Interim Results

Expro International Group PLC 29 November 2007 29 November 2007 EXPRO INTERNATIONAL GROUP PLC Interim results for the half year ended 30 September 2007 Expro International Group PLC ("Expro", "the Group" or "the Company"), the oilfield services company, today announces interim results for the half year ended 30 September 2007. • Industry dynamics remain positive • Record set of results despite weaker US dollar • Record investment in R&D including the development of AX-S (TM) • Strong organic growth • Continued margin expansion • Continued earnings growth and strong cash generation • Dividend increased Six months ended Year ended 30 September 31 March 2007 2006 Change 2007 Unaudited Unaudited Audited Revenue £294.6m £226.4m 30.1% £518.8m Underlying operating profit (a) £45.1m £31.4m 43.6% £72.5m Underlying operating margin 15.3% 13.9% 1.4pts 14.0% Underlying EPS (*a) 22.8p 17.9p 27.4% 37.8p Statutory operating profit £40.4m £29.4m 37.4% £66.8m Statutory operating margin 13.7% 13.0% 0.7pts 12.9% Statutory continuing EPS * 19.7p 16.5p 19.4% 34.1p Net cash from operating activities £31.0m £25.7m 20.6% £67.9m Free cash flow (b) £15.0m £2.6m £12.4m £18.6m Dividends per share (c) 4.0p 3.8p 5.3% 11.8p Net bank borrowings (d) £159.8m £193.2m (£33.4m) £170.5m * All references to earnings per share (EPS) are calculated using the basic number of shares. a Underlying operating profit and underlying EPS are based on continuing and discontinued operations and are before exceptional items and intangible asset amortisation that arises on business combinations. The basis of these alternative measures and details of exceptional items arising in the period are included within the interim management report on page 6. b As calculated in the interim management report on page 6. c For interim periods, dividends per share represent amounts declared for the relevant period. d Bank loans and overdrafts of £184.7m (30 September 2006: £230.0m; 31 March 2007: £203.4m) less cash of £24.9m (30 September 2006: £36.8m; 31 March 2007: £32.9m), as extracted from the consolidated balance sheet on page 6. Commenting on the results, Graeme Coutts, Chief Executive Officer, said: "I am delighted to announce a strong set of results for the first six months of the 2007/08 financial year, reflecting continued positive momentum for late cycle upstream oil and gas services and the successful execution of our strategy. Financial performance has been complemented by strong technical delivery and exemplary health and safety performance in challenging environments both offshore and onshore. "The outlook for the upstream services sector remains positive, with strong confidence in the robust nature of the oil and gas price driven by the fundamental growth in energy demand and increasing supply difficulties. As previously highlighted, we have internal and external evidence that indicates a short-term slow down in the rate of growth due to third party capacity constraints. We believe this will be short lived with the phased arrival of new rigs and additional trained personnel. This additional industry capacity is fuelling record enquiry levels within Expro as customers prepare for a prolonged up cycle. "Conditions for the remainder of the financial year remain positive in our markets and in line with our expectations. Despite the challenges of the US Dollar/Sterling exchange rate acting as a headwind to our performance, the outlook continues to remain positive for a prolonged up cycle." - Ends - For further information please contact: Expro International Group PLC On 29 November 2007: 020 7067 0700 Graeme Coutts, Chief Executive Officer Thereafter: 0118 959 1341 Michael Speakman, Finance Director Weber Shandwick Financial 020 7067 0700 Nick Oborne / Rachel Martin / Stephanie Badjonat Financial calendar Ex dividend date 24 Dec 2007 Record date 28 Dec 2007 Interim dividend payable 31 Jan 2008 An analyst meeting will be held at 09.30 this morning at the offices of Weber Shandwick Financial, Fox Court, 14 Gray's Inn Road, London, WC1X 8WS Notes to Editors Expro's business is well flow management. Expro is a leading provider of products and services that measure, improve, control and process flow from high-value oil and gas wells. Key niche businesses must be able to command and sustain market share leadership through a combination of technological pre-eminence and/or operational economies of scale. They will have a high knowledge and service content and will be able to anticipate, meet and exceed customers' expectations. With its head office in the UK, Expro employs more than 4,000 highly-trained staff in 50 countries. For more information, please visit the Expro website www.exprogroup.com Chairman and Chief Executive Officer's Statement The Board is delighted to report a strong set of results for the first six months of the 2007/08 financial year, reflecting continued positive momentum for late cycle upstream oil and gas services and the successful execution of management's strategy. These results include Power Well Services ("PWS"), which contributed three months performance in the comparative period. The acquisition of PWS has delivered a step change for Expro in performance, industry profile and outlook. The Group's performance in the period resulted in an underlying earnings per share of 22.8 pence, a 27.4% increase on the same period last year. The Board is pleased to declare an interim dividend of 4 pence which represents a 5.3% increase over the comparative period, which reflects continuing confidence in the future prospects of the Group. Expro has enjoyed a strong six months to 30 September with strengthened market presence and improved critical mass in all our operating regions. The deepwater environments of the Gulf of Mexico and West Coast of Africa have demonstrated particularly strong performance and our enhanced global footprint has provided further growth opportunities with the National Oil Companies in Saudi Arabia and Brazil. Expro delivered three industry firsts in the period. We set a new deepwater record for North African exploration well testing on the NEMED prospect, off the coast of North Africa, in over 7,500 feet of water. This achievement follows the world's deepest ever well test in 8,993 feet of Brazilian waters last year. In the Gulf of Mexico we deployed the industry's first HPHT (high pressure/high temperature) subsea tools on Chevron's flagship Tahiti project; in all, five new Tahiti deepwater wells were installed and commissioned from two separate high specification semi-submersible drilling rigs. Finally, in a first for an upstream services provider and reflecting our continued focus on "Excellence in Operations", we received our second consecutive RoSPA (Royal Society for the Prevention of Accidents) sector award, building on our previous achievement in gaining the RoSPA Gold award in 2005. Expro invests significant effort in developing and executing business strategy. In order to further support our mission, the Group also adopted a new unified international brand identity, which was launched at the Houston Offshore Technology Conference in April. This approach, which has improved clarity and messaging both internally and externally, is designed to allow our customers to understand our products, which are grouped in complementary sales channels, more easily. Coupled with our focused strategic initiatives, the results have established Expro as a highly recognised and key provider of safe, innovative, and focused services in all major oil and gas provinces. In an environment where our customers are paying record long-term rates for rig operations, these are increasingly important qualities for successful service providers. Outlook Expro's diverse global portfolio and strong focus on technology segments continues to offer excellent growth opportunities. The development and commercialisation of enhanced technologies from within our portfolio continues to build a value position for our customers, staff and shareholders. As an established leader in the area of well flow management our objective remains unchanged; to reward shareholders with profitable growth beyond the cycle. The outlook for the upstream services sector remains positive, with strong confidence in the robust nature of the oil and gas price driven by the fundamental growth in energy demand and increasing supply difficulties. As previously highlighted, we have internal and external evidence that indicates a short-term slow down in the rate of growth due to third party capacity constraints. We believe this will be short lived with the phased arrival of new rigs and additional trained personnel. This additional industry capacity is fuelling record enquiry levels within Expro as customers prepare for a prolonged up-cycle. Conditions for the remainder of the financial year remain positive in our markets and in line with our expectations. Despite the challenges of the US Dollar/Sterling exchange rate acting as a headwind to our performance, the outlook continues to remain positive for a prolonged up-cycle. Interim Management Report Results for six months ended 30 September 2007 Market conditions Market conditions for late cycle upstream oil and gas services have remained strong throughout the period. The prospects of sustained global economic growth as well as ever increasing supply challenges have created a new platform for oil and gas commodity prices, with oil prices now firmly established well above USD 60 per barrel. This provides a positive environment for Expro to execute focused growth strategies aimed at helping our customers meet their extensive operational challenges. With industry cost inflation and an acute shortage of skilled and experienced personnel, customers are turning to companies who can provide high quality solutions to assist their reduction in non-productive expenditure. This will be an increasing feature over the coming years and plays to Expro's strategic investments and strong operational reputation. Revenue Revenue increased 30.1% to £294.6m in the six months to 30 September 2007 compared to the same period last year, due to increasing activity in both our Global and Regional businesses. Revenues for the six months were generated on an increasingly geographically diverse basis enhanced by the platform provided by the PWS acquisition. The results evidence sustained growth despite the ending of the Chayvo EPF (Early Production Facility) contract which contributed £14.9m in revenue in the same period last year. Impact of the PWS acquisition and foreign exchange The acquisition of PWS, offset by adverse movements in foreign exchange rates, had a significant impact on the Group's revenues for this period when compared to the same period last year. During the prior year, the Group acquired PWS with an effective date of 3 July 2006. The six months to 30 September 2007 include the full benefit of this acquisition, while the comparative period includes only three months of activity. The Group's revenues are also impacted by the translation of its overseas operations whose principal transactional and functional currencies are US Dollars. The table below sets out the impact of these two factors on the revenues of the Group: ________________________________________________________________________________________________________________________ 6 months 6 months Normalised Revenue 6 months to PWS pre- pro forma to normalised to Increased 6 months to Growth growth £m 30/09/2006 acquisition 30/09/2006 Forex 30/09/2006 activity 30/09/2007 % % ________________________________________________________________________________________________________________________ Regional 138.6 38.5 177.1 (9.6) 167.5 23.1 190.6 37.5% 13.8% Global 87.8 4.5 92.3 (4.1) 88.2 15.8 104.0 18.5% 17.9% Group 226.4 43.0 269.4 (13.7) 255.7 38.9 294.6 30.1% 15.2% ________________________________________________________________________________________________________________________ The depreciating US Dollar has continued to act as headwind on revenue and earnings growth. On a constant currency basis and on a pro forma basis, revenues across Expro increased 15.2% against the same period last year. GBP to USD foreign exchange rates prevailing in the relevant periods were: ________________________________________________________________________________________ 30/09/2007 30/09/2006 31/03/2007 ________________________________________________________________________________________ Income statement 2.00 1.83 1.88 Balance sheet 2.02 1.87 1.96 ________________________________________________________________________________________ Segmental overview Regional businesses Regional businesses revenues increased 37.5% to £190.6m, reflecting high activity levels around the world. The Gulf of Mexico, West Africa and Latin America saw particularly strong activity levels reflecting increased offshore development work. Europe FSU also enjoyed strong performance with operators increasing intervention activity to tackle reservoir decline in the mature North Sea. In many cases our services are deployed in packages, jointly with Global business offerings. Notable examples include the deployment of subsea safety systems and well testing services with BHP in the Gulf of Mexico, and our continued deepwater exploration, appraisal and new well commissioning activity offshore Angola in support of BP and Total. North America Land continued to deliver robust revenues after allowing for foreign exchange and the disposal of our Canadian wireline operations in February 2007. North America Land is a volatile market driven by the gas spot market. Following a period of sustained growth, demand has levelled off as expected and management is ensuring that costs are aligned to this change in demand. Longer term, the outlook for this market remains positive driven by energy demand and increasing supply challenges. Global businesses Global businesses increased nominal revenues 18.5% on the same period last year to £104.0m, despite the effect of the Chayvo EPF contract ending. Several high profile projects have been delivered, notably in our Subsea Safety System business which contributed revenues of £45.5m this period and is increasingly critical to oil companies operating in difficult deepwater subsea developments. Expro designed and delivered the industry's first Subsea Safety Systems for the rapidly emerging HPHT (high pressure, high temperature) market. These tools were used for commissioning the first HPHT field in the Gulf of Mexico, Chevron's Tahiti project. West Africa, which holds potential to become a prolific deepwater market, saw good progress in Angola and Nigeria. In the latter, continued deepwater activity in the period saw delivery of the first deepwater subsea tools for the Agbami field development. These tools were derivatives of the proven high specification Tahiti systems. Commissioning activity will commence in the second half of the year. Production Systems' Dibi early production barge arrived on site in Nigeria during the period. Commissioning activity for the barge was severely constrained by security disruption but it is now on track for full production in the second half of the financial year. Costs in respect of the AX-S system were previously included against the Global business segment; however these costs and any comparative costs are now included within unallocated costs. Alternative measures The Group has elected to classify certain items as exceptional and present them separately on the face of the Income Statement. Exceptional items are classified as those which management have identified and disclosed as material one-off or unusual items and which are not considered to be part of the core operations of the Group. In addition, the Group has separately disclosed intangible asset amortisation that arises on business combinations which is added back to arrive at underlying performance. Management focuses on underlying performance in order to compare performance over time and believes that this gives a useful additional measure of profit and earnings. Exceptional items arising in the period are detailed below and disclosed under note 5. Underlying operating profit The first half of the financial year has seen underlying operating profit of £45.1m generated together with continued margin improvement resulting from our strategy of focusing activity in key geographic locations, creating areas of critical mass capable of serving local markets effectively and profitably throughout the business cycle. This focus, together with initiatives such as Excellence in Operations, has contributed to the Group's improving underlying margin, which at 15.3% for the six months to 30 September 2007 was 1.4 percentage points ahead of the same period last year. Margin expansion has been delivered in a period of record investment in research and development. Exceptional items Two exceptional items arose during the period, both of which have been excluded from the Group's underlying measures. Impairment of investment In the prior year, the Group disposed of Expro Group Canada Inc. to Enseco Energy Services Corporation, receiving part of the consideration in the form of a convertible debenture. During the current period Enseco exercised its right to convert this debenture into 2.8m ordinary shares with a par value of CAD 3.50. Market conditions in the Canadian oil and gas services sector have continued to deteriorate and as a result, the Group has impaired its investment, resulting in a charge during the period of £1.1m included within administration expenses. Post tax gain from disposal of joint ventures In the year ended 31 March 2006, the Group disposed of its shares in the Quantx joint ventures to Baker Hughes Inc. for £15.7m, generating a profit on disposal of £9.7m. During the current period, the Group reached agreement with Baker Hughes Inc. regarding the final consideration due. Additional proceeds of £2.5m were received, and after the deduction of additional costs of £0.2m, an additional profit on disposal of £2.3m was recorded. Tax The effective tax rate is calculated before the inclusion of post tax profits from joint ventures and associates. Tax for the six month period is charged at 37.2% (six months ended 30 September 2006: 37.9%; year ended 31 March 2007: 37.9%), representing the best estimate of the average annual effective income tax rate expected for the full year, applied to the pre-tax income of the six month period. After excluding the impairment of the investment described above, the effective tax rate for the period was 36.0%. Underlying EPS Underlying EPS has increased by 27.4% to 22.8p (30 September 2006:17.9p). Free cash flow Expro has continued to improve cash flow, a key financial management objective. This improvement has been delivered whilst significantly increasing investment in the business. ____________________________________ Six months ended Year ended 30 September 31 March 2007 2006 2007 £m £m £m _____________________________________________________________________________________________ Net cash from operating activities 31.0 25.7 67.9 _____________________________________________________________________________________________ Interest received 0.6 1.0 1.9 _____________________________________________________________________________________________ Proceeds on disposal of property, plant and equipment 0.8 2.9 5.2 _____________________________________________________________________________________________ Purchases of property, plant and equipment (17.3) (26.9) (56.2) _____________________________________________________________________________________________ Purchases of intangible assets (0.1) (0.1) (0.2) _____________________________________________________________________________________________ Free cash flow 15.0 2.6 18.6 _____________________________________________________________________________________________ Dividend The Board declared an interim dividend of 4 pence which represents a 5.3% increase over the prior period, which reflects continuing confidence in the future prospects of the Group. Investment in joint venture On 1 June 2007 the Group entered into a joint venture with China Oilfield Services Limited (COSL) and invested £3.7m during the period. Net debt Expro refinanced last financial year with a five year USD 550m facility. Initially £271.5m was drawn to pay down existing liabilities and fund the PWS acquisition, since when significant headway has been made in paying down the drawn amounts. Net debt stood at £159.8m at the end of the half year against £170.5m at 31 March 2007 and £193.2m at 30 September 2006 demonstrating continued debt repayment whilst at the same time funding increased research and development. Borrowings are predominantly drawn in US Dollars and incur interest at libor plus 55 basis points. Principal risks and uncertainties The principal risks and uncertainties for the remaining six months of the year are outlined within the outlook section of the Chairman and Chief Executive Officer's Statement. Consolidated Income Statement Six months ended 30 September 2007 Six months ended 30 September Six months ended 30 September 2007 2006 2007 Unaudited 2006 Unaudited Unaudited £'000 2007 Unaudited £'000 2006 £'000 Exceptional Unaudited £'000 Exceptional Unaudited Underlying items and £'000 Underlying items and £'000 Note performance amortisation Total performance amortisation Total Continuing operations Revenue 4 294,564 - 294,564 226,362 - 226,362 Cost of sales (240,915) (3,574) (244,489) (184,952) (1,993) (186,945) _________ _________ _________ _________ _________ _________ Gross profit 53,649 (3,574) 50,075 41,410 (1,993) 39,417 Administration expenses (8,549) (1,102) (9,651) (10,018) - (10,018) _________ _________ _________ _________ _________ _________ Operating profit 4 45,100 (4,676) 40,424 31,392 (1,993) 29,399 Share of post tax profit from joint ventures and associates 558 - 558 - - - Investment income 2,828 - 2,828 3,123 - 3,123 Finance costs (9,406) - (9,406) (8,293) - (8,293) _________ _________ _________ _________ _________ _________ Profit before tax 39,080 (4,676) 34,404 26,222 (1,993) 24,229 Tax 6 (13,825) 1,240 (12,585) (9,938) 755 (9,183) _________ _________ _________ _________ _________ _________ Profit after tax 25,255 (3,436) 21,819 16,284 (1,238) 15,046 Discontinued operations Post tax gain from disposal of joint ventures - 2,258 2,258 - - - _________ _________ _________ _________ _________ _________ Profit for the period 25,255 (1,178) 24,077 16,284 (1,238) 15,046 _________ _________ _________ _________ _________ _________ Attributable to: Equity holders of the parent 25,039 (1,178) 23,861 16,266 (1,238) 15,028 Minority interest 216 - 216 18 - 18 _________ _________ _________ _________ _________ _________ 25,255 (1,178) 24,077 16,284 (1,238) 15,046 _________ _________ _________ _________ _________ _________ Earnings per share From continuing and discontinued operations Basic 8 22.8p 21.7p 17.9p 16.5p _________ _________ _________ _________ _________ _________ Diluted 8 22.6p 21.5p 17.5p 16.2p _________ _________ _________ _________ _________ _________ From continuing operations Basic 8 19.7p 16.5p _________ _________ Diluted 8 19.5p 16.2p _________ _________ Year ended 31 March 2007 2007 Unaudited Audited £'000 2007 £'000 Exceptional Audited Underlying items and £'000 Note performance amortisation Total Continuing operations Revenue 4 518,820 - 518,820 Cost of sales (427,798) (5,733) (433,531) _________ _________ _________ Gross profit 91,022 (5,733) 85,289 Administration expenses (18,480) - (18,480) _________ _________ _________ Operating profit 4 72,542 (5,733) 66,809 Share of post tax profit from joint ventures and associates 102 - 102 Investment income 6,327 - 6,327 Finance costs (18,133) - (18,133) _________ _________ _________ Profit before tax 60,838 (5,733) 55,105 Tax 6 (22,831) 1,985 (20,846) _________ _________ _________ Profit after tax 38,007 (3,748) 34,259 Discontinued operations Post tax gain from disposal of joint ventures - - - _________ _________ _________ Profit for the period 38,007 (3,748) 34,259 _________ _________ _________ Attributable to: Equity holders of the parent 37,875 (3,748) 34,127 Minority interest 132 - 132 _________ _________ _________ 38,007 (3,748) 34,259 _________ _________ _________ Earnings per share From continuing and discontinued operations Basic 8 37.8p 34.1p _________ _________ Diluted 8 37.3p 33.6p _________ _________ From continuing operations Basic 8 34.1p _________ Diluted 8 33.6p _________ Underlying performance is based on continuing and discontinued operations and is before exceptional items and intangible asset amortisation that arises on business combinations. The basis of these alternative measures is included under note 3 and details of exceptional items arising in the period are included under note 5. Consolidated Statement of Recognised Income and Expense Six months ended 30 September 2007 Six months ended Year ended 30 September 31 March 2007 2006 2007 Unaudited Unaudited Audited £'000 £'000 £'000 Loss on cash flow hedges - (3,563) (3,563) Exchange differences on translation of foreign operations (7,076) (5,044) (16,931) Actuarial gains/(losses) on defined benefit pension schemes 2,183 (1,180) 2,165 Tax on items taken directly to equity (896) 325 (732) _________ _________ _________ Net expense recognised directly in equity (5,789) (9,462) (19,061) _________ _________ _________ Transfers Transferred to profit and loss on disposal of subsidiary - - (344) Transferred to profit and loss on maturity of cash flow hedges - 273 273 Profit for the period 24,077 15,046 34,259 _________ _________ _________ Total recognised income and expense for the period 18,288 5,857 15,127 _________ _________ _________ Attributable to: Equity holders of the parent 18,072 5,839 14,995 Minority interest 216 18 132 _________ _________ _________ 18,288 5,857 15,127 _________ _________ _________ Consolidated Balance Sheet At 30 September 2007 30 September 31 March Note 2007 2006 2007 Unaudited Unaudited Audited £'000 £'000 £'000 Non-current assets Goodwill 175,636 189,892 180,438 Intangible assets 93,643 107,743 99,458 Property, plant and equipment 9 179,080 187,853 194,307 Available for sale investments 5 195 - 1,297 Interests in joint ventures and associates 10 4,526 187 278 Deferred tax assets 6,347 6,719 7,536 _________ _________ _________ 459,427 492,394 483,314 Current assets Inventories 35,823 36,053 31,685 Trade and other receivables 168,352 165,252 161,646 Cash 24,941 36,839 32,872 _________ _________ _________ 229,116 238,144 226,203 _________ _________ _________ Total assets 688,543 730,538 709,517 _________ _________ _________ Current liabilities Bank overdraft - - (2,142) Bank loan - - (294) Trade and other payables (100,388) (105,966) (108,697) Current tax liabilities (27,384) (23,397) (28,427) Finance leases (1,423) (768) (1,607) Derivative financial instruments - (43) - Provisions (51) (188) (55) _________ _________ _________ (129,246) (130,362) (141,222) Non-current liabilities Bank loans 11 (184,727) (230,006) (200,911) Retirement benefit obligation (15,041) (21,728) (17,490) Deferred tax liabilities (29,395) (35,921) (31,573) Finance leases (7,857) (7,869) (8,088) Provisions (927) (2,775) (848) _________ _________ _________ (237,947) (298,299) (258,910) _________ _________ _________ Total liabilities (367,193) (428,661) (400,132) _________ _________ _________ Net assets 321,350 301,877 309,385 _________ _________ _________ Equity Share capital 12 11,037 10,905 10,958 Share premium account 5,503 1,993 3,796 Other reserve 60,677 60,677 60,677 Hedging and translation reserve (24,570) (5,264) (17,494) Equity reserve 1,561 1,467 1,544 Retained earnings 266,746 232,049 249,724 _________ _________ _________ Equity attributable to equity holders of the parent 320,954 301,827 309,205 Minority interest 396 50 180 _________ _________ _________ Total equity 321,350 301,877 309,385 _________ _________ _________ Consolidated Cash Flow Statement Six months ended 30 September 2007 Six months ended Year ended 30 September 31 March 2007 2006 2007 Unaudited Unaudited Audited £'000 £'000 £'000 Operating profit 40,424 29,399 66,809 Adjustments for: Depreciation of property, plant and equipment 24,089 21,594 39,545 Loss/(gain) on disposal of property, plant and equipment 48 (1,126) (2,398) Amortisation of intangible assets 4,029 2,264 6,679 Impairments and write back of negative goodwill 3,502 434 1,216 Share-based payments 666 435 910 Retirement benefit (credit) / charge (260) 124 (471) _________ _________ _________ Operating cash flows before movements in working capital 72,498 53,124 112,290 Increase in inventories (4,424) (4,423) (2,587) Increase in receivables (10,129) (21,901) (25,689) (Decrease)/increase in payables (5,797) 11,954 11,840 _________ _________ _________ Cash generated by operations 52,148 38,754 95,854 Income taxes paid (14,335) (7,868) (15,580) Interest paid (6,800) (5,180) (12,341) _________ _________ _________ Net cash from operating activities 31,013 25,706 67,933 _________ _________ _________ Investing activities Interest received 590 1,034 1,916 Purchases of property, plant and equipment (17,263) (26,935) (56,222) Proceeds on disposal of property, plant and equipment 792 2,915 5,198 Purchases of intangible assets (88) (67) (235) Net cash outflow on acquisition of subsidiaries - (171,682) (175,000) Investment in associates - (185) (185) Investment in joint ventures (3,701) - - Proceeds on disposal of subsidiary 481 - 1,718 Payments on disposal of joint ventures - (996) (996) Proceeds on disposal of joint ventures from prior period 2,283 - - Payment of deferred consideration (9) (79) (115) _________ _________ _________ Net cash used in investing activities (16,915) (195,995) (223,921) _________ _________ _________ Financing activities Issue of share capital 1,786 128,195 130,915 Proceeds on the exercise of options over own shares - - 629 Dividends paid (8,781) (5,192) (9,355) Initial drawing of loans under new facility - 271,539 271,539 Repayment of loan under previous facility - (60,913) (60,913) Repayment of loan assumed on acquisition - (135,140) (135,140) Repayment of loan under new facility (10,186) (35,245) (52,983) Repayments of finance leases (1,537) (712) (1,980) _________ _________ _________ Net cash from financing activities (18,718) 162,532 142,712 _________ _________ _________ Net decrease in cash and cash equivalents (4,620) (7,757) (13,276) Cash and cash equivalents at beginning of period 30,730 45,642 45,642 Effect of foreign exchange rate changes (1,169) (1,046) (1,636) _________ _________ _________ Cash and cash equivalents at end of period 24,941 36,839 30,730 _________ _________ _________ Notes to the Condensed Consolidated Accounts Six months ended 30 September 2007 1. General information The financial information included within this interim financial report comprises the condensed financial statements of Expro International Group PLC for the six months ended 30 September 2007. The interim financial report has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 Interim Financial Reporting as adopted by the European Union. The report should be read in conjunction with the annual financial statements for the year ended 31 March 2007. The comparative information included within this report for the year ended 31 March 2007 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. The Group's auditors have not performed a review or an audit of this interim financial report. 2. Accounting policies The condensed set of financial statements has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) and the same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements. The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year ended 31 March 2008: • IFRS 7: Financial Instruments: Disclosures; and the related amendment to IAS 1 on capital disclosures. As these are disclosure standards, there is no impact of that change in accounting policy on the half-yearly financial report. Full details of the change will be disclosed in our annual report for the year ended 31 March 2008. • IFRIC 8: Scope of IFRS 2. This interpretation has not had any impact on the recognition of share-based payments in the Group. • IFRIC 9: Re-assessment of Embedded Derivatives. The Group does not have any embedded derivatives and accordingly this interpretation has not had any impact on the Group. • IFRIC 10: Interim Reporting and Impairments. This interpretation has been applied by the Group. • IFRIC 11: IFRS 2 - Group and Treasury Share Transactions. This interpretation has not had any impact on the Group. 3. Use of adjusted measures As permitted by IAS 1, Presentation of Financial Statements, the Group has elected to classify certain items as exceptional and present them separately on the face of the Income Statement. Exceptional items are classified as those which management have identified and disclosed as material one-off or unusual items and which are not considered to be part of the core operations of the Group. In addition, the Group has separately disclosed intangible asset amortisation that arises on business combinations which is added back to arrive at underlying performance. Management focuses on underlying performance in order to compare performance over time and believes that this gives a useful additional measure of profit and earnings. Exceptional items arising in the period are disclosed under note 5. 4. Business and geographical segments For management purposes, the Group is organised into two operating divisions - Regional businesses and Global businesses. These divisions are the basis on which the Group reports its primary segment information. Six months ended Year ended 30 September 31 March 2007 2006 2007 Unaudited Unaudited Audited £'000 £'000 £'000 Continuing operations Segment revenue Regional businesses 190,597 138,614 321,944 Global businesses 103,967 87,748 196,876 _________ _________ _________ 294,564 226,362 518,820 Underlying segment profit Regional businesses 36,682 23,406 50,005 Global businesses 22,166 18,749 44,524 _________ _________ _________ 58,848 42,155 94,529 Intangible asset amortisation - business combinations Regional businesses (3,244) (1,833) (5,129) Global businesses (330) (160) (604) _________ _________ _________ (3,574) (1,993) (5,733) Segment profit Regional businesses 33,438 21,573 44,876 Global businesses 21,836 18,589 43,920 _________ _________ _________ 55,274 40,162 88,796 Unallocated corporate expenses (14,850) (10,763) (21,987) _________ _________ _________ Operating profit 40,424 29,399 66,809 _________ _________ _________ Underlying segment profit is before exceptional items and intangible asset amortisation that arises on business combinations. The basis of these alternative measures is included under note 3 and details of exceptional items arising in the period are included under note 5. 5. Exceptional items The following items have been classified as exceptional by management: Impairment of investment In the prior year, the Group disposed of Expro Group Canada Inc. to Enseco Energy Services Corporation, receiving part of the consideration in the form of a convertible debenture. During the current period Enseco exercised its right to convert this debenture into 2.8m ordinary shares with a par value of CAD 3.50. Market conditions in the Canadian oil and gas services sector have continued to deteriorate and as a result, the Group has impaired its investment, resulting in a charge of £1.1m included within administration expenses. Post tax gain from disposal of joint ventures In the year ended 31 March 2006, the Group disposed of its shares in the Quantx joint ventures to Baker Hughes Inc. for £15.7m, generating a profit on disposal of £9.7m. During the current period, the Group reached agreement with Baker Hughes Inc. regarding the final consideration due. Additional proceeds of £2.5m were received, and after the deduction of additional costs of £0.2m, an additional profit on disposal of £2.3m was recorded. 6. Tax The effective tax rate is calculated before the inclusion of post tax profits from joint ventures and associates. Tax for the six month period is charged at 37.2% (six months ended 30 September 2006: 37.9%; year ended 31 March 2007: 37.9%), representing the best estimate of the average annual effective income tax rate expected for the full year, applied to the pre-tax income of the six month period. After excluding the impairment of the investment described above, the effective tax rate for the period was 36.0%. 7. Dividends Six months ended Year ended 30 September 31 March 2007 2006 2007 Unaudited Unaudited Audited £'000 £'000 £'000 Amounts recognised as distributions to equity holders in the period: Final dividend for the year ended 31 March 2007 of 8.0p (2006: 7.1p) per share 8,781 5,192 5,192 _________ _________ Interim dividend for the year ended 31 March of 3.8p per share 4,163 _________ 9,355 _________ An interim dividend of 4.0p per share (2006: 3.8p) was declared by the Board on 28 November 2007 and has not been included as a liability as at 30 September 2007. 8. Earnings per share Six months ended Year ended The calculation of the basic and diluted earnings per share 30 September 31 March is based on the following data: 2007 2006 2007 Unaudited Unaudited Audited £'000 £'000 £'000 Earnings Profit for the period 24,077 15,046 34,259 Less minority interest (216) (18) (132) _________ _________ __________ Earnings attributable to equity holders of the parent - continuing and discontinued 23,861 15,028 34,127 Less post tax gain from disposal of joint ventures (2,258) - - _________ _________ __________ Earnings for the purpose of basic earnings per share - continuing 21,603 15,028 34,127 Amortisation of intangible assets arising from business combinations 3,574 1,993 5,733 Less tax on the above (1,240) (755) (1,985) Impairment of investment 1,102 - - _________ _________ __________ Earnings for the purpose of underlying earnings per share 25,039 16,266 37,875 _________ _________ __________ 2007 2006 2007 Number Number Number Number of shares Weighted average number of ordinary shares for the purposes of basic earnings per share 109,813,974 91,080,778 100,226,082 Effect of dilutive potential ordinary shares: Share options 1,097,666 1,701,623 1,442,331 ___________ ___________ ____________ Weighted average number of ordinary shares for the purposes of diluted earnings per share 110,911,640 92,782,401 101,668,413 ___________ ___________ ____________ Earnings per share From continuing and discontinued operations Basic 21.7p 16.5p 34.1p ___________ ___________ ____________ Diluted 21.5p 16.2p 33.6p ___________ ___________ ____________ From continuing operations Basic 19.7p 16.5p 34.1p ___________ ___________ ____________ Diluted 19.5p 16.2p 33.6p ___________ ___________ ____________ From discontinued operations Basic 2.0p - - ___________ ___________ ____________ Diluted 2.0p - - ___________ ___________ ____________ Underlying Basic 22.8p 17.9p 37.8p ___________ ___________ ____________ Diluted 22.6p 17.5p 37.3p ___________ ___________ ____________ Underlying earnings per share is based on continuing and discontinued operations and is before exceptional items and intangible asset amortisation that arises on business combinations. The basis of this alternative measure is included under note 3 and details of exceptional items arising in the period are included under note 5. 9. Property, plant and equipment During the period, the Group incurred additions of £17.5m in respect of property, plant and equipment. The Group also had capital commitments amounting to £10.4m at the end of the period. 10. Interests in joint ventures and associates On 1 June 2007, the Group entered into a joint venture with China Oilfield Services Limited (COSL) and invested £3.7m during the period. 11. Bank overdrafts and loans During the period £10.2m of the Group's borrowing facility was repaid, resulting in a balance at the period end of £184.7m after the effects of foreign exchange rates. In addition an overdraft facility of £2.1m was repaid in full. 12. Share capital Allotted, called up and Allotted, Authorised fully paid called up and number of Authorised number of fully paid Ordinary share capital shares £'000 shares £'000 At 1 April 2006 100,000,000 10,000 73,276,337 7,328 Increase in authorised share capital 40,000,000 4,000 - - Employee share option schemes - shares issued - - 447,047 45 Shares issued - - 35,326,082 3,532 ___________ ___________ ___________ ___________ At 30 September 2006 140,000,000 14,000 109,049,466 10,905 Employee share option schemes - shares issued - - 528,891 53 ___________ ___________ ___________ ___________ At 1 April 2007 140,000,000 14,000 109,578,357 10,958 Employee share option schemes - shares issued - - 794,521 79 ___________ ___________ ___________ ___________ At 30 September 2007 140,000,000 14,000 110,372,878 11,037 =========== =========== =========== =========== 13. Retirement benefit obligation The defined benefit liability as at 30 September 2007 is calculated on a year-to-date basis using a roll forward of the latest actuarial valuation as at 6 April 2005. The Group has updated its assumptions in line with current best practice, including an increased discount rate which has been partially offset by a reduction in mortality rates. The defined benefit plan assets have been updated to reflect their market value as at 30 September 2007. The impact of the changes in the plan assumptions have been recognised as an actuarial gain in the consolidated statement of recognised income and expense in accordance with the Group's accounting policy. 14. Contingent liabilities The Group is party to indemnities, legal actions and claims that arise in the ordinary course of the Group's business. While the outcome of such legal proceedings cannot be readily foreseen, the Group believes that they will be resolved without material effect on the Group's results, financial position or liquidity. 15. Events after the balance sheet date There were no subsequent events between the balance sheet date and the date the interim financial statements were authorised for issue that require disclosure. 16. Related party transactions Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Trading transactions During the period, Group companies entered into transactions with associates who are not members of the Group. Goods and services Goods and services Amounts owing Amounts owing provided to related provided by related from related to related party party party party £'000 £'000 £'000 £'000 Associates Six months ended 30 September 2007 182 230 465 991 Six months ended 30 September 2006 - - - - Year ended 31 March 2007 302 761 302 761 The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties. No transactions were entered into with joint ventures during the period, and no balances were outstanding at 30 September 2007. Responsibility Statement We confirm that to the best of our knowledge and belief that: (a) the condensed set of financial statements has been prepared in accordance with IAS 34; (b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and (c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein). By order of the Board Graeme Coutts Michael Speakman Chief Executive Officer Group Finance Director Date: 28 November 2007 This information is provided by RNS The company news service from the London Stock Exchange

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