the weir group plc an ever stronger weir · 2019. 7. 30. · 7 the weir group plc h1 2019...

The Weir Group PLC

Presented by Jon Stanton and John HeasleyGlasgow 30 July 2019

AN EVERSTRONGERWEIR

The Weir Group PLC2019 Half Year Results

The Weir Group PLCH1 2019 Results

Jon StantonChief Executive Officer

3 The Weir Group PLC

H1 2019 Results

Agenda

H1 2019 Highlights – Jon Stanton, CEO

Financial Review – John Heasley, CFO

Business Review – Jon Stanton, CEO

Q&A


22%

78%

Original Equipment Aftermarket

H1 2019 Highlights

Good growth and strategic progress

26%

53%

21%

Oil & Gas Minerals ESCO

Safety – 18% reduction in TIR

Mining upturn continues; strong pipeline

O&G: NAM soft but International improving

Portfolio transformation delivering results

H1 2019 revenues by division and OE/AM

Sustainable technologies gaining traction


Weir ShareBuilder

Giving our people a share in our future success

IndonesiaIndia

Australia

Brazil Chile China

S. Africa


John HeasleyChief Financial Officer


H1 2019 highlights

Good order, revenue and profit growth

169 132

ESCO 40

0

50

100

150

200

H1 2018 H1 2019

£m Operating profit1,2

+2% (-22%)3

1 Continuing operations at constant currency. 2 Adjusted to exclude exceptional items and intangibles amortisation.3 2018 restated at H1 2019 average exchange rates and like-for-like excluding ESCO acquisition in 2018.4 Cash generated from operations includes continuing and discontinued operations and is before exceptional cash flows.

1,211 1,131

ESCO 289

0

400

800

1,200

1,600

H1 2018 H1 2019

£m Orders1

+17% (-7%)3

1,090 1,049

ESCO 280

0

400

800

1,200

1,600

H1 2018 H1 2019

£m Revenue1

+22% (-4%)3

Dividend increased by 5%

139

54

0

20

40

60

80

100

120

140

160

H1 2018 H1 2019

£m Cash from Operations4

-61%

147 147

0

50

100

150

200

H1 2018 H1 2019

£m PBT2

+0%

47 42

0

10

20

30

40

50

H1 2018 H1 2019

p EPS2

-11%


H1 2019 Minerals

Record aftermarket performance

Robust demand; supportive commodity

prices

OE lumpier with some project delays

17.2% operating margin

0

100

200

300

400

500

600

700

800

H1'17 H2'17 H1'18 H2'18 H1'19

£mAM Orders OE Orders Revenue

17.3% 17.8% 17.4%18.2%

17.2%

0%

5%

10%

15%

20%

60

80

100

120

140

H1'17 H2'17 H1'18 H2'18 H1'19

£m EBITA Operating margin

Order and revenue trends1

EBITA 1,2 and margins

Orders1

£797m

+5%

Revenues1

£706m

+6%

EBITA1,2

£121m

+5%

+8%

-2%

1 On a constant currency basis.2 Adjusted to exclude exceptional items and intangibles amortisation.


0

100

200

300

400

H1'18 pro forma H2'18 pro forma H1'19

£mOrders Revenue

H1 2019 ESCO

Continued strong execution

Positive market conditions

Cost synergies at $20m run rate

+300bps2 margin expansion year on year

Order and revenue trends1

Orders1

£289m

+1%2

Revenues1

£280m

+5%2

EBITA1,3

£40m

+34%2

11.1%

13.0%14.1%

0%

5%

10%

15%

20%

20

30

40

50

H1'18 pro forma H2'18 pro forma H1'19

£mEBITA Operating margin


1 On a constant currency basis.2 Comparisons include H1 2018 pro forma ESCO. H2 2018 also provided on a pro forma basis. ESCO was acquired on 12 July 2018. 3 Adjusted to exclude exceptional items and intangibles amortisation.


10.7%

15.9% 16.0%

8.3% 8.5%

0%

5%

10%

15%

20%

0

20

40

60

80

H1'17 H2'17 H1'18 H2'18 H1'19

£m EBITA Operating margin %

0

100

200

300

400

500

H1'17 H2'17 H1'18 H2'18 H1'19

£m AM orders OE orders Revenue

H1 2019 Oil & Gas

As expected, excess pressure pumping capacity

Industry cash flow & capacity constraints

Reduced refurbishment activity

Good traction on new technology

Order and revenue trends 1

Orders1

£334m

-27%

Revenues1

£343m

-19%

EBITA1,2

£29m

-57%-14%

-31%


1 On a constant currency basis.2 Adjusted to exclude exceptional items and intangibles amortisation.


H1 2019 Discontinued Operations

Successful disposal of Flow Control

Underlying H1 trading lower year on year

£263m cash received

£m H1

2019

H1

2018

Discontinued operations

Revenue 150 157

EBITA (3) 6

£m

Enterprise value 275

Estimated debt and debt like items (12)

Cash received 263

Net assets (271)

Costs of disposal (18)

Reclassification of foreign currency translation reserve 21

Loss on sale pre tax (5)

Tax charge (15)

Loss on sale post tax (20)

Normal completion accounts process;

final consideration true-up by end of year


H1 2019 Working Capital

Growth and phasing impacting H1

2018 restated at H1 2019 closing exchange rates. Working

capital metrics are presented for continuing operations on a

like-for-like basis.

26.8%

0

150

300

450

600

750

900

H1 2018 H2 2018 H1 2019

% of sales£m Working capital

31.5%

22.9%

Inventory step up to support Minerals

order book

Lower payables as forward production

plan reduced by Oil & Gas and impact of

normal seasonality of bonus and other

accruals

Receivables impacted by back end

loading of new product sales in Oil &

Gas and customer holds

£m H1 2019 H1 2018

Operating cash flow - pre working capital 235 200

Working capital cash flows – continuing (157) (62)

Working capital cash flows – discontinued (24) 1

Operating cash inflow 54 139

426 401 409

87 92 87

85

73 6669

0

20

40

60

80

0

150

300

450

600

H1 2018 H2 2018 H1 2019

Debtor Days£m Trade receivables

577 582 630

- 116 116

85

71

2.5 2.5 2.3

0

1

2

3

0

150

300

450

600

750

900

H1 2018 H2 2018 H1 2019

Inventory turns

£m Inventory

536 562

474

73

61 103

104

0

150

300

450

600

750

900

H1 2018 H2 2018 H1 2019

£mTotal payables

Continuing ESCO Discontinued


H1 2019 Leverage and net debt

Movement in net debt £m

Net debt at 31 December 2018 1,127

Free cash outflow 198

Exceptional cash outflow 26

IFRS 16 Leases 215

Net disposal proceeds (253)

FX 3

Net debt at 30 June 2019 1,316

Increased working capital

Adoption of IFRS 16 Leases - £215m

Net Flow Control disposal proceeds - £253m

(£263m consideration less costs paid)

Cash flow statement (as reported) £m H1 2019 H1 2018

Operating cash inflows 54 139

Net interest (24) (18)

Tax (38) (36)

Net capex (54) (32)

Settlement of derivative financial instruments (44) (19)

Other cash flows (13) (2)

Free cash flow – pre dividends (119) 32

Dividends paid (79) (39)

Free cash flows (198) (7)

Net debt:EBITDA – 2.6x on lender covenant

basis

Net Debt:EBITDA – c.2x by year end


2019 Financial Guidance

Effective full year tax rate expected to be around 25%

Interest second half run rate similar to H1, full year includes £8m IFRS 16 interest

Based on current rates no further FX translational impact expected in H2

Capex c.£110m, capex to depreciation of 1.5x times


Jon StantonChief Executive Officer


Our place in a growing world

The role of innovative engineering is vital

Our vision

Our mission

To be the most admired

engineering business

in our markets

To enable our customers to

sustainably and efficiently

deliver the resources needed

by a growing world

Business model


Mining markets

Multi-year upturn continues

Robust global economic growth

Additional sources of supply required

Strong project pipeline for process

equipment

Ore production growth and grade

declines95

97

99

101

103

105

107

109

111

113

2018 2019 2020 2021 2022 2023

Copper Gold Iron ore Thermal Coal

Strong production growth for key commodities1

Mining capex growth projections1

-

20

40

60

80

100

120

2018 2019 2020 2021 2022 2023

Sustaining Brownfield Greenfield

1. CRU Feb 2019.


Minerals

Capturing the upturn

Integrated solutions; embedded

engineers

Encouraging pipeline of expansion

projects

Optimise business structure for

scalability

Balance investment with profitability

Celebrating a contract signing with a customer in Western Australia


ESCO

Leveraging our expanded platform

Continue to grow market share

Deliver cost and revenue synergies

Operational and production

improvements

Upgrade safety to Weir standard

ESCO engineers on site in Brazil


Minerals Case Study

High Pressure Grinding Rolls

Acceptance of technology gathers pace

30% energy saving

Reduces water use and wet tailings waste

Supporting the mine of the futureWeir’s Enduron® High Pressure Grinding Rolls


ESCO Case Study

N70 Lip system gaining share

Innovative Nemisys® technology

>500 machines using Nemisys®

N70 serving smaller front end loaders

Safer and longer lasting than competition One of the largest mining front end loaders in the world on a mine in South Africa.


Oil and gas markets

Tough market conditions in NAM

Global markets balanced

NAM E&Ps cash flow constrained

Medium term prospects positive

US Frack fleet utilisation1

Global shale oil production projections2

Steady international recovery

50%

55%

60%

65%

70%

75%

80%

2Q'17 4Q'17 2Q'18 4Q'18 E 2Q'19

Sources: 1. Rystad May 2019. 2. McKinsey Jan 2019.

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2018 2025 2035

Mb

pd


Oil & Gas

Managing the short-term; investing for the long term

Tight cost management

Balance price and volume

Leverage service capability

Extend technology leadership

Weir engineers on site in Oklahoma, USA.


Oil & Gas Case Study

Enabling electric fracking: QEM 5000

Potential to significantly reduce costs

Substantial environmental improvement

Unique field-proven technology

Gradual adoption expected

Traditional Fleet

▪ 20 pumps

▪ 2,500 HHP each

▪ 100 bores

▪ 50,000 HHP fleet

Intermittent Duty

SPM® QEM 5000

▪ 8 pumps

▪ 5,000 HHP each

▪ 40 bores

▪ 40,000 HHP fleet

Continuous Duty

Trailer decrease:

12


2019 outlook

Group

• Good constant currency revenue and profit growth

Minerals• Good growth in constant currency revenues

• Operating margins to remain at lower end of cyclical range

ESCO• Good growth in constant currency revenues

• Further margin expansion supported by integration synergies

Oil & Gas

• Lower constant currency revenues

• Operating profits now expected to be towards the lower end of the £55m-£95m range


Key takeaways

✓

✓

✓

✓

Portfolio transformation delivering results

Multi-year upturn in mining continues; healthy and growing pipeline

NAM O&G challenging but medium term fundamentals robust

Great traction for our new technologies

The Weir Group PLC

London, UKVenlo, Netherlands

Capital Markets Day

Venlo, Netherlands 5/6 Dec 2019


Appendix


Appendix 1

Minerals Review

£m H1 2019 H1 20181 Growth H2 20181

OE orders 218 222 -2% 226

AM orders 579 534 8% 514

Total orders 797 756 5% 740

OE revenue 179 180 0% 219

AM revenue 527 484 9% 529

Total revenue 706 664 6% 748

Book to bill 1.13 1.14 0.99

EBITA as reported2 121 116 5% 135

Operating margin2 % 17.2% 17.4% -20bps 18.2%

Operating cash flow 81 115 -29% 133

1 2018 restated at H1 2019 average exchange rates except for operating cash flow. Prior year restated for reclassifications between

continuing and discontinued operations. 2 Adjusted to exclude exceptional items and intangibles amortisation.


Appendix 2

ESCO Review

£m

H1 2019

Post

Acquisition

20181

OE orders 10 9

AM orders 279 244

Total orders 289 253

OE revenue 10 13

AM revenue 270 247

Total revenue 280 260

Book to bill 1.03 0.97

EBITA as reported2 40 34

Operating margin2 % 14.1% 13.0%

Operating cash flow 32 35

1 2018 restated at H1 2019 average exchange rates except for operating cash flow. 2 Adjusted to exclude exceptional items and intangibles amortisation.


Appendix 3

Oil & Gas Review

£m H1 2019 H1 20181 Growth H2 20181

OE orders 98 114 -14% 81

AM orders 236 341 -31% 289

Total orders 334 455 -27% 370

OE revenue 102 101 1% 94

AM revenue 241 325 -26% 287

Total revenue 343 426 -19% 381

Book to bill 0.97 1.07 0.97

EBITA as reported2 29 68 -57% 32

Operating margin2 % 8.5% 16.0% -750bps 8.3%

Operating cash flow (16) 38 -144% 56

1 2018 restated at H1 2019 average exchange rates except for operating cash flow. Prior year restated for reclassifications between

continuing and discontinued operations. 2 Adjusted to exclude exceptional items and intangibles amortisation.


Appendix 4

Quarterly input trends (constant currency)

Reported growth Like-for-like growth 1,2

Division 2018 Q3 2018 Q4 2019 Q1 2019 Q2 2018 Q3 2018 Q4 2019 Q1 2019 Q2

Original equipment 19% 30% -10% 7% 19% 30% -10% 7%

Aftermarket 20% 3% 9% 7% 20% 3% 9% 7%

Minerals 20% 10% 3% 7% 20% 10% 3% 7%

Original equipment 37% -38% -7% -22% 23% -14% -7% -22%

Aftermarket 6% -4% -28% -34% 6% -4% -28% -34%

Oil & Gas 13% -12% -23% -31% 10% -6% -23% -31%

Group

Original equipment 28% 11% -6% - 20% 17% -9% -3%

Aftermarket 44% 34% 27% 23% 15% - -6% -8%

Continuing operations1 40% 28% 18% 17% 16% 4% -7% -7%

Book to bill 1.02 0.94 1.09 1.05 1.04 0.94 1.11 1.05

1 Continuing operations excludes the Flow Control division which has been sold.

2 Like-for-like excludes the impact of acquisitions. KOP was acquired on 27 July 2017 and excluded from 2018. ESCO was acquired on 12 July 2018 and is excluded from 2018 and 2019.


Order input by geography £m Minerals ESCO Oil & Gas H1 2019 total H1 2018 total

North America 197 165 243 605 559

Europe & FSU 96 22 13 131 100

Australasia 117 27 2 146 112

Middle East & Africa 106 18 43 167 143

South America 171 42 2 215 163

Asia Pacific 110 15 31 156 134

Continuing operations 797 289 334 1,420 1,211

Order input by end market £m Minerals ESCO Oil & Gas H1 2019 total H1 2018 total

Mining 597 163 - 760 540

Infrastructure 13 85 - 98 24

Oil & Gas 63 26 330 419 498

General Industrial 72 15 3 90 78

Other 52 - 1 53 71

Continuing operations 797 289 334 1,420 1,211

Appendix 5

Order input by end market and geography (constant currency)


Appendix 6

Foreign exchange by currency

H1 2018 Revenue £m H1 2018 Operating profit1 £m

Currency At 2018 rates FX At 2019 rates At 2018 rates FX At 2019 rates

US dollar 518 33 551 101 5 106

Australian dollar 140 (4) 136 12 - 12

Canadian dollar 96 2 98 22 - 22

Euro 37 - 37 8 - 8

Chilean peso 75 (3) 72 19 (1) 18

United Arab Emirates dirham 23 1 24 2 - 2

South African rand 57 (4) 53 2 - 2

Brazilian real 20 (1) 19 1 - 1

Russian rouble 14 (1) 13 1 - 1

Other 85 2 87 (4) 1 (3)

Continuing operations 1,065 25 1,090 164 5 169

Variance 2% 4%

Interest (17) (1) (18)

PBTA 147 4 151

Variance 3%

1 Adjusted to exclude exceptional items and intangibles amortisation.


Appendix 7

Foreign exchange by division

H1 2018 Revenue £m H1 2018 Operating profit1 £m

Division At 2018 rates FX At 2019 rates At 2018 rates FX At 2019 rates

Minerals 664 - 664 114 2 116

ESCO - - - - - -

Oil & Gas 401 25 426 64 4 68

Central Costs - - - (14) (1) (15)


Discontinued operations 157 2 159 6 - 6



Appendix 8

Foreign exchange tailwind expected in 2019

FY 2018 Revenue £m FY 2018 Operating profit1 £m

Currency At 2018 rates FX At 2019 rates At 2018 rates FX At 2019 rates

US dollar 1,291 43 1,334 225 7 232

Australian dollar 299 (8) 291 30 (1) 29

Canadian dollar 203 1 204 49 - 49

Euro 81 (1) 80 22 - 22

Chilean peso 161 (3) 158 41 (1) 40

United Arab Emirates dirham 52 2 54 7 1 8

South African rand 112 (4) 108 6 - 6

Brazilian real 41 (1) 40 5 - 5

Russian rouble 35 - 35 5 - 5

Other 175 - 175 (42) - (42)


Variance 1% 2%

Interest (38) - (38)

PBTA 310 6 316

Variance 2%



Appendix 9

Exchange rates

CurrencyH1 2018

Average FX rate

H1 2019

Average FX rate

H1 2018

Balance sheet date

H1 2019

Balance sheet date

US dollar 1.38 1.29 1.32 1.27

Australian dollar 1.78 1.83 1.78 1.81

Canadian dollar 1.76 1.72 1.73 1.66

Euro 1.14 1.14 1.13 1.12

Chilean peso 841.97 872.86 861.70 861.30

United Arab Emirates dirham 5.06 4.75 4.85 4.66

South African rand 16.92 18.35 18.15 17.91

Brazilian real 4.71 4.97 5.10 4.87

Russian rouble 81.73 84.28 82.78 80.15

The principal exchange rates applied in the preparation of the financial statements were as follows:

the weir group plc an ever stronger weir · 2019. 7. 30. · 7 the weir group plc h1 2019...

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