23rd Aug 2011 07:00
John Wood Group PLC
Half year results for the six months to 30 June 2011
Performing well and positioned for good longer term growth
John Wood Group PLC ("Wood Group" or the "Group") is a market leader inengineering design, production enhancement and support, and integratedindustrial gas turbine maintenance services for customers in the oil & gas andpower generation industries around the world. Wood Group employs approximately35,000 people1 and operates in over 50 countries.
Financial Highlights
Total revenue6 of $2,828.8m (2010: $2,409.7) up 17%
Total EBITA2,6 of $192.0m (2010: $153.3m) up 25%
Revenue from continuing operations, including PSN since acquisition and excluding Well Support, of $2,481.8m (2010: $1,959.7m) up 27%, and EBITA from continuing operations of $133.6m (2010: $99.8m) up 34%
Profit from continuing operations before tax and exceptional items of $102.4m (2010: $68.8m) up 49%
Post tax exceptional gain of $2,154.0m (2010: nil)
Basic earnings per share, including net exceptional gain of $2,154.0m, of 444.0 cents (2010:15.8 cents)
Adjusted diluted earnings per ordinary share3 of 25.2 cents (2010: 17.4 cents) up 45%
Interim dividend of 3.9 cents (2010: 3.4 cents) up 15%
Completed arrangements to return cash to shareholders of £1.1bn
Group Highlights
Following the acquisition of PSN and disposal of the Well Support division, the refocused Group is well positioned as:
A world leading engineering business with strong market positions in upstream, subsea & pipelines ("Engineering")
The world leading production facilities support provider, formed by the merger of PSN and Wood Group's Production Facilities business ("Wood Group PSN")
The world leading independent provider of integrated maintenance services for industrial gas turbines ("Gas Turbine Services"("GTS"))
Operating Highlights
Engineering
Good first half revenue growth and margin improvement
Strong performance in upstream and subsea & pipelines
Continued order book strength and good bidding pipeline
Wood Group PSN
Good activity levels in the North Sea
Improved geographic coverage
First half benefitting from strong performance in the US, held back by start up delays in Australia and Oman
Integration progressing well and strong second half performance anticipated
GTS
Maintenance EBITA up over 20%
Power Solutions contracts progressing well
Strong growth in 2011 expected from improved Maintenance performance and good contribution from Power Solutions in the second half
In their half year report, Sir Ian Wood, Chairman, and Allister Langlands, Chief Executive, of Wood Group, state:
"The Group has delivered good growth in the first half and anticipates that full year performance will be in line with expectations.
"The first half of 2011 has been a period of exciting change for the Group aswe completed our strategic repositioning to focus on world leading positionsin engineering, production facilities support and gas turbine services.Following the acquisition of PSN, the disposal of the Well Support divisionand the return of cash to shareholders, we are well positioned to deliver goodlonger term growth.
"Market conditions have continued to improve during the period with global exploration & production spending forecast to increase in 2011 and 2012. Despite the recent volatility in financial and commodity markets, we continue to see good momentum across our business.
"The longer term fundamentals for oil & gas development & production, and gasfired power generation remain strong. Reflecting continuing confidence in ourlonger term outlook, we have declared a 15% increase in the interim dividend."Information:Wood GroupAlan Semple 01224 851 000Nick GilmanAndrew RoseCarolyn SmithBrunswickPatrick Handley 020 7404 5959Nina CoadNotesFor footnotes see page 20Interim StatementIntroductionThe first half of 2011 has been a period of exciting change for the Group aswe completed our strategic repositioning to focus on leading positions inengineering, production facilities support and gas turbine services. In April,we completed the acquisition of PSN for a consideration of $1.0bn and thedisposal of the Well Support division for $2.8bn. We also announced ourintention to return cash to shareholders following the Well Support disposal.In June, we announced the results of our tender offer and details of the B/Cshare scheme to complete arrangements to return cash to shareholders of£1.1bn.
In Engineering, we entered the year with a strong order book and have seen good revenue growth and margin improvement. Wood Group PSN was formed by the merger of Wood Group Production Facilities with PSN and has delivered good revenue growth. Integration is progressing well and we are successfully working towards delivering expected synergies. In GTS, we have seen an improved Maintenance performance and are increasingly confident of a strong contribution from Power Solutions in the second half.
Market conditions have continued to improve during the period with globalexploration & production ("E&P") spending in 2011 forecast to be up by over10% on 2010. The group has delivered good growth in the first half andanticipates that full year performance will be in line with expectations. Thelonger term fundamentals for oil & gas development & production, and gas firedpower generation remain strong. Overall, we believe the refocused Group iswell positioned to deliver good longer term growth.Trading Performance Interim Interim June 2011 June 2010 $m $m Change Total revenue 2,828.8 2,409.7 17% Revenue from continuing operations 2,481.8 1,959.7 27% Total EBITA 192.0 153.3 25% EBITA from continuing operations 133.6 99.8 34% Total EBITA margin % 6.8% 6.4% 0.4% pts Continuing operations EBITA margin % 5.4% 5.1% 0.3% pts Profit from continuing operations before taxand exceptional items 102.4 68.8 49% exceptional items Basic EPS (cents) 444.0 15.8 n/m Adjusted diluted EPS3 (cents) 25.2 17.4 45%
Note: Total revenue and EBITA figures represent the sum of the Group's continuing operations and Well Support activity up to the date of disposal. Continuing operations revenue and EBITA figures include the results of PSN since acquisition.
Total revenue increased by 17% and total EBITA was up 25%. Revenue fromcontinuing operations increased by 27% in the first half reflecting a strongincrease in activity across all three divisions and the inclusion of PSNresults from 20 April. EBITA from continuing operations increased by 34% to$133.6m. Continuing operations EBITA margin ("margins") increased by 0.3percentage points. The margin movement reflects improved margins inEngineering, and the high margin contribution of PSN during the period sinceacquisition, partially offset by lower margins in GTS due to the second halfweighting of Power Solutions profit recognition in 2011.
Adjusted diluted EPS increased by 45% to 25.2 cents, largely as a result of the increased EBITA in the period, combined with lower net finance expense and a lower effective tax rate.
DividendReflecting continuing confidence in our longer term outlook, we have declareda 15% increase in the interim dividend to 3.9 cents (2010: 3.4 cents). Thedividend will be paid on 24 September 2011 to shareholders on the Register
at2 September 2011.Markets
Conditions in oil & gas markets continued to improve in the first half andcommodity prices remained strong. Despite the recent volatility in financialand commodity markets, we continue to see good momentum across our business.We are seeing improved activity levels in our engineering business and we areencouraged by forecasts of increased E&P spend in 2011 and 2012 of more than10% per annum. It is expected that the number of oil & gas installations willcontinue to grow and, as installations and reservoirs mature, the market forour brownfield production support services will expand as operatorsincreasingly focus on asset integrity, process safety, operational assuranceand production enhancement.Economic conditions for power customers remain relatively weak in Europe andNorth America but we anticipate some improvement in outlook for ourMaintenance services. The longer term growth in global energy demand,relatively favourable gas prices, and environmental considerations continue tosupport the longer term market for gas fired power generation.
Divisional highlights
Engineering
We offer a broad range of engineering services to the upstream; subsea,pipeline and midstream; and downstream, process and industrial sectors. Theseinclude conceptual studies, engineering, project and construction management,automation projects and control systems upgrades. Interim Interim June 2011 June 2010 $m $m Change Revenue 688.5 595.5 16% EBITA 72.5 57.9 25% EBITA margin % 10.5% 9.7% 0.8% pts People1 8,000 6,600 21%
Revenue increased by 16%. We entered the year with order book at the higherend of our typical range due to increased bidding volumes during the secondhalf of 2010. This contributed to good growth in activity in upstream andsubsea & pipelines during the period, partially offset by a slight reductionin downstream. EBITA increased 25% in the period with margin increasing from9.7% to 10.5%. The margin movement principally reflected higher volumes,together with slightly improved utilisation and pricing.
Headcount increased from 6,600 to 8,000 primarily as a result of increased activity levels in upstream and subsea & pipelines, together with the addition of around 300 people through the acquisitions of Dar E&C and PI Consult in Saudi Arabia.
Upstream activity accounted for around 40% of Engineering revenue. Volumeshave increased, although we are still being impacted by delays in theprogression and sanctioning of certain projects by operators. We are active ona number of projects including the Chevron Jack & St Malo topsides design inthe US Gulf of Mexico, the Noble Alen project in Equatorial Guinea and thedetailed design scope for the Hess Tioga gas plant expansion onshore US. TheCanadian oil sands market, where we are currently working on projectsincluding Cenovus Foster Creek, showed the strongest signs of recovery. InSaudi Arabia, we were awarded a multi-year engineering services frameworkagreement by Saudi Aramco. We also announced the establishment of a jointventure in Malaysia, which has recently been awarded its first contracts.Our subsea and pipeline business accounted for around 40% of Engineeringrevenue and continues to perform well, most notably in Australia where we areworking on a number of projects including Chevron Gorgon and Woodside Browse.We are currently working on over 20 major subsea projects globally, includingkey projects for BP in Angola and Shell in Malaysia. We continued to be activein our onshore pipelines business, particularly in the US shale regions.Our downstream, process and industrial activities accounted for around 20% ofrevenue. The market in the US remains soft, although we are beginning to seesome early signs of improvement.
Outlook
Our order book continues to be strong and we have a good bidding pipeline. Wecontinue to see opportunities for growth to broaden our international presenceand extend our services. Estimates of forecast E&P spend into 2012 and beyondunderpin our confidence in good longer term growth.
Wood Group PSN
We provide life of field support to producing assets through brownfield engineering and modifications, production enhancement, operations and maintenance, training and abandonment services on a reimbursable basis.
Interim Interim June 2011 June 2010 $m $m Change Revenue 1,296.9 976.0 33% EBITA 65.1 49.2 32% EBITA margin % 5.0% 5.0% - People1 24,000 14,400 n/m
Revenue and EBITA include the results of PSN from the date of acquisition on 20 April 2011 to 30 June 2011, amounting to revenue of $274.4m and EBITA of $24.6m.
Wood Group PSN was created through the merger of Wood Group Production Facilities with PSN, to create the global market leader in brownfield production facilities support, which now employs around 24,000 people worldwide.
Revenue increased by 33% and EBITA increased by 32% in the period, principallydue to the post acquisition contribution of PSN. Financial performance in WoodGroup's Production Facilities business was held back by start up delays inAustralia and Oman, offset to some extent by a strong performance in the US.A key driver for the acquisition of PSN was to further internationalise thecombined business. The North Sea remains our largest market, and accounted foraround 40%7 of revenue compared to 54% for Wood Group's Production Facilitiesbusiness in 2010. We are seeing good activity levels in the North Sea andcontinue to be active for a range of clients on longer term contractsincluding BP, Shell and Talisman. In June we also successfully extended ourcontract with Taqa Bratani for a further 5 years.North America accounted for around 30%7 of revenue. We are experiencing strongdemand for our US onshore services, particularly in the shale regions where wehave around 800 people. We are also seeing steady performance in the Gulf ofMexico where we have recently been awarded the commissioning work for the Jack& St. Malo development for Chevron. In Canada, the acquisition of PSNpositions us well in the offshore East coast market, where we are providingservices to Exxon's Hebron development.We continue to increase our presence in international markets outside theNorth Sea and North America, which represent around 30%7 of revenue. Australiaremains a key market for the division where we have a significant level ofresource and are working for Exxon in the Bass Strait and ENI in the TimorSea. Performance in Wood Group's Production Facilities business was held backby start up delays in Australia and Oman. In Africa, we continue to be activeon contracts in Angola, Cameroon, Chad, Equatorial Guinea and Nigeria. InRussia, we have recently extended our contract with SEIC in Sakhalin for afurther five years and, in Kazakhstan, we now have over 1,000 people workingfor TengizChevroil and AGIP KCO.
Outlook
The integration of Wood Group Production Facilities and PSN is progressing well. Management and reporting structures are in place and we are working towards delivering expected synergies.
Performance in the North Sea and North America, and some improvement in international markets should lead to a strong second half.
Wood Group PSN has an excellent track record in the key brownfield engineering& construction and operations & maintenance segments. Looking forward, webelieve there will be opportunities to deliver high quality, high integrityservices in good long term growth markets as the industry increasingly focuseson operational assurance, competency, reliability and asset integrity.
GTS
We are a leading provider of services and solutions for clients in the oil &gas and power markets on a worldwide basis. Our aftermarket Maintenanceactivities include facility operations & maintenance and repair & overhaul ofgas, wind and steam turbines, pumps and other high-speed rotating equipment.Our Power Solutions business provides power plant engineering, procurement &construction and construction management services to the owners ofpower-generation facilities. Interim Interim June 2011 June 2010 $m $m Change Revenue 480.5 371.2 29% EBITA 22.5 20.1 12% EBITA margin % 4.7% 5.4% (0.7% pts) People1 3,400 3,400 -
Overall, revenue was up 29%. Maintenance revenue increased by 4% from $340m to$355m. Power Solutions revenue increased from $31m to $125m reflecting goodprogress on our EPC contracts with GWF and Dorad, which were both awarded inthe fourth quarter of 2010.EBITA was up 12% in the period. Maintenance EBITA increased by over 20% due tosomewhat improved market conditions and the benefit of cost reduction measurestaken in 2010. Given the percentage completion of the Dorad and GWF contracts,we did not recognise any Power Solutions profit in the first half. Theprojects are progressing well and we are increasingly confident of a goodprofit contribution in the second half.
Headcount remains unchanged, with the impact of cost reductions made in 2010 being offset by increased headcount in our Power Solutions business.
Demand for our Maintenance services in the oil & gas market providing supportfor turbines used in power generation, gas compression and transmission,remains robust. Performance in the period was impacted by downtime on certaintest cells leading to overhaul delays. We are confident of delivering animproved performance in the second half.Our power & industrial Maintenance activities, which provide support forturbines used for power generation and industrial applications, saw a goodperformance on some of our longer term contracts. We were also successful withthe award of various new longer term agreements including the MunicipalUtility District Financing Authority in Sacramento California, EGASA in Peruand PlusPetrol in Argentina.Outlook
We continue to anticipate a strong recovery for the year, with an improved performance in our Maintenance business and the timing of profit recognition in Power Solutions resulting in a significant second half weighting.
Economic conditions for power customers remain relatively weak in Europe andNorth America but we anticipate some improvement in outlook for ourMaintenance services. In Power Solutions, we have good visibility on work into2012 and 2013 and are actively pursuing further opportunities to add to ourorder book. The longer term growth in global energy demand, relativelyfavourable gas prices, and environmental considerations continue to supportthe longer term market for gas fired power generation.
Well Support
Interim Interim June 2011 June 2010 $m $m Revenue 347.0 450.0 EBITA 58.4 53.5 EBITA margin % 16.8% 11.9% People1 - 3,700
Well Support continued to perform strongly up to the date of disposal on 26 April, generating EBITA of $58.4m from revenue of $347.0m.
Financial ReviewFinancial performance Interim Interim Full Year June 2011 June Dec 2010 $m 2010 $m $m Total revenue 2,828.8 2,409.7 5,063.1Well Support revenue (347.0) (450.0) (947.1)
Revenue from continuing operations 2,481.8 1,959.7 4,116.0
Total EBITA 192.0 153.3 344.8 Well Support EBITA (58.4) (53.5) (128.1)EBITA from continuing operations 133.6 99.8 216.7 Total EBITA margin 6.8% 6.4% 6.8%
EBITA margin from continuing operations 5.4% 5.1% 5.3%
Amortisation (26.9) (14.0) (29.0)Operating profit from continuingoperations before exceptional items 106.7 85.8 187.7 Net finance expense (4.3) (17.0) (34.0)Profit from continuing operations beforetax and exceptional items 102.4 68.8 153.7
Taxation on continuing operations before (30.2) (22.0) (56.9) exceptional items
Profit for the period from continuing 72.2 46.8 96.8operations before exceptional itemsProfit from discontinued operations, net 36.7 34.4 90.4of taxProfit for the period before exceptional 108.9 81.2 187.2items Exceptional items, net of tax 2,154.0 - (21.4)Profit for the period 2,262.9 81.2 165.8 Basic EPS (cents) 444.0 15.8 32.4Adjusted diluted EPS (cents) 25.2 17.4 39.7The results for the first six months have been impacted by the acquisition ofPSN on 20 April 2011 and the disposal of the Well Support division on 26 April2011. The review of our trading performance is contained within the Divisionalcommentary above.The amortisation charge for the half year of $26.9m includes $17.1m (30 June2010: $4.9m) of amortisation relating to other intangible assets arising fromacquisitions, of which $11.8m is in relation to the PSN acquisition. The otherintangible asset recognised in relation to the acquisition of PSN was $194.5mand will be amortised over a period of 5 years. The expected charge for theeight months post acquisition in 2011 is around $47.0m and for the full year2012 is $49.0m. We continue to regard the amortisation charge relating tointangible assets arising from acquisitions to be a relatively subjectivemeasure, and as a result continue to believe that performance is best measuredexcluding this figure. This is the reason our key reporting measures forprofit and earnings per share exclude the impact of amortisation.
The net continuing finance expense before exceptional items in the first half of $4.3m is analysed further below:
Interim Interim Full year June 2011 June 2010 Dec 2010 $m $m $m Interest on debt 5.3 10.8 20.0 Non utilisation fees 1.5 2.7 5.1 Non cash charges on pension anddeferred consideration 0.3 1.0 1.8Bank fees and charges 0.4 3.4 8.9 Total finance charge 7.5 17.9 35.8 Finance income (3.2) (0.9) (1.8) Net continuing finance expense 4.3 17.0 34.0
before exceptional items
Interest cover, based on EBITA from continuing operations, is strong at 31.1 times (30 June 2010: 5.9 times).
The effective tax rate on continuing operations was 29.5% (30 June 2010:29.9%). Interim Interim Full year June 2011 June 2010 Dec 2010 $m $m $m Underlying tax charge 35.2 22.0 56.9 Credit in relation to deferred tax onamortisation of other intangible (5.0) - -assets (a)Tax charge per financial statements 30.2 22.0 56.9 Profit from continuing operations 102.4 68.8 153.7
before tax and exceptional items
Add other intangible assets - 4.9 10.5amortisation (a) Adjusted profit 102.4 73.7 164.2 Effective tax rate on continuingoperations before exceptional items 29.5% 29.9% 34.7%
A tax credit has been recognised on the amortisation of other intangible assets during 2011, therefore the adjustment to profit before tax shown for 2010 is no longer required.
The higher effective rate on continuing operations for the full year 2010 relates primarily to unrecognised tax losses. Without these, the underlying rate would have been around 30%.
Adjusted diluted EPS for the six months to 30 June 2011 increased by 45% to 25.2c, largely as a result of the increased EBITA in the period, combined with lower net finance expense and a lower effective tax rate.
Exceptional Items
In the period the Group recorded a post tax exceptional gain of $2,154.0m. Apre tax gain of $2,267.2m was generated in relation to the disposal of ourWell Support division, on which tax of $77.5m was payable. This amount wasoffset by pre tax exceptional charges of $22.9m in relation to a receivable inLibya and $23.0m for the acquisition, subsequent integration and associatedbank fees in respect of the PSN transaction, on which tax credits of $10.2mhave been recognised. Further details are provided in Note 3 to the interimfinancial statements.Costs in relation to the return of cash to shareholders of $14.5m wereincurred and a foreign exchange loss of $28.8m arose on the sterling balancesheld in anticipation of the return of cash and these have been taken directlyto equity.
Return of cash and share consolidation
In February 2011 we announced that, following the completion of theacquisition of PSN and the disposal of our Well Support Division to GE, weintended to make a return of cash to shareholders of not less than $1.7bn. InMay 2011 we announced that the Board had decided that the most appropriateprocess for effecting the return of cash was, in the first instance, a tenderoffer of up to £1.1bn, followed by a subsequent B/C share scheme.At the close of the tender offer on 2 June 2011, 65.9m Wood Group shares,representing approximately 12.2 % of the issued ordinary share capital, hadbeen tendered and were purchased by the Group at a price of 625 pence pershare, for a total value of £411.9m. Following completion of the tender offer,the Company announced that it would complete the return of cash through areturn of 140 pence per share to all shareholders on the register on 1 July2011. The return was made through a B/C share scheme, which was substantiallycompleted on 4 July 2011.
At the date of this report we have successfully completed the return of £1.1bn, with a further £4.7m expected to be returned when the B shares issued pursuant to the deferred capital option under the B/C share scheme are redeemed in April 2012.
Concurrent with the B/C Share Scheme, the Company undertook a share capitalconsolidation. The purpose of the share capital consolidation was to seek toensure that, subject to market fluctuations, the market price of Wood Groupordinary shares immediately following the B/C share issue was approximatelythe same as the market price immediately beforehand. The share capitalconsolidation should also allow historical and future financial information inrelation to the Company to be compared on a per-share basis before and afterthe B/C share scheme.The amount returned under the B/C share scheme represented approximately 21.9% of the Company's market capitalisation on 10 June 2011. As a result of theshare capital consolidation, the number of ordinary shares in issue has beenreduced by a broadly equivalent percentage, shareholders having received 7 newordinary shares for every 9 existing ordinary shares held. Following thecancellation of the ordinary shares purchased under the tender offer, therewere 474.9m ordinary shares in issue at the close of trading on 1 July 2011.On 4 July 2011, following the completion of the share capital consolidation,there were 369.4m new ordinary shares in issue.
The weighted average number of fully diluted shares in the six months to 30 June 2011 was 526.9m. As the consolidation took place after 30 June 2010 it has no impact on the current period but the table below sets out the anticipated impact on the full year 2011 weighted average number of shares.
Analysis of movements in ordinary shares
Closing Weighted Average Anticipated Anticipated 30 June 2011 30 June 2011 Weighted ClosingAll figures are in million Averageshares FY 2011 FY 2011 Ordinary shares - opening 530.3 530.3 530.3 530.3balance PSN acquisition 10.5 4.1 7.3 10.5Tender offer (65.9) (10.6) (38.5) (65.9)B/C share and consolidation - - (52.8) (105.5)Ordinary shares - closing 474.9 523.8 446.3 369.4balance
Shares held by employee share (11.6) (14.2) (11.5)
(9.0)
trusts
Basic shares for EPS purposes 463.3 509.6 434.8
360.4 Effect of dilutive shares 13.9 17.3 15.5 13.9 477.2 526.9 450.3 374.3Fully diluted shares for EPSpurposes
Note - The anticipated numbers above assume that there are no further changes to the capital structure of the Group, that no further dilutive options are issued and that the share price remains at 30 June 2011 levels.
Adjusted diluted EPS of 25.2 cents for the period is calculated by taking total profit for the period attributable to the owners of the parent of $2,262.7m less exceptional items net of tax of $2,154.0m plus amortisation net of tax of $23.9m to give adjusted earnings of $132.6m, and dividing this by the fully diluted weighted average number of shares in the period of 526.9m.
Cash flow and net debt Interim Interim Full year June 2011 $m June 2010 $m Dec 2010 $m Opening net debt (15.1) (87.9) (87.9)
Cash generated from operations
217.8 191.3 421.9pre working capital Working capital movements (87.7) (80.4) 23.5
(excluding Well Support) Working capital movements related (77.6) (9.7) (42.9) to Well Support
Cash generated from operations 52.5 101.2 402.5 Acquisitions and capex (989.4) (91.3) (146.6) Disposals 2,745.9 - -Return of cash to shareholders (681.0) - -Tax paid (58.5) (48.8) (99.3) Interest, dividends and other (37.7) (65.1) (89.9) Exchange movements on net debt (31.6) 11.8 6.1
Decrease/(increase) in net debt 1,000.2 (92.2) 72.8
Closing net cash / (debt) 985.1 (180.1) (15.1)The funding position of the Group has been impacted significantly in the firsthalf of the year by the acquisition of PSN, the disposal of Well Support andthe tender offer. Throughout the period the Group has maintained a level ofcore gross debt as set out below. Interim Interim Full Year June 2011 June 2010 Dec 2010 $m $m $m Average gross (debt) (282.9) (382.8) (364.3)Closing net cash / (debt) 985.1 (180.1) (15.1)The return of cash to shareholders in July 2011 resulted in an outflow of$1,075.1m which, together with other adjustments in relation to the completionof the Well Support disposal, would result in adjusted pro forma net debt ofaround $125m at 30 June 2011.Cash generated from operations pre working capital increased by $26.5m to$217.8m. The working capital outflows of $87.7m and $77.6m (2010: $80.4m and$9.7m) shown above were due primarily to the impact of seasonally reducedworking capital at December 2010, combined with higher activity compared tothe second half of 2010. The Well Support disposal structure includes aworking capital adjustment mechanism. It is anticipated that the workingcapital position will improve in the second half, and that the refocused Groupwill be less working capital intensive.
Cash paid in relation to acquisitions, primarily the PSN acquisition, totalled $929.4m (30 June 2010: $16.3m), deferred consideration paid in respect of prior period acquisitions decreased to $9.2m (30 June 2010: $42.2m) and payments for capex and intangible assets increased to $50.8m (30 June 2010: $32.8m).
The reduction in tax, interest, dividend and other largely relates to the purchase of shares by the employee share trust in the first half of 2010, offset by higher tax and dividend payments in the first half of 2011.
In February 2011, the Group renegotiated its $800m bilateral borrowing facilities which has resulted in lower pricing.
Gearing and capital efficiency
Due to the significant changes in the Group structure during the first 6 months of 2011 comparison with prior periods is not meaningful.
Foreign exchange and constant currency reporting
The Group's revenue and EBITA can be impacted by movements in foreign exchangerates, including the effect of retranslating the results of subsidiaries withvarious functional currencies into US dollars at different exchange rates.Movements in the average US dollar rate to other major currencies in which weoperate between the first half of 2010 and the first half of 2011, would havehad the impact of reducing the growth in total EBITA for the Group byapproximately 5% or $5m on a constant currency basis.
Group Outlook
The Group has delivered good growth in the first half and anticipates that full year performance will be in line with expectations.
The first half of 2011 has been a period of exciting change for the Group aswe completed our strategic repositioning to focus on world leading positionsin engineering, production facilities support and gas turbine services.Following the acquisition of PSN, the disposal of the Well Support divisionand the return of cash to shareholders, we are well positioned to deliver goodlonger term growth.Market conditions have continued to improve during the period with globalexploration & production spending forecast to increase in 2011 and 2012.Despite the recent volatility in financial and commodity markets, we continueto see good momentum across our business and the longer term fundamentals foroil & gas development & production, and gas fired power generation remainstrong.Sir Ian WoodChairmanAllister G LanglandsChief Executive23 August 2011***********************Footnotes
1 Number of people includes both employees and contractors at 30 June.
2 Total EBITA represents operating profit from continuing operations pre exceptional items of $106.7m (2010: $85.8m) before the deduction of amortisation of $26.9m (2010: $14.0m) and including Well Support EBITA of $58.4m (2010: $53.4m) and EBITA is provided as it is a key unit of measurement used by the Group in the management of its business.
3 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 share ownership trusts and adjusted to assume conversionof all potentially dilutive ordinary shares.
4 Interest cover is EBITA from continuing operations divided by the net continuing finance expense.
5 Unless stated otherwise, comparisons of financial performance are between the six months to 30 June 2011 and the six months to 30 June 2010.
6 Total revenue and total EBITA are the sum of the Group's continuing operations and the activity of the Well Support business up to the date of disposal. These are non-GAAP measures. Continuing operations revenue and EBITA figures include the results of PSN since acquisition.
7 Annualised geographical revenue split based on annualised Wood Group PSN figures.
John Wood Group PLC
Interim Financial Statements 2011
John Wood Group PLCGroup income statement
for the six month period to 30 June 2011
Unaudited Interim June Unaudited Interim June Audited Full Year December 2011 2010 2010 Pre- Pre- Pre- except- Except- except- Except- except- Except- Note ional ional Total ional ional Total ional ional Total items items $m items items $m items items $m $m $m $m $m $m $m Revenue from 2 2,481.8 - 2,481.8 1,959.7 - 1,959.7 4,116.0 - 4,116.0continuing operationsCost of sales (2,032.5) - (2,032.5) (1,587.0) - (1,587.0) (3,360.7) - (3,360.7)Gross profit 449.3 - 449.3 372.7 - 372.7 755.3 - 755.3Administrative (342.6) (42.1) (384.7) (286.9) - (286.9) (567.6) (27.6) (595.2)expensesOperating profit 2 106.7 (42.1) 64.6 85.8 - 85.8 187.7 (27.6) 160.1Finance income 3.2 - 3.2 0.9 - 0.9 1.8 - 1.8Finance expense (7.5) (3.8) (11.3) (17.9) - (17.9) (35.8) - (35.8)Profit before taxationfrom continuing 102.4 (45.9) 56.5 68.8 - 68.8 153.7 (27.6) 126.1operationsTaxation 9 (30.2) 10.2 (20.0) (22.0) - (22.0) (56.9) 6.2 (50.7)
Profit for the period 72.2 (35.7) 36.5 46.8 - 46.8 96.8 (21.4) 75.4from continuingoperationsProfit from 36.7 2,189.7 2,226.4 34.4 - 34.4 90.4 - 90.4discontinuedoperations, net of taxProfit for the period 108.9 2,154.0 2,262.9 81.2 -
81.2 187.2 (21.4) 165.8
Equity attributable toowners of the parent:Owners of the parent 108.7 2,154.0 2,262.7 81.1 - 81.1 187.4 (21.4) 166.0Non-controlling 0.2 - 0.2 0.1 - 0.1 (0.2) - (0.2)interests 108.9 2,154.0 2,262.9 81.2 - 81.2 187.2 (21.4) 165.8Earnings per share(expressed in centsper share)Basic 8 21.3 422.7 444.0 15.8 - 15.8 36.6 (4.2) 32.4Diluted 8 20.6 408.8 429.4 15.3 - 15.3 35.4 (4.1) 31.3
Results of discontinued operations represent the post-tax profits of the Well Support division which was divested on 26 April 2011 together with the post-tax gain on divestment.
John Wood Group PLC
Group statement of comprehensive income
for the six month period to 30 June 2011
Unaudited Unaudited Audited Interim Interim Full Year June June December 2011 2010 2010 $m $m $m Profit for the period 2,262.9 81.2 165.8 Other comprehensive incomeActuarial gains on retirement benefit liabilities - - 1.0Movement in deferred tax relating to retirement - -
(0.3)
benefit liabilitiesCash flow hedges 7.1 1.1
3.3
Net exchange movements on retranslation of 12.7 (13.5)
3.1
foreign currency net assetsTotal comprehensive income for the period 2,282.7 68.8
172.9
Total comprehensive income for the period isattributable to:Owners of the parent 2,282.3 69.1 172.8Non-controlling interests 0.4 (0.3) 0.1 2,282.7 68.8 172.9John Wood Group PLCGroup balance sheetas at 30 June 2011 Unaudited Unaudited Audited Interim Interim Full Year June June December 2011 2010 2010 Note $m $m $mAssets
Non-current assets Goodwill and other intangible assets 5 1,694.0 662.3 677.5 Property plant and equipment
146.7 247.5 238.2Long term receivables 42.4 6.6 43.4Derivative financial instruments 3.5 0.3 0.1
Deferred tax assets 70.7 61.9 100.2 1,957.3 978.6 1,059.4Current assetsInventories 416.2 649.2 663.8Trade and other receivables 1,246.5 1,034.5 1,050.8Income tax receivable 13.9 36.0 25.2
Derivative financial instruments 4.0 2.3 1.2
Cash and cash equivalents 13 1,186.8 131.7 180.1 2,867.4 1,853.7 1,921.1LiabilitiesCurrent liabilitiesBorrowings 13 29.2 33.0 30.1
Derivative financial instruments 1.3 2.7 0.3
Trade and other payables 1,218.3 1,027.7 1,139.5Income tax liabilities 130.1 50.2 60.8 1,378.9 1,113.6 1,230.7Net current assets 1,488.5 740.1 690.4 Non-current liabilitiesBorrowings 13 172.5 278.8 165.1
Derivative financial instruments 2.1 2.9 2.7Deferred tax liabilities 63.5 7.2 2.3Retirement benefit liabilities 10 25.3 32.7 33.3Other non-current liabilities 86.4 39.8 82.0Provisions 29.3 50.1 47.2 379.1 411.5 332.6Net assets 3,066.7 1,307.2 1,417.2 Equity attributable to owners of theparentShare capital 23.3 26.3 26.3Share premium 321.8 315.8 315.8Retained earnings 2,516.2 917.2 1,007.6Other reserves 194.2 38.5 56.6 3,055.5 1,297.8 1,406.3 Non-controlling interests 11.2 9.4 10.9Total equity 3,066.7 1,307.2 1,417.2 John Wood Group PLC
Group statement of changes in equity
for the six month period to 30 June 2011
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 2010 26.3 315.8 877.6 50.5
1,270.2 10.8 1,281.0
Profit for the period - - 81.1 - 81.1 0.1 81.2Othercomprehensiveincome:Cash flow hedges - - - 1.1 1.1 - 1.1Net exchange - - - (13.1) (13.1) (0.4) (13.5)movements onretranslation offoreign currencynet assetsTotal comprehensive - - 81.1 (12.0) 69.1 (0.3) 68.8income for the periodTransactions with owners:Dividends paid 4 - - (35.7) - (35.7) (1.1) (36.8)Credit relating to 14 - - 7.8 - 7.8 - 7.8share based chargesShares purchased by - - (20.5) - (20.5) - (20.5)employee share trustsShares disposed of by - - 3.1 - 3.1 - 3.1employee share trustsExchange movements in - - 3.8 - 3.8 - 3.8respect of shares held byemployee share trustsAt 30 June 2010 26.3 315.8 917.2 38.5
1,297.8 9.4 1,307.2
At 1 January 2011 26.3 315.8 1,007.6 56.6
1,406.3 10.9 1,417.2
Profit for the period - - 2,262.7 - 2,262.7 0.2 2,262.9Other comprehensiveincome:Cash flow hedges - - - 7.1 7.1 - 7.1Net exchange movements - - - 12.5 12.5 0.2 12.7on retranslation of foreigncurrency net assetsTotal comprehensive - - 2,262.7 19.6 2,282.3 0.4 2,282.7income for the periodTransactions with owners:Dividends paid 4 - - (39.3) -
(39.3) (0.2) (39.5) Credit relating to share 14 - - 2.2 - 2.2
- 2.2based chargesShares disposed of by - - 9.9 - 9.9 - 9.9employee share trustsExchange movements in - - (1.9) - (1.9) - (1.9)respect of shares held byemployee share trustsShares issued in respect 5 0.6 - - 114.4 115.0 - 115.0
of the PSN acquisition Purchase of shares under 7 (3.6) - (675.7) 3.6 (675.7)
- (675.7)
tender offer Expenses relating to return 7 - - (43.3) - (43.3)
- (43.3)of cash to shareholdersAdjustment relating to - 6.0 (6.0) - - - -options exercised undershare symmetry scheme
Non-controlling interests - - - -
- 0.4 0.4arising on businesscombinationsPurchase of non- - - - - - (0.3) (0.3)controlling interestsAt 30 June 2011 23.3 321.8 2,516.2 194.2
3,055.5 11.2 3,066.7
The figures presented in the above tables are unaudited.
Other reserves include the capital redemption reserve, capital reductionreserve, merger reserve, currency translation reserve and the hedging reserve.The capital redemption reserve was credited with $3.6m during the period as aresult of the purchase of shares under the tender offer. The merger reservewas credited during the period with $114.4m as a result of the issue of sharesas part of the PSN acquisition.John Wood Group PLCGroup cash flow statement
for the six month period to 30 June 2011
Unaudited Unaudited Audited Interim Interim Full Year June 2011 June 2010 December 2010 Note $m $m $mCash generated from operations 12 52.5 101.2
402.5
Tax paid (58.5) (48.8)
(99.3)
Net cash (used in)/from operating activities (6.0) 52.4 303.2
Cash flows from investing activitiesAcquisition of subsidiaries (net of cash and 5 (917.4) (16.3) (20.9)borrowings acquired)Deferred consideration payments (9.2) (42.2)
(47.7)
Proceeds from divestment of subsidiaries 6 2,745.9 -
-
(net of cash and borrowings divested anddivestment costs)Cash impact of exceptional items (11.2) -
(8.0)
Purchase of property plant and equipment (38.0) (26.4)
(54.4)
Proceeds from sale of property plant and 1.0 2.7
5.6
equipment
Purchase of intangible assets (12.8) (6.4)
(15.6)
Proceeds from disposal of other intangible 0.6 -
-
assets
Purchase of non-controlling interests (0.8) -
-
Investment by non-controlling interests - -
0.8
Net cash from/(used in) investing activities 1,758.1 (88.6) (140.2)
Cash flows from financing activities(Repayment of)/proceeds from bank loans (1.6) 30.1
(97.3)
Purchase of shares under tender offer 7 (675.7) -
-
Expenses relating to return of cash to (5.3) -
-
shareholders
Purchase of shares in employee share trusts - (21.8)
(22.1)
Disposal of shares in employee share trusts 9.9 3.1
6.3Interest received 2.5 1.2 2.3Interest paid (12.2) (13.5) (28.6)Dividends paid to shareholders 4 (39.3) (35.7)
(53.1)
Dividends paid to non-controlling interests (0.2) (1.1)
(1.1)
Net cash used in financing activities (721.9) (37.7)
(193.6)
Net increase/(decrease) in cash and cash 1,030.2 (73.9)
(30.6)
equivalents
Effect of exchange rate changes on cash and (23.5) (3.0) 2.1cash equivalentsOpening cash and cash equivalents 180.1 208.6
208.6
Closing cash and cash equivalents 1,186.8 131.7 180.1John Wood Group PLC
Notes to the interim accounts
for the six month period to 30 June 2011
1. Basis of preparation
The interim report and accounts for the six months ended 30 June 2011 has beenprepared in accordance with the Disclosure and Transparency Rules of theFinancial Services Authority and with IAS 34 `Interim financial reporting' asadopted by the European Union. The interim report and accounts should be readin conjunction with the Group's 2010 Annual Report and Accounts which havebeen prepared in accordance with IFRSs as adopted by the European Union.The interim report and accounts have been prepared on the basis of theaccounting policies set out in the Group's 2010 Annual Report and Accounts andthose new standards discussed below which are applicable from 1 January 2011.The interim report and accounts do not comprise statutory accounts within themeaning of section 434 of the Companies Act 2006. The interim accounts wereapproved by the Board of Directors on 22 August 2011. The results for the sixmonths to 30 June 2011 and the comparative results for six months to 30 June2010 are unaudited. The comparative figures for the year ended 31 December2010 do not constitute the statutory financial statements for that year. Thosefinancial statements have been delivered to the Registrar of Companies andinclude the auditor's report which was unqualified and did not contain anystatement under Section 498 of the Companies Act 2006.
After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.
The Group therefore continues to adopt the going concern basis in preparing the consolidated interim financial statements.
Functional currency
The Group's earnings stream is primarily US dollars and the principal functional currency is the US dollar, being the most representative currency of the Group. The Group's financial statements are therefore prepared in US dollars.
The following exchange rates have been used in the preparation of theseaccounts: June 2011 June 2010Average rate £1 = $ 1.6150 1.5243Closing rate £1 = $ 1.6055 1.5189
Disclosure of impact of new and future accounting standards
Amended standards and interpretations not relevant to the Group
The following revisions and amendments to standards and interpretations are mandatory as of 1 January 2011 but are currently not relevant to the Group and have no impact to the Group's interim financial statements:
IAS 24 (revised) "Related party disclosures"
Amendments to IAS 32 Financial instruments: Presentation on classification of rights issues
Amendment to IFRS 1, First time adoption on financial instruments disclosures
Amendment to IFRIC 14, "Pre-payments of a Minimum Funding Requirement"
IFRIC 19, "Extinguishing financial liabilities with equity instruments"
Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group
The following standards and amendments and interpretations to existing standards have been published and are mandatory for the Group's accounting periods beginning on or after 1 January 2012 or later periods, but the Group has not early adopted them:
IFRS 9, 'Financial instruments'
IFRS 10, 'Consolidated financial statements'
IFRS 11, 'Joint arrangements'
IFRS 12, 'Disclosures of interests in other entities'
IFRS 13, 'Fair value measurement'
IAS 19 (revised 2011) 'Employee benefits'
IAS 27 (revised 2011) 'Separate financial statements'
IAS 28 (revised 2011) 'Associates and joint ventures'
The Group is currently assessing the impact that the new standards and amendments may have to the Group's financial statements.
2. Segmental reporting
The segment information provided to the Chief Operating Decision Maker for the reportable operating segments for the period included the following:
Business segments
Revenue EBITDA (2) EBITA (2) Operating profit Un- Un- Audited Un- Un- Audited Un- Un- Audited Un- Un- Audited audited audited Full audited audited Full audited audited Full audited audited Full Interim Interim Year Interim Interim Year Interim Interim Year Interim Interim Year June June 2010 June June 2010 June June 2010 June June 2010 2011 2010 2011 2010 2011 2010 2011 2010 $m $m $m $m $m $m $m $m $m $m $m $m
Engineering 688.5 595.5 1,239.1 76.7 62.4 130.2 72.5
57.9 122.0 42.1 50.2 106.0Wood Group 1,296.9 976.0 2,041.1 70.5 53.9 112.2 65.1 49.2 101.4 30.0 46.1 88.6PSN (3)Gas Turbine 480.5 371.2 804.9 28.1 27.0 60.0 22.5
20.1 46.1 19.7 17.2 18.8ServicesCentral costs (4) - - - (24.8) (24.7) (48.1) (26.2) (26.0) (50.8) (26.9) (26.3) (51.3)
Gas Turbine 15.9 17.0 30.9 (0.3) (1.2) (1.6) (0.3) (1.4) (2.0) (0.3) (1.4) (2.0)Services - to bedivested (5)Well Support - 347.0 450.0 947.1 70.0 69.9 165.9 58.4 53.5 128.1 58.4 53.5 128.1divested (7)Total (6) 2,828.8 2,409.7 5,063.1 220.2 187.3 418.6 192.0 153.3 344.8 123.0 139.3 288.2Remove Well (347.0) (450.0) (947.1) (70.0) (69.9) (165.9) (58.4) (53.5) (128.1) (58.4) (53.5) (128.1)Support (7)Total 2,481.8 1,959.7 4,116.0 150.2 117.4 252.7 133.6
99.8 216.7 64.6 85.8 160.1continuingFinance 3.2 0.9 1.8incomeFinance (11.3) (17.9) (35.8)expenseProfit before 56.5 68.8 126.1taxation fromcontinuingoperationsTaxation (20.0) (22.0) (50.7)Profit for the 36.5 46.8 75.4period fromcontinuingoperationsProfit from 2,226.4 34.4 90.4discontinuedoperationsProfit for the 2,262.9 81.2 165.8periodNotesFollowing the acquisition of PSN and the divestment of the Well Supportdivision the Group's reportable segments are now Engineering, Wood Group PSNand Gas Turbine Services. Management considers these segments to be the mostappropriate in light of the change in the structure of the Group.Total continuing EBITDA represents operating profit of $64.6m (2010 : $85.8m)before continuing depreciation of property, plant and equipment of $16.6m(2010 : $17.6m) , amortisation of $26.9m (2010 : $14.0m) and continuingexceptional items of $42.1m (2010 : nil) . Well Support depreciation includes$1.8m (2010 : $2.8m) of rental inventory depreciation. EBITA represents EBITDAless depreciation. EBITA and EBITDA are provided as they are units ofmeasurement used by the Group in the management of its business.
The results of Wood Group PSN include the trading activity of PSN from the date of acquisition, 20th April 2011 to 30th June 2011.
Central costs include the costs of certain management personnel in both the UK and the US, along with an element of Group infrastructure costs. Certain foreign exchange gains and losses are also included within central costs.
The GTS business to be divested is an Aero engine overhaul company which the Group has decided to dispose of.
Figures on the total row are the sum of continuing activity and Well Support activity up to the date of disposal excluding the gain on divestment.
The results of the Well Support division represent the trading activity of that division from 1st January 2011 to 26th April 2011, the date the division was divested.
Revenue arising from sales between segments is not material.
2. Segmental reporting (continued)
Segment assets Unaudited Unaudited Audited Interim Interim Full Year June June December 2010 2011 2010 $m $m $mEngineering 735.3 566.1 604.9Wood Group PSN 2,000.2 742.5 740.8Gas Turbine Services 883.4 878.9 857.1Well Support - 594.8 636.1
Gas Turbine Services - to be divested 28.3 24.8 23.0 Unallocated
1,177.5 25.2 118.6 4,824.7 2,832.3 2,980.5Unallocated segment assets includes cash, income tax and deferred tax balances.3. Exceptional items Unaudited Unaudited Audited Interim Interim Full Year June 2011 June 2010 December 2010 $m $m $mExceptional items included in continuing operationsAcquisition costs 9.5 -
6.6
Integration and restructuring charge 9.7 -
21.0
Political disruption in North Africa 22.9 -
-
42.1 -
27.6
Bank fees relating to PSN acquisition 3.8 -
- 45.9 - 27.6Taxation (10.2) - (6.2) 35.7 - 21.4
Exceptional items included in discontinued operations Gain on divestment of subsidiaries
(2,267.2) - -Taxation 77.5 - - (2,189.7) - -Exceptional items post-tax (2,154.0) - 21.4Acquisition costs of $9.5m relating to the purchase of PSN have been expensedin the period. $6.6m of costs were expensed in relation to this transaction in2010.A charge of $9.7m has been recorded in the period in respect of costs relatingto the integration of PSN with the existing Wood Group Production Facilitiesbusiness and the closure of a training facility in Louisiana, USA. Therestructuring charge in 2010 relates to the Gas Turbine Services division andthe majority of the costs were in respect of the closure of a repair facilityin Connecticut, USA.
There are doubts over the Group's ability to recover $22.9m of engineering related receivables following political and social unrest in Libya and therefore the outstanding balance has been provided in full.
Bank fees of $3.8m relating to the acquisition of PSN have been expensed in the period.
The gain on divestment of subsidiaries of $2,267.2m relates to the sale of the Well Support division in April 2011. Further details of the divestment are provided in note 6.
A tax charge of $77.5m has been recorded in relation to the gain on divestment of subsidiaries. A tax credit of $10.2m has been recorded in relation to exceptional items in continuing operations in the period.
4. Dividends Unaudited Unaudited Audited Interim Interim Full Year June 2011 June 2010 December 2010 $m $m $mDividends on equity sharesFinal paid 39.3 - -Second interim paid - 35.7 35.7Interim paid - - 17.4Total dividends 39.3 35.7 53.1
After the balance sheet date, the directors declared an interim dividend of 3.9 cents per share which will be paid on 24 September 2011. The interim financial report does not reflect this dividend payable, which will be recognised in equity attributable to owners of the parent as an appropriation of retained earnings in the year ended 31 December 2011.
5. Business combinations
The fair value of assets and liabilities acquired through business combinations in the period were as follows:
PSN Other Total $m $m $mProperty plant and equipment 24.4 3.0 27.4Other intangible assets 194.5 - 194.5Inventories - 7.0 7.0Trade and other receivables 289.4 19.3 308.7Cash 40.0 6.3 46.3Bank borrowings (370.2) (1.3) (371.5)Trade and other payables (201.5) (28.5) (230.0)Income tax liabilities (42.4) 0.2 (42.2)Deferred tax (60.4) - (60.4)Provisions (6.3) (0.7) (7.0)Total identifiable net (liabilities)/assets acquired (132.5) 5.3 (127.2)Goodwill 817.8 17.0 834.8Non-controlling interests (0.4) - (0.4)Consideration 684.9 22.3 707.2 Consideration satisfied by:Cash 569.9 22.3 592.2Issue of shares 115.0 - 115.0
Total consideration transferred 684.9 22.3 707.2The Group acquired 100% of the share capital of Production Services NetworkLimited (`PSN') on 20 April 2011 for a total consideration of $684.9m. $569.9mwas paid in cash and $115.0m of shares were issued as part of the transaction.The Group repaid PSN's borrowings of $370.2m immediately following theacquisition. $194.5m of other intangible assets were recognised onacquisition.The total identifiable net liabilities of PSN are stated after recording fairvalue adjustments of $25.1m. The fair value adjustments relate mainly to taxissues.
Goodwill of $834.8m has been recognised on the acquisitions in the period. This, together with the other intangible assets of $194.5m recognised on the acquisitions, contribute to the increase in goodwill and other intangible assets in the period.
The acquisition of PSN advances Wood Group's strategy of maintaining anappropriate balance between oil & gas development and later cycle productionsupport, creating global market leading positions, developing long termcustomer relationships, extending services and broadening international reach.Wood Group PSN will be a global leader in brownfield production services andbe well positioned for growth across the oil & gas industry.
Other acquisitions include the purchase of Dar E&C and PI Consult in Saudi Arabia in June 2011. In addition, the Group made deferred consideration payments of $9.2m relating to acquisitions in previous periods.
The outflow of cash equivalents on the acquisitions made during the period isanalysed as follows: $mCash consideration 592.2Cash acquired (46.3)Borrowings acquired 371.5Cash outflow 917.4
The results of the Group, if the acquisition of PSN had been made at the beginning of the period, would have been as follows:
$mContinuing revenue 2,845.1Continuing EBITA 155.6
From the date of acquisition to 30 June 2011, PSN contributed $274.4m to revenue and $24.6m to EBITA.
6. Divestments
In April 2011, the Group divested of its Well Support division to GE for a gross consideration of $2,850.0m. Details of the assets and liabilities disposed of were as follows:
$mProperty plant and equipment 127.8Goodwill and other intangible assets 31.9Inventories 291.4Trade and other receivables 238.8Deferred tax assets 24.3Cash and cash equivalents 44.4Borrowings (3.5)Trade and other payables (245.7)Net income tax liabilities (24.7)Provisions (19.5)Net assets divested 465.2Gross proceeds received 2,821.8Disposal costs (89.4)Gain on divestment 2,267.2Tax (77.5)Gain on divestment after tax 2,189.7
The inflow of cash and cash equivalents in relation to the divestment of the Well Support division is analysed as follows:
$mGross proceeds received (a) 2,821.8Divestment costs paid (35.0)Cash divested (44.4)Borrowings divested 3.5Net cash inflow from divestment 2,745.9
(a) Of the total agreed sale proceeds of $2,850.0m, $28.2m relating to the divestment of a business in the Middle East remains outstanding. The divestment of this business is expected to be completed in the second half of 2011. The gain on sale calculation will be finalised following agreement of the working capital adjustment with GE and this is expected to be completed before year-end.
7. Return of cash to shareholders
In February 201l the Group announced its intention to return cash toshareholders. The first part of the return was via a tender offer which wascompleted in June 2011 and which resulted in the purchase by the company of65.9m shares at £6.25 per share. The total cost of $675.7m (£411.9m) wasrecorded as a reduction in retained earnings in the period. The second part ofthe return was via the B/C share scheme and this was completed in July 2011and resulted in a payment of £660.1m ($1,075.1m) being made to shareholders. Afurther payment of £4.7m ($7.7m) will be made in April 2012. These paymentswill also be recorded as a reduction in retained earnings. Expenses of $43.3mrelating to the return of cash, including a $28.8m exchange loss on theretranslation of sterling cash held in anticipation of the return toshareholders, have also been deducted from retained earnings.8. Earnings per share Unaudited Unaudited Audited Full Year Interim Interim December 2010 June 2011 June 2010 Earnings Earnings Earnings attrib- attrib- attrib- utable Number of Earnings utable Number of Earnings utable Number of Earnings to equity shares per share to shares per to shares per share share- (millions) (cents) equity (millions) share equity (millions) (cents) holders share- (cents) share- ($m) holders holders ($m) ($m) Basic 2,262.7 509.6 444.0 81.1 512.4 15.8 166.0 512.6 32.4Effect of dilutive - 17.3 (14.6) - 16.3 (0.5) - 17.0 (1.1)ordinary sharesDiluted 2,262.7 526.9 429.4 81.1 528.7 15.3 166.0 529.6 31.3Exceptional items, (2,154.0) - (408.8) - -
- 21.4 - 4.0net of taxAmortisation, 23.9 - 4.6 11.0 - 2.1 23.0 - 4.4net of taxAdjusted diluted 132.6 526.9 25.2 92.1 528.7 17.4 210.4 529.6 39.7Adjusted basic 132.6 509.6 26.0 92.1 512.4 18.0 210.4 512.6 41.0
Basic discontinued 2,226.4 509.6 436.9 34.4 512.4 6.7 90.4 512.6 17.6The calculation of basic earnings per share (`EPS') is based on the earningsattributable to equity shareholders divided by the weighted average number ofordinary shares in issue during the period excluding shares held by theGroup's employee share trusts. For the calculation of diluted EPS, theweighted average number of ordinary shares in issue is adjusted to assumeconversion of all potentially dilutive ordinary shares. The Group has twotypes of dilutive ordinary shares - share options granted to employees underEmployee Share Option Schemes and the Long Term Retention Plan; and sharesissuable under the Group's Long Term Incentive Plan. Adjusted EPS is disclosedto show the results excluding exceptional items and amortisation, net of tax.
9. Taxation
The taxation charge for the six months ended 30 June 2011 reflects an anticipated rate of 29.5% on continuing profit before taxation and exceptional items for the year ending 31 December 2011 (June 2010 : 29.9%).
A number of changes to the UK Corporation tax system were announced in theJune 2010 Budget Statement. The Finance Act 2010 includes legislation toreduce the main rate of corporation tax from 28% to 27% from 1 April 2011.Further reductions to the main rate are proposed to reduce the rate by 1% perannum to 23% by 1 April 2014. No changes had been substantively enacted at thebalance sheet date and therefore there is no impact on these financialstatements.
10. Retirement benefit liability
In June 2011, the Group made a one-off payment of $8.1m (£5.0m) to the Groupretirement benefit scheme, reducing the scheme liability. No interimrevaluation of the pension liability has been carried out at 30 June 2011 andaccordingly there is no actuarial gain/loss in the statement of recognisedincome and expense. The figures for gains and losses for the full yeartogether with the surplus/deficit at the year end will be presented in the2011 Annual Report and Accounts.
11. Related party transactions
The following transactions were carried out with the Group's joint ventures inthe six months to 30 June. These transactions comprise sales and purchase ofgoods and services in the ordinary course of business. Unaudited Unaudited Audited Interim Interim Full Year June 2011 June 2010 December 2010 $m $m $m
Sales of goods and services to joint ventures 27.0 47.7
102.2
Purchase of goods and services from joint ventures 8.0 21.0
49.3
Receivables from joint ventures 26.5 37.8
43.0
Payables to joint ventures 4.2 14.1
5.7
12. Cash generated from operations
Unaudited Unaudited Audited Interim Interim Full Year June 2011 June 2010 December 2010 $m $m $mReconciliation of operating profit to cashgenerated from operations: Operating profit from continuing operations 106.7 85.8 187.7before exceptional itemsOperating profit from discontinued 58.4 53.5
128.1
operations before exceptional items
Adjustments for:Depreciation 26.4 31.2
66.3
Loss on disposal of property plant and 0.8 0.2
3.4equipmentAmortisation 26.9 14.0 29.0Share based charges 2.2 7.8 16.7Decrease in provisions (5.7) (2.6) (6.2) Changes in working capital (excluding effectof acquisition and divestment ofsubsidiaries)Increase in inventories (36.0) (39.9) (53.9)Increase in receivables (131.2) (52.6) (33.8)Decrease in payables 1.9 2.4 68.3Exchange differences 2.1 1.4 (3.1)Cash generated from operations 52.5 101.2
402.5
13. Reconciliation of cash flow to movement in net (debt)/cash
At 1 Exchange At 30 June January movements 2011 2011 Cash flow $m $m $m $mCash and cash equivalents 180.1 1,030.2 (23.5) 1,186.8Short term borrowings (30.1) 1.4 (0.5) (29.2)Long term borrowings (165.1) 0.2 (7.6) (172.5)Net (debt)/cash (15.1) 1,031.8 (31.6) 985.114. Share based chargesShare based charges comprise $8.5m (2010: $7.8m) relating to options grantedunder the Group's executive share option schemes and share awards under theLong Term Incentive Plan. This amount is included in administrative expenses.In addition, and included within exceptional items, are $3.6m of charges thathave been accelerated following the divestment of the Well Support division.Also included within exceptional items were payments made to Well Supportemployees in relation to share based charges. In accordance with therequirements of IFRS2, the fair value of these payments, $9.9m, has beendeducted from reserves. The $2.2m credit to reserves comprises the $8.5m and$3.6m mentioned above less the $9.9m fair value adjustment.
15. Capital commitments
At 30 June 2011 the Group had entered into contracts for future capital expenditure amounting to $15.7m. The capital expenditure relates to property plant and equipment and has not been provided in the financial statements.
16. Post balance sheet events
The second part of the return of cash to shareholders, the B/C share scheme,was completed in July 2011 when £660.1m ($1,075.1m) was paid to shareholders.A number of shareholders elected to defer their return of cash until April2012 and accordingly, a further £4.7m ($7.7m) will be returned on that date.
16. Contingent liabilities
In February 2010, the Group, and several other parties, were notified of alegal claim from a customer in respect of work carried out in 2008. The Groupis in the process of lodging its formal defence. Management continues tobelieve that the Group is in a strong position to defend the claim, and do notbelieve that it is probable that any material liability will arise as aresult.
Statement of directors' responsibilities
for the six month period to 30 June 2011
The directors confirm that the interim report and accounts have been preparedin accordance with IAS 34 as adopted by the European Union and that theinterim report includes a fair review of the information required by DTR 4.2.7and DTR 4.2.8, namely:
¢- an indication of important events that have occurred during the first six months and their impact on the accounts and a description of the principal risks and uncertainties for the remaining six months of the year; and
¢- material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.
The directors of John Wood Group PLC are listed in the Group's 2010 Annual Report and Accounts with the exception of the following changes in the period :
J Renfroe resigned on 20 April 2011, R Keiller was appointed on 26 April 2011, J Ogren resigned on 11 May 2011 and J Wilson was appointed on 1 August 2011.
A G LanglandsChief ExecutiveA G SempleGroup Finance Director22 August 2011Independent review reportto John Wood Group PLC
for the six month period to 30 June 2011
Introduction
We have been engaged by the company to review the condensed set of financialstatements in the half year report for the six months ended 30 June 2011 whichcomprises the Group income statement, statement of comprehensive income,balance sheet, statement of changes in equity, cash flow statement and relatednotes. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information in the condensed set offinancial statements.
Directors' responsibilities
The interim report, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. This report, including the conclusion, has been prepared for and onlyfor the Company for the purpose of the Disclosure and Transparency Rules ofthe Financial Services Authority and for no other purpose. We do not, inproducing this report, accept or assume responsibility for any other purposeor to any other person to whom this report is shown or into whose hands it maycome save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, `Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us tobelieve that the condensed set of financial statements in the half-yearlyfinancial report for the six months ended 30 June 2011 is not prepared, in allmaterial respects, in accordance with International Accounting Standard 34 asadopted by the European Union and the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority.PricewaterhouseCoopers LLPChartered AccountantsAberdeen22 August 2011Notes:(a) The maintenance and integrity of the John Wood Group PLC web site is theresponsibility of the directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors acceptno responsibility for any changes that may have occurred to the interim reportsince it was initially presented on the web site.
(b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.
John Wood Group PLCShareholder informationPayment of dividendsThe Company declares its dividends in US dollars. As a result of theshareholders being mainly UK based, dividends will be paid in sterling, but ifyou would like to receive your dividend in dollars please contact theRegistrars at the address below. All shareholders will receive dividends insterling 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. 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 2 September 2011 as published in the Financial Times on 3 September2011.
Officers and advisers
Secretary and Registered Office Registrars
R Brown EquinitiJohn Wood Group PLC Aspect HouseJohn Wood House Spencer RoadGreenwell Road LancingABERDEEN West SussexAB12 3AX BN99 6DATel: 01224 851000 Tel: 0871 384 2649
Stockbrokers Auditors
JPMorgan Cazenove Limited PricewaterhouseCoopers LLP
Credit Suisse Chartered Accountants and Statutory Auditors
Financial calendar
6 months ended Year ending 30 June 2011 31 December 2011
Results announced 23 August 2011 Early March
2012Ex-dividend date 31 August 2011 April 2012Dividend record 2 September April 2012date 2011Dividend payment 24 September May 2012date 2011Annual General May 2012
Meeting
The Group's Investor Relations website can be accessed at www.woodgroup.com.
PINXRelated Shares:
Wood Group (J)