The mining and energy end-markets for Weir Group’s (WEIR) engineering services may indeed exhibit “positive long-term fundamentals”, to quote chief executive Jon Stanton. But it is current momentum which continues to impress. Buoyed by a 20 per cent rise in the order book, Weir saw revenues motor ahead in the six months to June, culminating in a 170 basis points jump in the operating margin to 15.1 per cent.
The latter figure may exclude £53.2m of exceptional items and amortised intangibles, but this kind of charge is par for the course for a services group. A corresponding surge in the return on capital employed to 11.8 per cent also suggests Weir has not compromised on margin, despite the 35 per cent leap in orders from oil and gas clients, and record aftermarket orders from the larger mining division.
Against this backdrop, the engineer has also found room to expand. In April, Weir tapped investors including BlackRock in a lightly-discounted £363m placing, to fund the $1.3bn (£0.99bn) purchase of mining tools maker ESCO. That deal completed this month, and largely explains the rise in net debt.
On average, analysts are guiding for adjusted pre-tax profits of $345m and EPS of 115¢ this year, rising to $422m and 138¢ in 2019.
| WEIR GROUP (WEIR) | ||||
| ORD PRICE: | 2,014p | MARKET VALUE: | £ 5.22bn | |
| TOUCH: | 2,013-2,016p | 12-MONTH HIGH: | 2,333p | LOW: 1,711p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 721p* | NET DEBT: | 47% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 (restated) | 0.92 | 75.3 | 27.9 | 15.00 |
| 2018 | 1.06 | 90.1 | 26.6 | 15.75 |
| % change | +15 | +20 | -5 | +5 |
| Ex-div: | 11 Oct | |||
| Payment: | 02 Nov | |||
| *Includes intangible assets of £1.4bn, or 544p a share. | ||||
