Final Results

John Wood Group PLC Full year results for the year to 31 December 2010 Re-positioning for the next phase of growth John Wood Group PLC ("Wood Group" or the "Group") is an international energy services company with approximately $5.1bn revenue, employing approximately 29,0001 people worldwide and operating in 50 countries. The Group has three businesses-Engineering & Production Facilities, Well Support, and Gas Turbine Services-providing a range of engineering, production facilities support, and industrial gas turbine overhaul and repair services to the oil & gas and power generation industries worldwide. Financial Highlights Revenue of $5,063.1m (2009: $4,927.1m) up 3% EBITA2 of $344.8m (2009: $358.4m) down 4% Profit before tax of $254.6m (2009: $264.8m) down 4%, after an exceptional charge of $27.6m (2009: $35.8m) Strong cash generated from operations of $394.5m (2009: $545.5m) Basic earnings per ordinary share of 32.4 cents (2009: 32.1 cents) up 1% Adjusted diluted earnings per ordinary share3 of 39.7 cents (2009: 41.8 cents) down 5% Proposed final dividend of 7.6 cents, making a full year dividend of 11.0 cents (2009: 10.0 cents) up 10% Strategic Highlights Strategic decision to enhance the Group's focus and market-leading positions in its Engineering & Production Facilities and Gas Turbine Services divisions Two major steps recently announced to achieve this re-positioning December 2010 - acquisition of PSN for $955m. Upon completion, PSN will merge with Wood Group's Production Facilities business to create Wood Group PSN which will have around 22,000 people in over 30 countries across the world covering all the significant oil & gas development regions February 2011 - divestment of the Well Support division to GE for $2.8 billion, which, we believe, fully recognises the strong performance and future prospects of the division Return of cash to shareholders of not less than $1.7 billion, details of which are expected to be communicated to shareholders following completion of the disposal of the Well Support division Following the expected second quarter completion of the PSN acquisition and disposal of the Well Support division, Wood Group will be set to grow its position as A world-leading engineering business with strong market positions in upstream, subsea and pipelines The world's leading production facilities support provider The world's leading independent industrial gas turbine aftermarket provider Looking ahead, we will further develop these market-leading positions by extending services and broadening our international presence Important new markets include Angola, Brazil, Canada, Malaysia and Saudi Arabia We will continue to pursue both organic and acquisition-led growth Operating Highlights Group Good overall revenue growth in opex4 related activities and improving market for capex4 related businesses Engineering & Production Facilities Continued good revenue growth in our Production Facilities activities, offset by somewhat subdued activity in our capex related Engineering businesses Engineering Results impacted by soft market in 2009 and early 2010, but recovery starting to come through in good order book growth Strong performance in subsea & pipelines Continued international expansion Production Facilities Steady performance from North Sea business First significant contract win in Middle East with Wood Group CCC joint venture Continued expansion in Africa and Asia Pacific Well Support Significant improvement in results, including benefit of strong US drilling rig count Continuing focus on cost control and operating efficiency Gas Turbine Services Revenues impacted by deferred maintenance spending by customers and delayed contract awards for Power Solutions Market improvement in the second half of the year, contributed to over $1 billion of contract wins for Power Solutions Outlook Anticipate improving market conditions in 2011 The recovery signs in the greenfield engineering market in the second half of 2010, together with the increase in global E&P expenditure predicted for 2011 should result in good growth for our Engineering businesses The combination of Wood Group and PSN will create the global market leader in production facilities support. We will be well positioned to benefit from the growth in new installations each year and to help our customers meet the need for even greater focus on asset integrity, process safety and quality assurance following the Macondo incident The significant backlog in Power Solutions and strengthening maintenance market should lead to a significantly improved EBITA performance in Gas Turbine Services Sir Ian Wood, Chairman, and Allister Langlands, Chief Executive of Wood Group, said: "This has been an exciting and decisive re-positioning period. Our enhanced focus on our market-leading positions in greenfield engineering, production facilities support, and the industrial gas turbine aftermarket increases our capability to add value to our clients' activities. We are well positioned to take advantage of the improving market conditions and will continue to pursue our strategy of targeted geographic expansion and extended services through organic and acquisition-led growth. Overall, we anticipate good growth over the next few years." Information: Wood Group Alan Semple 01224 851 000 Nick Gilman Carolyn Smith Brunswick Patrick Handley 020 7404 5959 Notes 1. Number of employees and contractors at 31 December 2010. 2. EBITA represents operating profit of $288.2m (2009: $298.5m) for 2010 before adjusting for exceptional items of $27.6m (2009:$35.8m), and amortisation of $29.0m (2009: $24.1m). This financial term is provided as it is a key unit of measurement used by the Group in the management of its business. 3. Shares held by the Group's employee share trusts are excluded from the number of shares in calculating earnings per ordinary share. Adjusted diluted earnings per ordinary share is based on the diluted number of shares, taking account of share options where the effect of these is dilutive. Adjusted diluted earnings per ordinary share is calculated on profit for the year excluding the post tax effect of amortisation and exceptional items. 4. Our businesses focused on customer operating expenditure ("opex related activities") and our businesses focused on customer capital expenditure ("capex related activities") Chairman and Chief Executive's statement Introduction Following a comprehensive Board review of strategy, the recently-announced acquisition of PSN and disposal of the Well Support Division are key strategic moves to significantly enhance our focus on our core engineering, production facilities support and gas turbine services activities. Following the expected second quarter completion of these transactions, Wood Group will be well set to grow its position as A world-leading engineering business with strong market positions in upstream, subsea and pipelines The world's leading production facilities support provider The world's leading independent industrial gas turbine aftermarket provider With global exploration & production (E&P) spend forecast to increase in 2011 and the global economy continuing to recover, we anticipate a period of good market growth over the next few years. Results 2010 Group performance 2010 2009 % $m $m Change Revenue 5,063.1 4,927.1 2.8% EBITA1 344.8 358.4 (3.8%) EBITA margin 6.8% 7.3% (0.5%pts) Profit before tax 254.6 264.8 (3.9%) Basic EPS 32.4c 32.1c 0.9% Adjusted diluted EPS2 39.7c 41.8c (5.0%) Total dividend 11.0c 10.0c 10% ROCE3 24.8% 26.3% (1.5%pts) Cash generated from operations 394.5 545.5 (27.7%) Revenue for the year was slightly up on 2009 but EBITA fell $13.6m to $344.8m. Overall, our business focused on customer operating expenditure ("opex") continued to deliver a good performance, although results were affected by the slow recovery in certain power markets. In our capex-related Engineering activities, the relatively low bidding activity during 2009 carried forward into 2010, but picked up as the year went on. In Well Support, the higher average drilling rig level in the US contributed to better volumes and profitability. Cash generated from operations was strong at $394.5m, following the exceptional 2009 performance. Reflecting our continued confidence in the longer term outlook, we are declaring a final dividend of 7.6 cents, which will bring the full dividend for the year to 11.0 cents, up 10% on 2009. Markets Global E&P spend is set to increase as oil & gas operators seek to extract additional hydrocarbons from existing assets and invest in exploiting increasingly challenging reservoirs. In the oil & gas market, it is expected that the number of installations, both on and offshore, will continue to grow and, as the installations and reservoirs mature, asset integrity and production enhancement spending will increase. We are well positioned to support our customers around the world and, following the Macondo incident, we are seeing more client interest in our asset integrity, process safety and performance assurance services. The power market has been less active in 2010, particularly in North America and Europe, driven by excess generation capacity and generally poor economics for the electricity generation sector. However, the longer term fundamentals for gas fired power generation remain strong and we have recently won contracts in our Maintenance and Power Solutions businesses which reflect some recovery in the market and provide a significant increase in Power Solutions backlog. We believe the Clean Energy sector will grow over the longer term, albeit more slowly over the next few years. We have some early contracts in this sector and our skills and expertise are well suited for the future growth. Strategy Implementation We have announced two decisive steps to implement the Board's strategic decision to enhance the Group's focus on its core engineering, production facilities support and gas turbine services activities. In December 2010, we announced the proposed purchase of PSN, who have over 8,000 personnel providing life of field support to oil & gas facilities through brownfield engineering, modifications, production enhancement, operations management, maintenance management and abandonment services. Upon completion, PSN will merge with Wood Group's Production Facilities business to create Wood Group PSN, which will have 22,000 people in over 30 countries across the world covering all the significant oil & gas development regions. In February 2011, the Group agreed to sell its Well Support division to GE Oil & Gas for $2.8 billion, which, we believe, fully recognises the division's strong performance and future prospects. Following the expected second quarter completion of the PSN acquisition and disposal of the Well Support division, Wood Group will be well set to grow its position as A world-leading engineering business with strong market positions in upstream, subsea and pipelines The world's leading production facilities support provider The world's leading independent industrial gas turbine aftermarket provider Looking ahead, we will further develop these market-leading positions by extending services and broadening our international presence through organic and acquisition led growth in important new markets including Angola, Brazil, Canada, Malaysia and Saudi Arabia. Return of Cash Having considered the expected net proceeds from the disposal of the Well Support division together with the forecast operating cash flow of the continuing Group, including associated working capital requirements, the continuing Group's capex profile, nearer term acquisition opportunities and the recently announced acquisition of PSN, the Board intends that Wood Group will return cash to shareholders of not less than $1.7 billion. Details regarding the return of cash are expected to be communicated to shareholders following completion of the disposal of the Well Support division. The Board and People Michel Contie was appointed to the Board in February 2010. On completion of the PSN acquisition it is intended that Bob Keiller, the CEO of PSN, will also join the Board. John Ogren will retire from our Board in May this year after almost 10 years service. His wide knowledge of the oil & gas industry has been absolutely invaluable in developing our growth strategy for North America in particular and we thank him warmly for his invaluable advice and counsel. A special thank you this year and best wishes to all our management and employees in Wood Group Well Support with whom we have worked to build a great company. We believe that GE Oil & Gas will be an excellent new home for Well Support. The combination will be complementary in capabilities and technologies, and should benefit employees and customers. And once again, our very warm thanks, on behalf of the Board and Senior Executive, to all Wood Group people around the world for their commitment and dedication to satisfying our customers' needs and consistently achieving continuous improvement. We are continuing to invest in the training and development of our people and are increasingly seeing the benefits of a global workforce. We are also pleased to support and encourage our people to become involved in community support activities around the world. Risks and Uncertainties Risks and uncertainties are inherent features of the oil & gas and power services industries and present challenges that cannot be completely eliminated. However, we assess risk carefully and, wherever possible, mitigate these to ensure that we can keep our people safe, serve our customers and, at the same time, achieve acceptable returns. Safety4 Since 2004 we have seen year on year improvement in total recordable case frequency and in 2010 maintained this trend with a further 11% reduction. This reduction was achieved through a series of proactive initiatives with a focus on the higher risk areas of our operations. Our commitment to achieving the highest standards of safety in everything we do was recognised through a series of industry awards around the world. Continuous improvement is a key measure of our success and is given the highest priority. Outlook This has been an exciting and decisive re-positioning period. Our enhanced focus on our market-leading positions in greenfield engineering, production facilities support, and the industrial gas turbine aftermarket increases our capability to add value to our clients' activities. We are well positioned to take advantage of the improving market conditions and will continue to pursue our strategy of targeted geographic expansion and extended services through organic and acquisition-led growth. Overall, we anticipate good growth over the next few years. Operational Review Engineering & Production Facilities We deliver a wide range of market leading engineering services to the upstream, subsea & pipelines, downstream & industrial and clean energy sectors. These include conceptual studies, engineering, project and construction management "EPCM" and control systems upgrades. We provide life of field support to producing assets, through brownfield engineering and modifications, production enhancement, operations management (including UK duty holder services), training, maintenance management and abandonment services. 2010 2009 % $m $m Change Revenue 3,280.2 3,241.9 1.2% EBITA 223.4 266.0 (16.0%) EBITA margin 6.8% 8.2% (1.4%pts) People5 21,400 20,800 3% Revenue in the year increased by 1%, reflecting a 11% reduction in Engineering revenue offset by 11% growth in our opex related Production Facilities activities. Engineering represented 38% of the Divisional revenue compared to 43% in 2009. In Engineering, the impact of a weak downstream, process and industrial market and delays in the progression of projects in our upstream business in the first half of 2010, was offset to some extent by continued strength in our subsea and pipeline activities. Growth in Production Facilities reflected increased demand for our services, predominantly in international markets. EBITA decreased by 16% in the year, with the margin decreasing from 8.2% to 6.8%. The margin reduction is due to the change in revenue mix towards relatively lower margin Production Facilities work, and reduced underlying margins in both Engineering and Production Facilities. Engineering margins fell as a consequence of the lower pricing of work won in 2009 and early 2010, the loss of scale efficiencies as volumes decreased and reduced utilisation. In Production Facilities, margins fell due to reduced scope on certain North Sea contracts, the slower than anticipated start up on some contracts in Australia, and lower volumes on certain specialist services in the international market. Divisional headcount at the year end, including contractors, stood at around 21,400 an increase of 3% over 2009. Engineering headcount was added, from the first quarter low of 6,300, to support increasing activity levels and ended the year up 8% on the prior year at 6,900. Production Facilities has seen a small increase in the year to 14,500, largely the result of increased international activity offset by a fall in North Sea activity. Engineering Upstream engineering represents around 40% of total Engineering revenue. Activity was lower in 2010; however, increasing bidding volumes during the year resulted in a number of project awards in the second half and the higher order book provides much improved visibility into 2011. Notable awards included the Chevron Jack & St Malo topsides design in the US Gulf of Mexico, the Noble Alen project in Equatorial Guinea, Hess Tioga in the US, Ecopetrol in Colombia and Altagas Gordondale in Canada. We have also won work in Uganda, Angola and Israel. Subsea and pipeline engineering has continued to grow and accounted for around 40% of engineering revenues. Spending on subsea pipelines is robust and we are working on over 20 major subsea projects globally with awards during the year including Apache Julimar in Australia, Chevron Jack & St Malo in the Gulf of Mexico, Total Egina in Nigeria and BG Joerbar in Norway. In our onshore pipeline business, we are continuing to broaden our client base in and are active on engineering services work for Ecopetrol in Colombia. We are also supporting infrastructure developments to link unconventional gas developments to end markets in the US. Downstream engineering in the US has continued to experience a soft market as refining margins have been suppressed and the significant activity around compliance with the MSAT 2 environmental legislation is substantially complete. Overall, the downstream market looks set to remain weak for some time. The process and industrial area saw some slight strengthening in the second half as general economic conditions in the US improved. This sector now accounts for around 20% of Engineering revenue. Broadening our international presence and extending our services remain key elements of our strategy in Engineering. During the year, we progressed our geographic expansion into key markets through the acquisition of a controlling interest in Al Hejailan Consulting, in Saudi Arabia, the award of a general engineering services (GES) contract from Saudi Aramco; the establishment of joint ventures with Sime Darby in Malaysia and Kianda in Angola; and we also broadened our services through an investment in Sgurr Energy, an engineering consultancy specialising in renewable energy projects. Production Facilities We have continued to see increased demand for skilled resources in operations & maintenance support services as our customers bring new developments on stream, particularly in international markets. In line with our strategy, we have now increased the proportion of revenues from international markets to 46% (2009: 40%). The North Sea remains our largest Production Facilities business representing around 54% of revenue and we have been successful in renewing a number of important contracts including those for Hess, Talisman and Total, which provides continuity for our business. We also remain active on our duty holder business for Centrica, Ithaca and Premier. Baker Energy, acquired in 2009, has now been integrated with our existing operations, strengthening our US business and expanding our international operations, especially in Africa. In the US we have also seen an increase in demand for our support services to the expanding market in the unconventional shale regions. In Latin America and the Caribbean we have continued to provide support under longer term contracts to Chevron and Statoil in Brazil, BP and Ecopetrol in Colombia and BP in Trinidad. In December our joint venture with CCC in the Middle East secured its first major contract with PDO for the provision of engineering and maintenance services. The contract is initially for seven years and represents a significant expansion into the growing Middle East market. In West Africa we extended our longer term contracts with Hess and Marathon in Equatorial Guinea and we secured work in Angola for BP and Chevron. In addition we have continued to support the Nigeria LNG contract. We extended our longer term support contract with Brunei Shell Petroleum in Asia Pacific and negotiated framework agreements with Woodside and ENI. We also entered into a joint venture with Wagners in Australia, focused on coal seam methane, which secured its first contract with Westside. In December we announced the acquisition of PSN, which is subject to clearance by the UK merger control authorities. It is our intention to merge PSN with Production Facilities to create the global market leader in production facilities support. This new business, which will be called Wood Group PSN, will have the capability to provide comprehensive support services to customers across the global oil & gas market. Engineering & Production Facilities Outlook In Engineering, increased forecast global E&P spend, higher bidding volumes and an improved order book supports our expectation of a continuing recovery in our upstream engineering businesses and ongoing growth in our subsea and pipeline business. This will be partially held back by the continuing subdued demand for our services in the US based downstream market through 2011. We anticipate we will see some benefit from our international expansion during the later part of 2011 with the start of work on the GES contract, and with our joint venture partners Sime Darby in Malaysia and Kianda in Angola. Overall, increased bidding in the second half of 2010 has resulted in our order book being at the higher end of our typical range, representing approximately eight months of forecast revenue. We expect that scale efficiencies resulting from higher volumes and slightly improving utilisation, somewhat offset by lower pricing on orders secured in 2010, will lead to an improved EBITA margin in 2011. In Production Facilities, we expect to see good revenue growth in the Middle East in 2011 with the start up of the PDO contract, albeit start up costs will largely offset any contribution to earnings in the first year. In other markets, Gulf of Mexico support activities are anticipated to perform well, and in Asia Pacific we anticipate a good contribution from work on coal seam methane in Australia and our longer term support contracts. Our North Sea business is expected to reduce due to the loss of some contracts that went to re-tender and a fall in activity on certain longer term contracts, offset by increases in project related work for existing customers. Subject to UK merger control clearance, we will see a significant increase in overall activity through our acquisition of PSN, which should add some $1.2bn of revenue on an annualised basis and over 8,000 additional people. Overall we expect margins to be relatively flat in 2011 as the scale benefits of increased activity will be offset by start up costs in certain overseas locations. Well Support We provide solutions, products and services to enhance production rates and efficiency from oil & gas reservoirs. We are among the market leaders in artificial lift using electric submersible pumps "ESPs" and in surface wellheads and valves. We also provide electric line and slickline services. 2010 2009 % $m $m Change Revenue 947.1 813.7 16.4% EBITA 128.1 75.1 70.6% EBITA margin 13.5% 9.2% 4.3%pts People 3,900 3,500 11% Revenue was 16% higher than 2009 due to the impact of the strong US rig count on our Pressure Control and Logging Services businesses, together with good ESP activity globally. EBITA increased by 71%, reflecting higher volumes, the benefit of our continued focus on operating efficiency, cost discipline and a slightly improved pricing environment. Electric Submersible Pumps ("ESPs") Our ESP business represents around 52% of the division's revenue. ESP continues to perform strongly internationally, typically under longer term contracts, in regions including South America, the Middle East and Africa. International revenue accounts for 71% of ESP's total revenue. Growth in the US, where we are a market leader in the sale, operation and service of ESPs, was driven by strong transactional activity. Good revenue growth, together with our continued focus on cost discipline and process efficiency, has resulted in higher margins. Pressure Control Pressure Control represents 36% of the division's revenue and is the leading surface wellhead provider in the US serving more than 25% of operating rigs. The recovery in the US drilling rig count, particularly as a result of an increase in horizontal liquids related drilling in the shale regions, led to a significant increase in revenue in 2010. Internationally, we continued to develop in the Middle East and Asia Pacific and opened our manufacturing plant in Saudi Arabia. International business represents 27% of Pressure Control activity. Overall margins have significantly improved in 2010 as a result of increased volumes, improved supply chain processes, and control of overhead costs. Logging Services Our Logging Services business has seen a good increase in activity during 2010 and represented 12% of the division's revenue. The US business, which encompasses slickline and cased hole electric wireline services and has a strong position in deepwater pipe recovery and completion services in the Gulf of Mexico, performed strongly in 2010. Robust drilling activity in the US land unconventional shale and traditional markets more than offset the slowdown offshore. In addition, we achieved a strong performance in Argentina where we are the leading provider of cased hole electric wireline services. Improved volumes in 2010 and the impact of cost reduction actions taken in 2009 have contributed to significantly increased profitability in the year. Outlook All three Well Support businesses are anticipated to perform strongly in 2011 and are well positioned to take advantage of a growing market in mature oilfield production and the developments in the US unconventional shale regions. We believe that the US drilling rig count average for 2011 will be above that of 2010 which should result in increased volumes. We also anticipate that some easing of pricing pressure, and the continued benefit of structural changes made to the cost base in 2009, will contribute to further EBITA margin improvement. On 14 February 2011 we announced our intention to dispose of our Well Support division for $2.8 billion. Subject to shareholder approval and certain regulatory approvals the disposal is targeted to complete by the end of the second quarter of 2011. Further details of this transaction are provided in a separate announcement. Gas Turbine Services We are a leading independent provider of services and solutions for clients in the power, oil & gas and renewable energy markets on a worldwide basis. Our aftermarket Maintenance activities include facility operations & maintenance, repair & overhaul of gas, wind and steam turbines, pumps, compressors and other high-speed rotating equipment. Our Power Solutions business provides power plant engineering, procurement & construction, and construction management services to the owners of power generation facilities. 2010 2009 % $m $m Change Revenue 804.9 825.6 (2.5%) EBITA 46.1 65.7 (29.8%) EBITA margin 5.7% 8.0% (2.3%pts) People 3,300 3,500 (6%) Maintenance revenue, covering the Division's operations & maintenance, and repair & overhaul activities, fell from around $740m to $715m, principally reflecting lower spending by customers in North America and Europe. Power Solutions revenue was flat at around $90m with work performed on recently awarded major contracts contributing around 50% of Power Solutions revenue, on which no profit was recognised due to their early stages of completion. EBITA before exceptional items for 2010 was $46.1m. Maintenance EBITA fell by $10m with activity impacted by deferrals of spend by customers and losses at our Connecticut component repair shop. Power Solutions generated a small loss for the year, reflecting low activity levels for much of the year, and the cost of expanding our execution capability. Across the Division, we have continued to seek cost reductions in both direct and indirect costs wherever possible and this contributed to an improved EBITA performance in the second half of the year. During the year, we took the decision to close our loss making Connecticut component repair shop and also undertook a restructuring of our organisation which resulted in a reduction of more than 10% of indirect headcount. Together, these actions resulted in one off costs of $21m, of which the cash element is around $11m, and are expected to deliver annual cash savings of around $8m. Headcount has reduced to 3,300 at the end of 2010 as compared to 3,500 for 2009 largely as a result of the cost reduction measures noted above. In the oil & gas sector, where we provide Maintenance services in support of turbines used in power generation, gas compression and transmission, we made progress in extending our presence in a number of new international markets, including significant contracts in Peru, Canada and Iraq. We also continued to be successful with our services in the North Sea managing rotating equipment reliability. Our Maintenance business supporting turbines in the power generation market was affected by soft market conditions, although we saw good performance on some of our longer term contracts. We also won several new long term contracts in a number of different countries, particularly during the latter part of the year, including in Iraq, Oman, Germany, Australia and USA, all of which provide significant order book for future years. Overall in our Maintenance activities, we continued to focus on building our engineering and operational capability and to build up our work under longer term contracts. We are now supporting around 19,000 MW under longer term contracts (2009: 17,000 MW). In Power Solutions, market confidence began to return during the course of the year, and we were awarded two major contract awards in the fourth quarter with GWF in North America and Dorad Energy in Israel. These two contracts represent a solid backlog to underpin performance recovery in 2011 and beyond. Outlook We expect to see some recovery in the Maintenance market in 2011, and this greater volume of activity, coupled with the cost reduction measures already implemented, should result in margin improvement. In Power Solutions the award of the GWF and Dorad contracts has resulted in backlog of over $1billion. We expect this business to represent around 25% of divisional revenue and to begin to deliver an EBITA contribution in 2011, with stronger EBITA contribution in 2012 and 2013 as the projects progress towards completion. Overall we expect a strong recovery in GTS EBITA in 2011. Financial Review 2010 2009 % $m $m Change Revenue 5,063.1 4,927.1 3% EBITA 344.8 358.4 (4%) EBITA Margin 6.8% 7.3% (0.5%pts) Amortisation 29.0 24.1 Exceptional items 27.6 35.8 Operating profit 288.2 298.5 (3%) Net finance expense 33.6 33.7 Profit before tax 254.6 264.8 (4%) Tax 88.8 100.6 Profit for the year 165.8 164.2 1% Basic EPS (cents) 32.4c 32.1c 1% Adjusted diluted EPS (cents) 39.7c 41.8c (5%) Dividend per share (cents) 11.0c 10.0c 10% 2010 saw an increase in revenue and a decrease in EBITA and EBITA margin. Revenue increased by 3% to $5,063.1m, EBITA fell by 4% to $344.8m and EBITA margin by 50 basis points to 6.8%. A detailed review of our trading performance is contained within the Chairman and Chief Executive's report, together with the divisional reviews. The amortisation charge of $29.0m includes $10.5m (2009: $11.0m) of amortisation relating to other intangible assets arising from acquisitions. The acquisition of PSN, which is subject to UK merger control clearance, is likely to lead to a significant increase in the value of other intangible assets and corresponding amortisation. A full assessment of the split between other intangible assets and goodwill will be provided post acquisition. During 2010, we recorded an exceptional charge of $27.6m. Within this, $21.0m was an impairment and restructuring charge in the Gas Turbine Services division. The majority of the $21.0m charge relates to the closure of our component repair facility in Connecticut with the balance resulting from divisional restructuring, which included a reduction of more than 10% of indirect headcount. Ongoing savings are expected to be around $8m per annum. $6.6m of acquisition related costs incurred during the year have been recorded as an exceptional charge. These costs mainly relate to the PSN acquisition. The net finance expense in the period of $33.6m (2009:$33.7m) is made up of a finance charge of $35.9m (2009: $36.2m) and finance income of $2.3m (2009: $2.5m). The finance charge of $35.9m (2009:$36.2m) is comprised of interest on debt of $20.1m (2009: $23.5m) and other interest charges of $15.8m (2009: $12.7m). Included in the other interest charges of $15.8m (2009:$12.7m) are $8.4m (2009: $3.4m) of arrangement fees incurred in relation to the refinancing carried out in 2009. The fees were being amortised over three years but the write off has been accelerated in 2010 as a result of the renegotiation of the bank facilities early in 2011. The other interest charge also includes non - utilisation fees of $5.1m (2009: $5.3m), deemed interest on deferred consideration and pension liabilities of $1.8m (2009: $4.0m), and bank fees and charges relating to the PSN acquisition of $0.5m (2009: nil) . The movement in the tax charge is outlined below: 2010 2009 $m $m Tax charge 88.8 100.6 Tax on exceptional items 6.2 - Adjusted tax charge 95.0 100.6 Profit before tax 254.6 264.8 Exceptional items 27.6 35.8 Amortisation of other intangible assets 10.5 11.0 on acquisition Adjusted profit before tax 292.7 311.6 Effective tax rate 32.5% 32.3% The Group's effective tax rate has increased from 32.3% to 32.5% and reflects an underlying lower tax rate, offset primarily by adjustments in respect of prior years and non-recognition of losses. The proposed final dividend is 7.6c. This results in a full year dividend of 11.0c, an increase of 10% from last year. Dividend cover 6 for 2010 was 3.6 times (2009: 4.2 times). Summary balance sheet 2010 2009 $m $m Assets Non-current assets 1,059.4 1,003.8 Current assets 1,921.1 1,850.7 Liabilities Current liabilities 1,230.7 1,137.1 Net current assets 690.4 713.6 Non-current liabilities 332.6 436.4 Net assets 1,417.2 1,281.0 Total shareholders' equity 1,406.3 1,270.2 Non controlling interest 10.9 10.8 Total equity 1,417.2 1,281.0 Non-current assets are primarily made up of goodwill and other intangible assets, and property plant and equipment. Capital efficiency and gearing7 The Group's ROCE3 decreased from 26.3% to 24.8%. The decrease reflects the reduced EBITA in the period and slightly higher capital employed. The Group's ratio of OCER8 has improved from 16.8% to 16.7% at 31 December 2010, reflecting a more efficient use of operating capital in the year. The Group's gearing ratio has reduced from 6.9% to 1.1% during the year reflecting lower net debt at 31 December 2010. Cashflow and net debt 2010 2009 $m $m Opening net debt (87.9) (248.8) EBITA 344.8 358.4 Depreciation and other non cash items 69.5 68.8 Cash generated from operations before 413.9 427.2 working capital movements Working capital movements (19.4) 118.3 Cash generated from operations 394.5 545.5 Acquisitions and deferred consideration (68.6) (110.1) Capex and intangible assets (70.0) (68.4) Disposals - 10.7 (Purchase)/sale of trust shares (net) (15.8) 4.3 Tax paid (99.3) (113.9) Interest, dividends and other (74.1) (73.7) Exchange movements on net debt 6.1 (33.5) Decrease in net debt 72.8 160.9 Closing net debt (15.1) (87.9) Cash and cash equivalents 180.1 208.6 During the year the Group generated $394.5m (2009: $545.5m) of cash from operations, which was used to fund acquisitions, capex and intangible assets amounting to $138.6m (2009: $178.5m) and which contributed to net debt reducing by $72.8m to $15.1m (2009: $87.9m). Included in the cash generated from operations was a net $19.4m outflow (2009: $118.3m inflow) from working capital. The increase in net working capital was principally due to the higher revenue in the period and represents 14.3% of incremental revenue. The working capital inflow in 2009 primarily reflected a reduction in revenue in 2009. The acquisition cost of $68.6m comprised $20.9m in relation to acquisitions in the year and $47.7m in relation to deferred consideration for previous years' acquisitions. Of the deferred consideration, $9.9m was for a working capital settlement on the 2009 Baker Energy acquisition, and the remainder was for performance based payments on four acquisitions made in prior years. Capex and intangible assets investment at $70.0m was broadly similar to 2009. The level of debt carried by the Group fluctuates throughout the year and is typically lower at December and June. The average and closing levels of gross debt are shown below. 2010 2009 $m $m Average Gross Debt 364.3 421.3 Average Net Debt 182.3 229.4 Closing Gross Debt 195.2 296.5 Closing Net Debt 15.1 87.9 Credit facilities At 31 December 2010 the Group had unutilised borrowing facilities of $749.0m (2009: $780.8m) representing 79% (2009: 72%) of total borrowing facilities. Total borrowing facilities amount to $944.2m. In addition the Group has a number of facilities covering the issue of bonds, guarantees and letters of credit amounting to $665.2m (2009: $327.2m). At 31 December 2010 these facilities were 61% utilised (2009: 58%). The Group renegotiated its $800m bilateral banking facilities in February 2011 which will result in lower pricing and non utilisation fees going forward. Net Debt to EBITDA and Interest Cover9 The ratio of net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) fell from 0.21 times to 0.04 times. Interest cover decreased from 10.6 times to 10.3 times, as a result of the lower EBITA in the year. Foreign Exchange and constant currency reporting The Group's revenue and EBITA can be impacted by movements in foreign exchange rates, including the effect of retranslating the results of subsidiaries with various functional currencies into US dollars at different exchange rates. Given there was no significant movement in the average US dollar rate to other major currencies in which we operate between 2009 and 2010, our results in constant currency terms are materially the same as those presented above. Pensions The majority of the Group's pension arrangements are on a defined contribution basis. The Group operates one UK defined benefit scheme which had 348 active members and 634 deferred, pensionable deferred or pensionable members at 31 December 2010. At 31 December 2010 the scheme had a deficit of $33.3m (2009: $34.3m). In assessing the potential liabilities, judgment is required to determine the assumptions around future salary and pension increases, inflation, investment returns and member longevity. The scheme is closed to new members and future benefits under the scheme are provided on a Career Average Revalued Earnings "CARE" basis. Full details of pension assets and liabilities are provided in note 29 to the Group financial statements. Acquisitions and disposals In December 2010, the Group entered into an agreement to acquire PSN for a total enterprise value of $955m. The acquisition is subject to UK merger control clearance and is expected to be completed in the second quarter of 2011. In April 2010, the Group completed the purchase of a majority shareholding in Al-Hejailan Consultants ("AHC"). AHC provides engineering and project management services to Saudi Arabia's oil and gas and chemical industries. In September 2010, the Group acquired a majority shareholding in SgurrEnergy Ltd ("SgurrEnergy"). SgurrEnergy provides a range of consultancy, engineering and measurement services to the developers and funders of wind farms and other renewable energy projects. The acquisitions carried out during the year provide the Group with access to new markets and strengthen the Group's capabilities in certain areas. The acquired companies are now able to access the Group's wider client base and use the Group's existing relationships to further grow and develop their business. These factors contributed to the goodwill recognised by the Group on acquisitions during the year. We announced on 14 February 2011 that we have entered into an agreement to sell our Well Support division to GE for a cash consideration of $2.8bn. Following the disposal the board of directors intend that Wood Group will return cash of not less than $1.7bn to shareholders. The disposal is conditional, amongst other things, upon obtaining anti-trust clearances, and approval of the shareholders of Wood Group at a General Meeting. The disposal is targeted for completion by the end of quarter two 2011. Footnotes EBITA represents operating profit of $288.2m (2009: $298.5m) for 2010 before adjusting for exceptional items of $27.6m (2009: $35.8m), and amortisation of $29.0m (2009: $24.1m). This financial term is provided as it is a key unit of measurement used by the Group in the management of its business. Shares held by the Group's employee share trusts are excluded from the number of shares in calculating earnings per ordinary share. Adjusted diluted earnings per ordinary share is based on the diluted number of shares, taking account of share options where the effect of these is dilutive. Adjusted diluted earnings per ordinary share is calculated on profit for the year excluding the post tax impact of amortisation and exceptional items. Return on Capital Employed "ROCE" is EBITA divided by average equity plus average net debt and excludes the GTS business to be disposed. Safety cases are measured by TRCF. TRCF is Total Recordable Case Frequency (LWC+RWC+MTC) per million man hours. LWC Lost Work Case RWC Restricted Work Case MTC Medical Treatment Case Number of employees and contractors at 31 December 2010. Dividend cover is adjusted diluted earnings per ordinary share divided by the total dividend per ordinary share for the period. Gearing is net debt divided by total shareholders' equity. Operating Capital Employed to Revenue "OCER" is operating capital employed (property, plant and equipment, intangible assets (excluding intangibles recognised on acquisition), inventories and trade and other receivables less trade and other payables) divided by revenue. Interest cover is EBITA divided by net finance costs. Important Notice This document does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares in the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the shares of the Company. Certain statements in this document are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward looking statements. These risks, uncertainties or assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward looking statements contained in this document regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future. You should not place undue reliance on forward looking statements, which speak as only of the date of this document. JOHN WOOD GROUP PLC GROUP FINANCIAL STATEMENTS FOR THE YEAR TO 31ST DECEMBER 2010 Company Registration Number 36219 Consolidated income statement for the year to 31 December 2010 2010 2009 Note $m $m Revenue 1 5,063.1 4,927.1 Cost of sales (4,001.1) (3,870.1) Gross profit 1,062.0 1,057.0 Administrative expenses (746.2) (722.7) Exceptional items 4 (27.6) (35.8) Operating profit 1 288.2 298.5 Finance income 2 2.3 2.5 Finance expense 2 (35.9) (36.2) Profit before taxation 3 254.6 264.8 Taxation 5 (88.8) (100.6) Profit for the year 165.8 164.2 Profit attributable to: Owners of the parent 166.0 163.2 Non-controlling interests 25 (0.2) 1.0 165.8 164.2 Earnings per share (expressed in cents per share) Basic 7 32.4 32.1 Diluted 7 31.3 31.2 The notes on pages 7 to 52 are an integral part of these consolidated financial statements Consolidated statement of comprehensive income for the year to 31 December 2010 2010 2009 Note $m $m Profit for the year 165.8 164.2 Other comprehensive income Actuarial gains/(losses) on retirement benefit 29 1.0 (8.4) liabilities Movement in deferred tax relating to retirement (0.3) 2.4 benefit liabilities Cash flow hedges 24 3.3 2.4 Net exchange movements on retranslation of foreign 24 3.1 12.6 currency net assets Total comprehensive income for the year 172.9 173.2 Total comprehensive income for the year is attributable to: Owners of the parent 172.8 172.0 Non-controlling interests 25 0.1 1.2 172.9 173.2 The notes on pages 7 to 52 are an integral part of these consolidated financial statements Consolidated balance sheet as at 31 December 2010 2010 2009 Note $m $m Assets Non-current assets Goodwill and other intangible assets 8 677.5 679.3 Property plant and equipment 9 238.2 254.2 Long term receivables 12 43.4 8.0 Derivative financial instruments 17 0.1 - Deferred tax assets 19 100.2 62.3 1,059.4 1,003.8 Current assets Inventories 11 663.8 618.9 Trade and other receivables 12 1,050.8 987.4 Income tax receivable 25.2 29.8 Derivative financial instruments 17 1.2 6.0 Cash and cash equivalents 13 180.1 208.6 1,921.1 1,850.7 Liabilities Current liabilities Borrowings 15 30.1 19.0 Derivative financial instruments 17 0.3 3.3 Trade and other payables 14 1,139.5 1,061.8 Income tax liabilities 60.8 53.0 1,230.7 1,137.1 Net current assets 690.4 713.6 Non-current liabilities Borrowings 15 165.1 277.5 Derivative financial instruments 17 2.7 3.3 Deferred tax liabilities 19 2.3 7.9 Retirement benefit liabilities 29 33.3 34.3 Other non-current liabilities 16 82.0 59.7 Provisions 18 47.2 53.7 332.6 436.4 Net assets 1,417.2 1,281.0 Equity attributable to owners of the parent Share capital 21 26.3 26.3 Share premium 22 315.8 315.8 Retained earnings 23 1,007.6 877.6 Other reserves 24 56.6 50.5 1,406.3 1,270.2 Non-controlling interests 25 10.9 10.8 Total equity 1,417.2 1,281.0 The financial statements on pages 2 to 52 were approved by the board of directors on 18 February 2011. Allister G Langlands, Director Alan G Semple, Director The notes on pages 7 to 52 are an integral part of these consolidated financial statements Consolidated statement of changes in equity for the year to 31 December 2010 Note Share Share Retained Other Equity Non- Total attributable Capital Premium Earnings Reserves to owners of Controlling Equity the parent $m $m $m $m Interests $m $m $m At 1 January 26.2 311.8 760.2 35.7 1,133.9 13.1 1,147.0 2009 Profit for the - - 163.2 - 163.2 1.0 164.2 year Other comprehensive income: Actuarial 29 - - (8.4) - (8.4) - (8.4) losses on retirement benefit liabilities Movement in - - 2.4 - 2.4 - 2.4 deferred tax relating to retirement benefit liabilities Cash flow - - - 2.4 2.4 - 2.4 hedges Net exchange - - - 12.4 12.4 0.2 12.6 movements on retranslation of foreign currency net assets Total - - 157.2 14.8 172.0 1.2 173.2 comprehensive income for the year Transactions with owners: Dividends paid - - (50.3) - (50.3) (0.4) (50.7) Non-controlling 25 - - - - - 2.7 2.7 interests acquired Non-controlling 25 - - - - - (5.8) (5.8) interests disposed Credit relating - - 11.2 - 11.2 - 11.2 to share based charges Tax credit - - 7.0 - 7.0 - 7.0 relating to share option schemes Allocation of 0.1 4.0 (4.1) - - - - shares to employee share trusts Shares - - (1.3) - (1.3) - (1.3) purchased by employee share trusts Shares disposed - - 4.3 - 4.3 - 4.3 of by employee share trusts Exchange - - (6.6) - (6.6) - (6.6) movements in respect of shares held by employee share trusts At 31 December 26.3 315.8 877.6 50.5 1,270.2 10.8 1,281.0 2009 Profit for the - - 166.0 - 166.0 (0.2) 165.8 year Other comprehensive income: Actuarial gains 29 - - 1.0 - 1.0 - 1.0 on retirement benefit liabilities Movement in - - (0.3) - (0.3) - (0.3) deferred tax relating to retirement benefit liabilities Cash flow - - - 3.3 3.3 - 3.3 hedges Net exchange - - - 2.8 2.8 0.3 3.1 movements on retranslation of foreign currency net assets Total - - 166.7 6.1 172.8 0.1 172.9 comprehensive income for the year Transactions with owners: Dividends paid - - (53.1) - (53.1) (1.1) (54.2) Non-controlling 25 - - - - - 0.3 0.3 interests acquired Investment by 25 - - - - - 0.8 0.8 non-controlling interests Credit relating - - 16.7 - 16.7 - 16.7 to share based charges Tax credit - - 12.5 - 12.5 - 12.5 relating to share option schemes Shares 23 - - (20.8) - (20.8) - (20.8) purchased by employee share trusts Shares disposed 23 - - 6.3 - 6.3 - 6.3 of by employee share trusts Exchange - - 1.7 - 1.7 - 1.7 movements in respect of shares held by employee share trusts At 31 December 26.3 315.8 1,007.6 56.6 1,406.3 10.9 1,417.2 2010 The notes on pages 7 to 52 are an integral part of these consolidated financial statements. Consolidated cash flow statement for the year to 31 December 2010 2010 2009 Note $m $m Cash generated from operations 26 394.5 545.5 Tax paid (99.3) (113.9) 295.2 431.6 Net cash from operating activities Cash flows from investing activities Acquisition of subsidiaries (net of cash and 27 (20.9) (101.0) borrowings acquired) Deferred consideration payments 27 (47.7) (9.1) Proceeds from disposal of businesses (net of cash - 10.7 and borrowings disposed) Purchase of property plant and equipment (54.4) (54.0) Proceeds from sale of property plant and equipment 5.6 6.6 Purchase of intangible assets (15.6) (14.4) Proceeds from disposal of other intangible assets - 0.6 Investment by non-controlling interests 25 0.8 - Net cash used in investing activities (132.2) (160.6) Cash flows from financing activities Repayment of bank loans (97.3) (155.0) Purchase of shares in employee share trusts (22.1) - Disposal of shares in employee share trusts 6.3 4.3 Interest received 2.3 2.5 Interest paid (28.6) (32.7) Dividends paid to shareholders 6 (53.1) (50.3) Dividends paid to non-controlling interests 25 (1.1) (0.4) Net cash used in financing activities (193.6) (231.6) Net (decrease)/increase in cash and cash equivalents (30.6) 39.4 Effect of exchange rate changes on cash and cash 2.1 (6.9) equivalents Opening cash and cash equivalents 208.6 176.1 Closing cash and cash equivalents 13 180.1 208.6 The notes on pages 7 to 52 are an integral part of these consolidated financial statements Notes to the financial statements for the year to 31 December 2010 Accounting Policies Basis of preparation These financial statements have been prepared in accordance with IFRS and IFRIC interpretations adopted by the European Union (`EU') and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Group financial statements have been prepared on a going concern basis under the historical cost convention as modified by the revaluation of financial assets and liabilities (including derivative financial instruments) at fair value through the income statement. Significant accounting policies The Group's significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Basis of consolidation The Group financial statements are the result of the consolidation of the financial statements of the Group's subsidiary undertakings from the date of acquisition or up until the date of disposal as appropriate. Subsidiaries are entities over which the Group has the power to govern the financial and operating policies and generally accompanies a shareholding of more than one half of the voting rights. The Group's interests in joint ventures are accounted for using proportional consolidation. Under this method the Group includes its share of each joint venture's income, expenses, assets, liabilities and cash flows on a line by line basis in the consolidated financial statements. Transactions between Group subsidiaries are eliminated and transactions between the Group and its joint ventures are eliminated to the extent of the Group's interest in the joint venture. All Group companies apply the Group's accounting policies and prepare financial statements to 31 December. Critical accounting judgments and estimates The preparation of the financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. These estimates are based on management's best knowledge of the amount, event or actions and actual results ultimately may differ from those estimates. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are addressed below. (a) Impairment of goodwill The Group carries out impairment reviews whenever events or changes in circumstance indicate that the carrying value of goodwill may not be recoverable. In addition, the Group carries out an annual impairment review. An impairment loss is recognised when the recoverable amount of goodwill is less than the carrying amount. The impairment tests are carried out by CGU ("Cash Generating Unit") and reflect the latest Group budgets. The budgets are based on various assumptions relating to the Group's businesses including oil price, gas price, rig count, resource utilisation, foreign exchange rates, contract awards and contract margins. (b) Revenue recognition Revenue on lump sum contracts for services, construction contracts and fixed price long term service agreements is recognised according to the stage of completion reached in the contract by measuring the proportion of costs incurred for work performed to total estimated costs. Use of the percentage of completion method requires the use of estimates in assessing the stage of completion reached. (c) Income taxes The Group is subject to income taxes in numerous jurisdictions. Judgement is required in determining the worldwide provision for income taxes. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. Functional currency The Group's earnings stream is primarily US dollars and the principal functional currency is the US dollar, being the most representative currency of the Group. The Group's financial statements are therefore prepared in US dollars. Notes to the financial statements for the year to 31 December 2010 Accounting Policies (continued) The following exchange rates have been used in the preparation of these accounts: 2010 2009 Average rate £1 = $ 1.5459 1.5679 Closing rate £1 = $ 1.5657 1.6149 Foreign currencies Income statements of entities whose functional currency is not the US dollar are translated into US dollars at average rates of exchange for the period and assets and liabilities are translated into US dollars at the rates of exchange ruling at the balance sheet date. Exchange differences arising on translation of net assets in such entities held at the beginning of the year, together with those differences resulting from the restatement of profits and losses from average to year end rates, are taken to the currency translation reserve. In each individual entity, transactions in overseas currencies are translated into the relevant functional currency at the exchange rates ruling at the date of the transaction. Where more than one exchange rate is available, the appropriate rate at which assets can be readily realised and liabilities can be extinguished is used. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rates ruling at the balance sheet date. Any exchange differences are taken to the income statement. Where an entity's functional currency is in a hyperinflationary economy, the income statement and balance sheet of that entity will be translated into US dollars using the exchange rate at the reporting date where the impact of the change in exchange rate due to hyperinflation is material to the Group. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rate ruling at the balance sheet date. The directors consider it appropriate to record sterling denominated equity share capital in the accounts of John Wood Group PLC at the exchange rate ruling on the date it was raised. Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group's activities. Revenue is recognised only when it is probable that the economic benefits associated with a transaction will flow to the Group and the amount of revenue can be measured reliably. Revenue from services is recognised as the services are rendered, including where they are based on contractual rates per man hour in respect of multi-year service contracts. Incentive performance revenue is recognised upon completion of agreed objectives. Revenue from product sales is recognised when the significant risks and rewards of ownership have been transferred to the buyer, which is normally upon delivery of products and customer acceptance, if any. Where revenue relates to a multi-element contract, then each element of the contract is accounted for separately. Revenue is stated net of sales taxes (such as VAT) and discounts. Revenue on lump-sum contracts for services, construction contracts and fixed price long term service agreements is recognised according to the stage of completion reached in the contract by measuring the proportion of costs incurred for work performed to total estimated costs. An estimate of the profit attributable to work completed is recognised once the outcome of the contract can be estimated reliably. Expected losses are recognised in full as soon as losses are probable. The net amount of costs incurred to date plus recognised profits less the sum of recognised losses and progress billings is disclosed as trade receivables/trade payables. Exceptional items Exceptional items are those significant items which are separately disclosed by virtue of their size or incidence to enable a full understanding of the Group's financial performance. Transactions which may give rise to exceptional items include gains and losses on disposal of investments, write downs or impairments of assets including goodwill, restructuring costs or provisions, litigation settlements, acquisition costs and one off gains and losses arising from currency devaluations. Notes to the financial statements for the year to 31 December 2010 Accounting Policies (continued) Finance expense/income Interest income and expense is recorded in the income statement in the period to which it relates. Arrangement fees in respect of the Group's borrowing facilities are amortised over the period to which the facility relates. Interest relating to the discounting of deferred consideration liabilities is recorded as finance expense. Dividends Dividends to the Group's shareholders are recognised as a liability in the period in which the dividends are approved by shareholders. Goodwill The Group uses the purchase method of accounting to account for acquisitions. Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Goodwill is carried at cost less accumulated impairment losses. Acquisition costs relating to business combinations prior to 31 December 2009 were treated as part of the cost of acquisition and capitalised as goodwill. In accordance with IFRS 3 (revised) acquisition costs relating to business combinations completed on or after 1 January 2010 are expensed in the income statement. Other intangible assets Intangible assets are carried at cost less accumulated amortisation. Intangible assets are recognised if it is probable that there will be future economic benefits attributable to the asset, the cost of the asset can be measured reliably, the asset is separately identifiable and there is control over the use of the asset. Where the Group acquires a business, other intangible assets such as customer contracts are identified and evaluated to determine the carrying value on the acquisition balance sheet. Intangible assets are amortised over their estimated useful lives, as follows: Computer software 3-5 years Other intangible assets 1-10 years Property plant and equipment Property plant and equipment (PP&E) is stated at cost less accumulated depreciation and impairment. No depreciation is charged with respect to freehold land and assets in the course of construction. Transfers from PP&E to current assets are undertaken at the lower of cost and net realisable value. Depreciation is calculated using the straight line method over the following estimated useful lives of the assets: Freehold and long leasehold buildings 25-50 years Short leasehold buildings period of lease Plant and equipment 3-10 years When estimating the useful life of an asset group, the principal factors the Group takes into account are the durability of the assets, the intensity at which the assets are expected to be used and the expected rate of technological developments. Impairment The Group performs impairment reviews in respect of PP&E and other intangible assets whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. In addition, the Group carries out annual impairment reviews in respect of goodwill. An impairment loss is recognised when the recoverable amount of an asset, which is the higher of the asset's fair value less costs to sell and its value in use, is less than its carrying amount. For the purposes of impairment testing, goodwill is allocated to the appropriate cash generating unit ("CGU"). The CGUs are aligned to the structure the Group uses to manage its business. Cash flows are discounted in determining the value in use. Notes to the financial statements for the year to 31 December 2010 Accounting Policies (continued) Inventories Inventories, which include materials, work in progress and finished goods and goods for resale, are stated at the lower of cost and net realisable value. Product based companies determine cost by weighted average cost methods using standard costing to gather material, labour and overhead costs. These costs are adjusted, where appropriate, to correlate closely the standard costs to the actual costs incurred based on variance analysis. Service based companies' inventories consist of spare parts and other consumables. Serialised parts are costed using the specific identification method and other materials are generally costed using the first in, first out method. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and estimated selling expenses. Allowance is made for obsolete and slow-moving items, based upon annual usage. Cash and cash equivalents Cash and cash equivalents include cash in hand and other short-term bank deposits with maturities of three months or less and bank overdrafts where there is a right of set-off. Bank overdrafts are included within borrowings in current liabilities where there is no right of set-off. Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The provision is determined by reference to previous experience of recoverability for receivables in each market in which the Group operates. Trade payables Trade payables are recognised initially at fair value and subsequently measured at amortised cost. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Deferred consideration Where it is probable that deferred consideration is payable on the acquisition of a business based on an earn out arrangement, an estimate of the amount payable is made at the date of acquisition and reviewed regularly thereafter, with any change in the estimated liability being reflected in the income statement. Changes in the estimated liability in respect of acquisitions completed before 31 December 2009 are reflected in goodwill. Where deferred consideration is payable after more than one year the estimated liability is discounted using an appropriate rate of interest. Taxation The tax charge represents the sum of tax currently payable and deferred tax. Tax currently payable is based on the taxable profit for the year. Taxable profit differs from the profit reported in the income statement due to items that are not taxable or deductible in any period and also due to items that are taxable or deductible in a different period. The Group's liability for current tax is calculated using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax is provided, using the full liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. The principal temporary differences arise from depreciation on PP&E, tax losses carried forward and, in relation to acquisitions, the difference between the fair values of the net assets acquired and their tax base. Tax rates enacted, or substantially enacted, by the balance sheet date are used to determine deferred tax. Notes to the financial statements for the year to 31 December 2010 Accounting Policies (continued) Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Accounting for derivative financial instruments and hedging activities Derivatives are initially recognised at fair value on the date the contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either: (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); (2) hedges of highly probable forecast transactions (cash flow hedge); or (3) hedges of net investments in foreign operations (net investment hedge). Where hedging is to be undertaken, the Group documents the relationship between the hedging instrument and the hedged item at the inception of the transaction, as well as its risk management objective and strategy for undertaking the hedge transaction. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged items. The Group performs effectiveness testing on a quarterly basis. Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in administrative expenses in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the hedging reserve in equity. The gain or loss relating to the ineffective portion is recognised immediately in administrative expenses in the income statement. Amounts accumulated in equity are recycled through the income statement in periods when the hedged item affects profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. Net investment hedge Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in the currency translation reserve in equity; the gain or loss relating to the ineffective portion is recognised immediately in administrative expenses in the income statement. Gains and losses accumulated in equity are included in the income statement when the foreign operation is disposed of. Derivatives that are not designated as hedges Certain derivatives, whilst providing effective economic hedges are not designated as hedges. Changes in the fair value of any derivative instruments that are not designated for hedge accounting are recognised immediately in administrative expenses in the income statement. Fair value estimation The fair value of interest rate swaps is calculated as the present value of their estimated future cash flows. The fair value of forward foreign exchange contracts is determined using forward foreign exchange market rates at the balance sheet date. The fair value of currency options is determined using market rates at the balance sheet date. The fair values of all derivative financial instruments are obtained from valuations provided by financial institutions. The carrying values of trade receivables and payables approximate to their fair values. Notes to the financial statements for the year to 31 December 2010 Accounting Policies (continued) The fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. Fair value measurements are classified using the following hierarchy:- (a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) (b) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (market price) or indirectly (derived from prices) (Level 2); and (c) inputs for the assets or liabilities that are not based on observable market data (Level 3). The Group's fair values of derivative financial instruments are measured using Level 2 techniques. Operating leases As lessee Payments made under operating leases are charged to the income statement on a straight line basis over the period of the lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight line basis over the period of lease. As lessor Operating lease rental income arising from leased assets is recognised in the income statement on a straight line basis over the period of the lease. Retirement benefit liabilities The Group operates a defined benefit scheme and a number of defined contribution schemes. The liability recognised in respect of the defined benefit scheme represents the present value of the defined benefit obligations less the fair value of the scheme assets. The assets of this scheme are held in separate trustee administered funds. The defined benefit scheme's assets are measured using market values. Pension scheme liabilities are measured annually by an independent actuary using the projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. The increase in the present value of the liabilities of the Group's defined benefit scheme expected to arise from employee service in the period is charged to operating profit. The expected return on the scheme assets and the increase during the period in the present value of the scheme's liabilities arising from the passage of time are included in finance income/expense. Actuarial gains and losses are recognised in the statement of comprehensive income in full in the period in which they occur. The defined benefit scheme's net assets or net liabilities are recognised in full and presented on the face of the balance sheet. The Group's contributions to defined contribution schemes are charged to the income statement in the period to which the contributions relate. Provisions Provision is made for the estimated liability on all products and services still under warranty, including claims already received, based on past experience. Other provisions are recognised where the Group is deemed to have a legal or constructive obligation, it is probable that a transfer of economic benefits will be required to settle the obligation, and a reliable estimate of the obligation can be made. Where amounts provided are payable after more than one year the estimated liability is discounted using an appropriate rate of interest. Share based charges relating to employee share schemes The Group has a number of employee share schemes:- Share options granted under Executive Share Option Schemes (`ESOS') are granted at market value. A charge is booked to the income statement as an employee benefit expense for the fair value of share options expected to be exercised, accrued over the vesting period. The corresponding credit is taken to retained earnings. The fair value is calculated using an option pricing model. Notes to the financial statements for the year to 31 December 2010 Accounting Policies (continued) Share options granted under the Long Term Retention Plan (`LTRP') are granted at par value. The charge to the income statement for LTRP shares is also calculated using an option pricing model and, as with ESOS grants, the fair value of the share options expected to be exercised is accrued over the vesting period. The corresponding credit is also taken to retained earnings. The Group has a Long Term Incentive Plan (`LTIP') for executive directors and certain senior executives. Participants are awarded shares dependent on the achievement of performance targets. The charge to the income statement for shares awarded under the LTIP is based on the fair value of those shares at the grant date, spread over the vesting period. The corresponding credit is taken to retained earnings. For those awards that have a market related performance measure, the fair value of the market related element is calculated using a Monte Carlo simulation model. Proceeds received on the exercise of share options are credited to share capital and share premium. Share capital John Wood Group PLC has one class of ordinary shares and these are classified as equity. Dividends on ordinary shares are not recognised as a liability or charged to equity until they have been approved by shareholders. The Group is deemed to have control of the assets, liabilities, income and costs of its employee share trusts, therefore they have been consolidated in the financial statements of the Group. Shares acquired by and disposed of by the employee share trusts are recorded at cost. The cost of shares held by the employee share trusts is deducted from equity. Segmental reporting The Group has determined that its operating segments are based on management reports reviewed by the Chief Operating Decision Maker (`CODM'). As a result, the Group's operating segments are its three operating divisions, namely Engineering & Production Facilities, Well Support and Gas Turbine Services. The Group reports central costs and its Gas Turbine Services business to be disposed separately within its management reports. The CODM measures the operating performance of these segments using `EBITA' (Earnings before interest, tax and amortisation). Operating segments are reported in a manner consistent with the internal management reports provided to the CODM who is responsible for allocating resources and assessing performance of the operating segments. Engineering & Production Facilities offers a wide range of engineering services to the upstream, subsea and pipelines, downstream and industrial, and clean energy sectors. These include conceptual studies, engineering, project and construction management (`EPCM') and control system upgrades. It also offers life of field support to producing assets through brownfield engineering and modifications, production enhancement, operations management (including UK dutyholder services), training, maintenance management and abandonment services. Well Support provides solutions, products and services to enhance production rates and efficiency from oil and gas reservoirs. Gas Turbine Services is an independent provider of services and solutions for clients in the power, oil and gas and renewable energy markets. Aftermarket maintenance activities include facility operations and maintenance, repair and overhaul of gas, wind and steam turbines, pumps, compressors and other high speed rotating equipment. The Power Solutions business includes power plant engineering, procurement and construction and construction management services to the owners of power generation facilities. Notes to the financial statements for the year to 31 December 2010 Accounting Policies (continued) Disclosure of impact of new and future accounting standards (a) New and amended standards and interpretations adopted by the Group The Group has adopted the following new and amended IFRSs as of 1 January 2010: ● IFRS 3 (revised) `Business Combinations' and consequential amendments to IAS 27 `Consolidated and separate financial statements', IAS 28 `Investments in associates' and IAS 31 `Interests in joint ventures'. Under IFRS 3 (revised) changes in estimates of deferred consideration are now reflected through the income statement. The following standards and interpretations which have been adopted and are relevant to the Group have had no material impact on these financial statements :- ● IFRS 2 (amendments) `Group cash settled share based payment transactions'. ● IAS 1 (amendment) `Presentation of financial statements'. ● IAS 36 (amendment), `Impairment of assets'. ● IFRS 5 (amendment), `Non-current assets held for sale and discontinued operations'. ● IFRIC 16, `Hedges of a net investment in a foreign operation'. (b) Amended standards and interpretations not relevant to the Group The following amendments to standards and interpretations are mandatory as of 1 January 2010 but are currently not relevant to the Group and have no impact on the Group's financial statements: ● IFRIC 17 `Distribution of non-cash assets to owners' ● IFRIC 18 `Transfers of assets from customers' ● IFRIC 9 (amendment) `Reassessment of embedded derivatives' and IAS 39 (amendment) `Financial instruments : recognition and measurement' Notes to the financial statements for the year to 31 December 2010 Accounting Policies (continued) (c) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group The following standards and amendments and interpretations to existing standards have been published and are mandatory for the Group's accounting period beginning on or after 1 January 2011 or later periods, but the Group has not early adopted them: ● IFRS 9 `Financial instruments' ● IAS 24 (revised) `Related party disclosures' ● `Classification of rights issues' (amendment to IAS 32) ● IFRIC 19 `Extinguishing financial liabilities with equity instruments' ● `Prepayments of a minimum funding requirement' (amendments to IFRIC 14) It is not anticipated that the application of these standards and amendments will have any material impact on the Group financial statements. 1 Segmental reporting The segment information provided to the CODM for the reportable operating segments for the year ended 31 December 2010 includes the following: Reportable Operating Segments Revenue EBITDA(1) EBITA(1) Operating profit Year Year Year Year Year Year Year Year ended ended ended ended ended ended ended ended 31 Dec 31 Dec 31 Dec 31 Dec 2010 31 Dec 2010 31 Dec 2010 31 Dec 2010 31 Dec 2009 2009 2009 2009 $m $m $m $m $m $m $m $m Engineering & 3,280.2 3,241.9 242.4 280.3 223.4 266.0 194.6 229.7 Production Facilities Well Support 947.1 813.7 165.9 106.7 128.1 75.1 128.1 60.6 Gas Turbine Services 804.9 825.6 60.0 80.6 46.1 65.7 18.8 56.8 Central costs (2) - - (48.1) (45.5) (50.8) (48.0) (51.3) (48.2) 5,032.2 4,881.2 420.2 422.1 346.8 358.8 290.2 298.9 Gas Turbine Services 30.9 45.9 (1.6) - (2.0) (0.4) (2.0) (0.4) - to be disposed (3) Total 5,063.1 4,927.1 418.6 422.1 344.8 358.4 288.2 298.5 Finance income 2.3 2.5 Finance expense (35.9) (36.2) Profit before 254.6 264.8 taxation Taxation (88.8) (100.6) Profit for the year 165.8 164.2 Notes EBITDA represents operating profit of $288.2m (2009 : $298.5m) before depreciation of property plant and equipment of $66.3m (2009 : $59.1m), rental inventory depreciation of $7.5m (2009: $4.6m), amortisation of $29.0m (2009 : $24.1m) and exceptional items of $27.6m (2009 : $35.8m). EBITA represents EBITDA less depreciation. EBITA and EBITDA are provided as they are units of measurement used by the Group in the management of its business. Central costs include the costs of certain management personnel in both the UK and the US, along with an element of Group infrastructure costs. The Gas Turbine Services business to be disposed is an Aero engine overhaul company which the Group has decided to divest. Revenue arising from sales between segments is not material. 1 Segmental Reporting (continued) Segment assets and liabilities Engineering Well Gas Gas Unallocated Total & Support Turbine Turbine Production Services Services Facilities - to be disposed At 31 December 2010 $m $m $m $m $m $m Segment assets 1,345.7 636.1 857.1 23.0 118.6 2,980.5 Segment liabilities 727.3 210.9 212.3 5.0 407.8 1,563.3 At 31 December 2009 Segment assets 1,239.9 570.4 891.0 27.1 126.1 2,854.5 Segment liabilities 741.1 204.2 178.4 8.7 441.1 1,573.5 Unallocated assets and liabilities includes income tax, deferred tax and cash and borrowings where this relates to the financing of the Group's operations. 1 Segmental Reporting (continued) Other segment items 2010 Engineering Well Gas Gas Unallocated Total & Support Turbine Turbine Production Services Services Facilities - to be disposed $m $m $m $m $m $m Capital expenditure - Property plant and 18.6 22.4 10.9 0.9 2.3 55.1 equipment - Rental inventory - 9.0 - - - 9.0 - Intangible assets 10.6 - 4.4 - 0.6 15.6 Non-cash expense - Depreciation of 19.0 30.3 13.9 0.4 2.7 66.3 property plant and equipment - Depreciation of - 7.5 - - - 7.5 rental inventory - Amortisation of 22.6 - 5.9 - 0.5 29.0 other intangible assets - Exceptional items 6.2 - 13.4 - - 19.6 (non-cash element) 2009 $m $m $m $m $m $m Capital expenditure - Property plant and 19.7 14.4 12.0 0.9 3.4 50.4 equipment - Rental inventory - 7.1 - - - 7.1 - Intangible assets 6.6 0.1 7.4 - 0.3 14.4 Non-cash expense - Depreciation of property 14.3 27.0 14.9 0.3 2.6 59.1 plant and equipment - Depreciation of rental - 4.6 - - - 4.6 inventory - Amortisation of other 18.7 0.1 5.1 - 0.2 24.1 intangible assets - Exceptional items 17.6 14.4 3.0 - - 35.0 (non-cash element) 1 Segmental Reporting (continued) Geographical segments Segment assets Revenue 2010 2009 2010 2009 $m $m $m Sm UK 604.1 559.4 1,377.0 1,402.1 USA 1,079.4 1,029.7 1,716.0 1,818.1 Rest of the World 1,297.0 1,265.4 1,970.1 1,706.9 2,980.5 2,854.5 5,063.1 4,927.1 Revenue by geographical segment is based on the geographical location of the customer. 2010 2009 $m $m Revenue by category is as follows: Sale of goods 569.2 574.6 Rendering of services 4,493.9 4,352.5 5,063.1 4,927.1 2 Finance expense/(income) 2010 2009 $m $m Interest payable on bank borrowings 25.2 28.8 Bank facility fees expensed 8.4 3.4 Interest relating to discounting of deferred consideration 1.7 3.1 Other interest expense - retirement benefit liabilities (note 0.1 0.9 29) Bank facility fee relating to acquisitions 0.5 - Finance expense 35.9 36.2 Interest receivable on short term deposits (2.3) (2.5) Finance income (2.3) (2.5) Finance expense - net 33.6 33.7 3 Profit before taxation 2010 2009 $m $m The following items have been charged/(credited) in arriving at profit before taxation: Employee benefits expense (note 28) 1,985.7 1,991.7 Cost of inventories recognised as an expense 390.7 351.1 Impairment of inventories 21.8 7.7 Depreciation of property plant and equipment 66.3 59.1 Amortisation of other intangible assets 29.0 24.1 Loss on disposal of property plant and equipment 3.4 2.5 Other operating lease rentals payable: - Plant and machinery 16.7 14.0 - Property 69.8 66.6 Foreign exchange losses 3.2 4.6 Loss/(gain) on fair value of unhedged derivative financial 0.5 (2.0) instruments Impairment of inventories is included in cost of sales in the income statement. Depreciation of property plant and equipment is included in cost of sales and administrative expenses in the income statement. Amortisation of other intangible assets is included in administrative expenses in the income statement. Services provided by the Group's auditor and network firms During the year the Group obtained the following services from its auditor and network firms at costs as detailed below: 2010 2009 $m $m Audit services - Fees payable for audit of parent company and consolidated 0.9 0.9 accounts - Audit of Group companies pursuant to legislation 1.6 1.5 Non-audit services Fees payable to the Group's auditor and its network firms for other services - Tax services 0.2 0.2 - Other services 1.4 - 4.1 2.6 Other services in 2010 relates to due diligence and other transactional work in respect of the proposed PSN acquisition (see note 27) and the disposal of the Well Support division (see note 34). 4 Exceptional items 2010 2009 $m $m Impairment and restructuring charge 21.0 16.7 Acquisition costs 6.6 - Loss on disposal of investment - 10.8 Exchange rate devaluation - 8.3 Total exceptional items 27.6 35.8 4 Exceptional items (continued) An impairment and restructuring charge of $21.0m was booked in the Gas Turbine Services division in respect of rationalisation of businesses and facilities, severance costs and impairment of intangible assets and property plant and equipment. The majority of the charge relates to the closure of a repair facility in Connecticut, USA with the balance relating to the impact of a significant restructuring of the division with a reduction of more than 10% of indirect headcount. The charge includes $3.6m of goodwill impairment and $3.5m of property plant and equipment impairment. A tax credit of $6.2m has been booked in respect of these charges. Acquisition costs of $6.6m were expensed during the year. These mainly relate to the proposed acquisition of PSN (see note 27). In 2009, the Group recorded $35.8m of exceptional items in relation to its Venezuelan operations. $10.8m related to the disposal of its interest in Vepica; $16.7m was an impairment and restructuring charge in relation to the closure of its Venezuelan businesses and the termination of a contract with PDVSA; and $8.3m related to the devaluation of the Venezuelan Bolivar Fuerte. 5 Taxation 2010 2009 $m $m Current tax - Current year 115.3 86.0 - Adjustment in respect of prior years 6.0 0.4 121.3 86.4 Deferred tax Relating to origination and reversal of temporary differences (32.5) 14.2 Total tax charge 88.8 100.6 2010 2009 Tax on items credited to equity $m $m Deferred tax movement on retirement benefit liabilities 0.3 (2.4) Deferred tax relating to share option schemes (8.6) (7.0) Current tax relating to share option schemes (3.9) - Total credited to equity (12.2) (9.4) 5 Taxation (continued) Tax is calculated at the rates prevailing in the respective jurisdictions in which the Group operates. The expected rate is the weighted average rate taking into account the Group's profits in these jurisdictions. The expected rate has decreased in 2010 due to the change in profitability of the Group's subsidiaries in their respective jurisdictions. The tax charge for the year is higher (2009 : higher) than the expected tax charge due to the following factors: 2010 2009 $m $m Profit before taxation 254.6 264.8 Profit before tax at expected rate of 29.8% (2009: 33.1%) 75.9 87.6 Effects of: Adjustments in respect of prior years 7.7 1.0 Non-recognition of losses and other attributes 7.3 4.5 Other permanent differences (2.1) 7.5 Total tax charge 88.8 100.6 6 Dividends 2010 2009 $m $m Dividends on equity shares Second interim dividend paid - year ended 31 December 2009 : 35.7 34.4 6.9 cents (2009: 6.2 cents) per share Interim dividend paid - year ended 31 December 2010 : 3.4 17.4 15.9 cents (2009: 3.1 cents) per share 53.1 50.3 The directors are proposing a final dividend in respect of the financial year ended 31 December 2010 of 7.6 cents per share. The final dividend will be paid on 16 May 2011 to shareholders who are on the register of members on 15 April 2011. The financial statements do not reflect the final dividend, the payment of which will result in an estimated $39.1m reduction in shareholders' funds. 7 Earnings per share 2010 2009 Earnings Number of Earnings Earnings Number of Earnings attributable shares per attributable shares per to equity (millions) share to equity share shareholders$m (cents) shareholders (millions) (cents) $m Basic 166.0 512.6 32.4 163.2 508.0 32.1 Effect of dilutive - 17.0 (1.1) - 15.6 (0.9) ordinary shares Diluted 166.0 529.6 31.3 163.2 523.6 31.2 Exceptional items, net 21.4 - 4.0 35.8 - 6.8 of tax Amortisation, net of tax 23.0 - 4.4 19.8 - 3.8 Adjusted diluted 210.4 529.6 39.7 218.8 523.6 41.8 Adjusted basic 210.4 512.6 41.0 218.8 508.0 43.1 The calculation of basic earnings per share for the year ended 31 December 2010 is based on the earnings attributable to equity shareholders divided by the weighted average number of ordinary shares in issue during the year excluding shares held by the Group's employee share trusts. For the calculation of diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. The Group has two types of dilutive ordinary shares - share options granted to employees under Executive Share Option Schemes and the Long Term Retention Plan; and shares issuable under the Group's Long Term Incentive Plan. Adjusted basic and adjusted diluted earnings per share is disclosed to show the results excluding the impact of exceptional items and amortisation, net of tax. 8 Goodwill and other intangible assets Computer Other Total Goodwill software $m $m $m $m Cost At 1 January 2010 616.6 56.7 101.6 774.9 Exchange movements 2.3 0.3 1.7 4.3 Additions - 11.8 3.8 15.6 Acquisitions 22.7 - 3.0 25.7 Adjustment to deferred (15.1) - - (15.1) consideration estimates Disposals - (0.7) - (0.7) Reclassification from property - 1.6 - 1.6 plant and equipment Reclassification from current - 0.4 0.4 0.8 assets At 31 December 2010 626.5 70.1 110.5 807.1 Aggregate amortisation and 6.1 39.1 50.4 95.6 impairment At 1 January 2010 Exchange movements - 0.2 1.4 1.6 Amortisation charge for the year - 14.5 14.5 29.0 Impairment 3.6 - - 3.6 Disposals - (0.5) - (0.5) Reclassification from current - 0.3 - 0.3 assets At 31 December 2010 9.7 53.6 66.3 129.6 Net book value at 31 December 2010 616.8 16.5 44.2 677.5 Cost At 1 January 2009 569.0 46.2 82.4 697.6 Exchange movements 27.6 3.1 6.3 37.0 Additions - 8.6 5.8 14.4 Acquisitions 75.2 - 7.8 83.0 Adjustment to deferred (43.7) - - (43.7) consideration estimates Disposals - (0.5) (0.7) (1.2) Disposal of businesses (11.5) (0.7) - (12.2) At 31 December 2009 616.6 56.7 101.6 774.9 Aggregate amortisation and 3.6 28.2 33.6 65.4 impairment At 1 January 2009 Exchange movements - 2.3 2.5 4.8 Amortisation charge for the year - 9.6 14.5 24.1 Impairment 3.2 - - 3.2 Disposals - (0.4) (0.2) (0.6) Disposal of businesses (0.7) (0.6) - (1.3) At 31 December 2009 6.1 39.1 50.4 95.6 Net book value at 31 December 2009 610.5 17.6 51.2 679.3 In accordance with IAS 36 `Impairment of assets', goodwill was tested for impairment during the year. The impairment tests were carried out on a Cash Generating Unit (`CGU') basis using the 2011-12 budgets. Cash flows for 2013-15 are assumed to grow at a rate of 5% per annum and subsequent cash flows have been assumed to grow at 3% per annum for a further 15 years reflecting expected long term growth rates in the countries in which the Group operates. Details of other key assumptions used are included in critical accounting judgements and estimates in the accounting policies. In total, a 20 year period has been used for the impairment tests reflecting the expected long term growth in the market. The cash flows have been discounted using a pre-tax discount rate of 10%. 8 Goodwill and other intangible assets (continued) The value in use has been compared to the net book value of goodwill for each CGU to assess whether an impairment write down is required. $3.6m of goodwill has been impaired during the year. See note 4 for further details. A sensitivity analysis has been performed in order to assess the impact of reasonable possible changes in the key assumptions due to the current economic environment. This analysis did not identify any further CGUs requiring to be impaired. The carrying amounts of goodwill by division at 31 December 2010 are: Engineering & Production Facilities $468.5m (2009 : $455.1m), Gas Turbine Services $116.5m (2009 : $123.6m) and Well Support $31.8m (2009 : $31.8m). The carrying amounts of goodwill attributable to the principal CGUs within the Engineering & Production Facilities division are Mustang $170.9m, IMV $116.3m, Production Facilities Americas $85.8m and Wood Group Kenny $53.0m. The carrying amounts of goodwill attributable to the principal CGUs within the Gas Turbine Services division are Equipment and Power Solutions $37.7m and Field Service $45.1m. The `other' heading in the above table includes development costs, licences and customer contracts and relationships arising on acquisitions. Development costs with a net book value of $11.7m (2009 : $12.2m) are internally generated intangible assets. 9 Property plant and equipment Land and Land and Plant and Total buildings buildings equipment - Long - Short leasehold leasehold and freehold $m $m $m $m Cost At 1 January 2010 66.1 28.2 467.2 561.5 Exchange movements 0.7 0.5 1.8 3.0 Additions 6.1 1.4 47.6 55.1 Acquisitions - - 0.7 0.7 Disposals (4.5) (0.7) (32.5) (37.7) Reclassification to intangible - - (1.6) (1.6) assets Reclassification to current assets - - (0.7) (0.7) At 31 December 2010 68.4 29.4 482.5 580.3 Accumulated depreciation and impairment At 1 January 2010 26.1 15.7 265.5 307.3 Exchange movements (0.3) 0.4 1.9 2.0 Charge for the year 2.1 2.7 61.5 66.3 Impairment 3.5 - - 3.5 Disposals (3.4) (0.7) (24.7) (28.8) Reclassification to current assets - - (8.2) (8.2) At 31 December 2010 28.0 18.1 296.0 342.1 Net book value at 31 December 2010 40.4 11.3 186.5 238.2 Plant and equipment includes assets held for lease to customers under operating leases of $42.3m (2009: $41.0m). Additions during the year amounted to $7.7m (2009 : $3.5m) and depreciation totalled $12.6m (2009 : $11.4m). The gross cost of these assets at 31 December 2010 is $66.5m (2009 : $65.3m) and aggregate depreciation is $24.2m (2009 : $24.3m). Property plant and equipment includes assets in the course of construction of $9.6m (2009 : $4.9m). 9 Property plant and equipment (continued) Land and Land and Plant and Total buildings buildings equipment - Long - Short leasehold leasehold and freehold $m $m $m $m Cost At 1 January 2009 62.8 24.9 494.1 581.8 Exchange movements 1.9 2.3 10.9 15.1 Additions 8.4 2.7 39.3 50.4 Acquisitions 0.8 0.1 23.0 23.9 Disposals (1.2) (1.8) (21.8) (24.8) Disposal of businesses (6.6) - (0.2) (6.8) Reclassification to current assets - - (78.1) (78.1) At 31 December 2009 66.1 28.2 467.2 561.5 Accumulated depreciation and impairment At 1 January 2009 26.6 13.1 279.1 318.8 Exchange movements 0.3 1.0 7.1 8.4 Charge for the year 4.0 1.8 53.3 59.1 Impairment - - 1.8 1.8 Disposals (0.9) (0.2) (16.2) (17.3) Disposal of businesses (3.9) - - (3.9) Reclassification to current assets - - (59.6) (59.6) At 31 December 2009 26.1 15.7 265.5 307.3 Net book value at 31 December 2009 40.0 12.5 201.7 254.2 The reclassification to current assets in 2009 related mainly to the transfer of plant and equipment to other receivables on termination of the water injection contract in Venezuela. 10 Joint ventures In relation to the Group's interests in joint ventures, its share of assets, liabilities, income and expenses is shown below. 2010 2009 $m $m Non-current assets 40.4 39.8 Current assets 233.1 233.7 Current liabilities (120.8) (122.9) Non-current liabilities (4.9) (5.9) Net assets 147.8 144.7 Income 417.5 375.3 Expenses (374.9) (333.3) Profit before tax 42.6 42.0 Tax (8.1) (10.6) Share of post tax results from joint ventures 34.5 31.4 The joint ventures have no significant contingent liabilities to which the Group is exposed, nor has the Group any significant contingent liabilities in relation to its interest in the joint ventures. The name and principal activity of the most significant joint ventures is disclosed in note 35. 11 Inventories 2010 2009 $m $m Materials 66.5 56.3 Work in progress 122.4 141.3 Finished goods and goods for resale 474.9 421.3 663.8 618.9 12 Trade and other receivables 2010 2009 $m $m Trade receivables 891.3 857.5 Less: provision for impairment of trade receivables (56.5) (50.2) Trade receivables - net 834.8 807.3 Amounts recoverable on contracts 21.9 15.6 Prepayments and accrued income 91.1 78.9 Other receivables 103.0 85.6 Trade and other receivables - current 1,050.8 987.4 Long term receivables 43.4 8.0 Total receivables 1,094.2 995.4 12 Trade and other receivables (continued) The Group's trade receivables balance is analysed by division below:- Trade Provision Trade Receivable Receivables for Receivables days - Gross impairment - Net 31 December 2010 $m $m $m Engineering & Production 570.7 (24.2) 546.5 51 Facilities Well Support 169.7 (27.1) 142.6 50 Gas Turbine Services 150.9 (5.2) 145.7 37 Total Group 891.3 (56.5) 834.8 49 31 December 2009 Engineering & Production 518.4 (20.9) 497.5 53 Facilities Well Support 142.3 (24.1) 118.2 49 Gas Turbine Services 196.8 (5.2) 191.6 57 Total Group 857.5 (50.2) 807.3 53 Receivable days are calculated by allocating the closing trade receivables balance to current and prior period revenue including sales taxes. A receivable days calculation of 49 indicates that closing trade receivables represent the most recent 49 days of revenue. A provision for the impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the terms of the original receivables. The ageing of the provision for impairment of trade receivables is as follows: 2010 2009 $m $m Up to 3 months 26.1 22.4 Over 3 months 30.4 27.8 56.5 50.2 12 Trade and other receivables (continued) The movement on the provision for impairment of trade receivables by division is as follows: Engineering Well Gas Total & Production Support Turbine Facilities Services 2010 $m $m $m $m At 1 January 20.9 24.1 5.2 50.2 Exchange movements (0.3) (0.1) - (0.4) Charge to income statement 3.6 3.1 - 6.7 At 31 December 24.2 27.1 5.2 56.5 2009 At 1 January 18.6 32.0 11.8 62.4 Exchange movements (0.1) (7.5) (0.6) (8.2) Acquisitions 1.0 - 0.3 1.3 Disposal of businesses (0.3) - - (0.3) Charge/(credit) to income 1.7 (0.4) (6.3) (5.0) statement At 31 December 20.9 24.1 5.2 50.2 The charge/(credit) to the income statement is included in administrative expenses. The other classes within trade and other receivables do not contain impaired assets. Included within gross trade receivables of $891.3m above (2009 : $857.5m) are receivables of $176.5m (2009: $163.4m) which were past due but not impaired. These relate to customers for whom there is no recent history or expectation of default. The ageing analysis of these trade receivables is as follows: 2010 2009 $m $m Up to 3 months 147.8 137.2 Over 3 months 28.7 26.2 176.5 163.4 13 Cash and cash equivalents 2010 2009 $m $m Cash at bank and in hand 163.2 174.3 Short-term bank deposits 16.9 34.3 180.1 208.6 The effective interest rate on short-term deposits was 1.3% (2009 : 1.0%) and these deposits have an average maturity of 20 days (2009 : 32 days). At 31 December 2010, the Group held $14.8m of cash that was not accessible within three months or less. At 31 December 2010 the Group held $10.1m of cash (2009: $10.8m) as security for standby letters of credit issued by the Group's insurance captive in relation to its reinsurance liabilities. 14 Trade and other payables 2010 2009 $m $m Trade payables 357.7 277.9 Other tax and social security payable 84.6 74.4 Accruals and deferred income 642.0 611.7 Deferred consideration 10.7 48.7 Other payables 44.5 49.1 1,139.5 1,061.8 15 Borrowings 2010 2009 $m $m Bank loans and overdrafts due within one year or on demand Unsecured 30.1 19.0 Non-current bank loans Unsecured 165.1 277.5 Bank loans are denominated in a number of currencies and bear interest based on LIBOR or foreign equivalents appropriate to the country in which the borrowing is incurred. The effective interest rates on the Group's borrowings at the balance sheet date were as follows: 2010 2009 % % US Dollar 3.50 6.18 Sterling 4.25 5.47 Euro 4.14 4.05 Canadian Dollar 4.49 4.46 The carrying amounts of the Group's borrowings are denominated in the following currencies: 2010 2009 $m $m US Dollar 17.0 86.5 Sterling 60.1 93.1 Euro 58.9 63.0 Canadian Dollar 56.4 49.9 Other 2.8 4.0 195.2 296.5 The Group is required to issue trade finance instruments to certain customers. These include tender bonds, performance bonds, retention bonds and advance payment bonds. The Group has also issued standby letters of credit as security for local bank facilities. At 31 December 2010 the Group's bank facilities relating to the issue of bonds, guarantees and letters of credit amounted to $665.2m (2009: $327.2m). At 31 December 2010, these facilities were 61% utilised (2009: 58%). 15 Borrowings (continued) Borrowing facilities The Group has the following undrawn borrowing facilities available at 31 December. 2010 2009 $m $m Expiring within one year 113.9 106.5 Expiring between one and two years 635.1 674.3 749.0 780.8 All undrawn borrowing facilities are floating rate facilities. The facilities expiring within one year are annual facilities subject to review at various dates during 2011. In December 2010, the Group arranged an $800m loan facility to fund the proposed acquisition of PSN. This facility will be required if the acquisition proceeds in 2011. This facility is not included in the table above. In February 2011, the Group renewed its $800m bilateral facilities to March 2013 with an option to extend for a further year. 16 Other non-current liabilities 2010 2009 $m $m Deferred consideration 33.2 48.9 Other payables 48.8 10.8 82.0 59.7 Deferred consideration represents amounts payable on acquisitions made by the Group and is expected to be paid over the next four years. Details of the reduction in deferred consideration during the year are provided in note 27. 17 Financial instruments The Group's activities give rise to a variety of financial risks: market risk (including foreign exchange risk and cash flow interest rate risk), credit risk and liquidity risk. The Group's overall risk management strategy is to hedge exposures wherever practicable in order to minimise any potential adverse impact on the Group's financial performance. Risk management is carried out by the Group Treasury department in line with the Group's Treasury policies. Group Treasury, together with the Group's business units identify, evaluate and where appropriate, hedge financial risks. The Group's Treasury policies cover specific areas, such as foreign exchange risk, interest rate risk, use of derivative financial instruments and investment of excess cash. Where the Board considers that a material element of the Group's profits and net assets are exposed to a country in which there is significant geo-political uncertainty a strategy is agreed to ensure that the risk is minimised. 17 Financial instruments (continued) (a) Market risk (i) Foreign exchange risk The Group is exposed to foreign exchange risk arising from various currencies. The Group has a number of subsidiary companies whose revenue and expenses are denominated in currencies other than the US dollar. The Group hedges part of its net investment in non US dollar subsidiaries by using foreign currency bank loans. Other strategies, including the payment of dividends, are used to minimise the amount of net assets exposed to foreign currency revaluation. Some of the sales of the Group's businesses are to customers in overseas locations. Where possible, the Group's policy is to eliminate all significant currency exposures on sales at the time of the transaction by using financial instruments such as forward currency contracts. Changes in the forward contract fair values are booked through the income statement. The Group carefully monitors the economic and political situation in the countries in which it operates to ensure appropriate action is taken to minimise any foreign currency exposure. The Group's main foreign exchange risk relates to movements in the sterling/US dollar exchange rate. Movements in the sterling/US dollar rate impact the translation of sterling profit earned in the UK and the translation of sterling denominated net assets. If the average sterling/US dollar rate had been 10% higher or lower during 2010, post-tax profit for the year would have been $6.9m higher or lower (2009: $8.3m). If the closing sterling/US dollar rate was 10% higher or lower at 31 December 2010, exchange differences in equity would have been $18.3m (2009: $15.1m) higher or lower respectively. 10% has been used in these calculations as it represents a reasonable possible change in the sterling/US dollar exchange rate. (ii) Interest rate risk The Group finances its operations through a mixture of retained profits and bank borrowings. The Group borrows in the desired currencies at floating rates of interest and then uses interest rate swaps into fixed rates to generate the desired interest profile and to manage the Group's exposure to interest rate fluctuations. The Group's long-term policy is to maintain approximately 50% of its borrowings at fixed rates of interest. At 31 December 2010, 57% (2009 : 77%) of the Group's borrowings were at fixed rates after taking account of interest rate swaps. The Group is also exposed to interest rate risk on cash held on deposit. The Group's policy is to maximise the return on cash deposits whilst ensuring that cash is deposited with a financial institution with a credit rating of `A' or better, where possible. If average interest rates had been 1% higher or lower during 2010, post-tax profit for the year would have been $1.2m higher or lower respectively (2009: $1.4m). 1% has been used in this calculation as it represents a reasonable possible change in interest rates. (iii) Price risk The Group is not exposed to any significant price risk in relation to its financial instruments. 17 Financial instruments (continued) (b) Credit risk The Group's credit risk primarily relates to its trade receivables. The Group's operations comprise three divisions, Engineering & Production Facilities, Well Support and Gas Turbine Services each made up of a number of businesses. Responsibility for managing credit risks lies within the businesses with support being provided by Group and divisional management where appropriate. A customer evaluation is typically obtained from an appropriate credit rating agency. Where required, appropriate trade finance instruments such as letters of credit, bonds, guarantees and credit insurance will be used to manage credit risk. The Group's major customers are typically large companies which have strong credit ratings assigned by international credit rating agencies. Where a customer does not have sufficiently strong credit ratings, alternative forms of security such as the trade finance instruments referred to above may be obtained. The Group has a broad customer base and management believe that no further credit risk provision is required in excess of the provision for impairment of trade receivables. Management review trade receivables across the Group based on receivable days calculations to assess performance. There is significant management focus on receivables that are overdue. A table showing trade receivables and receivable days by division is provided in note 12. Receivable days calculations are not provided on non-trade receivables as management do not believe that this information is a relevant metric. The Group also has credit risk in relation to cash held on deposit. The Group's policy is to deposit cash at institutions with a credit rating of `A' or better where possible. 100% of cash held on deposit at 31 December 2010 (2009 : 100%) was held with such institutions. (c) Liquidity risk With regard to liquidity, the Group's main priority is to ensure continuity of funding. At 31 December 2010, 94% (2009 : 99%) of the Group's borrowing facilities (excluding joint ventures) were due to mature in more than one year. Based on the current outlook the Group has sufficient funding in place to meet its future obligations. (d) Capital risk The Group seeks to maintain an optimal capital structure. The Group monitors its capital structure on the basis of its gearing ratio, interest cover and the ratio of net debt to EBITDA. Gearing is calculated by dividing net debt by shareholders' funds. Gearing at 31 December 2010 was 1% (2009: 7%). Interest cover is calculated by dividing EBITA by net interest expense. Interest cover for the year to 31 December 2010 was 10.3 times (2009: 10.6 times). The ratio of net debt to EBITDA at 31 December 2010 was 0.04 times (2009: 0.21 times). 17 Financial instruments (continued) The table below analyses the Group's financial liabilities which will be settled on a net basis into relevant maturity groupings based on the remaining period from the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Long term borrowings are not discounted as the loans are for periods of three months or less. At 31 December 2010 Less than Between 1 Between 2 Over 5 1 year and 2 and 5 years years years $m $m $m $m Borrowings 30.1 165.1 - - Derivative financial instruments 0.3 0.6 2.1 - Trade and other payables 1,139.5 - - - Other non-current liabilities - 27.3 54.7 - At 31 December 2009 Borrowings 19.0 1.8 275.7 - Derivative financial instruments 3.3 1.5 1.8 - Trade and other payables 1,061.8 - - - Other non-current liabilities - 15.3 44.4 - The table below analyses the Group's derivative financial instruments which will be settled on a gross basis into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. At 31 December 2010 Less than Between 1 Between 2 Over 5 1 year and 2 and 5 years years years $m $m $m $m Forward foreign exchange contracts Outflow 339.6 7.8 - - Inflow 341.1 8.0 - - Interest rate swaps Outflow 2.3 1.8 0.5 - Inflow 0.8 0.5 0.1 - At 31 December 2009 Forward foreign exchange contracts Outflow 322.5 9.1 1.5 - Inflow 324.0 9.0 1.5 - Interest rate swaps Outflow 8.0 3.0 3.2 - Inflow 1.1 0.6 0.7 - Currency options Outflow - - - - Inflow 3.9 - - - 17 Financial instruments (continued) Fair value of non-derivative financial assets and financial liabilities The fair value of short-term borrowings, trade and other payables, trade and other receivables, short-term deposits and cash at bank and in hand approximates to the carrying amount because of the short maturity of interest rates in respect of these instruments. Long-term borrowings are loans for periods of three months or less and as a result, book value and fair value are considered to be the same. 2010 2009 Book Fair Book Fair Value Value Value Value $m $m $m $m Fair value of long-term borrowings Long-term borrowings (note 15) 165.1 165.1 277.5 277.5 Fair value of other financial assets and financial liabilities Primary financial instruments held or issued to finance the Group's operations: Trade and other receivables (note 1,050.8 1,050.8 987.4 987.4 12) Cash at bank and in hand (note 13) 163.2 163.2 174.3 174.3 Short-term bank deposits (note 13) 16.9 16.9 34.3 34.3 Trade and other payables (note 14) 1,054.9 1,054.9 987.4 987.4 Short-term borrowings (note 15) 30.1 30.1 19.0 19.0 Other non-current liabilities (note 82.0 82.0 59.7 59.7 16) Derivative financial instruments The fair value of the Group's derivative financial instruments at the balance sheet date were as follows: 2010 2009 Assets Liabilities Assets Liabilities $m $m $m $m Interest rate swaps - cash flow - 2.7 - 6.0 hedges Forward foreign exchange contracts 1.3 0.3 2.1 0.6 Currency options - - 3.9 - Total 1.3 3.0 6.0 6.6 Less non-current portion: Interest rate swaps - cash flow - 2.7 - 3.3 hedges Forward foreign exchange contracts 0.1 - - - Current portion 1.2 0.3 6.0 3.3 The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and, as a current asset or liability if the maturity of the hedged item is less than 12 months. The Group's derivative financial instruments have been classified using the fair value hierarchy set out in the fair value estimation accounting policy. The measurement of the Group's derivative financial instruments above used Level 2 techniques (see page 12). There was no ineffectiveness recorded in the income statement from fair value hedges, cash flow hedges or net investment in foreign entity hedges in the current or preceding period. 17 Financial instruments (continued) The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets in the balance sheet. (a) Forward foreign exchange contracts The notional principal amounts of the outstanding forward foreign exchange contracts at 31 December 2010 was $339.6m (2009: $322.5m). (b) Interest rate swaps The notional principal amount of the Group's outstanding interest rate swap contracts at 31 December 2010 was $111.2m (2009 : $227.3m). At 31 December 2010 the fixed interest rates, including margin varied from 4.1% to 7.3% (2009 : 4.1% to 7.3%) and the floating rates ranged from 3.0% to 3.5%, also including margin (2009 : 2.5% to 2.9%). The Group's interest rate swaps are for periods of up to 5 years and they expire between 2012 and 2013. The fair value gains and losses relating to the interest rate swaps which are deferred in equity at 31 December 2010 will reverse in the income statement over the term of the swaps. (c) Hedge of net investment in foreign entities The table below shows the Group's foreign currency borrowings which it has designated as a hedge of subsidiary company net assets. The fair value of the borrowings at 31 December 2010 was $164.0m (2009 : $196.0m). Foreign exchange gains of $4.6m (2009 : losses $22.9m) on translation of the borrowings into US dollars have been offset against equivalent gains on retranslation of net assets in the currency translation reserve. 2010 2009 Foreign $m % of foreign Foreign $m % of foreign currency currency net currency currency net amount assets amount assets hedged hedged £35.0m 54.8 20% £55.0m 88.8 37% C$50.0m 50.3 42% C$47.0m 44.8 45% €43.9m 58.9 52% €43.5m 62.4 56% 164.0 196.0 18 Provisions Warranty Other Total provisions $m $m $m At 1 January 2010 29.8 23.9 53.7 Exchange movements (0.3) (0.1) (0.4) Charge/(credit) to income statement 7.2 (2.7) 4.5 Payments during the year (10.0) (0.6) (10.6) At 31 December 2010 26.7 20.5 47.2 Warranty provisions These provisions are recognised in respect of guarantees provided in the normal course of business relating to contract performance. They are based on previous claims history and it is expected that most of these costs will be incurred over the next two years. Other provisions At 31 December 2010, other provisions of $20.5m (2009 : $23.9m) have been recognised. This amount includes provisions for future losses on onerous contracts, a provision for non-recoverable indirect taxes and a provision for remedial work at one of our facilities. It is expected that the majority of the costs in relation to these provisions will be incurred over the next two years. 19 Deferred tax Deferred tax is calculated in full on temporary differences under the liability method using the tax rate applicable to the territory in which the asset or liability has arisen. Deferred tax in relation to UK companies is provided at 27% (2009: 28%). The movement on the deferred tax account is shown below: 2010 2009 $m $m At 1 January (54.4) (48.8) Exchange movements (1.0) (3.1) (Credit)/charge to income statement (32.5) 14.2 Acquisitions - 1.0 Disposal of businesses - (1.6) Deferred tax relating to retirement benefit liabilities 0.3 (2.4) Deferred tax relating to share option schemes (8.6) (7.0) Reclassification to current tax (1.7) (6.7) At 31 December (97.9) (54.4) Deferred tax is presented in the financial statements as follows: Deferred tax assets (100.2) (62.3) Deferred tax liabilities 2.3 7.9 (97.9) (54.4) 19 Deferred tax (continued) No deferred tax is recognised on the unremitted earnings of overseas subsidiaries and joint ventures. As these earnings are continually reinvested by the Group, no tax is expected to be payable on them in the foreseeable future. The Group has unrecognised tax losses of $56.2m (2009 : $55.3m) to carry forward against future taxable income. Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net. The deferred tax balances are analysed below:- Accelerated Pension Share Short term Total tax based timing depreciation charges differences $m $m $m $m $m Deferred tax assets 30.5 (9.0) (24.5) (97.2) (100.2) Deferred tax - - - 2.3 2.3 liabilities Net deferred tax 30.5 (9.0) (24.5) (94.9) (97.9) liability/(asset) 20 Share based charges The Group currently has three share schemes that give rise to share based charges. These are the Executive Share Option Scheme (`ESOS'), the Long Term Retention Plan (`LTRP') and the Long Term Incentive Plan (`LTIP'). Details of each of the schemes are given in the Directors' Remuneration Report and in note 21. The charge in the Group income statement in 2010 for these schemes amounted to $16.7m (2009 : $11.2m) The assumptions made in arriving at the charge for each scheme are detailed below: ESOS and LTRP At 31 December 2010 there were 1,138 employees (2009 : 1,084) participating in these schemes. For the purposes of calculating the fair value of the share options, a Black-Scholes option pricing model has been used. Based on past experience, it has been assumed that options will be exercised, on average, six months after the earliest exercise date, which is four years after grant date, and there will be a lapse rate of between 15% and 20%. The share price volatility used in the calculation of 35%-40% is based on the actual volatility of the Group's shares since IPO as well as that of comparable companies. The risk free rate of return of 1.6%-5.2% is based on the implied yield available on zero coupon gilts with a term remaining equal to the expected lifetime of the options at the date of grant. A dividend yield of 1.0%-2.0% has been used in the calculations. The fair value of options granted under the ESOS during the year was £1.16 (2009 : £0.65 to £0.87). The fair value of options granted under the LTRP during the year ranged from £2.79 to £3.57 (2009 : £2.00 to £2.56). The weighted average remaining contractual life of share options at 31 December 2010 is 5.5 years (2009: 5.3 years). 20 Share based charges (continued) LTIP The share based charge for the LTIP was calculated using a fair value of £4.12 for the first cycle, £1.81 for the second cycle and £3.01 for the third cycle. The charge for market related performance targets has been calculated using a Monte Carlo simulation model taking account of share price volatility against peer group companies, risk free rate of return, dividend yield and the expected lifetime of the award. 21 Share capital 2010 2009 Issued and fully paid shares $m shares $m Ordinary shares of 3⅓ pence each At 1 January 530,266,720 26.3 527,836,720 26.2 Allocation of new shares to - 2,430,000 0.1 employee share trusts At 31 December 530,266,720 26.3 530,266,720 26.3 John Wood Group PLC is a public limited company, incorporated and domiciled in Scotland. Executive Share Option Schemes The following options to subscribe for new or existing shares were outstanding at 31 December: Year of Number of ordinary Exercise shares under option price Grant 2010 2009 (per Exercise share) period 2000 - 138,750 17⅓p 2005-2010 2001 30,000 30,000 93⅓p 2006-2011 2001 307,000 612,100 83⅓p 2006-2011 2002 117,000 174,000 83⅓p 2007-2012 2003 519,179 769,215 158p 2007-2013 2004 1,223,084 2,211,287 128½p 2008-2014 2005 505,689 1,073,189 145p 2009-2015 2006 424,000 852,918 265¼p 2010-2016 2007 994,000 1,106,190 268½p 2011-2017 2008 1,255,896 1,356,418 381¾p 2012-2018 2008 175,729 200,937 354⅓p 2012-2018 2009 3,784,767 4,048,545 222p 2013-2019 2009 100,000 110,000 283⅔p 2013-2019 2010 3,789,958 - 377½p 2014-2020 13,226,302 12,683,549 Details of the Group's Executive Share Option Schemes are set out in the Directors' Remuneration Report. Share options are granted at an exercise price equal to the average mid-market price of the shares on the three days prior to the date of grant. 21 Share capital (continued) 3,125,952 options (2009 : 5,008,541) were exercisable at 31 December 2010. 3,923,500 options were granted during the year, 2,715,578 options were exercised during the year and 665,169 options lapsed during the year. The weighted average share price for ESOS options exercised during the year was £ 4.03 (2009 : £2.96). Options granted to directors under the executive share option scheme are subject to performance criteria as set out in the Directors' Remuneration Report. There are no performance criteria under this scheme for options granted to employees. Long Term Retention Plan The following options granted under the Group's LTRP were outstanding at 31 December: Year of Number of ordinary Exercise shares under option price Grant 2010 2009 (per Exercise share) period 2005 - 66,502 3⅓p 2009-2010 2006 114,177 1,204,360 3⅓p 2010-2011 2007 1,450,647 1,571,189 3⅓p 2011-2012 2008 1,563,236 1,695,309 3⅓p 2012-2013 2009 3,368,090 3,632,819 3⅓p 2013-2014 2010 1,576,875 - 3⅓p 2014-2015 8,073,025 8,170,179 Options are granted under the Group's LTRP at par value (3⅓ pence per share). The basis of the scheme is that an overall bonus pool is calculated annually based on performance criteria that consider the growth in the Group's adjusted earnings per share in the prior year. There are no performance criteria attached to the exercise of options under the LTRP. 114,177 options (2009 : 66,502) were exercisable at 31 December 2010. 1,658,000 LTRP options were granted during the year, 1,258,693 LTRP options were exercised during the year and 496,461 LTRP options lapsed during the year. The weighted average share price for LTRP options exercised during the year was £3.87 (2009 : £2.96). Further details on the LTRP are provided in the Directors' Remuneration Report. Long Term Incentive Plan The Group's Long Term Incentive Plan (`LTIP') has been in place since 2008. Under this Scheme, the executive directors (but not the Chairman) and certain other senior executives are awarded shares dependent upon the achievement of performance targets established by the Remuneration Committee. The performance measures for the LTIP are EBITA, return on capital employed, total shareholder return and adjusted diluted earnings per share. The LTIP awards are in the form of shares and restricted shares. 20% of any award earned over the three year performance cycle are deferred for a further two years in the form of forfeitable restricted shares. At 31 December 2010, 5,582,738 shares were potentially issuable under these schemes. Further details of the LTIP are provided in the Directors' Remuneration Report. 22 Share premium 2010 2009 $m $m At 1 January 315.8 311.8 Allocation of shares to employee share trusts - 4.0 At 31 December 315.8 315.8 23 Retained earnings 2010 2009 $m $m At 1 January 877.6 760.2 Profit for the year attributable to owners of the parent 166.0 163.2 Dividends paid (53.1) (50.3) Credit relating to share based charges 16.7 11.2 Actuarial gain/(loss) on retirement benefit liabilities 1.0 (8.4) Movement in deferred tax relating to retirement benefit (0.3) 2.4 liabilities Shares allocated to employee share trusts - (4.1) Shares purchased by employee share trusts (20.8) (1.3) Shares disposed of by employee share trusts 6.3 4.3 Tax credit relating to share option schemes 12.5 7.0 Exchange movements in respect of shares held by employee 1.7 (6.6) share trusts At 31 December 1,007.6 877.6 Retained earnings are stated after deducting the investment in own shares held by employee share trusts. Investment in own shares represents the cost of 16,543,702 (2009 : 20,626,241) of the company's ordinary shares totalling $74.5m (2009 : $61.7m). No options have been granted over shares held by the employee share trusts (2009 : nil). Shares acquired by the employee share trusts are purchased in the open market using funds provided by John Wood Group PLC to meet obligations under the Employee Share Option Schemes, the LTRP and the LTIP. During 2010, 4,000,000 shares were purchased on the open market at a cost of $20.8m. Shares costing $1.3m were purchased on 31 December 2009 but the cash payment for these shares was not made until 5 January 2010. 3,974,270 shares were issued during the year to satisfy the exercise of share options at a value of $6.3m. In addition, 4,108,269 shares were issued during the year to satisfy share awards under the Long Term Incentive Scheme which was replaced by the Long Term Incentive Plan in 2008. Exchange adjustments of $1.7m arose during the year relating to the retranslation of the investment in own shares from sterling to US dollars. The costs of funding and administering the trusts are charged to the income statement in the period to which they relate. The market value of the shares at 31 December 2010 was $144.8m (2009 : $102.9m) based on the closing share price of £5.59 (2009 : £3.09). The employee share trusts have waived their rights to receipt of dividends. 24 Other reserves Capital Currency Hedging Total reduction translation reserve reserve reserve $m $m $m $m At 1 January 2009 88.1 (43.6) (8.8) 35.7 Exchange movements on retranslation of - 9.2 - 9.2 foreign currency net assets Exchange movements recycled to income - 3.2 - 3.2 statement on disposal of businesses Cash flow hedges - - 2.4 2.4 At 31 December 2009 88.1 (31.2) (6.4) 50.5 Exchange movements on retranslation of - 2.8 - 2.8 foreign currency net assets Cash flow hedges - - 3.3 3.3 At 31 December 2010 88.1 (28.4) (3.1) 56.6 A capital redemption reserve was created on the conversion of convertible redeemable preference shares immediately prior to the Initial Public Offering in June 2002. The capital redemption reserve was converted to a capital reduction reserve in December 2002 and is part of distributable reserves. The currency translation reserve relates to the retranslation of foreign currency net assets on consolidation. This was reset to zero on transition to IFRS at 1 January 2004. The hedging reserve relates to the accounting for derivative financial instruments under IAS 39. Fair value gains and losses in respect of effective cash flow hedges are recognised in the hedging reserve. 25 Non-controlling interests 2010 2009 $m $m At 1 January 10.8 13.1 Exchange movements 0.3 0.2 Acquisitions 0.3 2.7 Investment by non-controlling interests 0.8 - Share of profit for the year (0.2) 1.0 Dividends paid (1.1) (0.4) Disposal of businesses - (5.8) At 31 December 10.9 10.8 26 Cash generated from operations 2010 2009 $m $m Reconciliation of operating profit to cash generated from operations: Operating profit 288.2 298.5 Adjustments for: Depreciation 66.3 59.1 Loss on disposal of property plant and equipment 3.4 2.5 Amortisation of other intangible assets 29.0 24.1 Share based charges 16.7 11.2 (Decrease)/increase in provisions (6.2) 5.7 Exceptional items - non cash impact 19.6 35.0 Changes in working capital (excluding effect of acquisition and disposal of subsidiaries) (Increase)/decrease in inventories (53.9) 9.2 (Increase)/decrease in receivables (33.8) 154.9 Increase/(decrease) in payables 68.3 (45.8) Exchange movements (3.1) (8.9) Cash generated from operations 394.5 545.5 Analysis of net debt At 1 Cash flow Exchange At 31 January movements December 2010 2010 $m $m $m $m Cash and cash equivalents 208.6 (30.6) 2.1 180.1 Short term borrowings (19.0) (10.5) (0.6) (30.1) Long term borrowings (277.5) 107.8 4.6 (165.1) Net debt (87.9) 66.7 6.1 (15.1) 27 Acquisitions and disposals Acquisitions The assets and liabilities acquired in respect of the acquisitions during the year were as follows: Book value and fair value $m Property plant and equipment 0.7 Other intangible assets 3.0 Trade and other receivables 7.7 Cash 0.1 Trade and other payables (6.7) Net assets acquired 4.8 Goodwill 22.7 Non-controlling interests (0.3) Consideration 27.2 Consideration satisfied by: Cash 20.3 Deferred consideration 6.9 27.2 The Group has used acquisition accounting for the purchases and, in accordance with the Group's accounting policies, the goodwill arising on consolidation of $22.7m has been capitalised. The table above includes amounts relating to the acquisitions of Al-Hejailan Consultants (`AHC') and SgurrEnergy (`Sgurr') made during the year. The Group acquired 55% of the share capital of AHC and 51% of the share capital of Sgurr. The acquisitions are not considered to be material to the Group on an individual basis and therefore have been aggregated in the table above. The acquisitions during the year provide the Group with access to new markets and strengthen the Group's capabilities in certain areas. The acquired companies will be in a position to access the Group's wider client base and use the Group's existing relationships to further grow and develop their businesses. These factors contribute to the goodwill recognised by the Group on the acquisitions. 27 Acquisitions and disposals (continued) Deferred consideration payments of $47.7m were made during the year in respect of acquisitions made in prior periods. Payments during the year and changes to previous estimates of deferred consideration have resulted in a reduction of goodwill of $15.1m. Costs of $0.7m were incurred during the year in respect of acquisitions made in 2009. The outflow of cash and cash equivalents on the acquisitions made during the year is analysed as follows: $m Cash consideration 20.3 Cash acquired (0.1) 20.2 Costs incurred in relation to acquisitions in prior period 0.7 Cash outflow 20.9 The results of the Group, as if the above acquisitions had been made at the beginning of period, would have been as follows: $m Revenue 5,072.4 Profit for the year 166.2 From the date of acquisition to 31 December 2010, the acquisitions contributed $9.4m to revenue and $(0.4)m to profit for the year. In December 2010, the Group entered into an agreement to acquire Production Services Network Limited (`PSN') for a total enterprise value of $955m. The acquisition is subject to approval by the UK merger control authorities. The consideration will be paid in a mixture of sterling and US dollars based on the exchange rate at the date of the announcement. It is impracticable to provide details of the fair value of the assets acquired and the calculation of goodwill at this stage as the transaction has not been completed. The purchase price allocation and acquisition amounts will be disclosed in the 2011 Annual Report subject to the acquisition proceeding. 28 Employees and directors Employee benefits expense 2010 2009 $m $m Wages and salaries 1,798.8 1,805.2 Social security costs 129.9 138.8 Pension costs - defined benefit schemes (note 29) 6.5 4.1 Pension costs - defined contribution schemes (note 29) 50.5 43.6 1,985.7 1,991.7 Average monthly number of employees (including executive 2010 2009 directors) No. No. By geographical area: Europe 5,880 5,670 North America 9,460 9,660 Rest of the World 8,516 7,944 23,856 23,274 28 Employees and directors (continued) Key management compensation 2010 2009 $m $m Salaries and short-term employee benefits 18.4 18.5 Amounts receivable under long-term incentive schemes 9.9 6.7 Post employment benefits 1.0 1.0 Share based charges 7.4 3.7 36.7 29.9 The key management figures given above include executive directors. 2010 2009 Directors $m $m Aggregate emoluments 5.8 5.6 Aggregate amounts receivable under long-term incentive 1.4 1.1 schemes Aggregate gains made on the exercise of share options 0.6 0.9 7.8 7.6 One director (2009: one) has retirement benefits accruing under a defined contribution pension scheme. Retirement benefits are accruing to six (2009: six) directors under the company's defined benefit pension scheme. Further details of directors emoluments are provided in the Directors' Remuneration Report. 29 Retirement benefit liabilities One of the Group's pension schemes in the UK, the John Wood Group PLC Retirement Benefits Scheme, is a defined benefit scheme, which is contracted out of the State Scheme. The assets of the scheme are held separately from those of the Group, being invested with independent investment companies in trustee administered funds. The most recent actuarial valuation of the scheme was carried out at 5 April 2007 by a professionally qualified actuary. The principal assumptions made by the actuaries at the balance sheet date were: 2010 2009 % % Rate of increase in pensionable salaries 5.30 5.40 Rate of increase in pensions in payment and deferred 3.30 3.40 pensions Discount rate 5.40 5.80 Expected return on scheme assets 7.24 7.06 The expected return on scheme assets is based on market expectation at the beginning of the period for returns over the entire life of the benefit obligation. The mortality assumptions used by the actuary take account of standard actuarial tables compiled from UK wide statistics relating to occupational pension schemes. At 31 December 2010 the actuary has used the PXA00 mortality table with `long cohort' projections and a 1% underpin in the rate of future improvements in mortality. 29 Retirement benefit liabilities (continued) The amounts recognised in the balance sheet are determined as follows: 2010 2009 $m $m Present value of funded obligations (188.3) (174.4) Fair value of scheme assets 155.0 140.1 Net liabilities (33.3) (34.3) The major categories of scheme assets as a percentage of total scheme assets are as follows: 2010 2009 % % Equity securities 84.4 86.0 Corporate bonds 9.5 7.0 Gilts 5.1 6.4 Cash 1.0 0.6 The amounts recognised in the income statement are as follows: 2010 2009 $m $m Current service cost included within employee benefits 6.5 4.1 expense Interest cost 10.0 8.8 Expected return on scheme assets (9.9) (7.9) Total included within finance expense 0.1 0.9 The employee benefits expense is included within administrative expenses in the income statement. Changes in the present value of the defined benefit liability are as follows: 2010 2009 $m $m Present value of funded obligations at 1 January 174.4 124.7 Current service cost 6.5 4.1 Interest cost 10.0 8.8 Actuarial losses 6.5 24.0 Scheme participants contributions 0.7 2.4 Benefits paid (4.8) (6.0) Exchange movements (5.0) 16.4 Present value of funded obligations at 31 December 188.3 174.4 29 Retirement benefit liabilities (continued) Changes in the fair value of scheme assets are as follows: 2010 2009 $m $m Fair value of scheme assets at 1 January 140.1 101.6 Expected return on scheme assets 9.9 7.9 Contributions 6.3 7.7 Benefits paid (4.8) (6.0) Actuarial gains 7.5 15.6 Exchange movements (4.0) 13.3 Fair value of scheme assets at 31 December 155.0 140.1 Analysis of the movement in the balance sheet liability: 2010 2009 $m $m At 1 January 34.3 23.1 Current service cost 6.5 4.1 Finance expense 0.1 0.9 Contributions (5.6) (5.3) Net actuarial (gains)/ losses recognised in the year (1.0) 8.4 Exchange movements (1.0) 3.1 At 31 December 33.3 34.3 Cumulative actuarial losses recognised in equity: 2010 2009 $m $m At 1 January 51.5 43.1 Net actuarial (gains)/losses recognised in the year (1.0) 8.4 At 31 December 50.5 51.5 The actual return on scheme assets was $17.4m (2009 : $23.5m). 29 Retirement benefit liabilities (continued) History of experience gains and losses: 2010 2009 2008 2007 2006 Difference between the expected and actual return on scheme assets : Gain/(loss) ($m) 7.5 15.6 (44.3) 10.5 2.9 Percentage of scheme assets 5% 11% 44% 6% 2% Experience (losses)/gains on scheme liabilities: (Loss)/gain ($m) (6.5) (24.0) 25.6 (7.9) 5.6 Percentage of the present value of 4% 14% 21% 4% 3% the scheme liabilities Present value of scheme liabilities 188.3 174.4 124.7 187.5 165.3 ($m) Fair value of scheme assets ($m) 155.0 140.1 101.6 176.2 140.4 Deficit ($m) 33.3 34.3 23.1 11.3 24.9 The contributions expected to be paid during the financial year ending 31 December 2011 amount to $7.2m. Pension costs for defined contribution schemes are as follows: 2010 2009 $m $m Defined contribution schemes 50.5 43.6 Contributions outstanding at 31 December 2010 in respect of defined contribution schemes amounted to $19.4m (2009 : $17.1m). 30 Operating lease commitments - minimum lease payments Property 2010 Property 2009 Vehicles, Vehicles, plant and plant and equipment equipment $m $m $m $m Amounts payable under non-cancellable operating leases due: Within one year 63.1 12.0 64.6 11.0 Later than one year and less than five 159.6 14.8 154.6 13.8 years After five years 69.1 0.6 42.4 1.8 291.8 27.4 261.6 26.6 The Group leases various offices and facilities under non-cancellable operating lease agreements. The leases have various terms, escalation clauses and renewal rights. The Group also leases plant and machinery under non-cancellable operating lease agreements. 31 Contingent liabilities At the balance sheet date the Group had cross guarantees without limit extended to its principal bankers in respect of sums advanced to subsidiaries. In February 2010, the Group, and several other parties, were notified of a legal claim from a customer in respect of work carried out in 2008. A meeting was held with the customer in January 2011 but no progress was made towards any resolution. Management believe that the Group is in a strong position to defend the claim, and do not believe that it is probable that any material liability will arise as a result. 32 Capital and other financial commitments 2010 2009 $m $m Contracts placed for future capital expenditure not provided 13.5 4.3 in the financial statements The capital expenditure above relates to property plant and equipment. $9.2m of the above amount relates to commitments made by one of the Group's joint venture companies. 33 Related party transactions The following transactions were carried out with the Group's joint ventures. These transactions comprise sales and purchases of goods and services in the ordinary course of business. 2010 2009 $m $m 102.2 103.4 Sale of goods and services to joint ventures Purchase of goods and services from joint ventures 49.3 29.4 Receivables from joint ventures 43.0 40.7 Payables to joint ventures 5.7 7.7 In addition to the above, the Group charged JW Holdings Limited, a company in which Sir Ian Wood has an interest, an amount of $0.1m (2009 : $0.1m) for management services provided under normal commercial terms. Key management compensation is disclosed in note 28. 34 Events after the balance sheet date On 13 February 2011, the Group entered into an agreement to dispose of its Well Support business to GE for a total consideration of $2,800m. Well Support contributed $947.1m of revenue and $128.1m of operating profit to the Group's results for the year ended 31 December 2010. Full details of the disposal will be provided in the 2011 Annual Report. The Group plans to return cash to shareholders from the proceeds of sale. 35 Principal subsidiaries and joint ventures The Group's principal subsidiaries and joint ventures at 31 December 2010 are listed below. Name of subsidiary or joint Country of Ownership Principal activity venture incorporation interest or % registration Engineering & Production Facilities: Mustang Engineering Holdings, USA 100 Conceptual studies, Inc engineering, project Alliance Wood Group USA 100 and construction Engineering L.P. management and control J P Kenny Engineering Limited UK 100 system upgrades. IMV Projects Inc Canada 100 Marine Computation Services Ireland 100 Group Limited Wood Group Engineering (North UK Brownfield engineering Sea) Limited 100 and modifications, SIGMA 3 (North Sea) Limited UK 33.3* production enhancement, operations Wood Group Production USA 100 management, maintenance Services, Inc management Wood Group Colombia S.A Colombia 100 and abandonment services. Wood Group Equatorial Guinea Cyprus 100 Limited Deepwater Specialists Inc USA 100 Wood Group E&PF Australia Pty Australia 100 Limited Producers Assistance USA 100 Corporation Well Support: Wood Group ESP, Inc. USA 100 Wood Group Products & Services Argentina 100 Electric submersible SA pumps Wood Group ESP (Middle East) Cyprus 100 Ltd Wood Group Pressure Control, USA Valves and wellhead L.P. 100 equipment Wood Group Pressure Control UK 100 Limited Wood Group Logging Services USA 100 Logging services Inc. Gas Turbine Services: Rolls Wood Group (Repair & UK Overhauls) 50* Limited TransCanada Turbines Limited Canada 50* Gas turbine repair and overhaul Wood Group Field Services, USA 100 Inc. Wood Group Gas Turbine UK 100 Services Limited Wood Group Pratt & Whitney USA 49* Industrial Turbine Services, LLC Wood Group Power Solutions, USA 100 Power plant engineering, Inc. procurement and construction Wood Group Advanced Parts Switzerland 100 Provision of gas turbine Manufacture AG parts Shanahan Engineering Ltd Ireland 100 Power plant installation services Wood Group Power Plant USA 100 Operations and Services Inc maintenance Wood Group Power Inc USA 100 Gas turbine maintenance The proportion of voting power held equates to the ownership interest, other than for joint ventures (marked *) which are jointly controlled. Shareholder information Payment of dividends The Company declares its dividends in US dollars. As a result of the shareholders being mainly UK based, dividends will be paid in sterling, but if you would like to receive your dividend in US dollars please contact the Registrars at the address below. All shareholders will receive dividends in sterling unless requested. If you are a UK based shareholder, the Company encourages you to have your dividends paid through the BACS (Banker's Automated Clearing Services) system. The benefit of the BACS payment method is that the Registrars post the tax vouchers directly to the shareholders, whilst the dividend is credited on the payment date to the shareholder's Bank or Building Society account. UK shareholders who have not yet arranged for their dividends to be paid direct to their Bank or Building Society account and wish to benefit from this service should contact the Registrars at the address below. Sterling dividends will be translated at the closing mid-point spot rate on 15 April 2011 as published in the Financial Times on 16 April 2011. Officers and advisers Secretary and Registered Office Registrars R M Brown Equiniti Limited John Wood Group PLC Aspect House John Wood House Spencer Road Greenwell Road Lancing ABERDEEN West Sussex AB12 3AX BN99 6DA Tel: 01224 851000 Tel: 0871 384 2649 Stockbrokers Independent Auditors JPMorgan Cazenove PricewaterhouseCoopers LLP Credit Suisse Chartered Accountants and Statutory Auditors Company Solicitors Slaughter and May Financial calendar Results announced 21 February 2011 Ex-dividend date 13 April 2011 Dividend record date 15 April 2011 Annual General Meeting 11 May 2011 Dividend payment date 16 May 2011 The Group's Investor Relations website can be accessed at www.woodgroup.com. 43 John Wood Group PLC John Wood Group PLC Notes to the financial statements for the year to 31 December 2010 John Wood Group PLC Notes to the financial statements for the year to 31 December 2010

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