Last checked at 19 Mar 2018 11:02
The Weir Group PLC
LEI Number: 549300KDR56WHY9I3D10
2017 Annual Report and 2018 Annual General Meeting
The following documents have today been posted or otherwise made available to shareholders:
1. Annual Report and Financial Statements for the period ended 31 December 2017 (the "2017 Annual Report");
2. Notice of 2018 Annual General Meeting; and
3. Form of Proxy for the 2018 Annual General Meeting.
In accordance with Listing Rule 9.6.1, a copy of each of these documents has been uploaded to the National Storage Mechanism and will be available for viewing shortly at http://www.morningstar.co.uk/uk/NSM.
The documents (except the Form of Proxy) are also available on the Company's website at www.global.weir and in hard copy to shareholders upon request to Investor Relations, The Weir Group PLC, 1 West Regent Street, Glasgow, G2 1RW.
The Company's 2018 Annual General Meeting will be held at the Company's Head Office, 1 West Regent Street, Glasgow, G2 1RW, on Thursday 26 April 2018 at 2.30pm.
The Company's full year results announcement of 28 February 2018 contained a management report as well as the audited financial statements which were prepared in accordance with the applicable accounting standards.
The 2017 Annual Report submitted to the National Storage Mechanism today also contains information regarding the Company's principal risks and uncertainties and a responsibility statement relating to the content of the 2017 Annual Report; an extract of this information is provided below as required under paragraph 6.3.5 of the DTR, however this material should be read in conjunction with and is not a substitute for reading the full 2017 Annual Report. Page numbers and cross-references in the following appendices refer to page numbers and cross-references in the 2017 Annual Report.
APPENDICES
Appendix A: Principal risks and uncertainties
A description of the principal risks and uncertainties that the Company faces is extracted in full and unedited form from pages 50 to 55 of the 2017 Annual Report.
As in any business, there are risks and uncertainties which could impact the Group's ability to achieve its objectives in the future. However, we believe the Group's risk management and assurance framework makes this less likely.
The Board has conducted a robust assessment of the principal risks, alongside the Risk Appetite Statement set out on page 47, meeting the Board's responsibilities in connection with Risk Management and Internal Control detailed in the UK Corporate Governance Code. Each of the principal risks is assigned an owner from amongst the Board or Group senior management team and is either a standing agenda item at each Board meeting or subject to formal periodic review by the Board. A summary of principal risks and the Group's mitigating controls is presented at every Board meeting.
The Directors reviewed the Group's risk register, reassessed the validity of the principal risks identified in the prior year and considered whether any new principal risks have emerged or a risk is no longer considered a principal risk. The identified principal risks were subjected to a detailed assessment based on the following considerations:
· Severity of each risk;
· Existence and effectiveness of actions and internal controls which serve to mitigate the risk;
· The overall effectiveness of the Group's control environment, including assurance and any identified control weaknesses or failings; and
· The extent to which each of the principal risks could impact upon the Group's viability, in financial or operational terms, due to their potential effects on the business plan, solvency or liquidity.
The principal risks set out on pages 51 to 55 are those which we believe to have the greatest potential to impact our ability to achieve the Group's strategic objectives or which have the greatest potential impact on the Group's solvency or liquidity.
Risk Review: Principal risks and uncertainties
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Technology and innovation
Failure to innovate or to react to emerging technology developments, and therefore fail to ensure that the business continues to deliver sustainable and attractive solutions for our customers.
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Why we think this is important
The strength of our business is built upon a history of delivering innovative and sustainable solutions for our customers. If we fail to keep abreast of market needs or to innovate solutions, we are at risk of losing market share to our competitors and lowering margins as demand will reduce. | How we are mitigating the risk
Our existing research and development initiatives within the business, at Weir Advanced Research Centre, are enhanced through partnerships with certain leading universities around the world. These partnerships are designed to help the Group develop game-changing solutions to our customers' challenges. We devote skilled resource to reviewing and responding to developing technologies, with our agreements with specialist external parties to develop Internet of Things (IoT) technology. Engineering strategies are in place at Group and divisional levels with strategic innovation arenas defined as part of the innovation strategy. | Changes during 2017
The pace of technological innovation continues to increase as we and our competitors seek to provide customers with solutions that improve the efficiency of their operations.
Recognising the strategic importance of technology and innovation we recruited a Chief Technology Officer during the year to define the Group's Technology Vision and Strategy. Further information on progress made in this area is set out in the Products and Technology section of the Sustainability Review on page 57.
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IT security and continuity
Failure to maintain business systems or technical infrastructure that serves the business needs.
Failure to successfully execute changes to these business systems or technical infrastructure; together with failure to minimise disruption and maintain business as usual activity during technical infrastructure or business system changes.
Failure to adequately protect the business operations from cybercrime.
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Why we think this is important
Up-to-date data allows us to make informed decisions about our business. Therefore, we require reliable and efficient IT systems and infrastructure to provide our data requirements. Breaches of our IT security could have serious consequences for our business, including: interruption to business operations; and loss of intellectual property and other sensitive data. The Group is investing in a significant IT transformation programme. If this is not managed effectively, the consequences could include interruption to business operations if data is unavailable due to unsuccessful execution of change, impacting our ability to compete and our reputation in the market. At present, the Group's principal exposures to cybercrime relate to the misappropriation of cash and data. Our revenue streams are largely protected as our products are not currently electronic in nature and we do not, as a rule, transact over the internet. | How we are mitigating the risk
We have an IT Governance Framework with a focus on structured change management techniques, including setting project governance levels in line with risk.
Policies, procedures and baseline standards in relation to cyber risk and IT security more generally are continuously updated and rolled out to operations. A programme of user training in relation to cyber risk is in place. All security related incidents are reported to the Group Executive. | Changes during 2017
IT security and continuity continues to be a matter of strategic priority for the Group in an environment of ever increasing cyber security threats. Progress to strengthen the Group's defences in this respect is being made through our IT Next programme.
We continually review the effectiveness of our key IT security controls in consultation with external experts. There is regular reporting of unplanned outages and potential security breaches, with lessons learned across the Group.
Security Incident Responder teams monitor our various security systems.
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Value Chain Excellence
Failure to achieve Value Chain Excellence improvements and the associated reduction in costs and enhanced flexibility.
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Why we think this is important
If we fail to improve our value chain management we risk:
· Losing the opportunity to invest capital into alternative value creating opportunities; · Damaging our reputation and as a consequence losing customers and market share; · Losing market position if the Group fails to demonstrate to customers the value of our products and services;
· Incurring penalties as a result of late delivery contractual clauses; · Reducing margins by incurring unnecessary additional costs associated with late remedial actions taken to avoid missing delivery targets; and · Failing to respond to market upturns or downturns quickly enough to respond to market demand or manage costs. | How we are mitigating the risk
Regular KPI monitoring of the value chain throughout the organisation.
The Group's operations are implementing Value Chain Excellence initiatives amongst other business improvement objectives.
Established Centres of Excellence drive cost savings, efficiencies and enhance delivery standards whilst maintaining quality.
The Group's forward purchase commitments are being closely monitored to manage inventories at levels appropriate to market conditions.
Our credit risk management procedures are under continuous appraisal and review. We regularly monitor market activity to ensure we remain competitive. | Changes during 2017
Value chain remains an area of strategic focus for the Group. Value chain improvements continue to be recognised year on year as the Group realises benefits from its focused approach to these matters. An updated and more focused VCE model has been successfully introduced. A programme of Value Chain Excellence initiatives has been operating throughout the Group to drive value chain improvements.
All businesses now complete VCE self-assessments, including value stream segmentation, model design and improvement project identification. Initiatives to expand production in best-cost locations are reviewed and the procurement function continues to drive cost and quality improvements through the Group's supply chain.
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Political and social
Adverse political action, or political and social instability, in territories in which we operate may result in strategic, financial or personnel loss to the Group.
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Why we think this is important
We operate across the globe and therefore have to work within a wide range of political and social conditions. Adverse events may occur in the territories in which we operate that may require us to act swiftly to protect our people and our property and regulatory changes could impact our competitiveness. We need to be flexible and able to anticipate such issues. Expansions into new territories are only undertaken after rigorous assessment of the risks, including the social and political situation within the territory.
| How we are mitigating the risk
Regular review of market attractiveness.
Monitoring travel by Weir employees to higher risk locations in accordance with the Weir Group travel policy. External expert risk assessments and regular monitoring in higher risk locations. Contingency plans and exit strategy planning. Our strategic planning assists in forecasting potential political and social instability in regions. Proactive monitoring of evolving policy and development of contingency plans as situations materialise. | Changes during 2017
The US has approved significant corporate tax reform. The new US tax code will significantly change the tax profile of the Group's US operations and provide opportunities for the Group resulting from a lowering of the US Federal Tax rate. We will continue to respond to any further US tax clarifications this year.
We continue to monitor the direction of Brexit negotiations and any potential impacts directly on our UK manufacturing base.
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Ethics, governance and control
Interactions with our people, customers, suppliers and other stakeholders are not conducted with the highest standards of integrity which devalues our reputation.
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Why we think this is important
We are unwilling to accept dishonest or corrupt behaviour from our people, or external parties acting on our behalf, whilst conducting our business. If we fail to act with integrity, we are at risk of: · Reputational damage leading to a loss of customers; · Increased scrutiny from regulators; · Legal action from regulators including fines, penalties and imprisonment; and · Exclusion from markets important for our future growth. We expect all areas of the business to do the right thing and conduct business in compliance with procedures, applicable laws, Weir Group operating policies and the highest ethical standards.
| How we are mitigating the risk
The Code of Conduct, supplemented with Group policies on related topics, provides a clear benchmark for how we expect our business will be conducted.
Regular training is provided using a range of mechanisms including Town Hall style sessions, online and induction training.
The financial control framework is continually monitored for effectiveness. Internal Audit's remit includes regular review of the anti-bribery and corruption and financial controls across the Group. The Group Legal team is responsible for monitoring compliance with the Code of Conduct.
A Whistleblower hotline is available to all members of staff. Reports are investigated on a timely basis and summary reports provided to Group Executive and Board. | Changes during 2017
The governance and legislative environment in which the Group operates continues to evolve and become more complex. We routinely review operations in geographies where ethical standards may not be as well established as in other countries.
The Group has reinforced its commitment to high standards of ethics and governance through the Code of Conduct and completed a programme of training for key individuals
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Staff recruitment, development and retention
Failure to recruit, develop or retain key management and staff may lead to disruption to the Group's operations, functions and processes.
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Why we think this is important
Our people represent our biggest asset and failure to attract, develop and retain key management and staff would have a detrimental impact on the Group's ability to deliver our key strategic objectives. As markets improve we need to continue to recruit high quality staff building on existing capability while recruiting skilled expertise in the right areas of the business and at the right time. | How we are mitigating the risk
Promotion of the Weir Group Values & Behaviours, Code of Conduct and HR Policies sets the standards and expectations for all our staff, reinforcing our stated commitment to attracting and retaining the very best people. High performer assessments are undertaken to identify and develop our very best talent.
Succession plans are in place and periodically reviewed for all of our key management.
Personal Development Plans are set and reviewed for the effective development of all of our staff.
We continue to offer competitive compensation and benefits packages. Personal development programmes including Weir University and the Weir Leadership Programme are open to participation by high potential staff members and these continue to attract high calibre individuals. | Changes during 2017
A new Chief People Officer was appointed during the year and tasked with the identification of key strategic priorities for Weir's go-forward people strategy for the Group. Senior Leadership and Regional Conferences were held during 2017 focused on the delivery of the four strategic pillars. Our new ENERGY performance development framework was introduced during the year.
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Market volatility
Changes in key markets, including commodity prices affecting mining and oil and gas, have an adverse impact on customers' expenditure plans. This may include delaying existing expenditure commitments. As markets improve we may fail to effectively upscale operations to meet customer needs.
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Why we think this is important
We need to remain sufficiently flexible to allow us to anticipate downturns, to allow us to adjust our operations accordingly, and equally to meet growth in demand when our customers' markets are buoyant and therefore capital investment is high. Otherwise, we are at risk of incurring unnecessary costs during downturns, and not maximising our potential for growth in buoyant markets. In challenging market conditions, our value chain risks are increased. These are described in more detail on page 52.
| How we are mitigating the risk
We maintain regular engagement with our customers to understand their needs and challenges, and ensure our business is appropriately aligned.
Improved demand planning and forecasting including Sales and Operations Planning within VCE.
Our strategic planning utilises extensive market intelligence to assist in forecasting opportunities and dips in markets.
We maintain contingency plans for downturns | Changes during 2017
Our core markets have seen continued improvements during the year, with customers planning for higher activity levels. We continue to focus on technology development, customer relationships and Value Chain Excellence to meet increasing demand from our key sectors.
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Safety, Health and Environment (SHE)
Failure to adequately protect our people and other stakeholders from harm associated with a breach in SHE standards.
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Why we think this is important
We operate in hazardous environments, and therefore have a fundamental duty to protect our people and other stakeholders from harm whilst conducting our business. As well as the personal impact on our people resulting from a failure to meet this obligation, we would also be at risk of:
· Reputational damage leading to a loss of customers; · Legal action from regulators, including fines and penalties; and · Exclusion from markets important for our future growth.
| How we are mitigating the risk
The Weir Behavioural Safety system is in place to reduce the risk of safety incidents.
In addition, there are initiatives to prevent the most common accident types. The Weir global SHE standards are continually reviewed.
The SHE Excellence Committee is responsible for monitoring performance and compliance with Group objectives, policies and standards relating to SHE. The Chief Executive's Safety Committee met 12 times during the year, committed to achieving the highest of SHE standards.
There is a formal SHE assurance programme with issues escalated as required through the reporting structures. | Changes during 2017
The Group continues to set higher benchmarks for SHE compliance and roll out cohesive programmes to address SHE risks and drive safe and sustainable working practices. Improved SHE incident reporting tools have been piloted and rolled out across the Group to provide visibility and responsive actioning of any SHE related issues.
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Contract risk
Failure to adequately manage contract risk and, as a result, commit to obligations which the Group is unable to meet without incurring significant unplanned costs.
In addition, failure to follow Group policies and procedures may lead to commitments without the desired level of contractual protections.
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Why we think this is important
We operate in an increasingly complex and competitive environment where customers are not only highly focused on price and service but are also more challenging in contract negotiations.
As we offer a broader range of products and services to our customers, including those that are more technologically advanced, we risk exposing the Group to reputational and financial loss should our contract acceptance, negotiation and approval processes fail to protect the Group accordingly. | How we are mitigating the risk
The Group has policies and procedures for contract acceptance and approval. These are under continuous review and improvement to ensure they are adequate for current and future circumstances.
The tools and training available to employees responsible for contract management are similarly under continuous review. | Changes during 2017
Contract management continues to be an area of focus for the Group, given the competitive environment. Group policies and procedures continue to be reviewed and refreshed to provide employees with improved tools to assist them in their contract training and management activities.
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Appendix B: Directors' statement of responsibilities
The following statement is repeated here solely for the purpose of complying with DTR 6.3.5. This statement relates to and is extracted from page 119 of the 2017 Annual Report and is signed on behalf of the Board of Directors by Charles Berry, Chairman and Jon Stanton, Chief Executive Officer. Responsibility is for the full 2017 Annual Report and not the extracted information presented in this announcement or the full year results announcement.
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and the Company financial statements in accordance with UK Accounting Standards and applicable law.
In preparing those financial statements, the Directors are required to:
• Select suitable accounting policies and then apply them consistently.
• Make judgements and estimates that are reasonable and prudent.
• State that the Group financial statements have complied with IFRS as adopted by the European Union, subject to any material departures being disclosed and explained.
• State for the Company financial statements whether the applicable UK Accounting Standards have been followed, subject to any material departures being disclosed and explained.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Group financial statements comply with the 2006 Act and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of accounts may differ from legislation in other jurisdictions.
The Directors confirm that they have complied with the above requirements in preparing the financial statements.
The Directors consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's performance, business model and strategy.
Each of the Directors, as at the date of this report, confirms to the best of their knowledge that:
• The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Group.
• The Strategic Report and the Directors' Report include a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.