Full year results for the year ended 31 December 2013

18 February 2014 Full year results for the year ended 31 December 2013 Wood Group delivers good growth with EBITA up 16% Financial summary * Total Revenue of $7,064.2m (2012: $6,828.1m) up 3% * Total EBITA1 of $533.0m (2012: $459.1m) up 16% * Profit before tax of $412.8m (2012: $361.4m) up 14% * Adjusted diluted EPS of 98.6 cents (2012: 85.2 cents) up 16% * Total dividend of 22.0 cents per share (2012: 17.0 cents) up 29% Group highlights * Another year of good growth in 2013; performance in line with expectations * $276m invested in strategic acquisitions, including Elkhorn in US shale market * Enhanced differentiation in gas turbine activities through joint venture with Siemens * Wood Group Engineering + Growth in all three segments in 2013: Upstream, Subsea & Pipeline and Downstream + Scope on Mafumeira Sul and Ichthys substantially complete + Slower pace of significant offshore awards; anticipated growth in subsea & pipeline to be more than offset by reduction in Upstream in 2014 * Wood Group PSN + Growth in North Sea; significant renewals maintain leading position and provide visibility + Strong growth in the Americas led by US onshore shale related business + Reduced losses in Oman; agreeing transition plan with customer to exit + US onshore shale to benefit from contribution of Elkhorn; well positioned to deliver good growth in 2014 * Wood Group GTS + Maintenance performance up on 2012; lower contribution from Power Solutions + Completion of Siemens joint venture anticipated in H1 2014; all gas turbine activities reported in Wood Group PSN thereafter + Performance of gas turbine activities in 2014 expected to be in line with 2013 Bob Keiller, CEO commented: "2013 represents another year of good growth for Wood Group. In my first fullyear as CEO, the leadership team and I have considered the Group's strategywhich remains sound and positions us well for the longer term. We arepredominantly an upstream oil and gas services business and our intention is tobroaden and deepen the services we can offer in this sector. We have reviewedall parts of the Group from three perspectives: risk profile, current andfuture financial performance and strategic fit with the Group overall, and thishas resulted in a number of actions including the acquisition of Elkhorn andthe joint venture with Siemens. Looking to 2014, our mix of opex and capexactivities and the contribution of completed acquisitions is expected to leadto growth overall." Enquiries: Wood Group Andrew Rose 01224 851 000Carolyn Smith Brunswick Patrick Handley 020 7404 5959Nina Coad There will be an analyst and investor presentation at the Lincoln Centre, 18Lincoln's Inn Fields, WC2A 3ED at 09.00 (GMT). Early registration is advisedfrom 08.30 (GMT) A live webcast of the presentation will be available from www.woodgroup.com/investors. Replay facilities will be available later in the day. 1 See detailed footnotes. Chairman's Statement Introduction 2013 has been a year of good growth and important strategic development for theGroup under Bob Keiller's leadership in his first full year as CEO, havingtaken over in November 2012. My appointment as Chairman at that time reflectedthe need for continuity amongst the senior team. Since his appointment in 2012,Bob has shown excellent leadership as he further develops the Group's strategyand direction. Having supported Bob through this planned period of transition I will retirefrom the Board at the AGM in May. I am delighted that Ian Marchant will takeover as Chairman of Wood Group. Ian knows the Group well, having served as anon-executive director on the Board since 2006, latterly as senior independentdirector. Ian was Chief Executive of SSE plc for over 10 years, isnon-executive chairman of Infinis Energy PLC and a non-executive director ofAggreko plc. His appointment represents a natural evolution in the Group'sstewardship and provides important continuity. I am confident that Ian will bean excellent leader of the Board and ensure its continued effectiveness. Markets Energy markets generally remained favourable during the year with analyststypically estimating an increase in E&P spend of around 10%. For 2014, analystsestimate some reduction in that growth rate reflecting a greater focus oncapital budgets by our customers. The Group continues to have a good balance ofopex and capex activities which should help underpin growth in the medium term. Financial performance and dividends In 2013, Total Revenue was up 3% and Total EBITA was up 16% to $533.0m, withEBITA margin increasing from 6.7% to 7.5%. Adjusted diluted EPS increased from85.2 cents to 98.6 cents. We are declaring a final dividend of 14.9 cents whichwill bring the full year dividend to 22.0 cents, an increase of 29% on 2012. Board changes In September, we announced that Mike Straughen, Group Director for Wood GroupEngineering intends to retire from the Board during 2014. Mike has stepped awayfrom his Wood Group Engineering role and now oversees the Group's HSEactivities and sits on the Safety & Assurance committee. The committee ischaired by Tom Botts, formerly of Shell, who was appointed as non-executivedirector in January 2013. In October we entered an agreement to form a joint venture between elements ofWood Group GTS and Siemens' TurboCare business, at which point Mark Dobler,Group Director for Wood Group GTS stepped down from the Board. Mark willtransfer to the new joint venture on formation as its CEO. Neil H. Smith retired from the Board in December. Neil was a non-executivedirector from 2004 and served on the Remuneration and Nomination committeesduring his time on the Board. His knowledge of the power generation industrygreatly assisted Board discussions on the strategic development of our gasturbine activities. I have enjoyed leading Wood Group during an exciting period of organic growthand strategic development including, most recently, the acquisition of PSN andthe sale of the Group's Well Support business. I am leaving the Group wellpositioned for growth in good long term markets and in the hands of a strongBoard and management team. I will continue to follow the Group's ongoingdevelopment with keen interest. Finally, I would like to thank our managementand employees for their enormous and continuing contribution in making WoodGroup a great company. Allister Langlands, Chairman CEO Review Safety & assurance The safety of our people, and those affected by what we do, is our toppriority. Tragically we had a fatality during the year in our Pyeroy businessin Wood Group PSN. We have assessed, and are acting on, the lessons learned. In2013, we saw some improvement in our total recordable case frequency (TRCF) andour lost work case frequency (LWCF) remained relatively flat. During 2013 weestablished a Board-level Safety & Assurance committee to provide enhancedvisibility and awareness of our performance, and we extended our SafetyLeadership Programme to a wider audience. Financial performance 2013 Group performance 2013 2012 % $m $m Change Total Revenue 7,064.2 6,828.1 3% Total EBITA 1 533.0 459.1 16% EBITA margin % 7.5% 6.7% 0.8pts Profit before tax 412.8 361.4 14% Basic EPS 81.4c 71.4c 14% Adjusted diluted EPS2 98.6c 85.2c 16% Total dividend 22.0c 17.0c 29% ROCE6 19.4% 19.3% 0.1pts Note: The analysis above includes revenue and EBITA related to the Wood GroupGTS businesses which will transfer to the gas turbine joint venture withSiemens. As required by accounting standards, the results from these businesseshave been included in discontinued operations in the Group Financial Statementsfor 2013. 2013 represents another year of good growth for the Group with Total EBITA up16%. In Wood Group Engineering, revenue increased by 11% and EBITA increased by12% reflecting growth in all three segments; Upstream, Subsea & Pipeline andDownstream. In Wood Group PSN, strong EBITA growth of 28% included a full yearcontribution from the Duval and Mitchells acquisitions in the US completedduring 2012, although performance overall was impacted by continuing losses inOman where we are now agreeing a transition plan to exit. In Wood Group GTS,revenue fell 19% and EBITA fell 9%, with Maintenance up slightly on 2012 and alower contribution from Power Solutions. Net debt at the end of December was$310m and average net debt during the year was $258m. Net debt excludes areceipt in January in respect of a recovery in relation to a previouslyterminated contract in Venezuela which after costs, payments to non-controllinginterests and taxation is expected to be around $40m. Group review Since my appointment as CEO I have focused on a number of key issues. I havedelivered a consistent message to our people that our Core Values are vital forour future success and that we can be even better if we increase collaborationacross our business. I have been developing our leadership team on theExecutive committee and, together, we have considered the Group's strategywhich remains sound and positions us well for the longer term. We arepredominantly an upstream oil and gas services business and our intention is tobroaden and deepen the services we can offer in this sector. We have also reviewed all parts of the Group from three perspectives: riskprofile, current and future financial performance and strategic fit with theGroup overall, and this has resulted in a number of actions covered below. I have previously highlighted the need to remain a lower risk, predominantlyreimbursable business. During the year we tightened our controls aroundcontracts that contain lump sum or fixed-price elements, to ensure that we keepour overall risk profile within acceptable levels. Typically, these contractstogether represent less than 10% of revenues. Specifically in the PowerSolutions business of Wood Group GTS, where we have executed large lump sumprojects, the risk profile was too high. The Dorad contract is the lastremaining contract of this scale and is approaching completion. It isanticipated that the contract will be profitable overall, but will generate aloss in 2013 and we will not pursue further opportunities of this size. We looked at financial performance across the Group and recognised that in WoodGroup GTS, certain Maintenance activities with less differentiation were notdelivering an acceptable level of return. We concluded that a sale of theunderperforming parts was not in the best interest of shareholders, andrecognised that our activities in joint ventures typically deliver strongerperformance over the longer term. In October we therefore entered an agreementto form a JV consisting of the Maintenance and Power Solutions businesses ofWood Group GTS (excluding the Rolls Wood Group, TransCanada Turbines and SulzerWood joint ventures), and Siemens' TurboCare business unit which providesaftermarket design, repair and manufacturing services. The JV will be astronger, better differentiated business, providing access to certain OEMknow-how. The JV is expected to deliver annual net synergies to Wood Group ofaround $15m by year three. In other areas of the Group, we have taken stepsincluding merging operations in Canada, reorganising our Engineering divisionalstructure and addressing underperforming contracts. Our consistent message on increasing collaboration has resulted in businessopportunities from people working more closely together. Wood Group Mustang andWood Group PSN jointly secured a topsides detailed engineering and procurementscope in Canada, and we are working more closely together in the US, Australiaand elsewhere. We recently completed a corporate rebranding exercise which webelieve will improve customer awareness and understanding of the Group'sservices, and better facilitate our collaborative efforts. We are increasinglyfocused on deepening customer relationships at a Group level and this isresulting in a number of potential opportunities. In 2013, we invested $276m in acquisitions which we believe will improve ourfinancial performance and strategic positioning. In December we acquiredElkhorn for a consideration of $215m, representing around 6 times proformaEBITA. Elkhorn is a Wyoming based construction services provider which enhancesour US shale exposure and complements our construction, maintenance andfabrication activities. We also acquired Pyeroy in July to expand the range ofservices we provide into specialist coatings and fabric maintenance, and in Maywe acquired Intetech, a niche provider of software and engineering consultancyservices for well integrity and corrosion management. We will continue topursue acquisition opportunities in 2014. Our consideration of capital structure is informed by our assessment ofoperating cash flows, investment opportunities, and the risks in our business.We would generally expect a net debt to EBITDA range of around 0.5x to 1.5xgoing forward, and to be typically below 1.0x. To the extent that the Group hasfinancial capacity which is surplus to the anticipated needs for acquisitionsand organic growth, we would look to return this to shareholders through sharebuy backs or special dividends. The Group continues to adopt a progressive dividend policy taking into accountits capital requirements, cash flows and earnings. Since IPO in 2002, we haveincreased the dividend by an equivalent of 20% per annum compound. Thedirectors have recommended a final dividend of 14.9 cents per share which makesa total distribution for the year of 22.0 cents, an increase of 29%. Reflectingour confidence in future growth, the Board currently expects the dividendincrease in 2014 to be around 25%, and our intent would be to increase the USdollar value of dividend per share paid from 2015 onwards by a double digitpercentage. Outlook I would like to thank Allister for his valuable support during 2013 and for hisextraordinary dedication and leadership over 23 years with Wood Group. Duringthe year, we have taken some important strategic steps and achieved goodgrowth. In 2014, our mix of opex and capex activities and the contribution ofcompleted acquisitions is expected to lead to growth overall, with growth inWood Group PSN offsetting a reduction in Wood Group Engineering. More detailsof anticipated performance are set out in the balance of this report. Lookingfurther ahead, we believe our strategy remains sound and positions us well forgrowth over the longer term. Bob Keiller, CEO Wood Group Engineering We provide a wide range of market-leading engineering services to the upstream,subsea & pipeline, downstream & industrial and clean energy sectors. Theseinclude conceptual studies, engineering, project & construction management(EPCM) and control system upgrades. 2013 2012 % $m $m Change Revenue 1,985.4 1,787.3 11.1% EBITA 246.0 220.0 11.8% EBITA margin 12.4% 12.3% 0.1pts People3 10,700 10,200 5% In Wood Group Engineering, revenue increased by 11% and EBITA increased by 12%,reflecting growth in all three segments; Upstream, Subsea & Pipeline andDownstream. EBITA margin increased slightly from 12.3% to 12.4%. Headcountincreased by 5% from 10,200 to 10,700 reflecting additions in Saudi and London,offset by reductions in Canada and Houston. Our Upstream business accounted for around 40% of divisional revenue. Our scopeon the significant Mafumeira Sul and Ichthys projects is substantially completeand made a good EBITA contribution in 2013. We remain active on a number ofcurrent offshore projects, including Hess Stampede and Anadarko Heidelberg inthe Gulf of Mexico, Husky White Rose in Eastern Canada and Ivar Aasen for SMOEin the North Sea, although increased focus on capital budgets is evident in theslower pace of significant new offshore awards. Performance in Western Canadacontinues to be impacted by a weak upstream oil sands market and we have takensteps to position our business appropriately. Subsea & pipeline represented around 40% of divisional revenue. In subsea, theUS market remains strong, and in the North Sea we have seen good ongoingbrownfield activity including BP Quad 204 and Andrew, despite the impact ofsome delays such as Chevron Rosebank. Australia has been a strong greenfieldmarket for our subsea business in recent years and we anticipate that a goodmarket for brownfield, infill, tie back and integrity management work willdevelop in the longer term. Our onshore pipelines business continues to benefitfrom healthy activity in US shale and we see further pipeline opportunities inNorth America more generally. Downstream, process & industrial saw increased activity in the US, Saudi Arabiaand Latin America and delivered an improved performance over 2012, although themarket remains competitive. Outlook In 2013, Wood Group Engineering delivered EBITA growth of 12%, following growthof over 30% in 2011 and 2012. Looking ahead to 2014, we anticipate growth inSubsea & pipeline to be more than offset by a reduction in Upstream, where wesee good prospects although not of the scale of the significant offshoreprojects recently completed. Overall we see a good long term market for ourservices but continue to anticipate a reduction in Engineering EBITA of around15% in 2014. Wood Group PSN We provide life of field support to producing assets through brownfieldengineering and modifications, production enhancement, operations andmaintenance, training, maintenance management and abandonment services. 2013 2012 % $m $m Change Revenue 3,996.0 3,690.7 8.3% EBITA 262.1 205.0 27.9% EBITA margin 6.6% 5.6% 1.0pt People 31,100 29,200 7% In Wood Group PSN, strong EBITA growth of 28% includes a full year contributionfrom the Duval and Mitchells acquisitions in the US completed during 2012,although performance overall was impacted by continuing losses in Oman. EBITAmargin increased from 5.6% to 6.6% in part due to the change in geographicalmix of our business towards shale, overhead reductions and lower losses inOman. Headcount increased by 7% from 29,200, principally due to the impact ofthe acquisitions of Pyeroy in July and Elkhorn in December. In the Americas, which accounted for around 30% of revenue, we saw stronggrowth led by our US onshore shale related business. In December, we enhancedour US shale market exposure with the acquisition of Elkhorn, a Wyoming basedconstruction services provider, serving the Niobrara, Permian, Marcellus andUtica shales. Wood Group PSN now has around 4,500 onshore personnel providingconstruction, maintenance and fabrication activities across the mostsignificant US shale plays. We saw growth in the North Sea, which accounted for around 40% of revenue. Themarket remains strong and we secured nine contract renewals in 2013 withcustomers including CNR, ConocoPhillips, Dana, Nexen, Talisman Sinopec, Total.In December, we also won a support services contract for BG's central North Seaassets. These awards help maintain our leading position and provide goodrevenue visibility. The acquisition of Pyeroy in July further expanded ourrange of services and we are starting to see the benefit from Pyeroy'sexpansion with oil & gas customers. In international markets, performance was held back by losses on our PDOcontract in Oman, despite an improvement in the underlying position. We are inthe process of agreeing a transition plan to exit, after which PDO plans topursue a different contracting model. We have made an exceptional provision of$28.0m to reflect this. In other international markets, we recently signed anew engineering and construction contract with NCPOC in Kazakhstan and securedsignificant renewals in Africa. In Asia Pacific, the recently awarded contractwith ExxonMobil in Papua New Guinea will help replace successful project workin Australia which is anticipated to complete in the first quarter of 2014. Outlook Wood Group PSN is well positioned to deliver good growth in 2014, led by our USonshore shale related business which will benefit from the full yearcontribution of Elkhorn. Our North Sea business has good revenue visibilityfollowing a number of awards. In international markets, we have provided forthe impact of potential future losses on the PDO contract and see goodprospects in Africa, Asia Pacific and in the Middle East. Wood Group GTS We are a leading independent provider of rotating equipment services andsolutions for clients in the power and oil & gas markets. These servicesinclude: power plant engineering, procurement and construction; facilityoperations & maintenance; and repair, overhaul, optimisation and upgrades ofgas and steam turbines, pumps, compressors and other high-speed rotatingequipment. 2013 2012 % $m $m Change Revenue 1,082.8 1,343.3 (19.4)% EBITA 80.8 88.6 (8.8)% EBITA margin 7.5% 6.6% 0.9pts People 3,500 3,400 3% In Wood Group GTS, revenue fell 19% and EBITA fell 9%. In Maintenance,performance was up slightly on 2012 with strength in our power plant servicesbusiness offset to some extent by performance elsewhere including the impact ofdeferrals in our aero derivative activities. Power Solutions was down on 2012but benefitted from final settlement on the completed GWF contract. We also sawa good contribution from the completed NRG and Pasadena contracts. The Dorad contract is anticipated to be profitable overall, but generated aloss in 2013 due to factors including the impact of project slippage andassociated increased costs. We anticipate that the project will reachsubstantial completion in the first quarter and that future change ordersshould result in some profit recognition in 2014. We are the preferredcontractor on a number of smaller Power Solutions contracts, although they arenot yet in our order book. In October we entered an agreement to form a JV consisting of the Maintenanceand Power Solutions businesses of Wood Group GTS (excluding the Rolls WoodGroup, TransCanada Turbines and Sulzer Wood joint ventures), and Siemens'TurboCare business unit which provides aftermarket gas turbine, steam turbineand generator design, repair and manufacturing services. The shareholding willbe split 51% Wood Group: 49% Siemens. The JV should enhance the differentiationand future prospects of our gas turbine activities, bring togethercomplementary strengths, customers, geographies and provide access to certainOEM know-how. It is expected that the JV will deliver annual net synergies toWood Group of around $15m by year three. Outlook Completion of the JV with Siemens is anticipated in the first half of 2014. Oncompletion, all Wood Group's predominantly opex related gas turbine activitieswill be in joint ventures and will be reported within Wood Group PSN. It is theGroup's intention to retain proportional consolidation for management andsegmental reporting into 2014, and we will continue to provide good visibilityof the performance of our gas turbine activities within Wood Group PSN goingforward. Performance in those activities is expected to be broadly flat in2014, with growth in Maintenance offset by a lower contribution from PowerSolutions, reflecting our current order book and lower risk appetite. Financial Review The Financial Review provides a high level summary of the key matters in theGroup Financial Statements. The Review also includes a proforma assessment ofrevenue and EBITA for 2013, and an alternative presentation of financialperformance for 2013 and the balance sheet at the end of 2013 which moreclosely reflect management's view of the financial position. Financial performance 2013 2012 $m $m Total Revenue 7,064.2 6,828.1 Continuing 6,379.7 6,118.4 Discontinued - GTS JV 684.5 702.9 Discontinued - Businesses divested in - 6.8prior year Total EBITA 533.0 459.1 Continuing 486.0 438.3 Discontinued - GTS JV 47.0 22.8 Discontinued - Businesses divested in - (2.0)prior year EBITA margin 7.5% 6.7% Amortisation (102.1) (85.5) Exceptional items 0.5 0.7 Total operating profit 431.4 374.3 Continuing 365.6 335.0 Discontinued - GTS JV 31.4 14.1 Discontinued - Businesses divested in 34.4 25.2prior year Net finance expense (18.6) (12.9) Profit before tax 412.8 361.4 Taxation (112.3) (103.2) Profit for the period 300.5 258.2 Basic EPS (cents) 81.4c 71.4c Adjusted diluted EPS (cents) 98.6c 85.2c The totals above include revenue and EBITA related to the Wood Group GTSbusinesses which the Group intends to transfer to the recently announced gasturbine JV with Siemens. As required under IFRS 5, the results of the WoodGroup GTS businesses that are being transferred into the new joint venture arepresented as discontinued activities in the consolidated income statement.However, the Group will own 51% of the new joint venture and, although we willnot exercise control, it will remain part of the Group, therefore the Group'sresults as prepared for internal management reporting purposes are presentedhere. As noted at the time that the JV was announced, it is the Group's intention toretain proportional consolidation for management and segmental reporting into2014, which is consistent with the approach above. A review of the Group's trading performance is contained within the CEO'sreview. The performance of the Group on a pro forma constant currency basis is set outbelow. The 2012 results have been restated to include the results ofacquisitions made in 2012 as if they had been acquired on 1 January 2012, andalso to apply the average exchange rates used to translate the 2013 results.The 2013 results exclude the post-acquisition results of the Pyeroy, Elkhornand Intetech acquisitions made during 2013; EBITA of $8.8m was earned fromthese acquisitions in 2013. Unaudited 2013 2012 % $m $m Change Wood Group Engineering 1,981.3 1,767.4 12.1 Wood Group PSN 3,887.0 3,723.9 4.4 Wood Group GTS 1,082.8 1,338.5 (19.1) Wood Group GTS - divested - 6.8 Pro forma total revenue 6,951.1 6,836.6 1.7 Acquisitions 113.1 (99.9) Constant currency - 91.4 As reported 7,064.2 6,828.1 Wood Group Engineering 244.2 217.3 12.4 Wood Group PSN 255.1 223.1 14.3 Wood Group GTS 80.8 87.5 (7.7) Wood Group GTS - divested - (2.0) Central costs (55.9) (52.1) (7.3) Pro forma total EBITA 524.2 473.8 10.6 Acquisitions 8.8 (21.9) Constant currency - 7.2 As reported 533.0 459.1 The pro forma result shows underlying growth in revenue of 1.7% and in EBITA of10.6%. Amortisation The amortisation charge for the year of $102.1m (2012: $85.5m) includes $57.6m(2012: $57.1m) of amortisation relating to intangible assets arising fromacquisitions, of which $38.5m (2012: $46.0m) is in relation to the PSNacquisition made in 2011. The total amortisation charge for 2014 is expected tobe around $111.0m of which it is anticipated around $65.0m will relate tointangible assets arising from acquisitions. Net finance expense 2013 2012 $m $m Interest on debt 8.5 9.8 4.6 Other fees and charges 11.2 4.6 Total finance expense 19.7 14.4 Finance income (1.1) (1.5) Net finance expense 18.6 12.9 Interest cover4, based on Total EBITA, was 28.7 times (2012: 35.6 times). Otherfees and charges have increased during the year due to fees incurred on therenewal of the Group's bank facilities in February 2013 and the increasedpension charge resulting from the changes to IAS 19. Exceptional items 2013 2012 $m $m Lease termination income (15.1) - Restructuring charges 15.9 14.6 Onerous contract 28.0 - Impairment of goodwill - 1.9 Bad debt (recoveries)/write (6.0) 10.0offs Acquisition and JV formation 11.1 -costs Businesses divested in prior (34.4) (27.2)years Total exceptional gain before (0.5) (0.7)tax Tax on exceptional items (1.1) 0.1 Total exceptional gain after (1.6) (0.6)tax As set out in the table above, a pre-tax exceptional gain of $0.5m wasrecognised in the period, $1.6m after tax. An exceptional gain of $15.1m has been recorded in the period in respect of aone-off compensation payment received by the Group for vacating sub-let officespace. Restructuring charges of $15.9m have been expensed in 2013 relating to themerging of certain businesses in Canada, the write down of assets in Wood GroupPSN's Americas business and the reorganisation of Wood Group Engineering toreflect a change in the management structure of the business. The Group's contract with PDO in Oman has continued to make losses in 2013,albeit at a lower level than 2012. The parties are in the process of agreeinga transition period to exit, after which PDO plans to pursue a differentcontracting model. The Group has made an exceptional provision of $28.0m toreflect the onerous nature of this contract, comprising an assumption of lossesduring the period of run-off and an accelerated write-off of assets. A gain of $6.0m has been recorded in respect of cash recovered against bad debtwrite offs treated as exceptional charges in previous periods. Costs of $11.1m have been incurred in the period in respect of acquisitionactivity (see note 27) and costs in relation to the formation of the jointventure with Siemens, and have been treated as exceptional. During the period, the Group settled certain matters relating to the WellSupport disposal in 2011. As a result of the settlement and a subsequent reviewof the carrying value of the related warranty provision, $34.4m was credited toexceptional items in 2013. In 2009, the Group made provision against assets owned and amounts receivableunder a contract to provide services in Venezuela which was terminated andsubsequently taken over by PDVSA. In January 2014, the Group finalised asettlement agreement and received a payment of $62.5m. The net recovery, afterdeduction of costs, payments to non-controlling interests and taxation isexpected to be around $40m and will be recorded as a 2014 exceptional gain. Taxation 2013 2012 $m $m Profit before tax 412.8 361.4 Exceptional items (0.5) (0.7) Profit before tax and exceptional items 412.3 360.7 Total tax charge 112.3 103.2 Tax on exceptional items 1.1 (0.1) Tax charge pre-exceptional items 113.4 103.1 Effective tax rate 27.5% 28.6% The effective tax rate in 2013 was 27.5% (2012: 28.6%). Going forward, weexpect the effective tax rate based on proportional consolidation to remainaround 27.5% in the medium term. Earnings per share Adjusted diluted EPS for the year increased by 16% to 98.6 cents per share(2012: 85.2 cents) due principally to the increase in underlying profitability. Reconciliation of number of fully Weighteddiluted shares Average (All figures are in million shares) 2013 Ordinary shares 373.8 Shares held by employee trusts (10.5) Basic shares for EPS purposes 363.3 Effect of dilutive shares 10.2 Fully diluted shares for EPS purposes 373.5 Adjusted diluted EPS adds back all amortisation. If only the amortisationrelated to intangible assets arising on acquisition is adjusted, then thefigure for 2013 would be 90.0 cents per share (2012: 79.7cents). Dividend The Group continues to adopt a progressive dividend policy taking into accountits capital requirements, cash flows and earnings. Since IPO in 2002, the Grouphas increased the dividend by an equivalent of 20% per annum compound. In line with our policy, the Board is recommending a final dividend of 14.9cents per share, an increase of 32%, which when added to the interim dividendof 7.1 cents per share makes a total distribution for the year of 22.0 centsper share (2012: 17.0 cents), an increase of 29%. The dividend of 22.0 cents iscovered 4.5 times (2012 : 5.0 times) by adjusted earnings per share for the2013 financial year. Reflecting confidence in future growth, the Boardcurrently expects the dividend increase in 2014 to be around 25%, and ourintent would be to increase the US dollar value of dividend per share paid from2015 onwards by a double digit percentage. Summary Balance Sheet Note 1 to the Group Financial Statements contains a bridge between the balancesheet for management reporting purposes as summarised below and the statutoryformat which treats certain businesses as discontinued. 2013 2012 $m $m Assets Non-current assets 2,350.0 2,131.8 Current assets 2,198.0 2,029.3 Liabilities Current liabilities (1,457.7) (1,303.4) Net current assets 740.3 725.9 Non-current liabilities (674.0) (622.4) Net assets 2,416.3 2,235.3 Equity attributable to owners of the 2,407.4 2,227.1parent Non-controlling interests 8.9 8.2 Total equity 2,416.3 2,235.3 Non-current assets are primarily made up of goodwill and intangible assets, andproperty, plant and equipment. The increase in net current assets since December 2012 is primarily due tohigher trade receivables in Wood Group Engineering and Wood Group PSN due toincreased activity and higher inventory in Wood Group GTS. The increase in non-current liabilities in 2013 is primarily due to theincrease in long term borrowings as a result of the three acquisitionscompleted during the year. Capital efficiency Net debt to total EBITDA at 31 December 2013 was 0.53 times (2012: 0.31 times).The Board would generally expect net debt to EBITDA to be in a range of around0.5 to 1.5 times going forward, and to be typically below 1.0 times. To theextent that the Group has financial capacity which is surplus to theanticipated needs for acquisitions and organic growth the Group would look toreturn this to shareholders through share buy backs or special dividends. The Group's pre-tax Return on average Capital Employed6 ("ROCE") increasedslightly from 19.3% to 19.4% with an increase in Wood Group PSN being offset byreductions in Wood Group Engineering and Wood Group GTS. The Group's ratio of average Operating Capital Employed to Revenue7 ("OCER")worsened from 12.5% to 15.6% principally due to a combination of increasedinventory and lower revenue in Wood Group GTS and higher average receivabledays in both Wood Group Engineering and Wood Group PSN. Cash flow and net debt 2013 2012 $m $m Opening net debt (154.5) (3.9) Cash generated from operations 597.9 520.6pre-working capital Working capital movements (continuing (22.0) (192.9)operations) Working capital movements (discontinued (39.5) -operations) Cash generated from operations 536.4 327.7 Acquisitions and deferred consideration (290.4) (188.7) Capex and intangibles (142.0) (127.2) Disposals 0.3 40.6 Purchase of shares by employee share (47.8) -trusts Tax paid (127.8) (134.7) Interest, dividends and other (83.7) (68.3) Increase in net debt (155.0) (150.6) Closing net debt (309.5) (154.5) Throughout the period the Group has maintained a level of debt as set outbelow. 2013 2012 $m $m Average net debt 258.4 140.7 Average gross debt 436.0 356.5 Closing net debt 309.5 154.5 Closing gross debt 493.0 326.8 In February 2013, the Group renewed and extended its bilateral borrowingfacilities from $800m to $950m with the maturity date being extended toFebruary 2018. Cash generated from operations pre-working capital increased by $77.3m to$597.9m and post-working capital increased by $208.7m to $536.4m. The workingcapital outflow of $61.5m relates primarily to higher trade receivables as aresult of increased activity in the period along with higher inventory in GTS,offset by higher payables. Cash paid in relation to acquisitions totalled $275.5m (2012: $158.3m) anddeferred consideration paid in respect of prior period acquisitions amounted to$11.8m (2012: $30.4m). Included within acquisition spend is $3.1m (2012: $nil)relating to the purchase of non-controlling interests. Payments for capex and intangible assets increased to $142.0m (2012: $127.2m).We anticipate spend on capex and intangible assets to be around $140m in 2014. The Group's employee share trusts purchased 3 million shares during the year ata cost of $47.8m. The reduction in tax paid in the year was due to timing of instalment paymentsin certain jurisdictions and payments relating to the 2011 Well Supportdisposal made in 2012. The increase in interest, dividend and other largely relates to the increaseddividend paid in the period. Pensions The majority of the Group's pension arrangements are on a defined contributionbasis. The Group operates one UK defined benefit scheme which had 241 activemembers and 940 deferred, pensionable deferred or pensionable members at 31December 2013. At 31 December 2013 the scheme had a deficit of $41.2m (2012:$55.0m) before recognition of a deferred tax asset of $9.1m (2012: $12.7m). Inassessing the potential liabilities, judgment is required to determine theassumptions around future salary and pension increases, inflation, investmentreturns and member longevity. The reduction in the deficit from 2012, althoughaffected by a number of factors, was due primarily to better than anticipatedinvestment performance in the period. The scheme is closed to new members, and future benefits under the scheme arecurrently provided on a Career Average Revalued Earnings "CARE" basis. TheGroup has entered into consultation with members of the scheme with regard to aproposal which would result in closure to future accrual from 30 June 2014. Noimpact of the proposed change has been reflected in the 2013 net liability. Full details of pension assets and liabilities are provided in note 29 to theGroup Financial Statements. Acquisitions During the year the Group completed the acquisitions of Intetech, which is aniche provider of software and engineering consultancy services for wellintegrity and corrosion management services; Pyeroy, a provider of specialistcoating and fabric maintenance services; and Elkhorn, a provider ofconstruction services for midstream oil & gas facilities in the US shalemarket. The total initial consideration for these acquisitions was $275.5m, netof cash and borrowings acquired, of which Elkhorn made up $217.4m ($215.0mconsideration plus $2.4m borrowings acquired). Footnotes 1. Total EBITA includes continuing and discontinued operations and representstotal operating profit of $431.4m (2012: $374.3m) before exceptional income of$0.5m (2012: $0.7m) and the deduction of amortisation of $102.1m (2012: $85.5m)and is provided as it is a key unit of measurement used by the Group in themanagement of its business. Total operating profit for the year comprisesoperating profit from continuing operations of $365.6m (2012 $335.0m) andoperating profit from discontinued operations of $65.8m (2012: $39.3m) 2. Adjusted diluted earnings per share is calculated by dividing earningsbefore exceptional items and amortisation, net of tax, by the weighted averagenumber of ordinary shares in issue during the period, excluding shares held bythe Group's employee ownership trusts and adjusted to assume conversion of allpotentially dilutive ordinary shares. 3. Number of people includes both employees and contractors at 31 December. 4. Interest cover is total EBITA divided by the net finance charge. 5. Dividend cover is AEPS divided by the total dividend per ordinary share forthe period. 6. Return on Capital Employed (ROCE) is total EBITA divided by average capitalemployed. 7. Operating Capital Employed to Revenue (OCER) is the average operatingcapital employed (property, plant and equipment, intangible assets (excludingintangibles recognised on acquisition), inventories and trade and otherreceivables less trade and other payables) divided by total revenue. JOHN WOOD GROUP PLC GROUP FINANCIAL STATEMENTS FOR THE YEAR TO 31ST DECEMBER 2013 Company Registration Number SC 36219 As required under IFRS 5, the results of the Wood Group GTSbusinesses that are being transferred into the new joint venture with Siemensare presented as discontinued activities in the consolidated income statement.However, the Group will own 51% of the new joint venture and although not ableto exercise control, it will remain part of the Group. Reconciliation to thetotal income statement is shown in note 1 to the consolidated financialstatements. Consolidated income statement for the year to 31 December 2013 2013 2012 (restated) Pre- Exceptional Pre- Exceptional Exceptional Items Exceptional Items Items (note 4) Total Items (note 4) Total Note $m $m $m $m $m $m Revenue from continuing operations 1 6,379.7 - 6,379.7 6,118.4 - 6,118.4Cost of sales (5,351.9) - (5,351.9) (5,118.5) - (5,118.5) Gross profit 1,027.8 - 1,027.8 999.9 - 999.9Administrative expenses (635.3) (26.9) (662.2) (638.4) (26.5) (664.9) Operating profit 1 392.5 (26.9) 365.6 361.5 (26.5) 335.0 Finance income 2 1.1 - 1.1 1.5 - 1.5Finance expense 2 (19.6) - (19.6) (14.1) - (14.1) Profit before taxation from continuing 3 374.0 (26.9) 347.1 348.9 (26.5) 322.4operationsTaxation 5 (93.5) 0.9 (92.6) (109.8) 4.1 (105.7) Profit for the year from continuing 280.5 (26.0) 254.5 239.1 (22.4) 216.7operations Profit from discontinued operations, net of 27 18.4 27.6 46.0 18.5 23.0 41.5tax Profit for the year 298.9 1.6 300.5 257.6 0.6 258.2 Profit attributable to:Owners of the parent 294.3 1.6 295.9 256.4 0.6 257.0Non-controlling interests 25 4.6 - 4.6 1.2 - 1.2 298.9 1.6 300.5 257.6 0.6 258.2Earnings per share (expressed in cents pershare)Basic 7 81.0 0.4 81.4 71.2 0.2 71.4Diluted 7 78.8 0.4 79.2 68.8 0.2 69.0 As a result of the classification of the Wood Group GTS businessesthat are being transferred into a new joint venture company in 2014 asdiscontinued, the 2012 income statement has been restated (see note 27). The income statement for 2012 has also been restated to reflect areclassification of $83.0m from administrative expenses to cost of sales. The notes on pages 22 to 73 are an integral part of these consolidatedfinancial statements. Consolidated statement of comprehensive income for the year to 31 December 2013 2013 2012 Note $m $m Profit for the year 300.5 258.2 Other comprehensive income Items that will not be reclassified to profit or loss Remeasurement gains/(losses) on retirement benefit obligations 29 16.5 (8.5)Movement in deferred tax relating to retirement benefit obligations 5 (3.8) 2.1 Total items that will not be reclassified to profit or loss 12.7 (6.4) Items that may be reclassified subsequently to profit or lossCash flow hedges 24 0.2 3.7Exchange movements on retranslation of foreign currency net assets 24 (37.6) 41.3Exchange movements on retranslation of non-controlling interests 25 (0.2) 0.1 Total items that may be reclassified subsequently to profit or loss (37.6) 45.1 Other comprehensive (expense)/income for the period, net of tax (24.9) 38.7 Total comprehensive income for the period 275.6 296.9 Total comprehensive income for the period is attributable to: Owners of the parent 271.2 295.6 Non-controlling interests 25 4.4 1.3 275.6 296.9Total comprehensive income for the period is attributable to: Continuing operations 229.1 251.9Discontinued operations 27 46.5 45.0 275.6 296.9 Exchange movements on the retranslation of net assets would only besubsequently reclassified to profit or loss in the event of the disposal of abusiness. The notes on pages 22 to 73 are an integral part of these consolidatedfinancial statements. As required under IFRS 5, the assets and liabilities of Wood GroupGTS that are being transferred into the new joint venture with Siemens havebeen shown as assets and liabilities held for sale in the Group balance sheet.A reconciliation from the total balance sheet showing the reclassification asheld for sale is provided in note 1 to the consolidated financial statements. Consolidated balance sheet as at 31 December 2013 2012 2013 (restated) Note $m $mAssetsNon-current assetsGoodwill and intangible assets 8 1,875.5 1,839.1Property plant and equipment 9 221.3 198.6Long term receivables 12 68.0 54.7Deferred tax assets 19 27.2 39.4 2,192.0 2,131.8Current assetsInventories 11 101.1 439.5Trade and other receivables 12 1,365.1 1,392.5Income tax receivable 20.7 25.0Assets held for sale 27 685.6 -Cash and cash equivalents 13 183.5 172.3 2,356.0 2,029.3LiabilitiesCurrent liabilitiesBorrowings 15 96.8 45.3Trade and other payables 14 1,123.0 1,155.8Liabilities held for sale 27 185.4 -Income tax liabilities 61.3 102.3 1,466.5 1,303.4Net current assets 889.5 725.9 Non-current liabilitiesBorrowings 15 396.2 281.5Deferred tax liabilities 19 - 9.4Retirement benefit obligations 29 41.2 55.0Other non-current liabilities 16 141.0 163.7Provisions 18 86.8 112.8 665.2 622.4Net assets 2,416.3 2,235.3Equity attributable to owners of the parentShare capital 21 23.6 23.5Share premium 22 56.0 54.3Retained earnings 23 1,856.6 1,640.7Other reserves 24 471.2 508.6 2,407.4 2,227.1Non-controlling interests 25 8.9 8.2Total equity 2,416.3 2,235.3 The balance sheet at December 2012 has been restated to reflect areclassification of $32.2m from trade and other payables to provisions (note18). The financial statements on pages 17 to 73 were approved by theboard of directors on 17 February 2014. Bob Keiller, Director Alan G Semple, Director The notes on pages 22 to 73 are an integral part of theseconsolidated financial statements. Consolidated statement of changes in equity for the year to 31 December 2013 Equity Attributable Non- Share Share Retained Other to owners of controlling Total capital premium earnings reserves the parent interests equity Note $m $m $m $m $m $m $m At 1 January 2012 23.4 7.7 1,469.8 463.6 1,964.5 10.0 1,974.5 Profit for the year - - 257.0 - 257.0 1.2 258.2 Other comprehensive income: Remeasurement losses on retirement benefit 29 - - (8.5) - (8.5) - (8.5)liabilitiesMovement in deferred tax relating to retirement 5 - - 2.1 - 2.1 - 2.1benefit liabilitiesCash flow hedges 24 - - - 3.7 3.7 - 3.7Exchange movements on retranslation of foreign 24/25 - - - 41.3 41.3 0.1 41.4currency net assetsTotal comprehensive income for the year - - 250.6 45.0 295.6 1.3 296.9 Transactions with owners:Dividends paid 6/25 - - (55.2) - (55.2) (1.2) (56.4)Transactions with non-controlling interests 25 - - - - - (1.9) (1.9)Credit relating to share based charges 20 - - 19.6 - 19.6 - 19.6Tax credit relating to share option schemes 5 - - 1.1 - 1.1 - 1.1Proceeds from Group companies relating to 22 - 43.5 (43.5) - - - -options exercised under share symmetry schemeShares allocated to employee share trusts 23 0.1 3.1 (3.2) - - - -Shares disposed of by employee share trusts 23 - - 6.5 - 6.5 - 6.5Exchange movements in respect of shares held by - - (5.0) - (5.0) - (5.0)employee share trustsAt 31 December 2012 23.5 54.3 1,640.7 508.6 2,227.1 8.2 2,235.3 Profit for the year - - 295.9 - 295.9 4.6 300.5 Other comprehensive income:Remeasurement gains on retirement benefit 29 - - 16.5 - 16.5 - 16.5liabilitiesMovement in deferred tax relating to retirement 5 - - (3.8) - (3.8) - (3.8)benefit liabilitiesCash flow hedges 24 - - - 0.2 0.2 - 0.2Exchange movements on retranslation of foreign 24/25 - - - (37.6) (37.6) (0.2) (37.8)currency net assetsTotal comprehensive income for the year - - 308.6 (37.4) 271.2 4.4 275.6 Transactions with owners:Dividends paid 6/25 - - (67.4) - (67.4) (3.1) (70.5)Transactions with non-controlling interests 23/25 - - (3.3) - (3.3) (0.6) (3.9)Credit relating to share based charges 20 - - 21.0 - 21.0 - 21.0Tax credit relating to share option schemes 5 - - 3.2 - 3.2 - 3.2Shares allocated to employee share trusts 23 0.1 1.7 (1.8) - - - -Shares purchased by employee share trusts 23 - - (47.8) - (47.8) - (47.8)Shares disposed of by employee share trusts 23 - - 7.9 - 7.9 - 7.9Exchange movements in respect of shares held by - - (4.5) - (4.5) - (4.5)employee share trustsAt 31 December 2013 23.6 56.0 1,856.6 471.2 2,407.4 8.9 2,416.3 The notes on pages 22 to 73 are an integral part of these consolidatedfinancial statements. Consolidated cash flow statement for the year to 31 December 2013 2013 2012 Note $m $m Cash generated from operations 26 536.4 327.2Tax paid (127.8) (134.7)Net cash generated from operating activities 408.6 192.5 Cash flows from investing activitiesAcquisition of subsidiaries (net of cash and 27 (287.3) (188.7)borrowings acquired)Acquisition of non-controlling interests 25 (3.1) -Proceeds from divestment of subsidiaries (net ofcash and borrowings disposed and divestment costs) 27 0.3 40.6Purchase of property plant and equipment 9 (90.4) (69.4)Proceeds from sale of property plant and equipment 2.6 0.4Purchase of intangible assets 8 (51.6) (57.8)Interest received 1.1 1.5 Net cash used in investing activities (428.4) (273.4) Cash flows from financing activitiesProceeds from bank loans 26 165.4 89.0Return of cash to shareholders - (7.7)Purchase of shares by employee share trusts 23 (47.8) -Proceeds from disposal of shares by employee share 23 7.9 6.5trustsInterest paid (18.6) (11.3)Dividends paid to shareholders 6 (67.4) (55.2)Dividends paid to non-controlling interests 25 (3.1) (1.2) Net cash from financing activities 36.4 20.1 Net increase/(decrease) in cash and cash 26 16.6 (60.8)equivalents Effect of exchange rate changes on cash and cash 26 (5.4) 6.5equivalents Opening cash and cash equivalents 172.3 226.6 Closing cash and cash equivalents 13 183.5 172.3 Cash flows from discontinued operations are shown in note 27. The notes on pages 22 to 73 are an integral part of theseconsolidated financial statements. Notes to the financial statements for the year to 31 December 2013 General information John Wood Group PLC, its subsidiaries and joint ventures, provideservices to the oil and gas and power generation industries worldwide. Detailsof the Group's activities during the year are provided in the StrategicReport. John Wood Group PLC is a public limited company, incorporated anddomiciled in Scotland and listed on the London Stock Exchange. Accounting Policies Basis of preparation These financial statements have been prepared in accordance withIFRS and IFRIC interpretations adopted by the European Union (`EU') and withthose parts of the Companies Act 2006 applicable to companies reporting underIFRS. The Group financial statements have been prepared on a going concernbasis under the historical cost convention as modified by the revaluation offinancial assets and liabilities at fair value through the income statement. Significant accounting policies The Group's significant accounting policies adopted in the preparation ofthese financial statements are set out below. These policies have beenconsistently applied to all the years presented, unless otherwise stated. Basis of consolidation The Group financial statements are the result of the consolidationof the financial statements of the Group's subsidiary undertakings from thedate of acquisition or up until the date of divestment as appropriate.Subsidiaries are entities over which the Group has the power to govern thefinancial and operating policies and generally accompanies a shareholding ofmore than one half of the voting rights. The Group's interests in jointventures are accounted for using proportional consolidation. Under this methodthe Group includes its share of each joint venture's income, expenses, assets,liabilities and cash flows on a line by line basis in the consolidatedfinancial statements. Transactions between Group subsidiaries are eliminatedand transactions between the Group and its joint ventures are eliminated tothe extent of the Group's interest in the joint venture. All Group companiesapply the Group's accounting policies and prepare financial statements to 31December. At 31 December 2013, certain Wood Group GTS assets and liabilitiesthat are being transferred into a new joint venture with Siemens, which iscurrently anticipated to take place in the first half of 2014, have been shownas assets and liabilities held for sale in the Group balance sheet. Assetsheld for sale are recorded at the lower of cost and fair value. The 2012 and2013 trading activity for the relevant entities has been presented as profitfrom discontinued activities in the Group income statement, the 2012 incomestatement having been restated accordingly. See note 27 for further details. Critical accounting judgments and estimates The preparation of the financial statements requires the use ofestimates and assumptions that affect the reported amounts of assets andliabilities at the date of the financial statements and the reported amountsof revenue and expenses during the year. These estimates are based onmanagement's best knowledge of the amount, event or actions and actual resultsultimately may differ from those estimates. The estimates and assumptions thatcould result in a material adjustment to the carrying amounts of assetsand liabilities are addressed below. (a) Impairment of goodwill The Group carries out impairment reviews whenever events or changesin circumstance indicate that the carrying value of goodwill may not berecoverable. In addition, the Group carries out an annual impairment review.An impairment loss is recognised when the recoverable amount of goodwill isless than the carrying amount. The impairment tests are carried out by CGU("Cash Generating Unit") and reflect the latest Group budgets. The budgets arebased on various assumptions relating to the Group's businesses includingassumptions relating to market outlook, resource utilisation, foreign exchangerates, contract awards and contract margins. The outlook for the Group isdiscussed in the CEO Review. Pre-tax discount rates of between 11% and 13%have been used to discount the CGU cash flows and a sensitivity analysis hasalso been performed (see note 8). Notes to the financial statements for the year to 31 December 2013 Accounting Policies (continued) (b) Revenue recognition Revenue on fixed price or lump sum contracts for services,construction contracts and fixed price long-term service agreements isrecognised according to the stage of completion reached in the contract bymeasuring the proportion of costs incurred for work performed to totalestimated costs. Estimating the costs to completion and therefore the totalcontract costs is a key judgment in respect of the revenue recognition onthese contracts. (c) Income taxes The Group is subject to income taxes in numerous jurisdictions. Judgement isrequired in determining the worldwide provision for income taxes. The Grouprecognises liabilities for anticipated tax issues based on estimates of whetheradditional taxes will be due. Where the final outcome of these matters is differentfrom the amounts that were initially recorded, such differences will impact thecurrent and deferred income tax assets and liabilities in the period in which suchdetermination is made. (d) Retirement benefit liabilities The value of the Group's retirement benefit liabilities isdetermined on an actuarial basis using a number of assumptions. Changes inthese assumptions will impact the carrying value of the liability. The Groupdetermines the appropriate discount rate to be used in the actuarial valuationat the end of each financial year following consultation with the retirementbenefit scheme actuary. In determining the rate used, consideration is givento the interest rates of high quality corporate bonds in the currency in whichthe benefits will be paid and that have terms to maturity similar to those ofthe related retirement benefit obligation. See note 29 for further details. (e) Provisions The Group records provisions where it has a present obligation(legal or constructive) as a result of a past event, it is probable that anoutflow of resources will be required to settle the obligation and a reliableestimate of the obligation can be made. Where the outcome is less thanprobable, but more than remote, no provision is recorded but a contingentliability is disclosed in the financial statements, if material. The recordingof provisions is an area which requires the exercise of management judgementrelating to the nature, timing and probability of the liability and typicallythe Group's balance sheet includes provisions for doubtful debts, inventoryand warranty provisions, contract provisions (including onerous contracts) andpending legal issues. Functional currency The Group's earnings stream is primarily US dollars and the principalfunctional currency is the US dollar, being the most representative currencyof the Group. The Group's financial statements are therefore prepared in USdollars. The following exchange rates have been used in the preparation of theseaccounts: 2013 2012 Average rate £1 = $ 1.5673 1.5845Closing rate £1 = $ 1.6563 1.6255 Foreign currencies Income statements of entities whose functional currency is not theUS dollar are translated into US dollars at average rates of exchange for theperiod and assets and liabilities are translated into US dollars at the ratesof exchange ruling at the balance sheet date. Exchange differences arising ontranslation of net assets in such entities held at the beginning of the year,together with those differences resulting from the restatement of profits andlosses from average to year end rates, are taken to the currency translationreserve. In each individual entity, transactions in overseas currencies aretranslated into the relevant functional currency at the exchange rates rulingat the date of the transaction. Where more than one exchange rate isavailable, the appropriate rate at which assets can be readily realised andliabilities can be extinguished is used. Monetary Notes to the financial statements for the year to 31 December 2013 Accounting Policies (continued) assets and liabilities denominated in foreign currencies areretranslated at the exchange rates ruling at the balance sheet date. Anyexchange differences are taken to the income statement. Goodwill and fair value adjustments arising on the acquisition of aforeign entity are treated as assets and liabilities of the foreign entity andtranslated at the exchange rate ruling at the balance sheet date. The directors consider it appropriate to record sterling denominated equityshare capital in the accounts of John Wood Group PLC at the exchange rateruling on the date it was raised. Revenue recognition Revenue comprises the fair value of the consideration received or receivablefor the sale of goods and services in the ordinary course of the Group'sactivities. Revenue is recognised only when it is probable that the economic benefits associated with a transaction will flow to the Group and the amountof revenue can be measured reliably. Revenue from services is recognised asthe services are rendered, including where they are based on contractual ratesper man hour in respect of multi-year service contracts. Incentive performancerevenue is recognised upon completion of agreed objectives. Revenue fromproduct sales is recognised when the significant risks and rewards of ownership have been transferred to the buyer, which is normallyupon delivery of products and customer acceptance, if any. Revenue is statednet of sales taxes (such as VAT) and discounts. Revenue on fixed price or lump sum contracts for services, constructioncontracts and fixed price long-term service agreements is recognised accordingto the stage of completion reached in the contract by measuring the proportionof costs incurred for work performed to total estimated costs. An estimate ofthe profit attributable to work completed is recognised, on a basis that thedirectors consider to be appropriate, once the outcome of the contract can beestimated reliably, which is when a contract is not less than 20% complete.Expected losses are recognised in full as soon as losses are probable. The netamount of costs incurred to date plus recognised profits less the sum ofrecognised losses and progress billings is disclosed within tradereceivables/trade payables. Exceptional items Exceptional items are those significant items which are separately disclosedby virtue of their size or incidence to enable a full understanding of the Group's financial performance. Transactionswhich may give rise to exceptional items include gains and losses ondivestment of businesses, write downs or impairments of assets includinggoodwill, restructuring costs or provisions, litigation settlements,provisions for onerous contracts and acquisition and divestment costs. Finance expense/income Interest income and expense is recorded in the income statement inthe period to which it relates. Arrangement fees in respect of the Group'sborrowing facilities are amortised over the period which the Group expects thefacility to be in place. Interest relating to the unwinding of the discount ondeferred and contingent consideration liabilities is included in financeexpense. Interest relating to the Group's retirement benefit scheme is alsoincluded as finance income/expense. Dividends Dividends to the Group's shareholders are recognised as a liabilityin the period in which the dividends are approved by shareholders. Interimdividends are recognised when paid. Goodwill The Group uses the purchase method of accounting to account foracquisitions. Goodwill represents the excess of the cost of an acquisitionover the fair value of the net assets acquired. Goodwill is carried at costless accumulated impairment losses. Goodwill is not amortised. Acquisitioncosts are expensed in the income statement. Intangible assets Intangible assets are carried at cost less accumulatedamortisation. Intangible assets are recognised if it is probable that therewill be future economic benefits attributable to the asset, the cost of theasset can be Notes to the financial statements for the year to 31 December 2013 Accounting Policies (continued) measured reliably, the asset is separately identifiable and thereis control over the use of the asset. Where the Group acquires a business,intangible assets on acquisition such as customer contracts are identified and evaluated to determine the carrying value on the acquisitionbalance sheet. Intangible assets are amortised over their estimated usefullives, as follows: Software and development costs 3-5 years Intangible assets on acquisition 3-10 years Property plant and equipment Property plant and equipment (PP&E) is stated at cost lessaccumulated depreciation and impairment. No depreciation is charged withrespect to freehold land and assets in the course of construction. Depreciation is calculated using the straight line method over thefollowing estimated useful lives of the assets: Freehold and long leasehold buildings 25-50 years Short leasehold buildings period of lease Plant and equipment 3-10 years When estimating the useful life of an asset group, the principal factors theGroup takes into account are the durability of the assets, the intensity atwhich the assets are expected to be used and the expected rate oftechnological developments. Asset lives and residual values are assessed ateach balance sheet date. Impairment The Group performs impairment reviews in respect of PP&E and intangible assetswhenever events or changes in circumstance indicate that the carrying amountmay not be recoverable. In addition, the Group carries out annual impairmentreviews in respect of goodwill. An impairment loss is recognised when therecoverable amount of an asset, which is the higher of the asset's fair valueless costs to sell and its value in use, is less than its carrying amount. For the purposes of impairment testing, goodwill is allocated to theappropriate cash generating unit ("CGU"). The CGUs are aligned to thestructure the Group uses to manage its business. Cash flows are discounted indetermining the value in use. Inventories Inventories, which include materials, work in progress and finishedgoods and goods for resale, are stated at the lower of cost and net realisablevalue. Service based businesses' inventories consist of spare parts and otherconsumables. Serialised parts are costed using the specific identificationmethod and other materials are generally costed using the first in, first outmethod. Product based businesses determine cost by weighted average costmethods using standard costing to gather material, labour and overhead costs.These costs are adjusted, where appropriate, to correlate closely the standardcosts to the actual costs incurred based on variance analysis. Net realisable value is the estimated selling price in the ordinarycourse of business, less the estimated costs of completion and estimatedselling expenses. Allowance is made for obsolete and slow-moving items, basedupon annual usage. Cash and cash equivalents Cash and cash equivalents include cash in hand and other short-termbank deposits with maturities of three months or less. Bank overdrafts areincluded within borrowings in current liabilities. Where the Group usespooling arrangements with a right of set-off, overdrafts and cash are nettedand included in the appropriate category depending on the net position of thepool. Trade receivables Trade receivables are recognised initially at fair value andsubsequently measured at amortised cost using the effective interest method,less provision for impairment. A provision for impairment of trade receivablesis established when there is objective evidence that the Group will not beable to collect all amounts due according Notes to the financial statements for the year to 31 December 2013 Accounting Policies (continued) to the original terms of the receivables. The provision isdetermined by reference to previous experience of recoverability forreceivables in each market in which the Group operates. Trade payables Trade payables are recognised initially at fair value andsubsequently measured at amortised cost. Borrowings Borrowings are recognised initially at fair value, net oftransaction costs incurred. Borrowings are subsequently stated at amortisedcost. Deferred and contingent consideration Where it is probable that deferred or contingent consideration ispayable on the acquisition of a business based on an earn out arrangement, anestimate of the amount payable is made at the date of acquisition and reviewedregularly thereafter, with any change in the estimated liability beingreflected in the income statement. Changes in the estimated liability inrespect of acquisitions completed before 31 December 2009 are reflected ingoodwill. Where deferred consideration is payable after more than one year theestimated liability is discounted using an appropriate rate of interest. Taxation The tax charge represents the sum of tax currently payable anddeferred tax. Tax currently payable is based on the taxable profit for theyear. Taxable profit differs from the profit reported in the income statementdue to items that are not taxable or deductible in any period and also due toitems that are taxable or deductible in a different period. The Group'sliability for current tax is calculated using tax rates enacted orsubstantively enacted at the balance sheet date. Deferred tax is provided, using the full liability method, ontemporary differences arising between the tax bases of assets and liabilitiesand their carrying amounts in the consolidated financial statements. Theprincipal temporary differences arise from depreciation on PP&E, tax lossescarried forward and, in relation to acquisitions, the difference between thefair values of the net assets acquired and their tax base. Tax rates enacted,or substantially enacted, at the balance sheet date are used to determinedeferred tax. Deferred tax assets are recognised to the extent that it isprobable that future taxable profits will be available against which thetemporary differences can be utilised. Accounting for derivative financial instruments and hedging activities Derivatives are initially recognised at fair value on the date the contract isentered into and are subsequently remeasured at their fair value. The methodof recognising the resulting gain or loss depends on whether the derivative isdesignated as a hedging instrument, and if so, the nature of the item beinghedged. The Group designates certain derivatives as either: (1) hedges of thefair value of recognised assets or liabilities or a firm commitment (fairvalue hedge); (2) hedges of highly probable forecast transactions (cash flowhedge); or (3) hedges of net investments in foreign operations (net investmenthedge). Where hedging is to be undertaken, the Group documents the relationshipbetween the hedging instrument and the hedged item at the inception of thetransaction, as well as its risk management objective and strategy forundertaking the hedge transaction. The Group also documents its assessment,both at hedge inception and on an ongoing basis, of whether the derivativesthat are used in hedging transactions are highly effective in offsettingchanges in fair values or cash flows of the hedged items. The Group performseffectiveness testing on a quarterly basis. (a) Fair value hedge Changes in the fair value of derivatives that are designated and qualify asfair value hedges are recorded in administrative expenses in the incomestatement, together with any changes in the fair value of the hedged asset orliability that are attributable to the hedged risk. Notes to the financial statements for the year to 31 December 2013 Accounting Policies (continued) (b) Cash flow hedge The effective portion of changes in the fair value of derivatives that aredesignated and qualify as cash flow hedges is recognised in the hedgingreserve in equity. The gain or loss relating to the ineffective portion isrecognised immediately in administrative expenses (in the case of forwardcontracts) or finance income/expense (in the case of interest rate swaps) inthe income statement. Amounts accumulated in equity are recycled through theincome statement in periods when the hedged item affects profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meetsthe criteria for hedge accounting, any cumulative gain or loss existing inequity at that time remains in equity and is recognised when the forecasttransaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain orloss that was reported in equity is immediately transferred to the incomestatement. (c) Net investment hedge Hedges of net investments in foreign operations are accounted for similarly tocash flow hedges. Any gain or loss on the hedging instrument relating to theeffective portion of the hedge is recognised in the currency translationreserve in equity; the gain or loss relating to the ineffective portion isrecognised immediately in administrative expenses in the income statement.Gains and losses accumulated in equity are included in administrative expensesin the income statement when the foreign operation is disposed of. (d) Derivatives that are not designated as hedges Certain derivatives, whilst providing effective economic hedges are notdesignated as hedges. Changes in the fair value of any derivative instrumentsthat are not designated for hedge accounting are recognised immediately inadministrative expenses in the income statement. Fair value estimation The fair value of interest rate swaps is calculated as the present value oftheir estimated future cash flows. The fair value of forward foreign exchangecontracts is determined using forward foreign exchange market rates at thebalance sheet date. The fair values of all derivative financial instrumentsare obtained from valuations provided by financial institutions. The carrying values of trade receivables and payables approximate to theirfair values. The fair value of financial liabilities is estimated by discounting the futurecontractual cash flows at the current market interest rate that is availableto the Group for similar financial instruments. Operating leases As lessee Payments made under operating leases are charged to the incomestatement on a straight line basis over the period of the lease. Benefitsreceived and receivable as an incentive to enter into an operating lease arealso spread on a straight line basis over the period of lease. As lessor Operating lease rental income arising from leased assets isrecognised in the income statement on a straight line basis over the period ofthe lease. Retirement benefit liabilities The Group operates a defined benefit scheme and a number of definedcontribution schemes. The liability recognised in respect of the definedbenefit scheme represents the present value of the defined benefit obligationsless the fair value of the scheme assets. The assets of this scheme are heldin separate trustee administered funds. The defined benefit scheme's assets are measured using fair values. Pensionscheme liabilities are measured annually by an independent actuary using theprojected unit method and discounted at the current rate of return Notes to the financial statements for the year to 31 December 2013 Accounting Policies (continued) on a high quality corporate bond of equivalent term and currency to theliability. The increase in the present value of the liabilities of the Group'sdefined benefit scheme expected to arise from employee service in the period is charged to operating profit. The interest income on scheme assetsand the increase during the period in the present value of the scheme'sliabilities arising from the passage of time are included in financeincome/expense. Remeasurement gains and losses are recognised in the statementof comprehensive income in full in the period in which they occur. The definedbenefit scheme's net assets or net liabilities are recognised in full andpresented on the face of the balance sheet. The Group's contributions to defined contribution schemes arecharged to the income statement in the period to which the contributionsrelate. Provisions Provision is made for the estimated liability on all products and servicesstill under warranty, including claims already received, based on pastexperience. Other provisions are recognised where the Group is deemed to havea legal or constructive obligation, it is probable that a transfer of economicbenefits will be required to settle the obligation, and a reliable estimate ofthe obligation can be made. Where amounts provided are payable after more thanone year the estimated liability is discounted using an appropriate rate ofinterest. Share based charges relating to employee share schemes The Group has a number of employee share schemes:- (i) Share options granted under Executive Share Option Schemes (`ESOS') aregranted at market value. A charge is booked to the income statement as anemployee benefit expense for the fair value of share options expected to beexercised, accrued over the vesting period. The corresponding credit is takento retained earnings. The fair value is calculated using an option pricingmodel. (ii) Share options granted under the Long Term Retention Plan (`LTRP') aregranted at par value. The charge to the income statement for LTRP shares isalso calculated using an option pricing model and, as with ESOS grants, thefair value of the share options expected to be exercised is accrued over thevesting period. The corresponding credit is also taken to retained earnings. (iii) The Group's Long Term Incentive Plan (`LTIP') for executive directorsand certain senior executives was in place from 2008 to 2012. Participants areawarded shares or share options dependent on the achievement of performancetargets. The charge to the income statement for shares awarded under the LTIPis based on the fair value of those shares at the grant date, spread over thevesting period. The corresponding credit is taken to retained earnings. Forthose awards that have a market related performance measure, the fair value ofthe market related element is calculated using a Monte Carlo simulation model. (iv) The Group's Long Term Cash Incentive Plan (`LTCIP') for senior managementwas in place in 2011 and 2012. Participants are paid a cash bonus dependent onthe achievement of performance targets. The charge to the income statement isbased on the fair value of the awards and is linked to movements in theGroup's share price. The charge is spread over the vesting period with thecorresponding credit being recorded in liabilities. (v) During 2013, the Group introduced the Long Term Plan (`LTP') to replacethe LTRP, LTIP and LTCIP. The LTP comprises two separate awards, an award ofshare options on a similar basis to the LTRP and an award of shares or shareoptions on a broadly similar basis to the LTIP scheme. The charge to theincome statement for the LTP is as outlined for the LTRP and LTIP above withthe corresponding credit being recorded in retained earnings. Proceeds received on the exercise of share options are credited to sharecapital and share premium. Notes to the financial statements for the year to 31 December 2013 Accounting Policies (continued) Share capital John Wood Group PLC has one class of ordinary shares and these are classifiedas equity. Dividends on ordinary shares are not recognised as a liability orcharged to equity until they have been approved by shareholders. The Group is deemed to have control of the assets, liabilities, income andcosts of its employee share trusts, therefore they have been consolidated inthe financial statements of the Group. Shares acquired by and disposed of bythe employee share trusts are recorded at cost. The cost of shares held by theemployee share trusts is deducted from equity. Segmental reporting The Group has determined that its operating segments are based onmanagement reports reviewed by the Chief Operating Decision Maker (`CODM'),the Group's Chief Executive. The Group's reportable segments are Wood GroupEngineering, Wood Group PSN and Wood Group GTS. The Chief Executive measures the operating performance of thesesegments using `EBITA' (Earnings before interest, tax and amortisation).Operating segments are reported in a manner consistent with the internalmanagement reports provided to the Chief Executive who is responsible forallocating resources and assessing performance of the operating segments. Wood Group Engineering offers a wide range of engineering servicesto the upstream, subsea and pipelines, downstream and industrial, and cleanenergy sectors. These include conceptual studies, engineering, project andconstruction management (`EPCM') and control system upgrades. Wood Group PSNoffers life of field support to producing assets through brownfieldengineering and modifications, production enhancement, operations andmanagement, training, maintenance management and abandonment services. WoodGroup GTS is an independent provider of rotating equipment services andsolutions for clients in the power and oil and gas markets. These servicesinclude power plant engineering, procurement and construction; facilityoperations and maintenance; and repair, overhaul, optimisation and upgrades ofgas and steam turbines, pumps, compressors and other high speed rotatingequipment. Disclosure of impact of new and future accounting standards (a) Amended standards and interpretations The following revisions and amendments to standards andinterpretations are mandatory as of 1 January 2013: - IAS 1 (amended 2012) `Financial statement presentation' - IAS 19 (revised 2011) `Employee benefits' - IFRS 13 (amended 2012) `Fair value measurement' The amendments to IAS 1 relates to other comprehensive income. Themain change resulting from these amendments is a requirement for entities togroup items presented in `other comprehensive income' (OCI) on the basis ofwhether they are potentially reclassifiable to profit or loss subsequently(reclassification adjustments). The amendments do not address which items arepresented in OCI. The revision to IAS 19 does not have a material impact on thefinancial statements. The revision has been adopted in the current period andhas resulted in an increase of $2.5m in net finance expense in the incomestatement (see note 29). As the impact of this revision is not material inboth the current and prior period, no restatement of the comparativeinformation has been made. IFRS 13 measurement and disclosure requirements are applicable for periodscommencing from 1 January 2013. IFRS 13 does not have a material impact on thefinancial statements. Notes to the financial statements for the year to 31 December 2013 Accounting Policies (continued) Disclosure of impact of new and future accounting standards(continued) (b) Standards, amendments and interpretations to existing standardsthat are not yet effective and have not been early adopted by the Group The following relevant standards and amendments and interpretationsto existing standards have been published and are mandatory for the Group'saccounting periods beginning on or after 1 January 2014 or later periods, butthe Group has not early adopted them: - IFRS 10 `Consolidated financial statements' - IFRS 11 `Joint arrangements' - IFRS 12 `Disclosure of interests in other entities' The Group does not anticipate any material impact on the financialstatements on the adoption of IFRS 10. The Group currently accounts for its interests in joint ventures usingproportional consolidation. IFRS 11 does not permit proportional consolidationand therefore from 1 January 2014, for all periods presented, the Group willaccount for its interests in joint ventures using equity accounting. The useof equity accounting will have no impact on Group profit for the year orearnings per share, but will impact the presentation of the Group's interestsin joint ventures in the income statement and in the balance sheet. The Groupwill continue to prepare its management information using proportionalconsolidation and this will be presented in the segmental reporting note infuture years. The adoption of IFRS 12 may result in some additional disclosures in thefinancial statements. 1 Segmental reporting As required under IFRS 5, the results of the Wood Group GTSbusinesses that are being transferred into the new joint venture with Siemensare presented as discontinued activities. For management reporting, the WoodGroup GTS results are presented in total (i.e. the continuing and discontinuedactivities are added together). We have therefore presented below the totalGroup income statement analysed between the continuing and discontinuedelements. 2013 2012 Continuing Discontinued Continuing Discontinued Total operations operations Total operations operations $m $m $m $m $m $m Revenue 7,064.2 6,379.7 684.5 6,828.1 6,118.4 709.7Cost of sales (5,903.5) (5,351.9) (551.6) (5,710.0) (5,118.5) (591.5) Gross profit 1,160.7 1,027.8 132.9 1,118.1 999.9 118.2Administrative expenses (729.8) (635.3) (94.5) (744.5) (638.4) (106.1)Exceptional items (note 4) 0.5 (26.9) 27.4 0.7 (26.5) 27.2 Operating profit 431.4 365.6 65.8 374.3 335.0 39.3 Finance income 1.1 1.1 - 1.5 1.5 -Finance expense (19.7) (19.6) (0.1) (14.4) (14.1) (0.3) Profit before taxation 412.8 347.1 65.7 361.4 322.4 39.0Taxation (112.3) (92.6) (19.7) (103.2) (105.7) 2.5 Profit for the year 300.5 254.5 46.0 258.2 216.7 41.5 1 Segmental reporting (continued) As required under IFRS 5, the assets and liabilities of the WoodGroup GTS businesses that are being transferred into the new joint venturewith Siemens are presented as `held for sale' in the balance sheet at 31December 2013. A reconciliation from the balance sheet as presented formanagement reporting to the reported balance sheet on page 19 is shown below. Balance sheet for Balance management Held for Sheet per reporting sale accounts $m $m $mAssetsNon-current assetsGoodwill and intangible assets 1,987.6 (112.1) 1,875.5Property plant and equipment 251.3 (30.0) 221.3Long term receivables 68.0 - 68.0Deferred tax assets 43.1 (15.9) 27.2 2,350.0 (158.0) 2,192.0Current assetsInventories 457.5 (356.4) 101.1Trade and other receivables 1,524.4 (159.3) 1,365.1Income tax receivable 32.6 (11.9) 20.7Assets held for sale - 685.6 685.6Cash and cash equivalents 183.5 - 183.5 2,198.0 158.0 2,356.0LiabilitiesCurrent liabilitiesBorrowings 96.8 - 96.8Trade and other payables 1,249.4 (126.4) 1,123.0Liabilities held for sale - 185.4 185.4Income tax liabilities 111.5 (50.2) 61.3 1,457.7 8.8 1,466.5Net current assets 740.3 149.2 889.5 Non-current liabilitiesBorrowings 396.2 - 396.2Retirement benefit obligations 41.2 - 41.2Other non-current liabilities 144.6 (3.6) 141.0Provisions 92.0 (5.2) 86.8 674.0 (8.8) 665.2Net assets 2,416.3 - 2,416.3Equity attributable to owners of the parentShare capital 23.6 - 23.6Share premium 56.0 - 56.0Retained earnings 1,856.6 - 1,856.6Other reserves 471.2 - 471.2 2,407.4 - 2,407.4 Non-controlling interests 8.9 - 8.9Total equity 2,416.3 - 2,416.3 1 Segmental reporting (continued) The segment information provided to the Group's Chief Executive for thereportable operating segments for the year ended 31 December 2013 includes thefollowing: Reportable Operating Segments (1) Revenue EBITDA(2) EBITA(2) Operating profit Year Year Year Year Year Year Year Year ended ended ended ended ended ended ended ended 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 2013 2012 2013 2012 2013 2012 2013 2012 $m $m $m $m $m $m $m $m Wood Group Engineering 1,985.4 1,787.3 260.3 231.2 246.0 220.0 228.0 187.8 Wood Group PSN 3,996.0 3,690.7 281.5 219.9 262.1 205.0 161.9 146.1 Wood Group GTS -continuing 398.3 640.4 38.1 68.9 33.8 65.8 33.6 55.4 Wood Group GTS - discontinued (see note 27) 684.5 709.7 57.0 31.8 47.0 20.8 31.4 12.1 Well Support - discontinued - - - - - - 34.4 27.2 Central costs (3) - - (52.0) (48.9) (55.9) (52.5) (57.9) (54.3) Total (4) 7,064.2 6,828.1 584.9 502.9 533.0 459.1 431.4 374.3 Remove discontinued (684.5) (709.7) (57.0) (31.8) (47.0) (20.8) (65.8) (39.3) Total continuing operations 6,379.7 6,118.4 527.9 471.1 486.0 438.3 365.6 335.0 Finance income 1.1 1.5 Finance expense (19.6) (14.1) Profit before taxation fromcontinuing operations 347.1 322.4 Taxation (92.6) (105.7) Profit for the year fromcontinuing operations 254.5 216.7 Profit from discontinuedoperations, net of tax (5) 46.0 41.5 Profit for the year 300.5 258.2 1 Segmental reporting (continued) Notes 1 The Group's reportable segments are Wood Group Engineering, WoodGroup PSN and Wood Group GTS. 2 Total EBITDA represents operating profit of $431.4m (2012 :$374.3m) before depreciation of property plant and equipment of $51.9m (2012 :$43.8m), amortisation of $102.1m (2012 : $85.5m) and net exceptional income of$0.5m (2012 : $0.7m). EBITA represents EBITDA less depreciation. EBITA andEBITDA are provided as they are units of measurement used by the Group in themanagement of its business. 3 Central costs include the costs of certain management personnelin both the UK and the US, along with an element of Group infrastructurecosts. 4 The total row is the total of continuing and discontinuedoperations. 5 Profit from discontinued operations, net of tax, represents theprofit from the Wood Group GTS businesses being transferred to the new jointventure company with Siemens, the aero engine business divested by Wood GroupGTS during 2012 and the Well Support business divested in 2011. See note 27for further details. 6 Revenue arising from sales between segments is not material. 1 Segmental Reporting (continued)Segment assets and liabilities Wood Wood Wood Wood Group Group Group Group GTS- GTS- Engineering PSN continuing discontinued Unallocated Total At 31 December 2013 $m $m $m $m $m $m Segment assets 885.9 2,471.4 394.6 657.8 138.3 4,548.0 Segment liabilities 413.2 816.7 121.1 135.2 645.5 2,131.7 At 31 December 2012 Segment assets 807.2 2,203.9 1,034.2 - 115.8 4,161.1 Segment liabilities 360.6 693.3 271.5 - 600.4 1,925.8 Unallocated assets and liabilities includes income tax, deferred tax and cashand cash equivalents and borrowings where this relates to the financing of theGroup's operations. 1 Segmental Reporting (continued) Other segment items Wood2013 Wood Wood Wood Group Group Group Group GTS- GTS- Engineering PSN continuing discontinued Unallocated Total $m $m $m $m $m $mCapital expenditure- Property plant and equipment 16.2 57.7 2.4 11.5 3.6 91.4- Intangible assets 29.8 10.7 - 10.0 1.7 52.2Non-cash expense- Depreciation of property plant and 19.4equipment 14.3 4.3 10.0 3.9 51.9- Amortisation of intangible assets 32.9 58.4 0.2 8.6 2.0 102.1- Exceptional items (non-cash element) 0.9 37.1 - 3.6 (37.0) 4.6 2012 $m $m $m $m $m $mCapital expenditure- Property plant and equipment 25.7 17.9 9.2 9.0 7.6 69.4- Intangible assets 43.1 6.2 1.9 5.4 1.2 57.8Non-cash expense- Depreciation of property plant and 14.9equipment 11.2 3.1 11.0 3.6 43.8- Amortisation of intangible assets 18.4 55.8 0.8 8.7 1.8 85.5- Exceptional items (non-cash element) 13.3 3.1 9.6 - (27.2) (1.2) The non-cash exceptional items in Unallocated relate to the Well Supportdisposal in 2011 (see note 4 for further details). 1 Segmental Reporting (continued) Geographical segments Segment assets Continuing revenue 2013 2012 2013 2012 $m $m $m $m UK 1,216.6 1,066.1 1,953.9 1,747.4US 1,667.7 1,526.2 1,561.9 1,563.1Rest of the world 1,663.7 1,568.8 2,863.9 2,807.9 4,548.0 4,161.1 6,379.7 6,118.4 Revenue by geographical segment is based on the location of the ultimateproject. 2013 2012 $m $mRevenue by category is as follows:Sale of goods 15.3 8.5Rendering of services 6,364.4 6,109.9 Revenue from continuing operations 6,379.7 6,118.4 2 Finance expense/(income) 2013 2012 $m $m Interest payable on bank borrowings 10.1 10.9Bank facility fees expensed 4.3 1.4Interest relating to discounting of deferred and contingent 2.8 1.8considerationInterest expense - retirement benefit obligations (note 29) 2.4 - Finance expense - continuing operations 19.6 14.1 Interest receivable on short-term deposits (1.1) (1.4)Interest income - retirement benefit obligations (note 29) - (0.1) Finance income (1.1) (1.5) Finance expense - continuing operations - net 18.5 12.6 3 Profit before taxation 2013 2012 $m $m The following items have been charged in arriving at profitbefore taxation (before exceptional items) : Employee benefits expense (note 28) 3,371.1 3,063.6Cost of inventories recognised as an expense 85.4 75.4 Impairment of inventories 4.0 3.1Depreciation of property plant and equipment (note 9) 51.9 43.8Amortisation of intangible assets (note 8) 102.1 85.5Loss on disposal of property plant and equipment 1.6 1.3Other operating lease rentals payable:- Plant and machinery 35.4 27.2- Property 96.8 93.0Foreign exchange losses 3.6 5.1 Impairment of inventories is included in cost of sales in theincome statement. Depreciation of property plant and equipment is included incost of sales or administrative expenses in the income statement. Amortisationof intangible assets is included in administrative expenses in the incomestatement. The information in the above table includes both continuing anddiscontinued operations. Services provided by the Group's auditors and associate firms During the year the Group obtained the following services from its auditorsand associate firms at costs as detailed below: 2013 2012 $m $m Fees payable to the Group's auditors and its associate firmsfor - Audit of parent company and consolidated financialstatements 0.9 0.8Audit of Group companies pursuant to legislation 1.9 1.7Tax and other services 0.1 0.2 2.9 2.7 4 Exceptional items 2013 2012 $m $mExceptional items included in continuing operationsLease termination income (15.1) -Restructuring charges 15.9 14.6Onerous contract 28.0 -Impairment of goodwill (note 8) - 1.9Bad debt (recoveries)/write offs (6.0) 10.0Acquisition costs 4.1 - 26.9 26.5Taxation (0.9) (4.1) Continuing operations exceptional items, net of tax 26.0 22.4 Exceptional items included in discontinued operationsGain on divestment - Well Support (34.4) (27.2)JV formation costs 7.0 - (27.4) (27.2)Taxation (0.2) 4.2 Discontinued operations exceptional items, net of tax (27.6) (23.0) Total exceptional credit, net of tax (1.6) (0.6) An exceptional credit of $15.1m has been recorded in the period inrespect of a one-off compensation payment received by the Group for vacatingsub-let office space. Restructuring charges of $15.9m have been expensed in 2013 relatingto the merging of certain Group businesses in Canada, the write down ofcertain assets in Wood Group PSN's Americas business and the reorganisation ofWood Group Engineering to reflect a change in the management structure of thebusiness. $28.0m has been expensed in relation to WG PSN's contract in Omanwhich has been treated as onerous as at 31 December 2013. A credit of $6.0m has been recorded in respect of cash recoveredagainst bad debt write offs treated as exceptional charges in previousperiods. Acquisition costs of $4.1m have been incurred in respect ofacquisition activity during the year (see note 27). During 2013, the Group settled certain claims relating to the WellSupport disposal in 2011. As a result of the settlement and a subsequentreview of the carrying value of the related disposal provision, $34.4m wascredited to exceptional items in the period. Costs of $7.0m relating to the formation of the Wood Group GTSjoint venture with Siemens have been incurred during the year and treated asexceptional (see note 27). A tax credit of $0.9m has been recorded in respect of thecontinuing exceptional items and a tax credit of $0.2m has been recorded inrespect of the discontinued exceptional items in the period. For further details of the 2012 exceptional items refer to the 2012Annual Report and Accounts. 5 Taxation 2013 2012 $m $mCurrent tax- Current year 120.8 106.5- Adjustment in respect of prior years 24.5 5.0 145.3 111.5 Deferred tax- Current year (9.1) (15.6)- Adjustment in respect of prior years (23.9) 7.3 (33.0) (8.3)Total tax charge 112.3 103.2 Comprising -Tax on continuing operations before exceptional items 93.5 109.8Tax on exceptional items in continuing operations (0.9) (4.1)Tax on discontinued operations before exceptional items 19.9 (6.7)Tax on exceptional items in discontinued operations (0.2) 4.2 112.3 103.2 2013 2012 Tax charged/(credited) to equity $m $m Deferred tax movement on retirement benefit liabilities 3.8 (2.1)Deferred tax relating to share option schemes 10.7 8.6Current tax relating to share option schemes (13.9) (9.7) Total charged/(credited) to equity 0.6 (3.2) 5 Taxation (continued) Tax is calculated at the rates prevailing in the respectivejurisdictions in which the Group operates. The expected rate is the weightedaverage rate taking into account the Group's profits in these jurisdictions.The expected rate has increased in 2013 due to the change in mix of the taxjurisdictions in which the Group operates. The tax charge for the year islower (2012: higher) than the expected tax charge due to the followingfactors: 2013 2012 $m $m Profit before taxation from continuing operations 347.1 322.4Profit before taxation from discontinued operations 65.7 39.0 Total profit before taxation 412.8 361.4 Profit before tax at expected rate of 29.75% (2012: 27.31%) 122.8 98.7Effects of:Adjustments in respect of prior years 0.6 12.3(Recognition)/non-recognition of losses and other attributes (2.3) 12.0Effect of foreign taxes 7.1 4.2Other permanent differences (15.9) (24.0) Total tax charge 112.3 103.2 Other permanent differences include adjustments for share based charges,research and development allowances, changes in unrecognised tax attributesand expenditure which is not allowable as a deduction for tax purposes. 6 Dividends 2013 2012 $m $mDividends on ordinary sharesFinal dividend paid - year ended 31 December 2012: 11.3 cents(2012: 9.6 cents) per share 41.4 34.6Interim dividend paid - year ended 31 December 2013: 7.1 26.0 20.6cents (2012: 5.7 cents) per share 67.4 55.2 The directors are proposing a final dividend in respect of thefinancial year ended 31 December 2013 of 14.9 cents per share. The finaldividend will be paid on 20 May 2014 to shareholders who are on the registerof members on 11 April 2014. The financial statements do not reflect the finaldividend, the payment of which will result in an estimated $54.4m reduction inequity attributable to owners of the parent. 7 Earnings per share 2013 2012 Earnings Earnings attributable Earnings attributable to owners of Number of per to owners of Number of Earnings the parent shares share the parent shares per share $m (millions) (cents) $m (millions) (cents) Basic pre-exceptional 294.3 363.3 81.0 256.4 360.0 71.2Exceptional items, net of tax 1.6 - 0.4 0.6 - 0.2 Basic 295.9 363.3 81.4 257.0 360.0 71.4 Effect of dilutive ordinary shares - 10.2 (2.2) - 12.6 (2.4) Diluted 295.9 373.5 79.2 257.0 372.6 69.0Exceptional items, net of tax (1.6) - (0.4) (0.6) - (0.2) Diluted pre-exceptional items 294.3 373.5 78.8 256.4 372.6 68.8 Amortisation, net of tax 74.0 - 19.8 61.0 - 16.4 Adjusted diluted 368.3 373.5 98.6 317.4 372.6 85.2 Adjusted basic 368.3 363.3 101.4 317.4 360.0 88.2 Basic discontinued earnings per share for the year is 12.7 cents(2012: 11.5 cents) and diluted discontinued earnings per share is 12.3 cents(2012: 11.1 cents). The calculation of basic earnings per share is based on theearnings attributable to owners of the parent divided by the weighted averagenumber of ordinary shares in issue during the year excluding shares held bythe Group's employee share trusts. For the calculation of diluted earnings pershare, the weighted average number of ordinary shares in issue is adjusted toassume conversion of all potentially dilutive ordinary shares. The Group'sdilutive ordinary shares comprise share options granted to employees underExecutive Share Option Schemes and the Long Term Retention Plan and shares andshare options awarded under the Group's Long Term Incentive Plan and Long TermPlan. Adjusted basic and adjusted diluted earnings per share are disclosed toshow the results excluding the impact of exceptional items and amortisation,net of tax. 8 Goodwill and intangible assets Software and Intangibles development arising on Goodwill costs acquisition Total $m $m $m $mCostAt 1 January 2013 1,650.3 192.5 315.4 2,158.2Exchange movements (21.3) 1.0 (10.9) (31.2)Additions - 52.2 - 52.2Acquisitions (note 27) 138.9 - 82.5 221.4Disposals - (6.2) - (6.2)Divestment of business (1.8) - - (1.8)Reclassification from current - 0.9 - 0.9assetsReclassification as assets held for (135.9) (72.1) (2.2) (210.2)sale (note 27) At 31 December 2013 1,630.2 168.3 384.8 2,183.3 Aggregate amortisation andimpairment 56.2 108.7 154.2 319.1At 1 January 2013Exchange movements (0.6) 0.1 (7.7) (8.2)Amortisation charge for the year - 44.6 57.5 102.1Impairment (note 4) - 0.3 - 0.3Disposals - (5.6) - (5.6)Divestment of business (1.8) - - (1.8)Reclassification as assets held for (49.1) (47.2) (1.8) (98.1)sale (note 27)At 31 December 2013 4.7 100.9 202.2 307.8Net book value at 31 December 2013 1,625.5 67.4 182.6 1,875.5 CostAt 1 January 2012 1,465.0 140.0 252.2 1,857.2Exchange movements 28.6 3.6 5.6 37.8Additions - 57.8 - 57.8Acquisitions 156.7 - 57.6 214.3Disposals - (8.9) - (8.9)At 31 December 2012 1,650.3 192.5 315.4 2,158.2 Aggregate amortisation and 54.3 86.8 94.8 235.9impairment At 1 January 2012Exchange movements - 2.1 2.3 4.4Amortisation charge for the year - 28.4 57.1 85.5Impairment 1.9 - - 1.9Disposals - (8.6) - (8.6)At 31 December 2012 56.2 108.7 154.2 319.1Net book value at 31 December 2012 1,594.1 83.8 161.2 1,839.1 In accordance with IAS 36 `Impairment of assets', goodwill wastested for impairment during the year. The impairment tests were carried outagainst the Group's Cash Generating Units (`CGU'), being the key StrategicBusiness Units (`SBUs') within the three operating divisions, which arealigned with how the Group manages and monitors performance. 8 Goodwill and intangible assets (continued) Value-in-use calculations have been prepared for each CGU using thecash flow projections included in the financial budgets approved by managementfor 2014 and 2015. Cash flows beyond this period are extrapolated using agrowth rate of 3% per annum for a further three year period. A terminal valueis applied thereafter in order to calculate long term estimated cash flowsusing the same anticipated long term growth rate of 3% across all CGUs. Thegrowth rate used does not exceed the long-term average growth rates for theregions in which the CGUs operate. The cash flows have been discounted usingpre-tax discount rates appropriate for each CGU. Division Cash Generating Unit Goodwill Average carrying pre-tax value discount ($m) rate used Wood Group Wood Group Mustang 339.7 13%Engineering Wood Group Kenny 71.2 Wood Group WG PSN International (Australia and Asia Pacific) 162.0PSN WG PSN International (Africa) 117.3 WG PSN International (Middle East and ERC) 9.6 11% WG PSN Americas 391.0 WG PSN UK 477.7 WG PSN Global Business 44.9 Wood Group Aero Derivative 12.1GTS Oil & Gas and Industrial Services 18.2 Power Plant Services 19.2 12% Equipment and Project Solutions 39.8 Other Wood Group GTS 9.6 Wood Group GTS goodwill, with the exception of that relating to theAero Derivative CGU, is included in assets held for sale in the Group balancesheet at 31 December 2013 (see note 27). Details of the key assumptions underlying the cash flows areincluded in critical accounting judgements and estimates in the AccountingPolicies on page 22. The value-in-use has been compared to the carrying value for eachCGU. No goodwill has been written off during the year. $1.9m of goodwill wasimpaired during 2012. A sensitivity analysis has been performed on the basis that theexpected long-term growth rate falls to 2% and that the discount rates are 1%higher than those above in order to assess the impact of reasonable possiblechanges to the assumptions used in the impairment review. This analysis didnot identify any impairment. Intangibles arising on acquisition include the valuation ofcustomer contracts and customer relationships recognised on businesscombinations. Development costs with a net book value of $22.4m (2012: $20.8m)are internally generated intangible assets. 9 Property plant and equipment Land and Buildings Long leasehold and Short Plant and freehold leasehold equipment Total $m $m $m $mCostAt 1 January 2013 76.9 29.5 333.3 439.7Exchange movements (0.5) (0.6) (1.6) (2.7)Additions 2.6 2.4 86.4 91.4Acquisitions (note 27) - - 22.2 22.2Disposals (1.1) (4.8) (21.4) (27.3)Divestment of businesses - - (3.7) (3.7)Reclassification as assets held for (9.4) (5.6) (127.8) (142.8)sale (note 27) At 31 December 2013 68.5 20.9 287.4 376.8 Accumulated depreciation andimpairmentAt 1 January 2013 24.5 14.8 201.8 241.1Exchange movements - (0.3) (1.6) (1.9)Charge for the year 3.0 3.3 45.6 51.9Impairment (note 4) - - 3.3 3.3Disposals (1.1) (3.3) (18.7) (23.1)Divestment of business - - (3.0) (3.0) Reclassification as assets held for (4.9) (3.8) (104.1) (112.8)sale (note 27) At 31 December 2013 21.5 10.7 123.3 155.5 Net book value at 31 December 2013 47.0 10.2 164.1 221.3CostAt 1 January 2012 55.5 30.3 280.2 366.0Exchange movements 0.7 0.4 4.1 5.2Additions 5.6 6.9 56.9 69.4Acquisitions 2.2 0.2 28.1 30.5Disposals (0.1) (3.9) (14.7) (18.7)Divestment of business (4.8) - (7.9) (12.7)Reclassifications 17.8 (4.4) (13.4) - At 31 December 2012 76.9 29.5 333.3 439.7 Accumulated depreciation andimpairmentAt 1 January 2012 19.3 18.3 178.4 216.0Exchange movements 0.3 0.3 4.2 4.8Charge for the year 3.5 3.1 37.2 43.8Impairment - - 4.9 4.9Disposals (0.1) (3.8) (13.1) (17.0)Divestment of business (4.2) - (7.2) (11.4)Reclassifications 5.7 (3.1) (2.6) - At 31 December 2012 24.5 14.8 201.8 241.1 Net book value at 31 December 2012 52.4 14.7 131.5 198.6 There were no assets in the course of construction at 31 December 2013 (2012:nil). 10 Joint ventures In relation to the Group's interests in joint ventures, its share of assets,liabilities, income and expenses is shown below. 2013 2012 $m $m Non-current assets 60.8 65.2Current assets 324.4 312.8Current liabilities (203.2) (192.9)Non-current liabilities (44.2) (26.1) Net assets 137.8 159.0 Income 658.5 532.3Expenses (645.7) (497.5) Profit before tax 12.8 34.8Tax (10.9) (12.2) Share of post-tax results from joint ventures 1.9 22.6 The profit before tax for the year is net of the onerous contractprovision referred to in note 4. The joint ventures have no significant contingent liabilities towhich the Group is exposed, nor has the Group any significant contingentliabilities in relation to its interest in the joint ventures. The name andprincipal activities of the most significant joint ventures is disclosed innote 35. 11 Inventories 2013 2012 $m $m Materials 38.7 53.6Work in progress 23.2 115.3Finished goods and goods for resale 39.2 270.6 101.1 439.5 As per note 27, $356.4m of inventory has been classified as `held for sale' at31 December 2013. 12 Trade and other receivables 2013 2012 $m $m Trade receivables 1,125.2 1,150.1Less: provision for impairment of trade receivables (25.4) (43.3) Trade receivables - net 1,099.8 1,106.8Amounts recoverable on contracts 103.1 105.9Prepayments and accrued income 55.0 87.0Other receivables 107.2 92.8 Trade and other receivables - current 1,365.1 1,392.5Long term receivables 68.0 54.7 Total receivables 1,433.1 1,447.2 As per note 27, $159.3m of trade and other receivables has been classified as`held for sale' at 31 December 2013. The Group's trade receivables balance is analysed by division as follows: Trade Provision Trade receivables for receivables Receivable - Gross impairment - Net days 31 December 2013 $m $m $m Wood Group Engineering 378.5 (15.3) 363.2 64Wood Group PSN 691.5 (10.1) 681.4 52Wood Group GTS - continuing 55.2 - 55.2 24 Total Group 1,125.2 (25.4) 1,099.8 54 31 December 2012 Wood Group Engineering 299.7 (21.7) 278.0 56Wood Group PSN 651.5 (14.0) 637.5 53Wood Group GTS 198.9 (7.6) 191.3 19 Total Group 1,150.1 (43.3) 1,106.8 51 Receivable days are calculated by allocating the closing tradereceivables balance to current and prior period revenue including sales taxes.A receivable days calculation of 54 indicates that closing trade receivablesrepresent the most recent 54 days of continuing revenue. A provision for theimpairment of trade receivables is established when there is objectiveevidence that the Group will not be able to collect all amounts due accordingto the terms of the original receivables. The ageing of the provision for impairment of trade receivables isas follows: 2013 2012 $m $m Up to 3 months 2.6 10.4Over 3 months 22.8 32.9 25.4 43.312 Trade and other receivables (continued) The movement on the provision for impairment of trade receivables by divisionis as follows: Wood Group Wood Group Wood Group Engineering PSN GTS Total $m $m $m $m2013At 1 January 21.7 14.0 7.6 43.3Exchange movements (0.4) - - (0.4)Net movement in provision (6.0) (3.9) (5.6) (15.5)Reclassification as held for - - (2.0) (2.0)sale At 31 December 15.3 10.1 - 25.4 2012At 1 January 27.2 15.4 8.3 50.9Exchange movements 0.5 0.2 - 0.7Net movement in provision (6.0) (1.8) (0.7) (8.5)Acquisitions - 0.2 131 0.2 At 31 December 21.7 14.0 7.6 43.3 Credits to the income statement are included in administrative expenses (the$6.0m in relation to Wood Group Engineering is included in exceptional items -see note 4). The other classes within trade and other receivables do not contain impairedassets. Included within gross trade receivables of $1,125.2m above (2012:$1,150.1m) are receivables of $182.8m (2012: 214.3m) which were past due butnot impaired. These relate to customers for whom there is no recent history orexpectation of default. The ageing analysis of these trade receivables is asfollows: 2013 2012 $m $m Up to 3 months overdue 141.4 158.6Over 3 months overdue 41.4 55.7 182.8 214.3 Construction contracts Financial information in respect of material Engineering, Procurement andConstruction (`EPC') contracts carried out by Wood Group GTS is as follows: 2013 2012 $m $m Contract costs incurred and recognised profit for projects to 1,051.3 867.4dateContract revenue recognised in the year 183.9 458.1Receivables for work done under these contracts at the 79.2 90.3balance sheet date 13 Cash and cash equivalents 2013 2012 $m $m Cash at bank and in hand 154.1 157.9Short-term bank deposits 29.4 14.4 183.5 172.3 The effective interest rate on short-term deposits was 0.5% (2012:1.6%) and these deposits have an average maturity of 44 days (2012: 31 days). At 31 December 2013 the Group held $10.0m of cash (2012: $10.0m) inits insurance captive subsidiary to comply with local regulatory requirements. 14 Trade and other payables 2013 2012 $m $m Trade payables 338.0 447.4Other tax and social security payable 66.2 83.3Accruals and deferred income 579.0 502.4Deferred and contingent consideration 27.6 14.1Other payables 112.2 108.6 1,123.0 1,155.8 As per note 27, $126.4m of trade and other payables has been classified as`held for sale' at 31 December 2013. 15 Borrowings 2013 2012 $m $m Bank loans and overdrafts due within one year or on demand Unsecured 96.8 45.3 Non-current bank loans Unsecured 396.2 281.5 Bank loans are denominated in a number of currencies and bear interest based onLIBOR or foreign equivalents appropriate to the country in which the borrowingis incurred. [[TAB_STOP_RIGHT]]The effective interest rates on the Group's borrowings at thebalance sheet date were as follows: 2013 2012 % % US Dollar 1.24 1.11Sterling 1.50 2.36Euro 1.24 1.45Canadian Dollar 2.21 2.40 The carrying amounts of the Group's borrowings are denominated in the followingcurrencies: 2013 2012 $m $m US Dollar 265.9 131.1Sterling 99.0 68.4Euro 61.3 63.1Canadian Dollar 53.4 57.3Other 13.4 6.9 493.0 326.8 The Group is required to issue trade finance instruments to certaincustomers. These include tender bonds, performance bonds, retention bonds,advance payment bonds and standby letters of credit. At 31 December 2013 theGroup's bank facilities relating to the issue of bonds, guarantees and lettersof credit amounted to $700.6m (2012: $702.3m). At 31 December 2013, thesefacilities were 44% utilised (2012: 51%). 15 Borrowings (continued) Borrowing facilities The Group has the following undrawn borrowing facilities available at 31December: 2013 2012 $m $mExpiring within one year 82.4 101.8Expiring between one and two years - 518.5Expiring between two and five years 553.8 - 636.2 620.3 All undrawn borrowing facilities are floating rate facilities. Thefacilities expiring within one year are annual facilities subject to review atvarious dates during 2014. In February 2013, the Group increased its bilateralfacilities from $800m to $950m, with the maturity date being extended toFebruary 2018. The Group was in compliance with its bank covenants throughoutthe year. 16 Other non-current liabilities 2013 2012 $m $m Deferred and contingent consideration 57.6 76.5Other payables 83.4 87.2 141.0 163.7 Deferred and contingent consideration represents amounts payable onacquisitions made by the Group and is expected to be paid over the next fiveyears. As per note 27, $3.6m of other non-current liabilities has beenclassified as `held for sale' at 31 December 2013. 17 Financial instruments The Group's activities give rise to a variety of financial risks: market risk(including foreign exchange risk and cash flow interest rate risk), creditrisk and liquidity risk. The Group's overall risk management strategy is tohedge exposures wherever practicable in order to minimise any potentialadverse impact on the Group's financial performance. Risk management is carried out by the Group Treasury department inline with the Group's Treasury policies. Group Treasury, together with theGroup's business units identify, evaluate and where appropriate, hedgefinancial risks. The Group's Treasury policies cover specific areas, such asforeign exchange risk, interest rate risk, use of derivative financialinstruments and investment of excess cash. Where the Board considers that a material element of the Group'sprofits and net assets are exposed to a country in which there is significantgeo-political uncertainty a strategy is agreed to ensure that the risk isminimised. 17 Financial instruments (continued) (a) Market risk (i) Foreign exchange risk The Group is exposed to foreign exchange risk arising from variouscurrencies. The Group has a number of subsidiary companies whose revenue andexpenses are denominated in currencies other than the US dollar. The Groupuses strategies such as the payment of dividends to minimise the amount of netassets exposed to foreign currency revaluation. Some of the revenues of the Group's businesses are to customers inoverseas locations. Where possible, the Group's policy is to eliminate allsignificant currency exposures on revenues at the time of the transaction byusing financial instruments such as forward currency contracts. Changes in theforward contract fair values are booked through the income statement, exceptwhere hedge accounting is used in which case the change in fair value isrecorded in equity. The Group carefully monitors the economic and political situationin the countries in which it operates to ensure appropriate action is taken tominimise any foreign currency exposure. The Group's main foreign exchange risk relates to movements in thesterling/US dollar exchange rate. Movements in the sterling/US dollar rateimpact the translation of sterling profit earned in the UK and the translationof sterling denominated net assets. If the average sterling/US dollar rate had been 10% higher or lowerduring 2013 (2012:10%), post-tax profit for the year would have been $15.1mhigher or lower (2012: $10.6m). If the closing sterling/US dollar rate was 10%higher or lower at 31 December 2013 (2012:10%), exchange differences in equitywould have been $59.4m (2012: $48.0m) higher or lower respectively. 10% hasbeen used in these calculations as it represents a reasonable possible changein the sterling/US dollar exchange rate. (ii) Interest rate risk The Group finances its operations through a mixture of retainedprofits and bank borrowings. The Group borrows in the desired currencies atfloating rates of interest and then uses interest rate swaps into fixed ratesto generate the desired interest profile and to manage the Group's exposure tointerest rate fluctuations. At 31 December 2013, 24% (2012: 19%) of theGroup's borrowings were at fixed rates after taking account of interest rateswaps. The Group is also exposed to interest rate risk on cash held ondeposit. The Group's policy is to maximise the return on cash deposits whilstensuring that cash is deposited with a financial institution with a creditrating of `A' or better, where possible. If average interest rates had been 1%higher or lower during 2013 (2012: 1%), post-tax profit for the year wouldhave been $2.6m lower or higher respectively (2012: $1.9m). 1% has been usedin this calculation as it represents a reasonable possible change in interestrates. (iii) Price risk The Group is not exposed to any significant price risk in relationto its financial instruments. 17 Financial instruments (continued) (b) Credit risk The Group's credit risk primarily relates to its trade receivables.The Group's operations comprise three divisions, Wood Group Engineering, WoodGroup PSN and Wood Group GTS each made up of a number of businesses.Responsibility for managing credit risks lies within the businesses withsupport being provided by Group and divisional management where appropriate. A customer evaluation is typically obtained from an appropriatecredit rating agency. Where required, appropriate trade finance instrumentssuch as letters of credit, bonds, guarantees and credit insurance will be usedto manage credit risk. The Group's major customers are typically large companies whichhave strong credit ratings assigned by international credit rating agencies.Where a customer does not have sufficiently strong credit ratings, alternativeforms of security such as the trade finance instruments referred to above maybe obtained. The Group has a broad customer base and management believe thatno further credit risk provision is required in excess of the provision forimpairment of trade receivables. Management review trade receivables across the Group based onreceivable days calculations to assess performance. There is significantmanagement focus on receivables that are overdue. A table showing tradereceivables and receivable days by division is provided in note 12. Receivabledays calculations are not provided on non-trade receivables as management donot believe that this information is a relevant metric. The Group also has credit risk in relation to cash held on deposit.The Group's policy is to deposit cash at institutions with a credit rating of`A' or better where possible. 81% of cash held on deposit at 31 December 2013(2012: 100%) was held with such institutions. (c) Liquidity risk With regard to liquidity, the Group's main priority is to ensurecontinuity of funding. At 31 December 2013, 84% (2012: 96%) of the Group'sborrowing facilities (excluding joint ventures) were due to mature in morethan one year. Based on the current outlook the Group has sufficient fundingin place to meet its future obligations. In February 2013, the Group increased its bilateral facilities from$800m to $950m, with the maturity date being extended to February 2018. (d) Capital risk The Group seeks to maintain an optimal capital structure. The Groupmonitors its capital structure on the basis of its gearing ratio, interestcover and when applicable, the ratio of net debt to EBITDA. Gearing is calculated by dividing net debt by equity attributableto owners of the parent. Gearing at 31 December 2013 was 12.9% (2012: 6.9%). Interest cover is calculated by dividing total EBITA by net financeexpense. Interest cover for the year to 31 December 2013 was 28.7 times (2012:35.6 times). The ratio of net debt to total EBITDA at 31 December 2013 was 0.53(2012: 0.31). 17 Financial instruments (continued) The table below analyses the Group's financial liabilities intorelevant maturity groupings based on the remaining period from the balancesheet date to the contractual maturity date. The amounts disclosed in thetable are the contractual undiscounted cash flows. Drawdowns under long termbank facilities are for periods of three months or less and are not thereforediscounted and loan interest payable is excluded from the amounts below. Between Between Less than 1 and 2 2 and 5 Over 1 year years years 5 years At 31 December 2013 $m $m $m $m Borrowings 96.8 - 396.2 -Trade and other payables 1,056.8 - - -Other non-current liabilities - 49.9 96.0 - At 31 December 2012 Borrowings 45.3 281.5 - -Trade and other payables 1,072.5 - - -Other non-current liabilities - 62.1 107.1 - Fair value of non-derivative financial assets and financial liabilities The fair value of short-term borrowings, trade and other payables,trade and other receivables, short-term deposits and cash at bank and in handapproximates to the carrying amount because of the short maturity of interestrates in respect of these instruments. Drawdowns under long-term bankfacilities are for periods of three months or less and as a result, book valueand fair value are considered to be the same. Details of derivative financial instruments are not disclosed inthe financial statements as they are not material. 18 Provisions Warranty Other provisions provisions Total $m $m $m At 1 January 2013 47.8 65.0 112.8Exchange movements 0.2 (0.1) 0.1Acquisitions - 3.2 3.2Net movement in provision (9.6) (14.5) (24.1)Reclassified as held for sale (5.2) - (5.2) At 31 December 2013 33.2 53.6 86.8 Warranty provisions These provisions are recognised in respect of guarantees providedin the normal course of business relating to contract performance. They arebased on previous claims history and it is expected that most of the costs inrespect of these provisions will be incurred over the next two years. Theopening balance has been adjusted by $32.2m to reflect a reclassification fromtrade and other payables at 31 December 2012. Other provisions At 31 December 2013, other provisions of $53.6m (2012: $65.0m) havebeen recognised. This amount includes provisions for future losses on onerouscontracts, a provision for non-recoverable indirect taxes and provisionsrelating to the divestment of businesses. It is expected that any paymentrequired in respect of these provisions would be made within the next twoyears. The net movement of $14.5m during the year includes the release of theWell Support provision and the creation of the Oman onerous contract provisionas detailed in note 4. 19 Deferred tax Deferred tax is calculated in full on temporary differences underthe liability method using the tax rate applicable to the territory in whichthe asset or liability has arisen. Deferred tax in relation to UK companies isprovided at 22% (2012: 23%). The movement on the deferred tax account is shownbelow: 2013 2012 $m $m At 1 January (30.0) (54.9)Exchange movements 1.3 (4.3)Credit to income statement (note 5) (33.0) (8.3)Acquisitions (note 27) 4.1 31.0Deferred tax relating to retirement benefit liabilities 3.8 (2.1)Deferred tax relating to share option schemes 10.7 8.6Reclassified as held for sale 15.9 - At 31 December (27.2) (30.0) Deferred tax is presented in the financial statements asfollows: Deferred tax assets (27.2) (39.4)Deferred tax liabilities - 9.4 (27.2) (30.0) 19 Deferred tax (continued) No deferred tax is recognised on the unremitted earnings ofoverseas subsidiaries and joint ventures. As these earnings are continuallyreinvested by the Group, no tax is expected to be payable on them in theforeseeable future. The Group has unrecognised tax losses of $105.9m (2012: $192.7m) tocarry forward against future taxable income. Deferred tax assets and liabilities are only offset where there isa legally enforceable right of offset and there is an intention to settle thebalances net. The deferred tax balances are analysed below:- Accelerated Share Short term tax based timing depreciation Pension charges differences Losses Total2013 $m $m $m $m $m $m Deferred tax assets 66.3 (9.1) (19.2) (56.1) (9.1) (27.2) 2012 Deferred tax assets 71.5 (12.7) (31.3) (64.9) (2.0) (39.4)Deferred taxliabilities - - - 9.4 - 9.4 Net deferred taxliability/(asset) 71.5 (12.7) (31.3) (55.5) (2.0) (30.0) 20 Share based charges The Group currently has a number of share schemes that give rise toshare based charges. These are the Executive Share Option Scheme (`ESOS'), theLong Term Retention Plan (`LTRP'), the Long Term Incentive Plan (`LTIP'), theLong Term Cash Incentive Plan (`LTCIP') and the Long Term Plan (`LTP'). TheLTP replaced the LTRP, LTIP and LTCIP in 2013. The charge to operating profitin 2013 for these schemes amounted to $22.4m (2012: $26.2m). $21.0m (2012:$19.6m) of the total charge is credited to retained earnings and $1.4m (2012:$6.6m), relating to the LTCIP, is included in liabilities as the LTCIP is acash settled scheme. The assumptions made in arriving at the charge for each scheme aredetailed below: ESOS and LTRP Around 1,300 employees participate in these schemes. For thepurposes of calculating the fair value of the share options, a Black-Scholesoption pricing model has been used. Based on past experience, it has beenassumed that options will be exercised, on average, six months after theearliest exercise date, which is four years after grant date, and there willbe a lapse rate of between 15% and 20%. The share price volatility used in thecalculation of 35%-40% is based on the actual volatility of the Group's sharessince IPO as well as that of comparable companies. The risk free rate ofreturn is based on the implied yield available on zero coupon gilts with aterm remaining equal to the expected lifetime of the options at the date ofgrant. The rate used ranges from 0.5% to 2.5%. A dividend yield of between1.0% and 2.0% has been used in the calculations. The fair value of options granted under the ESOS during the yearranged from £2.29 to £2.52 (2012: £2.09). The fair value of options grantedunder the LTRP during the year ranged from £7.56 to £7.97 (2012: £6.43 to£7.48). The weighted average remaining contractual life of share options at 31December 2013 is 5.9 years (2012: 5.6 years). LTIP/LTP The share based charge for the LTIP/LTP was calculated using a fairvalue of £3.01 for the third cycle, £5.10 for the fourth cycle, £6.18 for thefifth cycle and £7.53 for the sixth cycle (LTP). The charge for market relatedperformance targets has been calculated using a Monte Carlo simulation modeltaking account of share price volatility against peer group companies, riskfree rate of return, dividend yield and the expected lifetime of the award.Further details of the LTIP/LTP are provided in the Directors' RemunerationReport. LTCIP The share based charge for the LTCIP was calculated using a fairvalue of £6.62 (2012: £7.01). The fair value is calculated using aBlack-Scholes option pricing model using similar assumptions to those used forESOS and LTRP above. Payments under the LTCIP are linked to movements in theGroup's share price. 20 Share based charges (continued) Executive Share Option Schemes The following options to subscribe for new or existing shares were outstandingat 31 December: Number of ordinary ExerciseYear of shares under option pricegrant 2013 2012 (per share) Exercise period 2003 - 72,500 158p 2007-20132004 135,000 160,000 128½p 2008-20142005 10,000 20,000 145p 2009-20152006 38,500 48,500 265¼p 2010-20162007 61,000 102,290 268½p 2011-20172008 118,989 254,346 381¾p 2012-20182008 8,986 29,850 354⅓p 2012-20182009 732,316 2,498,791 222p 2013-20192009 35,000 50,000 283⅔p 2013-20192010 2,270,374 2,556,687 377½p 2014-20202011 1,730,681 1,938,166 529½p 2015-20212012 1,710,398 1,919,865 680½p 2016-20222012 5,000 5,000 802p 2016-20222013 1,876,583 - 845⅓p 2017-20232013 4,000 - 812p 2017-2023 8,736,827 9,655,995 Details of the Group's Executive Share Option Schemes are set outin the Directors' Remuneration Report. Share options are granted at anexercise price equal to the average mid-market price of the shares on thethree days prior to the date of grant. 1,139,791 options (2012: 687,486) were exercisable at 31 December2013. 1,954,000 options were granted during the year, 2,130,318 options wereexercised during the year and 742,850 options lapsed during the year. Theweighted average share price for ESOS options exercised during the year was£8.54 (2012: £7.59). Options granted to directors under the executive share optionscheme are subject to performance criteria. No options have been granted toexecutive directors since 2009. There are no performance criteria under thisscheme for options granted to employees. Long Term Retention Plan The following options granted under the Group's LTRP wereoutstanding at 31 December: Number of ordinary ExerciseYear of shares under option pricegrant 2013 2012 (per share) Exercise period 2008 - 145,000 3⅓p 2012-20132009 256,500 2,201,000 3⅓p 2013-20142010 940,272 1,029,042 3⅓p 2014-20152011 67,917 75,000 3⅓p 2015-20162011 495,982 569,500 47p 2015-20162012 794,010 896,334 4 2/7p 2016-20172013 866,439 - 4 2/7p 2017-2018 3,421,120 4,915,876 20 Share based charges (continued) Options are granted under the Group's LTRP at par value. The basisof the scheme is that an overall bonus pool is calculated annually based onperformance criteria that consider the growth in the Group's adjusted earningsper share in the prior year. There are no performance criteria attached to theexercise of options under the LTRP. 256,500 options (2012: 145,000) wereexercisable at 31 December 2013. 913,680 LTRP options were granted during theyear, 2,104,012 LTRP options were exercised during the year and 304,424 LTRPoptions lapsed during the year. The weighted average share price for LTRPoptions exercised during the year was £8.45 (2012: £7.51). Further details onthe LTRP are provided in the Directors' Remuneration Report. Long Term Incentive Plan The Group's Long Term Incentive Plan (`LTIP') has been in placesince 2008. Under this Scheme, the executive directors and certain seniorexecutives are awarded shares or share options dependent upon the achievementof performance targets established by the Remuneration Committee. Theperformance measures for the LTIP are EBITA, OCER (ratio of operating capitalemployed to revenue), total shareholder return and adjusted diluted earningsper share. The LTIP awards are in the form of shares or share options andforfeitable restricted shares or share options. 20% of any award earned overthe three year performance cycle is deferred for a further two years in theform of forfeitable restricted shares or share options. At 31 December 2013,2,661,359 shares or share options were potentially issuable under this scheme.Further details of the LTIP are provided in the Directors' RemunerationReport. Long Term Plan The Group's Long Term Plan (`LTP') was introduced during 2013 toreplace the LTRP, LTIP and LTCIP. Two distinct awards will be made under LTP.Nil value share options will be awarded on the same basis as awards under LTRP(see above). Awards to former LTIP and LTCIP participants will be made on abroadly similar basis to LTIP with the performance measures being EBITA, totalshareholder return and adjusted diluted earnings per share. These awards arein the form of shares or share options and forfeitable restricted shares orshare options. 20% of any award is deferred for two years in the form offorfeitable restricted shares or share options. At 31 December 2013, 1,742,591shares were potentially issuable under this scheme. Further details of the LTPare provided in the Directors' Remuneration Report. The following options granted under the Group's LTP wereoutstanding at 31 December: Number of ordinary ExerciseYear of shares under option pricegrant 2013 2012 (per share) Exercise period 2013 11,500 - 0.00p 2017-2018 Options are granted under the Group's LTP at nil value. There areno performance criteria attached to the exercise of these options. No optionswere exercisable at 31 December 2013. 11,500 LTP options were granted duringthe year, no options were exercised or lapsed during the year. Further detailson the LTP are provided in the Directors' Remuneration Report. 21 Share capital Ordinary shares of 42/7 pence each(2012: 42/7 pence) 2013 2012 Issued and fully paid shares $m shares $m At 1 January 373,175,384 23.5 371,275,384 23.4Allocation of new shares to employee 1,900,000 0.1 1,900,000 0.1share trusts At 31 December 375,075,384 23.6 373,175,384 23.5 22 Share premium 2013 2012 $m $mAt 1 January 54.3 7.7Proceeds from Group companies relating to options exercised - 43.5under share symmetry schemeAllocation of new shares to employee share trusts 1.7 3.1 At 31 December 56.0 54.3 23 Retained earnings 2013 2012 $m $m At 1 January 1,640.7 1,469.8Profit for the year attributable to owners of the parent 295.9 257.0Dividends paid (note 6) (67.4) (55.2)Credit relating to share based charges (note 20) 21.0 19.6Remeasurement gain/(loss) on retirement benefit liabilities 16.5 (8.5)(note 29)Movement in deferred tax relating to retirement benefit (3.8) 2.1liabilitiesProceeds from Group companies relating to options exercised - (43.5)under share symmetry schemeShares allocated to employee share trusts (1.8) (3.2)Shares purchased by employee share trusts (47.8) -Shares disposed of by employee share trusts 7.9 6.5Tax credit relating to share option schemes 3.2 1.1Transactions relating to non-controlling interests (3.3) -Exchange movements in respect of shares held by employee (4.5) (5.0)share trusts At 31 December 1,856.6 1,640.7 During 2012, the parent company received $43.5m of proceeds fromGroup companies relating to the exercise of employee share options under theshare symmetry scheme. This amount was credited to share premium in the parentcompany and an equivalent amount deducted from retained earnings onconsolidation. Under the share symmetry scheme, subsidiary companies remitshare proceeds to the parent company in respect of employee share optionsgranted before the IPO in 2002. Retained earnings are stated after deducting the investment in ownshares held by employee share trusts. Investment in own shares represents thecost of 11,640,553 (2012: 11,599,912) of the company's ordinary sharestotalling $158.9m (2012: $112.7m). No options have been granted over sharesheld by the employee share trusts (2012: nil). 23 Retained earnings (continued) Shares acquired by the employee share trusts are purchased in theopen market using funds provided by John Wood Group PLC to meet obligationsunder the Employee Share Option Schemes, LTRP, LTIP and LTP. During 2013, 1,900,000 new shares were allocated to the employeeshare trust. 3,934,000 shares were purchased during the year at a cost of$47.8m. 4,227,436 shares were issued during the year to satisfy the exerciseof share options at a value of $7.9m. 1,565,923 shares were issued during theyear to satisfy share awards under the Long Term Incentive Plan. Exchange adjustments of $4.5m (2012: $5.0m) arose during the yearrelating to the retranslation of the investment in own shares from sterling toUS dollars. The costs of funding and administering the trusts are charged tothe income statement in the period to which they relate. The market value ofthe shares at 31 December 2013 was $132.3m (2012: $137.0m) based on theclosing share price of £6.86 (2012: £7.27). The employee share trusts havewaived their rights to receipt of dividends on ordinary shares. Transactions with non-controlling interests include $2.5m relatingto the cost of acquiring minority shareholdings, the excess of cost ($3.1m)over book value ($0.6m) being charged directly to equity. In addition,included within dividends to non-controlling interests was a payment of $0.8min excess of the shareholders interest in the subsidiary which has also beencharged to equity. 24 Other reserves Capital Capital Currency reduction redemption translation Hedging reserve reserve reserve reserve Total $m $m $m $m $m At 1 January 2012 88.1 439.7 (59.5) (4.7) 463.6 Exchange movements onretranslation of foreigncurrency net assets - - 41.3 - 41.3 Cash flow hedges - - - 3.7 3.7 At 31 December 2012 Exchange movements on retranslationof foreign currency net assets 88.1 439.7 (18.2) (1.0) 508.6 - - (37.6) - (37.6)Cash flow hedges - - - 0.2 0.2 At 31 December 2013 88.1 439.7 (55.8) (0.8) 471.2 The currency translation reserve relates to the retranslation offoreign currency net assets on consolidation. This was reset to zero ontransition to IFRS at 1 January 2004. The movement during the year relates tothe retranslation of foreign currency net assets, including goodwill andintangible assets recognised on acquisition. The hedging reserve relates tothe accounting for derivative financial instruments under IAS 39. Fair valuegains and losses in respect of effective cash flow hedges are recognised inthe hedging reserve. 25 Non-controlling interests 2013 2012 $m $mAt 1 January 8.2 10.0Exchange movements (0.2) 0.1Share of profit for the year 4.6 1.2Dividends paid to non-controlling interests (3.1) (1.2)Other transactions with non-controlling interests (0.6) (1.9) At 31 December 8.9 8.2 Other transactions with non-controlling interests relate to the cost ofacquiring minority shareholdings with the excess of cost ($3.1m) over bookvalue ($0.6m above) being charged directly to equity (see note 23). 26 Cash generated from operations 2013 2012 $m $mReconciliation of operating profit to cash generatedfrom operations: Operating profit from continuing operations 365.6 335.0Operating profit from discontinued operations (note 65.8 39.327) 431.4 374.3Adjustments for:Depreciation 51.9 43.8Loss on disposal of property plant and equipment 1.6 1.3Amortisation of intangible assets 102.1 85.5Share based charges 22.4 26.2Decrease in provisions (7.6) (8.1)Exceptional items- non cash impact 4.6 (1.2) Changes in working capital (excluding effect ofacquisition and divestment of subsidiaries)Increase in inventories (17.9) (43.7)Increase in receivables (66.8) (50.1)Increase/(decrease) in payables 23.2 (99.1) Exchange movements (8.5) (1.7) Cash generated from operations 536.4 327.2 Analysis of net debt At 1 At 31 January Exchange December 2013 Cash flow movements 2013 $m $m $m $m Cash and cash equivalents 172.3 16.6 (5.4) 183.5Short-term borrowings (45.3) (51.5) - (96.8)Long-term borrowings (281.5) (113.9) (0.8) (396.2) Net debt (154.5) (148.8) (6.2) (309.5) 27 Acquisitions and divestments Acquisitions The assets and liabilities acquired in respect ofbusiness combinations were as follows: Elkhorn Other Total $m $m $m Property plant and equipment 15.3 6.9 22.2Intangible assets recognised on acquisition 64.9 17.6 82.5Trade and other receivables 58.4 35.9 94.3Cash and cash equivalents - 19.2 19.2Borrowings (2.4) - (2.4)Trade and other payables (14.8) (24.3) (39.1)Income tax liabilities - (2.3) (2.3)Deferred tax - (4.1) (4.1)Provisions (1.0) (2.2) (3.2) Total identifiable net assets acquired 120.4 46.7 167.1 Goodwill 94.6 44.3 138.9Consideration 215.0 91.0 306.0 Consideration satisfied by:Cash 215.0 89.1 304.1Deferred and contingent consideration - 1.9 1.9 215.0 91.0 306.0 The Group has used acquisition accounting for the purchases and, inaccordance with the Group's accounting policies, the goodwill arising onconsolidation of $138.9m has been capitalised. During the year the Group acquired 90% of the share capital ofIntetech Limited, 95% of the share capital of Pyeroy Limited and 100% of theshare capital of Elkhorn Holdings Inc. Due to its size, the acquisition ofElkhorn is considered material and has been presented separately in the tableabove. The other acquisitions are not considered to be material on anindividual basis and therefore have been aggregated above. The acquired companies will be in a position to access the Group'swider client base and use the Group's resources to further grow and developtheir businesses. These factors contribute to the goodwill recognised on theacquisitions. Provisional fair value adjustments of $82.5m, representing the fairvalue of customer contracts, have been recorded in relation to theacquisitions made in the year. Other provisional fair value adjustments of$3.0m have also been recorded. Trade and other receivables acquired of $94.3mare expected to be recovered in full. 27 Acquisitions and divestments (continued) The outflow of cash and cash equivalents in respect of acquisitionsis analysed as follows: $m Cash consideration 304.1Cash acquired (19.2)Borrowings acquired 2.4Cash outflow 287.3Included in the cash outflow above are deferred and contingentconsideration payments of $11.8m made during the year in respect ofacquisitions made in prior periods. The results of the Group, as if the above acquisitions had been made at thebeginning of period, would have been as follows: $m Total Revenue 7,458.1Total EBITA 571.5 From the date of acquisition to 31 December 2013, the acquisitions contributed$113.1m to revenue and $8.8m to EBITA. 27 Acquisitions and divestments (continued) Divestments In October 2013, the Group entered into an agreement with Siemensto form a joint venture company containing the maintenance and power solutionsbusinesses of Wood Group GTS and the Siemens `TurboCare' business unit. WoodGroup will have a 51% shareholding in the new joint venture and thetransaction is expected to be completed in the first half of 2014. Whilst WoodGroup will have a 51% interest in the net assets and the income, allsignificant decision making requires unanimous consent from both parties andtherefore Wood Group do not have control, and the new company will be treatedas a joint venture. Wood Group GTS's assets and liabilities that will be transferredinto the new joint venture company have been treated as assets and liabilitiesheld for sale in the Group balance sheet at 31 December 2013 and the profit ofthose businesses is included in profit from discontinued operations in theGroup income statement. Wood Group GTS's existing joint ventures, Rolls Wood Group, TransCanada Turbines and Sulzer Wood will not form part of the new entity. Theassets and liabilities of these companies have not been treated as assets andliabilities held for sale and the profits of these joint venture companies areincluded in profit from continuing operations. In December 2013, the Group disposed of a small Australian businessfor $0.3m. The assets of this business had been provided against in previousperiods and a small gain arose on the sale. Details of the 2012 divestments are included in the 2012 AnnualReport and Accounts. Analysis of results from discontinued operations Discontinued operations comprise the Wood Group GTS business beingtransferred into the new joint venture company with Siemens, the aero engineoverhaul business divested by Wood Group GTS in 2012 and the Well Supportbusiness divested in 2011. 2013 2012 $m $mRevenue Cost of sales 684.5 709.7 Administrative expenses (551.6) (591.5) Exceptional items (94.5) (106.1) 27.4 27.2Operating profit 65.8 39.3 Finance expense (0.1) (0.3)Profit before tax Taxation 65.7 39.0 (19.7) 2.5Profit after tax 46.0 41.5 27 Acquisitions and divestments (continued) Divestments Analysis of assets held for sale 2013 2012 $m $mGoodwill Other intangible assets 86.8 - Property, plant and equipment 25.3 - Deferred tax asset 30.0 - Inventories 15.9 - Trade and other receivables 356.4 - Income tax receivable 159.3 - 11.9 - 685.6 - Analysis of liabilities held for sale 2013 2012 $m $mTrade payables Accruals and deferred income 23.8 - Other payables 94.8 - Income tax liabilities 7.8 - Other non-current liabilities 50.2 - Provisions 3.6 - 5.2 - 185.4 - Analysis of cash flows from discontinued activities 2013 2012 $m $m Operating cash flows 62.4 (38.9) Investing cash flows (20.7) (14.3) Financing cash flows (0.1) (0.3)Total cash flows 41.6 (53.5) 28 Employees and directors Employee benefits expense 2013 2012 $m $m Wages and salaries 3,039.7 2,758.8Social security costs 205.9 184.1Pension costs - defined benefit schemes (note 29) 7.5 7.0Pension costs - defined contribution schemes (note 29) 95.6 87.5Share based charges 22.4 26.2 3,371.1 3,063.6 Employee benefits expense includes both continuing and discontinuedoperations. 28 Employees and directors (continued) Average monthly number of employees (including executive 2013 2012directors) No. No.By geographical area:UK 9,035 7,791US 10,854 9,896Rest of the World 15,585 15,792 35,474 33,479 The average number of employees includes personnel from both continuing anddiscontinued operations and excludes contractors. Key management compensation 2013 2012 $m $m Salaries and short-term employee benefits 8.5 9.9Amounts receivable under long-term incentive schemes 2.0 2.6Social security costs 1.1 1.4Post-employment benefits 0.5 0.5Share based charges 4.1 4.6 16.2 19.0 The criteria for inclusion in the definition of `key management' has beenrevised during the year to cover board members and members of the Group`Excom' only and as a consequence the 2012 figures have been restated. Key management compensation represents the charge to the income statement inrespect of the remuneration of the Group board and Group `Excom' members. 2013 2012 Directors $m $m Aggregate emoluments 5.9 6.2Aggregate amounts receivable under long-term incentive 1.4 1.6schemesAggregate gains made on the exercise of share options 0.9 4.1Share based charges 3.1 2.7 11.3 14.6 At 31 December, three directors (2012: two) had retirement benefitsaccruing under a defined contribution pension plan and one director (2012:two) had benefits accruing under the Group's defined benefit pension scheme.Further details of director's emoluments are provided in the Directors'Remuneration Report. 29 Retirement benefit obligations The Group operates a defined benefit pension scheme in the UK, theJohn Wood Group PLC Retirement Benefits Scheme, which is contracted out of theState Scheme, and a number of defined contribution plans. The assets of thedefined benefits scheme are held separately from those of the Group, beinginvested with independent investment companies in trustee administered funds.Since 5 April 2007 members have accrued benefits under the scheme on a `CARE'(Career Averaged Revalued Earnings) basis. The Group has entered intoconsultation with members of the scheme with regard to a proposal which wouldresult in closure to future accrual from 30 June 2014. No impact of theproposed change has been reflected in the 2013 net liability. The most recent actuarial valuation of the scheme was carried outat 5 April 2013 by a professionally qualified actuary. As a result of thevaluation, the Group has agreed to pay deficit reduction contributions of$4.7m (£2.9m) per annum from 2014 until 2021. At 31 December 2013, there were241 active members (2012: 254), 286 pensioners (2012: 270) and 654 deferredmembers (2012 : 667) of the scheme. The principal assumptions made by the actuaries at the balancesheet date were: 2013 2012 % % Rate of increase in pensionable salaries 5.40 5.00Rate of increase in pensions in payment and deferred 3.40 3.00pensionsDiscount rate 4.50 4.50Rate of retail price index inflation 3.40 3.00Rate of consumer price index inflation 5.00 4.90 At 31 December 2013, the mortality assumption used to determinepension liabilities is based on the most recent mortality tables whichconsider UK wide mortality data relevant to the Group's pension scheme. Themortality rates are then adjusted to allow for expected future improvements inmortality using up to date projections. The mortality assumption can be fullydescribed as PCA00­ CMI_2012 (1.25%). The amounts recognised in the balance sheet are determined asfollows: 2013 2012 $m $m Present value of funded obligations (267.1) (246.1)Fair value of scheme assets 225.9 191.1Net liabilities (41.2) (55.0) The major categories of scheme assets as a percentage of total scheme assetsare as follows: 2013 2013 2012 2012 $m % $m % Equity securities 232.7 87.1 204.0 82.9Corporate bonds 21.1 7.9 20.7 8.4Gilts 9.6 3.6 20.4 8.3Cash 3.7 1.4 1.0 0.4 267.1 100.0 246.1 100.0 29 Retirement benefit obligations (continued) The amounts recognised in the income statement are as follows: 2013 2012 $m $m Current service cost included within employee benefits 7.5 7.0expense Interest cost 10.8 10.4Interest income on scheme assets (8.4) (10.5)Total included within finance expense/(income) 2.4 (0.1) The employee benefits expense is included within administrative expenses inthe income statement. Changes in the present value of the defined benefit liability are as follows: 2013 2012 $m $m Present value of funded obligations at 1 January 246.1 206.7Current service cost 7.5 7.0Interest cost 10.8 10.4Remeasurements:- actuarial losses arising from changes in financial 11.4 18.3assumptions- actuarial gains arising from changes in demographic (9.2) -assumptions- actuarial losses/(gains) arising from changes in 0.1 (1.3)experienceBenefits paid (5.1) (5.3)Exchange movements 5.5 10.3 Present value of funded obligations at 31 December 267.1 246.1 At 31 December 2013, the present value of funded obligations comprised $109.0mrelating to active members, $99.8m relating to deferred members and $58.3mrelating to pensioners. Changes in the fair value of scheme assets are as follows: 2013 2012 $m $m Fair value of scheme assets at 1 January 191.1 160.9Interest income on scheme assets 8.4 10.5Contributions 7.9 8.9Benefits paid (5.1) (5.3)Expenses paid (0.4) (0.4)Remeasurement gain on scheme assets 18.8 8.5Exchange movements 5.2 8.0 Fair value of scheme assets at 31 December 225.9 191.1 29 Retirement benefit obligations (continued) Analysis of the movement in the balance sheet liability: 2013 2012 $m $m At 1 January 55.0 45.8Current service cost 7.5 7.0Finance expense/(income) 2.4 (0.1)Contributions (7.9) (8.9)Expenses paid 0.4 0.4Remeasurement (gains)/losses recognised in the year (16.5) 8.5Exchange movements 0.3 2.3 At 31 December 41.2 55.0 The contributions expected to be paid during the financial year ending 31December 2014 amount to $12.2m (£7.3m). Scheme risksThe retirement benefit scheme is exposed to a number of risks, the mostsignificant of which are - Volatility The defined benefit obligation is measured with reference tocorporate bond yields and if scheme assets underperform relative to thisyield, this will create a deficit, all other things being equal. The schemeinvestments are well diversified such that the failure of a single investmentwould not have a material impact on the overall level of assets. Changes in bond yields A decrease in the corporate bond yields will increase the definedbenefit obligation. This would however be offset to some extent by acorresponding increase in the value of the scheme's bond asset holdings. Inflation risk The majority of benefits in deferment and in payment are linked toprice inflation so higher actual inflation and higher assumed inflation willincrease the defined benefit obligation. Life expectancy The defined benefit obligation is generally made up of benefitspayable for life and so increases to members' life expectancies will increasethe defined benefit obligation all other things being equal. Sensitivity of the retirement benefit obligation The impact of changes to the key assumptions on the retirementbenefit obligation is shown below. The sensitivity is based on a change in anassumption whilst holding all other assumptions constant. In practice, this isunlikely to occur, and changes in some of the assumptions may be correlated.When calculating the sensitivity of the defined benefit obligation tosignificant actuarial assumptions the same method has been applied as whencalculating the pension obligation recognised in the Group balance sheet. Assumption Change Impact on obligation Discount rate 0.1% $5.3mRate of retail prices index inflation 0.1% $3.4mRate of consumer price index inflation 0.1% $1.0mLife expectancy 1 year $6.5m 29 Retirement benefit obligations (continued) Defined contribution plans Pension costs for defined contribution plans are as follows: 2013 2012 $m $m Defined contribution plans 95.6 87.5 There were no material contributions outstanding at 31 December 2013 inrespect of defined contribution plans. 30 Operating lease commitments - minimum lease payments 2013 2012 Vehicles, Vehicles, plant and plant and Property equipment Property equipment $m $m $m $mAmounts payable under non-cancellableoperating leases due:Within one year 89.6 12.6 85.4 20.4Later than one year and less than five 257.9 18.8 254.7 21.4yearsAfter five years 197.5 - 176.4 0.1 545.0 31.4 516.5 41.9 The Group leases various offices and facilities undernon-cancellable operating lease agreements. The leases have various terms,escalation clauses and renewal rights. The Group also leases vehicles, plantand equipment under non-cancellable operating lease agreements. 31 Contingent liabilities At the balance sheet date the Group had cross guarantees withoutlimit extended to its principal bankers in respect of sums advanced tosubsidiaries. From time to time and in the normal course of business the Group isnotified of legal claims in respect of work carried out. Management believethat the Group is in a strong position to defend these claims. In addition,the Group is currently cooperating with an investigation in relation to afacility where it previously provided services. Management do not believe thatit is probable that any material liability will arise from any of thesematters. 32 Capital and other financial commitments 2013 2012 $m $mContracts placed for future capital expenditure notprovided in the financial statements 9.5 12.5 The capital expenditure above relates to property plant andequipment. $0.7m of the above amount relates to commitments made by theGroup's joint venture companies. 33 Related party transactions The following transactions were carried out with the Group's joint ventures.These transactions comprise sales and purchases of goods and services andfunding provided in the ordinary course of business. The receivables includeloans to certain joint venture companies. 2013 2012 $m $m Sale of goods and services to joint ventures 25.1 35.5Purchase of goods and services from joint ventures 11.7 33.3Receivables from joint ventures 87.0 83.1Payables to joint ventures 9.8 20.8 Key management compensation is disclosed in note 28. 34 Subsequent events In 2009, the Group's contract to provide water injection servicesin Venezuela was terminated and subsequently taken over by PDVSA and the Groupmade provision against assets owned and amounts receivable. In January 2014,the Group finalised a settlement agreement with PDVSA and received a paymentof $62.5m. The net recovery, after deduction of costs, an amount payable tonon-controlling interests and tax is expected to be around $40m. 35 Principal subsidiaries and joint ventures The Group's principal subsidiaries and joint ventures at 31 December 2013 arelisted below. These are the companies which have the most significant impacton the Group's financial statements. The Group has taken advantage of section410 of the Companies Act 2006 and not disclosed a full list of subsidiaries asthis would involve a statement of excessive length. A full list ofsubsidiaries will be included in the Company's Annual Return. Country of incorporationName of subsidiary or joint or Ownershipventure registration interest % Principal activity Wood Group Engineering Wood Group Mustang Holdings, Inc USA 100 Conceptual studies, engineering, projectWood Group Kenny Corporate UK 100 and constructionLimited management and controlIMV Projects Inc Canada 100 system upgrades. Wood Group PSN Wood Group Engineering (North UK 100 Brownfield engineeringSea) Limited and modifications,Wood Group PSN, Inc USA 100 production enhancement, operations andWood Group PAC, Inc USA 100 management, training, maintenanceWood Group PSN Limited UK 100 management and abandonment services.Production Services Network (UK) UK 100LimitedWood Group PSN Australia Pty Australia 100LimitedProduction Services Network Russia 100Sakhalin LLCProduction Services Network Canada 100Canada IncMitchells Oilfield Services Inc USA 100 Elkhorn Holdings Inc USA 100 Wood Group CCC Limited Cyprus 50* Wood Group GTS Rolls Wood Group (Repair & UK 50* Gas turbine repair andOverhauls) overhaulLimited TransCanada Turbines Limited Canada 50* Wood Group Pratt & Whitney USA 49*Industrial Turbine Services, LLC(a) Wood Group Gas Turbine Services UK 100Limited (a) Wood Group Power Solutions, Inc USA 100 Power plant(a) engineering, procurement and construction The proportion of voting power held equates to the ownership interest, otherthan for joint ventures (marked *) which are jointly controlled. (a) These companies will be transferred to the new joint venture company withSiemens and their assets and liabilities have been treated as held for sale at31 December 2013 (see note 27). Shareholder information Payment of dividends The Company declares its dividends in US dollars. As a result ofthe shareholders being mainly UK based, dividends will be paid in sterling,but if you would like to receive your dividend in US dollars please contactthe Registrars at the address below. All shareholders will receive dividendsin sterling unless requested. If you are a UK based shareholder, the Companyencourages you to have your dividends paid through the BACS (Banker'sAutomated Clearing Services) system. The benefit of the BACS payment method isthat the Registrars post the tax vouchers directly to the shareholders, whilstthe dividend is credited on the payment date to the shareholder's Bank orBuilding Society account. UK shareholders who have not yet arranged for theirdividends to be paid direct to their Bank or Building Society account and wishto benefit from this service should contact the Registrars at the addressbelow. Sterling dividends will be translated at the closing mid-point spotrate on 11 April 2014 as published in the Financial Times on 12 April 2014. Officers and advisers Secretary and Registered Office RegistrarsR M B Brown Equiniti LimitedJohn Wood Group PLC Aspect HouseJohn Wood House Spencer RoadGreenwell Road LancingAberdeen West SussexAB12 3AX BN99 6DA Tel: 01224 851000 Tel: 0871 384 2649 Stockbrokers Independent Auditors JPMorgan Cazenove Limited PricewaterhouseCoopers LLPCredit Suisse Chartered Accountants and Statutory Auditors 32 Albyn Place Aberdeen AB10 IYL Company SolicitorsSlaughter and May Financial calendar Results announced 18 February 2014Ex-dividend date 9 April 2014Dividend record date 11 April 2014Annual General Meeting 14 May 2014Dividend payment date 20 May 2014 The Group's Investor Relations website can be accessed atwww.woodgroup.com.