Weir Group's (WEIR) profits slumped during a tumultuous six months for the engineering group that saw its oil and gas division fall into a £4m operating loss. Weir reiterated its intent on exiting oil and gas “at the right time”, having cast doubt on the future of the segment at its 2019 full-year results in February.
Oil and gas only accounted for 17 per cent of half-year group turnover. But the division suffered from weak market conditions as the North American market operated at record lows, and Weir expects this business to remain loss-making assuming that these conditions persist. Weir’s minerals arm fared better, as supply concerns and a surging gold price helped limit the division’s revenue decline to 7 per cent.
Weir’s exceptional costs ballooned to £18m from £3m in the prior year, and included coronavirus-related restructuring costs and a £5m charge linked to the troubled oil and gas division. Its free cash flow markedly improved to an inflow of £65m versus an outflow of £222m last year, although this largely reflected the £79m Weir saved from cancelling its 2019 final dividend and an improved working capital position that was helped by “lower activity levels across all three divisions”.
The consensus forecast are for full-year 2020 earnings per share of 62.64p, rising to 77.26p in 2021.
| WEIR GROUP (WEIR) | ||||
| ORD PRICE: | 1,191p | MARKET VALUE: | £3.09bn | |
| TOUCH: | 1,190-1,191p | 12-MONTH HIGH: | 1,597p | LOW: 666p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 616p* | NET DEBT: | 73% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019 | 1.33 | 106 | 29.8 | 16.5 |
| 2020 | 1.09 | 62.5 | 17.6 | nil |
| % change | -18 | -41 | -41 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £1.66bn, or 639p a share | ||||
