been recalculated to remove the divested Flow Control Division
and removal of sites which were previously incorrectly included in reporting.
KEY NEXT STEPS
CO2e and Energy
Waste
Water
• Implement further energy efficiency
improvements through process
and technology upgrades and
behavioural change.
• Increase % of renewable energy in global
consumption footprint.
• Achieve divisional annual CO2e
target reductions.
• Conduct detailed waste data analysis.
• Expand water stewardship programme.
• Focus on highest impact waste reduction
and redirection projects.
• Develop water footprint
assurance programme.
• Further share and embed waste reduction
best practice as core component of
lean operations.
61
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 SUSTAINABILITY REVIEW
CONTINUED
SUSTAINABLE FOUNDATIONS
In addition to the strategic priorities within our Sustainability Roadmap, we maintain high standards of corporate governance across all areas
of sustainability. You can read more about how the Directors have regard to stakeholder interests when discharging their duty to promote the
success of the company, in the Strategic Report on pages 24 -25.
EMPLOYEES
Code of Conduct
We are dedicated to doing business in an ethical and transparent manner,
and this commitment has driven our legacy for 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.
Internal Audit performs (i) annual Code audits (including employee expense
reviews) at selected Group locations and (ii) an annual audit of gifts,
hospitality, and donations entered in the Group’s gifts and hospitality approval
portal. Additionally, Internal Audit, along with Finance, tests compliance with
and effectiveness of the Group’s financial controls through the Internal Audit
Annual Plan and the biannual Group Compliance Scorecard process.
These assurance activities ensure adherence to compliance policies
and procedures and that those policies and procedures remain robust.
Internal Audit provides reports to the Compliance function, Group Executive,
and Board of Directors’ Audit Committee, and the Compliance function
manages any necessary improvements to Weir’s compliance policies
and procedures.
ANTI-BRIBERY AND CORRUPTION
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.
The Compliance function works closely with the business to ensure that
matters raised via the Ethics Hotline are investigated in a fair and impartial
matter consistent with the Group Investigation Protocol, and are resolved
expeditiously. During this past year, the average time to investigate and
close out a matter was 42 days, which is consistent with average industry
performance based on data supplied by Navex, our hotline administrator.
We are aware of the risk of bribery and corruption for companies that operate
globally and for our company specifically, and through our Code of Conduct
and Group Anti-bribery and Corruption Policy (ABC Policy), we have a zero
tolerance towards bribery and corruption by Group personnel and third parties
working on our behalf.
Our Code of Conduct training includes a module on anti-bribery. For those
employees in high-risk roles and/or geographies, we provide targeted training
on the ABC Policy as well. In 2020, approximately 2,482 employees in
designated high-risk roles completed training to deepen their understanding of
risks and identification of red flags.
In 2019, the Compliance function undertook and completed a broad based
refresh of our global antibribery assessment, for purposes of confirming
our bribery risks and assessing the adequacy of our antibribery compliance
program. In early 2020 we created an industry accepted risk model that
identifies the key causal pathways for the risk of breaching antibribery and
anticorruption laws and the consequences of doing so, along with the
company’s key internal controls for preventing those causal pathways from
occurring. Additionally, the risk assessment findings informed updates made
to the Group’s Enterprise Risk Dashboard and the biannual compliance
scorecard review and certification.
Our Gifts Policy and Hospitality Policy supplements the Code of Conduct
by further describing the requirements and process for providing business
courtesies to customers and other third parties. The Compliance function
plans to roll out an improved system for seeking approval for gifts and
hospitality, in Q1 2021.
HUMAN RIGHTS
Human Rights
Modern Slavery
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. In 2020, the Compliance function did
not receive any reports (internal or external) alleging violations of the Human
Rights Policy. We report on outcomes for safety on pages 55 and Inclusion
and Diversity on page 57.
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.
We continue our work to embed the principles of our Human Rights Policy
and Code of Conduct within our supply chain. In 2020, our Compliance
function began working with divisional supply chain leadership to enhance
existing processes for appointing and managing direct suppliers, such as
incorporating labor standards and conflict minerals inquiries into the selection
process and formalising a regime for monitoring key supplier compliance.
62
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 PRIVACY & DATA PROTECTION
Our privacy programme is designed to meet all applicable data and data
protection laws, including the General Data Protection Regulation (GDPR) and
UK Data Protection Act 2018. New data protection laws and regulations in
the countries where we operate require us continually to review and update
our privacy program. This year, the Compliance function updated our Data
Protection Policy and implemented a new Incident Response Policy and a
Data Subject Request Response Procedure. We focused on minimising the
use of personal data to only adequate, relevant and non-excessive uses and
will continue to maintain this focus in 2021.
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.
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 cooperative
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;
INFORMATION SYSTEMS AND TECHNOLOGY
In some of our markets, we rely upon agents and distributors to increase our
reach to customers. We choose to work only with agents and distributors that
meet our company standards and expectations for compliance. During this
past year and in 2021, we have focused and will continue to focus on
improving the management of our third-party intermediaries, such as agents,
distributors, and certain service providers. The Compliance function, working
closely with the business, created the Agents and Business Partner Policy,
an updated due diligence policy and procedure designed to enhance our risk
assessment and mitigation and improve our life cycle management of these
third-party intermediaries, with implementation set for Q1 2021.
• 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.
The Information Systems & Technology (IS&T) Transformation Programme
launched at the beginning of 2020, just as the Covid-19 pandemic was
beginning to take hold across the globe. In direct response to this, the global
IS&T team helped more than 5,000 colleagues move to remote working in
the space of three weeks and parts of the Transformation Programme were
accelerated to ensure everybody had the tools, resources and support they
needed to continue working.
Weir’s size, spread and success make it an attractive target for cybercriminals
looking to make a profit or harm the business. To mitigate these threats,
updated security awareness campaigns, training, scenario testing and
improved cyber intelligence have been introduced, significantly strengthening
our cyber resilience. These improvements have been underpinned by a new
global security operations function and the publication of new Information
Security, Data Classification and Third-Party Assurance policies.
The increased use of, and reliance on, technology during 2020 not only
underpinned the key role IS&T has to play in the future of Weir but also
reinforced the importance of having robust information security and
cybersafety measures in place to ensure the business can operate safely
and securely.
63
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 NON-FINANCIAL REPORTING
Accountability for all areas of our Sustainability Roadmap are embedded in our core governance structures including principal risks,
management committees and working groups as summarised below. Additional details of our sustainability related policies and standards
can be found on page 68.
SUSTAINABILITY GOVERNANCE ACCOUNTABILITIES
MANAGEMENT
COMMITTEE
PRINCIPAL RISK
OTHERS
• CEO’s Safety Committee
• Safety, Health and Wellbeing
• SHE Excellence Committee
- led by CPO
• Divisional, Regional and
Local SHE Committees
ZERO TIR
LEADING
eNPS SCORE
50%
REDUCTION
IN CO2e
BY 2030
• HR Excellence Committee -
• People
led by CPO
• Inclusion & Diversity
Committee - led by CFO
• Employee Voice Board -
with NED lead
• Third-party Employee
Engagement benchmarking
• Sustainability Excellence
Committee* - including
CEO, CFO, CS&SO and
divisional Presidents
• Value Chain Excellence
• Environmental Sustainability
• Safety, Health and Wellbeing
• Reducing our Footprint
Leads and Technical Group
• Divisional Sustainability
Committees and
Best Practice Groups
e.g. Foundry Best
Practice Forum
• Third-Party carbon
footprint verification
• Creating Sustainable
Solutions Working Group
• Divisional
Technology Committees
and Risk functions
• Group Executive
remuneration linkage
via scorecard
• Weir Technology Excellence
• Technology
Committee - including
CEO, CS&SO and
divisional Presidents
• Sustainability
• Competition
• Environmental Sustainability
ENABLING
NET ZERO
Excellence Committee*
FOUNDATIONS
• Audit Committee
• Information Security
• Regular Group Executive
• Risk Committee
• Finance Excellence
Committee
• Markets
and Cyber
and Board reviews
• Ethics and Governance
• Compliance, Internal Audit
• Sustainability Excellence
• Environmental Sustainability
Committee*
* Established January 2021
64
WELLBEINGHEALTH &FIRSTSAFETYENVIRONMENTALSAFEGUARDINGZERO HARMCHAMPIONINGUNIQUE CULTURENURTURING OURPARTNERSHIPSCOMMUNITYENGAGEMENTINCLUSION &DIVERSITYWASTECO2eWATERFOOTPRINTREDUCING OURSOLUTIONSCREATING SUSTAINABLECIRCULARITYPRODUCTS IN USEDESIGN ANDSUPPLY CHAINStrategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 OUR APPROACH TO NON-FINANCIAL REPORTING
We designed our Sustainability Roadmap to support Weir’s purpose
“to enable the sustainable and efficient delivery of the natural
resources essential to create a better future for the world”. This means
we focus first on the major impact areas that matter most to our
stakeholders: Reducing our Footprint, Championing Zero Harm,
Nurturing our Unique Culture and Creating Sustainable Solutions
for customers.
Our reporting approach matches this philosophy: we focus on
metrics and targets most relevant to our objectives because
these are the ones that will drive the most positive impact and
sustainability value. We do not seek to cover every base, or report
every metric. We participate in frameworks that matter most to our
stakeholders and investors, with a strong emphasis on climate change.
These include CDP Climate as well as the major ESG ratings providers.
As a UK-listed company, we also comply with financial and non-
financial reporting legislation and requirements.
We strongly support efforts by regulators and international standard-
setting bodies to streamline and standardise non-financial reporting
frameworks, with an emphasis on providing information that is most
material to investors and other stakeholders. As this work progresses,
we anticipate further enhancing our non-financial disclosures, for
example by incorporating relevant metrics defined by the Sustainability
Accounting Standards Board (SASB) in the near future. We plan to
take steps to digitalise our sustainability disclosure and make more
information available via our website to increase efficiency and
transparency of reporting during this period of increasingly customised
stakeholder requests.
We have been a member of the FTSE4Good index series for ten 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 for a full decade.
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 2021 and beyond.
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 submit annually to CDP – Climate Change to share our risk
management approach to climate change and our greenhouse gas
(GHG) emissions performance. In 2020, we were pleased to be
awarded an A- score by CDP, one of the world’s leading research
groups focused on climate change research. It means Weir has been
recognised for its leadership in its commitment to best practice,
particularly in governance, disclosure and emissions reduction
initiatives. The score reflects the progress we are making (our previous
CDP score was B), while we recognise we have more to do.
As a business with operations around the world we can be exposed
to a wide range of extreme weather events. In 2020, this included
torrential rainfall and flooding in China and Dubai, extreme heat in
Iraq and the Persian Gulf, and cyclones hitting Western Australia and
Brazil. The USA saw a record number of hurricanes make landfall this
year and significant wildfires raged in Western States primed by a
summer heatwave.
We were fortunate that very little disruption has occurred at our
sites due to these incidents. In the case of such events occurring
the Group maintains robust business continuity plans and specific
insurance protection to mitigate against the extent of any operational
impact that may occur.
We recognise that climate change will likely increase the frequency
and severity of extreme weather impacts upon our business. 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.
TASKFORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES
We believe that companies should be transparent about how they
plan to mitigate and be resilient in the face of climate change.
Therefore, we 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.
In 2020 we conducted our first TCFD assessment as we began
the process to align with TCFD reporting requirements. The review
considered risks and opportunities related to the physical impacts
of climate – such as direct damage to property or ability to supply
customers – as well as transition risks and opportunities that derive
from the economic transition to reduce reliance on fossil fuels and
decrease carbon emissions. The review considered two possible
climate change scenarios: well below 2°C, which considers aggressive
mitigation to reduce energy consumption in line with the Paris
Agreement with high transition risk; and a worst-case scenario of +4°C
global temperature increase, assuming emissions continue to rise at
current rates, with low transition risk but higher longer-term physical
risks. Findings were reviewed with business unit leadership teams and
with the Group Executive.
During 2021 we will further review risks and opportunities and
continue to develop our approach to business strategy and disclosure
to align with the TCFD recommendations and to meet the Financial
Conduct Authority requirements for premium listed companies to
adopt TCFD reporting for financial years starting in 2021.
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Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 NON-FINANCIAL REPORTING
CONTINUED
TCFD ALIGNMENT TIMELINE
2018
2019
2020
2021
2022+
Climate change
factors built into
Sustainability
Roadmap
development plans
Environmental
Sustainability added
as a principal risk
Reporting to TCFD-
aligned questions
in CDP
Sustainability
Roadmap published
Further risks and
opportunities review
TCFD reporting in
annual report
Initial risks and
opportunities
assessment with
business units
TCFD reporting
preparations for 2021
financial year
TCFD INDEX TABLE
TCFD recommended disclosure
Where reported
Governance
Governance around climate-related issues
and opportunities.
Sustainability Roadmap, pages 52-53 – strategy, governance, key milestone and goals
Non-financial reporting, pages 64-68 – sustainability governance, description of first pass
TCFD evaluation, Scope 1 and 2 greenhouse gas emissions and energy data
Risk management, page 42 – description of Board and Executive governance of risks
Risk factors, page 45 – description of principle risks including first pass TCFD evaluation
Stakeholder engagement, pages 24-25 – stakeholder concerns about sustainability
Governance at a glance, page 72 – key board areas of focus
Directors’ Remuneration Report, pages 103 – description of 2021 remuneration
framework, including climate goals
Strategy
Actual and potential impacts of climate-related
risks and opportunities on business, strategy
and financial planning.
Sustainability Roadmap, pages 52-53
Reducing Our Footprint, pages 60-61 – CO2e reduction goals and strategies
Creating Sustainable Solutions, pages 58-59 – strategies and programmes to enable
Net Zero for customers
Risk factors, page 45
Risk management
How the organisation identifies, assesses and
manages climate-related risks.
Non-financial reporting, pages 64-68 – description of first pass TCFD evaluation
Risk management, page 42
Risk factors, page 45
Metrics and targets
Metrics and targets used to assess
and manage relevant climate-related
risks and opportunities.
Sustainability Roadmap, pages 52-53
Reducing Our Footprint, pages 60-61
Creating Sustainable Solutions, pages 58-59
Non-financial reporting, pages 64-68 – Scope 1 and 2 greenhouse gas emissions
and energy data
66
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 TOTAL ANNUAL GHG EMISSIONS
We have provided below our GHG emissions as required under the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013
and have reported the requirements of the Streamlined Energy & Carbon Reporting (SECR) framework. In 2020 we identified and implemented energy
efficiency measures across our business which included manufacturing efficiency improvements, behavioural change, process upgrades and selecting
energy efficient technology such as LED lighting. Our total identified and implemented energy savings in 2020 is estimated to be 6,225,469 kWh.
TOTAL ANNUAL GHG EMISSIONS
Location Based Emissions
Scope 1 emissions: fuel combustion
and operation of facilities
Scope 2 emissions: purchased electricity,
heat and steam
Total Scope 1&2 (continuing and
discontinued operations)
Total Scope 1&2 (continuing operations)
Total Scope 1&2 (discontinued operations)
Market Based Emissions
Scope 2: purchased electricity, heat and steam
market-based emissions (continuing and
discontinued operations)
Scope 2: purchased electricity, heat and steam
market based emissions (continuing operations)
Total Scope 1&2 (market-based); continuing
and discontinued operations
Total Scope 1&2 (market-based); continuing
operations
Total Scope 1&2 (market-based);
discontinued operations
Energy
UK & Offshore area Annual GHG
Emissions (tCO2e)
Global Annual GHG
emissions (tCO2e)
Global GHG emissions intensity
(tCO2e per £m revenue)
2020
2019
2020
2019
2,871
4,683
57,183
70,573
3,965
5,000
120,259
139,635
6,836
6,697
139
9,683
9,481
202
177,442
157,173
20,269
210,208
179,280
30,928
214
214
262
262
112,161
134,170
99,202
116,680
3,085
4,944
169,344
204,743
2,982
4,802
148,707
173,347
103
142
20,637
31,396
2020
25.1
52.8
77.9
80.0
64.5
49.2
50.5
74.3
75.7
65.7
2019
27.2
53.8
81.0
90.2
50.9
51.7
58.7
78.9
87.2
51.6
UK & Offshore area Annual
Energy Use (kWh)
Global Annual
Energy Use (kWh)
2020
2019
2020
2019
32,134,643
44,181,799 560,243,293
662,833,177
Energy consumption used to calculated emissions;
continuing and discontinued operations
ANNUAL GHG EMISSIONS FROM FOUNDRIES
Scope 1 emissions:
fuel combustion and operation of facilities
Location Based Scope 2 emissions:
purchased electricity and heat
Market Based Scope 2 emissions:
purchased electricity and heat
Location Total
Market Total
Methodology and Notes
Annual GHG emissions (tCO2e)
Proportion of Global
(continuing operations)
annual emissions (%)
GHG emissions intensity
(tCO2e per tonne of metal
poured)
2020
2019
2020
2019
2020
2019
32,428
37,341
20.6%
20.8%
76,832
84,777
48.9%
47.3%
69,666
109,260
102,094
80,209
122,118
117,550
46.8%
69.5%
68.7%
46.3%
68.1%
67.8%
0.4
0.8
0.7
1.2
1.1
0.4
0.8
0.7
1.2
1.1
In calculating our 2019 and 2020 Location based GHG emissions we have followed the principles of the ‘GHG Protocol: Corporate Accounting and Reporting Standard’ (revised edition)
and emissions are reported based on an operational control approach. We have used emission factors from the UK Government’s ‘GHG Conversion Factors for Company Reporting 2019
& 2020’ and other region-specific where available to calculate our Scope 1&2 Location footprint. In calculating our 2019 and 2020 Market Based Emissions we have followed the principles
of the GHG Protocol: Corporate Accounting and Reporting Standard’ (revised edition), the GHG Protocol Scope 2 Guidance (an amendment to the GHG Protocol Corporate Standard) and
emissions are reported based on an operational control approach. We have used emission factors from the UK Government’s ‘GHG Conversion Factors for company Reporting 2019 & 2020’
and other contractual, market, residual or location based emissions factors where available to calculate our Scope 1&2 Market footprint. 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 Financial Statements. Reported Scope 1 emissions cover emissions from liquid fuel and gas - used for heat, transportation and process and
refrigerants. Scope 2 emissions cover emissions generated from heat, steam and purchased electricity for own use, calculated using both the location and market-based methodologies.
Annual emissions figures for 2019 have been restated as they were materially different due to the reclassification of two sites as out with our operational control, sale of the Flow Control
Division (June 2019), to reflect the collation of more accurate consumption data and the correction of emissions factors which had resulted in an overstatement. The need to restate was
identified during our standard review process. We have provided data which separates our continuing and discontinued operations. Our continuing operations consists of our two remaining
Divisions (Minerals and ESCO) and Group functions. Our discontinued operations comprise our Oil & Gas Division which was sold in Feb 2021.
In line with SECR energy consumption data has been provided for both the UK & Offshore and globally, this data was used in the creation of our GHG emissions. Our Foundry GHG
emissions do not contain any discontinued operations so no differentiation is required. Revenue for 2019 is based on 2020 average exchange rates. For our foundries, the Scope 1 proportion
of Global (continuing operations) annual emissions is a proportion of total Location Based GHG emissions. Therefore the % shown in the Market Total row does not equal the sum of the
Scope 1 and Market Based Scope 2 rows.
Our Scope 1 & 2 GHG emissions data for 2019 & 2020 has been externally verified to a limited level of assurance by Corporate Citizenship.
67
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 NON-FINANCIAL REPORTING
CONTINUED
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 page 20. Details of our sustainability
governance accountabilities can be found on page 66.
Policies and standards which govern
our approach and due diligence
Relevant Group
Principal Risks
KPIs3
Code of Conduct¹
SHE Charter¹
SHE Management System¹
Sustainability Roadmap¹
Safety, Health and
Wellbeing2
Environmental
Sustainability2
Outcomes and
additional information
Sustainability Review
pages 52-68
Sustainability Review
pages 52-68
Rating within the SHE
performance measurement
process
GHG Emissions
CDP score
Reducing our Footprint Goals
Rating within the
SHE performance
measurement process
Total Incident Rate
Gender pay gap results
Employee engagement survey
participation rates
Employee engagement eNPS
People2
Safety, Health and
Wellbeing2
Information Security
& Cyber2
Ethics & Governance2
Non-Financial
Reporting
Requirement
Environmental
matters
Employees
Human rights
Social matters
Anti-corruption
and anti-bribery
Code of Conduct¹
SHE Charter¹
SHE Management System¹
Sustainability Roadmap¹
Inclusion, Diversity & Equality Policy¹
Board Diversity Policy¹
Data Protection Policy
Incident Response Policy
Data Subject Request Response
Procedure
Information Security Policy
Data Classification Policy
Code of Conduct¹
Supply Chain Policy¹
Human Rights Policy¹
Modern Slavery Statement¹
Sustainability Roadmap¹
Code of Conduct¹
Gifts & Hospitality Policy¹
Anti-Bribery and Corruption Policy¹
Sustainability Roadmap¹
Code of Conduct¹
Anti-Bribery and Corruption Policy¹
Gifts & Hospitality Policy¹
Agents and Business
Partner Policy¹
Sustainability Roadmap¹
Ethics & Governance2
FTSE4Good score
Code of Conduct Training
completion
Inclusion Diversity and
Equality Policy¹
Sustainability Review
page 62
Ethics & Governance2 Charitable giving FTSE4Good
score
Other ESG Ratings
Sustainability Review
pages 52-68
Ethics & Governance2 Group Compliance Scorecard
FTSE4Good score
Code of Conduct Training
completion
Other ESG Ratings
Sustainability Review
page 62
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 43-51
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 103
The Strategic Report covering pages 1-68 of the Annual Report and Financial Statements 2020, 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
2 March 2021
68
Strategic ReportThe Weir Group PLC Annual Report and Financial Statements 2020 GOVERNANCE
STRONG
GOVERNANCE
TO PROTECT
STAKEHOLDER
VALUE
CHAIRMAN’S
INTRODUCTION
TO GOVERNANCE
READ MORE: PAGE 70
CONTENTS
Introduction from the Chairman
Governance at a glance
Governance Framework
Board of Directors
Group Executive
Board Statements
Division of Responsibilities
Board Meetings
Board Activities and Governance in Action
Governance in Action – Meet the Board Session
Shareholder Engagement
Boardroom Practice
Board Effectiveness
Accountability
Viability Statement
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
70
72
73
74
78
79
80
81
82
83
84
85
86
88
89
90
93
103
128
131
OUR BOARD AND
GROUP EXECUTIVE
READ MORE: PAGES 74-78
GOVERNANCE
IN ACTION
READ MORE: PAGE 83
69
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 INTRODUCTION FROM THE CHAIRMAN
We are making a positive difference
to our stakeholders by ensuring a
culture of integrity and accountability.
Our strong Corporate Governance
framework operates effectively to
protect stakeholder value.
DEAR SHAREHOLDER,
I am pleased to present the Corporate Governance Report for 2020.
Under my Chairmanship, I continue to ensure that the Board leads
by example, demonstrating the values of the Company and promoting
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 this
framework remains appropriate and effective. This prudent oversight
is essential to deliver the strategy and create long-term value for
our stakeholders.
The Board continues to ensure ongoing engagement with its
stakeholders throughout the year and acknowledges the clear
responsibility it has to promote the long-term success of the Company.
We have 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 with an appropriate balance of skills,
experience, independence and knowledge, with each member able
to commit sufficient time to carry out 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 strategic plan.
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.
WEIR IS A VALUES-
LED BUSINESS THAT
BENEFITS FROM A
STRONG CULTURE
OF CONTINUOUS
IMPROVEMENT AND
INNOVATION.
CHARLES BERRY
Chairman
70
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 UK CORPORATE GOVERNANCE CODE 2018
The UK Corporate Governance Code 2018 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 128 -130.
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.
COMPANY SECRETARY
The Company Secretary plays a critical role in ensuring strong
Corporate Governance and ongoing compliance with the UK Corporate
Governance Code 2018. The Company Secretary together with the
Chairman, reviews the governance framework to ensure that it
remains fit for purpose and operates effectively in order to uphold
the highest standards of accountability and integrity. The Company
Secretary is the Secretary to the Board and its Committees and
ensures that they function efficiently. The Company Secretary is also
a key adviser to the Board and is available to all Directors as required.
The Company has complied in full during 2020 and
to the date of this report with the provisions of the
UK Corporate Governance Code published in 2018.
The UK Corporate Governance Code 2018 is publicly
available at the website of the Financial Reporting
Council at www.frc.org.uk.
BOARD DECISIONS TABLE
The following table sets out some of the more significant decisions taken by the Board during the year and how stakeholder interests were
taken into account. You can read more about how the Directors have regard to stakeholder interests when discharging their duty to promote
the success of the company, in the Strategic Report on pages 24 -25
Key decision
Stakeholders affected
Strategic factors taken into consideration
Outcome
Sale of Oil & Gas
Division
Shareholders
Customers
Employees
Suppliers
Appointment of
two Non-Executive
Directors
Shareholders
Employees
Customers
Withdrawal of
Dividend Payment
Shareholders
Employees
Closed AGM
Shareholders
Employees
Communities & Environment
Governments & NGOS
• Maximising value for Shareholders
• Delivering transformation of Weir into a
premium mining technology pure play
• Strengthened balance sheet to provide
enhanced flexibility to invest in future
growth opportunities
• Putting sustainability at the heart of
our strategy
• Mining experience to deliver strategy
• Commitment to building an inclusive and
diverse culture
• Protecting Shareholder value
• Protecting the business with prudent cost
and cash mitigation actions
• Prudence to provide maximum flexibility
• Safety of Shareholders and employees of
utmost priority in light of Covid-19 pandemic
• Shareholder Engagement
The Board believes the
simplified and stronger
retained Group is ideally placed
to benefit from long-term
structural trends, including the
growing demand from Weir’s
customers for critical solutions
that are smarter, more efficient
and sustainable.
The new Directors contribute
a wealth of highly relevant
experience to the Group as
it transforms into a focused,
premium mining technology
business.
The Board took the decision to
withdraw its recommendation
to pay a 2019 final dividend and
did not recommend payment of
a 2020 interim or final dividend.
In accordance with Government
legislation and to minimise
public health risk, the AGM was
held as a closed meeting.
71
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 GOVERNANCE AT A GLANCE
COMPLIANCE WITH THE UK
CORPORATE GOVERNANCE
CODE 2018
The Company has complied in full during
2020 and to the date of this report with the
provisions of the UK Corporate Governance
Code published in 2018.
The UK Corporate Governance Code 2018 is
publicly available at the website of the Financial
Reporting Council at www.frc.org.uk.
READ MORE: PAGES 69-89
33%
Female representation on the Board
at 31 December 2020
A- CDP
A- Score by CDP
89%
Employee Engagement Survey
participation rate
KEY BOARD AREAS OF FOCUS
• Sustainability
• Corporate Strategy Portfolio and Business Portfolio
• People Strategy
• Reassessing risk in light of Covid-19
• Safety, Health and Environment
• Performance
• Corporate Governance
• Succession Planning
KEY BOARD ACTIONS
• Sale of Oil & Gas Division
• Appointment of two Non-Executive Directors
• Withdrawal of Dividend Payment
• Closed AGM
• Established a Sustainability Excellence Committee
READ MORE: PAGES 69-89
OUR PURPOSE, CULTURE AND STRATEGY
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.
OUR CULTURE
READ MORE: PAGES 4-5
OUR STRATEGY
READ MORE: PAGES 10-15
ENGAGING WITH OUR WORKFORCE
The Board and Group Executive review and approve all key
policies and practices which could impact on our workforce and
drive their behaviours. We actively engage with our employees
through activities and initiatives which allows us to identify
where our employees think we do well, and where we can do
better so we can work together to ensure Weir becomes an even
better place to work. You can read more about these initiatives
on pages 24 and 56-57.
72
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 GOVERNANCE FRAMEWORK
BOARD OF DIRECTORS
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. The Board may also set up separate Committees to consider specific issues when the need arises.
BOARD COMMITTEES
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 governance framework and 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
AUDIT COMMITTEE
REMUNERATION COMMITTEE
YOU CAN READ MORE IN THE
NOMINATION COMMITTEE REPORT
ON PAGES 90-92
YOU CAN READ MORE IN THE
AUDIT COMMITTEE REPORT
ON PAGES 93-102
YOU CAN READ MORE IN THE
REMUNERATION COMMITTEE
REPORT ON PAGES 103-127
DISCLOSURE COMMITTEE
GENERAL ADMINISTRATION 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. Terms of Reference can be found on our
website at www.global.weir/investors/corporate-governance/
board-committees
The General Administration Committee is a sub-committee of
the Board which comprises any two Directors of the Company,
at least one of whom must be an Executive Director. The Terms
of Reference can be found on our website at www.global.weir/
investors/corporate-governance/board-committees
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 78. The Group Executive is chaired by the Chief Executive Officer. The Board delegates the execution of the Company’s
strategy and the day-to-day management of the business to the Group Executive. During 2020 the Group Executive had 12 scheduled
meetings and a further 20 unscheduled meetings, in light of Covid-19.
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.
Weir Technology
Excellence
Committee
Risk Committee
Finance Excellence
Committee
CEO’s Safety
Committee
SHE Excellence
Committee
Group Information
Services Excellence
Committee
HR Excellence
Committee
Inclusion and
Diversity Steering
Committee
Sustainability
Excellence
Committee
73
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 BOARD OF DIRECTORS
CHARLES BERRY
Chairman
N*
Nationality:
Date of appointment: Chairman since
1 January 2014 and Non-Executive
Director since 1 March 2013
Independent: Yes
JON STANTON
Chief Executive Officer
Nationality:
Date of appointment: Chief Executive
Officer since 1 October 2016
Finance Director from April 2010 –
October 2016
Independent: No
Key strengths and experience
Charles brings broad 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 Centrica plc, 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 extensive 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
• A Member of the steering group of the Hampton-Alexander Review,
during 2020
• Honorary Air Commodore No.602 (City of Glasgow) Squadron, Royal
Auxiliary Air Force
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 and Audit Committee Chair of Imperial
Brands PLC
JOHN HEASLEY
Chief Financial Officer
Nationality:
Date of appointment: Chief Financial
Officer since 3 October 2016
Independent: No
BARBARA JEREMIAH
Senior Independent Director
NA
R
Nationality:
Date of appointment: 1 August 2017
Senior Independent Director since
1 January 2020
Independent: Yes
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 experience 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
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.
She was previously a Non-Executive Director and RemCo Chair of Premier
Oil plc and a Non-Executive Director of Russel Metals Inc.
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.
• Non-Executive Director and Honorary Treasurer of Royal Scottish National
Key external appointments
Orchestra Society Limited
• Non-Executive Director and Remuneration Committee Chair
of Aggreko plc
74
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020
COMMITTEE MEMBERSHIP KEY
* Committee Chair
A Audit Committee member
N Nomination Committee member
R Remuneration Committee member
S Secretary to the Board and Committees
CLARE CHAPMAN
Non-Executive Director
R*
Nationality:
ROLE STATUS KEY
In the role currently
Outgoing
Newly appointed
EBBIE HAAN
Non-Executive Director
A R
Nationality:
Date of appointment: 1 August 2017
Date of appointment: 18 February 2019
Independent: Yes
Independent: Yes
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
• Chair of the Advisory, Conciliation and Arbitration Service (Acas) Council
• Steering Group Member and Co-Chair of Purposeful Company
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 and
was a Non-Executive Director of Orca Exploration Group from 2019-2020.
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 are 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
• 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
Nationality:
Date of appointment: Non-Executive
Director since 1 January 2014
Employee Engagement Non-Executive
Director since 26 April 2018
Independent: Yes
SIR JIM MCDONALD
Non-Executive Director
NA
Nationality:
Date of appointment: 1 January 2015
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, a Member of the Advisory Committee on
Business Appointments and on the Board of Directors of Foundation
to Restore Accountability. 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
• International Advisory Board, IE University
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 Scottish Engineering and Energy Research Pools and
is FREng, FRSE, FIET, FInstP, FEI.
Key external appointments
• Non-Executive Director of Scottish Power Limited
• Senior Adviser to the 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
75
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020
BOARD OF DIRECTORS
CONTINUED
STEPHEN YOUNG
Non-Executive Director
A*
R
Nationality:
Date of appointment: 1 January 2018
Independent: Yes
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, a Fellow of the Chartered
Institute of Management Accountants and a council member of The
University of Southampton.
Key external appointments
• Non-Executive Director, and Audit Committee Chair of Mondi plc
GRAHAM VANHEGAN
Chief Legal Officer and
Company Secretary
S
Nationality:
Date of appointment: 1 May 2018
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.
OUTGOING DIRECTORS
CAL COLLINS
Non-Executive Director
Nationality:
Date of appointment: 12 July 2018
Cal stepped down from the Board on
3 September 2020
RICK MENELL
Non-Executive Director
Nationality:
Date of appointment: 1 April 2009
Rick stepped down from the Board on
28 April 2020
76
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020
COMMITTEE MEMBERSHIP KEY
* Committee Chair
A Audit Committee member
N Nomination Committee member
R Remuneration Committee member
S Secretary to the Board and Committees
NEWLY-APPOINTED NON-EXECUTIVE DIRECTORS
ROLE STATUS KEY
In the role currently
Outgoing
Newly appointed
BEN MAGARA
Non-Executive Director
Nationality:
SRINIVASAN VENKATAKRISHNAN
Non-Executive Director
Nationality:
Date of appointment: 19 January 2021
Date of appointment: 19 January 2021
Independent: Yes
Independent: Yes
Key strengths and experience
Ben is a seasoned mining industry leader. He contributes extensive
experience of leading global mining businesses, which is of critical
importance to the Board as the Group transforms into a focused, premium
mining technology business. Since 2019, Ben has run his own mining
advisory firm.
Prior to joining The Weir Board, Ben served from 2013-2019 as CEO
of Lonmin Plc, the then third largest global platinum mining company.
He was a senior mining executive at Anglo American plc, having served
as Executive Vice President of Engineering & Projects for Anglo Platinum
from 2009-2013 and CEO of Anglo Coal SA 2006-2009. Ben started his
career as a graduate with Anglo American plc after completing his mining
engineering degree at the University of Zimbabwe.
Key external appointments
• Non-Executive Director of Grindrod Limited
Key strengths and experience
Venkat brings a wealth of mining experience to the Board gained through
his vast experience of leading global mining businesses.
He served as CEO of Vedanta Resources plc from 2018-2020 and was
CEO of AngloGold Ashanti Limited between 2013-2018, having previously
been Chief Financial Officer of the business from 2005, and of Ashanti
Goldfields Limited from 2000. His earlier career was as an accountant and
restructuring specialist with Deloitte & Touche in India and the UK.
Key external appointments
• Non-Executive Director of Roscan Gold Corporation
BOARD AS AT 31 DECEMBER 2020
BOARD TENURE
NATIONALITY
GENDER DIVERSITY
NON-EXECUTIVE DIRECTORS
ALL BOARD
1–2 years
2–3 years
3–4 years
4–5 years
5–6 years
6–7 years
7–8 years
10 –11 years
1
1
2
1
1
1
1
1
British
American
American/British
Dutch
Male
Female
6
1
1
1
4
3
Male
Female
6
3
77
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020
GROUP EXECUTIVE
ROLE STATUS KEY
In the role currently
Outgoing
Newly appointed
Jon Stanton, John Heasley and Graham Vanhegan are also members of
the Group Executive. Their biographical information can be found on the
previous pages.
ROSEMARY MCGINNESS
Chief People Officer
Nationality:
Date of appointment: 31 July 2017
JON STANTON
Chief Executive
Officer
JOHN HEASLEY
Chief Financial
Officer
GRAHAM VANHEGAN
Chief Legal Officer and
Company Secretary
PAULA COUSINS
Chief Strategy and Sustainability Officer
Nationality:
Date of appointment: 1 January 2020
Experience:
Rosemary joined Weir as Chief People Officer in 2017. She 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.
Experience:
Paula joined the Group Executive in January 2020. 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.
ANDREW NEILSON
President of Weir ESCO Division
Nationality:
Date of appointment: 1 April 2020
GARRY FINGLAND
Chief Information Officer
Nationality:
Date of appointment: 1 January 2020
Experience:
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 on 1 January 2020, retaining his title as CIO.
Experience:
Andrew joined Weir in 2010 as Head of Strategy then taking over
responsibility for investor relations and corporate communications.
He joined the Group Executive in 2014 as Director of Strategy and
Corporate Affairs and served as Company Secretary in 2016. In 2017
Andrew moved to the US to lead the Finance function of the Minerals
Division, before taking on the role of Chief Integration Officer and led the
integration of ESCO into Weir. Andrew then led the Europe, North Africa
and Russia region for Minerals, before returning to the United States in July
2020 as President of the ESCO Division.Prior to Weir, Andrew held a variety
of roles within banking, energy and professional services companies,
including HSBC, HBOS, Scottish Power and KPMG. Andrew holds a
Masters degree in Manufacturing Sciences and Engineering from the
University of Strathclyde and is a Chartered Accountant.
OUTGOING GROUP EXECUTIVE MEMBERS
RICARDO GARIB
President of Weir Minerals
Nationality:
Date of appointment: 1 January 2016
Experience:
Ricardo joined the Group Executive in January 2016 and is the 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 was
a founder and Vice President of the Mining Suppliers Association and now
elected council member of the Board of the Chilean Federation of Industry.
He holds an MBA and is a Civil Mechanical Engineer from the Catholic
University in Chile.
JON OWENS
President of Weir
ESCO Division
PAUL COPPINGER
President of Weir
Oil & Gas Division
Nationality:
Nationality:
Jon Owens stepped down
from the Group Executive
on 15 July 2020
Paul Coppinger stepped down
from the Group Executive on
1 February 2021
78
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020
BOARD STATEMENTS
OUR PURPOSE AND CULTURE
The Company has fully complied with all the principles of the
UK Corporate Governance Code 2018, for the year ended
31 December 2020, and from that date to the date of approval
of this Annual Report.
READ MORE IN OUR CORPORATE
GOVERNANCE REPORT PAGES 69-89
VIABILITY STATEMENT
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 43-51 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 2023.
READ MORE IN OUR RISK REVIEW:
HOW WE MANAGE RISK PAGES 39-42 AND IN OUR
VIABILITY STATEMENT ON PAGE 89
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 downside risk
scenarios and the impact of the Oil & Gas disposal.
In addition, the Directors have considered the potential impact of
credit risk and liquidity risk detailed in note 28 to the Group financial
statements on pages 194-200.
Each of these items has been considered in relation to the Group’s
banking facilities, including those refinanced during the year, as
described in note 18 on pages 176-177
READ MORE IN OUR DIRECTORS’
REPORT PAGES 128-130
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.
READ MORE IN OUR RISK REVIEW:
HOW WE MANAGE RISK PAGES 39-42
FAIR, BALANCED AND UNDERSTANDABLE
The Directors consider that the Annual Report and Financial
Statements, taken as a whole, are fair, balanced and
understandable and provide the information necessary for
Shareholders to assess the Group’s performance, business model
and strategy.
MODERN SLAVERY STATEMENT
As a Company, we understand our role in eradicating modern
slavery. Following an extensive review of our existing policies
and practices in light of the 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 131
A COPY OF THIS STATEMENT CAN
BE FOUND ON OUR WEBSITE:
WWW.GLOBAL.WEIR/SITE-INFORMATION/
MODERN-SLAVERY-STATEMENT.PDF
79
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 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 2020, the Board comprised of two Executive Directors,
and up to nine Non-Executive Directors including the Chairman.
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 global.weir/investors/
corporate-governance/matters-reserved-to-the-board/.
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 to 77. The key responsibilities of the Board and the Company
Secretary are set out below.
CHAIRMAN
Charles Berry
CEO
Jon Stanton
• Leading the Board in an ethical manner and promoting
• Planning the Group objectives and strategy for
effective Board relationships
Board approval
• 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
• Ensuring the effective delivery of corporate strategy
• Providing leadership to the Group and communicating the
Company’s culture, values and behaviours
• Leading engagement with key stakeholder groups
including investors
• Leading the Group Executive and ensuring strong succession
and development plans are in place
• Day-to-day management of the Company
CFO
John Heasley
SENIOR INDEPENDENT DIRECTOR
Barbara Jeremiah
• Ensuring an effective financial control environment which is
compliant with regulations
• Supporting the Chairman in his duties where necessary
• Leading the annual review of the performance of
• Ensuring effective management of Group capital structure
the Chairman
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
• Being available to Directors and Shareholders with concerns
that cannot be addressed through the normal channels
NON-EXECUTIVE DIRECTORS
Clare Chapman, Ebbie Haan, Mary Jo Jacobi, Ben Magara
Professor Sir Jim McDonald, Srinivasan Venkatakrishnan,
Stephen Young
COMPANY SECRETARY
Graham Vanhegan
• Contributing independent challenge and rigour
• Assisting in the development of the Company’s strategy
• Ensuring the integrity of financial information, controls and
• Advising the Board on governance, legislation and
regulatory requirements
• Ensuring the presentation of high quality information to the
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
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
• Ensuring the provision of effective legal advice for the Group
and compliance with laws
80
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 BOARD MEETINGS
BOARD MEETINGS
The Board meets regularly in order to effectively discharge its duties.
The Board’s activities and meetings rapidly increased in frequency
this year to address the escalating and constantly changing Covid-19
pandemic, as well as the disposal of the Oil & Gas business.
Due to the impact of Covid-19, the vast majority of Board meetings
were held virtually by Microsoft Teams. During 2020 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 2020. Due to the sale of the Oil & Gas business and the
impact of Covid-19, eight unscheduled Board meetings were 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, receive
an individual briefing from the Company Secretary and provide their
feedback accordingly.
In addition to formal Board meetings, the Board maintains an open
dialogue throughout the year. Due to the restrictions imposed by
Covid-19, the Non-Executive Directors met with the Chairman virtually
during the year, without Executive Directors present.
The Board’s annual calendar is discussed at least twelve months
prior to its commencement to allow the Directors to plan their time
accordingly. The 2021 annual calendar was discussed at the Board
meeting in 2019 and circulated as soon as it was finalised.
The 2022 timetable was reviewed during 2020. 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 twelve 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 on safety,
strategy, sustainability, technology, risk, legal and financial matters.
In order to effectively discharge their duties, the Non-Executive
received presentations by members of the Group’s Senior
Management team and other external advisers, as required.
BOARD MEETING ATTENDANCE 2020
Scheduled Board meetings
Charles Berry (Chairman)1
22 Jan
2020
24 Feb
2020
–
28 April
2020
22/23 Jun
2020
23/24 Jul
2020
3 Sep
2020
22 Oct
2020
14 Dec
2020
Jon Stanton
John Heasley
Clare Chapman
Ebbie Haan
Mary Jo Jacobi
Barbara Jeremiah
Sir Jim McDonald
Stephen Young
Rick Menell2
Cal Collins3
Location
Unscheduled Board meetings
Charles Berry (Chairman)1
Jon Stanton
John Heasley
Clare Chapman
Ebbie Haan
Mary Jo Jacobi
Barbara Jeremiah
Sir Jim McDonald
Stephen Young
Rick Menell2
Cal Collins3
Location
–
–
–
–
–
–
–
Glasgow
London
Virtual
Virtual
Virtual
Virtual
Virtual
Virtual
9 Feb
2020
16 Mar
2020
31 Mar
2020
15 Apr
2020
27 May
2020
19 Aug
2020
16 Sep
2020
2 Oct
2020
–
–
–
–
–
–
–
–
–
–
–
–
–
Telephone Telephone Telephone
Virtual
Virtual
Virtual Virtual
Virtual
1 Charles Berry took a short leave of medical absence during 2020.
2 Rick Menell stepped down from the Board on 28 April 2020.
3 Cal Collins stepped down from the Board on 3 September 2020.
Total
88%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Total
75%
100%
100%
75%
100%
100%
100%
75%
100%
100%
83%
81
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 BOARD ACTIVITIES AND GOVERNANCE IN ACTION
BOARD ACTIVITIES AND GOVERNANCE IN ACTION
The undernoted timeline summarises the Board’s activities during
the course of the year ended 31 December 2020. Although this
is by no means exhaustive, the timeline provides a flavour of our
Boardroom activities, discussions and debates. The Board Agenda
is split between standing items, which are discussed at the start
of every meeting and those listed in the timeline below.
Board Meeting Standing items:
• Updates from the relevant Committee Chairs
• Business Reports from the CEO and CFO
• Conflicts
• Reminder of s.172 duties
• Shareholder & Market Analysis
• Balanced Scorecard Report
• Corporate Services Report (the Board routinely reviews the reports
arising from the whistleblowing mechanism – the Ethics Hotline)
The Board is supplied in a timely manner with the appropriate
information to enable it to discharge its duties. Directors are informed
of important changes to laws and regulations affecting the Group’s
businesses and their duties as Directors. In addition, the Board
normally meets once or more a year at one of the Group’s operation
sites which allows the opportunity to meet employees across the
global operations. This was impacted in 2020 due to Covid-19,
however, the Board held two virtual ‘Meet the Board’ sessions during
the year to engage with employees.
READ MORE ABOUT OUR GOVERNANCE IN ACTION ON PAGE 82
WHAT WE DID IN 20201
22 JANUARY
Safety
• SHE update
Governance
• Board Diversity Policy
• Gender Pay Report
Risk
• Annual Risk Review
Employee Engagement
• Employee Insights Report
22/23 JUNE
Safety
• Covid-19 update
Strategy
• Strategic Planning Process;
Divisional Reviews
Governance
• Balanced Scorecard Report
Risk
• Risk Dashboard review
24 FEBRUARY
28 APRIL
Strategy
• Technology update
• Portfolio update
Governance
• Annual Report & Financial Statements;
Notice of AGM
Finance
• Q1 forecast; 2020 Budget;
Dividend consideration
23/24 JULY
Safety
• SHE update
Safety
• Impact of Covid-19 review
Governance
• AGM
Finance
• Q2 Forecast update;
Dividend consideration
Employee Engagement
• Employee Voice
3 SEPTEMBER
Employee Engagement
• ShareBuilder update
Strategy
• Strategy & Sustainability review
Finance
• Treasury, Tax and Pensions update
Finance
• Dividend; Q3 update; Interim results
Strategy
• M&A update; IS&IT update
Risk
• Global Insurance programme update
Stakeholder Engagement
• IR feedback on interims
22 OCTOBER
14 DECEMBER
Strategy
• Strategy & Sustainability sessions
Governance
• Operating Model review
Finance
• Q3 IMS; Q4 Forecast update
Risk
• Risk Dashboard update
Strategy
• People; Inclusion & Diversity; Talent
Development; Succession Planning
Governance
• Board Evaluation; Conflicts of Interest
• 2021 and 2022 Board Calendars
Finance
• 2021 Budget; Q3 IMS Feedback
Stakeholder Engagement
• Shareholder Meeting Feedback
UNSCHEDULED ADDITIONAL
MEETINGS
Safety
• Responding to Covid-19
Strategy
• Disposal of Oil & Gas Division
1 Scheduled Board meetings
82
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 GOVERNANCE IN ACTION – MEET THE BOARD SESSION
At the core of our ‘We are Weir’ framework remains our
commitment to truly listen to our employees, customers, suppliers
and wider communities in which we operate, ensuring our
relationships are based on open and honest discussions, trust and
mutual respect.
Year on year, we seek to continuously build employee engagement
and promote an open and transparent culture, fostering genuine and
meaningful dialogue with our employees. We have in place a range
of employee voice channels which give all our employees equal
access to various platforms where they can make their voice count
and continue to positively impact on Weir’s future. This includes our
global engagement survey, Ethics Hotline, our Town Hall sessions,
Yammer and ‘Ask Jon’, our dedicated email which allows employees
to directly contact our CEO with ideas, comments or questions.
These continue to be developed and enhanced to ensure maximum
participation and engagement.
Another element of our employee voice strategy is our strong
commitment to strengthening the links between Weir’s employees
and the Board. In 2019 we introduced ‘Meet the Board’ sessions to
enable our Non-Executive Directors to stay in touch with the broad
range of views of employees, allowing them to take these into
account as part of their role and decision-making processes.
These listening sessions present an opportunity for a discussion
between a group of employees and members of the Board, where
employees participating can discuss topics close to their hearts such
as what we do at Weir, how we do it and their overall experience of
life at Weir.
The first sessions took place face-to-face in Fort Worth (June
2019) and the second in Santiago (October 2019). During 2020,
the Covid-19 pandemic meant that our ‘Meet the Board’ sessions
were developed to run virtually. The first of the virtual sessions
in 2020 took place with 13 UK-based employees and the second
session took place with 12 employees from our Venlo business,
with employees based in the Netherlands, Spain and Australia.
The ‘Meet the Board’ sessions are chaired by Mary Jo Jacobi,
our Non-Executive Director with Board responsibility for Employee
Engagement. Both sessions were also attended by Charles Berry,
Chairman, Jon Stanton, Chief Executive, and one other Board
Member. In the UK session we welcomed Barbara Jeremiah, Senior
Independent Director, and for the Venlo session, we welcomed
Ebbie Haan, Non-Executive Director.
Both sessions were hosted on Microsoft Teams and allowed Board
Members and employee participants to discuss a range of topics
as suggested by the employees themselves. The format was
designed to give employees maximum opportunity to share their
views with the Board but there was also some time set aside for
the participants to engage in short Q&A sessions.
Despite the sessions having to be conducted remotely, participants
and Board Members still felt they achieved excellent levels of
discussion. Topics discussed across both sessions included
the impact and opportunities arising due to the Covid-19 global
pandemic including safety for those on site, working remotely
and how we are adapting interactions with customers across the
globe through innovative technology. We also discussed Weir’s
future, the direction and progress against our Sustainability
Roadmap and ways in which teams across different Weir Divisions
and geographies can become more collaborative, in line with our
‘We are Weir’ framework.
Participants across both sessions fed back that they found Board
Members to be very welcoming and accessible and that they had
a genuine interest in personal opinions from all employees at varying
levels within the Company; an opportunity that would be highly
recommended to other colleagues.
The key insights gathered from this year’s sessions are currently
being considered both with local Leadership Teams and at Board level.
They also form a key part of the annual Employee Insights Report.
Further ‘Meet the Board’ sessions will be rolled out in 2021, taking
into consideration ongoing global and relevant local guidance
surrounding the Covid-19 pandemic.
MEET THE BOARD - UK SESSION MAY 2020 AND VENLO SESSION NOVEMBER 2020
CHARLES BERRY
JON STANTON
BARBARA JEREMIAH
MARY JO JACOBI
EBBIE HAAN
83
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 SHAREHOLDER ENGAGEMENT
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. As a result of the impact of
Covid-19, from mid-March onwards, all the investor relations activity
including roadshows and conferences moved to a virtual format.
The Company has directly engaged with investors (221 meetings in
2020), either face-to-face or via telephone or by video-conferencing.
The Company also engages with its Shareholders through its
attendance (virtually and physically) at investor conferences held
by the financial community and roadshows and investor relations
events held by the Company, of which there were 20 during the
year, held virtually in Canada, Finland, France, Germany, Switzerland,
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 at the AGM to answer
questions relevant to the work of the Board and the Committees.
During 2020 the Chairman, Chief Executive Officer, Chief Financial
Officer and Chair of the Remuneration Committee have 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. These meetings 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 2020
JANUARY
FEBRUARY
• Closed Period
20 December 2019 -
26 February 2020
• Full Year results
• Investor roadshow London
• Equity sales force
meetings x2
APRIL
• Q1 IMS
• Closed Annual
General Meeting
MARCH
• Investor
roadshow Edinburgh
• Virtual North
American roadshow
• Virtual conference Bank of
America Merrill Lynch
• Trading and impact of
Covid-19 update
MAY
JUNE
JULY
AUGUST
• Investor meetings post
• Virtual JP
Q1 IMS
Morgan conference
• Virtual European roadshow
SEPTEMBER
• Virtual Morgan
Stanley conference
• Virtual Rothschild/Redburn
ESG conference
OCTOBER
• Oil & Gas
disposal announced
• Investor meetings post
O&G deal announcement
• Investor meetings post
Interim results
• Closed Period 29 June
2020 - 29 July 2020
• Interim results
• Virtual London and
Edinburgh roadshows
• Equity sales force
briefings x2
NOVEMBER
DECEMBER
• Q3 IMS
• Virtual equity sales force
meetings x4
• Virtual Goldman
Sachs conference
• Virtual North
• Virtual European roadshow
• General Meeting - disposal
American roadshow
• Virtual Bank of
of Oil & Gas Division
• Remuneration
Committee Chair
Shareholder Meetings
America Merrill Lynch
UK conference
• Remuneration Policy
• Chairman’s
Investor Meetings
84
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 BOARDROOM PRACTICE
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.
APPOINTMENT OF NON-EXECUTIVE DIRECTORS
BEN MAGARA AND SRINIVASAN VENKATAKRISHNAN
Following the departure of Rick Menell and Cal Collins in 2020, Russell
Reynolds Associates were engaged to support a Non-Executive
Director recruitment search process. Following the satisfactory
conclusion of the process, the Nomination Committee recommended,
and the Board approved the appointment of both Ben Magara and
Srinivasan Venkatakrishnan to the Board, with effect from 19 January
2021. You can read more about the recruitment process in detail,
in the Nomination Committee Report, on page 90.
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, purpose, strategy, structure, operations, policies and
other relevant documentation.The induction process also covers the
Corporate Governance Framework, the Board and Committee process,
Board and Committee 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.
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. 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, however, 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 relation to the relationship between the
Group and the University of Strathclyde, whether in relation to WARC
or otherwise.
RE-ELECTION TO THE BOARD
In accordance with the Company’s Articles of Association and
good practice, all Directors on the Board at 31 December 2020
will seek election or re-election at the Company’s AGM in April
2021, in compliance with the UK Corporate Governance Code
2018. The Executive Directors have contracts of service with one
year’s notice, whilst Non-Executive Directors’ appointments can
be terminated with six months’ notice. The letters of appointment
of the Chairman and the Non-Executive Directors are available for
inspection at the Company’s registered office and set out the required
commitment the Director must have to the Company. Further details
can also be found in the Directors’ Remuneration Report on pages
103-127. 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 103-127.
TIME COMMITMENT
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.
BOARD EFFECTIVENESS
To facilitate our external Board Effectiveness Review, the Nomination
Committee recommended to the Board to engage with The Effective
Board LLP for a third year. The role of The Effective Board is to identify
any issues that the Board should consider and the role of the Board is
to take appropriate action to address any issues. The Company does
not have any other connection with The Effective Board. The Chairman
and Company Secretary met remotely with The Effective Board in
order to agree the objectives, scope and timeline of the review to allow
a proposal to be put forward for consideration. In November 2020,
the Non-Executive Directors, led by the Senior Independent Director,
met without the Chairman present to discuss his performance. The
outcome was extremely positive and it was reported to the Board at
the December 2020 Board meeting.
The Board Effectiveness process and findings can be found on the
following page. The Effective Board LLP has reviewed the content of
the Board Effectiveness section on pages 86 and 87. The Board also
obtains feedback from employees and other stakeholders through
various ways such as ‘Meet the Board’ sessions, ‘Ask Jon’, and
Shareholder meetings. You can read more about this on page 83.
85
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 BOARD EFFECTIVENESS
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.
BOARD EFFECTIVENESS AND REVIEW PROCESS
The Board Effectiveness Review operates on a three-year cycle. In light of Covid-19, it was decided in 2020 to opt for a hybrid approach
to the external evaluation, using bespoke questionnaires and virtual interviews. The process is detailed 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 (assistance
from The Effective Board)
Year 2 – 2019
Internal Evaluation (assistance
from The Effective Board)
Circulate findings and review
recommendations from
previous year
Online confidential
bespoke questionnaire
Analysis and discussion at
Board meeting
Individual meetings with Chairman
and Directors post evaluation
Circulate findings and review
recommendations from previous year
Online confidential
bespoke questionnaire
Analysis and discussion
at Board meeting
Individual meetings with Chairman
and Directors post evaluation
Year 3 – 2020
External Evaluation
Circulate findings and review
recommendations from previous year
Online confidential bespoke
questionnaire and individual
virtual interviews
Analysis and discussion at
Board meeting
Individual virtual meetings with
Chairman and each Director
post evaluation
THE PROCESS WAS DIVIDED INTO FOUR STAGES:
Stage 1
The questionnaires were drafted to focus on the recommendations from the last review and whether they had been
implemented successfully and other bespoke questions to assess how the Board works together, the quality of
information received, the performance, succession and development plans, diversity, and processes for identifying risks.
The on-line questionnaires were then sent to the Board and Company Secretary for completion.
Stage 2
Following completion of the questionnaires, virtual interviews were held via Microsoft Teams with each of the following
Board members; the Chairman, CEO, CFO, SID, Committee Chairs, and Company Secretary. These interviews focused on
any comments that had been made on how to improve the effectiveness of the Board and whether the recommendations
from last year’s review had been completed.
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.
Stage 4
The Effectiveness Reports were presented at the Board and Committee Meetings in December 2020 and January 2021,
to allow discussion and action planning.
Follow up meetings were held by the Chairman with each individual Director.
86
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 FINDINGS FROM 2019
PROGRESS FROM 2019 OUTCOMES
• 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 Inclusion and
Diversity, in line with the Parker Review. The Board also
amended their Board Diversity Policy. You can read about our
progress on Diversity on page 57.
• The Board has made significant efforts on Inclusion and
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.
• The Board implemented a Management Committee, namely
the Sustainability Excellence Committee, to provide oversight
of the Sustainability Strategy. You can read more about this
on page 64.
FINDINGS FROM 2020
KEY AREAS OF FOCUS FOR 2021/2022
• There was an even greater increase in positive views of the
• Continuing to increase focus on wider aspects of Diversity.
Board’s overall effectiveness from last year.
• That the Board concludes its discussions around the
potential creation of a new Committee of the Board to
oversee the Sustainability Strategy.
• That the Board reviews how the Group engages with
its suppliers and local communities as stakeholders to
understand their views on the Company in line with the
Companies Act Section 172 requirements.
• Whilst there was increased scoring in succession planning
at Board and Executive level this as always remains work
in progress.
• Keep engagement mechanisms under review so that they
remain effective.
THE BOARD TAKES THE RESPONSIBILITY FOR
CONTINUOUS IMPROVEMENT SERIOUSLY AND
IS COMMITTED TO FOCUS ON CONTINUALLY
MONITORING AND IMPROVING EFFECTIVENESS.
CHARLES BERRY
Chairman
87
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 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
93 to 102. Information on the Company’s external auditors is contained
within the Audit Committee Report.
Internal Control and Risk Management
In accordance with the UK Corporate Governance Code 2018 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 2020. More information on
how the Group seeks to manage risk can be found on pages 39-51.
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 2020,
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.
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.
88
OUR INTERNAL CONTROL FRAMEWORK HAS FOUR
KEY LAYERS:
4
ETHICAL AND CULTURAL ENVIRONMENT
3
ASSURANCE ACTIVITIES
S
K
S
R
I
2
MONITORING AND OVERSIGHT CONTROLS
1
FUNCTIONAL AND FRONT LINE CONTROLS
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 73,
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, 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 51 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.
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 VIABILITY STATEMENT
In accordance with provision 31 of the UK Corporate Governance Code
2018, the directors have assessed the viability of the Group, taking into
account the Group’s current position and the potential impact of the
principal risks documented on pages 43 to 51 of the Annual Report.
Assessment period
The directors have determined that a three year period to
31 December 2023 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.
Risk assessment
The Board considered the longer-term prospects of the Group as a
mining technology pure play following the disposal of the Oil & Gas
Division, 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, digital transformation, 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.
In response to the Covid-19 pandemic, the Group has now identified
Covid-19 as a principal risk. The financial impact of potential site
lockdowns arising from further waves has been incorporated in the
viability modelling. Refer to pages 43-51 for the Group’s principal risks,
specifying those risks considered during this review.
Process and key assumptions
The Group Budget and Strategic plan, both prepared bottom up
annually and approved by the Board, are used as the basis for the
viability modelling and supplemented with due consideration of
current trading. The key assumptions underpinning the Strategic
plan include continued strong demand for minerals such as copper,
iron and gold driven by global population growth, industrialisation,
and electrification. This translates into supportive commodity prices,
slow long term economic growth and increasing demand for our new,
more sustainable solutions technology.
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. The base case has been stress tested to reflect:
i. a severe but plausible downside scenario; and,
ii. a highly unlikely more severe scenario.
The resulting scenarios were modelled to include a series of individual
one-off ‘shocks’ which represent the principal risks identified above,
in combination with commodity price based market downturn
scenarios. The assessment took 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.
The analysis indicated that the Group would be able to comply with
its current banking covenants and maintain sufficient headroom within
its existing lending facilities under both scenarios.
The outcome of the modelling is supported by the following factors:
• The geographic spread 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 some cyclicality from the
markets in which it operates, it continues to have a strong balance
sheet, further strengthened following completion of the sale of the
Oil & Gas Division, that provides capacity in which to operate; and
• The Group’s ability to flex its cost base and preserve cash, as
demonstrated in 2020 with the swift actions taken in response
to Covid, and seen in earlier downturn years.
These factors are considered critical in protecting the Group’s viability
in the face of adverse economic conditions and/or the additional
risks highlighted.
Review process
The Audit Committee, on behalf of the Board, have reviewed the
underlying processes and key assumptions underpinning the
Viability Statement.
While this review does not consider all of the risks that the Group may
face, the Board consider that this stress testing based assessment
of the Group’s prospects is reasonable in the circumstances of the
inherent uncertainty involved.
Confirmation of viability
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 2023.
89
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 NOMINATION COMMITTEE REPORT
NOMINATION COMMITTEE
OVERVIEW
AT-A-GLANCE
MEMBERS
The Nomination Committee is entirely made up of Independent
Non-Executive Directors and the Chairman of the Board is Chair of
the Committee. The Company Secretary, Graham Vanhegan, acts as
Secretary to the Committee. Members of Senior Management and
Advisers are invited to attend meetings as appropriate.
CHARLES BERRY
Chair of
Nomination
Committee
EFFECTIVE SUCCESSION
PLANNING IS VERY IMPORTANT
FOR THE LONG-TERM SUCCESS
OF A COMPANY AND THE
NOMINATION COMMITTEE
PLAYS A VITAL ROLE IN THIS.
CHARLES BERRY
Chair of Nomination Committee
Dear Shareholder,
I am pleased to introduce our Nomination Committee Report for 2020
which explains the Committee’s focus and activities during the year.
The Committee focuses on succession planning and Inclusion and
Diversity to ensure that the size, composition and structure of the
Board is appropriate for the delivery of the Group’s strategy, whilst
also meeting all relevant provisions of the UK Corporate Governance
Code 2018.
2020 was another busy year for the Committee, which saw the search
for and appointment of two Non-Executive Directors, following the
departure of Rick Menell and Cal Collins from the Board last year. I am
pleased that an effective search process resulted in the appointment of
both Ben Magara and Srinivasan Venkatakrishnan.
Throughout 2021, the Nomination Committee will continue to focus
on succession planning together with advancing inclusion, diversity
and equality in accordance with our policies and also the work of the
Hampton-Alexander and Parker Reviews.
CHARLES BERRY
Chair of Nomination Committee
90
BARBARA JEREMIAH
Senior Independent
Director
MARY JO JACOBI
Employee Engagement
Non-Executive Director
SIR JIM MCDONALD
Non-Executive Director
Member since:
25 June 2019
Member since:
1 August 2017
Member since:
26 April 2018
MAIN ACTIVITIES OF THE NOMINATION COMMITTEE
DURING 2020
• Ensured Board and Senior Management succession planning
aligned with our strategy and culture.
• Recommended appointment of Non-Executive Directors,
Ben Magara and Srinivasan Venkatakrishnan.
• Reviewed and updated Board Diversity Policy.
• Continued focus on Hampton-Alexander and Parker Reviews.
• Undertook Board skills assessment and gap analysis.
• Reviewed Board Committee membership and extension of
appointment for Sir Jim McDonald and Stephen Young.
NOMINATION COMMITTEE MEETING ATTENDANCE
Members
Charles Berry
Mary Jo Jacobi
Barbara Jeremiah
Sir Jim McDonald
21-Jan
2020
22-Jun
2020
3-Sept
2020
20-Oct
2020
14-Dec
2020
Total
100%
100%
100%
100%
Scheduled Scheduled Unscheduled Unscheduled Scheduled
BOARD TENURE
as at 31 December 2020
m
8
y
0
1
n
o
t
n
a
t
S
n
o
J
m
0
1
y
7
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r
e
B
s
e
l
r
a
h
C
y
7
i
b
o
c
a
J
o
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r
a
M
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2
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4
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s
a
e
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n
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o
J
m
5
y
3
i
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J
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r
a
b
r
a
B
m
5
y
3
n
a
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a
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l
y
3
g
n
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e
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0
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e
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y
6
l
d
a
n
o
D
c
M
m
J
i
r
i
S
Director tenure
Director tenure – including previous Weir Board appointment
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020
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.
BOARD SKILLS AND ATTRIBUTES
The Board skills and attributes matrix, as detailed below, is reviewed by the Nomination Committee annually, taking into account the future
requirements of the Board.
Director
Independence Engineering
Mining
Oil & Gas
Governance
Environment &
Sustainability
Banking
& Finance
International
Leadership
Charles Berry
Jon Stanton
John Heasley
Clare Chapman
Engelbert Haan
Mary Jo Jacobi
Barbara Jeremiah
Sir Jim McDonald
Stephen Young
Rick Menell1
Cal Collins2
Ben Magara3
Srinivasan
Venkatakrishnan4
1 Rick Menell stepped down from the Board on 28 April 2020.
2 Cal Collins stepped down from the Board on 3 September 2020.
3 Ben Magara appointed to the Board on 19 January 2021.
4 Srinivasan Venkatakrishnan appointed to the Board on 19 January 2021.
BOARD INDEPENDENCE
BOARD GENDER BALANCE
BOARD NATIONALITY
BOARD AGE
as at 31 December 2020
as at 31 December 2020
as at 31 December 2020
as at 31 December 2020
Executive
Non-Executive
2
7
Male
Female
6
3
British
American
American/British
Dutch
6
1
1
1
Lower than 55
56-60
61-65
66-70
2
1
3
3
91
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020
NOMINATION COMMITTEE REPORT
CONTINUED
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 Committee has reviewed the composition of the Board
and Board Committees and considers that they consist 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.
SUCCESSION PLANNING AND TENURE
The Nomination Committee continues to give full consideration to
succession planning for the Board and Senior Management, with a
proactive approach taking into account the challenges and
opportunities facing the Company, and what skills and expertise are
required for the Board to operate effectively. The Committee annually
reviews the length of tenure of the Board and the mix of skills,
strengths and experience of the Directors.
BOARD APPOINTMENTS
The Weir Board Diversity Policy sets out the approach taken to ensure
appointments to the Board and succession planning are based on
merit. The Committee evaluates candidates against objective criteria to
assess their suitability. This includes, but is not restricted to, their skills,
education, experience, background and independence. Due regard
is given to diversity and the benefits that this brings to the Board.
The time commitment required for the role is also considered to
ensure the candidate is able to fulfil all of their obligations. The Board
acknowledges that the processes of appointment have a strong
influence on the outcomes. Any recruitment consultants used in the
appointment of Non-Executive and Executive Directors will be asked
to create a diverse talent pool of applications. No brief provided to the
consultants should restrict the parameters of their search or the list of
potential candidates they are able to produce with regards to diversity.
APPOINTMENT OF NON-EXECUTIVE DIRECTORS
BEN MAGARA AND SRINIVASAN VENKATAKRISHNAN
As part of our succession planning process and, following the
departure of Rick Menell and Cal Collins, it was agreed that the
appointment of an additional director should be made in order to
maintain an appropriate level of mining experience on the Board.
The Board engaged Russell Reynolds Associates as external search
consultant to initiate a rigorous search process. Russell Reynolds
assists with the recruitment process for Senior Management, but
does not have any other connections with the Company or individual
Directors. At the request of the Committee, Russell Reynolds
incorporated diversity from the initial stages of the search process and
as a result, the longlists and shortlists were diverse in race, gender,
nationality, experience and skills. The Committee was updated on the
search process at every meeting and two unscheduled meetings were
held to discuss the process. Russell Reynolds reviewed the longlist
of candidates with the Committee, from which a shortlist of four
people was identified. The shortlisted candidates were interviewed
by the Nomination Committee Chair, CEO and Committee members
initially. Meetings for the two top candidates were then held with all
other Board members and the Company Secretary. Following those
meetings, the Nomination Committee decided to recommend to the
Board the appointment of both candidates given their skills, experience
and fit for the Company. The Board duly approved this recommendation
and appropriate background and reference checks were conducted and
written confirmation was sought from the candidates to ensure they
complied with the appropriate Listing Rules.
INCLUSION AND DIVERSITY
The Committee itself is gender balanced with two female and two
male members and is committed to ensuring that at least a third of
the Board, Group Executive members and their direct reports are
92
female. Our objective of driving the benefits of a diverse Board, Senior
Management team and wider workforce is underpinned by our Board
Diversity Policy, our Inclusion, Diversity & Equality Policy and the work
of our Inclusion and Diversity Steering Committee (see page 57).
These policies can be viewed on our website at www.global.weir/
sustainability/policies/.
The Board keeps these 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.
Whilst we achieved the Hampton-Alexander Review target of 33% as at
31 December 2020, we need to continue to make progress, because the
current percentage has since reduced as we have made appointments
which have enhanced other areas of diversity. This also applies to the
Group Executive and their direct reports, where female representation
reduced in 2020 from 28% to 21% due to the realignment of certain
head office functions. The representation of women at senior levels is
still above the average across the organisation as a whole and the Board
remains fully committed to the Hampton-Alexander Review targets and
to improving the gender diversity in the Board and Senior Leadership
population. Goals have been incorporated into the balanced scorecard of
the Company. I continued to be a member of the steering group of the
Hampton-Alexander Review throughout 2020.
Our Hampton-Alexander statistics are noted below.
Board
Group Executive
Committee and
direct reports
As at 31 December 2020
As at 31 December 2019
33%
(3 females, 6 males)
21%
(13 females, 48 males)
27%
(3 females, 8 males)
28%
(16 females, 42 males)
Further information regarding our approach, initiatives and training on
Inclusion and Diversity can be found on page 57.
INDEPENDENCE AND RE-ELECTION OF DIRECTORS
In December 2020, 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 consideration of
Conflicts as a standing item on every Board and Committee Agenda.
The Committee reviewed and considered the independence of each
Non-Executive Director in line with the UK Corporate Governance
Code 2018 and Guidance on Board Effectiveness. The Nomination
Committee considers that all of the Non-Executive Directors are
independent. During the year, the Committee considered and
recommended an extension to the current tenure of Sir Jim McDonald
and Stephen Young, for a further three year period subject to annual
re-election by Shareholders.The Nomination Committee discussed the
annual 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 aided discussion.
COMMITTEE EFFECTIVENESS
The Committee’s effectiveness was reviewed during the year as part
of the external Board Effectiveness Review facilitated by The Effective
Board LLP. Their report was presented to the Board in December 2020.
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 pages 85 to 87.
CHARLES BERRY
Chair of Nomination Committee
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 AUDIT COMMITTEE REPORT
STEPHEN YOUNG
Chair of the
Audit Committee
THE AUDIT COMMITTEE
IS PLEASED TO REPORT
ONGOING EFFECTIVE INTERNAL
CONTROLS AND CONTINUED
HIGH STANDARDS OF FINANCIAL
REPORTING GOVERNANCE
IN A CHALLENGING YEAR.
STEPHEN YOUNG
Chair of Audit Committee
OVERVIEW
MEMBERS
• There have been no changes in the membership of the
MAIN ACTIVITIES DURING 2020
• Monitored the impact of Covid-19 on the overall control
Committee during 2020.
• Committee members are considered to provide a wide range
of financial and commercial expertise.
BARBARA JEREMIAH
Senior Independent
Director
EBBIE HAAN
Non-Executive Director
SIR JIM MCDONALD
Non-Executive Director
Member since:
1 August 2017
Member since:
25 June 2019
Member since:
1 January 2015
AUDIT COMMITTEE MEETING ATTENDANCE
Members
Stephen Young
Ebbie Haan
Barbara Jeremiah
Sir Jim McDonald
21-Jan
2020
19-Feb-
2020
23-Jul
2020
29-Sep
2020
22-Oct
2020
Total
100%
100%
100%
100%
Scheduled Scheduled Scheduled Unscheduled Scheduled
environment, ensuring that appropriate risk assessments were
undertaken and teams across the wider finance community had
the appropriate systems, processes and resources to support
ongoing effective controls, despite challenges of remote working
and possible absences.
• Reviewed and challenged interim and annual financial reporting,
including appropriate reporting and presentation of the financial
impacts of Covid-19 and the treatment of the Oil & Gas Division
as a discontinued operation held for sale and related disclosures.
• Reviewed the effectiveness of the Group’s risk management
and internal control frameworks, comprising internal audit,
compliance scorecard process, presentations to the Committee
from divisional Finance Directors, the Group Head of Tax and the
Global Head of Compliance.
• Reviewed the results of internal audits in the year and agreed
the 2021 internal audit strategy and plan; met with the Head of
Internal Audit independent of Executive management.
• Approved the external audit plan presented by PwC, reviewed
the effectiveness of the external audit and held independent
discussions with the Group Engagement Leader.
• Reviewed the work undertaken in respect of the financial
information required as part of the Class 1 Circular for the
sale of the Oil & Gas Division and approved this at a specially
convened meeting.
COMMITTEE EFFECTIVENESS
• External evaluation concluded that the Committee was
fulfilling its terms of reference effectively and no significant
areas of concern were noted.
EXTERNAL AUDITOR INDEPENDENCE
• Confirmed the external auditor, PwC, remains independent
and that non-audit fees are appropriately approved and below
Group policy limits.
• With Lindsay Gardiner having served his full five-year term as
Group Engagement Leader he will be replaced by Kenny Wilson
for the year ending 31 December 2021.
AREAS OF FOCUS 2021
• Track progress in cyber security control effectiveness.
• Monitor ongoing control effectiveness as more operating
businesses transition core accounting processes to global
shared services.
• Continue to oversee the increasing use of digital technology in
the internal audit function.
• Respond to the recommendations and reporting requirements
of the Task Force on Climate-related Financial Disclosures.
• Smooth transition to the new PwC Group Engagement Leader.
93
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020
AUDIT COMMITTEE REPORT
CONTINUED
INTRODUCTION
I am pleased to present our report to Shareholders for the year ended
31 December 2020 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 2021.
Committee membership in 2020
Stephen Young (Committee Chair)
Ebbie Haan
Barbara Jeremiah
Sir Jim McDonald
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 and have been members
of the Committee for the full year. 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 to78.
MEETINGS
We met five times during the year and have met twice since the year
end. Like many organisations, we have followed Government guidance
on restricting travel and working remotely where possible, with the
last five of our meetings having been held virtually. Each Committee
meeting normally takes place prior to a Board meeting, during which
I provide a report on our activities. A special meeting was convened in
September 2020 in order that the Committee could be updated on the
finance workstream supporting the preparation of the Group’s Class 1
Circular, required in respect of the sale of the Oil & Gas Division.
We met twice in 2020 with the external auditors without any Executive
management present. This provided us with the opportunity for any
issues of concern to be raised by, or with, the auditors. We also met
once in 2020 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 2020. In addition, PricewaterhouseCoopers LLP (PwC) attended
the meetings by invitation as auditors to the Group.
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, Group Head of Internal Audit
Chris Palmer, Group Head of Tax
Lindsay Gardiner (PricewaterhouseCoopers LLP, Group
Engagement Leader)
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;
(iv) external audit; and
(v) Class 1 Circular.
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;
• the clarity of the disclosures and 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 2020 meeting and Annual Report during our
January and February 2021 meetings.
We reviewed the change in presentation of the Consolidated Income
Statement to present “Adjusted results”, “Adjusting items” and
“Statutory results” noting no change to the policy for exceptional
items and consistency in approach to provide the users of the
Consolidated Financial Statements with a more relevant presentation
of the Group’s underlying performance. The change in presentation
is detailed in the Alternative Performance Measures section in note 2
to the financial statements.
94
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 We received and reviewed details of the significant exceptional and
other adjusting items in the year, including the impairment charge
taken in relation to the Oil & Gas Division, Covid-19 restructuring
and other costs and the charge in relation to the Group’s legacy
US asbestos-related liabilities.
The financial reporting matters discussed in the current year and
recurring agenda items are summarised in the table on pages 98 to 102.
In December 2020 the Group received a letter from the Financial
Reporting Council (FRC), as part of their regular programme of
thematic reviews, highlighting their intention to include the Group’s
2020 annual report in their review of IAS 37 ‘Provisions, Contingent
Liabilities and Contingent Assets’. The FRC’s role in such reviews is
to consider compliance with recognition, measurement and disclosure
requirements with the aim of improving the quality of corporate
reporting and identifying good practice.
(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 88.
Our work in this area was supported by reporting from the Head
of Internal Audit on the results of the programme of internal audits
completed; the overall assessment of the internal control environment;
and in addition, reporting, either verbal or written, from Senior
Management covering any investigations into known or suspected
fraudulent activities. We 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). In addition,
the Committee take comfort from the audit work performed and
conclusions reached by PwC over the controls environment of the
Group’s critical IT systems. Despite disruption from Covid-19, IT
processes and controls remained stable and effective and there
have been no high priority findings which required to be reported
to management.
The Committee also receives regular reporting on the Group’s
compliance-related activities from the Global Head of Compliance
and the Head of Internal Audit. This includes reviewing compliance
with the Group’s Ethics Hotline 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.
In 2020, this regular reporting was supplemented by a specific Ethics
and Compliance presentation to the Committee by the Global Head of
Compliance. The Committee were updated on the work performed in
the year with regard to anti-bribery and corruption risk assessments
and the roll out of an updated Anti-Bribery and Corruption Policy
with accompanying global training. In addition, the Committee were
informed that global refresher training had been completed in respect
of the Group’s Code of Conduct.
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,
cybersecurity, 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
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. Following Covid-19 related Government guidance,
most internal audits were performed remotely with the team and
business adapting well to the necessary arrangements.
Responding to disruptions in the business environment caused by the
Covid-19 pandemic, Internal Audit amended its audit approach to cover
areas of heightened fraud, performance & reporting and regulatory
risks. Some of the areas amended included manual journals, employee
expenses, inventory management, customer/supplier set-up, one-time
vendors, segregations of duties and revenue recognition. The review of
the control environment against the backdrop of Covid-19 highlighted
that the control environment has functioned effectively and generally,
compliance with company policy has remained robust. Due to the sale
of the Oil & Gas Division, the 2020 plan was adjusted later in the year
to remove some Oil & Gas entities from scope.
95
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 AUDIT COMMITTEE REPORT
CONTINUED
The Committee has fully supported Tayo Oyinlola in her first full year as
Head of Internal Audit as Tayo has implemented changes to strengthen
the internal audit team, improve timeliness of audits and the close
out of resulting actions and embed more automation through specific
audit software tools, process improvements and data analytics.
In 2020, the internal audit team were supported by guest auditors from
across the Group, including Group Finance and Group Tax, providing
subject matter expertise for the internal audit team and development
opportunities for the guest auditors. The number of audits completed
in 2020 increased 19% on the prior year.
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 wider internal assurance risk indicators. 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. Planning is further
assisted by a risk modelling tool for dynamic risk prioritisation of audits.
The resulting 2021 plan continues to focus the largest proportion
of resource on financial assurance reviews whilst incorporating
wider risk assurance coverage, both financial and non-financial,
as described below:
• reviews are 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;
• the IT assurance programme which, for 2021, will continue to be
focused on the Group’s IS&T transformation programme as well as
areas such as data governance and application security; and
• an element of the Annual Plan is reserved for assurance coverage
of any emerging risk areas.
The Committee considered and approved the 2021 Internal Audit
Strategy and Plan including the resource model. Further progress on
automation is a significant feature of the internal audit strategy with
the 2021 plan including a continued push towards greater use of data
analytics and a gradual introduction of robotic process automation into
the audit process.
(iv) External audit
The 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 Committee will follow the
UK guidance to conduct a tender at least every ten years, with the
next audit tender process required to be concluded for the year ending
31 December 2026.
In response to the Covid-19 pandemic, PwC have monitored the
impact of this on the business throughout the year and considered any
change required to their risk assessment and planned audit approach
as a result. A Key Audit Matter on the implications of the pandemic for
the Group is included in their Audit Report on page 132. Planning for
the 2020 audit also included due consideration to the practical
impact of Covid-19, such as travel restrictions, with PwC noting well
developed plans were in place for remote file reviews and component
audit supervision, assisted by the increased use of video calls and
other technology to support certain audit procedures normally requiring
physical attendance at operating sites.
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 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. In addition, during 2020 the
Committee were advised that the Financial Reporting Council’s (FRC)
Audit Quality Review team had selected the Weir Group 2019 audit for
specific review. PwC presented a summary of the findings from this
review to the Committee in October 2020. There were no key findings
arising from the review.
The Committee held two private meetings with the external auditor
in 2020. This provided additional opportunity for open dialogue and
feedback from the Committee and the auditor without Executive
management being present. Matters discussed included 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 Group Engagement Leader
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 and the specific FRC Audit Quality
Review in the year, 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.
96
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 OUR FOCUS FOR 2020
In last year’s report we said that, in addition to our routine business,
we would focus on the following two areas:
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.
As discussed in section (ii) above, the Committee invited Steve Meck,
Global Head of Compliance, to present a specific update on Ethics
and Compliance. This will now become part of the annual schedule for
the Committee with more regular and immediate reporting continuing
through other channels such as internal audit or the Group Chief Legal
Officer and Company Secretary as and when required.
As discussed in section (iii) above, the Committee have been
supportive of Tayo Oyinlola in her first full year in the role of Head of
Internal Audit and have noted good progress on the use of technology
to increase efficiency and deliver deeper insights, with this journey
towards greater automation continuing into 2021.
OUR FOCUS FOR 2021
In addition to our routine business, in 2021 our focus will be on:
1. tracking progress in cyber security control effectiveness;
2. monitoring ongoing control effectiveness as more operating
businesses transition core accounting processes to global
shared services;
3. continuing to oversee the increasing use of digital technology in
the internal audit function;
4. responding to the recommendations and reporting requirements
of the Task Force on Climate-related Financial Disclosures; and
5. overseeing a smooth transition to the new PwC Group
Engagement Leader.
STEPHEN YOUNG
Chair of Audit Committee
The auditor confirms their independence at least annually. As the
independence rules allow a maximum of five years as engagement
leader of the Group, the Committee were advised that the 2020
financial year would be Lindsay Gardiner’s final year as Group
Engagement Leader. Following a selection process by management
and myself, it was determined that Lindsay will be replaced by Kenny
Wilson from the year ended 31 December 2021.
Fees payable to PwC in respect of audit and assurance services for
2020 of £3.7m (2019: £3.3m) 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 increase in level of fees is primarily attributable to
specific changes in local audit scopes accompanied by nominal fee
increases associated with regulatory change in audit.
Non-audit fee work conducted by PwC in the year of £0.3m
(2019: £0.1m) represented 7% (2019: 2%) of the audit fee.
The increase in non-audit fees in the year is due to the appointment of
PwC in the role of Reporting Accountant with respect to the Class 1
Circular required for the sale of the Oil & Gas Division. 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 2020
year end. As a result, the Committee recommended to the Board that
PwC should be reappointed as auditor at the next AGM.
(v) Class 1 Circular
In addition to the regular areas of focus, in 2020, the Committee also
reviewed the outputs from the finance workstream, which addressed
the Listing Rules requirements for inclusion of financial information
in the Class 1 Circular required in respect of the sale of the Oil & Gas
Division. This included:
• gaining an understanding of the process undertaken to produce
the historic and pro forma financial information and reviewing
reconciliations back to previously published information;
• reviewing the work undertaken to support the statement in the
Circular on the sufficiency of the remaining Group’s working capital
for twelve months from the date of the Circular including the
downside sensitivity analysis performed; and
• reviewing the conclusions reached by the Reporting Accountants
further to their work performed in relation to the above.
This work was discussed at a specially convened Audit Committee
meeting held in September 2020 followed by the Committee agreeing
to recommend to the Board for approval the financial information and
the statement on working capital presented in the Circular.
COMMITTEE EVALUATION
The Committee was subject to an external evaluation process
during the year as part of the overall Board Effectiveness Review
which operates on a three-year cycle. The evaluation was performed
by ‘The Effective Board LLP’ using bespoke questionnaires and
virtual interviews.
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.
97
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 Conclusion
The Committee
agrees with
the accounting
treatment and
disclosure of these
items in the Annual
Report.
AUDIT COMMITTEE REPORT
CONTINUED
CURRENT YEAR MATTERS
Area of focus
Issue
Role of the Committee
Exceptional
items
(see notes
5 and 20 of
the financial
statements)
Management
exercises
judgement on
the classification
of certain items
as exceptional
or adjusting.
98
We have received detailed reporting from the Chief Financial Officer covering
the following exceptional and other adjusting items:
(i)
(ii) analysis of the ESCO integration costs;
(iii)
charge/credit by Division, including the nature of the items;
analysis of Covid-19 restructuring and other costs and other restructuring
and rationalisation charges and related provisions;
details in respect of the Broad-based Black Economic Empowerment
transaction, which resulted in an exceptional share-based payment charge;
details of the charge in respect of the Group’s US asbestos-related
liabilities following the completion of the planned triennial actuarial review;
details in respect of the Guaranteed Minimum Pension (GMP) equalisation
charge;
(iv)
(v)
(vi)
(vii) analysis of discontinued operations exceptional items, primarily the
impairment charge on the re-measurement of the Oil & Gas Division at
fair value less costs to sell in accordance with IFRS 5 ‘Non-current Assets
Held for Sale and Discontinued Operations’, due to its ‘held for sale’ status
at the year end; and
(viii) disclosure of the amounts and related narrative reporting. Our work has
focused on ensuring that exceptional items met the criteria as such due
to their size, nature and/or frequency, and, other adjusting items met the
criteria being legacy items not relatable to current and ongoing trading.
We carefully considered the treatment of Covid-19 restructuring and other costs
as exceptional in light of FRC guidance in this area. We are satisfied that these
costs meet the Group’s criteria for exceptional items and that no judgement or
arbitrary split has been applied in determining this figure. We note that other
Covid-19 related costs have remained in operating profit as they did not meet
the definition of exceptional items, i.e. were of a recurring and/or consumable
nature.
We received detailed reporting in respect of the findings and associated financial
modelling from the latest US asbestos-related provision triennial actuarial review
leading the Committee to being satisfied that the charge in the Consolidated
Income Statement and its classification as an adjusting item is appropriate.
For discontinued operations, we received analysis in support of the impairment
charge taken on comparing the carrying values of the Oil & Gas Division to the
proceeds received on completion of the sale to Caterpillar Inc. on 1 February
2021, and anticipated proceeds in respect of the pending sale of the Saudi
Arabia-based joint venture, Arabian Metals Company, to the Group’s joint venture
partner, and estimated costs to sell.
We also received details of the onerous contracts charge, disposal costs and
restructuring charges.
We concluded that, following the impairment charge, the held for sale assets
and liabilities are correctly stated at the lower of their carrying value or fair value
less costs to sell and the charges to the Consolidated Income Statement are
appropriate.
We noted the final gain or loss on sale, including any adjustments for customary
working capital and debt-like items and the recycling of cumulative foreign
exchange gains and losses to the Consolidated Income Statement, is expected
to be reported in 2021, following completion of the sale and associated
completion accounts process.
We noted the exceptional and adjusting items reflected the way in which we,
as members of the Board, reviewed the performance of the Group and were
disclosed appropriately. We considered the change in presentation of the
Consolidated Income Statement to be a suitable presentation that meets the
IAS 8 criteria on “more relevant” and agree with the change. 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
provisions, including both new provisions and those remaining from previous
years, with management providing details of the remaining liabilities and
expected utilisation.
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 Area of focus
Issue
Role of the Committee
Discontinued
operations
(see note 8 of
the financial
statements)
New
accounting
standards
(see note 2 of
the financial
statements)
Impairment
(see note 13
of the financial
statements)
Following the
announcement in
October 2020 of
the sale of the Oil
& Gas Division,
the Division has
been classified
as a discontinued
operation and
held for sale as at
December 2020.
The introduction
of new accounting
standards has
required changes in
accounting policy,
treatment and
disclosures.
Management
undertakes an
annual detailed,
formal impairment
review of goodwill
and other intangible
assets, with
judgements made
on the relevant
Cash Generating
Units (CGUs)
and estimates of
available headroom.
We have received detailed reporting from the Chief Financial Officer covering:
(i) accounting treatment of Oil & Gas as a discontinued operation, including
restatement of the prior period Consolidated Income Statement, and held
for sale classification in the Consolidated Balance Sheet;
(ii) calculation of the impairment charge taken on the re-measurement of
the Division at lower of carrying value or fair value less costs to sell (see
exceptional and adjusting items);
(iii) details of other exceptional items including disposal related costs; and
(iv) related presentation and disclosures in the Annual Report.
We considered the accounting treatment, the impairment charge, other
exceptional items and related disclosures.
PwC confirmed the treatment and related disclosures were appropriate.
The amendments to accounting standards set out in note 2 of the financial
statements are not considered to have a material impact on the Consolidated
Financial Statements of the Group.
Conclusion
The Committee
agrees with the
discontinued
operations
accounting
treatment, the
impairment charge,
other exceptional
items and the
related disclosures
in the Annual
Report.
The Committee
agrees this is not a
significant issue for
the year ended 31
December 2020.
As the Oil & Gas Division is classified as held for sale, an impairment charge has
been booked on the re-measurement of the Division at the lower of carrying
amount and fair value less costs to sell (see exceptional and
adjusting items). As a result, no further impairment testing was carried out
on the Oil & Gas CGUs.
The remaining two CGUs are Minerals and ESCO.
The most significant estimates are in setting the assumptions underpinning the
calculation of the value in use of the CGUs. We specifically reviewed:
(i) the achievability of the long-term business plan numbers and macroeconomic
assumptions underlying the valuation process; and
(ii) long-term growth rates and discount rates used in the cash flow models for
We are satisfied
that the impairment
analysis supports
the carrying value
of the underlying
assets in the
continuing CGUs
and that the carrying
value of the Oil &
Gas Division reflects
its fair value less
costs to sell.
the CGUs.
Business plans and budgets were Board-approved and underpin the cash flow
forecasts. We also compared the value in use models to the Group’s market
capitalisation.
We noted that the results of impairment testing for Minerals and ESCO CGUs
produce significant headroom above carrying value for each and, as such, no
sensitivity analysis has been undertaken.
We have reviewed the disclosures in the financial statements and the related
narrative. We also received confirmation from PwC that they are in agreement
with management’s conclusions.
99
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 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-
related provision.
AUDIT COMMITTEE REPORT
CONTINUED
RECURRING AGENDA ITEMS
Area of focus
Issue
Role of the Committee
Provisions
(see note 20
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.
A significant focus area for the 2020 financial year was in respect of the
Group’s US asbestos-related provisions, following the completion of the
planned triennial actuarial review.
The Committee’s focus was centred on gaining an understanding of:
(i) historic claims and settlement data;
(ii) revised claims projections and estimated future settlement values;
(iii) their relation to the assumptions that underpin the discounted cash flow
model;
(iv) the period over which the liability can be reasonably estimated;
(v) the position with regard to availability of insurance cover; and
(vi) the adequacy and transparency of the disclosures in note 20.
We received detailed reporting that confirmed the Group’s claims experience
and the Group’s date of first exposure period were both greater than that
modelled at the time of the last actuarial review in 2017, leading to an increase
in the Group’s liability. In addition, the review confirmed that the insurance
coverage was expected to expire within the ten year time period for claims
received (15 years for cash flows) used as the basis for the Group’s provision.
The Committee considered the ongoing appropriateness of basing the
provision on ten years of projected claims and concluded it appropriate due to
the inherent uncertainty resulting from the changing nature of the US litigation
environment.
This has resulted in a charge to the Consolidated Income Statement of £11.8m
and a net liability on the Consolidated Balance Sheet of £12.1m.
The Committee considered the results of the actuarial review, the assumptions
and outputs from the discounted cash flow modelling and concluded that the
closing provision and related insurance asset and charge to the Consolidated
Income Statement were appropriate.
PwC provided confirmation that management’s assumptions were reasonable.
With regard to other provisions (other than inventory – see below), we received
details of the nature of each provision and explanations of the key movements
between the opening and closing balances. The Committee are satisfied with
the accounting treatment and related disclosures in respect of other provisions
in the financial statements.
Pensions
(see note 22
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.
100
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 Area of focus
Issue
Role of the Committee
Tax charge and
provisioning
(see notes
7 and 21 of
the financial
statements)
The tax position
is complex,
with a number
of international
jurisdictions
requiring
management’s
judgement with
regard to effective
tax rates, tax
compliance and tax
provisioning.
The Audit Committee receives a detailed report from the Chief Financial Officer
every six months, which covers the following key areas:
(i) status of ongoing enquiries and tax audits with local tax authorities;
(ii) the Group’s effective tax rate for the current year; and
(iii) the level of provisioning for known and potential liabilities, including
significant movements on the prior period.
In addition, the Committee takes comfort from the work done, and conclusions
reached, by PwC in this area.
In 2020, the Committee also received a presentation on tax strategy and
risk from the Group Head of Tax. Going forward, this will form part of the
Committee’s annual schedule.
The Committee received an update in respect of the State Aid contingent
liability, first disclosed in the 2019 Interim Report, which confirmed the Group
no longer has a contingent liability further to confirmation being received from
HMRC that they do not consider the Group has been a beneficiary of State Aid.
The Committee reviewed the State Aid disclosures in the Annual Report and
are satisfied with the position taken and the clarity of disclosures.
With respect to discontinued operations, the Committee noted the de-
recognition of certain balance sheet deferred tax assets resulting from the
pending disposal of the Oil & Gas Division, and further noted these US tax
attributes would remain available to the Group to offset future US taxable
income of the continuing operations. The re-recognition of these assets in the
future will depend on the level of future US profitability and the US tax law in
force at that point in time.
The Committee considered the accounting treatment to be appropriate and
this was confirmed by PwC.
Inventory
valuation
(see note 15
of the financial
statements)
Management
applies estimates
on inventory
valuation and
provisioning.
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.
Fair,
balanced and
understandable
The Board is
required to state
that the Group’s
external reporting
is fair, balanced and
understandable.
The Audit
Committee is
requested by the
Board to provide
advice to support
the assertion.
The Committee received a report from management summarising the detailed
approach that had been taken to ensure that the Group’s external reporting
is fair, balanced and understandable. This covered, but was not limited to, the
following:
(i) involvement of a cross section of management across the organisation
during the preparation of the external reporting, including the Group
Executive, divisional Finance Directors, Group Communications, Group
Finance (including Group Tax and Group Treasury) and Company Secretariat;
(ii) input and advice from appropriate external advisers, including the
Company’s brokers and public relations agency;
(iii) use of available disclosure checklists for both corporate governance and
financial statement reporting;
(iv) regular research to identify emerging practice and guidance from relevant
regulatory bodies;
(v) regular meetings 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.
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.
101
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 AUDIT COMMITTEE REPORT
CONTINUED
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.
Viability
Statement
The Committee’s
role, as delegated
by the Board,
is to review
the underlying
processes and
key assumptions
underpinning the
Viability Statement
and report to the
Board accordingly.
We fulfilled our responsibilities in this area through the review and discussion
of reporting received from management, which covered the following areas:
(i) 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 (see tax charge and provisioning).
When considering going concern, we specifically noted the successful
refinancing of the Group’s main lending facilities in the year, the quick and
decisive action taken to protect the business against any potential adverse
impact from Covid-19 and the resilience of the business demonstrated in the
current financial year.
In addition, given current levels of global macro-economic uncertainty
stemming from Covid-19, the Group performed additional financial modelling of
future cash flows. The financial modelling included reverse stress testing which
focused on the level of downside risk which would be required for the Group to
breach its current lending facilities and related financial covenants. The review
indicated that the Group continues to have sufficient headroom on both lending
facilities and related financial covenants. The circumstances which would lead
to a breach are not considered plausible.
Further to the sale of the Oil & Gas Division and receipt of proceeds from
Caterpillar Inc, we note the pro forma net debt to EBITDA on a lender covenant
basis is 1.7x, well below the 3.5x limit.
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.
We noted the specific inclusion of Covid-19 risks in the Group’s viability
modelling, while recognising the resilience of the business demonstrated in
the current financial year.
Conclusion
The successful
completion of this
work has been
reported to the
Board. The Group’s
statement on going
concern is included
on page 130.
The successful
completion of this
work has been
reported to the
Board. The Group’s
Viability Statement
is reported on
page 89.
102
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 DIRECTORS’ REMUNERATION REPORT
CLARE CHAPMAN
Chair of
Remuneration
Committee
REMUNERATION COMMITTEE DURING 2020
MEMBERS
The Committee is comprised entirely of independent Non-
Executive Directors whose biographies are set out on pages 74-77.
BARBARA JEREMIAH
Senior Independent
Director
Member since:
1 August 2017
EBBIE HAAN
Non-Executive
Director
Member since:
25 June 2019
MARY JO JACOBI
Employee Engagement
Non-Executive Director
Member since:
21 January 2014
STEPHEN YOUNG
Non-Executive Director
Member since:
26 April 2018
REMUNERATION COMMITTEE MEETING ATTENDANCE
Members
Clare Chapman (Chair)
Ebbie Haan
Mary Jo Jacobi
Barbara Jeremiah
Stephen Young
24-Feb-
2020
24-Jul-
2020
03-Sep
2020
14-Dec
2020
Scheduled Scheduled Scheduled Scheduled
Total
100%
100%
100%
100%
100%
WE ARE RENEWING OUR
REMUNERATION POLICY, WHICH
ALIGNS TO OUR STRATEGY
AND REWARDS THE DELIVERY
OF SUSTAINABLE LONG-TERM
VALUE FOR SHAREHOLDERS.
CLARE CHAPMAN
Chair of Remuneration Committee
DEAR SHAREHOLDER,
I am pleased to introduce our Directors’ Remuneration Report for the
year ended 31 December 2020.
I would like to start by recognising the huge efforts made throughout
the Group as we have responded to the unique challenges of Covid-19.
Our performance in these unprecedented times has reaffirmed the
fundamental strength of Weir. Across the Group we have adapted
quickly to new and challenging circumstances, putting the safety
of our people and communities first, while also fully supporting our
customers during these difficult and uncertain times. I am proud of the
ongoing commitment of our employees around the world.
Our actions in response to Covid-19 have included requiring everyone
who can work from home to do so, adapting our manufacturing
and service facilities to support infection control procedures,
including social distancing, and prioritising mental health support
through our employee assistance programmes. The pandemic has
highlighted the importance to the business of focusing on our key
stakeholders, including employees, communities, customers, suppliers
and investors.
This approach has been at the heart of our ‘We are Weir’ strategic
framework and our reward principles continue to support the ‘We
are Weir’ culture. This year we made the second award of Free
Shares under our global all employee Weir ShareBuilder plan, which
was designed with the ambition of reinforcing our culture. All Weir
colleagues are Shareholders and this has contributed to increasing
employee engagement, which has also been a particular area of focus
throughout the pandemic. The award of Free Shares through Weir
ShareBuilder also recognises the extraordinary effort and performance
of our employees in 2020. As a Committee, we are thankful for the
dedication and commitment our employees have shown.
103
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 DIRECTORS’ REMUNERATION REPORT
CONTINUED
For the Executive Directors, performance against the stretching
financial and strategic objectives set at the start of the financial year
would have resulted in an outcome of 46% of maximum. Taking into
account the ongoing uncertainty in the current environment, as well
as the announcement made in April, the Executive Directors asked
that they not be considered for an annual bonus in respect of 2020.
This gesture was welcomed by the Committee, which endorsed the
decision and exercised discretion to reduce the 2020 bonus outcome
for the Executive Directors to zero.
Discretionary reduction to restricted share awards vesting
As explained above, swift and decisive action taken by the Board
to safeguard the business in response to Covid-19 included the
withdrawal of any dividend payments in 2020. As a result, the underpin
relating to the dividend will technically not be met for the tranches of
the 2018 and 2019 restricted share awards due to vest in April 2021.
The underpin framework provides discretion for the Committee to
consider whether any adjustment to vesting should be made, based
on an assessment of all relevant factors. In making this assessment,
the Committee took into account a number of factors, including:
• The withdrawal of the dividend was fully supported by the Board
(and our major Shareholders) as the prudent and right thing to do
for the business in the unprecedented circumstances we faced
at the time. It was not a failure of business performance, which the
underpins are designed to safeguard against.
• On the contrary, as highlighted above, the business delivered
resilient financial and operational performance, strategic success,
and strong share price performance for our Shareholders over the
period, in spite of the ongoing Covid-19 challenges.
• The Committee also took into account the other outcomes for the
Executive Directors (withdrawal of salary increases and waiver of
2020 bonus participation).
The Committee sought to recognise the technical breach of the
dividend underpin, and the impact on the income stream for
our Shareholders, but also reflect the points above to ensure a
proportionate, fair and balanced approach for all stakeholders.
The Committee decided to make a 5% discretionary reduction to
the tranches of both the 2018 and 2019 restricted share awards due
to vest in April 2021 and a retrospective 5% discretionary reduction
on the 2020 vesting of the 2018 restricted share award which will be
applied in practice to the tranche vesting in 2021. The impact of these
actions will be seen in the single figure of remuneration in next year’s
report, where the vesting of these tranches will be disclosed.
DIRECTORS’ REMUNERATION POLICY REVIEW
Our current Directors’ Remuneration Policy was approved by
Shareholders at the 2018 Annual General Meeting. In line with the
three-year cycle in UK remuneration regulations, we will be submitting
a new Directors’ Remuneration Policy for Shareholder approval at
the forthcoming AGM. In advance of this, the Committee undertook
a detailed review of our remuneration framework.
The Committee re-confirmed that our objective continues to be to
appropriately reward the continuous improvement of our value-drivers
and the delivery of sustainable value over time as reflected by our
reward principles:
PERFORMANCE CONTEXT
This year reaffirmed the strength of Weir, as we continued to deliver
positive progress in a uniquely challenging environment. We have
an effective strategy, a strong business model and a committed global
team who have continued to execute effectively in 2020 and build
an ever-stronger Weir.
The Group’s financial performance for the year was highly resilient,
particularly in the context of the disruptions caused by Covid-19.
Revenues from continuing operations were down 1% on a constant
currency basis. Adjusted pre-tax profits from continuing operations,
of £255m represent a 5% decrease from the previous year.
We generated £372m in operating cash flow before additional pension
contributions, exceptional and other adjusting cash items and income
tax paid, reaffirming the highly cash generative nature of our business
and enabling us to continue to invest in our longer-term strategic
initiatives. You can read more in the Financial Review on page 28.
We delivered a major milestone in our strategic transformation into
a mining technology pure play through the sale of the Oil & Gas
Division, maximising value for Weir’s stakeholders and providing
a great new home for Oil & Gas and its employees. We believe
our business will benefit from focusing on its core strength as a
leading provider of premium mining technology to an industry that
has excellent long-term growth opportunities. Further detail can be
found in the Chief Executive’s Strategic Review on page 10.
We also continued to maximise opportunities through our ‘We are
Weir’ framework which focuses on People, Customers, Technology
and Performance. Our significant strategic progress has included
achieving a record safety performance, improved customer
responsiveness and commercialising solutions to reduce energy,
water and waste in mining operations.
At the same time, given the level of uncertainty brought about
by the Covid-19 pandemic, the Board has also had to take some
difficult decisions in order to protect the business. For the first time
in almost 40 years, the Board did not recommend a 2020 interim or
final dividend to Shareholders, which followed the withdrawal of its
recommendation for a 2019 final dividend. This decision was taken
to support the business and exercise prudent financial management.
As we look to the future we expect to deliver above market growth
and progressive margin development through the cycle. This will be
achieved within a strict financial framework which will keep net debt
to EBITDA between 0.5x to 1.5x and result in 33% of net adjusted
earnings being distributed by way of dividend each year. We believe
that this provides us with the financial strength necessary to be a
leader in our markets while retaining sufficient capital flexibility to
invest in the exciting growth opportunities we see ahead.
2020 OUTCOMES
The remuneration outcomes for the Executive Directors during 2020
reflected our prudent response to the impact of the Covid-19 pandemic
and consideration of the Shareholder experience.
Withdrawal of base salary increases in 2020
As an immediate action to mitigate the cost and cash impact of the
pandemic, salary increases (of 3%) previously agreed for the Group
Executive (including the Executive Directors), and due to take effect
from April 2020, were withdrawn.
Discretionary reduction to annual bonus
In April 2020, we also announced the suspension of the annual
bonus plans for the Group Executive and wider management team,
as another prudent measure to mitigate cost pressure and safeguard
the business. However, reflecting the strong and resilient business
performance described above, the Committee subsequently decided
to pay a bonus on a limited and discretionary basis for all employees,
appropriately rewarding the significant contribution of our colleagues
during the year.
104
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 Employees as Shareholders
Reward long-term
value creation
Supporting our culture
Simplifying and
increasing effectiveness
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.
Simple and transparent reward
linked to business success,
delivered in a way that rewards
fairly and appropriately and
enables retention.
In the context of these principles, and reflecting on the uncertainty
created by the current macroeconomic and geopolitical environment,
including the impact of Covid-19, and the impact of the sale of our
Oil & Gas Division on our long-term strategy, the Committee concluded
that the existing Policy should be renewed, with some proposed
changes to reflect current best practice and Shareholder views.
The Committee believes that the restricted shares framework
continues to support our business goals and rewards our Executive
Directors for creating long-term sustainable value. As a reminder, the
parameters of our restricted shares were designed in 2018 to align
with best practice guidance, and continue to do so in key areas:
• Maximum award sizes (125% for the CEO and 100% for the CFO)
remain appropriately market competitive for the size of our business
and will not change under the new Policy.
• Restricted shares are released between five to seven years from
grant, which remains market leading.
• Awards are subject to underpins, which we review each year to
ensure they remain right for the business (see below in respect
of 2021 awards).
While our underlying approach is to renew the Policy in its current
form, the Committee is proposing the following changes to reflect
evolving best practice:
• Alignment of Executive Director pensions to the all-employee
rate - the maximum pension contribution (or equivalent cash
allowance) for any new Executive Director will be reduced to align
with the rate available to the majority of UK employees (currently
8% of salary). For our incumbent Executive Directors, we also
commit to aligning with the UK employee rate by the end of 2022,
in line with Shareholder guidance.
• Strengthening of malus/clawback provisions - in line with
good practice, the Committee has also reviewed the malus and
clawback provisions within our incentive plans. It was concluded
that an additional event (“corporate failure”) be added to the
existing provisions.
In developing the approach to our Policy renewal, we consulted with
our major Shareholders and investor bodies. Overall, there was a
positive response to our proposals, along with valuable feedback
which was relayed to the Remuneration Committee to help shape final
proposals. I would like to thank all those Shareholders who engaged
with us during this process. The proposed Directors’ Remuneration
Policy is set out on pages 110-118 and will be subject to a binding
Shareholder vote at the 2021 Annual General Meeting.
2021 DECISIONS
For 2021, the average salary increase across the UK workforce will
be 3%, and the Committee has agreed that this will also apply to the
two Executive Directors (with effect from April 2021).
Whilst the Committee recognises the need to continue to show
restraint and moderation on salary progression, as evidenced by the
withdrawal of the agreed salary increases last year, at the same time
the Committee is also conscious of the growth in the size and scale
of the business. As a result of execution of strategy and swift action
in response to Covid-19, the market capitalisation of Weir increased
by over 30% during 2020. In this context, the Committee intends to
undertake a review of executive salaries during 2021.
The annual bonus plan for the Group Executive and management will
be reinstated for 2021 in order to incentivise and reward management
in a critical period for the Company. There is no proposed change to
the bonus measures and weightings which continue to be aligned
to our reward principles and the delivery of our strategy. 70% of the
bonus will be based on performance against financial measures:
PBTA (defined as profit before tax and adjusting items from continuing
operations) and third-party working capital, which was introduced
in 2020 and allows for a greater focus on absolute cash generation.
The remaining 30% is based on improvement in Weir’s strategic levers
as set out on pages 120-121.
Restricted share awards will be granted to the CEO and CFO in April
2021. Further detail on the award sizes and performance measures/
underpins is set out on page 109. Ahead of the grant of the 2021
restricted share award, the Committee undertook a review of the
underpin framework to ensure that it remains appropriate, aligned to
our strategy, value creation and reflective of Shareholder feedback
which centred around Weir being a high quality business and that
the underpin should be directly aligned to the key underlying drivers
of value. As a result, for the 2021 award we will introduce a new
environmental, social and governance (ESG) based underpin to replace
the dividend underpin. This underpin will require us to maintain an
appropriate CDP score, a leading benchmark for environmental
disclosure and performance. Further details are set out on page 109.
The Committee will keep the ESG-based underpin under review
to ensure it continues to align with our evolving ESG strategy.
The Committee also considered the messaging from a number of
our Shareholders on capital allocation. We will continue to keep this
under review for future awards, including reflecting the impact of any
evolution of our capital allocation policy as we transform the Group
into a focused, premium mining technology business.
The Remuneration Committee has sought to take a simple and
responsible approach to executive pay, and decisions in the year have
been made taking into account the experience of our employees,
Shareholders and key stakeholders in the period. 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 your support
for our new Directors’ Remuneration Policy and this year’s Directors’
Remuneration Report at the 2021 AGM.
CLARE CHAPMAN
Chair of Remuneration Committee
2 March 2021
105
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 REMUNERATION AT A GLANCE
REMUNERATION AT A GLANCE
Our objective is to appropriately reward the continuous improvement of our value-drivers and the delivery of sustainable value over time as
reflected by our reward principles:
EMPLOYEES AS
SHAREHOLDERS
REWARD LONG-TERM
VALUE CREATION
SUPPORTING OUR
CULTURE
SIMPLIFYING AND
INCREASING
EFFECTIVENESS
CURRENT DIRECTORS’ REMUNERATION POLICY
Our current Directors’ Remuneration Policy, under which restricted shares replaced a conventional long-term incentive plan within our
reward framework, was approved by Shareholders at the 2018 AGM. The key components of our remuneration framework are fixed pay,
annual bonus and restricted share awards.
FIXED PAY
Consists of salary, pension
and benefits
ANNUAL BONUS
Includes a core financial component and
an element based on the delivery
of key objectives aligned to the
strategic framework
Maximum: 150% (CEO) and
125% (CFO) of salary
30% deferred into shares
for 3 years
RESTRICTED SHARE
AWARDS
Encourages substantial long-term share
ownership and increases emphasis on
the creation of long-term value for end
market customers and Shareholders
Award size: 125% (CEO) and 100%
(CFO) of salary
Vested shares released between
five and seven years from grant.
Vesting subject to underpin
ROLLOVER OF THE DIRECTORS’ REMUNERATION POLICY – WITH UPDATES FOR BEST PRACTICE:
We will be submitting a new Directors’ Remuneration Policy for Shareholder approval at the forthcoming AGM. While our underlying
approach is to renew the Policy in its current form, the Committee is proposing the following changes to reflect evolving best practice.
Alignment of Executive Director pensions to the all-employee rate
Current pension contribution
for incumbent executives.
12%
8%
Pension contributions for new
executive hires will be set at the
rate available to the majority of
UK employees (currently 8%).
Incumbent executives will align
with UK employees by end 2022
in line with Shareholder guidance.
Strengthening of malus and clawback provisions
MATERIAL
MISSTATEMENT
GROSS
MISCONDUCT
REPUTATIONAL
IMPACT
ERROR IN
CALCULATION
CORPORATE
FAILURE
APPLIES TO AWARDS FROM 2021 ONWARDS
106
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 KEY DECISIONS MADE IN THE YEAR – IMPACT OF COVID-19
Discretionary reduction to annual bonus
For the Executive Directors, performance against the stretching financial and strategic objectives set at the start of the financial year would
have resulted in an outcome of 46% of maximum. Taking into account the ongoing uncertainty in the current environment the Executive
Directors asked that they not be considered for an annual bonus in respect of 2020. This gesture was welcomed by the Committee, which
endorsed the decision and exercised discretion to reduce the 2020 bonus outcome to zero.
PBTA:
0%
WORKING CAPITAL:
20%
STRATEGIC:
26%
46%
Committee discretion
0%
Withdrawal of base salary increases in 2020
Previously approved 2020 salary and fee increases for the Group Executive and Board members were withdrawn.
Discretionary reduction to restricted share awards vesting in April 2021
To recognise the technical breach of the dividend underpin, the Committee made the following reductions to in-flight restricted
share awards.
10%
5%
2018 award (vesting in April 2021)
2019 award (vesting in April 2021)
2021 restricted share awards underpin
With effect from the 2021 award, we are introducing an ESG-based metric to replace the dividend metric in the underpin framework.
The underpins which will apply to the 2021 restricted share awards are as follows.
RETURN ON CAPITAL
EMPLOYED (‘ROCE’)
BREACHING
COVENANTS
MAJOR
GOVERNANCE
FAILURE
ESG
CDP score of B or above
for every year during the
vesting period
2020 CEO SINGLE TOTAL FIGURE OF REMUNERATION
2019
2020
£1.434m
c.40% reduction
£0.897m
£0m
£0.5m
£1.0m
£1.5m
£2.0m
EXECUTIVE DIRECTORS’ SHAREHOLDING
Shareholding requirement
CEO
CFO
0%
100%
200%
300%
400%
500%
600%
700%
Shareholding requirement
107
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 DIRECTORS’ REMUNERATION IN 2021
IMPLEMENTATION OF REMUNERATION POLICY IN 2021
The table below summarises the key components of our remuneration framework and indicates how we intend to operate the policy
in 2021.
Operation
2021 implementation
Fixed
Salary
Fixed remuneration which
reflects role, skills, and
responsibilities.
Increases for 2021 aligned to the average increase for UK employees of 3%:
• CEO – £708,000
• CFO – £436,000
Pension
Executive Directors receive
pension contributions of 12%
per annum in line with other
senior UK employees.
No change for 2021 but commitment to reduce to align with the rate
available to the majority of UK employees by the end of 2022.
Benefits
Car allowance, healthcare 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.
No change to maximum opportunities.
Measures and weightings in 2021:
• 50% PBTA (defined as profit before tax and adjusting items from
continuing operations)
• 20% Third-party working capital
• 30% Strategic measures
Set out below are the strategic measures to be achieved over the
medium term as set out in the Chief Executive’s Strategic Review on
page 12, as well as the target priorities for 2021. Underlying targets will
be fully disclosed in next year’s report.
People
Improve safety and employee engagement
• 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 (VoE)
Customer
Grow ahead of our markets
• Enhance global capabilities and customer intimacy
• Increase customer focused partnerships and collaboration
• Respond to Voice of Customer (VoC)
Technology
Create more sustainable solutions
• Innovate products and solutions that address our customers’
biggest challenges
• Protect and extend our core through materials, manufacturing and
process advancement
• Progress commercialisation of Weir Digital offering
Performance
Sustainably higher margins through cycle
• Improve operational performance
• Realise benefits of Group portfolio
• Deliver against Reducing our Footprint sustainability priority
108
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 Restricted
share awards
Operation
2021 implementation
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 to award size.
Underpin refreshed with effect from 2021 with dividend removed, new
environmental, social and governance (ESG) underpin added.
Underpin:
Balance sheet health
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
Environmental, social and governance (ESG)
Sustainability Roadmap progress
• Awarded a B listing or better by CDP1 through the vesting period in
recognition of climate change contribution
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
Notes:
1 CDP are one of the world’s leading climate change research groups https://www.cdp.net.
CDP’s annual environmental disclosure and scoring process is respected as the gold standard
of corporate environmental transparency. It ranks companies on a scale of A to D- based
on the comprehensiveness of disclosure, awareness and management of environmental
risks and demonstration of best practices associated with environmental leadership, such as
setting ambitious and meaningful targets. Weir’s score was recently increased to A- from B,
recognising the progress made in this area. The underpin for the 2021 award will be set such
that if Weir’s score falls below a threshold of B for any year during the vesting period, this would
trigger the Committee to consider an adjustment to vesting. The CDP methodology requires
continuous improvement even to maintain a level of scoring and therefore the Committee
believes this is an appropriate level at which to set the threshold for the underpin.
Other
Shareholding
guidelines
• CEO – 400% of base salary
No change.
• CFO – 300% of base salary
In addition, shareholding
requirements will continue
post-employment for a period of
two years.
Chairman
and Non-
Executive
Director
(NED) fees
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 2021.
• 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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GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 DIRECTORS’ REMUNERATION POLICY
REMUNERATION POLICY
The policy will be put to Shareholders for approval at the AGM to be held on 29 April 2021. Subject to approval, the policy is intended to apply
for three years from that date.
There are two major differences between the proposed and the current policy approved in 2018: (i) provisions to reduce Executive Director
pensions (both new hires and incumbents) to the all-employee rate; and ii) strengthening of the malus/clawback provisions.
POLICY TABLE
BASE SALARY
Purpose
To provide a salary which takes into account an individual’s role, skills and
responsibilities and enables the Group to attract and retain talented leaders.
Operation
Reviewed annually, with increases normally taking effect from 1 April. Salaries are
set by reference to market practice for similar roles in companies of similar size and
complexity. The Committee also takes into account personal performance, the wider
employee context, and economic and labour market conditions.
PENSION
Purpose
To encourage long-term saving and planning for retirement.
Operation
A contribution into the Company’s defined contribution pension plan or an equivalent
cash allowance, or any other arrangement the Committee considers has the same
economic benefit.
Maximum value
While there is no stipulated maximum salary
increase, increases will not normally be greater
than the average salary increase for UK employees
(or the relevant jurisdiction if an Executive Director
is based outside the UK).
Different increases may be awarded at the
Committee’s discretion in instances such as where:
• there has been a significant increase in the size,
complexity or value of the Group;
• there has been a change in role or responsibility;
• the individual is relatively new in the role and the
salary level has been set to reflect this; and
• the individual is positioned below relevant
market levels.
Maximum value
12% of base salary per annum in line with other
senior UK employees.
For any Executive Director appointed after
the effective date of this Policy, the maximum
contribution will be set at the rate available to the
majority of UK employees (currently 8% of salary).
For Executive Directors in office at the date of this
Policy, contributions will remain at 12% of base
salary until the end of 2022, at which point they will
reduce to the rate available to all-employees.
BENEFITS
Purpose
To provide cost-effective benefits valued by individuals.
Operation
Benefits include, but are not limited to, healthcare, 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 healthcare
benefits varies according to premium rates, so
there is no formal maximum monetary value.
110
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 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),
a material corporate failure in any Group company or a relevant business unit,
or reputational damage causing significant damage to the Company and clearly
attributable to the individual.
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), stretch, and any points
in between.
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.
Operation
The Committee may grant awards under the SRP on an annual basis.
Vesting of awards will be phased over a five-year period. This will normally be 50% 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;
• 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; and
• a material corporate failure in any Group company or a relevant business unit.
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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GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 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.
Current Policy 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
Executive Directors may be entitled to participate in all-employee share plans on the
same basis as all other employees.
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.
Shareholding guidelines
• CEO 400% of base salary
• CFO 300% of base salary
Maximum Value
The maximum value will be in line with the
maximum value for all other employees.
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.
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GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 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 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.
LEGACY ARRANGEMENTS
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 SRP.
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GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 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
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.
Internal promotion to
Executive Director
The Committee will honour existing remuneration arrangements made prior to and not in
contemplation of promotion. The arrangements will continue to pay out in accordance with
the respective rules and guidelines.
SERVICE CONTRACTS AND POLICY ON PAYMENT 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.
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.
Provision
Unexpired term
Change of control
Notice period
Contractual payments
114
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 Provision
Policy
Annual bonus and deferred bonus
awards
Outstanding share plan awards
At the discretion of the Committee, where an individual leaves as a Good Leaver (as
defined below), 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.
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.
Awards will remain subject to the operation of malus and clawback provisions.
Change in control – the extent to which unvested awards vest will be determined by the
Committee, taking into account the performance conditions and/or underpins as applicable
and the proportion of the vesting period that has elapsed. Alternatively, awards may be
exchanged for new equivalent awards in the acquiring company. The holding period applicable
to any awards will end at the time of change in control.
All employee share plans
The rules of any all-employee share plans will apply in the event of termination of
employment or change in control.
Relocation
Chairman and Non-Executive
Directors
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.
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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GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 DIRECTORS’ REMUNERATION POLICY
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 election 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
Engelbert Haan
Barbara Jeremiah
Mary Jo Jacobi
Ben Magara
Sir Jim McDonald
Srinivasan Venkatakrishnan
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
18 February 2019
1 August 2017
1 January 2014
19 January 2021
1 January 2015
19 January 2021
1 January 2018
Date when next subject to election/re-election
29 April 2021
29 April 2021
29 April 2021
29 April 2021
29 April 2021
29 April 2021
29 April 2021
29 April 2021
29 April 2021
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 continued 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 in the form of an annual employee insights report.
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 play a very active role in the continued development of our Remuneration Policy. We have
undertaken significant engagement with Shareholders in relation to our decision that the existing Remuneration Policy should be renewed
in 2021, whilst seeking their input on the proposed changes to reflect current best practice.
The Committee remains committed to ongoing dialogue and will seek input from Shareholders when considering any further changes.
116
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 COMPLYING WITH UK CORPORATE GOVERNANCE CODE 2018
The following table summarises how the Remuneration Policy fulfils the factors set out in provision 40 of the 2018 UK Corporate Governance
Code 2018.
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.
The Committee is committed to providing open and transparent
disclosures to Shareholders and the workforce with regards to
executive remuneration arrangements.
The 2020 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, strengthened from 2021, 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, mid-point, maximum
and maximum including a 50% share price increase scenarios are
provided in the Directors’ Remuneration Policy.
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 second 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, performance measures and underpins
are designed to be consistent with the Company’s purpose, values
and strategy.
117
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020
DIRECTORS’ REMUNERATION POLICY
CONTINUED
PAY AT WEIR
APPLICATION OF REMUNERATION POLICY
Jon Stanton
Fixed
100%
£819,981
Mid Point
35%
£819,981
Maximum
30%
£819,981
Maximum* +
26%
£819,981
27%
£637,200
38%
£885,000
38%
£1,062,000
33%
£1,062,000
32%
£885,000
41%
£1,327,500
John Heasley
Fixed
100%
£507,651
Mid Point
40%
£507,651
Maximum
34%
£507,651
Maximum* +
30%
£507,651
26%
£327,000
34%
£436,000
37%
£545,000
32%
£545,000
29%
£436,000
38%
£654,500
* Maximum + 50% share price increase
* Maximum + 50% share price increase
Fixed pay
Annual bonus
SRP
Fixed pay
Annual bonus
SRP
NOTES TO APPLICATION OF REMUNERATION POLICY CHARTS
The above chart illustrates the potential total remuneration for the Executive Directors in respect of the application of our
Remuneration Policy.
Element of package
Assumptions used
Fixed Pay
Annual Bonus
SRP
Base salary: effective 1 April 2021
Benefits: benefits as disclosed in single total figure of remuneration for 2020
Pension: 12% cash allowance (while this will be reduced to the all-employee rate by the end of 2022,
it will remain at 12% for the first year of the policy, which is the basis for the chart)
Minimum: no bonus is earned
Mid-point: 60% of maximum is earned (being the mid-point under the annual bonus between the
threshold pay-out of 20% and maximum pay-out)
Maximum: 100% of maximum is earned
Minimum: no vesting
Mid-point: 100% vesting
Maximum: 100% vesting
Maximum +50%: As above for maximum performance but includes share price appreciation in respect
of the SRP of 50%
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GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 DIRECTORS’ REMUNERATION REPORT
ANNUAL REPORT ON REMUNERATION
This section sets out how the Remuneration Policy was applied for the year ending 31 December 2020.
SINGLE TOTAL FIGURE OF REMUNERATION FOR EXECUTIVE DIRECTORS (AUDITED)
Base Salary
Pension
Benefits
Total Fixed Pay
Annual Bonus
LTIP
Restricted Shares
Total Variable Pay
Total Pay
Jon Stanton
John Heasley
2020 (£)
687,000
82,440
27,021
796,461
–
–
100,441
100,441
896,902
2019 (£)
682,300
81,876
21,066
785,242
395,119
253,802
–
648,921
1,434,163
2020 (£)
423,000
50,760
19,331
493,091
–
–
49,447
49,447
542,538
2019 (£)
420,050
50,406
18,035
488,491
202,736
124,947
–
327,683
816,174
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 2020.
Pension – corresponds to the cash allowance provided to the Executive Directors during the year ended 31 December 2020. This equates to 12% of salary.
Benefits – corresponds to the value of benefits in respect of the year ended 31 December 2020, as follows:
Car allowance
Group healthcare
Life assurance
Total
Jon Stanton
John Heasley
2020 (£)
17,000
1,715
8,306
27,021
2020 (£)
13,970
1,715
3,646
19,331
Annual bonus – the Executive Directors asked that they not be considered for an annual bonus in 2020.
LTIP/restricted shares – the restricted shares value shown for 2020 represents the vesting of the first tranche of the 2018 restricted share award
in April 2020, based on the share price at vesting and the value of dividend equivalents on the award. The LTIP value shown for 2019 represents
the vesting of the final LTIP award granted in 2017, with the value updated from last year’s report to reflect the share price on the date of vesting.
2020 ANNUAL BONUS
In April 2020, the suspension of the annual bonus plans for the Group Executive and wider management team was announced, as a prudent
measure to mitigate cost pressure and safeguard the business. However, reflecting the strong and resilient business performance, the
Committee subsequently decided to pay a bonus on a limited and discretionary basis for all employees, appropriately rewarding the significant
contribution of our colleagues during the year.
For the Executive Directors, performance against the stretching financial and strategic objectives set at the start of the financial year would
have resulted in an outcome of 46% of maximum. Taking into account the ongoing uncertainty in the current environment, as well as the
announcement made in April, the Executive Directors asked that they not be considered for an annual bonus in respect of 2020. This gesture was
welcomed by the Committee, which endorsed the decision and exercised discretion to reduce the 2020 bonus outcome to zero. A summary of
the 2020 bonus framework, performance delivered, and the overall outcome is shown in the following table, with more detail on the underlying
performance targets in the sections which follow.
Payout as % of maximum
PBTA1
Third-party working capital
Strategic measures
Total bonus
Note
Weighting
50%
20%
30%
100%
Entry
20%
£252.8m
£689.6m
Mid-point
60%
£289.9m
£656.7m
Maximum
100%
£327.0m
£623.9m
See below
Achievement
Pay-out (%)
£230.2m
£592.3m
Executive Director gesture/discretion
Final bonus outcome for
Executive Directors
1 PBTA is defined as profit before tax, amortisation and adjusting items. The performance targets and achievements are calculated using the January 2020 exchange rates.
0%
20%
25.7%
45.7%
(45.7%)
0%
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GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 DIRECTORS’ REMUNERATION REPORT
CONTINUED
STRATEGIC MEASURES
The strategic measures were introduced 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 2020. The following provides a detailed view of results in 2020:
PEOPLE
Improved sustainable engagement and organisational effectiveness
Priority for 2020
High standards of
leadership driving
a best-in-class
behavioural safety
culture.
Target
• Reduce TIR by at least 5%.
Result
• TIR 0.37. +23% underlying improvement.
• SHE Level 3 assessment in >75% of ESCO
• 76% of ESCO sites at level 3.
manufacturing sites.
• 94% and 93% of employees completed
• 70% of all employees to complete safety training
safety modules 1 & 2 respectively.
Score out
of 7.5%
7.0%
modules 1 & 2.
Improve organisational
effectiveness.
• Design performance development strategy and
• Project development and design executed
prepare to implement first cycle.
to schedule.
• Improve employee engagement driver and measure
• Improvement in employee engagement. 0.6
through survey.
above True Benchmark.
• Deliver Discovery phase 1 in 2020.
• Phase 1 delivered with successful go-live of
Workday in August.
• Maintain overall mean employee engagement score
• Sector-leading employee engagement with
in the upper quartile.
eNPS up on previous survey.
• Embed the Employee Voice programme.
• Virtual ‘Meet the Board’ and Board/Senior
• Develop and deliver Inclusion & Diversity training.
Leader sessions held in 2020.
• Inclusion & Diversity learning module
completion rate of 75% across Weir.
Continue and extend
the Weir culture and
develop the voice of
the employee.
CUSTOMER
Increase market share
Priority for 2020
Enhance global
service capabilities.
Target
• Expand Minerals Service Centre footprint and
proximity to customers.
• Capture incremental Integrated Solutions input
of £150m.
• Increase market share of new
ESCO technologies.
Result
• Expanded service centre network into new
and under-represented territories. 4 new
major service centres opened.
Score out
of 7.5%
7.1%
• £159m in additional orders from
Integrated Solutions.
• Exceeded market share growth objectives
for ESCO new technologies.
Increase customer
focused partnerships
and field trials.
• Installation of new Minerals Mill Circuit trials to
• Increase in market share resulting from
enhance aftermarket offering.
successful trials.
• Develop flagship partnerships to deliver process
and new technology pilots with customers.
• First TerraflowingTM pilot
plant commissioned.
• Increase market share of new
ESCO technologies.
• New Nemisys® technology developed in
collaboration with key customer to deliver
additional input.
Respond to Voice of
Customer (VoC).
• Achieve full roll out of CRM system in Minerals.
• CRM system rolled out globally in Minerals.
• Test CRM survey effectiveness with evidence of
• CRM surveys undertaken for ESCO and
tangible VoC feedback.
Minerals with VoC feedback implemented.
• Leverage customer insights to inform the
development of the supply chain of the future.
• Customer-specific supply chain roadmaps
designed and implemented in response
to VoC.
120
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 TECHNOLOGY
Improved percentage revenue from new solutions, services, products
Priority for 2020
Protect and
extend our core
through materials,
manufacturing
and process
advancement.
Progress
commercialisation of
Weir Digital offering.
Innovate products
and solutions
that address our
customers’ biggest
challenges.
Target
• Develop and commercialise new materials for
Result
• Field trials completed for traditional and
traditional or additive manufacturing applications.
additive materials.
Score out
of 7.5%
7.3%
• Complete customer field trials.
• New materials available commercially.
• Develop and trial process technology solutions.
• Capture business value from digital/big data.
• Develop and deploy knowledge transfer
framework and embed sustainability
best practice.
• Leverage mining-focused scenario planning to
inform strategic planning.
• Manage at least two projects through innovation
process to business implementation.
• First HPGR upgrade released to include tyre
wear monitoring. Installed and operational
at customer site.
• Field trials of new SMART technology
prototypes performing well.
• Sustainable product design training
developed with the University of
Queensland. Coalition for Energy Efficient
Comminution (CEEC) industry footprint and
Weir product case studies developed.
• Insights from scenario planning
workstreams embedded into
strategic planning and technology
scouting processes.
• Three projects managed through the
Weir Innovation Network to deliver
business improvements.
PERFORMANCE
Sustainably higher margins through cycle
Priority for 2020
Improve operational
performance.
Target
• Implement new ERP in key manufacturing
locations and at least 70% of Minerals’ sites.
• Execute refocused comminution strategy.
• Optimise current manufacturing footprint and
inventory management.
• Increase ESCO Newton tonnage per working day
by 10%.
Result
• New ERP roll out executed to plan.
• Comminution strategy execution on track.
• Global inventory management process and
governance established and operational.
• ESCO Newton tonnage not met due to
impact of Covid-19 on foundry demand.
Score out
of 7.5%
4.3%
Realise benefits of
Group portfolio.
Action Sustainability
Roadmap to deliver
tangible value across
the Group.
Total Achievement
• Capture ESCO/Minerals revenue synergies.
• Good progress realised in 2020.
• Capture cost synergies from ESCO integration.
• Fully realised cost synergies in 2020.
• Launch reporting of delivery against divisional
power and gas reduction targets and projects.
• Execute sustainability Strategy Roadmap
to deliver tangible and replicable power and
gas reductions.
• Evaluate renewables opportunities to underpin
CO2 strategy development and pilot water
stewardship programme at locations in highest
water-stressed locations.
• Deliver Sustainability Roadmap communications
campaign to improve sustainability engagement.
• Waste actions deferred to 2021 to allow
alternative focus on Task Force Climate-
related Financial Disclosures (TCFD) and
sustainable design training development.
• Divisional targets agreed for
implementation in 2021. Software platform
and divisional structures in place to deliver
and measure.
• Renewables strategy study completed.
Alliance for Water Stewardship training
implemented, and pilots initiated.
• Improvements in sustainability results in
employee engagement survey.
25.7% out
of 30%
121
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 DIRECTORS’ REMUNERATION REPORT
CONTINUED
SCHEME INTERESTS AWARDED DURING 2020 (AUDITED)
The following table sets out awards granted to the Executive Directors in the year ending 31 December 2020. The Committee recognises that
some Shareholders have concerns around the potential for perceived ‘windfall gains’ if there is market volatility around the grant date. As a result,
the Committee included provisions in the 2020 restricted share award which allow for a discretionary downward adjustment to be made at the
point of vesting if the Committee determines that it would be appropriate to do so.
Share award1
Restricted Share (Conditional)
Bonus (Deferred)
Restricted Share (Conditional)
Bonus (Deferred)
Award basis
125% salary
30% bonus
100% salary
30% bonus
Grant date
8 Apr 20
7 Apr 20
8 Apr 20
7 Apr 20
Face value of award
at maximum vesting2
£858,325
£62,334
£422,784
£31,381
No of shares
granted
105,5753
6,996
52,0033
3,522
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 three-year holding period will also apply to the first 25% tranche vesting and an additional two-year
holding period will apply to the second, third and fourth 25% tranches vesting such that 50% of vested shares from 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 £8.13. The value of the Bonus Share Award is
calculated as the share price at the date of grant, being £8.91.
3 The number of restricted shares awarded was originally determined using salaries inclusive of increases which had been agreed for 2020. As these increases were subsequently withdrawn, an
adjustment was made to the number of shares under award to reflect this.
Vesting of the 2020 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.
Balance sheet
health
Investor
returns
Corporate
Governance
Dividend
Maintain average absolute dividend per share over the vesting period at least in line with 2019 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)
Senior Independent Director/
Employee Engagement
Non-Executive Director/
Committee Chair Fee (£)
Basic Fee (£)
Taxable Benefits5 (£)
Total Fees (£)
2020
262,500
62,900
42,659
62,900
62,900
62,900
62,900
20,563
62,900
2019
312,876
62,475
62,475
54,393
62,475
62,475
62,475
62,475
62,475
2020
2019
2020
16,400
16,275
16,400
13,200
16,400
16,275
13,100
16,275
802
1,620
821
324
690
1,025
1,863
2019
27
4,245
2020
262,500
80,102
44,279
63,721
79,624
76,790
62,900
21,588
81,163
2019
312,903
78,750
62,475
54,393
82,995
62,475
62,475
75,575
78,750
Charles Berry1
Clare Chapman
Cal Collins2
Engelbert Haan
Mary Jo Jacobi
Barbara Jeremiah3
Sir Jim McDonald
Rick Menell4
Stephen Young
Notes
1 Charles Berry waived his fees for two months in 2020 and requested the fees instead be donated on a charitable basis to the Solidarity Fund in South Africa and the Prince and Princess of
Wales Hospice in the UK.
2 Cal Collins stepped down from the Board on 3 September 2020.
3 Barbara Jeremiah was appointed as Senior Independent Director on 1 January 2020.
4 Rick Menell stepped down from the Board on 28 April 2020.
5 Taxable benefits includes travel and accommodation to attend Board meetings.
122
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 STATEMENT OF DIRECTORS’ SHAREHOLDINGS AND SHARE INTERESTS (AUDITED)
Shares owned
outright1
Scheme Interests
As at 31 December 2020
With
performance
conditions
–
Without
performance
conditions
185,399
Vested
in 20202
58,943
Current
shareholding
(% of salary)3
357%
–
–
–
–
–
–
–
–
–
–
91,314
–
–
–
–
–
–
–
–
–
29,155
–
–
–
–
–
–
–
–
–
292%
–
–
–
–
–
–
–
–
–
123,256
62,044
2,145
456
1,000
5,000
2,250
500
5,883
1,024
348,015
Shareholding
requirement
(% of salary)
400%
300%
Current
shareholding
including
scheme
interests
without
performance
conditions
(% of salary)4
641%
515%
–
–
–
–
–
–
–
–
–
Jon Stanton
John Heasley
Charles Berry
Clare Chapman
Engelbert Haan
Mary Jo Jacobi5
Barbara Jeremiah
Sir Jim McDonald
Stephen Young
Rick Menell6
Cal Collins7
Notes
1 Shares owned outright includes the net-of-tax shares which vested in 2020.
2 Vested in 2020 reflects the gross shares vesting in 2020.
3 Current shareholding percentage is calculated using the share price of £19.89 as at 31 December 2020.
4 The values of scheme interests are on an estimated net-of-tax basis.
5 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.
6 Rick Menell shareholding as at 28 April 2020.
7 Cal Collins shareholding as at 3 September 2020.
EXTERNAL APPOINTMENTS
During the year Jon Stanton was a Non-Executive Director of Imperial Brands PLC. He received £101,428 in fees. John Heasley was a Non-
Executive Director of Royal Scottish National Orchestra Society Ltd. He received no fees.
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 2020. The ratios for 2020
and 2019 have been determined using Option A of the regulations given Option A is the most robust approach and preferred by Shareholders.
In 2018 the ratios were calculated based on the single total figure of 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 mainly a result of the Executive Directors asking
that they not be considered for an annual bonus in respect of 2020 and receiving significantly less from the restricted share vest in 2020 in
comparison to the LTIP vest in 2019. We are satisfied that the median pay ratio is consistent with the pay, reward and progression policies for our
UK employees.
Financial year
2020
2019
2018
Total pay
Base Salary
Notes
Calculation Method
Option A
Option A
Option B
25th percentile pay ratio
27:1
56:1
75:1
Median pay ratio
22:1
44:1
66:1
75th percentile pay ratio
17:1
34:1
53:1
Jon Stanton
£896,902
£687,000
25th percentile
£32,772
£20,316
Median
£40,093
£38,870
75th percentile
£52,671
£24,096
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 private medical and life assurance.
No annual bonus or long-term incentive/restricted share 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 global all employee share plan, Weir ShareBuilder.
123
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 DIRECTORS’ REMUNERATION REPORT
CONTINUED
GENDER PAY
For 2020, our mean gender pay gap has moved from -3% to 1%. Our median gender pay gap moved from -4% to -15%. Whilst our outcomes
show we are generally well positioned on gender pay, 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. Related to this, and despite a greater
proportion of females receiving a bonus in 2020 in comparison to 2019, both our mean and median gender bonus gap outcomes have increased,
again largely because of the proportionately fewer number of females in management and leadership roles. Whilst we have made progress in
2020 with a greater proportion of females in the upper and upper middle pay quartiles, we remain committed to continuing with our efforts to
appoint more females, particularly into senior roles, and to encourage the study of STEM subjects and employment 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 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
1%
80%
Male
71%
74%
82%
79%
Median
-15%
30%
21%
50%
Female
29%
26%
18%
21%
HISTORICAL PERFORMANCE AND CEO PAY
The graph below shows Weir’s TSR performance against the performance of the FTSE 350 over the period 1 January 2010 to 31 December 2020,
as well as the total and vested received remuneration for the CEO over the same period.
200
180
160
140
120
100
80
60
40
20
0
Restricted shares
Long-term incentive
Short-term incentive
Fixed elements
The Weir Group PLC
FTSE 350
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
£5m
£4m
£3m
£2m
£1m
0
124
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 CHANGE IN CHIEF EXECUTIVE’S REMUNERATION OVER 10 YEARS
The table below shows the total remuneration over the period 1 January 2011 to 31 December 2020, 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
2011
–
4,728
2011
–
100%
2011
–
100%
2012
–
3,363
2012
–
54%
2012
–
100%
2013
–
1,787
2013
–
10%
2013
–
43%
2014
–
1,456
2014
–
61%
2014
–
0%
2015
–
1,065
2015
–
20%
2015
–
0%
2016
2811
1,0122
2017
1,441
–
2018
2,400
–
2019
1,4343
–
2016
38%
40%
2016
0%
0%
2017
70%
–
2017
0%
–
2018
62%
–
2018
75%
–
2019
38%
–
2019
45%
–
2020
897
–
2020
0%4
–
20205
–
–
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.
4 The formulaic annual bonus outcome for 2020 was 46%, however this was waived by the Executive Directors.
5 The final award under the long-term incentive plan was made in 2017 and which vested at 45% of maximum in 2019 as shown above. From 2018, restricted shares were awarded to the CEO
which have no performance conditions and the value of which at vest are included in the single total figure for 2020 above (see also page 119).
PERCENTAGE CHANGE IN REMUNERATION OF BOARD DIRECTORS AND WIDER EMPLOYEE POPULATION
The table below shows the percentage change in elements of remuneration for the Board Directors between 2019 and 2020.
The employee population comprises those employed by The Weir Group PLC.
All Weir Group PLC employees
Jon Stanton (CEO)1
John Heasley (CFO)
Charles Berry2
Clare Chapman
Cal Collins3
Ebbie Haan4
Mary Jo Jacobi
Barbara Jeremiah5
Sir Jim McDonald
Rick Menell6
Stephen Young
Notes
Salary/Fees
-3.3%
0.7%
0.7%
-16.1%
0.7%
-31.7%
15.6%
0.7%
21.8%
0.7%
-72.8%
0.7%
Taxable Benefits7
-36.6%
28.3%
7.2%
-100.0%
n/a
n/a
n/a
-92.4%
n/a
n/a
n/a
n/a
Bonus
-65.4%
-100.0%
-100.0%
–
–
–
–
–
–
–
–
–
1 The change in benefits for the CEO reflects a change to his life assurance terms.
2 Charles Berry waived his fees for two months in 2020 and requested the fees instead be donated on a charitable basis to the Solidarity Fund in South Africa and the Prince and Princess of
Wales Hospice in the UK.
3 Cal Collins stepped down from the Board on 3 September 2020.
4 Ebbie Haan was appointed to the Board on 18 February 2019.
5 Barbara Jeremiah was appointed as Senior Independent Director on 1 January 2020.
6 Rick Menell stepped down from the Board on 28 April 2020.
7 The taxable benefits change shown as n/a for various of the Non-Executive Directors reflects that a % change in 2020 cannot be calculated given their nil taxable benefits in 2019. The Single
Total Figure of Remuneration for Chairman and Non-Executive Directors on page 122 provides further detail.
125
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 DIRECTORS’ REMUNERATION REPORT
CONTINUED
RELATIVE IMPORTANCE OF SPEND ON PAY
The table below shows the change in total staff pay for continuing operations between 2020 and 2019, and dividends paid out in respect of 2020
and 2019.
Financial year
Overall spend on pay for employees
Profit distributed by way of dividend
2020
£m
489.1
–
2019
£m
535.4
121.7
Percentage
Change
-8.6%
-100%
Details of the overall spend on pay for employees can be found in note 4 to the Financial Statements on page 160. Details of the dividends
declared and paid are contained in note 10 to the Financial Statements on page 168.
THE REMUNERATION COMMITTEE
The Remuneration Committee in 2020
There were four Committee meetings during 2020 and all Committee members attended the meetings they were eligible to attend.
Role
Chair and members
Internal attendees
Name
Clare Chapman
Ebbie Haan
Mary Jo Jacobi
Barbara Jeremiah
Stephen Young
Charles Berry
Jon Stanton
Rosemary McGinness
Geraldine Pamphlett1
Craig Gibson2
Graham Vanhegan
Committee’s external adviser
Deloitte
Notes
1 Until May 2020.
2 From June 2020.
Title
Independent Non-Executive Directors
Chairman
Chief Executive Officer
Chief People Officer
Group Head of Reward
Group Head of Reward
Chief Legal Officer and Company Secretary and Secretary
to the Committee
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 2020. Fees paid to Deloitte LLP for work that materially
assisted the Committee were £131,250. Deloitte LLP also provided other services to the Weir Group in the year, principally tax advisory and
compliance services. Deloitte is a signatory to the Remuneration Consultants’ Group Voluntary Code of Conduct and the Committee is satisfied
that Deloitte’s advice was objective and independent.
MAIN ACTIVITIES
Over the course of the year since the last Annual Report, the Committee’s work has been focused on:
• Response to Covid-19 situation, including withdrawal of the planned 2020 salary increases for Executive Director and Group Executives and the
suspension of the 2020 annual bonus scheme as well as wider workforce considerations
• 2019 annual bonus plan outturns
• Restricted share awards grant levels and assessment of underpins
• 2021 Remuneration Policy review and associated consultation with Shareholders
• External environment – market and governance review
• 2021 salary review for Executive Directors and Group Executives
• 2021 Chairman’s fees
• Group Executive shareholdings
126
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 COMMITTEE’S PERFORMANCE
The Committee’s Terms of Reference are reviewed on an annual basis and were last updated in December 2020. A copy can be found on our
website www.corporategovernance.weir.
The Committee was evaluated as part of the 2020 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 2020.
Remuneration Report
For
186,963,419
(87.93%)
Against
25,656,546
(12.07%)
Total Votes Cast
212,619,965
(81.90%)
Withheld
452,294
The table below sets out the voting by Shareholders on the resolution to approve the current Directors’ Remuneration Policy at the AGM held
in April 2018.
Remuneration Policy
For
172,580,892
(92.35%)
Against
14,286,238
(7.65%)
Total Votes Cast
186,867,130
(77.48%)
Withheld
60,833
ANNUAL GENERAL MEETING
This report and our proposed renewal of the existing Remuneration Policy will be submitted to Shareholders for approval at the Annual General
Meeting to be held on 29 April 2021.
CLARE CHAPMAN
Chair of Remuneration Committee
2 March 2021
127
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 DIRECTORS’ REPORT
The Directors present their report for the year ending
31 December 2020.
The Directors’ Report includes the Corporate Governance Report
from pages 69 to 89, together with the sections of the Annual Report
incorporated by reference.
The Company has chosen to disclose the following information in the
Strategic Report on pages 2 to 68:
• Particulars of any important events, if any, affecting the Company
which have occurred since the end of the financial year.
• An indication of likely future developments in the business of
the Company.
• An indication of the activities of the Company in the field of research
and development.
• Details of employee policy and involvement (pages 56 to 57).
• Information on greenhouse gas emissions (page 67).
• Principal risks and uncertainties
(pages 43 to 51).
• 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 2 to 68) and in the
Corporate Governance Report (pages 69-89). The Board decisions
table on page 71 demonstrates the key decisions made by the
Board, the stakeholders affected and the strategic factors taken
into consideration.
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 emoluments
(LR 9.8.4(5))
Waiver of future emoluments
(LR 9.8.4(6))
Waiver of dividends
(LR 9.8.4(12))
Page reference
122
119
129
Paragraphs (1), (2), (4), (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 229.
COMPANY NUMBER
The Weir Group PLC is registered in Scotland under company
number SC002934.
128
2021 ANNUAL GENERAL MEETING
The Annual General Meeting will be held on Thursday 29 April 2021
at 2.30 pm.
The Notice of Meeting, along with an explanation of the proposed
resolutions, are set out in a separate document 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
As a result of the Covid-19 pandemic, in order to provide maximum
flexibility and to protect the business with prudent cost and cash
mitigation actions, the Board took the decision to withdraw its
recommendation to pay a 2019 final dividend and did not recommend
the payment of a 2020 interim or final dividend to Shareholders.
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 2020:
Number of
voting rights
Shareholder
16,426,162
BlackRock, Inc.
Sprucegrove Investment Management Ltd 12,898,529
Black Creek Investment Management Inc. 10,412,590
Number of
voting rights
6.32%
4.97%
4.01%
Between 31 December 2020 and 1 March 2021, the Company was notified of the following
changes to the table above.
TR-1 received from Black Creek Investment Management Inc. on 8 January 2021. Number of
voting rights 10,307,240. Percentage of voting rights 3.97%.
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 160.
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 56 to 57.
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 28 to
the Group financial statements on pages 194 to 200.
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 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 23
to the Group financial statements on page 188. 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 employee benefit
trusts with Estera Trust (Jersey) Limited (the ‘Estera EBT’) and
Computershare Trustees (Jersey) Limited (the ‘Computershare EBT’).
During the period, the Estera EBT purchased 600,000 shares in the
market at an aggregate value of £ 4,279,383, the Computershare
EBT purchased 351,950 shares in the market at an aggregate value
of £6,593,712 on behalf of the Company for satisfaction of any future
vesting of the awards granted under the LTIP, the SRP, ShareBuilder
and the ESCO Plan.
During the period, the Long Term Incentive Plan (the ‘LTIP’) vested
and the trustees of the Estera EBT transferred 262,099 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 289,491 ordinary shares to
employees to satisfy the SRP 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, the
Computershare EBT and the Estera EBT are set out in note 23 to the
Group Financial Statements on page 188.
The 477,168 shares held in the Computershare Nominee are the
shares in respect of which dividends have not been waived. 189,158
shares held in the Computershare Nominee are subject to post
vesting restrictions.
The Estera EBT held, through nominee account CGWL Nominees Ltd,
0.01% of the issued share capital of the Company as at 31 December
2020. 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, the
ESCO and ShareBuilder Plans.
The Computershare EBT held, through nominee account
Computershare Nominees (Channel Islands) Limited, 0.14% of the
issued share capital of the Company as at 31 December 2020. 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, the ESCO and
ShareBuilder Plans.
The Computershare Nominee held 0.18% of the issued share capital
of the Company as at 31 December 2020. The shares are held on
behalf of employees and former employees of the Group.
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 2020 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 2020. At the
forthcoming Annual General Meeting, the Board will again seek
Shareholder approval to renew the annual authority for the Company
to make market purchases at the same level.
VOTING RIGHTS
The Company’s Articles of Association provide that on a show of hands
at a general meeting of the Company, every holder of ordinary shares
present in person and by proxy and entitled to vote shall have one vote
and on a poll, every member present in person or by proxy and entitled
to vote shall have one vote for every ordinary share held.
The Notice of the AGM specifies deadlines for exercising voting rights
and appointing a proxy or proxies to vote in relation to resolutions
to be passed at the AGM. The Company conducts the vote at the
AGM by poll and the result of the poll will be released to the London
Stock Exchange and posted on the Company’s website as soon as
practicable after the meeting.
The Articles of Association may only be amended by a special
resolution passed at a general meeting of Shareholders.
TRANSFER OF SHARES
There are no restrictions on the transfer of ordinary shares in the
Company, other than as contained in the Articles of Association:
• The Directors may refuse to register any transfer of any certificated
share which is not fully paid up, provided that this power will not be
exercised so as to disturb the market in the Company’s shares.
• The Directors may also refuse to register the transfer of a
certificated share unless it is delivered to the Registrar’s office,
or such other place as the Directors have specified, accompanied
by a certificate for the shares to be transferred and such other
evidence as the Directors may reasonably require to prove title of
the intending transferor.
Certain restrictions may from time to time be imposed by laws and
regulations, for example, insider trading laws, in relation to the transfer
of shares.
APPOINTMENT AND REPLACEMENT OF DIRECTORS
The provisions about the appointment and re-election of Directors
of the Company are contained in the Articles of Association.
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.
129
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 GOING CONCERN
These financial statements have been prepared on the going
concern basis.
As discussed more fully in the Chief Executive Officer’s review, the
Group has reacted quickly and decisively to the Covid-19 pandemic,
implementing a range of prudent cost management and cash
preservation actions in order to protect the business from any
potential adverse impact. To date, while the Group has experienced
some disruption, the impact of Covid-19 has been relatively limited
and our mining businesses have continued to be highly profitable and
cash generative.
The sale of our Oil & Gas business was announced on 5 October 2020
and completed on 1 February 2021 for an enterprise value of $405m,
subject to customary debt-like items and working capital adjustments.
The Group has also successfully completed the refinancing of its main
lending facilities during the year, securing good levels of liquidity over
an extended maturity profile as discussed in the Financial Review.
Given current levels of global macroeconomic uncertainty stemming
from Covid-19, the Group performed additional financial modelling
of future cash flows, which cover a period of 12 months from
the approval of the 2020 Annual report. The financial modelling
included reverse stress testing which focused on the level of
downside risk which would be required for the Group to breach its
current lending facilities (note 18) and related financial covenants
(note 29). The review indicated that the Group continues to have
sufficient headroom on both lending facilities and related financial
covenants. The circumstances which would lead to a breach are not
considered plausible.
The Directors, having considered all available relevant information,
have a reasonable expectation that the Group has adequate resources
to continue to operate as a going concern.
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
2 March 2021
DIRECTORS’ REPORT
CONTINUED
PENSION SCHEME INDEMNITIES
The Group operates a closed defined benefit pension scheme in
the UK which provides retirement and death benefits for employees
and former employees of the Group: The Weir Group Pension and
Retirement Savings Scheme. The corporate trustee of the pension
scheme is The Weir Group Pension Trust Limited, a subsidiary of
The Weir Group PLC. 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 2020 and remain in force
for the benefit of each of the Directors of The Weir Group Pension
Trust Limited. The Weir Group 1972 Pension & Life Assurance Plan for
Senior Executives was wound up on 16 December 2020 and, from that
date, alternative indemnity provisions were put in place for the benefit
of the Directors of The Weir Group Senior Executives Pension Trust
Limited. These indemnity provisions cover, to the extent permitted by
law, certain losses or liabilities incurred as a Director or officer of the
corporate trustees of the pension schemes.
CHANGE OF CONTROL – SIGNIFICANT AGREEMENTS
The following significant agreements contain provisions entitling the
counterparties to require prior approval, exercise termination, alteration
or similar rights in the event of a change of control of the Company.
The Group has in place a US$950m multi-currency revolving credit
facility (the ‘Facility’) with a syndicate of 12 banks due to mature in
June 2023 and a GBP 200m Term Loan from seven banks due to
mature in March 2022. 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.
CONFIRMATIONS
So far as each of the Directors is aware, there is no relevant audit
information (as defined by section 418 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.
130
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law, the Directors have prepared
the Group financial statements in accordance with both international
accounting standards in conformity with the requirements of the
Companies Act 2006 and international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies to the
European Union and the Company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 101 ‘Reduced
Disclosure Framework’, and applicable law.)
Under company law, directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and Company and of the profit or
loss of the Group for that period. In preparing the financial statements,
the directors are required to:
• Select suitable accounting policies and then apply
them consistently;
• State whether applicable international accounting standards in
conformity with the requirements of the Companies Act 2006 and
the international financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European
Union have been followed for the group financial statements
and United Kingdom Accounting Standards, comprising FRS
101 have been followed for the company financial statements,
subject to any material departures disclosed and explained in the
financial statements;
• Make judgements and estimates that are reasonable and prudent;
• Prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group and Company will
continue in business.
The Directors are also responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Group’s and Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and Company and enable them to
ensure that the financial statements comply with the Companies
Act 2006.
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 financial statements may differ from
legislation in other jurisdictions.
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 Group financial statements, which have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and the
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union,
give a true and fair view of the assets, liabilities, financial position
and loss of the Group;
• The Company financial statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising
FRS 101, give a true and fair view of the assets, liabilities, financial
position and profit of the Company; and
• 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 and Company, together with a description of
the principal risks and uncertainties that it faces.
In the case of each director in office at the date the Directors’ Report
is approved:
• So far as the director is aware, there is no relevant audit information
of which the Group’s and Company’s auditors are unaware; and
• They have taken all the steps that they ought to have taken as a
director in order to make themselves aware of any relevant audit
information and to establish that the Group’s and Company’s
auditors are aware of that information.
On behalf of the Board of Directors
JON STANTON
Chief Executive Officer
2 March 2021
JOHN HEASLEY
Chief Financial Officer
2 March 2021
131
GovernanceThe Weir Group PLC Annual Report and Financial Statements 2020 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 2020 and of the Group’s loss, the Company’s profit
and the Group’s cash flows for the year then ended;
• the Group financial statements have been properly prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006;
• 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.
We have audited the financial statements, included within the
Annual Report, which comprise: the Consolidated and Company
Balance Sheets as at 31 December 2020; the Consolidated Income
Statement and Consolidated Statement of Comprehensive Income,
the Consolidated Cash Flow Statement, and the Consolidated and
Company Statements of Changes in Equity for the year then ended;
and the notes to the financial statements, which include a description
of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
SEPARATE OPINION IN RELATION TO INTERNATIONAL
FINANCIAL REPORTING STANDARDS ADOPTED
PURSUANT TO REGULATION (EC) NO 1606/2002 AS IT
APPLIES IN THE EUROPEAN UNION
As explained in note 1 to the Group financial statements, the Group,
in addition to applying international accounting standards in conformity
with the requirements of the Companies Act 2006, has also applied
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
In our opinion, the Group financial statements have been properly
prepared in accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
Overview
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.
Other than those disclosed in note 4 to the Group financial
statements, we have provided no non-audit services to the Group in
the period under audit.
OUR AUDIT APPROACH
Context
The Group is organised into two continuing Divisions: Minerals and
ESCO. On 5 October 2020, the Group announced its intention to
dispose of the Oil & Gas Division. Since that time the Group’s JV
partner in Saudi Arabia exercised their right to acquire the Group’s
shareholding in the JV. This represents approximately 7% of the total
Oil & Gas disposal proceeds. The Caterpillar transaction completed on
1 February 2021 and the JV sale is expected to complete in H1 2021.
This division has therefore been treated as a discontinued operation.
Each division conducts its business in a number of locations around
the world. Many of the business locations (or components) are of a
similar size, so we scoped our audit to ensure we had appropriate
coverage of the Group, covering both continuing and discontinued
operations. 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.
• Overall Group materiality: £11,550,000 (2019: £15,000,000) based on 5% of profit before tax and adjusting
items from total operations.
• Overall Company materiality: £10,500,000 (2019: £1,500,000) based on 1% of net assets, capped at 91%
Materiality
of Group materiality.
• Performance materiality: £8,662,500 (Group) and £7,875,000 (Company).
• We conducted audit work on 17 components in nine countries. We conducted full scope audits on ten
of these components, specified scope on five components and specified procedures on the remaining
two components.
• The 17 components where we performed audit work accounted for 71% of total Group revenue and 66%
of adjusted profit before tax from total operations.
• Accounting for the disposal of Oil & Gas, including tax impact (Group)
• Accounting for asbestos-related claims (Group)
• Accounting for exceptional items (Group)
• Valuation of pension liabilities (Group and Company)
• Implications of COVID-19 (Group and Company)
Audit scope
Key audit
matters
132
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
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
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined in the Auditors’ responsibilities for the audit
of the financial statements section, to detect material misstatements
in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is
detailed below.
Based on our understanding of the Group and industry, 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
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:
• 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 Ethics Hotline;
• 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; and
• 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.
We are less likely to become aware of instances of non-compliance
with laws and regulations that are not closely related to events and
transactions reflected in the financial statements. 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.
Accounting for the disposal of the Oil & Gas Division, valuation of
pension liabilities and implications of COVID-19 are new key audit
matters this year. Valuation of uncertain tax provisions and valuation of
goodwill and intangibles for the Oil & Gas CGUs, which were key audit
matters last year, are no longer included because of a reduction in the
number and value of uncertain tax provisions and due to the disposal
of the Oil & Gas Division. Otherwise, the key audit matters below are
consistent with last year.
133
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 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 the disposal of the Oil & Gas Division, including
the tax impact (Group)
On 5 October 2020 the Group announced it had reached an agreement
to sell its Oil & Gas Division to Caterpillar Inc. Since that time the
Group’s JV partner in Saudi Arabia exercised their right to acquire the
Group’s shareholding in the JV. This represents approximately 7% of
the total Oil & Gas disposal proceeds.
The Caterpillar transaction completed on 1 February 2021 and the JV
sale is expected to complete in H1 2021.
IFRS 5 requires the division to be treated as a discontinued operation
and for it to be valued at the lower of the carrying amount and fair
value less costs to sell.
Since the sale had not completed at 31 December 2020 management
has classified the assets and liabilities as held for sale and written
down the value of the net assets to reflect the value of the
consideration and estimated working capital adjustments and costs
to sell. The carrying amount has been written down to £284.3m,
resulting in an impairment charge of £209.2m being recorded in
exceptional items.
The disposal of the Oil & Gas Division has resulted in significant
deferred tax assets arising in the United States due to current year
losses and the impact of steps taken to prepare for the disposal.
This has resulted in the derecognition of £49.5m of deferred tax assets
in the United States where forecasts based on management’s 5 year
strategic plan do not support recognition of the assets.
These unrecognised deferred tax assets remain with the Group and
will be available to offset future taxable income arising in the retained
US operations.
We confirmed the reallocation of the Oil & Gas Division’s assets
and liabilities as held for sale on the balance sheet and its results to
discontinued operations. We have audited management’s estimate of
the fair value less costs to sell by:
• agreeing the consideration to a signed sale and purchase
agreement; and
• assessing the appropriateness of management’s estimate of costs
to sell.
This estimate of fair value less costs to sell was then compared to the
carrying amount of the Oil & Gas Division in the financial statements
and we recalculated the impairment charge recorded by management
to confirm its accuracy.
In order to validate the deferred tax impact of the US Oil & Gas
disposal, we audited management’s forecasts which support the
continued recognition of a portion of the Group’s US deferred tax
assets to confirm the quantum of deferred tax derecognised in the
period was appropriate.
We did this by:
• verifying the inputs in management’s US taxable income forecasts
were derived from the Group’s five year strategic plan;
• assessing the assumptions made by management in determining
the amount of deferred tax which could be supported; and
• performed sensitivity analysis on the assumptions used by
management to confirm the amount of deferred tax remaining
on the balance sheet was within our calculated range of
possible outcomes.
We assessed the disclosures in the financial statements for
compliance with IFRS 5 ‘Non current assets held for sale and
discontinued operations’ and the reasonableness of the disclosure
in relation to the deferred tax movements during the year.
134
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 Key audit matter
How our audit addressed the key audit matter
Accounting for asbestos-related claims (Group)
Provision has been made as at 31 December 2020 for future asbestos
related claims of £67.7m (2019: £47.6m). This consists of a provision of
£64.5m (2019: £44.4m) for the Group’s liabilities arising from asbestos
related damages claims in the US and £3.2m in the UK (2019: £3.2m).
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 partially offset the US
provision (£52.4m) which is disclosed within other receivables. After
deduction of the insurance asset there is a net provision for the
estimated uninsured US liability of £12.1m (2019: £1.0m).
Accounting for exceptional items (Group)
The Group incurred £19.4m (2019: £32.9m) of exceptional charges in
the period from continuing operations and £225.3m from discontinued
operations (2019: £563.5m).
The accurate presentation of costs and income as exceptional items
was considered an area of focus for all reporting components. 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.
Restructuring costs, combined with COVID-19 related severance costs,
and the write down to fair value of the Oil & Gas Division are material
in size and therefore required a higher level of focus.
We 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 obtain a triennial actuarial estimate of the US
asbestos liability from an independent expert and the most recent
assessment was performed by external actuarial consultants in
2020. Management updated the liability calculation based on this
assessment. We involved our PwC actuarial experts to assess the
reasonableness of the methodology used by the independent expert.
We evaluated management’s underlying assumptions used in its
calculation which 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 to the
independent actuarial assessment; and
• the reasonableness of forecast number and value of claims to be
settled to the actuarial assessment for the period of provision.
We evaluated the appropriateness of management’s assessment of
the timescale over which a liability can be reliably measured, which
remains at ten years.
We also examined the insurance cover held by the Group and
recalculated the expected date of insurance exhaustion to be in line
with that determined by management’s external insurance expert.
In addition, we validated that the insurance cover remains active
and currently continues to settle 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 obtained a listing of the exceptional costs, split by both component
and category and tested a sample to supporting documentation.
We checked the nature of the costs 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
in relation to exceptional items 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.
135
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF THE WEIR GROUP PLC
CONTINUED
Key audit matter
How our audit addressed the key audit matter
Valuation of pension liabilities (Group and Company)
The Group operates a number of defined benefit pension plans, giving
rise to net pension liability of £160.8m (2019: £138.7m) being the net
of gross pension assets of £971.3m (2019: £941.8m) and gross pension
liabilities of £1,132.1m (2019: £1,080.5m). In respect of the Company,
there is a net liability of £95.8m (2019: £69.3m). These balances are
significant in the context of the overall balance sheet of the Group and
of the Company.
The valuation of pension liabilities requires judgment and technical
expertise in choosing appropriate assumptions such as salary
increases, mortality rates, discount rates and inflation levels.
Management engaged external actuarial experts to assist them in
selecting appropriate assumptions and to calculate the liabilities.
Inappropriate selection of assumptions or methodologies for
calculating the pension liabilities could result in a material difference in
the value of the liabilities.
In addition, given the economic uncertainty arising from COVID-19,
inappropriate valuation of pension assets could lead to a material
difference on the balance sheet.
Implications of COVID-19 (Group and Company)
The COVID-19 pandemic has caused significant global disruption
and economic uncertainty. The outbreak has had an impact on the
Group’s results and future expected cash flows could be impacted
due to the heightened uncertainty, which could have a direct impact
on the recoverability of assets and on the going concern of the Group
and Company. Additionally, there is a heightened risk of the Group’s
controls being bypassed with employees working remotely in most
locations around the world.
Management has included COVID-19 considerations when modelling
future cash flows, including in relation to going concern, and assessing
assets for impairment.
The Group disclosed COVID-19 exceptional costs of £10.4m within
exceptional items. The majority of these costs relate to severance
costs. The assessment of these costs is covered in the key audit
matter on exceptional items above.
We used our actuarial specialists to assess whether the assumptions
used in calculating the pension liabilities were reasonable, by:
• assessing whether salary increases and mortality rate assumptions
were consistent with the specifics of each plan and, where
applicable, with UK industry benchmarks;
• verifying that the discount and inflation rate assumptions were
consistent with our internally developed benchmarks, based on
national data and other companies’ recent external reporting; and
• reviewing the calculations prepared by external actuaries to assess
the consistency of the assumptions used.
Based on our procedures, we concluded management’s key
assumptions individually and collectively were acceptable.
For pension assets, we obtained confirmations from third parties and
assessed the reasonableness of the asset valuation methodology used
by those third parties.
We assessed the related disclosures included in the Group and
Company financial statements and consider them to be appropriate
and in compliance with IAS 19 Employee Benefits (Revised).
We reviewed and evaluated management’s cash flow forecasts (which
were prepared to support the Board’s going concern assessment and
goodwill impairment reviews) and the process by which they were
determined and approved. We agreed the forecasts to the latest
Board approved budgets and confirmed the mathematical accuracy of
underlying calculations.
We assessed management’s forecast assumptions for base case
and severe but plausible downside scenarios and the impact of
COVID-19 on forecasts. Further, we considered whether there were
any views which were contrary to those of management which
should be considered. We concluded that management’s forecasts
were reasonable.
We considered the Group’s liquidity and availability of financing to
support the going concern and viability assessments. We tested
journal entries posted across the Group to underlying support with
consideration to the risk of management override of controls.
In respect of the control environment, we did not observe any
degradation in the operation of controls during our audit.
We assessed the related Covid-19 disclosures included in the Group
financial statements and consider them to be appropriate.
136
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 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 industry in which
they operate.
The Group is organised into two continuing operating Divisions: Minerals and ESCO. On 5 October 2020, the Group announced its intention
to dispose of the Oil & Gas Division to Caterpillar Inc. Since that time the Group’s JV partner in Saudi Arabia exercised their right to acquire the
Group’s shareholding in the JV. This represents approximately 7% of the total Oil & Gas disposal proceeds. The Caterpillar transaction completed
on 1 February 2021 and the JV sale is expected to complete in H1 2021. The division has been treated as a discontinued operation. Each division
conducts its business in a number of locations around the world. Many of the business locations (or components) 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 ten components that, in our view, required an audit of their complete financial
information due to their relative size or risk characteristics. Of these full scope component audits, 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 six full scope component audits were performed by other PwC network firms. Other PwC network firms also performed specific
scope audits over a further five components which covered all line items on the income statement and specified line items on the balance sheet.
Specified procedures audits were performed at the remaining two components.
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 video conference
calls with all full and specific scope component teams. The discussions during the audit also included divisional management. Due to COVID-19
restrictions, with the exception of one component, the audits of all components were performed remotely.
Of the 17 components in scope, we deemed five to be financially significant to the Group. The UK and global travel restrictions resulted in all
aspects of oversight of the component audits by the Group engagement team occurring remotely in 2020.
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
£11,550,000 (2019: £15,000,000).
£10,500,000 (2019: £1,500,000).
How we determined it 5% of profit before tax and adjusting items from
1% of net assets, capped at 91% of Group materiality
total operations
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.
In the prior year an allocation of Group materiality was used for
the Company, however this was revised in 2020 to better reflect
the nature of the activities in the Company (holding activities).
Consequently, we used the Company net assets value as a basis
for the calculation of the overall materiality level.
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 £670,000 and £10,500,0000. Certain components were audited to a local statutory audit
materiality that was also less than our overall Group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and
extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance
materiality was 75% of overall materiality, amounting to £8,662,500 for the Group financial statements and £7,875,000 for the Company
financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation
risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £600,000 (Group audit)
(2019: £750,000) and £600,000 (Company audit) (2019: £750,000) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
137
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF THE WEIR GROUP PLC
CONTINUED
CONCLUSIONS RELATING TO GOING CONCERN
Our evaluation of the directors’ assessment of the Group’s and the Company’s ability to continue to adopt the going concern basis
of accounting included:
• review and evaluation of management’s cash flow forecasts and the process by which they were determined and approved, agreeing the
forecasts with the latest Board approved budgets and confirming the mathematically accuracy of underlying calculations.
• assessment of management’s forecast assumptions for base case and severe but plausible downside scenarios which include the impact
of COVID-19 on the Group’s ability to continue as a going concern.
• consideration of the Group’s liquidity and availability of financing to support the going concern basis of accounting.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s and the Company’s
ability to continue as a going concern.
In relation to the Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
REPORTING ON OTHER INFORMATION
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on
the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006
have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as
described below.
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 2020 is consistent with the financial statements and has been prepared in accordance with applicable
legal requirements.
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.
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.
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate
governance statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.
Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other
information section of this report.
138
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material
to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
• The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of any material uncertainties to the Group’s and Company’s ability to continue to do
so over a period of at least twelve months from the date of approval of the financial statements;
• The directors’ explanation as to their assessment of the Group’s and Company’s prospects, the period this assessment covers and why the
period is appropriate; and
• The directors’ statement as to whether 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 of its assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the Group was substantially less in scope than an audit and only
consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in alignment
with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial
statements and our knowledge and understanding of the Group and Company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the Group’s and Company’s position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when 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.
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, 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.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek
to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw
a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the 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.
139
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF THE WEIR GROUP PLC
CONTINUED
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 obtained 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 5 years, covering the
years ended 31 December 2016 to 31 December 2020.
LINDSAY GARDINER (SENIOR STATUTORY AUDITOR)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Glasgow
2 March 2021
140
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2020
Continuing operations
Revenue
Continuing operations
Operating profit before share of results
of joint ventures
Share of results of joint ventures
Operating profit
Finance costs
Finance income
Profit before tax from continuing
operations
Tax (expense) credit
Profit 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
(Loss) earnings per share
Basic – total operations
Basic – continuing operations
Diluted – total operations
Diluted – continuing operations
Year ended 31 December 2020
Restated (note 2)
Year ended 31 December 2019
Adjusted
results
£m
Adjusting
items (note 5)
£m
Statutory
results
£m
Adjusted
results
£m
Adjusting
items (note 5)
£m
Statutory
results
£m
Notes
3
1,964.7
–
1,964.7
2,049.8
–
2,049.8
14
6
6
7
8
9
303.8
1.6
305.4
(53.8)
3.8
255.4
(62.1)
(71.1)
–
(71.1)
–
–
(71.1)
16.4
232.7
1.6
234.3
(53.8)
3.8
184.3
(45.7)
313.8
1.5
315.3
(50.3)
4.0
269.0
(65.8)
(79.6)
–
(79.6)
–
–
(79.6)
21.0
234.2
1.5
235.7
(50.3)
4.0
189.4
(44.8)
193.3
(54.7)
138.6
203.2
(58.6)
144.6
(26.6)
166.7
(261.4)
(316.1)
(288.0)
(149.4)
166.5
0.2
166.7
74.4p
73.8p
(316.1)
–
(316.1)
(149.6)
0.2
(149.4)
(57.6p)
53.3p
(57.6p)
52.9p
21.6
224.8
224.3
0.5
224.8
78.1p
77.6p
(545.6)
(604.2)
(524.0)
(379.4)
(604.2)
–
(604.2)
(379.9)
0.5
(379.4)
(146.4p)
55.5p
(146.4p)
55.2p
141
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
Loss for the year
Other comprehensive (expense) income
Losses taken to equity on cash flow hedges
Exchange losses on translation of foreign operations
Reclassification of foreign currency translation reserve on discontinued operations
Exchange gains (losses) on net investment hedges
Reclassification adjustments on cash flow hedges
Tax relating to other comprehensive expense (income) 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 not to be reclassified in subsequent periods
Items that will not be reclassified to profit or loss in subsequent periods
Net other comprehensive expense
Total net comprehensive expense for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Total net comprehensive income (expense) for the year attributable to equity holders
of the Company
Continuing operations
Discontinued operations
Year ended
31 December
2020
£m
(149.4)
Notes
Restated
(note 2)
Year ended
31 December
2019
£m
(379.4)
7
22
7
(1.1)
(34.2)
–
6.5
1.9
0.1
(26.8)
(34.5)
0.2
6.5
(27.8)
(1.3)
(105.3)
(20.5)
(2.4)
0.7
(0.2)
(129.0)
(5.2)
(0.1)
0.8
(4.5)
(54.6)
(133.5)
(204.0)
(512.9)
(205.2)
1.2
(204.0)
(513.2)
0.3
(512.9)
79.4
(284.6)
(205.2)
70.6
(583.8)
(513.2)
142
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2020
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
2020
£m
31 December
2019
£m
Notes
11
12
14
21
16
28
15
16
28
17
8
18
19
28
20
8
18
19
28
20
21
22
23
449.5
1,262.7
15.0
54.9
84.6
0.1
1,866.8
443.6
420.2
16.0
29.4
351.7
427.6
1,688.5
3,555.3
26.5
413.9
18.9
14.6
29.2
143.3
646.4
1,332.6
0.3
–
76.1
21.4
160.8
1,591.2
2,237.6
1,317.7
32.5
582.3
332.6
(6.8)
0.5
(55.4)
1.6
419.1
1,306.4
11.3
1,317.7
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
The financial statements were approved by the Board of Directors and authorised for issue on 2 March 2021. The financial statements also
comprise the notes on pages 147 to 202.
JON STANTON
Director
JOHN HEASLEY
Director
143
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2020
Total operations
Cash flows from operating activities
Cash generated from operations
Additional pension contributions paid
Exceptional and other adjusting cash items
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisitions of subsidiaries, net of cash acquired
Investment in joint ventures
Purchases of property, plant & equipment
Purchases of intangible assets
Other proceeds from sale of property, plant & equipment and intangible assets
Disposals of discontinued operations, net of cash disposed and disposal costs
Interest received
Dividends received from joint ventures
Net cash (used in) generated from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Lease payments
Settlement of derivative financial instruments
Interest paid
Net proceeds from changes in non-controlling interests
Dividends paid to equity holders of the Company
Purchase of shares for employee share plans
Net cash used in financing activities
Net increase in cash & cash equivalents
Cash & cash equivalents at the beginning of the year
Foreign currency translation differences
Cash & cash equivalents at the end of the year
The cash flows from discontinued operations included above are disclosed separately in note 8.
Year ended
31 December
2020
£m
Year ended
31 December
2019
£m
Notes
24
372.2
(11.3)
(24.1)
(63.4)
273.4
–
0.1
(59.9)
(19.0)
4.3
(6.8)
2.2
8.3
(70.8)
1,467.2
(1,455.8)
(43.4)
5.1
(52.7)
5.1
–
(10.9)
(85.4)
117.2
272.1
(15.2)
374.1
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
24
24
14
10
17
144
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
Share
capital
£m
32.5
Share
premium
£m
582.3
Merger
reserve
£m
332.6
Treasury
shares
£m
(2.1)
Capital
redemption
reserve
£m
0.5
Foreign
currency
translation
reserve
£m
101.3
Hedge
accounting
reserve
£m
1.5
Attributable
to equity
holders
of the
Company
£m
2,143.6
Retained
earnings
£m
1,095.0
Non-
Total
controlling
equity
interests
£m
£m
5.3 2,148.9
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
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 credit
Dividends
Purchase of shares for
employee share plans
Reduction in non-
controlling interests
Exercise of share-
based payments
At 31 December 2019
(Loss) profit for the
year
Losses taken to equity
on cash flow hedges
Exchange (losses)
gains on translation of
foreign operations
Exchange gains on net
investment hedges
Reclassification
adjustments on cash
flow hedges
Remeasurements on
defined benefit plans
Remeasurements on
other benefit plans
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
32.5
–
582.3
–
332.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(10.0)
–
11.6
(0.5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(379.9)
(379.9)
0.5
(379.4)
(1.3)
–
(1.3)
(105.1)
(0.2)
(105.3)
–
–
(105.1)
(20.5)
(2.4)
–
–
–
–
(1.3)
–
–
–
0.7
–
–
–
–
–
–
–
(5.2)
(0.1)
(0.2)
0.8
0.6
(20.5)
(2.4)
0.7
(5.2)
(0.1)
–
–
–
–
–
–
(20.5)
(2.4)
0.7
(5.2)
(0.1)
0.6
(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
–
(149.6)
(149.6)
0.2
(149.4)
–
–
–
–
–
–
–
–
–
(35.2)
6.5
–
–
–
(1.1)
–
(1.1)
(35.2)
1.0
(34.2)
(1.1)
–
–
1.9
–
–
–
–
–
–
6.5
1.9
(34.5)
(34.5)
0.2
0.2
–
–
–
–
6.5
1.9
(34.5)
0.2
145
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
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
Retained
earnings
£m
Non-
controlling
interests
£m
Total
equity
£m
Tax relating to other
comprehensive
expense
Total net
comprehensive
(expense) income for
the year
Cost of share-based
payments inclusive of
tax credit
Purchase of shares for
employee share plans
Notional proceeds
of increase of non-
controlling interests
Proceeds of increase
of non-controlling
interests
Proceeds from
decrease in non-
controlling interests
Exercise of share-
based payments
At 31 December 2020
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(10.9)
–
–
–
–
–
–
–
–
–
–
–
0.1
6.5
6.6
–
6.6
(28.7)
0.9
(177.4)
(205.2)
1.2
(204.0)
–
–
–
–
–
–
–
–
–
–
10.5
10.5
–
–
–
–
(10.9)
–
–
–
–
–
10.5
(10.9)
3.6
3.6
5.4
5.4
(0.3)
(0.3)
–
32.5
–
582.3
–
332.6
4.6
(6.8)
–
0.5
–
(55.4)
–
1.6
(4.6)
419.1
–
1,306.4
–
11.3
–
1,317.7
146
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 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 2020 (‘2020’) were approved and authorised for issue in accordance with a resolution of the Directors on 2 March 2021.
The comparative information is presented for the year ended 31 December 2019 (‘2019’).
The Consolidated Financial Statements of The Weir Group PLC have been prepared in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
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 going concern basis as disclosed in the Directors’ Report on pages 128 to 130. The financial
statements are also 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 2020:
i) Definition of Material – amendments to IAS 1 and IAS 8;
ii) Definition of a Business – amendments to IFRS 3;
iii) Amendment to IFRS 9, IAS 39 and IFRS 7 regarding interest rate benchmark reform;
iv) Revised Conceptual Framework for Financial Reporting; and
v) Covid-19 related rent concessions – amendment to IFRS 16.
The amendments listed above are not considered to have a material impact on the Consolidated Financial Statements of the Group. The Group
has applied the practical expedient to all rent concessions that meet the conditions in paragraph 46B of the IFRS 16 amendment issued on
28 May 2020. The amount recognised in operating profit for the reporting period to reflect changes in lease payments that arise from rent
concessions is a credit of £0.2m.
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting periods
and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future
reporting periods and on foreseeable future transactions.
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 218 to 224.
Prior period restatements
On 5 October 2020 the Group announced an agreement had been entered into to sell the Oil & Gas Division and, in line with IFRS 5 ‘Non-current
Assets Held for Sale and Discontinued Operations’, the Group has classified the Division as held for sale. Previously disclosed as an individual
segment, the Division is now reported as a discontinued operation. This has resulted in a restatement of the Consolidated Income Statement,
Consolidated Statement of Comprehensive Income and related notes for the year ended 31 December 2019. See note 8 for Discontinued
Operations results.
Adjusting items
In order to provide the users of the Consolidated Financial Statements with a more relevant presentation of the Group’s underlying performance,
statutory results for each year has been analysed between:
i) Adjusted results and;
ii) the effect of adjusting items.
This reflects a change from the previous year which disclosed results before exceptional items & intangibles amortisation and separately
disclosed the effect of exceptional items & intangibles amortisation.
The principal adjusting items are summarised below. These specific items are presented on the face of the Consolidated Income Statement,
along with the related adjusting items taxation, 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.
147
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2. ACCOUNTING POLICIES continued
i) Intangibles amortisation
Intangibles amortisation is expensed in line with the other intangible assets policy, with separate disclosure provided to allow visibility of the
impact of both:
a) 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;
b) ongoing multi-year 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.
During the year, amortisation of £5.0m is included within adjusted operating profit in relation to assets, which in 2020, are no longer part of
ongoing multi-year investment activities. In the prior year these assets met the criteria for amortisation to be included as an adjusting item.
ii) Exceptional items
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. 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; and other items deemed exceptional due to their significance, size
or nature. The change in presentation has had no impact on exceptional items recognised in the prior year, with 2019 balances being restated
to reflect the split between continuing and discontinued operations.
iii) Other adjusting items
Other adjusting items are those which do not relate to the Group’s current ongoing trading and, due to their nature, are treated as adjusting
items. For example these may include, but are not restricted to, movements in the provision for asbestos related claims or the associated
insurance assets, which relate to the Flow Control Division that was sold in 2019 but the provision remains with the Group and is in run-off,
or past service costs related to pension liabilities. There is no impact on the 2019 results from this change in presentation.
Further analysis of the items included in the column ‘Adjusting items’ in the Consolidated Income Statement is provided in notes 4, 5 and 13
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 93.
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 22.
ii) Provisions (judgement/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 judgement and estimate is the US asbestos provision and associated insurance asset, details of which are included in note 20.
iii) 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 or the expected value for each liability.
Provisions for uncertain tax positions are included in current tax liabilities and total £18.6m at 31 December 2020.
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 21.
148
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 iv) Discontinued operations (estimate)
IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’ requires entities to measure discontinued operations at the lower of
the carrying amount and fair value less costs to sell. Prior to completion of the sale on 1 February 2021 and subsequent completion accounts
process, which will include finalisation of customary working capital and debt-like items, management were required to apply certain estimates
about possible outcomes of the sale process and estimate both the fair value and costs of disposal. This exercise was completed as at the
31 December 2020 based on the latest developments in the Oil & Gas sale process. This resulted in an impairment of £209.2m being recognised
in relation to goodwill, intangible assets and inventory. When the disposal is recognised in the 2021 financial statements a gain or loss may arise
since final proceeds are subject to finalisation of customary working capital and debt-like items and the conclusion of the completion accounts
process. At this time the foreign currency translation reserve will also be recycled to the income statement and reflected in the gain or loss on
disposal. The disclosure in relation to discontinued operations is provided in note 8, with the impairment testing reflected in note 13.
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, 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.
149
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2. ACCOUNTING POLICIES continued
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.
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, provided 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
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.
150
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 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 annually 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.
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.
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.
151
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2. ACCOUNTING POLICIES continued
The expected useful lives of acquired intangible assets are as follows:
Brand names
indefinite life
Customer & distributor relationships
5 – 30 years
Purchased software
4 – 8 years
Intellectual property & trademarks
6 – 15 years
Other
up to 6 years
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 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: Financial Instruments where
the modification is not substantial, any difference in the modified cash flows is recognised in profit or loss.
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 16 and the policy in respect of invoice discounting
is included in note 28.
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 19.
152
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 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, contingent liabilities and contingent assets
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.
A contingent liability is disclosed if there is a possible obligation as a result of a past event that might, but will probably not, require an outflow of
economic benefits; or there is a present obligation as a result of a past event that probably requires an outflow of economic benefits, but where
the obligation cannot be measured reliably.
A contingent asset is disclosed if there is a possible asset that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
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. For the cash flow hedging, 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. For net investment hedges, gains and losses on hedging instruments designated as hedges of the net investments in foreign operations
are recognised in other comprehensive income to the extent that the hedging relationship is effective. Gains and losses accumulated in the
foreign currency translation reserve are recycled to the income statement when the foreign operation is disposed of.
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. 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.
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.
153
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2. ACCOUNTING POLICIES continued
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, where applicable. 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, or those held in Trust, 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.
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.
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.
154
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 Alternative performance measures
The financial statements are prepared in accordance with International Accounting Standards in conformity with the requirements of the
Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union. 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.
Adjusted results and adjusting items
The Consolidated Income Statement presents Statutory results, which are provided on a GAAP basis, and Adjusted results (non GAAP), which
are management’s primary area of focus when reviewing the performance of the business. Adjusting items represent the difference between
Statutory results and Adjusted results and are defined within the accounting policies section above. The accounting policy for Adjusting items
should be read in conjunction with this note. Details of each adjusting item is provided in note 5. We consider this presentation to be helpful as it
allows greater comparability of the underlying performance of the business from year to year.
We have made the following changes to our reconciliation from GAAP to non GAAP measures, as summarised below:
1. Our non GAAP Income Statement measures are now referred to as ‘Adjusted’ rather than ‘before exceptional items and intangibles
amortisation’, for example, Adjusted operating profit and Adjusted profit before tax. This change in presentation follows the recognition of £5.0m
of intangible assets amortisation, on assets which are no longer part of ongoing multi-year investment activities, being included within our non
GAAP measure. Until this year, no intangible assets amortisation was reflected in our non GAAP results on the basis it was all considered to
relate to multi-year investment activities. A split of statutory amortisation between Adjusted and Adjusting items is provided in note 4.
2. Within Adjusting items, we have introduced the category of Other adjusting items alongside Amortisation related to acquisition related
intangible assets and ongoing multi-year investment activities and Exceptional items. Other Adjusting items are those which do not relate to the
Group’s current ongoing trading, but due to their nature, may result in a recurring adjustment and, as a result, are not considered to meet the
definition of exceptional. These items include adjustments to the Group’s asbestos-related liabilities and assets and past service costs associated
with retirement benefit obligations. Details of these items are included in note 5.
Operating cash flow (cash generated from operations)
Operating cash flow excludes additional pension contributions, exceptional and other adjusting 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.
Free cash flow
Free cash flow (FCF) is a non-GAAP measure, defined as operating cash flow (cash generated from operations), adjusted for income taxes, net
capital expenditures, lease payments, net interest payments, dividends received from joint ventures, settlement of derivatives, purchase of
shares for employee share awards and pension contributions. Following the withdrawal of dividends payments in the year dividends paid have
been removed from the definition of FCF and the prior year has been restated accordingly. 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, dividends, exceptional and other
adjusting items, or to fund our strategic initiatives, including acquisitions, if any.
The reconciliation of operating cash flows (cash generated from operations) to FCF is as follows.
Operating cash flow (cash generated from operations)
Income tax paid
Net capital expenditure from purchase & disposal of property, plant & equipment and intangibles
Lease payments
Net interest paid
Dividends received from joint ventures
Settlement of derivative financial instruments
Purchase of shares for employee share plans
Additional pension contributions paid
Free cash flow
2020
£m
372.2
(63.4)
(74.6)
(43.4)
(50.5)
8.3
5.1
(10.9)
(11.3)
131.5
Restated
2019
£m
407.6
(90.2)
(104.3)
(44.3)
(44.6)
3.5
(62.2)
(10.0)
(12.9)
42.6
155
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
2. ACCOUNTING POLICIES continued
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 £91.0m included in note 16 and £9.5m of interest accruals
included in note 19. 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.
EBITDA
EBITDA is operating profit from continuing operations, before exceptional items, other adjusting items, intangibles amortisation, and excluding
depreciation of owned assets and right of use assets. EBITDA is used in conjunction with other GAAP and non-GAAP financial measures to
assess our operating performance. A reconciliation of EBITDA to the closest equivalent GAAP measure, operating profit, is provided.
Continuing operations
Operating profit
Adjusted for:
Exceptional and other adjusting items (note 5)
Adjusting amortisation (note 5)
Adjusted operating profit
Non-adjusting amortisation (note 4)
Adjusted Earnings before interest, tax and amortisation (EBITA)
Depreciation of owned property, plant & equipment (note 11)
Depreciation of right-of-use property, plant & equipment (note 11)
Adjusted Earnings before interest, tax, depreciation and amortisation
Net debt
Restated
(note 2)
2019
£m
2020
£m
234.3
235.7
31.8
39.3
305.4
5.0
310.4
43.2
29.0
382.6
32.9
46.7
315.3
–
315.3
41.6
27.3
384.2
Net debt is a common measure used by management and investors when monitoring the capital management of the Group and is the basis for
covenant reporting as included in note 29. A reconciliation of net debt to cash & short-term deposits, interest-bearing loans and borrowings is
provided in note 24.
3. SEGMENT INFORMATION
Following the announcement during the year of the Group’s intention to sell the Oil & Gas Division, the Group has classified the Division as
a discontinued operation. On 5 October 2020 the Group announced an agreement had been entered into to sell the Division, as disclosed in
note 8. Prior comparatives in Minerals have been restated to reflect transactions between the segments. Continuing operations includes two
operating Divisions: Minerals and ESCO. These two Divisions are organised and managed separately based on the key markets served and each
is treated as an operating segment and a reportable segment under IFRS 8. The operating and reportable segments were determined based on
the reports reviewed by the Chief Executive Officer which are used to make operational decisions.
The Minerals segment is the global leader in the provision of slurry handling equipment and associated aftermarket support for abrasive high-
wear applications used in the mining and oil sands markets. The ESCO segment is the world’s leading provider of ground engaging tools for
surface mining and infrastructure.
The Chief Executive Officer assesses the performance of the operating segments based on operating profit from continuing operations before
exceptional and other adjusting items (including impairments) (‘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.
156
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
The segment information for the reportable segments for 2020 and 2019 is disclosed below. Information for Oil & Gas is included in note 8.
Minerals
ESCO
Total continuing operations
Revenue
Sales to external customers
Inter-segment sales
Segment revenue
Eliminations
2020
£m
1,469.2
0.1
1,469.3
Restated
(note 2)
2019
£m
1,477.8
–
1,477.8
2020
£m
495.5
0.9
496.4
2019
£m
572.0
0.5
572.5
2020
£m
1,964.7
1.0
1,965.7
(1.0)
1,964.7
Restated
(note 2)
2019
£m
2,049.8
0.5
2,050.3
(0.5)
2,049.8
Sales to external customers – 2019 at 2020 average exchange rates
1,469.2
Sales to external customers
1,418.4
495.5
568.6
1,964.7
1,987.0
Segment result
Segment result before share of results
of joint ventures
Share of results of joint ventures
Segment result
Unallocated expenses
Adjusted operating profit
Adjusting items
Net finance costs
Profit before tax from continuing operations
Segment result – 2019 at 2020 average exchange rates
Segment result before share of results
of joint ventures
Share of results of joint ventures
Segment result
Unallocated expenses
Adjusted operating profit
259.9
–
259.9
270.3
–
270.3
79.4
1.6
81.0
81.6
1.5
83.1
259.9
–
259.9
260.4
–
260.4
79.4
1.6
81.0
81.2
1.4
82.6
339.3
1.6
340.9
(35.5)
305.4
(71.1)
(50.0)
184.3
339.3
1.6
340.9
(35.5)
305.4
351.9
1.5
353.4
(38.1)
315.3
(79.6)
(46.3)
189.4
341.6
1.4
343.0
(38.1)
304.9
Revenues from any single external customer do not exceed 10% of Group revenue.
157
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
3. SEGMENT INFORMATION continued
Minerals
ESCO
Discontinued
operations
Assets & liabilities
Intangible assets
Property, plant & equipment
Working capital assets
Investments in joint ventures
Segment assets held for sale
Segment assets
Unallocated assets
Total assets
Working capital liabilities
Segment liabilities held for sale
Segment liabilities
Unallocated liabilities
Total liabilities
Other segment information – total Group
Segment additions to non-current assets
Unallocated additions to non-current assets
Total additions to non-current assets
Other segment information – total Group
Segment depreciation & amortisation
Segment impairment of property,
plant & equipment
Segment impairment of intangible assets
Unallocated depreciation & amortisation
Total depreciation, amortisation & impairment
2020
£m
2019
£m
576.2
311.7
678.7
1,566.6
–
–
1,566.6
579.5
293.5
701.1
1,574.1
–
–
1,574.1
2020
£m
664.2
124.0
191.0
979.2
15.0
–
994.2
2019
£m
700.9
122.2
217.0
1,040.1
15.2
–
1,055.3
Restated
(note 2)
2019
£m
268.0
137.5
297.8
703.3
21.4
–
724.7
2020
£m
–
–
–
–
–
427.6
427.6
365.2
–
365.2
408.2
–
408.2
83.4
–
83.4
87.8
–
87.8
–
143.3
143.3
133.5
–
133.5
71.0
85.5
22.1
28.6
6.6
48.9
Total Group
Restated
(note 2)
2019
£m
1,548.4
553.2
1,215.9
3,317.5
36.6
–
3,354.1
498.1
3,852.2
629.5
–
629.5
1,709.3
2,338.8
2020
£m
1,240.4
435.7
869.7
2,545.8
15.0
427.6
2,988.4
566.9
3,555.3
448.6
143.3
591.9
1,645.7
2,237.6
99.7
6.9
106.6
163.0
7.5
170.5
66.1
63.4
37.2
37.1
31.6
67.6
134.9
168.1
(0.4)
–
1.9
6.3
–
–
–
–
(1.4)
176.1
28.6
472.9
(1.8)
176.1
13.2
322.4
30.5
479.2
15.0
692.8
The assets and liabilities balances include right-of-use assets and lease liabilities. Refer to note 11 for depreciation on right-of-use assets.
Unallocated assets are continuing operations and primarily comprise cash and short-term deposits, asbestos-related insurance asset, Trust
Owned Life Insurance policy investments, derivative financial instruments, income tax receivable, deferred tax assets and elimination of
intercompany 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 and related interest accruals, derivative financial instruments, income tax payable,
provisions, deferred tax liabilities, elimination of intercompany and retirement benefit deficits as well as liabilities relating to general head office
activities. Segment additions to non-current assets include right-of-use assets.
158
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 Geographical information
Geographical information in respect of revenue and non-current assets for 2020 and 2019 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 2020
Revenue from continuing operations
Sales to external customers
Non-current assets
UK
£m
US
£m
Canada
£m
15.8
332.5
296.0
749.3
274.6
61.8
Year ended 31 December 2019
(Restated note 2)
Revenue from continuing operations
Sales to external customers
Non-current assets
UK
£m
US
£m
Canada
£m
19.8
341.1
360.0
1,145.3
313.0
70.8
The following disclosures are given in relation to continuing operations.
Asia
Pacific
£m
227.3
138.8
Asia
Pacific
£m
246.9
198.4
Australia
£m
South
America
£m
Middle East &
Africa
£m
Europe &
FSU
£m
Total
£m
348.0
210.1
415.6
82.6
218.0
98.1
169.4
54.0
1,964.7
1,727.2
Australia
£m
South
America
£m
Middle East &
Africa
£m
Other
£m
Total
£m
260.4
181.1
440.4
91.9
240.1
106.3
169.2
45.9
2,049.8
2,180.8
An analysis of the Group's revenue is as follows:
Original equipment
Aftermarket parts
Sales of goods
Provision of services - Aftermarket
Construction contracts - Original equipment
Revenue
Timing of revenue recognition
At a point in time
Over time
Segment revenue
Eliminations
2020
£m
444.3
1,358.1
1,802.4
116.0
46.3
1,964.7
Restated
(note 2)
2019
£m
371.1
1,491.9
1,863.0
131.0
55.8
2,049.8
Minerals
ESCO
Total continuing operations
2020
£m
1,382.1
87.2
1,469.3
Restated
(note 2)
2019
£m
1,373.5
104.3
1,477.8
2020
£m
490.1
6.3
496.4
2019
£m
560.4
12.1
572.5
2020
£m
1,872.2
93.5
1,965.7
(1.0)
1,964.7
Restated
(note 2)
2019
£m
1,933.9
116.4
2,050.3
(0.5)
2,049.8
4. REVENUES & EXPENSES
The following disclosures are given in relation to continuing operations.
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
Year ended 31 December 2020
Restated (note 2)
Year ended 31 December 2019
Adjusted
results
2020
£m
Adjusting
items
2020
£m
Statutory
results
2020
£m
Adjusted
results
2019
£m
Adjusting
items
2019
£m
Statutory
results
2019
£m
1,964.7
(1,263.6)
701.1
7.5
(203.5)
(201.3)
1.6
305.4
–
(8.2)
(8.2)
–
(5.8)
(57.1)
–
(71.1)
1,964.7
(1,271.8)
692.9
7.5
(209.3)
(258.4)
1.6
234.3
2,049.8
(1,300.1)
749.7
10.4
(233.5)
(212.8)
1.5
315.3
–
(23.7)
(23.7)
–
(1.5)
(54.4)
–
(79.6)
2,049.8
(1,323.8)
726.0
10.4
(235.0)
(267.2)
1.5
235.7
159
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
4. REVENUES & EXPENSES continued
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 and other adjusting items (note 5)
Net foreign exchange losses
Net impairment charge of trade receivables (note 16)
Year ended 31 December 2020
Restated (note 2)
Year ended 31 December 2019
Adjusted
results
2020
£m
Adjusting
items
2020
£m
Statutory
results
2020
£m
Adjusted
results
2019
£m
Adjusting
items
2019
£m
Statutory
results
2019
£m
1,263.6
72.2
9.1
5.0
–
14.4
10.5
–
–
–
39.3
31.8
–
–
1,263.6
72.2
9.1
44.3
31.8
14.4
10.5
1,300.1
68.9
9.3
–
–
9.0
1.6
–
–
–
46.7
32.9
–
–
1,300.1
68.9
9.3
46.7
32.9
9.0
1.6
Depreciation of property, plant & equipment (note 11) for discontinued operations was £22.5m (2019: £35.9m) and amortisation of intangible
assets (note 12) was £9.1m (2019: £31.6m).
Research & development costs
Research & development costs for continuing operations amount to £30.8m (2019: £26.3m) of which £24.8m (2019: £24.3m) was charged
directly to cost of sales in the income statement and £6.0m (2019: £2.0m) was capitalised (note 12). Research & development costs for
discontinued operations amounted to £5.9m (2019: £9.7m) of which £5.9m (2019: £9.7m) was charged to cost of sales in the income statement.
Employee benefits expense
Wages & salaries
Social security costs
Other pension costs
Defined benefit plans (note 22)
Defined contribution plans
Share-based payments – equity settled transactions (note 26)
Details of Directors’ remuneration is disclosed in note 27.
The average monthly number of people employed by the Company and its subsidiaries is as follows:
Minerals
ESCO
Group companies
2020
£m
420.5
36.6
0.4
22.3
9.3
489.1
2020
Number
8,455
2,228
447
11,130
Restated
(note 2)
2019
£m
458.1
40.7
1.0
22.7
12.9
535.4
Restated
(note 2)
2019
Number
8,630
2,338
470
11,438
The following disclosures are given in relation to total operations.
At 31 December 2020, the number of people employed by the Group and including those under temporary contracts was 13,070 (2019: 14,687).
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 auditors for the audit of the Company and Consolidated Financial Statements
Fees payable to the Company's auditors for other services
The audit of the Company’s subsidiaries
Audit-related assurance services
Other non-audit services
2020
£m
2019
£m
2.4
1.3
0.1
0.2
2.2
1.1
0.1
–
160
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 5. ADJUSTING ITEMS
Recognised in arriving at operating profit from continuing operations
Intangibles amortisation (note 4)
Exceptional items
ESCO acquisition and integration related costs
Covid-19 restructuring and other costs
Other restructuring and rationalisation charges
Black Economic Empowerment transaction
Intangibles impairment (note 12)
Legal claims
Other adjusting items
Asbestos-related provision (note 20)
Pension equalisation
Total adjusting items
Recognised in arriving at operating profit from discontinued operations
Intangibles amortisation (note 12)
Exceptional items
Impairment - Fair value adjustment
Oil & Gas North America impairment – intangibles and goodwill (note 12)
Oil & Gas North America impairment – tangible assets (notes 11 and 15)
Onerous purchase contracts
Disposal related costs
Covid-19 restructuring and other costs
Other restructuring and rationalisation charges
Legacy product warranty
Total adjusting items (note 8)
Continuing operations
Restated
(note 2)
2019
£m
2020
£m
(39.3)
(46.7)
(3.3)
(9.7)
(2.0)
(4.4)
–
–
(19.4)
(11.8)
(0.6)
(12.4)
(71.1)
(10.7)
–
(16.2)
–
(6.3)
0.3
(32.9)
–
–
–
(79.6)
(9.1)
(31.6)
(209.2)
–
–
(3.8)
(11.4)
(0.7)
(0.2)
–
(225.3)
(234.4)
–
(472.9)
(73.3)
–
–
–
(15.0)
(2.3)
(563.5)
(595.1)
Intangibles amortisation
Intangibles amortisation of £39.3m relates to acquisition assets and ongoing multi-year investment activities as outlined in the accounting policy
in note 2.
Exceptional items
Included in exceptional items is £3.3m of costs associated with the integration of ESCO into the Group following its acquisition in July 2018.
The majority of these costs relate to project staff and restructuring. The integration activities and associated costs completed by 31 December 2020.
Due to the unprecedented Covid-19 pandemic, specific one-off and/or short-term measures have been taken to protect the Group’s ability to
generate future cash flows, ensure the immediate health and safety of the workforce and manage supply chain issues enabling us to continue
to meet customer needs. Where specific costs have been deemed to be non-recurring in nature and as a direct result of the Covid-19 pandemic,
these have been treated as exceptional items in line with the Group’s accounting policy. Of the £9.7m recognised to date, £8.2m relates to
severance costs across the Minerals Division and £0.7m in the ESCO Division. The remaining £0.8m relates to incremental costs such as one-off
site decontaminations, additional freight costs for existing customer orders and employee support costs. The impact of under-recoveries from
mandated or voluntary site shutdowns, as well as costs for items such as disposable face masks and increased routine cleaning, have not been
treated as exceptional items and are included within adjusted results. This reflects the fact these are considered ‘sunk costs’ or of a consumable
and/or recurring nature for at least the immediate to medium-term future as the pandemic continues.
The continued deep downturn in oil and gas markets in the year, exacerbated by Covid-19, has resulted in further steps to right-size certain central
functions to protect short-term cash generation. This resulted in £2.2m restructuring and rationalisation costs in Head Office, primarily related to
severance due to a reduction in headcount. In addition, £0.2m additional costs were incurred by Minerals for the final adjustments for the exit
of the sand and aggregates comminution market in North America completed in the year, offset by a credit of £0.4m in Minerals relating to prior
year unutilised owned property disposal costs.
The Black Economic Empowerment transaction is a one-off charge for the completion of a Broad-based Black Economic Empowerment
(‘B-BBEE’) ownership transaction by the Group’s subsidiary, Weir Minerals South Africa (Pty) Ltd (WMSA) with Medu Capital (Pty) Ltd (‘Medu
Capital’). The transaction will result in WMSA being ‘25%+1’ Black-owned (as defined in the Broad-Based Black Economic Empowerment Act 53
of 2003). The business will continue to be fully consolidated in the Group’s financial statements. This ownership structure better reflects the
161
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
5. ADJUSTING ITEMS continued
demographics of South Africa and reiterates Weir’s long-term commitment to the country and to the communities in which we operate. It will
also differentiate WMSA from many of its competitors as one of the few ‘25%+1’ empowered mining technology companies in South Africa.
The consideration from Medu Capital includes a payment of £5.4m received on 23 April 2020 for 40% of the ‘25%+1’ shareholding, with the
remaining 60% covered by a notional loan served by declared dividends over a maximum period of eight years. Full entitlement to the shares
(economic and voting rights) is achieved on full settlement of the notional loan. The exceptional charge of £4.4m includes £3.6m non-cash IFRS
2 charge representing the fair value of the remaining 60% shareholding with £0.8m incurred for consultancy and legal fees required to complete
the transaction.
The prior year to December included costs of £10.7m associated with the integration of ESCO. Restructuring costs for Minerals totalled £17.8m
with a partial offset of £1.6m of credits in Minerals relating to prior year unutilised provisions and a property disposal. The restructuring charge
included £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. The intangibles impairment charge of £6.3m in Minerals was for the full write-down of
customer relationships asset value which also related to the North American sand and aggregates market exit. The legal claim credit of £0.3m
was in relation to the successful resolution of a legal claim associated with legacy Trio issues.
Other adjusting items
A charge of £11.8m has been recorded following the completion of the planned triennial actuarial review of the US asbestos-related claims, which
relate to legacy Group products. Further details of this review are included in note 20.
Following the most recent Lloyds judgement in November 2020 in relation to guaranteed minimum pension (GMP) inequality, a charge of £0.6m
for GMP equalisation has been booked which follows the £6.3m charge initially recognised in 2018.
Discontinued operations
Intangibles amortisation
Intangibles amortisation of £9.1m relates to acquisition assets and ongoing multi-year investment activities outlined in the accounting policy in
note 2.
Exceptional items
An adjustment of £209.2m has been made to the carrying value of the Oil & Gas Division to reflect the fair value less costs to sell of the
Division, in line with IFRS 5. This reflects the estimated proceeds from the disposal which completed on 1 February 2021, and remains subject
to customary debt-like items and working capital adjustments. This fair value adjustment includes £49.5m of intangible assets, £126.6m goodwill
and £33.1m inventory.
As part of the disposal process, settlement agreements were reached with certain suppliers for onerous purchase contracts, resulting in a
provision of £3.8m. This included settlement payments made in January and a provision of 40% against inventory yet to be delivered.
Disposal costs associated with the sale of the Oil & Gas Division total £11.4m primarily relating to advisory and consultancy fees.
Covid-19 related costs within Oil & Gas of £0.7m relate solely to incremental costs, incurred mainly in the Middle East, for one-off site
decontaminations, additional freight costs for existing customer orders and employee support costs.
As noted above, the continued deep downturn in oil and gas markets in the year resulted in restructuring and rationalisation costs of £3.0m within
the Oil & Gas Division, primarily relating to severance with a reduction in headcount. This is offset by £2.8m of credit balances: £1.1m gain on sale
of a property written off as an exceptional item in the prior year, £1.0m credit for the final adjustments in relation to the liquidation of the EPIX
joint venture and £0.7m relating to prior year unutilised provisions.
Prior year exceptional items include a charge of £546.2m for the impairment to the Oil & Gas North American Cash Generating Unit (CGU) which
was made up of write-downs to inventory of £48.6m, property, plant & equipment of £24.7m, brand names of £39.7m, customer relationships of
£144.3m, purchased software of £0.9m, and goodwill of £288.0m. Restructuring charges of £15.0m include £0.4m for Flow Control impairment
of inventory due to restructuring as well as £14.6m for Oil & Gas restructuring costs for North America to reduce the workforce and impair £3.9m
of property, plant & equipment associated with site closures. An additional inventory provision of £2.3m was incurred to reflect the final closing
inventory provision to the 2018 Oil & Gas legacy product warranty issue.
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
162
Restated
(note 2)
2019
£m
(37.3)
(4.2)
(1.6)
(1.8)
(0.6)
(4.8)
(50.3)
2020
£m
(38.6)
(4.0)
(3.1)
(4.5)
(0.3)
(3.3)
(53.8)
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 Finance income
Interest receivable on financial assets
7. TAX EXPENSE
Income tax (expense) credit 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*
Restated
(note 2)
2019
£m
4.0
2020
£m
3.8
2020
£m
2019
£m
0.5
(7.7)
(7.2)
(73.9)
5.5
(75.6)
35.1
(36.9)
(1.3)
3.0
(0.1)
1.8
(5.9)
(4.1)
(87.7)
6.5
(85.3)
86.4
(3.9)
(3.0)
10.0
89.5
Total income tax (expense) credit in the Consolidated Income Statement
(75.7)
4.2
Total income tax (expense) credit is attributable to:
(Loss) from continuing operations
(Loss) profit from discontinued operations
*
Includes £8.2m of deferred tax charge relating to foreign tax (2019: £84.9m credit).
The total income tax (expense) credit is disclosed in the Consolidated Income Statement, and note 8, as follows.
Tax (expense) credit – adjusted continuing operations
– adjusted discontinued operations (note 8)
– exceptional and other adjusting items
– adjusting intangibles amortisation and impairment
Total income tax (expense) credit in the Consolidated Income Statement
2020
£m
(45.7)
(30.0)
(75.7)
2020
£m
(62.1)
(3.0)
(21.3)
10.7
(75.7)
Current tax for 2020 has been reduced by £0.3m (2019: £nil) due to the utilisation of deferred tax assets previously not recognised.
The total deferred tax included in the income tax expense is detailed in note 21.
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 on actuarial losses on retirement benefits
Tax credit (charge) on hedge losses
Tax credit in the Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Deferred tax on share-based payments
Tax credit in the Consolidated Statement of Changes in Equity
2020
£m
6.5
–
6.5
0.1
6.6
1.2
1.2
Restated
(note 2)
2019
£m
(44.8)
49.0
4.2
Restated
(note 2)
2019
£m
(65.8)
(8.5)
11.2
67.3
4.2
2019
£m
1.0
(0.2)
0.8
(0.2)
0.6
0.4
0.4
163
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
7. TAX EXPENSE continued
Reconciliation of the total tax charge from total operations
The tax charge (2019: credit) in the Consolidated Income Statement for the year is higher (2019: lower) than the weighted average of standard
rates of corporation tax across the Group of -1.1% (2019: 20.0%). The differences are reconciled below.
Profit before tax from continuing operations
Loss before tax from discontinued operations
Loss before tax
At the weighted average of standard rates of corporation tax across the Group of -1.1% (2019: 20.0%)
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 –102.7% (2019: 1.1%)
Restated
(note 2)
2019
£m
189.4
(573.0)
(383.6)
(76.7)
(0.6)
(10.0)
(1.3)
10.9
3.1
0.6
(7.7)
0.7
76.8
(4.2)
2020
£m
184.3
(258.0)
(73.7)
0.8
2.2
(3.0)
(1.3)
1.6
3.3
2.4
(6.3)
0.9
75.1
75.7
Exceptional and other adjusting items ineligible for tax includes the tax impact of the £126.6m impairment to goodwill together with the
derecognition of £49.5m of US group deferred tax assets relating to the sale of the Oil & Gas Division. These deferred tax assets remain with
the Group and will be available to offset future taxable income arising in the retained US operations.
Outside of the US Oil & Gas deferred tax asset de-recognition, unrecognised deferred tax assets reduced from an addition of £10.9m in 2019
to an addition of £1.6m in 2020. This is due to reduced 2020 losses in various group operations including China, Canada and non-US operations
in the ESCO Division.
The tax effect of funding overseas operations reduced from a credit of £7.7m in 2019 to a credit of £6.3m in 2020 due to the unwind of the
Group’s US financing arrangement in November 2020.
The Group’s provision for overseas tax on unremitted earnings increased from an addition of £3.1m in 2019 to an increase of £3.3m in 2020.
This is due to an increase in 2020 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 had previously estimated the maximum contingent liability, excluding interest,
to be 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.
HMRC have subsequently confirmed that they do not consider the Group has been a beneficiary of State Aid, and accordingly there is no longer
a contingent liability and no payment is anticipated to be made.
164
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 8. DISCONTINUED OPERATIONS
On 5 October 2020 the Group announced an agreement had been entered into to sell the Oil & Gas 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 and its results are reported in discontinued
operations. On 1 February 2021, the Group completed the sale to Caterpillar Inc., subject to customary working capital and debt-like adjustments.
Refer to note 31 for details of the consideration. The Oil & Gas Division provides products and service solutions to upstream, production,
transportation and related industries.
Previously reported as an individual reporting segment, the Division is now reported as a discontinued operation. In compliance with IFRS 5, the
results for the year ended 31 December 2020 for the Division are disclosed within one line in the income statement, with the comparative period
also restated. In the balance sheet, the assets and liabilities of the Division, in the current period only, are reported as current assets/liabilities
held for sale. As a discontinued operation, the Division is measured at the lower of its carrying amount and fair value less costs to sell. In order
to reflect this an impairment of £209.2m in relation to goodwill, intangible assets and inventory was recognised in the year. When the sale of the
disposal group occurs, a gain or loss may arise. At the time of disposal the foreign currency translation reserve will be recycled to the income
statement and included in the gain or loss on disposal.
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.
Financial information relating to discontinued operations is set out in the table below. The 2019 discontinued operations income statement has
been restated to include the results of the Oil & Gas Division.
Financial performance and cash flow information for discontinued operations
Revenue
Operating (loss) profit before share of results
of joint ventures
Share of results of joint ventures
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 year from
discontinued operations
Year ended 31 December 2020
Restated (note 2)
Year ended 31 December 2019
Adjusted
results
£m
314.3
Adjusting
items
(note 5)
£m
–
Statutory
results
£m
314.3
Adjusted
results
£m
762.1
(24.5)
3.9
(20.6)
(3.3)
0.3
(23.6)
(3.0)
(26.6)
(234.4)
–
(234.4)
–
–
(234.4)
(27.0)
(261.4)
(258.9)
3.9
(255.0)
(3.3)
0.3
(258.0)
(30.0)
(288.0)
29.2
4.7
33.9
(4.1)
0.3
30.1
(8.5)
21.6
Adjusting
items
(note 5)
£m
–
(595.1)
–
(595.1)
–
–
(595.1)
71.2
(523.9)
Statutory
results
£m
762.1
(565.9)
4.7
(561.2)
(4.1)
0.3
(565.0)
62.7
(502.3)
–
–
–
–
(21.7)
(21.7)
(26.6)
(261.4)
(288.0)
21.6
(545.6)
(524.0)
Reclassification of foreign currency translation reserve
Other comprehensive expense from discontinued
operations
Net other comprehensive expense from
discontinued operations
–
–
–
–
–
–
–
–
–
(20.5)
(0.2)
(20.7)
Loss per share
Loss per share from discontinued operations was as follows.
Basic
Diluted
–
–
–
2020
pence
(110.9)
(110.9)
(20.5)
(0.2)
(20.7)
2019
pence
(201.9)
(201.9)
These loss per share figures were derived by dividing the net loss 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.
165
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
8. DISCONTINUED OPERATIONS continued
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase (decrease) in cash & cash equivalents from discontinued operations
Assets and Liabilities held for sale – Oil & Gas Division
The following table details the assets and liabilities classified as held for sale in the Consolidated Balance Sheet.
ASSETS
Property, plant & equipment
Intangible assets
Investments in joint ventures
Deferred tax assets
Inventories
Trade & other receivables
Income tax receivable
Cash & short-term deposits
Assets held for sale
LIABILITIES
Interest-bearing loans & borrowings
Trade & other payables
Derivative financial instruments
Income tax payable
Provisions
Deferred tax liabilities
Liabilities held for sale
NET ASSETS
Details of the sale of the Flow Control subsidiaries
Consideration received
Cash received
Completion accounts settlement
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
Year ended
31 December
2020
£m
20.3
3.8
(18.5)
5.6
Restated
(note 2)
Year ended
31 December
2019
£m
(16.2)
(14.1)
(20.3)
(50.6)
31 December
2020
£m
Notes
11
12
14
21
24
24
28
20
21
117.3
82.0
17.9
7.5
110.1
67.3
2.5
23.0
427.6
67.0
50.2
0.1
14.7
11.2
0.1
143.3
284.3
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)
166
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 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
Year ended
31 December
2019
£m
95.7
98.4
79.1
150.7
2.1
(140.5)
(14.9)
270.6
(0.5)
270.1
9. (LOSS) EARNINGS PER SHARE
Basic (loss) earnings per share amounts are calculated by dividing net (loss) profit for the year attributable to equity holders of the Company
by the weighted average number of ordinary shares outstanding during the year. Diluted (loss) earnings per share is calculated by dividing the
net (loss) profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year,
adjusted for the effect of dilutive share awards.
The following reflects the earnings and share data used in the calculation of (loss) earnings per share.
(Loss) profit attributable to equity holders of the Company
Total operations* (£m)
Continuing operations** (£m)
Continuing operations before adjusting items** (£m)
Weighted average share capital
Basic (loss) earnings per share (number of shares, million)
Diluted (loss) earnings per share (number of shares, million)
Restated
(note 2)
2019
(379.9)
144.1
202.7
259.5
261.2
2020
(149.6)
138.4
193.1
259.5
261.7
* Adjusted for a profit of £0.2m (2019: profit of £0.5m) in respect of non-controlling interests for total operations.
** Adjusted for a profit of £0.2m (2019: profit of £0.5m) in respect of non-controlling interests for continuing operations.
The difference between the weighted average share capital for the purposes of the basic and the diluted (loss) earnings per share calculations is
analysed as follows.
Weighted average number of ordinary shares for basic (loss) earnings per share
Effect of dilution: employee share awards
Adjusted weighted average number of ordinary shares for diluted (loss) earnings per share
2020
Shares
million
259.5
2.2
261.7
2019
Shares
million
259.5
1.7
261.2
167
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
9. (LOSS) EARNINGS PER SHARE continued
The (loss) profit attributable to equity holders of the Company used in the calculation of both basic and diluted (loss) earnings per share from
continuing operations before adjusting items is calculated as follows.
Net profit attributable to equity holders from continuing operations**
Adjusting items net of tax
Net profit attributable to equity holders from continuing operations before adjusting items
Basic (loss) earnings per share:
Total operations*
Continuing operations**
Continuing operations before adjusting items**
Diluted (loss) earnings per share:
Total operations*
Continuing operations**
Continuing operations before adjusting items**
Restated
(note 2)
2019
£m
144.1
58.6
202.7
Restated
(note 2)
2019
pence
(146.4)
55.5
78.1
(146.4)
55.2
77.6
2020
£m
138.4
54.7
193.1
2020
pence
(57.6)
53.3
74.4
(57.6)
52.9
73.8
* Adjusted for a profit of £0.2m (2019: profit of £0.5m) in respect of non-controlling interests for total operations.
** Adjusted for a profit of £0.2m (2019: profit of £0.5m) in respect of non-controlling interests for continuing operations.
There have been 350,896 share awards (2019: nil) exercised between the reporting date and the date of signing of these financial statements.
These were settled out of existing shares held in trust.
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 2019: 0.00p (2018: 30.45p)
Interim dividend for 2020: 0.00p (2019: 16.50p)
Proposed for approval by shareholders at the Annual General Meeting
Final dividend for 2020: 0.00p (2019: 0.00p)
2020
£m
–
–
–
–
2019
£m
78.9
42.8
121.7
–
In response to the Covid-19 pandemic, on 25 March 2020, the Board took the decision to withdraw the proposal to pay the final 2019 dividend as
part of wider cash preservation actions taken by the Group. The Board did not propose an interim or final dividend for 2020.
168
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 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 2018
Transfer to right-of-use asset
Transition adjustment
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
Additions
Disposals
Reclassifications to intangible assets (note 12)
Reclassifications from inventory
Reclassifications
Reassessments and modifications
Transferred to assets held for sale (note 8)
Exchange adjustment
At 31 December 2020
Accumulated depreciation & impairment
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
Depreciation charge for the year*
Impairment charge (reversal) during the year
Disposals
Reclassifications to intangible assets (note 12)
Reclassifications
Reassessments and modifications
Transferred to assets held for sale (note 8)
Exchange adjustment
At 31 December 2020
Net book value at 31 December 2018
Net book value at 31 December 2019
Net book value at 31 December 2020
189.2
–
–
189.2
5.6
(6.0)
–
–
1.1
–
(7.8)
182.1
7.3
(1.8)
–
–
2.4
–
(32.4)
(3.8)
153.8
49.5
–
49.5
6.4
1.4
(3.1)
0.3
–
(2.3)
52.2
5.8
0.1
(1.3)
–
(0.2)
–
(15.6)
(1.0)
40.0
139.7
129.9
113.8
688.7
(4.1)
–
684.6
86.9
(75.4)
(3.8)
(0.1)
(1.1)
–
(30.5)
660.6
54.1
(44.1)
(2.2)
0.3
(2.4)
–
(166.8)
(9.7)
489.8
401.3
(1.7)
399.6
56.0
26.6
(65.0)
(0.3)
–
(19.9)
397.0
47.0
(1.9)
(40.9)
(0.6)
0.2
–
(133.9)
(5.9)
261.0
287.4
263.6
228.8
877.9
(4.1)
–
873.8
92.5
(81.4)
(3.8)
(0.1)
–
–
(38.3)
842.7
61.4
(45.9)
(2.2)
0.3
–
–
(199.2)
(13.5)
643.6
450.8
(1.7)
449.1
62.4
28.0
(68.1)
–
–
(22.2)
449.2
52.8
(1.8)
(42.2)
(0.6)
–
–
(149.5)
(6.9)
301.0
427.1
393.5
342.6
–
–
149.2
149.2
34.4
–
–
–
(0.1)
3.4
(5.2)
181.7
19.8
(3.3)
–
–
(0.1)
10.6
(78.9)
(1.6)
128.2
–
–
–
30.3
2.5
–
–
–
(1.1)
31.7
32.6
–
(3.3)
–
–
(2.4)
(21.2)
(1.2)
36.2
–
150.0
92.0
–
4.1
27.7
31.8
12.5
(1.1)
–
–
0.1
(2.4)
(1.3)
39.6
7.8
(3.5)
–
–
0.1
(2.5)
(12.5)
(0.8)
28.2
–
1.7
1.7
12.1
–
(1.1)
–
(0.5)
(0.3)
11.9
9.3
–
(3.5)
–
–
(1.4)
(2.6)
(0.4)
13.3
–
27.7
14.9
–
4.1
176.9
181.0
46.9
(1.1)
–
–
–
1.0
(6.5)
221.3
27.6
(6.8)
–
–
–
8.1
(91.4)
(2.4)
156.4
–
1.7
1.7
42.4
2.5
(1.1)
–
(0.5)
(1.4)
43.6
41.9
–
(6.8)
–
–
(3.8)
(23.8)
(1.6)
49.5
–
177.7
106.9
877.9
–
176.9
1,054.8
139.4
(82.5)
(3.8)
(0.1)
–
1.0
(44.8)
1,064.0
89.0
(52.7)
(2.2)
0.3
–
8.1
(290.6)
(15.9)
800.0
450.8
–
450.8
104.8
30.5
(69.2)
–
(0.5)
(23.6)
492.8
94.7
(1.8)
(49.0)
(0.6)
–
(3.8)
(173.3)
(8.5)
350.5
427.1
571.2
449.5
*
Includes depreciation on owned assets in relation to discontinued operations of £9.6m (2019: £20.8m) and depreciation on right-of-use assets in relation to discontinued operations of £12.9m
(2019: £15.1m).
169
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
11. PROPERTY, PLANT & EQUIPMENT continued
Owned property, plant & equipment
Finance leases are recorded as ‘right-of-use assets’ in accordance with IFRS 16 ‘Leases’.
The carrying amount of assets under construction included in plant & equipment for continuing operations is £39.5m (2019: £45.2m).
Discontinued operations include assets under construction in plant & equipment of £1.7m (2019: £4.4m).
The impairment reversal in the year of £1.8m is split £1.6m in adjusting items and £0.2m in adjusted profits, and primarily relates to the Oil &
Gas Division following a £1.1m gain on sale of a property written off as an exceptional item in the prior year, and £0.4m relating to a property in
Minerals. See note 5 for further details.
The impairment charges in the prior 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 2018. See note 5 for further details.
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 five
years. Plant & equipment lease terms range from one to seven years, with an average lease term of approximately four years. The current and
non-current lease liabilities are disclosed in notes 18 and 28 respectively. The maturity analysis of contractual undiscounted cash flows is included
in note 28. 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 for continuing operations.
The impairment charge of £2.5m recognised in the prior 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
Restated
(note 2)
2019
£m
(27.3)
(8.3)
(1.3)
0.7
(0.4)
(36.6)
(4.2)
(40.8)
2020
£m
(29.0)
(7.7)
(1.5)
0.5
(0.4)
(38.1)
(4.0)
(42.1)
The total cash outflow in the year for continuing operations, which includes right-of-use cash flows and associated finance costs as well as cash
flows for the above expenses, is £41.6m (2019: £43.1m). Future cash outflows from leases not yet commenced to which the Group is committed
total £12.8m (2019: £18.2m).
170
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
12. INTANGIBLE ASSETS
Cost
At 31 December 2018
Additions
Disposals
Reclassifications from property,
plant & equipment (note 11)
Reclassifications
Exchange adjustment
At 31 December 2019
Additions
Disposals
Reclassifications from property,
plant & equipment (note 11)
Reclassifications
Transferred to assets held for sale
(note 8)
Exchange adjustment
At 31 December 2020
Accumulated amortisation & impairment
At 31 December 2018
Amortisation charge for the year*
Impairment during the year
Disposals
Reclassifications
Exchange adjustment
At 31 December 2019
Amortisation charge for the year*
Impairment during the year
Disposals
Reclassifications from property,
plant & equipment (note 11)
Reclassifications
Transferred to assets held for sale
(note 8)
Exchange adjustment
At 31 December 2020
Net book value at 31 December 2018
Net book value at 31 December 2019
Net book value at 31 December 2020
1,200.1
875.9
744.8
Goodwill
£m
1,620.3
–
–
–
–
(63.4)
1,556.9
–
–
–
–
(777.9)
(30.9)
748.1
420.2
–
288.0
–
–
(27.2)
681.0
–
126.6
–
–
–
(777.9)
(26.4)
3.3
Brand
names
£m
Customer &
distributor
relationships
£m
Purchased
software
£m
Intellectual
property &
trade marks
£m
Development
costs
£m
Other
£m
Total
£m
366.2
–
–
–
–
(14.0)
352.2
–
–
–
–
730.8
–
–
–
–
(27.2)
703.6
–
(1.9)
–
–
(88.9)
(9.7)
253.6
(502.7)
(19.0)
180.0
10.8
1.8
39.7
–
–
(1.8)
50.5
–
14.2
–
–
–
(63.2)
(1.5)
–
355.4
301.7
253.6
322.0
40.5
150.6
–
3.7
(18.9)
497.9
18.8
28.1
(1.9)
–
–
(451.9)
(14.6)
76.4
408.8
205.7
103.6
72.4
21.7
(2.0)
3.8
2.0
(3.6)
94.3
11.6
(4.6)
1.8
(0.4)
(8.3)
0.9
95.3
37.2
8.2
0.9
(2.0)
0.9
(1.8)
43.4
9.5
–
(4.2)
0.3
(0.1)
(7.3)
0.1
41.7
35.2
50.9
53.6
136.2
–
(0.1)
–
–
(5.2)
130.9
–
(6.1)
–
–
(32.7)
(1.6)
90.5
60.4
12.8
–
(0.1)
(3.7)
(2.8)
66.6
12.4
6.2
(6.1)
0.3
–
(30.2)
(1.0)
48.2
75.8
64.3
42.3
50.4
2.0
(0.7)
–
–
(0.4)
51.3
6.0
(5.7)
–
1.4
(0.1)
0.4
53.3
19.6
8.8
–
(0.4)
–
(0.2)
27.8
9.4
–
(5.8)
–
–
–
0.1
31.5
30.8
23.5
21.8
86.2
–
–
–
(2.0)
(3.3)
80.9
–
(2.5)
0.4
(1.0)
(8.6)
(1.9)
67.3
25.7
6.2
–
–
(0.9)
(1.1)
29.9
3.3
1.0
(2.5)
–
0.1
(6.7)
(0.8)
24.3
60.5
51.0
43.0
3,062.5
23.7
(2.8)
3.8
–
(117.1)
2,970.1
17.6
(20.8)
2.2
–
(1,419.2)
(61.8)
1,488.1
895.9
78.3
479.2
(2.5)
–
(53.8)
1,397.1
53.4
176.1
(20.5)
0.6
–
(1,337.2)
(44.1)
225.4
2,166.6
1,573.0
1,262.7
*
Includes amortisation in relation to discontinued operations of £9.1m (2019: £31.6m).
The impairment charge recorded in 2020 of £176.1m relates to discontinued operations including goodwill £126.6m, brand names £14.2m,
customer and distributor relationships £28.1m, intellectual property £6.2m and other intangible assets £1.0m.
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 before being transferred
to held for sale in 2020.
The carrying value of brand names with an indefinite life is tested annually for impairment (note 13). The carrying value at the year end was
£253.6m (2019: £301.7m).
171
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
12. INTANGIBLE ASSETS continued
The brand name value includes the brands of ESCO, Linatex and Warman all of which are considered to be leaders in their respective markets.
The allocation of significant brand names is as follows.
ESCO
Warman
Linatex
SPM
Trio
Other
SPM included in assets held for sale
Other brands included in assets held for sale
Brand names
2020
£m
124.9
60.8
41.8
18.0
17.4
16.4
279.3
(18.0)
(7.7)
253.6
2019
£m
128.6
62.6
43.0
41.1
17.9
8.5
301.7
–
–
301.7
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
Novatech
Trio
Other
2020
Years
25-28
n/a
n/a
4
Up to 10
2019
Years
26-29
12
6
5
Up to 11
SPM and Novatech customer and distributor relationships included in assets
held for sale
n/a
Up to 12
2020
£m
92.3
35.5
15.3
3.9
7.4
154.4
(50.8)
103.6
2019
£m
98.8
64.3
23.2
4.7
14.7
205.7
–
205.7
13. 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
Continuing operations
Discontinued operations
Description of CGUs
Goodwill
2020
£m
365.7
379.1
744.8
–
Intangibles
2020
£m
128.7
124.9
253.6
25.7
Goodwill
2019
£m
363.0
390.3
753.3
122.6
Intangibles
2019
£m
132.0
128.6
260.6
41.1
A description of each of the CGUs is provided below along with a summary of the key drivers of revenue growth and operating profit 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 2020.
ESCO
ESCO includes the ESCO and Bucyrus Blades brands. This CGU is a supplier of ground engaging tools (G.E.T.) 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 2020.
172
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 Discontinued operations
Discontinued operations incorporate the former Oil & Gas North America and Oil & Gas International CGUs. Oil & Gas North America includes the
Weir SPM brand and 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. 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 wellheads, surface trees, valves and actuators as well
as providing support to customers including installation, maintenance, rental and refurbishment services.
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. The forecasts reflect latest budgets and strategic plans, for each of the CGUs, covering a period of five years
and incorporate initial plans for achieving the Group’s long term sustainability goals, which are described more fully in the Strategic Report.
The basis of the impairment tests for the two continuing CGUs, including key assumptions, are set out in the table below.
CGU
Minerals
Basis of valuation Period of forecast Discount rate1
Value in use
5 years
10.9%
(2019: 11.4%)
Real growth2
2.1%
(2019: 1.2%)
ESCO
Value in use
5 years
9.5%
(2019: 10.6%)
1.8%
(2019: 1.2%)
Key assumptions3
Revenue growth
Adjusted operating
profit margins
Revenue growth
Adjusted operating
profit margins
Source
External forecast
Historic experience
External forecast
Historic experience
1
Discount rate
The pre-tax nominal weighted average cost of capital (WACC) is the basis for the discount rate, with adjustments made, as appropriate, for geographic risk. The WACC is the weighted average
of the pre-tax cost of debt financing and the pre-tax cost of equity finance. A reduction in discount rates in the year, is driven by lower Government bond yields, while Mining asset betas have
remained stable.
2 Real growth
For the two remaining CGUs the real growth beyond the five-year forecast period has been updated to reflect external International Monetary Fund (IMF) growth rates for the countries in which
the CGU operates. These reflect 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.
3 Adjusted operating profit margins
Adjusted operating profit 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
Forecasts for the Minerals and ESCO 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.
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
estimation due to the size of the balance, the relatively low discount rates compared to pre-2019 and the current levels of global macroeconomic
uncertainty which could reasonably lead to changes in the carrying value as a result of future events within the next five years.
Discontinued operations
The Oil & Gas CGUs are classified as held for sale and in line with IFRS 5 are measured at the lower of carrying amount and fair value less costs
to sell. Impairment adjustments to reflect the fair value less costs to sell of the Oil & Gas Division are reflected in note 5. As a result no further
impairment testing was carried out on the Oil & Gas CGUs.
14. INVESTMENTS IN JOINT VENTURES
At the year end, the Group held investments in joint ventures.
At 31 December 2018
Share of results
- continuing operations
- discontinued operations
Share of dividends - continuing operations
- discontinued operations
Exchange adjustment
At 31 December 2019
Disposals
Transfer to assets held for sale (note 8)
Share of results
- continuing operations
- discontinued operations
Share of dividends - continuing operations
- discontinued operations
Exchange adjustment
At 31 December 2020
£m
36.6
1.5
4.7
–
(3.5)
(2.7)
36.6
(0.1)
(17.9)
1.6
3.9
(2.1)
(6.2)
(0.8)
15.0
173
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
14. INVESTMENTS IN JOINT VENTURES continued
Weir Arabian Metals Company and Wesco LLC were transferred to assets held for sale in the year.
EPIX Power Systems LLC was dissolved in November 2020, resulting in a loss of £0.1m.
The Group’s share of the continuing balance sheet at 31 December 2020 and total operations at 31 December 2019 are detailed below.
Share of joint ventures' balance sheets
Goodwill
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
The Group’s share of the continuing operations revenue and profit of its remaining joint ventures are included below.
Share of joint ventures' revenue & profits
Revenue
Cost of sales
Administrative expenses
Income tax expense
Profit after tax
The Group’s investments in joint ventures are listed on pages 218 to 224.
15. INVENTORIES
Raw materials
Work in progress
Finished goods
2020
£m
–
7.5
14.3
(5.3)
(1.5)
15.0
2020
£m
13.5
(11.2)
(0.2)
(0.5)
1.6
2020
£m
27.0
33.9
382.7
443.6
2019
£m
4.0
27.0
17.2
(8.7)
(2.9)
36.6
Restated
(note 2)
2019
£m
15.3
(13.4)
–
(0.4)
1.5
2019
£m
76.3
54.0
512.6
642.9
Inventories classified as held for sale are included in note 8.
In 2020, the cost of inventories recognised as an expense within cost of sales for continuing operations amounted to £1,263.6m (2019: continuing
operations £1,300.1m). In 2020, the write-down of inventories to net realisable value for continuing operations amounted to £12.2m (2019: total
Group £66.7m), and the reversal of previous write-downs amounted to £7.6m (2019: total Group £21.5m).The prior year write-down included £9.4m
for Group restructuring actions in Minerals following the exit from the North American sand and aggregates market.
Inventories classified as held for sale include a fair value adjustment of £33.1m, as discussed in note 5. In 2019, a further £2.3m was recognised
in relation to warranty issues in Oil & Gas, as disclosed in note 5. The prior year write-down also included £48.6m due to uncertainty in the market
outlook for Oil & Gas North America.
174
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 16. TRADE & OTHER RECEIVABLES
Other receivables presented as non-current on the face of the Consolidated Balance Sheet of £84.6m (2019: £77.1m) 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 £45.2m (2019: £36.4m). Further detail
on these claims is presented in note 20.
Current trade & other receivables are analysed in the following table.
Trade receivables
Loss allowance
Other debtors
Sales tax receivable
Prepayments
Contract assets
2020
£m
338.7
(18.8)
319.9
21.7
19.3
24.8
34.5
420.2
2019
£m
454.6
(14.4)
440.2
26.7
18.8
50.8
21.4
557.9
Trade & other receivables classified as held for sale are included in note 8.
The average credit period on sales of goods is 59 days (2019: 60 days) on a continuing basis. Other debtors includes £0.2m (2019: £2.1m)
in respect of amounts due from joint ventures, and £7.2m (2019: £7.0m) in respect of insurance contracts relating to asbestos-related claims
(note 20).
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 (note 4).
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
2020
£m
258.5
40.2
8.6
31.4
338.7
2019
£m
310.4
99.8
13.3
31.1
454.6
175
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
16. TRADE & OTHER RECEIVABLES continued
Reconciliation of opening to closing loss allowance for trade receivables
Balance at the beginning of the year
Impairment losses recognised on receivables
Amounts written-off as uncollectable
Amounts recovered during the year
Impairment losses reversed
Exchange adjustment
Transferred to assets held for sale
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
2020
£m
(14.4)
(11.8)
2.0
0.9
1.3
0.3
2.9
(18.8)
2020
£m
15.1
19.4
34.5
2019
£m
(18.2)
(4.3)
3.5
1.1
2.7
0.8
–
(14.4)
2019
£m
12.5
8.9
21.4
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 increase in accrued income relates mainly to amounts yet to be invoiced in relation to a contract
to provide equipment to the Iron Bridge Magnetite Project in Western Australia, partially offset by a transfer to discontinued operations.
17. 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 18)
Cash & short-term deposits held for sale (note 8)
2020
£m
287.4
64.3
351.7
351.7
(0.6)
23.0
374.1
2019
£m
242.3
31.5
273.8
273.8
(1.7)
–
272.1
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.
During the period, the Group entered a new notional cash pooling arrangement in which individual balances are not offset for reporting purposes.
Cash & short-term deposits at 31 December 2020 includes £0.4m that is part of this arrangement and both cash and interest-bearing loans &
borrowings are grossed up by this amount.
18. INTEREST-BEARING LOANS & BORROWINGS
Current
Bank overdrafts
Bank loans
Commercial paper
Lease liabilities
Non-current
Bank loans
Fixed-rate notes
Lease liabilities
2020
£m
0.6
–
–
25.9
26.5
667.7
578.4
86.5
1,332.6
2019
£m
1.7
299.6
190.5
42.3
534.1
158.4
595.1
142.7
896.2
During the period, the Group entered a new notional cash pooling arrangement in which individual balances are not offset for reporting purposes.
Cash & short-term deposits at 31 December 2020 includes £0.4m that is part of this arrangement and both cash and interest-bearing loans
& borrowings are grossed up by this amount.
176
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 Bank loans
Revolving credit facility
United States Dollar variable rate loans
United States Dollar variable rate loans
Sterling variable rate loans
Other
Sterling variable rate term loan
United States Dollar fixed-rate loan facilities
Sterling variable rate term loan
Less: current instalments due on bank loans
Sterling variable rate term loan
Non-current bank loans
* Facility has been refinanced as detailed below
Maturity
Interest basis
2021* US$ LIBOR
US$ LIBOR
2023
£ LIBOR
2023
2020*
2021
2022
£ LIBOR
FIXED
£ LIBOR
Weighted average
interest rate
2020
%
–
1.90
1.78
–
–
2.02
2019
%
2.39
–
–
1.56
7.80
–
2020
£ LIBOR
–
1.56
Commercial paper
Commercial paper
Euro variable rate commercial paper
Less: current instalments due on commercial paper
Euro variable rate commercial paper
Non-current commercial paper
Maturity
Interest basis
2020
EUR LIBOR
2020
EUR LIBOR
Weighted average
interest rate
2020
%
–
2019
%
0.03
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
Non-current fixed-rate notes
Maturity
Interest basis
Fixed interest rate
2019
%
2020
%
2022
2023
FIXED
FIXED
4.27
4.34
4.27
4.34
2020
£m
–
153.9
314.9
–
–
198.9
667.7
–
667.7
2020
£m
–
–
–
–
2020
£m
432.2
146.2
578.4
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
The disclosures above represent the interest profile and currency profile of financial liabilities before the impact of derivative financial instruments.
In June 2020, the Group completed the refinancing of its US$950m Revolving Credit Facility (RCF) which was due to expire in September 2021.
This has been replaced with a US$950m RCF with a syndicate of 12 global banks and will mature in June 2023 with the option to extend for
up to a further two years. The Group’s £300m term loan facility was also replaced, previously maturing in December 2020, and refinanced as
a £200m facility to mature in March 2022. Both the RCF and term loan now include a link to the Group’s sustainability goals and the covenant
terms remain unchanged.
In February 2020, the Group entered into a new loan facility under the Bank of England’s Covid-19 Corporate Financing Facility (CCFF). The total
available amount under the facility is £300m of which £nil was drawn as at 31 December 2020 and is due to mature in May 2021.
At 31 December 2020, £468.8m (2019: £158.3m) was drawn under the US$950m multi-currency revolving credit facility and is net of unamortised
issue costs of £5.1m (2019: £nil).
At 31 December 2020, £198.9m (2019: £299.6m) was drawn under the £200m term loan facility and is net of unamortised issue costs of £1.1m
(2019: £0.4m).
At 31 December 2020, a total of £nil (2019: £190.5m) was outstanding under the Group’s US$1bn commercial paper programme.
At 31 December 2020, a total of £578.4m (2019: £595.1m) was outstanding under private placement which is net of total unamortised issue
costs of £0.3m (2019: £0.5m).
177
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
19. TRADE & OTHER PAYABLES
Current
Trade payables
Other creditors
Other taxes & social security costs
Accruals
Contract liabilities
Non-current
Other payables
2020
£m
210.7
9.6
13.7
140.0
39.9
413.9
0.3
0.3
2019
£m
306.7
12.7
12.5
191.6
66.1
589.6
–
–
Trade & other payables classified as held for sale are included in note 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 2020 for continuing operations was £71.2m (2019: total Group £95.0m) and may be voluntarily
cancelled under bilateral terms of 30 days notice. At 31 December 2020, suppliers chose to utilise supply chain financing facilities of £32.8m
on a continuing basis, or £40.7m for total Group (2019: total Group £45.6m).
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 2020 and
31 December 2019 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
2020
£m
2.0
37.9
39.9
2019
£m
3.7
62.4
66.1
The decrease in total contract liabilities in the year primarily relates to revenue now recognised on contracts previously included within
deferred income.
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:
Continuing operations
Discontinued operations
Total Group
Transaction price allocated to unsatisfied performance obligations
Restated
(note 2)
2019
£m
27.4
0.9
28.3
2020
£m
43.7
–
43.7
The transaction price allocated to performance obligations unsatisfied at the year end for continuing operations is £55.6m (2019: total Group
£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 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
2020
£m
48.5
7.1
55.6
2019
£m
90.8
33.2
124.0
178
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 20. PROVISIONS
At 31 December 2019
Additions
Utilised
Unutilised
Transferred to liabilities held for sale (note 8)
Exchange adjustment
At 31 December 2020
Current 2020
Non-current 2020
At 31 December 2020
Current 2019
Non-current 2019
At 31 December 2019
Warranties
& contract
claims
£m
13.5
9.7
(13.1)
(1.0)
(2.6)
–
6.5
6.1
0.4
6.5
12.4
1.1
13.5
Asbestos-
related
£m
47.6
30.1
(7.3)
(0.1)
–
(2.6)
67.7
Employee-
related
£m
17.8
11.5
(13.0)
–
(3.9)
0.1
12.5
Exceptional
rationalisation
£m
12.8
27.6
(26.7)
(0.7)
(4.4)
(0.1)
8.5
7.7
60.0
67.7
7.2
40.4
47.6
6.8
5.7
12.5
7.7
10.1
17.8
7.7
0.8
8.5
12.0
0.8
12.8
Other
£m
11.8
2.1
(1.8)
(1.4)
(0.3)
(0.3)
10.1
0.9
9.2
10.1
2.9
8.9
11.8
Total
£m
103.5
81.0
(61.9)
(3.2)
(11.2)
(2.9)
105.3
29.2
76.1
105.3
42.2
61.3
103.5
The impact of discounting is not material for any category of provision.
Warranties & contract claims
Provision has been made in respect of actual warranty 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. At 31 December 2020, the warranties portion
of the provision totalled £5.7m for continuing operations. The majority of these costs relate to claims which fall due within one year of the balance
sheet date and 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. At 31 December 2020, the
contract claims element of the provision was £0.8m, all of which is expected to be incurred within one year of the balance sheet date.
Asbestos-related claims
US asbestos-related provision – pre-1981 date of first exposure
US asbestos-related provision – post-1981 date of first exposure
US asbestos-related provision – total
UK asbestos-related provision
Total asbestos-related provision
US asbestos-related provision
2020
£m
61.4
3.1
64.5
3.2
67.7
2019
£m
43.4
1.0
44.4
3.2
47.6
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 dates of alleged exposure currently range from the
1950s to the 1980s.
The Group has historically held comprehensive insurance cover for cases of this nature and continues to do so for claims with a date of first
exposure (dofe) pre-1981. The expiration of one of the Group’s insurance policies in 2019 resulted in no further insurance cover for claims with a
post-1981 dofe. All claims are directly administered by National Coordinating Counsel on behalf of the Group’s insurers who also meet associated
defence costs. The insurers, their legal advisers and in-house counsel agree and execute the defence strategy between them.
A summary of the Group’s US asbestos-related claim activity is shown in the table below.
Number of open claims
Opening
New
Dismissed
Settled
Closing
2020
Number
1,551
528
(309)
(184)
1,586
2019
Number
1,383
683
(361)
(154)
1,551
179
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
20. PROVISIONS continued
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 2020 as part of our planned triennial actuarial update.
This review is based on an industry standard epidemiological decay model, and Weir’s claims settlement history. The 2020 review reflected higher
levels of claims, particularly relating to the 1970s and 1980s, and a longer dofe period, but lower settlement values than the previous review
conducted in 2017. The actuarial model incorporates claims, with a dofe pre- and post-1981, primarily relating to lung cancer and mesothelioma
and includes estimates relating to:
• the number of future claims received;
• settlement rates by disease type;
• mean settlement values by disease type;
• ratio of defence costs to indemnity value; and
• the profile of associated cash flows through to 2049.
The actuarial model provides a range of potential liability based on levels of probability from 10% to 90%, which, on an undiscounted basis,
equates to £53m-£133m. The mean actuarial estimate of £91m represents the expected undiscounted value over the range of reasonably
possible outcomes. The provision in the financial statements is based on the mean actuarial estimate which is then adjusted to reflect discounting
and restricting our estimate to ten years of future claims.
Period of future claims provided
Discount rate
2020
10 years
2.1%
2019
10 years
3.0%
The period over which the provision can be reliably estimated is judged to be ten years due to the inherent uncertainty resulting from the
changing nature of the US litigation environment detailed below, and cognisant of the broad range of probability levels included within the
actuarial model. While claims may extend past ten years and may result in a further outflow of economic benefits, the directors do not believe any
obligation which may arise beyond ten years can be reliably measured at this time. The effect of extending the claims period by a further ten years
is included in the sensitivities below. The discount rate is set based on the yield available at the balance sheet date denominated in the same
currency, and with a term broadly consistent to that of the liabilities being provided for, with sensitivities to the discount rate also included below.
Confirmation was also received from external advisers of the insurance asset available and the estimated defence costs which would be met
by the insurer. Based on the profile of the claims in the actuarial model, external advisors expect the insurance cover and associated limits
currently in place to be sufficient to meet the settlement and associated costs until c.2029. Therefore, no cash flows to or from the Group, related
to claims with an exposure date pre-1981, are expected until that time. Claims with an exposure date post-1981 are estimated to incur cash
outflows of less than £0.4m per annum and are not insured currently or in the future.
The table below represents the Directors’ best estimate of the future liability and corresponding insurance asset.
US asbestos-related provision
Gross provision
Effect of discounting
Discounted US asbestos-related provision
Insurance asset
Net US asbestos-related liability
The net provision and insurance asset are presented in the accounts as follows.
Provisions - current
Provisions - non-current
Trade & other receivables
Long-term receivables
2020
£m
72.7
(8.2)
64.5
52.4
12.1
2020
£m
7.2
57.3
7.2
45.2
2019
£m
50.6
(6.2)
44.4
43.4
1.0
2019
£m
7.1
37.3
7.0
36.4
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.
180
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 As a result, 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. The results of this analysis are
shown below.
Estimated impact on the discounted US asbestos-related provision of
Increasing the number of projected future settled claims by 10%
Increasing the estimated settlement value by 10%
Increasing the basis of provision by ten years
Decreasing the discount rate by 50bps
2020
£m
5.6
6.2
5.5
1.8
Application of these sensitivities, on an individual basis, would not lead to a material change in the provision.
The Group’s US subsidiaries have been effective in managing the asbestos litigation, in part, because the Group has access to historical project
documents and other business records going back more than 50 years, allowing it to defend itself by determining if legacy products were present
at the location of the alleged asbestos exposure and, if so, the timing and extent of their presence. In addition, the Group has consistently and
vigorously defended claims that are without merit.
UK asbestos-related 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 1950s to 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 (2019: £3.2m).
Employee-related
Employee-related provisions arise from legal obligations in a number of territories in which the Group operate, the majority of which relate to
compensation associated with periods of service. A large proportion of the provision is for long service leave. The outflow is generally dependent
upon the timing of employees’ period of leave with the calculation of the majority of the provision being based on criteria determined by the
various jurisdictions.
Exceptional rationalisation
The exceptional rationalisation provision relates to exceptional charges included within note 5 where the cost is based on a reliable estimate of
the obligation.
The opening balance of £12.8m relates to restructuring costs booked in prior periods. The utilised balance includes £8.7m of cash settlements in
2020 and £1.5m of non-cash settlements, with £0.7m unutilised relating to Oil & Gas restructuring costs. The closing balance includes £1.9m for
onerous contract provisions in Minerals with £0.8m classified as non-current.
Additions in the year, related to continuing operations, total £19.8m. This includes £9.7m in Minerals for Covid-19 restructuring and other costs,
plus legal and consultancy fees related to the Black Economic Empowerment transaction in South Africa. In respect of ESCO, additions of £4.2m
relate to Covid-19 restructuring and other costs along with final integration charges. The remaining balance includes £1.8m related to Central
restructuring and £4.1m for Oil & Gas disposal costs where work streams were committed. In the year £13.1m was cash settled, with the closing
balance of £6.6m related to severance costs in Minerals and Oil & Gas disposal costs.
Discontinued operations included additions in the year of £7.8m relating to restructuring and other costs, onerous purchase contracts and
Covid-19 incremental charges, with £3.4m being cash settled in the year. The closing balance, which is expected to settle within 12 months, was
transferred to liabilities held for sale and included provisions for onerous purchase contracts and final restructuring and rationalisation costs.
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. The timing of outflows is difficult
to predict as many of these will ultimately rely on legal resolutions and the expected conclusion is based on information currently available.
Where certain outcomes are unknown, a range of possible scenarios is calculated, with the most likely being reflected in the provision.
181
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
21. 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 (note 8)
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 (note 8)
2020
£m
2019
£m
33.5
7.3
0.1
163.6
(142.1)
62.4
54.9
7.5
62.4
(21.0)
(9.4)
(132.9)
(0.3)
142.1
(21.5)
(21.4)
(0.1)
(21.5)
28.1
1.3
1.0
154.2
(123.4)
61.2
29.2
32.0
61.2
(11.3)
(9.0)
(131.1)
(1.0)
123.4
(29.0)
(29.0)
–
(29.0)
Net deferred income tax asset
40.9
32.2
The movement in deferred income tax assets and liabilities during the year was as follows.
At 1 January 2019
(Charged) credited to the income statement (note 7)
Credited to equity (note 7)
Disposal of business
Exchange adjustment
At 31 December 2019
(Charged) credited to the income statement (note 7)
Credited to equity (note 7)
Exchange adjustment
At 31 December 2020
Post-
employment
benefits
£m
30.7
(2.0)
0.8
(0.8)
(0.6)
28.1
(0.9)
6.5
(0.2)
33.5
Accelerated
depreciation
for tax
purposes
£m
(21.7)
8.4
–
2.1
1.2
(10.0)
(4.8)
–
1.1
(13.7)
Overseas
tax on
unremitted
earnings
£m
(8.1)
(1.6)
–
–
0.7
(9.0)
(0.4)
–
–
(9.4)
Untaxed
reserves, tax
losses & other
temporary
differences
£m
136.4
33.1
0.2
(11.3)
(5.2)
153.2
12.2
1.3
(3.4)
163.3
Intangible
assets
£m
(188.1)
51.6
–
4.1
2.3
(130.1)
(6.2)
–
3.5
(132.8)
Continuing operations
Discontinued operations
At 31 December 2020
33.5
–
33.5
(14.5)
0.8
(13.7)
(9.4)
–
(9.4)
(135.3)
2.5
(132.8)
159.2
4.1
163.3
Total
£m
(50.8)
89.5
1.0
(5.9)
(1.6)
32.2
(0.1)
7.8
1.0
40.9
33.5
7.4
40.9
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. Included in this balance is a deferred tax asset in relation to tax losses of £54.7m.
This includes £44.5m relating to US tax losses and £5.6m relating to UK tax losses.
Deferred tax assets of £59.9m have been recognised in respect of entities which have suffered a loss in either the current or preceding period.
Deferred tax assets have been recognised in these territories on the basis of forecast future profitability. Of the recognised deferred tax assets,
£8.6m of US foreign tax credits have a ten year time expiry with the earliest expiration date being 2026, £4.2m of US research and development
tax credits have a 20 year time expiry with the earliest expiration date being 2028, and £3.8m of US State attributes have a 20 year time expiry.
Deferred tax asset balances for unused tax losses of £69.7m (2019: £21.7m) have not been recognised on the grounds that there is insufficient
evidence that these assets will be recoverable.
182
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 This includes £46.6m of US deferred tax assets not recognised, but retained by the continuing US group, in connection with the disposal of
the US entities within the Oil & Gas Division. US deferred tax asset recognition was determined by the application of a model which estimates
the future forecast levels of US taxable income with reference to the Group’s five year strategic plan. Assets de-recognised include foreign tax
credits of £23.5m where expiry of these attributes is within five years. The ongoing application of this model may result in future changes to the
amount of US deferred tax assets that remain unrecognised.
Deferred tax asset balances for capital losses amounting to £6.3m (2019: £5.9m) have not been recognised but would be available in the event of
future taxable capital gains being incurred by the Group.
Unrecognised assets will be recovered when future tax charges are sufficient to absorb these tax benefits.
The net deferred tax asset due after more than one year is £40.9m (2019: £32.2m).
Temporary differences associated with Group investments
A deferred tax liability of £9.4m (2019: £9.0m) has been recognised in respect of taxes on the unremitted earnings of the South American and
Canadian subsidiaries. As at 31 December 2020, 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 £2,355.1m (2019: £2,430.7m).
There are no income tax consequences attaching to the payment of dividends by the Company to its Shareholders.
UK corporation tax rate changes
Finance Bill 2016 enacted provisions to reduce the main rate of UK corporation tax to 17% from 1 April 2020. However in the March 2020 Budget
it was announced that the reduction in the UK rate to 17% would now not occur and the corporation tax rate would be held at 19%. This was
subsequently enacted in Finance Act 2020 on 22 July. Consequently, deferred tax has been provided on UK temporary differences at 19%
(2019: 17.1%).
183
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
22. 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
At the balance sheet date, the Group has a funded defined benefit plan (the Main 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. The liabilities of the Group’s former Executive Plan, which was previously accounted
for on the balance sheet, have now been transferred in full to an insurer. The Executive Plan’s assets, primarily insurance policies, and liabilities
have therefore been removed from the Group’s balance sheet as at 31 December 2020.
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.
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 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 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 15% 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 12 years.
The defined benefit plans in the UK and North America expose the Group to a number of risks.
• Uncertainty in benefit payments
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.
• Volatility in asset values
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.
• Uncertainty in cash funding
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.
• Exchange rate movements
Movements in exchange rates will affect the value in GBP of the assets and obligations of the Group’s
North American defined benefit plans.
184
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
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 (RPI) 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
2020
2019
2020
2019
1.4
3.0
21.3
23.2
22.6
24.8
2.9
2.1
2.1
n/a
2.1
3.0
21.1
23.1
22.5
24.6
2.9
2.0
1.9
n/a
2.1
n/a
20.4
22.3
21.9
23.7
n/a
n/a
n/a
*
3.0
n/a
20.5
22.5
22.1
24.1
n/a
n/a
n/a
**
* Between 5.5% and 7.2% per annum decreasing to 4.5% per annum and remaining static at that level from 2031 onwards.
** Between -4.8% and 7.3% 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 2041 (in 20 years’
time). No specific allowance has been made in the mortality assumptions for the potential impact of Covid-19.
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)
Multi Asset Credit Funds
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 pension
North American pensions &
post-retirement healthcare
2020
£m
211.2
65.1
45.1
102.6
330.4
–
26.3
39.3
11.3
831.3
(925.7)
(94.4)
(1.4)
(95.8)
(95.8)
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)
2020
£m
48.4
3.1
47.1
36.2
–
4.9
–
–
0.3
140.0
(169.7)
(29.7)
(35.3)
(65.0)
(65.0)
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)
Total
2020
£m
2019
£m
259.6
68.2
92.2
138.8
330.4
4.9
26.3
39.3
11.6
971.3
(1,095.4)
(124.1)
(36.7)
(160.8)
(160.8)
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)
Of the Government bonds held at 31 December 2020, 47% 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.
185
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
22. PENSIONS & OTHER POST-EMPLOYMENT BENEFIT PLANS continued
In 2020 the UK Main Plan’s Trustees invested in Multi Asset Credit. The purpose of this investment is to offer similar returns to that of the private
debt already held, while giving increased diversification of the Main Plan’s invested assets.
The decrease in the value of the UK insurance policies at the 2020 year end compared with the 2019 year end is largely due to the removal of
the UK Executive Plan insurance policy from the 2020 year end balance sheet, as a result of the Executive Plan’s assets and liabilities being fully
transferred to an insurer.
The change in net liabilities recognised in the Consolidated Balance Sheet is comprised as follows.
Opening net liabilities
Expense charged to the Consolidated Income Statement
Amount recognised in the Consolidated Statement
of Comprehensive Income
Employer contributions
Exchange adjustment
Closing net liabilities
UK pension
North American pensions &
post-retirement healthcare
Total
2020
£m
(69.3)
(2.0)
(30.1)
5.6
–
(95.8)
2019
£m
(72.1)
(1.9)
(3.4)
8.1
–
(69.3)
2020
£m
(69.4)
(3.4)
(4.4)
10.4
1.8
(65.0)
2019
£m
(77.0)
(3.9)
(1.8)
10.5
2.8
(69.4)
2020
£m
(138.7)
(5.4)
(34.5)
16.0
1.8
(160.8)
2019
£m
(149.1)
(5.8)
(5.2)
18.6
2.8
(138.7)
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.
UK pension
North American pensions &
post-retirement healthcare
Total
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 Consolidated Income
Statement
Recognised in the Consolidated Statement
of Comprehensive Income
Actual return on plan assets
Less: interest on plan assets
Other actuarial gains (losses) due to:
Changes in financial assumptions
Changes in demographic assumptions
Experience on benefit obligations
Actuarial losses recognised in the Consolidated
Statement of Comprehensive Income
2020
£m
–
(0.6)
–
–
(0.6)
(1.4)
(2.0)
96.2
(16.8)
79.4
(106.6)
(2.9)
–
(30.1)
2019
£m
–
–
–
–
–
(1.9)
(1.9)
95.5
(21.4)
74.1
(97.9)
20.4
–
(3.4)
2020
£m
(0.4)
–
–
(1.1)
(1.5)
(1.9)
(3.4)
20.3
(3.9)
16.4
(20.8)
1.3
(1.3)
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
2020
£m
(0.4)
(0.6)
–
(1.1)
(2.1)
(3.3)
(5.4)
116.5
(20.7)
95.8
(127.4)
(1.6)
(1.3)
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
(4.4)
(1.8)
(34.5)
(5.2)
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 £11.3m in 2020 (2019: £12.9m) in addition to the Group’s regular contributions.
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.
186
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 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%. The funding valuation as at 31 December 2020 is in progress and is expected to conclude
in 2021.
The Trustees of the UK Executive Plan, which was previously consolidated within the Group’s accounting figures, entered into a full buy-in
transaction with Scottish Widows in 2017. A final balancing premium was paid during 2020, and the responsibility of this Plan is now with the
insurer. The Executive Plan has therefore been removed from the Group’s balance sheet as at 31 December 2020, with £47.1m of liabilities and
plan assets being removed as disclosed below.
The Group has taken legal advice regarding its UK arrangements to confirm the accounting treatment under IFRIC 14 with regard to recognition
of a 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.
Based on the current funding valuations, the total Group contributions for 2021 (including those expected from the SLP in the UK) are expected
to be £12.1m.
Changes in the present value of the defined benefit obligations are analysed as follows.
Opening defined benefit obligations
Current service cost
Past service cost
Interest on benefit obligations
Benefits paid
Actuarial gains (losses) due to
Changes in financial assumptions
Changes in demographic assumptions
Experience on benefit obligations
Liabilities removed due to curtailments/settlements
Exchange rate adjustment
Closing defined benefit obligations
Changes in the fair value of plan assets are analysed as follows.
Opening plan assets
Interest on plan assets
Employer contributions
Administrative expenses
Benefits paid
Actual return on plan assets less interest on plan assets
Assets distributed on settlements
Exchange rate adjustment
Closing plan assets
UK pensions
North American pensions &
post-retirement healthcare
Total
2020
£m
(883.7)
–
(0.6)
(18.2)
37.8
(106.6)
(2.9)
–
47.1
–
(927.1)
2019
£m
(821.2)
–
–
(23.3)
38.3
(97.9)
20.4
–
–
–
(883.7)
2020
£m
(196.8)
(0.4)
–
(5.8)
13.1
(20.8)
1.3
(1.3)
–
5.7
(205.0)
2019
£m
(192.8)
(1.0)
–
(7.5)
13.7
(19.9)
3.0
0.3
1.1
6.3
(196.8)
2020
£m
(1,080.5)
(0.4)
(0.6)
(24.0)
50.9
(127.4)
(1.6)
(1.3)
47.1
5.7
(1,132.1)
2019
£m
(1,014.0)
(1.0)
–
(30.8)
52.0
(117.8)
23.4
0.3
1.1
6.3
(1,080.5)
UK pensions
North American pensions &
post-retirement healthcare
Total
2020
£m
814.4
16.8
5.6
–
(37.8)
79.4
(47.1)
–
831.3
2019
£m
749.1
21.4
8.1
–
(38.3)
74.1
–
–
814.4
2020
£m
127.4
3.9
10.4
(1.1)
(13.1)
16.4
–
(3.9)
140.0
2019
£m
115.8
4.6
10.5
(1.1)
(13.7)
14.8
–
(3.5)
127.4
2020
£m
941.8
20.7
16.0
(1.1)
(50.9)
95.8
(47.1)
(3.9)
971.3
2019
£m
864.9
26.0
18.6
(1.1)
(52.0)
88.9
–
(3.5)
941.8
187
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
22. PENSIONS & OTHER POST-EMPLOYMENT BENEFIT PLANS continued
Sensitivity analysis
Changes in key assumptions can have a significant effect on the reported retirement benefit obligation and the Consolidated Income Statement
expense for 2021. 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 one year change
Effect on net liability of a one year change
Increase
Decrease
Increase
Decrease
2020
£m
165.3
132.5
(103.9)
(75.5)
(39.1)
(24.3)
2020
£m
(198.7)
(161.9)
94.0
67.6
39.1
24.3
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
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.
23. SHARE CAPITAL & RESERVES
Issued & fully paid share capital
At the beginning of the year
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
2020
Number
million
2019
Number
million
259.6
259.6
259.6
259.6
–
1.0
(0.6)
0.4
0.2
0.7
(0.9)
–
The Company has one class of ordinary share with a par value of 12.5p which carries no rights to fixed income.
As at 31 December 2020, Computershare Investor Services PLC held the following shares, which are subject to restriction, on behalf
of individuals:
• 24,478 shares (2019: 24,478) for the ESCO restricted awards made under the ESCO 2010 stock incentive plan. These shares have a market
value of £0.5m.
• 97,765 shares (2019: 61,418) for the performance shares that have vested under the LTIP. These shares have a market value of £2.0m.
• 8,093 shares (2019: nil) for the restricted shares that have vested under the Share Reward Plan. These shares have a market value of £0.2m.
• 58,816 shares (2019: 39,396) for the bonus shares awarded under the Share Reward Plan. These shares have a market value of £1.2m.
As at 31 December 2020, 15,988 (2019: 24,045) shares were unallocated and held by the Estera Employee Benefit Trust (EBT) with a market
value of £0.3m.
As at 31 December 2020, 351,950 (2019: nil) shares were unallocated and held by the Computershare Employee Benefit Trust (EBT) with
a market value of £7.0m.
Reserves
The period movements on the below reserves are summarised in the Consolidated Statement of Changes in Equity.
Merger reserve
The merger reserve was created by the issue of new equity in relation to the acquisition of Delta Industrial Valves Inc. during 2015, which resulted
in a reserve of £9.4m. The shares issued directly to ESCO Shareholders on 12 July 2018 qualified for merger relief under Section 612 of the
Companies Act 2006 and resulted in an increase to the reserve of £323.2m.
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.
188
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 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 2019, 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
24. ADDITIONAL CASH FLOW INFORMATION
Total operations
Net cash generated from operations
Operating profit – continuing operations
Operating loss – discontinued operations
Operating loss – total operations
Exceptional and other adjusting items
Amortisation of intangible assets
Share of results of joint ventures
Depreciation of property, plant & equipment
Depreciation of right-of-use assets
Impairment of property, plant & equipment
Grants received
Gains 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
Decrease (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 and other adjusting 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 and other adjusting items are detailed in note 5.
2020
£m
(0.1)
–
(1.8)
(1.9)
Notes
2020
£m
8
5
12
14
11
11
26
22
234.3
(255.0)
(20.7)
257.1
53.4
(5.5)
52.8
41.9
0.2
(0.4)
(0.3)
(2.6)
9.3
14.5
(7.6)
392.1
44.2
130.0
(194.1)
372.2
(11.3)
(24.1)
(63.4)
273.4
2019
£m
–
(0.2)
(0.5)
(0.7)
Restated
(note 2)
2019
£m
235.7
(561.2)
(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
189
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
24. ADDITIONAL CASH FLOW INFORMATION continued
The following tables summarise the cash flows arising on acquisitions and disposals (note 8).
Acquisitions of subsidiaries
Acquisition of subsidiaries – cash paid
Total cash outflow relating to acquisitions
Net cash inflow (outflow) arising on disposals
Consideration received net of costs paid & cash disposed of
Pre-disposal costs incurred to date – Oil & Gas Division
Prior period disposals – settlement of final costs and final completion adjustment
Total cash (outflow) inflow relating to disposals
Net debt comprises the following
Cash & short-term deposits (note 17)
Current interest-bearing loans & borrowings (note 18)
Non-current interest-bearing loans & borrowings (note 18)
Assets and liabilities held for sale (note 8)
Reconciliation of financing cash flows to movement in net debt
2020
£m
–
–
–
(2.1)
(4.7)
(6.8)
2020
£m
2019
£m
(0.1)
(0.1)
244.6
–
0.1
244.7
2019
£m
351.7
(26.5)
(1,332.6)
(44.0)
(1,051.4)
273.8
(534.1)
(896.2)
–
(1,156.5)
Cash
movements
£m
117.2
Additions
£m
–
Disposals
£m
–
Non-cash
movements
£m
–
FX
£m
(15.2)
Closing
balance
at 31
December
2020
£m
374.1
Transferred
to assets/
liabilities
held for
sale
£m
23.0
Total
continuing
operations
£m
351.1
–
–
–
–
–
–
–
11.1
1.2
–
12.3
–
0.6
(2.2)
(1.6)
(1,252.6)
(179.4)
6.5
(1,425.5)
–
(67.0)
–
(67.0)
(1,252.6)
(112.4)
6.5
(1,358.5)
(2.9)
(1.6)
(1,051.4)
(44.0)
(1,007.4)
–
6.4
(2.5)
–
(2.5)
12.3
4.8
(1,428.0)
(67.0)
(1,361.0)
Opening
balance
at 31
December
2019
£m
272.1
(1,244.5)
(185.0)
0.9
(1,428.6)
Cash & cash equivalents
Third-party loans
Leases
Unamortised issue costs
Amounts included in gross debt
(19.2)
43.4
7.8
32.0
–
(39.6)
–
(39.6)
Amounts included in net debt
(1,156.5)
149.2
(39.6)
Financing derivatives
(3.8)
(5.1)
–
Total financing liabilities*
(1,432.4)
26.9
(39.6)
* Total financing liabilities comprise gross debt plus other liabilities relating to financing activities.
190
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 –
–
–
–
–
–
–
–
–
(1,244.5)
(185.0)
0.9
(1,428.6)
(1,156.5)
(3.8)
–
(3.8)
(1,432.4)
2020
£m
7.5
0.3
2019
£m
18.0
0.5
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
–
Total
continuing
operations
£m
272.1
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 year include the transition impact of IFRS 16 ‘Leases’ in the opening balance sheet, totalling £194.1m.
25. COMMITMENTS & LEGAL CLAIMS
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 for continuing operations amounted to £0.7m (2019: total Group £1.5m).
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 probable. All other claims are believed to be
remote or are not yet ripe.
26. 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. The SRP
replaced the Long Term Incentive Plan 2014 (LTIP) under which the types of awards which were granted included: Performance shares, Restricted
shares and Bonus shares. Details of the SRP are outlined in the Remuneration Report on pages 103 to 127.
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.
In 2019, the Weir Group All-Employee Share Ownership Plan (Weir ShareBuilder) launched. Awards granted under ShareBuilder are free shares
given to all employees who meet the eligibility criteria. Awards granted in 2019 vest in two tranches. One third of the shares awarded vested on
9 May 2020 and the remaining shares will vest on 9 May 2021. Dividend equivalents will be added in the form of shares at each vesting date.
Awards granted in 2020 vest in one tranche on the second anniversary of the grant 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.
191
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
26. EQUITY SETTLED SHARE-BASED PAYMENTS continued
Performance shares
Outstanding at the beginning of the year
Vested during the year
Forfeited during the year
Outstanding at the end of the year
Restricted shares
Outstanding at the beginning of the year
Awarded during the year
Vested during the year
Forfeited during the year
Outstanding at the end of the year
Weir ShareBuilder Plan (WSBP)
Outstanding at the beginning of the year
Awarded during the year
Exercised during the year
Outstanding at the end of the year
2020
Number
million
0.4
(0.2)
(0.2)
–
2020
Number
million
1.1
1.4
(0.4)
(0.2)
1.9
2020
Number
million
0.2
0.2
(0.1)
0.3
2020
WASP
£17.46
£18.58
£16.75
–
2020
WASP
£17.91
£8.69
£18.54
£12.91
£11.74
2020
WASP
£16.32
£16.57
£16.32
£16.47
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
In respect of awards issued in the year and revised estimates of previously issued awards, an amount of £9.3m has been charged (2019: £12.9m)
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, Weir ShareBuilder and one-off conditional share awards at the end of the period are
as follows.
Year of award
2016
2017
2018
2019
2020
2020
Number
million
–
–
0.2
0.4
1.6
Remaining
contractual
life
–
–
11 months
10 months
16 months
2019
Number
million
0.1
0.4
0.3
0.9
–
Remaining
contractual
life
8 months
3 months
16 months
17 months
–
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 Weir ShareBuilder
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 Weir ShareBuilder awards at grant date and occasional one-off conditional awards at grant date is also estimated on this basis.
ii) Performance shares
Performance shares were last granted in 2017. No further performance shares have been granted.
Bonus shares
Under the Group’s annual bonus plan, Executive Directors and members of the Group Executive defer 30% of any bonus received 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 in Computershare Trust Company, N.A., CPU Share Plans Pty Ltd
and Computershare Investor Services PLC until such time as they are vested. Forfeited shares are reallocated in subsequent grants. Under the
terms of the Trust Deed, Weir Group is required to provide the 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 2020, 25,464 shares were awarded (2019: 20,577).
The fair value of the rights at grant date was estimated by taking the market price of the Company’s shares on that date.
192
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
27. RELATED PARTY DISCLOSURE
The following table provides the total amount of significant transactions which have been entered into by the Group 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
5.9
9.6
–
–
Sales to
related
parties
– services
£m
0.1
0.2
–
–
Purchases
from related
parties
– goods
£m
19.3
21.4
–
–
Purchases
from related
parties
– services
£m
0.3
0.8
–
–
Amounts
owed to
related
parties
£m
–
–
5.9
6.1
2020
2019
2020
2019
Contributions to the Group pension plans are disclosed in note 22.
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 2020, the Group has not raised any provision for
doubtful debts relating to amounts owed by related parties (2019: £nil) as the payment history has been excellent. This assessment is undertaken
each financial year through examining the financial position of the related party and the market in which the related party operates.
Compensation of key management personnel
Short-term employee benefits*
Share-based payments
Post-employment benefits
*
Included in short-term employee benefits for 2020 is £1.2m related to specific retention and incentive awards (2019: £nil).
Emoluments paid to the Directors of The Weir Group PLC
Remuneration
Gains made on the exercise of Long Term Incentive Plan awards
2020
£m
6.6
0.7
0.3
7.6
2020
£m
2.1
0.1
2.2
2019
£m
6.2
3.5
0.2
9.9
2019
£m
2.8
0.8
3.6
Key management comprises the Board and the Group Executive. Further details of the Directors’ remuneration are disclosed in the Directors’
Remuneration Report on pages 103 to 127.
193
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
28. 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
Cross-currency swaps 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
B. Financial assets and liabilities
2020
£m
–
0.1
0.1
0.2
4.3
11.5
16.0
–
(0.1)
(0.9)
(17.9)
(18.9)
–
–
(2.8)
(0.1)
(2.9)
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)
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.
During the years ended 31 December 2020 and 31 December 2019, 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 2020, cash & short-term deposits of £351.7m (2019: £273.8m) and current interest-bearing loans & borrowings of £26.5m
(2019: £534.1m) were presented after elimination of debit and credit balances within individual pools of £0.3m (2019: £0.2m).
During the year, the Group entered a new notional cash pooling arrangement in which individual balances are not offset for reporting purposes.
Cash & short-term deposits at 31 December 2020 includes £0.4m that is part of this arrangement and both cash and interest-bearing loans
& borrowings are grossed up by this amount.
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 2020, the Group had derivative financial instruments of £1.9m which were subject to master netting
arrangements but not offset.
194
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
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 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
Amortised cost
Fixed-rate borrowings
Floating-rate borrowings
Leases
Bank overdrafts & short-term borrowings
Trade & other payables excluding statutory liabilities & contract liabilities
Financial liabilities held for sale
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
Fair value measurement using
Carrying
amount
2020
£m
Fair value
2020
£m
Level 1
Quoted prices
in active
markets
£m
Level 2
Significant
observable
inputs
£m
Level 3
Significant
unobservable
inputs
£m
11.6
4.5
445.6
351.7
81.4
894.8
17.9
1.0
578.4
667.7
112.4
0.6
360.6
117.3
1,855.9
Carrying
amount
2019
£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
11.6
4.5
445.6
351.7
81.4
894.8
17.9
1.0
620.2
667.7
112.4
0.6
360.6
117.3
1,897.7
–
–
–
–
–
–
–
–
–
–
–
–
–
11.6
4.5
445.6
351.7
81.4
17.9
1.0
620.2
667.7
112.4
0.6
360.6
117.3
–
–
–
–
–
–
–
–
–
–
–
–
–
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
2019
£m
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
–
–
–
–
–
–
–
–
–
–
–
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.
195
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
28. 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 for continuing operations are set out in the
table below.
Year ended 31 December 2020
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 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
Net carrying
amount
£m
0.2
4.2
(0.9)
(6.3)
(2.8)
Net carrying
amount
£m
(10.0)
0.9
4.1
0.8
(4.2)
Maturity
dates
2021
2021
2021
2021 to 2023
Maturity
dates
2020
2020
2021
2020 to 2023
For each type of derivative financial instrument, the amounts recognised for the year 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 2020
Instruments measured at fair value through profit or loss (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 FVTPL
Total (losses) on instruments measured at FVTPL
Amounts recognised
in profit or loss
Other gains
(losses) in
operating
profit
£m
Total
amounts
recognised in
profit or loss
£m
Amounts recognised
in equity
Hedge
accounting
reserve
£m
Foreign
currency
translation
reserve
£m
Losses
recycled to
inventory
£m
1.9
–
–
(8.6)
(6.7)
1.9
–
–
(8.6)
(6.7)
(1.1)
–
–
–
(1.1)
–
3.6
(6.1)
–
(2.5)
–
–
–
–
–
196
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 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 FVTPL
Total gains (losses) on instruments measured at FVTPL
Hedge ineffectiveness
Amounts recognised
in profit or loss
Amounts recognised
in equity
Other gains in
operating profit
£m
Total
amounts
recognised in
profit or loss
£m
Hedge
accounting
reserve
£m
Foreign
currency
translation
reserve
£m
Losses
recycled to
inventory
£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
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.
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 2020 or 2019 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
EUR
Average hedged rates
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.
2020
0.2
0.2
–
4.4
–
2019
(10.0)
0.3
(10.3)
12.5
210.0
1.37
–
03/2021 –
05/2021
1:1
(1.1)
1.1
1.45
1.12
01/2020 –
08/2020
1:1
(1.3)
1.3
197
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
28. FINANCIAL INSTRUMENTS continued
Net investment hedging: foreign currency forwards, cross-currency swaps and borrowings
Carrying amount (£m)
Assets – derivatives
Liabilities – derivatives
Liabilities – borrowings
Notional amounts (m)
USD
ZAR
AUD
EUR
Average hedged 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)
2020
(345.3)
4.3
(1.0)
(348.6)
655.6
345.0
158.7
–
2019
(371.6)
5.6
(0.6)
(376.6)
655.6
345.0
167.5
21.0
1.32
20.23
1.79
–
01/2021 –
02/2022
1:1
6.5
(6.5)
1.32
18.39
1.81
1.13
01/2020 –
02/2022
1:1
(2.4)
2.4
* 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.
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 income
statement, these amounts are partially offset by the retranslation of foreign currency denominated receivables and payables.
198
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 Transactional foreign exchange
2020
Australian Dollar
Canadian Dollar
Euro
US Dollar
2019
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%
(2.9)
(32.3)
(1.5)
7.5
(8.2)
(32.2)
(54.1)
37.3
17.9
–
3.8
96.0
(17.7)
–
3.6
71.9
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 before adjusting items from continuing
operations was denominated in the following currencies.
US Dollar
Canadian Dollar
Chilean Peso
Euro
Australian Dollar
Chinese Yuan
Indian Rupee
Brazilian Real
Russian Rouble
South African Rand
UK Sterling
Other
Operating profit before adjusting items from continuing operations
Restated
(note 2)
2019
£m
175.5
55.1
43.2
34.2
30.1
(2.7)
8.9
6.2
9.9
4.1
(45.9)
(3.3)
315.3
2020
£m
161.5
52.8
42.3
40.4
20.3
7.5
7.3
6.3
4.8
3.2
(48.6)
7.6
305.4
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 2020, 54%
(2019: 52%) 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
Floating-rate
£m
(153.9)
–
(520.0)
2020
Fixed-rate
£m
(578.7)
–
–
Total
£m
(732.6)
–
(520.0)
Floating-rate
£m
(158.3)
(190.5)
(300.0)
2019
Fixed-rate
£m
(595.7)
–
–
Total
£m
(754.0)
(190.5)
(300.0)
Sensitivity to interest rates
Based on borrowings at 31 December 2020, a 1% increase in interest rates would have a £6.7m (2019: £6.5m) 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.
199
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
28. 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 18.
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 2020
Total Group
Forward foreign currency contracts – net (outflow) inflow
Cash flows relating to derivative financial liabilities
Trade & other payables excluding statutory liabilities & deferred income
Leases
Bank overdrafts & short-term borrowings
Bank loans
Fixed-rate notes
Cash flows relating to non-derivative financial liabilities
Year ended 31 December 2019
Total Group
Forward foreign currency contracts – net (outflow) inflow
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
Less than
1 year
1 to 2 years
2 to 5 years
More than
5 years
£m
(1.4)
(1.4)
(409.6)
(29.5)
(0.6)
(12.8)
(24.8)
(477.3)
(478.7)
Less than
1 year
£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
(0.3)
(23.5)
–
(208.6)
(447.8)
(680.2)
(679.8)
£m
0.1
0.1
–
(41.4)
–
(478.2)
(149.7)
(669.3)
(669.2)
£m
–
–
–
(30.5)
–
–
–
(30.5)
(30.5)
1 to 2 years
2 to 5 years
More than
5 years
£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)
Total
£m
(0.9)
(0.9)
(409.9)
(124.9)
(0.6)
(699.6)
(622.3)
(1,857.3)
(1,858.2)
Total
£m
(8.5)
(8.5)
(511.0)
(218.8)
(1.7)
(477.2)
(190.8)
(666.2)
(2,065.7)
(2,074.2)
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 16, 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 receivable invoices discounted at the year end and therefore derecognised
was £6.5m (2019: £21.6m) and this is reflected in the working capital cash flows section of note 24. 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.
200
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 29. 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.
Net debt to EBITDA cover - covenant basis
Net debt to EBITDA comprises net debt divided by operating loss from total operations before exceptional and other adjusting 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 Consolidated Cash Flow Statement, 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 covenant basis net debt to EBITDA is the key metric from a capital management perspective and historically
has sought to maintain the ratio below 2.0 times. Given the recent downturn in oil and gas markets, the metric is currently 2.7 times and remains
actively managed. Following the completion of the sale of the Oil & Gas Division, we anticipate the metric to reduce considerably to below 2.0
times. As we look to the future, we will seek to maintain a ratio of between 0.5 and 1.5 times.
Net debt (excluding leases) at average exchange rates (£m)
Adjusted EBITDA from continuing operations (note 2) (£m)
Adjusted EBITDA from Oil & Gas Division (£m)
Adjustment to exclude the impact of IFRS 16 (£m)
Total EBITDA - covenant basis (£m)
Net debt to EBITDA cover (ratio) - covenant basis
Interest cover - covenant basis
2020
913.1
382.6
1.8
(50.4)
334.0
2.7
2019
970.9
384.2
72.7
(49.3)
407.6
2.4
Interest cover comprises adjusted operating profit from total operations divided by adjusted net finance costs (excluding other finance costs) and
excluding the impact of IFRS 16 ‘Leases’.
Adjusted EBITA from continuing operations (note 2) (£m)
Adjusted EBITA - Oil & Gas Division (£m)
Adjustment to exclude the impact of IFRS 16 (£m)
Operating profit - covenant basis (£m)
Net finance costs (excluding other finance costs) - covenant basis (£m)
Interest cover (ratio) - covenant basis
Gearing ratio
2020
310.4
(20.6)
(8.5)
281.3
42.4
6.6
2019
315.3
36.8
(6.9)
345.2
37.2
9.3
Gearing comprises net debt divided by total equity. Net debt comprises cash & short-term deposits and interest-bearing loans & borrowings
(note 24).
Net debt (£m)
Total equity (£m)
Gearing ratio (%)
2020
1,051.4
1,317.7
79.8
2019
1,156.5
1,513.4
76.4
201
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE GROUP FINANCIAL STATEMENTS
CONTINUED
30. 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
Chinese Yuan
Indian Rupee
Closing rate (per £)
US Dollar
Australian Dollar
Euro
Canadian Dollar
United Arab Emirates Dirham
Chilean Peso
South African Rand
Brazilian Real
Russian Rouble
Chinese Yuan
Indian Rupee
2020
1.28
1.86
1.13
1.72
4.72
1,015.14
21.06
6.61
92.76
8.86
95.12
1.37
1.77
1.12
1.74
5.01
970.26
20.04
7.10
101.33
8.92
99.76
2019
1.28
1.84
1.14
1.69
4.69
897.37
18.43
5.03
82.53
8.81
89.81
1.33
1.89
1.18
1.72
4.87
994.76
18.54
5.33
82.29
9.24
94.49
31. EVENTS AFTER THE BALANCE SHEET DATE
On 1 February 2021, the Group completed the sale of its Oil & Gas Division to Caterpillar Inc.
The sale, for an enterprise value of $405m, subject to customary debt-like items and working capital adjustments, was first announced on
5 October 2020 and approved by Weir Shareholders on 23 November 2020.
Since then, the Group’s joint venture partner based in Saudi Arabia - Arabian Metals Company (AMCO) has exercised its pre-emption right, as set
out in the Class 1 Circular published on 3 November 2020, to purchase Weir’s 49% stake in AMCO. Therefore, the cash proceeds from the sale
of the Division will be split between $375m received from Caterpillar Inc. and $30m to be received on completion of the sale of AMCO, which is
expected to occur in the first half of 2021.
202
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 COMPANY BALANCE SHEET
AT 31 DECEMBER 2020
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
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
2020
£m
31 December
2019
£m
Notes
3
4
5
6
7
9
7
9
10
9
12
11
9
12
8
13
13
13
13
13
1.8
11.4
3,890.6
26.5
37.0
0.1
3,967.4
95.8
22.9
39.6
158.3
4,125.7
1,238.7
27.4
4.2
1,270.3
1,365.1
0.1
–
95.8
1,461.0
2,731.3
1,394.4
32.5
582.3
332.6
(6.8)
0.5
1.8
451.5
1,394.4
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
In accordance with the concession granted under section 408 of the Companies Act 2006, the Income Statement and Statement of
Comprehensive Income of the Company have not been separately presented in these financial statements. The profit of the company was
£164.7m (2019: £53.8m).
The financial statements on pages 203 to 217 were approved by the Board of Directors on 2 March 2021.
JON STANTON
Director
JOHN HEASLEY
Director
203
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
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 credit
Dividends (note 2)
Purchase of shares for employee share plans
Exercise of share-based payments
At 31 December 2019
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 credit
Purchase of shares for employee share plans
Exercise of share-based payments
At 31 December 2020
Share
capital
£m
32.5
–
–
–
Share
premium
£m
582.3
–
–
–
Merger
reserve
£m
332.6
–
–
–
Treasury
shares
£m
(2.1)
–
–
–
Capital
redemption
reserve
£m
0.5
–
–
–
Special
reserve
£m
1.8
–
–
–
Retained
earnings
£m
374.3
53.8
(3.4)
0.6
Total
equity
£m
1,321.9
53.8
(3.4)
0.6
–
–
–
–
–
32.5
–
–
–
–
–
–
–
32.5
–
–
–
–
–
–
–
582.3
–
–
–
–
–
–
–
332.6
–
–
–
–
–
(10.0)
11.6
(0.5)
–
–
–
–
–
–
–
–
–
582.3
–
–
–
332.6
–
(10.9)
4.6
(6.8)
–
–
–
–
–
0.5
–
–
–
–
–
–
–
0.5
–
–
–
–
–
1.8
–
–
–
51.0
51.0
13.3
(121.7)
–
(11.6)
305.3
164.7
(30.1)
5.7
13.3
(121.7)
(10.0)
–
1,254.5
164.7
(30.1)
5.7
–
140.3
140.3
–
–
–
1.8
10.5
–
(4.6)
451.5
10.5
(10.9)
–
1,394.4
204
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 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 2020 (‘2020’) were approved and
authorised for issue in accordance with a resolution of the Directors on 2 March 2021. The comparative information is presented for the year
ended 31 December 2019 (‘2019’).
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 26 to the Group
ii)
financial statements;
IFRS 7 ‘Financial Instruments: Disclosures’ exemption has been taken as a result of the disclosures in note 28 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 the following standards, amendments
and interpretations which are effective for the year ended 31 December 2020:
i) Definition of Material – amendments to IAS 1 and IAS 8;
ii) Definition of a Business – amendments to IFRS 3;
iii) Amendment to IFRS 9, IAS 39 and IFRS 7 regarding interest rate benchmark reform;
iv) Revised Conceptual Framework for Financial Reporting; and
v) Covid-19 related rent concessions – amendment to IFRS 16.
The amendments listed above are not considered to have a material impact on the Financial Statements of the Company.
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting periods and
have not been early adopted by the Company. These standards are not expected to have a material impact on the entity in the current or future
reporting periods and on foreseeable future transactions.
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.
205
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
1. ACCOUNTING POLICIES continued
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:
Long leasehold land & buildings
20 years
Office & computer equipment
3 – 10 years
ii. Right-of-use asset and lease liability
At inception of a contract, the Company 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 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.
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.
206
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 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 where applicable. 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.
Financial assets & liabilities
The Company’s principal financial assets and liabilities, other than derivatives, comprise bank overdrafts, short-term borrowings, loans and fixed-
rate notes, commercial paper, cash and short-term deposits. The Company also has other financial assets and liabilities such as trade receivables
and trade payables which arise directly from its operations.
A financial asset is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability
is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such
an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, such that the difference in
the respective carrying amounts together with any costs or fees incurred are recognised in profit or loss. 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.
207
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
1. ACCOUNTING POLICIES continued
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, or those held in Trust, 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 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.
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 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.
ii) 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 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 accounts of the Company was £164.7m (2019: £53.8m). The corporate tax credit dealt with in the accounts of the
Company was £2.6m (2019: £4.6m).
Dividends paid & proposed
Declared & paid during the period
Equity dividends on ordinary shares
Final dividend for 2019: 0.00p (2018: 30.45p)
Interim dividend for 2020: 0.00p (2019: 16.50p)
Proposed for approval by Shareholders at the Annual General Meeting
Final dividend for 2020: 0.00p (2019: 30.45p)
2020
£m
2019
£m
–
–
–
–
78.9
42.8
121.7
–
In response to the Covid-19 pandemic, on 25 March 2020, the Board took the decision to withdraw the proposal to pay the final 2019 dividend as
part of wider cash preservation actions taken by the Group. The Board did not propose an interim or final dividend for 2020.
Employee benefits expense
Wages & salaries
Social security costs
Other pension costs
Defined contribution plans
Share-based payments – equity settled transactions
During 2020, the average number of people employed by the Company was 239 (2019: 246).
2020
£m
17.6
2.7
0.7
9.3
30.3
2019
£m
21.6
3.1
0.6
12.9
38.2
208
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 Directors
Details of Directors’ remuneration, benefits and LTIP awards are included in the Remuneration Report on pages 103 to 127, and in note 27 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
£23,500 (2019: £21,630). Fees paid to PwC for non-audit services to the Company itself are not disclosed in these accounts as the Group’s
Consolidated Financial Statements, in which the Company is included, are required to disclose such fees on a consolidated basis.
Fees payable by the Company to Ernst & Young LLP for work performed in respect of the audit of the pension scheme were £39,800
(2019: £36,550).
3. INTANGIBLE ASSETS
Cost
At 31 December 2019
Additions
Disposals
At 31 December 2020
Accumulated amortisation
At 31 December 2019
Charge for the year
Disposals
At 31 December 2020
Net book value at 31 December 2019
Net book value at 31 December 2020
4. PROPERTY, PLANT & EQUIPMENT
Cost
At 31 December 2019
Additions
Disposals
At 31 December 2020
Accumulated depreciation
At 31 December 2019
Charge for the year
Disposals
At 31 December 2020
Net book value at 31 December 2019
Net book value at 31 December 2020
Right-of-use assets
Purchased
software
Total
£m
1.2
1.7
(0.9)
2.0
1.0
0.1
(0.9)
0.2
0.2
1.8
Total
£m
15.6
0.7
(1.6)
14.7
3.6
1.3
(1.6)
3.3
12.0
11.4
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
0.7
0.2
–
0.9
3.0
2.8
2.9
0.7
(1.6)
2.0
2.0
0.2
(1.6)
0.6
0.9
1.4
8.8
–
–
8.8
0.9
0.8
–
1.7
7.9
7.1
0.2
–
–
0.2
–
0.1
–
0.1
0.2
0.1
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
Income from sub-leasing 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 £0.9m (2019: £1.0m).
2020
£m
0.9
(0.3)
0.6
0.2
0.8
2019
£m
0.9
(0.4)
0.5
0.3
0.8
209
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
5. INVESTMENTS IN SUBSIDIARIES
Cost
At 31 December 2019
Additions
Disposal
Settlement
Exchange
At 31 December 2020
Impairment
At 31 December 2019
Utilisation of provision
At 31 December 2020
Net book value at 31 December 2019
Net book value at 31 December 2020
Subsidiaries
shares
£m
Loans
£m
Total
£m
3,574.8
269.3
(15.5)
–
–
3,828.6
1,312.3
–
1,312.3
1,467.9
188.2
–
(257.2)
(20.1)
1,378.8
5.4
(0.9)
4.5
5,042.7
457.5
(15.5)
(257.2)
(20.1)
5,207.4
1,317.7
(0.9)
1,316.8
2,262.5
1,462.5
3,725.0
2,516.3
1,374.3
3,890.6
The subsidiaries and joint ventures of the Company are listed on pages 218 to 224.
During 2020 the Company carried out a corporate restructure for internal financing purposes. This resulted in a series of equity investments
of £269.3m. The Company carried out an exercise to rationalise the number of its legal entities. This involved a subsequent disposal of its
investment in Weir Group Investments Limited of £15.5m.
The loan balances above are amounts owed by subsidiaries and represent short to long term funding arrangements under term or
cash management loans. Additions and settlements are movements on these loan facilities due to changes in individual subsidiary
funding requirements.
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 2020 and 31 December 2019, the loss allowances for all loans to subsidiaries were measured at an amount equal to
12 month expected credit losses.
The carrying value of loans and investments is considered to be supported by the value in use and market capitalisation of the Group.
210
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
6. DEFERRED TAX ASSETS
Deferred income tax assets
Other timing differences
Retirement benefits
Deferred income tax assets
Deferred income tax assets
Recoverable after one year
2020
£m
8.3
18.2
26.5
26.5
26.5
2019
£m
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 £37.0m (2019: £39.5m) are in respect of a
prepayment recognised as a result of the pension funding partnership structure. Further information pertaining to this arrangement can be found
in note 8.
Amounts recoverable within one year
Amounts owed by subsidiaries
Tax receivable
Other debtors
Prepayments & accrued income
2020
£m
68.4
23.3
1.8
2.3
95.8
2019
£m
103.1
21.2
2.9
1.1
128.3
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 31 December 2020 and 31 December 2019 are therefore immaterial,
and there has been no material change to the expected loss allowance during the year.
211
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
8. RETIREMENT BENEFITS
At the balance sheet date, the Company has a funded defined benefit plan (the Main 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. The liabilities of the Group’s former Executive Plan, which was previously accounted
for on the balance sheet, have now been transferred in full to an insurer. The Executive Plan’s assets, primarily insurance policies, and liabilities
have therefore been removed from the Group’s balance sheet as at 31 December 2020.
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.
The current funding target for the Main UK Plan 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 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 funded 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.
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)
2020
2019
1.4
3.0
21.3
23.2
22.6
24.8
2.9
2.1
2.1
2.1
3.0
21.1
23.1
22.5
24.6
2.9
2.0
1.9
The assumptions used to determine end-of-year benefit obligations are also used to calculate the following year’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 2041
(in 20 years time). No specific allowance has been made in the mortality assumptions for the potential impact of Covid-19.
212
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
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)
Multi Asset Credit Funds
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
2020
£m
211.2
65.1
45.1
102.6
330.4
26.3
39.3
11.3
831.3
(925.7)
(94.4)
(1.4)
(95.8)
(95.8)
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)
Of the Government bonds held at 31 December 2020, 40% 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.
In 2020 the UK Main Plan’s Trustees invested in Multi Asset Credit. The purpose of this investment is to offer similar returns to that of the private
debt already held, while giving increased diversification of the Main Plan’s invested assets.
The decrease in the value of the UK insurance policies at the 2020 year end compared with the 2019 year end is largely due to the removal of
the UK Executive Plan insurance policy from the 2020 year end balance sheet, as a result of the Executive Plan’s assets and liabilities being fully
transferred to an insurer.
The change in net liabilities recognised in the balance sheet is comprised as follows.
Opening net liabilities
Expense charged to the Income Statement
Amount recognised in Statement of Comprehensive Income
Employer contributions
Closing net liabilities
2020
£m
(69.3)
(2.0)
(30.1)
5.6
(95.8)
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
Included in operating profit
Interest on net pension liability
Total expense charged to the Income Statement
Recognised in the Statement of Comprehensive Income
Actual return on plan assets
Less: interest on plan assets
Other actuarial (losses) gains due to:
Changes in financial assumptions
Changes in demographic assumptions
Actuarial losses recognised in the Statement of Comprehensive Income
2020
£m
(0.6)
(0.6)
(1.4)
(2.0)
96.2
(16.8)
79.4
(106.6)
(2.9)
(30.1)
Past service cost and administration expenses are recognised in operating costs and interest on net pension liability is recognised in other
finance costs.
2019
£m
(72.1)
(1.9)
(3.4)
8.1
(69.3)
2019
£m
–
–
(1.9)
(1.9)
95.5
(21.4)
74.1
(97.9)
20.4
(3.4)
213
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
8. RETIREMENT BENEFITS continued
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 £5.5m in 2020 (2019: £8.0m) in addition to the Company’s regular contributions.
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 funding valuation as at 31 December 2020 is in progress and is expected to conclude
in 2021.
The Trustees of the UK Executive Plan, which was previously consolidated within the Company’s accounting figures, entered into a full buy-in
transaction with Scottish Widows in the third quarter of 2017. A final balancing premium was paid during 2020, and the responsibility of this
Plan is now with the insurer. The Executive Plan has therefore been removed from the Company’s balance sheet as at 31 December 2020, with
£47.1m of liabilities and plan assets being removed as disclosed below.
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.
Based on the current funding valuation, the total Company contributions for 2021 (including those expected from the SLP) are expected
to be £4.4m.
Sensitivity analysis
Changes in key assumptions can have a significant effect on the reported net retirement benefit obligation and the Income Statement expense
for 2021. The effects of changes in those assumptions are set out in the table below.
Discount rate
Effect on defined benefit obligation of a 1.0% change
Effect on net liability of a 1.0% change
RPI inflation (and associated assumptions)
Effect on defined benefit obligation of a 1.0% change
Effect on net liability of a 1.0% change
Life expectancy
Effect on defined benefit obligation of a one year change
Effect on net liability of a one year change
Increase
2020
£m
Decrease
2020
£m
Increase
2019
£m
Decrease
2019
£m
143.2
110.4
(103.9)
(75.5)
(32.5)
(17.7)
(173.7)
(136.9)
94.0
67.6
32.5
17.7
132.4
95.2
(99.1)
(65.5)
(31.1)
(15.1)
(159.9)
(118.0)
89.6
58.7
31.1
15.1
The impact on the net liability is significantly reduced as a result of the insurance policies held. In the absence of such policies, the impact on the
net liability would be much closer to the significantly higher impact on the defined benefit obligation shown in the table.
These sensitivities have been calculated to show the movement in the defined benefit obligation and net liability in isolation and assume no
other changes in market conditions at the accounting date. In practice, for example, a change in discount rate is unlikely to occur without any
movement in the value of the invested (non-insurance policy) assets held by the plans.
214
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020
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
Liabilities extinguished on settlements
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
Benefits paid
Actual return on plan assets less interest on plan assets
Assets distributed on settlements
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
Cross-currency swaps
Forward foreign currency contracts
Non-current liabilities
Forward foreign currency contracts
2020
£m
(883.7)
(0.6)
(18.2)
37.8
(106.6)
(2.9)
47.1
(927.1)
2020
£m
814.4
16.8
5.6
(37.8)
79.4
(47.1)
831.3
2020
£m
–
0.1
0.1
22.9
22.9
(0.9)
(26.5)
(27.4)
(0.1)
(0.1)
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
2020
£m
–
1,203.5
0.6
8.3
1.3
7.3
17.7
1,238.7
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)
2019
£m
490.0
1,125.8
1.1
14.3
1.2
7.6
23.4
1,663.4
215
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
11. INTEREST-BEARING LOANS & BORROWINGS
Amounts due are repayable as follows
Less than one year
– bank loans
– commercial paper
– loans from subsidiaries
– lease liability
More than one year but not more than two years
– bank loans
– fixed-rate notes
– 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
– commercial paper
– loans from subsidiaries
– lease liability
2020
£m
2019
£m
–
–
1,203.5
0.6
198.9
432.2
110.2
0.6
468.8
146.2
–
1.9
299.6
190.5
1,125.8
1.1
158.3
–
65.3
0.8
–
595.4
131.7
2.2
6.3
2,569.2
6.2
2,576.9
–
–
(1,203.5)
(0.6)
1,365.1
(299.6)
(190.5)
(1,125.8)
(1.1)
959.9
The loans from subsidiaries with a maturity date of less than one year are repayable in 2021 and have an interest rate of 0.35%. The loans for
subsidiaries with a maturity date greater than one year and less than two years are repayable in 2022 and have an interest rate of 4.27%.
Details of the interest and repayment terms of the bank loans, fixed-rate notes and commercial paper can be found in note 18 to the Group
financial statements.
12. PROVISIONS
At 31 December 2019
Additions
Utilised
At 31 December 2020
Current 2020
Non-current 2020
At 31 December 2020
Current 2019
Non-current 2019
At 31 December 2019
The provision mainly relates to costs associated with the sale of the Oil & Gas Division.
216
Exceptional
rationalisation
£m
0.3
22.2
(18.3)
4.2
4.2
–
4.2
0.2
0.1
0.3
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 13. SHARE CAPITAL & RESERVES
Allotted, called up & fully paid
Ordinary shares of 12.5p each
Treasury shares
At the beginning of the year
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 end of the year
Equity settled share-based payments
Share awards outstanding at the end of the year
Merger reserve
2020
£m
32.5
2019
£m
32.5
2020
Number
million
2019
Number
million
–
1.0
(0.6)
0.4
0.2
0.7
(0.9)
–
2.2
1.7
The merger reserve was created by the issue of new equity in relation to the acquisition of Delta Industrial Valves Inc. during 2015, which
resulted in a reserve of £9.4m. The shares issued directly to ESCO Shareholders on 12 July 2018 qualify for merger relief under Section 612 of
the Companies Act 2006 and resulted in an increase to the reserve of £323.2m.
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. CONTINGENT LIABILITIES & LEGAL CLAIMS
Guarantees
The Company has given guarantees in relation to the bank and other borrowings of certain subsidiary companies amounting to £686.0m
(2019: £819.3m) of which £219.0m (2019: £217.1m) was utilised at 31 December 2020. 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 probable. All other claims are believed to be
remote or are not yet ripe.
15. RELATED PARTY DISCLOSURES
The Company has taken advantage of the exemption under paragraph 8(k) of FRS 101 not to disclose transactions with related parties that are
wholly owned by a subsidiary of The Weir Group PLC. The following table provides the total amount of transactions which have been entered into
with non-wholly owned related parties for the relevant financial year and outstanding balances at the year end.
Related party
Weir ABF LP
Weir Minerals (India) Private Ltd
Vulco S.A.
2020
2019
2020
2019
2020
2019
Group charges
£m
–
–
0.7
–
4.1
1.3
Amounts
due by
£m
60.8
58.5
0.2
–
0.9
0.4
16. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The description of the Group’s financial risk management objectives and policies is provided in note 28 to the Group financial statements.
These financial risk management objectives and policies also apply to the Company.
217
Financial StatementsThe Weir Group PLC Annual Report and Financial Statements 2020 SUBSIDIARY UNDERTAKINGS
The subsidiary undertakings of the Company as at 31 December 2020 are noted below. Unless otherwise indicated, the Company’s
shareholdings are held indirectly.
Company Name
Country
Registered Office address
Class name
Aislación Sismica Perú SA
Peru
Av. Separadora Industrial, N° 2201 Urb Vulcano Ate, Lima, Peru Ordinary
Aspir Pty Ltd
Bucyrus Blades de Mexico S.A.
DE C.V.
Australia
Mexico
1-5 Marden Street, Artarmon, NSW, 2064, Australia
Ordinary
Calle 14, Manzana 4, Lote 4, Parque Industrial,
Apartado Postal 129, Atlacomulco, Mexico
Fixed Capital
Variable Capital
Common
Bucyrus Blades Inc.
United States
C T Corporation System, 4400 Easton Commons Way,
Suite 125, Columbus, OH, 43219, United States
Bucyrus Blades of Canada ULC
Canada
1800 - 510 West Georgia Street, Vancouver BC, V6B 0M3,
Canada
CAD Common
CH Warman Asia Limited
Malta
32, Sovereign Building, Zaghfran Road, Attard, ATD 9012,
Malta
Ordinary
Comercializadora TEP Limitada
Chile
San José N° 0815, San Bernardo, Santiago de Chile, Chile
Corporate Relationship
%
Dongying Weir O&G Pump
Products Co., Ltd.
China
No. 69 Dengzhou Road, Dongying Area, Dongying City,
Shandong, China
N/A
Directly
Held By
PLC*
% of
class
99.997
100
99.998
100
100
100
100
100
Duhn Oil Tool, Inc.
United States
CT Corporation System, 818 West Seventh Street, Suite 930,
Los Angeles, CA, 90017
Class A Common Stock
100
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
A Ordinary
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 (UK) Holdings Limited
England & Wales
Ings Road, Doncaster, DN5 9SN, United Kingdom
ESCO (UK) Limited
England & Wales
Ings Road, Doncaster, DN5 9SN, United Kingdom
Ordinary
Interests
Interests
Ordinary
Ordinary
ESCO (Xuzhou) Wearparts Co., Ltd. China
DaZhai Road and CuiZhuan Nan Road, Tongshan Economic
Development Zone, Xuzhou City, Jiangsu Province, 221116,
China
Corporate Relationship
%
ESCO Australia Holdings
Pty Limited
Australia
25 Trade Street, Lytton, Queensland, QLD 4178, Australia
Ordinary
ESCO Belgium SA
Belgium
ESCO Canada Finance
Company Inc.
ESCO Canada Ltd.
Canada
Canada
Rue des Fours a Chaux 122, Zoning Industriel, Frameries,
7080, Belgium
1800 - 510 West Georgia Street, Vancouver BC, V6B 0M3,
Canada
1800 - 510 West Georgia Street, Vancouver BC, V6B 0M3,
Canada
Ordinary
Common
Ordinary
ESCO Dunedin Pty Ltd
Australia
25 Trade Street, Lytton, Queensland, QLD 4178, Australia
Ordinary
ESCO Elecmetal
Fundición Limitada
Chile
Calle Miraflores, Numero 222, Piso veinticuatro, Santiago,
Chile
Corporate Relationship
%
ESCO Electric Steel Foundry
Company of Africa (Pty) Ltd
ESCO EMEA Holdings (UK)
Limited
ESCO Engineering Kingaroy
Pty Ltd
South Africa
22 Chester Road, Parkwood, Johannesburg, 2193,
South Africa
Ordinary
England & Wales
Ings Road, Doncaster, DN5 9SN, United Kingdom
Ordinary
Australia
25 Trade Street, Lytton, Queensland, QLD 4178, Australia
Ordinary
D-Ordinary
F-Ordinary
ESCO Engineering Pty Ltd
ESCO GmbH
ESCO GP Ltd.
Australia
Germany
Canada
25 Trade Street, Lytton, Queensland, QLD 4178, Australia
Ordinary
Marie-Bernays Ring 1, Moenchengladbach, 41199, Germany
Ordinary
1800 - 510 West Georgia Street, Vancouver BC, V6B 0M3,
Canada
Common
ESCO Group Holdings Pty Ltd
Australia
25 Trade Street, Lytton, Queensland, QLD 4178, Australia
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
* Directly held by PLC
** Directly and indirectly held by PLC
218
Shareholder InformationThe Weir Group PLC Annual Report and Financial Statements 2020 Company Name
ESCO Group LLC
Country
Registered Office address
Class name
United States
1209 Orange Street, Wilmington, DE 19801, United States
Membership Units
ESCO Hydra (UK) Limited
England & Wales
Ings Road, Doncaster, DN5 9SN, United Kingdom
Ordinary
Ordinary-A
ESCO Indonesia Investco No 1
Pty Ltd
ESCO Indonesia Investco No 2
Pty Ltd
Australia
25 Trade Street, Lytton, Queensland, QLD 4178, Australia
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.
Esco Latin América Comércio e
Indústria Ltda.
ESCO Limited
Japan
Brazil
Canada
122, Rue des Fours à Chaux, Zoning Industriel,
Frameries, 7080, Belgium
Marunouchi Mitsui Building, 2-2-2 Marunouchi, Chiyoda-ku,
Tokyo, 100-0005, Japan
Rua Engenheiro Gerhard Ett, nº 1.215, Galpão 02, Distrito
Industrial Paulo Camilo Sul, Betim, 32668-110, Brazil
1800 - 510 West Georgia Street, Vancouver BC, V6B 0M3,
Canada
Class A Common
ESCO Moçambique S.A.
Mozambique
Avenida Kim Il Sung, no. 961, Maputo, Mozambique
Ordinary
ESCO Northgate Pty Limited
Australia
25 Trade Street, Lytton, Queensland, QLD 4178, Australia
Ordinary
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, Moscow, 125445,
Russian Federation
ESCO S.A.S.
France
57 rue d’Amsterdam, Paris, 75008, France
Common
Ordinary
Ordinary
ESCO Servicios Mineros S.A.
Argentina
Tucuman 1, Piso 4, C1049AAA, Buenos Aires, Argentina
Ordinary
Ordinary
Ordinary
Common
Ordinary
Directly
Held By
PLC*
% of
class
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
ESCO South Africa Wearparts (Pty)
Limited
South Africa
22 Chester Road, Parkwood, Johannesburg, 2193,
South Africa
Cumulative Reedemable
Preference;
Empowerment Shares;
Ordinary-A
99.347
ESCO Supply and
Service Kazakhstan
Kazakhstan
4th floor, 192/2 Dostyk avenue, Almaty city,
050051, Kazakhstan
Esco Supply Carajás Indústria de
Peças e Equipamentos Ltda
Brazil
Rodovia PA-160, S/N, Sala B, Quadra 73, Lotes 1, 2, 3, 4,
5, 6, 7, 22, 23 e 24, Parque dos Carajas Il, Parauapebas/PA,
68515000, Brazil
Ordinary
Ordinary
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
ESCOSupply Ltd.
Fabrica de Aisladores Sismicos de
Chile Limitada
Canada
Chile
CT Corporation System, 600 North 2nd Street, Suite 401,
Harrisburg, PA, 17101
Common Stock
2500, 10175 - 101 Street, Edmonton, Alberta, T5J 0H3, Canada Class A Common
San José N° 0815, San Bernardo, Santiago de Chile, Chile
Fundición Vulco Ltda
Chile
San José N° 0815, San Bernardo, Santiago de Chile, Chile
G. & J. Weir, Limited
England & Wales
Inversiones ESCO Chile Limitada
Chile
Inversiones Linatex Chile (Holdings)
Limitada
Chile
c/o Weir Minerals Europe, Halifax Road, Todmorden,
Lancashire, OL14 5RT
Calle Miraflores, Numero 222, Piso veinticuatro,
Santiago, Chile
San José N° 0815, San Bernardo, Santiago de Chile, Chile
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 Ordinary
Linatex Asset Holdings Malaysia
Sdn. Bhd.
Malaysia
2nd Floor, No 2-4 Jalan Manau, Wilayah Persekutuan,Wilayah
Persekutuan, Kuala Lumpur, 50460, Malaysia
Ordinary
100
100
100
100
100
100
100
100
Ordinary
100
*
Corporate Relationship
% – CLP
Corporate Relationship
% – CLP
Corporate Relationship
%
Corporate Relationship
%
100
100
100
100
100
219
Shareholder InformationThe Weir Group PLC Annual Report and Financial Statements 2020 SUBSIDIARY UNDERTAKINGS
CONTINUED
Company Name
Linatex Australia Pty Limited
Linatex Chile Limitada
Linatex Chile SpA
Country
Australia
Chile
Chile
Registered Office address
Class name
1-5 Marden Street, Artarmon, NSW, 2064, Australia
Class A Shares
San José N° 0815, San Bernardo, Santiago de Chile, Chile
Class B Shares
Corporate Relationship
%
Santa Catalina de Chena 850, San Bernardo, Santiago de Chile,
Chile
Ordinary
Nominative Share
Linatex Consolidated Holdings Ltd British
Linatex Limited
Virgin Islands
England & Wales
Linatex Rubber Limited
England & Wales
Kingston Chambers, PO Box 173, Tortola, Road Town, British
Virgin Islands
c/o Weir Minerals Europe, Halifax Road, Todmorden,
Lancashire, OL14 5RT
c/o Weir Minerals Europe, Halifax Road, Todmorden,
Lancashire, OL14 5RT
Ordinary
Ordinary
Ordinary
Linatex Rubber Products Sdn. Bhd. Malaysia
2nd Floor, No 2-4 Jalan Manau, Wilayah Persekutuan,Wilayah
Persekutuan, Kuala Lumpur, 50460, Malaysia
Ordinary
Metalúrgica Vulco Ltda
Chile
San José N° 0815, San Bernardo, Santiago de Chile, Chile
Common Stock
Multiflo Pumps Pty Limited
Australia
1-5 Marden Street, Artarmon, NSW, 2064, Australia
Overseas ESCO Corporation Ltd.
British
Virgin Islands
The Lake Building, 1st Floor, Wickams Cay 1,Tortola, P. O.
Box 3152, Road Town, 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
PT Weir Pressure Control Indonesia Indonesia
Suite 701B, 7th Floor, Setiabudi Atrium, JI. H.R. Rasuna
Said Kav 62, Jakarta 12920, Indonesia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary – Class A
Ordinary – Class B
Ordinary – Class A
Ordinary – Class B
S.P.M. Flow Control, Inc.
United States
CT Corporation System, 1999 Bryan St., Suite 900, Dallas, TX,
75201, United States
Common Stock NPV –
Voting
Common Stock NPV –
Non-Voting
Seaboard Canada Ltd.
Canada
5233 49 Ave, Red Deer, AB, T4N 6G5, Canada
Common
Seaboard Holdings, LLC
United States
The Corporation Trust Company, 1209 Orange Street,
Wilmington,
DE, 19801, United States
Membership Units
Seaboard International Holding
Company (Hong Kong) Limited
Hong Kong
Level 54, Hopewell Centre, 183 Queen's Road East,
Hong Kong
Ordinary
Seaboard International LLC
United States
CT Corporation System, 1999 Bryan St., Suite 900, Dallas, TX,
75201, United States
Membership Units
Shanghai JF Engineering
Equipment Co. Ltd
Shanghai Vortex Engineering
Machinery Co. Ltd
Slurry Holdings Limited
Soldering Comercio e
Industria Ltda
Specialised Petroleum
Manufacturing Limited
China
China
Malta
Brazil
No.572, Yonghe Road, Jing'an District, Shanghai, China
N/A
Building #3, No.4918, Liuxiang Road, Jiading District, Shanghai,
China
N/A
32, Sovereign Building, Zaghfran Road, Attard, ATD 9012, Malta Ordinary
Rua Engenheiro Gerhard Ett, nº 1.215, Distrito Industrial Paulo
Camilo Sul, CEP 32669-110, Brazil
Ordinary
Scotland
SPM House, Badentoy Crescent, Badentoy Industrial Park,
Aberdeen, Portlethen, AB12 4YD
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
Ordinary
Serie A
SPM Flow Control Ltd.
Canada
5233 49 Ave, Red Deer, AB, T4N 6G5, Canada
CAD Class A Common
Thandilwa Training Centre (Pty) Ltd South Africa
22 Chester Road, Parkwood, Johannesburg, 2193, South Africa Ordinary
220
Directly
Held By
PLC*
% of
class
100
100
100
100
100
100
100
100
100
100
100
100
100
95
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Shareholder InformationThe Weir Group PLC Annual Report and Financial Statements 2020 Company Name
Country
Registered Office address
The Weir Group Insurance
Company Limited
Isle of Man
1st Floor, Goldie House, 1-4 Goldie Terrace, Upper Church
Street, Douglas, IM1 1EB, Isle of Man
The Weir Group International S.A.
Switzerland
Rue de Romont 35, c/o Daniel Schneuwly, Fribourg, 1700
FRIBOURG, Switzerland
The Weir Group Pension
Trust Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
Trio Engineered Products (Hong
Kong) Limited
Hong Kong
Level 54, Hopewell Centre, 183 Queen's Road East,
Hong Kong
Class name
Ordinary
Ordinary
N/A
Ordinary
Trio Engineered Products, Inc.
United States
CT Corporation System, 818 West Seventh Street, Suite 930,
Los Angeles, CA, 90017, United States
Common Stock
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,
Ordinary
TWG Finance, Inc.
United States
TWG Investments (No. 6) Limited
Scotland
TWG Investments (No. 7) Limited
Scotland
TWG Investments (No. 8) Limited
Scotland
TWG Investments (No.10) Limited
Scotland
TWG Investments (No.11) Limited
Scotland
TWG Investments (No.3) Limited
Scotland
TWG Investments (No.4) Limited
Scotland
Grand Cayman, KY1-1104, Cayman Islands
The Corporation Trust Company, 1209 Orange Street,
Wilmington, DE, 19801, United States
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
TWG Overseas Finance S.à.r.l
Luxembourg
20 rue des Peupliers, L-2328, Luxembourg
TWG South America
Holdings Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
TWG UK Holdings Limited
Scotland
TWG US Finance LLC
United States
TWG US Holdings LLC
United States
TWG Young Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
The Corporation Trust Company, 1209 Orange Street,
Wilmington, DE, 19801, United States
The Corporation Trust Company, 1209 Orange Street,
Wilmington, DE, 19801, United States
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
Preference
Common
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Preference
Ordinary
Preference
Ordinary
Ordinary
Preference
Ordinary
Membership Units
Preferred Units
Units
Ordinary
Vulco Peru SA
Vulco S.A.
Warman Pumps Ltd
Weir ABF LP
Peru
Chile
Australia
Scotland
Av. Separadora Industrial, N° 2201 Urb Vulcano Ate, Lima, Peru Ordinary
San José N° 0815, San Bernardo, Santiago de Chile, Chile
Ordinary
Nominative Share
99.171
1-3 Marden Street, Artarmon, NSW, 2064, Australia
Ordinary
1 West Regent Street, Glasgow, G2 1RW, Scotland
N/A
Weir Arabian Metals Company
Saudi Arabia
Makkah Street, Dammam 2nd, Industrial City, Al Khobar,
Saudi Arabia
Weir B.V.
Netherlands
PO Box 249, 5900 AE, Venlo, Netherlands
Weir Brasil Comercio Ltda
Brazil
Rodovia BR-101, KM 43, N° 43.000, Galpão 10-C, Bairro Nova
Brasília, Joinville/SC, CEP 89213-125, Brazil
Common
Ordinary
Ordinary
Weir Canada, Inc.
Canada
2360 Millrace Court, Mississauga, ON, L5N 1W2, Canada
Common
Weir Canadian Investments, Inc.
Canada
2360 Millrace Court, Mississauga, ON, L5N 1W2, Canada
Common
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
49
100
100
100
100
*
*
221
Ordinary
100
**
Shareholder InformationThe Weir Group PLC Annual Report and Financial Statements 2020 SUBSIDIARY UNDERTAKINGS
CONTINUED
Company Name
Country
Registered Office address
Class name
Weir do Brasil Ltda
Weir Engineering Products
(Shanghai) Co., Ltd
Brazil
China
Av Jose Benassi, 2151, Sala A, Condominio Fazgran, Jundiaí/SP,
13.213-085, Brazil
Nominal
Room 318, Floor 3, No. 458, Fute North Road, Shanghai, China N/A
Weir Engineering Services Limited Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
Ordinary
Directly
Held By
PLC*
% of
class
100
100
100
Weir Group (Australian Holdings)
Pty Limited
Australia
1-5 Marden Street, Artarmon, NSW, 2064, Australia
Ordinary
100
*
Weir Group (Overseas Holdings)
Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
Weir Group African IP Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
Ordinary
Ordinary
Weir Group Engineering Hong
Kong Limited
Hong Kong
Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong Ordinary
Weir Group Executive SUURB
Trustee Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
Weir Group General Partner Limited Scotland
Weir Group Holdings Limited
Scotland
Weir Group Inc.
United States
Weir Group IP Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
The Corporation Trust Company, 1209 Orange Street,
Wilmington, DE, 19801, United States
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
Ordinary
Ordinary
Ordinary
Common
Ordinary
Weir Group Machinery Equipment
(Shanghai) Co. Ltd.
China
No.4918, Liuxiang Road, Xuxing Town, Jiading District, Shanghai,
China
N/A
Weir Group Management
Services Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
Ordinary
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
Weir Investments Two Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
Ordinary
Ordinary A
Preference
Weir Malaysia Sdn. Bhd.
Malaysia
2nd Floor, No 2-4 Jalan Manau, Wilayah Persekutuan,Wilayah
Persekutuan, Kuala Lumpur, 50460, Malaysia
Ordinary – Class A
Ordinary – Class B
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
*
*
*
*
*
*
Weir Minerals (India)
Private Limited
India
No 1110, 11th Floor, DLF Tower-B, Jasola District Centre,
New Delhi,
110 025, India
Ordinary
97.252
Weir Minerals Africa (Proprietary)
Limited
South Africa
5 Clarke Street South, Alrode, Alberton, 1149, South Africa
Ordinary
Weir Minerals Armenia LLC
Armenia
22, Hanrapetutyan Str, 5th Floor, Yerevan Centre, 0010, Armenia Ordinary
Weir Minerals Australia Limited
Australia
1-3 Marden Street, Artarmon, NSW, 2064, Australia
Weir Minerals Balkan d.o.o.
Beograd
Weir Minerals Botswana
(Proprietary) Limited
Weir Minerals Caribe SRL
Serbia
Dimitrija Tucovica 28b, Zvezdara, Belgrade, Serbia
Botswana
Plot 5039/5040, Somerset East Industrial, Francistown,
Botswana
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
Ordinary
Weir Minerals China Co., Limited
China
Factory #27, 158 Hua Shan Road, Suzhou New District, Suzhou,
215011, China
N/A
222
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
Shareholder InformationThe Weir Group PLC Annual Report and Financial Statements 2020 Company Name
Country
Registered Office address
Weir Minerals Colombia SAS
Colombia
Carrera 43 B # 16 41 Office 904, Building Staff, Medellin
Antioquia, Colombia
Class name
Ordinary
Directly
Held By
PLC*
% of
class
100
Weir Minerals Czech & Slovak, s.r.o. Czech Republic
Hlinky 118, 603 00 Brno, Czech Rep., Brno, Czech Republic
Ordinary
Weir Minerals East Africa Limited
The United
Republic
of Tanzania
Plot No. 137, Capri Point, Mwanza, The United Republic
of Tanzania
Ordinary
Weir Minerals Europe Limited
England & Wales Halifax Road, Todmorden, Lancashire, OL14 5RT
Weir Minerals Finland Oy
Weir Minerals France SAS
Finland
France
Askonkatu 13 D, Lahti, FIN-15100, Finland
10 rue Jacquard, Chassieu, 69680, France
Weir Minerals FZCO
United
Arab Emirates
2W, M058 Dubai, UAE
Ordinary
Ordinary
Ordinary
Ordinary
Weir Minerals Germany GmbH
Germany
Lise-Meitner-Straße 12, Heilbronn, 74074, Germany
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 Ordinary
Weir Minerals Italy S.r.l.
Italy
Via F.lli Cervi 1/D, Cernusco sul Naviglio, Milan, 20063, Italy
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
Ordinary
Immcuble Mining Business Center sis a Mamory Ivato, 10518
Ivato Aeroport ,Analamanga, Madagascar
Ordinary
Weir Minerals Mexico Servicios,
S.A. de C.V.
Mexico
Av. Nafta No. 775, Col. Parque Industrial, Stiva Aeropuerto,
Mexico
Ordinary
Nominative Share
Weir Minerals México, SA de CV
Mexico
Av. Nafta No. 775, Col. Parque Industrial, Stiva Aeropuerto,
Mexico
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,
AV. Zedequias ,Manganhela, Mozambique
Ordinary
Weir Minerals Netherlands B.V.
Netherlands
PO Box 249, 5900 AE, Venlo, Netherlands
Weir Minerals North Africa SARL
Morocco
Boulevard Sidi Mohamed, Ben Abdellah, Im B, 1Er Etage N 29.,
Casablanca, 20160, Morocco
Weir Minerals Panama S.A.
Panama
Urbanización Vista Alegre, Edificio Parque Logístico
Panawest Bodega
7 Autopista, Panama-Arraijan, Panamá
Ordinary
Ordinary
Ordinary
Weir Minerals Poland Sp. z.o.o.
Poland
ul. Ignacego Domeyki 2, Krakow, 30-066, 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
Namibia
54 Hidipo Hamutenya Avenue, Swakopmund, Namibia
Ordinary
Weir Minerals RFW LLC (OOO)
Russian Federation Bolshaya Polyanka, Building 2, house 2, Moscow, 119180,
Russian Federation
Corporate Relationship
%
South Africa
5 Clarke Street South, Alrode, Alberton, 1149, South Africa
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
49
100
100
100
Weir Minerals Shared Services
Proprietary Limited
Weir Minerals South Africa
Proprietary Limited
South Africa
5 Clarke Street, Alrode, Alberton, Gauteng, 1449, South Africa Ordinary
74.90
Weir Minerals Sweden AB
Sweden
Metallvägen 6, 982 38 Gällivare, Sweden
Weir Minerals Ukraine LLC
Ukraine
2 Glinka str., letter Б-18, Б-1, Dnipropetrovsk Reg,
Dnipropetrovsk, 49000, Ukraine
Weir Minerals West Africa Limited Ghana
No.4, 3rd Close, Airport Residential Area, Accra Post Box
CT3170, Accra, Ghana
Ordinary
Ordinary – A
A-Class Shares
B-Class Shares
Share Capital
100
100
100
223
Shareholder InformationThe Weir Group PLC Annual Report and Financial Statements 2020 SUBSIDIARY UNDERTAKINGS
CONTINUED
Company Name
Country
Registered Office address
Weir Oil & Gas Australia Pty Limited Australia
1-5 Marden Street, Artarmon, NSW, 2064, Australia
Weir Oil & Gas Malaysia Sdn Bhd Malaysia
12th Floor,Menara Symphony, No. 5, Jalan Prof, Khoo Kay Kim,
Seksyen 13, Petaling Jaya, Malaysia, 46200, Malaysia
Weir Oil & Gas Singapore (Services)
Pte Ltd
Singapore
77 Science Park Drive, #04-01/08, Cintech III Building,
118256, Singapore
Class name
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,
Plymouth Mi 48170 4675, United States
Common Stock
Weir Pumps Limited
Scotland
10th Floor, 1 West Regent Street, Glasgow, G2 1RW,
United Kingdom
Weir Services Australia Pty Ltd
Australia
1-5 Marden Street, Artarmon, NSW, 2064, Australia
Weir Services Tanzania
(Pty) Limited.
The United
Republic
of Tanzania
Plot No. 137, Capri Point, Mwanza, The United Republic
of Tanzania
Weir Slurry Group, Inc.
United States
CT Corporation System, 301 South Bedford Street, Suite 1,
Madison, WI, 53703
Weir Solutions Caspian LLC
Azerbaijan
29 Zarifa Aliyeva Street, Apt 77/77A, Sabayil District, Baku,
AZ1095, Azerbaijan
Ordinary
Ordinary
Ordinary
Common
Preferred Stock
Ordinary
Weir Solutions FZE
Weir Solutions LLC
Weir SOS Limited
Weir SPM do Brasil Comércio,
Locação e Instalação de Bombas
e Equipamentos Geradores de
Pressão Ltda.
United
Arab Emirates
Office no. W 312, West Side 1, Dubai Airport Free Zone, Dubai,
United Arab Emirates
Ordinary
Oman
Bahamas
Brazil
PO Box 168, Postal Code 102, Muscat, Oman
Ocean Centre, Montagu Foreshore, East Bay Street,New
Providence, Nassau, Bahamas
Ordinary
Ordinary
Rua Internacional s/n, Lote Novo Cavaleiros 5 Prolongamento,
Granja dos Cavaleiros, Macaé/RJ, CEP 27933-420, Brazil
Nominal
Weir SPM Singapore Pte. Ltd.
Singapore
57, 03-07, Mohamed Sultan Road, Singapore, Singapore, 238997 Ordinary
Weir Sudamerica S.A.
Chile
San José N° 0815, San Bernardo, Santiago de Chile, Chile
Ordinary
Nominative Share
Weir Turkey Mineralleri
Limited Sirketi
Turkey
1, 13, Tepeören Mah. Dervispasa Cad.Weir, Merkez-Merkez,
Tuzla, Istanbul, 3080535234, Turkey
Bearer
Weir US Holdings Inc.
United States
The Corporation Trust Company, 1209 Orange Street,
Wilmington, DE, 19801, United States
Weir Valves & Controls USA Inc.
United States
CT Corporation System, 155 Federal Street, Suite 700, Boston,
MA, 02110, United States
Common
Common
Preferred
Weir Vulco Argentina S.A.
Argentina
Sarmiento 511 Sur 1°Piso A, San Juan, CP 5400, Argentina
Ordinary
Weir Warman (U.K.) Limited
England & Wales Halifax Road, Todmorden, Lancashire, OL14 5RT
Wesco LLC
United
Arab Emirates
Bin Hamoodah Towers, Floor 13, Khalifa Street, Abu Dhabi,
United Arab Emirates
WHW Group Inc.
United States
The Corporation Trust Company, 1209 Orange Street,
Wilmington, DE, 19801, United States
Ordinary
Ordinary
Common
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
100
100
100
100
100
100
100
100
100
100
100
100
99.99
100
100
100
100
100
49
100
100
*
224
Shareholder InformationThe Weir Group PLC Annual Report and Financial Statements 2020 The Group has an interest in a partnership, the Weir ABF LP, which is fully consolidated into these statements. The Group has taken advantage
of the exemption conferred by Regulation 7 of the Partnerships (Accounts) Regulations 2008 and has, therefore, not appended the accounts
of this qualifying partnership to these financial statements. Separate accounts for the partnership are not required to be, and have not been,
filed at Companies house in the UK.
STATUTORY AUDIT EXEMPTIONS
The Weir Group PLC has issued guarantees over the liabilities of the following companies at 31 December 2020 under Section 479C of
Companies Act 2006 and these entities are exempt from the requirements of the Act relating to the audit of individual accounts by virtue of
Section 479A of the Act:
Company Name
Company number
ESCO (UK) Holdings Limited
ESCO EMEA Holdings (UK) Limited
Linatex Limited
TWG Canada Holdings Limited
TWG Investments (No.3) Limited
TWG Investments (No.4) Limited
TWG Investments (No.6) Limited
TWG Investments (No.7) Limited
TWG Investments (No.8) Limited
TWG Investments (No.11) Limited
TWG South America Holdings Limited
TWG UK Holdings Limited
Weir Engineering Services Limited
Weir Group (Overseas Holdings) Limited
Weir Group African IP Limited
Weir Group General Partner Limited
Weir Group Holdings Limited
Weir Group IP Limited
Weir Investments Two Limited
Weir Warman (U.K.) Limited
04743623
08690169
00246713
SC288837
SC197235
SC197236
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Shareholder InformationThe Weir Group PLC Annual Report and Financial Statements 2020 SHAREHOLDER INFORMATION
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 transfer of shares
etc. should be addressed to Computershare.
SHAREHOLDER COMMUNICATIONS
Online Communications
Shareholders are encouraged to visit the Company’s corporate website
(www.global.weir), which contains a wealth of information about
the Weir Group. The website includes information about the markets
in which we operate, our strategy and business performance, recent
news from the Group and product information. The investor section is
a key source of information for Shareholders, containing details on the
share price, our financial results, Shareholder meetings and dividends,
as well as a ‘Shareholders FAQ’ section.
E-Communications
We are encouraging our Shareholders to receive their information by
email and via our website. Not only is this quick, it helps to reduce
paper, printing and costs.
To register for e-communications, log on to www.investorcentre.co.uk/
ecomms
Follow us
ORDINARY SHAREHOLDER
ANALYSIS AT 31 DECEMBER 2020
By country
UK Shareholders
Overseas Shareholders
92.39%
7.61%
By holding size
Range
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-500,000
500,001-1,000,000
1,000,001-999,999,999
Total
By Shareholder category
Individuals
Bank or Nominees
Investment Trust
Insurance Company
Other Company
Pension Trust
Other Corporate Body
Total
No. of
Shareholders
2558
1102
175
269
147
37
49
4337
% No. of Shares
996601
2369074
1244662
9047831
35723885
26367188
183864276
259613517
58.98
25.41
4.04
6.20
3.39
0.85
1.13
100.00
%
0.38
0.91
0.48
3.49
13.76
10.16
70.82
100.00
3057
1202
13
1
45
1
18
4337
70.49
27.72
0.30
0.02
1.04
0.02
0.45
100.03
4535346
253902381
36792
21716
205807
1
911474
259613517
1.75
97.80
0.01
0.01
0.08
0.00
0.35
100
226
Shareholder InformationThe Weir Group PLC Annual Report and Financial Statements 2020 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.
Managing your shareholding online with 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.
ANNUAL GENERAL MEETING 2021
Our Annual General Meeting will be held at 2.30pm on Thursday
29 April 2021. Further details are contained in the Notice of Annual
General Meeting 2021, which is available to download from
our website at www.global.weir/shareholder-information/agm.
Please check this dedicated AGM page on our website for updates on
the arrangements for the forthcoming AGM.
VOTING
Information on how you can vote electronically on the resolutions
which will be put forward at our 2021 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
As a result of the Covid-19 pandemic, in order to provide maximum
flexibility and to protect the business with prudent cost and cash
mitigation actions, the Board took the decision to withdraw its
recommendation to pay a 2019 final dividend and did not recommend
the payment of a 2020 interim, or 2020 final dividend to Shareholders.
DIVIDEND HISTORY – (PENCE PER SHARE)
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
0.0
16.50
2020
0.0
0.0
0.0
IMPORTANT – PAYMENT OF DIVIDENDS BY MANDATORY
DIRECT CREDIT
From 2019, the Company simplified the way in which it pays 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, 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 is sent once a year either electronically or to
your registered address.
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 0.5 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.
227
Shareholder InformationThe Weir Group PLC Annual Report and Financial Statements 2020 SHAREHOLDER INFORMATION
CONTINUED
Telephone share dealing – commission is 1% of the value of each
sale or purchase of shares, plus £50. 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.
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
Email: 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.
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.
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.
228
Shareholder InformationThe Weir Group PLC Annual Report and Financial Statements 2020 GLOSSARY
Additive manufacturing
The process of joining materials to make
objects from 3D model data (3D printing)
AGM
Annual General Meeting
Board
The Board of Directors of The Weir Group PLC
bps
Basis points
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
Computershare EBT
Employee benefit trust (Computershare
Trustees (Jersey) Limited)
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
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
Operating Cash flow (cash generated
from operations) adjusted for income
taxes, net capital expenditures, lease
payments, net interest payments, dividends
received from joint ventures, settlement
of derivatives, purchase of shares for
employee share awards and other awards and
pension contributions.
GAAP
Generally Accepted Accounting Practice
greenfield
A term used to describe new
mine developments
Group
The Company together with its subsidiaries
HR
Human resources
IAS
International Accounting Standards
IFRS
International Financial Reporting Standards
IIOT
Industrial Internet of Things
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
Like-for-like
On a consistent basis, excluding the impact
of acquisitions
LTIP
Long Term Incentive Plan
NGO
Non-governmental organisation
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
OT
Operational Technology
PILON
Payment in lieu of notice
Registrar
Computershare Investor Services PLC
R&D
Research and development
RPI
UK Retail Prices Index
Scope 1 Emissions
Direct GHG emissions occur from sources
that are owned or controlled by the company,
for example, emissions from combustion
in owned or controlled boilers, furnaces,
vehicles, process emissions etc.
Scope 2 Emissions
Indirect GHG emissions. Scope 2 accounts
for GHG emissions from the generation
of purchased electricity, heat or steam
consumed by the company and is purchased
or otherwise brought into the organisational
boundary of the company.
Scope 3 Emissions
Other indirect GHG emissions across
the value chain Scope 3 emissions are a
consequence of the activities of the company,
but occur from sources not owned or
controlled by the company. Some examples
of scope 3 activities are extraction and
production of purchased materials;
transportation of purchased fuels; and use of
sold products and services.
SHE
Safety, Health and Environment
SME
Small and medium-sized enterprises
SRP
Share Reward Plan
subsidiary
An entity that is controlled, either directly or
indirectly, by the Company
tCO2e
Tonnes of carbon dioxide equivalent
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
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.
229
Shareholder InformationThe Weir Group PLC Annual Report and Financial Statements 2020 NOTES
230
Shareholder InformationThe Weir Group PLC Annual Report and Financial Statements 2020 Designed and produced by Radley Yeldar www.ry.com
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The Weir Group PLC
1 West Regent Street
Glasgow
G2 1RW