Weir presents a brighter picture
The Investment Column
Thursday 21 August 1997
Weir's shares have underperformed the FTSE All-Share Index by 44 per cent over the last five years as the group was hit by fierce competition from Swiss and German rivals which were prepared to take on low-return work.
The impact on margins and more recent concerns over sterling's strength has led to the City marking Weir's shares down. This seems harsh, as half of the group's turnover is manufactured abroad and large chunks of its UK business is in services rather than exports. Only about pounds 100m of the group's UK sales are exported and the currency effect here is limited as the bulk is shipped to dollar markets rather than to France, Germany and Italy.
The City's view of the company perked up yesterday when Weir reported half-year profits well ahead of expectations at pounds 27.8m, a 44 per cent increase. The group's shares surged 13.5p to 279.5p and analysts upgraded full-year forecasts by around pounds 3m to pounds 58m.
The half-year figures were flattered by a kind comparison with the first half last year which was affected by problems at the Devenport Dockyard, hit by a refitting programme, and Strachan & Henshaw, its materials handling subsidiary, which had contract problems.
The company is sticking to its policy of not taking on low-margin contracts and is finding that German competitors are starting to come back into line on prices. Weir's US order book is strong and the business is throwing off cash.
Net debt of pounds 26m at the half-way stage last year has turned into a cash pile of nearly pounds 10m this time around. Further bolt-on acquisitions are expected, though the company is being deterred by high prices, especially in the US.
Weir's shares have been swinging wildly over the last 12 months but analysts are encouraged that the company may have put the worst behind it. On yesterday's close, the shares trade on a forward rating of 13. At these levels, a safe hold.
- 2 How the language you speak changes your view of the world
- 4 Italian police 'reveal' what Jesus looked like as a young boy
'Fire at every person you see': Israeli soldiers reveal they were ordered to shoot to kill in Gaza – even if the targets may have been civilians
Italian police 'reveal' what Jesus looked like as a young boy
Who should I vote for? The Independent quiz matches best political party for undecided voters ahead of the general election
First-time buyers in London 'need to earn at least £77,000'
General Election 2015: Photographic history of Bullingdon Club tracked down - including new picture of David Cameron in his finery
In defence of liberal democracy
Over 50,000 families shipped out of London boroughs in the past three years due to welfare cuts and soaring rents
EU asylum policy is 'a direct threat to our civilisation', says Nigel Farage
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
Schools forced to act as 'miniature welfare states' with teachers buying underwear and even haircuts for poor pupils
iJobs Money & Business
£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...
£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...
£215 per day: Ashdown Group: Junior Project Manager (website, web application ...
£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...