13th Sep 2005 07:04
Wood Group (John) PLC13 September 2005 John Wood Group PLC Interim results for the six months to 30 June 2005 Strong revenue and EBITA growth in all divisions Cash placing to raise approximately $90m John Wood Group PLC ("Wood Group", the "Group") is a market leader inengineering design, production support and industrial gas turbine services forcustomers in the oil & gas and power generation industries around the world.Operating in 36 countries, Wood Group's businesses employ over 14,000 people. Financial Highlights (Note 1) • Revenues of $1,327.0m (2004: $1,040.8m) up 27% • EBITA of $69.2m (2004: $53.7m) up 29% (Note 2) • Operating profit of $67.2m (2004: $26.9m, after impairment and restructuring charges of $24.9m) up 150% • Profit before tax of $56.2m (2004: $18.0m, after impairment and restructuring charges of $24.9m) up 212% • Adjusted diluted earnings per ordinary share of 7.8 cents (2004: 5.9 cents) up 32%. Basic earnings per share of 7.6 cents (2004: 1.9 cents) up 300% (Note 3) • Declared interim dividend of 1.3 cents (2004: 1.2 cents) up 8% (Note 4) Operating Highlights • Strong global oil & gas market - good demand for the Group's services • Cash placing expected to raise approximately $90m - to strengthen the balance sheet and increase flexibility to pursue our growth strategy • Engineering & Production Facilities: • Engineering - upstream active on fast-track upgrades and winning a healthy mix of work on new developments in deep and shallow water, and stronger activity in our downstream business. Developing presence in Europe, Africa, Middle East and Asia Pacific • Production Facilities - continuing high activity levels in North Sea, building presence in new regions around the world • Well Support - very good performance in all businesses. Strong US performance and further international development: • ESP - further growth in Russia and a successful start-up of Chad contract • Pressure Control - contract wins in Mexico and the Middle East, and further development of Chinese manufacturing capabilities • Logging Services - leading position in cased hole electric wireline in Argentina • Gas Turbine Services - US power market more stable, with our restructuring delivering anticipated benefits. Differentiation through re-engineering parts and entering into more long-term contracts Commenting on the results, Sir Ian Wood, Chairman and Chief Executive, WoodGroup, said: "The overall oil & gas markets are healthy, with good demand for Wood Group'sservices. We are confident 2005 will show strong growth in line with our Julytrading update and believe that our business development programme will delivercontinuing growth in 2006 and beyond." ENQUIRIES: Wood Group Alan Semple Finance Director 01224 851000Nick Gilman IR ManagerCarolyn Smith Communications Manager Brunswick Patrick Handley/ Nina Coad 020 7404 5959 Notes 1 All figures are prepared on the basis detailed in note 1 to the interimaccounts. 2 EBITA represents operating profit of $67.2m (2004: $26.9m), before deductionof impairment and restructuring charges of $nil (2004: $24.9m) and amortisationof $2.0m (2004: $1.9m). This financial term is provided as it is a key unit ofmeasurement used by the Group in the management of its business. 3 Shares held by the Group's employee share ownership trusts are excluded fromthe number of shares in calculating earnings per ordinary share. Adjusteddiluted earnings per ordinary share is calculated on earnings beforeamortisation, and impairment and restructuring charges, net of tax. Adjusteddiluted earnings per ordinary share is based on the diluted number of shares,taking account of employee share schemes where the effect of these is dilutive. 4 In accordance with International Financial Reporting Standards ("IFRS"), theinterim dividend declared is not reflected in these accounts. The dividend willbe reflected in the accounts when paid. Interim Statement - six months to 30 June 2005 The Group has made good progress in the first half, with strong revenue andEBITA growth in all divisions. In the six months to June 2005, revenues increased to $1,327.0m (2004:$1,040.8m) and EBITA increased to $69.2m (2004: $53.7m). During the period weinvested $61.8m (2004: $86.7m) and as at 30 June 2005 gearing (Note 5) was 70%,compared to 62% as at 30 June 2004 and interest cover (Note 6) was 6.3 times(2004: 6.0 times). Background to and reasons for the cash placing Wood Group has grown substantially over the last three and a half years,increasing revenues by over 70%, and investing $200m in acquisitions and $140min capital expenditure in excess of depreciation. The Board believes that the current strong conditions in the oil & gas marketwill continue and wishes to maintain the growth strategy of targeted geographicexpansion and broadening of the service provision to take advantage of theopportunities. This will involve further investment and resources to developour client base, including the majors, independents and the national oilcorporations, in key oil and gas regions in Europe, Africa, the Middle East andAsia Pacific. We also intend to broaden our service provision: • In Engineering & Production Facilities through extending our project management and EPCM (Engineering, Procurement and Construction Management) services, and increasing our involvement in midstream engineering and downstream refinery upgrades and debottlenecking, further developing our pre-operations, commissioning and start-up support services as well as pursuing long term performance based modifications, maintenance & operations contracts • In Well Support, expanding our services in key markets such as Russia, the Middle East and North and West Africa, and building up our manufacturing capability in low-cost areas such as China • In Gas Turbine Services, continuing to enhance our differentiation through the re-engineering of parts and broadening the range of turbines that we support. These developments are likely to include acquisitions of local businesses,capital expenditure on new facilities and investment in projects with ourcustomers. In addition, we will continue to assess larger acquisitions andinvestments in our oil & gas and power activities round the world. The Board is therefore proposing a cash placing of approximately 24 millionshares, representing 5% of the Group's issued share capital, expected to raiseapproximately $90m (the "placing"). The placing will strengthen the Group'sbalance sheet and increase the flexibility to pursue our growth strategy. Inthe short term, the proceeds of the placing will be used to reduce netborrowing, reducing gearing from 70% to approximately 46% on a pro forma basisas at 30 June 2005. (Note 7) Dividend Reflecting continuing confidence in our long-term strategy, we have declared anincrease in the interim dividend to 1.3 cents per share (2004: 1.2 cents pershare) which will be payable to shareholders on the register on 23 September2005 and will be paid on 13 October 2005. Engineering & Production Facilities Revenues increased 29.6% to $703.0m (2004: $542.3m), and EBITA rose 20.6% to$40.9m (2004: $33.9m). Although revenue growth was good, the EBITA margin ('margin') decreased to 5.8% (2004: 6.3%). This is principally as a result ofhigher zero margin pass-through revenues in the active North Sea market and ourextended international business development programme. Engineering is active for a broad spread of clients. In upstream, we areworking on a range of fast-track upgrade projects and have won a healthy mix ofcontracts for new developments in deep and shallow water. These include Valhallin Norway, East Area Gas in Nigeria, Gorgon & Jansz in Australia and Shenzi inthe Gulf of Mexico. In downstream, we are also busy with a number of ourrefinery clients on low sulphur gas and diesel modifications and implementingupgrades to their facilities to take advantage of the current market conditions.In addition, we are focusing resources in Mustang's new London offices and inPerth, Australia to develop our client base in Europe, Africa, the Middle Eastand Asia Pacific. In Production Facilities, our clients' focus on improving the structure andintegrity of their assets and enhancing production is leading to increasedactivity. In the North Sea we are working on a diverse range of long termsupport contracts and upgrade projects for a number of clients. ProductionFacilities in the Americas is making steady progress and our activities in WestAfrica, where we have recently won further work, and Brunei are progressingwell. We are also investing in developing new international markets, whererecent wins include the contract to operate and maintain Sevan Marine's SSP 300floating, production, storage and offloading (FPSO) vessel offshore Brazil andmulti-year, turbo-machinery operations & maintenance contracts in Mexico,Vietnam and Indonesia. In April, we acquired Offshore Design Limited ("ODL"), a provider of technicaland consulting services and pre-operations support. ODL has performed wellsince its acquisition and made progress in further expanding its businessinternationally. Well Support Revenues increased 26.7% to $302.1m (2004: $238.5m), EBITA increased 37.1% to$27.0m (2004: $19.7m) and margin increased to 8.9% (2004: 8.3%). The US andinternational markets for all three of our Well Support businesses - ElectricSubmersible Pumps (ESP), Pressure Control and Logging Services - are strong andwe are maintaining our significant US positions, while seeing further success inour international business development efforts. ESP is performing well in the US and, in the significant Russian market, theNizhnevartovsk pump facility is making good progress. In Chad our major newcontract started up successfully. We also continue to maintain good levels ofactivity in South America and the Middle East. In addition to its significant position in the US market, Pressure Control ismaking progress in growing the business internationally, with contract wins inthe UK, Russia, Mexico and the Middle East. The investment in manufacturing,assembly and test capabilities in China is contributing to further product costimprovements. Logging Services operations are strong in the US, notably in the second quarter,despite the early and active hurricane season and in Argentina, where we are nowthe leader in cased hole electric wireline logging. Gas Turbine Services Revenues increased 24.3% to $304.4m (2004: $244.9m), EBITA increased 51.5% to$15.0m (2004: $9.9m) and the margin increased to 4.9% (2004: 4.0%). Our oil &gas related activities, representing about 35% of Gas Turbine Services revenues,continue to make progress. The US power market is more stable and theanticipated benefits from our restructuring programme, have contributed to theimproved performance. Our Power Solutions business is very active and this iscontributing to the strong revenue growth. The focus on increasing the long term content in our activities is continuing.We have recently won a number of operations & maintenance contracts, including a10-year contract with Sacramento Municipality Utility District FinancingAuthority announced today. We have also won a long term maintenance contractwith a wholly-owned subsidiary of Alliant Energy Corp. to provide maintenanceservices to two Frame 7FA turbines. We are continuing to build on thedifferentiation we enjoy through the supply of re-engineered parts and haverecently won a six-year packaged maintenance services contract, including thesupply of re-engineered parts under the Group's APM (R) (Advanced PartsManufacture) programme, supporting British Nuclear Fuel's Fellside CHP plant. Outlook In Engineering & Production Facilities, we anticipate that Engineering willcontinue to be involved in a wide range of upstream, midstream and downstreamprojects and that Production Facilities will enjoy strong levels of activity,led by the North Sea. In Well Support, we expect all three businesses toperform well. Gas Turbine Services should see a similar level of performance inthe second half, with the continuing drive to differentiation leading to furtherimprovement in 2006. The overall oil & gas markets are very healthy, with good demand for the Group'sservices. We are confident 2005 will show strong growth in line with our Julytrading update and believe our business development programme will delivercontinuing growth in 2006 and beyond. Interim Financial Review The income statement for the six months to 30 June 2005 is summarised below: Unaudited Unaudited Interim Interim June 2005 June 2004 US$m US$m Increase Revenues 1,327.0 1,040.8 27%EBITA 69.2 53.7 29%Profit before tax 56.2 18.0 212%Profit for the period 36.4 10.0 264%Adjusted diluted EPS (cents) 7.8 5.9 32% Revenues increased by $286.2m, or 27%, for the six months to June 2005reflecting growth in all three divisions. EBITA increased by $15.5m or 29% forthe period, again increasing in all three divisions. Profit before tax hasincreased by $38.2m or 212%, with profits in the prior period having beenimpacted by an impairment and restructuring charge of $24.9m. Excluding thischarge, profit before tax increased by 31%. The tax charge for the period of$19.8m (2004: $8.0m) is based on an anticipated effective tax rate for the yearof 34% on profit before tax, impairment and restructuring charges, andamortisation. The actual effective tax rate for the year ended 31 December 2004was 35%. The cash flow statement for the six months to 30th June 2005 is summarisedbelow: Unaudited Unaudited Unaudited Interim Interim Full Year June 2005 June 2004 December 2004 US$m US$m US$m Cash generated from operations 92.7 62.1 145.2before movements in workingcapitalWorking capital movements (35.5) (49.0) (66.8)Capex and acquisitions (59.0) (74.8) (124.5)Transactions in own shares (1.0) (14.7) (22.3)Interest, tax, dividends and (26.4) (32.3) (77.3)otherIncrease in net debt (29.2) (108.7) (145.7)Opening net debt (354.3) (208.6) (208.6)Closing net debt (383.5) (317.3) (354.3) Cash generated from operations before movements in working capital increased by$30.6m or 49% for the six months to June 2005. Working capital outflows in theperiod of $35.5m compare to $49.0m in the first half of 2004. Capitalexpenditure amounted to $32.5m (2004: $39.9m) and proceeds from the disposal oftangible fixed assets amounted to $2.8m (2004: $11.9m). The cost of acquisitionof subsidiaries, net of cash acquired, totalled $11.1m (2004: $17.3m). The Groupalso acquired minority interests and made deferred consideration paymentstotalling $15.2m (2004: $28.9m). Net debt increased by US$29.2m from $354.3m atDecember 2004 to $383.5m at June 2005. The Group's gearing ratio increased from67% at December 2004 to 70% at June 2005. Net debt of $383.5m is primarily US dollar denominated in line with the currencyof the bulk of the Group's net assets. Long-term borrowings amounted to $483.0m(December 2004: $355.0m), of which $125.0m (December 2004: $125.0m), or 26%(December 2004: 35%), was at a weighted average fixed rate of interest of 5.0%(December 2004: 5.0%). Net finance costs were $11.0m, which is an increase of$2.1m compared to the same period in 2004. This increase was principally due tothe higher level of borrowings and higher US dollar interest rates. Interestcover was 6.3 times (June 2004: 6.0 times). Adjusted diluted earnings per ordinary share for the period increased by 32% to7.8 cents (June 2004: 5.9 cents) and basic earnings per ordinary share increasedto 7.6 cents (June 2004: 1.9 cents). Notes 1 All figures are prepared on the basis detailed in note 1 to the interimaccounts. 2 EBITA represents operating profit of $67.2m (2004: $26.9m), before deductionof impairment and restructuring charges of $nil (2004: $24.9m) and amortisationof $2.0m (2004: $1.9m). This financial term is provided as it is a key unit ofmeasurement used by the Group in the management of its business. 3 Shares held by Wood Group's employee share ownership trusts are excluded fromthe number of shares in calculating earnings per ordinary share. Adjusteddiluted earnings per ordinary share is calculated on earnings beforeamortisation, and impairment and restructuring charges, net of tax. Adjusteddiluted earnings per ordinary share is based on the diluted number of shares,taking account of employee share schemes where the effect of these is dilutive. 4 In accordance with International Financial Reporting Standards ("IFRS"), theinterim dividend declared is not reflected in these accounts. The dividend willbe reflected in the accounts when paid. 5 Gearing represents net debt over shareholders' funds. 6 Interest cover is EBITA divided by net finance costs of $11.0m (2004: $8.9m). 7 Pro forma gearing is based on the gearing as at June 2005 adjusted to takeinto account the impact of the proceeds from the cash placing of approximately$90m. John Wood Group PLCGroup income statementfor the six month period to 30 June 2005 Unaudited Unaudited Unaudited Interim Interim Full Year June 2005 June 2004 December 2004 Note US$M US$M US$M Revenues 3 1,327.0 1,040.8 2,288.1Cost of sales (1,062.3) (823.0) (1,818.5)Gross profit 264.7 217.8 469.6 Administrative expenses before impairment and (197.5) (166.0) (357.8)restructuring charges Impairment and restructuring charges 6 - (24.9) (26.2)Administrative expenses (197.5) (190.9) (384.0)Operating profit 3 67.2 26.9 85.6 Finance income 1.0 0.8 1.8Finance expense (12.0) (9.7) (21.2)Profit before tax 56.2 18.0 66.2Taxation 7 (19.8) (8.0) (26.8) Profit for the period 36.4 10.0 39.4 Attributable to:Equity shareholders 35.3 9.0 37.3 Minority interest 1.1 1.0 2.1 36.4 10.0 39.4 Earnings per share for profit attributable toequity shareholders (expressed in cents pershare)Basic 5 7.6 1.9 8.0Diluted 5 7.4 1.9 7.8 All items dealt with in arriving at the profits stated above relate tocontinuing operations. John Wood Group PLCGroup balance sheetas at 30 June 2005 Unaudited Unaudited Unaudited Full Year Interim Interim December June 2005 June 2004 2004 Note US$M US$M US$MAssetsNon-current assetsGoodwill 314.7 261.5 297.1Intangible assets 13.8 9.1 11.8Property plant and equipment 219.5 206.9 216.2Long term receivables 17.6 29.2 22.6Deferred tax assets 20.2 17.8 20.9 585.8 524.5 568.6Current assetsInventories 355.2 278.4 329.9Trade and other receivables 617.4 502.2 579.3Income tax receivable 4.2 8.2 6.8Cash and cash equivalents 135.3 74.8 71.4 1,112.1 863.6 987.4LiabilitiesCurrent liabilitiesFinancial liabilities- Borrowings 35.8 56.6 70.7- Derivative financial instruments 0.2 - -Trade and other payables 520.2 394.3 496.7Income tax liabilities 16.5 8.7 11.8 572.7 459.6 579.2Net current assets 539.4 404.0 408.2 Non-current liabilitiesFinancial liabilities- Borrowings 483.0 335.5 355.0- Derivative financial instruments 1.2 - -Deferred tax liabilities 8.5 11.3 8.6Retirement benefit liability 10 31.7 27.5 33.9Other non-current liabilities 23.0 13.1 21.7Provisions 15.2 15.6 15.7 562.6 403.0 434.9Net assets 562.6 525.5 541.9 Shareholders' equityOrdinary shares 23.9 23.5 23.5Share premium 202.4 200.9 200.9Other reserves 78.2 85.4 89.8Retained earnings 244.9 204.9 215.7Total shareholders' equity 549.4 514.7 529.9 Minority interest in equity 13.2 10.8 12.0Total equity 562.6 525.5 541.9 John Wood Group PLCStatement of recognised income and expensefor the six month period to 30 June 2005 Unaudited Unaudited Unaudited Interim Interim Full Year June June December 2005 2004 2004 US$M US$M US$M Profit for the period/year 36.4 10.0 39.4 Actuarial loss in pension scheme - - (4.8)Movement in deferred tax relating to pension liability - - 1.4Cash flow hedges - fair value gains 0.4 - - - reported in profit for the period 1.0 - - Exchange adjustments (10.6) (2.7) 1.7 Total recognised income 27.2 7.3 37.7 Attributable to:Equity shareholders 26.1 6.3 35.6Minority interest 1.1 1.0 2.1 27.2 7.3 37.7 John Wood Group PLCConsolidated statement of changes in shareholders' equity Period to June 2005 Period to June 2004 Year ended 31 December 2004 Note Share-holders' Minority Total Share-holders' Minority Total Share-holders' Minority Total equity interest equity equity interest equity equity interest equity US$M US$M US$M US$M US$M US$M US$M US$M US$M Opening 529.9 12.0 541.9 531.9 18.7 550.6 531.9 18.7 550.6BalanceAdoption of 8 (3.3) - (3.3) - - - - - -IAS 32 andIAS 39 At 1 January 526.6 12.0 538.6 531.9 18.7 550.6 531.9 18.7 550.6 Profit for 35.3 1.1 36.4 9.0 1.0 10.0 37.3 2.1 39.4the yearDividends 4 (11.1) - (11.1) (10.3) - (10.3) (15.9) - (15.9)Exchange (10.6) 0.1 (10.5) (2.7) (0.1) (2.8) 1.7 - 1.7adjustmentsValue of 3.9 - 3.9 1.3 - 1.3 2.9 - 2.9servicesprovidedunder sharebasedschemesCash Flow 1.4 - 1.4 - - - - - -HedgesActuarial - - - - - - (3.4) - (3.4)loss inpensionscheme, netof deferredtaxIssue of new 1.9 - 1.9 0.2 - 0.2 0.2 - 0.2sharesShares (2.0) - (2.0) (14.9) - (14.9) (22.5) - (22.5)acquired byESOP trustsShares 1.0 1.0 0.2 - 0.2 0.2 - 0.2disposed ofby ESOPtrustsExchange 3.0 - 3.0 - - - (2.5) - (2.5)adjustmentsin respectof sharesheld by ESOPtrustsAcquisition - - - - (9.3) (9.3) - (9.3) (9.3)of minorityinterestsMinority - - - - 0.5 0.5 - 0.5 0.5shareholdingrecognisedonconversionfrom jointventure tosubsidiaryClosing 549.4 13.2 562.6 514.7 10.8 525.5 529.9 12.0 541.9Balance John Wood Group PLCGroup cash flow statementfor the six month period to 30 June 2005 Unaudited Unaudited Unaudited Interim Interim Full Year June 2005 June 2004 Dec 2004 Note US$m US$m US$mCash generated from operations 11 57.2 13.1 78.4Tax paid (11.4) (16.1) (34.7)Net cash inflow/(outflow) from operating activities 45.8 (3.0) 43.7 Cash flows from investing activitiesAcquisition of subsidiaries (net of cash acquired) (11.1) (17.3) (32.9)Acquisition of minority interests (6.2) (24.2) (24.2)Deferred consideration payments (9.0) (4.7) (4.7)Purchase of property, plant and equipment (32.5) (39.9) (68.4)Proceeds from sale of property, plant and equipment 2.8 11.9 12.7Purchase of intangible assets (3.0) (0.6) (7.0)Net cash used in investing activities (59.0) (74.8) (124.5) Cash flows from financing activitiesProceeds from issue of ordinary share capital 1.9 0.2 0.2Proceeds from new bank loans 102.8 96.6 118.0Purchase of shares in employee share trusts (2.0) (14.9) (22.5)Sale of shares in employee share trusts 1.0 0.2 0.2Interest received 1.0 0.8 1.8Interest paid (11.8) (9.7) (20.8)Dividends paid to shareholders (11.1) (10.3) (15.9)Net cash from financing activities 81.8 62.9 61.0Effect of exchange rate changes on cash and cash equivalents (4.7) (1.1) 0.4Net increase/(decrease) in cash and cash equivalents 63.9 (16.0) (19.4)Opening cash and cash equivalents 71.4 90.8 90.8Closing cash and cash equivalents 135.3 74.8 71.4 John Wood Group PLCNotes to the interim accountsfor the six month period to 30 June 2005 1. Preparation of interim accounts Introduction Following the adoption of IAS Regulation EC 1606/2002 by the EuropeanParliament, John Wood Group PLC is required to prepare consolidated financialstatements in accordance with International Financial Reporting Standards ("IFRS") for periods beginning on or after 1 January 2005. The Group will apply IFRS for the year ended 31 December 2005, and is requiredto prepare 2004 comparative figures under IFRS. The Group's date of transitionto IFRS is 1 January 2004 and its first reporting period is for the six monthsended 30 June 2005. This report contains the consolidated financial results forthe 6 months ended 30 June 2005, comparatives for the 6 months ended 30 June2004 and for the year ended 31 December 2004 under the basis of preparation setout below. To assist with the understanding of the impact of transition from United KingdomGenerally Accepted Accounting Principles ("UK GAAP") to IFRS, the Group haspresented the reconciliations of UK GAAP to IFRS information as required by IFRS1 for 1 January 2004, 31 December 2004 and 30 June 2004 in Appendix 1. Basis of preparation The financial information has been prepared in accordance with UK Listing Rules,under the historical cost and fair value conventions and on the basis of theaccounting policies set out below, which the Group expects to apply to itsfinancial statements for 31 December 2005 and which are to be prepared inaccordance with IFRS. Further standards and interpretations may be issued that will be applicable forfinancial years beginning on or after 1 January 2005 or that are applicable tolater accounting periods but may be adopted early. The Group's first IFRSfinancial statements may therefore be prepared in accordance with some differentaccounting policies from the financial information presented here. The comparative figures for the financial year ended 31 December 2004 do notconstitute the statutory financial statements for that year. Those financialstatements which were prepared under UK GAAP in accordance with the CompaniesAct 1985, have been delivered to the Registrar of Companies and include theauditors' report which was unqualified and did not contain statements undersection 237(2) or (3) of the Companies Act 1985. 2. Significant accounting policies The Group's key accounting policies are detailed below. These policies havebeen prepared on the basis of the recognition and measurement requirements ofIFRS standards that have been published at 31 December 2004 and that apply toaccounting periods beginning on or after 1 January 2005. The standards used areeither endorsed by the European Union or are expected to be endorsed at 31December 2005, the Group's first annual reporting date at which it is requiredto adopt IFRS. In particular, the directors have assumed that the amendment to IAS 19 'EmployeeBenefits' will be fully endorsed by the European Union and therefore availablefor use in the annual IFRS Financial Statements for the year ended 31 December2005. In respect of financial instruments, the Group's policy has been to adopt IAS 32'Financial Instruments: Disclosure and Presentation' and 39 'FinancialInstruments: Recognition and Measurement' from 1 January 2005. Comparatives for2004 have not been restated to reflect the requirements of IAS 32 and IAS 39and, as permitted by IFRS 1, these are accounted for under UK GAAP in accordancewith the accounting policies set out in the annual financial statements for theyear ended 31 December 2004. Transitional arrangements On transition to IFRS, an entity is generally required to apply IFRSretrospectively, except where an exemption is available under IFRS 1 'First-timeAdoption of International Financial Reporting Standards'. The following is asummary of the key elections from IFRS 1 that were made by the Group: • The Group has elected to adopt the IFRS 1 exemption in relation to business combinations and will only apply IFRS 3 'Business Combinations' prospectively from 1 January 2004. As a result, the balance of goodwill under UK GAAP as at 31 December 2003 remains as the carrying value of goodwill at 1 January 2004. • The Group has elected to adopt the IFRS 1 option to reset foreign currency cumulative translation reserves to zero on transition to IFRS. • The Group has elected to apply IFRS 2 to all share option grants made after 7 November 2002, but not vested at 1 January 2005. Basis of consolidation The Group financial statements are the result of the consolidation of thefinancial statements of the Group's subsidiary undertakings from the date ofacquisition or up until the date of disposal as appropriate. Subsidiaries areentities over which the Group has the power to govern the financial andoperating policies generally accompanying a shareholding of more than one halfof the voting rights. The Group's interests in joint ventures are accounted forusing proportional consolidation. Under this method the group includes itsshare of each joint venture's income, expenses, assets, liabilities and cashflows on a line by line basis in the consolidated financial statements. AllGroup companies prepare accounts to 31 December. Reporting currency The Group's earnings stream is primarily US dollars and the principal functionalcurrency is the US dollar, being the most representative currency of the Group.The Group financial information is therefore prepared in US dollars. Foreign currencies Income statements of entities whose functional currency is not the US dollar aretranslated into US dollars at average rates of exchange for the period andassets and liabilities are translated into US dollars at the rates of exchangeruling at the balance sheet date. Exchange differences arising on translationof net assets in such entities held at the beginning of the year, together withthose differences resulting from the restatement of profits and losses fromaverage to year end rates, are taken to equity. Other exchange differences aretaken directly to the income statement. In each individual entity, transactions in overseas currencies are translatedinto the relevant functional currency at the exchange rates ruling at the dateof the transaction. Monetary assets and liabilities denominated in foreigncurrencies are retranslated at the exchange rates ruling at the balance sheetdate. Any exchange differences are taken to the income statement. Goodwill and fair value adjustments arising on the acquisition of a foreignentity are treated as assets and liabilities of the foreign entity andtranslated at the closing rate. John Wood Group PLCNotes to the interim accountsfor the six month period to 30 June 2005 The directors consider it appropriate to record sterling denominated equityshare capital in the accounts of John Wood Group PLC at the exchange rate rulingon the date it was raised. Revenue recognition Revenue is measured at the fair value of the consideration received orreceivable. Revenue is recognised only when it is probable that the economicbenefits associated with a transaction will flow to the Group and the amount ofrevenue can be measured reliably. Revenue from services is recognised as theservices are rendered, including where based on contractual rates per man hourin respect of multi-year service contracts. Incentive performance revenues arerecognised upon completion of agreed objectives. Revenue from product sales isrecognised when the significant risks and rewards of ownership have beentransferred to the buyer, which is normally upon delivery of products andcustomer acceptance, if any. Where revenue relates to a multi-element contract,then each element of the contract is accounted for separately. Revenues arestated net of sales taxes and discounts. Revenue on lump-sum contracts for services, or construction contracts isrecognised according to the stage of completion reached in the contract byreference to the value of work done. An estimate of the profit attributable towork completed is recognised once the outcome of the contract can be estimatedreliably. Expected losses are recognised in full as soon as losses areprobable. The net amount of costs incurred to date plus recognised profits lessthe sum of recognised losses and progress billings is disclosed as tradereceivables/trade payables. Goodwill Goodwill arising on consolidation represents the excess of the cost of anacquisition over the fair value of the Group's share of the net assets of theacquired subsidiary or joint venture at the date of acquisition. Goodwill istested annually for impairment and carried at cost less accumulated impairmentlosses. Goodwill is allocated to the appropriate cash generating unit for thepurpose of impairment testing. Intangible assets Intangible assets are recognised if it is probable that there will be futureeconomic benefits attributable to the asset, the cost of the asset can bemeasured reliably, the asset is separately identifiable and there is controlover the use of the asset. The assets are amortised on a straight line basisover their estimated useful lives. Property, Plant and Equipment Property, Plant and Equipment (P,P&E) is stated at cost less accumulateddepreciation. No depreciation is charged with respect to freehold land andassets in the course of construction. Transfers from P,P&E to current assets areundertaken at the lower of cost and net realisable value. Depreciation is calculated on the straight line method over the estimated usefullife of the asset, as follows: Freehold buildings 25-50 yearsLong leasehold buildings 25-50 yearsShort leasehold buildings period of leasePlant 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 of technologicaldevelopments. Impairment The Group carries out annual impairment reviews in respect of goodwill. TheGroup performs impairment reviews in respect of P,P&E and intangible assetswhenever events or changes in circumstance indicate that the carrying amount maynot be recoverable. An impairment loss is recognised when the recoverableamount of an asset, which is the higher of the asset's net realisable value andits value in use, is less than its carrying amount. Inventories Inventories, which include raw materials, work in progress and finished goods,are stated at the lower of cost and net realisable value. Product basedcompanies determine cost by weighted average methods using standard costing togather raw material, labour and overhead costs. These costs are adjusted, whereappropriate, to correlate closely the standard costs to the actual costsincurred based on variance analysis. Service based companies' inventoriesconsist of spare parts and other consumables. Serialised parts are costed usingthe specific identification method and other materials are generally costedusing the first in, first out method. Net realisable value is the estimated selling price in the ordinary course ofbusiness, less the costs of completion and selling expenses. Allowance is madefor obsolete and slow-moving items, based upon annual usage. Deferred income taxes Deferred income tax is provided, using the full liability method, on temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the consolidated financial statements. The principaltemporary differences arise from depreciation on property, plant and equipment,and tax losses carried forward; and, in relation to acquisitions, on thedifference between the fair values of the net assets acquired and their taxbase. Tax rates enacted, or substantially enacted, by the balance sheet dateare used to determine deferred income tax. Deferred tax assets are recognised to the extent that it is probably that futuretaxable profits will be available against which the temporary differences can beutilised. Accounting for derivative financial instruments and hedging activities Pre 1 January 2005 The Group uses derivative financial instruments to hedge its exposures tofluctuations in interest and foreign exchange rates. Instruments accounted foras a hedge are designated as a hedge at the inception of contracts. Receiptsand payments on interest rate instruments are recognised as adjustments tointerest expense over the life of the instrument. Gains and losses on foreigncurrency hedges are recognised on maturity of the underlying transaction. Post 1 January 2005 Derivatives are initially recognised at fair value on the date the contract isentered into and are subsequently remeasured at their fair value. The method ofrecognising 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 (fair valuehedge); (2) hedges of highly probable forecast transactions (cash flow hedges);or (3) hedges of net investments in foreign operations (net investment hedge). John Wood Group PLCNotes to the interim accountsfor the six month period to 30 June 2005 Where hedging is to be undertaken, the Group documents at the inception of thetransaction the relationship between hedging instruments and hedged items, aswell as its risk management objective and strategy for undertaking various hedgetransactions. The Group also documents its assessment, both at hedge inceptionand on an ongoing basis, of whether the derivatives that are used in hedgingtransactions are highly effective in offsetting changes in fair values or cashflows of hedged items. (a) Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fairvalue hedges are recorded in the income statement, together with any changes inthe fair value of the hedged asset or liability that are attributable to thehedged risk. (b) Cash flow hedge The effective portion of changes in the fair value of derivatives that aredesignated and qualify as cash flow hedges are recognised in equity. The gainor loss relating to the ineffective portion is recognised immediately in theincome statement. Amounts accumulated in equity are recycled through the income statement inperiods when the hedged item affects profit or loss. However, when the forecasttransaction that is hedged results in the recognition of a non-financial assetor liability, the cost of the asset or liability is adjusted by the gains orlosses previously held in equity. 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 forecasttransaction is no longer expected to occur, the cumulative gain or loss that wasreported in equity is immediately transferred to the income statement. (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 equity; the gain or lossrelating to the ineffective portion is recognised immediately in the incomestatement. Gains and losses accumulated in equity are included in the income statement whenthe foreign operation is disposed of. (d) Derivatives that do not qualify for hedge accounting Certain derivatives, whilst providing effective economic hedges under theGroup's policy are not designated as hedges. Changes in the fair value of anyderivative instruments that do not qualify for hedge accounting are recognisedimmediately in the income statement. Fair Value Estimation The fair value of financial instruments traded in active markets is based onquoted market prices at the balance sheet date. The fair value of interest rateswaps is calculated as the present value of the estimated future cash flows.The fair value of forward foreign exchange contracts is determined using forwardexchange market rates at the balance sheet date. The carrying value of tradereceivables and payables approximate to their fair values. The fair value offinancial liabilities is estimated by discounting the future contractual cashflows at the current market interest rate that is available to the Group forsimilar financial instruments. Operating leases As lessee Payments made under operating leases are charged to the income statement on astraight line basis over the period of the lease. As lessor Operating lease rental income arising from leased assets is recognised in theincome statement on a straight line basis over the period of the lease. Finance leases As lessor Finance lease rental income arising from leased assets is recognised in theincome statement so as to produce a constant rate of return on the net cashinvestment. Amounts receivable under finance leases represent the outstandingamounts due under these agreements less amounts allocated to future periods. Retirement benefit liability The Group operates a defined benefit scheme and a number of defined contributionschemes and these are accounted for under IAS 19 'Employee Benefits'. Theliability recognised in respect of the defined benefit scheme is the fair valueof the defined benefit obligations less the fair value of the scheme assets.The assets of these schemes are held in separate trustee administered funds.The defined benefit scheme's assets are measured using market values. Pensionscheme liabilities are measured annually by an independent actuary using theprojected unit method and discounted at the current rate of return on a highquality corporate bond of equivalent term and currency to the liability. Theincrease in the present value of the liabilities of the Group's defined benefitpension scheme expected to arise from employee service in the period is chargedto operating profit. The expected return on the scheme assets and the increaseduring the period in the present value of the scheme's liabilities arising fromthe passage of time are included in finance income/expense. Actuarial gains andlosses are recognised in the consolidated statement of recognised income andexpense in the period in which they occur. The pension scheme's surpluses, to the extent that they are consideredrecoverable, or deficits are recognised in full and presented on the face of thebalance sheet. The Group's contributions to defined contribution schemes are charged to theincome statement in the period to which the contributions relate. Use of estimates and assumptions The preparation of these financial statements requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities at the date of the financial statements and the reported amounts ofrevenue during the reporting period. Actual results could differ from thoseestimates. Warranties Provision is made for the estimated liability on all products and services stillunder warranty, including claims already received, based on past experience. John Wood Group PLCNotes to the interim accountsfor the six month period to 30 June 2005 Share based payments relating to Employee Share Schemes The Group has a number of employee share schemes:- (i) Share options granted under Employee Share Option Schemes('ESOS') are granted at market value. A charge is booked to the incomestatement as an employee benefit expense for the fair value of share optionsaccrued over the vesting period. The corresponding credit is taken to retainedearnings. The fair value is calculated using an option pricing model. (ii) Share options granted under the Long Term Retention Plan('LTRP') are granted at par value. The charge to the income statement for LTRPshares is also calculated using an option pricing model and as with ESOS sharesthe fair value of the share options is accrued over the vesting period. Thecorresponding credit is also taken to retained earnings. (iii) The Group also has a Long Term Incentive Scheme ('LTIS')for directors and senior managers. Under the LTIS, participants are awardedshares dependent on the achievement of certain performance targets. The chargeto the income statement for shares expected to be awarded under the LTIS isbased on the fair value of those shares at the grant date, spread over thevesting period. The corresponding credit is taken to retained earnings. Forthose shares that have a market related performance criteria, the fair value iscalculated using a Monte Carlo simulation model. Proceeds received on the exercise of share options are credited to share capitaland share premium. The Group is deemed to have control of the assets, liabilities, income and costsof its employee share ownership trusts ("ESOP trusts"). They have therefore beenincluded in the financial statements of the Group. The cost of shares held bythe ESOP trusts is deducted from shareholders' equity. Segmental reporting The Group's primary reporting segments are its three operating divisions, namelyEngineering & Production Facilities, Well Support and Gas Turbine Services. Engineering & Production Facilities provides a broad range of life-of-fieldengineering, modifications, maintenance and operations services to oil and gascustomers worldwide. Well Support supplies solutions, products and services toincrease production rates and recovery from oil and gas reservoirs. It is amongthe market leaders worldwide in artificial lift using electric submersiblepumps, in the provision of surface wellheads and valves and, in the Gulf ofMexico and in South America, in the provision of electric wireline and slicklineservices. Gas Turbine Services is a world leading independent provider ofmaintenance, repair and overhaul services for industrial gas turbines andrelated high speed rotating equipment used for compression, transmission andpower generation in the oil and gas and power generation industries. John Wood Group PLCNotes to the interim accountsfor the six month period to 30 June 2005 3. Segmental reporting Business segments Revenues EBITDA (1) EBITA (1) Operating profit Unaudi- Unaudi- Unaudi- Unaudi- Unaudi- Unaudi- Unaudi- Unaudi- Unaudi- Unaudi- Unaudi- Unaudi- ted ted ted ted ted ted ted ted ted ted ted ted Interim Interim Full Interim Interim Full Interim Interim Full Interim Interim Full 30 June 30 June Year 30 June 30 June Year 30 June 30 June Year 30 June 30 June Year 2005 2004 2004 2005 2004 2004 2005 2004 2004 2005 2004 2004 US$M US$M US$M US$M US$M US$M US$M US$M US$M US$M US$M US$M Engineering & 703.0 542.3 1,199.6 45.6 38.4 83.1 40.9 33.9 73.9 39.9 32.5 69.7ProductionFacilitiesWell Support 302.1 238.5 513.9 35.1 26.6 58.4 27.0 19.7 41.2 26.9 16.7 38.3Gas Turbine 304.4 244.9 537.9 23.1 17.3 38.4 15.0 9.9 23.5 14.4 (12.4) (0.6)ServicesUnallocated - - - (13.1) (8.3) (20.1) (13.3) (8.7) (19.8) (13.5) (8.8) (20.1)Total 1,309.5 1,025.7 2,251.4 90.7 74.0 159.8 69.6 54.8 118.8 67.7 28.0 87.3excludingdiscontinuingoperations Gas Turbine 17.5 15.1 36.7 - (0.7) (0.7) (0.4) (1.1) (1.4) (0.5) (1.1) (1.7)Services -discontinuingoperations (2) Total 1,327.0 1,040.8 2,288.1 90.7 73.3 159.1 69.2 53.7 117.4 67.2 26.9 85.6 Net finance (11.0) (8.9) (19.4)expenseProfit before 56.2 18.0 66.2tax Notes 1. EBITDA represents operating profit before deduction of impairment andrestructuring charges, depreciation and amortisation. EBITA represents EBITDAless depreciation. EBITA and EBITDA are provided as they are units ofmeasurement used by the Group in the management of its business. 2. The discontinuing operations relate to an Aero engine overhaulcompany which the Group has decided to divest. 3. Revenues arising from sales between segments are not material. 4. Dividends Unaudited Unaudited Unaudited Interim Interim Full Year June 2005 June 2004 Dec 2004 US$m US$m US$mDividends on equity sharesInterim paid (1.2 cents per share) - - 5.5 Final paid (2.4 cents per share) 11.1 10.3 10.4Total dividends 11.1 10.3 15.9 After the balance sheet date, the directors declared an interim dividend of 1.3cents per share which will be paid on 13 October 2005. John Wood Group PLCNotes to the interim accountsfor the six month period to 30 June 2005 5. Earnings per share Unaudited interim Unaudited interim Unaudited full year June 05 June 04 Dec 04 Earnings Earnings Earnings attributable Earnings attributable Earnings attributable Earnings to equity Number of per to equity Number of per to equity Number of per shareholders shares share shareholders shares share shareholders shares share (US $m) (millions) (cents) (US $m) (millions) (cents) (US $m) (millions) (cents) Basic 35.3 463.8 7.6 9.0 469.2 1.9 37.3 466.2 8.0 Effect ofdilutiveordinary shares Options and 14.5 11.0 10.4share basedpayments Diluted 35.3 478.3 7.4 9.0 480.2 1.9 37.3 476.6 7.8 Amortisation 2.0 1.9 5.6 Impairment and - 24.9 26.2restructuringcharges Tax on - (7.5) (7.7)impairment andrestructuringcharges Adjusted diluted 37.3 478.3 7.8 28.3 480.2 5.9 61.4 476.6 12.9 Adjusted basic 37.3 463.8 8.0 28.3 469.2 6.0 61.4 466.2 13.2 The calculation of basic earnings per share for the six months ended 30 June2005 is based on the earnings attributable to equity shareholders divided by theweighted average number of ordinary shares in issue during the period excludingshares held by the Group's employee share ownership trusts. Adjusted EPS isdisclosed to show the results excluding the impact of amortisation andimpairment and restructuring charges, net of tax. For the calculation ofdiluted EPS, the weighted average number of ordinary shares in issue is adjustedto assume conversion of all potentially dilutive ordinary shares. The group hastwo classes of dilutive ordinary shares - share options granted to employeesunder Employee Share Option Schemes and the Long Term Retention Plan; and sharesissuable under the Group's Long Term Incentive Scheme. In calculating thediluted number of shares at 30 June 2005 it has been assumed that theperformance criteria for the vesting of the awards under the LTIS have been met,and the shares are therefore included in the calculation. 6. Impairment and restructuring charges An impairment and restructuring charge of US$nil (June 2004: US $24.9m, Dec 2004: US $26.2m) was booked in the period. US$nil (June 2004: US $21.9m, Dec 2004:US $23.4m) of this charge was booked in the Gas Turbine Services division inrespect of rationalisation of businesses and facilities, severance costs andfixed asset impairment. US$nil (June 2004: US$3.0m, Dec 2004: US$2.8m) wasbooked in the Well Support division in respect of severance costs and fixedasset impairment. 7. Taxation The taxation charge for the six months ended 30 June 2005 reflects ananticipated effective taxation rate of 34% on profit before taxation,amortisation and impairment and restructuring charges for the year ending 31December 2005 (June 2004 : 35%). 8. IAS 32 and 39 The adoption of IAS 32 and 39 at 1 January 2005 has resulted in the recognitionof financial assets of US$0.1m and financial liabilities of US$3.4m at thatdate. A corresponding reduction in equity was also recorded. The adoption ofIAS 32 and 39 does not impact prior periods. 9. Acquisitions In April 2005, the Group acquired 100% of the share capital of Offshore DesignLtd, a company based in Aberdeen, Scotland that provides technical support andconsulting services to the oil and gas industry. 10. Retirement benefit liability The pension liability at 30 June 2005 is as calculated at 31 December 2004 asadjusted for current service cost, interest cost and expected return on assets.No interim revaluation has been carried out and accordingly there is noactuarial gain/loss in the statement of recognised income and expense. Thefigures for gains and losses for the full year together with the surplus/deficitat the year end will be presented in the 2005 Annual Report. John Wood Group PLCNotes to the interim accountsfor the six month period to 30 June 2005 11. Cash flows from operating activities Unaudited Unaudited Unaudited Interim Interim Full Year June 2005 June 2004 Dec 2004 US$m US$m US$mCash flows from operating activities Operating profit 67.2 26.9 85.6 Adjustments for:Depreciation 21.5 19.6 41.7Loss on sale of property plant and equipment 0.3 0.3 0.9Amortisation of intangibles 2.0 1.9 5.6Adjustment in respect of employee share awards 3.9 1.3 2.9Impairment and restructuring charges - non-cash impact - 14.1 12.5 Changes in working capital (excluding effect of acquisition ofsubsidiaries)Increase in inventories (29.1) (34.0) (74.5)Increase in receivables (46.2) (40.7) (90.4)Increase in payables 40.0 27.3 99.6Decrease in provisions (0.2) (1.6) (1.5)Exchange adjustments (2.2) (2.0) (4.0) Cash generated from operations 57.2 13.1 78.4 John Wood Group PLCNotes to the interim accountsfor the six month period to 30 June 2005 Appendix I - Reconciliation of UK GAAP to IFRS (i) Reconciliation of income statement - six months ended 30 June 2004 Proportional As Consolidation As reported of Joint reported under Ventures IFRS under UK GAAP Note (a) Adjustments IFRS Note US$M US$M US$M US$M Revenues 1,040.8 - - 1,040.8Share of joint venture revenues (121.3) 121.3 - - Group revenues 919.5 121.3 - 1,040.8 Cost of Sales (732.0) (91.0) - (823.0)Gross Profit 187.5 30.3 - 217.8 Administrative expenses (b) (155.9) (16.4) 6.3 (166.0) (c) (d)Impairment and restructuring charges (24.9) - - (24.9)Share of joint venture operating profit 13.9 (13.9) - -Operating profit 20.6 - 6.3 26.9Finance income 0.8 - - 0.80.8Finance expense (9.7) - - (9.7) Profit before tax 11.7 - 6.3 18.0 Taxation (e) (7.1) - (0.9) (8.0) Profit for the period 4.6 - 5.4 10.0 Attributable to:Equity shareholders 3.6 - 5.4 9.0Minority interest 1.0 - - 1.0 4.6 - 5.4 10.0 (ii) Reconciliation of income statement - year ended 31 December 2004 Proportional As Consolidation As reported of Joint reported under Ventures IFRS under UK GAAP Note (a) Adjustments IFRS Note US$M US$M US$M US$M Revenues 2,288.1 - - 2,288.1Share of joint venture revenues (285.6) 285.6 - - Group revenues 2,002.5 285.6 - 2,288.1 Cost of Sales (1,592.2) (226.3) - (1,818.5)Gross Profit 410.3 59.3 - 469.6 Administrative expenses (b) (338.3) (32.0) 12.5 (357.8) (c) (d)Impairment and restructuring charges (26.2) - - (26.2)Share of joint venture operating profit 27.3 (27.3) - -Operating profit 73.1 - 12.5 85.6Finance income 1.8 - - 1.8Finance expense (21.2) - - (21.2) Profit before tax 53.7 - 12.5 66.2 Taxation (e) (24.9) - (1.9) (26.8) Profit for the year 28.8 - 10.6 39.4 Attributable to:Equity shareholders 26.7 - 10.6 37.3Minority interest 2.1 - - 2.1 28.8 - 10.6 39.4Explanation of the IFRS adjustments is givenon page 17. John Wood Group PLCNotes to the interim accountsfor the six month period to 30 June 2005 Appendix I - Reconciliation of UK GAAP to IFRS (iii) Reconciliation of equity at 1st January 2004 (date of transition to IFRS) Proportional As Consolidation As reported of Joint reported under Ventures IFRS under UK GAAP Note (a) Adjustments IFRS Note US$M US$M US$M US$M Assets Non-current assetsGoodwill 217.2 18.8 - 236.0Intangible assets 3.2 1.6 - 4.8Property plant and equipment 174.2 53.4 - 227.6Investment in joint ventures 103.6 (103.6) - -Long term receivables 28.4 - - 28.4Deferred tax assets (f) 9.7 1.0 8.2 18.9 536.3 (28.8) 8.2 515.7Current assetsInventories 180.5 62.1 - 242.6Trade and other receivables 386.9 66.8 - 453.7Income tax receivable 8.1 1.3 - 9.4Cash and cash equivalents 69.8 21.0 - 90.8 645.3 151.2 - 796.5LiabilitiesCurrent liabilitiesBorrowings 13.9 24.3 - 38.2Trade and other payables (g) 326.6 61.0 (10.4) 377.2Income tax liabilities 18.2 2.0 - 20.2 358.7 87.3 (10.4) 435.6Net current assets 286.6 63.9 10.4 360.9 Non-current liabilitiesBorrowings 230.9 30.3 - 261.2Deferred tax liabilities 10.2 1.1 - 11.3Retirement benefit liability (f) 19.3 - 8.2 27.5Other non-current liabilities 7.5 1.4 - 8.9Provisions 14.8 2.3 - 17.1 282.7 35.1 8.2 326.0Net assets 540.2 - 10.4 550.6 Shareholders' equityOrdinary shares 23.4 - - 23.4Share premium 200.8 - - 200.8Other reserves 88.1 - - 88.1Retained earnings (g) 209.2 - 10.4 219.6Total shareholders' equity 521.5 - 10.4 531.9Minority interest in equity 18.7 - - 18.7Total equity 540.2 - 10.4 550.6 John Wood Group PLCNotes to the interim accountsfor the six month period to 30 June 2005 Appendix I - Reconciliation of UK GAAP to IFRS (iv) Reconciliation of equity at 30 June 2004 Proportional As Consolidation As reported of Joint reported under Ventures IFRS under UK GAAP Note (a) Adjustments IFRS Note US$M US$M US$M US$M Assets Non-current assetsGoodwill (c) 238.2 18.3 5.0 261.5 (d)Intangible assets (c) 3.1 1.3 4.7 9.1Property plant and equipment (c) 158.0 51.6 (2.7) 206.9Investment in joint ventures 100.6 (100.6) - -Long term receivables 27.9 1.3 - 29.2Deferred tax assets (e) 9.1 1.4 7.3 17.8 (f) 536.9 (26.7) 14.3 524.5Current assetsInventories 213.9 64.5 - 278.4Trade and other receivables 450.9 51.3 - 502.2Income tax receivable 7.8 0.4 - 8.2Cash and cash equivalents 61.7 13.1 - 74.8 734.3 129.3 - 863.6LiabilitiesCurrent liabilitiesBorrowings 17.0 39.6 - 56.6Trade and other payables (g) 357.5 42.4 (5.6) 394.3Income tax liabilities 7.0 1.7 - 8.7 381.5 83.7 (5.6) 459.6Net current assets 352.8 45.6 5.6 404.0 Non-current liabilitiesBorrowings 322.5 13.0 - 335.5Deferred tax liabilities 9.9 1.4 - 11.3Retirement benefit liability (f) 19.3 - 8.2 27.5Other non-current liabilities 10.1 3.0 - 13.1Provisions 14.1 1.5 - 15.6 375.9 18.9 8.2 403.0Net assets 513.8 - 11.7 525.5 Shareholders' equityOrdinary shares 23.5 - - 23.5Share premium 200.9 - - 200.9Other reserves 85.4 - - 85.4Retained earnings (c)(d) 193.2 - 11.7 204.9 (e)(g) (a) (b)Total shareholders' equity 503.0 - 11.7 514.7Minority interest in equity 10.8 - - 10.8Total equity 513.8 - 11.7 525.5 John Wood Group PLC Notes to the interim accounts for the six month period to 30 June 2005 Appendix I - Reconciliation of UK GAAP to IFRS (v) Reconciliation of equity at 31 December 2004 Proportional As Consolidation As reported of Joint reported under Ventures IFRS under UK GAAP Note (a) Adjustments IFRS Note US$M US$M US$M US$M Assets Non-current assetsGoodwill (c)(d) 264.7 18.2 14.2 297.1Intangible assets (c) 4.1 1.4 6.3 11.8Property plant and equipment (c) 168.8 53.7 (6.3) 216.2Investment in joint ventures 104.5 (104.5) - -Long term receivables 21.9 0.7 - 22.6Deferred tax assets (e)(f) 11.5 1.1 8.3 20.9 575.5 (29.4) 22.5 568.6Current assetsInventories 264.4 65.5 - 329.9Trade and other receivables 507.0 72.3 - 579.3Income tax receivable 9.7 (2.9) - 6.8Cash and cash equivalents 54.4 17.0 - 71.4 835.5 151.9 - 987.4LiabilitiesCurrent liabilitiesBorrowings 18.2 52.5 - 70.7Trade and other payables (g) 453.6 54.2 (11.1) 496.7Income tax liabilities 12.1 (0.3) - 11.8 483.9 106.4 (11.1) 579.2Net current assets 351.6 45.5 11.1 408.2 Non-current liabilitiesBorrowings 345.0 10.0 - 355.0Deferred tax liabilities 7.3 1.3 - 8.6Retirement benefit liability (f) 23.7 - 10.2 33.9Other non-current liabilities 18.7 3.0 - 21.7Provisions 13.9 1.8 - 15.7 408.6 16.1 10.2 434.9Net assets 518.5 - 23.4 541.9 Shareholders' equityOrdinary shares 23.5 - - 23.5Share premium 200.9 - - 200.9Other reserves 89.8 - - 89.8Retained earnings (a) (b)(c)(d)(e)(g) 192.3 - 23.4 215.7 Total shareholders' equity 506.5 - 23.4 529.9Minority interest in equity 12.0 - - 12.0Total equity 518.5 - 23.4 541.9 John Wood Group PLCNotes to the interim accountsfor the six month period to 30 June 2005 Appendix I - Reconciliation of UK GAAP to IFRS Explanatory notes to the UK GAAP to IFRS reconciliations (a) Joint ventures Under UK GAAP, joint ventures are accounted for using equity accounting with theGroup's share of profits being shown in the consolidated income statement andthe Group's share of net assets included in the consolidated balance sheet. Aspermitted under IFRS, the Group has used proportional consolidation toconsolidate its joint ventures. Under this method, the Group includes its shareof each joint venture's income, expenses, assets, liabilities and cash flows ona line by line basis in the consolidated financial statements. The Group haspresented the proportional consolidation of the joint ventures as a separatecolumn in the UK GAAP to IFRS reconciliations. Shareholders' equity is notimpacted by the adoption of proportional consolidation. (b) Share based payments Under UK GAAP, charges for share based payments are based on the intrinsic valueof shares awarded at the grant date. Under IFRS, the charge is based on thefair value of the share option awarded at the grant date. The fair value iscalculated using option pricing models and applies to all options granted after7 November 2002 and not vested at 1 January 2005. The adjustment for the periodto June 2004 is US$0.7m and the adjustment for the year ended December 2004 isUS$1.7m. (c) Intangible assets Purchased intangible assets other than goodwill are recognised on acquisitionand amortised over their useful life. On the acquisition of a business, anyintangible asset that may exist separately from goodwill and that meets therecognition criteria under IFRS should be recognised and amortised over itsuseful economic life. Under IFRS, the recognition criteria for intangibles mayresult in the recognition of more intangible assets than under UK GAAP. Ontransition to IFRS, US$2.7m of intangible assets have been recognised onacquisitions made in 2004. These intangible assets had a useful economic lifeof less than one year and as a result were fully amortised during 2004. Acharge of US$0.7m was booked for the period to June 2004 and a charge of US$2.7mwas booked for the year ended December 2004. Additionally, software, which was previously included in Property, Plant andEquipment under UK GAAP has been reclassified under intangible assets asrequired under IFRS. US$6.3m was reclassified at December 2004 and US$2.7m atJune 2004. Amortisation on this software is added back to operating profit forthe calculation of EBITA. Software amortisation for the period to June 2004 wasUS$0.8m and the for the year to December 2004 was US$2.0m. (d) Goodwill Under UK GAAP, goodwill is amortised on a straight line basis over its estimateduseful life. Under IFRS 3, goodwill is not amortised but subject to an annualimpairment review. Goodwill amortisation booked in 2004 under UK GAAP has beenreversed and goodwill is carried at 1 January 2004 levels. Amortisation ofUS$7.7m has been reversed for the period to June 2004 and US$16.9m has beenreversed for the year ended December 2004. ' (e) Tax Under UK GAAP, the provision for deferred tax is based on a timing differenceapproach, whereas under IFRS a temporary difference approach is used.Consequently, accounting under IFRS may result in the provision of additionaldeferred tax. Due to the reversal of the goodwill amortisation charge for 2004mentioned at (d) above, the book value of goodwill has increased. There hasbeen no change in the underyling tax basis of the goodwill in those countrieswhere amortisation is tax deductible and therefore additional deferred taxarises on the increase in the temporary difference. Additional deferred tax ofUS$0.9m has been provided for the period to June 2004 and additional deferredtax of US$1.9m has been provided for the year ended December 2004. (f) Deferred tax relating to retirement benefit liability Under UK GAAP, the deferred tax asset in respect of the retirement benefitliability is netted against the liability. Under IFRS the deferred tax is splitout and shown separately. The deferred tax asset at January 2004 and June 2004amounted to US$8.2m and at December 2004, US$10.2m. (g) Dividends Under UK GAAP, proposed dividends are recognised at the balance sheet date. IAS10 requires that dividends should not be recognised as a liability or charged tothe income statement until they have been declared. As a result, the dividendsaccrued at December 2003 (US$10.4m), June 2004 (US$5.6m) and December 2004(US$11.1m) under UK GAAP have been reversed and only dividends paid in theperiod recognised in the financial statements. (h) Cash flow statement The Group cash flow statement has been prepared inaccordance with IAS 7. The changes to the Group's cash flows that werepreviously presented under UK GAAP are mainly presentational although theproportional consolidation of joint ventures results in the Group's share of itsjoint venture cash flows being included on a line by line basis. Under IFRS,the cash flow statement presents "cash and cash equivalents" which includesshort term deposits. In the UK GAAP cash flow the movement in short termdeposits was shown separately to the movement in cash. John Wood Group PLCShareholder information Payment of dividends The 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 the Registrarsat the address below. All shareholders will receive dividends in sterling unlessrequested. If you are a UK based shareholder, the Company encourages you tohave your dividends paid through the BACS (Banker's Automated Clearing Services)system. The benefit of the BACS payment method is that the Registrars post thetax vouchers directly to the shareholders, whilst the dividend is credited onthe payment date to the shareholder's Bank or Building Society account.Shareholders who have not yet arranged for their dividends to be paid direct totheir Bank or Building Society account and wish to benefit from this serviceshould contact the Registrars at the address below. Sterling dividends will betranslated at the closing mid-point spot rate on 23 September 2005 as publishedin the Financial Times on 24 September 2005. Officers and advisers Secretary and Registered Office RegistrarsI Johnson Lloyds TSB Registrars ScotlandJohn Wood Group PLC PO Box 28448John Wood House Finance HouseGreenwell Road Orchard BraeABERDEEN EDINBURGHAB12 3AX EH4 1WQ Tel: 01224 851000 Tel: 0870 601 5366 Stockbrokers AuditorsCazenove & Co Limited PricewaterhouseCoopers LLPCredit Suisse First Boston Chartered Accountants Financial calendar 6 months ended Year ending 30 June 2005 31 December 2005 Results announced 13 September 2005 Early March 2006Ex-dividend date 21 September 2005 May 2006Dividend record date 23 September 2005 May 2006Annual General Meeting - May 2006Dividend payment date 13 October 2005 May 2006 The Group's Investor Relations website can be accessed at www.woodgroup.com. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Wood Group (J)