Preliminary Results
Expro International Group PLC
6 June 2001
EXPRO INTERNATIONAL GROUP PLC
Preliminary results for the year ended 31 March 2001
'Expro sees a year of significant progress'
Expro International Group PLC, the UK's leading service provider
to the international oil and gas industry, today announces
preliminary results for the year ended 31 March 2001.
The company supplies a closely related range of high value added,
differentiated services, focused on reducing client's capital and
operating costs. With the oilfield service industry now
advancing, Expro is reporting a year of significant progress,
Highlights of the results are as follows:
* Turnover increased 28% to £174.3m (£135.7m in 2000)
* Operating Profit increased 23% to £20.9m (£17m in 2000)
* All business streams report increased turnover
* Earnings per share pre-goodwill up 14% to 19.7p (17.3p in
2000)
* Final dividend of 6.4p per share (6.4p in 2000). Unchanged
full year dividend of 9.8p per share
* Investment in organic growth and acquisitions totalled £46m.
Acquisitions primarily targeted at the North America Cased
Hole well services market
* Geographic enhancement - substantial growth in the North
America market - expected to be approx 30% of turnover next year
* Increased demand for services into 2001/2 already apparent
Commenting on the results, Chief Executive John Dawson said:
'Our investments in organic growth and acquisitions means Expro is
well placed to benefit from the increase in client spending that
we are now seeing. We will invest resources wherever we can
enhance the capital growth potential of the business for our
shareholders'.
For further information please contact:
Expro International Group PLC On 6 June: 020 7324 8888
John Dawson, Chief Executive Thereafter: 0118 9591341
Eric Woolley, Finance Director
Golin/Harris Ludgate 020 7324 8888
Robin Hepburn/Denise Peplow/Claudine Cartwright
Chairman's and Chief Executive's Statement
Results
We are pleased to report a year of significant progress for the
Expro Group, both in terms of improved financial performance and
also in respect of strategic development. Turnover in the year to
31 March 2001 has increased 28% to £174.3m (2000 - £135.7m), with
operating profits 23% ahead at £20.9m (2000 - £17.0m). Pre-
goodwill earnings per share at 19.7p were up 14% (2000 -17.3p).
Dividend
The Board is recommending a final dividend of 6.4p per ordinary
share. This will be payable on 31st July, to shareholders on the
register at 6th July 2001. The resulting full year dividend of
9.8p is unchanged on last year. The opportunities to invest
capital to further the profitable growth of the business are
increasing. Future dividend growth will broadly reflect that of
underlying earnings improvement.
Overview
The rising trend in upstream exploration and production
expenditures during the year originated in North America and is
now spreading to other markets. As predominantly a late cycle
player with its focus on the development and production phase of
an oilfield's life, Expro was cushioned from the harsh impact of
the downturn of many oilfield service companies and is only now
beginning to benefit significantly from the recovery in activity.
The group provides three distinct service and product offerings
focused on the areas of production enhancement (Cased Hole
Services 'CHS'); deepwater development and maintenance (Subsurface
Systems 'SSS'); and small field production solutions (Surface and
Environmental Systems 'SES'). The portfolio is managed globally
in four geographic markets: Europe, Africa/Former Soviet
Union/Middle East ('AFSUM'); Asia Pacific and the Americas.
We have been extremely active in the last twelve months in
continuing to develop the business, having invested £21m on
acquisitions and £25m on organic growth opportunities. The
Tripoint and Kinley acquisitions of £29m made just before the end
of the previous financial year, increase recent strategic
investments to £75m in aggregate.
Of the £50m of acquisitions referred to, £44m were in the CHS
area, further developing our business in North America. Expro now
has a material presence in the important US market providing the
entire suite of group services. Other significant acquisitions
were PTI and SPS, which added to our capabilities in the SES
segment, particularly related to the provision of small field
production systems mainly in AFSUM and Asia Pacific.
Engineering and Development expenditures continue at around £3m,
ensuring 'best-in-class' status for our core activities as we
continue to adapt our products and capabilities to meet our
customers requirements. The main areas of focus are subsea
systems for the ultra-deepwater; smart well technologies;
continued enhancement of slickline capability and environmentally
beneficial products.
Outlook
We are encouraged by the outlook in all areas of the business. We
are beginning to see a resurgence in client development capital
spending which will have a significant impact on our SSS business
next year. We are already seeing the early benefits of this with
Tronic, our subsea controls and power connector business, with its
comparatively short lead-time delivery profile.
Our CHS business will make continued progress in overseas markets,
particularly in North America. As a result we estimate that next
year our Americas business, which three years ago represented less
than 6% of group turnover, will be of equivalent size to our UK
North Sea business, each representing approximately 30% of overall
turnover.
The SES business continues to develop on the back of contract
awards for small field production systems in AFSUM and Asia
Pacific.
Based on recent tender activity it is expected that high levels of
capital investment will continue in the current financial year, to
support the growth of the business, though this will continue to
be essentially contract led.
Our clients have adjusted to the oil price shock of 1998 and are
now better able to deal with oil price volatility, with their
investment decisions being robust against a low oil price
scenario. As an innovative, flexible and responsive technical
service provider, offering development and production solutions to
reduce client capital and operating costs, Expro will continue to
flourish in this environment.
It is against this backdrop that the Directors look to the future
with confidence.
............... ...............
Dr Chris Fay John Dawson
Chairman Chief Executive Officer
Operations Review
Cased Hole Services
CHS turnover increased 52% to £71.2m. The majority of this
increase arose in the Americas, as a result of the acquisitions of
Tripoint and Kinley last year, further buoyed by the rising trend
in US natural gas prices. In Europe our roll out of the new
slickline initiative, which accomplishes many of the tasks
previously requiring electric-line deployed systems, is well
underway and training programmes are in place to transfer this
capability to other regions.
In North Africa, firm progress is being made in Algeria and Libya,
where we have established new base facilities and have recently
won integrated contract awards with BHP, bp and Veba. The
integrated well rejuvenation contract with KPO in Kazakhstan, via
Baker Hughes, commenced in the last quarter of the year and will
have a significant impact next year. The Santos award in the
Cooper basin in Australia for CHS was awarded on the strength of
Expro's technical capabilities; operations commenced at the start
of the new financial year.
In North America the acquisitions in the last quarter of the year
of Multiline in Canada and Production Wireline Services in the
USA, did not, due to their timing, have a material effect on
revenues. However, the development of an integrated offering got
off to an excellent start when Expro ran the first integrated well
service programme involving Production Wireline deployment systems
on the date of acquisition.
Tripoint's Excape(TM) technology is now field proven, offering
increased opportunities for perforation and stimulation of multi-
zone producers, using new casing conveyed technology. Kinley's
Digical(TM) corrosion measurement system is now supported by 3D
software and will be launched commercially in the international
market in the coming year.
Focused on the delivery of well uptime and production optimisation
solutions, CHS is expanding in response to new innovations,
blending microchip technology with mechanical tools.
Subsurface Systems
SSS turnover increased 5% to £39.9m. Approximately half of the
Group's SSS activity is presently generated off the UK and
Norwegian continental shelves, with turnover little changed on the
prior year. It is only now that the pick up in client capital
development spending levels is feeding through to increased
activity levels. An early indication of this global momentum has
been the rapid increase in Tronic's provision of connector
products such as Digitron(TM) for power and instrumentation on
deepwater completions where turnover has increased 50% on last
year. In the UK North Sea, increasing activity levels are linked
to satellite accelerator programmes for marginal fields, using
subsea tie backs to maximise the use of existing infrastructure.
In Norway the new generation landing string technology, ELSA is
seeing an increase in demand.
In Africa our main area of SSS operation is Angola where we have
been extremely active on Chevron's Kuito and Total Fina Elf's
Girassol field developments, with deepwater Nigeria emerging as a
new market with a number of major projects presently being
tendered. In Asia Pacific, significant continuing projects
include Shell Brunei's requirement for enhanced reservoir
knowledge on old wells, Shell Philippines deepwater Malampaya gas
project and, in China, FMC's CACT project in the South China Sea.
In the Americas, good progress continues to be made in Eastern
Canada and Brazil, with business doubling in the Gulf of Mexico as
a result of continued deepwater activity. As the development
phase gathers pace and the attraction of the increased
productivity possible from horizontal wells continues, we expect
to see sustained high levels of activity in this area, as we
leverage our strength in horizontal completion technology.
The attraction of the deepwater lies in the high flow rates and
discovery size that make extraction economic. The industry
estimates that the rate of deepwater expenditure (that is in
depths in excess of 500 metres) will rise from $5bn to over $14bn
per annum over the next two years. Expro's success in this area
will be driven by our technological leadership in areas such as
electro-hydraulic safety systems; enhanced reservoir data
acquisition in downhole monitoring linked to the progress of
intelligent well completions and applications for Tronic's
connector capabilities.
Surface & Environmental Systems
SES turnover increased 24% to £63.2m. Activities in Europe were
broadly neutral with the improvements coming from other regions,
largely in the area of production solutions for small field
developments. Europe will benefit in this area from the extended
well test programme for Agip's Gaggiano field in Italy which was
commissioned during the last quarter of the year, linked to
Expro's new clean enclosed burner system.
In AFSUM the production system provided to Fred Olsen for Addax in
Nigeria has been sold, however, revenue flows will more than be
replaced on commencement of operations on Shell's Soroosh field
offshore Iran in the summer of this year. The rig is currently
under conversion in Port Rashid, Dubai. This project, which PTI
played a significant role in winning, is being undertaken through
a joint venture with Swire Pacific. In North Africa a number of
well rejuvenation programmes are commencing, adding to the
momentum with other Expro services in this area. We will also be
providing surface treatment packages and support operations to
Baker Hughes' underbalanced drilling programme for Stimul in
Russia.
In the Americas, we continue to be involved in major well clean-up
programmes in the Gulf of Mexico, and have provided underbalanced
drilling equipment to Weatherford in Colombia with associated
manpower and training services. In Asia Pacific, turnover has
increased substantially with activities in Indonesia, linked to
the PTI purchase and the commencement of operations in the
Philippines on Shell's Malampaya gas development project. We have
been awarded an extended well test by Shell, linked to the oil
rim, on the same field.
The temporary provision market for SES, related to flow testing
data and well clean-up, is predominantly focused on environmental
concerns linked to emission reduction. Expro is currently working
on enclosed well test systems and has recently launched a low
emissions burner. Clean-up services in the future will be
increasingly linked to our subsea capability in the deepwater
areas.
The long-term deployment of production systems in the small field
solutions business is linked to a number of Expro's core
competencies such as low engineering costs, packaged facilities,
well control and remote operations expertise, required to support
the fast track demands of our customers.
The Future
Expro operates in the global marketplace and is a recognised
industry franchise in its three business segments. Significant
investment has been made to develop the business, closely linked
to the Group's evolving four-point strategy: continuous
improvement of core services; enhancement of geographic coverage
and service range; increased value through engineered solutions;
and maintained focus on development and production phase
activities. Expro is experiencing strong enquiry levels in all
areas of its business and is encouraged by the market outlook.
Consolidated Profit and Loss Account
For the year ended 31 March 2001
2001 2000
Note £'000 £'000
Turnover: 2
Existing operations 170,252 135,694
Acquisitions 4,004 -
------- --------
Continuing operations of group and
share of joint ventures 174,256 135,694
Less: share of joint ventures' turnover (2,559) -
------- --------
Group turnover 171,697 135,694
Cost of sales (135,559) (108,820)
-------- --------
Gross profit 36,138 26,874
-------- --------
Other operating expenses (net)
Goodwill amortisation (1,733) (713)
Other expenses (13,895) (9,177)
-------- --------
Total other operating expenses (15,628) (9,890)
-------- --------
Operating profit/(loss):
Existing operations 20,939 16,984
Acquisitions (429) -
-------- --------
Continuing operations of group 20,510 16,984
Share of operating profit in joint ventures 356 -
-------- --------
Continuing operations of group and
share of joint ventures 20,866 16,984
Finance charges (net) (4,932) (2,130)
-------- --------
Profit on ordinary activities
before taxation 15,934 14,854
Tax on profit on ordinary activities 3 (5,013) (4,530)
-------- --------
Profit on ordinary activities after taxation 10,921 10,324
Minority equity interests (1) (2)
-------- --------
Profit for the financial year 10,920 10,322
Dividends paid and proposed 4 (6,394) (6,278)
-------- --------
Retained profit for the year 4,526 4,044
-------- --------
Earnings per ordinary share 5
Basic 17.0p 16.1p
Diluted 16.9p 16.1p
Basic before goodwill amortisation 19.7p 17.3p
-------- --------
Consolidated Balance Sheet
31 March 2001
31 March 31 March
2000 2001
Note £'000 £'000
Fixed assets
Patents 572 529
Goodwill 45,969 28,682
Tangible assets 72,352 64,436
Investments 41 39
Investments in joint ventures 1,164 -
------- -------
120,098 93,686
------- -------
Current assets
Stocks and work-in-progress 11,759 8,277
Debtors 73,457 50,011
Cash at bank and in hand 6,272 6,725
------- -------
91,488 65,013
Creditors: Amounts falling due
within one year (93,320) (55,652)
------- -------
Net current (liabilities)/assets (1,832) 9,361
------- -------
Total assets less current liabilities 118,266 103,047
Creditors: Amounts falling due after
more than one year (40,270) (34,584)
Provisions for liabilities and charges (2,911) (3,266)
------- -------
Net assets 75,085 65,197
------- -------
Capital and reserves
Called-up share capital 6,575 6,407
Share premium account 7 60,441 53,793
Capital reserve 7 24 24
Profit and loss account 7 8,057 4,986
------- -------
Shareholders' funds, being equity interests 75,097 65,210
Minority interest (12) (13)
------- -------
Total capital and reserves 75,085 65,197
------- -------
Consolidated Cash Flow Statement
For the year ended 31 March 2001
2001 2000
£'000 £'000
Note
Net cash inflow from operating activities 8 25,479 22,818
------- -------
Returns on investments and
servicing of finance
Interest received 261 137
Interest paid (5,046) (2,311)
Dividends paid to minority shareholder of
subsidiary undertaking - (28)
------- -------
Net cash outflow for returns on investments
and servicing of finance (4,785) (2,202)
------- -------
Taxation (4,603) (4,124)
------- -------
Capital expenditure and financial investment
Purchase of intangible fixed assets - (157)
Purchase of tangible fixed assets (16,634) (10,374)
Purchase of trade investments - (32)
Increased investment in joint ventures (8,775) -
Sales of plant and machinery 137 79
------- -------
Net cash outflow for capital
expenditure and financial investment (25,272) (10,484)
------- -------
Acquisition of subsidiary undertakings 6 (7,785) (13,980)
Acquisition of share of joint ventures (995) -
Equity dividends paid (6,297) (6,265)
------- -------
Cash outflow before financing (24,258) (14,237)
------- -------
Financing
Issue of ordinary share capital 620 207
Increase in debt 5,151 9,699
------- -------
5,771 9,906
------- -------
Decrease in cash in the year (18,487) (4,331)
------- -------
Notes to the preliminary results
31 March 2001
1.The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 March 2000
and 2001 but is derived from these accounts. Statutory accounts
for the financial year ended 31 March 2000 have been delivered
to the Registrar of Companies, whereas those for the financial
year ended 31 March 2001 will be delivered to the Registrar of
Companies following the company's next Annual General Meeting.
The auditors have reported on the statutory accounts for both
financial years. Their reports were unqualified and did not
contain a statement under section 237(2) or (3) of the Companies
Act 1985.
2.Analysis of turnover
Surface &
Cased Hole Subsurface Environmental
Services Systems Systems Total
2001 2000 2001 2000 2001 2000 2001 2000
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Europe 30,016 26,918 20,074 20,182 20,742 20,191 70,832 67,291
Africa/FSU/ME* 8,034 6,676 6,450 6,288 26,884 23,558 41,368 36,522
Asia Pacific 7,092 8,007 3,594 2,726 7,283 5,504 17,969 16,237
Americas 26,078 5,394 9,738 8,644 5,712 1,606 41,528 15,644
---------------------------------------------------------
Group turnover 71,220 46,995 39,856 37,840 60,621 50,859 171,697 135,694
Joint ventures - - - - 2,559 - 2,559 -
---------------------------------------------------------
Total turnover 71,220 46,995 39,856 37,840 63,180 50,859 174,256 135,694
---------------------------------------------------------
* Africa, Former Soviet Union and Middle East.
3. Taxation
The taxation charge is based on the profit for the year and
comprises:
2001 2000
£'000 £'000
UK corporation tax (credit)/charge (764) 1,221
Overseas taxation 5,806 2,870
Deferred taxation (credit)/charge (29) 439
------- -------
5,013 4,530
------- -------
4. Dividends paid and proposed
2001 2000
£'000 £'000
Dividend paid on 31 January 2001 of
3.4p (2000 - 3.4p) per ordinary share 2,192 2,173
Proposed final dividend of
6.4p (2000 - 6.4p) per ordinary share 4,202 4,105
-------- --------
6,394 6,278
-------- --------
5. Earnings per ordinary share
Basic earnings per ordinary share are based on the group's
profit on ordinary activities after taxation and on the weighted
average number of 64,384,050 ordinary shares in issue and
ranking for dividend during the year (2000 - 63,914,328).
Diluted earnings per share are based upon the group's profit on
ordinary activities after taxation and on a weighted average of
ordinary shares diluted by 83,995 shares (2000 - 69,672) in
respect of an executive share scheme and 36,669 shares (2000 -
226,258) in respect of an employee share scheme, resulting in a
diluted weighted average number of shares of 64,504,714 (2000 -
64,210,258).
Basic earnings per share before goodwill amortisation are
calculated by adjusting earnings for goodwill amortisation of
£1,733,000 (2000 - £713,000).
6. Acquisitions
During the year the group acquired the following businesses which
were accounted for as acquisitions;
- On 1 May 2000 the Asia Pacific business of Production Testers
International.
- On 19 May 2000 the entire issued share capital of Surface
Production Systems Inc., a company incorporated in the United
States.
- On 15 February 2001 the entire issued share capital of
Multiline Combination Services Inc., a company incorporated in
Canada.
- On 20 March 2001 the business of Production Wireline Services
comprising the entire issued share capital of Production Wireline
Services Inc., Production Wireline Services of Texas Inc. and
Production Wireline Services Marine Inc., all incorporated in the
United States.
The total fair value of the consideration for the Production
Wireline Services business was £11,337,000 and the fair value of
net assets acquired was £1,634,000 generating goodwill of
£9,703,000. The consideration was settled by cash of £2,405,000,
the issue of 1,159,318 shares by Expro International Group PLC
with a market value of £5,847,000, deferred cash consideration of
£349,000, loan notes of £813,000 repayable on 20 September 2001
and loan notes of £1,923,000 repayable on 20 March 2002. The loan
notes repayable on 20 September 2001 had a face value of
£1,573,000 with the amount payable contingent upon the market
value of the shares issued in connection with the acquisition
should they be sold within 6 months of the acquisition.
Subsequent to the year end the shares have been sold and the
amount payable under these loan notes fixed at £813,000. The
deferred cash consideration is contingent upon the financial
performance for the year ended 31 March 2002.
The total fair value of consideration for other acquisitions was
£6,661,000 and the fair value of net assets acquired was
£3,712,000 generating goodwill of £2,949,000. The consideration
for these acquisitions was settled by cash £5,735,000, loan notes
of £186,000 repayable on 2 May 2001, deferred consideration of
£559,000 payable on 2 May 2001 and £181,000 payable on 15
February 2002.
7. Reserves
Share Profit
premium Capital and loss
account reserve account
£'000 £'000 £'000
Group
Beginning of year 53,793 24 4,986
Share issues 6,648 - -
Loss on foreign currency translation - - (1,455)
Retained profit for the year - - 4,526
-------- -------- --------
End of year 60,441 24 8,057
-------- -------- --------
8. Cash flow information
2001 2000
£'000 £'000
Reconciliation of operating profit to
net operating cash inflow
Operating profit 20,510 16,984
Depreciation and amortisation 16,003 12,788
Profit on sale of tangible fixed assets (5) (17)
Increase in stocks and work-in-progress (1,261) (1,985)
(Increase)/decrease in debtors (12,616) 3,084
Increase/(decrease) in creditors
and provisions 2,848 (8,036)
-------- --------
Net cash inflow from operating activities 25,479 22,818
-------- --------
8. Cash flow information
2001 2000
£'000 £'000
Reconciliation of net cash flow to
movement in net debt
Decrease in cash in the year (18,487) (4,331)
Cash flow from increase in debt finance (5,151) (9,699)
-------- --------
Increase in net debt resulting
from cash flows (23,638) (14,030)
Translation difference (1,751) (21)
Loans acquired with subsidiary undertakings (1,363) (6,190)
Loan notes issued in connection
with acquisitions (2,922) -
-------- --------
Movement in net debt in the year (29,674) (20,241)
Net debt at beginning of year (47,272) (27,031)
-------- --------
Net debt at end of year (76,946) (47,272)
-------- --------
Analysis of net debt
Other
Beginning Cash non-cash End of
of year flow Acquisitions changes year
£'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 6,725 (453) - - 6,272
Bank overdrafts (14,212) (18,034) - - (32,246)
Debt due within 1 year (6,992) 5,280 (2,943) (8,211) (12,866)
Debt due after 1 year (32,698) (10,526) - 5,118 (38,106)
Finance leases (95) 95 - - -
---------------- ------------------------
(47,272)(23,638) (2,943) (3,093) (76,946)
---------------- ------------------------
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