Weir Group shows hunger to buy firms after record profits

Published on Tuesday 9 March 2010 20:17

WEIR Group has built up a £500 million war chest as it continues to search the world for acquisitions after booking record annual profits.

Keith Cochrane, chief executive of the Glasgow-based engineering firm, said that, given the group's balance sheet capacity, it could spend between 400m and 500m on deal-making. The City is primed for a single deal which could transform Weir's oil and gas or industrial business.

Although there was no definitive news on progress towards a major transaction yesterday, Cochrane stressed that Weir's board "continues to hunt on a fairly broad front".

He added: "We're doing more work in terms of looking for opportunities, but converting that from a long list to actually having an acquisition that you can see through takes a bit of time."

Weir did announce that last week it had agreed the acquisition of an Adelaide-based company worth A$7m (4.3m), which will expand SPM – its oil and gas business – into Australia.

Cochrane said further, larger, deals would rely on the right opportunity presenting itself, and that Weir also expected to grow through product innovation.

"This is not just a single track growth story – we envisage both acquisitions and organic growth in Weir's expansion," he noted.

Shares in the FTSE-250 group jumped to the highest level in 19 months after Weir said it expected this year's profits to be a fifth higher than the City expected.

Despite the recession causing mining and oil and gas companies to cut capital expenditure, the group reported a pre-tax profit of 187m for 2009, a 6 per cent increase on the previous year and marginally ahead of expectations.

Shares in the company jumped as much as 8 per cent as the chief executive said Weir was hoping to match these profits again in 2010.

Cochrane, who was promoted from finance director to the top role in late 2009, said the company was in rude financial health and well-placed to capitalise on an improving economy.

"Although the pace and timing of global economic recovery remains uncertain and forward visibility limited, we are now targeting a broadly similar level of profitability to that achieved in 2009," he said.

Weir halved its net debt to 119m, below what the City had forecast. The total dividend was raised 14 per cent to 21p a share.

Created as a shipping engineering group on the Clyde, Weir now mainly provides services for drilling for the mining, oil and gas sectors and services for power projects.

Cochrane said he had seen an increase in orders in the first few weeks of the new financial year.

Analysts said Cochrane's comments signalled that profits would be as much as 20 per cent more than the City was forecasting. Shares in Weir closed up 67.5p, or 7.9 per cent, at 926.5p, valuing the group at just under 2 billion.