Final Results

Expro International Group PLC 6 June 2002 NEWS RELEASE For Immediate Release 6 June 2002 EXPRO INTERNATIONAL GROUP PLC ("Expro" or "the Group") Preliminary results for the twelve months ending 31 March 2002 "Turnover and profits have risen to record levels" Expro International Group PLC, the oil field services company, today announces preliminary results for the twelve months ending 31 March 2002. Year Year ending 31 ending 31 March 2002 March 2001 Change Turnover £219.0m £171.9m 27% Operating Profit £28.0m £22.1m 27% Profit before Tax £22.6m £17.2m 31% Basic EPS 23.7p 18.9p 25% Dividend per share 10.8p 9.8p 10% Results exclude discontinued operations in Venezuela • All three business streams delivered healthy growth • Robust client demand for services driving growth in all key markets • Expro's development and production focus ensures resilience in current market • Expro is well positioned to benefit from recovery in world development and production spending Commenting on these results, John Dawson, Chief Executive, said: "Turnover and profits this year have risen to record levels. With approximately 85% of our business in the development and production phases, we have benefited from the high level of demand for our specialist technologies which are focused on reducing client capital and operating costs and therefore improving the economics of field developments. With our bias towards key growth markets such as the deepwater, we continue to see robust demand and are well positioned to benefit from an expected increase in development and production spending, particularly in the North American gas market, in the second half of the financial year." For further information please contact: Expro International Group PLC On 6 June: 020 7950 800 John Dawson, Chief Executive Thereafter: 01189 591 341 Eric Woolley, Group Finance Director Weber Shandwick Square Mile 020 7950 2800 Tim Jackaman, Sara Musgrave, Rachel Taylor EXPRO INTERNATIONAL GROUP PLC ("Expro" or "the Group") Preliminary results for the twelve months ended 31 March 2002 Chairman's & Chief Executive's Statement Results Summary Turnover and profits this year have risen to record levels. What has been encouraging has been the steady improvement as the year has progressed, building on the strong results in the year to March 2001. With approximately 85% of our business in the development and production phases, we have benefited from the high level of demand for our specialist technologies which are focused on reducing client capital and operating costs and therefore improving the economics of field developments. The results for the twelve months to 31 March 2002 (31 March 2001): • Turnover increased 27% to £219m (£171.9m) • Operating Profits increased 27% to £28m (£22.1m) • Profits before Tax increased 31% to £22.6m (£17.2m) • Earnings per share (EPS) increased 25% to 23.7p (18.9p) • Pre-goodwill EPS increased 27% to 27.5p (21.6p) • Dividend for the year increased 10% to 10.8p (9.8p) Results exclude discontinued operations in Venezuela. Dividend The Board is recommending a final dividend of 7.1p per ordinary share, subject to shareholder's approval at the Annual General Meeting on 10 July 2002. The dividend will be paid on 31 July, to shareholders on the register at 5 July 2002. This brings total dividends for the year to 10.8p (2001: 9.8p), an increase of 10% on the previous year. Overview These outstanding results have been achieved against a background of commodity price volatility following the world economic slowdown and the unsettled world political situation, manifest particularly during the second half of our financial year. These results demonstrate that the group's wide geographic diversity and its focus on the development and production phases of an oilfield's life continues to provide earnings stability. With strong performances across the group, growth has been broadly based, stimulated by product innovations, the development of our business in North America, our response to the growing number of deepwater developments worldwide and our increasing technical solutions capability. This growing capability is demonstrated by Expro's role in the highly successful Shell Malampaya gas to power project in the Philippines. Growth Strategy Our continued growth remains linked to our clear focus on service provision in the development and production phase of an oilfield's life, with particular emphasis on building our presence in the North American market. In all of our businesses we have a range of services and products which are fundamental to the safe, efficient and economic development and production of oil and gas resources. For our cased hole activities, the emphasis is on delivering a broader range of our market leading, high value cased hole solutions through our global distribution infrastructure, particularly in the markets geared to increased development activity. Surface and environmental has successfully repositioned itself as the leading small field development specialist and we will continue to develop our engineering and product capability to service this market. In addition, we will continue to provide solutions which enable our clients to undertake reservoir evaluation and well maintenance operations in an environmentally responsible manner. With our class leading capability in subsurface systems, our objective is to maintain Expro as the number one provider of deepwater well intervention and maintenance solutions, building upon our data capability and advanced knowledge of well requirements. Outlook Despite the generally uncertain economic climate, the high level of demand for our portfolio of services is similar to the levels of six months ago. This resilience demonstrates the importance of our services in assisting our clients either to economically expand and to replace their reserve base or to increase production levels. With our bias towards key growth markets such as the deepwater, we continue to see robust demand and are well positioned to benefit from an expected increase in development and production spending, particularly in the North American gas market, in the second half of the financial year. Dr Chris Fay, CBE John Dawson Chairman Chief Executive Officer 5 June 2002 Operations Review The portfolio of high value added service and product lines, together with a presence in the key oil and gas provinces, enabled the group to deliver a strong performance, despite economic uncertainty leading to fluctuating oil and gas industry conditions over the past year. The resulting predominantly organic 27% increase in turnover and 31% increase in pre-tax profit, reflects an excellent second half performance, despite the more difficult industry conditions, particularly in the Gulf of Mexico where weaker gas prices led to a significant reduction in rig count. Surface and Environmental Systems ("SES") Much of the 28% increase in revenues has been driven by our successful Productions Solutions focus, leading to substantial long term contracts for the provision of fast track production systems on a lease, operate and maintain basis. Expro's ability to combine well operations and production processing with the associated engineering, procurement and financing, provides a powerful offering to clients looking to achieve early production or cost-effective smaller field exploitation. Expro's surface processing and environmental operations, which are now deployed primarily for well clean-up services, continue to perform well and are usually integrated with our Subsea and CHS offerings. In Europe, income growth of 14% arose primarily from the extended gas production operations for AGIP on their Gaggianno field, close to Milan, where environmental considerations have been critical. Elsewhere in Europe, traditional clean-up operations have remained at a similar level to the prior year. The income growth of 7% in Africa / FSU / ME belies the underlying strength in this region which will feed through into further growth in the new financial year. Growth has been delivered from a very high base following the completion of operations on two productions solutions contracts at the end of the prior year and is based on revenues under long-term contracts. In the second half, mobilisation of both the Soroosh early production system for Shell in Iran (through our joint venture with Swire Pacific Offshore) and the floating production system for Coparex's Isis field offshore Tunisia took place, the latter under a five year agreement. In addition, the integrated services contracts for bp and BHP in Algeria and KPO in Kazakhstan have been major contributors within this business stream. The most significant increase in income occurred in the Asia Pacific region, where revenues doubled. Major contributors were the very successful gas to power field development, and the ensuing extended well test, for Shell on their Malampaya field and the long term integrated services contract for Santos in Australia. Finally, revenue from China doubled with significant increases in the sales of production equipment packages to local service providers. Cased Hole Services ("CHS") Income was up 22% on the prior year reflecting the robust performance through the recent cycle, given its focus on well maintenance and production optimisation. Client expenditure on these activities is stable as it is largely de-coupled from capital expenditure programmes. In addition, the business stream has seen the benefit of integrating successful acquisitions made over the last three years, as a result of which we have established a significant presence in the Gulf of Mexico. In Europe, income was 6% lower than prior year, with most of the impact being in the second half. With the weakness being more pronounced in the Southern North Sea, we promptly took action to reduce the scale of operations in Great Yarmouth. In the Northern North Sea, platform activity was robust, particularly supporting Shell's expanded Northern Business Unit where we have successfully deployed our wide technology portfolio including slickline perforation services. Despite a static market in the UKCS last year, we have been able to maintain margins. We remain confident that our commitment to the highest levels of performance in service delivery, underpinned by significant investments in Health, Safety, and in Training, will enable us to continue to lead the way in the UKCS and Continental Europe markets for CHS. In Africa / FSU / ME income was up 63%, with excellent performances in Algeria and Kazakhstan in particular where Expro is providing integrated services packages comprising both cased hole services and surface and environmental services. Our Algeria operations on the BHP and bp gas fields, have included extensive electronic downhole data gathering in addition to core slickline operations. These operations will continue into the new year. Of similar significance are the services provided to KPO in Kazakhstan through an alliance of service companies led by Baker Hughes, under a three year agreement. Again, high levels of data acquisition and sampling activities increase the value of these operations to Expro. A 19% increase in CHS income in Asia Pacific reflects the contribution of another major long-term integrated service contract in Australia's Cooper basin, for Santos. These operations have been building-up over the second half of the year following commencement in June, 2001. Operations for Santos comprise a comprehensive outsourcing solution, with Expro providing extensive planning and management services to ensure cost effective well operations for Santos across all their onshore Australia assets, including the introduction of new technologies to improve the productivity of their wells. In the Americas region, CHS income was up 44%, in part reflecting the contribution of Production Wireline Services ("PWS") which was acquired late in the prior year. However, double digit organic growth was achieved against a background of a marked reduction in onshore and shallow water drilling activity during the second half of the year. This has been achieved by introducing new service capabilities to the businesses acquired, such as heavy duty fishing and deepwater operations to PWS and the electronic caliper, Digical, through Kinley. As expected, Tripoint experienced weaker activity levels in the second half of the year, as well as margin erosion resulting from a combination of pricing pressure and operational gearing. This is a natural feature of the market in the Gulf of Mexico and we are anticipating a restoration of prior levels of activity and margin towards the end of 2002 and into 2003. Early in the first half of the year, the group discontinued its CHS operations in Venezuela as we had been unable to sustain acceptable rates of return. Subsurface Systems ("SSS") Enjoying the strong recovery in our clients' development spending, Subsurface Systems achieved income growth of 36% on the prior year. Subsea services, Tronic connectors and permanent in-well monitoring systems all achieved strong growth on the prior year. Activity accelerated during the year and the second half showed higher levels of growth than the first, with Tronic in particular achieving high levels of deliveries in conjunction with an improving order book. Technical innovation continues to drive this part of our business. The ELSA (Enhanced Landing String Assembly) recently received the Hart's E&P 2002 Special Meritorious Award for Engineering Innovation. WellGUARD, our new high temperature permanent in-well monitoring system, was launched at the Offshore Technology Conference in Houston in May 2002 after undergoing rigorous testing and installation in three wells in West Africa and the UK North Sea. Digitron, Tronic's new generation modular connector, has continued to attract favourable client response and has made a significant contribution to Tronic's outstanding performance this year, with sales up more than 50% on the prior year to record levels. In September 2001, Brian Wilson MP, UK Minister for Industry and Energy opened Expro's new Research and Development facility in Aberdeen, supporting our growing international Subsurface Systems business. All regions experienced significant growth on the prior year. Income in Europe was 35% up on the prior year, primarily reflecting the strength of Tronic. However, subsea operations for Mobil's Skene, Kerr McGee's Leadon and bp's Machar fields also contributed significantly to this growth. The Norwegian market for Subsurface Systems has remained subdued, although recent awards on Statoil's Sigyn and Norske Hydro's Fram Vest and Vale fields suggest a recovery in 2002/03. Africa / FSU / ME income grew by 36%, with West Africa continuing to dominate, particularly Angola, Equatorial Guinea, Ivory Coast; both subsea operations and installation of permanent in-well monitoring systems continued at a high level throughout the year. Relative to the prior year, the Asia Pacific region achieved the highest income growth at 44%, attributable primarily to the extensive subsea operations conducted for Shell on their Malampaya field in the Philippines. Finally, the Americas region achieved income growth of 35%, from a near doubling of subsea income combined with significant Tronic revenue growth. In safety systems, Expro continues to dominate the Gulf of Mexico subsea completion and intervention market, conducting operations for Kerr McGee on Boom Vang and Mariner on King Kong amongst others. Recent orders for high pressure, large bore valves for bp's Thunderhorse suggest a continuation of high levels of activity. Offshore Newfoundland, we have continued our successful subsea completions operations for PetroCanada on their Terra Nova field. - ends - For further information please contact: Expro International Group PLC On 6 June: 020 7950 2800 John Dawson, Chief Executive Thereafter: 01189 591 341 Eric Woolley, Group Finance Director Weber Shandwick Square Mile 020 7950 2800 Tim Jackaman, Sara Musgrave, Rachel Taylor Consolidated Profit and Loss Account For the year ended 31 March 2002 2002 2001 _______________________________________________________________________ Continuing Discontinued Total Continuing Discontinued Total operations operations operations operations Note £000's £000's £000's £000's £000's £000's Turnover: Group and share of joint 2 219,042 199 219,241 171,864 2,392 174,256 ventures Less: share of joint ventures (6,203) - (6,203) (2,559) - (2,559) _______ ______ _______ _______ ______ _______ Group turnover 2 212,839 199 213,038 169,305 2,392 171,697 Cost of sales (169,038) (349) (169,387) (133,179) (2,380) (135,559) _______ ______ _______ _______ ______ _______ Gross profit / (loss) 43,801 (150) 43,651 36,126 12 36,138 _______ ______ _______ _______ ______ _______ Other operating expenses (net) Goodwill amortisation (2,474) 6 (2,468) (1,777) 44 (1,733) Other expenses (15,043) (303) (15,346) (12,607) (1,288) (13,895) _______ ______ _______ _______ ______ _______ Total other operating expenses (17,517) (297) (17,814) (14,384) (1,244) (15,628) _______ ______ _______ _______ ______ _______ Operating profit / (loss): Group 26,284 (447) 25,837 21,742 (1,232) 20,510 Share of operating profit in 1,695 - 1,695 356 - 356 joint ventures _______ ______ _______ _______ ______ _______ Group and share of joint 27,979 (447) 27,532 22,098 (1,232) 20,866 ventures Loss on termination of discontinued 3 - (1,964) (1,964) - - - operations _______ ______ _______ _______ ______ _______ Profit / (loss) on ordinary activities before finance charges 27,979 (2,411) 25,568 22,098 (1,232) 20,866 Finance charges (net) (5,415) - (5,415) (4,932) - (4,932) _______ ______ _______ _______ ______ _______ Profit / (loss) on ordinary activities before taxation 22,564 (2,411) 20,153 17,166 (1,232) 15,934 Tax on profit on ordinary activities 4 (6,967) - (6,967) (5,013) - (5,013) _______ ______ _______ _______ ______ _______ Profit / (loss) on ordinary activities after taxation 15,597 (2,411) 13,186 12,153 (1,232) 10,921 Minority equity interests (15) - (15) (1) - (1) _______ ______ _______ ______ ______ _______ Profit / (loss) for the financial 15,582 (2,411) 13,171 12,152 (1,232) 10,920 year Dividends paid and proposed 5 (7,119) - (7,119) (6,394) - (6,394) _______ ______ _______ ______ ______ _______ Retained profit / (loss) for the year 8,463 (2,411) 6,052 5,758 (1,232) 4,526 _______ ______ _______ ______ ______ _______ Earnings per ordinary share 6 Basic 23.7p 20.0p 18.9p 17.0p Diluted 23.5p 19.8p 18.8p 16.9p Basic before goodwill amortisation 27.5p 23.8p 21.6p 19.7p Consolidated Balance Sheet 31 March 2002 31 March 31 March 2002 2001 £'000 £'000 Fixed assets Patents and licences 906 572 Goodwill 43,364 45,969 ______ ______ Intangible assets 44,270 46,541 Tangible assets 76,868 72,352 Investments 10 41 Investments in joint ventures: _______________________ share of gross assets 13,986 10,386 share of gross liabilities (11,520) (10,052) goodwill 1,092 830 _______________________ 3,558 1,164 ______ ______ 124,706 120,098 ______ ______ Current assets Stocks and work-in-progress 12,073 11,759 Debtors 84,414 73,457 Cash at bank and in hand 5,848 6,272 ______ ______ 102,335 91,488 Creditors: Amounts falling due within one year (58,709) (93,320) ______ ______ Net current assets / (liabilities) 43,626 (1,832) ______ ______ Total assets less current liabilities 168,332 118,266 Creditors: Amounts falling due after more than one year (82,607) (40,270) Provisions for liabilities and charges (2,635) (2,911) ______ ______ Net assets 83,090 75,085 ______ ______ Capital and reserves Note Called-up share capital 6,605 6,575 Share premium account 7 61,304 60,441 Capital reserve 7 24 24 Profit and loss account 7 15,154 8,057 ______ ______ Shareholders' funds, being equity interests 83,087 75,097 Minority interest 3 (12) ______ ______ Total capital and reserves 83,090 75,085 ______ ______ Consolidated Cash Flow Statement For the year ended 31 March 2002 31 March 31 March 2002 2001 £'000 £'000 Note Net cash inflow from operating activities 8 28,850 25,479 ______ ______ Returns on investments and servicing of finance Interest received 338 261 Interest paid (5,457) (5,046) ______ ______ Net cash outflow for returns on investments and servicing of finance (5,119) (4,785) ______ ______ Taxation (7,010) (4,603) ______ ______ Net cash outflow for capital expenditure and financial investment (22,312) (25,272) ______ ______ Acquisition of subsidiary undertakings - (7,785) Acquisition of share of joint ventures - (995) Equity dividends paid (6,636) (6,297) ______ ______ Cash outflow before financing (12,227) (24,258) ______ ______ Financing Issue of ordinary share capital 247 620 Increase in debt 31,686 5,151 ______ ______ 31,933 5,771 ______ ______ Increase/ (decrease) in cash in the year 19,706 (18,487) ______ ______ Notes to the preliminary results 31 March 2002 1. The financial information set out above does not constitute the Company's statutory accounts within the meaning of Section 240 of the Companies Act 1985. The statutory accounts of the Company for the year ended 31 March 2001 have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statements under Section 237(2) or (3) of the Companies Act 1985. The auditors have given an unqualified opinion on the accounts for the year ended 31 March 2002. These accounts have been prepared using the same accounting policies as in the 31 March 2001 statutory accounts with the exception of the adoption of FRS 19 (Deferred tax). No adjustments were necessary as a result of the adoption of this new standard. These accounts will be delivered to the Registrar of Companies following the Annual General Meeting on 10 July 2002. 2. Analysis of turnover The analysis of turnover by geographical area and business stream is as follows: Surface & Cased Hole Subsurface Environmental Services Systems Systems Total 2002 2001 2002 2001 2002 2001 2002 2001 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Europe 28,194 30,016 27,058 20,074 23,648 20,742 78,900 70,832 Africa/FSU/ME* 13,095 8,034 8,772 6,450 25,303 26,884 47,170 41,368 Asia Pacific 8,408 7,092 5,176 3,594 15,454 7,283 29,038 17,969 Americas 34,321 23,774 13,105 9,738 10,305 5,624 57,731 39,136 ______ ______ ______ ______ ______ ______ ______ ______ Group turnover continuing operations 84,018 68,916 54,111 39,856 74,710 60,533 212,839 169,305 Discontinued operations 199 2,304 - - - 88 199 2,392 ______ ______ ______ ______ ______ ______ ______ ______ Group turnover 84,217 71,220 54,111 39,856 74,710 60,621 213,038 171,697 Joint ventures - - - - 6,203 2,559 6,203 2,559 ______ ______ ______ ______ ______ ______ ______ ______ Total turnover 84,217 71,220 54,111 39,856 80,913 63,180 219,241 174,256 ______ ______ ______ ______ ______ ______ ______ ______ * Africa, Former Soviet Union and Middle East. An analysis of profit on ordinary activities and net assets by geographical area and business stream has been omitted. 3. Loss on termination of discontinued operations The exceptional loss on termination of discontinued operations relates to the closure of the group's Cased Hole Services business in Venezuela and is after charging £506,000 of goodwill previously written off to reserves and crediting £261,000 of negative goodwill previously capitalised. The exceptional charge had no effect on the group tax charge or minority interest. 2002 2001 £'000 £'000 Loss on termination of discontinued operations 1,576 - Goodwill previously eliminated against reserves 506 - Negative goodwill (261) - Loss on disposal of fixed assets 143 - ______ ______ 1,964 - ______ ______ 4. Tax on profit on ordinary activities The taxation charge comprises: 2002 2001 £'000 £'000 Current tax UK corporation tax charge / (credit) 2,240 (764) Double tax relief (1,046) - _______ ______ 1,194 (764) Foreign tax 5,946 5,806 ------- ------- 7,140 5,042 Adjustments to UK corporation tax in respect of prior years 51 - _______ _______ Total current tax 7,191 5,042 Deferred tax: Origination and reversal of timing differences (224) (29) ------- ------- Total tax on profit on ordinary activities 6,967 5,013 _______ _______ 5. Dividends paid and proposed 2002 2001 £'000 £'000 Dividend paid on 31 January 2002 of 3.7p (2001 - 3.4p) per ordinary share 2,434 2,192 Proposed final dividend of 7.1p (2001 - 6.4p) per ordinary share 4,685 4,202 ______ ______ 7,119 6,394 ______ ______ 6. Earnings per ordinary share Basic earnings per ordinary share are based on the group's profit on ordinary activities after taxation and on the weighted average number of 65,755,130 ordinary shares in issue and ranking for dividend during the year (2001 - 64,384,050). Diluted earnings per share are based upon the group's profit on ordinary activities after taxation and on a weighted average of ordinary shares diluted by 298,009 shares (2001 - 83,995) in respect of an executive share scheme and 300,515 shares (2001 - 36,669) in respect of an employee share scheme, resulting in a diluted weighted average number of shares of 66,353,654 (2001 - 64,504,714). Basic earnings per share before goodwill amortisation are calculated by adjusting earnings for goodwill amortisation of £2,468,000 (2001 - £1,733,000) and by £2,474,000 (2001 - £1,777,000) for continuing operations. 7. Reserves Share Profit premium Capital and loss account reserve account £'000 £'000 £'000 Group Beginning of year 60,441 24 8,057 Share issues 863 - - Profit on foreign currency translation - - 539 Retained profit for the year - - 6,052 Transfer to current year exceptional charge (note 3) - - 506 ______ ______ ______ End of year 61,304 24 15,154 ______ ______ ______ Cumulative goodwill written off against reserves was £47,186,000 (2001 - £47,692,000). 8. Cash flow information Reconciliation of operating profit to net operating cash inflow 2002 2001 ________________________________________________________________________ Continuing Discontinued Total Continuing Discontinued Total operations operations operations operations £'000 £'000 £'000 £'000 £'000 £'000 Operating profit / (loss) 26,284 (447) 25,837 21,742 (1,232) 20,510 Depreciation and amortisation 18,252 244 18,496 15,405 598 16,003 Loss / (profit) on sale of tangible 20 - 20 (5) - (5) fixed assets (Increase) / decrease in stocks and work-in-progress (185) (129) (314) (1,465) 204 (1,261) (Increase) / decrease in debtors (12,062) 1,029 (11,033) (12,822) 206 (12,616) (Decrease) / increase in creditors and provisions (3,425) (372) (3,797) 2,762 86 2,848 Net cash outflow related to exceptional charge (note 3) - (359) (359) - - - ______ ______ ______ ______ ______ ______ Net cash inflow / (outflow) from operating activities 28,884 (34) 28,850 25,617 (138) 25,479 ______ ______ ______ ______ ______ ______ Reconciliation of net cash flow to movement in net debt 2002 2001 £'000 £'000 Increase / (decrease) in cash in the year 19,706 (18,487) Cash flow from increase in debt finance (31,686) (5,151) ______ ______ Increase in net debt resulting from cash flows (11,980) (23,638) Translation difference 753 (1,751) Loans acquired with subsidiary undertakings - (1,363) Loan notes issued in connection with acquisitions - (2,922) ______ ______ Movement in net debt in the year (11,227) (29,674) Net debt at beginning of year (76,946) (47,272) ______ ______ Net debt at end of year (88,173) (76,946) ______ ______ Analysis of net debt Other Beginning Cash non cash End of of year flow changes year £'000 £'000 £'000 £'000 Cash at bank and in hand 6,272 (424) - 5,848 Bank overdrafts (32,246) 20,130 - (12,116) Debt due within 1 year (12,866) 12,676 190 - Debt due after 1 year (38,106) (44,362) 563 (81,905) ______ ______ ______ ______ (76,946) (11,980) 753 (88,173) ______ ______ ______ ______ This information is provided by RNS The company news service from the London Stock Exchange

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