The retirement of Lord Weir from the 128-year-old Scottish engineering group which bears his name marks the end of an era. In his 42 years with the company – 25 as chairman – the group has been transformed. The traditional Clydeside shipbuilding engineer, which designed, manufacturing and selling marine pumps and related equipment, is now a diversified group. It operates in 20 countries across the general industrial, oil and gas, power generation, mineral processing, water and sewage, and naval and marine sectors.
Weir, the last of the great Clydeside engineers, is now Scotland’s biggest engineering group, with 8,000 employees (1,200 at its Glasgow headquarters and manufacturing site), 37 plants, and 49 service centres worldwide.
Born in 1933, William Kenneth James Weir, the third Viscount Weir, is the last of his family to run the company founded by his great-grandfather James and brother George in 1871. With its location close to Clydeside, one of the great shipbuilding regions, Weir Group prospered. In 1886 its sales were £90,000. By 1914 they were £750,000.
The company also ventured into other areas, building pumping stations for a 270-mile oil pipeline in Burma and one for a similar pipeline in Persia. In 1884, in Egypt, Weir built its first land-based desalination plant, a process for producing fresh water from the sea invented by Weir’s great-grandfather.
The turning point in the group’s history came at the end of the 1950s, when shipbuilding was in decline and steamships were becoming obsolete with the advent of diesel engines. `From the 1960s onwards, we were supplying less equipment to ships and had to shift the emphasis of the business,’ says the former Weir group chairman.
Today, only about 50% of the group’s turnover derives from pump sales. Valves and engineering services each account for about 15%, while materials handling and other product-based businesses account for the rest.
A crucial factor in Weir’s move to supplying pumps and associated equipment for a diverse range of markets was the acquisition of Harland Engineering – a pump manufacturer based in Alloa and Manchester – in the 1970s. The deal still gives Weir satisfaction: `It gave us a base on which to build our pumps business and also took us into wider markets,’ he says.
Harland was Weir’s first and only hostile bid. The company, which has just fended off a £600m hostile bid from US pump manufacturer Flowserve, prefers not to launch such bids itself. `Although Harland was hostile, we knew the company well,’ Weir says. `It’s much better to know the people and the business.’
Diverse market spread is just one reason Lord Weir offers for the group’s progress. `We’ve consistently followed the same strategy,’ he says. `Our success is built on providing high-quality, specialist products backed by comprehensive service activities – this provides good, consistent earnings and helps us through hard times when sales may be down. And when conditions have been difficult, we’ve shown lots of self-discipline; we’ve focused on winning high-quality orders to improve our profit margins, rather than trying to simply increase the volume of sales.’
For 1998, the result of this strategy was record pre-tax profits before exceptionals of £64m, despite a 4.2% decline in turnover to £724.9m.
While many other engineering firms have suffered from the strong pound and the contraction in orders in regions such as Asia, or markets like oil and gas, Weir’s orders have increased in these difficult areas.
But the City has remained unimpressed by both these achievements and the conservative acquisitions strategy. Rising profit margins have been met with a falling share price, as engineering stocks have fallen out of favour. `The stock market over-reacted to the impact of the strong pound,’ says Weir. `It said it would make life more difficult in general for manufacturing, which it has. But our business has hardly been touched by the high pound.’
Making high-value, essential systems for large projects means that Weir has been protected, for example, from the flood of cheap imports which has hit other manufacturers.
Sir Ron Garrick and ex-Scottish Power executive Duncan Whyte, Weir Group’s new chairman and chief executive respectively, say acquisitions of up to £250m are afoot.
But the retiring chairman is confident they will not overpay for acquisitions and will continue to exercise a cautious approach. `You have to remember that most takeovers are unsuccessful,’ he says. `It’s dangerous to get caught up in takeover fever. Since the mid-1980s our record on acquisitions stands up well. That is because we’ve taken a great deal of care with them.’
These include Weir’s largest acquisition to date, the £135m purchase of US pump manufacturer EnviroTech, bought in 1994. This strengthened Weir’s position as one of the top 10 pump makers in the world and expanded its range of international markets.
Although saddened at leaving the group, Lord Weir has found plenty from his long career to give him satisfaction. He recalls with pride how he persuaded colleagues to stay in the desalination business when, in the 1960s, they wanted to pull out. This decision paid off: Weir still has a good track record in this specialist market. About two years ago it acquired Entropie, a French desalination company which produced impressive results in its first full year of operation last year.
The group has had its difficult times. In the 1980s it nearly went bust, and Weir had to relinquish his chairmanship for two years. The company had overborrowed at a time when the pound had soared and its main pump market had deteriorated. Personal friends – the financier Lord Rothschild and US investor Gerald Ruttenberg – stepped in to mop up an unpopular rights issue. `It was a key moment in keeping the company independent,’ says Weir.
He hopes this independence will continue despite the recent takeover threat: `Weir has never been seen as an impersonal, run-of-the-mill company. It is a great local institution and an integral part of Glasgow. It would be a great shame to lose this. It’s never the same being a branch of some big conglomerate.’
Despite the advantages available in other countries, such as lower labour costs, the Weir Group believes its Scottish and other UK manufacturing sites are still cost competitive. `Low wage costs are not the beginning and end of it. We’ve had to spread ourselves around more and have a more global sourcing policy, but you can’t make our type of specialist products in these types of countries.’
Although now retired from his main business, Lord Weir still has plenty to occupy him. He has been non-executive chairman of engineering and construction company BICC for the past two and a half years. Its recent threatened takeover by Wassall and subsequent sale of the cables business to General Cable of the US has certainly kept him busy, as will his work with trade associations British Water and Major British Exporters, the latter representing large exporters abroad.
He is also a non-executive director of Canadian Pacific – his links with the country go back to his early schooling, which took place there – and is involved with insurance company St James Place Capital. In the House of Lords, he is on the standing committee on monetary policy.
Whatever free time he has he may fill with writing, which he has always enjoyed. He also has a 10-year-old son to keep him active. Although no longer responsible for the day-to-day running of Weir group, he has been appointed honorary president. His interest in the family business will be as keen as ever.
Lord Weir at a glance:
Education: Canada, Eton and Trinity College Cambridge
First job: G&J Weir in 1957
Key appointment: Weir group chief executive in 1971 and chairman in 1972 Former director of the Bank of England, British Steel Corporation, The British Bank of the Middle East and Allied Dunbar Assurance
Interests: Golf, shooting, fishing
Weir’s way forward
Weir aims in the next three to four years to double its engineering services division’s £145m turnover. The division has grown at a rate of 19% annually over the past four years, as more of its customers have outsourced maintenance work.
Weir Group has no gearing and up to £250m to spend on acquisitions. With consolidation to come in the pumps and other markets, Weir is looking to buy a pumps, valves or materials handling firm, but one with a large aftermarket business.
Mainland Europe, especially Germany, eastern Europe and the former Soviet Union, are its main geographical targets. Already it has received offers from conglomerates wanting to sell off what they see as non-core businesses.
Some analysts still see the group as vulnerable to takeover, although Flowserve’s bid was highly geared and widely seen as opportunistic.