The Weir Group PLC
23 March 2021
2020 Annual Report and 2021 Annual General Meeting
The following documents have today been posted or otherwise made available to Shareholders:
1. Annual Report and Financial Statements for the period ended 31 December 2020 (the "2020 Annual Report");
2. Notice of 2021 Annual General Meeting; and
3. Form of Proxy for the 2021 Annual General Meeting.
In accordance with Listing Rule 9.6.1, a copy of each of these documents has been uploaded to the National Storage Mechanism and will be available for viewing shortly at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
The documents (except the Form of Proxy) are also available on the Company's website at
www.global.weir/investors/shareholder-information/agm/ and in hard copy to Shareholders upon request to Investor Relations, The Weir Group PLC, 1 West Regent Street, Glasgow, G2 1RW.
The Company currently intends to hold its 2021 Annual General Meeting (the "AGM") at the Company's Head Office, 1 West Regent Street, Glasgow, G2 1RW, on Thursday 29 April 2021 at 2.30pm. As set out in the Notice of AGM, the Company fully supports the Government restrictions on mass gatherings, non-essential travel and social contact. On this basis, the Board has concluded that it is appropriate to strongly urge Shareholders not to attend the AGM in person this year as to do so would be inconsistent with current Government guidance relative to Covid-19. Shareholders are instead requested to make use of the electronic facilities to participate remotely. Shareholders are asked to please exercise their votes by submitting their proxy electronically or by post.
The Company intends to livestream the AGM so that Shareholders will be able to follow the meeting remotely, however, this will be kept under review and subject to the Government guidance in place at the time of the AGM. Shareholders will be able to access the meeting by visiting https://web.lumiagm.com/. For further information on how to join the AGM electronically, please see the guidance included in Appendix 2 of the Notice of AGM.
In addition, should a Shareholder have a question that they would like to raise at the AGM, the Company strongly encourages Shareholders to email it in advance to WeirAGM2021@mail.weir, or send it by post to the Company's Head Office to be received no later than close of business on 27 April 2021. The Company will also provide the facility for Shareholders to ask questions electronically immediately before and during the AGM via https://web.lumiagm.com/.
The Company will be closely monitoring the impact of Covid-19 and how this may affect the arrangements for the AGM. Shareholders should therefore continue to monitor the Company's website and announcements for any updates in relation to the AGM.
The Company's full year results announcement of 2 March 2021 contained a management report as well as the audited financial statements which were prepared in accordance with the applicable accounting standards.
The 2020 Annual Report submitted to the National Storage Mechanism today also contains information regarding the Company's principal risks and uncertainties as at 2 March 2021 (being the date of the 2020 Annual Report) and a responsibility statement relating to the content of the 2020 Annual Report; an extract of this information is provided below as required under paragraph 6.3.5 of the DTR, however this material should be read in conjunction with and is not a substitute for reading the full 2020 Annual Report. Page numbers and cross-references in the following appendices refer to page numbers and cross-references in the 2020 Annual Report.
APPENDICES
Appendix A: Principal risks and uncertainties as at 2 March 2021 (the date of the 2020 Annual Report)
A description of the principal risks and uncertainties that the Company faces is extracted in full and unedited from pages 43 to 51 of the 2020 Annual Report.
As in any business, there are risks and uncertainties which could impact the Group's ability to achieve its objectives in the future. The Group's risk management and assurance framework is designed to make this less likely by clearly identifying and seeking to mitigate these key risks.
The Board has conducted a robust assessment of the principal risks, alongside the Risk Appetite Statement set out on page 41, meeting the Board's responsibilities in connection with Risk Management and Internal Control details in the UK Corporate Governance Code 2018. Each of the principal risks is assigned an owner from amongst the Board or Group Senior Management team and a detailed review of each principal risk has been completed in the year.
The Group's risk registers were reviewed and validity of the existing prior year principal risks were reassessed and consideration was given as to whether any new principal risks have emerged, or certain risks are no longer considered to be a principal risk. This review resulted in changes being made to the principal risks in 2020.
The identified principal risks were subjected to a detailed assessment based on the following considerations:
· Severity of each risk relative to the Group's stated risk appetite;
· Existence and effectiveness of actions and internal controls which serve to mitigate the risk;
· The overall effectiveness of the Group's control environment, including assurance and any identified control weakness; and
· The extent to which each of the principal risks could impact the Group's viability in financial or operational terms, due to their potential effects on the business plan, solvency, reputation or liquidity.
The principal risks set out on pages 44 to 51 are those which we believe to have the greatest potential to impact our ability to achieve the Group's strategic objectives or which have the greatest potential impact on the Group's solvency, liquidity or reputation.
| Principal Risks and Uncertainties | ||
| Covid-19 (Risk trend: Increasing)
Risk of subsequent pandemic waves giving rise to further plant closures and heightened workforce exposures both for the Group and its key customers and suppliers which could lead to a loss of productivity and/or loss of life.
| ||
| Why we think this is important
Subsequent waves of Covid-19 gives rise to further plant closures resulting in a material impact on the Group's productivity and ability to meet customers' demands.
Subsequent waves of Covid-19 gives rise to further lockdowns and a resulting impact on the mental health and wellbeing of the Group's global workforce.
Wider supply chain interruptions as host Governments look to prioritise and safeguard their citizens and economies leading to increased restrictions around the cross-border movement of people and goods.
Risk of Covid-19 induced global recession impacting commodity prices and demand for mining equipment.
| How we are mitigating the risk
Divisional and Group Covid-19 response plans developed for all employees which are cognisant of locality and ongoing local authority restrictions.
Developed protocols and Group risk mitigation plans are focused on key control measures with particular attention to employee safety.
| Changes during 2020
This is a new risk in 2020. |
| Technology (Risk trend: Increasing)
Failure of the Group to embrace technology, innovate and continue to develop and invest in both our core and next generation solutions and services for our customers, leaves the Group's market leading positions and ability to deliver on growth ambitions exposed.
| ||
| Why we think this is important
We need to continue to drive innovation across the Group and collaborate with research partners to ensure there is a sustainable and evolving product offering leveraging new and adjacent technologies.
This can result in failure to achieve and maximise the expected sales opportunities from new product launches and technological advances.
Failure to adapt our business model to capture economic value from technological advances or prevent economic loss from other technological advances.
Failure to develop products meeting the sustainable needs of our customers and other stakeholders.
Failure to identify and respond to threats from disruptive technologies.
Failure to harness new technology to reduce costs/improve efficiency of our operations relative to peers (digital, automation, big data etc). | How we are mitigating the risk
Continued investment in our technology strategy aligned on smart, sustainable, efficient (SSE) priorities.
Hybrid R&D operating model combining divisional R&D, Weir Advanced Research Centre (WARC), Weir Additive Manufacturing Solutions (WAMS).
Strategic international research, academic and technology scanning partnerships and funding.
Strong governance around intellectual property and new material/product launches. | Changes during 2020
Further risk mitigation has been updated to capture latest thinking on key next priorities following the strategic planning process.
Engineering Excellence Committee (EEC) replaced with Weir Technology Excellence Committee (WTEC) with a focus on horizon 2/horizon 3 technology strategy and associated performance metrics.
Weir Innovation Network (WIN) approach matured to further promote, celebrate and reward culture of innovation. |
| Value Chain Excellence (Risk trend: No change)
Failure to achieve Value Chain Excellence improvements and the associated reduction in costs and enhanced capital efficiency.
| ||
| Why we think this is important
If we fail to improve our value chain management, we risk:
Losing the opportunity to meet our customer needs in terms of product volume, quality and delivery, through a failure in internal and external supply chains resulting in a low of reputation and sales;
Failure to optimise our inventory thus inhibiting the Group investment strategy and creating slow moving and obsolete inventory ultimately impacting our results;
Failure to manage potential above inflationary increases in procurement costs as commodity prices increasing thereby reducing our cost competitiveness and margins; and
Failure to develop organisational capability to sustain and improve operational performance results.
| How are we mitigating the risk
Regular KPI monitoring of the value chain throughout the organisation. Value Chain Excellence initiatives have been operating throughout the Group to drive value chain improvements including expanding production in best cost countries.
The Group's forward purchase commitments are being closely monitored to manage inventories at levels appropriate to market conditions.
Our credit risk management procedures are under continuous appraisal and review.
We regularly monitor market activity to ensure we remain competitive.
Improved demand planning and forecasting including Sales and Operations Planning within VCE.
Realising value from shared service initiatives. | Changes during 2020
Further mitigations reflects the ongoing plans to realise full value from our mining pure play platform including functional shared service initiatives. |
| Environmental Sustainability (Risk trend: No change)
Failure to adapt to and mitigate climate change and the associated impact on our current or future business.
| ||
| Why we think this is important
Failure to manage this risk has significant impacts on us, our customers and our supply chain. These impacts can be both acute and chronic.
Furthermore, failure to manage these risks may have political and legal implications following increased Governmental focus.
There are also wider implications of this risk including loss of market share, negative impact on reputation and failure to attract talent into the organisation. | How are we mitigating the risk
Sustainability Roadmap developed via extensive multi-stakeholder materiality assessment encompassing Environmental, Social & Governance (ES&G).
Two of the four Sustainability Roadmap priority areas focus on Environmental Sustainability.
Creating sustainable solutions: with targets for increased sustainability impact of our products in use, sustainable design and supply and end-of-life stewardship for our products.
Reducing our footprint: with targets for CO2 reduction (both efficiency and renewable supply optimisation), water stewardship, waste elimination.
We are continuing strong engagement with stakeholders in this area.
| Changes during 2020
2020 organisational changes to bring new focus on delivery of Sustainability Roadmap priorities and further strengthen governance foundations.
Further risk mitigations updated to capture proposed work arising from the completion of the 1st pass Task Force on Climate-related Financial Disclosures evaluation process. |
| Safety, Health and Well-Being (Risk trend: No change)
Failure to adequately protect our people and customers from harm presents a significant threat to the physical and mental wellbeing of the Group's existing and available workforce leading to a resultant impact on productivity and our ability to meet customer demands and expectations.
| ||
| Why we think this is important
We operate in hazardous environments, and therefore have a fundamental duty to protect our people and other stakeholders from harm whilst conducting our business.
Policies and processes must be in place to ensure the continued health, safety and wellbeing of all employees, customers and third parties.
Failure to ensure continued environmental compliance and/or contravention of environmental legislations.
Failure of the Group to respond to a significant risk to employees resulting from a pandemic or significant global health issue.
Failure of the Group to adequately protect its workforce from both the heightened stress on their wellbeing and/or psychological fears from changing work practices.
Failure to manage the security and safety risks associated with operating in higher risk location.
| How are we mitigating the risk
The Weir Behavioural Safety system is in place to reduce the risk of safety incidents.
In addition, there are initiatives to prevent the most common accident types. The Weir global SHE standards are continually reviewed.
The SHE Excellence Committee is responsible for monitoring performance and compliance with Group objectives, policies and standards relating to SHE.
The Chief Executive's Safety Committee meets monthly and is committed to achieving the highest of SHE standards.
There is a formal SHE assurance programme with issues escalated as required through the reporting structures.
Employee wellbeing support (including dedicated mental health first aiders, pandemic protocols and expansion of existing health training programme).
| Changes during 2020
Control measures updated to track status and progress of safety training for all employees.
Risk title refined to include employee's wellbeing. |
| Market Cyclicality (Risk trend: Decreasing)
Changes in key mining markets, including commodity prices and macro economic conditions have an adverse impact on customers' expenditure plans. Fundamental market structure changes could alter the long-term economics of the business.
| ||
| Why we think this is important
Cyclical nature of the Group's end markets, including continued exposure to oil sands, giving rise to downturns and resultant pricing and operational pressures.
Risk of credit markets tightening limiting access to capital.
Failure of the Group to maximise upturn opportunities and meet customer demands. | How are we mitigating the risk
We maintain regular engagement with our customers to understand their needs and challenges, and ensure our business is appropriately aligned.
Our strategic planning utilises extensive market intelligence to assist in forecasting opportunities and dips in markets.
| Changes during 2020
We continue to focus on customer relationships, technology development and Value Chain Excellence to manage this risk.
The risk trend has reduced to reflect the sale of Oil & Gas. |
| Competition (Risk trend: Decreasing)
Increasing presence of low cost competitors with improving quality in our end markets leads to significant pricing pressure and margin deterioration. Disruptive technologies or new entrants with alternative business models could also reduce our ability to sustainably win future business, achieve operating results and realise future growth opportunities. Continuing threat from third-party replicators.
| ||
| Why we think this is important
Increasing presence of low cost competitors with improving quality in our end markets leads to significant pricing pressure and margin deterioration.
Alternatively, increased competition forces a continual release of longer wear life products resulting in maintaining market share but cannibalising our sales volumes with difficulty in realising commercial benefits. | How are we mitigating the risk
Horizon scanning for competitor threats including patent searches and applications.
Collaboration with customers on technology partnerships and field trials.
Technology solutions with differentiation on engineering expertise, aftermarket service and total cost of ownership.
Continued development of operational efficiency and improvement plans.
Continued investment in core product design, process and materials that provide high value. | Changes during 2020
Risk trend reduced following the sale of Oil & Gas. |
| Digital Strategy and Roadmap (Risk trend: No change)
Failure to both exploit 'digitalisation' opportunities impacting the Group's ability to meet evolving customer expectations.
| ||
| Why we think this is important
Failure to embed 'digitalisation' as a priority within Group and divisional strategies, leading to underinvestment/delayed development of the capabilities needed to meet our medium-term business performance goals.
Failure to identify and mitigate potentially disruptive digital technology trends as they appear in mining or adjacent industries and/or failing to adapt at the required pace to gain/sustain market competitiveness.
Failure to leverage digital capabilities to drive automation and efficiency across core business processes, resulting in increased costs and/or lower responsiveness.
Failure to converge across Information Technology, Operational Technology (IIOT, OT) and Engineering Technology, leading to fragmented architecture, security exposure and inefficient service models.
Failure to exploit current and emerging data and analytics capabilities to improved operational performance for ourselves and our customers.
Failure to develop, attract and retain the talent need to underpin Weir's digitalisation journey and culture.
| How are we mitigating the risk
Digital and IT leadership embedded in the Group and divisional strategic planning processes.
Oversight and Governance within Information Systems & Technology (IS&T) Business Management system.
Group-lead scenario planning processes to identify and align on the major emerging technologies (including digital) as input to Group and divisional strategies.
IS&T operating model, providing clear governance framework (Strategy, Policy and Governance) and foundational platforms (Core Services) for IT and Digital investments across Group and Divisions.
Customer requirements evaluated through User Experience framework as input to the investment in development of processes, products and solutions Oversight and Governance within IS&T Business Management system.
Assurance work to embed Secure by Design within all Digital Development activities.
Alignment of products, solutions, technologies in line with IS&T operating model to deliver scalable solutions through Core, Common and Distinct framework. | Changes during 2020
Technological innovation continues to be at the forefront of the business due to more drive for financial and environmental efficiency and the pressure to provide customers solutions to improve the efficiency of their operations.
Further information on progress made in this area is set out on page 15.
Risk updated to reflect IS&T digital operating model changes. |
| Information Security & Cyber (Risk trend: No change)
Failure to adequately protect Weir Group from cyber enabled fraud and other information security risks which can lead to operational disruption, reputational damage, regulatory fines and/or financial impacts.
| ||
| Why we think this is important
Up-to-date data allows us to make informed decisions about our business. Therefore, we require reliable and efficient IT systems and infrastructure to support our data requirements. Breaches of our IT security could have serious consequences for our business, including: interruption to business operations; and loss of intellectual property and other sensitive data.
The Group is investing in a significant IT transformation programme. If this is not managed effectively, the consequences could include interruption to business operations if data is unavailable due to unsuccessful execution of change, impacting our ability to compete and our reputation in the market.
At present, the Group's principal exposures to cybercrime relate to the misappropriation of cash and data. Our revenue streams are largely protected as our products are not currently electronic in nature and we do not, as a rule, transact over the internet. | How are we mitigating the risk
We have an IT Governance Framework with a focus on structured change management techniques, including setting project governance levels in line with risk.
IS&T Control Board provides assurance and oversight.
Policies, procedures and baseline standards in relation to cyber risk and IT security more generally are continuously updated and rolled out to operations. A programme of user training in relation to cyber risk is in place.
Security Incident Responder teams monitor our various security systems.
All security related incidents are reported to the Group Executive. | Changes during 2020
Cybersecurity controls further enhanced, including a 24/7 security operations centre to monitor cybersecurity threats and regular crisis management rehearsals linked to cyber security scenarios. |
| People (Risk trend: No change)
Failure of the Group to build an ever more inclusive and diverse culture, which gives rise to an inability to attract and retain the very best workforce. | ||
| Why we think this is important
Our people represent our biggest asset and failure to attract, develop and retain key management and staff would have a detrimental impact on the Group's ability to deliver our key strategic objectives.
As markets improve we need to continue to recruit high quality staff building on existing capability while recruiting skilled expertise in the right areas of the business and at the right time. | How are we mitigating the risk
Promotion of the Weir Group Values & Behaviours, Code of Conduct and HR Policies sets the standards and expectations for all our staff, reinforcing our stated commitment to attracting and retaining the very best people.
High performer assessments are undertaken to identify and develop our very best talent.
Succession plans are in place and periodically reviewed for all of our key management.
Personal Development Plans are set and reviewed for the effective development of all of our staff.
We continue to offer competitive compensation and benefits packages.
Inclusion and Diversity Training and Steering Committee.
| Changes during 2020
The recruitment, talent development and performance enablement programme is being further developed.
Inclusion and Diversity Training |
| Political and Social (Risk trend: No change)
Adverse political action, or political and social instability, in territories in which we operate may result in strategic, financial or personnel loss to the Group.
| ||
| Why we think this is important
We operate across the globe and therefore have to work within a wide range of political and social conditions. Adverse events may occur in the territories in which we operate that may require us to act swiftly to protect our people and our property and regulatory changes could impact our competitiveness. We need to be flexible and able to anticipate such issues.
Expansions into new territories are only undertaken after rigorous assessment of the risks, including the social and political situation within the territory. | How are we mitigating the risk
Regular review of market attractiveness. Monitoring travel by Weir employees to higher risk locations in accordance with the Weir Group travel policy.
External expert risk assessments and regular monitoring in higher risk locations including contingency plans and exit strategy planning.
Our strategic planning assists in forecasting potential political and social instability in regions.
Continued assessment of global tariffs.
Proactive monitoring of evolving policy and development of contingency plans as situations materialise.
| Changes during 2020
Existing controls updated to reflect sale of minority B-BBEE interest.
Revised Strategic Planning Process adjusted to address Covid-19 risks.
While the UK's exit from the European Single Market and Customs Union did not have a material impact on the Group, mitigating actions were taken by our local UK businesses ahead of the transition. |
| Ethics and Governance (Risk trend: No change)
Interactions with our people, customers, suppliers and other stakeholders are not conducted with the highest standards of integrity and in accordance with Group Policies & Procedures which devalues our reputation.
| ||
| Why we think this is important
We are unwilling to accept dishonest or corrupt behaviour from our people, or external parties acting on our behalf, whilst conducting our business. If we fail to act with integrity, we are at risk of: · Reputational damage leading to a loss of business opportunity; · Increased scrutiny from regulators; · Legal action from regulators including fines, penalties and imprisonment; · Exclusion from markets important for our future growth; · Failure to meet required social standards to maintain licence to operate in our communities.
We expect all areas of the business to do the right thing and conduct business in compliance with applicable laws, Weir Group policies and procedures, and the highest ethical standards. | How are we mitigating the risk
The Code of Conduct, supplemented with Group policies on related topics, provides a clear framework for how we expect our business will be conducted.
Regular training and re-enforcement of principles is provided using a range of mechanisms including Town Hall style sessions and online and induction training.
The financial control framework is continually monitored for effectiveness.
Internal Audit's remit includes regular review of the anti-bribery and corruption and financial controls across the Group.
The compliance 'sub- function' within Group Legal designs and administers our global compliance programme and assists Internal Audit in monitoring adherence to enhance global focus on compliance.
An Ethics Hotline is available to all members of staff and the public. Reports are investigated on a timely basis and summary reports provided to Group Executive and Board.
| Changes during 2020
Completed in-depth review and refresh of Group anti-corruption risk assessment which underpins compliance programme risk mitigation.
Refreshed due diligence and management process for third-party intermediaries, which will be rolled out across 2021. |
Appendix B: Directors' statement of responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared the Group financial statements in accordance with both international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies to the European Union and the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 'Reduced Disclosure Framework', and applicable law.)
Under company law, directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. In preparing the financial statements, the directors are required to:
• Select suitable accounting policies and then apply them consistently;
• State whether applicable international accounting standards in conformity with the requirements of the Companies Act 2006 and the international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union have been followed for the group financial statements and United Kingdom Accounting Standards, comprising FRS 101 have been followed for the company financial statements, subject to any material departures disclosed and explained in the financial statements;
• Make judgements and estimates that are reasonable and prudent;
• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.
The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for Shareholders to assess the Group's performance, business model and strategy.
Each of the Directors, as at the date of this report, confirms to the best of their knowledge that:
• The Group financial statements, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and the international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Group;
• The Company financial statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 101, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and
• The Strategic Report and the Directors' Report include a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces.
In the case of each director in office at the date the Directors' Report is approved:
• So far as the director is aware, there is no relevant audit information of which the Group's and Company's auditors are unaware; and
• They have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Group's and Company's auditors are aware of that information.
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