Financial Highlights 2002 - Morningstar, Inc.

Financial Highlights 2002

ifc Financial Highlights

1 The Journey to Excellence

2 The Weir GroupWorldwide

4 Chairman’s Statement

6 Chief Executive’s Review

8 Operating & FinancialReview

14 Divisional Reports

24 Board of Directors

26 Directors’ Report

27 Corporate GovernanceStatement

29 Audit Committee Report

30 Report of the Bonus andRemuneration Committee

36 Corporate SocialResponsibility Report

38 Directors’ ResponsibilitiesIndependent Auditors’Report

40 Accounting Policies

42 Consolidated Profit & Loss Account

43 Balance Sheets

44 Cash Flow Statement

Reconciliation of NetCash Flow to Movementin Net Funds/(Debt)

45 Additional Statements

Statement of TotalRecognised Gains & Losses

Reconciliation of Movements in Shareholders’ Funds

46 Notes to the Accounts

70 Principal Companies of the Group

71 Group Five Year Summary

72 Financial Calendar

(1) Excludes goodwill amortisation & exceptionals(2) Excludes joint ventures and associates(3) At constant exchange rates

Contents:

Earnings per share (1)

22.6pDown 1%

Dividend

12.0pUp 3.4%

Net funds on hand

£1.9mPlus £67.9m

200122.8p

200222.6p

24

18

12

6

200111.6p

200212.0p

12

9

6

3

2001–£66.0m

2002£1.9m

30

–30

–60

Turnover

£841.7mDown 9%

Operating profit (1)

£62.2mDown 1%

Pre-tax profit

£59.4mUp 68%

Group results 2002

Continuing operations 2002 (3)

Turnover

£786.7mDown 5%

Operating profit (1)

£57.7mDown 5%

Pre-tax profit (1)

£55.5mDown 6%

Order input (2)

£650.9mDown 4%

The Weir Group PLC Report and Accounts 2002 1

The Journey to Excellence

Sir Robert SmithChairman

Mark SelwayChief Executive

The Weir Group has made good progress during 2002,which is particularly commendable given the difficulteconomic and market conditions experienced throughoutthe year. We have pursued our strategy of focusing onimproving the productivity of our existing operations,developing best in class products and concentrating onthose markets where we can establish leading positions.From this we go forward with confidence, focusing ourefforts at the markets where we see excellent prospects for growth.

2 The Weir Group PLC Report and Accounts 2002

Weir Minerals is the world leader in the design and manufacture of pumps,mill liners, cyclones and slurry valves forthe mining and minerals processingindustries. Based on advanced, patentedmaterials and design, our products andsupport services add value to virtually any aggressive, corrosive process.

The Weir Group has a strong reputation forengineering excellence in the manufacture ofspecialist equipment and the delivery of cradle- to-grave engineering services. Weir solutions arerecognised as best in class, backed by superiordesign, project management and technicalexpertise applied to customer support and assetmanagement.

Weir employs just under 8000 people worldwideacross five specialist divisions focused on our keymarkets. These range from mining and mineralsprocessing to the defence and nuclear industry,from oil and gas exploration to power generationand water treatment. In all these areas, we providesolutions that meet the engineering andoperational challenges facing our customers.

For further information about The Weir Group PLC,visit www.weir.co.uk

For further information about each division, visitwww.weirminerals.comwww.weirclearliquid.comwww.weirvalves.comwww.weirservices.comwww.weirtechna.com

Weir Clear Liquid has a reputation forengineering excellence in the design,manufacture and service of engineeredpumps and fluid handling systems. We provide dependable, efficient solutionsfor oil and gas, power generation, water,wastewater, hydrocarbon processing andgeneral industrial projects.

The Weir Group Worldwide


Weir Valves & Controls specialises incritical service and isolation valvesdesigned to support regulatorycompliance and best practice in powergeneration, oil and gas safety. We providemarket-leading products for the mosttechnically demanding environments,including nuclear and subsea applications.

Weir Services is a leading provider ofequipment maintenance, process supportand asset management in conventionalpower generation and renewable energy,oil and gas, water, marine and generalindustry. We deliver innovative solutionsenhancing the performance and life ofour customers’ equipment.

Weir Techna is the specialist engineeringdesign and systems integration division ofthe Weir Group. Our expertise includes awide range of specialist technologies forcomplex projects, with particular strength inthe areas of desalination, water treatment,defence and nuclear markets.

MineralsClear LiquidValves & ControlsServicesTechna


Chairman’s Statement

operations at Ipswich at a cost of £2.7m. Offsettingthese charges was the profit arising from the disposalof our 22.5% stake in First Engineering and the sale ofthe turbo drilling operations of Neyrfor-Weiramounting in total to £10.5m.

With an effective tax rate of 23% on profits beforeexceptional items and goodwill amortisation, earningsper share on this basis, amounted to 22.6p (22.8p in2001). Including exceptional items, earnings pershare on an FRS3 basis rose to 24.7p (13.5p in 2001).

Cash generation was excellent with cash flow fromoperations of £68.0m, in spite of an £11.3m adverseflow on the funding of pension and post retirementcosts. The year ended with a net in funds position of£1.9m, showing a £67.9m improvement from theprevious year (net debt £66.0m in 2001).

Order input from continuing operations, excludingJoint ventures and associates, was 4% down at£650.9m (£722.0m in 2001).

The Board is recommending a final dividend of 8.75pper share making a total distribution for the year of12.0p (11.6p in 2001).

Strategy & structureOur programme for the execution of operational andstrategic changes is making sound progress. The 2002results in the Engineering Products and Servicesbusinesses, validate our belief that operationalimprovements provide the best short term opportunityto deliver margin, earnings and cash flowimprovement in the face of adverse market conditions.

During the year we successfully completed theplanned divestments and closure of non-corebusinesses, primarily in the UK. These actions improvesignificantly the focus of the Group and releasefinancial and management resources to facilitateprogress in the operational and strategic developmentof the business.

The key management focus for 2003 is to ensure that the operational changes we have initiated areimplemented to yield their full potential. At the sametime we will continue to invest in new products andin growth sectors of our business.

While the Group’s organic growth strategy providesgood prospects for profitable expansion, our strongcash generation and ungeared balance sheet give usthe full range of options to create further growththrough business development and acquisitions.However, shareholders can be confident that ourfinancial strength and self-determination will not becompromised by any high risk or speculative businessdevelopment activity.

OverviewAs this is my first statement since becoming Chairmanlast summer, I would like to begin by saying howdelighted I am to have joined the Weir Group at avery exciting stage of its development.

Since Mark Selway’s appointment as Chief Executivein June 2001, the Group has undergone significantchanges. The businesses have been reorganised intofive divisions and the planned divestment and closureof ten non-core businesses has been completed.Productivity improvements have been implemented in all areas, which despite difficult external conditions,have delivered a creditable year on year performance.

Since my appointment, I have visited many of theGroup’s key operations and am pleased to report thatthere is a great deal of enthusiasm for our programmeto revitalise our product portfolio confirming Weir’sreputation for engineering excellence.

Financial performancePre-tax profit, excluding goodwill amortisation andexceptionals, was similar to last year at £60.0m(£60.9m in 2001) despite a 9% reduction in Groupturnover to £841.7m (£926.7m in 2001).

There were several separate items classified asexceptional in 2002. Charges arose from the closureof our Hazleton, Pennsylvania foundry at a cost of£1.6m and the closure of our Girdlestone pump

“2002 was a year of major change for the Group, with a new management structure and strategy tiedto transforming Weir’s business portfolio to highlyfocused, globally driven divisions.”

executive director of Johnson Matthey plc and TravisPerkins plc. His marketing and industrial experience atan international level is particularly relevant to theWeir Group’s strategic ambitions.

Corporate GovernanceIn September 2002, the Financial Reporting Council(who are responsible for overseeing the CombinedCode on Corporate Governance) set up a group todevelop the existing guidance for Audit Committeescontained in the Combined Code. This grouppublished its recommendations in January this year.At the same time the Higgs Review on the role andeffectiveness of non-executive directors published itsrecommendations.

Both of these are currently being examined by the Financial Reporting Council. They have invitedcomments on the recommendations which it isanticipated will be effective for reporting years on or after 1 July 2003. The consultation period ends on 14 April 2003.

The Board will consider fully all of the finalrecommendations but in the meantime, have decidedto implement some of the recommendations of bothreports with particular reference to publication for thefirst time of an Audit Committee Report. Also, morebackground and information has been given in theannual general meeting notice on the directorsproposed for election and re-election.

PeopleOn behalf of the Board, I want to thank the executiveand our 8000 employees around the world for theircommitment, tireless energy and focus in what was a tough year. I ask them all to show the samedetermination to succeed in 2003. The developmentof new products, improvement in productivity andthe forging of new and stronger customerrelationships are more essential today than ever.

Finally, I want to thank our shareholders who continueto show belief in our potential. We recognise it is upto us to deliver. I am convinced that the Weir Grouphas the right direction, structure and depth ofmanagement expertise to deliver improving returns to shareholders.

Sir Robert SmithChairman19 March 2003


OutlookDespite difficult market conditions in the year, theGroup achieved significant performance improvementin its continuing operations with increased marginsand strong cash generation in our core EngineeringProducts and Services businesses.

With market improvements yet to materialise againstthe same period in 2002, we continue to gear ourcost base accordingly, taking the tough but necessarysteps to reduce costs, dispose of non-core operationsand drive productivity to improve competitiveness.

In 2003, we expect to book good levels of businessfrom our minerals processing and services activities.The power generation and industrial sectors are likelyto continue to be weak. Overall, we expect to showorder input growth from our Engineering Productsand Services businesses during the year.

In 2002, the defence and desalination businesses wereaffected by geopolitical uncertainty in the Middle Eastand the widely publicised delays in UK defencespending. Our recent award of the US$25m Kindasadesalination project and pre-selection on a number ofsignificant defence and desalination projects shouldprovide for stronger order input for Weir TechnaDivision in 2003.

Due to the reduced level of second half input in 2002 and the lead time for engineering projects, the expected progress in 2003 is likely to occur in the second half of the year.

For the medium term and whenever economicconditions improve, we are confident that theleadership positions and improved competitivenessbeing established in our key business areas willstrengthen our position for development andprofitable growth.

The BoardSir Ronald Garrick retired from the Board on 30 June2002 after almost 40 years with the Group, 20 yearsas chief executive. His personal dedication,professional experience and insight during his longassociation with the Group has been invaluable.

David Newlands and Dr Chris Fay, who have been non-executive directors since 1997 and 2001respectively, have indicated their intention not to seek re-election at the annual general meeting in May 2003. Their wise and helpful counsel during their time in office has been of immense value to the Group.

On 17 February 2003, Michael Dearden joined theBoard as a non-executive director. Michael is a formerdirector of Burmah Castrol plc and is currently a non-


Chief Executive’s Review

Restructuring for market leadershipIn 2001, we reorganised the business into five coredivisions to focus the capabilities of the Group andto better reflect the markets in which we operate. In 2002, by leveraging the global strength of Weir through the divisions, our local companieswere well placed to achieve and defend marketleading positions.

Our strongest performance in 2002 came from ourServices and Minerals Divisions, where our best inclass product offerings and geographic diversityproduced earnings, profit and cash flow growth.

Despite challenging conditions in many of theirmarkets, the Clear Liquid and Valves & ControlsDivisions made significant progress in theirrealignment to operational excellence. Both havetaken action focused at increasing quality andproductivity in every area of their operations. Before one-off costs, both divisions producedstronger second half earnings when compared tothe same period in 2001.

As previously predicted, Weir Techna continued to experience a tough trading environment withdeferrals of major contract awards in both ourdefence and desalination activities. Our first quarter2003 contract award for a desalination plant inSaudi Arabia and an expected decision on the UKcarrier programme offer early signs of an improvingmarket environment for the year ahead.

Our joint ventures & associates investmentscontinued to perform well during the course of2002. As forecast, lower levels of sales activity atDML were largely offset by improved operationalperformance and management action to controlcosts. Our timely exit from First Engineering, our rail service business, crystallised a considerableexceptional gain and eliminates the Group’sexposure to the difficulty currently facing the UK rail industry.

At the end of 2002, we actively focused ondeveloping those businesses which offer the bestprospects for the future.

Pursuing operational excellenceOperational excellence is a Group objective, in line with our philosophy that meeting andexceeding customer expectations plays a direct role in earnings growth. In 2002, the executiveengaged the entire organisation in the Group’s

“I am pleased with the Weir Group’s progress during2002, especially in light of the difficult economic andmarket conditions we faced. I attribute much of oursuccess in 2002 to the actions initiated by ourmanagement team to improve productivity in ourexisting operations and to focus our efforts at thosemarkets where Weir has a realistic ambition to lead.”

Despite a lack of market growth in most of oursectors, our results for the year validated ourfundamental belief that delivering operationalexcellence provides the basis for improvingmargins, earnings and cash flow.

All of our businesses have been managed robustlyduring the year, as we press ahead with decisiveactions to improve competitiveness and shareholderreturns. We also made sound progress inimplementing the strategic changes required to deliver sector best performance.

I want to recognise the contribution of ouremployees at all levels of our organisation. I am grateful for their tremendous enthusiasm and outstanding contribution throughout 2002. We have all worked hard, in the face of anuncertain global economic outlook, to improve our processes, manage our costs and achieve real progress.


vision, putting in place actions designed to deliver excellent operational performance. We remain absolutely convinced that in doing sowe will unlock our potential to deliver best in sectorcustomer satisfaction and financial returns in themedium term.

The implementation of The Weir Production Systemas a structured process, with company-widetraining, is already beginning to deliver a leanerculture and discipline across all our operations,irrespective of product or geographic location.

Our impressive result in eliminating Group debt is an early indication of the benefits of these leaninitiatives. Improved working capital, lowerinventories and improved on-time delivery in theyear were all a direct result of our drive foroperational excellence.

Developing world class productsOur 2002 plans to deploy our assets and resourcesmore effectively proceeded to target. All ourdivisions completed the early work on developingmore focused product portfolios aimed at the mostattractive markets. The first range of new productswill be launched in 2003 and we are committed tofurther major investments in research anddevelopment for the coming year.

I am confident that the technical and intellectualtalent already installed at Weir, coupled to adeliberate and systematic approach to innovation,will enhance the Group’s competitive positioning inthe near term. This confidence was reinforced bythe response from all quarters at our Groupconference, where innovation and market growthfeatured as headline ambitions. Technology andintellectual property will be pivotal in our futureearnings.

Promoting leadership During the year, we continued to strengthen our management team, increasing the resourcestargeted at developing our leadership talent. Our personal development programmes wereenhanced to identify high potential employees and we put in place a new and intensive executiveleadership training programme, which will cultivateour next generation of business leaders. Employeeappraisals, career development and successionplanning now form an important component of the executive calendar.

Going forwardAs we move forward into 2003 with the foundationstones of our transition substantially laid, and thenecessary tools in place to roll out best practiceacross the Group, we are ideally placed toaccelerate growth.

Our operational plans are tightly linked to ourambitions for progressive delivery of world-classproducts, operational excellence and marketleadership.

Structurally we have benefited from the disposal of a number of non-core businesses providing aclearer vision of the substantial potential for furtherorganic growth and inter-divisional collaboration as and when market conditions improve.

In 2002, we considerably strengthened our corporatedevelopment team to pursue opportunities to addstrategically compatible companies to the Group.Acquisitions will be closely targeted to ensurestructural, technical and geographical ‘fit’ in line with our strategy for growth.

While the uncertain economic climate will have an impact, particularly in the first half of the year,Weir is well positioned even in these difficult marketconditions. The actions taken in 2002 provide astrong platform for increased growth and earningswhen external conditions improve.

Mark W SelwayChief Executive 19 March 2003


Operating & Financial Review

• Minerals DivisionOur Minerals Division reinforced its leadershipposition, achieving strong margins and profitimprovements despite a continued softening of our markets in the United States and Europe.

During the year, the division implemented actions which promise to accelerate organic growth and increase market share through thedevelopment of exceptional new products,penetration of new markets and global expansion of our existing portfolio.

Our South American operations continue toproduce year on year growth in both sales andprofits, building strong relationships with themining majors in the region.

• Valves & Controls Division2002 saw a significant strengthening of the Valves & Controls Division management team.Action was taken to realign the business around a more focused product portfolio aimed at the most attractive markets.

The entire division is engaged in the adoption oflean business practices and results during the yearwere impressive, producing growth in margins andprofits despite a 2.3% decline in sales to £69.1m(2001: £70.7m).

During the year, the division disposed of its small French actuator business and transferred its UK valves services business to Weir Services. A redundancy programme affecting some 16% of employees at Weir Valves & Controls UK Ltd was carried out without disruption in July 2002.

• Clear Liquid DivisionOur Clear Liquid Division remains the single largest sales contributor under EngineeringProducts, with sales at £184.3m, (2001: £192.6m).Despite our premier geographic footprint andterrific engineering pedigree, the businesses in this division historically under-perform the best of our peers, demanding management actions.These were taken during the year.

A number of management changes were made at Weir Pumps, the largest company in the division representing approximately 50% of totaldivisional turnover.

Change in accounting policies & presentationWe have decided to amend the basis of thesegmental analysis of operations to disclose theresults of the Techna Division as a separate segmentin order to more fully disclose the impact of thisdivision’s activities on the Group’s results.

In the Operating & Financial Review last year we stated the Board’s intention to fully implementthe new accounting standard for pensions andother retirement benefits, FRS17, and to change to the use of average exchange rates for thetranslation of profits and cash flows of overseassubsidiaries and joint ventures and associates. In addition, the new accounting standard governingaccounting for deferred taxation, FRS19, becamemandatory for the 2002 accounts. The effect ofthese changes in accounting policies is set out innote 20 on page 62.

Engineering ProductsOur Engineering Products business includes theoperations of our Clear Liquid, Valves & Controlsand Minerals Divisions, which are closely alignedthrough their engineering, manufacturing andmarketing disciplines.

Despite a reduction in turnover from continuingoperations of 3.3% to £429.6m in 2002 (2001:£444.3m), operating margins improved to 7.6%(2001: 7.2%) due to improved performances in ourValves & Controls Division and a significant secondhalf improvement in our Clear Liquid Division.

Ian BoydFinance Director

Mark SelwayChief Executive


The Clear Liquid Division is actively implementingThe Weir Production System, applying stringentlean initiatives to operational and supportingprocesses. This promises to deliver margin, earningsand cash flow improvements in line with ourambition to achieve sector best returns andperformance.

The division’s plan to deploy assets and resourcesmore effectively is on target and our realignment ofthe product portfolio to the most attractive marketswill be the subject of further investment in 2003.

During the year, the Clear Liquid Division disposedof a non-core injection moulding company in theUnited States and closed its UK Ipswich operationafter transferring the manufacturing activities to theunder-utilised Cathcart plant. Further restructuringwill take place in 2003, including the transfer of our £12m Hazleton pump business to the MineralsDivision where there is greater market alignmentand potential for synergy. The division’s £13mturnover engineered pump business in Australia will be re-focused towards its service operations and transferred to our Services Division, where it will form the platform for growing our assetmanagement activities in Australia and Asia.

Engineering ServicesWe were particularly pleased with the progress of our Services Division in 2002, especially in light of the difficult economic and market conditions we faced during the year. Much of this success can be attributed to the actions initiated by ourmanagement to improve productivity and capitalise on our reputation for engineering services excellence.

Turnover from the continuing operations of ourServices Division was £150.7m, 12.9% above the£133.5m achieved in 2001. Operating profits of £15.2m were up 26.1% (2001: £12.0m) andoperating margin improved to 10.1% against 9.0% in 2001.

Our main UK service business, Weir EngineeringServices, grew sales by 28.7% thanks to its ongoing success in hydro refurbishment and asset management activities. Despite softer marketconditions, the new management team actedstrongly to deliver robust margin growth from our Canadian service and distribution businessduring the year.

2002 saw increased investment in the skills andinfrastructure required for global expansion and to accelerate organic growth. We also invested in a dedicated corporate development resource withthe capability to identify and fully investigate futureexpansion and acquisition targets.

In 2002, the Services Division disposed of the non-core Neyrfor-Weir turbo-drilling operations,resulting in a positive exceptional profit for theGroup in 2002. 2003 will see investment in anumber of greenfield service operations in theUnited States. The transfer of the Australianengineered pump operations to the ServicesDivision will give us the opportunity to redirect the company’s activities towards asset managementand rotating equipment servicing, based on oursuccessful UK model.

Techna DivisionWeir Techna Division includes those businesseswhere primary value is derived from our design andproject management of large scale capital projects.

The division’s activities cover four principal businesssegments: water treatment, defence, nuclear andliquid gas handling, all of which are suffering fromthe effects of contract deferrals during the course of 2002.

Techna turnover reduced £1.4m to £105.0m in2002 (2001: £106.4m). Operating margins reducedto 4.8% compared to 9.5% in 2001 due to thetiming of contract completions and the resultantprofit taking impact of projects in 2001, which weflagged would not be repeated in 2002.

• Water treatmentTurnover in our desalination businesses fell £13.7mto £29.1m due to the timing of completions ofsignificant contracts in our UK and Frenchoperations in 2001, which were not expected to be replicated in 2002. The division’s technologiesare largely focused at Middle East markets and the uncertain political stability of the region resultedin the postponement of a number of significantcontract awards during the year.

Our March announcement of a US$25mdesalination order in Saudi Arabia and the promiseof further major awards during 2003 providerealistic grounds for short-term improvements.

The world’s largest slurrypump – the 750 SHD – usedin major mining projects,particularly in South America

A cluster of Cavex cyclones usedin an Australian gold mine


naval base there. As anticipated, our share of that operation’s turnover reduced to £91.6m (2001: £131.3m) following completion of the major capital works programme to accommodatethe Vanguard submarine refit. Decisive actions of DML management in containing costs andimproving efficiencies are to be recognised in a solid profit performance.

Our joint venture service business in Abu Dhabicontinued to gain market share and building on a solidly established engineering reputation grewsales by 9.2% to £4.7m (2001: £4.3m).

Weir Houston, the oil drilling service business inAberdeen, saw flat sales at £4.6m (2001: £4.6m).Tighter market conditions in the North Seadepressed margins.

The contribution from our investment in FirstEngineering of £1.8m is lower than in 2001, due to disposal of this investment in October.

Disposals In July 2002, the Group announced the sale of the turbo-drilling operations of Neyrfor-Weir toSmith International for net proceeds of £14.9m.This resulted in a net gain of £2.1m as describedunder exceptional items below. The results ofNeyrfor-Weir to date of sale are disclosed as adiscontinued activity in the profit and loss accounthaving contributed £2.5m (2001: £0.3m) tooperating profit for the year.

In October, we sold our 22.5% stake in First Engineering, the railway infrastructuremaintenance company, to Peterhouse Group PLCfor a total consideration of £11.9m cash and aholding, valued at £2.3m, of new Peterhouseshares, which were subsequently sold. In addition,the company received £5.4m from the redemptionof First Engineering preference shares. The disposalcrystallised an exceptional profit of £8.5m andeliminated the Group’s future exposure to thetroubled UK rail sector.

The sale of two minor non-core activities gave rise to proceeds of £3.4m and an insignificant book loss.

• Defence & nuclearTurnover from our defence and nuclear businessesgrew £7.1m to £59.0m while profits showed asharp reduction. This is due to our prudent rules for the recognition of profits on long termcontracts, whereby profits are taken on theachievement of milestones much later than turnover is recognised. This had a particularlypositive impact on our 2001 results.

The current Middle East situation and slippage in order placement by the UK Ministry of Defence,have delayed the follow-on award of severalsubstantial contracts to Weir Strachan & Henshaw.However, the recent finalisation of UK spend formajor defence projects does offer the realisticprospect of order placements in 2003 and beyond.

In the medium term, our corporate developmentand divisional teams are actively pursuingopportunities to globally expand our defencebusiness, particularly in the United States. Ourtechnologies are globally competitive and we arecommitted to increasing our scale thereby reducingour dependency on the UK defence market andproviding a more stable platform for ongoinginvestment in these highly technical markets.

• Liquid gas handlingOur small (£16.9m sales) Edinburgh-based Liquid Gas Equipment business, which provides equipmentfor storing and transporting liquefied petroleumgas, had a continued strong profit performance onthe back of orders booked in 2001. The currentyear experienced a cyclical downturn in the newbuild programme for liquid gas carriers with only£2.8m of orders being booked in the year.

Joint ventures & associatesGroup share of turnover from our continuing Jointventures & associates activity at £101.4m fell by almost 30% against 2001. Operating profitsreduced by 12.5% to £7.7m against £8.8m lastyear. DML manages the naval dockyard atDevonport and provides support services to the

Operating & Financial Review (continued)

Quality check at Weir Lewis,specialists in pump and valveequipment for the corrosivechemical industry

Weir Floway pumpsinstallation at the SouthernNevada Water Agency, Las Vegas, USA


The net credit in 2002 was £1.8m (2001: £5.4m).The significant reduction in this credit compared to the 2001 level was mainly due to the fall in thevalue of the Group’s pension fund assets during2001. The further drop in the value of these assetsduring 2002, means that this line will show a netdebit in 2003 currently estimated at £4.6m.

TaxationIn compliance with the requirements of FRS19, a detailed reconciliation of the actual current taxcharge to the theoretical standard rate charge isgiven in note 4 on page 49.

The tax charge for the year at £9.0m benefitedfrom the exceptional credit described underexceptional items above, but now reflects a £1.7maddition to the deferred tax element arising fromthe new requirements of FRS19 in relation to thefiscal deduction for goodwill in the United States.Excluding the exceptional credit, the tax chargerises to £13.8m giving an effective tax rate of 23%(2001: 24.5%) on profits before exceptional itemsand goodwill amortisation.

Earnings per shareThe basic earnings per share increased 83% to 24.7p against 13.5p in 2001. The increase is whollyattributable to the differential effect of exceptionalitems in the two years.

The adjusted earnings per share which the Boardconsiders to present a more meaningful measure of earnings excludes the effect of goodwillamortisation and exceptional items. On this basis, earnings per share reduced by 1% to 22.6p(2001: 22.8p).

DividendThe Board is recommending a final dividend of8.75p per share making a total distribution for theyear of 12p (2001: 11.6p) an increase of 3.4%.

The resulting dividend cover, excluding goodwillamortisation and the net exceptional items credit of £4.2m, is 1.9 times.

Exceptional itemsThis year, the profit and loss account contains fourcategories of transactions classified as exceptional.

The first arises from the decision to include Hazletonin our Minerals Division thereby clarifying the needto shed United States foundry capacity. The intentionto close or sell Hazleton’s Pennsylvanian foundryfacilities at a book loss of £1.6m was announced.

The second charge stems from the decision to closethe manufacturing and administration operations atGirdlestone in Ipswich and transfer production toour under-utilised operations in Scotland, at anoverall cost of £2.7m.

The sale of our shareholding in First Engineeringand the turbo-drilling activities of Neyrfor-Weirresulted in pre-tax gains of £8.5m and £2.1mrespectively. The Neyrfor-Weir gain includes arelease of £0.7m of negative goodwill transferredfrom reserves.

The fourth item relates to a taxation credit of £3.4m arising from the favourable conclusionduring the year of a number of fiscal issues with the authorities for which provision had been madein prior years together with credits arising on theGirdlestone closure costs and the sale of Neyrfor-Weir assets.

Interest & other finance incomeThe net interest charge at £4.0m showed a furthersignificant reduction from the 2001 level of £7.2m.In addition to the proceeds from the disposalprogramme, the Group benefited from a generalreduction in the level of world interest rates andfrom strong cash generation over the last 18months. The interest cover for the year, calculatedusing profits before exceptional items, interest and other finance income, tax and goodwillamortisation, was 15.6 times. The year ended with a net in funds position of £1.9m providing a firmfoundation for a further reduction in the 2003interest charge.

With the adoption of FRS17, a new line has beenintroduced in the profit and loss account for otherfinance income. It represents the net result of theprojected income arising from the retirementbenefit fund assets, less the unwinding of thediscount on the accrued retirement obligations at the start of the year.

A Batley butterfly valve beinginstalled at the Texaco OilRefinery Pembroke Dock

Weir Valves & Controlssystems at Heysham 2 power station in the UK


Operating & Financial Review (continued)

Cash flow & gearingCash inflow from operations at £68.1m was only £3.0m down from last year’s level in spite of an£11.3m adverse flow on the funding of pensionsand post retirement costs (of which £7.7m relatedto a funding payment to the UK Executive Plan).This good result was delivered by a £9.6mreduction in working capital.

Net interest payments of £3.5m were £5.1m belowlast year. Capital expenditure of £15.3m and theproceeds from the sale of surplus assets at £5.0mwere broadly at the same level as 2001.

The most significant feature of the cash flowstatement is the £36.9m of proceeds received fromthe various disposals detailed previously.

The overall result gives a £67.9m reduction in netdebt, finishing the year with a net funds balance of £1.9m (2001: £66m net debt). The ungearedposition compares with an opening debt to equityratio of 26%.

Treasury mattersThe Group has continued to follow a policy ofmanaging its exposure to foreign currencies byhedging all material transaction exposures using the forward forex markets. The period of the hedge is governed by the underlying transactionexposures, which can extend for a variety of periodsup to four years. Exposure to the translation offoreign currency profits is not hedged.

It is Group policy to manage balance sheettranslation exposure by partially hedging the net assets of overseas subsidiaries with forwardcontracts and borrowings denominated in thecurrencies of the principal exposures, namely theUnited States and Australian dollars. At 2002 yearend, such currency borrowing represented a hedgeof 21% and 55% of the respective net assetexposures. However, the strength of sterling against most currencies, with the exception of the euro and the South African rand, has resulted in a net translation write-off against reserves of£9.0m. The most significant element of the chargerelates to the Brazilian real and the United Statesdollar, where these currencies depreciated againststerling by 44% and 9% respectively.

The Group’s positive cash generation has resulted in cash balances at year end of £153.0m, which are invested with an approved list of financialinstitutions and financial instruments. During the year, there has been no need to add to theGroup’s committed credit lines with the panel of relationship banks, which are due to mature in 2004. At the year end, the undrawn portion ofthese lines amounted to £77.0m and there was alsoavailable £38.0m of undrawn uncommitted lines.

The Group operates a policy designed to reduceinterest rate risk and to maintain a cost efficientbalance between fixed and floating rate debt.Throughout the year virtually all the debt has beenkept at floating rates. With the transition to a net in funds position, the floating rate bias has produceda position of minimal interest rate risk exposure.

PensionsLast year, the Board took the decision to implementthe new retirement benefits accounting standardFRS17 in full. As a result of the subsequentrequirement for listed EU companies to adoptinternational accounting standards from 2005, the Accounting Standards Board introduced arevision to FRS17 incorporating a delay to itsmandatory start date. The Board has decided tocontinue with the full implementation of FRS17.

We stated last year that the effect ofimplementation on the profit and loss accountwould be an additional charge of some £3.0m. The actual impact on pre-tax profit has been anadditional net charge of £2.1m reflected as a £4.4m reduction in operating profits offset by a credit of £2.3m to other finance income.

The reduction in the relevant AA corporate bondyield and the fall in world equity markets hasproduced an increase in the deficits of the Group’sdefined benefit pension plans from £19.0m to£102.1m net of tax. This is in spite of their closureto new entrants in 2001. With effect from April2003, the benefit structure of the UK plans hasbeen altered and both employee and employercontributions increased to address the equitablesharing of the increased future burden of pensionprovision. Pending stabilisation in world capitalmarkets, the Group has also committed to asupplementary cash injection into the main UK plan of £10.0m to reduce the current deficitposition reported under FRS17.

Weir Services Division enjoys a dominant position in theupgrading of hydro powerstations in the UK

Generator runners for hydropower stations in final stagesof preparation at one of Weir Services’ major Scottishservice centres


LitigationSince 1991, the Group has successfully defended all the asbestos-related actions raised in the UnitedStates and a total of 33 have been dismissedwithout any payment being made to the claimants.

Currently there are 23 actions outstanding againstGroup companies. We will continue to defend theseactions in connection with which legal defencecover is being provided. As the cases are believed to be without merit no provision has been made inthe Group accounts.

Health, safety & environmentIt is Group policy to maintain and continuallyimprove healthy and safe working conditions and to operate in a responsible manner with regard tothe environment.

During 2002, we launched a challenge to all world-wide companies to improve our performance in thearea of health and safety. Management was chargedwith investigating the cause of any accident andensuring that lessons were shared across the Groupto prevent recurrences.

The results of these efforts produced an impressive32% reduction in lost time accidents in 2002 whencompared to 2001 and improvements of a similarmagnitude have been targeted for 2003.

We also set out our intention to fully articulatetargets for environmental improvements andsubsequently agreed to the attainment of formalaccreditation to ISO 14001 for all Group-ownedcompanies by year end 2004.

Summary & outlook2002 was a year of transition for Weir, characterisedby decisive actions to improve the performance ofour businesses and realign our activities to thosemarkets which offer the most attractive scope forgrowth. During the year, we made sound progressin strengthening our financial position through thedelivery of operational performance and disposaland closures of non-core operations.

We expect the uncertain economic climate to placecontinued competitive and market pressures on theEngineering Products businesses and the slowsecond half input from 2002 to have an impact,particularly in the first half of the year.

The improved margin performance from theEngineering Products businesses reflect the earlydelivery from our lean and purchasing activitieswhich will continue in 2003 and beyond.

Outlook for our Services Division remains positiveand current enquiry levels would indicate furtherprogress in 2003.

In the Techna Division, our core markets sufferedthroughout 2002 as a consequence of instability in the Middle East and the decline in major capitalspending across the globe. We can report thatacross our contracting businesses we have anumber of significant opportunities which are welladvanced with a high probability for delivery whenexternal conditions improve.

The current economic and geopolitical uncertaintymakes it particularly difficult to predict the outlookfor the year ahead. However, provided economicconditions remain similar to those experienced in2002, by continuing to implement our strategy, we expect to further improve productivity andmargins in our Engineering Products and Servicesbusinesses. These improvements will offset in partthe impact of the lower second half order book and increased pensions charges.

In 2002, we have made further progress tostrengthen our financial position. Given the Group’sungeared balance sheet and strong cash generation,we are confident that it is well positioned for futuregrowth as and when external conditions improve.

In the short term, this financial strength positions us well to weather the current uncertain marketconditions.

We are committed to developing the right people, the right structure and the right strategy for the future success of the Group. As a result, we are going forward with a shared vision, aneffective leadership team and a clear strategy for sustainable growth.

Mark W Selway Ian M BoydChief Executive Finance Director

19 March 2003

Weir Techna technologies helpmeet the growing need forfresh water supplies. Ghubrahdesalination plant in Oman,designed and built by WeirWestgarth, successfullycompleted one year ofoperation at the end of 2002

Weir LGE Process provideliquid gas handling plant to some of the largestrefrigerated ships in the world


Mining and minerals processing typically involveabrasive, corrosive slurries that make severedemands on the equipment used. The strength ofWeir Minerals’ products lies in the superiority of ourhydraulic designs and our wear and corrosionresistant materials.

Competitive advantageContinuous product enhancement is essential to both our own and our customers’ competitiveadvantage. Engineering research is carried out by our globally accredited advanced materialsdevelopment centre in Australia, bringing innovationto market efficiently and rapidly integratingdevelopments back into our local operations.

By way of example, the world’s largest metal linedslurry pump was commissioned in Chile, while the1000 GSL prototype pump specifically designed forpower plant flue gas desulphurisation projects wassuccessfully produced and tested.

As a result, our global leadership in slurry pumps iscombined with innovative design in complementaryproducts such as mill liners, hydrocyclones and

slurry valves. This advanced and integrated productrange includes market leading brands coveringvirtually any application in any aggressiveprocessing environment.

Customer focusOur customers range from the world’s largestmining and minerals multinationals to single sitecoal producers. In applications where the ongoingrunning and maintenance costs can outweigh theinitial capital costs, we help our customers addressissues such as longevity, capacity, efficiency ofoperation and ease of maintenance.

Local support, global supplyIn a sector characterised by large scale, complexoperations in remote and inaccessible locations, weare at the forefront in developing full servicemaintenance contracts, whereby Weir engineersremain on site 24 hours a day, 7 days a week.

As customers across the mining and mineralsindustries look to rationalise their supply base, WeirMinerals has both the geographic footprint and thepartnering experience to support that consolidation.

Scot SmithDivisional ManagingDirector

First choice for process efficiency

“Understanding the critical role our products playin the customer’s process, we ensure that WeirMinerals consistently outperform our competitorsand exceed customer expectations.”

Divisional Report

Main picture: Weir Warmanrecently won the contract to replace flue gasdesulphurisation (FGD) pumps at Prunerov II, one of the Czech Republic’s largestcoal fired power plants

Small picture: Prunerov II,which runs 15 FGD pumps, to help ensure it meetsenvironmental standards


Key achievements 2002:Key statistics:

• Global strategy across product portfolio.Development focus on core pump product withcomplementary product offering of cyclones, mill liners and valves being co-ordinated globally.

• Operational improvements include Lean initiativesin every company which have improved cycletimes, one example being 13 days down to eightand inventory reduction of up to 38%.

• Purchasing synergy – purchases leveraged globallywith Clear Liquid and Valves & Controls Divisions,with the objective of creating a more focused,smaller supply base generating savings andbenefits across the entire Group.

• South America successes – continued extension of cross-divisional activity with major mineralscustomers.

• New market activity saw exports to East Russiagrow 43%; major power orders from China;appointment of a managing director for India.

• At year end assumed responsibility for Hazletonfrom Clear Liquid, providing better alignment.

Facts and figures:Market share: c.18%Sales: c.£176mNo. of people: 2,600Market size: c.£1bnMarket position: 1

Primary markets: Mineral processingAbrasive fluidsMiningChemical processing

Geographic sales:

UK 4%Europe 17%Americas 41%Mid East & Africa 12%Asia 8%Australasia 18%

Market sectors:

Minerals 64%General industrial 19%Power generation 8%Oil industry 6%Water & wastewater 3%


Weir Clear Liquid solutions are at the heart of high profile projects in the oil and gas, powergeneration, water and wastewater, hydrocarbonprocessing and general industrial sectors.

We aim to meet the needs of both majorengineering contractors and the ultimate end-user,with products known for their dependability,efficiency and ease of maintenance.

Meeting the technical challengeFrom downhole pumps for oil exploration, to safetycritical cooling systems, our equipment operates inthe most demanding environments. In the oilindustry, continuity of operation is essential, whileenergy efficiency is a major issue to our watercustomers. Whatever the project priorities, we work closely with major contractors, consultingengineers, distributors and end-users, to developsolutions to the technical challenges they face.

World class designOur computer aided design (3D-CAD) systemsprovide a fast track testbed for designs and rapid

product configuration. We can optimise the solutionfor any process using flow modelling and stressanalysis, simplifying designs and reducing lead times.

Our early work using these systems in 2002 hasresulted in cost and quality improvements of up to 40%.

Weir Clear Liquid design teams are seamlesslyintegrated with our manufacturing operations,customers and suppliers, offering full support to the primary project team.

Benchmarking quality & valueAll Clear Liquid products are benchmarked to worldclass standards. Using value analysis and valueengineering techniques, coupled to the world classNew Project Introduction process ensures ourproducts are delivered to meet customer demands.

With superior products backed by a substantialglobal support and service operation, we are in aposition to offer a more comprehensive service to awider range of sectors than any of our competitors.

Laurie WestDivisional ManagingDirector

First choice for innovative solutions

“The Clear Liquid Division has undergonefundamental change in 2002, building a solidfoundation to enable major opportunities to beexploited. The new management team blendsextensive industry knowledge with proven experts in developing and running world class businesses.Our new upgraded range of products is engineeredto the most demanding specification which exceedscost, quality and delivery expectations.”

Divisional Report

Main picture: circulatingwater pumps destined for Fairless Energy inPennsylvania undergoingmanufacture at Weir Pumps in Scotland

Small picture: divisionalresources available includefully accredited metallurgicallaboratories where futureleading edge products aretested and developed



• Disposal of Molded Products – non-core business.• Girdlestone (part of Warman acquisition) integrated

into Weir Pumps, Scotland and Ipswich closed.• Rubber Engineering in Salt Lake City restructured

and returned to profit.• New senior management team installed at

Weir Pumps, Scotland.• The Weir Production System Lean training

programme developed by Weir Pumps personnel and rolled out Group-wide.

• Lean initiatives have produced divisionalimprovements of 37% on inventory turns and a 55% improvement in on-time delivery.

• Major investment in 3D-CAD. Seven new products developed in six months, against a previous time of four years.

• Divisional purchasing team installed.

Facts and figures:Market share: c.2.5%Sales: c.£184mNo. of people: 2,000Market size: c.£7.5bnMarket position: 3,4 or 5

in sectors inwhich we operate

Primary markets: Water & wastewater Oil & gasPetrochemicalPower generationGeneral industrial

Geographic sales:


Market sectors:

Water & wastewater 28%Oil 27%General industrial 19%Power generation 12%Minerals 12%Naval & marine 2%


As a leader in critical service and isolationapplications, we offer a portfolio of products thatsupport global best practice in power generationand oil and gas safety.

Weir products include market leading valves fornuclear and subsea applications and we have a 15%share of our niche markets, world-wide.

Whole project, whole process solutionsWe have developed a unique configuration system,designed for use in collaboration with customers tooptimise value and performance. By packaging acomplete range of high quality engineeredequipment, we deliver the end-to-end system thatoffers the best protection to our customers’ process.

Safety & reliabilityReliability is essential in the areas where we operate,whether we are providing critical pressure controlvalves for subsea oil exploration, or designing asafety valve system for a nuclear power plant.

The design and durability of our products reducesdowntime, keeping the routine replacement ofparts to a minimum. We are committed tomaintaining the high standards set by our productsthroughout their lifespan. We provide a dedicatedservice resource to monitor and maintain ourinstalled equipment and to identify opportunitiesfor on-going process enhancement. This iscombined with tailored maintenance, repair andoperational back up.

Innovation in products & materialsWe have a strong portfolio of intellectual propertyrelating to both products and materials. Ourproduct development activities are concentrated inglobal Centres of Excellence in Europe, the UK andthe United States. The advances made in these’hothouse’ environments are rapidly deployed tomeet the changing needs of customers worldwide.

Tony MorganDivisional ManagingDirector

First choice for process protection

“With the secure foundation we have built in 2002 wenow have confidence to achieve our objectives for 2003and deliver sustainable benefits both to our customersand shareholders. We have strengthened our globalposition through branding and further rationalisation of product and market sectors whilst continuing todevelop best in class manufacturing units in support of our drive to become market leaders.”

Divisional Report


• New management and downsizing at Weir Valves & Controls UK.

• Disposal of non-profitable actuator business in France.

• Transfer of valve service operations to Services Division.

• Product rationalisation and investment in new portfolio.

• Investment in new product development with the launch of two new valve products.

• Taking existing products to new markets through introducing French nuclear product to the United States.

• Embracing Lean techniques leading to majorreductions in inventory (25% improvement).

• 15% improvement in working capital from 2001.• Significant reduction in the fixed overhead base

reducing the number of employees by 21%.


Facts and figures:Market share: c.5%Sales: c.£69mNo. of people: 700Market size: c.£1.5bnMarket position: 15% share

of niche markets

Primary markets: Power generationOil & gasGeneral industrial

Geographic sales:


Market sectors:

Power generation 57%General industrial 22%Oil industry 19%Naval & marine 1%Water & wastewater 1%

Main picture: the controlroom at Heysham 2 powerstation in North WestEngland, where Weir Valves & Controls provide year roundmaintenance of safety criticalequipment

Small picture: primary safety and isolation valves at BP’s petrochemical plant at Grangemouth, Scotland are supplied and maintainedby Weir Valves & Controls

Peter SymeDivisional ManagingDirector


Our core capability is the effective maintenance,repair and upgrading of rotating machinery andassociated equipment. We provide comprehensiveengineering support for a wide range of productsfrom all the major original equipmentmanufacturers, under flexible service agreementstailored to customer needs.

Consolidated maintenanceWe overhaul pumps, gas compressors, steam andwater turbines, as well as motors, valves andinstrumentation equipment. As a one stop shop forplant maintenance, we help our customers improveproductivity, reducing the disruption caused bybreakdowns and essential maintenance.

Increasingly, customers require the integrateddelivery of engineering support across multiplesites. In developing a consolidated service we haveevolved techniques for planned and preventativemaintenance strategies and inventory controlsystems, that also benefit single site contracts.

Engineering excellenceWeir Services has a strong network of local servicecentres. Our customers have access to the bestpeople, experts in highly specialist technical fields,who provide laboratory and on-site analysis, advancedresearch and design and a sophisticated range ofmetallurgical and electronic component testing.

Asset managementWeir Services has developed a sophisticated processanalysis system, INQUISITOR™. This valuable assetmanagement tool accurately identifies under-performing equipment. Together with our ability to introduce advanced and patented materials and technologies into existing products, this givesus the opportunity to enhance ageing, failing orunder-efficient processes, to extend plant lifespanand capacity.

By aligning our own objectives with those of ourcustomers, even to the extent of transferring on-sitetechnical staff into our own team, Weir Services isforming long-term, mutually beneficial partnerships.

First choice for service innovation

“Weir Services is a leading provider of equipmentmaintenance, process support and assetmanagement to customers in conventional powergeneration and renewable energy, oil and gas,water, marine and general industry. Our reputationis based on excellent engineering, applied to therepair, overhaul and upgrade of a wide range ofmechanical and electrical equipment.”

Divisional Report

Main picture: the inspectionof the spiral casing insideGaur hydro power stationduring its current upgrade by Weir Services

Small picture: Gaur hydroelectric power station in theScottish Highlands, one ofScottish & Southern Energy’sfacilities being upgraded


• At year end Weir Engineering Pty Australia Ltdincorporated into the Services Division as WeirServices, Australia. Considerable potential forservice growth in the region and south east Asia.

• New regional organisation with managingdirectors for Asia-Pacific, Americas and thetraditional services area of UK, Europe, MiddleEast and Africa.

• Excellent performances in the UK, Abu Dhabi and Dubai. New service centre opened in Kuwait.

• Robust cost reduction and restructuring of theCanadian sales and distribution operation resultedin almost 50% improvement in profits.

• Dominant position in refurbishment market forhydroplant in the UK. Work secured at six sites in Scotland and Wales for three energy utilities.

• Plans finalised to establish four greenfield servicefacilities in the United States during 2003.

• Sale of the turbo-drilling operations of Neyrfor-Weir.


Facts and figures:Market share: c.4%Sales: c.£160mNo. of people: 1800Market size: c.£4.2bnMarket position: UK no.1

Primary markets: Rotating equipment repair Sales & distribution Spares Asset management Hydro electric services

Geographic sales:

UK 41%Europe 2%Americas 47%Mid East & Africa 6%Asia 4%

Market sectors:

Oil industry 27%General industrial 25%Power generation 22%Water & wastewater 14%Naval & marine 7%Minerals 5%


Whole project solutionsWhether taking sole responsibility for the delivery ofa turnkey project, or working in support of a largerprogramme of work, Weir Techna works from theearliest stages to develop the most appropriatesolution for the customer including commissioningto through-life support, operation and management.

Desalination & water treatmentWeir Westgarth has been supplying and operatingdesalination plants for more than 100 years. As market leaders with Weir Entropie they are the only companies in the world able to offer all desalination technologies.

Weir Envig specialises in industrial water treatmentusing technology aimed at protecting theenvironment. Together with Weir Westgarth’soffshore sulphate removal applications, they havethe technology to treat complex wastewater issues.

Weir Entropie is a world leader in the design, supplyand installation of environmentally friendly heatingand cooling facilities. Recent developments in

turbine inlet air cooling systems increase gas turbineoutput by up to 30%.

Weir LGE Process is a market leader in both marineand onshore liquid gas storage and handling. Thecompany has designed and supplied over 150 cargoplants for a wide range of ships including some ofthe largest refrigerated vessels trading today.

Defence & nuclearLeaders in the defence industry since the early1970s, Weir Strachan & Henshaw is the designauthority and major supplier to the UK Ministry of Defence for all submarine weapon handling and discharge systems. Weapons handling expertise is also supplied to naval clients in Canada, Australia,the United States, Europe and Asia.

Weir Strachan & Henshaw has over 50 yearsexperience in the supply of high integrity handlingsystems for the transfer of both nuclear fuel andcontaminated waste. Its customers include BNFL,British Energy and UKAEA.

Paul CapellPeter SymeDivisional ManagingDirectors

First choice for major projects

“Weir Techna is the engineering design andsystems integration division of the Weir Group.Its companies are involved at every stage in thedelivery of high capital, technically complexprojects in desalination, water treatment,defence and nuclear markets. Customers rangefrom national governments and internationalconsortia to smaller industrial businesses.”

Divisional Report

Main picture: The Jebel Ali ‘G’desalination plant in Dubai,designed and built by Weir Westgarth, providing 60 million gallons of drinkingwater a day for the people of Dubai

Small picture: the ReactorAccess House used forrefuelling operations atDevonport Dockyard,designed and built by Weir Strachan & Henshaw


Desalination & water treatment• Weir Entropie completed a 44000m3/day

desalination plant for an aluminium processingfacility in Bahrain – the largest of its typecommissioned by Entropie to date.

• Weir LGE Process delivered four liquid gas carriers for Asia.

• Weir Westgarth designed and delivered anoffshore water treatment facility for Iran.

Defence & nuclear• First class performance on the Astute submarine

contract has been recognised by BAE SYSTEMSSupply Chain Excellence Award.

• Innovative use of technical computing capabilityhas produced an automated munitions handlingdesign for the Future Carrier project.

• Weir Strachan & Henshaw is a key participant in the UK’s first nuclear decommissioningprogramme at Dounreay.


Facts and figures:Market share: c.4%Sales: c.£105mNo. of people: 740Market size: c.£4.1bn

Primary markets: DesalinationWater treatmentGas storage/handlingDefenceNuclear

Geographic sales:


Market sectors:

Naval & marine 39%Water & wastewater 23%Power generation 16%General industrial 10%Oil industry 9%Minerals 3%


Board of Directors


Sir Robert SmithChairman (1)

Aged 58, was appointed Chairman in July 2002. He is a BBC Governor, a member of the Board of Trustees of The British Council and a member of theFinancial Reporting Council. He is also anon-executive director of Network Rail, Railtrack plc and Aegon UK plc. He wasformerly CEO of Morgan Grenfell AssetManagement and a member of theFinancial Services Authority, as well asChairman of Stakis plc and non-executivedirector of several listed companies.

M W SelwayChief Executive (1)

Aged 43, was appointed chief executive in June 2001. Before his appointment hewas a director of Britax International plcand managing director of its automotivecomponents division. Following thepurchase of that division by SchefenackerInternational AG in 2000, he became adirector of that company and executivedirector of Schefenacker Vision Systems.

I M BoydFinance Director

Aged 58, is a chartered accountant and a graduate of the London BusinessSchool. He joined the Group in 1968, was appointed finance controller in 1980 and finance director in March 1981. He is a non-executive director of Glasgow Income Trust PLC.

A W F MitchelsonDirector and Secretary

Aged 53, is a solicitor and joined theGroup in March 2000 as secretary. He wasappointed a director in December 2001.

C A ClarkeNon-executive Director (2), (3)

Aged 57, was appointed a non-executivedirector in October 1999. A graduate ofCambridge University and of the LondonBusiness School, he was formerly a directorof Samuel Montagu & Co Limited andHSBC Investment Banking. He is a memberof the Competition Commission.

J M Cox Non-executive Director (2), (3)

Aged 55, was appointed a non-executivedirector in February 2000. A graduate ofCambridge University, he was formerly adirector and head of UK Equity Strategy ofSchroder Investment Management Limitedand prior to that an assistant director ofPrudential Portfolio Managers. He is a non-executive director of Invesco English andInternational Trust plc.

M B Dearden (not pictured)Non-executive Director

Aged 60, was appointed a non-executivedirector in February 2003. A graduate of Oxford University, he was formerly adirector of Burmah Castrol plc. He is a non-executive director of Johnson Matthey plcand Travis Perkins plc.

Dr C E Fay CBENon-executive Director (2), (3)

Aged 57, was appointed a non-executivedirector in February 2001. A charteredengineer, he was formerly chairman andchief executive of Shell UK Limited. He is chairman of the Government’sAdvisory Committee on Business and the Environment. He is also chairman ofExpro International Group and TuscanEnergy Group Limited, deputy chairman of Stena International BV and a non-executive director of Anglo American plcand BAA plc.

D B NewlandsNon-executive Director (2), (3)

Aged 56, was appointed a non-executivedirector in July 1997. He is a charteredaccountant and was formerly financedirector of The General Electric Companyplc. He is chairman of Tomkins PLC and a non-executive director of Standard Life Assurance Company and several other companies.

Professor J P Percy CBENon-executive Director (1), (2), (3)

Aged 60, was appointed a non-executive director in September 1996. He is thesenior non-executive director. Formerlychairman of the Accounts Commission and Audit Scotland and president of theInstitute of Chartered Accountants ofScotland. He is chairman of Kiln plc andCompanies House; and a non-executivedirector of Cala Group Limited and Ricardo plc.

(1) Member of the Nominations Committee(2) Member of the Audit Committee(3) Member of the Bonus and Remuneration Committee

Left to right:C A ClarkeProf J P Percy CBEM W SelwayDr C E Fay CBED B Newlands

Left to right:A W F MitchelsonJ M CoxI M BoydSir Robert Smith

Financial Calendar

Ex-dividend Date for Final Dividend30th April 2003

Record Date for Final Dividend*2nd May 2003

Annual General Meeting15th May 2003

Final Dividend Paid2nd June 2003

*shareholders on the register at this date will receive the dividend

Designed by Design Motive

Printed by Royle Corporate Print

1

The Weir Group PLC Cathcart, Glasgow G44 4EX, Scotland

Telephone: +44 (0)141 637 7111Facsimile: +44 (0)141 637 2221

Email: [email protected]: www.weir.co.uk

ExcellentEngineeringSolutions

Directors’ Report


The directors submit their 109th annual report, together with the audited statement of accounts, for the 52 weeks ended 27 December 2002.

Results

£’000 £’000

The profit for the 52 weeks ended 27 December 2002 after charging taxation was 50,156Dividends on ordinary shares:

Interim paid on 8 November 2002 6,635Proposed final 17,865 24,500

Transfer to reserves 25,656

Subject to the approval of members at the forthcoming annualgeneral meeting, the proposed final dividend of 8.75p per ordinaryshare will be paid on 2 June 2003 to shareholders whose namesare on the company’s register at close of business on 2 May 2003.

Principal activities, business review and futuredevelopments A review of the year’s operations and future developments iscontained in the Chairman’s Statement, Chief Executive’s Review,the Operating & Financial Review and the Divisional Reports onpages 4 to 23.

The principal companies of the Group and their activities as at 27 December 2002 are set out on page 70.

Other reportsThe annual report this year includes a separate CorporateGovernance Statement, which is on pages 27 and 28, the AuditCommittee Report on page 29, the Report of the Bonus andRemuneration Committee on pages 30 to 35 and the CorporateSocial Responsibility Report on pages 36 and 37.

DirectorsThe names of the current directors of the company are set out on pages 24 and 25. Sir Robert Smith was appointed to the Board on 6 February 2002 and became chairman on 1 July 2002. Sir Ronald Garrick retired from the Board on 30 June 2002. M B Dearden was appointed to the Board on 17 February 2003.

The directors who retire this year by rotation are C A Clarke, Dr C E Fay, D B Newlands and Prof J P Percy. In accordance with article 97 of the Articles of Association of the company, M B Dearden also retires at the forthcoming general meeting,and, being eligible, offers himself for election. C A Clarke and Prof J P Percy offer themselves for re-election.

D B Newlands and Dr C E Fay, who have served on the Boardsince 1997 and 2001 respectively, have decided not to seek re-election at the annual general meeting in May 2003.

C A Clarke, M B Dearden and Prof J P Percy do not have servicecontracts with the company or any of its subsidiaries.

Share capitalDuring the year options were exercised by participants in thecompany’s share option schemes as a consequence of which1,773,627 ordinary shares of 12.5p each were allotted and issued.Of that total, 828,611 shares were allotted to exercising employeesat prices ranging from 197.5p to 285.4p per share, while thebalance of 945,016 shares was allotted to The Weir Group PLCEmployee Share Ownership Trust for subsequent transfer to therelevant exercising employees. The prices paid by the Trust forthese shares ranged from 197.5p to 260p per share, the relevantprice in each case being the market price (as derived from theLondon Stock Exchange Daily Official List) on the business dayimmediately preceding the date on which the Trust applied for therelevant shares. The market price of the company’s shares at closeof business on 27 December 2002 was 210p and the close ofbusiness range during the year was 173.5p to 318p.

Details of the options outstanding under each of the company’sshare option schemes at the end of the year are set out in note 19 to the accounts.

Substantial shareholdersThe company has been notified of the following interestsrepresenting 3% or more of the issued ordinary share capital ofthe company as at 19 March 2003: –

Number Percentageof shares Holding

AXA S.A. 10,015,174 4.91%Standard Life Investments Limited 7,206,194 3.53%Prudential Group of Companies 6,488,902 3.17%Legal & General Investment Management Limited 6,477,680 3.17%

Annual general meeting The annual general meeting will be held on 15 May 2003. Aseparate letter has been sent to all shareholders containing theNotice of Meeting and the resolutions to be proposed.

Auditors A resolution to re-appoint Ernst & Young LLP as the company’sauditors will be put to the forthcoming annual general meeting.

By order of the BoardGlasgow G44 4EX Alan W F Mitchelson19 March 2003 Secretary


Corporate Governance Statement

ComplianceThe company remains committed to high standards of corporategovernance and manages the affairs of the company in accordancewith the Principles of Good Governance and Code of Best Practice(the ‘Combined Code’) issued by the Financial Services Authority as an appendix to its Listing Rules. During the 52 weeks ended 27 December 2002, the company complied with the detailedprovisions of the Combined Code with the exception that twodirectors had service contracts which were subject to two years’notice. This position has now changed and details are set out in the Report of the Bonus and Remuneration Committee.

Proposed appointments to the Board are considered by the Boardupon a recommendation by the Nominations Committee followinginterview of proposed candidates by the Nominations Committee.Directors appointed to the Board other than at an annual generalmeeting of the company are required to retire at the followingannual general meeting when they may offer themselves forelection. One third of the remaining members of the Board (or, where that number is not a whole number, the nearest lowerwhole number) presently are required to retire by rotation subjectto all directors requiring to submit themselves for re-election atleast once every three years.

The Board The Board is headed by a chairman and comprises the Group chiefexecutive, finance director, one further executive director and sixnon-executive directors. The Board meets regularly throughout theyear with ad hoc meetings as necessary. Meetings are held at thehead office in Glasgow as well as in London at the time of thecompany’s annual and interim announcements and at operatinglocations. There is an agreed list of matters which require to beauthorised by the Board, such as the approval of the Groupstrategic plan, Group budget and risk management strategy. Major acquisitions and disposals, as well as major capital spend, are authorised by the Board and are also subsequently monitoredby the Board after authorisation. The Board also approves the issueof final and interim accounts.

There is an agreed procedure for directors to take independentlegal advice. The company secretary is responsible for ensuringthat Board procedures are followed and all directors have directaccess to the company secretary. All directors bring their ownindependent judgement to all major matters affecting the Groupand the views of executive directors are not limited to thoseoperational or functional areas for which directors have primeresponsibility. Board papers are sent to directors in sufficient timebefore Board meetings and any further back-up papers andinformation are readily available to all directors on request to the company secretary. The chairman ensures that non-executivedirectors are properly briefed on any issue arising at Boardmeetings and non-executive directors have access to the chairman at any time.

The roles of chairman and chief executive are separated. Thechairman’s primary role is to ensure that the Board is effective in its task of setting and implementing the company’s direction.The chief executive is responsible for management of the business,particularly the challenges of integrating new acquisitions anddeveloping the appropriate organisational structure for aninternational business. The chief executive chairs the GroupOperations Executive Committee.

The non-executive directors are independent of management.None of the non-executive directors has any material business or other relationship with the company. Each member of the Board has considerable experience at senior level in othercompanies, which allows for well informed and broadly baseddebate. Prof J P Percy has been designated the senior non-executive director to whom any concerns can be conveyed.

Group Operations Executive CommitteeThe Group Operations Executive Committee is responsible forensuring that each of the Group’s businesses are managedeffectively and that the operational objectives of the Group asapproved by the Board are achieved. Its role includes thepreparation of the Group budget for approval by the Board,management of business performance to achieve the Groupbudget, establishing and maintaining reporting systems providingclear and consistent information on all aspects of businessperformance, managing and minimising corporate risk andensuring that the necessary mechanisms are in place to achieveeffective inter-division co-ordination, for example in purchasing,branding and career development planning. It also approves majoritems of capital expenditure within limits authorised by the Board.The Group Operations Executive Committee meets each month. Itsmembership comprises the chief executive, finance director,company secretary and the five divisional managing directors.

Nominations CommitteeAppointments to the Board are approved by the Board as a whole.However, it is the role of the Nominations Committee to makerecommendations to the Board in respect of the appointment of new executive or non-executive directors. The process by whichthe Nominations Committee may bring candidates to the Boardhas been agreed by the Board. Members of the NominationsCommittee are Sir Robert Smith as chairman, Prof J P Percy and M W Selway. The company secretary acts as secretary to theNominations Committee.

Other CommitteesThe Board also has an Audit Committee and a Bonus andRemuneration Committee whose work is explained in more detailon pages 29 to 35.

ShareholdersThe company has a regular dialogue with institutional shareholdersthroughout the year, other than during close periods. The companyalso encourages communication with private shareholdersthroughout the year and welcomes their participation at shareholdermeetings. In addition to the chairman’s statement at the annualgeneral meeting, a trading presentation to shareholders is given anddetails of the company’s trading activities are on display at theannual general meeting. The Board members attend the annualgeneral meeting and, in particular, the chairmen of the Audit,Bonus and Remuneration and Nominations Committees are availableto answer questions.

Notice of the annual general meeting is sent to shareholders at least20 working days before the meeting and details of the proxy votesfor and against each resolution are announced after the result ofthe hand votes.


CommunicationsThe Board considers that the annual report and accounts andinterim statements present a balanced and understandableassessment of the Group’s performance and prospects. In additionto information which any company is under a legal or regulatoryrequirement to publish, the Group frequently publicises otherbusiness developments by announcement to the national orspecialised press or in its own newspapers and bulletins which have wide circulation.

The company’s website at www.weir.co.uk provides additionalcompany information, is regularly updated and includes thepresentations to shareholders given at the announcements of the final and interim results.

Internal controlResponsibilityThroughout 2002 and up until the date of this report, the Grouphas continued to operate procedures which were established toenable the Group to implement in full the Turnbull Committee’sFinal Guidance on Internal Control issued in 1999.

Risk managementAs part of these procedures, which are designed to serve asongoing processes for identifying, evaluating and managing the significant risks faced by Group companies, senior executives at each of the Group operating companies and business unitsprepared Risk and Control frameworks for their respectivebusinesses. Those frameworks were then considered and approvedby the chief executive, the finance director and the GroupOperations Executive Committee. In addition, a Group Risk andControl Framework was prepared by the Group OperationsExecutive Committee taking account of the significant risksidentified by the individual units together with other Group-widerisks. The Group Risk and Control Framework has been consideredand adopted by the Board which is responsible for risk and themanagement of risk. It should however be noted that the systemof internal control can only manage, rather than eliminate, the riskof failure to achieve business objectives and provide reasonable,but not absolute, assurance against material mis-statement or loss.

The managing director, or his equivalent in overseas companies,and the principal finance officer of each operating company assess the effectiveness of the internal control environment andprocedures in their units. They are responsible for the operation of key internal controls. A peer review process monitors andevaluates the system of internal control. The process covers theareas of most significant risk to the Group and the annual reviewprogramme is developed from feedback from both the externalaudit risk assessment planning process and the internal riskassessment priorities. The results of these reviews are reported to the Audit Committee. The Audit Committee considers anddetermines relevant action in respect of any control issues raised by the external auditors.

Each year the operating companies prepare a report within the Risk and Control Framework identifying the relative probability andseverity of the risks identified and on the process for managing andmitigating them and the means by which management might beassured that the processes are effective. These reports are reviewedby the Group Operations Executive Committee and the chief

executive reports to the Board the control issues arising from these processes.

Also on an ongoing basis any issues or incidents are considered at therespective operating company’s board meetings. These are reviewedby the relevant divisional managing director with significant orrecurring matters being considered by the Group OperationsExecutive Committee and, where appropriate, by the Board.

The Board has monitored the effectiveness of the Group’s systemof internal control during the year. In particular, the Board hasreviewed the Group Risk and Control Framework in the light of experience following its introduction and has made suchamendments as it thought appropriate.

In addition to the Risk and Control Frameworks, other procedureswhich are fundamental to the Group’s system of internal controlare as follows:

– Control environment There is a clearly defined organisational structure within whichindividual responsibilities are identified and can be monitored.Business units operate to well understood procedures and arerequired to comply with them.

– Main control proceduresThe Group has identified a number of key areas which aresubject to regular reporting to the Board. These controlsinclude procedures for seeking and obtaining approval formajor transactions.

– Group-wide standardsThere is, for universal application throughout the Group, a Group standards manual which sets out Group policies with which all Group companies are required to comply.Copies of that manual have been circulated to all Groupoperating companies, the managing directors of which areresponsible for ensuring that their companies observe andimplement the policies and procedures set out in the manual.

– Information systemsThere is a comprehensive budgeting system in place with an annual budget approved by the Board. Managementinformation systems provide directors with relevant and timelyreports that identify significant deviations from approved plansand include regular re-forecasts for the year.

The Group’s internal control procedures described in this sectionhave not been extended to cover its interests in joint ventures andassociates. The Group has Board representation on each of its jointventure and associate companies where separate systems ofinternal control have been adopted.

Going concernWith regard to the basis on which the accounts of the Group have been prepared, the directors state that, after making all dueenquiries, they have a reasonable expectation that the Group hasadequate resources to continue in operational existence for theforeseeable future. Therefore, in preparing the accounts theycontinue to adopt the going concern basis.

Corporate Governance Statement (Continued)

Audit Committee Report

The Audit Committee is charged with responsibility to the Boardfor satisfying itself, on behalf of the Board as a whole, that the financial affairs of the Group are conducted with openness,integrity and accountability, and in accordance with such existingstatutory and regulatory provisions and codes as are applicable tothe Group and to so report on these matters to the Board.

Its duties are to:

• Consider the appointment, resignation or dismissal of theauditors and the level of audit fee;

• Discuss with the auditors the nature and scope of the audit;

• Review the draft interim and annual financial statements beforesubmission to the Board for approval, focusing particularly onany changes in accounting policies and practices, majorjudgmental areas, significant adjustments resulting from theaudit, the going concern assumption, compliance withaccounting standards and current best practice and compliancewith the Listing Rules of the Financial Services Authority;

• Discuss any problems and reservations arising from the annualaudit and any matters the auditors may wish to raise;

• Discuss with the auditors the Group’s system of internal financialcontrols and any auditors’ recommendations for improvement;

• Consider the findings of internal investigations andmanagement’s response.

The chairman of the Committee is Prof J P Percy. The members of the Committee are C A Clarke, J M Cox, Dr C E Fay and D B Newlands. The secretary to the Committee is A W FMitchelson. All non-executive directors, apart from the Groupchairman, are members of the Committee.

Prof J P Percy, formerly chairman of The Accounts Commissionand Audit Scotland and president of the Institute of CharteredAccountants of Scotland, is presently chairman of Kiln plc andCompanies House. D B Newlands is a chartered accountant and former finance director of General Electric Company plc. Dr C E Fay has a general management and operationsbackground which includes wide health, safety and environmentexperience. C A Clarke and J M Cox both have considerableknowledge of financial services and therefore an appreciation of regulatory issues and risk factors.

The Committee has the ability to call on the Group’s staff to assist intheir work and have access to independent advice if they so choose.The chairman of the Committee receives additional remunerationfor his duties which is set out on page 33.

The Committee meets each March and August, and at othertimes as appropriate. During the March meeting the Committeeundertakes a full review of the audit and meets the Group’s auditors.There were three meetings in 2002.

In the course of 2002, the Committee discussed the auditmethodology and procedures which were performed throughoutthe Group, the various accounting and audit issues, the auditors’fees, accounting policies, partner rotation, audit strategy andcorporate governance.

In compliance with the Turnbull Report a review of the function of internal auditor was carried out during 2002 and the currentmethod of peer group review considered adequate and effective.It was decided to retain this process during 2003.

The Committee has introduced a policy on the appointment androle of the auditors. This includes guidelines on their appointmentwhich is subject to review at least every five years and on their on-going work to ensure that the independence of the Group’sauditors is not threatened, particularly by the provision of non-audit services. Prior approval of the Audit Committee is requiredwhere the cost of such services is in excess of £75,000.

The day-to-day maintenance of the Committee’s policy isdelegated to the Group Finance Director who in turn monitors the business units to ensure that all engagements fall within theCommittee’s guidelines.

During 2002, fees payable to Ernst & Young in respect of taxationadvice of £1.1m, audit and assurance services of £0.7m andconsultancy work of £0.2m were approved by the Committee.


Report of the Bonus & Remuneration Committee


IntroductionAlthough recent legislation requiring companies to prepare adirectors’ remuneration report and put this report to its annualgeneral meeting only applies for companies whose financial yearsend on or after 31 December 2002, it has been decided tocomply in respect of this report and a resolution is being put tothe forthcoming annual general meeting.

Committee membership The Bonus and Remuneration Committee comprises C A Clarke, J M Cox, Dr C E Fay, D B Newlands and Prof J P Percy. J M Coxwas appointed chairman of the Committee on 9 December 2002,taking over from D B Newlands. The Committee consistsexclusively of non-executive directors who are independent ofmanagement and free from any business or other relationship whichcould materially interfere with the exercise of their independentjudgement. No member of the Committee has any personalfinancial interest, other than as a shareholder, in the mattersdecided by the Committee.

The remuneration of the non-executive directors of the company isdetermined by the Board, the non-executive directors taking no partin that determination. The remuneration of the chairman of theBoard is determined by the Board on the recommendation of theCommittee, the chairman taking no part in that determination.

The Committee receives advice from independent remunerationconsultants on all aspects of executive remuneration. During 2002Ernst & Young advised the Committee that the company had met the performance criteria for the executive share option scheme.Ernst & Young provide audit, tax and other consultancy services to the Group.

On 4 February 2003, the Committee appointed New Bridge Street Consultants to provide external advice in formulatingremuneration policy and its implementation. This is the only workcarried out by New Bridge Street Consultants on behalf of theGroup. In carrying out its tasks the Committee consults with theGroup chairman and the chief executive as appropriate.

Committee responsibilities The responsibilities of the Committee are as follows:

• to determine the policy on the remuneration and performanceof executive directors of the company;

• to determine the conditions of employment, levels of salary andpension arrangements of executive directors of the company;

• to set target levels and operating conditions of any bonusschemes applicable to executive directors of the company;

• to approve the proposed terms of any Group share optionscheme and to grant options thereunder; and

• to recommend to the Board the terms of employment andremuneration of the chairman of the Board.

The Committee met four times in 2002.

Executive directors’ remuneration policy The objective of the company’s remuneration policy is to attract,motivate and retain executive directors with the necessary abilitiesto manage and develop the Group’s activities successfully to thebenefit of shareholders.

Accordingly, the Committee sets remuneration packages for theexecutive directors to reflect the size and complexity of the businessand individual responsibilities. It also takes into consideration theremuneration practices adopted by other companies of similar sizeand international spread of operations.

Executive directors’ remuneration comprises the following:

a) a basic salary, which is set by the Committee for eachexecutive director by reference to individual and companyperformance through a formal appraisal system. Whensetting base salaries the Committee’s policy is that theyshould be competitive having regard to companies of asimilar size and industry practice;

b) an annual incentive bonus. Bonus payments are intended toreflect the achievement of agreed business objectives andpositive contribution to the stretching performance of theGroup. The targets used are based primarily on normalisedpre-tax profits and are set at the beginning of the financialyear. Bonus payable for on-target performance for the years2002 and 2003 is 20% of salary with a maximum of 60%. The bonuses are non-contractual and non-pensionable. The Committee review the bonuses on an annual basis;

c) participation in the executive share option scheme details of which are set out on the following pages;

d) participation in the company’s pension plan (M W Selway isnot a member), details of which are set out on the followingpages; and

e) other benefits-in-kind, which are the provision of a car andfuel or car allowance, participation in a Group health carescheme, travel allowance, unapproved death in serviceinsurance and scholarship awards from The Weir GroupEducational Trust.

For all senior executives, the Group policy is to provide a significant part of their total potential reward throughperformance based incentive plans. The bonus for the Group’sexecutives has been structured so that targets reflect Group and divisional performance.

The Committee believes that the level and provision of benefits-in-kind is consistent with that provided by other comparablecompanies. Executive directors receive an additional non-pensionable cash payment should they elect to have use of a car of lesser engine size than that to which their positionentitles them.


With the exception of M W Selway, executive directors are membersof the company’s 1972 pension and life assurance plan for seniorexecutives in terms of which a member (subject to Inland Revenuerules) can become entitled, after 20 years’ service with the Group,to a maximum pension equal to two thirds of final basic salarypayable on normal retirement date which is 60 years of age. The plan provides life assurance cover of five times pensionablesalary for death in service. It also provides for a surviving spouse’spension of one half of the member’s pension and, in certaincircumstances, for a dependent child’s pension until the childattains the age of 18 years (or 25 years if in full time furthereducation). Pensions in payment and deferred pensions increaseby an amount equal to retail price inflation up to 5% per annum.

The plan is a defined benefit contributory plan with the memberscontributing 6% of basic salary (rising to 8% in April 2003), thebalance of the funding of the plan being met by the companyhaving taken account of the funding recommendations of theplan’s independent actuary. Where life assurance benefits under the plan are restricted in respect of any executive director byreason of the statutory capping limit of pensionable salary(currently £97,200), the company pays for such additional lifecover as is necessary to make good the shortfall.

Details of the remuneration of each of the directors of the company,the accrued pension benefits of the executive directors and detailsof the share options of the executive directors are set out intabular form on pages 33 to 35.

Share option schemes The company operates a discretionary executive share optionscheme (“the Executive Scheme”) under which options may be granted each year to those senior executives of the Groupwhose skills and experience the Committee believes to be mostcritical to the success of the Group. The Executive Schemeoperates world-wide. In addition, the company operates a SavingsRelated Share Option Scheme in the UK, in which the executivedirectors are eligible to participate and which is not subject toperformance criteria.

Under the rules of the Executive Scheme, share options may be granted up to a maximum value of four times a participant’searnings although most grants are in the range of 50% to 75% of basic salary. Options are granted at the mid market price of a share at the date of grant. The right to exercise an ExecutiveScheme option is subject to performance conditions asdetermined by the Committee at the date of grant.

The performance criteria in 2002 were for the growth in thecompany’s normalised earnings per share over a three year period,to either exceed by nine per cent the growth in the retail priceindex of the UK over that three year period, or exceed the weightedaverage growth during that three year period of the normalisedearnings per share of those companies in the Engineering &Machinery sector as categorised by the London Stock Exchange.This is re-tested every year from the third anniversary of the grantof the option to the date the option lapses. The performancecriteria in 2003 will remain unchanged from 2002 as theCommittee feel the criteria are sufficiently stretching and relevant to the company’s financial goals at this time.

The calculation for 2002 was carried out by Ernst & Young frompublicly available information from those companies in theEngineering & Machinery sector (as published by the LondonStock Exchange) at both the start and the end of the period. The weighting used is market capitalisation. Normalised earningsper share is interpreted as basic earnings per share excludingexceptional items and amortisation of goodwill. It is theCommittee’s intention to have this year's calculation carried outby New Bridge Street Consultants.

The existing Executive Scheme is due to expire in 2004 and theCommittee with the advice of New Bridge Street Consultants isreviewing the Group’s long term incentives. At this stage it is tooearly to predict the outcome of this review.

Directors’ service contracts To recruit the best executives the Committee has in the past and may in the future, agree contractual notice periods whichinitially exceed 12 months.

From 6 January 2003, the contractual notice period for both M W Selway and I M Boyd has been reduced to 12 months in thecase of notice given by the company, with a minimum period ofnotice of six months when given by the individual. This change totheir contracts was effected voluntarily and without compensation.

A W F Mitchelson also has a service contract with the company that provides for a minimum period of notice of six months by A W F Mitchelson and one year by the company.

Were the company to terminate an executive director’s servicecontract other than in accordance with its terms, the Committee,when determining what compensation, if any, should properly be paid by the company to the departing director, would give full consideration to the obligation of that director to mitigate any loss which he may suffer as a result of the termination of his contract.

Report of the Bonus & Remuneration Committee (Continued)


In the event of a change of status of the company, each of M W Selway, I M Boyd and A W F Mitchelson has the option, for a period of six months, of giving the company three months’notice of termination of his service contract and, in that event, the executive director will become entitled to a severancepayment of 12 months’ gross basic salary together with enhancedpension benefits. If the director’s 60th birthday (being his normalretirement date) falls within the 12 month period followingtermination, the severance entitlement will be reduced to reflectthe number of months to the director’s normal retirement date.

The chairman and all the non-executive directors have letters of appointment, do not have any contractual entitlement to a termination payment and can be removed in accordance with the company’s Articles of Association. They are not members ofthe company’s pension schemes and do not participate in any of the bonus, option or incentive schemes.

Details of the service contracts are set out in the table below.

Directors’ Service Contracts

Director Effective Date of Contract Unexpired term/Notice period

I M Boyd 6 January 2003 12 monthsA W F Mitchelson 6 January 2003 12 monthsM W Selway 6 January 2003 12 months

The executive directors are permitted with Board agreement to take up appointments with other companies provided thatthere is no conflict of interest and that the time spent would not impinge on their work. I M Boyd is a director of GlasgowIncome Trust PLC.

Performance graphThe graph below compares the company’s total shareholderreturn performance over a five year period against the FTSE All-Share Engineering & Machinery Sector Index. The Committeeconsiders that this is the most appropriate index for making such a comparison, as it is this sector which is used for comparisonpurposes for the executive share option scheme. The share priceat year end was 210p compared to 241.5p in 2001. The shareprice reached a high of 318p in May 2002 but continued todecline throughout the remainder of the year as a consequence of weaker markets.

31 Dec 1997

20

40

60

80

100

120

140

160

31 Dec 1998

31 Dec 1999

31 Dec 2000

31 Dec 2001

31 Dec 2002

Total Shareholder ReturnSource: Datastream

This graph shows the value, by the end of 2002, of £100 invested in Weir Group on 31 December 1997 compared with £100 invested in the FTSE All-Share Engineering & Machinery Sector Index.

Weir Group

FTSE All-Share Engineering & Machinery Sector Index


Directors’ remuneration #Salary Benefits Total Total& Fees Bonus £ 2002 2001

Notes £ £ (see note iv) £ £

Non-executive directors:

C A Clarke 25,750 – – 25,750 22,000 J M Cox i 30,015 – – 30,015 22,000 Dr C E Fay 25,750 – – 25,750 19,740 D B Newlands ii 30,500 – – 30,500 24,493 Professor J P Percy iii 30,500 – – 30,500 26,000 2001 retirees – – – – 18,017

142,515 – – 142,515 132,250

Chairman and Executive Directors:

Sir Robert Smith (appointed director 6.2.02 and chairman 1.7.02) 75,005 – 171 75,176 – Sir Ronald Garrick (retired 30.6.02) 56,094 – 3,311 59,405 282,894 I M Boyd 224,106 44,895 14,204 283,205 270,754 A W F Mitchelson 157,500 34,000 18,679 210,179 28,688 M W Selway 444,973 88,000 11,447 544,420 292,8682001 retirees – – – – 398,112

957,678 166,895 47,812 1,172,385 1,405,566

Previous year comparatives 1,162,796 176,054 66,716

(i) The fees for J M Cox include £4,265 for services as chairman of the two UK pension plan trustee companies up to his resignationfrom both on 27 December 2002.

(ii) The fees for D B Newlands include £4,750 for services as chairman of the Bonus and Remuneration Committee until 9 December2002 (2001: from 17 May 2001 £2,493).

(iii) The fees for Professor J P Percy include £4,750 for services as chairman of the Audit Committee (2001: £4,000).

(iv) Benefits include, as appropriate, a car and fuel or car allowance, participation in a Group health care scheme, travel allowance,unapproved death in service insurance and scholarship awards from The Weir Group Educational Trust.

Directors’ pension benefits #

The undernoted directors were members of a defined benefit scheme provided by the Group during the year. M W Selway is responsible for his own pension provision. Pension entitlements and corresponding transfer values were as follows during the year:

Accumulated Accumulated Increase in Transfer value Transfer value Transfer value Change intotal accrued total accrued accrued pension of the increase of accrued of accrued amount of the

pension at pension at during in accrued pension at pension at transfer valueName of Director notes year start year end the year pension year start year end over the year

Contributing members:

I M Boyd 1,2,3,4 133,025 141,652 6,079 95,176 2,008,717 2,249,094 226,991A W F Mitchelson 1,2,3,4,5 5,513 8,869 3,242 37,149 70,000 113,000 37,195

# Audited

As at 27 December 2002 As at 28 December 2001shares shares under option shares shares under option

I M Boyd 57,548 365,036 57,548 335,036C A Clarke 10,000 – 10,000 –J M Cox 50,000 – 50,000 –Dr C E Fay 5,000 – 5,000 –A W F Mitchelson 34,000 135,094 30,000 85,094D B Newlands 10,000 – 10,000 –Professor J P Percy – – – –M W Selway 11,211 600,000 – 150,000Sir Robert Smith 50,000 – – –

Report of the Bonus & Remuneration Committee (Continued)


(1) The pension entitlement shown is that which would be paidannually on retirement based on service to the end of theyear or date of leaving the pension plan or ceasing to accruefurther benefit if earlier.

(2) The increase in accrued pension during the year excludes anyincrease for inflation.

(3) The transfer value of the increase in accrued pension hasbeen calculated on the basis of actuarial advice in accordancewith Actuarial Guidance Note GN11. The calculation of eachtransfer value includes an allowance for the cost of death in service benefits less the director’s own contributions overthe year.

(4) The change in the amount of the transfer value over the year is impacted by the following elements:

a. transfer value of the increase in accrued pension (net of inflation)

b. transfer value of the increase in accrued pension (due to inflation)

c. increase in the transfer value of accrued pension atyear start due to ageing

d. impact of any change in the economic or mortalityassumptions underlying the transfer value basis

e. the effect a. to d. less the director’s own contributions over the year

The change in the amount of the transfer value over the year includes the effect of fluctuations in the transfer valuedue to factors beyond the control of the Group and directors,such as stockmarket movements which are reflected in d. above.

(5) The figures for A W F Mitchelson allow for the impact of theearnings cap. This includes the period of service prior to himbecoming a director. A W F Mitchelson does not have anentitlement to an unapproved pension from the Group.

(6) Directors have the option to pay additional voluntarycontributions. However, neither the contributions nor theresulting benefits are included in the table.

(7) K G A Gamble retired in February 2002 and commenceddrawing his pension. His pension at the end of the year of£46,590 included an additional seven months of pensionableservice. The capital value of the additional service amountedto £43,900.

(8) Sir Ronald Garrick’s pension at the start of 2002 was£131,593 and at the year end was £132,514.

(i) at the date of this report the interests of the directors in the shares of the company remain as stated above;

(ii) by reason of his being a trustee of The Weir Group PLCEmployee Share Ownership Trust and as a result of theparticipation of the Trust in the exercise of savings relatedshare options by employees, A W F Mitchelson acquired anon-beneficial interest in 945,016 shares pending the transferof those shares to the exercising employees;

(iii) No director had, during or at the end of the year, anymaterial interest in any contract of any significance in relationto the company’s business, in any debenture stocks of thecompany, or in the share capital or debenture or loan stocksof any subsidiary.

Directors’ interests The interests of the directors in the ordinary shares of the company as at 27 December 2002 and at the end of the preceding financial year (or, in the case of Sir Robert Smith, at the date of appointment to the Board) were as follows:–


Directors’ options#

An analysis of the directors’ shares under options as at 27 December 2002* is as follows:

Shares Shares subject tosubject to options granted Shares subject to Earliest date Date optionoptions at (exercised) options at Exercise normally normally

Director Scheme 28/12/01 during year 27/12/02 price exercisable lapses

I M Boyd Exec 1984 100,000 – 100,000 261p 4/10/97 4/10/04Exec 1994 40,000 – 40,000 234p 31/3/98 31/3/05Exec 1994 25,000 – 25,000 239p 25/3/00 25/3/07Exec 1994 55,350 – 55,350 246.5p 29/3/02 29/3/09Exec 1994 25,000 – 25,000 197.5p 5/4/03 5/4/10SAYE 1991 4,286 – 4,286 226p 1/7/04 1/1/05Exec 1994 85,400 – 85,400 251.5p 26/3/04 26/3/11Exec 1994 – 30,000 30,000 262.5p 27/8/05 27/8/12

Sir Ronald Garrick Exec 1984 125,000 (125,000) – 261p – –Exec 1994 100,000 (100,000) – 234p – –Exec 1994 80,000 (80,000) – 246p – –

A W F Mitchelson Exec 1994 43,750 – 43,750 197.5p 27/3/03 27/3/10Exec 1994 32,800 – 32,800 251.5p 26/3/04 26/3/11SAYE 1991 8,544 – 8,544 197.5p 1/7/05 1/1/06Exec 1994 – 50,000 50,000 262.5p 27/8/05 27/8/12

M W Selway Exec 1994 150,000 – 150,000 282.5p 3/9/04 3/9/11Exec 1994 – 450,000 450,000 262.5p 27/8/05 27/8/12

(i) In terms of The Weir Group PLC Executive Share OptionScheme 1994 options over 305,000 shares were exercised bySir Ronald Garrick during the year. The market price on thedate of exercise was 307.5p. The gain realised was £180,825.In 2001, a gain of £69,869 was realised by K G A Gamble.

(ii) The closing market price of the shares at 27 December 2002was 210p and the range for the year was 173.5p to 318p.The range for the period 27 August 2002 to the year end was173.5p to 268.5p.

(iii) Since 2000, the exercise of options granted under the 1994Executive Share Option Scheme is subject to the growth ofthe company’s normalised earnings per share over a threeyear period, either exceeding by nine per cent the growth in the retail price index of the UK over that three year period,or exceeding the weighted average growth during that threeyear period of the normalised earnings per share of thosecompanies in the Engineering and Machinery sector ascategorised by the London Stock Exchange. Between 1994and 1999 the growth in the retail price index required to beexceeded by six per cent.

* In the case of Sir Ronald Garrick as at the date he ceased being a director of the company

# Audited

J M CoxChairman of the Bonus and Remuneration CommitteeSigned and approved for and on behalf of the Board19 March 2003

Corporate Social Responsibility Report


Our approachWe recognise that corporate social responsibility requires us firstand foremost to listen to our external and internal customers ineverything we do and to respond to their needs throughengineering excellence.

As an organisation, our core values include integrity, self-determination and valuing people. These enable us to meet ourresponsibilities to customers, suppliers, employees and shareholders,as well as to the communities where we work.

Weir is a global organisation, working in sectors and industriesthat have a significant impact on human and natural resources. By working across boundaries and by ensuring that corporatesocial responsibility is an inherent part of leadership, we seek tocombine business success with support for people, communitiesand the environment.

Environmental policyThe Group’s environmental policy is the responsibility of the Board,while its implementation is the responsibility of our divisionalmanaging directors. Each Weir division is required to report on environmental performance and maintain environmentalmanagement practices.

During 2002, Group-wide, there were no major environmentalincidents.

We have established centres of excellence for environmentalperformance in Europe, the Americas and Asia, with the remit totransfer best practice both regionally and inter-divisionally. In thisway, we will create a global, shared resource of environmentalbest practice and expertise.

The Group Operations Executive Committee monitors, throughkey performance indicators, how each of the divisions isimplementing these improvements and achieving targets toreduce the environmental impact of their activities. Data iscollected globally through an environmental performancequestionnaire, which is completed by all divisions. This is part of the continuous improvement agenda across Weir.

We have committed to achieving ISO 14001 accreditation for all companies by the end of 2004. 2002 saw significantprogress towards that target, with those companies as yetunaccredited completing a gap analysis and programme forimplementation. ISO 14001 entails the establishment of aframework environmental Management System that integratesenvironmental issues into overall business operations. Those Weircompanies accredited to date are already realising the benefits interms of operating efficiencies and better risk management.

We will continue to work towards reducing our energy and waterconsumption, hazardous waste generation and emissions ofvolatile organic compounds. Hard targets for 2004/5 will bedeveloped during the course of 2003.

Harmful substancesPotentially harmful substances are used in the operation of severalof our companies. We are committed to finding substitutesubstances and processes wherever possible and practicable. We are continuously improving our management programmes for the storage, handling and disposal of dangerous substances at company level.

For example, at Weir Floway we filter the water run off fromprocesses so it can be safely disposed of in the sewage system.Weir Lewis now recycles 100% of all harmful toxic substances toensure no issues with disposal.

In 2002, Weir Strachan & Henshaw utilised the SYPOL COSHHsystem to identify environmentally hazardous substances and anew waste storage facility was introduced that improved handlingand containment for waste liquids.

EmissionsWe monitor discharges and emissions with a view to settingtargets on reductions. Again, this activity is carried out atcompany level. All our operations work within local legislation and procedures and monitor the control of discharge, wastedisposal and emissions within appropriate limits. For example, in Chile, Weir Vulco installed a new collector in the foundry during2002 to reduce emissions.

We are responding to the challenge of reducing energyconsumption as presented by Target 2010 requirements and theClimate Change Levy. 2002 saw Weir Warman in Australia reducetheir CO2 emissions by 10% and target a further 5% reduction in2003. Similar targets have been set by Weir Warman in the UK,specifically for site energy consumption. Weir Pumps have targeteda 10% reduction in electricity and water usage in their sites andhave formed an energy conservation team to review energy use in collaboration with an independent energy surveyor. Theirreport and recommendations will be shared and acted upon inthe next 12 months.

At divisional level, we have also made progress in 2002. Weir Valves& Controls Division have targeted the elimination or substitution ofall harmful and toxic products. The division aims to reduce energyconsumption by 10% and achieve a 12.5% reduction in emissionsof the six greenhouse gases covered by the Kyoto protocol by 2010.

RecyclingRecycling plays an important part in reducing the amount ofwaste sent to landfill and we have been working closely withmany of our suppliers to improve our recycling performance. In 2002, Weir Vulco recycled 80% of plastic and 100% of scrap.Weir Lewis in the United States has successfully implemented ascheme to segregate scrap by type and this is now converted byoutside sources to prime ingot for use by our casting suppliers.Our materials and foundries operations are redirecting waste sand,which would previously have gone to landfill, for road use.

Many of our companies offer opportunities for staff to recycle itemssuch as paper, toner cartridges and drinks cans. In Weir Strachan& Henshaw, for example, improvements have been made to theirrecycling programme. In 2002, 12.5 tonnes of paper andcardboard were recycled, along with metal waste and swarf,plastic cups, drinks cans and fluorescent bulbs. Redundant officefurniture and computer equipment is donated free to charities.


Health & safety Safety remains a very high priority within Weir. The Group’s policy onhealth and safety requires that all our companies take a responsibleattitude to the protection of their employees’ health and safety.

All companies carefully evaluate risks to personnel wherever theyare working and take appropriate steps to minimise such risks.This includes ensuring that project design engineers considerdesign factors that minimise or eliminate the risk of accidents topersonnel during site installation and commissioning.

All Group companies are required to comply with the legislationgoverning health and safety at work and to conduct regularformal health and safety reviews at plant and site level. Suchreviews involve nominated managers and employees, in orderthat risks may be properly evaluated, that events leading toaccidents may be examined and that appropriate remedial oravoidance action may be initiated and subsequently monitored.

Formal reporting procedures have been implemented so that wecan monitor the safety performance of individual companies andpeer-to-peer audits are conducted in order to provide a criticalassessment of each company’s performance.

Research & development We recognise that research and development has a vital role to play in meeting our corporate social responsibilities. The development of new products that are more environmentallybenign in both manufacture and operation and the substitution of harmful materials, offer competitive advantage to ourselves and to our customers.

Weir Entropie’s innovative high performance chillers arespecifically designed to use waste heat as the energy source for process cooling and air conditioning. This enables ourcustomers to increase their energy efficiency and meet their own emissions targets. We are also running an internationalresearch programme to assess the potential of solar energy indrinking water production and we make the heat pumps that are a key component in the most efficient flue gas cleaning unitsfor biomass & waste incineration plants.

We recognise that many of our products are themselvescontributors to environmental protection in critical areas such as nuclear handling and subsea oil and gas exploration. We aretherefore investing in research and development to continuouslyimprove their performance.

2003 will see increased investment in design, research anddevelopment, in which our corporate social responsibility andbusiness objectives are closely aligned.

Employee involvementCorporate social responsibility demands that we involve and inform our employees as much as possible. Weir has establishedmany channels for employee involvement, including an open andongoing dialogue with trades unions. Given the diverse nature and geographical spread of our operations, it would beinappropriate and impractical to apply uniform procedures Group-wide. Each company is therefore responsible for achievingand maintaining appropriate consultation and communicationwith their employees.

We encourage wider, more general employee involvement throughthe production and distribution on a regular basis of printed andelectronic newspapers and bulletins for employees to promoteawareness of current progress and developments within the Group.

Employment of disabled personsThe Group gives full and fair consideration to employmentapplications from disabled persons. Where an employee becomesdisabled, arrangements are made wherever practicable to continueemployment by identifying an available job suited to that person’scapabilities and providing any necessary retraining. The Group’scareer development programme encourages disabled employeesto reach their full potential.

Community involvementDuring the year, Group companies were involved in numerouscommunity, social and cultural initiatives. These include manycharitable donations, ranging from children’s health charities toarts organisations. Causes, events and charities are often nominatedand driven by our employees, reflecting their own interests andsocial engagement.

We participate in a range of educational and training initiatives,including a programme to raise industrial awareness in schools,engineering support for the Young Enterprise scheme, workexperience placements for school children and an accessible and well-respected apprenticeship scheme.

Charitable contributionsDuring the year Group companies made the following contributions:

The Weir Group Educational Trust £55,000Other charitable and educational purposes £81,623

The Group made no political contributions during the year or in theprevious financial year.

Our suppliersWe recognise that our corporate social responsibility also reflects inthe way we behave towards our suppliers. While the Group doesnot operate a standard code in respect of payments to suppliers,we strive to be open, honest and consistent in all our dealings.

Each operating company is responsible for agreeing the terms and conditions under which business transactions are conducted,including the terms of payment. It is Group policy that paymentsto suppliers be made in accordance with the agreed terms. At 27 December 2002, the Group had an average of 60 days’purchases outstanding in trade creditors.

Many Weir companies are collaborating closely with suppliers to address environmental impacts throughout the supply chain,particularly in areas such as raw materials, packaging and recycling,to our mutual benefit.

Directors’ responsibilities Company law requires the directors to prepare accounts for eachfinancial period which give a true and fair view of the state ofaffairs of the company and of the Group and of the profit or lossof the Group for the period. In preparing those accounts, thedirectors are required to select suitable accounting policies andthen apply them consistently, make judgements and estimatesthat are reasonable and prudent and state whether or notapplicable accounting standards have been followed.

The directors are responsible for keeping proper accountingrecords which disclose with reasonable accuracy at any time thefinancial position of the Group and which enable them to ensurethat the accounts comply with the Companies Act 1985. They arealso responsible for safeguarding the assets of the company andhence for taking any reasonable steps for the prevention anddetection of fraud and other irregularities.

Directors’ Responsibilities Independent Auditors’ Report


Independent auditors’ report to the members of The Weir Group PLCWe have audited the Group’s accounts for the 52 weeks ended 27 December 2002 which comprise the Accounting Policies,Consolidated Profit & Loss Account, Balance Sheets, Cash FlowStatement, Reconciliation of Net Cash Flow to Movement in NetFunds/(Debt), Statement of Total Recognised Gains & Losses,Reconciliation of Movements in Shareholders’ Funds, the relatednotes 1 to 26 and Principal Companies of the Group. Theseaccounts have been prepared on the basis of the accountingpolicies set out therein. We have also audited the information in the Report of the Bonus and Remuneration Committee that is described as having been audited.

This report is made solely to the company’s members, as a body,in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the company and thecompany’s members as a body, for our audit work, for this report,or for the opinions we have formed.

Respective responsibilities of directors and auditorsThe directors’ responsibilities for preparing the Annual Report, the Report of the Bonus and Remuneration Committee and the accounts in accordance with applicable United Kingdom law and accounting standards are set out in the Directors’Responsibilities statement.

Our responsibility is to audit the accounts and the part of the Report of the Bonus and Remuneration Committee to be audited in accordance with relevant legal and regulatoryrequirements, United Kingdom Auditing Standards and the Listing Rules of the Financial Services Authority.


We report to you our opinion as to whether the accounts give a true and fair view and whether the accounts and the part of the Report of the Bonus and Remuneration Committee to beaudited have been properly prepared in accordance with theCompanies Act 1985. We also report to you if, in our opinion, the Directors’ Report is not consistent with the accounts, if thecompany has not kept proper accounting records, if we have notreceived all the information and explanations we require for ouraudit, or if information specified by law or the Listing Rulesregarding directors’ remuneration and transactions with theGroup is not disclosed.

We review whether the Corporate Governance Statement reflectsthe company’s compliance with the seven provisions of theCombined Code specified for our review by the Listing Rules and we report if it does not. We are not required to considerwhether the Board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk andcontrol procedures.

We read other information contained in the Annual Report and consider whether it is consistent with the audited accounts.This other information comprises the Financial Highlights 2002,The Journey to Excellence, The Weir Group Worldwide,Chairman’s Statement, Chief Executive’s Review, Operating & Financial Review, Divisional Reports, Board of Directors,Directors’ Report, Corporate Governance Statement, unauditedpart of the Report of the Bonus and Remuneration Committee ,the Corporate Social Responsibility Report and the Group FiveYear Summary. We consider the implications for our report if we become aware of any apparent misstatements or materialinconsistencies with the accounts. Our responsibilities do notextend to any other information.

Basis of audit opinionWe conducted our audit in accordance with United KingdomAuditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidencerelevant to the amounts and disclosures in the accounts and the part of the Report of the Bonus and Remuneration Committeeto be audited. It also includes an assessment of the significantestimates and judgements made by the directors in thepreparation of the accounts and of whether the accountingpolicies are appropriate to the Group’s circumstances, consistentlyapplied and adequately disclosed.

We planned and performed our audit so as to obtain all theinformation and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonableassurance that the accounts and the part of the Report of theBonus and Remuneration Committee to be audited are free from material misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the accounts and the part of the Report of the Bonus andRemuneration Committee to be audited.

OpinionIn our opinion:

– the accounts give a true and fair view of the state of affairsof the company and of the Group as at 27 December 2002and of the profit of the Group for the 52 weeks then ended;and

– the accounts and the part of the Report of the Bonus andRemuneration Committee to be audited have been properlyprepared in accordance with the Companies Act 1985.

Ernst & Young LLPRegistered AuditorGlasgow19 March 2003

Accounting Policies


a) Group accounts The Group accounts consolidate the accounts of the company andsubsidiary undertakings made up to a date co-terminous with thefinancial year of the company. References to ‘subsidiaries’ are tobe taken as references to subsidiary undertakings unless otherwisestated. The results of subsidiaries acquired during the year areconsolidated from the date of acquisition and the results ofsubsidiaries disposed of are consolidated up to the date of sale.

Entities in which the Group holds an interest on a long term basisand are jointly controlled by the Group and one or more otherventurers under a contractual arrangement are treated as jointventures. In the Group accounts, joint ventures are accounted for using the gross equity method as defined in FRS9.

Entities, other than subsidiaries or joint ventures, in which the Grouphas a participating interest and over whose operating and financialpolicies the Group exercises a significant influence are treated asassociates. In the Group accounts, associates are accounted forusing the equity method. References to ‘associates’ are to be takenas references to associated undertakings unless otherwise stated.The amounts are derived from the latest audited or reliableunaudited accounts made up to the company’s reporting date.

The accounts are prepared in accordance with applicableaccounting standards.

In preparing the financial statements for the current year the Grouphas adopted FRS17 “Retirement Benefits”, FRS19 “Deferred Tax”and applied average rates of exchange instead of closing rates for the translation of the profit and loss account and cash flowstatements of overseas subsidiaries, joint ventures and associates.Further information is provided in note 20 to the accounts.

b) Goodwill Goodwill on acquisition of subsidiaries, associates or businessesprior to 27 December 1997 was deducted directly from reservesand has not been reinstated on implementation of FRS10. Positivegoodwill arising on acquisitions since then is capitalised, classifiedas an asset on the balance sheet and amortised on a straight linebasis over its useful economic life up to a presumed maximum of 20 years. It is reviewed for impairment at the end of the first fullfinancial year following the acquisition and in other periods ifevents or changes in circumstances indicate that the carryingvalue may not be recoverable.

If a subsidiary, associate or business is subsequently sold or closed,any goodwill arising on acquisition that was deducted directly fromreserves or that has not been amortised through the profit and lossaccount is taken into account in determining the profit or loss onsale or closure.

c) Tangible assets Freehold land and buildings are stated at valuation in 1978 and1981 with subsequent additions at cost. Other tangible assets arestated at cost. Except for land, the cost or valuation of tangibleassets is depreciated over the estimated useful life by equal annualinstallments at rates of 2.5% for buildings and 5% to 33.33% forplant and equipment. The surplus arising on revaluation of buildingsincluded in the revaluation reserve is amortised over the estimateduseful lives of these buildings by transfer to the profit and lossaccount reserve in equal annual installments.

d) Government grants Grants related to expenditure on tangible assets are credited toprofit at the same rate as the depreciation on the assets to whichthe grants relate. The amounts shown in the balance sheet in respectof grants consist of the total grants receivable to date, less theamounts so far credited to profit. Grants of a revenue nature arecredited to income in the period to which they relate.

e) StocksStocks are stated at the lower of cost and net realisable value.Cost comprises direct materials on a first-in, first-out basis and directlabour plus attributable production overheads based on a normallevel of activity. Net realisable value is based on estimated sellingprice less anticipated costs to disposal. Provision is made for allforeseeable losses and due allowance is made for obsolete and slowmoving items. Claims for progress payments are deducted fromthe value of work in progress, or to the extent that they exceedthis value, are disclosed as payments receivable on account.

f) Long term contractsA long term contract is defined as the supply of a single substantialproject where the supply normally extends into different accountingperiods. Profit on long term contracts is taken as the work is carriedout if the final outcome can be assessed with reasonable certainty.The profit included is calculated on a prudent basis to reflect theproportion of the work carried out at the year end, by recordingturnover and related costs as contract activity progresses. Dependingon the nature of each contract, turnover is either calculated to becost together with a proportion of profit appropriate to the stageof completion of each contract or is ascertained by reference to thevaluation of individual elements of work completed with separatelyascertainable sales values. Provision is made for all foreseeablelosses. Claims for progress payments are deducted from amountsrecoverable on long term contracts, or to the extent that theyexceed this value, are disclosed as payments receivable on account.

g) Research & development expenditure Research and development expenditure is written off in the yearin which it is incurred.


h) Deferred tax Deferred tax is recognised in respect of all timing differences thathave originated but not reversed at the balance sheet date wheretransactions or events have occurred at that date that will result inan obligation to pay more, or a right to pay less or to receive more,tax, with the following exceptions:

• provision is made for tax on gains arising from the revaluation(and similar fair value adjustments) of fixed assets and gains ondisposal of fixed assets that have been rolled over into replacementassets, only to the extent that, at the balance sheet date, there is abinding agreement to dispose of the assets concerned. However,no provision is made where, on the basis of all available evidenceat the balance sheet date, it is more likely than not that the taxablegain will be rolled over into replacement assets and charged totax only where the replacement assets are sold;

• provision is made for deferred tax that would arise on remittanceof the retained earnings of overseas subsidiaries, joint venturesand associates but only to the extent that, at the balance sheetdate, dividends have been accrued as receivable;

• deferred tax assets are recognised only to the extent that thedirectors consider that it is more likely than not that there willbe suitable taxable profits from which the future reversal of theunderlying timing differences can be deducted.

Deferred tax is measured on an undiscounted basis at the tax ratesthat are expected to apply in the periods in which timing differencesreverse, based on tax rates and laws enacted or substantivelyenacted at the balance sheet date.

i) Foreign currencies Transactions in foreign currencies are converted at the rate ruling at the date of the transaction. The accounts of overseassubsidiaries, joint ventures and associates are translated using theaverage rate for the year for the profit and loss account and cashflow statements and the closing rate for the balance sheet.Monetary assets and liabilities in foreign currencies and theGroup’s interest in the equity of overseas joint ventures andassociates are translated at the closing rate. Exchange differenceson consolidation, after adjusting for differences on foreigncurrency net borrowings, are treated as adjustments to reserves and other exchange differences are dealt with through the profitand loss account as they arise other than those on contractswhich are incorporated into the contract assessment.

j) Retirement benefits The company and its major subsidiaries operate defined benefitpension plans which are set up under separate trusts or throughinsurance companies. On the advice of an independent qualifiedactuary, contribution payments are made to the plans to ensure thatthe plans’ assets are sufficient to cover future liabilities. Pension planassets are measured using market values. Pension plan liabilities aremeasured using the projected unit method and discounted at thecurrent rate of return on a high quality corporate bond of equivalentterm and currency to the liability. Any increase in the present valueof the liabilities of the Group’s defined benefit pension plansexpected to arise from employee service in the period is chargedagainst operating profit. The expected return on the plans’ assetsand the increase during the period in the present value of the plans’liabilities arising from the passage of time are included in otherfinance income. Actuarial gains and losses are recognised in thestatement of total recognised gains and losses.

Unfunded unapproved pension promises and obligations to providecertain additional post retirement benefits to a number of overseasemployees are accorded the same accounting treatment as appliesto defined benefit pension plan liabilities.

Contributions to defined contribution pension plans are charged tothe profit and loss account when they become payable.

k) Leasing Assets obtained under finance leases are capitalised in the balancesheet and are depreciated over their useful lives. The interestelement of the rental obligations is charged to profit and lossaccount over the period of the lease and represents a constantproportion of the balance of capital repayments outstanding.Rentals paid under operating leases are charged to income on a straight line basis over the term of the lease.


Consolidated Profit & Loss Accountfor the 52 weeks ended 27 December 2002

Group

Before Before amortisation of Amortisation amortisation of Amortisation

goodwill & of goodwill & goodwill & of goodwill &exceptional exceptional exceptional exceptional

items items Total items items Total2002 2002 2002 2001 2001 2001

(restated) (restated) (restated)Notes £’000 £’000 £’000 £’000 £’000 £’000

Turnover 1Group – continuing operations 685,246 – 685,246 703,963 – 703,963

– discontinued operations 15,964 – 15,964 36,481 – 36,481

701,210 – 701,210 740,444 – 740,444 Share of – joint ventures 9,814 – 9,814 10,091 – 10,091

– associates 91,631 – 91,631 131,304 – 131,304 – discontinued associate 39,051 – 39,051 44,910 – 44,910

841,706 – 841,706 926,749 – 926,749

Operating profit 2a, 3Group – continuing operations 50,056 (4,289) 45,767 53,783 (4,110) 49,673

– discontinued operations 2,699 – 2,699 (2,738) – (2,738)– goodwill amortisation – (6,671) ( 6,671) – (6,558) (6,558)

52,755 (10,960) 41,795 51,045 (10,668) 40,377 Share of – joint ventures 1,813 – 1,813 2,470 – 2,470

– associates 5,870 (182) 5,688 6,316 – 6,316 – discontinued associate 1,797 – 1,797 2,911 – 2,911

62,235 (11,142) 51,093 62,742 (10,668) 52,074

Exceptional items 3Profit/(loss) on disposal & closureof discontinued operations – 10,539 10,539 – (14,850) (14,850)

Interest & other income Net interest & other income 2b (3,984) – (3,984) (7,202) – (7,202)Other finance income 2b 1,779 – 1,779 5,381 – 5,381

Profit on ordinary activities before tax 2c 60,030 (603) 59,427 60,921 (25,518) 35,403 Tax on profit on ordinary activities 4a 13,822 (4,796) 9,026 14,942 (6,775) 8,167

Profit on ordinary activities after tax 46,208 4,193 50,401 45,979 (18,743) 27,236 Minority interest 245 – 245 16 – 16

Profit attributable to The Weir Group PLC 21 45,963 4,193 50,156 45,963 (18,743) 27,220 Dividends 5 24,500 – 24,500 23,478 – 23,478

Transfer to reserves 20 21,463 4,193 25,656 22,485 (18,743) 3,742

Earnings per share 6 22.6p 2.1p 24.7p 22.8p (9.3p) 13.5p

Diluted earnings per share 6 24.6p 13.4p


Balance Sheets at 27 December 2002

Group Company

2002 2001 2002 2001(restated) (restated)

Notes £’000 £’000 £’000 £’000

Fixed assets Intangible assets – goodwill 8 105,509 115,150 – – Tangible assets 9 97,676 116,029 135 131 Investments 10Joint ventures – share of gross assets 9,343 9,629 – –

– share of gross liabilities 3,199 3,683 – – 6,144 5,946 – –

Associates 13,468 20,895 13,334 20,792 Other 539 567 353,678 434,123

20,151 27,408 367,012 454,915

Total fixed assets 223,336 258,587 367,147 455,046

Current assetsStocks 11 95,034 114,624 – – Debtors 12 186,090 197,395 8,689 7,533 Cash at bank & in hand 153,056 99,209 71,031 53,199

434,180 411,228 79,720 60,732

Creditors falling due within one yearBorrowings 13 11,898 15,581 39,089 29,150 Other creditors 14 186,331 194,759 29,055 34,298

198,229 210,340 68,144 63,448

Net current assets/(liabilities) 235,951 200,888 11,576 (2,716)

Total assets less current liabilities 459,287 459,475 378,723 452,330

Less

Creditors falling due after more than one year Loans 15 137,237 147,338 196,086 199,425 Obligations under finance leases 16 1,542 1,968 – –

Provisions for liabilities & charges 17 33,114 35,701 1,885 1,987

Deferred income Grants not yet credited to profit 147 276 – –

Minority interest 560 422 – –

Net assets excluding retirement benefits 286,687 273,770 180,752 250,918

Retirement benefits – asset 18 – 484 – – – liability 18 106,594 24,134 659 798

Net assets including retirement benefits 180,093 250,120 180,093 250,120

Capital & reservesCalled up share capital 19 25,522 25,300 25,522 25,300 Share premium account 20 20,219 15,791 20,219 15,791 Capital redemption reserve 20 531 531 531 531 Revaluation reserve 20 – – (112,754) (36,098)Special reserve 20 – – 1,840 1,840 Profit & loss account 20 133,821 208,498 244,735 242,756

180,093 250,120 180,093 250,120

Approved by the Board of Directors on 19 March 2003 M W Selway Director I M Boyd Director


Cash Flow Statementfor the 52 weeks ended 27 December 2002

Reconciliation of Net Cash Flow to Movement in Net Funds/(Debt) for the 52 weeks ended 27 December 2002

Group


Notes £’000 £’000 £’000 £’000

Cash inflow from operating activities 22a– funds generated by operations 59,739 72,266 – decrease in working capital 9,658 2,686 – cash spent on exceptional items (1,325) (3,748)

68,072 71,204 Dividends received from joint ventures 1,329 1,156 Dividends received from associates 1,811 4,361 Returns on investments & servicing of finance 22b (3,510) (8,550)Taxation (7,116) (5,294)Capital expenditure & financial investment

– purchases 22b (15,770) (15,996)– sales 22b 5,573 5,538

(10,197) (10,458)Acquisitions & disposals

– acquisitions 23a (927) (3,838)– disposals of businesses 23c 17,423 (1,047)– disposal of associate 19,517 –

36,013 (4,885)Equity dividends paid (23,766) (22,442)

Cash inflow before liquid resources & financing 62,636 25,092 Management of liquid resources 22b (35,516) (12,946)Financing – issue of shares 22b 4,054 3,933

– new loans 22b 96 9,586 – debt repaid 22b (15,069) (22,376)– foreign exchange hedging 22b 3,246 (1,344)

(7,673) (10,201)

Increase in cash 19,447 1,945

Group

2002 2001(restated)

£’000 £’000

Increase in cash 19,447 1,945 Cash flow from debt repaid 15,069 22,376 Cash flow from new loans (96) (9,586)Cash flow from management of liquid resources 35,516 12,946

Change in net funds/(debt) resulting from cash flows 69,936 27,681 Loans – acquired – (11)Leases – inceptions (182) (876)Exchange (1,859) 2,253

Movement in net funds/(debt) during the year 67,895 29,047 Net debt at 29 December 2001 (65,971) (95,018)

Net funds/(debt) at 27 December 2002 1,924 (65,971)

The analysis of net funds/(debt) is included in note 22(c).

Group

2002 2001(restated)

Notes £’000 £’000

Profit excluding share of profit for joint ventures & associates 43,409 18,535 Share of joint ventures’ profit 1,681 2,185 Share of associates’ profit 5,066 6,500

Profit attributable to The Weir Group PLC 50,156 27,220 Actuarial loss 18 (129,832) (85,334)Tax thereon 4b 39,523 25,994 Exchange differences on foreign currency net investments (8,703) (7,416)Tax thereon 4b – (1,142)

Total recognised losses relating to the year (48,856) (40,678)Prior year adjustment 20 (42,917) –

Total recognised losses since last annual report (91,773) (40,678)


Additional Statementsfor the 52 weeks ended 27 December 2002

Statement of Total Recognised Gains & Losses

Group

2002 2001(restated)

£’000 £’000

Total recognised losses (48,856) (40,678)Dividends (24,500) (23,478)Other movements

– new share capital subscribed 4,650 4,581 – cost of issuing shares (596) (648)– goodwill reinstated on disposals & closures (725) 3,354

Net reduction to shareholders’ funds (70,027) (56,869)Opening shareholders’ funds (originally £293,037,000before deducting prior year adjustment of £42,917,000) 250,120 306,989

Closing shareholders’ funds 180,093 250,120

Shareholders’ funds are entirely attributable to equity interests.

Reconciliation of Movements in Shareholders’ Funds

Notes to the Accounts


1. Turnover & profit on ordinary activities before tax

Turnover represents the amount invoiced to third parties in respect of goods sold and services provided excluding value added tax. In the case of long term contracts, it represents the value of work done during the year. Turnover and profit on ordinary activities before tax were contributed as shown in the tablebelow. For comparative purposes 2001 figures for this note have been restated at the 2002 average exchange rates with the aggregate adjustment beingmade on the “Exchange adjustment – Group” line. The basis of the segmental analysis of operations has been amended to disclose the results of theTechna Division as a separate segment (formerly within Engineering Products) in order to more fully disclose the impact of this division’s activities on theGroup’s results.

Turnover Turnover Profit Profit2002 2001 2002 2001

£’000 £’000 £’000 £’000

Engineering Products:Group – continuing – excluding exceptionals 429,610 444,314 32,810 32,193

– operating exceptional items – – (4,289) (4,110)– discontinued 3,459 18,472 174 (2,484)

433,069 462,786 28,695 25,599 Share of associate 15 13 (1) 28

433,084 462,799 28,694 25,627

Techna:Group 104,968 106,401 5,016 10,115 Share of joint venture 549 1,126 5 2

105,517 107,527 5,021 10,117

Engineering Services:Group – continuing 150,668 133,485 15,168 12,029

– discontinued 12,505 17,579 2,525 (285)

163,173 151,064 17,693 11,744 Share of joint ventures 9,265 8,965 1,808 2,468 Share of associate 91,616 131,291 5,871 6,288 Share of associate – discontinued 39,051 44,910 1,797 2,911

303,105 336,230 27,169 23,411

Segmental totalsGroup 701,210 720,251 51,404 47,458 Joint ventures & associates 140,496 186,305 9,480 11,697

Goodwill amortisation – Engineering Products – – (6,671) (6,509)Goodwill amortisation – associates – – (182) – Unallocated costs – – (2,938) (2,298)Exchange adjustment – Group – 20,193 – 1,726

841,706 926,749 51,093 52,074 Exceptional items– Engineering Products – – (48) (13,881)– Engineering Services – – 10,587 (969)

Interest & other income – – (2,205) (1,821)

841,706 926,749 59,427 35,403

The analysis of Group turnover before share of joint ventures and associates by geographical area of origin is as follows:

Continuing Discontinued Continuing Discontinuedoperations operations Total operations operations Total

2002 2002 2002 2001 2001 2001£’000 £’000 £’000 £’000 £’000 £’000

United Kingdom 311,568 3,964 315,532 307,165 19,166 326,331 Rest of Europe 51,436 5,258 56,694 61,319 6,284 67,603 Americas 240,099 6,602 246,701 243,840 10,329 254,169 Middle East & Africa 23,961 140 24,101 15,217 272 15,489 Asia 1,873 – 1,873 893 – 893 Australia 56,309 – 56,309 55,766 – 55,766

685,246 15,964 701,210 684,200 36,051 720,251


1. Turnover & profit on ordinary activities before tax (continued)

The analysis of Group operating profit before unallocated costs, goodwill amortisation and share of joint ventures and associates by geographical area of origin is as follows:


2002 2002 2002 2001 2001 2001£’000 £’000 £’000 £’000 £’000 £’000

United Kingdom 8,869 1,517 10,386 18,354 (2,349) 16,005 Rest of Europe 3,617 (54) 3,563 6,184 (725) 5,459 Americas 24,307 1,576 25,883 15,263 960 16,223 Middle East & Africa 2,182 (340) 1,842 2,033 (655) 1,378 Asia 231 – 231 139 – 139 Australia 9,499 – 9,499 8,254 – 8,254

48,705 2,699 51,404 50,227 (2,769) 47,458

Group operating profit shown under the “Americas” heading is net of the operating exceptional cost of £1,589,000 (2001: £4,110,000). Group operating profit shown under the “UK” heading is net of the operating exceptional cost of £2,700,000 (2001: £nil)

The analysis of Group turnover by geographical area of destination is as follows:


2002 2002 2002 2001 2001 2001£’000 £’000 £’000 £’000 £’000 £’000

United Kingdom 157,273 1,425 158,698 161,239 14,600 175,839 Rest of Europe 74,163 2,703 76,866 79,748 5,552 85,300 Americas 261,603 6,632 268,235 250,715 10,427 261,142 Middle East & Africa 82,749 5,182 87,931 91,873 5,249 97,122 Asia 63,184 21 63,205 53,660 187 53,847 Australia 46,274 1 46,275 46,965 36 47,001

685,246 15,964 701,210 684,200 36,051 720,251

An analysis of engineering products by activity and an analysis of net assets by class of business and geographical origin have not been disclosed. The directors are of the opinion that to disclose such information would be seriously prejudicial to the interests of the Group.

2. Profit on ordinary activities before tax

(a) Movement between turnover & operating profit:Continuing Discontinued Continuing Discontinuedoperations operations Total operations operations Total

2002 2002 2002 2001 2001 2001(restated) (restated) (restated)

£’000 £’000 £’000 £’000 £’000 £’000

Turnover 685,246 15,964 701,210 703,963 36,481 740,444 Cost of sales (497,279) (12,117) (509,396) (509,844) (34,172) (544,016)

Gross profit 187,967 3,847 191,814 194,119 2,309 196,428 Distribution costs (88,428) (815) (89,243) (93,698) (1,941) (95,639)Administrative expenses (57,808) (1,361) (59,169) (53,628) (4,043) (57,671)Goodwill amortisation (6,671) – (6,671) (6,558) – (6,558)Other operating income 4,036 1,028 5,064 2,880 937 3,817

Operating profit:– Group 39,096 2,699 41,795 43,115 (2,738) 40,377 – share of joint ventures 1,813 – 1,813 2,470 – 2,470 – share of associates 5,688 1,797 7,485 6,316 2,911 9,227

Total operating profit 46,597 4,496 51,093 51,901 173 52,074

Goodwill amortisation is classified as administrative expenses which therefore total £65,840,000 (2001: £64,229,000). Administrative expenses includes theexceptional item of £4,289,000 (2001: £4,110,000).

Notes to the Accounts (Continued)


2. Profit on ordinary activities before tax (continued)2002 2001

(restated)£’000 £’000

(b) Interest & other income:

Interest receivable on cash at bank 4,692 4,435 Income from associates 217 489 Interest payable on bank loans & overdrafts (8,005) (11,574)Finance charges related to committed loan facilities (465) (495)Finance charges payable under finance leases (204) (133)

Group interest & other income (3,765) (7,278)Share of – joint ventures 34 22

– associates (253) 54

Net interest & other income (3,984) (7,202)

Expected return on pension plan assets 31,829 33,864 Interest on retirement benefits liabilities (30,050) (28,483)

Other finance income 1,779 5,381

(c) Profit on ordinary activities before tax is after charging/(crediting):

Depreciation 16,961 19,566 Goodwill amortisation 6,671 6,558 Government grant credits (122) (125)

Auditors’ remuneration & expenses for audit services 695 666 Auditors’ remuneration includes £10,400 (2001: £10,200) payable in respect of the company.

Auditors’ remuneration & expenses for other servicesUnited Kingdom 621 440 Overseas 637 491Non audit services mainly relate to taxation advice (2001: taxation advice).

Operating lease rentalsLand & buildings 3,555 3,878 Plant & machinery 4,705 4,995

8,260 8,873

Gross research & development 4,612 4,905Reimbursable from third parties (544) (156)

Net cost 4,068 4,749


3. Exceptional items2002 2001

£’000 £’000

Operating exceptional items (4,289) (4,110)

Provision has been made in the year to cover the net costs of closure (including tangible asset impairment losses) of the foundry activities at HazletonPumps Inc and the operations of Weir Pumps Limited at Girdlestone. In 2001 provision was made in respect of Weir Floway Inc’s contribution to futureenvironmental clean-up costs based on independent expert advice on the known facts and represented management’s best estimate of Weir Floway Inc’sshare of the costs of the clean-up programme. The actual costs when incurred may be higher or lower than this estimate.

Profit/(loss) on disposal of discontinued operations (note 23b) 2,066 (969) Profit on disposal of associate company 8,473 – Losses on closure of discontinued operations – net costs of closure – (9,591)

– goodwill written off on closure – (2,456) – goodwill previously deducted directly from reserves – (1,834)

Non operating exceptional items 10,539 (14,850)

The profit on disposal of discontinued operations relates to the disposals of the businesses of Molded Products, Actuators and the turbo-drilling operations of Neyrfor-Weir Limited which were completed on 28 June 2002, 1 July 2002 and 31 July 2002 respectively. The results of these businesses for the period to the dates of disposal have been shown in the profit and loss account as “discontinued” and prior year figures have been restated accordingly. The comparative figure for the 52 weeks to 28 December 2001 relates to the disposal of Weir Systems Limited which was completed on 28 June 2001. The results of Weir Systems Limited for the prior year to the date of disposal have been shown in the profit and loss account as “discontinued”.

The profit on disposal of associate company relates to the disposal of First Engineering Limited which was completed on 7 October 2002. The results of this business for the period to the date of disposal have been shown in the profit and loss account as “discontinued” and prior year figures have beenrestated accordingly.

The comparative figure for the 52 weeks to 28 December 2001 for the loss on closure of discontinued operations relates to the losses on closure of Tooling Products Limited, G Perry & Sons Limited and to the Manchester operation of Strachan & Henshaw Limited which were announced on 5 July 2001.The results of these businesses for the prior year to date of closure have been shown in the profit and loss account as “discontinued”.

4. Tax

(a) Profit & loss account – tax charge: Before On Exceptional –exceptional exceptional previous year

items items adjustments Total2002 2002 2002 2002

£’000 £’000 £’000 £’000

Current tax:UK corporation tax at 30% 2,089 (755) – 1,334UK tax adjustment to previous years – – (2,072) (2,072)

2,089 (755) (2,072) (738)Double tax relief (635) – 7 (628)

1,454 (755) (2,065) (1,366)Foreign tax 7,281 316 – 7,597Foreign tax adjustment to previous years – – (284) (284)

Group current tax 8,735 (439) (2,349) 5,947Share of joint ventures’ current tax 166 – – 166Share of associates’ current tax 2,061 – – 2,061

Total current tax 10,962 (439) (2,349) 8,174

Deferred tax:Origination & reversal of timing differences 2,740 (962) (1,046) 732Effect of tax rate change on opening liability 15 – – 15

Group deferred tax 2,755 (962) (1,046) 747Share of associates’ deferred tax 105 – – 105

Total deferred tax 2,860 (962) (1,046) 852

Tax on profit on ordinary activities 13,822 (1,401) (3,395) 9,026

The tax credit on exceptional items includes £810,000 relating to the operating exceptional items and £591,000 relating to the non operating exceptional items.



4. Tax (continued)

(a) Profit & loss account – tax charge: Before On Exceptional –exceptional exceptional previous year

items items adjustments Total2001 2001 2001 2001

(restated) (restated) (restated) (restated)£’000 £’000 £’000 £’000

Current tax:UK corporation tax at 30% 7,163 (1,989) – 5,174 UK tax adjustment to previous years – – 3,442 3,442

7,163 (1,989) 3,442 8,616 Double tax relief (557) – 68 (489)

6,606 (1,989) 3,510 8,127 Foreign tax 7,085 – – 7,085 Foreign tax adjustment to previous years – – (658) (658)

Group current tax 13,691 (1,989) 2,852 14,554 Share of joint ventures’ current tax 307 – – 307 Share of associates’ current tax 2,601 – – 2,601

Total current tax 16,599 (1,989) 2,852 17,462

Deferred tax:Origination & reversal of timing differences (1,837) (121) (7,517) (9,475)

Group deferred tax (1,837) (121) (7,517) (9,475)Share of associates’ deferred tax 180 – – 180

Total deferred tax (1,657) (121) (7,517) (9,295)

Tax on profit on ordinary activities 14,942 (2,110) (4,665) 8,167

The tax credit on exceptional items of £2,110,000 relates to the non operating exceptional items.

(b) Statement of total recognised gains & losses2002 2001

(restated)£’000 £’000

Tax charge on exchange differences on foreign currency net investments:Current tax – UK – (3,160)Current tax – overseas – 152 Deferred tax – origination & reversal of timing differences – 1,866

– (1,142)

Tax credit on actuarial loss on retirement benefits:Current tax on contributions in excess of costs through the profit & loss account 1,239 – Deferred tax on contributions in excess of costs through the profit & loss account 1,525 –Deferred tax – origination & reversal of timing differences 36,759 25,994

39,523 25,994

39,523 24,852


4. Tax (continued)

(c) Factors affecting current tax charge

The tax assessed on the profit on ordinary activities for the year is less than the weighted average of standard rates of corporation tax across the Group of 30.3% (2001: 31.3%). The differences are reconciled below:

2002 2001£’000 £’000

Profit on ordinary activities before tax 59,427 35,403

Profit on ordinary activities multiplied by the weighted average rate of corporation tax across the Group of 30.3% (2001: 31.3%) 17,994 11,083 Expenses not deductible for tax purposes 983 715 Goodwill amortised/released not eligible for tax relief 1,785 3,873 Enhanced tax relief on expenditure (577) (501)Benefit arising from fiscally efficient financing of global operations (6,565) (5,354)Tax on overseas earnings repatriated to the UK 249 618 Increase in unrecognised deferred tax assets 2,039 2,398 Gains covered by unrecognised losses or exempt from tax (3,485) – Decelerated capital allowances 1,603 240 Timing difference on goodwill eligible for tax relief (1,707) (1,778)Other timing differences (1,796) 3,316 Adjustments to tax charge in respect of previous periods (2,349) 2,852

Total current tax (see note 4a) 8,174 17,462

(d) Factors that may affect future tax charges

Overseas deferred tax asset balances amounting to £12,167,000 (2001: £10,133,000) have not been recognised on the grounds that there is insufficientevidence that these assets will be recoverable. These assets will be recovered when future tax charges are sufficient to absorb the reversal of these taxbenefits. Deferred tax asset balances for capital losses in the UK amounting to £13,460,000 (2001: £1,472,000) have not been recognised but would beavailable in the event of future capital gains being incurred by the Group.

The Group will continue to manage its future global tax charge with a view to delivering a continuing sub-standard tax rate.

No provision has been made for the liability to tax from capital gains amounting to £77,000 (2001: £125,000) which would arise if land and buildingswere to be sold at their book amounts.

No provision has been made for any taxation which might arise on the distribution to the UK of retained overseas earnings of £162,408,000 (2001: £129,406,000).

(e) Balance sheet – deferred taxGroup Company


£’000 £’000 £’000 £’000

Included in debtors (note 12) 1,217 1,168 1,518 19 Included in provisions for liabilities & charges (note 17) (16,672) (18,850) – – Included in retirement benefits (note 18) 47,257 11,134 283 342

31,802 (6,548) 1,801 361

Accelerated capital allowances (2,475) (4,628) (15) (2)Other timing differences (12,980) (13,054) 1,533 21 Retirement benefits 47,257 11,134 283 342

31,802 (6,548) 1,801 361

At 29 December 2001 (6,548) 361Profit & loss account (747) 1,509Statement of total recognised gains & losses 38,284 (69)Exchange 813 –

At 27 December 2002 31,802 1,801



5. Dividends2002 2001

£’000 £’000

On ordinary shares:Interim 3.25p per share (2001: 3.15p) 6,635 6,373 Proposed final 8.75p per share (2001: 8.45p) 17,865 17,105

24,500 23,478

6. Earnings per share

The earnings per share calculation is based on earnings of £50,156,000 being profits attributable to The Weir Group PLC (2001: £27,220,000) and on the weighted average of 203,400,997 shares in issue (2001: 201,608,096 ).

The earnings per share excluding goodwill amortisation and exceptional items is based on earnings of £45,963,000 (2001: £45,963,000) being profitattributable to The Weir Group PLC of £50,156,000 (2001: £27,220,000) as adjusted to exclude goodwill amortisation of £6,853,000 (2001: £6,558,000)and the exceptional profit after tax of £11,046,000 (2001: loss of £12,185,000) and on the weighted average of 203,400,997 shares in issue (2001: 201,608,096). The effect of excluding the goodwill amortisation and the exceptional items on the earnings per share is a decrease of 2.1p per share (2001: an increase of 9.3p). The figure for earnings per share excluding goodwill amortisation and the exceptional items has been presented as the directors consider that this figure gives a more meaningful measurement of earnings.

The diluted earnings per share calculation is based on earnings of £50,156,000 being profits attributable to The Weir Group PLC (2001: £27,220,000) andon the weighted average of 204,015,270 shares in issue (2001: 202,695,672). The weighted average shares in issue is based on the basic weighted averageof 203,400,997 shares in issue (2001: 201,608,096) together with the dilutive potential ordinary shares of 614,273 (2001: 1,087,576) in respect ofemployee share options.


7. Directors & employees2002 2001

Number Number

Average number of persons employed by the company and its subsidiaries:Engineering Products 5,396 6,078 Techna 739 734 Engineering Services 1,751 1,632

7,886 8,444

2002 2001(restated)

£’000 £’000

Staff costs:Wages & salaries 183,617 194,603 Social security costs 22,100 23,585 Other pension costs (see below) 11,761 13,521 Other post retirement healthcare costs (see below) (430) 154

217,048 231,863

Pension costs are analysed as follows:Defined benefit pensions:

Current service cost UK 6,950 8,061 North America 1,212 1,197

Past service cost North America 42 – Settlements/curtailments UK – (300)

North America (954) –

7,250 8,958

Defined contribution pensions:UK 115 – Overseas 4,396 4,563

4,511 4,563

Post retirement healthcare costs are analysed as follows:Current service cost North America 71 154 Settlements/curtailments North America (501) –

(430) 154

Details of directors’ remuneration, pension benefits and share options are included in the Report of the Bonus and Remuneration Committee on pages 33 to 35.

8. Intangible assets – goodwillTotal£’000

Cost:At 29 December 2001 130,905 Exchange (3,543)

At 27 December 2002 127,362

Amortisation:At 29 December 2001 15,755 Provided during the year 6,671 Exchange (573)

At 27 December 2002 21,853

Net book value at 27 December 2002 105,509

Net book value at 29 December 2001 115,150

Goodwill is being amortised over the directors’ estimate of useful economic life which is 20 years.



9. Tangible assetsGroup Company

Freehold Freeholdland & Plant & land & Plant &

buildings machinery Total buildings machinery Total£’000 £’000 £’000 £’000 £’000 £’000

At 29 December 2001Cost 56,262 179,462 235,724 49 258 307 Valuation 1978 8,947 – 8,947 – – – Valuation 1981 1,600 – 1,600 – – –

Additions 842 14,515 15,357 – 76 76 Disposals (5,235) (33,886) (39,121) (49) (48) (97)Reclassification 736 (736) – – – – Exchange (2,029) (6,535) (8,564) – – –

At 27 December 2002 61,123 152,820 213,943 – 286 286

Whereof:Cost 50,703 152,820 203,523 – 286 286 Valuation 1978 8,947 – 8,947 – – – Valuation 1981 1,473 – 1,473 – – –

61,123 152,820 213,943 – 286 286

Aggregate depreciationAt 29 December 2001 17,745 112,497 130,242 24 152 176 Charge for year 1,899 15,062 16,961 – 47 47 Impairment losses 244 966 1,210 – – – Disposals (1,769) (25,738) (27,507) (24) (48) (72)Reclassification 644 (644) – – – – Exchange (626) (4,013) (4,639) – – –

At 27 December 2002 18,137 98,130 116,267 – 151 151

Net book value at 27 December 2002 42,986 54,690 97,676 – 135 135

Net book value at 29 December 2001 49,064 66,965 116,029 25 106 131

On a historical cost basis, freehold land and buildings would have been included at a cost of £55,608,000 (2001: £59,411,000) less a cumulative provision for depreciation of £16,302,000 (2001: £15,920,000).

At 27 December 2002 the net book value of tangible assets acquired under finance leases included in Group land and buildings amounted to £879,000 (2001: £714,000) and in company land and buildings, £Nil (2001: £Nil). Depreciation charged for the year on these assets amounted to £53,000 (2001: £51,000) and £Nil (2001: £Nil) respectively.

At 27 December 2002 the net book value of tangible assets acquired under finance leases included in Group plant and machinery amounted to £854,000 (2001: £1,460,000) and in company plant and machinery, £Nil (2001: £Nil). Depreciation charged for the year on these assets amounted to £548,000 (2001: £709,000) and £Nil (2001: £Nil) respectively.

The transition rules of FRS15 were adopted for freehold land and buildings which permitted the retention of the carrying values at the previously revaluedamounts. These assets valued in 1978 and 1981 will not be subject to further revaluation.


10. Fixed asset investments

Group

Joint Otherventures Associates investments Total

£’000 £’000 £’000 £’000

At 29 December 2001– cost – – 567 567 – equity basis 5,946 20,895 – 26,841

Additions – – 288 288 Disposals – (11,044) (308) (11,352)Increase in net assets 302 3,595 – 3,897 Exchange (104) 22 (8) (90)

At 27 December 2002 6,144 13,468 539 20,151

Whereof:Cost – – 539 539 Equity basis 6,144 13,468 – 19,612

6,144 13,468 539 20,151

Group

2002 2001£’000 £’000

The aggregate of the Group’s share in the net assets of the associates is analysed as follows:Fixed assets 38,779 23,653 Current assets 17,860 56,073

Share of gross assets 56,639 79,726

Liabilities due within one year 31,562 56,045 Liabilities due after more than one year 11,609 2,786

Share of gross liabilities 43,171 58,831

Share of net assets 13,468 20,895

Company

Subsidiaries OtherShares Loans Associates investments Total£’000 £’000 £’000 £’000 £’000

At 29 December 2001 as stated – cost – – – 23 23– valuation 466,700 7,622 20,792 – 495,114

Prior year adjustment – valuation (40,222) – – – (40,222)

At 29 December 2001 as restated – cost – – – 23 23 – valuation 426,478 7,622 20,792 – 454,892

Additions 1,672 6,194 – – 7,866 Disposals/repayments (4,006) (4,874) (11,394) – (20,274)Increase/(decrease) in net assets 1,048 (6,232) 3,936 – (1,248)Decrease in net assets due to FRS17 (74,649) – – – (74,649)Exchange – 402 – – 402

At 27 December 2002 350,543 3,112 13,334 23 367,012

Whereof:Cost – – – 23 23 Valuation 350,543 3,112 13,334 – 366,989

350,543 3,112 13,334 23 367,012

Investments in subsidiaries and associates are held at valuation representing the amount of attributable underlying net assets at the balance sheet dateincluding related unamortised goodwill together with the unallocated pension liability relating to subsidiaries. As at 27 December 2002 a provision of £1,885,000 (2001: £1,987,000) has been made against the deficiency of underlying net assets in certain subsidiaries. On a historical cost basis theinvestment in the subsidiaries would have been included at a cost of £506,125,000 (2001: £506,737,000) less a provision for diminution in value of £28,043,000 (2001: £22,921,000). On a historical cost basis the investment in the associates would have been included at a cost of £1,661,000 (2001: £7,174,000). The principal subsidiaries, joint ventures and associates of the Group are listed on page 70.



11. Stocks

Group

2002 2001£’000 £’000

Raw materials 17,233 29,253 Work in progress 41,703 33,338 Finished goods 43,808 56,507

102,744 119,098 Less: progress payments received & receivable 7,710 4,474

95,034 114,624

12. Debtors

Group Company


£’000 £’000 £’000 £’000

Amounts recoverable within one year:Amounts recoverable on contracts 37,792 30,796 – – Trade debtors 131,749 149,544 – – Amounts owed by subsidiaries – – 5,808 6,223 Amounts owed by joint ventures & associates 1,353 951 735 547 Tax recoverable 2,709 1,546 – – Deferred tax recoverable 1,217 1,168 1,518 19 VAT recoverable 1,166 1,555 77 64 Other debtors 5,885 5,775 551 484 Prepayments & accrued income 4,219 6,060 – 196

186,090 197,395 8,689 7,533

13. Borrowings

Group Company

2002 2001 2002 2001£’000 £’000 £’000 £’000

Bank overdrafts & short term debt 1,918 5,708 28,609 18,848 Loans – current portion

– bank loans 9,980 9,873 9,900 9,722 – loans from subsidiaries – – 580 580

11,898 15,581 39,089 29,150

14. Other creditors

Group Company


£’000 £’000 £’000 £’000

Payments received on account 18,851 28,129 – – Obligations under finance leases (note 16) 455 293 – – Trade creditors 74,596 73,130 – – Amount owed to subsidiaries – – 599 267 Amounts owed to associates 9 11 – – Corporate tax 13,390 14,473 9,165 14,016 Other taxes & social security costs 8,277 8,931 278 251 Other creditors 6,727 14,785 109 114 Accruals & deferred income 46,161 37,902 1,039 2,545 Proposed dividends 17,865 17,105 17,865 17,105

186,331 194,759 29,055 34,298


15. Loans

Group Company

2002 2001 2002 2001£’000 £’000 £’000 £’000

Amounts due are repayable as follows:in more than two years butnot more than five years: – bank loans 396 137,532 – 66,942

– loans from subsidiaries – – 129,129 122,747 in more than one year butnot more than two years – bank loans 136,841 9,806 66,957 9,736

137,237 147,338 196,086 199,425 Loans – current portion (includedin borrowings – see note 13) – bank loans 9,980 9,873 9,900 9,722

– loans from subsidiaries – – 580 580

147,217 157,211 206,566 209,727

Bank loans amounting to £555,000 (2001: £501,000) are secured over local assets.

16. Leasing commitments

Group Company

2002 2001 2002 2001£’000 £’000 £’000 £’000

(a) Finance leases:

As at 27 December 2002 the net obligationsunder finance leases amounted to 1,997 2,261 – –

of which payable during 2003 455 293 – – 2004 425 341 – – 2005 to 2007 762 1,438 – – after 2007 355 189 – –

1,997 2,261 – –

(b) Operating leases:

As at 27 December 2002 committed payments under operating leases for 2003 amounted to Land & buildings 3,067 3,545 – – Other 3,242 3,205 35 55

6,309 6,750 35 55

of which payable in respect of operating leases ending in 2003 1,252 1,378 – 22

2004 to 2007 3,984 3,621 35 33 after 2007 1,073 1,751 – –

6,309 6,750 35 55



17. Provisions for liabilities & charges

Group

Deferred Post retirement benefits Rational-tax Pensions Other Warranties isation Other Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000

At 29 December 2001 – as stated 4,479 1,809 7,038 7,102 1,093 8,656 30,177 Prior year adjustment 14,371 (1,809) (7,038) – – – 5,524

At 29 December 2001 – as restated 18,850 – – 7,102 1,093 8,656 35,701 Reclassification – – – 88 – 447 535 Net movement in year (937) – – – – – (937)Arising during the year – – – 3,504 4,626 1,741 9,871 Disposals – – – (26) – (132) (158)Released – utilised – – – (3,477) (2,541) (1,964) (7,982)

– unutilised – – – (893) – (967) (1,860)Exchange (1,241) – – (103) (54) (658) (2,056)

At 27 December 2002 16,672 – – 6,195 3,124 7,123 33,114

The reclassification of £535,000 to “warranties” and “other” relates to provisions which were previously included in “other creditors”. Warranty provisionsinclude provisions for expected warranty and contract penalty claims on products sold and services provided. It is expected that all costs related to suchclaims will have been incurred within five years of the balance sheet date. Rationalisation provisions relate primarily to rationalisation of operations in theUK and the United States. It is expected that the majority of these costs will be incurred within one year of the balance sheet date with remaining costsbeing incurred in the period up to 2012. Other provisions relate principally to environmental issues in the United States, provisions held by Australiansubsidiaries for employees’ long service leave, severance provisions in South America and leaving indemnity provisions in France. It is expected that theenvironmental costs will be incurred in the period up to 2024.

Company

Deferred Pensiontax costs Subsidiaries Total

£’000 £’000 £’000 £’000

At 29 December 2001 – as stated 795 1,116 1,987 3,898 Prior year adjustment (795) (1,116) – (1,911)

At 29 December 2001 – as restated – – 1,987 1,987 Net movement in year – – (102) (102)

At 27 December 2002 – – 1,885 1,885

The provision for subsidiaries is made in respect of the deficiency of underlying net assets in certain subsidiaries (see note 10).

18. Retirement benefits

The Group operates defined benefit pension arrangements in the UK and North America of which The Weir Group Pension & Retirement Savings Scheme ispredominant. The latest full actuarial valuation of this plan was at 6 April 2000 and, for the purposes of accounting for FRS17, this has been adjusted to reflectthe positions at the 2000, 2001 and 2002 year ends by a qualified independent actuary. For this closed scheme the current service cost is expected toincrease under the projected unit method as the members of the scheme approach retirement.

Following an initial review of the financial position of the plan completed in January 2003, on the advice of the actuary, the employer contribution rateincreases from 10.5% to 12.5% (2001: 6% to 10.5%) of total contribution salaries with effect from 1 April 2003 and a special contribution of £10m will bemade in the first half of 2003. The next full actuarial valuation of this plan for funding purposes will take place as at 31 December 2002.

The weighted averages of the major assumptions used by the actuaries for all defined benefit plans were (in nominal terms):

UK North America UK North America UK North America

2002 2002 2001 2001 2000 2000% % % % % %

Rate of increase in salaries 3.4 3.2 3.6 4.2 3.6 4.2 Rate of increase in pensions in payment 2.3 n/a 2.5 n/a 2.5 n/a Discount rate 5.6 6.8 6.0 6.9 6.0 7.2 Inflation assumption 2.3 2.5 2.5 3.0 2.5 3.0 Discount rate – post retirement healthcare n/a 6.3 n/a 6.8 n/a 7.6 Healthcare cost increases n/a * n/a ** n/a ***

*12.2% per annum decreasing to 5% per annum and remaining static at that level from 2008 onwards.**12.3% per annum decreasing to 5% per annum and remaining static at that level from 2007 onwards.***8.7% per annum decreasing to 5.8% per annum and remaining static at that level from 2021 onwards.


18. Retirement benefits (continued)

The assets and liabilities of the UK plans and the weighted average expected rates of return are:

UK

2002 2002 2001 2001 2000 2000% £’000 % £’000 % £’000

Equities 7.5 248,119 7.4 325,837 7.1 369,723 Bonds 4.4 96,589 5.1 89,509 4.7 100,986 Property 7.0 13,910 6.9 14,988 6.6 14,681

Total market value of assets 358,618 430,334 485,390 Actuarial value of plan liabilities (499,168) (457,981) (434,466)

(Deficit)/surplus in the plans (140,550) (27,647) 50,924 Related deferred tax asset/(liability) 42,177 8,294 (15,278)

Net UK pension (liability)/asset (98,373) (19,353) 35,646

The assets and liabilities of the North America plans and the weighted average expected rates of return are:

North America

2002 2002 2001 2001 2000 2000% £’000 % £’000 % £’000

Equities 7.8 17,181 7.4 21,046 7.4 22,731 Bonds 4.7 9,364 4.2 12,237 4.9 13,980 Property 3.0 1,142 n/a – n/a –

Total market value of assets 27,687 33,283 36,711 Actuarial value of plan liabilities (33,998) (33,382) (32,037)

(Deficit)/surplus in the plans (6,311) (99) 4,674 Post retirement healthcare liability (6,990) (7,038) (6,610)

(13,301) (7,137) (1,936)Related deferred tax asset 5,080 2,840 654

Net North America retirement benefits liability (8,221) (4,297) (1,282)

Total retirement benefits (liability)/asset (106,594) (23,650) 34,364

The movement in the deficit during the year is analysed as follows:

UK North America Post retirement UK North America Post retirementpensions pensions healthcare pensions pensions healthcare

2002 2002 2002 2001 2001 2001£’000 £’000 £’000 £’000 £’000 £’000

(Deficit)/surplus in plans at beginning of year (27,647) (99) (7,038) 50,924 4,674 (6,610)

Movement in year:Current service costs (note 7) (6,950) (1,212) (71) (8,061) (1,197) (154)Past service costs (note 7) – (42) – – – – Settlements/curtailments (note 7) – 954 501 300 – – Exceptional curtailment – – 172 – – – Other finance income (note 2b) 2,536 (263) (494) 5,768 73 (460)

Profit before tax impact (4,414) (563) 108 (1,993) (1,124) (614)

Contributions 13,635 510 401 4,926 255 365

Actual return less expected return on pension plan assets (103,203) (3,859) – (77,081) (3,876) – Experience gain/(loss) arising on retirement benefits plan liabilities 344 (929) 33 (4,423) 1,541 – Changes in financial assumptionsunderlying retirement benefits plan liabilities (19,265) (1,761) (1,192) – (1,495) –

Variance between actuarialassumptions & actual experience (122,124) (6,549) (1,159) (81,504) (3,830) –

Exchange – 390 698 – (74) (179)

Deficit in the plans at end of year (140,550) (6,311) (6,990) (27,647) (99) (7,038)



18. Retirement benefits (continued)

The history of experience gains and losses is as follows:UK North America Post retirement

pensions pensions healthcare

2002 2001 2002 2001 2002 2001

Difference between expected & actual return on plan assets:Amount £’000 (103,203) (77,081) (3,859) (3,876) n/a n/aPercentage of plan assets 29% 18% 14% 12% n/a n/a

Experience gains & losses on plan liabilities:Amount £’000 344 (4,423) (929) 1,541 33 n/aPercentage of present value of plan liabilities 0.1% 1% 3% 5% 0.5% n/a

Total gross amount recognised in statement of total recognised gains & losses:Amount £’000 (122,124) (81,504) (6,549) (3,830) (1,159) n/a Percentage of present value of plan liabilities 24% 18% 19% 11% 17% n/a

Company unapproved planThe major assumptions used by the actuaries for the company unapproved plan were:

Company

2002 2001 2000% % %

Rate of increase in salaries 4.1 4.3 4.3 Rate of increase in pensions in payment 2.3 2.5 2.5 Discount rate 5.6 6.0 6.0 Inflation assumption 2.3 2.5 2.5

The liabilities of the company unapproved plan are:Company

2002 2001 2000£’000 £’000 £’000

Actuarial value of plan liabilities (942) (1,140) (1,114)Related deferred tax asset 283 342 334

Net pension liability (659) (798) (780)

The movement in the deficit during the year is analysed as follows:Company

2002 2001£’000 £’000

Deficit in plan at beginning of year (1,140) (1,114)

Movement in year:Current service costs (15) (87)Interest on pension liabilities (67) (67)

Profit before tax impact (82) (154)

Payments 51 50

Experience gain arising on pension plan liabilities 256 78 Changes in financial assumptions underlying pension plan liabilities (27) –

Variance between pension fund actuarial assumptions & actual experience 229 78

Deficit in the plan at end of year (942) (1,140)

The history of experience gains and losses is as follows:Company

2002 2001

Experience gains on plan liabilities:Amount £’000 256 78 Percentage of present value of plan liabilities 27% 7%

Total gross amount recognised in statement of total recognised gains & losses:Amount £’000 229 78 Percentage of present value of plan liabilities 24% 7%


19. Share capital

2002 2001£’000 £’000

Authorised share capital:Ordinary shares of 12.5p each 36,000 36,000

Allotted, called up & fully paid:Ordinary shares of 12.5p each 25,522 25,300

Shares Aggregate Share Considerationallotted nominal value premium receivedNumber £’000 £’000 £’000

Exercise of share options 1,773,627 222 4,428 4,650

At 27 December 2002 shares in the company subject to options under the company’s share option scheme were as follows:

First normal Price per Numberexercise date share of shares

Executive Share Option Scheme 19841996 298.5210p 157,107 1997 311.6268p 73,291 1997 285.4152p 41,203 1997 261.0000p 100,000

Savings Related Share Option Scheme 19912002 218.0000p 88,577 2002 210.0000p 23,056 2003 250.0000p 328,962 2003 197.5000p 344,162 2004 210.0000p 594,695 2004 226.0000p 374,427 2005 197.5000p 582,992 2005 260.0000p 435,475 2006 226.0000p 436,308 2007 260.0000p 476,731

Executive Share Option Scheme 19941998 234.0000p 273,828 1999 260.0000p 127,306 1999 258.0000p 73,462 2001 242.5000p 12,371 2001 239.0000p 257,943 2002 283.5000p 139,779 2002 293.5000p 10,221 2002 246.5000p 892,700 2003 197.5000p 463,042 2004 251.5000p 892,000 2004 282.5000p 150,000 2005 262.5000p 1,506,000

In accordance with Urgent Issues Task Force Abstract 17 “Employee Share Schemes” the company has taken advantage of the exemption contained therein in respect of the accounting for the discount arising on the grant of options in the company’s Inland Revenue approved Savings Related ShareOption Scheme 1991.



20. Reserves

GroupShare Capital

premium redemption Revaluation Special Profit and lossaccount reserve reserve reserve account Total

£’000 £’000 £’000 £’000 £’000 £’000

At 29 December 2001 – as stated 15,791 531 – – 251,415 267,737Prior year adjustment – – – – (42,917) (42,917)

At 29 December 2001 – as restated 15,791 531 – – 208,498 224,820Premium on share issues 4,428 – – – – 4,428Cost of issuing shares through ESOT – – – – (596) (596)Goodwill reinstated – – – – (725) (725)Profit retained in year – – – – 25,656 25,656Actuarial loss net of deferred tax thereon – – – – (90,309) (90,309)Exchange differences – – – – (8,703) (8,703)

At 27 December 2002 20,219 531 – – 133,821 154,571

The profit and loss account above is stated after deducting an accumulated loss in respect of retirement benefits of £106,594,000 (2001: £23,650,000).

CompanyShare Capital

premium redemption Revaluation Special Profit and lossaccount reserve reserve reserve account Total

£’000 £’000 £’000 £’000 £’000 £’000

At 29 December 2001 – as stated 15,791 531 1,484 1,840 248,091 267,737Prior year adjustment – – (37,582) – (5,335) (42,917)

At 29 December 2001 – as restated 15,791 531 (36,098) 1,840 242,756 224,820Premium on share issues 4,428 – – – – 4,428Cost of issuing shares through ESOT – – – – (596) (596)Deficit on revaluation of investments – – (2,007) – – (2,007)Deficit on revaluation of investments due to FRS17 – – (74,649) – – (74,649)Gain on foreign exchange contract – – – – 2,464 2,464Actuarial gain net of deferred tax thereon – – – – 160 160Deficit for year – – – – (49) (49)

At 27 December 2002 20,219 531 (112,754) 1,840 244,735 154,571

The profit and loss account above is stated after deducting an accumulated loss in respect of retirement benefits of £659,000 (2001: £798,000).

In preparing the financial statements for the 52 weeks ended 27 December 2002, The Weir Group PLC has adopted FRS 17 ’Retirement Benefits’ in full, FRS 19 ’Deferred Tax’ and applied average rates of exchange instead of closing rates for the translation of the profit and loss account and cash flowstatements of overseas subsidiaries, joint ventures and associates. The adoption of average rates of exchange is more appropriate because this reflects morefairly the Group’s profits and losses and cash flow movements as they arise throughout the accounting period.

The adoption of FRS 17 has resulted in a change in accounting policy for pensions. Defined benefit pension scheme assets and liabilities measured underFRS 17 now replace the SSAP 24 pension prepayments and provisions in the balance sheet. Similarly in the performance statements FRS 17 accounting forpension costs replaces SSAP 24 accounting. In the profit and loss account two new items, expected return on assets and interest on pension schemeliabilities, are now included under the heading ’other finance income’. Actuarial gains and losses are reflected in the statement of total recognised gainsand losses.

The adoption of FRS 19 has resulted in a change of accounting policy for deferred tax. Deferred tax is recognised on a full provision basis in accordancewith the accounting policy described in the accounting policies section. Previously, deferred tax was provided for on a partial provision basis, wherebyprovision was made on all timing differences to the extent that they were expected to reverse in the future without replacement.


20. Reserves (continued)

The above changes in policy have resulted in prior year adjustments. The table below shows the impact of the prior year adjustments on the financialstatements of the prior period and the effect of the changes in accounting policy on the results of the current period relating to FRS17 and FRS19.

FRS17 FRS19 Total FRS17 FRS19 Total2002 2002 2002 2001 2001 2001

£’000 £’000 £’000 £’000 £’000 £’000

Operating profit 4,055 – 4,055 (5,642) – (5,642)Exceptional item 172 – 172 – – –Other finance income 1,779 – 1,779 5,381 – 5,381

Profit before tax 6,006 – 6,006 (261) – (261)Tax (1,698) (1,179) (2,877) 227 (3,384) (3,157)

Increase/(decrease) in profit after tax 4,308 (1,179) 3,129 (34) (3,384) (3,418)

Decrease in shareholders’ funds (114,039) (14,219) (128,258) (28,756) (14,161) (42,917)

The adoption of average exchange rates for translation purposes increased the operating profit for the 52 weeks to 28 December 2001 by £1.1m. The impact on the 52 weeks to 27 December 2002 was an increase of £1.6m. There is no impact on shareholders’ funds.

During the year the company issued 945,016 ordinary shares to an employee share ownership trust (ESOT) in respect of the exercise of options under theSavings Related Share Option Scheme 1991. The company made a contribution to the ESOT equal to the difference between the market price at date of issue and the option price at cost to the company of £596,000.

The exchange differences adjustment to Group profit and loss account reserves includes exchange gains free of tax of £3,096,000 on foreign exchangecontracts which partially hedge overseas net assets (2001: loss of £996,000 on foreign exchange contracts which partially hedge overseas net assets).

The cumulative amount of goodwill deducted directly from Group reserves net of goodwill relating to businesses disposed of as at 27 December 2002 is £138,785,000 (2001: £138,060,000).

21. Profit attributable to The Weir Group PLC

The profit dealt with in the accounts of The Weir Group PLC was £24,451,000 (2001: £20,357,000). In accordance with the concession granted undersection 230 of the Companies Act 1985 the profit and loss account of The Weir Group PLC has not been separately presented in these accounts.



22. Cash flow statement2002 2001

(restated)£’000 £’000

(a) Reconciliation of Group operating profit to net cash inflow from operating activities:

Operating profit 41,795 40,377 Depreciation, goodwill amortisation & grant credits 23,510 25,999 Surplus on disposal of tangible assets & investments (1,612) (1,378)Funding of pension & post retirement costs (7,726) 3,566 Increase in provisions 3,772 3,702

Funds generated by operations 59,739 72,266

Decrease/(increase) in stocks 6,749 (5,639)Decrease in debtors 2,131 24,568 Increase/(decrease) in creditors 778 (16,243)

Decrease in working capital 9,658 2,686

Cash spent on exceptional environmental provision (1,029) –Cash realised/(spent) on exceptional closure costs 52 (2,692)Cash spent on exceptional Warman reorganisation costs (348) (1,056)

Cash spent on exceptional items (1,325) (3,748)

Net cash inflow from operating activities 68,072 71,204

(b) Analysis of cash flows for headings netted in the cash flow statement:

Returns on investments & servicing of finance:Interest received 4,059 3,711 Interest & finance charges paid (7,365) (12,128)Interest element of finance lease rentals (204) (133)

(3,510) (8,550)

Capital expenditure & financial investment:Purchase of tangible fixed assets (15,344) (15,841)Purchase of investments (426) (155)

(15,770) (15,996)

Sale of tangible fixed assets – continuing operations 3,030 1,020 Sale of tangible fixed assets – discontinued operations 2,040 4,151 Sale of investments 503 367

5,573 5,538

(10,197) (10,458)

Management of liquid resources:Cash moved to deposit (35,516) (12,946)

Financing:Issue of shares 4,650 4,581 Cost of issuing shares to ESOT (596) (648)New loans 96 463 Loans repaid (10,069) (21,970)Short term bank loans (4,549) 9,123 Lease obligations repaid (451) (406)Foreign exchange hedging 3,246 (1,344)

(7,673) (10,201)


22. Cash flow statement (continued)

(c) Analysis of net funds/(debt):At Cash Lease At

29.12.01 flow inception Exchange 27.12.02£’000 £’000 £’000 £’000 £’000

Cash on call at bank & in hand 28,415 44,959 Overdrafts (3,111) (1,918)

25,304 19,447 – (1,710) 43,041 Cash on deposit at bank 77,238 35,516 – (222) 112,532 Short term debt (9,041) 4,549 – 57 (4,435)Loans (157,211) 9,973 – 21 (147,217)Finance leases (2,261) 451 (182) (5) (1,997)

(65,971) 69,936 (182) (1,859) 1,924

* These amounts represent ’cash at bank & in hand’ per the balance sheet (2001: excluding short term debt of £2,597,000 not offsettable against cash).

23. Acquisitions & disposals

(a) Cash outflow on prior years’ acquisitions:Total Total2002 2001

(restated)£’000 £’000

Acquisition cost – 3,868 Cash transferred – (30)Previous years’ acquisition deferred consideration paid 927 –

927 3,838

(b) Disposal of businesses:

During the year the Group disposed of the businesses of Molded Products, Actuators and the turbo-drilling operations of Neyrfor-Weir Limited

Molded Neyrfor-WeirProducts Actuators Limited Total

2002 2002 2002 2002£’000 £’000 £’000 £’000

Net assets disposed of Tangible assets 1,327 13 6,282 7,622 Working capital

– stocks 762 689 5,951 7,402 – debtors 1,840 – 1,270 3,110 – cash 28 – – 28 – creditors (1,232) – – (1,232)

Goodwill previously written off to reserves – – (725) (725)

2,725 702 12,778 16,205(Loss)/gain on disposal (202) 154 2,114 2,066

Net proceeds 2,523 856 14,892 18,271

The profit attributable to The Weir Group PLC includes profits of Molded Products and the turbo-drilling operations of Neyrfor-Weir Limited up to their dates of disposal of £151,000 and £2,633,000 respectively. During the year Molded Products generated £385,000 of the Group’s cash inflow fromoperating activities, received £8,000 in respect of net returns on investments and servicing of finance and utilised £53,000 for capital expenditure. During the year Neyrfor-Weir Limited generated £5,408,000 of the Group’s cash inflow from operating activities, received £390,000 in respect of netreturns on investments and servicing of finance and utilised £527,000 for capital expenditure.

*

**



23. Acquisitions & disposals (continued)

(c) Cash inflow/(outflow) on disposals:Molded Neyrfor-Weir

Products Actuators Limited Others Total Total2002 2002 2002 2002 2002 2001

£’000 £’000 £’000 £’000 £’000 £’000

Net proceeds/(cost) on disposals 2,523 856 14,892 – 18,271 (421)Accrued costs & deferred (proceeds) 37 (565) – – (528) 114 Prior year disposals’ deferred price adjustment & costs paid – – – (292) (292) (974)

2,560 291 14,892 (292) 17,451 (1,281)(Cash)/overdraft transferred (28) – – – (28) 234

2,532 291 14,892 (292) 17,423 (1,047)

24. Derivatives & other financial instruments

An outline of the Group’s objectives, policies and strategies in respect of financial instruments is set out in the Operating & Financial Review on page 12.

For the purposes of the disclosures which follow in this note, short term debtors and creditors which arise directly from the Group’s operations have been excluded as permitted under FRS13. The disclosures focus on those financial instruments which play a significant medium to long term role in thefinancial risk profile of the Group. An analysis of the carrying value of all financial assets and liabilities is given in the fair value table in note 24(e).

(a) Interest rate management

The interest rate profile of the financial liabilities of the Group at 27 December 2002 is set out in the table below:

Fixed rate financial liabilitiesWeighted

Weighted average Floatingaverage period for Fixed rate rateinterest which rate financial financial

rate is fixed liabilities liabilities TotalCurrency % Years £’000 £’000 £’000

Sterling – – – 44,298 44,298 US $ 8.50 2.00 112 29,558 29,670 Australian $ – – – 69,883 69,883 Other 6.38 6.42 2,390 7,721 10,111 Bank offset arrangements – – – (2,830) (2,830)

6.48 6.22 2,502 148,630 151,132

The interest rate profile of the financial liabilities of the Group at 28 December 2001 is set out in the table below:

Fixed rate financial liabilitiesWeighted

Weighted average Floatingaverage period for Fixed rate rateinterest which rate financial financial

rate is fixed liabilities liabilities TotalCurrency % Years £’000 £’000 £’000

Sterling – – – 51,361 51,361 US $ 8.50 5.00 177 37,327 37,504 Australian $ – – – 70,348 70,348 Other 6.59 5.19 1,666 15,417 17,083 Bank offset arrangements – – – (11,116) (11,116)

6.77 5.17 1,843 163,337 165,180

The floating rate financial liabilities comprise:– sterling denominated bank loans that bear interest at rates based on bank base rate and/or LIBOR.– United States dollar bank loans that bear interest at rates based on United States prime rate and/or LIBOR.– Australian dollar bank loans that bear interest at rates based on the average bank bill swap bid rate (BBSY).


24. Derivatives & other financial instruments (continued)

The interest rate profile of the financial assets of the Group at 27 December 2002 is set out in the table below:Financial

Floating assetsFixed rate rate on which

financial financial no interestassets assets is paid Total

Currency £’000 £’000 £’000 £’000

Sterling 355 89,635 174 90,164 US $ 93 20,916 31 21,040 Australian $ – 26,710 20 26,730 Other – 18,404 87 18,491 Bank offset arrangements – (2,830) – (2,830)

448 152,835 312 153,595

The interest rate profile of the financial assets of the Group at 28 December 2001 is set out in the table below:Financial

Floating assetsFixed rate rate on which

financial financial no interestassets assets is paid Total

Currency £’000 £’000 £’000 £’000

Sterling 353 65,586 393 66,332 US $ 102 12,697 592 13,391 Australian $ – 19,638 4 19,642 Other – 10,507 1,020 11,527 Bank offset arrangements – (11,116) – (11,116)

455 97,312 2,009 99,776

The fixed rate financial assets comprise UK gilts and United States treasury bonds and based on carrying value the one year weighted average yields are6.50% and 1.29% respectively (2001: 6.07% and 1.81%).

The floating rate financial assets comprise cash and short term deposits at call and short notice rates.

Financial assets on which no interest is paid comprise cash in hand and cash held at bank on non interest bearing accounts together with sundry unlistedinvestments.




(b) Exchange risk management:

The Group follows a policy of managing its exposure to foreign currencies by hedging all transaction exposures using the forward forex markets wheneverpossible. In addition, foreign currency monetary assets are utilised to manage currency exposure on future monetary liabilities arising in respect of existingcontracts. The currency gains/losses on these monetary assets are matched against the exposure on the future monetary liability in the overall contractassessment. Accordingly, as at 27 December 2002 and at 28 December 2001 there are no material exposures on currency transactions that give rise to netcurrency gains and losses recognised in the profit and loss account.

(c ) Maturity of financial liabilities:

The maturity profiles of the Group’s financial liabilities as listed in the fair value table below, are disclosed in notes 15 and 16.

(d) Borrowing facilities:

The Group has various borrowing facilities available to it. The undrawn committed facilities available as at 27 December 2002 in respect of which allconditions precedent have been met at the date, were as follows:

2002 2001£’000 £’000

Expiring in more than one year but not more than two years 77,078 – Expiring thereafter – 77,260

77,078 77,260

(e) Fair value:

The estimated fair value of the Group’s financial instruments are summarised below:

Carrying Estimated Carrying Estimatedamount fair value amount fair value

2002 2002 2001 2001£’000 £’000 £’000 £’000

Primary financial instruments held or issued to finance the Group’s operations:Investments – UK gilts 355 357 353 351

– United States treasury bonds 93 93 102 102 – unlisted 91 91 112 112

Cash at bank & in hand 153,056 153,056 99,209 99,209 Bank overdrafts & short term debt (1,918) (1,918) (5,708) (5,708)Loans (147,217) (147,217) (157,211) (157,211)Finance leases (1,997) (1,997) (2,261) (2,261)

2,463 2,465 (65,404) (65,406)Derivative financial instruments held to hedge the currencyexposure on financial assets & liabilities:Unrecognised forward foreign currency contractsGains – 2,014 – 2,142 Losses – (1,136) – (497)

Asset/(liability) 2,463 3,343 (65,404) (63,761)

Market values have been used to determine the fair value of listed fixed asset investments. The fair value of forward foreign exchange contracts is theestimated amount the Group would expect to pay or receive on the termination of these contracts. The fair value of all other items have been calculated by discounting the expected future cash flows at prevailing interest rates.



(f) Hedges:

Gains and losses on financial derivatives at 27 December 2002 which are being used for hedging purposes are as follows:

Gains Losses Total Gains Losses Total2002 2002 2002 2001 2001 2001

£’000 £’000 £’000 £’000 £’000 £’000

Gains & losses unrecognised 2,014 (1,136) 878 2,142 (497) 1,645 Gains & losses deferred 254 (162) 92 68 (183) (115)

2,268 (1,298) 970 2,210 (680) 1,530

of which:Gains & losses expected to berecognised in the profit & loss accountin the following year 2,205 (1,181) 1,024 2,043 (362) 1,681

Gains & losses included in the profit & loss account for the current yearthat arose in previous years 2,329 (292) 2,037 723 (1,103) (380)

25. Capital commitments

Group Company

2002 2001 2002 2001£’000 £’000 £’000 £’000

Outstanding capital commitments contracted but not provided 1,515 1,527 – –

26. Contingent liabilities & guarantees

Group Company

2002 2001 2002 2001£’000 £’000 £’000 £’000

Maximum guarantee obligations relating to bankand other borrowings of subsidiaries and a joint venture. – – 3,661 4,121

Guarantees and indemnities have been given in respect of the performance of Devonport Royal Dockyard Limited. The company and certain subsidiarieshad other contingent liabilities in the normal course of business, including counter indemnities for performance and tendering bonds of certain subsidiaries.


Country of % equity ownedregistration & voting rights at

Activity or incorporation 27 December 2002

Engineering ProductsSubsidiaries

EnviroTech Pumpsystems Inc. Clear Liquid Pumps USA 100 EnviroTech Pumpsystems S.A. Minerals Pumps France 100 SEBIM Holding S.A. Valves & Controls France 100 Vulco S.A. + Minerals Pumps Chile 100 Weir do Brazil Minerals Pumps Brazil 100 Weir Engineering Pty Ltd. Clear Liquid Pumps Australia 100 Weir-EnviroTech (Pty) Ltd. Minerals Pumps South Africa 100 Weir Floway Inc. + Clear Liquid Pumps USA 100 Weir Hazleton Inc. + Clear Liquid Pumps USA 100 Weir Netherlands b.v Minerals Pumps Netherlands 100 Weir Pumps Ltd. – Pump Division * Clear Liquid Pumps Scotland 100 Weir Slurry Group Inc. Minerals Pumps USA 100 Weir Valves & Controls Flowguard Ltd. (formerly Flowguard Ltd.) Flow Control Equipment England 100 Weir Valves & Controls UK Ltd. (formerly Hopkinsons Ltd.) * Valves & Controls England 100 Weir Valves & Controls USA Inc. (formerly Atwood & Morrill Co. Inc.) Valves & Controls USA 100 Weir Warman Ltd. (formerly Warman International Ltd.) Minerals Pumps England 100

TechnaSubsidiaries

Entropie S.A. Desalination & Thermal Processes France 100 Liquid Gas Equipment Ltd. * Liquid Gas Handling Scotland 100 Strachan & Henshaw Ltd. Mechanical Handling Equipment England 100 Weir Envig (Pty) Ltd. Water & Effluent Treatment South Africa 100 Weir Westgarth Ltd. * Desalination & Water Treatment Scotland 100

Joint VentureEuropean Nuclear Technologies Limited Marketing Joint Venture England 50

Engineering ServicesSubsidiaries

Peacock Inc. Engineering Services Canada 100 Weir Pumps Ltd. Engineering Services Scotland 100 – Engineering Services Division *

Joint VenturesWeir-Houston Engineers Ltd. Downhole Drilling Equipment Scotland 50 Wesco Abu Dhabi L.L.C. Engineering Services U.A.E. 49

AssociateDevonport Management Ltd. *‡ Refitting & Maintenance of Naval Vessels England 24.5

(holding company of Devonport Royal Dockyard Ltd.)

Joint ventures’ issued capital as follows: European Nuclear Technologies Limited £1,000; Weir-Houston Engineers Ltd. £100,000;Wesco Abu Dhabi L.L.C. £578,571.

Associate’s issued capital as follows: Devonport Management Ltd. £400.

* Companies whose shares are owned directly by The Weir Group PLC.+ The results of these companies have been included on the basis of reliable unaudited management accounts.‡ The results of DML have been included on the basis of the latest draft statutory accounts.

Principal Companies of the Group


Group Five Year Summary

1998 1999 2000 2001 2002(restated)

£’000 £’000 £’000 £’000 £’000

Group turnover 624,418 637,522 745,936 740,444 701,210Operating profit before goodwill amortisation & exceptional items 61,583 56,891 72,875 62,742 62,235Net interest & other income (before other finance income) 2,461 (3,635) (11,661) (7,202) (3,984)Profit before exceptional items & tax 63,629 49,926 54,509 54,363 53,177Total exceptional items 7,935 (8,329) 2,317 (18,960) 6,250Profit on ordinary activities before tax 71,564 41,597 56,826 35,403 59,427Tax – charge pre exceptional items (17,139) (14,163) (15,276) (14,942) (13,822)

– exceptional (charge) / credit (1,501) 1,753 – 6,775 4,796Profit on ordinary activities after tax 52,924 29,187 41,550 27,236 50,401Earnings per share excluding goodwill amortisation & exceptional items 23.2p 19.6p 22.9p 22.8p 22.6pOrdinary dividends per share 9.9p 10.4p 11.0p 11.6p 12.0p

Total assets less current liabilitiesIntangible assets 19,931 146,010 124,988 115,150 105,509Tangible assets 104,076 138,316 127,250 116,029 97,676Investments 19,734 22,133 24,398 27,408 20,151Net current assets 141,989 139,015 220,813 200,888 235,951

285,730 445,474 497,449 459,475 459,287

Financed byShareholders’ capital 250,144 258,768 286,804 250,120 180,093Creditors falling due after more than one year 14,325 148,185 167,390 149,306 138,779Deferred tax 5,523 10,717 19,029 18,850 16,672Pension costs provision 2,047 2,477 2,081 – –Other provisions 12,685 24,447 21,204 16,851 16,442Deferred income 611 506 494 276 147Minority interest 395 374 447 422 560Retirement benefits – – – 23,650 106,594

285,730 445,474 497,449 459,475 459,287

The figures for 1998, 1999 and 2000 have not been restated to reflect the impact of moving to average exchange rates or the changes introduced byFinancial Reporting Standard No 17 “Retirement Benefits” and Financial Reporting Standard No 19 “Deferred Tax”.


Financial Calendar

Ex-dividend date for final dividend30 April 2003

Record date for final dividend*2 May 2003

Annual general meeting15 May 2003

Final dividend paid2 June 2003

*shareholders on the register at this date will receive the dividend

Financial Highlights 2002 - Morningstar, Inc.

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Transcript of Financial Highlights 2002 - Morningstar, Inc.