Interim Results

Expro International Group PLC 30 November 2006 30 November 2006 EXPRO INTERNATIONAL GROUP PLC ("Expro" or "the Group") Interim results for the six months ended 30 September 2006 Expro International Group PLC, the oilfield services company, today announces interim results for the six months ended 30 September 2006. Highlights • Strong results - Robust organic growth - Three months contribution from Power Well Services ("PWS") - Operating margin increased to 13% - Continued EPS growth • Successful acquisition of PWS - Integration proceeding ahead of plan and cost synergies higher than planned - Expro's technology offering well received by existing PWS customers - Materially enhanced position in key geographic markets • Dividend maintained • Outlook positive with continued growth momentum in upstream oil and gas sector Year ended 31 Six months ended 30 September March 2006 2005 2006 Revenue £226.4m £131.6m £300.7m Operating profit £29.4m £13.6m £34.1m Operating margin 13.0% 10.3% 11.3% Basic EPS* 16.5p 9.7p 36.6p Underlying EPS*(a) 17.9p 10.0p 24.8p Headline EPS (b) 16.5p 9.7p 24.2p Net cash from operating activities £25.7m £9.0m £58.4m Free cash flow (c) £2.6m (£13.4m) £10.4m Dividend per share 3.8p 3.8p 10.9p Net bank borrowings (d) £193.2m £52.8m £17.1m Notes: * All references to earnings per share (EPS) are based on continuing and discontinuing operations and are calculated using the basic number of shares. The denominator for the purposes of calculating basic earnings per share has been adjusted to reflect the bonus element of the rights issue (see note 9) (a) Underlying statistics reflect the performance of the continuing and discontinued operations before significant non recurring items and amortisation of intangible assets which arise from acquisitions, as calculated under Note 6 (b) Headline statistics reflect the performance of the continuing and discontinued operations before significant non recurring items, as calculated under Note 6. Previously published headline earnings per share were on a continuing only basis (c) As calculated under note 13 (d) Bank loans of £230.0m (30 September 2005 - £62.3m; 31 March 2006 - £62.7m) less cash of £36.8m (30 September 2005 - £9.5m; 31 March 2006 - £45.6m), as extracted from the consolidated balance sheet Commenting on the results, Graeme Coutts, Chief Executive, said, "I am pleased to report a strong set of results for the first six months of the financial year, reflecting the successful execution of our strategy and sustained growth momentum across the recently expanded Expro business. These results include three months of contribution from the PWS acquisition which marks a "step change" in the development of the Expro Group. Importantly this acquisitive growth has been complemented by robust organic growth from both the existing Expro business and PWS. The integration of PWS is progressing well and ahead of our initial plans. The market outlook for the second half and beyond remains positive." - Ends - For further information please contact: Expro International Group PLC On 30 November: 020 7067 0700 Graeme Coutts, Chief Executive Thereafter: 0118 959 1341 Michael Speakman, Finance Director Ed Cutts, Investor Relations Weber Shandwick Square Mile 020 7067 0700 Kirsty Raper/Rachel Taylor/Stephanie Badjonat 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. Financial calendar Ex dividend date 27 December 2006 Record date 29 December 2006 Interim dividend payable 26 January 2007 EXPRO INTERNATIONAL GROUP PLC ("Expro" or "the Group") Interim results for the six months ended 30 September 2006 Chairman's and Chief Executive's Statement Summary The Board is delighted to report a strong set of results for the first six months of the financial year, reflecting the successful execution of our strategy and sustained growth momentum across the recently expanded Expro business. These results include three months of contribution from the Power Well Services ("PWS") acquisition which marks a "step change" in the development of the Expro Group. Importantly this acquisitive growth has been complemented by robust organic growth from both the existing Expro business and PWS. This combined growth has generated an adjusted earnings per share of 17.9 pence, on an underlying basis(a), a 79% increase on the same period last year. On a headline basis(b) earnings per share of 16.5p grew by 70% compared to the same period last year. The Board has declared the interim dividend at 3.8 pence. -------------------------- (a) Underlying EPS reflects the performance of the continuing and discontinuing operations before significant non-recurring items and the amortisation of acquisition intangibles, as calculated under Note 6. (b) Headline EPS reflects the performance of the continuing and discontinuing operations before significant non-recurring items as calculated under Note 6. Previously published headline earnings per share were on a continuing only basis. Market Conditions Market conditions for upstream oil and gas services have continued to strengthen over the last six months, continuing the progressive momentum of the last two years. Demand for upstream services has been very high, driven by global economic growth and numerous factors which have restricted supply of oil and natural gas. World economies continue to increase energy demand to meet growth. Supply of oil and gas is the only real answer to demand for the foreseeable future. However, supply remains subject to a combination of geopolitical disruption and strong production discipline by the Organisation of Petroleum Exporting Countries ("OPEC"). The effect has been to keep supply and demand keenly balanced supporting global oil prices which are consistently well above USD 50 per bbl. This environment has provided a strong platform for Expro to implement its growth strategies, the most significant during the period being the acquisition of PWS. This has materially enhanced all aspects of Expro's capabilities, particularly our geographic penetration into key markets where the Group has to date had limited participation. As anticipated in the trading statements made throughout the period, our progress has been strong in the first half of the financial year. This has been assisted in part by the smooth integration of the PWS business but mainly as a result of Expro's focused strategy. Integration of PWS In July we completed the acquisition of PWS. This strategic move was a step change in the global development of Expro, adding markets and technologies to our portfolio, whilst at the same time bringing synergies to the Group and enhancing our existing growth strategies. The integration of PWS is progressing well and ahead of our initial plans. The cost synergies identified have been higher than originally assumed and although significant progress has also been made with revenue synergies they inevitably take longer to crystalise. The PWS portfolio fits predominantly within Expro's Regional businesses segment where it complements our existing capabilities and adds critical mass to our operations. Our customers have welcomed our enhanced capability and the benefits are already being seen. PWS has brought to us a strong business platform in Norway and the increasingly important markets of the Middle East and Brazil. The technology within Power Chokes is benefiting our domestic U.S. business, as well as providing good international growth prospects. In the former market, our Choke products play an essential role in the development of unconventional land based gas reserves where flow management in association with rock fracturing is critical to commercialisation of tight gas prospects. This type of gas field is increasingly important within the domestic U.S. market which is becoming service intensive as more complex reservoirs are exploited. Business Strategy Expro's strategy has established many of our product lines as market leaders. We position ourselves as a safe, innovative and focused provider of services to our customers in all the areas we operate in. In a business environment where our customers are paying record amounts for rig operations, these are increasingly important features for successful service providers. During the period Expro was awarded the Oil & Gas Sector RoSPA (the Royal Society for the Prevention of Accidents) award for occupational health and safety performance. This prestigious award marks a first for any upstream oil and gas service company and is clear recognition of our efforts to create and maintain safe working environments for our customers and employees. As part of our business review process we continually challenge and refine our strategy. The implementation and evolution of our four point strategy, first published in 2004, has been a major contributor to our success. Four Point Strategy • Customer care, backed by investment in skilled personnel and sophisticated intelligence systems, are critical to delivering sustained success as well as positioning for future market developments. • Technology development backed by investment in world class people and facilities, designed at keeping all Expro product lines in a leading position. • Geographic optimisation to create areas of critical mass capable of effectively and profitably serving local markets throughout the business cycle. • Strategic acquisitions and divestments which focus and enhance Expro's global market positions. Segmental Review Regional Businesses Expro provides products and services which are critical to the maintenance and commissioning of oil and gas wells through a comprehensive footprint of international locations. These products fall under the technology categories of Cased Hole Services ("CHS") and Surface Welltesting ("SWT"). The largely call-off nature of the products and services requires supporting infrastructure which, in many areas, is expensive to maintain. These infrastructure costs are the focus of our strategy of creating areas of critical mass where we fully leverage across our product and service lines. Our acquisition of PWS, completed in July, added materially to our Regional businesses' capabilities. Including the period of ownership of PWS, total revenues for our Regional businesses were £138.6m an increase of 80% over the corresponding prior period. Expro's management structure was reorganised following the acquisition. Our Regional businesses are now structured under two hemispheres; Western, managed from Houston (North America, Canada and Latin America), and Eastern, managed from Aberdeen (North Sea, FSU, West Africa, North Africa/Middle East and Asia). The PWS acquisition has greatly enhanced all aspects of Expro's strategy execution without compromising our market identity or customer perception. In the Western Hemisphere, traditionally confined to North America and Brazil, the PWS acquisition has brought Power Chokes flow management which provides a very strong technology position in the unconventional domestic gas markets of North America. This acquired capability is entirely complementary to our existing strategy of providing advanced, high value services where the market demands a "Best in Class" supplier. The strong platform the Chokes business provides, will enable the pull-through of our products and services into areas which are an increasingly significant source of energy to the United States. Progress in our Gulf of Mexico business continues in line with the positive outlook for deepwater subsea developments, an area which plays strongly to Expro's technology strategy. In Latin America, Expro is now active in several countries. By far the biggest is Brazil where the PWS acquisition has provided us with an excellent position with Petrobras, and increasingly the incoming international oil and gas companies involved in offshore developments. We believe that our relationship with Petrobras will develop to enable us to assist their international growth plans in areas such as offshore Angola and deep water Gulf of Mexico. As a predominantly former PWS territory we see the opportunity to bring many of Expro's broader capabilities into Latin America on a selective basis. In the Eastern Hemisphere where Expro has for some time been regarded as a market leader in the combined markets of the North Sea area, the PWS acquisition has reinforced our position and critical mass through the addition of a strong Norwegian SWT presence. This also positions Expro in a closer operating environment with Statoil and Norsk Hydro as they look to internationalise their capabilities. The relatively high oil price has greatly helped the UK North Sea support strong reinvestment in this aging province, which is important again to our major international customers as a safer investment area in an increasingly difficult global environment. The FSU has performed well for Expro in the first half of the financial year and West Africa continued to deliver strongly throughout the period. The majority of revenues came from offshore deepwater activities all along the West African coast, but predominantly Angola where we have established critical mass to capitalise on our strong technology position. Our regional service portfolio continued to expand in this area with high demand for our welltest equipment to commission the technically demanding deepwater fields. The newly formed region of North Africa and the Middle East has also been strengthened through the PWS acquisition. These markets are dominated by gas projects in North Africa, particularly in Algeria and Egypt, and the increase in Saudi-Arabian rig activity. The latter two locations are new for Expro giving us a valuable position in the major producing areas of the world and new outlets for many of our high value niche technologies. Finally, in Asia we are working to establish our new position and take advantage of the critical mass opportunities offered by the acquisition while building on excellent positions in Australia, Malaysia and Indonesia. Global Businesses The Global businesses segment, consisting of the deepwater businesses of TronicMatre and subsea safety tools ("SST") and our capital intensive early production facilities ("EPF") business has benefited from increased customer capital expenditure. The main driver has been our customers refocusing towards subsea fields, and in particular deep water developments. Due to the project based nature of this segment we manage our resources on a centralised, global basis. However, during project execution we leverage the comprehensive international infrastructure provided by our in-country Regional businesses to deliver a local product. PWS did not add materially to the portfolio of our Global businesses, therefore the overall revenues of £87.7m to 30 September 2006 represent organic Expro growth which on a like for like basis is 60% ahead of the corresponding prior period. Tronic and Matre, both leading brands, are used to market our technical leadership in the areas of subsea connectors and instrumentation. These businesses are fully integrated and offer the only integrated solution to customers looking to increase capacity and efficiency. Demand for TronicMatre products has increased in line with the global dynamics for subsea production. The high cost of operating in the subsea environment is increasingly driving our customers towards reliability, a hallmark of TronicMatre and the wider Expro Group. In the area of SST where Expro has a material position, global demand has been strong. Prior period investments to increase capacity have allowed us to meet the current demand for safety systems throughout the deepwater provinces of the world. In this area we are now marketing products and services within legacy PWS contracts to customers who have a requirement to develop their subsea reserves. Finally, our EPF group has been actively engineering potential field development solutions for customers looking to exploit the high oil price on a fast track basis. Two major projects have been ongoing in the period. One has been under construction for a major customer in West Africa which is due for commissioning in the second half of this financial year, while the other is the highly successful Chayvo plant which has produced commercial oil and gas for ExxonMobil in Sakhalin Island throughout the period. This method of small field exploitation is relatively fast when project sanction is approved, however the overall gestation period between enquiry and sanction can be prolonged. Technology During the first half of the financial year record levels of investment were made supporting our strategy of technology development and commercialisation. Our focus clearly remains on developing technologies in order to meet our customers' evolving business needs, further enhancing our corporate differentiation. All business segments benefited from technology enhancements, particularly those where Expro continues to demonstrate leadership. The cableless telemetry system "CATs" is operating in its first field installation, a suspended North Sea subsea well, providing our customer with valuable new reservoir data. As part of the PWS combination, Expro acquired a 50% interest in a company developing new drilling technology aimed at reducing overall drilling cost while facilitating greater safety during operations. The managed pressure drilling ("MPD") process utilises state of the art metering and choke technology from within the former PWS portfolio. Field trials in the US during the period were very positive and well received. The second phase of our AX-S rigless technology project made good progress in the period with the joint partners continuing to provide excellent support to this potentially transformational technology. The business environment for this system continues to strengthen, driven by our customers increasing reliance on subsea wells and the inflated cost of semi-submersible operations. Outlook The outlook for the upstream services sector remains positive, driven by the continuing increase in oil and gas demand. In the medium term this position is maintained by the continued discipline of OPEC in regulating supply rather than a fundamental shortage in oil and gas. The long term dynamics are not in doubt, oil and gas remains the only real answer to demand, and the world will need to find and produce materially more oil and gas than is currently capable of being produced. Within this environment the outlook for Expro is positive. Our investment supporting our four point strategy has positioned Expro to take advantage of these conditions. The outlook for the remainder of this financial year is favourable and our long term objectives remain unchanged; to benefit shareholders with profitable growth beyond the cycle. Dr Chris Fay, CBE Graeme Coutts 29 November 2006 Chairman Chief Executive Officer Consolidated income statement Six months ended 30 September 2006 Six months ended Six months ended Year ended 30 September 30 September 31 March Note 2006 2006 2006 2005 2005 2005 2006 2006 2006 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Underlying Special Total Underlying Special Total Underlying Special Total items items items Continuing operations Revenue 3 226,362 - 226,362 131,647 - 131,647 300,727 - 300,727 Cost of sales (184,952) (1,993) (186,945) (109,714) (455) (110,169) (254,516) (735) (255,251) ________ ________ _______ _______ _______ _______ _______ _______ ______ Gross profit 41,410 (1,993) 39,417 21,933 (455) 21,478 46,211 (735) 45,476 Administrative expenses (10,018) - (10,018) (7,881) - (7,881) (11,360) - (11,360) ________ ________ _______ _______ _______ _______ _______ _______ ______ Operating profit 3 31,392 (1,993) 29,399 14,052 (455) 13,597 34,851 (735) 34,116 Investment income 3,123 - 3,123 1,847 - 1,847 3,855 - 3,855 Finance costs (8,293) - (8,293) (4,140) - (4,140) (8,409) - (8,409) ________ ________ _______ _______ _______ _______ _______ _______ ______ Net finance costs (5,170) - (5,170) (2,293) - (2,293) (4,554) - (4,554) Profit before tax 26,222 (1,993) 24,229 11,759 (455) 11,304 30,297 (735) 29,562 Tax 4 (9,938) 755 (9,183) (4,387) 172 (4,215) (11,483) 279 (11,204) ________ ________ _______ _______ _______ _______ _______ _______ ______ Profit after tax 16,284 (1,238) 15,046 7,372 (283) 7,089 18,814 (456) 18,358 Discontinued operations Post tax profit from joint ventures - - - 348 - 348 441 - 441 Post tax gain from disposal of joint ventures - - - - - - - 9,661 9,661 ________ ________ _______ _______ _______ _______ _______ _______ ______ Profit for the period 16,284 (1,238) 15,046 7,720 (283) 7,437 19,255 9,205 28,460 ======== ======== ======= ======= ======= ======= ======= ======= ====== Attributable to: Equity holders of the parent 16,266 (1,238) 15,028 7,650 (283) 7,367 19,206 9,205 28,411 Minority interest 18 - 18 70 - 70 49 - 49 ________ ________ _______ _______ _______ _______ _______ _______ ______ 16,284 (1,238) 15,046 7,720 (283) 7,437 19,255 9,205 28,460 ======== ======== ======= ======= ======= ======= ======= ======= ====== Earnings per share From continuing and discontinuing operations Basic 6 17.9p 16.5p 10.0p 9.7p 24.8p 36.6p Diluted 6 17.5p 16.2p 9.9p 9.5p 24.4p 36.1p ======== ======== ======= ======= ======= ======= ======= ======= ====== From continuing operations Basic 6 16.5p 9.2p 23.6p ======= ======= ====== Diluted 6 16.2p 9.1p 23.3p ======= ======= ====== Underlying numbers reflect the performance of the continuing and discontinuing operations before special items. Special items comprise significant non-recurring items and the amortisation of acquisition intangibles Consolidated statement of recognised income and expense Six months ended 30 September 2006 Six months ended Year ended 30 september 31 March 2006 2005 2006 Note £'000 £'000 £'000 Losses on cash flow hedges (2,136) (2,200) (2,951) Exchange differences on translation of foreign operations (5,044) 4,250 5,672 Actuarial (losses)/gains on defined benefit pension schemes (1,180) (2,586) 4,451 Tax on items taken directly to equity 326 673 567 ______ ______ ______ Net (expense) / income recognised directly in equity (8,034) 137 7,739 Transferred to profit and loss on disposal of joint venture foreign operations - - (365) Transferred to profit and loss on maturity of cash flow hedges (1,155) - 1,815 Profit for the period 15,046 7,437 28,460 ______ ______ ______ Total recognised income and expense for the period 5,857 7,574 37,649 ====== ====== ====== Attributable to: Equity holders of the parent 5,839 7,504 37,600 Minority interest 18 70 49 ______ ______ ______ 5,857 7,574 37,649 ====== ====== ====== Consolidated balance sheet At 30 September 2006 30 September 30 September 31 March 2006 2005 2006 Note £'000 £'000 £'000 Non-current assets Goodwill 189,892 20,954 20,511 Intangible assets 107,743 10,535 9,221 Property, plant and equipment 7 187,853 89,236 95,423 Interests in associates 187 - - Deferred tax assets 6,719 5,367 6,365 Derivative financial instruments - 72 - ______ ______ ______ 492,394 126,164 131,520 Current assets Inventories 36,053 16,971 19,237 Trade and other receivables 165,252 91,414 95,577 Cash 36,839 9,573 45,642 Assets in disposal group held for sale - 3,786 - ______ ______ ______ 238,144 121,744 160,456 ______ ______ ______ Total assets 730,538 247,908 291,976 ______ ______ ______ Current liabilities Trade and other payables (105,966) (51,345) (73,159) Current tax liabilities (23,397) (8,964) (12,549) Finance leases (768) (688) (768) Derivative financial instruments (43) (1,417) (295) Provisions (188) (115) (188) ______ ______ ______ (130,362) (62,529) (86,959) Non-current liabilities Bank loans 8 (230,006) (62,331) (62,699) Retirement benefit obligation (21,728) (26,836) (19,348) Deferred tax liabilities (35,921) (3,109) (2,428) Finance leases (7,869) (8,049) (7,972) Derivative financial instruments - (235) (138) Provisions (2,775) (2,754) (2,882) ______ ______ ______ (298,299) (103,314) (95,467) ______ ______ ______ Total liabilities (428,661) (165,843) (182,426) ______ ______ ______ Net assets 301,877 82,065 109,550 ====== ====== ====== Equity Share capital 9 10,905 7,319 7,328 Share premium account 1,993 281 570 Other reserves 60,677 Hedging and translation reserve (5,264) 894 3,099 Own shares - (407) (352) Equity reserve 1,467 640 1,032 Retained earnings 232,049 73,201 97,841 ______ ______ ______ Equity attributable to equity holders of the parent 301,827 81,928 109,518 Minority interest 50 137 32 ______ ______ ______ Total equity 301,877 82,065 109,550 ====== ====== ====== The financial statements were approved by the board of directors and authorised for issue on 29 November 2006. They were signed on its behalf by: G Coutts M Speakman Director Director 29 November 2006 Consolidated cash flow statement Six months ended 30 September 2006 Six months ended Year ended 30 September 31 March 2006 2005 2006 Note £'000 £'000 £'000 Operating profit 29,399 13,597 34,116 Adjustments for: Depreciation of property, plant and equipment 21,594 11,134 30,445 (Gain)/loss on disposal of property, plant and equipment (1,126) 397 1,771 Amortisation of intangible assets 2,264 873 1,469 Impairments 434 - 718 Share-based payments 435 223 615 Retirement benefit charge 124 (285) 251 ______ ______ ______ Operating cash flows before movements in working capital 53,124 25,939 69,385 Increase in inventories (4,423) (704) (2,611) Increase in receivables (21,901) (16,934) (21,263) Increase in payables 11,954 5,034 25,589 ______ ______ ______ Cash generated by operations 38,754 13,335 71,100 Income taxes paid (7,868) (2,513) (9,209) Interest paid (5,180) (1,834) (3,534) ______ ______ ______ Net cash from operating activities 25,706 8,988 58,357 ______ ______ ______ Investing activities Interest received 1,034 273 614 Purchases of property, plant and equipment 7 (26,935) (22,758) (49,288) Proceeds on disposal of property, plant and equipment 2,915 314 846 Purchases of intangible assets (67) (213) (100) Net cash outflow on acquisition of subsidiaries 10 (171,682) (5,988) (6,075) Investment in associates (185) - - Payment on disposal of joint ventures (996) - - Proceeds on disposal of joint ventures - 4,797 20,116 Payment of deferred consideration (79) (291) (334) ______ ______ ______ Net cash used in investing activities (195,995) (23,866) (34,221) ______ ______ ______ Financing activities Issue of share capital 9 128,195 25,258 25,555 Dividends paid 5 (5,192) (5,182) (7,956) Drawing of new loans 8 272,090 - - Repayment of loans 8 (231,849) - - Repayments of finance leases (712) (634) (1,305) ______ ______ ______ Net cash from financing activities 162,532 19,442 16,294 ______ ______ ______ Net (decrease)/increase in cash (7,757) 4,564 40,430 Cash at beginning of period 45,642 5,009 5,009 Effect of foreign exchange rate changes (1,046) - 203 ______ ______ ______ Cash at end of period 36,839 9,573 45,642 ====== ====== ====== Notes to the condensed consolidated accounts Six months ended 30 September 2006 1. Basis of preparation The unaudited financial information contained in this interim report has been prepared in accordance with IAS 34 Interim Financial Reporting, and with the Listing Rules of the Financial Services Authority. The Group's auditors have not performed a review of this interim report. These condensed consolidated accounts do not include all of the information required for full annual financial statements. The interim report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985, and should be read in conjunction with the annual report 2006. A copy of the statutory accounts for the year ended 31 March 2006 has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain statements under section 237 (2) and (3)of the Companies Act 1985. 2. Significant accounting policies The condensed financial statements have been prepared under the historical cost convention. The accounting policies are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 March 2006, with the addition of IFRIC 4 Determining whether an arrangement contains a lease. IFRIC 4 came into effect from 1 January 2006 and provides guidance on whether complex arrangements include a lease. This becomes effective for the Group for the year ending 31 March 2007. The Group has reviewed its contracts and the interpretation does not have a material impact on the Group. The following standards which have not been applied in these financial statements were in issue but not yet effective: IFRS 7 Financial instruments: Disclosures; and the related amendment to IAS 1 on capital disclosures. The Group anticipates that the adoption of this standard in future periods will have no material impact on the financial statements of the Group except for additional disclosures on capital and financial instruments when the relevant standard comes into effect for periods commencing on or after 1 January 2007. 3. Business 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. Principal activities are as follows: Regional businesses provide services which are primarily driven by customer operating expenditure. Customer requirements are often for a short period of time, and delivery is made through, and supported by, the Group's locally established infrastructure. Global businesses provide products and services which are primarily driven by customer capital expenditure. These products and services, which are often based upon bespoke engineering or technology based solutions, are delivered remotely over a long term and are typically for offshore projects. The following is an analysis of the revenue and results for the period, analysed by business segment. Six months ended Year ended 30 September 31 March 2006 2005 2006 £000 £000 £000 Segment revenue Global businesses 87,748 54,804 131,245 Regional businesses 138,614 76,843 169,482 ______ ______ ______ Total revenue 226,362 131,647 300,727 Segment result Global businesses 17,844 11,053 26,107 Regional businesses 21,573 10,425 19,369 ______ ______ ______ Total result 39,417 21,478 45,476 Unallocated corporate expenses (10,018) (7,881) (11,360) ______ ______ ______ Operating profit 29,399 13,597 34,116 ====== ====== ====== 4. Tax Six months ended Year ended 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 Current tax: UK corporation tax 1,386 1,687 1,638 Foreign tax 7,471 3,100 11,821 ______ ______ ______ 8,857 4,787 13,459 Deferred tax: 326 (572) (2,255) ______ ______ ______ Total 9,183 4,215 11,204 ====== ====== ====== The tax charge for the six months to 30 September 2006 has been based on an estimated effective rate for the year to 31 March 2007 of 37.9%. This compares with the UK standard rate of 30%, with the difference largely attributable to foreign profits taxed at rates higher than the UK rate and expenses not deductible for tax purposes. 5. Dividends Six months ended Year ended 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 Amounts recognised as distributions to equity holders in the period: Interim dividend paid for the year ended 31 March 2006 of 3.8p per ordinary share (2005: 3.8p per share) - - 2,774 Final dividend paid for the year ended 31 March 2006 of 7.1p per ordinary share (2005: 7.1p per share) 5,192 5,182 5,182 ______ ______ ______ 5,192 5,182 7,956 ====== ====== ====== The proposed interim dividend for the year ended 31 March 2007 is 3.8p per ordinary share. This was approved by the Board after 30 September 2006 and has not been included as a liability in these financial statements. 6. Earnings per share The calculation of the basic and diluted earnings per share is based on the following data: Six months ended Year ended 30 September 31 March 200 2005 2006 £'000 £'000 £'000 Earnings Profit for the period 15,046 7,437 28,460 Less minority interest (18) (70) (49) ______ ______ ______ Earnings attributable to equity holders of the parent - continuing and discontinued 15,028 7,367 28,411 Less post tax gain from disposal of joint ventures - - (9,661) Less post tax profit from discontinued joint venture operations - (348) (441) ______ ______ ______ Earnings for the purpose of basic earnings per share - continuing 15,028 7,019 18,309 Adjustments Post tax profit from discontinued joint venture operations - 348 441 ______ ______ ______ Earnings for the purpose of headline earnings per share 15,028 7,367 18,750 Amortisation of intangible assets arising from acquisitions 1,993 455 735 Less tax on the above (755) (172) (279) ______ ______ ______ Earnings for the purpose of underlying earnings per share 16,266 7,650 19,206 ====== ====== ====== Number of shares Weighted average number of ordinary shares for the purposes of basic earnings per share 91,080,778 76,126,186 77,480,885 Effect of dilutive potential ordinary shares: Share options 1,701,623 1,124,478 1,252,641 ______ ______ ______ Weighted average number of ordinary shares for the purposes of diluted earnings per share 92,782,401 77,250,664 78,733,526 =========== =========== =========== 6. Earnings per share Earnings per share From continuing and discontinued operations Basic 16.5p 9.7p 36.6p ====== ====== ====== Diluted 16.2p 9.5p 36.1p ====== ====== ====== From continuing operations Basic 16.5p 9.2p 23.6p ====== ====== ====== Diluted 16.2p 9.1p 23.3p ====== ====== ====== From discontinued operations Basic - 0.5p 13.0p ====== ====== ====== Diluted - 0.5p 12.8p ====== ====== ====== Headline Basic 16.5p 9.7p 24.2p ====== ====== ====== Diluted 16.2p 9.5p 23.8p ====== ====== ====== Underlying Basic 17.9p 10.0p 24.8p ====== ====== ====== Diluted 17.5p 9.9p 24.4p ====== ====== ====== The denominator for the purposes of calculating both basic and diluted earnings per share has been adjusted to reflect the bonus element of the rights issue (see note 9). Headline earnings per share reflect the performance of the continuing and discontinuing operations before significant non-recurring items. Significant non-recurring items include gains on disposal of discontinued operations. Previously published headline earnings per share were on a continuing only basis. Underlying earnings per share reflect the performance of the continuing and discontinuing businesses before significant non-recurring items and the amortisation of acquisition intangibles. 7. Property, plant and equipment During the period, the Group incurred additions of £27.0m of property, plant and equipment. A further £95.6m was acquired through the acquisition of PowerWell Services, see note 10 for further details. 8. Bank loans During the period, the Group settled its existing bank loans (£60.9m), as well as the debt acquired on the acquisition of PWS (£135.2m). In order to partially finance the acquisition of PWS, the Group entered into a new $550m facility repayable over 5 years. An initial amount of £271.5m was drawn, and £35.7m was repaid during the period, resulting in a balance at the period end of £230.0m after the effects of foreign exchange rates. Interest payable on this facility is dependent on LIBOR plus a margin. 9. Share capital Allotted, called up and Authorised fully paid Ordinary share capital £'000 £'000 At 1 April 2005 8,100 6,646 Increase in authorised share capital 1,900 - Employee share option schemes - options exercised - 9 Shares issued - 664 ______ ______ At 30 September 2005 10,000 7,319 Employee share option schemes - options exercised - 9 ______ ______ At 1 April 2006 10,000 7,328 Increase in authorised share capital 4,000 - Employee share option schemes - options exercised - 45 Shares issued - 3,532 ______ ______ At 30 September 2006 14,000 10,905 ====== ====== The Group has one class of ordinary shares which carry no right to fixed income. On 26 July 2006, 26,170,121 ordinary shares of 10 pence each were issued at a price of 500 pence per share under a rights issue. The premium arising on this share issue was credited against the merger reserve offset by costs of £3,271,265, which arose from the issue. The remaining balance of the merger reserve was transferred to retained earnings. On 31 July 2006 a further 9,155,961 ordinary shares of 10 pence each were issued to First Reserve as part consideration for the acquisition of Power Well Services. These shares were issued at a price of 673 pence per share. The premium arising on this share issue was credited to other reserves. These share issues were credited as fully paid and ranked pari passu in all respects with the Group's existing ordinary shares. 10. Acquisition of subsidiary During the period the Group acquired Power Well Services "PWS", with an acquisition date of 3 July 2006. PWS is a leading supplier of well testing and other flow management products and services to the global oil and gas industry. The acquisition comprised a 100% interest in Power Well Services Inc (registered in the USA) and a 100% interest in Power Well Services Holdings LP (registered in the Cayman Islands), and their respective subsidiaries. All intangible assets were recognised at their respective fair values. The residual excess over net assets acquired is recognised as goodwill in the financial statements. Provisional Provisional Provisional Book Fair value Fair value adjustments value £'000 £'000 £'000 Intangible assets 18,487 86,137 104,624 Property, plant and equipment 95,583 - 95,583 Inventories 14,133 - 14,133 Trade and other receivables 57,471 (2,680) 54,791 Cash 3,837 - 3,837 Trade and other payables (23,678) - (23,678) Current tax liabilities (12,514) - (12,514) Finance leases (381) - (381) Bank loans (135,212) - (135,212) Retirement benefit obligation (737) - (737) Deferred tax liabilities (4,357) (30,148) (34,505) _______ ______ ______ 12,632 53,309 65,941 Goodwill 174,489 ______ Total consideration 240,430 ====== Satisfied by: Cash 168,757 Shares 61,593 Directly attributable costs 10,080 ______ 240,430 ====== Net cash outflow arising on acquisition: Cash consideration 168,757 Directly attributable costs (paid) 6,762 Cash acquired (3,837) ______ 171,682 ====== The values set out above are provisional pending finalisation of the fair values attributable, and will be finalised in subsequent periods. Shares issued were valued at market price at the date of acquisition. The goodwill arises through the strengthening of the Group's geographical footprint, product pull-through opportunities with new clients and the value of the acquired workforce. The revenue and operating profit of PWS for the period has not been disclosed as integration has made this impracticable. If the acquisition had been completed on 1 April 2006, total Group revenue for the period would have been £269.4m, and operating profit for the period would have been £34.7m. 11. Events after the balance sheet date There were no subsequent events between the balance sheet date and the date the financial statements were authorised for issue that require disclosure. 12. Related party transactions No related party transactions requiring disclosure occurred in the period to 30 September 2006. 13. Free cash flow Free cash flow is calculated as follows: Six months ended Year ended 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 Net cash from operating activities 25,706 8,988 58,357 Interest received 1,034 273 614 Proceeds on disposal of property, plant and equipment 2,915 314 846 Purchases of property, plant and equipment (26,935) (22,758) (49,288) Purchases of intangible assets (67) (213) (100) ______ ______ ______ Free cash flow 2,653 (13,396) 10,429 ====== ====== ====== This information is provided by RNS The company news service from the London Stock Exchange

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