Final Results
Expro International Group PLC
02 June 2005
2 June 2005
EXPRO INTERNATIONAL GROUP PLC
("Expro" or "the group")
Preliminary results for the twelve months ended 31 March 2005
Expro International Group PLC, the oil field services company, today announces
preliminary results for the twelve months ended 31 March 2005.
Year Year
ended ended
31 March 2005 31 March 2004 Change
Turnover* £223.3m £208.4m 7%
Operating profit/(loss)* £14.3m £(2.0)m
Operating profit before goodwill amortisation
and exceptional items* £21.3m £16.5m 29%
Profit/(loss) before tax £11.6m £(4.5)m
Profit before tax, goodwill & exceptional items £18.6m £14.0m 33%
Basic EPS /(loss) 6.7p (15.0)p
Basic EPS before goodwill & exceptional items 17.3p 13.0p 33%
Dividend per share 10.9p 10.9p
* (includes share of joint-ventures)
The above numbers have been extracted from the Group Consolidated Profit and
Loss Account.
•Excellent results at the upper end of market expectations.
•The strategy announced 18 months ago is now delivering the financial
benefits anticipated at the time.
•Market conditions generally improving for Expro's late cycle products and
services.
•Record enquiry and order books, fuelled by increased technology
development and customer focus, are providing improved revenue and earnings
visibility.
•Dividend maintained.
•Cash placing launched to refinance recent acquisitions and support the
next phase of Expro's development.
•Post placing outlook for 2005/06 is in line with the market's current
expectations for earnings per share (pre goodwill and exceptional items).
Commenting on these results, Graeme Coutts, Chief Executive, said:
"I am very pleased to announce today a set of results that reflect in financial
terms the continued progress Expro has made implementing the strategy announced
18 months ago. Our increased customer focus and technology development has not
only reversed the previous downward sales trend, it has also generated record
levels of new business enquiries and provided improved earnings visibility.
Global market conditions for Expro's products and services have strengthened in
the past year, and, with earnings now benefiting from the group's high
operational gearing, the outlook for 2005/06 and beyond is positive.
Against a background of gathering momentum within Expro, and increasing new
business opportunities for our products and services, we announced today the
launch of a non pre-emptive cash placing of shares. The proceeds of this placing
will be used to refinance our successful recent acquisitions and support the
next phase of the group's development."
- Ends -
For further information please contact:
Expro International Group PLC On 2 June: 020 7067 0700
Graeme Coutts, Chief Executive Thereafter: 01189 591 341
Michael Speakman, Group Finance Director
Weber Shandwick Square Mile 020 7067 0700
Mike Kirk, Stephanie Badjonat, Rachel Taylor
An analyst meeting will be held at 09.30 this morning at the offices of Weber
Shandwick Square Mile, Fox Court, 14 Gray's Inn Road, London, WC1X 8WS
EXPRO INTERNATIONAL GROUP PLC
("Expro" or "the group")
Preliminary results for the twelve months ending 31 March 2005
Chairman's and Chief Executive's Statement
The challenge for Expro is clearly defined in the group strategy, which is to
ensure Expro remains a leading upstream oil and gas technology service provider.
A generally strong improvement in market conditions, coupled with successful
implementation of Expro's published strategy, has led to a steadily improving
business performance in the year ended 31 March 2005. The discipline displayed
by the Organisation of the Petroleum Exporting Countries ("OPEC"), and the
evidence of strong economic demand for hydrocarbon energy, has led to increased
confidence in oil prices which can now be sustained at levels above USD30 per
bbl. Consequently client capital and operating expenditure levels have risen,
providing a more favourable environment for the upstream services industry. With
few exceptions, all markets have shown improvement as oil and gas operators
strive to maximise cash flow from existing assets, seek to add additional
production through new field developments, or look to increase proven reserves
through higher levels of exploration. The first two of these are late phase
activities in the cycle of the upstream oil and gas industry, which benefit the
strengths of Expro. These improved market conditions are tainted only by the
continued weakness of the US Dollar. This has a marked effect on Expro's
translated earnings and has an erosional effect on our competitive position,
particularly against our major US based competitors.
Underlying trading in the second half of the year strengthened in line with the
aforementioned conditions. The focused strategy, published 18 months ago, has
had a marked effect on performance: good progress is being made re-engineering
our loss making Americas business; market share gains have been made in the
North Sea; international contract wins from new clients; and the addition of a
small, synergistic acquisition to our market leading Subsurface business.
As predicted previously, and in common with our peers, the weakening of the US
Dollar adversely impacted the results of both the Americas and Africa/Asia/ME
regions, with profits from the latter region particularly affected as a
consequence of its US Dollar revenue and mainly non US Dollar cost base. The
continued adverse exchange impact was largely mitigated by the group's hedging
policy in the first half of the year, but inevitably once the hedges placed at
stronger dollar rates unwound, profit in the second half of the year was
impacted to a greater extent.
Despite the currency effect, turnover improved, increasing by 7.1% to £223.3m
for the group, including its share of joint ventures. As a result, pre-tax
profits, excluding goodwill amortisation and exceptional items, at £18.6m* were
32.8% up on the prior year, with EPS on the same basis at 17.3p*, up 33.1%.
Excluding the impact of the exchange rate, the results for the year show an
excellent recovery in the gross profit, confirming the leveraged effect of
increased revenue activity.
The re-engineering of the business has continued throughout the year, and
although performance improvements have been achieved in the majority of the
areas targeted, there have also been some persistently disappointing operations,
principally Tripoint in the US. We have, therefore, taken a considered course of
action to further impair the goodwill associated with these activities. Overall
this has resulted in an exceptional non cash charge of £4.3m and a remaining
goodwill balance of £18.8m.
The group tax charge of £7.2m, represents an effective tax rate of 38.5% on the
profit before goodwill and exceptional items*. During the year, the group made
good progress in addressing the historical, non recurring, tax issues in the US
and numerous smaller territories, and work continues in addressing similar
matters elsewhere in the group.
* As extracted from the consolidated profit and loss account.
Largely as a result of the investment in the Chayvo EPF project and the
acquisition of Read Matre Investments A.S. ("RMI"), net debt rose towards the
end of the year to £54.0m, a gearing level of 76.5% (prior year £44.8m and
60.5%). Total net debt is within the group's borrowing facility.
Dividend Statement
The Board is recommending maintaining the final dividend of 7.1p per ordinary
share, bringing the total dividend for the year to 10.9p, unchanged from last
year. This recommendation reflects the Board's confidence that Expro is
continuing on its track to restore performance against its new business
strategy. The dividend will be paid on 29 July 2005 to shareholders on the
register on 1 July 2005.
Group Strategy
In response to declining business performance, Expro published a new strategy in
September 2003 aimed at setting new growth objectives for the business. The
decline was mainly as a result of the high cost of Expro's global infrastructure
and a subsequent exaggerated geared effect on earnings, a situation created by a
relatively small drop in group revenue. The strategy was designed to counter
this effect and position Expro for a renewed phase of growth.
There were three remaining key areas from the strategy for business focus and
improvement at the beginning of this financial year. Firstly, management were
required to re-engineer the loss making Americas business and deal with an under
performing shallow water Gulf of Mexico market, an area where Expro had
traditionally relied for much of its US revenue generation. The challenge was to
turn a loss making region back into profitability, with solid growth prospects,
whilst reducing the long term dependency on the shallow water market.
Secondly, a far greater degree of client interaction was required which led to
additional investment in people, professional training and a fully integrated
sales network to improve the overall efficiency of Expro's sales efforts.
Finally, the importance of technology development was emphasised and
appropriately resourced. Technology enhancement took shape in two ways, firstly
through organic projects such as the Joint Industry Partnership ("JIP") for
rigless intervention, and secondly, through the identification and acquisition
of synergistic growth technologies.
During the year, all aspects of the implemented strategy had a positive impact.
To support the strategy, several key structural and organisational changes were
made. Special emphasis was placed on separating out the geographically dependent
Cased Hole Services ("CHS") and Surface and Environmental Systems ("SES") from
the project driven Subsurface Systems ("SSS") business. These key changes
allowed specialisation and differentiation to support the sales and technology
strategies. Overall the results to date are encouraging.
In our CHS business, we offer our clients a wide range of well performance
technologies for the maintenance of existing wells and the installation of new
producing wells. The market for CHS is driven by a combination of client capital
expenditure for new well construction and operating expenditure for existing
wells. Virtually all wells require cased hole products and services throughout
their economic life. Our CHS technology offering varies according to geography.
In the majority of our locations, we have a business closely aligned to our
client's operating expenditure. Our CHS business generally delivers stable and
relatively predictable earnings. This is particularly true of mature provinces
such as the North Sea, a market which continues to offer us opportunity. In this
area we have increased our CHS market share and increased the contractual
opportunity base to introduce new high value technologies such as our Cableless
Telemetry System ("CaTS TM") wireless well products.
We continue to invest in additional high value technologies to enhance our
earnings capability through our global infrastructure and extensive client
contract base. The acquisition, post year end, of the Down Hole Video
International Inc ("DHVI") is an excellent example of this.
The SES area of our business provides small plant, topside processing equipment
for temporary, semi-permanent and occasionally permanent field development. This
business is seeing the benefit of a sustained high oil price, late cycle
deepwater field developments and a need to increase exploration testing. All of
this has been assisted by our improved sales efforts. Although the period of
time between enquiry and contract conversion can be long, we are seeing
increased levels of interest from our clients. Many see our small, fast track
production solutions as a viable way to gain early cash flow from major
projects, as well as to increase their reservoir knowledge and reserves
position. Early in the year, we announced Expro's largest ever single contract
award to provide an early production system for ExxonMobil's Chayvo project in
Sakhalin Island.
The largest beneficiary of the increased late cycle activity and group strategy
has been our SSS business. In this grouping, we have market leading businesses
all closely aligned to our client's deepwater capital expenditure. These late
cycle businesses are dependent on sanctioned projects which are operationally
underway. The market environment for our subsurface businesses is currently
favourable. These conditions, combined with our organisational focus and
increased sales drive, has produced a strong position and outlook. The recent
addition of the Matre sensor range to our portfolio at Tronic is very timely.
Our Employees
Our ability to deliver our strategy, and to continue to develop the business, is
greatly assisted by the professional attitude and performance of our employees.
The Board wishes to place on record its recognition of the achievements and
contribution made by all employees.
Geographic Performance
Expro provides the products and services of our three business streams to global
markets through an extensive network of operational areas. These geographic
operating areas are managed and report within three distinct regional groupings.
Europe/FSU continues to be the largest of Expro's operating regions. In this
region, Expro has critical mass offering the most complete range of products and
services and employing over 1,100 personnel. Performance in the year,
particularly in the UK North Sea, exceeded expectations. Despite receiving much
negative press, the ageing characteristics of this province play strongly to
Expro's suite of products. Our CHS technologies have seen increasing demand
resulting in market share gains with bp, Talisman and, latterly, the award of
Shell's pan European contract. This particular contract gain also extended to
our SES business where our well testing equipment will be deployed to assist
Shell's European operations. These core contracts are in product lines which are
at the lower end of Expro's margin portfolio, however they do provide good
earnings visibility and a recognised conduit for the introduction of new CHS
technologies. The performance of our SSS business in this region was excellent.
There was strong demand in the offshore areas of the North Sea to provide
products and services aligned to new subsea wells. These wells are strategically
placed to provide additional production from stranded accumulations which cannot
be reached by conventional drilling from existing platform infrastructure.
Africa/Asia/ME region is now managed from our new Dubai office. Opened early in
the year, this strategically important hub is now fully operational. This region
suffers more than any other as a result of the weak US Dollar, having a large
degree of fixed non US Dollar costs. However, despite the currency issue,
underlying progress in the year has been good. In the prior year, the region had
several minor loss making territories which have since been restructured to
reduce cost, increase sales and return to profitable operations; the specific
areas being Australia, Indonesia and China. December 2004 marked the final month
of Shell's highly successful Soroosh field contract offshore Iran. This early
production contract was initially awarded to Expro for a short term but
continued for almost 3 years. During this time Expro and our partner, Swire
Pacific, processed over 50 million barrels of crude oil with over 99%
operational efficiency and a safety record of over 1.5 million man hours
operation without a Lost Time Incident ("LTI"). This is the type of outstanding
performance that we will be required to deliver on the upcoming Chayvo contract
for ExxonMobil in Sakhalin Island, which is on schedule for commissioning early
next financial year. Our Africa/Asia/ ME management team cover a large
geographic area. Their product offering varies with market and location. Markets
such as deepwater West Africa offer different challenges to land operations in
central Australia. However, all areas are generally experiencing increased
levels of enquiry driven by enhanced client spending.
The Americas region is undergoing a strategic re-engineering exercise.
Headquartered in Houston, the management team have progressively refocused on
key technology markets, reducing exposure to segments which will not deliver
acceptable business performance and closing operational bases which are marginal
or loss making. Thus far the results are very encouraging. Expro Americas have
moved from a £3 million prior year loss to making a small pre-exceptional,
profitable contribution. A major part of the strategy is to re-engineer the
technology and market focus of our Americas business. Work continues on this
challenge, however, the prior period issues relating to the shallow Gulf of
Mexico are now firmly behind us with revenue levels manageable and stable. We
are now beginning to see the new Expro emerging in the Americas, with greater
growth dynamics through new deepwater and land market technologies. The recently
announced Chevron Tahiti project will require state of the art Expro subsea
technology to support our client with the most technically demanding, deepwater
field development undertaken to date.
Houston remains a critical centre for Expro as a global service provider. Much
of our client networking, technology and engineering skills are now resident in
this area. The influence of a strong Expro Americas on the rest of our business
is not to be underestimated. Our well publicised JIP for the rigless
intervention project has moved beyond concept phase into detailed engineering.
In this project all of our partners are Houston based, from where decisions on
the future global requirements of their respective organizations are taken.
Outlook
The outlook for the oil and gas services sector is much brighter, driven by
improved client confidence and stable commodity prices, resulting in a general
uplift in client capital and operational spend. As a late cycle player, Expro is
now beginning to see the benefit of these market conditions. This positive
environment is providing good impetus to Expro's strategy, resulting in a more
favourable trading outlook. Key markets, such as the United Kingdom Continental
Shelf, have held up well for the group and offer continued good prospects. Our
project based SSS business unit is enjoying the benefit of prior investment in
new technology and positive client demand.
These otherwise positive conditions are somewhat tainted by unfavourable
currency movements particularly relating to the weakness of the US Dollar. This
issue creates an erosional effect on Expro's translated earnings and has a
detrimental effect on our competitive position when compared to many of our US
based competitors.
We have a highly focused strategy and an outstanding technology portfolio.
Globally, our levels of tendering and enquiry are very high, in part driven by
enhanced client interaction. Our order book is sufficiently robust to give us
confidence that we remain well set to deliver our strategic goals.
Immediately following the announcement of these results for the year ended 31
March 2005, the company intends to issue and place for cash, 6,640,000 ordinary
shares representing approximately 9.99% of its existing issued ordinary share
capital.
The Board believes that the business will be strengthened by an issue of equity,
with the proceeds to be used to refinance the recent acquisitions of DHVI, RMI
and Plus Design and provide funds to support the next phase of the group's
development.
Following the placing, the Board is confident that the group's outlook for 2005/
06 will remain in line with the market's current expectations for earnings per
share (pre goodwill and exceptional items).
Chris Fay, CBE Graeme Coutts 1 June 2005
Chairman Chief Executive Officer
Operations Review
Expro's global operations are centred in three geographic regions. The Europe/
FSU region, headquartered in Aberdeen, covers the UK, Norway, Continental
Europe, Former Soviet Union and Western Russia. The Africa/Asia/ME region,
managed from its hub in Dubai, UAE, covers Africa, the Middle East and Asia
including Australia and China. The Americas region spans North and South
America, with headquarters in Houston. The group operates in over forty
countries worldwide.
Europe/FSU revenue, including share of joint ventures, was £104m, up 11% on the
prior year. This was despite a continued slow down in capital investment in the
North Sea. Our clients continue to focus on optimising production from existing
wells and this, coupled with increased market share, resulted in higher than
expected activity levels.
Africa/Asia revenue, including share of joint ventures, was £80m, up 8% on the
prior year, notwithstanding a corresponding drop in the value of the USD. Delays
to some major projects in West Africa were more than offset by increased
activity in North Africa. The prior year restructuring in Asia resulted in a
strong performance throughout the area, with revenue up 52% and a more balanced
cost base.
In the Americas, including share of joint ventures, revenue of £39m was up 4% in
US Dollar terms. The Gulf of Mexico shallow water market continued to be weak,
however, considerable progress was made in the deepwater subsea intervention
market, the benefits of which will be evident in the coming year. Plans to
expand the onshore business, through the deployment of new cased hole
technologies, suffered a setback with the tragic death in September of Mark
Thatcher, the Region Director. A new Region Director, Jeff Skelly, has been
appointed and that strategy is now regaining momentum.
Cased Hole Service
Revenue was down 2% on the prior year at £86.5m, due entirely to the weaker US
Dollar. In US Dollar terms revenue was up 3%.
In Europe/FSU, long term North Sea contracts with Shell, Talisman, bp,
ConocoPhillips and ChevronTexaco were all retained. This not only secures
ongoing work but, in most cases, will result in additional work. In the case of
Shell, the contract now covers the whole of Shell's European wireline
operations. Our clients' focus on production enhancement from mature wells is
evidenced by the increasing demand for specialist services such as wireline
perforating and StimTube TM well stimulation products. New entrants to the North
Sea and independent operators continued to provide a valuable source of revenue,
the most significant contract being with Apache on the Forties Field.
In Africa and the Middle East, CHS revenue was down 10% due almost entirely to
the weaker US Dollar. A drop in activity in Angola and Equatorial Guinea was
offset by increased activity offshore Mauritania for Woodside, on their
Chinguetti field, and a full year's activity in Oman for PDO, providing fluid
sampling and on-site analysis services as part of a major production
rejuvenation programme. Both the Woodside and PDO contracts use Expro's
proprietary GOLD system, providing laboratory standard PVT analysis in the
field.
In Asia, CHS revenue was up 13% on prior year. This was due to increased
activity in Thailand for ChevronTexaco, for Santos in the Cooper Basin in
Australia and also for Apache, offshore Western Australia. This work was carried
out under long term service contracts to provide cased hole services in these
areas. Revenue also benefited from a full year's activity in China, providing
Tubing Conveyed Perforating ("TCP") services to CNOOC in Bohai Bay. Recent
contracts awarded in India and China for StimTube TM well stimulation products
are further evidence of the quest by operators to enhance production from
existing wells.
In the Americas, CHS revenue was up 9% in US Dollar terms. The poor market
conditions noted last year in the shallow water Gulf of Mexico continued,
affecting both wireline and TCP services. This was offset by increased activity
in Canada, including the award of a major contract by Encana for SmarTract TM
downhole tractor services and in the United States, by the award of two major
contracts by Shell for the CaTS TM system. The two contracts required the
installation of 46 data probes in three wells in the Rocky Mountains. After a
rapid increase in the number of Excape (R) perforating jobs in the prior year,
revenue was virtually unchanged in the year ended 31st March 2005. A number of
new initiatives are underway to promote the technology, particularly for
horizontal wells.
Subsurface Systems
Revenue, including share of joint ventures, was up 47% on the prior year at
£62m. The three product lines that make up Subsurface Systems, subsea
intervention systems, subsea connectors and permanent in-well instrumentation,
are all linked to field developments using subsea wells and hence reflect our
clients' capital expenditure plans.
Revenue from the supply, operation and maintenance of subsea intervention
systems in the mature North Sea declined, as expected, by 8% with the drop in
investment in major new subsea projects. In the Gulf of Mexico however, revenue
was up 30% on the prior year in US Dollar terms. The mobilisation of Expro's new
deepwater electro-hydraulic intervention system for Dominion Resources'
multi-well Mississippi Canyon development and the new high pressure (15,000 psi)
system for ENI's deepwater K2 development, were major milestones. These
achievements, coupled with recent contract awards for similar subsea systems,
provide a positive outlook for deepwater subsea activity in the Gulf of Mexico.
The award of a contract to provide a deepwater electro-hydraulic intervention
system for bp's Block 18 development offshore Angola, West Africa, helped to
boost Africa's subsea revenue to new highs. A number of major tenders are
awaiting award that would see this trend continue in the all important deepwater
West Africa market.
Revenue from the manufacture and supply of Tronic subsea connectors achieved
record levels, boosted by a strong subsea market and increased market share.
Tronic's core business is based on its range of hydraulic connectors. However,
there has been significant interest in the newly developed range of electrical
power connectors and a number of studies have been carried out for major
clients. This reflects the increasing demand for the distribution of electrical
power to offshore platforms, subsea installations and wells.
Revenue from the group's 50% share of the QuantX joint venture was up 24% on the
prior year. This was the result of major contract awards for permanent
monitoring systems for West African field developments and nine months' revenue
from their Plus Design acquisition, which has taken QuantX into the Electrical
Submersible Pump monitoring business.
Surface and Environmental Systems
Overall revenue was down 4% on the prior year at £75m, due entirely to the
weaker US Dollar.
In the North Sea, well testing and clean up activity exceeded expectations,
boosted by increased market share and work for new entrants such as Oilexco on
their Brenda appraisal wells and Petro-Canada on the Pict Development. Several
long term well testing contracts were extended during the year and, in the case
of Shell, now cover the whole of Shell's European operations. Expro provides and
operates the production facilities on the Ardmore field in the North Sea, where
operations continued throughout the year.
In Africa and the Middle East, well testing and associated clean up revenue was
significantly higher compared to the prior year despite the weaker US Dollar.
Increased activity offshore Cote d'Ivoire for CNR and offshore Mauritania for
Woodside boosted revenues. In Algeria, work continued for BHP on the Ohanet
field and for bp on the In Salah development. In December 2004, the production
solutions contract for the ESP-1, a mobile production unit employed as an early
production facility on Shell's Soroosh field offshore Iran, came to an end. The
loss of the last quarter's revenue offset the gain in testing and clean up
revenue noted above. Overall there was an 11% decrease in Surface and
Environmental revenue over the prior year.
The above mentioned ESP-1 mobile production facility was demobilized from
Shell's Soroosh Field at the end of December after thirty six months operations,
during which time it produced over 50 million barrels, with an average
production uptime of over 99% and with over one and a half million man hours
worked without a lost time incident.
In Asia, well testing and clean up revenue doubled. The provision of testing
services on ConocoPhillips' Bayu Undan development in the Timor Sea continued as
did clean up services for Santos in the Australian Cooper Basin. Contracts were
also secured for testing services for the Cuulong joint venture offshore Vietnam
and for Cairn Energy in India. A number of contracts were awarded during the
year for the supply, operation and maintenance of early production facilities.
Three of these are in Indonesia and one offshore Thailand. As a result, revenue
from early production facilities was almost three times that in the prior year.
At the beginning of the year, Expro was awarded a major contract to provide an
early production facility for ENL (Exxon Neftegas Limited) on Sakhalin Island,
Eastern Russia. Engineering work has been completed and all equipment has been
procured. The equipment was delivered to Sakhalin Island at the end of January,
on time. Work is currently underway to install the equipment on the location
ready for commissioning and start up in July 2005.
- Ends -
For further information please contact:
Expro International Group PLC On 2 June: 020 7067 0700
Graeme Coutts, Chief Executive Thereafter: 01189 591 341
Michael Speakman, Group Finance Director
Weber Shandwick Square Mile 020 7067 0700
Mike Kirk, Stephanie Badjonat, Rachel Taylor
Consolidated Profit and Loss Account
For the year ended 31 March 2005
2005 2004
_______________________________________ ________________________________________
Continuing operations Before Before
goodwill and Goodwill and goodwill and Goodwill and
exceptional exceptional exceptional exceptional
items items Total items items Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Turnover:
Group and share of
joint ventures
- Existing operations 2 222,005 - 222,005 208,395 - 208,395
- Acquisitions 3 1,272 - 1,272 - - -
______ ______ ______ ______ ______ ______
223,277 - 223,277 208,395 - 208,395
Less: share of
joint ventures 2 (12,004) - (12,004) (12,655) - (12,655)
______ ______ ______ ______ ______ ______
Group turnover 2 211,273 - 211,273 195,740 - 195,740
Cost of sales (177,394) - (177,394) (173,376) - (173,376)
______ ______ ______ ______ ______ ______
Gross profit 33,879 - 33,879 22,364 - 22,364
______ ______ ______ ______ ______ ______
Other operating
expenses
__________________________________________________________________________
Goodwill amortisation - (1,810) (1,810) - (2,372) (2,372)
Exceptional provision
for goodwill
impairment 4 - (4,342) (4,342) - (16,125) (16,125)
Exceptional provision
for inventory
obsolescence 4 - (1,546) (1,546) - - -
Other expenses (15,060) - (15,060) (9,411) - (9,411)
__________________________________________________________________________
______ ______ ______ ______ ______ ______
Total other operating
expenses (15,060) (7,698) (22,758) (9,411) (18,497) (27,908)
______ ______ ______ ______ ______ ______
Operating profit /
(loss)
Group - Existing
operations 18,555 (7,698) 10,857 12,953 (18,497) (5,544)
- Acquisitions 3 264 - 264 - - -
______ ______ ______ ______ ______ ______
18,819 (7,698) 11,121 12,953 (18,497) (5,544)
__________________________________________________________________________
Share of operating
profit in joint
ventures 2,486 - 2,486 3,566 - 3,566
- Goodwill amortisation - (785) (785) - - -
- Exceptional credit
from release of
provision 4 - 1,464 1,464 - - -
__________________________________________________________________________
Total share of
operating profit in
joint ventures 2,486 679 3,165 3,566 - 3,566
______ ______ ______ ______ ______ ______
Group and share of
joint ventures 21,305 (7,019) 14,286 16,519 (18,497) (1,978)
Finance charges (net) (2,674) - (2,674) (2,488) - (2,488)
______ ______ ______ ______ ______ ______
Profit / (loss) on
ordinary activities
before taxation 18,631 (7,019) 11,612 14,031 (18,497) (4,466)
Tax on profit/ (loss)
on ordinary
activities 5 (7,175) - (7,175) (5,428) - (5,428)
______ ______ ______ ______ ______ ______
Profit / (loss) on
ordinary activities
after taxation 11,456 (7,019) 4,437 8,603 (18,497) (9,894)
Minority equity
interests (1) - (1) (9) - (9)
______ ______ ______ ______ ______ ______
Profit / (loss) for
the financial year 11,455 (7,019) 4,436 8,594 (18,497) (9,903)
Dividends paid
and proposed 6 (7,218) - (7,218) (7,202) - (7,202)
______ ______ ______ ______ ______ ______
Retained loss
for the year 4,237 (7,019) (2,782) 1,392 (18,497) (17,105)
______ ______ ______ ______ ______ ______
Earnings / (losses)
per ordinary share 7
Basic - - 6.7 p - - (15.0) p
Diluted - - 6.6 p - - (15.0) p
Basic before
goodwill
amortisation
and exceptional
items 17.3 p - 17.3 p 13.0 p - 13.0 p
Consolidated Statement of Total Recognised Gains and Losses
For the year ended 31 March 2005
2005 2004
£'000 £'000
Profit / (loss) for the financial year 4,436 (9,903)
Translation loss on foreign currency net investments (2,584) (14,114)
Gain on foreign currency borrowings 665 6,943
_______ _______
2,517 (17,074)
_______ _______
Consolidated Balance Sheet
31 March 2005
31 March 31 March
2005 2004
Restated
(note 8)
£'000 £'000
Fixed assets
Patents and licences 3,477 6,810
Goodwill 18,757 19,327
_______ _______
Intangible assets 22,234 26,137
Tangible assets 66,862 58,077
Investments in joint ventures:
___________________
- share of gross assets 6,126 12,496
- share of gross liabilities (3,447) (6,012)
- goodwill 665 757
___________________
3,344 7,241
_______ _______
92,440 91,455
_______ _______
Current assets
Stocks 15,213 16,296
Debtors
- due within one year 75,829 69,146
- due after one year - 419
Cash at bank and in hand 5,009 14,563
_______ _______
96,051 100,424
Creditors: Amounts falling due within one year (55,979) (49,932)
_______ _______
Net current assets 40,072 50,492
_______ _______
Total assets less current liabilities 132,512 141,947
Creditors: Amounts falling due after more than one year (58,868) (59,407)
Provisions for liabilities and charges (3,129) (8,374)
_______ _______
Net assets 70,515 74,166
_______ _______
Capital and reserves Note
Called-up share capital 6,646 6,615
Share premium account 8 929 61,650
Capital reserve 8 - 24
ESOP trust reserve 8 (407) (7)
Profit and loss account 8 63,314 5,852
_______ _______
Shareholders' funds, being equity interests 9 70,482 74,134
Minority equity interests 33 32
_______ _______
Total capital and reserves 70,515 74,166
_______ _______
Consolidated Cash Flow Statement
For the year ended 31 March 2005
31 March 31 March
2005 2004
£'000 £'000
Note
Net cash inflow from operating activities 10 40,629 27,990
Returns on investments and servicing of finance (2,571) (2,805)
Taxation (5,752) (10,278)
Net cash outflow for capital expenditure and
financial investment (29,216) (13,401)
Acquisitions and disposals (5,894) (3,867)
Equity dividends paid (7,204) (7,202)
_______ _______
Cash outflow before financing (10,008) (9,563)
Financing 454 (4,000)
_______ _______
Decrease in cash in the year 10 (9,554) (13,563)
_______ _______
Notes to the Preliminary Results
31 March 2005
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 2004 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' report for the year ended 31 March 2005 is unqualified and does
not contain any statements under Section 237 (2) or (3) of the Companies Act
1985. With the exception of the change to the employee share scheme accounting
policy on the adoption of UITF Abstract 38 Accounting for ESOP Trusts and the
corresponding restatement of prior year figures (see note 8), these accounts
have been prepared using the same accounting policies as in the 31 March 2004
statutory accounts. These accounts will be delivered to the Registrar of
Companies following the Annual General Meeting on 6 July 2005.
2. Segmental information
Surface & Environmental
Cased Hole Services Subsurface Systems Systems Total
2005 2004 2005 2004 2005 2004 2005 2004
Turnover by business
stream £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Total 86,482 88,054 61,824 42,002 74,971 78,339 223,277 208,395
Less: Share of joint
ventures - - (8,879) (7,232) (3,125) (5,423) (12,004) (12,655)
______ ______ ______ ______ ______ ______ _______ _______
Group turnover 86,482 88,054 52,945 34,770 71,846 72,916 211,273 195,740
______ ______ ______ ______ ______ ______ _______ _______
Segment profit 11,820 7,755 12,112 7,129 4,745 4,564 28,677 19,448
______ ______ ______ ______ ______ ______
Common costs (11,668) (8,867)
Exceptional provision
for inventory
obsolescence (1,546) - - - - - (1,546) -
Exceptional provision
for goodwill
impairment (4,059) (14,950) - - (283) (1,175) (4,342) (16,125)
______ ______ ______ ______ ______ ______ _______ _______
Operating profit/(loss) 11,121 (5,544)
Share of joint ventures
operating profit - - 1,158 863 543 2,703 1,701 3,566
Exceptional credit from
release of provision - - - - 1,464 - 1,464 -
______ ______ ______ ______ ______ ______ _______ _______
Operating profit/(loss)
from group and share
of joint ventures 14,286 (1,978)
Finance charges (net) (2,674) (2,488)
_______ _______
Profit/(loss) on
ordinary activities
before taxation 11,612 (4,466)
_______ _______
Segment net assets 36,586 48,565 45,451 34,133 45,610 41,381 127,647 124,079
______ ______ ______ ______ ______ ______
Unallocated net
liabilities (restated
- note 8) (57,132) (49,913)
_______ _______
Net assets 70,515 74,166
_______ _______
Unallocated net liabilities and common costs consist of the net liabilities, group borrowings and common costs of
the group head office which cannot reasonably be allocated to the business streams.
2. Segmental information (continued)
Europe / FSUa Africa / Asia /MEb Americas Total
2005 2004 2005 2004 2005 2004 2005 2004
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Turnover by geographical
origin
Total including inter-
segment sales 104,226 93,994 79,809 73,995 59,929 40,406
Inter-segment sales - - - - (20,687) -
_______ ______ ______ ______ ______ ______
Group and share of
joint ventures 104,226 93,994 79,809 73,995 39,242 40,406 223,277 208,395
Less: Share of joint
ventures (2,785) (2,243) (7,244) (8,778) (1,975) (1,634) (12,004) (12,655)
_______ ______ ______ ______ ______ ______ _______ _______
Sales to third parties 101,441 91,751 72,565 65,217 37,267 38,772 211,273 195,740
_______ ______ ______ ______ ______ ______ _______ _______
Segment profit/ (loss) 19,081 18,103 8,208 4,826 5,867 (3,481) 33,156 19,448
Unrealised profit on
inter-segment sales - - - - (4,479) - (4,479) -
_______ ______ ______ ______ ______ ______ _______ _______
Segment profit/ (loss)
on third party sales 19,081 18,103 8,208 4,826 1,388 (3,481) 28,677 19,448
_______ ______ ______ ______ ______ ______
Common costs (11,668) (8,867)
Exceptional provision
for inventory
obsolescence - - - - (1,546) - (1,546) -
Exceptional provision
for goodwill impairment (400) (160) (127) (1,015) (3,815) (14,950) (4,342) (16,125)
_______ ______ ______ ______ ______ ______ _______ _______
Operating profit/(loss) 11,121 (5,544)
Share of joint ventures
operating profit/(loss) 282 28 1,204 3,589 215 (51) 1,701 3,566
Exceptional credit from
release of provision - - 1,464 - - - 1,464 -
_______ ______ ______ ______ ______ ______ _______ _______
Operating profit/(loss)
from group and share of
joint ventures 14,286 (1,978)
Finance charges (net) (2,674) (2,488)
_______ _______
Profit/(loss) on
ordinary activities
before taxation 11,612 (4,466)
_______ _______
Segment net assets 49,029 51,345 50,446 36,606 28,172 36,128 127,647 124,079
_______ ______ ______ ______ ______ ______
Unallocated net
liabilities (restated
- note 8) (57,132) (49,913)
_______ _______
Net assets 70,515 74,166
_______ _______
a. Former Soviet Union b. Middle East
There is no material difference between turnover by origin and turnover by destination.
Unallocated net liabilities and common costs represent the net liabilities, group borrowings and common costs of
the group head office which cannot reasonably be allocated on a geographic basis.
The turnover and operating profit of the acquisition made during the year which have been included within the results
of the group were £1,272,000 and £264,000 respectively. The net assets of the acquired business at 31 March 2005 were
£971,000. These amounts are contained within the Subsurface Systems business segment and within the Europe / FSU
geographical segment figures given above.
2. Segmental information (continued)
The analysis of turnover, operating profit and net assets presented above
includes the following results and net assets in respect of joint ventures which
were disposed of during the year.
Surface &
Environmental
Africa /Asia /ME Systems
2005 2004 2005 2004
£'000 £'000 £'000 £'000
Share of joint ventures
sales to third parties 3,125 5,424 3,125 5,424
______ ______ ______ ______
Share of joint
ventures operating
profit 2,007 2,680 2,007 2,680
______ ______ ______ ______
Net assets - 7,241 - 7,241
______ ______ ______ ______
3. Acquisitions and disposals
Acquisitions
On 31 January 2005 the group acquired the entire issued share capital of Matre
Instruments AS, a company incorporated in Norway, which has been accounted for
as an acquisition. The results of the group include turnover of £1,272,000, cost
of sales of £970,000, administrative expenses of £38,000 and operating profit of
£264,000 arising in the period from acquisition to 31 March 2005. The results of
the business for the year ended 31 December 2004 were turnover of £5,908,000 and
operating profit of £1,087,000.
The table below sets out the provisional fair value of the acquired identifiable
assets and liabilities of Matre Instruments AS. No adjustments were made to
pre-acquisition book values as it was judged that these properly represented the
fair values to the group.
£'000
Fixed assets
Tangible assets 85
Current assets
Stocks 1,587
Debtors 1,350
Cash 553
______
Total assets 3,575
______
Creditors (2,857)
______
Total liabilities (2,857)
______
Net assets acquired 718
______
Purchase consideration
Cash 6,316
Acquisition costs 105
______
6,421
Goodwill arising (5,703)
______
718
______
Net cash outflows in respect of the acquisition comprised: £'000
Purchase consideration 6,421
Net cash balances acquired (553)
______
5,868
______
3. Acquisitions and disposals (continued)
Acquisitions (continued)
On 10 June 2004 QuantX Wellbore Instrumentation Limited acquired 100% of the
issued share capital, net assets and business of Blenheim Technology Group
Limited, including its interest in the shares of its wholly owned subsidiary,
Plus Design Limited. The total fair value of consideration, including costs, was
£3,029,000 and the fair value and book value of the net assets acquired was
£1,643,000 giving rise to goodwill of £1,386,000. On 1 January 2005 the trade
and assets of Plus Design Limited were transferred to QuantX Wellbore
Instrumentation Limited.
Disposals
On 31 March 2005 the group disposed of its 50% interest in the shares of both
Expro Swire Production Limited and Expro Swire Production Pte Limited for total
consideration of £6,032,000. The group's share of profit during the year up to
the date of disposal was £2,007,000 and for the prior year was £2,703,000.
The assets disposed of and the related sales proceeds were as follows:
£'000
Share of gross assets 7,153
Share of gross liabilities (1,121)
Profit on sale -
______
Total assets 6,032
______
Share proceeds satisfied by
Assignment of loan 1,320
Deferred consideration 4,712
______
6,032
______
4. Exceptional items
(a) Exceptional credit from release of provision in joint venture
The £1,464,000 exceptional credit from release of provision reflects the
write back of a provision made in prior years in connection with a
customer's option to purchase equipment from one of the group's joint
venture undertakings.
(b) Exceptional provision for inventory obsolescence
As a result of a stock obsolescence review conducted in the Americas region
a one-off inventory provision has been made in the year for £1,546,000.
(c) Exceptional provision for goodwill impairment
In accordance with FRS11 Impairment of Fixed Assets and Goodwill the
carrying values of the group's subsidiary undertakings have been compared to
their recoverable amounts, representing their value in use to the group.
This included a re-examination of the carrying values and recoverable
amounts of those undertakings for which exceptional impairment provisions
totalling £16,125,000 were recorded in the prior year.
As a result of these reviews, none of the impairment provisions recorded in
the prior year have been reversed and further exceptional impairment
provisions totalling £4,342,000 are recorded in the current year. The
exceptional charge in the current year arises primarily from a further
provision of £3,661,000 against the carrying value of goodwill of Tripoint
Inc. which was acquired on 1 February 2000. The discount rate applied to the
cash flows to arrive at the valuations was 8.7% (2004 - 9.1%).
5. Tax on profit/(loss) on ordinary activities
The taxation charge comprises:
2005 2004
£'000 £'000
Current tax
UK corporation tax charge 3,492 4,351
Double tax relief (746) (1,101)
______ ______
2,746 3,250
Foreign tax 5,798 3,699
______ ______
8,544 6,949
Adjustments to UK corporation tax in respect of prior
years (365) (844)
______ ______
Total current tax 8,179 6,105
Deferred tax: Origination and reversal of timing
differences (1,004) (677)
______ ______
Total tax on profit/(loss) on ordinary activities 7,175 5,428
______ ______
6. Dividends paid and proposed
2005 2004
£'000 £'000
Interim dividend paid on 31 January 2005 of 3.8p (2004 -
3.8p) per ordinary share 2,512 2,510
Proposed final dividend of 7.1p (2004 - 7.1p) per ordinary
share 4,706 4,692
______ ______
7,218 7,202
______ ______
The proposed final dividend, subject to shareholder approval at the Annual
General Meeting on 6 July 2005, will be paid on 29 July 2005, to shareholders on
the register at 1 July 2005.
7. Earnings/(losses) per ordinary share
The calculations of earnings/(losses)per ordinary share are based on the
following profits and numbers of shares.
2005 2004
£'000 £'000
Profit / (loss) for the financial year for basic and diluted
earnings per share 4,436 (9,903)
Goodwill amortisation 2,595 2,372
Exceptional provision for goodwill impairment 4,342 16,125
Exceptional provision for inventory obsolescence 1,546 -
Exceptional credit from release of joint venture provision (1,464) -
______ ______
Earnings before goodwill and exceptional items 11,455 8,594
______ ______
7. Earnings/(losses) per ordinary share (continued)
Number of shares
2005 2004
Weighted average number of shares ranking for dividend
used for basic earnings per share 66,110,613 66,075,394
Dilutive effect of share options
- Executive share scheme 407,740 -
- Employee share scheme 210,005 21,595
__________ __________
Weighted average number of shares used for diluted
earnings per share 66,728,358 66,096,989
__________ __________
The directors believe that the presentation of basic earnings per share before
goodwill amortisation and exceptional items assists with understanding the
underlying performance of the group.
8. Reserves
Share ESOP Profit
premium Capital trust and loss
account reserve reserve account
£'000 £'000 £'000 £'000
Group
Beginning of year 61,650 24 - 5,858
Reclassification of ESOP trust amounts - - (7) (6)
_______ _______ _______ _______
Beginning of year (restated - see
below) 61,650 24 (7) 5,852
Transfer (see below) (61,649) (24) - 61,673
Currency translation difference
- foreign currency net investments - - - (2,584)
- related borrowings - - - 665
New share capital from exercise of options 928 - - -
Shares acquired by ESOP trust - - (400) -
Provision made on employee share schemes - - - 490
Retained loss for the year - - - (2,782)
_______ _______ _______ _______
End of year 929 - (407) 63,314
_______ _______ _______ _______
Cumulative goodwill written off against reserves was £47,186,000 (2004 -
£47,186,000).
Following the adoption of UITF Abstract 38 Accounting for ESOP Trusts the
investment in own shares held by the ESOP trust, previously reported under
investment in own shares, has been reclassified as a deduction against
shareholders' funds under the ESOP trust reserve. At 31 March 2004 the ESOP
trust reported bank balances of £22,000, amounts owing to the group of £28,000
and net liabilities of £6,000. The prior year bank, other debtors and profit and
loss reserve brought forward have all been adjusted accordingly.
On 24 March 2005 as a result of a court application, £61,649,000 of the share
premium account and £24,000 of the capital reserve were cancelled. Corresponding
amounts have been transferred to the profit and loss account.
9. Reconciliation of movements in shareholders' funds
2005 2004
£'000 £'000
Profit / (loss) for the financial year 4,436 (9,903)
Dividends paid and proposed (7,218) (7,202)
______ ______
Retained loss for the year (2,782) (17,105)
Loss on foreign currency translation (1,919) (7,171)
Shares acquired by ESOP trust (400) -
Provision made on employee share schemes 490 -
New share capital subscribed 959 -
______ ______
Decrease in shareholders' funds (3,652) (24,276)
Opening shareholders' funds (restated - note 8) 74,134 98,410
______ ______
Closing shareholders' funds 70,482 74,134
______ ______
10. Cash flow information
Reconciliation of operating profit/(loss) to net operating
cash inflow 2005 2004
£'000 £'000
Operating profit / (loss) 11,121 (5,544)
Depreciation and amortisation 21,498 19,399
Exceptional provision for goodwill impairment 4,342 16,125
Provision made on employee share schemes 490 -
Loss on sale of tangible fixed assets 1,123 26
Decrease in stocks and work-in-progress 2,670 400
(Increase) / decrease in debtors (180) 584
Decrease in creditors and provisions (435) (3,000)
______ ______
Net cash inflow from operating activities 40,629 27,990
______ ______
Reconciliation of net cash flow to movement in net debt 2005 2004
£'000 £'000
Decrease in cash in the year (9,554) (13,563)
Cash flow from decrease in debt finance - 4,000
Cash flow from decrease in finance leases 105 -
______ ______
Increase in net debt resulting from cash flows (9,449) (9,563)
New finance leases (377) -
Translation difference 692 7,121
______ ______
Movement in net debt in the year (9,134) (2,442)
Net debt at beginning of year (44,844) (42,424)
Restatement (note 8) - 22
______ ______
Net debt at end of year (53,978) (44,844)
______ ______
Analysis of net debt
Other
Beginning Cash non cash Foreign End of
of year flow changes Exchange year
(restated note 8)
£'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 14,563 (9,554) - - 5,009
Debt due after 1 year (59,407) - - 692 (58,715)
Finance leases - 105 (377) - (272)
_______ _______ _______ _______ ________
(44,844) (9,449) (377) 692 (53,978)
_______ _______ _______ _______ ________
11. Post balance sheet events
On 11 April 2005 the group acquired Downhole Video International ('DHVI')
which is the market leading supplier to the oil and gas industry of downhole
video services. The acquisition comprised a 100% interest in Downhole Video
International Inc. (registered in USA) and its subsidiary companies,
Downhole Video Canada Inc. (registered in Canada), Downhole International
Limited (registered in Dubai) and a 75% interest in Downhole Video Far East
Pty Limited (registered in Singapore).
The fair value of the consideration, including costs, was USD 11,645,000 of
which USD 10,350,000 was settled in cash on acquisition and USD 1,150,000
paid into escrow to cover adjustments and claims for a period of 2 years
following the acquisition. The assessment of the fair value of net assets
acquired is in progress. The provisional fair value of net assets acquired
was USD 3,160,000 (£1,663,000) generating provisional goodwill of USD
8,485,000 (£4,466,000).
The unaudited results for the combined DHVI business for the year ended 31
December 2004 showed revenues of USD 7,108,000 generating profit, after tax
and minority interests, of USD 683,000. The unaudited results for the period
1 January 2005 to 12 April 2005 show revenues of USD 2,010,000 and profit,
after tax and minority interests, of USD 350,000.
This information is provided by RNS
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