Weir Group PLC · LSE:WEIR
Weir — The Weir Group — FY2002 Earnings Presentation
51 slides from Weir's earnings presentation, March 2003
Slide 1: Weir Group 2002 Results Presentation
Excellent The Weir Group PLC Excellent The Weir Group PLC Engineering Engineering Solutions Solutions March 2003 Weir Group 2002 Results Presentation
Slide 2: 2002 Highlights
The Weir Group PLC Excellent Engineering Solutions 2002 Highlights è 2002 – a year of transition è New management team and divisional structures in place è Roadmap to deliver sector best performance è Services and Engineering Products improve margins in 2002 è Exiting non core businesses – on course
Slide 3: Today's Agenda
The Weir Group PLC Excellent Engineering Solutions Today’s Agenda § Welcome and introduction Sir Robert Smith § 2002 financial performance review Ian Boyd § Strategic overview Mark Selway § 2002 input analysis Mark Selway § 2003 outlook and prospects Mark Selway § Questions & answers All
Slide 4: Consolidated Profit and Loss
The Weir Group PLC Excellent Engineering Solutions Consolidated Profit and Loss 2002 2001 (restated) Before Before amortisation of Amortisation of amortisation of Amortisation of goodwill and goodwill and goodwill and goodwill and exceptional items exceptional items Total exceptional items exception
Slide 5: Consolidated Profit and Loss
The Weir Group PLC Excellent Engineering Solutions Consolidated Profit and Loss 2002 2001 Before amortisation Before amortisation Of Goodwill and Of Goodwill and Exceptional items Exceptional items £m £m Turnover Group Continuing Operations 685.2 703.9 Discontinued Operations 16.0 36.5 701.2 740.4 J
Slide 6: Discontinued Operations
The Weir Group PLC Excellent Engineering Solutions Discontinued Operations Period consolidated Company Effective date 2002 2001 First Engineering Sold October 2002 9 mths 12 mths Neyrfor Weir Limited Sold July 2002 7 mths 12 mths Molded Products Sold June 2002 6 mths 12 mths Weir Systems Limited Sol
Slide 7: Exceptional items
City Presentation 2001 The Weir Group PLC Excellent Engineering Solutions Exceptional items (£4.3m) Provision - Girdlestone - Hazleton Foundry £10.5m Gain - First Engineering - Neyrfor Weir - Molded £4.8m Tax credit - £1.4m reflects tax effects of above items - £3.4m relates to favourable resolution
Slide 8: Divisional Split
The Weir Group PLC Excellent Engineering Solutions Divisional Split Turnover Operating Profit(1) Margin % 2002 2001 2002 2001 2002 2001 £m £m £m £m Engineering Products 429.6 444.3 32.8 32.2 7.6% 7.2% Engineering Services 150.7 133.5 15.1 12.0 10.1% 9.0% Techna 105.0 106.4 5.0 10.1 4.8% 9.5% J/V and
Slide 9: Effect of exchange rates
The Weir Group PLC Excellent Engineering Solutions Effect of exchange rates Profit Before Tax (1) Turnover 2002 2001 Change 2002 2001 £m £m % £m £m At 2002 rates 60.0 59.2 +1.3% 841.7 906.5 Exchange adjustment 1.7 20.2 2001 figures as published 60.9 926.7 Significant rates used 2002 2001 % Change US
Slide 10: Pensions
The Weir Group PLC Excellent Engineering Solutions Pensions 2001 2002 2003 PROFIT AND LOSS CHARGE £000 £000 £000 Defined Benefit Plans (Estimated) Service Cost 9,258 8,204 6,384 Curtailment Credit (300) (954) - Defined Contribution Plans Contributions 4,563 4,511 4,825 CHARGE TO OPERATING PROFIT 13,
Slide 11: Pensions
The Weir Group PLC Excellent Engineering Solutions Pensions 2001 2002 2003 PROFIT AND LOSS CHARGE £000 £000 £000 Defined Benefit Plans (Estimated) Service Cost 9,258 8,204 6,384 Curtailment Credit (300) (954) - Defined Contribution Plans Contributions 4,563 4,511 4,825 CHARGE TO OPERATING PROFIT 13,
Slide 12: Pensions
The Weir Group PLC Excellent Engineering Solutions Pensions 2001 2002 2003 PROFIT AND LOSS CHARGE £000 £000 £000 Defined Benefit Plans (Estimated) Service Cost 9,258 8,204 6,384 Curtailment Credit (300) (954) - Defined Contribution Plans Contributions1. All defined benefit plans closed to new entran
Slide 13: Pensions
The Weir Group PLC Excellent Engineering Solutions Pensions 2001 2002 2003 PROFIT AND LOSS CHARGE £000 £000£000 Defined Benefit Plans (Estimated) Service Cost 9,258 8,204 6,384 Curtailment Credit (300) (954) - Defined Contribution Plans Contributions 4,563 4,511 4,825 CHARGE TO OPERATING PROFIT 13,5
Slide 14: Pensions Continued
The Weir Group PLC Excellent Engineering Solutions Pensions Continued Expected Expected BALANCE SHEET Return Dec. 2002 Return Dec. 2001 % £m % £m Equities 7.5 265 7.4 347 Bonds 4.4 106 5.1 102 Property 7.0 15 6.9 15 Total assets at market value 386 464 Actuarial value of liabilities (533) (491) Defi
Slide 15: Tax Charge
The Weir Group PLC Excellent Engineering Solutions Tax Charge 2002 2001 % % Effective tax rate (1) 23.0 24.5 Tax credit on exceptional items (22.4) (11.1) Exceptional item (1) (1) – Tax provision release re prior years £3.4m (£4.7m) (5.7) (7.7) Actual tax rate 15.2 23.1 Guidance for next year (1) <2
Slide 16: Tax Reconciliation
The Weir Group PLC Excellent Engineering Solutions Tax Reconciliation 2002 2001 £ ‘000 £’000 Profit on ordinary activities before tax 59,427 35,403 Weighted average standard tax rate 30.3% 31.3% Profit multiplied by average standard tax rate 17,994 11,083 Expenses not deductible for tax purposes 983
Slide 17: EPS and Dividend
The Weir Group PLC Excellent Engineering Solutions EPS and Dividend 2002 2001 * Earnings per share FRS 3 basic (p) 24.7 13.5 Adjust: Goodwill amortisation 3.3 3.3 Exceptional items (5.4) 6.0 Pre Goodwill amortisation and exceptionals (p) 22.6 22.8 Average no of shares issued (m) 203.40 201.61 Divide
Slide 18: Cash Flow Statement (£m)
The Weir Group PLC Excellent Engineering Solutions Cash Flow Statement (£m) 2002 2001 Funds generated by operations 59.7 72.2 Decrease in working capital 9.7 2.7 Cash spent on exceptional items (1.3) (3.7) Cash from operations (1) 68.1 71.2 Interest and other income (0.4) (3.0) Taxation (7.1) (5.3)
Slide 19: Net Debt Movement
The Weir Group PLC Excellent Engineering Solutions Net Debt Movement -150 Year on Year -130 Net Debt Balance -110 -90 £m -70 -146.5 -50 -95 -30 -66 1999 2000 2001 2002 -10 Dividends DividendsPaid Paid 10 1.9 £67m £67m 1999 1999--2002 2002
Slide 20: 2002 Strategic Overview
The Weir Group PLC Excellent Engineering Solutions 2002 Strategic Overview “A year of transition”
Slide 21: 2002 strategy at-a-glance
The Weir Group PLC Excellent Engineering Solutions 2002 strategy at-a-glance “2002 was a year of transition for Weir, characterised by decisive actions to improve the performance of our businesses and realign our activities to those markets which offer the most attractive scope for growth. During th
Slide 22: Restructuring for market leadership
The Weir Group PLC Excellent Engineering Solutions Restructuring for market leadership HIGH Problem children Invest and grow? Market attractiveness Exit? Milk for cash? Competitive Position HIGH
Slide 23: Restructuring for market leadership
The Weir Group PLC Excellent Engineering Solutions Restructuring for market leadership Rigorous benchmark and Rigorous benchmark and Rigorous benchmark and Rigorous benchmark and Rigorous benchmark and peer group review peer group review peer group review peer group review peer group review Disposal
Slide 24: Restructuring for market leadership: Weir Minerals
The Weir Group PLC Excellent Engineering Solutions Restructuring for market leadership Weir Minerals Hazelton Hazelton realigned realigned with with Minerals Minerals Division Division Rigorous benchmark and peer group review New product developed for Canadian oil sands Introduced largest slurry pum
Slide 25: Restructuring for market leadership: Clear Liquid Division
The Weir Group PLC Excellent Engineering Solutions Restructuring for market leadership Clear Liquid Division Clear Clear Liquid Liquid disposes disposes of of Rigorous benchmark and non-core non-core US US injection injection peer group review moulded moulded business business Disposal of non-core U
Slide 26: Restructuring for market leadership: Valves & Controls Division
The Weir Group PLC Excellent Engineering Solutions Restructuring for market leadership Valves & Controls Division Rigorous benchmark and peer group review Valves Valves & & Controls Controls focuses focuses on OEM on OEM and and Disposal non-core actuator business transfers £7.5m services transfers
Slide 27: Restructuring for market leadership: Services Division
The Weir Group PLC Excellent Engineering Solutions Restructuring for market leadership Services Division Rigorous benchmark and peer group review Strategy to deliver North American market opportunities Strategy Strategy to to deliver deliver Disposal of non-core oil North North American American mar
Slide 28: Restructuring for market leadership: Techna Division
The Weir Group PLC Excellent Engineering Solutions Restructuring for market leadership Techna Division Rigorous benchmark and Weir Weir LGE LGE and and Weir Weir Entropie Entropie peer group review partnership. partnership. Create Create combined combined Combined Weir LGE and technology technology
Slide 29: Fixing the under performing businesses
The Weir Group PLC Excellent Engineering Solutions Fixing the under performing businesses § Disposal of non-core actuator business § Disposal of non-core US injection § Closure of under-utilised RSBD safety moulded business relief valve facility in France – 2003 § Closure of Hazleton’s foundry. Prod
Slide 30: Fixing the under performing businesses
The Weir Group PLC Excellent Engineering Solutions Fixing the under performing businesses 2002 2001 Variance Input £61m £67.5m (9.6%) § Disposal of non-core actuator business No of facilities 10 10 - § Closure of under-utilised RSBD safety No of 714 903 (21%) employees relief valve facility in Franc
Slide 31: Fixing the under performing businesses
The Weir Group PLC Excellent Engineering Solutions Fixing the under performing businesses 2002 2001 Variance Input £193m £207 (6.7%) § Disposal of non-core US injection No of facilities 11 16 (32%) moulded business No of 1,929 2046 (6%) employees § Closure of Hazleton’s foundry. Product Once off cos
Slide 32: Driving operational excellence
The Weir Group PLC Excellent Engineering Solutions Driving operational excellence Divisional structure Divisional structure Divisional structure Divisional structure Divisional structure Cross company Cross company Cross company Cross company sector champions champions champions champions Quoting &
Slide 33: Driving operational excellence: Minerals Division
The Weir Group PLC Excellent Engineering Solutions Driving operational excellence Minerals Division Divisional structure Cross company champions Divisional DivisionalDirector Director Scot ScotSmith Smith Division wide functional management introduced Regional RegionalMgr Regional RegionalMgr Region
Slide 34: Driving operational excellence: Clear Liquid Division
The Weir Group PLC Excellent Engineering Solutions Driving operational excellence Clear Liquid Division Divisional structure Cross company champions Division wide functional Divisional DivisionalDirector Director Laurie LaurieWest West management introduced for HR, purchase, engineering and marketin
Slide 35: Driving operational excellence: Valves & Controls Division
The Weir Group PLC Excellent Engineering Solutions Driving operational excellence Valves & Controls Division Divisional structure Cross company champions Divisional DivisionalDirector Director Tony TonyMorgan Morgan Division wide functional management introduced for HR, purchase, WVC WVCUSA USA WVC
Slide 36: Driving operational excellence
The Weir Group PLC Excellent Engineering Solutions Driving operational excellence Divisional structure Divisional structure Cross company sector champions Quoting & project control Strong growth Abu Dhabi & Dubai Strachan & Henshaw supply chain excellence Opened service centre award. Kuwait Strong g
Slide 37: Driving operational excellence
The Weir Group PLC Excellent Engineering Solutions Driving operational excellence Divisional structure Divisional structure Implemented rigorous personnel Cross company sector Pension Pension development, issues issues succession addressed: addressed: planning and champions Quoting & project leaders
Slide 38: Develop customer sales, marketing and distribution
The Weir Group PLC Excellent Engineering Solutions Develop customer sales, marketing and distribution Division-wide branding Division-wide branding Division-wide branding Division-wide branding Division-wide branding introduced presenting a introduced presenting a introduced presenting a introduced
Slide 39: Develop customer sales, marketing and distribution - Minerals Division
The Weir Group PLC Excellent Engineering Solutions Develop customer sales, marketing and distribution - Minerals Division Division-wide branding Mill Lining introduced presenting a Systems consistent global footprint. Dedicated team preparing study for manufacturing Minerals establishes presence in
Slide 40: Develop customer sales, marketing and distribution - Clear Liquid Division
The Weir Group PLC Excellent Engineering Solutions Develop customer sales, marketing and distribution – Clear Liquid Division Division-wide branding introduced presenting a consistent global footprint. New divisional marketing and distribution structure adds focus to Weir’s global offerings Clear Cl
Slide 41: Develop customer sales, marketing and distribution - Services Division
The Weir Group PLC Excellent Engineering Solutions Develop customer sales, marketing and distribution – Services Division Division-wide branding Weir Weir Services Services commits commits to to build build 44 Significant Significant expansion expansion of of introduced presenting a US-based US-base
Slide 42: Develop customer sales, marketing and distribution - Techna Division
The Weir Group PLC Excellent Engineering Solutions Develop customer sales, marketing and distribution - Techna Division Division-wide branding introduced presenting a consistent global footprint. Techna Techna wins wins US US $25m $25m US $25m desalination order desalination desalination order order
Slide 43: 2002 summary
The Weir Group PLC Excellent Engineering Solutions 2002 summary 1 2 3 4 Restructure & Fix the Drive Develop customer develop products under-performing operational focused marketing, for market businesses excellence sales and leadership distribution Excellent • Rationalised product portfolio focused
Slide 44: Looking to the future - Business Development
The Weir Group PLC Excellent Engineering Solutions Looking to the future - Business Development 2002 2002 Disposals Disposals Market attractiveness HIGH Problem children Invest and grow? Neyrfor Neyrfor t t Accelerating Accelerating Growth Growth Molded Products z Molded Products z •• Significant Si
Slide 45: 2002 Input Analysis and 2003 Outlook
The Weir Group PLC Excellent Engineering Solutions 2002 Input Analysis and 2003 Outlook Input Input 2002 2002 §§ Breakdown Breakdown by by division division §§ Breakdown Breakdown by by geographic geographic region region §§ Breakdown Breakdown by by sector sector 2003 2003 Outlook Outlook Longer Lo
Slide 46: Order Input by Division - Continuing Operations
The Weir Group PLC Excellent Engineering Solutions Order Input by Division - Continuing Operations 2002 2001 Variance £m £m % Clear Liquid 192.9 207.4 (7.0%) Minerals 184.8 174.6 5.8% (1) Valves 61.3 67.5 (9.2%) (1) Services 158.4 144.5 9.6% Sub Total 597.4 594.0 - Techna 53.5 85.8 (37.6%) Total 650
Slide 47: Order Input Analysis – by territory
The Weir Group PLC Excellent Engineering Solutions Order Input Analysis – by territory Continuing Operations By territory 2002 2001 Variance £m £m % Africa/Mideast 91.3 96.4 (5.3%) Americas 244.2 266.8 (8.4%) Australia 53.7 51.2 4.9% Europe & FSU 79.8 78.4 1.7% Indo Pacific 58.1 47.4 22.5% United Ki
Slide 48: Order Input Analysis by Major Sector
The Weir Group PLC Excellent Engineering Solutions Order Input Analysis by Major Sector Continuing Operations Without Techna Including Techna 2002 2001 Variance 2002 2001 Variance £m £m % £m £m % General Industrial 126.0 129.3 (2.5%) 131.2 133.4 (1.6%) Minerals 149.9 149.9 - 151.5 150.2 0.9% Oil & G
Slide 49: 2003 Outlook
The Weir Group PLC Excellent Engineering Solutions 2003 Outlook § Market and competitive pressures continue in Minerals, Clear Liquids and Valves with 1st half 2003 profits reflecting softer input carried forward from 2nd half 2002. § Positive outlook for Services division with strong enquiry levels
Slide 50: Outlook
The Weir Group PLC Excellent Engineering Solutions Outlook 2001 2002 2003 2004 2005 2006 A watershed year: Phase 1 - 2001 Complete • Market review • Common business agenda • Business focus Phase 2 - 2002 Performance A year of transition: • Structure and competency in line with expectations • Improve
Slide 51: Longer term
The Weir Group PLC Excellent Engineering Solutions Longer term “I remain convinced that Weir is capable of producing significant business growth and shareholder returns over the next five years” Mark Selway