2nd Jun 2005 07:02
Expro International Group PLC02 June 2005 2 June 2005 EXPRO INTERNATIONAL GROUP PLC ("Expro" or "the group") Preliminary results for the twelve months ended 31 March 2005 Expro International Group PLC, the oil field services company, today announcespreliminary results for the twelve months ended 31 March 2005. Year Year ended ended 31 March 2005 31 March 2004 Change Turnover* £223.3m £208.4m 7%Operating profit/(loss)* £14.3m £(2.0)mOperating profit before goodwill amortisation and exceptional items* £21.3m £16.5m 29%Profit/(loss) before tax £11.6m £(4.5)mProfit before tax, goodwill & exceptional items £18.6m £14.0m 33%Basic EPS /(loss) 6.7p (15.0)pBasic EPS before goodwill & exceptional items 17.3p 13.0p 33%Dividend per share 10.9p 10.9p * (includes share of joint-ventures)The above numbers have been extracted from the Group Consolidated Profit andLoss Account. •Excellent results at the upper end of market expectations. •The strategy announced 18 months ago is now delivering the financial benefits anticipated at the time. •Market conditions generally improving for Expro's late cycle products and services. •Record enquiry and order books, fuelled by increased technology development and customer focus, are providing improved revenue and earnings visibility. •Dividend maintained. •Cash placing launched to refinance recent acquisitions and support the next phase of Expro's development. •Post placing outlook for 2005/06 is in line with the market's current expectations for earnings per share (pre goodwill and exceptional items). Commenting on these results, Graeme Coutts, Chief Executive, said: "I am very pleased to announce today a set of results that reflect in financialterms the continued progress Expro has made implementing the strategy announced18 months ago. Our increased customer focus and technology development has notonly reversed the previous downward sales trend, it has also generated recordlevels of new business enquiries and provided improved earnings visibility.Global market conditions for Expro's products and services have strengthened inthe past year, and, with earnings now benefiting from the group's highoperational gearing, the outlook for 2005/06 and beyond is positive. Against a background of gathering momentum within Expro, and increasing newbusiness opportunities for our products and services, we announced today thelaunch of a non pre-emptive cash placing of shares. The proceeds of this placingwill be used to refinance our successful recent acquisitions and support thenext phase of the group's development." - Ends - For further information please contact: Expro International Group PLC On 2 June: 020 7067 0700Graeme Coutts, Chief Executive Thereafter: 01189 591 341Michael Speakman, Group Finance Director Weber Shandwick Square Mile 020 7067 0700Mike Kirk, Stephanie Badjonat, Rachel Taylor An analyst meeting will be held at 09.30 this morning at the offices of Weber Shandwick Square Mile, Fox Court, 14 Gray's Inn Road, London, WC1X 8WS EXPRO INTERNATIONAL GROUP PLC ("Expro" or "the group") Preliminary results for the twelve months ending 31 March 2005 Chairman's and Chief Executive's Statement The challenge for Expro is clearly defined in the group strategy, which is toensure Expro remains a leading upstream oil and gas technology service provider. A generally strong improvement in market conditions, coupled with successfulimplementation of Expro's published strategy, has led to a steadily improvingbusiness performance in the year ended 31 March 2005. The discipline displayedby the Organisation of the Petroleum Exporting Countries ("OPEC"), and theevidence of strong economic demand for hydrocarbon energy, has led to increasedconfidence in oil prices which can now be sustained at levels above USD30 perbbl. Consequently client capital and operating expenditure levels have risen,providing a more favourable environment for the upstream services industry. Withfew exceptions, all markets have shown improvement as oil and gas operatorsstrive to maximise cash flow from existing assets, seek to add additionalproduction through new field developments, or look to increase proven reservesthrough higher levels of exploration. The first two of these are late phaseactivities in the cycle of the upstream oil and gas industry, which benefit thestrengths of Expro. These improved market conditions are tainted only by thecontinued weakness of the US Dollar. This has a marked effect on Expro'stranslated earnings and has an erosional effect on our competitive position,particularly against our major US based competitors. Underlying trading in the second half of the year strengthened in line with theaforementioned conditions. The focused strategy, published 18 months ago, hashad a marked effect on performance: good progress is being made re-engineeringour loss making Americas business; market share gains have been made in theNorth Sea; international contract wins from new clients; and the addition of asmall, synergistic acquisition to our market leading Subsurface business. As predicted previously, and in common with our peers, the weakening of the USDollar adversely impacted the results of both the Americas and Africa/Asia/MEregions, with profits from the latter region particularly affected as aconsequence of its US Dollar revenue and mainly non US Dollar cost base. Thecontinued adverse exchange impact was largely mitigated by the group's hedgingpolicy in the first half of the year, but inevitably once the hedges placed atstronger dollar rates unwound, profit in the second half of the year wasimpacted to a greater extent. Despite the currency effect, turnover improved, increasing by 7.1% to £223.3mfor the group, including its share of joint ventures. As a result, pre-taxprofits, excluding goodwill amortisation and exceptional items, at £18.6m* were32.8% up on the prior year, with EPS on the same basis at 17.3p*, up 33.1%.Excluding the impact of the exchange rate, the results for the year show anexcellent recovery in the gross profit, confirming the leveraged effect ofincreased revenue activity. The re-engineering of the business has continued throughout the year, andalthough performance improvements have been achieved in the majority of theareas targeted, there have also been some persistently disappointing operations,principally Tripoint in the US. We have, therefore, taken a considered course ofaction to further impair the goodwill associated with these activities. Overallthis has resulted in an exceptional non cash charge of £4.3m and a remaininggoodwill balance of £18.8m. The group tax charge of £7.2m, represents an effective tax rate of 38.5% on theprofit before goodwill and exceptional items*. During the year, the group madegood progress in addressing the historical, non recurring, tax issues in the USand numerous smaller territories, and work continues in addressing similarmatters elsewhere in the group. * As extracted from the consolidated profit and loss account. Largely as a result of the investment in the Chayvo EPF project and theacquisition of Read Matre Investments A.S. ("RMI"), net debt rose towards theend of the year to £54.0m, a gearing level of 76.5% (prior year £44.8m and60.5%). Total net debt is within the group's borrowing facility. Dividend Statement The Board is recommending maintaining the final dividend of 7.1p per ordinaryshare, bringing the total dividend for the year to 10.9p, unchanged from lastyear. This recommendation reflects the Board's confidence that Expro iscontinuing on its track to restore performance against its new businessstrategy. The dividend will be paid on 29 July 2005 to shareholders on theregister on 1 July 2005. Group Strategy In response to declining business performance, Expro published a new strategy inSeptember 2003 aimed at setting new growth objectives for the business. Thedecline was mainly as a result of the high cost of Expro's global infrastructureand a subsequent exaggerated geared effect on earnings, a situation created by arelatively small drop in group revenue. The strategy was designed to counterthis effect and position Expro for a renewed phase of growth. There were three remaining key areas from the strategy for business focus andimprovement at the beginning of this financial year. Firstly, management wererequired to re-engineer the loss making Americas business and deal with an underperforming shallow water Gulf of Mexico market, an area where Expro hadtraditionally relied for much of its US revenue generation. The challenge was toturn a loss making region back into profitability, with solid growth prospects,whilst reducing the long term dependency on the shallow water market. Secondly, a far greater degree of client interaction was required which led toadditional investment in people, professional training and a fully integratedsales network to improve the overall efficiency of Expro's sales efforts. Finally, the importance of technology development was emphasised andappropriately resourced. Technology enhancement took shape in two ways, firstlythrough organic projects such as the Joint Industry Partnership ("JIP") forrigless intervention, and secondly, through the identification and acquisitionof synergistic growth technologies. During the year, all aspects of the implemented strategy had a positive impact.To support the strategy, several key structural and organisational changes weremade. Special emphasis was placed on separating out the geographically dependentCased Hole Services ("CHS") and Surface and Environmental Systems ("SES") fromthe project driven Subsurface Systems ("SSS") business. These key changesallowed specialisation and differentiation to support the sales and technologystrategies. Overall the results to date are encouraging. In our CHS business, we offer our clients a wide range of well performancetechnologies for the maintenance of existing wells and the installation of newproducing wells. The market for CHS is driven by a combination of client capitalexpenditure for new well construction and operating expenditure for existingwells. Virtually all wells require cased hole products and services throughouttheir economic life. Our CHS technology offering varies according to geography.In the majority of our locations, we have a business closely aligned to ourclient's operating expenditure. Our CHS business generally delivers stable andrelatively predictable earnings. This is particularly true of mature provincessuch as the North Sea, a market which continues to offer us opportunity. In thisarea we have increased our CHS market share and increased the contractualopportunity base to introduce new high value technologies such as our CablelessTelemetry System ("CaTS TM") wireless well products. We continue to invest in additional high value technologies to enhance ourearnings capability through our global infrastructure and extensive clientcontract base. The acquisition, post year end, of the Down Hole VideoInternational Inc ("DHVI") is an excellent example of this. The SES area of our business provides small plant, topside processing equipmentfor temporary, semi-permanent and occasionally permanent field development. Thisbusiness is seeing the benefit of a sustained high oil price, late cycledeepwater field developments and a need to increase exploration testing. All ofthis has been assisted by our improved sales efforts. Although the period oftime between enquiry and contract conversion can be long, we are seeingincreased levels of interest from our clients. Many see our small, fast trackproduction solutions as a viable way to gain early cash flow from majorprojects, as well as to increase their reservoir knowledge and reservesposition. Early in the year, we announced Expro's largest ever single contractaward to provide an early production system for ExxonMobil's Chayvo project inSakhalin Island. The largest beneficiary of the increased late cycle activity and group strategyhas been our SSS business. In this grouping, we have market leading businessesall closely aligned to our client's deepwater capital expenditure. These latecycle businesses are dependent on sanctioned projects which are operationallyunderway. The market environment for our subsurface businesses is currentlyfavourable. These conditions, combined with our organisational focus andincreased sales drive, has produced a strong position and outlook. The recentaddition of the Matre sensor range to our portfolio at Tronic is very timely. Our Employees Our ability to deliver our strategy, and to continue to develop the business, isgreatly assisted by the professional attitude and performance of our employees.The Board wishes to place on record its recognition of the achievements andcontribution made by all employees. Geographic Performance Expro provides the products and services of our three business streams to globalmarkets through an extensive network of operational areas. These geographicoperating areas are managed and report within three distinct regional groupings. Europe/FSU continues to be the largest of Expro's operating regions. In thisregion, Expro has critical mass offering the most complete range of products andservices and employing over 1,100 personnel. Performance in the year,particularly in the UK North Sea, exceeded expectations. Despite receiving muchnegative press, the ageing characteristics of this province play strongly toExpro's suite of products. Our CHS technologies have seen increasing demandresulting in market share gains with bp, Talisman and, latterly, the award ofShell's pan European contract. This particular contract gain also extended toour SES business where our well testing equipment will be deployed to assistShell's European operations. These core contracts are in product lines which areat the lower end of Expro's margin portfolio, however they do provide goodearnings visibility and a recognised conduit for the introduction of new CHStechnologies. The performance of our SSS business in this region was excellent.There was strong demand in the offshore areas of the North Sea to provideproducts and services aligned to new subsea wells. These wells are strategicallyplaced to provide additional production from stranded accumulations which cannotbe reached by conventional drilling from existing platform infrastructure. Africa/Asia/ME region is now managed from our new Dubai office. Opened early inthe year, this strategically important hub is now fully operational. This regionsuffers more than any other as a result of the weak US Dollar, having a largedegree of fixed non US Dollar costs. However, despite the currency issue,underlying progress in the year has been good. In the prior year, the region hadseveral minor loss making territories which have since been restructured toreduce cost, increase sales and return to profitable operations; the specificareas being Australia, Indonesia and China. December 2004 marked the final monthof Shell's highly successful Soroosh field contract offshore Iran. This earlyproduction contract was initially awarded to Expro for a short term butcontinued for almost 3 years. During this time Expro and our partner, SwirePacific, processed over 50 million barrels of crude oil with over 99%operational efficiency and a safety record of over 1.5 million man hoursoperation without a Lost Time Incident ("LTI"). This is the type of outstandingperformance that we will be required to deliver on the upcoming Chayvo contractfor ExxonMobil in Sakhalin Island, which is on schedule for commissioning earlynext financial year. Our Africa/Asia/ ME management team cover a largegeographic area. Their product offering varies with market and location. Marketssuch as deepwater West Africa offer different challenges to land operations incentral Australia. However, all areas are generally experiencing increasedlevels of enquiry driven by enhanced client spending. The Americas region is undergoing a strategic re-engineering exercise.Headquartered in Houston, the management team have progressively refocused onkey technology markets, reducing exposure to segments which will not deliveracceptable business performance and closing operational bases which are marginalor loss making. Thus far the results are very encouraging. Expro Americas havemoved from a £3 million prior year loss to making a small pre-exceptional,profitable contribution. A major part of the strategy is to re-engineer thetechnology and market focus of our Americas business. Work continues on thischallenge, however, the prior period issues relating to the shallow Gulf ofMexico are now firmly behind us with revenue levels manageable and stable. Weare now beginning to see the new Expro emerging in the Americas, with greatergrowth dynamics through new deepwater and land market technologies. The recentlyannounced Chevron Tahiti project will require state of the art Expro subseatechnology to support our client with the most technically demanding, deepwaterfield development undertaken to date. Houston remains a critical centre for Expro as a global service provider. Muchof our client networking, technology and engineering skills are now resident inthis area. The influence of a strong Expro Americas on the rest of our businessis not to be underestimated. Our well publicised JIP for the riglessintervention project has moved beyond concept phase into detailed engineering.In this project all of our partners are Houston based, from where decisions onthe future global requirements of their respective organizations are taken. Outlook The outlook for the oil and gas services sector is much brighter, driven byimproved client confidence and stable commodity prices, resulting in a generaluplift in client capital and operational spend. As a late cycle player, Expro isnow beginning to see the benefit of these market conditions. This positiveenvironment is providing good impetus to Expro's strategy, resulting in a morefavourable trading outlook. Key markets, such as the United Kingdom ContinentalShelf, have held up well for the group and offer continued good prospects. Ourproject based SSS business unit is enjoying the benefit of prior investment innew technology and positive client demand. These otherwise positive conditions are somewhat tainted by unfavourablecurrency movements particularly relating to the weakness of the US Dollar. Thisissue creates an erosional effect on Expro's translated earnings and has adetrimental effect on our competitive position when compared to many of our USbased competitors. We have a highly focused strategy and an outstanding technology portfolio.Globally, our levels of tendering and enquiry are very high, in part driven byenhanced client interaction. Our order book is sufficiently robust to give usconfidence that we remain well set to deliver our strategic goals. Immediately following the announcement of these results for the year ended 31March 2005, the company intends to issue and place for cash, 6,640,000 ordinaryshares representing approximately 9.99% of its existing issued ordinary sharecapital. The Board believes that the business will be strengthened by an issue of equity,with the proceeds to be used to refinance the recent acquisitions of DHVI, RMIand Plus Design and provide funds to support the next phase of the group'sdevelopment. Following the placing, the Board is confident that the group's outlook for 2005/06 will remain in line with the market's current expectations for earnings pershare (pre goodwill and exceptional items). Chris Fay, CBE Graeme Coutts 1 June 2005Chairman Chief Executive Officer Operations Review Expro's global operations are centred in three geographic regions. The Europe/FSU region, headquartered in Aberdeen, covers the UK, Norway, ContinentalEurope, Former Soviet Union and Western Russia. The Africa/Asia/ME region,managed from its hub in Dubai, UAE, covers Africa, the Middle East and Asiaincluding Australia and China. The Americas region spans North and South America, with headquarters in Houston. The group operates in over forty countries worldwide. Europe/FSU revenue, including share of joint ventures, was £104m, up 11% on theprior year. This was despite a continued slow down in capital investment in theNorth Sea. Our clients continue to focus on optimising production from existingwells and this, coupled with increased market share, resulted in higher thanexpected activity levels. Africa/Asia revenue, including share of joint ventures, was £80m, up 8% on theprior year, notwithstanding a corresponding drop in the value of the USD. Delaysto some major projects in West Africa were more than offset by increasedactivity in North Africa. The prior year restructuring in Asia resulted in astrong performance throughout the area, with revenue up 52% and a more balancedcost base. In the Americas, including share of joint ventures, revenue of £39m was up 4% inUS Dollar terms. The Gulf of Mexico shallow water market continued to be weak,however, considerable progress was made in the deepwater subsea interventionmarket, the benefits of which will be evident in the coming year. Plans toexpand the onshore business, through the deployment of new cased holetechnologies, suffered a setback with the tragic death in September of MarkThatcher, the Region Director. A new Region Director, Jeff Skelly, has beenappointed and that strategy is now regaining momentum. Cased Hole Service Revenue was down 2% on the prior year at £86.5m, due entirely to the weaker USDollar. In US Dollar terms revenue was up 3%. In Europe/FSU, long term North Sea contracts with Shell, Talisman, bp,ConocoPhillips and ChevronTexaco were all retained. This not only securesongoing work but, in most cases, will result in additional work. In the case ofShell, the contract now covers the whole of Shell's European wirelineoperations. Our clients' focus on production enhancement from mature wells isevidenced by the increasing demand for specialist services such as wirelineperforating and StimTube TM well stimulation products. New entrants to the NorthSea and independent operators continued to provide a valuable source of revenue,the most significant contract being with Apache on the Forties Field. In Africa and the Middle East, CHS revenue was down 10% due almost entirely tothe weaker US Dollar. A drop in activity in Angola and Equatorial Guinea wasoffset by increased activity offshore Mauritania for Woodside, on theirChinguetti field, and a full year's activity in Oman for PDO, providing fluidsampling and on-site analysis services as part of a major productionrejuvenation programme. Both the Woodside and PDO contracts use Expro'sproprietary GOLD system, providing laboratory standard PVT analysis in thefield. In Asia, CHS revenue was up 13% on prior year. This was due to increasedactivity in Thailand for ChevronTexaco, for Santos in the Cooper Basin inAustralia and also for Apache, offshore Western Australia. This work was carriedout under long term service contracts to provide cased hole services in theseareas. Revenue also benefited from a full year's activity in China, providingTubing Conveyed Perforating ("TCP") services to CNOOC in Bohai Bay. Recentcontracts awarded in India and China for StimTube TM well stimulation productsare further evidence of the quest by operators to enhance production fromexisting wells. In the Americas, CHS revenue was up 9% in US Dollar terms. The poor marketconditions noted last year in the shallow water Gulf of Mexico continued,affecting both wireline and TCP services. This was offset by increased activityin Canada, including the award of a major contract by Encana for SmarTract TMdownhole tractor services and in the United States, by the award of two majorcontracts by Shell for the CaTS TM system. The two contracts required theinstallation of 46 data probes in three wells in the Rocky Mountains. After arapid increase in the number of Excape (R) perforating jobs in the prior year,revenue was virtually unchanged in the year ended 31st March 2005. A number ofnew initiatives are underway to promote the technology, particularly forhorizontal wells. Subsurface Systems Revenue, including share of joint ventures, was up 47% on the prior year at£62m. The three product lines that make up Subsurface Systems, subseaintervention systems, subsea connectors and permanent in-well instrumentation,are all linked to field developments using subsea wells and hence reflect ourclients' capital expenditure plans. Revenue from the supply, operation and maintenance of subsea interventionsystems in the mature North Sea declined, as expected, by 8% with the drop ininvestment in major new subsea projects. In the Gulf of Mexico however, revenuewas up 30% on the prior year in US Dollar terms. The mobilisation of Expro's newdeepwater electro-hydraulic intervention system for Dominion Resources'multi-well Mississippi Canyon development and the new high pressure (15,000 psi)system for ENI's deepwater K2 development, were major milestones. Theseachievements, coupled with recent contract awards for similar subsea systems,provide a positive outlook for deepwater subsea activity in the Gulf of Mexico. The award of a contract to provide a deepwater electro-hydraulic interventionsystem for bp's Block 18 development offshore Angola, West Africa, helped toboost Africa's subsea revenue to new highs. A number of major tenders areawaiting award that would see this trend continue in the all important deepwaterWest Africa market. Revenue from the manufacture and supply of Tronic subsea connectors achievedrecord levels, boosted by a strong subsea market and increased market share.Tronic's core business is based on its range of hydraulic connectors. However,there has been significant interest in the newly developed range of electricalpower connectors and a number of studies have been carried out for majorclients. This reflects the increasing demand for the distribution of electricalpower to offshore platforms, subsea installations and wells. Revenue from the group's 50% share of the QuantX joint venture was up 24% on theprior year. This was the result of major contract awards for permanentmonitoring systems for West African field developments and nine months' revenuefrom their Plus Design acquisition, which has taken QuantX into the ElectricalSubmersible Pump monitoring business. Surface and Environmental Systems Overall revenue was down 4% on the prior year at £75m, due entirely to theweaker US Dollar. In the North Sea, well testing and clean up activity exceeded expectations,boosted by increased market share and work for new entrants such as Oilexco ontheir Brenda appraisal wells and Petro-Canada on the Pict Development. Severallong term well testing contracts were extended during the year and, in the caseof Shell, now cover the whole of Shell's European operations. Expro provides andoperates the production facilities on the Ardmore field in the North Sea, whereoperations continued throughout the year. In Africa and the Middle East, well testing and associated clean up revenue wassignificantly higher compared to the prior year despite the weaker US Dollar.Increased activity offshore Cote d'Ivoire for CNR and offshore Mauritania forWoodside boosted revenues. In Algeria, work continued for BHP on the Ohanetfield and for bp on the In Salah development. In December 2004, the productionsolutions contract for the ESP-1, a mobile production unit employed as an earlyproduction facility on Shell's Soroosh field offshore Iran, came to an end. Theloss of the last quarter's revenue offset the gain in testing and clean uprevenue noted above. Overall there was an 11% decrease in Surface andEnvironmental revenue over the prior year. The above mentioned ESP-1 mobile production facility was demobilized fromShell's Soroosh Field at the end of December after thirty six months operations,during which time it produced over 50 million barrels, with an averageproduction uptime of over 99% and with over one and a half million man hoursworked without a lost time incident. In Asia, well testing and clean up revenue doubled. The provision of testingservices on ConocoPhillips' Bayu Undan development in the Timor Sea continued asdid clean up services for Santos in the Australian Cooper Basin. Contracts werealso secured for testing services for the Cuulong joint venture offshore Vietnamand for Cairn Energy in India. A number of contracts were awarded during theyear for the supply, operation and maintenance of early production facilities.Three of these are in Indonesia and one offshore Thailand. As a result, revenuefrom early production facilities was almost three times that in the prior year. At the beginning of the year, Expro was awarded a major contract to provide anearly production facility for ENL (Exxon Neftegas Limited) on Sakhalin Island,Eastern Russia. Engineering work has been completed and all equipment has beenprocured. The equipment was delivered to Sakhalin Island at the end of January,on time. Work is currently underway to install the equipment on the locationready for commissioning and start up in July 2005. - Ends - For further information please contact: Expro International Group PLC On 2 June: 020 7067 0700Graeme Coutts, Chief Executive Thereafter: 01189 591 341Michael Speakman, Group Finance Director Weber Shandwick Square Mile 020 7067 0700Mike Kirk, Stephanie Badjonat, Rachel Taylor Consolidated Profit and Loss AccountFor the year ended 31 March 2005 2005 2004 _______________________________________ ________________________________________Continuing operations Before Before goodwill and Goodwill and goodwill and Goodwill and exceptional exceptional exceptional exceptional items items Total items items Total Note £'000 £'000 £'000 £'000 £'000 £'000Turnover:Group and share of joint ventures- Existing operations 2 222,005 - 222,005 208,395 - 208,395- Acquisitions 3 1,272 - 1,272 - - - ______ ______ ______ ______ ______ ______ 223,277 - 223,277 208,395 - 208,395Less: share of joint ventures 2 (12,004) - (12,004) (12,655) - (12,655) ______ ______ ______ ______ ______ ______Group turnover 2 211,273 - 211,273 195,740 - 195,740Cost of sales (177,394) - (177,394) (173,376) - (173,376) ______ ______ ______ ______ ______ ______Gross profit 33,879 - 33,879 22,364 - 22,364 ______ ______ ______ ______ ______ ______Other operating expenses __________________________________________________________________________ Goodwill amortisation - (1,810) (1,810) - (2,372) (2,372) Exceptional provision for goodwill impairment 4 - (4,342) (4,342) - (16,125) (16,125) Exceptional provision for inventory obsolescence 4 - (1,546) (1,546) - - - Other expenses (15,060) - (15,060) (9,411) - (9,411) __________________________________________________________________________ ______ ______ ______ ______ ______ ______ Total other operating expenses (15,060) (7,698) (22,758) (9,411) (18,497) (27,908) ______ ______ ______ ______ ______ ______Operating profit / (loss) Group - Existing operations 18,555 (7,698) 10,857 12,953 (18,497) (5,544) - Acquisitions 3 264 - 264 - - - ______ ______ ______ ______ ______ ______ 18,819 (7,698) 11,121 12,953 (18,497) (5,544) __________________________________________________________________________Share of operating profit in joint ventures 2,486 - 2,486 3,566 - 3,566 - Goodwill amortisation - (785) (785) - - -- Exceptional credit from release of provision 4 - 1,464 1,464 - - - __________________________________________________________________________Total share of operating profit in joint ventures 2,486 679 3,165 3,566 - 3,566 ______ ______ ______ ______ ______ ______Group and share of joint ventures 21,305 (7,019) 14,286 16,519 (18,497) (1,978)Finance charges (net) (2,674) - (2,674) (2,488) - (2,488) ______ ______ ______ ______ ______ ______Profit / (loss) on ordinary activities before taxation 18,631 (7,019) 11,612 14,031 (18,497) (4,466)Tax on profit/ (loss) on ordinary activities 5 (7,175) - (7,175) (5,428) - (5,428) ______ ______ ______ ______ ______ ______Profit / (loss) on ordinary activities after taxation 11,456 (7,019) 4,437 8,603 (18,497) (9,894)Minority equity interests (1) - (1) (9) - (9) ______ ______ ______ ______ ______ ______Profit / (loss) for the financial year 11,455 (7,019) 4,436 8,594 (18,497) (9,903)Dividends paid and proposed 6 (7,218) - (7,218) (7,202) - (7,202) ______ ______ ______ ______ ______ ______Retained loss for the year 4,237 (7,019) (2,782) 1,392 (18,497) (17,105) ______ ______ ______ ______ ______ ______Earnings / (losses) per ordinary share 7 Basic - - 6.7 p - - (15.0) p Diluted - - 6.6 p - - (15.0) p Basic before goodwill amortisation and exceptional items 17.3 p - 17.3 p 13.0 p - 13.0 p Consolidated Statement of Total Recognised Gains and LossesFor the year ended 31 March 2005 2005 2004 £'000 £'000 Profit / (loss) for the financial year 4,436 (9,903)Translation loss on foreign currency net investments (2,584) (14,114)Gain on foreign currency borrowings 665 6,943 _______ _______ 2,517 (17,074) _______ _______ Consolidated Balance Sheet31 March 2005 31 March 31 March 2005 2004 Restated (note 8) £'000 £'000Fixed assetsPatents and licences 3,477 6,810Goodwill 18,757 19,327 _______ _______Intangible assets 22,234 26,137Tangible assets 66,862 58,077Investments in joint ventures: ___________________ - share of gross assets 6,126 12,496 - share of gross liabilities (3,447) (6,012) - goodwill 665 757 ___________________ 3,344 7,241 _______ _______ 92,440 91,455 _______ _______Current assetsStocks 15,213 16,296Debtors - due within one year 75,829 69,146 - due after one year - 419Cash at bank and in hand 5,009 14,563 _______ _______ 96,051 100,424Creditors: Amounts falling due within one year (55,979) (49,932) _______ _______Net current assets 40,072 50,492 _______ _______Total assets less current liabilities 132,512 141,947Creditors: Amounts falling due after more than one year (58,868) (59,407)Provisions for liabilities and charges (3,129) (8,374) _______ _______Net assets 70,515 74,166 _______ _______Capital and reserves NoteCalled-up share capital 6,646 6,615Share premium account 8 929 61,650Capital reserve 8 - 24ESOP trust reserve 8 (407) (7)Profit and loss account 8 63,314 5,852 _______ _______Shareholders' funds, being equity interests 9 70,482 74,134Minority equity interests 33 32 _______ _______Total capital and reserves 70,515 74,166 _______ _______ Consolidated Cash Flow StatementFor the year ended 31 March 2005 31 March 31 March 2005 2004 £'000 £'000 NoteNet cash inflow from operating activities 10 40,629 27,990 Returns on investments and servicing of finance (2,571) (2,805) Taxation (5,752) (10,278) Net cash outflow for capital expenditure and financial investment (29,216) (13,401) Acquisitions and disposals (5,894) (3,867) Equity dividends paid (7,204) (7,202) _______ _______Cash outflow before financing (10,008) (9,563) Financing 454 (4,000) _______ _______Decrease in cash in the year 10 (9,554) (13,563) _______ _______ Notes to the Preliminary Results31 March 2005 1. The financial information set out above does not constitute the Company'sstatutory accounts within the meaning of Section 240 of the Companies Act 1985.The statutory accounts of the Company for the year ended 31 March 2004 have beendelivered to the Registrar of Companies. The auditors' report on those accountswas unqualified and did not contain any statements under Section 237(2) or (3)of the Companies Act 1985. The auditors' report for the year ended 31 March 2005 is unqualified and doesnot contain any statements under Section 237 (2) or (3) of the Companies Act1985. With the exception of the change to the employee share scheme accountingpolicy on the adoption of UITF Abstract 38 Accounting for ESOP Trusts and thecorresponding restatement of prior year figures (see note 8), these accountshave been prepared using the same accounting policies as in the 31 March 2004statutory accounts. These accounts will be delivered to the Registrar ofCompanies following the Annual General Meeting on 6 July 2005. 2. Segmental information Surface & Environmental Cased Hole Services Subsurface Systems Systems Total 2005 2004 2005 2004 2005 2004 2005 2004Turnover by business stream £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Total 86,482 88,054 61,824 42,002 74,971 78,339 223,277 208,395Less: Share of joint ventures - - (8,879) (7,232) (3,125) (5,423) (12,004) (12,655) ______ ______ ______ ______ ______ ______ _______ _______Group turnover 86,482 88,054 52,945 34,770 71,846 72,916 211,273 195,740 ______ ______ ______ ______ ______ ______ _______ _______Segment profit 11,820 7,755 12,112 7,129 4,745 4,564 28,677 19,448 ______ ______ ______ ______ ______ ______ Common costs (11,668) (8,867)Exceptional provision for inventory obsolescence (1,546) - - - - - (1,546) -Exceptional provision for goodwill impairment (4,059) (14,950) - - (283) (1,175) (4,342) (16,125) ______ ______ ______ ______ ______ ______ _______ _______Operating profit/(loss) 11,121 (5,544)Share of joint ventures operating profit - - 1,158 863 543 2,703 1,701 3,566Exceptional credit from release of provision - - - - 1,464 - 1,464 - ______ ______ ______ ______ ______ ______ _______ _______Operating profit/(loss) from group and share of joint ventures 14,286 (1,978)Finance charges (net) (2,674) (2,488) _______ _______Profit/(loss) on ordinary activities before taxation 11,612 (4,466) _______ _______Segment net assets 36,586 48,565 45,451 34,133 45,610 41,381 127,647 124,079 ______ ______ ______ ______ ______ ______Unallocated net liabilities (restated - note 8) (57,132) (49,913) _______ _______Net assets 70,515 74,166 _______ _______ Unallocated net liabilities and common costs consist of the net liabilities, group borrowings and common costs of the group head office which cannot reasonably be allocated to the business streams. 2. Segmental information (continued) Europe / FSUa Africa / Asia /MEb Americas Total 2005 2004 2005 2004 2005 2004 2005 2004 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Turnover by geographical originTotal including inter- segment sales 104,226 93,994 79,809 73,995 59,929 40,406Inter-segment sales - - - - (20,687) - _______ ______ ______ ______ ______ ______Group and share of joint ventures 104,226 93,994 79,809 73,995 39,242 40,406 223,277 208,395Less: Share of joint ventures (2,785) (2,243) (7,244) (8,778) (1,975) (1,634) (12,004) (12,655) _______ ______ ______ ______ ______ ______ _______ _______Sales to third parties 101,441 91,751 72,565 65,217 37,267 38,772 211,273 195,740 _______ ______ ______ ______ ______ ______ _______ _______Segment profit/ (loss) 19,081 18,103 8,208 4,826 5,867 (3,481) 33,156 19,448 Unrealised profit on inter-segment sales - - - - (4,479) - (4,479) - _______ ______ ______ ______ ______ ______ _______ _______Segment profit/ (loss) on third party sales 19,081 18,103 8,208 4,826 1,388 (3,481) 28,677 19,448 _______ ______ ______ ______ ______ ______ Common costs (11,668) (8,867)Exceptional provision for inventory obsolescence - - - - (1,546) - (1,546) -Exceptional provision for goodwill impairment (400) (160) (127) (1,015) (3,815) (14,950) (4,342) (16,125) _______ ______ ______ ______ ______ ______ _______ _______Operating profit/(loss) 11,121 (5,544)Share of joint ventures operating profit/(loss) 282 28 1,204 3,589 215 (51) 1,701 3,566Exceptional credit from release of provision - - 1,464 - - - 1,464 - _______ ______ ______ ______ ______ ______ _______ _______Operating profit/(loss) from group and share of joint ventures 14,286 (1,978)Finance charges (net) (2,674) (2,488) _______ _______Profit/(loss) on ordinary activities before taxation 11,612 (4,466) _______ _______Segment net assets 49,029 51,345 50,446 36,606 28,172 36,128 127,647 124,079 _______ ______ ______ ______ ______ ______Unallocated net liabilities (restated - note 8) (57,132) (49,913) _______ _______Net assets 70,515 74,166 _______ _______a. Former Soviet Union b. Middle EastThere is no material difference between turnover by origin and turnover by destination. Unallocated net liabilities and common costs represent the net liabilities, group borrowings and common costs of the group head office which cannot reasonably be allocated on a geographic basis. The turnover and operating profit of the acquisition made during the year which have been included within the results of the group were £1,272,000 and £264,000 respectively. The net assets of the acquired business at 31 March 2005 were£971,000. These amounts are contained within the Subsurface Systems business segment and within the Europe / FSU geographical segment figures given above. 2. Segmental information (continued) The analysis of turnover, operating profit and net assets presented aboveincludes the following results and net assets in respect of joint ventures whichwere disposed of during the year. Surface & Environmental Africa /Asia /ME Systems 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Share of joint ventures sales to third parties 3,125 5,424 3,125 5,424 ______ ______ ______ ______Share of jointventures operatingprofit 2,007 2,680 2,007 2,680 ______ ______ ______ ______Net assets - 7,241 - 7,241 ______ ______ ______ ______ 3. Acquisitions and disposalsAcquisitionsOn 31 January 2005 the group acquired the entire issued share capital of MatreInstruments AS, a company incorporated in Norway, which has been accounted foras an acquisition. The results of the group include turnover of £1,272,000, costof sales of £970,000, administrative expenses of £38,000 and operating profit of£264,000 arising in the period from acquisition to 31 March 2005. The results ofthe business for the year ended 31 December 2004 were turnover of £5,908,000 andoperating profit of £1,087,000. The table below sets out the provisional fair value of the acquired identifiableassets and liabilities of Matre Instruments AS. No adjustments were made topre-acquisition book values as it was judged that these properly represented thefair values to the group. £'000 Fixed assets Tangible assets 85 Current assets Stocks 1,587 Debtors 1,350 Cash 553 ______ Total assets 3,575 ______ Creditors (2,857) ______ Total liabilities (2,857) ______ Net assets acquired 718 ______ Purchase consideration Cash 6,316 Acquisition costs 105 ______ 6,421 Goodwill arising (5,703) ______ 718 ______ Net cash outflows in respect of the acquisition comprised: £'000 Purchase consideration 6,421 Net cash balances acquired (553) ______ 5,868 ______ 3. Acquisitions and disposals (continued) Acquisitions (continued)On 10 June 2004 QuantX Wellbore Instrumentation Limited acquired 100% of theissued share capital, net assets and business of Blenheim Technology GroupLimited, including its interest in the shares of its wholly owned subsidiary,Plus Design Limited. The total fair value of consideration, including costs, was£3,029,000 and the fair value and book value of the net assets acquired was£1,643,000 giving rise to goodwill of £1,386,000. On 1 January 2005 the tradeand assets of Plus Design Limited were transferred to QuantX WellboreInstrumentation Limited. DisposalsOn 31 March 2005 the group disposed of its 50% interest in the shares of bothExpro Swire Production Limited and Expro Swire Production Pte Limited for totalconsideration of £6,032,000. The group's share of profit during the year up tothe date of disposal was £2,007,000 and for the prior year was £2,703,000. The assets disposed of and the related sales proceeds were as follows: £'000 Share of gross assets 7,153 Share of gross liabilities (1,121) Profit on sale - ______ Total assets 6,032 ______ Share proceeds satisfied by Assignment of loan 1,320 Deferred consideration 4,712 ______ 6,032 ______ 4. Exceptional items (a) Exceptional credit from release of provision in joint venture The £1,464,000 exceptional credit from release of provision reflects the write back of a provision made in prior years in connection with a customer's option to purchase equipment from one of the group's joint venture undertakings. (b) Exceptional provision for inventory obsolescence As a result of a stock obsolescence review conducted in the Americas region a one-off inventory provision has been made in the year for £1,546,000. (c) Exceptional provision for goodwill impairment In accordance with FRS11 Impairment of Fixed Assets and Goodwill the carrying values of the group's subsidiary undertakings have been compared to their recoverable amounts, representing their value in use to the group. This included a re-examination of the carrying values and recoverableRelated Shares:
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