Weir Group Reports Strong 2024 Results with Improved Profitability and Cash Generation
Why we think this is good
The 2024 results for Weir Group demonstrate solid performance and a positive outlook. Despite a slight 1% decrease in revenue, the company achieved a 9% increase in adjusted operating profit on a constant currency basis. The adjusted operating margin improved significantly by 170 basis points to 18.8%, reflecting strong execution and benefits from the Performance Excellence programme. Cash generation was particularly impressive, with free operating cash conversion reaching 102%, up from 85% in the previous year. The company's net debt position improved, decreasing by £155m to £535m, indicating a strengthening balance sheet. Looking ahead, Weir Group has provided an optimistic outlook for 2025, expecting growth in revenue, operating profit, and margins. The upgraded Performance Excellence savings target of £80m by 2026 and the expectation of operating margins moving sustainably beyond 20% further support the positive sentiment. While there are some execution risks associated with ongoing programmes and potential market risks, the overall financial health and forward-looking statements suggest a company well-positioned for future growth and profitability.
Key Points
- Adjusted operating profit up 9% to £472m on constant currency basis
- Revenue slightly down 1% to £2,506m
- Free operating cash conversion improved to 102% from 85%
- Net debt reduced by £155m to £535m
- Adjusted operating margin increased by 170bps to 18.8%
- Performance Excellence programme delivering ahead of expectations
- 2026 Performance Excellence savings target upgraded to £80m
- Positive outlook for 2025 with expected growth in revenue, profit, and margins
- Final dividend increased by 6.3% to 22.1p per share
- Strong balance sheet with net debt to EBITDA ratio of 0.7x
Summary
Weir Group's 2024 results showcase a year of strong execution and financial improvement. Adjusted operating profit increased by 9% to £472m on a constant currency basis, despite a slight 1% decrease in revenue to £2,506m. The company demonstrated excellent cash management, with free operating cash conversion improving to 102% from 85% in the previous year. Net debt reduced by £155m to £535m, strengthening the balance sheet. The Performance Excellence programme continues to deliver benefits, with cumulative savings of £29m to date, ahead of expectations. Looking forward, Weir Group has upgraded its 2026 Performance Excellence savings target to £80m and expects operating margins to move sustainably beyond 20%. The outlook for 2025 is positive, with management projecting growth in revenue, operating profit, and margins. Broker targets generally support this optimistic view, with several maintaining 'Buy' or 'Overweight' ratings and price targets above the current share price.