Engineering giant Weir hit its 2014 profit targets early, after seeing adjusted pre-tax profits rise by a third in 2011, helped by record performances in its Minerals and Oil and Gas divisions.
The board has recommended a 22% increase in the full-year dividend to 33p per share, up from the 27p payout in 2010.
However, despite the strong performance, shares were down 3.5% in early trading on Wednesday, possibly owing to the group's ongoing battles in its bidding war with Danish rival FLSmidth over the takeover of Australian mining equipment supplier Ludowici. While Weir has claimed that FLSmidth filed a 'no increase' statement with its initial offer last month, the Danish group raised its offer again last week to trump Weir's and published a 'Declaration and Orders' yesterday which allows it to proceed, something that Weir is not at all happy with.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Back to the results, pre-tax profit, adjusted to exclude explication items and intangibles amortisation, jumped 34% from £295m to £396m in the 12 months ended December 30th, as a result of the growth in the upstream Oil and Gas operations, strong performances across the Minerals portfolio and the impact of earlier acquisitions with Power & Industrial.
However, the operating margin fell from 18.9% to 18% "with margin improvement in Oil & Gas offset by a reduction in Minerals margins as execution against strategic growth initiatives had the expected impact on revenue mix."
Revenue rose by 40% from £1,635m to £2,292m, helped by a shift towards original equipment and away from aftermarket sales, which now represent 48% and 52% of total revenue, respectively. The group said it reduced its exposure to emerging markets from 39% to 35% due to the continued strength of the North American businesses.
Meanwhile the order input increased by 30% from £1,896m to £2,467m, helped by a 36% increase in original equipment orders which were driven by the expansion of the North American pressure pumping market and increasing mining capital expenditure.
Chief Executive Keith Cochran said this morning: "Weir achieved in 2011 its stated ambition of doubling 2009 profits by 2014. This excellent performance was due to the ability of the group to execute effectively our growth plans in positive conditions in our principal end markets. We also progressed our strategic agenda with new product introductions, two acquisitions which further increase our exposure to fast growing markets and revenue growth from organic initiatives."
The group enters 2012 with a strong order book and with our clear strategy and flexible business model we expect a year of further good progress consistent with current consensus expectations."
Cash generated from operations (before working capital movements) increased by 34% to £458m. Meanwhile, net debt surged from £284m to £673m.
BC
-
FTSE 100 hits record highs – why is it rising and will we see more gains?Advice UK equities have been described as unloved for a long time but as the FTSE 100 hits new highs, we explain if now is the time to buy British.
-
How to invest in copperIt may be time to invest in copper as the red metal appears poised for a big jump. Dominic Frisby looks at what should investors should buy
