Positive mining markets and strong execution; significant margin expansion

Further growth and margin progress expected in 2024

Demand for Weir mining solutions at high levels

•     FY: Group AM orders¹ stable; Minerals AM orders¹ +3%, in ESCO mining growth offset by infrastructure

•     FY: Group OE orders¹ -3% relative to strong PY comparator; small brownfield and sustainability projects

•     Q4: Group AM orders¹ +1% YoY, and +2% sequentially

Very strong execution and progress towards 2026 operating margin target of 20%

•     FY adjusted operating margin^1,2 of 17.4%, +140bps

•     FY revenue¹ +9%; volume and price

•     FY adjusted operating profit^1,2 of £459m, +18%

•     Free operating cash conversion of 85%

Significant increase in returns and stronger balance sheet

•     Return on capital employed of 18.0%, +280bps

•     Full year dividend of 38.6p, +18%

•     Net debt to EBITDA of 1.1x

2024 Outlook: Growth in constant currency revenue, operating profit and margin

•     Strong order book, installed base expansion and positive production trends in mining markets

•     Operating margin expansion supported by Performance Excellence; further progress towards 2026 target

•     Free operating cash conversion of 90% to 100%

	2023	2022	As reported +/-	Constant currency1 +/-
Continuing Operations3
Orders1	£2,585m	£2,590m	n/a	0%
Revenue	£2,636m	£2,472m	+7%	+9%
Adjusted operating profit2	£459m	£395m	+16%	+18%
Adjusted operating margin2	17.4%	16.0%	+140bps	+140bps
Adjusted profit before tax2	£411m	£348m	+18%	n/a
Statutory profit before tax	£321m	£260m	+23%	n/a
Adjusted earnings per share2	115.9p	98.4p	+18%	n/a
Return on capital employed	18.0%	15.2%	+280bps	n/a
Total Group
Statutory profit after tax	£229m	£214m	+7%	n/a
Statutory earnings per share	88.2p	82.5p	+7%	n/a
Free operating cash conversion	85%	87%	-2pp	n/a
Dividend per share	38.6p	32.8p	+18%	n/a
Net debt4	£690m	£797m	+£107m	n/a

^{See footnotes on page 5}

Jon Stanton, Chief Executive Officer said:

"Weir is delivering on the compelling value creation opportunity we set out as a focused mining technology company. Our unique capabilities are enabling us to capitalise on the structural growth in demand for critical metals and the transition to more sustainable mining. In parallel, through Performance Excellence we are optimising our operations and driving efficiencies. 

In 2023 we made significant progress against these goals, taking advantage of positive mining production trends to win market share and grow orders in our mining aftermarket business, while making good progress with our technology focused growth initiatives. We executed well, delivering strong growth in revenue and profit, expanding operating margins in excess of our 2023 target, achieving consistent cash conversion and significant improvement in return on capital employed.

As we go into 2024, we have a growing installed base, a strong order book and ore production trends in our mining markets are positive. We expect to deliver another year of growth in revenue, profit and cash generation, and to further expand our operating margins with progress towards our 2026 target of 20%."

A webcast of the management presentation will begin at 08:00 (GMT) on 29 February 2024 at www.investors.weir. A recording of the webcast will also be available at www.investors.weir.

 

CHIEF EXECUTIVE OFFICER'S REVIEW

Another strong year as a mining technology leader

2023 was a year of significant progress for Weir. We met our commitments to stakeholders, advanced the transition to sustainable mining for our customers and took major steps forward in delivering our strategic agenda.

We capitalised on positive conditions in our mining markets and executed strongly, delivering year-on-year growth in revenue and operating profit, significantly expanding our operating margins and meeting our cash conversion target. Throughout the year we supported customers with essential spares and expendables to keep their mines running, and also provided innovative new technologies to make their operations more efficient and sustainable.

Our progress on strategy was a particular highlight. We built strong momentum in our Performance Excellence transformation programme, realising absolute cost savings of £6m and identifying new opportunities which enabled us to double our previous cost saving target to £60m in absolute savings by 2026. In parallel, we made good progress with our technology focused growth initiatives, launching and commencing field trials of a number of innovative new solutions, including our Cavex 2.0 technology in Minerals and our latest generation GET system in ESCO. In addition, the acquisition of SentianAI has expanded our digital capability and stepped up the roll-out of our process optimisation solutions. Sustainability remains core to our strategy and achieving validation of our emissions reduction targets by SBTi in March was an important milestone.

Our performance in 2023 is a testament to the hard work of Weir colleagues across the globe, and I'd like to thank them for their dedication and contribution through the year.

Going into 2024, notwithstanding complexity in the macroeconomic and geopolitical environment, I'm confident of further progress. Conditions in our mining markets are supportive and we are positioned for another year of growth and margin expansion. Further out, we have a clear strategy to capitalise on the attractive long-term structural trends in our markets, helping our customers to deliver the metals needed for the energy transition, and launching new transformative technologies to accelerate the shift to sustainable mining. In parallel, through Performance Excellence we are optimising our operations and realising our full potential as a mining technology leader. Combined, our market opportunity, technology focused strategy and Performance Excellence represent a compelling value creation opportunity, and we are delivering on it.

Growth: Ore production trends driving demand for Weir solutions

Throughout the year, activity levels in mining markets were high. Market prices for our main commodity exposures of copper, gold and iron ore were well above the cost curve, and our customers capitalised by maximising ore production. Continued complexities in the permitting and regulatory environment meant large expansion projects remained slow to convert, so customers' capital expenditure was largely focused on developing and improving the efficiency of existing assets.

Ore production trends, coupled with the effect of declining grades and installed based expansion, drove demand for our AM spares and expendables. OE demand was primarily driven by orders for small brownfield and debottlenecking projects at existing mines, with strong momentum through the year as customers chose Weir solutions due to their sustainability and performance benefits, coupled with our global service capability. Across the Group, demand was particularly strong in Australasia, with growth reflecting recent market share gains, while from a commodity perspective, order growth was strongest in copper and year-on-year demand decreased in both coal and the oil sands.

In infrastructure markets underlying demand was largely stable through the year, though well below the peak levels seen in the prior year, particularly the elevated levels seen in H1 2022.

On a constant currency basis, year-on-year Group orders were broadly stable.

AM constant currency orders were marginally ahead of the prior year. Growth in demand in hard rock mining and a contribution from pricing, as expected, was partially offset by lower demand from customers in the Canadian oil sands and ESCO's infrastructure customers, together with the non-repeat of Russia orders. As we go into 2024, the impact of these offsetting factors will normalise and we expect underlying growth in hard rock mining to be sustained. 

In OE, constant currency orders were down 3% against a strong prior year comparator, which included £33m of orders for nickel expansion projects in H2 2022. In Minerals we converted over 85% of our mill circuit pump trials and won market share with our latest Cavex 2.0 cyclone technology, while in ESCO we delivered strong growth in mining attachments as we continued to gain traction and expand market share.

Revenue for the Group was 9% higher on a constant currency basis. This reflects strong execution, delivery of our record opening order book and price realisation. The Group's book-to-bill was 0.98.

Margins and resilience: 2023 operating margin target exceeded

The operating environment in 2023 was stable. Relative to the prior year, availability of raw materials and freight improved, and input pricing steadied. While some pockets of inflation persisted, particularly across wages and salaries during the first half, our leading market positions and strong brands enabled us to achieve sufficient price increases to protect our gross margins.

On a constant currency basis adjusted operating profit grew 18% year-on-year, and adjusted operating margins were 17.4%, exceeding our 2023 target of 17%, and up 140bps on the prior year. Expansion in operating margin reflects strong operational efficiency, the initial benefits from Performance Excellence and a year-on-year reduction in adverse transactional FX movements, partially offset by a movement in Minerals revenue mix towards OE.

In December, we announced a new medium-term operating margin target of 20% in 2026. We expect to achieve this through operating leverage from growth and realisation of £60m of absolute cost savings from our Performance Excellence transformation programme. This comprises £20m of savings from each of the three main elements of capacity optimisation, lean processes and the transition of our enabling functions to Weir Business Services (WBS). The one-off cost to achieve the £60m of savings is £90m, with the phasing of the costs biased towards the early years of the programme.

Through the year we made good progress in delivering the initial benefits from Performance Excellence, realising £6m of absolute savings. This includes benefits from capacity optimisation, as we completed projects to consolidate several Minerals manufacturing facilities in the US and optimise our Australian service centre and Latin American distribution footprints. In addition, a number of other capacity optimisation and lean process projects were initiated during the year, underpinned by our recent investments in foundational systems and enhanced operational capability. Our transition to WBS is also progressing well, with the detailed design phase of the project complete and the transition of certain regional services underway. 

In the period, an exceptional charge of £29m was recognised relating to Performance Excellence, and the cash outflow for the programme was £14m.

Returns: Significant growth in return on capital employed, with balance sheet flexibility

Reflecting our focus on execution, return on capital employed (ROCE) increased 280bps on the prior year to 18%, as we grew revenue, expanded our margins and delivered strong cash generation.

Free operating cash conversion for the year was 85%, firmly within our 2023 target range of 80% to 90%, while the efficiency of our mining focused platform enabled us to reduce working capital as a percentage of sales to 21.3% (2022: 23.7%).

Net debt to EBITDA at the end of December was 1.1x, giving the Group considerable resilience and flexibility to deploy capital to drive shareholder value.

Reflecting high levels of confidence in our strategy and future prospects, the Board is recommending a final dividend of 20.8 pence per share. In line with our policy to pay out 33% of adjusted earnings per share (EPS), this equates to a total full year dividend of 38.6 pence per share and represents an increase of 18% on the prior year. The final dividend will be paid on 31 May 2024 to Shareholders on the register on 19 April 2024.

Safety and sustainability: First ever avoided emissions study for a mining use case

On safety, the Group's total incident rate⁵ (TIR) for the year was 0.42 (2022: 0.41) which was disappointing relative to our ambition. During the year we continued the roll out of our Zero Harm Behaviours programme, and to date over 8,000 colleagues have completed the first phase of the training.  Learnings from the programme are now being put into action as we drive to achieve our ambition of zero harm operations.

Our focus on safety extends beyond physical safety, and our commitment to workplace mental health was recognised in the CCLA Corporate Mental Health Benchmark released in June, with Weir being recognised as the biggest improver on performance and disclosure.

On inclusion, diversity and equity, we took positive steps forward on gender diversity, growing the percentage of our employees who are female.  

We also made good progress on sustainability. In the first quarter our scope 1, 2 & 3 emissions reduction targets were validated by SBTi, and in the year we delivered a further 6% reduction in our scope 1&2 emissions, meaning our cumulative reduction relative to our 2019 benchmark is now 23%. Our progress in this area continues to be externally recognised, as we maintained our place on the prestigious CDP A List for leadership in corporate transparency and performance on climate change.

Furthermore, we published the findings from our first ever avoided emissions study. The results, which have been independently verified, show that by choosing our Redefined Mill Circuit incorporating Enduron® High Pressure Grinding Rolls technology, instead of a traditional mill circuit which uses tumbling mill technology, energy consumption is reduced by over 40% and CO₂ emissions are more than halved per tonne of ore. The study, which we announced at the COP28 summit in December, is the first of its kind for a mining use case and is receiving global interest from a range of stakeholders, including customers, governmental bodies and the finance sector.

In line with best practice, we also updated our double materiality assessment, and key findings have been incorporated into a refreshed sustainability strategy which we launched in Q1 2024.

Outlook

We begin 2024 with a strong order book and positive ore production trends in our mining markets. These trends, coupled with the impact of declining grades and installed base expansion, are driving increased demand for our AM spares and expendables. We are also seeing good momentum in demand for our OE solutions, as customers focus on improving the efficiency and sustainability of existing assets.

In 2024, this continued favourable backdrop in mining, together with softer year-on-year order comparatives in oil sands and infrastructure, underpins our confidence in delivering growth in constant currency revenue, profit and operating margins. Benefits from Performance Excellence will support further margin expansion, and we expect free operating cash conversion of between 90% and 100%.

Further out, the long-term value creation opportunity for Weir is compelling. The fundamentals for our business are highly attractive, underpinned by long-term structural growth trends in our mining markets, and our technology strategy which is focused on enabling sustainable mining. In addition, the benefits of Performance Excellence will drive further margin expansion and underpin our 2026 operating margin target of 20%, while our strong cash generation and balance sheet give us optionality to allocate capital to prioritise growth in total shareholder returns.

Board changes

As previously announced, Brian Puffer will join the Group as Chief Financial Officer and be appointed to the Board with effect from 1 March 2024.

After completing his full nine-year term, Sir Jim McDonald will be stepping down from the Board at the end of the AGM on 25 April 2024 and Dame Nicola Brewer will succeed Sir Jim as Senior Independent Director.

Andy Agg was appointed to the Board as a Non-Executive Director on 27 February 2024, and Srinivasan Venkatakrishnan has informed the Board of his intention to step down as a Non-Executive Director of the Board with effect from 31 March 2024.

 

We are Weir strategic framework: 2023 performance

Each year the Group sets strategic and ESG measures aligned to the 'We are Weir' framework of People, Customer, Technology and Performance. The table below summarises our 2023 performance and rating against each of these measures, with full details outlined in our 2023 Annual Report.

	Strategic initiatives	2023 Measures	2023 Performance and rating
People	Deliver on Zero Harm for our people and the environment   Accelerate our purpose-driven culture and lead in inclusion, diversity and equity   Create talent and capabilities for the future	•   Retain our talent	•   Voluntary attrition < 11%	G
		•   Build our digital literacy	•   >76% of employees with more than one log-in to key software platform	G
		•   Maintain top quartile engagement scores	•   Engagement score of 8.4; top quartile of benchmark	G
		•   Improve our safety Total incident rate (TIR)*	•   TIR of 0.42 (2022: 0.41)	G
		•   Improve our gender diversity*	•   % of female in bands 3-5 improved by 3.1% •   % of female in bands 1-2 improved by 1.6%	G   G
Customer	Outgrow our markets through voice-of-customer led initiatives   Solve our customers' biggest smart, efficient and sustainable challenges   Show leadership in our industries' pathway to Net Zero	•   Execute our strategic growth initiatives in each division	•   Minerals executed its key strategic initiatives, however  orders of £314m below target of £371m •   ESCO executed its key strategic initiatives; orders achieved of $274m vs target of $272m	G       G
		•   Capture value from new strategic alliances	•   Seven orders originating from new strategic alliances	G
		•   Digitise our customer experience	•   >90% of Minerals customer quotes in certain regions completed via online configurator (phased roll-out) •   Near 100% of ESCO customer quotes completed via online configurator	G     G
		•   Continue to develop our scope 4 value proposition*	•   Target developed for phase 1 products and externally benchmarked	G
		•   Build customer-specific scope 3 and scope 4 data insight*	•   Data pipeline developed from customer projects and Weir digital tools	G
Technology	Invest in innovating transformational solutions   Digitally enable everything we do   Create new business and business models from data and insights	•   Increase revenue from new products	•   £108m of Minerals revenue from new products •   $3.1m of ESCO revenue from new products	G   G
		•   Digitise our current business model	•   Minerals: >60 Synertrex® connected sites •   ESCO: $22m sales from Motion Metrics	G     G
		•   Progress our priority R&D projects*	•   Targets for key R&D projects achieved	G
Performance	Drive clear, lean and agile operations and supply chain   Deliver high quality, efficient back-office functions   Expand margins and deliver strong cash conversion	•   Improve our lean scores	•   Minerals: achieved ambitions for sites on Level 2 & 4 •   ESCO: achieved target process management score	G   G
		•   Deliver our Performance Excellence transformation programme to plan	•   Delivered target IT architecture outcomes •   Delivered £7.2m programme savings; ahead of target of £4.5m run-rate	G   G
		•   Reduce scope 1&2 CO2e vs 2019 base aligned with SBTi*	•   23% absolute CO2e reduction6 achieved and verified	G
		•   Enable emergent ESG reporting governance *	•   Automated dashboard developed	G

*ESG measures

Notes:

The Group Financial Highlights and Divisional Financial Reviews include 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 other alternative performance measures are provided in note 2 of the Audited Results contained in this press release.

1.     2022 restated at 2023 average exchange rates.

2.     Profit figures before adjusting items. Continuing operations statutory operating profit was £368m (2022: £308m). Total operations operating cash flow (cash generated from operations) excludes additional pension contributions, exceptional and other adjusting cash items, and income tax paid. Total operations net cash generated from operating activities was £394m (2022: £321m).

3.     Continuing operations excludes the Oil & Gas Division, which was sold to Caterpillar Inc. in February 2021 and the Saudi Arabian joint venture, which was sold to Olayan Financing Company in June 2021.

4.     Refer to note 2 of the Audited Results contained in this press release for further details of alternative performance measures.

5.     Total incident rate is an industry standard indicator that measures lost time and medical treatment injuries per 200,000 hours worked.

6.     Market-based absolute CO₂ emissions. 2019 is the baseline year for our SBTi-aligned scope 1&2 target of 30% reduction in absolute emissions by 2030.

 

 

DIVISIONAL REVIEW

Minerals

Minerals is a global leader in products and integrated solutions for smart, efficient and sustainable processing in mining and infrastructure markets.

2023 Summary

•     Year-on-year orders¹ stable

•     AM orders¹ +3%; demand driven by mining production trends and installed base expansion

•     Small brownfield and sustainability projects driving continued momentum in demand for OE

•     Strong execution: operating profit^1,2 +18%; operating margin^1,2 expansion +110bps

2023 Strategic review

Minerals delivered a year of strong strategic progress, growing its installed base, significantly enhancing its digital offering, and completing and initiating a number of Performance Excellence projects that will drive efficiency and margin expansion. Progress across all four pillars of the 'We are Weir' strategic framework is outlined below.

People

On safety, TIR for Minerals was 0.34 (2022: 0.27). The Division remains amongst the safest in its sector, and through the Zero Harm Behaviours Programme is reinforcing safety as a priority.

Inclusion, diversity and equity was a key focus in the year, and this is reflected in improved gender diversity across the Division. Other milestones included increased diversity in recruitment and talent pipelines, and the global launch of our Woman in Leadership Programme, in conjunction with the University of Pretoria.

Customers

Comminution is a high growth area of our portfolio, and in the year we saw a significant increase in orders for our AM solutions.  This reflects growth in our installed base, and our increased strategic focus on this area.  A particular highlight was an order from a large copper mine in South America, where our customer ordered Enduron^® rollers for their High Pressure Grinding Rolls (HPGR). The installation will be the first instance of our rollers being fitted to a competitor's HPGR, and enables us to showcase the performance and reliability benefits of our technology. More generally, the pipeline for our HPGR remains strong with a number of projects advancing materially through the year.

We also gained further market share in mill circuit pumps, converting over 85% of our competitive field trials.

Technology

In November we acquired SentianAI, an innovative developer of process optimisation solutions powered by Artificial Intelligence. Coupled with the launch of our Synertrex^® intelli-solutions condition monitoring technology, which now spans six product platforms and is active at over 60 mines, the acquisition enhances our overall process optimisation capabilities and positions us to develop new revenue and business models.  

Our portfolio of sustainable solutions, which improve water efficiency and reduce energy consumption relative to traditional mining technologies, also gained traction. We grew our sales pipeline for our Redefined Mill Circuit and received initial commercial orders for Coarse Particle Flotation technology, which we access through our partnership with Eriez. 

In addition, we launched our Cavex^® 2.0 cyclone technology, and invested in upgrades and range expansions for our industry leading Warman^® slurry pumps.

Performance

On Performance Excellence, the Division consolidated several of its manufacturing facilities in the US, optimised its Australian service centre and Latin America distribution footprints and initiated the reconfiguration of its elastomer manufacturing in Asia Pacific. Several new 'configure to order' tools were also launched, which will reduce product variation and improve manufacturing efficiencies. These included full launch of our HPGR configurator tool, and phase 1 roll-out of our 'Warman selector' tool. 

Among other Performance Excellence projects initiated was the launch of Weir Integrating Network System (WINS), our new lean manufacturing programme. WINS is our proprietary operating system and is enabling us to extend our focus on lean to cover all value streams in our global operations. 

On sustainability, in our continued drive to reduce our environmental footprint, we installed solar panels at our facilities in South Africa and transitioned our Australian operations to a green energy tariff.

 

2023 Financial review

Constant currency £m	H11	H2	2023	20221	Growth1
Orders OE	262	252	514	547	-6%
Orders AM	700	681	1,381	1,339	3%
Orders Total	962	933	1,895	1,886	0%
Revenue OE	257	292	549	447	23%
Revenue AM	676	712	1,388	1,288	8%
Revenue Total	933	1,004	1,937	1,735	12%
Adjusted operating profit2	169	207	376	318	18%
Adjusted operating margin2	18.2%	20.5%	19.4%	18.3%	+110bps
Operating cash flow2	131	287	418	386	8%
Book-to-bill	1.03	0.93	0.98	1.09

1. 2022 and 2023 H1 restated at 2023 average exchange rates except for operating cash flow.

2. Profit figures before adjusting items. Operating cash flow (cash generated from operations) excludes additional pension contributions, exceptional and other adjusting cash items, and income tax paid. Refer to note 2 of the Audited Results contained in this press release for further details of alternative performance measures.

Orders were broadly stable on a constant currency basis at £1,895m (2022: £1,886m), with book-to-bill at 0.98 reflecting strong execution and ongoing strength in mining markets. OE orders decreased 6% year-on-year, relative to a strong prior year comparator which included £33m of large orders for nickel projects in Indonesia. Through the year, we continued to see good momentum in demand for OE for small brownfield and debottlenecking projects, as customers sought to maximise production from existing assets and large projects remained slow to convert. AM orders increased 3% year-on-year, with a contribution from pricing and an increase in volume from customers in hard rock mining, partially offset by reduced orders from customers in the Canadian oil sands and a loss of orders from Russia. Excluding orders from Russia from the prior year comparator, AM orders were up 4%. Contribution from pricing in H2 was lower than in H1, as the pricing environment normalised through the year. In line with prior years, AM orders in Q2 included multi-period orders, and excluding these, AM orders grew sequentially from H1 to H2. For the full year, AM orders represented 73% of total orders (2022: 71%), and mining end-markets accounted for 79% of total orders (2022: 76%).

Revenue increased 12% on a constant currency basis to £1,937m (2022: £1,735m), reflecting strong execution and price realisation. Half-on-half, revenue grew sequentially through the year, as we delivered our record opening order book in H1 and continued to benefit from strength in our mining markets in H2, with orders converting to revenue. Revenue growth in Canada was particularly high, following strong order growth in the Canadian oil sands last year. Partly offsetting this was reduced revenue from Russia, which year-on-year decreased by £38m as we wound down operations. Full year revenue mix moved towards OE, which accounted for 28% of revenue, up from 26% in the prior year.

Adjusted operating profit increased 18% on a constant currency basis to £376m (2022: £318m) as the Division benefited from increased volumes, strong execution and the initial benefits of Performance Excellence. In addition, year-on-year, the Division benefited from a reduction in adverse transactional FX movements of £8m.

Adjusted operating margin on a constant currency basis was 19.4% (2022: 18.3%).  The year-on-year improvement of 110bps reflects strong operational efficiency, early benefits from Performance Excellence, and a reduction in adverse transactional FX movements, partially offset by the movement in revenue mix towards OE.

Operating cash flow increased by 8% to £418m (2022: £386m) reflecting growth in operating profit, partially offset by a modest increase in working capital outflow to £26m (2022: £18m). Working capital movements include a reduction in inventory resulting from actions through Performance Excellence, and also a decrease in both receivables and payables in line with phasing of revenue and purchases respectively.

 

 

ESCO

ESCO is a global leader in Ground Engaging Tools (GET), attachments, and artificial intelligence and machine vision technologies that optimise productivity for customers in global mining and infrastructure markets.

2023 Summary

•     Orders¹ -2%; growth in mining offset by infrastructure

•     Very strong demand for mining attachments

•     Strong execution: operating profit^1,2 +11%; operating margin^1,2 expansion +150bps

2023 Strategic review

ESCO made good strategic progress in the year, significantly improving safety performance, delivering substantial growth in mining attachments and advancing its foundry optimisation programme. Progress across all four pillars of the 'We are Weir' strategic framework is outlined below.

People

Safety performance in ESCO was a highlight, with a reduction in TIR to 0.81 (2022: 1.01). This reflects strong focus across the Division and is an important step forward on our journey to delivering our ambition of zero harm.

In addition, we continued to make significant strides with respect to diversity, with improvement in gender diversity at all levels in the Division.

Customers

Throughout the year, the Division made significant progress in growing market share in mining attachments. Year-on-year orders increased by 40%, as customers chose ESCO solutions for their lowest total cost of ownership and productivity benefits. We grew orders in our largest market of North America, and also won key orders in Africa and Australia, reflecting our increased focus and momentum in these regions.

We also won share in our core GET market, delivering positive net conversions, and gained traction with our Motion Metrics digital solutions, growing our sales pipeline and delivering year-on-year revenue growth.

Technology

The development of our next generation GET technology was a major focus in 2023. Results from field trials of the new solution were positive, demonstrating that the technology further enhances our customer proposition of best in class wear life and lowest total cost of ownership.

We also delivered successful phase 1 field trials of our proprietary ore characterisation technology, with the second phase of trials due to commence in the first half of 2024. 

In addition, we continued to invest in our materials science capability, developing new alloys and composites to underpin our technology leadership.

Performance

Optimising the performance of its foundry network is ESCO's largest Performance Excellence opportunity, and the Division made good progress in the year. Construction of the new foundry in Xuzhou, China, is now complete and equipment is being commissioned. The first casting from the foundry was poured in February 2024 and, once fully operational, the facility will significantly increase the Division's low cost manufacturing capacity. Progress in our North American foundries was also positive, with year-on-year improvements in both operational and quality metrics.

From a sustainability perspective, the Division took steps forward in reducing its environmental footprint, completing environmental audits across a number of its facilities and establishing work groups that are addressing key findings.

 

2023 Financial review

Constant currency £m	H11	H2	2023	20221	Growth1
Orders OE	35	27	62	44	41%
Orders AM	318	310	628	660	-5%
Orders Total	353	337	690	704	-2%
Revenue OE	28	30	58	43	34%
Revenue AM	319	322	641	645	-1%
Revenue Total	347	352	699	688	2%
Adjusted operating profit2	58	64	122	109	11%
Adjusted operating margin2	16.7%	18.2%	17.4%	15.9%	+150bps
Operating cash flow2	53	84	137	93	47%
Book-to-bill	1.02	0.96	0.99	1.02

1. 2022 and 2023 H1 restated at 2023 average exchange rates except for operating cash flow.

2. Profit figures before adjusting items. Operating cash flow (cash generated from operations) excludes additional pension contributions, exceptional and other adjusting cash items, and income tax paid. Refer to note 2 of the Audited Results contained in this press release for further details of alternative performance measures.

Orders decreased 2% on a constant currency basis to £690m (2022: £704m), with book-to-bill at 0.99 reflecting strong execution coupled with high levels of activity in our mining markets. Year-on-year movement in orders reflects growth in mining orders, including a contribution from price, offset by a decrease in orders from infrastructure customers relative to a strong prior year comparator. Contribution from pricing in H2 was lower than in H1, as the pricing environment normalised through the year. In mining, demand was particularly strong for our mining attachments, which is reflected in OE order growth of 41%. Notwithstanding this, AM continues to be the largest part of ESCO accounting for 91% of total orders in the year (2022: 94%). In total, mining end markets accounted for 62% of orders (2022: 62%) and infrastructure accounted for 25% (2022: 26%). 

Revenue on a constant currency basis increased by 2% to £699m (2022: £688m) with price realisation and volume increases in mining, partially offset by a decrease in infrastructure volumes. Year-on-year revenues from infrastructure markets decreased by 14%. 

Adjusted operating profit increased by 11% to £122m (2022: £109m) on a constant currency basis, as the Division benefited from strong execution and operational efficiencies.

Adjusted operating margin on a constant currency basis was 17.4% (2022: 15.9%), with the year-on-year improvement of 150bps reflecting strong operational efficiency.

Operating cash flow increased by 47% to £137m (2022: £93m) reflecting growth in operating profit and a decrease in working capital outflow to £4m (2022: £33m). Working capital movements include a small reduction in inventory, and a modest increase and decrease in receivables and payables respectively.

 

 

GROUP FINANCIAL REVIEW

		Constant currency1		As reported
Continuing Operations3 £m	2023	2022	Growth	2022	Growth
Orders OE	576	591	-3%	n/a	n/a
Orders AM	2,009	1,999	0%	n/a	n/a
Orders Total	2,585	2,590	0%	n/a	n/a
Revenue OE	607	490	24%	501	21%
Revenue AM	2,029	1,933	5%	1,971	3%
Revenue Total	2,636	2,423	9%	2,472	7%
Adjusted operating profit2	459	388	18%	395	16%
Adjusted operating margin2	17.4%	16.0%	+140bps	16.0%	+140bps
Book-to-bill	0.98	1.07	n/a	1.07	n/a
Total Group £m
Operating cash flow2	526	n/a	n/a	448	17%
Free operating cash conversion	85%	n/a	n/a	87%	-2pp
Net debt4	690	n/a	n/a	797	+107

1. 2022 restated at 2023 average exchange rates.

2. Profit figures before adjusting items. Operating cash flow (cash generated from operations) excludes additional pension contributions, exceptional and other adjusting cash items, and income tax paid.

3. Continuing operations excludes the Oil & Gas Division, which was sold to Caterpillar Inc. in February 2021 and the Saudi Arabian joint venture, which was sold to Olayan Financing Company in June 2021.

4. Refer to note 2 of the Audited Results contained in this press release for further details of alternative performance measures.

 

Continuing operations orders at £2,585m were stable on a constant currency basis reflecting continued demand for our solutions. Minerals orders overall were marginally ahead of 2022 with AM up 3% (4% excluding the loss of orders from Russia) reflecting increased demand in hard rock mining and a contribution from pricing offset by lower demand in the Canadian oil sands. ESCO total orders decreased 2% on a constant currency basis; however OE order growth of 41% came from increased demand for mining attachments. 78% of orders related to aftermarket compared to 77% in the prior year.

Continuing operations revenue of £2,636m increased 9% on a constant currency basis. Minerals revenue grew 12% on a constant currency basis at £1,937m (2022: £1,735m). ESCO revenue increased 2% on a constant currency basis to £699m (2022: £688m). Aftermarket accounted for 77% of revenues, down from 80% in the prior year. Reported revenues increased 7% (2022: £2,472m), impacted by a foreign exchange translation headwind of £49m. Overall book-to-bill was 0.98.

Continuing operations adjusted operating profit increased by £64m (16%) to £459m on a reported basis (2022: £395m). Excluding a £7m foreign currency translation headwind, the constant currency increase was £71m (18%). As explained further in the Divisional reviews, Minerals adjusted operating profit increased on a constant currency basis to £376m (2022: £318m) and ESCO increased by 11% on a constant currency basis to £122m (2022: £109m). Unallocated costs are in line with the prior year at £39m.

Continuing operations adjusted operating margin of 17.4% is up 140bps versus last year on a constant currency basis and up 140bps as reported. Expansion in operating margin reflects strong operational efficiency, the initial benefits from Performance Excellence and a year-on-year reduction in adverse transactional FX movements, partially offset by a movement in Minerals revenue mix towards OE.

Continuing operations statutory operating profit of £368m was £61m favourable to the prior year, with the increase in adjusted operating profit of £64m being offset by an increase in adjusting items.

Continuing operations adjusting items increased by £3m to £90m (2022: £87m). Intangibles amortisation decreased to £25m (2022: £36m) primarily as a result of completed multi-year investment activities now being recognised within adjusted operating profit. Exceptional items decreased by £27m to £22m (2022: £49m). Costs of £29m (2022: £3m) were recognised relating to initiatives across all three pillars of our Performance Excellence programme - lean processes, capacity optimisation and global business services. These were partially offset by a net credit of £8m following the reversal of prior year provisions in respect of the wind down of operations in Russia as working capital recoveries have exceeded initial expectations. Exceptional costs in 2022 relating to our Russian operations totalled £44m. Exceptional items also included £1m for acquisition and integration related costs. Other adjusting items of £43m (2022: £3m) are primarily related to adjustments to the legacy US asbestos-related provision following a period of increased claims and the revised claims projections from the latest triennial actuarial review undertaken in the year.

Continuing operations net finance costs were £48m (2022: £47m) with an increase in finance costs of £15m after a foreign currency translation tailwind of £1m on USD denominated debt. The increase in costs was largely offset by higher finance income in the year, with both being driven by higher interest rates in the year.

Continuing operations adjusted profit before tax was £411m (2022: £348m), after a foreign currency translation headwind of £6m. The statutory profit before tax from continuing operations of £321m compares to £260m in 2022, the increase is primarily due to the increase in adjusted operating profit.

Continuing operations adjusted tax charge for the year of £111m (2022: £93m) on adjusted profit before tax from continuing operations of £411m (2022: £348m) represents an adjusted effective tax rate (ETR) of 27.0% (2022: 26.6%). Our ETR is principally driven by the geographical mix of profits arising in our business and, to a lesser extent, the impact of Group financing and transfer pricing arrangements. A tax credit of £20m has been recognised in relation to continuing operations adjusting items (2022: £45m).

Continuing operations profit after tax before adjusting items is £300m (2022: £255m). The statutory profit after tax for the year from continuing operations is £230m (2022: £213m).

Discontinued operations statutory loss after tax for the year was £1m (2022: profit of £1m) related to the finalisation of certain tax indemnities under the sale and purchase agreement for the Oil & Gas Division which was disposed of in 2021.

Statutory profit for the year after tax from total operations of £229m (2022: £214m) reflects the increase in profit from continuing operations of £17m offset by the reduction in discontinued operations.

Adjusted earnings per share from continuing operations increased by 18% to 115.9p (2022: 98.4p) reflecting the increased profit offset by higher effective tax rate in the year. Statutory reported earnings per share from total operations is 88.2p (2022: 82.5p). The weighted average number of shares in issue was 258.4m (2022: 258.7m).

Acquisition of SentianAI

The Group completed the acquisition of Sentiantechnologies AB (SentianAI) on 21 November 2023 for an enterprise value of SEK87m (£7m) less customary debt and working capital adjustments, which resulted in an initial cash consideration of £6m and deferred consideration of £1m, payable in 2025.

Cash flow and net debt

Cash generated from total operations³ increased by £78m to £526m (2022: £448m) primarily driven by the increase in adjusted operating profit, coupled with an improvement in working capital of £21m (2023: outflow of £28m vs 2022: £49m). The reduced working capital cash outflow reflects an improvement in inventory, only partially offset by receivables and payables. This reflects a combination of phasing of purchases and the initial benefit of actions under our Performance Excellence programme, as well as lower utilisation of invoice discounting facilities. As a result, working capital as a percentage of sales decreased to 21% from 24% in the prior year. Non-recourse invoice discounting facilities, primarily customers supply chain financing facilities, of £33m (2022: £45m) were utilised and suppliers chose to utilise supply chain financing facilities of £32m (2022: £54m). Net cash generated from operating activities is £394m (2022: £321m).

Net capital expenditure increased by £25m to £83m (2022: £58m), mainly due to the construction of our new ESCO foundry in China. Lease payments of £31m were in line with the prior year (2022: £31m).

Free operating cash flow increased by £50m to £392m (2022: £342m) resulting in free operating cash conversion of 85% (2022: 87%) (refer to note 2 of the Audited Results contained in this press release). This was in line with our 2023 target of between 80% and 90% and reflected the above noted improvement in cash generation, partially offset by the increase in capital expenditure in the year as we continued to invest in our new foundry in China. We continue to target free operating cash conversion for 2024 of between 90% and 100% driven by working capital efficiency and maintaining capex and lease costs closer to one times depreciation.

Free cash flow from total operations was an inflow of £238m (2022: £193m). In addition to the movements noted above, this was primarily impacted by an increase in tax payments of £11m, partially offset by lower net finance costs of £5m due to phasing.

Net debt decreased by £107m to £690m (2022: £797m) and includes £117m (2022: £115m) in respect of IFRS 16 'Leases'. The movement reflects free cash inflow of £238m, offset by dividends of £96m, exceptional cash flows of £18m, outflows of £8m in relation to acquisition of subsidiaries and disposals of discontinued operations, an increase in lease liabilities of £8m, other movements of £3m and favourable FX on translation of £2m. Net debt to EBITDA on a lender covenant basis was 1.1 times⁴ (2022: 1.5 times) compared to a covenant level of 3.5 times.

In June 2023, the Group completed the issue of £300m five-year Sustainability-Linked Notes due to mature in June 2028. These Notes are in addition to the US$800m Sustainability-Linked Notes drawn in May 2021 and due to mature in May 2026. The Group also continued to have access to its US$800m Revolving Credit Facility (RCF) and, in March 2023, exercised the option to extend the maturity date to April 2028, with the option to extend for a further year. As a result of strong cash generation in the year, the Group reduced its RCF by US$200m to US$600m in February 2024. Following these actions, the Group will have more than £700m of immediately available committed facilities and cash balances.

Pensions

The net IAS 19 funding position reduced from a net surplus of £15m at December 2022 to a net surplus of £2m at December 2023. This is primarily due to changes in financial assumptions, which resulted in a loss of £13m (2022: gain of £303m), mainly due to the decrease in discount rates over the year compared to increasing discount rates in the prior year, as well as a loss on plan assets of £12m (2022: £224m). These movements contributed to a charge of £28m (2022: credit of £65m) being recognised in the Consolidated Statement of Comprehensive Income.

During the year the UK Main Plan completed a further pensioner buy-in with the full buy-in premium amounting to £136m, which results in insurance policy assets held for the UK scheme now covering 60% (2022: 39%) of the UK's total funded obligation, reducing the Group's exposure to actuarial movements. In addition, the strength of the funding position of the UK Main Plan means that additional pension cash contributions will reduce by approximately £6m from 2024.

 

Enquiries:
Investors: Edward Pears	+44(0)141 308 3725
Media: Sally Jones	+44(0)141 308 3666
Citigate Dewe Rogerson: Kevin Smith	+44 (0) 207 638 9571 [email protected]

 

 

Appendix 1 - 2023 continuing operations³ quarterly order trends

	Reported growth
Division	2022 Q1	2022 Q2	2022 Q3	2022 Q4	2022 FY	2023 Q1	2023 Q2	2023 Q3	2023 Q4	2023 FY
Original Equipment	-18%	-3%	13%	19%	2%	20%	-12%	-10%	-15%	-6%
Aftermarket	23%	18%	25%	6%	18%	5%	5%	1%	2%	3%
Minerals	9%	11%	21%	10%	13%	9%	0%	-2%	-3%	0%
Original Equipment	-17%	98%	-6%	14%	14%	39%	40%	21%	69%	41%
Aftermarket	37%	19%	14%	1%	17%	-9%	-4%	-5%	-2%	-5%
ESCO	32%	23%	13%	2%	17%	-6%	0%	-3%	2%	-2%
Original Equipment	-17%	2%	12%	19%	3%	22%	-8%	-8%	-10%	-3%
Aftermarket	28%	18%	21%	5%	17%	0%	2%	-1%	1%	0%
Continuing Ops	15%	14%	19%	8%	14%	4%	0%	-2%	-2%	0%
Book-to-bill	1.22	1.13	1.02	0.95	1.07	1.04	1.01	0.94	0.94	0.98

 

 

 

	Quarterly orders1  £m
Division	2022 Q1	2022 Q2	2022 Q3	2022 Q4	2022 FY	2023 Q1	2023 Q2	2023 Q3	2023Q4	2023 FY
Original Equipment	111	148	144	144	547	132	130	129	123	514
Aftermarket	313	356	333	337	1,339	329	371	337	344	1,381
Minerals	424	504	477	481	1,886	461	501	466	467	1,895
Original Equipment	10	15	11	8	44	14	21	13	14	62
Aftermarket	178	162	161	159	660	162	156	154	156	628
ESCO	188	177	172	167	704	176	177	167	170	690
Original Equipment	121	163	155	152	591	146	151	142	137	576
Aftermarket	491	518	494	496	1,999	491	527	491	500	2,009
Continuing Ops3	612	681	649	648	2,590	637	678	633	637	2,585

 

 

Appendix 2 - 2023 order bridges (as reported)

	H1			H2			Full Year
Group orders (£m)	OE	AM	Total	OE	AM	Total	OE	AM	Total
2022 - as reported	285	997	1,282	320	1,042	1,362	605	2,039	2,644
Organic	5%	0%	1%	-9%	-1%	-3%	-3%	0%	0%
Structure	0%	1%	1%	0%	0%	0%	0%	0%	0%
Currency	1%	3%	2%	-5%	-5%	-5%	-2%	-1%	-2%
Total	6%	4%	4%	-14%	-6%	-8%	-5%	-1%	-2%
2023 - as reported	301	1,035	1,336	275	974	1,249	576	2,009	2,585

 

 

	H1			H2			Full Year
Minerals orders (£m)	OE	AM	Total	OE	AM	Total	OE	AM	Total
2022 - as reported	261	672	933	300	704	1,004	561	1,376	1,937
Organic	1%	5%	4%	-12%	1%	-3%	-6%	3%	0%
Structure	0%	0%	0%	0%	0%	0%	0%	0%	0%
Currency	1%	1%	1%	-5%	-6%	-6%	-2%	-2%	-2%
Total	2%	6%	5%	-17%	-5%	-9%	-8%	1%	-2%
2023 - as reported	266	714	980	248	667	915	514	1,381	1,895

 

 

	H1			H2			Full Year
ESCO orders (£m)	OE	AM	Total	OE	AM	Total	OE	AM	Total
2022 - as reported	24	325	349	20	338	358	44	663	707
Organic	40%	-9%	-6%	43%	-5%	-1%	41%	-7%	-3%
Structure	0%	3%	3%	0%	0%	0%	0%	2%	1%
Currency	7%	4%	4%	-12%	-5%	-3%	-1%	0%	1%
Total	47%	-2%	1%	31%	-10%	-4%	40%	-5%	-1%
2023 - as reported	35	321	356	27	307	334	62	628	690

 

Appendix 3 - Foreign exchange (FX) rates and continuing operations³ profit exposure

	2023 average FX rates	2022 average FX rates	Percentage of FY 2023 operating profits2
US Dollar	1.24	1.24	36%
Australian Dollar	1.87	1.78	17%
Euro	1.15	1.17	8%
Canadian Dollar	1.68	1.61	17%
Chilean Peso	1,044.69	1,078.02	15%
South African Rand	22.94	20.19	5%
Brazilian Real	6.21	6.39	4%
Chinese Yuan	8.81	8.30	2%
Indian Rupee	102.66	97.06	1%

1. 2022 restated at 2023 average exchange rates.

2. Profit figures before adjusting items. Refer to note 2 of the Audited Results contained in this press release for further details of alternative performance measures.

3. Continuing operations excludes the Oil & Gas Division, which was sold to Caterpillar Inc. in February 2021 and the Saudi Arabian joint venture, which was sold to Olayan Financing Company in June 2021.

 

 

This information includes 'forward-looking statements'. All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding The Weir Group PLC's ("the Group") financial position, business strategy, plans (including development plans and objectives relating to the Group's products and services) and objectives of management for future operations, are forward-looking statements. These statements contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. These forward-looking statements speak only as at the date of this document. The Group expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Past business and financial performance cannot be relied on as an indication of future performance.

 

 

AUDITED RESULTS

 

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2023

		Year ended 31 December 2023			Year ended 31 December 2022
		Adjusted results	Adjusting items (note 5)	Statutory results	Adjusted results	Adjusting items (note 5)	Statutory results
	Notes	£m	£m	£m	£m	£m	£m
Continuing operations
Revenue	3	2,636.0	-	2,636.0	2,472.1	-	2,472.1
Continuing operations
Operating profit before share of results of joint ventures		456.3	(90.4)	365.9	392.3	(87.3)	305.0
Share of results of joint ventures		2.5	-	2.5	2.5	-	2.5
Operating profit		458.8	(90.4)	368.4	394.8	(87.3)	307.5
Finance costs		(66.4)	-	(66.4)	(51.0)	-	(51.0)
Finance income		18.7	-	18.7	3.7	-	3.7
Profit before tax from continuing operations		411.1	(90.4)	320.7	347.5	(87.3)	260.2
Tax (expense) credit	6	(110.9)	20.1	(90.8)	(92.5)	44.9	(47.6)
Profit for the year from continuing operations		300.2	(70.3)	229.9	255.0	(42.4)	212.6
(Loss) profit for the year from discontinued operations	7	-	(1.3)	(1.3)	1.2	-	1.2
Profit (loss) for the year		300.2	(71.6)	228.6	256.2	(42.4)	213.8
Attributable to:
Equity holders of the Company		299.5	(71.6)	227.9	255.8	(42.4)	213.4
Non-controlling interests		0.7	-	0.7	0.4	-	0.4
		300.2	(71.6)	228.6	256.2	(42.4)	213.8
Earnings per share	8
Basic - total operations				88.2p			82.5p
Basic - continuing operations		115.9p		88.7p	98.4p		82.0p
Diluted - total operations				87.7p			82.0p
Diluted - continuing operations		115.3p		88.2p	97.8p		81.5p