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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
4 The Weir Group PLC
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
5 The Weir Group PLC
Weir ShareBuilder
Giving our people a share in our future success
IndonesiaIndia
Australia
Brazil Chile China
S. Africa
The Weir Group PLCH1 2019 Results
John HeasleyChief Financial Officer
7 The Weir Group PLC
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%
8 The Weir Group PLC
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.
9 The Weir Group PLC
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
EBITA 1,3 and margins
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 The Weir Group PLC
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%
EBITA 1,2 and margins
1 On a constant currency basis.2 Adjusted to exclude exceptional items and intangibles amortisation.
11 The Weir Group PLC
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
12 The Weir Group PLC
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
13 The Weir Group PLC
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
14 The Weir Group PLC
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
The Weir Group PLCH1 2019 Results
Jon StantonChief Executive Officer
16 The Weir Group PLC
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
17 The Weir Group PLC
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.
18 The Weir Group PLC
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
19 The Weir Group PLC
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
20 The Weir Group PLC
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
21 The Weir Group PLC
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.
22 The Weir Group PLC
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
23 The Weir Group PLC
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.
24 The Weir Group PLC
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
25 The Weir Group PLC
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
26 The Weir Group PLC
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
The Weir Group PLCH1 2019 Results
Appendix
29 The Weir Group PLC
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.
30 The Weir Group PLC
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.
31 The Weir Group PLC
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.
32 The Weir Group PLC
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.
33 The Weir Group PLC
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)
34 The Weir Group PLC
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.
35 The Weir Group PLC
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)
Continuing operations 1,065 25 1,090 164 5 169
Discontinued operations 157 2 159 6 - 6
1 Adjusted to exclude exceptional items and intangibles amortisation.
36 The Weir Group PLC
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)
Continuing operations 2,450 29 2,479 348 6 354
Variance 1% 2%
Interest (38) - (38)
PBTA 310 6 316
Variance 2%
1 Adjusted to exclude exceptional items and intangibles amortisation.
37 The Weir Group PLC
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:
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