27th Jul 2005 07:00
BG GROUP plc27 July 2005 BG GROUP PLC2005 SECOND QUARTER AND HALF YEAR RESULTS HIGHLIGHTS---------------------------------------------------------------------------------Second Quarter Half Year2005 2004 Business Performance(i) 2005 2004 £m £m £m £m 1 133 962 +18% Revenue and other operating 2 227 1 818 +22% income 491 347 +41% Total operating profit 974 683 +43% including share of pre-tax operating results from joint ventures and associates 275 192 +43% Earnings 545 379 +44% 7.8p 5.4p +44% Earnings per share 15.4p 10.7p +44% 1.91p 1.73p +10% Interim dividend per share 1.91p 1.73p +10% --------------------------------------------------------------------------------- Total results for the period (including disposals and re-measurements(i)) 1 013 962 +5% Revenue and other operating 2 069 1 818 +14% income 731 362 +102% Operating profit before share 1 137 673 +69% of results from joint ventures and associates 787 412 +91% Total operating profit 1 245 770 +62% including share of pre-tax operating results from joint ventures and associates 484 229 +111% Earnings 744 436 +71% 13.7p 6.5p +111% Earnings per share 21.0p 12.4p +69% 1.91p 1.73p +10% Interim dividend per share 1.91p 1.73p +10%--------------------------------------------------------------------------------- i) 'Business Performance' excludes disposals and certain re-measurementsand is presented as management believes that exclusion of these items providesreaders with a clear and consistent presentation of the underlying operatingperformance of the Group's ongoing business. For further explanation of BusinessPerformance and the presentation of results from joint ventures and associates,see Presentation of Non-GAAP measures, page 12 and Results Presentation, page 3. PERFORMANCE HIGHLIGHTS BG Group's Chief Executive, Frank Chapman said:"BG Group has delivered strong earnings, up 44% for the half year, driven byunderlying growth and firm prices. Good progress has been made on key projectsand BG Group's growth programme remains firmly on track." • Earnings up by £166 million (44%) for the half year • At constant US$/UK£ exchange rates and upstream prices, total operating profit would have increased by 17% for the half year • Interim dividend increased by 10% to 1.91p per share • E&P volumes up 8% in the quarter and first half • Comgas volumes up 16% for the half year • ELNG Train 1 and related upstream fields onstream • 13 exploration and appraisal wells completed of which 8 (62%) were successful • BG Group to purchase approximately two ELNG Train 1 cargoes per month until end 2006 • New exploration acreage in Egypt and Canada • Acquired full ownership of Brindisi regasification project, Italy RESULTS PRESENTATION The presentation of BG Group's results under IFRS separately identifies theeffect of: • The re-measurement of financial instruments • Profits and losses on the disposal of non-current assets and businesses. These items are excluded from Business Performance in order to provide readerswith a clear and consistent presentation of the underlying operating performanceof the Group's ongoing businesses. Under IFRS the results of joint ventures and associates are presented net offinance costs and tax (see pages 14 and 15). Given the relevance of thesebusinesses within BG Group, the results of joint ventures and associates arepresented both before interest and tax, and after tax. The pre-interest and taxresult is included in Business Performance discussed on pages 3 to 11. Thetables below set out the amounts related to joint ventures and associates,re-measurements under IAS 39 and profits on disposal of non-current assets andbusinesses. ------------------------------------------------------------------------------Second Quarter Half Year2005 2004 2005 2004 £m £m £m £m 731 362 Operating profit for the period before 1 137 673 share of results from joint ventures and associates 56 50 Share of pre-tax operating results from 108 97 joint ventures and associates------ ------ ------- ------ 787 412 Operating profit for the period 1 245 770 including share of pre-tax results from joint ventures and associates ------ ------ ------- ------ Disposals and re-measurements: 120 - Re-measurements - IAS 39(i) 158 -(416) (65) Profit on disposal (429) (87)------ ------ ------- ------ 491 347 Business Performance - total operating 974 683 profit for the period ------------------------------------------------------------------------------ ------------------------------------------------------------------------------Second Quarter Half Year2005 2004 2005 2004 £m £m £m £m 484 229 Earnings for the period - including 744 436 disposals and re-measurements(296) (65) Disposals and re-measurements - before (271) (87) interest and tax (8) - Disposals and re-measurements - (10) - interest 95 28 Tax and minority interest on disposals 82 30------ ------ and re-measurements ------- ------ 275 192 Earnings - excluding disposals and 545 379 re-measurements ------------------------------------------------------------------------------ i) Re-measurements excluded from Business Performance The IAS 39 re-measurements reflect movements in external market prices andexchange rates. Financial instruments include certain long-term UK gas contractswhich are classified as derivatives under IAS 39 due to the nature of thecontract terms and are therefore required to be marked-to-market. This treatmenthas no impact on the ongoing cashflows of the business and management believesthese unrealised mark-to-market movements are best presented separately fromunderlying business performance. For an explanation of Non-GAAP measures seepage 12. BUSINESS REVIEW The results discussed in this Business Review (pages 4 to 11) relate to BGGroup's performance excluding disposals and re-measurements. For the impact anda description of these items, see the consolidated income statement (pages 14and 15) and Note 2 of the accounts (page 23). Results at constant US$/UK£exchange rates and upstream prices are also quoted. See Presentation of Non-GAAPmeasures (page 12) for an explanation of these metrics. GROUP -------------------------------------------------------------------------------- Second Quarter Business Performance Half Year 2005 2004 2005 2004 £m £m £m £m 1 133 962 +18% Revenue and other 2 227 1 818 +22% operating income Total operating profit including share of pre-tax results from joint ventures and associates-------- -------- -------- ------- 407 274 +49% Exploration and 794 538 +48% Production 15 19 -21% Liquefied Natural Gas 42 34 +24% 56 36 +56% Transmission and 102 66 +55% Distribution 21 24 -13% Power Generation 57 61 -7% (8) (6) +33% Other activities (21) (16) +31%-------- -------- -------- ------- 491 347 +41% 974 683 +43% (10) (15) -33% Net finance costs(i) (28) (31) -10% (192) (133) +44% Taxation(ii) (379) (261) +45% 275 192 +43% Earnings 545 379 +44% 7.8p 5.4p +44% Earnings per share 15.4p 10.7p +44% 415 402 +3% Capital investment 730 1 029 -29% 386 292 +32% Capital investment 701 659 +6% excluding acquisitions-------------------------------------------------------------------------------- Second quarter Total operating profit increased by 41% to £491 million reflecting higher E&Pvolumes and prices together with a strong performance from the T&D segment,partially offset by the impact of tighter LNG supply conditions and the weakerUS Dollar. At constant US$/UK£ exchange rates and prices, total operating profitincreased by 14%. Net finance costs were lower primarily due to the reduced average net debtlevels following the receipt of cash proceeds from the sale of the Group'sinterest in the North Caspian Sea PSA. The effective tax rate (including BGshare of joint ventures and associates) was 40%. Earnings increased by 43% to £275 million. i) Includes Group share of net finance costs from joint ventures and associates for the quarter of £8 million (2004 £9 million) and for the half year of £17 million (2004 £18 million).ii) Includes Group share of taxation from joint ventures and associates for the quarter of £9 million (2004 £12 million) and for the half year of £13 million (2004 £19 million). Cash generated from operations increased by £220 million to £545 millionprimarily due to higher operating profit. Capital investment in the quarter of £415 million included total current anddeferred contingent consideration of €44 million (£29 million) for theacquisition of the remaining 50% of Brindisi LNG SpA in Italy and continuinginvestment in the Mediterranean Basin and Africa (£118 million), North Americaand the Caribbean (£101 million), North West Europe (£98 million), Asia and theMiddle East (£36 million) and South America (£33 million). Half year Total operating profit increased by 43% to £974 million reflecting E&P volumegrowth of 8% and higher upstream prices, partially offset by the impact of theweaker US Dollar. At constant US$/UK£ exchange rates and prices, total operating profit increased by 17%. Net finance costs were £3 million lower primarily due to lower net interest onGroup borrowings and higher investment income. The effective tax rate (includingBG share of joint ventures and associates) was 40%. Cash generated by operationsincreased by £395 million to £1 094 million primarily due to higher operatingprofit. As at 30 June 2005, net borrowings were £50 million. Capital investment of £730 million included investment in the MediterraneanBasin and Africa (£234 million), North America and the Caribbean (£165 million), Asia and the Middle East (£117 million), North West Europe (£157 million) and South America (£57 million). In line with the BG Group policy of the interim dividend being half of theprevious full year dividend, the interim dividend for 2005 is 1.91p. EXPLORATION AND PRODUCTION Second Quarter Business Performance Half Year 2005 2004 2005 2004 £m £m £m £m 44.6 41.2 +8% Production volumes (mmboe) 88.3 82.1 +8% 658 488 +35% Revenue and other operating 1 293 964 +34% income 407 274 +49% Total operating profit 794 538 +48% 193 275 -30% Capital investment 438 722 -39% 193 170 +14% Capital investment excluding 438 357 +23% acquisitions Additional operating and financial data are given on page 33. Second quarter E&P operating profit increased by 49% to £407 million primarily due to highervolumes and prices, partially offset by a higher exploration charge and theeffect of the weaker US Dollar. At constant US$/UK£ exchange rates and prices,total E&P operating profit increased by 13%. Increased production of 8% was primarily due to higher volumes from West DeltaDeep Marine (WDDM) in Egypt following the start up of the Egyptian LNG andDamietta LNG export facilities, along with increased liquids exports from theKarachaganak field in Kazakhstan. Unit operating expenditure was in line with last year at £2.04 ($3.82) per boe. The exploration charge of £34 million was £17 million higher due to the plannedincrease in exploration activity across the Group. Capital investment of £193 million included expenditure in Egypt (£55 million)and North West Europe (£66 million). Half year E&P operating profit increased by 48% to £794 million primarily due to the 8%increase in production volumes and higher prices, partially offset by a higherexploration charge and the effect of the weaker US Dollar. Increased productionwas primarily due to the export of liquids from the Karachaganak field, higherproduction from WDDM following the start up of LNG export facilities in Egyptand the acquired Canadian and Egyptian properties. Unit operating expenditure was £2.06 ($3.89) per boe, an increase of 12 pencecompared with 2004 but was broadly unchanged compared with the first quarter of2005. The change from the prior year reflects higher commodity prices andchanges in the production mix. Capital investment of £438 million included expenditure in Egypt (£110 million),North West Europe (£115 million) and Asia and the Middle East (£106 million). Second quarter business highlights In Egypt, the El Manzala (BG Group 70% and operator) and El Burg (BG Group 100%and operator) concessions are expected to be formally granted to BG Group andpartner imminently. Drilling on these offshore concessions is expected tocommence in 2007. On 17 May, BG Group was awarded Blocks CMV 4 and CMV 7 (BG Group 75% andoperator) covering net 275 490 acres in the Northwest Territories, Canada. Thisextends BG Group's activities towards the central Mackenzie Valley. On 19 May, Bolivia enacted a new hydrocarbons law. This is a complex change tothe operation of oil and gas assets in Bolivia and BG Group and its partners arein discussion with the Bolivian Government as to how the new law should beinterpreted and implemented. In the meantime, production continues from BGGroup's interests. During the quarter, further progress was made on the development of the Buzzardoil field, offshore UK (BG Group 21.7%), with the installation of three steeljackets, the wellhead deck, subsea pipelines and manifolds for water injection.Drilling of production wells is due to start this August and of water injectionwells in January 2006, with first production expected towards the end of 2006.Estimated total proved and probable reserves for Buzzard are around 500 mmboe. Since the start of the year, BG Group has completed 13 exploration and appraisalwells of which eight have been successful (62%). LIQUEFIED NATURAL GAS Second Quarter Business Performance Half Year 2005 2004 2005 2004 £m £m £m £m 236 276 -14% Revenue and other operating 456 466 -2% income Total operating profit 1 5 -80% Shipping and marketing 16 11 +45% 24 16 +50% Liquefaction 45 30 +50% (10) (2) +400% Business development and other (19) (7) +171% 15 19 -21% 42 34 +24% 183 100 +83% Capital investment 228 264 -14% 154 100 +54% Capital investment excluding 199 264 -25% acquisitions Additional operating and financial data are given on page 33. Second quarter Total operating profit was £4 million lower reflecting a higher level ofbusiness development expenditure, lower volumes in the shipping and marketingbusiness and the impact of the weaker US Dollar, partially offset by higheroperating profit from Atlantic LNG (ALNG). In shipping and marketing, operating profit was £4 million lower, reflectingtight supply conditions. With the availability to BG Group of Egyptian LNG(ELNG) and Damietta cargoes during the second half of the year, supplyconditions are expected to improve. BG Group's share of operating profit from its liquefaction activities increasedby £8 million to £24 million, principally due to increased volumes and pricerealisations from ALNG Train 1. Following the start-up of exports from Egypt,ELNG operations contributed £1 million to operating profit for the quarter. Increased business development costs included BG Group's activity in evaluatingthe OK LNG project in Nigeria and other LNG opportunities. Capital investment included £29 million of current and deferred contingentconsideration relating to the acquisition of Enel's interest in Brindisi(Italy), £77 million relating to LNG vessels in construction due for delivery in2006, and continuing investment at LNG projects in Egypt, Trinidad and the UK. Half year Total operating profit increased by £8 million (24%) reflecting increasedvolumes from the LNG shipping and marketing business, including ten cargoesdirected to markets outside of the US and higher profits from ALNG, partiallyoffset by the impact of the weaker US Dollar. Business development increased by £12 million, reflecting higher levels ofbusiness activity across the segment. Capital investment included £102 million relating to LNG vessels in constructiondue for delivery in 2006 and continuing investment at LNG projects in Egypt,Trinidad and the UK. Second quarter business highlights On 29 May, the first cargo of LNG from ELNG Train 1 was lifted. During thequarter, three early cargoes became available of which BG Group lifted one. On21 June, BG Group announced it had entered into agreement with Gaz de France forthe purchase of ELNG Train 1 volumes at the rate of approximately two cargoesper month from July 2005 until the end of 2006. On 21 June, BG Group acquired sole ownership of the Brindisi regasificationterminal in Italy for a cash consideration of €17 million plus a deferredcontingent sum of €27 million. On 30 June, FERC rejected the upgrade plans for the Providence, Rhode IslandUSA, LNG import facility. BG Group and its partner KeySpan have reviewed FERC'swritten order (released 5 July) and intend to petition FERC for a rehearing. TRANSMISSION AND DISTRIBUTION Second Quarter Business Performance Half Year 2005 2004 2005 2004 £m £m £m £m Revenue and other operating income 126 95 +33% Comgas 233 183 +27% 45 43 +5% MetroGAS 79 69 +14% 25 24 +4% Other 53 49 +8% 196 162 +21% 365 301 +21% Total operating profit 38 18 +111% Comgas 67 39 +72% 10 8 +25% MetroGAS 14 9 +56% 8 10 -20% Other 21 18 +17% 56 36 +56% 102 66 +55% 33 15 +120% Capital investment 50 28 +79% Second quarter Volumes continued to grow strongly across the segment. At Comgas, in Brazil, theimpact of 18% higher volumes and stronger exchange rates underpinned a £20million increase in operating profit to £38 million. Operating profit included a£6 million benefit from lower gas costs, which is expected to be passed back tocustomers through lower tariffs over the next twelve months. MetroGAS, in Argentina, reported an operating profit of £10 million, up £2million, due primarily to increased prices on volumes sold to power generationcustomers. Capital investment mainly represents development of the Comgas pipeline network. Half year Total operating profit rose by £36 million to £102 million, this reflected a £28million increase in profit reported by Comgas, principally due to 16% volumegrowth, the stronger Brazilian Real and lower gas costs. MetroGAS reported an increase in operating profit of 56% to £14 million, due tohigher volumes sold to power generation customers. The capital restructuring ofMetroGAS continues to make progress. POWER GENERATION Second Quarter Business Performance Half Year 2005 2004 2005 2004 £m £m £m £m 46 38 +21% Revenue and other operating 121 92 +32% income 21 24 -13% Total operating profit 57 61 -7% 3 1 +200% Capital investment 3 1 +200% Second quarter and half year The increase in revenue is primarily due to pass through of gas costs. Operating profit of £21 million for the quarter was £3 million lower than thesame period last year, principally due to the weaker US Dollar, maintenanceactivity at Premier Power in Northern Ireland, and reduced availability atSeabank, UK. The reduced availability at Seabank Power follows the failure of a steam turbinewhich occurred in June 2005. Remedial works are expected to be completed in2006. Presentation of Non-GAAP measures Business Performance 'Business Performance' excludes certain disposals and re-measurements (seebelow) and is presented as management believes that exclusion of these itemsprovides readers with a clear and consistent presentation of the underlyingoperating performance of the Group's ongoing business. Disposals and re-measurements BG Group's commercial arrangements for marketing gas include the use oflong-term gas sales contracts. Whilst the activity surrounding these contractsinvolves the physical delivery of gas, certain UK gas sales contracts areclassified as derivatives under the rules of IAS 39 and are required to bemeasured at fair value at the balance sheet date. Unrealised gains or losses onthese contracts reflect the comparison between current market gas prices and theactual prices to be realised under the gas sales contract. BG Group also usescommodity derivative instruments to manage certain price exposures in respect ofoptimising the timing of its gas sales, including the use of gas in storagefacilities. These instruments are also required to be measured at fair value atthe balance sheet date under IAS 39. BG Group uses financial instruments, including derivatives, to manage foreignexchange and interest rate exposure. These instruments are required to berecognised at fair value or amortised cost on the balance sheet in accordancewith IAS 39. Most of these instruments have been designated either as hedges offoreign exchange movements associated with the Group's net investments inforeign operations, or as hedges of interest rate risk. Where these instrumentscannot be designated as hedges under IAS 39, unrealised movements in fair valueare recorded in the income statement. Unrealised gains and losses in respect of long-term gas sales contracts andother financial instruments are disclosed separately as 'disposals andre-measurements'. Realised gains and losses relating to these instruments areincluded in Business Performance. Management considers that this presentationbest reflects the underlying performance of the business since it distinguishesbetween the temporary timing differences associated with re-measurements underIAS 39 rules and actual realised gains and losses. For a reconciliation between the overall results and Business Performance anddetails of disposals and re-measurements, see the consolidated income statement,pages 14 and 15 and Note 2 to the accounts, page 23. Joint ventures and associates Under IFRS the results from jointly controlled entities (joint ventures) andassociates, accounted for under the equity method, are required to be presentednet of finance costs and tax on the face of the income statement. Given therelevance of these businesses within BG Group, the results of joint ventures andassociates are presented before interest and tax, and after tax. Managementconsiders that this approach aids comparability with prior years' publishedresults and provides additional information on the source of BG Group'soperating profits. For a reconciliation between operating profit and earningsincluding and excluding the results of joint ventures and associates, see Note 3to the accounts, page 24. Exchange rates and prices BG Group also discloses certain information, as indicated, at constant US$/UK£exchange rates and upstream prices. The presentation of results in this manneris intended to provide additional information to explain further the underlyingtrends in the business. Net borrowings BG Group provides a reconciliation of net borrowings and an analysis of theamounts included within net borrowings as management believes that this is animportant liquidity measure for the Group. LEGAL NOTICE These results include "forward-looking information" within the meaning ofSection 27A of the US Securities Act of 1933, as amended and Section 21E of theUS Securities Exchange Act of 1934, as amended. Certain statements included inthese results, including without limitation, those concerning (i) strategies,outlook and growth opportunities, (ii) positioning to deliver future plans andto realise potential for growth, (iii) delivery of the performance required toachieve the 2006 targets, (iv) development of new markets, (v) the developmentand commencement of commercial operations of new projects, (vi) liquidity andcapital resources, (vii) plans for capital and investment expenditure and (viii)statements preceded by "expected", "scheduled", "targeted", "planned","proposed", "intended" or similar statements, contain certain forward-lookingstatements concerning operations, economic performance and financial condition.Although the Company believes that the expectations reflected in suchforward-looking statements are reasonable, no assurance can be given that suchexpectations will prove to have been correct. Accordingly, results could differmaterially from those set out in the forward-looking statements as a result of,among other factors, (i) changes in economic, market and competitive conditions,including oil and gas prices, (ii) success in implementing business andoperating initiatives, (iii) changes in the regulatory environment and othergovernment actions, including UK and international corporation tax rates, (iv) amajor recession or significant upheaval in the major markets in which BG Groupoperates, (v) the failure to ensure the safe operation of assets worldwide, (vi)implementation risk, being the challenges associated with delivering capitalintensive projects on time and on budget, including the need to retain andmotivate staff, (vii) commodity risk, being the risk of a significantfluctuation in oil and/or gas prices from those assumed, (viii) fluctuations inexchange rates, in particular the US$/UK£ exchange rate being significantlydifferent to that assumed, (ix) risks encountered in the gas and oil explorationand production sector in general, (x) business risk management and (xi) the RiskFactors included in BG Group's Annual Report and Accounts 2004. BG Groupundertakes no obligation to update any forward-looking statements. No part of these results constitutes or shall be taken to constitute aninvitation or inducement to invest in BG Group plc or any other entity and mustnot be relied upon in any way in connection with any investment decision. Cautionary note to US investors - The United States Securities and ExchangeCommission permits oil and gas companies, in their filings with the SEC, todisclose only proved reserves that a company has demonstrated by actualproduction or conclusive formation tests to be economically and legallyproducible under existing economic and operating conditions. We use certainterms in this press release, such as "estimated total recoverable reserves" thatthe SEC's guidelines strictly prohibit us from including in filings with theSEC. US investors are urged to consider closely the disclosure in our Form 20-F,File No. 1-09337, available from us at BG Group, 100 Thames Valley Park Drive,Reading RG6 1PT. You may read and copy this information at the SEC's publicreference room, located at 450 Fifth Street NW, Washington, D.C. 20549. Pleasecall the SEC at 1-800-SEC-0330 for further information on the public referenceroom. This filing is also available at the internet website maintained by SEC athttp://www.sec.gov. CONSOLIDATED INCOME STATEMENT SECOND QUARTER --------------------------------------------------------------------------- 2005 2004 Busi- Disposals Total Busi- Disposals Total ness and re- Result ness and re- Result Perfor- measure- Perfor- measure- mance(i) ments mance(i) ments (Note 2)(i) (Note 2)(i) Notes £m £m £m £m £m £m Group revenueand otheroperatingincome 3 1 133 (120) 1 013 962 - 962Operatingcosts (698) - (698) (665) - (665)Profit ondisposal ofnon-currentassets - 416 416 - 65 65 ---------------------------------------------------------------------------Operatingprofit/(loss)before shareof resultsfrom jointventures andassociates 3 435 296 731 297 65 362 ---------------------------------------------------------------------------Finance income 4 19 - 19 10 - 10Finance costs 4 (21) 8 (13) (16) - (16)Share ofpost-taxresults fromjoint venturesand associates 3 39 - 39 29 - 29 ---------------------------------------------------------------------------Profit/(loss)before tax 472 304 776 320 65 385Taxation 5 (183) (90) (273) (121) (28) (149) ---------------------------------------------------------------------------Profit for theperiod 289 214 503 199 37 236 --------------------------------------------------------------------------- Attributable to: ---------------------------------------------------------------------------BGshareholders(earnings) 275 209 484 192 37 229Minorityinterest 14 5 19 7 - 7 --------------------------------------------------------------------------- 289 214 503 199 37 236 --------------------------------------------------------------------------- ---------------------------------------------------------------------------Earnings pershare - basic 6 7.8p 5.9p 13.7p 5.4p 1.1p 6.5pEarnings pershare -diluted 6 7.7p 5.9p 13.6p 5.4p 1.1p 6.5p --------------------------------------------------------------------------- ---------------------------------------------------------------------------Totaloperatingprofitincludingshare ofpre-taxoperatingresults fromjoint venturesandassociates(ii) 3 491 296 787 347 65 412 --------------------------------------------------------------------------- i) See Presentation of Non-GAAP measures, page 12, for an explanation of results excluding disposals and re-measurements and presentation of the results of joint ventures and associates.ii) This measurement is shown by BG Group as it is used by management as a means of measuring the underlying performance of the business. CONSOLIDATED INCOME STATEMENT HALF YEAR --------------------------------------------------------------------------- 2005 2004 Busi- Disposals Total Busi- Disposals Total ness and re- Result ness and re- Result Perfor- measure- Perfor- measure- mance(i) ments mance(i) ments (Note 2)(i) (Note 2)(i) Notes £m £m £m £m £m £m Group revenueand otheroperatingincome 3 2 227 (158) 2 069 1 818 - 1 818Operatingcosts (1 361) - (1 361) (1 232) - (1 232) Profit ondisposal ofnon-currentassets - 429 429 - 87 87 ---------------------------------------------------------------------------Operatingprofit/(loss)before shareof resultsfrom jointventures andassociates 3 866 271 1 137 586 87 673 ---------------------------------------------------------------------------Finance income 4 30 - 30 21 - 21Finance costs 4 (41) 10 (31) (34) - (34)Share ofpost-taxresults fromjoint venturesand associates 3 78 - 78 60 - 60 ---------------------------------------------------------------------------Profit/(loss)before tax 933 281 1 214 633 87 720Taxation 5 (366) (74) (440) (242) (30) (272) ---------------------------------------------------------------------------Profit/(loss)for the period 567 207 774 391 57 448 ---------------------------------------------------------------------------Attributable to: ---------------------------------------------------------------------------BGshareholders(earnings) 545 199 744 379 57 436Minorityinterest 22 8 30 12 - 12 --------------------------------------------------------------------------- 567 207 774 391 57 448 --------------------------------------------------------------------------- ---------------------------------------------------------------------------Earnings pershare - basic 6 15.4p 5.6p 21.0p 10.7p 1.7p 12.4pEarnings pershare -diluted 6 15.3p 5.6p 20.9p 10.7p 1.7p 12.4p --------------------------------------------------------------------------- ---------------------------------------------------------------------------Totaloperatingprofitincludingshare ofpre-taxoperatingresults fromjoint venturesandassociates(ii) 3 974 271 1 245 683 87 770 --------------------------------------------------------------------------- i) See Presentation of Non-GAAP measures, page 12, for an explanation of results excluding disposals and re-measurements and presentation of the results of joint ventures and associates.ii) This measurement is shown by BG Group as it is used by management as a means of measuring the underlying performance of the business. CONSOLIDATED BALANCE SHEET HALF YEAR ----------------------------------------------------------------------------- As at 30 Jun 31 Dec 30 Jun 2005 2004 2004 £m £m £mAssetsNon-current assetsGoodwill 320 272 247Other intangible assets 688 585 511Property, plant and equipment 5 038 4 509 4 241Investments 1 115 1 050 1 007Deferred tax assets 68 68 39Trade and other receivables 51 46 74Derivative financial instruments 129 - ------------------------------------------------------------------------------ 7 409 6 530 6 119Current assetsInventories 113 99 140Trade and other receivables 1 219 1 190 832Commodity contracts and other derivativefinancial instruments 34 - -Cash and cash equivalents 1 223 340 259----------------------------------------------------------------------------- 2 589 1 629 1 231Non-current assets classified as held for sale - 530 426-----------------------------------------------------------------------------Total assets 9 998 8 689 7 776-----------------------------------------------------------------------------LiabilitiesCurrent liabilitiesBorrowings (383) (577) (485)Trade and other payables (1 021) (976) (771)Current tax liabilities (439) (264) (171)Commodity contracts and other derivativefinancial instruments (599) - ------------------------------------------------------------------------------ (2 442) (1 817) (1 427)Non-current liabilitiesBorrowings (1 002) (762) (728)Trade and other payables (88) (89) (80)Deferred income tax liabilities (718) (907) (864)Retirement benefit obligations (143) (135) (130)Provisions for other liabilities and charges (367) (325) (287)----------------------------------------------------------------------------- (2 318) (2 218) (2 089)Liabilities associated with non-current assetsclassified as held for sale - (67) (34)-----------------------------------------------------------------------------Total liabilities (4 760) (4 102) (3 550)----------------------------------------------------------------------------- -----------------------------------------------------------------------------Net assets 5 238 4 587 4 226-----------------------------------------------------------------------------Attributable to:BG Group equity shareholders 5 195 4 567 4 225Minority interests 43 20 1-----------------------------------------------------------------------------Total equity 5 238 4 587 4 226----------------------------------------------------------------------------- STATEMENT OF CHANGES IN EQUITY Second Quarter Half Year 2005 2004 2005 2004 £m £m £m £m Equity as at start of period4 573 4 020 BG Group shareholders' funds 4 567 3 924 28 1 Minority interest 20 (9)------- ------- ----------------------------- ------- --------4 601 4 021 4 587 3 915 - - Effect of adoption of IAS 39 (238) -------- ------- ----------------------------- ------- --------4 601 4 021 Equity as at start of period 4 349 3 915 503 236 Profit for the financial period 774 448 6 2 Issue of shares 14 7 (2) - Purchase of own shares (2) - 5 1 Adjustment in respect of employee 8 1 share schemes - - Dividends on ordinary shares(i) (74) (66) (14) - Dividends paid to minority interest (14) - 139 (34) Currency translation and hedge 183 (79) adjustments net of tax ------- ------- ----------------------------- ------- -------- 637 205 Net changes in equity for the 889 311 financial period Equity as at 30 June5 195 4 225 BG Group shareholders' funds 5 195 4 225 43 1 Minority interest 43 1------- ------- ----------------------------- ------- --------5 238 4 226 5 238 4 226------- ------- ----------------------------- ------- -------- i) The 2004 final dividend of 2.08 pence per share was paid to shareholders on 13 May 2005 (20 May 2005 to ADR holders). CONSOLIDATED CASH FLOW STATEMENT Second Quarter Half Year 2005 2004 2005 2004 £m £m £m £m Cash flows from operating activities 731 362 Profit from operations 1 137 673 119 106 Depreciation of property, plant and 234 217 equipment 121 - Fair value movements in commodity 158 - contracts (416) (65) Profit on disposal of non-current (429) (87) assets 11 4 Unsuccessful exploration expenditure 21 7 written off 5 - Increase in provisions 13 2 5 - Share based payments 8 - (31) (82) Increase in working capital (48) (113)------- ------- -------------------------- ------- ------- 545 325 Cash generated by operations 1 094 699 (171) (93) Income taxes paid (314) (169)------- ------- -------------------------- ------- ------- 374 232 Net cash inflow from operating 780 530 activities ------- ------- -------------------------- ------- ------- Cash flows from investing activities 26 28 Dividends received from joint 38 33 ventures and associates - - Proceeds from disposal of subsidiary 26 32 undertakings and investments 936 143 Proceeds from disposal of property, 936 143 plant and equipment and intangible assets (238) (206) Purchase of property, plant and (528) (421) equipment and intangible assets (45) 105 Loans (to)/from joint ventures and (54) 36 associates (12) (92) Purchase of subsidiary undertakings (12) (342) and investments(i) ------- ------- -------------------------- ------- ------- 667 (22) Net cash inflow/(outflow) from 406 (519) investing activities ------- ------- -------------------------- ------- ------- Cash flows from financing activities (4) (15) Net interest paid(ii) (16) (19) (74) (65) Dividends paid (74) (65) (14) - Dividends paid to minority (14) - - (66) Net increase/(decrease) in (257) 79 short-term borrowings 28 (57) Net increase/(decrease) in long-term 29 (54) borrowings 6 2 Issue of shares 14 7 (2) - Purchase of own shares (2) -------- ------- -------------------------- ------- ------- (60) (201) Net cash outflow from financing (320) (52) activities ------- ------- -------------------------- ------- ------- 981 9 Net increase/(decrease) in cash and 866 (41) cash equivalents 245 260 Cash and cash equivalents at 340 313 beginning of period (3) (10) Effect of foreign exchange rate 17 (13) changes ------- ------- -------------------------- ------- -------1 223 259 Cash and cash equivalents at end of 1 223 259 period(iii) ------- ------- -------------------------- ------- ------- i) Includes cash acquired of £18 million (2004 £10 million) on the purchase of a subsidiary undertaking.ii) Includes capitalised interest for the second quarter of £7 million (2004 £4 million), and for the half year of £10 million (2004 £6 million).iii) Cash and cash equivalents comprise cash and short-term liquid investments that are readily convertible to cash. RECONCILIATION OF NET BORROWINGS(i) - HALF YEAR £mNet borrowings as at 31 December 2004(i) (ii) (999)Adoption of IAS 39 (6)------------------------------------------------------------------------------- (1 005) Net increase in cash and cash equivalents 866Cash outflow from changes in gross borrowings 228Inception of finance leases (46)Foreign exchange and other re-measurements (93)-------------------------------------------------------------------------------Net borrowings as at 30 June 2005(i) (ii) (50)------------------------------------------------------------------------------- Net borrowings attributable to MetroGAS (including Gas Argentino) and Comgaswere £348 million (31 December 2004 £300 million). The gearing ratio (net borrowings as a percentage of net borrowings plus equity)was 0.9% (31 December 2004 17.9%). As at 30 June 2005, BG Group's share of the net borrowings in joint ventures andassociates amounted to approximately £0.8 billion, including BG Groupshareholder loans of approximately £600 million. These net borrowings are included in BG Group's share of the net assets in joint ventures and associates which are consolidated in BG Group's accounts. i) Net borrowings are defined on page 35.ii) Net borrowings comprise: As at 30 Jun 31 Dec 2005 2004 £m £mAmounts receivable/(due) within one yearCash and cash equivalents 1 223 340Overdrafts, loans and finance leases (383) (577)Derivative financial instruments (17)(iii) -------------------------------------------------------------------------------- 823 (237)Amounts receivable/(due) after more than one yearLoans and finance leases (1 002) (762)Derivative financial instruments 129 -------------------------------------------------------------------------------- (873) (762)-------------------------------------------------------------------------------Net borrowings (50) (999)------------------------------------------------------------------------------- iii) These items are included within commodity contracts and other derivative financial instrument balances on the balance sheet. RECONCILIATION OF NET BORROWINGS - HALF YEAR (Continued) LIQUIDITY AND CAPITAL RESOURCES All the information below is as at 30 June 2005, unless otherwise stated. The Group's principal borrowing entities are BG Energy Holdings Limited,including wholly-owned subsidiary undertakings whose borrowings are guaranteedby BG Energy Holdings Limited (collectively BGEH), and MetroGAS, Gas Argentino,Comgas and Gujarat Gas, which conduct their borrowing activities on a stand-alone basis. BGEH had a $1.0 billion US Commercial Paper Programme, which was unutilised, anda $1.0 billion Eurocommercial Paper Programme, of which $968.3 million wasunutilised. BGEH had aggregate committed multicurrency revolving borrowing facilities of$1.105 billion, of which $552 million matures in August 2005 and $553 millionmatures in April 2007. These facilities were undrawn. In addition, BGEH had uncommitted multicurrency borrowing facilities of £636million, all of which was unutilised. MetroGAS announced in 2002 that it had suspended payments of principal andinterest on its financial indebtedness of approximately $450 million. GasArgentino also suspended debt service on borrowings of $70 million. All theborrowings of MetroGAS and Gas Argentino are non-recourse to other members ofthe Group. On 7 November 2003, MetroGAS announced an offer to restructure itsfinancial obligations pursuant to an out-of-court agreement. As of 18 July 2005,MetroGAS obtained the support of creditors representing $76 million. Comgas had committed borrowing facilities of Brazilian Reais (BRL) 1 264.4million, of which BRL 623.8 million was unutilised, and uncommitted borrowingfacilities of BRL 573.4 million, of which BRL 389.4 million was unutilised.Gujarat Gas Company Limited had committed borrowing facilities of Indian Rupees(INR) 1 500 million, of which INR 900 million was unutilised. Gujarat Gas alsohad an uncommitted guarantee facility of INR 1 600 million, of which INR 972 million was unutilised, for issuing various standby letters of credit and Bank Guarantees. Independent review report to BG Group plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2005 which comprise the consolidated interimbalance sheet as at 30 June 2005 and the related consolidated interim statementsof income, cash flows, changes in shareholders' equity and the related notes forthe six months then ended. We have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority. As disclosed in Note 1, the next annual financial statements of the group willbe prepared in accordance with accounting standards adopted for use in theEuropean Union. This interim report has been prepared in accordance with thebasis set out in Note 1. The accounting policies are consistent with those that the directors intend touse in the next annual financial statements. As explained in Note 1, there is,however, a possibility that the directors may determine that some changes arenecessary when preparing the full annual financial statements for the first timein accordance with accounting standards adopted for use in the European Union.The International Financial Reporting Standards (IFRS) and InternationalFinancial Reporting Interpretations Committee (IFRIC) interpretations that willbe applicable and adopted for use in the European Union at 31 December 2005 arenot known with certainty at the time of preparing this interim financialinformation. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies havebeen applied. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit and therefore provides a lower level of assurance.Accordingly we do not express an audit opinion on the financial information.This report, including the conclusion, has been prepared for and only for thecompany for the purpose of the Listing Rules of the Financial Services AuthorityRelated Shares:
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