Final Results - Year Ended 31 December 1999
Hunting PLC
16 March 2000
Hunting PLC
Preliminary Results Announcement
Hunting PLC, the Oil Services and Defence Group, announces results for the
year ended 31 December, 1999
* Profit before tax of £30.1 million (1998: £40.4 million)
* Basic earnings per share of 10.0p (1998: 17.6p)
* Proposed final dividend of 6.25p per share, making a total for the
year of 9.25p (1998: 9.25p)
Commenting today, Ken Miller, Chief Executive of Hunting PLC, said:
'The Defence Division achieved satisfactory results while the Oil Division,
despite experiencing exceptionally testing conditions, finished the year
strongly.
With activity levels in the industry improving, the Oil Division should
continue its recovery, with the acquisition of Iberia Threading providing
good earnings growth. The Defence Division, notwithstanding the loss of
the AWE contract, has a strong order book and is well placed to benefit
from the contracts coming up in its niche markets.'
Enquiries to:-
Hunting PLC 0171 321 0123
Ken Miller, Chief Executive
Dennis Clark, Finance Director
Brunswick Group Limited 0171 404 5959
Richard Bassett/Sara Musgrave
Hunting PLC
Preliminary Statement
Overview
A significantly lower level of activity in the oil industry was the
dominant factor in the reduction in the Group's profits. Although, during
the second half of 1999 and into the current year, there has been a
dramatic improvement in the oil price and sentiment generally, it came too
late to benefit our upstream service business, though our Canadian based
mid-stream operation did see an improvement in the last few months of the
year.
The Oil Division experienced, therefore, a very difficult year but as the
results show, the second half started to see the benefit of the anticipated
recovery. This process will continue in 2000 but it is likely to take
until the second half of the year before we see any significant benefit
from a recovery in North Sea activity levels.
The Defence Division was disappointed to lose the contract to manage the
AWE with effect from April 2000. However, its order book is strong and
there are many sizeable bidding opportunities arising in the next two
years.
Results
Turnover for the year increased to £1,052 million from £982 million in
1998. Oil Division turnover increased to £512 million from £467 million,
principally as a result of higher oil and condensate prices in the second
half of the year, which resulted in Gibson's marketing sales for the year
increasing to £347 million from £268 million. In the Defence Division,
turnover rose to £540 million from £490 million following increased
activity in Hunting Engineering and at AWE, which increased to £313 million
from £289 million.
Operating profit reduced to £35.7 million from £51.0 million in 1998.
Whilst the recovery in the oil price during the year led to improved
marketing profits and activity levels in Gibson Petroleum, Hunting Oilfield
Services International, and its North Sea activity in particular, remained
at a very low level. As a consequence, Oil Division profits reduced
significantly to £9.5 million from £23.0 million in the previous year. In
the Defence Division operating profit was £24.4 million compared to £25.9
million, with strong contributions from AWE and Contract Services offset by
a decline in Irvin and a high level of bid costs, particularly on the
unsuccessful AWE contract re-bid. Operating profit from discontinued
operations included the release of provisions no longer required.
Basic earnings per share were 10.0p (1998: 17.6p) on an average of 100.2
million shares in issue during the year. An interim dividend of 3p was
paid on 5 January 2000 which, with a proposed final dividend of 6.25p,
gives a maintained dividend of 9.25p per ordinary share for the year.
Oil Division
Gibson Petroleum, the largest subsidiary in the Division, achieved much
improved results in the second half as the Canadian oil industry started to
recover on the back of the improvement in oil prices. Our business is more
efficient following the restructuring exercise in mid 1999 and has expanded
into the market of natural gas plants, a sector which has excellent growth
prospects. We also increased our presence in the transportation and
propane markets and are actively assessing further expansion moves.
Hunting Oilfield Services (HOSINT) had an extremely difficult year. The
market for this business depends on the number of wells drilled and 1999
experienced the lowest level of drilling in more than half a century.
However, we are seeing an improving trend and the prospects for North
America in particular have recovered strongly. Our market position in the
North Sea is very strong and we anticipate an increase in activity levels
by our customers in the current year.
HOSINT made an important acquisition in January 2000 with the purchase of
Iberia Threading Inc. for £22.4 million. In addition to its involvement in
oil tubular threading, this business has established a good position in the
trenchless drilling market which has grown strongly in recent years and
where the forecasts indicate continuing significant growth. This business
should provide good earnings growth in the years ahead.
Defence Division
The Defence Division's profits were close to target, with the AWE contract
producing creditable results.
The Division increased in its range of capabilities during the year with
the acquisition of Kudos and the formation of a jointly owned subsidiary
with GIAT of France, both to exploit the rapid reaction/mobility market.
This led to our being awarded a contract to provide accommodation and
related facilities to British forces in Kosovo, the construction phase of
which is close to completion. This market area has considerable potential.
The Division's future will be more service related and our Contract
Services business will be an important ingredient in this development.
The loss of the AWE contract is disappointing but we will now concentrate
on the many other opportunities arising. I believe it is worth pointing
out that the new AWE contract would have produced, particularly in the
early years, significantly lower profits than we achieved on the current
contract.
Financials
Operating cash inflow reduced to £16.9 million (1998: £55.8 million)
principally due to a short term working capital requirement for the Hunting
Engineering Kosovo contract and to lower trading profits. Capital
expenditure reduced to £14.9 million (1998: £23.0 million) with Gibson
Petroleum accounting for £5.4 million of the 1999 spend. During the year,
£13.0 million was spent on new acquisitions, principally in Gibson
Petroleum.
Tax of £8.7 million represents an effective rate of 29%. The effect of the
higher rate of overseas tax was not as evident in the current year due to
lower profits in the Oil Division and because of the utilisation of earlier
years trading losses.
Gearing, based on net borrowings as a percentage of shareholders' funds and
minority interests, increased to 42% (1998: 26%). Shareholders' funds
including minority interests increased to £176.8 million from £163.8
million.
The Company currently has in issue 704,700 6% Cumulative Preference Shares
of £1 each. These shares constitute a very small part of the Company's
total capitalisation but incur a disproportionate administrative cost.
Accordingly, a resolution will be proposed at the Annual General Meeting to
cancel and repay these shares by way of a reduction of share capital.
Board
David Waterstone CBE retires as a non-executive director at the forthcoming
Annual General Meeting. The Board would like to thank him for his valuable
contribution to the Group since his appointment in April 1995.
Strategy and Prospects
The year 2000 should see a good recovery in the Oil Division as activity
levels continue to improve. The Defence Division's results will clearly
reflect the loss of the AWE contract in April 2000 but shareholders will be
aware that there is a 49% minority share in this activity.
In addition to the Board's normal review of strategy, we are undertaking a
fundamental review with our advisers to determine the most appropriate way
for the Group to maximise shareholder value.
Consolidated Profit and Loss Account
For the Year ended 31 December 1999
Notes 1999 1998
£m £m
Turnover
Continuing operations, including share
of joint venture 1,053.7 958.5
Less: share of joint venture (2.1) (2.3)
------- -------
1,051.6 956.2
Discontinued operations - 25.6
------- -------
Group turnover 1 1,051.6 981.8
Cost of sales (907.7) (824.0)
------ -------
Gross profit 143.9 157.8
Net operating expenses (110.2) (108.5)
Continuing operations 31.9 47.2
Discontinued operations 1.8 2.1
Group operating profit 33.7 49.3
Share of operating profit in joint
venture and associated undertakings 2.0 1.7
------- -------
Total operating profit 1 35.7 51.0
Exceptional items:
Loss on disposal or termination of
discontinued operations - (13.1)
Loss on disposal of continuing
operations - (0.2)
Less provisions - 8.2
- (5.1)
------- -------
Profit on ordinary activities before
interest 35.7 45.9
Interest receivable and similar income 2.0 2.8
Interest payable and similar charges (7.6) (8.3)
------- -------
Profit on ordinary activities before
taxation 30.1 40.4
Taxation on profit on ordinary
activities (8.7) (11.3)
------- -------
Profit on ordinary activities after
taxation 21.4 29.1
Equity minority interests (7.5) (7.5)
------- -------
Profit for the financial year 13.9 21.6
Dividends 3 (13.2) (13.2)
------- -------
Retained profit for the year (non-
equity) 0.7 8.4
===== =====
Basic earnings per 25p ordinary share 10.0p 17.6p
===== =====
Diluted earnings per 25p ordinary share 10.0p 17.5p
===== =====
Consolidated Statement of
Total Recognised Gains and Losses
For the Year ended 31 December 1999
1999 1998
£m £m
Profit for the financial year 13.9 21.6
Currency translation differences on foreign
currency net investments 1.8 (3.8)
------- -------
Total recognised gains and losses for the year 15.7 17.8
===== =====
Consolidated Balance Sheet
At 31 December 1999
Notes 1999 1998
£m £m
Fixed assets
Intangible assets 6.2 3.5
Tangible assets 124.1 113.8
Investment in joint venture:
Share of gross assets 7.6 7.4
Share of gross liabilities (6.3) (6.6)
1.3 0.8
Investments in associates 2.8 4.5
Other investments 18.6 18.2
------- -------
153.0 140.8
------- -------
Current assets
Stocks 108.2 98.7
Debtors 206.2 153.5
Investments 10.1 1.4
Cash at bank and in hand 28.3 42.7
------- -------
352.8 296.3
Creditors: amounts falling due within
one year (235.3) (193.4)
------- -------
Net current assets 117.5 102.9
------- -------
Total assets less current liabilities 270.5 243.7
Creditors: amounts falling due after
more than one year (87.8) (73.4)
Provisions for liabilities and charges (5.9) (6.5)
------- -------
1 176.8 163.8
===== =====
Capital and reserves
Called up share capital 73.8 73.8
Share premium 41.0 41.0
Revaluation reserve 20.2 18.4
Profit and loss account (4.6) (5.4)
Shareholders' funds
Equity interests 81.8 79.2
Non-equity interests 48.6 48.6
130.4 127.8
Equity minority interests 46.4 36.0
------- -------
176.8 163.8
===== =====
Reconciliation of Movements
In Consolidated Shareholders' Funds
For the Year ended 31 December 1999
1999 1998
£m £m
Profit for the financial year 13.9 21.6
Dividends (13.2) (13.2)
------- -------
Retained profit for the year 0.7 8.4
Currency translation differences on foreign
currency net investments 1.8 (3.8)
New share capital subscribed - 1.6
Goodwill written back on disposals 0.1 0.6
------- -------
Net addition to shareholders' funds 2.6 6.8
Opening shareholders' funds 127.8 121.0
------- -------
Closing shareholders' funds 130.4 127.8
===== =====
Consolidated Cash Flow Statement
For the Year ended 31 December 1999
1999 1998
£m £m
Net cash inflow from operating activities 16.9 55.8
------- -------
Dividends received from associated undertakings - 0.1
------- -------
Returns on investments and servicing of finance
Interest received 2.1 2.9
Interest paid (7.1) (7.7)
Preference dividends paid (4.0) (4.0)
Dividends paid to minorities (1.0) (3.7)
------- -------
Net cash (outflow) from returns on investments
and servicing of finance (10.0) (12.5)
------- -------
Taxation paid (6.7) (14.7)
------- -------
Capital expenditure and financial investment
Purchase of tangible fixed assets (14.9) (23.0)
Sale of tangible fixed assets 5.8 1.7
Purchase of own shares - (0.5)
Purchase of assets for resale - (3.5)
Purchase of trade investments (0.4) (1.2)
------- -------
Net cash (outflow) from capital expenditure
and financial investment (9.5) (26.5)
------- -------
Acquisitions and disposals
Purchase of subsidiary undertakings (13.0) (4.9)
Net cash (overdraft) acquired with
subsidiary undertakings 1.3 (0.5)
Net proceeds from disposal of operations 1.5 35.6
(Cash) disposed of with subsidiary undertakings - (1.8)
Loans repaid by associated undertakings 0.2 -
------- -------
Net cash (outflow) inflow from acquisitions
and disposals (10.0) 28.4
------- -------
Equity dividends paid (6.3) (6.3)
------- -------
Net cash (outflow) inflow before use of liquid
resources and financing (25.6) 24.3
------- -------
Management of liquid resources
Net movement in short term money market deposits (8.7) 1.4
------- -------
Financing
Issue of ordinary share capital - 1.6
Increase in borrowings due within one year 9.8 9.1
Increase (decrease) in borrowings due beyond one
year 10.2 (14.1)
Capital element of finance leases (0.3) (0.6)
------- -------
Net cash inflow (outflow) from financing 19.7 (4.0)
------- -------
(Decrease) increase in cash (14.6) 21.7
===== =====
1. SEGMENTAL ANALYSIS
Turnover represents the total amount receivable in the
ordinary course of business for services provided and for
goods sold, after eliminating sales within the Group.
Turnover and operating profit, including associated and joint
venture undertakings but before net interest costs,
exceptional items and taxation, are shown below.
1998 1998 1998
Turnover Operating Net assets
profit (liabilities)
ACTIVITY £m £m £m
Continuing operations
Oil 468.9 21.3 149.8
Less share of joint venture
undertaking (2.3) - -
Share of joint venture
undertaking - 1.4 0.8
Share of associate undertakings - 0.3 4.5
------- ------- -------
466.6 23.0 155.1
Defence 489.6 25.9 51.7
------- ------- -------
956.2 48.9 206.8
Discontinued operations
Aviation 25.6 2.1 -
------- ------- -------
Net funding - - (43.2)
Central (liabilities) assets - - 0.2
------- ------- -------
981.8 51.0 163.8
===== ===== =====
AREA OF OPERATION
Continuing operations
Europe - UK 514.8 27.0 61.7
- Continent 23.3 0.9 14.1
North America - Canada 354.3 11.2 83.9
Share of joint venture - Canada - 1.4 0.8
Less share of joint venture
- Canada (2.3) - -
North America - US 53.8 6.4 38.7
Share of associates - US - - 2.4
- Continent - - 0.3
- UK - 0.3 1.6
- Other - - 0.2
Other 12.3 1.7 3.1
------- ------- -------
956.2 48.9 206.8
Discontinued operations
Europe - UK 25.3 2.1 -
North America - US 0.3 - -
------- ------- -------
25.6 2.1 -
Net funding - - (43.2)
Central (liabilities) assets - - 0.2
------- ------- -------
981.8 51.0 163.8
===== ===== =====
1999 1999 1999
Turnover Operating Net assets
profit (liabilities)
ACTIVITY £m £m £m
Continuing operations
Oil 514.0 7.5 178.5
Less share of joint venture
undertaking (2.1) - -
Share of joint venture
undertaking - 1.2 1.3
Share of associate undertakings
- 0.8 2.8
------- ------- -------
511.9 9.5 182.6
Defence 539.7 24.4 71.3
------- ------- -------
1,051.6 33.9 253.9
Discontinued operations
Aviation - 1.8 -
------- ------- -------
Net funding - - (73.8)
Central (liabilities) assets - - (3.3)
------- ------- -------
1,051.6 35.7 176.8
===== ===== =====
AREA OF OPERATION
Continuing operations
Europe - UK 530.8 21.0 76.8
- Continent 32.6 (1.7) 16.5
North America - Canada 437.4 11.4 105.6
Share of joint venture - Canada
- 1.2 1.3
Less share of joint venture -
Canada (2.1) - -
North America - US 42.2 (0.4) 46.1
Share of associates - US - - -
- Continent - - 0.3
- UK - 0.6 2.2
- Other - 0.2 0.3
Other 10.7 1.6 4.8
------- ------- -------
1,051.6 33.9 253.9
Discontinued operations
Europe - UK - 1.8 -
North America - US - - -
------- ------- -------
- 1.8 -
Net funding - - (73.8)
Central (liabilities) assets - - (3.3)
------- ------- -------
1,051.6 35.7 176.8
===== ===== =====
2. The summary of the results for the year ended 31 December
1999 does not constitute full financial statements within the
meaning of Section 254 of the Companies Act 1995. Full
consolidated accounts for Hunting PLC for the year ended 31
December 1999 will be delivered to the Registrar of Companies
and an unqualified auditors' report has been given on these
accounts.
3. The Directors are recommending a final dividend of 6.25p per
share to give an unchanged total dividend for the year of
9.25p per share. The proposed final dividend will be paid on
3 July 2000 to shareholders on the register at 31 March 2000.