The Weir Group PLC

Good morning everyone and welcome to the call. I appreciate you all joining at short notice. As you've seen, we've announced a very exciting acquisition this morning and in conjunction decided that we should pull forward and deliver our 2024 full year results announcement at the same time. Please note the usual cautionary notice on forward looking statements. Today I'm joined by our CFO Brian Puffer and after the presentation will run an extended Q&A session. The presentation will consist of an introduction from me, then Brian will take you through the detailed 2024 financial results. I'll then give a quick overview of our strategic progress in 2024 before covering the acquisition of Micromine in detail. Brian will discuss the financial effects of the deal before I wrap up. So let me start with a reminder of our transformation journey to deliver on WEIR's compelling long-term value creation opportunity. Firstly, through our portfolio transformation, we created a focused mining technology leader with unique capabilities. Our world-class engineering solutions, combined with intensive global aftermarket support, keep our customers' minds running and solve their biggest challenges. we are deeply embedded in their operations and have a large installed base of mission-critical equipment with high barriers to entry. The combination of these elements have underpinned our track record of consistent delivery both financially and strategically. Secondly, through performance excellence, we have optimized our business, creating an ever leaner and more efficient weir, reducing cost and complexity in our operations, and driving margin expansion. We have now created the scalable platform that will deliver compounding growth in the future. And we're currently ahead of plan on those ambitions, and so in turn have upgraded our target for absolute cumulative savings in 2026 by another 20 million to 80 million pounds in total. And thirdly, we're now moving into the growth acceleration phase of our strategy, underpinned by one, the energy transition and global demographic trends, two, the adoption of new technologies to deliver critical minerals in a more sustainable way, and three, our own strategic growth initiatives, which we are significantly embellishing today with the acquisition of MicroMine. In 2024, we performed strongly against our commitments to shareholders. Despite several mine-specific challenges in the first half of the year, conditions strengthened meaningfully in the second half as aftermarket demand accelerated, driven by good activity levels in mining markets and the commissioning of new installed base of original equipment. On revenue delivery, we accelerated growth in the second half along historic seasonal trends, though constant currency revenue decreased by 1% year-on-year, principally driven by re-phasing of OE deliveries in the order book late in the year. Over the past three years, our revenue growth has averaged above our three-cycle target, as the compounding benefits of our growing OE pipeline convert to an ever-expanding install base of mission-critical equipment. We executed very strongly on our performance excellence program with the acceleration of savings supporting our operating margin expansion of 170 basis points to reach 18.8% as we close in on our initial target of 20%. We grew free operating cash conversion to 102%, a 17 percentage point increase from last year and above our target range. We demonstrated resilience with growth in our constant currency operating profit of 9%, supporting another year of dividend growth. And actions we've taken delivered further reductions in absolute CO2 emissions from our operations, now at 27% lower than the 2019 baseline and getting close to our 2030 target of 30%. Taken together, the power of our Transform platform was evident in our strong execution in 2024 and reflects the outstanding efforts of our teams across the globe, to whom I am extremely grateful. In Micromine, we're making the next strategic leap for WEIR with our vision to create a sector-leading digital optimisation platform for the mining industry. The acquisition draws us a step closer to unlocking the full potential for digital technology in the mining industry by connecting the full value chain from exploration to mine to mill under one digital umbrella, deepening valuable insights at all stages of the mining process. By combining MicroMind with our world-class ESCO and minerals businesses, we are creating a global leader across engineered hardware and software demanded by the mining industry to address their most critical challenges, optimizing for a smarter, more efficient and sustainable operation across the mining value chain through a suite of clearly differentiated and competitive solutions. And in Micromine, we've identified a truly unique, high-quality asset, which is accretive to its revenue growth, operating profit, and earnings in the first full year of ownership. Micromine today is a digital business at scale, active on 3,000 sites, with an impressive history of growth at sector-leading margins, well beyond those achieved within our core hardware businesses today. With that, I'll now hand you over to Brian to take you through the full year 2024 financials in more detail, after which I'll share more on our strategic progress and on the exciting micromine opportunity.

Thank you, John, and good morning, everyone. As John noted, we are very happy with our financial results in 2024, which reflect the positive conditions in our mining markets combined with progress in delivering our performance excellence program ahead of schedule. In the following slides, I'll walk you through the highlights of our performance, noting that the appendix to this presentation contains more specific details on where we landed in 2024, as well as some additional data points on our 2025 expectations. Orders for the year were 2.5 billion, an increase of 2%, supported by 67 million pounds in relation to the large OE order received for the RICO-DEC and OCP expansion projects. Aftermarket orders grew by 4%, reflecting positive conditions in mining and the benefit of installed base expansion. Revenue decreased by 1% to £2.5 billion, reflecting OE delivery phasing and the non-repeat of revenue from oil sands to stocking and the exit of our Russian operations. Operating profit was £472 million, an increase of 9%, with a strong step-up in operating margins of 170 basis points to 18.8%. Margin expansion was driven by incremental performance excellence savings as we delivered a cumulative 29 million pounds of savings, 14 million pounds ahead of plan, in addition to a benefit from minerals revenue mix shifting towards aftermarket and normal operational efficiencies. Profit before tax of 428 million pounds was 17 million pounds ahead of last year, despite an FX translation headwind of 25 million pounds. Our increased profitability delivered an increase of 4% in EPS at 120 pence per share. Free operating cash conversion was above our target range at 102%, reflecting the positive actions we have taken in improving working capital management. Our strong cash generation resulted in net debt to EBITDA decreasing to 0.7 times. All of the above delivered an increase of 130 basis points and return on capital employed to 19.3%. Taken together, our strong financial performance in 2024 underpins our increased full-year dividend of 40 pence per share. I will now provide some commentary on each of the divisions, starting with minerals, where we delivered a year of good strategic progress, including the award of two large orders for our market-leading products and strong execution in the business, leading to record operating margin. Across our key commodities, market prices remain well above miners' cost to produce, and we saw particularly strong demand in copper and gold markets. Ore production growth, combined with installed base expansion, drove increased demand for our spare parts, resulting in 5% growth in aftermarket orders. And OE orders decreased 3% year-on-year, driven by delays during the fourth quarter in project awards, as well as market conditions in certain commodity markets, such as nickel and lithium. We saw continued momentum and demand for deep bottlenecking and small brownfield projects, and we won further market share, converting over 90% of our competitive field trials for large mill circuit pumps. Revenue decreased by 2%, driven by phasing of OE deliveries at the end of the year, combined with prior year comparables, including restocking in the Canadian oil sands and the final revenue recognized from our exited Russian operations. Despite these headwinds, strong underlying mining markets and the annualized benefit of price increase drove aftermarket growth of 3%. There was particularly strong growth in both South America and Australasia, reflecting the benefits of installed base growth in these regions. Product mix moved towards aftermarket, which represented 75% of revenue, up from 71% last year. Operating profit increased in kind by 9% on a constant currency basis to £383 million, and margins increased by 200 basis points to 21.1%. This was underpinned by incremental performance excellence savings, a shift in revenue mix towards aftermarket, and operational efficiencies. Moving on to ESCO, where similar to minerals, we saw the benefit of positive underlying mining conditions with good progress in our strategic growth initiatives. This included the commercial launch of our next generation LIP and GET system, Nexus, and the opening of our new foundry in Zhuzhou, China. orders decreased by 1% in the year, with strong demand for our core G.E.T. products and dredging solutions, offset by a reduction in mining attachment orders against a strong prior year comparator. Turning to revenue, which grew by 1% to 688 million pounds, reflecting growth in core G.E.T. mining and dredge solutions, with strong regional growth in the Middle East and APAC from our increased strategic focus in these regions. Operating profit at 129 million pounds was 9% higher than last year on a constant currency basis. Operating margins increased by 140 basis points to 18.8%, driven by incremental performance excellence savings, our foundry optimization program, and operational efficiencies. Now bringing things together to look at the group operating margins, where on a constant currency basis, year on year, margins increased by 170 basis points to 18.8%. The main drivers of underlying margin growth in the year were as follows. Firstly, minerals revenue mix shifted four percentage points from OE to aftermarket, resulting in an 80 basis points increase on margins. Performance excellence contributed an additional 80 basis points, having delivered the incremental savings during the year of 23 million pounds, well ahead of plan and highlighting momentum in the program across the group. As 2024 illustrates, and as we expect in future benefits from our improved operating model, will more than offset fluctuations in our aftermarket mix as we approach our 20% operating profit target. As expected, operational efficiencies, including cost discipline and pricing, contributed an additional 10 basis points to our margin. Now briefly touching on adjusting items, which in total amount to a credit of 6 million pounds, largely driven by 69 million pounds of previously unrecognized deferred tax assets arising from the disposal of the Oil and Gas Division in 2021. Exceptional items were 55 million pounds, 36 million pounds of which was associated with our Performance Excellence Program, with a related cash outflow of 28 million pounds being below our full year guidance due to phasing of spend. Other exceptional items, including 19 million pounds relating to the impairment of intangible assets due to the phasing out of some brands as part of our alignment of combination products. Other adjusting items reflect the normal amortization of intangibles, which is broadly in line with last year, and charges relating to our asbestos provisions, which has significantly decreased compared to the prior year. Turning to cash flow and returns, we delivered another year's performance in line with our track record of strong cash conversion. Cash generated from operations was up 12% to 591 million pounds, driven by increased profitability and improvements in working capital efficiency. Working capital cash flows improved mainly through process optimization and phasing of payables and receivables, and as a percentage of sales improved to 20.7%. CapEx was lower than last year at 1.1 times depreciation, the reduction driven by lower spend following the opening of our new ESCO foundry in China. Our strong execution resulted in an increase of free operating cash flows of 484 million pounds, a 92 million pound increase over last year, and 42% increase since 2022. Taken together, free operating cash conversion was above our target range at 102%. an increase of 17 percentage points year-on-year. Our net free cash flow of £328 million compares to £238 million last year, with the increase mainly driven by the favorable free operating cash flow just described and the non-repeat of special pension contributions. This funded our increased dividend and further deleveraging, leaving net debt to EBITDA at 0.7 times on a lender covenant basis. While new debt relating to the MicroMine acquisition will raise our leverage later this year, given our strong track record of execution, we anticipate deleveraging of this additional debt at pace, in total reducing below our 1.5 times covenant range by December 2026. I'll now summarize the key messages from this section of the presentation. Conditions in our mining markets are strong. Through our strategic growth initiatives and our customer focus on improving efficiency and sustainability of their existing operations, we are seeing high levels of activity driving ever resilient aftermarket demand. We are seeing continued momentum and demand for our brownfield OE solutions and our pipeline of large greenfield sustainable solutions is growing. In 2024, we executed strongly against the group delivering performance excellent savings well ahead of plan, growing profit and achieving a significant step toward our 2026 target of operating margins sustainably beyond 20%. We achieved our highest level of cash conversion at 102% beyond our target range. We continue to deliver on our track record of growing returns, deleveraging our balance sheet, growing road sheet and increasing our full year dividend. Looking ahead, we have great momentum across the group and are confident in delivering another year of financial performance in line with our shareholder commitments. We expect another year of margin growth supported by additional savings to our performance excellent program and cash conversion within our medium target range of between 90 and 100%. And finally, our performance will allow us to de-lever acquisition debt related to the micromine acquisition at pace, falling below 1.5 times by year-end 2026. Thank you, and I will now hand back to John.

Thank you, Brian. In this next section, I'll share more details on our strategic progress in 2024 and set out our view of market conditions and the outlook for 2025. Our strategy, as set out in the We Are Weir framework, is clear and enduring. It's fully embedded through the organisation. We have top-to-bottom alignment our priorities and strong engagement across our global team. Its familiar pillars of people, customer, technology and performance continue to guide our decisions and position us strongly to take advantage of the opportunities which lie ahead. Our refreshed sustainability strategy lies at the core of our framework and focuses on what we can do internally to deliver sustainable weir and externally to accelerate sustainable mining. So let me take you through our progress in 2024. So looking first at our people initiatives, the health, safety and well-being of colleagues remains our top priority. And we've taken steps to reinforce and reinvigorate our zero harm culture, particularly following the tragic fatal incident suffered by one of our colleagues in April last year. Since then, we've held safety stand downs across our businesses to discuss the learnings and re-emphasize that safety must always come first. Overall in 2024, both our lost time accident numbers and our total incident rate were flat year on year. Across the group, we continue to prioritize wellbeing and talk openly about mental health. And we were very pleased to be recognized by CCLA as a top improver for mental health in an assessment of the UK's largest companies. Our employee net promoter score of 47 remains in the top quartile of manufacturing companies, while our refreshed ID&E steering committee, made up of representatives from our senior leadership team, is supporting our efforts to accelerate the benefits that come with having a vibrant, purpose-driven culture. We continue to invest in our people with a focus on talent and succession planning, for example, through a new global mentoring program launched during the year. And we continue to invest in future talent, too, through programs around the world that encourage careers in STEM and the mining industry. turning next to our customers where we are shaping innovation that will enable the mining industry to scale up and clean up. During the year, we secured a £53 million order to supply an industry-leading fine grinding solution to Barrick Gold's Ricodeak copper gold projects in Pakistan, capitalising on growing industry acceptance of our redefined mill circuit and supporting our customers' need to use less energy and water at this remote mine site. We also secured a £25 million order to supply an energy-efficient separation solution to OCP's Benguria and Lutafosfate projects in Morocco, leveraging our market-leading Warman Pump and Cavex hydrocyclone brands. In minerals, we won 92% of our head-to-head mill circuit pump trials, and in ESCO, we won 118 net major digger conversions as we continue to drive strategic growth initiatives. We've continued to work in partnership with customers to accelerate sustainable mining. In January of this year in Saudi Arabia, we agreed an MOU to form a joint venture with Oli and Saudi Holding Company, which will extend our expertise and sales in the sustainable mining technology solutions to this exciting growth region. The progress we've made with our redefined mill circuit is one of the highlights of the year, and particularly the Ricodeek contract win. This project is located in one of the hardest to reach locations in the world, making energy a premium on site. Our redefined mill circuit solution requires up to 40% less energy than other alternative methods of crushing and grinding, and so is especially suited to this project. Ricodeek is another real-world reference of the power of this solution and illustrates its versatility across geographies from magnetite at Ironbridge to copper gold at Ricodeek. Turning next to technology, where we introduced both our next generation Nexus GET technology and our Enduron Elite screens to the market at Mine Expo in September. The Nexus system increases tooth and adapter wear life by 15% compared to our previous system, in turn leading to less plant downtime, and we've already received multiple orders for this next generation technology across four continents. In Minerals, we launched our new digital brand, Next, integrating our existing digital offerings such as Cinetrex and Sentient AI to offer customers an integrated platform to help their operations run safer and more efficiently. And we now have over 100 sites utilizing our digital platform. We also launched our latest motion metrics shovel metrics payload monitoring solution, which provides optimized truck loading and improved haulage efficiency for customers. Both systems provide valuable insights to our customers on how their equipment is operating and how best to optimize those assets in the field. So together with the acquisition of Micromine, WEIR is really accelerating how these insights can be combined with essential information from upstream in the mining value chain, moving closer to solving that critical missing link between mining operations and the process plant, so further enhancing productivity and sustainability for our customers. Let me expand now on the ESCO Nexus GET system. This is our latest technology advancement and case studies continue to come in from the field as the solution is now sold across all four major mining regions. Results from the studies all support our original data collected during the initial trial over thousands of hours. Critically, the Nexus system reduces the overall lit maintenance time by 40% over a five-year projected period. And this in turn leads to less plant downtime thanks to reduced adapter failures and is unmatched by any competitive solution. Finally, turning to performance, where progress within our performance excellence program continues at pace and is ahead of our targets for cumulative absolute savings. During the year, we opened our new ESCO foundry in Suzhou, China, giving us more capacity from the most efficient in the ESCO network and therefore supporting gross margin progression in future years. In minerals, we consolidated several sites in the US, LATAM and APAC, bringing us closer to customers and driving fulfillment efficiencies. We also completed the establishment of WIR business services and are embedding new ways of working through transformation across our finance, HR and IS&T functions, the benefits which will be reflected in the years to come. Completion of our journey to implement SAP across the minerals division now provides truly global capacity management and inventory optimisation capability. And adoption of our Refresh LEAN programme in minerals contributed to the largest amount of savings during the year, driving a reduction in overall material cost as well as quality improvements. With these examples, the Performance Excellence Programme is already running well ahead of plan, and therefore we've upgraded our total savings target to £80 million in 2026, with a further incremental £20 million expected in 2025. This is supported by additional capacity optimisation and lean process opportunities that have been identified as we progress with the programme. We anticipate additional exceptional one-off costs of £30 million to complete these projects, taking the total expected programme costs to £120 million, or one and a half times expected annual savings. The savings will help us to deliver operating margins sustainably above 20% in 2026 and beyond. Turning to Outlook, where we have a growing pipeline of opportunities on high levels of activity in our mining markets as customers look to invest in projects that address structural critical metal demand. Supported by favorable commodity prices, customers continue to prioritize maximizing ore production and improving the efficiency of the existing mine sites, which, together with ongoing installed base expansion, provides a strong underpin for demand for our aftermarket solutions. This continued favourable backdrop in mining underlies our strong opening early order book and demand growth expectation for aftermarket. Combined with execution of performance excellence, we enter 2025 with great momentum and confidence for delivering another year of growth in constant currency revenue, operating profit and operating margin in line with current market expectations driven by mid-single digit revenue growth and around 50 basis points of further operating margin expansion. We expect free operating cash conversion of between 90% and 100% in line with our medium-term guidance, as CAPEC continues to settle in line with depreciation and our lean operating model delivers further working capital efficiency. Okay, I'll now talk more about our other announcement today, the agreement to acquire Micromine, which presents a unique and really exciting opportunity to create a sector-leading digital optimization platform for the mining industry. As mentioned earlier, this acquisition is a significant step in accelerating our strategy to enable smart, efficient, and sustainable mining. By combining WEIR's deep customer insights and domain knowledge in extraction and processing with Micromine's leading mining software solutions and upstream data, we can unlock the potential for digital technology to deliver end-to-end productivity and sustainability solutions in mining for our customers. It will position WEIR as a global leader in engineered hardware and software solutions for the whole mining industry, enhancing our existing market-leading solutions across extraction, comminution, processing and tailings with insights from mine development and planning. Insights that are essential to make decisions better, faster and safer for our customers from extraction to mine to mill. Uniquely, Micromine offers WIR shareholders a compelling value creation opportunity to acquire a top-tier digital business of scale that is highly accretive to our already leading aftermarket-focused business model. As a global leader in mining software solutions, Micromine's products compete directly in a growing addressable market of around £2 billion, which is inelastic to the mining capex cycle. This additional market expands WIR's existing opportunity, creating a total combined and more resilient addressable market of £9 billion. MicroMind has four decades of experience solving customers' critical challenges. This gives its software solutions a strong competitive advantage as its deep library of proprietary plugins and functions help customers quickly and confidently turn their data into valuable insights. Like our market-leading ESCO-GET solutions, Micromind's software is hardware agnostic, meaning that regardless of the exploration, drill, blast or haul equipment, the Micromind suite of solutions will bring efficiency and add value to our customers' operations. Through the acquisition, we'll benefit from Micromind's highly talented specialist software sales engineers, deep product knowledge and an established track record of driving growth in sales at sector-leading profit. Micromine's revenue is heavily biased towards future-facing commodities such as copper, gold, iron ore and the battery metals. These positions will complement WIR's existing exposure, adding to our multi-decade opportunity to enable a sustainable future for our planet. In terms of reach, Micromine Solutions are already present on every continent across over 90 countries and 3,000 sites, with significant opportunity to grow outside of its home market of Australia, including the copper and gold rich regions of North and South America, where weir is particularly strong. Combining forces with Micromine will position us to create a leading digital platform of scale from exploration to mine to mill. Its suite of software solutions are highly complementary to WEIR's existing digital architecture, adding strength in data integration from one phase of planning to the next and updating forecasts real time to optimize mining operations. Starting at the mine exploration stage, Micromine's Geobank and Origin software solutions are used daily by thousands of geologists to manage and define their resource models for future investment and construction decisions. Customers with existing mines or sites under construction rely on Micromine's Beyond software to develop life of mine models and infrastructure plans using the resource shape already developed in the Geobank and Origin software. They use these life of mine models as the basis for investment and financial planning. Moving downstream, Elastree, Spry and Advance are Micromine's planning tools. Customers use them to manage their medium and short-term plans, an intelligent and insightful replacement for offline tools such as spreadsheets. And as we get to the pit and underground, Micromine's software solutions start to overlap with WEIR's motion metrics offerings. PitRAM, Micromine's software solutions for minerals extraction operations, takes data from the various mine and geology plans to optimize fleet management and mine control. In time, through the integration of WIRS motion metrics and NEXT intelligent solutions, we will be able to bundle solutions and pursue our vision of creating the critical missing link between mining operations and the process plant, offering real-time optimization based on live data, enhancing productivity and sustainability for our customers. MicroMind's deep customer value propositions and established global footprint means it is a top tier software player. And as I said before, it's a unique asset. It was clearly the best option to enable the pursuit of our strategic vision. It has industry leading financial performance with a track record of high growth underpinned by sector leading software as a service, recurring subscription revenue. Over the past three years, Micromind has consistently grown at a rate of approximately 25% per year, of which circa 90% is recurring subscription revenue. But not only has Micromind grown, it's growing profitability with sector-leading margins. Its subscriptions are largely paid up front, meaning that cash conversion aligns to WEIR's own 90% to 100% range, and working capital is low. Ongoing software upgrades provide upsell and pricing opportunity while customers are sticky. Over the past several years, MicroMind has retained over 95% of its customers from one subscription renewal to the next. So, it's a great business today, and by leveraging WEIR's direct global distribution channels in mining, we expect to further accelerate the growth of the current micromine business. From day one under WEIR, Micromine will have access to our existing network of service centres, which are located within 200km of every major mine on the planet. Through WIR's boots on the ground model, Micromine's specialized software sales team will have access to relationships and decision makers across our combined £9 billion addressable market. So you can see that armed with deeper customer insights and expanded domain knowledge afforded by Micromine, WIR has a tremendous opportunity to enable smart, efficient and sustainable mining. This acquisition will be terrific for our combined customer base too. Putting Micromine's software suite together with WIRS, Motion Metrics and Next Intelligent Solutions to create a digital optimisation platform will enable them to make better, faster and safer decisions about the performance of their operations. This starts with real-time insights that help miners determine what to mine, where to mine and when to mine. This is used to support decisions about their short and long term planning and helps them build a detailed understanding of how their geology and how to maximize the value from it. Making smarter choices upstream and in the pit can deliver compounding benefits through the processing plant, potentially leading to 10 times the savings and using less energy, water and waste. But it works both ways. Insights from the process plant can be used to optimize upstream operations in the mine as well. And that's why we're extremely excited by the potential of a digital optimization to transform productivity and sustainability across the whole mine. Brian's now going to take us through some of the key details of the transaction.