Weir Group Regulatory News (WEIR)

21 Mar 2007 07:01

Weir Group PLC21 March 2007 THE WEIR GROUP PLC PRELIMINARY RESULTS 2006 Results for 52 weeks ended 29 December 2006 HIGHLIGHTS Continuing Operations • Order input(*1) up 23% to £1099.5m (2005: £892.5m) • Revenue up 19% to £940.9m (2005: £789.4m) • Operating profit(*2) up 32% to £87.7m (2005: £66.3m) • Earnings per share(*2) up 38% to 32.4p (2005: 23.5p) • Dividend increase of 10% to 14.5p (2005: 13.2p) • Cash generation improved significantly to £134.5m (2005: £71.3m) • Net debt reduced to £7.1m (2005: £76.4m) 2006 2005 Change ------ ------ --------Continuing OperationsOrder Input (*1) £1,099.5m £892.5m +23%Revenue £940.9m £789.4m +19%Operating Profit (*2) £87.7m £66.3m +32%Profit before tax (*2) £87.1m £62.2m +40%Earnings per share (*2) 32.4p 23.5p +38% Total OperationsProfit before tax £102.8m £37.5m +174%Earnings per share 39.4p 12.6p +213%Dividend per share 14.5p 13.2p +10%Net debt £7.1m £76.4m -91% (*1) Excludes Joint Ventures & Associates; calculated at constant 2006 exchangerates(*2) Adjusted to exclude exceptional items The Chairman of The Weir Group, Sir Robert Smith, commented: "Ongoingoperational improvements, the benefits of restructuring, together with theaddition of a full year contribution from Gabbioneta all contributed to theGroup's excellent results in 2006. We enter 2007 with a robust portfolio of businesses operating in buoyant endmarkets which provides an excellent platform for further improvement in the yearahead. The Group's healthy balance sheet and cash generation provide thenecessary flexibility to pursue new capital investments and alignedacquisitions." Contact details:The Weir Group PLCMark Selway, Chief Executive Tel. 0141 637 7111 (switchboard);Helen Walker, Public Relations Manager Tel. 0141 308 3739 (Mobile: 07789 032296)Maitland Tel. 020 7379 5151Suzanne Bartch (Mobile: 07769 710 335)Peter Ogden FINANCIAL HIGHLIGHTS 2006 input for continuing operations at £1099.5m was 23% higher than 2005 withEngineering Products, Engineering Services and the Defence, Nuclear & Gasbusinesses all showing improvement. Revenue growth was achieved across all divisions with revenue for Groupcontinuing operations growing 19% to £940.9m (2005: £789.4m). More than 70% ofthe year's output was generated from the power, oil and gas and mining markets.Operating profit from continuing operations before exceptional items at £87.7m(2005: £66.3m) was 32% above 2005. Attributable profits from our Joint Ventures and Associates companiescontributed £10.5m against £9.2m in 2005. Net finance costs of £0.6m were £3.5m below 2005 and this was positivelyaffected by a £4.4m improvement in the net income earned on the assets of thepension scheme. Pre-tax profit from continuing operations before exceptionalitems was up 40% on the previous year at £87.1m (2005: £62.2m). Exceptional items during the year totalled £15.7m. These included a gain on saleof £6.8m from the former Weir Valves & Controls site in Huddersfield,fundamental restructuring costs of £1.8m in respect of the previously announcedUK restructuring and a once-off gain of £10.7m arising on the agreedimplementation of changes to the defined benefits arrangements in our main UKpension scheme. A tax charge of £19.9m (2005: £13.8m) gives a normalised tax rate of 26% onprofit before tax and exceptional items for continuing operations, as adjustedfor Joint Ventures and Associates. The resulting underlying earnings per share for continuing operations, beforeexceptional items, were 38% higher at 32.4p (2005: 23.5p). Basic earnings pershare for total operations rose to 39.4p from 12.6p last year, reflecting theimpact of exceptional items and discontinued operations. Cash generated from operations of £134.5m was substantially ahead of the prioryear (2005: £71.3m) as a consequence of increased profitability and a muchimproved working capital position. Net capital expenditure was £26.6m (2005:£25.3m) reflecting continued investment across the business. In addition,proceeds from the sale of the Huddersfield site of £8.3m were offset by relatedcash restructuring costs of £5.8m. Net debt at the year end was £7.1m comparedto £76.4m for the prior year. The Group has 16 pension schemes around the world of which six are definedbenefit schemes, the most significant being the UK and Canadian schemes. Alldefined benefit schemes are closed to new members and the net Group deficit forretirement benefit obligations at 29 December 2006 was £3.9m (2005: £61.6m). TheGroup reviews the level of the deficit on an annual basis and in 2006 made aspecial contribution of £7.0m to reduce the UK pension deficit. DIVIDEND A final dividend of 10.75p (2005: 9.65p) is proposed making a total payment forthe year of 14.5p (2005: 13.2p). Subject to shareholder approval, the finaldividend will be paid on 1 June 2007 to shareholders on the register at theclose of business on 4 May 2007. REVIEW OF RESULTS To assist in meaningful comparison, the following review of results, with theexception of joint ventures & associates, restates comparative 2005 figures atconstant exchange rates. ENGINEERING PRODUCTS The Engineering Products Division includes the operations of our Minerals, ClearLiquid and Valves & Controls businesses which supply pumps, valves and ancillaryproducts to the mining, power and oil industries. The division delivered thehighest ever level of new orders with input increasing 23% when compared to2005. Revenue from continuing businesses increased 21% to £608.5m (2005:£501.4m) while operating profit, before exceptional items from continuingoperations, increased 49% to £62.6m (2005: £41.9m). Workload was largelybalanced between new project and aftermarket activity. At the operating profit level, the margin was 10.3% compared with 8.4% in 2005,underpinned by a continued strong performance from Minerals and significantimprovements resulting from the restructuring of the UK businesses of Valves &Controls and Clear Liquid. The full year contribution from Gabbioneta is alsoevident in the results. Minerals Minerals had an excellent year growing order input, revenue and profit due to acombination of buoyant commodity markets, new product offerings and improvementsin operational efficiency. Order input increased 19% to £390.5m (2005: £328.1m), driven by a continuedstrong investment climate across our most important mining markets. The Americassaw a 25% increase in orders due to a combination of sales initiatives, newproducts and the strong investment climate. Growth in flue gas desulphurisationand the oil sands also contributed to the result. A 51% increase was achieved in Europe and the Former Soviet Union reflecting theaward of large contract wins in the FSU and increased demand for flue gasdesulphurisation throughout the region. The Minerals businesses have achieved significant success in expanding theirposition in the higher growth markets of South America, Eastern Europe and Asia.During the year, Minerals added significantly to its installed foundry capacitywith new facilities coming on stream in South Africa and China. In 2007, furtherinvestments will be made to add foundry capacity in Brazil and the Chinesebusiness will become fully operational. Going forward, the Minerals businesses are expected to continue to benefit fromthe favourable economic climate and make further progress in their alreadyestablished leadership positions. Clear Liquid Clear Liquid performed well with order input up 32% at £222.7m (2005: £168.2m).The collective speciality pump businesses improved their results and achievedgood levels of growth in each of their respective markets. The 2006 results included the full year benefits from the prior yearrestructuring at Weir Pumps and a full year contribution from Gabbioneta, whichcontributed £50.2m of input in 2006 against a final quarter contribution of£13.1m in 2005. Following the successful integration of Gabbioneta with ourClear Liquid operations, this business delivered turnover and profits in linewith our expectations and continues to progress well. In 2007, we expect further improvements from our Clear Liquid operations largelydriven by the continued strength of our most important markets, operationalbenefits attributable to the growing order book and ongoing implementation ofthe Weir Production System. Valves & Controls The Valves & Controls businesses made good progress in 2006 and contributed tothe revenue and profit growth in the Engineering Products Division during theyear. The business continued to build on its achievements in the Chinese power marketand was successful in its integration of our newly acquired wholly-ownedsubsidiary located at Suzhou. The increased activity in the domestic US powermarket helped deliver growth in turnover in the US operation. Weir Valves & Controls France benefited from its ongoing success in EasternEuropean nuclear markets where upgrade work is being funded by the EuropeanUnion and also growth in the Middle East oil and gas markets. Growth in salesand profits from these businesses was evident in the 2006 results. The restructuring of the Weir Valves & Controls UK operation is now complete andthe move to a modern, appropriately sized facility was executed both on time andon budget. The second half performance of the UK operation provides increasedconfidence in the delivery of anticipated improvements and positions us well forfurther profit progress in 2007. We remain encouraged by the prospects for the Valves & Controls businesses. TheUS operation will move to larger premises to capitalise on the growing poweropportunities in their domestic market. The growth of our acquisition in China,coupled to further progress from our UK and French operations, is expected todeliver further progress in 2007. ENGINEERING SERVICES Input from Engineering Services increased 5% to £236.6m (2005: £225.5m). Revenueincreased 3% to £225.2m (2005: £218.8m) producing an operating profit fromcontinuing operations of £12.4m against £13.6m in 2005, primarily due to onceoff costs of £4.4m relating to restructuring initiatives in the UK, USA andMiddle East. In the UK, input grew 6% to £60.0m (2005: £56.7m) with new hydro orders fromScottishPower and Scottish & Southern Energy contributing to solid growth in ourpower generation activities. Rationalisation of the number of UK Service Centreswas largely completed during the year and 2007 results are expected to reflectimproving returns. At our Middle East business, input grew 62% to £26.9m (2005: £16.6m) withsignificant new orders booked in oil services. Once off costs were taken in theyear to realign overheads and refocus the operation on the oil sector. Goodsecond half improvements are now expected to underpin further progress. The Canadian operation had another successful year benefiting from continuedbuoyant market conditions and Weir's growing position in the oil sands sector.In the USA, we took the decision to close our loss making Service Centres which,while disappointing, will result in the remaining US businesses contributingpositively to Services results in the coming year. The restructuring work undertaken in 2006 was necessary to reposition theEngineering Services Division in those sectors and geographies which arecritical to the future of the Group. The rationalisation of our UKinfrastructure, closure of smaller less profitable US Service Centres andrefocus towards the oil services sector in the Middle East, leave the Divisionbetter equipped to improve margins and take advantage of the significantopportunities available for accelerated growth. We remain optimistic of the prospects within our Services Division. Therestructuring investments made in 2006, together with the excellent progressfrom our Joint Ventures in Saudi Arabia and Abu Dhabi, provide the foundationsfor improvement in 2007. DEFENCE, NUCLEAR & GAS Revenue from the Defence, Nuclear & Gas Division increased 57% to £107.2m (2005:£68.3m) and produced an operating profit before exceptional items, fromcontinuing operations, of £9.8m against a prior year of £6.7m. 2006 inputincreased 60% to £179.1m against £112.0m in the previous year. The liquid gas storage business, Weir LGE, achieved a significant increase inrevenue and operating profit when compared to 2005. New orders from Korean andEuropean shipbuilders delivered input of £98.8m compared with £80.2m last year.Future market demand and limited shipbuilding capacity continue to underpin WeirLGE's earning stream in 2007 and beyond. The defence and nuclear businesses delivered an increase in revenue andoperating profit. Order input at £80.3m was 153% above 2005. The first halfaward of the £38m Spanish defence contract and our increased presence in the UK,Australia and Canada helped deliver higher turnover and profits from the defenceoperations in 2006. We expect a number of significant new opportunities in thedefence and nuclear activities in 2007. JOINT VENTURES AND ASSOCIATES Weir's share of profit after interest and tax from Joint Ventures and Associateswas up 14% to £10.5m (2005: £9.2m). The increased profits from DML reflect thebenefits of the improved performance of its pension scheme offsetting thenegative impact of favourable profit taking on a number of key contracts in theprior year. The full year contribution from the Group's 49% share of its JointVenture in Saudi Arabia also contributed to the improved result. STRATEGY Five years ago we outlined our strategy which was aimed at achieving sector bestperformance by targeting those markets which offered the most attractiveprospects and where we had a realistic ability to lead. The portfolio of Groupbusinesses has changed dramatically since this time, having largely restructuredour underperformers, exited lower margin activities and grown the business inhigher margin, high growth sectors. At the same time we have implemented across the entire organisation the WeirProduction System, a structured process geared to maximise operationalperformance. The benefits of these strategies are evident in today's results. In February 2007, the Group announced that it was in discussion to sell theGlasgow-based business unit of Weir Pumps to Sulzer AG for an expectedconsideration of £48m. Weir Pumps represents 8% of Weir Group revenue and alower percentage of annual profits and its disposal is entirely consistent withour stated intention to exit lower margin activities where the Group has limitedprospects to lead. The potential disposal is subject to reaching an acceptable final agreement andreceipt of regulatory approvals which are expected in the first half of 2007. Going forward the Group will continue to invest in developing a geographicpresence in high growth markets. Our growing infrastructure in China, the FormerSoviet Union and India, combined with our decision to invest in further foundrycapacity in Brazil, are all key components of our plans for future growth. We will also remain focused on continuing to improve the operational performanceof each of the businesses within the Group in order to unlock their fullpotential. Our strong cash generation and largely ungeared balance sheet alsoprovide us with flexibility to pursue the full range of options for futuregrowth. THE BOARD As previously reported, Keith Cochrane joined the Group as Group FinanceDirector, effective 3 July 2006, and has made a significant contribution sincejoining. OUTLOOK In 2007, the Engineering Products Division is expected to deliver growth inrevenue, margins and profits when compared to 2006. Minerals are expecting another good year against a backdrop of buoyant commoditymarkets, new product offerings and the continuing benefits being delivered fromtheir operational improvement activities. The outlook for the Clear Liquid businesses remains encouraging. Growth in salesfrom the higher margin businesses and continued benefits from operationalinitiatives should produce improved results when compared to 2006. Valves & Controls is expected to deliver improved results in 2007. The benefitsfrom the UK restructuring, addition of China and improved market outlook forpower generation markets in the United States, Indo Pacific and Former SovietUnion are expected to provide a platform for further progress when compared to2006. In the Engineering Services Division, the benefits of restructuring in theUnited States, the UK and Middle East are expected to grow margins and profitswhen compared to 2006. The Defence, Nuclear & Gas Division is positioned to deliver a further set ofsolid results in 2007. While the exceptional input during the past twelve monthsis not expected to repeat, the Division has secured the order book andunderpinned revenues for the medium term. While continuing its good performance in 2007, our Associates business, DML, isnot expected to repeat the favourable profit making milestones which wereevident in the 2006 results. The Group is in good financial condition with a robust order book which supportsour continuing level of confidence in our most important markets. By remainingon course, capitalising on our strong portfolio of businesses and striving forcontinued operational improvement, we will deliver a good level of progress in2007. AUDITED RESULTSConsolidated Income Statementfor the 52 weeks ended 29 December 2006 52 weeks ended 29 December 2006 52 weeks ended 30 December 2005 Before Exceptional Before Exceptional exceptional items exceptional items items (note 3) Total items (note 3) Total Notes £m £m £m £m £m £m-----------------------------------------------------------------------------------------------------------------------Continuing operationsRevenue 2 940.9 - 940.9 789.4 - 789.4Cost of sales (679.5) - (679.5) (570.7) - (570.7)-----------------------------------------------------------------------------------------------------------------------Gross profit 261.4 - 261.4 218.7 - 218.7Other operating income 2.1 6.8 8.9 1.5 - 1.5Selling & distribution costs (119.3) - (119.3) (106.6) - (106.6)Administrative expenses (67.0) 10.7 (56.3) (56.5) - (56.5)Restructuring costs - (1.8) (1.8) - (24.7) (24.7)Share of results of - joint ventures 2.4 - 2.4 1.7 - 1.7 - associates 8.1 - 8.1 7.5 - 7.5----------------------------------------------------------------------------------------------------------------------- Operating profit 87.7 15.7 103.4 66.3 (24.7) 41.6Finance costs (10.8) - (10.8) (6.6) - (6.6)Finance income 5.3 - 5.3 2.0 - 2.0Other finance income - retirement benefits 4.9 - 4.9 0.5 - 0.5----------------------------------------------------------------------------------------------------------------------- Profit before tax from continuing operations 87.1 15.7 102.8 62.2 (24.7) 37.5Tax expense 4 (19.9) (2.7) (22.6) (13.8) - (13.8)-----------------------------------------------------------------------------------------------------------------------Profit for the period from continuing operations 67.2 13.0 80.2 48.4 (24.7) 23.7Profit for the period from discontinued operations 1.4 - 1.4 2.3 - 2.3-----------------------------------------------------------------------------------------------------------------------Profit for the period 68.6 13.0 81.6 50.7 (24.7) 26.0======================================================================================================================= Attributable to:Equity holders of the Company 68.6 13.0 81.6 50.6 (24.7) 25.9Minority interests - - - 0.1 - 0.1----------------------------------------------------------------------------------------------------------------------- 68.6 13.0 81.6 50.7 (24.7) 26.0======================================================================================================================= Earnings per shareBasic - total operations 39.4p 12.6pBasic - continuing operations 32.4p 38.7p 23.5p 11.5p Diluted - total operations 38.8p 12.5pDiluted - continuing operations 32.0p 38.2p 23.4p 11.4p Consolidated Balance Sheetat 29 December 2006 29 December 30 December 2006 2005 Note £m £m-------------------------------------------------------------------------------------------ASSETSNon-current assetsProperty,plant & equipment 116.6 119.2Intangible assets 180.1 187.5Investments in joint ventures & associates 33.5 20.9Deferred tax assets 19.3 17.4Retirement benefit plan surpluses 7.8 -Forward foreign currency contracts 4.9 0.4-------------------------------------------------------------------------------------------Total non-current assets 362.2 345.4------------------------------------------------------------------------------------------- Current assetsInventories 120.9 122.8Trade & other receivables 203.8 207.3Construction contracts 34.9 28.2Forward foreign currency contracts 6.5 2.3Income tax receivable 0.1 0.6Cash & short term deposits 146.3 109.6-------------------------------------------------------------------------------------------Total current assets 512.5 470.8-------------------------------------------------------------------------------------------Total assets 874.7 816.2=========================================================================================== LIABILITIESCurrent liabilitiesInterest-bearing loans & borrowings 7.5 10.9Trade & other payables 212.4 178.8Construction contracts 46.3 39.2Forward foreign currency contracts 3.0 4.6Income tax payable 19.4 7.3Provisions 27.3 26.1-------------------------------------------------------------------------------------------Total current liabilities 315.9 266.9------------------------------------------------------------------------------------------- Non-current liabilitiesInterest-bearing loans & borrowings 145.9 175.1Forward foreign currency contracts 1.8 3.1Provisions 13.6 14.6Deferred tax liabilities 13.9 3.9Retirement benefit plan deficits 11.7 61.6-------------------------------------------------------------------------------------------Total non-current liabilities 186.9 258.3-------------------------------------------------------------------------------------------Total liabilities 502.8 525.2=========================================================================================== NET ASSETS 371.9 291.0=========================================================================================== CAPITAL & RESERVESShare capital 6 26.4 26.2Share premium 6 35.4 32.5Treasury shares 6 (10.7) (10.7)Capital redemption reserve 0.5 0.5Foreign currency translation reserve (2.9) 9.9Hedge accounting reserve 3.5 (3.7)Retained earnings 319.3 235.9-------------------------------------------------------------------------------------------Shareholders equity 6 371.5 290.6Minority interest 6 0.4 0.4-------------------------------------------------------------------------------------------TOTAL EQUITY 6 371.9 291.0=========================================================================================== Consolidated Cash Flow Statementfor the 52 weeks ended 29 December 2006 52 weeks 52 weeks ended ended 29 December 30 December 2006 2005 Note £m £m------------------------------------------------------------------------------------------- Cash flows from operating activities 7Cash generated from operations 134.5 71.3Additional pension contributions paid (7.0) (10.0)Fundamental restructuring costs paid (5.8) (16.6)Income tax paid (14.6) (7.9)-------------------------------------------------------------------------------------------Net cash generated from operating activities 107.1 36.8------------------------------------------------------------------------------------------- Cash flows from investing activitiesAcquisitions of subsidiaries & joint ventures (2.1) (75.6)Disposals of subsidiaries & joint ventures (1.8) 14.2Purchases of property,plant & equipment & intangible assets (27.6) (25.7)Exceptional proceeds on sale of property 8.3 -Other proceeds from sale of property, plant & equipment & intangible assets 1.0 0.4Proceeds from sale of other investments - 0.2Interest received 5.3 1.9Dividends received 1.5 4.0-------------------------------------------------------------------------------------------Net cash used in investing activities (15.4) (80.6)------------------------------------------------------------------------------------------- Cash flows from financing activitiesProceeds from issue of ordinary shares 3.1 6.3Purchase of treasury shares - (10.7)Proceeds from borrowings 90.7 170.0Repayments of borrowings (110.2) (84.5)Interest paid (10.2) (8.3)Dividends paid to equity holders of the Company (27.7) (26.6)-------------------------------------------------------------------------------------------Net cash (used in) generated from financing activities (54.3) 46.2------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 37.4 2.4Cash and cash equivalents at beginning of period 104.0 95.6Foreign currency translation differences (2.3) 6.0-------------------------------------------------------------------------------------------Cash and cash equivalents at end of period 139.1 104.0------------------------------------------------------------------------------------------- Consolidated Statement of Recognised Income & Expensefor the 52 weeks ended 29 December 2006 52 weeks 52 weeks ended ended 29 December 30 December 2006 2005 £m £m-------------------------------------------------------------------------------------------Income & expense recognised directly in equityGains (losses) taken to equity on cash flow hedges 11.5 (10.7)Exchange differences on translation of foreign operations (12.8) 13.9Actuarial gains on defined benefit plans 33.0 22.1Share of associate's actuarial gain on defined benefit plans 4.4 4.8Transfers to the income statementOn cash flow hedges (1.1) 0.3Tax on items taken directly to or transferred from equity (12.5) (2.9)-------------------------------------------------------------------------------------------Net income recognised directly in equity 22.5 27.5Profit for the period 81.6 26.0------------------------------------------------------------------------------------------- Total recognised income & expense for the period 104.1 53.5=========================================================================================== Attributable to:Equity holders of the Company 104.1 53.4Minority interests - 0.1------------------------------------------------------------------------------------------- 104.1 53.5------------------------------------------------------------------------------------------- Effect of changes in accounting policy:Net gain on cash flow hedges on first time application of IAS39 - 2.4------------------------------------------------------------------------------------------- 1. Basis of preparation The preliminary results for the 52 weeks ended 29 December 2006 have been prepared in accordancewith International Financial Reporting Standards (IFRS) as adopted by the European Union andapplied in accordance with the provisions of The Companies Act 1985. The format of the consolidated income statement included in this preliminary announcement differs from the Group'sfinancial statements for the 52 weeks ended 30 December 2005 and its unaudited 2006 interim reportas the directors are of the opinion that the revised format, which presents exceptional items inseparate columns, is more relevant to users of the financial statements. The accounting policiesapplied in preparing these preliminary results are unchanged from those which applied in the period to 30 December 2005. These preliminary results for the 52 weeks ended 29 December 2006 do not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. They are extracted from the full statutory accounts, which were approved by a Committee of the Board of Directors on 21 March 2007. A copy of those full statutory accounts will be lodged with the Registrar of Companies in due course.The report of the auditors on those accounts is unqualified and does not contain a statement under section 237 (2) or section 237 (3) of the Companies Act 1985 concerning accounting records or failure to obtain necessary information and explanations. 2. Segment information Business segmentsThe following table presents revenue and profit information on the Group's continuing operations for the 52 weeks ended 29 December 2006 and the 52 weeks ended 30 December 2005 analysed by business segment. Engineering Engineering Defence, Total continuing Products Services Nuclear & Gas operations 2006 2005 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £m £m £m-----------------------------------------------------------------------------------------------------------------------RevenueSales to external customers 608.5 505.6 225.2 215.4 107.2 68.4 940.9 789.4Inter-segment sales 20.9 19.0 1.6 1.3 - - 22.5 20.3-----------------------------------------------------------------------------------------------------------------------Segment revenue 629.4 524.6 226.8 216.7 107.2 68.4 963.4 809.7----------------------------------------------------------------------------------------------------------------------- Sales to external customers at 2006 average exchange rates 608.5 501.4 225.2 218.8 107.2 68.3 940.9 788.5 ResultSegment result before exceptional items 62.6 42.3 12.4 13.1 9.8 6.8 84.8 62.2Exceptional income (costs) (net) 5.0 (24.7) - - - - 5.0 (24.7)-----------------------------------------------------------------------------------------------------------------------Segment result after exceptional items 67.6 17.6 12.4 13.1 9.8 6.8 89.8 37.5Share of results of - joint ventures - - 2.4 1.7 - - 2.4 1.7 - associates - - 8.1 7.5 - - 8.1 7.5----------------------------------------------------------------------------------------------------------------------- 67.6 17.6 22.9 22.3 9.8 6.8 100.3 46.7 ==========================================================Unallocated expenses (7.6) (5.1)Unallocated exceptional income 10.7 - -------------------Operating profit 103.4 41.6 =================== Segment result before exceptional items at 2006 average exchange rates 62.6 41.9 12.4 13.6 9.8 6.7 84.8 62.2 3. Exceptional items 2006 2005Recognised in arriving at operating profit from continuing operations: £m £m----------------------------------------------------------------------------------------------------------------------- Profit on sale of property 6.8 -Pension plan gain 10.7 -Restructuring costs (1.8) (24.7)----------------------------------------------------------------------------------------------------------------------- 15.7 (24.7)======================================================================================================================= Profit on sale of propertyA profit of £6.8m (2005: £nil) was made on the sale of the Group's former premises at Huddersfield which were vacated as part of the restructuring of the UK EngineeringProducts businesses. Pension plan gainThe pension plan gain of £10.7m (2005: £nil), which represents a reduction in past service costs, arose on the implementation of amendments to the defined benefitarrangements of the Group's main UK defined benefit pension plan made with effect from November 2006. Restructuring costsDuring 2005 the Group incurred costs of £21.4m and impairment losses of £3.3m in connection with the previously announced fundamental restructuring activities in theUK Engineering Products businesses. Further costs of £1.8m have been incurred in 2006 in connection with this restructuring. The restructuring costs arose from activities that are not considered to fall within the normal function based classifications adopted by the Group when analysing results and, accordingly, they have been disclosed on a separate line on the income statement. 4. Tax expense 2006 2005 £m £m----------------------------------------------------------------------------------------------------------------------- Group - United Kingdom (1.6) (0.9)Group - Overseas (21.0) (13.0)-----------------------------------------------------------------------------------------------------------------------Total income tax expense in the consolidated income statement (22.6) (13.9)======================================================================================================================= The total income tax expense is disclosed in the consolidated income statement as follows:Tax expense - continuing operations before exceptional items (19.9) (13.8) - exceptional items (2.7) - - within profit from discontinued operations - (0.1)======================================================================================================================= The total income tax expense included in the Group's share of results of joint ventures and associates is as follows:Joint ventures (0.4) (0.2)Associates (3.3) (2.9)======================================================================================================================= 5. Dividends paid and proposed 2006 2005 £m £m-----------------------------------------------------------------------------------------------------------------------Declared and paid during the period:Equity dividends on ordinary shares:Final dividend for 2005: 9.65p (2004: 9.35p) 19.9 19.3Interim dividend for 2006: 3.75p (2005: 3.55p) 7.8 7.3----------------------------------------------------------------------------------------------------------------------- 27.7 26.6======================================================================================================================= Proposed for approval by shareholders at the AGM:Final dividend for 2006: 10.75p (2005: 9.65p) 22.3 19.9======================================================================================================================= The proposed dividend is based on the number of shares in issue, excluding treasury shares held, at the date the financial statements were approved and authorised for issue. The finaldividend may differ due to increases or decreases in the number of shares in issue between the date of approval of the report and financial statements and the record date for the finaldividend. 6. Reconciliation of movements in equity Minority Total Attributable to equity holders of the Company interest equity----------------------------------------------------------------------------------------------------------------------- Share Share Treasury capital premium shares Reserves Total £m £m £m £m £m £m £m----------------------------------------------------------------------------------------------------------------------- At 31 December 2004 25.9 26.5 - 212.4 264.8 0.6 265.4Adjustments relating to adoption of IAS 32 and IAS 39 from 1 January 2005 - - - 2.4 2.4 - 2.4----------------------------------------------------------------------------------------------------------------------- At 1 January 2005 25.9 26.5 - 214.8 267.2 0.6 267.8Total recognised income and expense for the period - - - 53.4 53.4 0.1 53.5Cost of share-based payments - - - 1.0 1.0 - 1.0Dividends - - - (26.6) (26.6) - (26.6)Exercise of options 0.3 6.0 - - 6.3 - 6.3Purchase of treasury shares - - (10.6) - (10.6) - (10.6)Transaction costs - - (0.1) - (0.1) - (0.1)Acquisition of minority interest - - - - - (0.3) (0.3) ----------------------------------------------------------------------------------------------------------------------- At 30 December 2005 26.2 32.5 (10.7) 242.6 290.6 0.4 291.0Total recognised income and expense for the period - - - 104.1 104.1 - 104.1Cost of share-based payments - - - 1.4 1.4 - 1.4Dividends - - - (27.7) (27.7) - (27.7)Exercise of options 0.2 2.9 - - 3.1 - 3.1 ----------------------------------------------------------------------------------------------------------------------- At 29 December 2006 26.4 35.4 (10.7) 320.4 371.5 0.4 371.9======================================================================================================================= 7. Additional cash flow information 2006 2005 £m £m----------------------------------------------------------------------------------------------------------------------- Net cash generated from operationsOperating profit before exceptional items 87.7 66.3Loss from discontinued operations before net finance costs and tax - (0.7)Share of results of joint ventures & associates (10.5) (9.2)Depreciation & amortisation 20.1 17.1Loss on disposal of property, plant & equipment & investments 0.1 0.3Funding of pension & post retirement costs (0.9) (0.8)Exchange (1.1) 0.3Employee share schemes 1.4 1.0Increase in provisions 2.8 2.4Increase in inventories (7.0) (18.9)Increase in trade & other receivables, construction contracts & forward foreign currency contracts (6.8) (12.3)Increase in trade & other payables, construction contracts & forward foreign currency contracts 48.7 25.8----------------------------------------------------------------------------------------------------------------------- Cash generated from operations 134.5 71.3Additional pension contributions paid (7.0) (10.0)Fundamental restructuring costs paid (5.8) (16.6)Income tax paid (14.6) (7.9)-----------------------------------------------------------------------------------------------------------------------Net cash generated from operating activities 107.1 36.8======================================================================================================================= Reconciliation of net increase in cash and cash equivalents to movement in net debtNet increase in cash and cash equivalents 37.4 2.4Net decrease (increase) in debt 19.5 (85.5)----------------------------------------------------------------------------------------------------------------------- Change in net (debt) funds resulting from cash flows 56.9 (83.1)Lease acquired - (0.2)Lease inception - (0.1)Foreign currency translation differences 12.4 (5.6)----------------------------------------------------------------------------------------------------------------------- Change in net (debt) funds during the period 69.3 (89.0)Net (debt) funds at beginning of period (76.4) 12.6----------------------------------------------------------------------------------------------------------------------- Net debt at end of period (7.1) (76.4)======================================================================================================================== Net debt comprises the following:Cash & short term deposits 146.3 109.6Current interest-bearing loans & borrowings (7.5) (10.9)Non current interest-bearing loans & borrowings (145.9) (175.1)----------------------------------------------------------------------------------------------------------------------- (7.1) (76.4)======================================================================================================================= This information is provided by RNS The company news service from the London Stock Exchange