30th Nov 2006 07:00
Expro International Group PLC30 November 2006 30 November 2006 EXPRO INTERNATIONAL GROUP PLC ("Expro" or "the Group") Interim results for the six months ended 30 September 2006 Expro International Group PLC, the oilfield services company, today announcesinterim results for the six months ended 30 September 2006. Highlights • Strong results - Robust organic growth - Three months contribution from Power Well Services ("PWS") - Operating margin increased to 13% - Continued EPS growth• Successful acquisition of PWS - Integration proceeding ahead of plan and cost synergies higher than planned - Expro's technology offering well received by existing PWS customers - Materially enhanced position in key geographic markets• Dividend maintained• Outlook positive with continued growth momentum in upstream oil and gas sector Year ended 31 Six months ended 30 September March 2006 2005 2006Revenue £226.4m £131.6m £300.7mOperating profit £29.4m £13.6m £34.1mOperating margin 13.0% 10.3% 11.3%Basic EPS* 16.5p 9.7p 36.6pUnderlying EPS*(a) 17.9p 10.0p 24.8pHeadline EPS (b) 16.5p 9.7p 24.2pNet cash fromoperating activities £25.7m £9.0m £58.4mFree cash flow (c) £2.6m (£13.4m) £10.4mDividend per share 3.8p 3.8p 10.9pNet bank borrowings (d) £193.2m £52.8m £17.1m Notes: * All references to earnings per share (EPS) are based on continuing and discontinuing operations and are calculated using the basic number of shares. The denominator for the purposes of calculating basic earnings per share has been adjusted to reflect the bonus element of the rights issue (see note 9) (a) Underlying statistics reflect the performance of the continuing and discontinued operations before significant non recurring items and amortisation of intangible assets which arise from acquisitions, as calculated under Note 6 (b) Headline statistics reflect the performance of the continuing and discontinued operations before significant non recurring items, as calculated under Note 6. Previously published headline earnings per share were on a continuing only basis (c) As calculated under note 13 (d) Bank loans of £230.0m (30 September 2005 - £62.3m; 31 March 2006 - £62.7m) less cash of £36.8m (30 September 2005 - £9.5m; 31 March 2006 - £45.6m), as extracted from the consolidated balance sheet Commenting on the results, Graeme Coutts, Chief Executive, said, "I am pleasedto report a strong set of results for the first six months of the financialyear, reflecting the successful execution of our strategy and sustained growth momentum across the recently expanded Expro business. These results includethree months of contribution from the PWS acquisition which marks a "stepchange" in the development of the Expro Group. Importantly this acquisitivegrowth has been complemented by robust organic growth from both the existingExpro business and PWS. The integration of PWS is progressing well and aheadof our initial plans. The market outlook for the second half and beyond remainspositive." - Ends - For further information please contact: Expro International Group PLC On 30 November: 020 7067 0700Graeme Coutts, Chief Executive Thereafter: 0118 959 1341Michael Speakman, Finance DirectorEd Cutts, Investor Relations Weber Shandwick Square Mile 020 7067 0700Kirsty Raper/Rachel Taylor/Stephanie Badjonat An analyst meeting will be held at 09.30 this morning at the offices of WeberShandwick Square Mile, Fox Court, 14 Gray's Inn Road, London, WC1X 8WS. Financial calendar Ex dividend date 27 December 2006 Record date 29 December 2006 Interim dividend payable 26 January 2007 EXPRO INTERNATIONAL GROUP PLC ("Expro" or "the Group") Interim results for the six months ended 30 September 2006 Chairman's and Chief Executive's Statement Summary The Board is delighted to report a strong set of results for the first sixmonths of the financial year, reflecting the successful execution of ourstrategy and sustained growth momentum across the recently expanded Exprobusiness. These results include three months of contribution from the Power WellServices ("PWS") acquisition which marks a "step change" in the development ofthe Expro Group. Importantly this acquisitive growth has been complemented byrobust organic growth from both the existing Expro business and PWS. Thiscombined growth has generated an adjusted earnings per share of 17.9 pence, onan underlying basis(a), a 79% increase on the same period last year. On aheadline basis(b) earnings per share of 16.5p grew by 70% compared to the sameperiod last year. The Board has declared the interim dividend at 3.8 pence. --------------------------(a) Underlying EPS reflects the performance of the continuing and discontinuingoperations before significant non-recurring items and the amortisation ofacquisition intangibles, as calculated under Note 6.(b) Headline EPS reflects the performance of the continuing and discontinuingoperations before significant non-recurring items as calculated under Note 6.Previously published headline earnings per share were on a continuing onlybasis. Market Conditions Market conditions for upstream oil and gas services have continued to strengthenover the last six months, continuing the progressive momentum of the last twoyears. Demand for upstream services has been very high, driven by globaleconomic growth and numerous factors which have restricted supply of oil andnatural gas. World economies continue to increase energy demand to meet growth.Supply of oil and gas is the only real answer to demand for the foreseeablefuture. However, supply remains subject to a combination of geopoliticaldisruption and strong production discipline by the Organisation of PetroleumExporting Countries ("OPEC"). The effect has been to keep supply and demandkeenly balanced supporting global oil prices which are consistently well aboveUSD 50 per bbl. This environment has provided a strong platform for Expro to implement itsgrowth strategies, the most significant during the period being the acquisitionof PWS. This has materially enhanced all aspects of Expro's capabilities,particularly our geographic penetration into key markets where the Group has todate had limited participation. As anticipated in the trading statements made throughout the period, ourprogress has been strong in the first half of the financial year. This has beenassisted in part by the smooth integration of the PWS business but mainly as aresult of Expro's focused strategy. Integration of PWS In July we completed the acquisition of PWS. This strategic move was a stepchange in the global development of Expro, adding markets and technologies toour portfolio, whilst at the same time bringing synergies to the Group andenhancing our existing growth strategies. The integration of PWS is progressingwell and ahead of our initial plans. The cost synergies identified have beenhigher than originally assumed and although significant progress has also beenmade with revenue synergies they inevitably take longer to crystalise. The PWSportfolio fits predominantly within Expro's Regional businesses segment where itcomplements our existing capabilities and adds critical mass to our operations.Our customers have welcomed our enhanced capability and the benefits are alreadybeing seen. PWS has brought to us a strong business platform in Norway and theincreasingly important markets of the Middle East and Brazil. The technologywithin Power Chokes is benefiting our domestic U.S. business, as well asproviding good international growth prospects. In the former market, our Choke products play an essential role in thedevelopment of unconventional land based gas reserves where flow management inassociation with rock fracturing is critical to commercialisation of tight gasprospects. This type of gas field is increasingly important within the domesticU.S. market which is becoming service intensive as more complex reservoirs areexploited. Business Strategy Expro's strategy has established many of our product lines as market leaders. Weposition ourselves as a safe, innovative and focused provider of services to ourcustomers in all the areas we operate in. In a business environment where ourcustomers are paying record amounts for rig operations, these are increasinglyimportant features for successful service providers. During the period Expro wasawarded the Oil & Gas Sector RoSPA (the Royal Society for the Prevention ofAccidents) award for occupational health and safety performance. Thisprestigious award marks a first for any upstream oil and gas service company andis clear recognition of our efforts to create and maintain safe workingenvironments for our customers and employees. As part of our business review process we continually challenge and refine ourstrategy. The implementation and evolution of our four point strategy, firstpublished in 2004, has been a major contributor to our success. Four Point Strategy • Customer care, backed by investment in skilled personnel and sophisticated intelligence systems, are critical to delivering sustained success as well as positioning for future market developments. • Technology development backed by investment in world class people and facilities, designed at keeping all Expro product lines in a leading position. • Geographic optimisation to create areas of critical mass capable of effectively and profitably serving local markets throughout the business cycle. • Strategic acquisitions and divestments which focus and enhance Expro's global market positions. Segmental Review Regional Businesses Expro provides products and services which are critical to the maintenance andcommissioning of oil and gas wells through a comprehensive footprint ofinternational locations. These products fall under the technology categories ofCased Hole Services ("CHS") and Surface Welltesting ("SWT"). The largelycall-off nature of the products and services requires supporting infrastructurewhich, in many areas, is expensive to maintain. These infrastructure costs arethe focus of our strategy of creating areas of critical mass where we fullyleverage across our product and service lines. Our acquisition of PWS, completedin July, added materially to our Regional businesses' capabilities. Includingthe period of ownership of PWS, total revenues for our Regional businesses were£138.6m an increase of 80% over the corresponding prior period. Expro'smanagement structure was reorganised following the acquisition. Our Regionalbusinesses are now structured under two hemispheres; Western, managed fromHouston (North America, Canada and Latin America), and Eastern, managed fromAberdeen (North Sea, FSU, West Africa, North Africa/Middle East and Asia). ThePWS acquisition has greatly enhanced all aspects of Expro's strategy executionwithout compromising our market identity or customer perception. In the Western Hemisphere, traditionally confined to North America and Brazil,the PWS acquisition has brought Power Chokes flow management which provides avery strong technology position in the unconventional domestic gas markets ofNorth America. This acquired capability is entirely complementary to ourexisting strategy of providing advanced, high value services where the marketdemands a "Best in Class" supplier. The strong platform the Chokes businessprovides, will enable the pull-through of our products and services into areaswhich are an increasingly significant source of energy to the United States.Progress in our Gulf of Mexico business continues in line with the positiveoutlook for deepwater subsea developments, an area which plays strongly toExpro's technology strategy. In Latin America, Expro is now active in severalcountries. By far the biggest is Brazil where the PWS acquisition has providedus with an excellent position with Petrobras, and increasingly the incominginternational oil and gas companies involved in offshore developments. Webelieve that our relationship with Petrobras will develop to enable us to assisttheir international growth plans in areas such as offshore Angola and deep waterGulf of Mexico. As a predominantly former PWS territory we see the opportunityto bring many of Expro's broader capabilities into Latin America on a selectivebasis. In the Eastern Hemisphere where Expro has for some time been regarded as amarket leader in the combined markets of the North Sea area, the PWS acquisitionhas reinforced our position and critical mass through the addition of a strongNorwegian SWT presence. This also positions Expro in a closer operatingenvironment with Statoil and Norsk Hydro as they look to internationalise theircapabilities. The relatively high oil price has greatly helped the UK North Seasupport strong reinvestment in this aging province, which is important again toour major international customers as a safer investment area in an increasinglydifficult global environment. The FSU has performed well for Expro in the first half of the financial year andWest Africa continued to deliver strongly throughout the period. The majority ofrevenues came from offshore deepwater activities all along the West Africancoast, but predominantly Angola where we have established critical mass tocapitalise on our strong technology position. Our regional service portfoliocontinued to expand in this area with high demand for our welltest equipment tocommission the technically demanding deepwater fields. The newly formed region of North Africa and the Middle East has also beenstrengthened through the PWS acquisition. These markets are dominated by gasprojects in North Africa, particularly in Algeria and Egypt, and the increase inSaudi-Arabian rig activity. The latter two locations are new for Expro giving usa valuable position in the major producing areas of the world and new outletsfor many of our high value niche technologies. Finally, in Asia we are workingto establish our new position and take advantage of the critical massopportunities offered by the acquisition while building on excellent positionsin Australia, Malaysia and Indonesia. Global Businesses The Global businesses segment, consisting of the deepwater businesses ofTronicMatre and subsea safety tools ("SST") and our capital intensive earlyproduction facilities ("EPF") business has benefited from increased customercapital expenditure. The main driver has been our customers refocusing towardssubsea fields, and in particular deep water developments. Due to the projectbased nature of this segment we manage our resources on a centralised, globalbasis. However, during project execution we leverage the comprehensiveinternational infrastructure provided by our in-country Regional businesses todeliver a local product. PWS did not add materially to the portfolio of ourGlobal businesses, therefore the overall revenues of £87.7m to 30 September 2006represent organic Expro growth which on a like for like basis is 60% ahead ofthe corresponding prior period. Tronic and Matre, both leading brands, are used to market our technicalleadership in the areas of subsea connectors and instrumentation. Thesebusinesses are fully integrated and offer the only integrated solution tocustomers looking to increase capacity and efficiency. Demand for TronicMatreproducts has increased in line with the global dynamics for subsea production.The high cost of operating in the subsea environment is increasingly driving ourcustomers towards reliability, a hallmark of TronicMatre and the wider ExproGroup. In the area of SST where Expro has a material position, global demand has beenstrong. Prior period investments to increase capacity have allowed us to meetthe current demand for safety systems throughout the deepwater provinces of theworld. In this area we are now marketing products and services within legacy PWScontracts to customers who have a requirement to develop their subsea reserves. Finally, our EPF group has been actively engineering potential field developmentsolutions for customers looking to exploit the high oil price on a fast trackbasis. Two major projects have been ongoing in the period. One has been underconstruction for a major customer in West Africa which is due for commissioningin the second half of this financial year, while the other is the highlysuccessful Chayvo plant which has produced commercial oil and gas for ExxonMobilin Sakhalin Island throughout the period. This method of small fieldexploitation is relatively fast when project sanction is approved, however theoverall gestation period between enquiry and sanction can be prolonged. Technology During the first half of the financial year record levels of investment weremade supporting our strategy of technology development and commercialisation.Our focus clearly remains on developing technologies in order to meet ourcustomers' evolving business needs, further enhancing our corporatedifferentiation. All business segments benefited from technology enhancements, particularly thosewhere Expro continues to demonstrate leadership. The cableless telemetry system"CATs" is operating in its first field installation, a suspended North Seasubsea well, providing our customer with valuable new reservoir data. As part ofthe PWS combination, Expro acquired a 50% interest in a company developing newdrilling technology aimed at reducing overall drilling cost while facilitatinggreater safety during operations. The managed pressure drilling ("MPD") processutilises state of the art metering and choke technology from within the formerPWS portfolio. Field trials in the US during the period were very positive andwell received. The second phase of our AX-S rigless technology project made goodprogress in the period with the joint partners continuing to provide excellentsupport to this potentially transformational technology. The businessenvironment for this system continues to strengthen, driven by our customersincreasing reliance on subsea wells and the inflated cost of semi-submersibleoperations. Outlook The outlook for the upstream services sector remains positive, driven by thecontinuing increase in oil and gas demand. In the medium term this position ismaintained by the continued discipline of OPEC in regulating supply rather thana fundamental shortage in oil and gas. The long term dynamics are not in doubt,oil and gas remains the only real answer to demand, and the world will need tofind and produce materially more oil and gas than is currently capable of beingproduced. Within this environment the outlook for Expro is positive. Ourinvestment supporting our four point strategy has positioned Expro to takeadvantage of these conditions. The outlook for the remainder of this financialyear is favourable and our long term objectives remain unchanged; to benefitshareholders with profitable growth beyond the cycle. Dr Chris Fay, CBE Graeme Coutts 29 November 2006Chairman Chief Executive Officer Consolidated income statementSix months ended 30 September 2006 Six months ended Six months ended Year ended 30 September 30 September 31 March Note 2006 2006 2006 2005 2005 2005 2006 2006 2006 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Underlying Special Total Underlying Special Total Underlying Special Total items items itemsContinuingoperationsRevenue 3 226,362 - 226,362 131,647 - 131,647 300,727 - 300,727Cost of sales (184,952) (1,993) (186,945) (109,714) (455) (110,169) (254,516) (735) (255,251) ________ ________ _______ _______ _______ _______ _______ _______ ______Gross profit 41,410 (1,993) 39,417 21,933 (455) 21,478 46,211 (735) 45,476 Administrative expenses (10,018) - (10,018) (7,881) - (7,881) (11,360) - (11,360) ________ ________ _______ _______ _______ _______ _______ _______ ______Operating profit 3 31,392 (1,993) 29,399 14,052 (455) 13,597 34,851 (735) 34,116 Investment income 3,123 - 3,123 1,847 - 1,847 3,855 - 3,855Finance costs (8,293) - (8,293) (4,140) - (4,140) (8,409) - (8,409) ________ ________ _______ _______ _______ _______ _______ _______ ______Net finance costs (5,170) - (5,170) (2,293) - (2,293) (4,554) - (4,554) Profit before tax 26,222 (1,993) 24,229 11,759 (455) 11,304 30,297 (735) 29,562 Tax 4 (9,938) 755 (9,183) (4,387) 172 (4,215) (11,483) 279 (11,204) ________ ________ _______ _______ _______ _______ _______ _______ ______Profit after tax 16,284 (1,238) 15,046 7,372 (283) 7,089 18,814 (456) 18,358 DiscontinuedoperationsPost tax profit fromjoint ventures - - - 348 - 348 441 - 441Post tax gainfrom disposalof joint ventures - - - - - - - 9,661 9,661 ________ ________ _______ _______ _______ _______ _______ _______ ______Profit for the period 16,284 (1,238) 15,046 7,720 (283) 7,437 19,255 9,205 28,460 ======== ======== ======= ======= ======= ======= ======= ======= ====== Attributableto:Equity holders of the parent 16,266 (1,238) 15,028 7,650 (283) 7,367 19,206 9,205 28,411Minority interest 18 - 18 70 - 70 49 - 49 ________ ________ _______ _______ _______ _______ _______ _______ ______ 16,284 (1,238) 15,046 7,720 (283) 7,437 19,255 9,205 28,460 ======== ======== ======= ======= ======= ======= ======= ======= ======Earnings pershare Fromcontinuing anddiscontinuingoperations Basic 6 17.9p 16.5p 10.0p 9.7p 24.8p 36.6p Diluted 6 17.5p 16.2p 9.9p 9.5p 24.4p 36.1p ======== ======== ======= ======= ======= ======= ======= ======= ====== Fromcontinuingoperations Basic 6 16.5p 9.2p 23.6p ======= ======= ======Diluted 6 16.2p 9.1p 23.3p ======= ======= ====== Underlying numbers reflect the performance of the continuing and discontinuingoperations before special items. Special items comprise significantnon-recurring items and the amortisation of acquisition intangibles Consolidated statement of recognised income and expenseSix months ended 30 September 2006 Six months ended Year ended 30 september 31 March 2006 2005 2006 Note £'000 £'000 £'000 Losses on cash flow hedges (2,136) (2,200) (2,951) Exchange differences ontranslation of foreign operations (5,044) 4,250 5,672 Actuarial (losses)/gains ondefined benefit pension schemes (1,180) (2,586) 4,451 Tax on items taken directly toequity 326 673 567 ______ ______ ______Net (expense) / income recogniseddirectly in equity (8,034) 137 7,739 Transferred to profit and loss ondisposal of joint venture foreignoperations - - (365) Transferred to profit and loss onmaturity of cash flow hedges (1,155) - 1,815 Profit for the period 15,046 7,437 28,460 ______ ______ ______Total recognised income andexpense for the period 5,857 7,574 37,649 ====== ====== ======Attributable to:Equity holders of the parent 5,839 7,504 37,600Minority interest 18 70 49 ______ ______ ______ 5,857 7,574 37,649 ====== ====== ====== Consolidated balance sheetAt 30 September 2006 30 September 30 September 31 March 2006 2005 2006 Note £'000 £'000 £'000Non-current assetsGoodwill 189,892 20,954 20,511Intangible assets 107,743 10,535 9,221Property, plant and equipment 7 187,853 89,236 95,423Interests in associates 187 - -Deferred tax assets 6,719 5,367 6,365Derivative financial instruments - 72 - ______ ______ ______ 492,394 126,164 131,520Current assetsInventories 36,053 16,971 19,237Trade and other receivables 165,252 91,414 95,577Cash 36,839 9,573 45,642Assets in disposal group held forsale - 3,786 - ______ ______ ______ 238,144 121,744 160,456 ______ ______ ______Total assets 730,538 247,908 291,976 ______ ______ ______Current liabilitiesTrade and other payables (105,966) (51,345) (73,159)Current tax liabilities (23,397) (8,964) (12,549)Finance leases (768) (688) (768)Derivative financial instruments (43) (1,417) (295)Provisions (188) (115) (188) ______ ______ ______ (130,362) (62,529) (86,959)Non-current liabilitiesBank loans 8 (230,006) (62,331) (62,699)Retirement benefit obligation (21,728) (26,836) (19,348)Deferred tax liabilities (35,921) (3,109) (2,428)Finance leases (7,869) (8,049) (7,972)Derivative financial instruments - (235) (138)Provisions (2,775) (2,754) (2,882) ______ ______ ______ (298,299) (103,314) (95,467) ______ ______ ______Total liabilities (428,661) (165,843) (182,426) ______ ______ ______Net assets 301,877 82,065 109,550 ====== ====== ======EquityShare capital 9 10,905 7,319 7,328Share premium account 1,993 281 570Other reserves 60,677Hedging and translation reserve (5,264) 894 3,099Own shares - (407) (352)Equity reserve 1,467 640 1,032Retained earnings 232,049 73,201 97,841 ______ ______ ______Equity attributable to equityholders of the parent 301,827 81,928 109,518Minority interest 50 137 32 ______ ______ ______Total equity 301,877 82,065 109,550 ====== ====== ====== The financial statements were approved by the board of directors and authorisedfor issue on 29 November 2006. They were signed on its behalf by: G Coutts M SpeakmanDirector Director 29 November 2006 Consolidated cash flow statementSix months ended 30 September 2006 Six months ended Year ended 30 September 31 March 2006 2005 2006 Note £'000 £'000 £'000Operating profit 29,399 13,597 34,116 Adjustments for:Depreciation of property, plant andequipment 21,594 11,134 30,445(Gain)/loss on disposal ofproperty, plant and equipment (1,126) 397 1,771Amortisation of intangible assets 2,264 873 1,469Impairments 434 - 718Share-based payments 435 223 615Retirement benefit charge 124 (285) 251 ______ ______ ______Operating cash flows beforemovements in working capital 53,124 25,939 69,385 Increase in inventories (4,423) (704) (2,611)Increase in receivables (21,901) (16,934) (21,263)Increase in payables 11,954 5,034 25,589 ______ ______ ______Cash generated by operations 38,754 13,335 71,100 Income taxes paid (7,868) (2,513) (9,209)Interest paid (5,180) (1,834) (3,534) ______ ______ ______ Net cash from operating activities 25,706 8,988 58,357 ______ ______ ______Investing activitiesInterest received 1,034 273 614Purchases of property, plant andequipment 7 (26,935) (22,758) (49,288)Proceeds on disposal of property,plant and equipment 2,915 314 846Purchases of intangible assets (67) (213) (100)Net cash outflow on acquisition ofsubsidiaries 10 (171,682) (5,988) (6,075)Investment in associates (185) - -Payment on disposal of jointventures (996) - -Proceeds on disposal of jointventures - 4,797 20,116Payment of deferred consideration (79) (291) (334) ______ ______ ______Net cash used in investingactivities (195,995) (23,866) (34,221) ______ ______ ______Financing activitiesIssue of share capital 9 128,195 25,258 25,555Dividends paid 5 (5,192) (5,182) (7,956)Drawing of new loans 8 272,090 - -Repayment of loans 8 (231,849) - -Repayments of finance leases (712) (634) (1,305) ______ ______ ______ Net cash from financing activities 162,532 19,442 16,294 ______ ______ ______ Net (decrease)/increase in cash (7,757) 4,564 40,430 Cash at beginning of period 45,642 5,009 5,009Effect of foreign exchange ratechanges (1,046) - 203 ______ ______ ______ Cash at end of period 36,839 9,573 45,642 ====== ====== ====== Notes to the condensed consolidated accountsSix months ended 30 September 2006 1. Basis of preparationThe unaudited financial information contained in this interim report has beenprepared in accordance with IAS 34 Interim Financial Reporting, and with theListing Rules of the Financial Services Authority. The Group's auditors have not performed a review of this interim report. These condensed consolidatedaccounts do not include all of the information required for full annualfinancial statements. The interim report does not constitute statutory accountsas defined in section 240 of the Companies Act 1985, and should be read inconjunction with the annual report 2006. A copy of the statutory accounts forthe year ended 31 March 2006 has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not containstatements under section 237 (2) and (3)of the Companies Act 1985. 2. Significant accounting policiesThe condensed financial statements have been prepared under the historical costconvention. The accounting policies are consistent with those followed in the preparation ofthe Group's annual financial statements for the year ended 31 March 2006, withthe addition of IFRIC 4 Determining whether an arrangement contains a lease.IFRIC 4 came into effect from 1 January 2006 and provides guidance on whethercomplex arrangements include a lease. This becomes effective for the Group forthe year ending 31 March 2007. The Group has reviewed its contracts and theinterpretation does not have a material impact on the Group. The following standards which have not been applied in these financialstatements were in issue but not yet effective: IFRS 7 Financial instruments: Disclosures; and the related amendment to IAS 1 oncapital disclosures. The Group anticipates that the adoption of this standard in future periods willhave no material impact on the financial statements of the Group except foradditional disclosures on capital and financial instruments when the relevantstandard comes into effect for periods commencing on or after 1 January 2007. 3. Business segmentsFor management purposes, the Group is organised into two operating divisions -Regional businesses and Global businesses. These divisions are the basis onwhich the Group reports its primary segment information. Principal activities are as follows: Regional businesses provide services which are primarily driven by customeroperating expenditure. Customer requirements are often for a short period oftime, and delivery is made through, and supported by, the Group's locallyestablished infrastructure. Global businesses provide products and services which are primarily driven bycustomer capital expenditure. These products and services, which are often basedupon bespoke engineering or technology based solutions, are delivered remotelyover a long term and are typically for offshore projects. The following is an analysis of the revenue and results for the period, analysedby business segment. Six months ended Year ended 30 September 31 March 2006 2005 2006 £000 £000 £000Segment revenueGlobal businesses 87,748 54,804 131,245Regional businesses 138,614 76,843 169,482 ______ ______ ______Total revenue 226,362 131,647 300,727 Segment resultGlobal businesses 17,844 11,053 26,107Regional businesses 21,573 10,425 19,369 ______ ______ ______Total result 39,417 21,478 45,476 Unallocated corporate expenses (10,018) (7,881) (11,360) ______ ______ ______Operating profit 29,399 13,597 34,116 ====== ====== ====== 4. Tax Six months ended Year ended 30 September 31 March 2006 2005 2006 £'000 £'000 £'000Current tax: UK corporation tax 1,386 1,687 1,638 Foreign tax 7,471 3,100 11,821 ______ ______ ______ 8,857 4,787 13,459Deferred tax: 326 (572) (2,255) ______ ______ ______Total 9,183 4,215 11,204 ====== ====== ====== The tax charge for the six months to 30 September 2006 has been based on anestimated effective rate for the year to 31 March 2007 of 37.9%. This compareswith the UK standard rate of 30%, with the difference largely attributable toforeign profits taxed at rates higher than the UK rate and expenses notdeductible for tax purposes. 5. Dividends Six months ended Year ended 30 September 31 March 2006 2005 2006 £'000 £'000 £'000Amounts recognised as distributions to equityholders in the period: Interim dividend paid for the year ended31 March 2006 of 3.8p per ordinary share(2005: 3.8p per share) - - 2,774Final dividend paid for the year ended 31March 2006 of 7.1p per ordinary share(2005: 7.1p per share) 5,192 5,182 5,182 ______ ______ ______ 5,192 5,182 7,956 ====== ====== ====== The proposed interim dividend for the year ended 31 March 2007 is 3.8p perordinary share. This was approved by the Board after 30 September 2006 and hasnot been included as a liability in these financial statements. 6. Earnings per shareThe calculation of the basic and diluted earnings per share is based on thefollowing data: Six months ended Year ended 30 September 31 March 200 2005 2006 £'000 £'000 £'000EarningsProfit for the period 15,046 7,437 28,460Less minority interest (18) (70) (49) ______ ______ ______Earnings attributable to equityholders of the parent - continuingand discontinued 15,028 7,367 28,411Less post tax gain from disposal ofjoint ventures - - (9,661)Less post tax profit fromdiscontinued joint ventureoperations - (348) (441) ______ ______ ______Earnings for the purpose of basicearnings per share - continuing 15,028 7,019 18,309 AdjustmentsPost tax profit from discontinuedjoint venture operations - 348 441 ______ ______ ______ Earnings for the purpose of headlineearnings per share 15,028 7,367 18,750Amortisation of intangible assetsarising from acquisitions 1,993 455 735Less tax on the above (755) (172) (279) ______ ______ ______Earnings for the purpose ofunderlying earnings per share 16,266 7,650 19,206 ====== ====== ======Number of sharesWeighted average number of ordinaryshares for the purposes of basicearnings per share 91,080,778 76,126,186 77,480,885Effect of dilutive potential ordinaryshares:Share options 1,701,623 1,124,478 1,252,641 ______ ______ ______Weighted average number of ordinaryshares for the purposes of dilutedearnings per share 92,782,401 77,250,664 78,733,526 =========== =========== =========== 6. Earnings per share Earnings per shareFrom continuing and discontinued operations Basic 16.5p 9.7p 36.6p ====== ====== ====== Diluted 16.2p 9.5p 36.1p ====== ====== ======From continuing operations Basic 16.5p 9.2p 23.6p ====== ====== ====== Diluted 16.2p 9.1p 23.3p ====== ====== ======From discontinued operations Basic - 0.5p 13.0p ====== ====== ====== Diluted - 0.5p 12.8p ====== ====== ======Headline Basic 16.5p 9.7p 24.2p ====== ====== ====== Diluted 16.2p 9.5p 23.8p ====== ====== ======Underlying Basic 17.9p 10.0p 24.8p ====== ====== ====== Diluted 17.5p 9.9p 24.4p ====== ====== ====== The denominator for the purposes of calculating both basic and diluted earningsper share has been adjusted to reflect the bonus element of the rights issue(see note 9). Headline earnings per share reflect the performance of thecontinuing and discontinuing operations before significant non-recurring items.Significant non-recurring items include gains on disposal of discontinuedoperations. Previously published headline earnings per share were on acontinuing only basis. Underlying earnings per share reflect the performance ofthe continuing and discontinuing businesses before significant non-recurringitems and the amortisation of acquisition intangibles. 7. Property, plant and equipmentDuring the period, the Group incurred additions of £27.0m of property, plant andequipment. A further £95.6m was acquired through the acquisition of PowerWellServices, see note 10 for further details. 8. Bank loansDuring the period, the Group settled its existing bank loans (£60.9m), as wellas the debt acquired on the acquisition of PWS (£135.2m).In order to partially finance the acquisition of PWS, the Group entered into anew $550m facility repayable over 5 years. An initial amount of £271.5m wasdrawn, and £35.7m was repaid during the period, resulting in a balance at theperiod end of £230.0m after the effects of foreign exchange rates. Interestpayable on this facility is dependent on LIBOR plus a margin. 9. Share capital Allotted, called up and Authorised fully paidOrdinary share capital £'000 £'000 At 1 April 2005 8,100 6,646Increase in authorised sharecapital 1,900 -Employee share optionschemes - options exercised - 9Shares issued - 664 ______ ______At 30 September 2005 10,000 7,319 Employee share optionschemes - options exercised - 9 ______ ______ At 1 April 2006 10,000 7,328 Increase in authorised sharecapital 4,000 -Employee share optionschemes - options exercised - 45Shares issued - 3,532 ______ ______ At 30 September 2006 14,000 10,905 ====== ====== The Group has one class of ordinary shares which carry no right to fixed income. On 26 July 2006, 26,170,121 ordinary shares of 10 pence each were issued at aprice of 500 pence per share under a rights issue. The premium arising on thisshare issue was credited against the merger reserve offset by costs of£3,271,265, which arose from the issue. The remaining balance of the mergerreserve was transferred to retained earnings. On 31 July 2006 a further9,155,961 ordinary shares of 10 pence each were issued to First Reserve as partconsideration for the acquisition of Power Well Services. These shares wereissued at a price of 673 pence per share. The premium arising on this shareissue was credited to other reserves. These share issues were credited as fully paid and ranked pari passu in allrespects with the Group's existing ordinary shares. 10. Acquisition of subsidiaryDuring the period the Group acquired Power Well Services "PWS", with anacquisition date of 3 July 2006. PWS is a leading supplier of well testing andother flow management products and services to the global oil and gas industry.The acquisition comprised a 100% interest in Power Well Services Inc (registeredin the USA) and a 100% interest in Power Well Services Holdings LP (registeredin the Cayman Islands), and their respective subsidiaries. All intangible assets were recognised at their respective fair values. Theresidual excess over net assets acquired is recognised as goodwill in thefinancial statements. Provisional Provisional Provisional Book Fair value Fair value adjustments value £'000 £'000 £'000 Intangible assets 18,487 86,137 104,624Property, plant and equipment 95,583 - 95,583Inventories 14,133 - 14,133Trade and other receivables 57,471 (2,680) 54,791Cash 3,837 - 3,837Trade and other payables (23,678) - (23,678)Current tax liabilities (12,514) - (12,514)Finance leases (381) - (381)Bank loans (135,212) - (135,212)Retirement benefit obligation (737) - (737)Deferred tax liabilities (4,357) (30,148) (34,505) _______ ______ ______ 12,632 53,309 65,941 Goodwill 174,489 ______Total consideration 240,430 ======Satisfied by:Cash 168,757Shares 61,593Directly attributable costs 10,080 ______ 240,430 ======Net cash outflow arising onacquisition:Cashconsideration 168,757Directly attributable costs (paid) 6,762Cash acquired (3,837) ______ 171,682 ====== The values set out above are provisional pending finalisation of the fair valuesattributable, and will be finalised in subsequent periods. Shares issued werevalued at market price at the date of acquisition. The goodwill arises through the strengthening of the Group's geographicalfootprint, product pull-through opportunities with new clients and the value ofthe acquired workforce. The revenue and operating profit of PWS for the period has not been disclosed asintegration has made this impracticable. If the acquisition had been completed on 1 April 2006, total Group revenue forthe period would have been £269.4m, and operating profit for the period wouldhave been £34.7m. 11. Events after the balance sheet dateThere were no subsequent events between the balance sheet date and the date thefinancial statements were authorised for issue that require disclosure. 12. Related party transactionsNo related party transactions requiring disclosure occurred in the period to 30September 2006. 13. Free cash flowFree cash flow is calculated as follows: Six months ended Year ended 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 Net cash from operating activities 25,706 8,988 58,357 Interest received 1,034 273 614Proceeds on disposal of property,plant and equipment 2,915 314 846Purchases of property, plant andequipment (26,935) (22,758) (49,288)Purchases of intangible assets (67) (213) (100) ______ ______ ______Free cash flow 2,653 (13,396) 10,429 ====== ====== ====== This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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