The Weir Group PLC (WEIR) Earnings Call Transcript & Summary

Good morning, everyone, and many thanks for joining the call today to discuss our results for the first half of 2026. Before we start, I'd like to draw your attention to the usual cautionary notice on forward-looking statements. We have a lot to share today, but before we dive into our results for the half, I'd like to hand you over to Andrew Neilson, who will be taking over the reins as CEO next week to say a few words. After we hear from Andrew, I'll start with some of the key highlights of the first half performance and the progress that we've made against our key strategic priorities. Brian Puffer, our CFO, will then run through the numbers in more detail and finish our outlook, after which I'll give you some closing remarks before taking your questions. So with that, I'll hand over to Andrew.

Good morning, everyone. I'm very excited to be picking up the baton from Jon and leading a business of Weir's quality, heritage and potential. I've been with Weir for 16 years and have worked across all areas of the business from strategy and M&A to integrating and leading ESCO and most recently heading up our Minerals division. That experience has given me a deep understanding of our markets, our customers, our operating model and the rich capabilities that differentiate Weir from our peers. It has been a privilege to work so closely with Jon over the last decade, helping transform Weir into a focused mining technology leader. Today, our strength is underpinned by a stronger, more resilient portfolio that now comprises both hardware and software solutions. That is opening up more and more opportunities to help customers all around the world respond to the rising demand for critical minerals, sustainable practices and responsible CapEx. As Chief Executive, my focus will be on seizing this multi-decade opportunity. My priority will be to build on what we have started, driving our performance with stronger execution and delivering on the recent investments that we have made whilst continuing to unlock operational efficiencies and deploy capital to accelerate our future growth. We are the proud engineering heritage, but what excites me most is the future. We have the customer relationships, technology platforms, operating discipline and deep capability to help shape the next generation of mining. If we execute well, we can support customers in producing the resources the world needs while delivering sustainable compounding value for shareholders. So it's a big opportunity ahead, and it's one I'm very excited to lead. I look forward to meeting you in the months ahead. But for now, let me hand you back to Jon and Brian to take you through the results.

Thank you, Andrew. You're certainly taking on the CEO role at a very exciting time for Weir, and I look forward to seeing the business continue to flourish under your leadership. I'm going to start today's presentation with a summary of our performance and strategic progress before we go into a deeper dive specifically on our growth drivers and competitive positioning. In short, our financial performance for the first half reflects a real acceleration in Q2 orders amid strong market activity levels, putting us exactly where we need to be to deliver on our full year guidance. Brian will take you through the details shortly, but let me provide the headlines, which sets the context for the remainder of my presentation. First, to orders, where we've grown 8% year-on-year on a constant currency basis. And that's against a very tough 2025 comp, which included the GBP 40 million Talabre's order and a heavy first half weighting to aftermarket orders last year. Original equipment orders grew by 10% year-on-year, supported by a high bid conversion rate on projects, over 90% success rate in pump trials, consistent with our historic average and excellent progress with new product penetration, particularly in comminution. Aftermarket orders grew by 8% with strong activity in our largest Minerals exposure of copper, gold, iron ore and oil sands, and we saw the expected bounce back from the weather-related disruptions of the first quarter. The key point to highlight is the Q2 aftermarket organic orders of Minerals, up 8% year-on-year, back in line with our expected mid- to high single-digit range and ESCO saw similar organic growth in Q2. And together, that puts us on track to meet our full year growth expectations after the slow start in Q1. Revenue increased by 5% on a constant currency basis as contributions from acquisitions were partially offset by the effect of some deliveries being deferred into the second half following our last round of production transfers within Performance Excellence. Just to give you a little color on that, you'll recall that late in 2025, we commenced relocating rubber parts to production to Malaysia and India as well as castings to the Americas and Africa following capacity reductions in Australia and the U.K. Now as you see on the map, these relocations involve transfers between multiple individual sites within our global operations with several complex movements across continents. As we progress with the transfers, unusual demand patterns seen in Q1 and early Q2 created a shift in product mix relative to our planning assumptions, which pushed out production and deferred deliveries. But with production replanned and a return to usual demand patterns, we exited June with strong operating momentum, which will allow delivery of delayed orders over the second half. With a book-to-bill of 1.12, we've grown our order book in the first half by circa GBP 150 million and with continuing strong market activity levels entered the second half with strong top line momentum, underpinning our full year guidance. Turning to profit, where on a constant currency basis, adjusted operating profit was stable and resulting operating margins were 18.8% against a very strong comparator with mix effect and the delivery deferrals I just mentioned more than offsetting first half Performance Excellence benefits. However, with the first half headwinds largely reversing over the remainder of the year and good line of sight on delivery of the remaining savings within Performance Excellence, we continue to expect operating margins above 20% for the full year. And finally, free operating cash conversion of 41% reflects an increase in working capital, supporting second half order book delivery and production transfers as well as the on-market purchase of shares for our LTIP awards during the first half. Again, these effects will unwind or normalize over the balance of the year, and we expect to deliver cash conversion of between 90% and 100%, in line with our established track record. Now just a few comments on current market conditions. In terms of mining CapEx, we're seeing accelerating growth and activity in our project pipeline, particularly in North and South America, where permitting is becoming more supportive of new mining activity. We've seen early packages awarded in North America and more are coming in South America over the next 12 to 24 months. As the industry grapples with the delivery of new mines, the challenges of capital efficiency, mine productivity and social license to operate are acute. So it's really pleasing to see the increasing customer focus on innovative hardware and software technologies as projects move through feasibility into the planning stage. Meanwhile, the focus on improving the efficiency, productivity and sustainability of existing resources continues unabated. Looking at OpEx, as I said earlier, we've seen a normalization of demand patterns since Q1 and see healthy underlying production growth in our big 4 exposures of copper, gold, iron ore and oil sands. One of the bright spot is the planned start-up of mothballed hard rock mines, particularly lithium in Australia. Geopolitical activity has affected some of our smaller markets, but overall, we expect the current positive conditions to continue, supporting continued growth in orders over the course of the second half. Now turning to strategic progress so far this year. The foundation for everything is the safety and wellness of our people. And while our total incident rate is stable so far this year, we're gaining traction with the improvement priorities I recently set out, which is reflected in fewer first aid cases and lower severity rates across the business. Beyond physical safety, we've again been recognized by CCLA in Tier 1 of their employee mental health and well-being benchmark, placing 6th among the largest companies in the U.K. We're making great progress on technology to expand our addressable markets with new solutions, but also to protect and extend our competitive advantage in core products. New solutions brought to market include the Optimil vertical stirred mill or VSM. And in core products, we launched our next-generation mill circuit pumps and construction GET, both of which will deliver step changes in efficiency for our customers, which I'll talk about in more detail later. On sustainability, we released our updated climate transition plan earlier this year, and our leadership continues to be recognized with CDP awarding Weir an A score for climate transparency for the fourth consecutive year. Our progress with acquisitions continues at pace. Deals completed in 2025 continue to perform in line with expectations with Micromine on track to deliver growth in annual recurring revenue of more than 25% this year, supported by our global cross-selling initiatives, which I'll also touch on later. In March, we completed the acquisition of the remaining 50% share of our Chile-based joint venture, ESEL, unlocking the opportunity to grow market share by direct sales in the world's largest copper-producing region. Longer term, and as we set out at our Capital Markets event last December, our focus is on delivery of the growth potential that's been unlocked by the transformation of Weir over the past few years. And we're making good progress. Our new products are driving the core business toward higher market shares and creating new market leadership positions as we expand our flow sheet solutions. We're positioned strongly with new foundry capacity in the fast-growing North and South American markets and Micromine is at the heart of what is becoming a very exciting end-to-end digital value proposition. While the 2026 focuses on integration and delevering, we're actively building the pipeline of new acquisition opportunities to compound future growth. So with that context set, I want to turn into a more detailed review of the growth prospects for Weir, starting with the outlook for the mining market. Now across the business, we're actively pursuing more than 2,000 projects across all commodities and regions with copper and gold across the Americas being the standouts. This is going to be supportive of robust future OE order intake and will drive ongoing growth in our installed base and therefore, aftermarket opportunity. Likewise, the projected production trends, which further underpin aftermarket growth are positive. On a revenue-weighted basis, we expect to see growth in copper, iron ore and nickel drive overall demand for aftermarket spares and expendables with coal the only negative but now a very small market for Weir. Declining ore grades will also be an ongoing factor as new lower-grade mines come online. So our markets are growing. And within those markets, our core pump and GET businesses retain their market leadership and competitive position, both are growing market share. Minerals remains the clear #1 in processing and mill circuit pumps with more than 50% market share, well ahead of our competition, driven by our differentiated technology and customer intimacy. Our market share grew in the first half, where we won over 2/3 of new large pump tenders and maintained our aftermarket capture rate. Our success extended to competitive mill pump trials, where we won 13 of 14 campaigns, taking our total success rate above 90% for the year, while our recent acquisition of Townley only adds to the opportunity pipeline in North America, which is currently the fastest-growing mining market. Likewise, ESCO is the global leader in ground engaging tools for mining, again, with clear technology leadership and embedded customer relationships, which deliver the industry-leading total cost of ownership. In the first half, ESCO won over 100 net major digger conversions, an increase of nearly 40% year-over-year, including 3 with new customers in Chile as we drive our go-direct model in that market. Our competitive success continues to demonstrate the value of our industry-leading total cost of ownership, combining leading edge technology with world-class service. And that's particularly true for our mill circuit pumps with their well-earned and long-standing industry reputation for running harder and longer than any of our competitors. And that's the essence of how we've been successful in over 90% of competitive trials, consistently gaining market share against all of our competitors. And here are the examples, trial wins in Latin America in large copper and gold applications where we deliver the performance when competitors fall short, landmark wins in China against local competitors when customers see the advantage of total cost of ownership and wins in Africa and Australia, where customers invested in step-change technology to deliver the performance they needed. Delivering technology today is important, but as with any competitive advantage, you must invest to retain leadership, and that's exactly what we're doing. And I wanted to highlight 2 next-generation iterations of our core products, starting with the newly released MCR squared mill circuit pump, which delivers a step change in operational efficiency of 20% compared to our existing offerings, further extending the lead over our competitors. This significant increase in performance demonstrates the powerful combination of our leading material science, hydraulic engineering and digital capability, and the results have been proven at 3 trial sites as part of product validation. The MCR squared is protected by 8 patents and day 1 NEXT digital enablement, fitting seamlessly into our existing mill pump business model. And ESCO has developed Vertasys, a next-generation GET solution for the construction industry after trials at 6 customer sites. Vertasys incorporates a unique vertical integrated locking system, which significantly reduces installation time and keeps machines out in the field. Following on the material science from our NEXUS suite of mining GET solutions, several field trials have validated a 15% increase in wear life compared to other offerings and generated significant excitement at the recent product launch. Now beyond our core products, we continue to invest in bringing new technology into our broader solution set and recently introduced a new Optimil VSM, the latest addition to our Enduron line of comminution products. The engineering team has done a fabulous job bringing a new concept for stirred mills through product development and into the market in less than 12 months. We've now received orders for 10 VSMs already across the product range based on the expertise and credibility of our team, and there's more to come. What sets the Optimil apart from other comminution solutions is the proprietary grinding mechanism of media, which improve energy efficiency and increase wear life, reducing maintenance frequency and delivering a lower total cost of ownership. As with MCR squared and Vertasys, this technology includes integrated digital automation, has significant patent protection and fits perfectly into our aftermarket intensive razor/razor blade business model. And when combined with the Enduron HPGR on the comminution flow sheet, we see energy savings of up to 40% compared to traditional technologies. So as you can see, our understanding of what customers need and delivering the right solutions are what keep them choosing Weir for their most mission-critical needs. Our innovative solutions reach across the flow sheet and lower total cost of ownership by providing greater uptime and higher utilization, reducing energy and water consumption. In a recent example in India, a major iron ore producer chose Weir for both their comminution and tailings flow sheets. Led by our Optimil VSM and GEHO positive displacement pumps, these flow sheet solutions will both increase the energy efficiency of the mine and increase the tailings capacity of the operation, allowing the concentrator to process more rock. India is an exciting market for Weir with domestic iron ore expected to grow fivefold over the next decade. And having this great case study is a strong first step in positioning Weir as a market leader in the country as future projects come to market. Finally, on the strategic growth road map is software, where Micromine continues to deliver in line with our expectations. Micromine is widely recognized by our customers for its value and performance. And year-on-year, we've increased our customer retention through the release of new feature packages. As we integrate our suite and offer more solutions through the cloud, more customers are adopting recurring licenses, increasing the quality and visibility of our revenue streams. Our qualified pipeline from warm introductions through the Minerals and ESCO networks has increased by 300% over the last 6 months with the vast majority of these opportunities originating outside Micromine's home market of Australia. We are matching that pipeline growth with dedicated software sales recruitment to ensure we can convert into new license sales and have seen new business at Tier 1 miners in Brazil and Chile as a result of warm introductions as well as significant wins in Kazakhstan and Africa. The team we're building is a great fit for Weir, and we maintain voluntary employee retention above 90% as we scaled sales force. With strong growth in license sales year-on-year, we're on track for our full year expectations of annual recurring revenue growth above 25%. Taking a step back, Weir offers compounding growth and resilience through the cycle, and we're well on track to achieve our annual commitments to shareholders to outgrow our markets, sustain industry-leading margins and clearly convert earnings into cash and returns, all while doing the right thing for our people and the planet. I'll return in a few minutes to share some final closing remarks, but we'll now turn over to Brian to go through our detailed financial performance and the outlook for the full year. Thank you, and over to you, Brian.

Thank you, Jon, and good morning, everyone. As Jon highlighted, our financial performance reflects strong order growth in the second quarter and improving operational momentum as we navigate the current geopolitical backdrop and a series of complex internal production transfers as part of the final work streams of our Performance Excellence program. In the first half of the year, orders grew by 8% as we saw weather-related mine site issues reverse along with an acceleration in demand during the second quarter. Revenue increased by 5% on a constant currency basis during the first half to GBP 1.3 billion with contributions from acquisitions being partially offset by some deliveries being deferred into the second half. Customer demand patterns, along with preplanned production transfers compounded production complexity, leading to additional costs and a lower mix contribution throughout the first half of the year. While operating profit was stable, operating margins decreased by 100 basis points to 18.8% against a strong prior year comparator. Profit before tax of GBP 196 million declined versus the prior year as we saw the annualized impact of higher interest costs relating to our recent acquisition activity. Free operating cash conversion of 41% reflects higher working capital outflows as we grew stocks to support order book phasing and production moves. In addition, we purchased 100% of our shares required for LTIP awards in the first half of 2026. We expect working capital to unwind in the second half and together with growing profitability, remain on track to deliver our full year guidance of 90% to 100% cash conversion. Net debt to EBITDA was 2.2x, primarily resulting from cash flow phasing. We expect our leverage to revert back toward our stated debt covenant range of 0.5 to 1.5x at year-end as the working capital build unwinds in the second half. Finally, our proposed interim dividend of 20p per share represents a 2% increase year-on-year and reflects our confidence in achieving our full year guidance. Turning to Minerals. The division delivered excellent order growth in Q2, supported by healthy activity across key mining commodities, particularly copper, gold, iron ore and oil sands. We also saw continued demand for our market-leading technology portfolio, while operational performance improved steadily throughout the year as we work through the mix and production transfer challenges. Orders increased by 7% on a constant currency basis. Original equipment orders grew by 9%, reflecting continued investment by customers and strong demand for our differentiated solutions. Aftermarket orders increased by 7%, supported by positive activity levels across our major mining markets. Book-to-bill was 1.15 at the end of June. Revenue increased by 3% on a constant currency basis to GBP 900 million, reflecting contributions from Townley and improving operational momentum as we deliver the order book. As mentioned earlier, reduced volume from unusual demand patterns in Q1 and early Q2, combined with the rescheduling of thousands of SKUs leading to inefficiencies in our manufacturing plants. As a result, operating profit decreased by 5% on a constant currency basis to GBP 181 million, with margins reducing by 170 basis points to 20.1%. With demand patterns returning to usual and production replan, we expect to deliver these backlog orders over the second half. Moving on to ESCO. The division delivered another strong performance, benefiting from healthy mining activity and contributions from our software solutions business. Micromine and Fast2Mine performed in line with expectations with Micromine remaining on track to deliver annual recurring revenue growth of more than 25% in 2026. Orders increased by 10% on a constant currency basis. Underlying demand remained positive across mining markets with strong growth in original equipment driven by mining bucket demand, particularly in North America and Australia. Aftermarket demand also improved through the period, supported by mining and construction activity and the return of dredging orders in the Middle East. The division delivered a book-to-bill ratio of 1.05 with mining markets accounting for 81% of total orders. Revenue increased by 11% on a constant currency basis to GBP 369 million, reflecting continued strength in core mining markets, together with contributions from Micromine, Fast2Mine and ESEL. Across software solutions, growth in annual recurring revenue remained on track with our full year expectations. Operating profit increased by 17% to GBP 79 million on a constant currency basis, while operating margins improved by 120 basis points to 21.5%. This performance was supported by lower cost sourcing initiatives in China and Chile, together with the growing contribution from our higher-margin Software Solution businesses. Turning to group operating margins, which were 18.8% for the first half, a decrease of 100 basis points year-on-year. The key drivers of the margin outturn in the first half were a headwind of 130 basis points from mix in Minerals stemming from new projects as we enter an upturn in the mining CapEx cycle and unanticipated aftermarket demand phasing between the first and second quarter. There was a tailwind of 100 basis points of further Performance Excellence savings, largely offsetting mix headwinds as we deliver on the final work streams of the program. And finally, a 70 basis point net headwind due to higher production costs and delays caused by production transfers across the Minerals business. As we look ahead to the full year, with the visibility we have of our order book and momentum in execution, we expect both mix and operational headwinds to unwind as we remain on track to deliver on our full year guidance. As per our commitment to bring accounting and operating performance in line, we saw a reduction in adjusting items year-on-year, totaling just GBP 12 million in the first half compared to GBP 41 million in the prior year. Total exceptional items for the half was a charge of GBP 1 million, which represents the step-up accounting gain on the acquisition of our ESEL JV, offset by GBP 3 million of acquisition and integration costs and a further GBP 12 million arising from the unwind of the fair value uplift on inventory for ESEL and Townley. Other adjusting items reflect normal amortization of acquisition-related intangibles, which have increased as expected. Turning to cash, where adjusted operating cash flow decreased to GBP 156 million, reflecting increased working capital outflows due to the phasing of our original equipment order book, higher inventory levels to support production transfers and reduced collections from debtors in June, much of which was paid in the first 2 weeks of July. Working capital as a percentage of sales increased by 380 basis points to 26.7% at the half year. However, we see this reverting back toward our 20% to 21% target as operations normalize. CapEx was flat year-on-year at 1x depreciation compared with 1.1x in the previous year, while free operating cash conversion decreased to 41%, partially driven by the timing of share purchase for LTIP awards and increased working capital. As Jon mentioned, these effects will unwind in the second half of the year. Turning to cash flow. Phasing of working capital during the first half and higher interest following acquisitions in 2025 reduced free cash flow to GBP 1 million. Following the completion of our ESEL transaction, net debt-to-EBITDA increased to 2.2x on a lender covenant basis. However, given the second half bias of our cash generation, we expect this will reduce towards the high end of our stated range by year-end. Turning to our outlook. We start the second half with a large order book, a strong demand backdrop and improving operational momentum, all underpinning our existing full year guidance reflected in current market expectations. We expect an acceleration of our project pipeline and positive mine site activity to support growth through the remainder of the year. We anticipate our high bid conversion rate and trial momentum to continue, growing our market share and together with contributions from acquisitions, we expect another strong year of growth. As we deliver on our order book in the second half, we expect the costs associated with production transfer delays to end. Further, we expect demand within our Minerals aftermarket business to return to normal patterns. We are on track to deliver our GBP 90 million target in cumulative performance excellence savings and combined with improved operating momentum, expect to sustain margins above 20% for the full year. Finally, as operational momentum increases and working capital normalizes, we expect to deliver free operating cash conversion of between 90% and 100% at the full year. I'll now summarize the key messages from today's results. Market conditions across our mining markets remain positive with strong activity levels across key commodities. Our markets, combined with the strength of our technology offering is reflected in our active and growing pipeline of opportunities. Our financial performance improved in the first half with a strong order book providing good visibility into the second half. We also continue to gain market share through our industry-leading total cost of ownership proposition and differentiated technology portfolio. Operational momentum is likewise improving. While Minerals experienced some short-term delays associated with production transfers, we are back on track and expect the full benefits of our operational execution and Performance Excellence initiatives throughout the second half. Overall, as we enter the second half, the combination of our strong order book and improving operational momentum underpin our full year guidance for growth in constant currency revenue, operating profit and margins. Thank you, and I will now hand back to Jon for closing remarks.

Thanks, Brian. Now with this being my last results presentation as CEO, I want to close by saying that it's been truly an honor to lead this remarkable company over the last decade and to thank you for both your support and constructive challenge over the years. When you start the journey as CEO, your hope is to leave the company in a stronger position than when you inherited it. And as I reflect, it is certainly a very different Weir to the one of 10 years ago. We've gone through a strategic portfolio realignment to focus on mining and capitalize on the multi-decade opportunity it presents. The business has delivered growth through the cycle and through the Performance Excellence business transformation has achieved operational efficiencies and the platform for annual operating margins sustainably above 20%, all while reducing CO2 emissions and embedding a strong safety culture. We've also brought on board key acquisitions to grow our Weir family, most recently adding a world-class digital solutions platform with the 2025 acquisition of Micromine at its core. And looking forward, the long-term value creation opportunity for Weir is exciting and even more compelling. The company is now a global leader in engineered hardware and software for the mining industry with a powerful culture and a strong team. Demand for critical metals continues to build and customers are increasingly recognizing the need for new, more efficient solutions to unlock future supply and for Weir, there's a clear pathway to sustained growth, delivering mining technology for a sustainable future. So I am satisfied that I'm leaving Weir in great shape with a clear strategy and strong prospects. The company is set to become the preeminent provider of mining technology solutions across both hardware and software, poised for our next phase of accelerating growth and well positioned to deliver long-term superior performance for our customers and shareholders. In Andrew, you have an experienced and hugely talented leader, and I'm confident that he, together with Brian and the wider team, will continue to take Weir from strength to strength. Thank you. And Brian and I will now be happy to take any questions.

[Operator Instructions] Our first question today comes from Chit Sinha from JPMorgan.

I have 2, please. So firstly, just on the margin bridge for H2. Thank you for providing color on the margin bridge in H1. Maybe if you could provide similar sort of detail for H2. I know previously, you've mentioned about 80 bps of investment costs for the full year and about a bit of a tailwind from M&A. So just wondering how we should expect this phasing into H2? And then my second question is just on your pumps growth. I know you've mentioned in a bit of detail with regards to the trials that you've been winning. But perhaps you could shed a bit more light on the competitive landscape that you've seen, especially when some of your Western peers have been talking about market share gains. And then also if you could just touch on pricing in this context. I believe you've implemented about low single-digit price increases.

Yes. Thanks for the questions. Let me deal with the pumps and pricing point first, and then Brian can come back on the margin. So yes, I think you'll have seen from the presentation, we wanted to give a fair bit of color in terms of the success we've been having in the pump market, and you saw the stats that we've won 70% of OE tenders for new equipment and more than 90% of pump trials, which we approach on both an attack and a defense basis. So we're always out in the market looking at mines where we do not have installed base and seeking to position our pumps on a trial basis to be able to take over those positions from our competitors. Also occasionally, that happens to us with competitors offering something different to what we're offering. So we attack and defend through those pump trials. As you see, the success, I think, really, really speaks for itself. And when you step back with roughly 50% market share ourselves in pumps and winning 70% of OE pumps coming through and more than 90% of trials, we continue to inch up our market share. That's just the math of the numbers that I've given you there. So I appreciate that we have a fantastic franchise in pumps with all the strengths that you know and love. And it's through the cycle. I've seen that over all of the 16 years I've been at Weir. It's something that our competitors look to as an opportunity. But year after year, we continue to defend our position really strongly. And I think the combination of the technology we have, which never stands still and the customer service and intimacy that sets Weir apart means that model is absolutely rock solid and resilient and will continue to deliver. And I also wanted to point out that those wins, those pump trials were also against all competitors. So be they the European peers or the Chinese as well, that is our total global success rate. So again, very, very confident in the position that we have and the ongoing sustainable resilience that it will demonstrate. On pricing, I think we're exactly where we thought we would be halfway through the year. We said it's a low single-digit pricing environment at the moment. There's quite a bit of cost consciousness out there among our mining customers at the moment. And clearly, from an OE point of view, it can be a bit more competitive at the earlier point of the CapEx cycle, and that tends to moderate over time. But for now, the realization that we're getting in pricing is absolutely in line with that low single-digit expectation that we had at the beginning of the year. So with that, Brian, margins?

Yes. Thanks, Chit, for the question. If you look at margins, as I start with H1, we had the tailwind with the Performance Excellence that contributed about 100 basis points increase to margins. But we had 2 things offsetting that in the first half. First, we had an unexpected mix within aftermarket. With a wide variety of products we've had, we saw a different level of mix that we've seen previously. That contributed a portion of the 130 basis points decrease that is in the bridge in the slide pack. And the other part of that was, as Jon said, as we entered the cycle in the early phase of that cycle, pricing sometimes is a bit more intense. So we've seen a little bit on the OE side there. The good news is that aftermarket mix that we saw, if you look at the order book, we see that reversing in the second half. So that should be coming back. The Business Excellence or Performance Excellence will be increasing to 120 basis points in the second half. And then the last bit that was a headwind in the first half was the delays in some of the production transfers and some of the work we needed to do led to some higher costs in the first half. And that had a 70 basis point impact in 1H. Once again, that will reverse in the second half. So we see us being sustainably above the 20% margins, as we've discussed, and we're quite comfortable with the operating profit that's currently in the published guidance, hence, why we said that guidance is underpinned. To the last part of your question regarding the impacts of the S4 program, the S4 program is kicking off, but it's more second half weighted. And we'll probably see that, that impact will be slightly less than originally expected in the first half. I think we had 70 to 80 basis points in there. It's probably half of that for the full year 2026. So hopefully, that answers your questions on those, and thanks for the question.

Jon, it's been a fantastic tenure.

Our next question comes from Jonathan Hurn from Barclays.

I have 3 questions, if I may. Firstly, just focusing on obviously that strong OE growth that you saw in the second quarter. Obviously, from the commentary, you expect that to continue through the remainder of this year, and I suspect into 2027 as well. So can you just talk about how we think about margins and mix going forward? I mean I know historically, you've said Weir can do between a 20% to 22% margin. But do we -- when we kind of look at the group, do we think at least I suppose, the near to medium term, it's more towards that sort of 20% as you get an adverse mix. That was the first question. The second question was actually just on your sort of vertical stirred mills. Obviously, good order growth in the first half. Can you talk us through maybe in a little bit more detail about that AM opportunity? Is this sort of the annual spares to OE in that sort of 30% level? Or is it essentially a higher aftermarket opportunity, those vertical stirred mills? And then the third question, maybe for Brian, was just in terms of that sort of working capital, obviously, a big outflow. We did see some customer payments sort of be extended essentially. Do you think there's scope for that to continue in the second half? Or was those sort of extensions of payments from your customers just one-off?

Thanks, Jonathan. Let me take the first 2. And then I just want to make the point I've been making for a little while on margins and bring you back to the Capital Markets event last December. The whole setup of where we wanted to go with margins was to achieve the floor of 20% operating margins because we think that is the gold standard for industrial companies who are seeking to earn a badge of a high-quality compounder. And so the whole setup has been say we want to get there as rapidly as we can and then over time, sustain ourselves as a 20%-plus operating margins company. Now some people are saying, well, just can you keep expanding those margins up and up and up? Well, I don't think that's right for the business because of 2 things. First of all, the next phase for Weir, which Andrew is going to lead is all about growth. It's all about taking advantage of the growth that is going to be available in this market through our technology and innovation, through the CapEx cycle that's coming, through our resilient aftermarket model. So this opportunity ahead over the next few years is really about growth and accelerating that growth and delivering on that. And that will deliver -- if we deliver on that growth and we execute well, that will deliver outstanding returns, and we will see our return on capital employed significantly increasing. So that's the backdrop. We don't want to be doing anything short term that means we're not investing in that growth. And secondly, our customers do look at our margins, and we just need to be mindful of how they're feeling if our margins are marching ever upwards. So it's with that context that 20% is the floor. That's where we very much intend to stay. That's the whole setup of the company. And from here, it's really about accelerating growth and returns. In some years, may it be higher with a positive mix or whatever, of course, but we don't want to be on a sort of conveyor belt where there's expectations it's going to go ever up and up. That's just not realistic. It's not the right thing for the business. And then on the vertical stirred mills opportunity, yes, obviously, we're very mindful that across all of our portfolio, that kind of classic ratio that you've seen with Weir of $0.30 of aftermarket every year, for as long as that equipment remains in the mine for $1 of OE and the vertical stirred mill that we have developed is bang in line with that average for the division. Not quite as high as the very best mill circuit pumps, but back in line with our overall average for the division. So the aftermarket is expected to be $0.30 in the dollar after we sold the equipment once it's commissioned on an annuity basis. Brian, on the payments.

Yes. Thanks, Jonathan. In terms of -- it's probably a wider question on the working capital. Working cash conversion was 41%. I think the first thing to note is from a seasonality standpoint, we are generally somewhere between 55% and 65% in terms of cash conversion. And there's really 3 things to talk about on why it's lower this half year. The first is we purchased the LTIP shares in the first half of this year as opposed to the second half like we did in 2025. That had about a 5% impact. That will not repeat in the second half of the year. The second one is around inventory. You look at the strong order book that we just printed here in the second quarter for the first half and you look at the book-to-bill of 1.12, we needed to build up this inventory to deliver that in the second half. And as you see, our revenue is 45-55, so in terms of the split, 1H to 2H. And so we have that higher inventory level that will burn down over the second half. So you'll see that convert into cash, which leads to the last point is around debtors, and you rightly called out that debtors increased. And what we saw at the end of June is our current debtors that are normally 0 to 30 days and paid at the end of June slipped. We saw about 30 to 40 customers slip into the second half. All that money came in with the first 10 days of July, but it didn't come in at the month end. So we will be looking at that closely over the coming months to ensure we don't see a repeat of that. But that had about an 8% impact on the cash conversion. So we remain very comfortable to be within the 90% to 100% range that we guide towards. But those were the impacts for 1H and why we're happy that they will reverse in the second half.

Great. Very clear. And Jon, I'd just like to say thank you for all your insights on Weir Group over the last 16 years. It's been great to see the company transform as a pure-play mining equipment leader under your tenure. And obviously, you've done some big things. You've exited flow control and obviously, the volatile oil and gas business. So best of luck for the future and the next chapter ahead.

Thanks, Jonathan. And for your support as well. I know you were one of the first analysts I met 16 years ago when I joined the company. So I've appreciated working with you over the years.

Our next question comes from Tore Fangmann from Bank of America.

First of all, as well, all the best for you, Jon. And secondly, looking very much forward to meeting you as well, Andrew. Just 2 from my side. First would be a clarification on the market share in pumps. So if I'm seeing it correctly, FLS is winning market share, METS is winning market share, you are winning market share. So could you please give us a little bit of insight on who's actually losing market share out there? Or are we maybe focusing on the wrong type of pumps? I mean there's many different pumps in the flow sheet. And are you maybe focusing on like a different value portion of the overall portfolio? Any insights would be super helpful.

Well, yes, I mean, thanks for the question. And I think what I would say is that as far as I can see, we're the only people who are actually putting some numbers out there. So I think our statements about market share are backed by those percentages that I talked about earlier in terms of share gains on pump trials and share gains on OE. And beyond our European peer group, there are Chinese and local replicators here and there. So it may be that our peers are taking market share from some of those guys, but it's certainly not coming from us. We're definitely not in the business of donating market share to anybody, quite the reverse. Now do we focus -- you know what our business model is, it's razor/razor blade. In the answer to my last question, Jonathan, I said we like that $0.30 on the dollar. So we do -- we're very disciplined in maintaining that in the bids that we go for. So if, for example, there are very light-duty slurry or water pumps that don't have the aftermarket, we are not going to go after those and sort of lowball pricing to win those because there's no aftermarket capability. And so that may be a factor in there, but we're very focused on big mill circuit, heavy-duty, high abrasion in the best parts of the mine that continue to deliver that razor/razor blade model, which is why our revenues are 80% generated by the aftermarket. That's what we do. And that's where we focus and we continue to win there. So I hope that gives you a bit of the color that you were looking for there.