Final Results

Hunting PLC 03 March 2005 3 March 2005 Preliminary results For the year ended 31 December 2004 Hunting PLC, the international energy services Company, today announces its preliminary results for the year ended 31 December 2004. • Turnover £1,255m (2003: £1,195m) +5% • Adjusted operating profit £30.8m* (2003: £25.2m) (Statutory operating profit £27.0m (2003: £25.2m)) +22% • Adjusted pre-tax profit £25.2m* (2003: £21.1m) (Statutory pre-tax profit £15.4m (2003: £21.1m)) +19% • Adjusted basic earnings per share 12.7p per share* (2003: 6.4p) (Statutory basic earnings per share 6.2p (2003: 6.4p)) +98% • Ordinary dividend per share 4.5p (2003: 3.5p) +29% * before exceptional items Commenting on the outlook for the Group, Dennis Proctor, Hunting's Chief Executive, said: 'The industry is forecasting 2005 to be the busiest year for drilling since 1985. 'The limiting factors in meeting these forecasts may be the availability of certain equipment and labour. In general, the increase in global spending will be approximately 5%, with many independent operators expanding their exploration and production budgets far above that. As we begin 2005, oil inventories remain tight and some experts question how much excess capacity remains in the major oil producing countries to help meet continued demand growth. Natural gas continues to be a primary driver for increased drilling as 50% depletion rates after one year are more common. Internationally, the world demand for natural resources is expected to continue and sustain the recent price levels. 'The Company's recent performance trend, coupled with the positive outlook from our customer base, should provide excellent opportunities for our assets, shareholders and staff in 2005.' Cont/...2 For further information, please contact: Hunting PLC 020 7321 0123 Dennis Proctor, Chief Executive Dennis Clark, Finance Director Hogarth Partnership Limited 020 7357 9477 Andrew Jaques Edward Westropp Notes to Editors: Hunting PLC is an international oil services company providing support solutions to the world's largest oil and gas companies. Chairman's Statement Profit before taxation for the year to 31 December 2004 was £25.2m, prior to exceptional items of £9.8m, (2003 - £21.1m) a 19% increase. Confidence in the energy industries we serve increased during the course of 2004, resulting in a long-delayed improvement in exploration and development drilling to address the worldwide production challenge. However, the continuing weakness of the US dollar relative to sterling, our reporting currency, reduced what would otherwise have been an even more satisfactory result. Hunting Energy Services, the Group's engineering operation providing sophisticated goods for the hydrocarbon drilling and production sector, benefited from another year of high commodity prices - with oil and gas companies increasing their expenditure, particularly in the second half. There was strong activity onshore in the United States, especially in the Rocky Mountain region, but offshore drilling in the Gulf of Mexico remained flat. Our North Sea customer base proved to be substantially more active than we had expected at the start of the year. Gibson Energy, the Group's Canadian based midstream operation, had another successful year following our purchase of the outstanding 36% minority in the company. Oil purchasing, transportation, blending, storage and marketing were all very busy and the Canwest Propane subsidiary, Canada's second largest distributor of that gas, expanded its operations in British Columbia. Our US-based exploration and production company, Tenkay Resources, was affected by delays in new production coming on stream and by the unusually severe hurricane season in the Gulf of Mexico but succeeded in increasing its reserve base once again. The E.A. Gibson Shipbrokers operation continued its strong contribution, benefiting from high tanker and dry cargo rates. In August we cancelled and repaid the 8.25% cumulative convertible preference shares in order to improve the Group's capital structure and returns to shareholders. I am pleased to report that basic earnings per share (before exceptional items) were 12.7p, an increase of 98% on 2003. We are recommending a final dividend of 3.0p per share, giving a total of 4.5p for the year, a 29% increase on the previous year. Our confidence for 2005 and future years is strengthened by these results and, barring unforeseen events, I expect continued progress. The Board wishes to thank our staff for their outstanding contribution to our success. Richard Hunting Chairman Chief Executive's Review Introduction Additional supply capacity of oil and gas has clearly become the focus of the upstream and midstream industries we serve. Rig activity continues to climb as many operators saw their reserve replacement in 2004 fall to 75% of production following historical levels of 100% or better. Hunting benefited in 2004 from sustained higher commodity prices and increased spending by our customers. Positive signs exist in all markets we serve and we expect the trend experienced in 2004 to continue. The reserve replacement shortfall combined with limited worldwide excess oil production capacity of 2% or less sets the stage for continued increases in drilling, exploration, production and transportation. In conjunction with an improvement in profits, the Company reduced its long term debt including the convertible preference shares by 29% and litigation matters were settled thereby reducing our exposure to future earnings impairment. Your Company's strategy is reflected in its strong position in four key areas that management continues to enhance: 1. Proprietary Technology - In Hunting Energy Services, numerous products are patented including premium connections, burst discs, make up processes for tubulars, coating of threads and thread protectors. 2. Geographic Position - From Canada to China, Hunting has plants, properties, equipment and people to serve its global customers with local talent and products. 3. Market Share Strength - Gibson Truck Transportation, Iberia Manufacturing, E.A. Gibson Shipbrokers and Tianjin Huaxin Premium Connections, the China Threading venture, all have leading shares in their respective product or service markets. 4. Asset Utilisation - In Gibson Energy, the marketing division utilises pipelines, storage tanks, terminals and truck transportation to obtain various grades of heavy oil and blend them with diluents to produce a lighter grade, higher priced crude for sale. The diversity of the Group's activities and skills enables us to balance earnings in a cyclical industry while achieving increases in gross margins. Higher oil and gas prices enabled Tenkay Resources to continue increasing its reserve base. Greater oil demand, primarily in Southeast Asia and developing countries, resulted in significantly increased tanker rates thereby providing excellent results for E.A. Gibson Shipbrokers. With the return to health of the major telecommunication companies, our drill rod manufacturer in Iberia, Louisiana saw its output improve 50% year-on-year in 2004. It is expected that the telecommunication industry will spend billions of dollars for fibre optic cable installations to residential and commercial consumers. Drilling activity across Western Canada including conventional, oil sands and shallow gas sectors is high and only limited by the ability to find sufficient qualified personnel to fill all the jobs. There were 21,000 wells drilled in 2004 of which 73% were targeted towards gas. Such increased activity offers our Canadian assets excellent opportunities for continued performance and growth. Business Developments In May 2004, the Company sold its under-performing assets of five inch and above oil country tubular goods for £25.6m. These assets were primarily targeted toward the deepwater Gulf of Mexico activity that has been depressed over the last two years and is not expected to experience sustained improvement in the foreseeable future. In August 2004, the Company cancelled and repaid its 8.25% convertible preference shares thereby reducing the cost of the Group's debt financing. Our reported results in sterling suffered from the negative impact of exchange rate movements, which have understated the profit improvement and the higher rates of tax in North America compared to the UK. Health, Safety and the Environment The Company remains diligent in efforts to continuously improve the health and safety aspects of its operating divisions. In Gibson Energy, the lost time incident record was 32% less than the Alberta Provincial average in 2004. Its truck transportation division has reduced its incident rate by 17% over the last two years, while operating over 40 million miles per year. Its largest terminals, Hardisty and Edmonton, handled over 250,000 barrels per day of crude and achieved a zero lost time incident record in 2004. In Hunting Energy, only one lost time injury was recorded in its seven manufacturing plants in spite of increased man-hours and the addition of new employees. In Aberdeen, the facility was awarded a second consecutive National Safety Award by the British Safety Council. For the seventh consecutive year, it received the Five Star rating for safety. No environmental issues occurred and one facility in Houston received the new ISO 14001 Environmental Management Specification. Simply put, our goals are - No accidents, No harm to people and No damage to the environment. Operational Review Turnover for the year increased to £1,255m (2003 - £1,195m) with operating profits before exceptional items of £30.8m compared to £25.2m in 2003. Pre-tax profit before exceptional items increased to £25.2m from £21.1m in 2003 and earnings per share before exceptional items increased 98% to 12.7p (2003 - 6.4p). GIBSON ENERGY 2004 2003 £m £m Turnover 1,002.9 939.6 Operating Profit 14.7 13.6 Crude oil prices continue to be the driver for higher activity levels in the Canadian oil and gas industry and this contributed to an 8% increase in operating profits for Calgary, Alberta based Gibson Energy. Heavy oil, bitumen and synthetic oil volumes from Northern Alberta and Fort McMurray averaged over one million barrels per day eclipsing conventional oil as a majority of Alberta's production volume. This combined with record levels of drilling activity led to a recovery in truck transportation and excellent marketing results. Further development of these large non-conventional reserves will provide many opportunities for the expansion of Gibson's marketing, transportation and distribution business. Marketing accounted for 50% of Gibson's operating profits. Good volumes and favourable margins for crude oil, diluents, trading, custom terminaling and gains from higher priced inventory were achieved. New volumes of well site fluids from Moose Jaw, natural gas trading and the Hardisty fractionation plant generated increased profits over prior years. Despite commodity price volatility during the year, Gibson's risk management systems minimised the exposure to large market swings. Expansion began in the fourth quarter of 2004 for additional storage, terminaling and piping of heavy crude through the Edmonton corridor. This project will complete by mid-year 2005. Truck Transportation recorded operating profits of £2.5m versus £1.3m in 2003. Additional hauling in the Lloydminster area as well as new developments from Athabasca and Northern frontiers provided an excellent recovery over the prior year. LPG and propane volumes remained steady but asphalt hauling was below expectations due to seasonal weather and the high cost of supplies. Oil and Gas Operations accounted for 33% of Gibson Energy's operating profits with steady volumes throughout the year. Pipeline volumes for conventional oil in the Hardisty area declined but were offset by increased tariffs, stabilised revenues and volume increases from the new Athabasca pipeline connections. Edmonton terminal volumes from Suncor Fort McMurray steadily increased throughout the year. Canwest and Natural Gas Liquids accounted for 11% of Gibson Energy's operating profits. A new rail terminal was commissioned in November 2004 and the Canwest branch in Surrey, British Columbia will provide growth opportunities and more cost efficient distribution. Trading at Moose Jaw Asphalt remained difficult due to the higher costs of asphalt feed stock and heavy crude oil. These increased costs resulted in lower margin asphalt sales to various provincial and regional governments. However, the division experienced a record year for asphalt and tops volumes. The plant continues to provide profitable service opportunities for Gibson Truck Transportation and Marketing. Robust commodity prices are expected to continue in 2005 and expectations are for another strong year of activity. Gibson Energy's leadership position in existing mid-stream assets, people and services should provide excellent opportunities. HUNTING ENERGY SERVICES 2004 2003 £m £m Turnover 159.9 168.6 Operating Profit 8.8 5.4 Houston, Texas based Hunting Energy Services has enjoyed a significant improvement year over year, driven by higher oil and gas prices as well as rig activity reaching levels not seen since 1985. Most of the growth in drilling activity was land based as the offshore Gulf of Mexico rig count recorded its worst year of activity since 1993, 11% off the 2003 level. With oil and gas operators reporting record earnings, the momentum for expanding exploration and production is now being generated. Seismic activity has progressed, rig rates in some cases have doubled over the past few months and there is evidence that both long and short-term contracts are being issued. In May, the company sold its inventory of oil country tubular goods in sizes 5 inch outside diameter and above but retained its more profitable proprietary products of 41/2 inch outside diameter and below. The company continues to focus on proprietary products with market niche opportunities that enable it to be a leading supplier to its customer base. Hunting Energy continues to develop new products for complex well applications both on and offshore. Proprietary connection testing is on going in China for national oil companies and the Tianjin Huaxin Premium Connections threading operation remains at full capacity. While the offshore Gulf of Mexico market has less opportunity for proprietary products, the company continued new developments in large diameter connections for depths of 25-30,000 feet. During the year, the company developed the Clear Run product for use on oil country tubular goods. Clear Run removes the need for environmentally damaging lubricants and storage compounds from the process of well construction and greatly improves the speed at which this piping can be deployed. Manufacturing The manufacturing division had its best performance since 2001 with turnover increasing 15% year over year. The manufacturing segment of Hunting Energy is divided into three product lines: • Accessory Manufacturing is comprised of those ancillary products connected to the casing or tubing necessary to complete an oil or gas well. Customers include the major oil and gas companies as well as Original Equipment Manufacturers ('OEMs'). These products are often required in a time sensitive fashion thereby warranting significantly higher gross margins. • Drill Rod Manufacturing. Since 2001, the company has provided trenchless drill rods, similar to that of oil country tubular goods, to the telecommunication industry. As more and more fibre optic cable is laid in a trenchless fashion, the demand for drill rod and accessories has increased. Activity for 2004 was up 60% over 2003 and due to the financial recovery of the telecommunication industry, expectations are for continued expansion and improvement in this market. • Mud Motors. Hunting entered the mud motor business three years ago and now has 300 motors throughout the Rocky Mountain region, primarily for natural gas drilling through hard rock. The patented technology within the motors enables operators to drill a well straighter and/or faster thereby reducing overall cost. This division will expand into Grand Junction, Colorado in 2005. The manufacturing segment of Hunting Energy is the highest gross margin division due to the requirement for quick deliveries, proprietary product manufacturing and geographic location. As major OEMs continue to outsource much of their business, Hunting manufacturing must respond with additional capacity. This combined with expected increases in drilling activity has justified the construction of a new threading facility in Houston and a large diameter accessory facility in Houma, Louisiana. International In the North Sea, the transition from major operators to independents took place throughout the year resulting in a very good performance for the operations in Aberdeen. Although rig activity is lower, the customer base of Hunting's facility has grown and with steel prices higher, margins have improved. The company continues to qualify its products in China for national oil companies and the Tianjin Huaxin Premium Connections threading operation remains at full capacity. Discussions are underway to expand this facility as China's energy demand continues to grow. The Singapore facility also had an excellent year in 2004 with expectations of increased exploration and production activity in the region. In December 2004, a larger manufacturing plant was acquired to accommodate this growth. TENKAY RESOURCES 2004 2003 £m £m Turnover 8.4 10.4 Operating Profit 3.2 4.3 Tenkay Resources turnover was down 19% from 2003 as a result of various delays in new wells coming on stream and temporary curtailment of production due to pipeline and platform damage from the unusually severe hurricanes in the Gulf of Mexico. However, strong product pricing for oil and natural gas generally continued throughout the year. Tenkay Resources increased its reserve base once again and the production increases that were expected in the second half of 2004 are now being realised in the first quarter of 2005. Tenkay Resources participated in the drilling of 19 wells offshore Louisiana and Texas with 13 successes. On a Net Equivalent Barrel ('NEB') basis, 411,000 bbls were produced over the twelve month period, and at year end, the reserves of oil and gas on an SEC basis were 2.3m NEB compared with 2.1m NEB at the end of the previous year. In addition to new wells, several workovers/recompletions are underway that are expected to further enhance production in the current year. E. A. GIBSON SHIPBROKERS 2004 2003 £m £m Turnover 18.8 14.9 Operating Profit 2.5 1.8 Record freight levels in the Crude and Dry Bulk sectors were mainly responsible for another very satisfactory year. E. A. Gibson's results, although affected by the weakness of the US Dollar, were complemented by strong returns from the LPG Products and Specialist Tankers segments. The performance of the latter was particularly encouraging and benefited from the acquisition of the specialist broker BE Moors, completed earlier in the year, giving E. A. Gibson entry into the chemical and 'veg' oil tanker sectors. HUNTING ENERGY FRANCE 2004 2003 £m £m Turnover 12.5 11.4 Operating Profit 1.0 0.7 Operating profit improved by 43% over 2003 with a strong contribution from Interpec for compressors and pumps and from Larco, which benefited from a change in the mix of its oil storage products. Roforge successfully introduced a new range of valves during the year but was adversely affected by raw material price increases. OTHER 2004 2003 £m £m Turnover 52.6 50.5 Operating Profit 0.6 (0.6) Field Aviation Field Aviation Canada had an excellent year in 2004 with operating profits increasing by 87%. In 2004 Field Aviation confirmed its position as a world leader in the modification of aircraft for Special Missions by being chosen to provide three new maritime patrol aircraft to the Swedish Coast Guard. The new aircraft will be delivered to Field's Toronto facility in 2006 and modified with specialised equipment to enforce immigration, customs, pollution and fishing regulations as well as performing search and rescue missions. Other customers for these types of modifications include Australia, Denmark and the US Department of Homeland Security. Parts manufacturing continues to do well in the niche markets it has established. Commercial Aviation showed some improvement in the year but continues to suffer from the ongoing difficulties of oversupply and low pricing plaguing the airline industry. Hunting Specialised Products Sales increased over the previous year but not sufficiently for the company to break into profit. During 2004 the Custom Packaging operation was closed and operations relocated to one site in the USA (Cincinnati) and one in the UK (Widnes). Opportunities in pipeline rehabilitation offer an exciting future and during the year the company was awarded a development contract with Transco plc. The company also successfully completed several above ground linings with its polymer application system. Aero Sekur Italian defence budget cuts adversely impacted both cash flow and the acceptance testing of manufactured goods in the second half of the year. However, the company was awarded six new R&D contracts by the Ministry of Defence and there is increased customer interest in its technological capability. Outlook The industry is forecasting 2005 to be the busiest year for drilling since 1985 and expecting the limiting factors on activity to come from the availability of certain equipment and labour. In general, the increase in global spending is expected to be approximately 5%, with many independent operators expanding their exploration and production budgets far above that. As we begin 2005, oil inventories remain tight and some experts question how much excess capacity remains in the major oil producing countries to help meet continued demand growth. Natural gas continues to be the primary driver for increased drilling as 50% depletion rates after one year are more common. Internationally, the world demand for natural resources is expected to continue and sustain the recent price levels. The Company's recent performance trend, coupled with the positive outlook from our customer base, should provide excellent opportunities for our assets, shareholders and staff in 2005. Dennis Proctor Chief Executive Finance Director's Review 2004 saw a significant increase in the activities and profitability of Hunting Energy Services and with an improved return from most other areas of the Group, operating profit before exceptional charges increased by 22% over 2003. Net interest payable including interest on the £47.9m cumulative convertible preference shares which were cancelled and repaid on 6 August 2004 was higher at £5.6m (2003 - £4.1m). The repayment of the 8.25% preference shares with their high interest coupon should lead to improved future returns. In the first half of the year operating profit before exceptional charges was £12.7m (2003 - £10.9m) and pre-tax profit was £10.1m (2003 - £8.4m). In the second half of the year, operating profit before exceptional items increased to £18.1m (2003 - £14.3m) and pre-tax profit before exceptional items to £15.1m (2003 - £12.7m). The £3.8m exceptional charge included within operating profit includes the costs and anticipated future rental deficit of a UK leasehold property where the previous tenant went into liquidation. Other exceptional charges of £6.0m comprise the settlement of a claim on the disposal of a former subsidiary in 2001 and the closure of Hunting Custom Packaging in the US. Earnings Per Share Basic earnings per share before exceptional items increased to 12.7p (2003 - 6.4p) on an average of 101.0m shares outstanding during the year. Basic earnings per share after exceptional items but before goodwill amortisation increased to 8.8p (2003 - 8.5p). International Financial Reporting Standards ('IFRS') The Group has adopted IFRS with effect from 1 January 2005 and will be reporting the 2005 interim results in compliance with IFRS. Excluding mark-to-market adjustments which cannot be predicted, the implementation of IFRS is not expected to affect earnings materially; balance sheet reserves will be affected by a number of transitional changes including deferred taxation. Exchange Rates Both the US and Canadian Dollars weakened during the year relative to Sterling with the US Dollar averaging 1.83 (2003 - 1.64) and the Canadian Dollar averaging 2.38 (2003 - 2.29). Year end rates for the US and Canadian Dollars against Sterling were 1.93 (2003 - 1.78) and 2.30 (2003 - 2.30) respectively. Taxation The taxation charge for the year excluding exceptional items was £9.5m, an effective rate of 37.7% (2003 - 34.6%). 2003 benefited from the initial changes in the Group's Canadian corporate structure. Financing and Risk Management The Group's centralised Treasury is a service centre with policies and procedures approved by the Board. These cover funding, banking relationships, foreign currency, interest rate exposures and cash management. The policies and procedures covering oil and gas price exposure managed by Gibson Energy are approved by the Board. On 12 May 2004, Hunting Energy Services sold its US tubular assets business in the five inch and above oil country tubular goods sector, for £25.6m in cash. On 1 July 2004, US$50m Private Placement Notes were repaid and on 6 August 2004 the £47.9m 8.25% cumulative convertible preference shares were cancelled and repaid at par. Currency options are used to reduce currency risk movements on the Group's results, by hedging approximately 50% of each year's budgeted Canadian and US Dollar earnings into Sterling. Currency exposure on the balance sheet is, where practical, reduced by financing assets with borrowings in the same currency. Forward foreign exchange contracts are used to cover the net exposure of purchases and sales in non-domestic currencies. Fluctuations in the selling price of crude oil inventories are managed by using futures, swaps and options. Interest expense is hedged by using interest rate swaps, interest rate caps, forward rate agreements and currency swaps. At 31 December 2004, interest rate swaps and caps covered 43.5% of net borrowings. On 17 December 2004, the issue of US$70m Private Placement Notes was concluded. These have a maturing profile commencing in January 2008 with final payment in January 2012. The proceeds of these Notes and other facilities were used to prepay the £45m three year term loan that was due to mature in July 2005. The Private Placement, the committed multi-currency facilities, and other borrowing lines provide total facilities of £201m, £160m of which are committed. As at 31 December 2004, £144m was drawn down. These facilities provide the Group with adequate liquidity to meet anticipated future requirements. Net interest payable of £5.6m (2003 - £4.1m) was 5.5 times covered before exceptional items. Dividends An interim dividend of 1.5p per share (2003 - 1.25p) was paid on 25 November 2004. A final dividend of 3.0p per share payable on 29 June 2005 to shareholders on the Register at 10 June 2005 is now proposed, giving a total of 4.5p (2003 - 3.5p) for the year. Cash Flow Free cash flow, that is cash flow before new business acquisitions, asset disposals and cancellation and repurchase of share capital, increased to £18.1m compared to £4.8m in 2003. Capital expenditure in the year was £22.1m (2003 - £28.2m) which included £8.5m in Gibson Energy, £6.5m in Tenkay Resources and £5.0m in Hunting Energy Services. In total £13.2m was replacement capital and £8.9m new business expenditure. Net debt excluding the convertible preference shares, increased during the year to £130.6m from £126.6m. Gearing, defined as net debt as a percentage of shareholders' funds and minority interests, increased from 77% to 111% following the repayment of the preference shares. Pensions In 2004 the Group accounted for pensions under SSAP 24 'Accounting for Pension Costs'. A review of the financial position of the Group's UK Defined Benefit Scheme ('the Scheme') was undertaken as at 5 April 2004. Included in the Consolidated Balance Sheet at 31 December 2004 is £25.8m representing the pension prepayment on a SSAP 24 basis (£18.1m net of deferred tax). The funding position of the UK Defined Benefit Scheme under FRS 17 principles shows that at 31 December 2004 assets exceeded liabilities by £24.0m. The Scheme remains funded on both a SSAP 24 and a FRS 17 basis. On 31 December 2002 the Scheme was closed to new UK employees who are now offered membership of a defined contribution scheme. Going Concern The Directors, after making enquiries and on the basis of current financial projections and the facilities available, believe that the Company and the Group have adequate financial resources to continue in operation for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. Dennis Clark Finance Director Consolidated Profit and Loss Account For the Year ended 31 December 2004 Before Exceptional Total Total exceptional items 2004 2003 items 2004 2004 Notes £m £m £m £m Turnover 1 1,255.1 - 1,255.1 1,195.4 Cost of sales (1,161.5) - (1,161.5) (1,112.9) -------- -------- ------- ------- Gross profit 93.6 - 93.6 82.5 Net operating expenses (after goodwill amortisation of £2.7m (2003 - £2.1m)) (62.9) (3.8) (66.7) (57.0) -------- -------- ------- ------- Group 30.7 (3.8) 26.9 25.5 operating profit Share of operating profit (loss) in associated undertakings 0.1 - 0.1 (0.3) -------- -------- ------- ------- Total 1 30.8 (3.8) 27.0 25.2 operating profit Exceptional items Sale and termination of operations - (6.0) (6.0) - -------- -------- ------- ------- Profit on ordinary activities before interest 30.8 (9.8) 21.0 25.2 Interest receivable and 0.8 - 0.8 1.3 similar income Interest payable and similar charges (6.4) - (6.4) (5.4) -------- -------- ------- ------- Profit on ordinary activities before taxation 25.2 (9.8) 15.4 21.1 Taxation (9.5) 3.2 (6.3) (7.3) -------- -------- ------- ------- Profit after 15.7 (6.6) 9.1 13.8 taxation Equity minority interests (0.5) - (0.5) (3.4) -------- -------- ------- ------- Profit for the financial year 15.2 (6.6) 8.6 10.4 Dividends (including non-equity) (6.9) - (6.9) (7.5) -------- -------- ------- ------- Retained profit for the year 8.3 (6.6) 1.7 2.9 ======== ======== ======= ======= Basic earnings per 25p ordinary share 12.7p (6.5)p 6.2p 6.4p ======== ======== ======= ======= Diluted earnings per 25p ordinary share 6.1p 6.4p ======= ======= There are no material differences between the results disclosed above and the results on an unmodified historical cost basis. The profit for the year arises from the Group's continuing operations. Consolidated Statement of Total Recognised Gains and Losses For the Year ended 31 December 2004 2004 2003 £m £m Profit for the financial year 8.6 10.4 Currency translation differences on foreign currency net investments (2.3) 2.5 ------- ------- Total recognised gains and losses for the year 6.3 12.9 ======= ======= Consolidated Balance Sheet At 31 December 2004 2004 2003 £m £m Fixed assets Intangible assets 44.8 49.1 Tangible assets 158.1 160.5 Investment in joint ventures and associated undertakings 8.7 13.0 Other investments 3.8 5.6 -------- -------- 215.4 228.2 -------- -------- Current assets Stocks 75.7 93.2 Debtors: amounts falling due within one year 140.5 135.3 : amounts falling due after more than one year 29.2 23.1 Investments - 0.4 Cash at bank and in hand 15.1 15.3 -------- -------- 260.5 267.3 Creditors: amounts falling due within one year (174.7) (147.0) -------- -------- Net current assets 85.8 120.3 -------- -------- Total assets less current liabilities 301.2 348.5 Creditors: amounts falling due after more than one year (132.3) (136.5) Provisions for liabilities and charges (51.0) (47.2) -------- -------- 117.9 164.8 ======== ======== Capital and reserves Called up share capital 25.3 73.2 Share premium 41.5 41.5 Revaluation reserve 16.6 17.8 Profit and loss account 30.8 29.2 Treasury shares - (0.1) Shareholders' funds -------- -------- Equity interests 114.2 113.7 Non-equity interests - 47.9 -------- -------- 114.2 161.6 Equity minority interests 3.7 3.2 -------- -------- 117.9 164.8 ======== ======== Reconciliation of Movements in Consolidated Shareholders' Funds For the Year ended 31 December 2004 2004 2003 £m £m Profit for the financial year 8.6 10.4 Dividends - ordinary (4.5) (3.6) - preference (2.4) (3.9) -------- -------- Retained profit for the year 1.7 2.9 Currency translation differences on foreign currency net investments (2.3) 2.5 Goodwill reinstated on closure of operations 1.0 - Allotment of Treasury shares 0.1 - Cancellation and repayment of preference shares (47.9) - -------- -------- Net (reduction) addition to shareholders' funds (47.4) 5.4 Opening shareholders' funds 161.6 156.2 -------- -------- Closing shareholders' funds 114.2 161.6 ======== ======== Consolidated Cash Flow Statement For the Year ended 31 December 2004 2004 2003 £m £m Net cash inflow from operating activities 42.6 48.5 -------- -------- Returns on investments and servicing of finance Interest received 3.1 1.3 Interest paid (8.7) (5.2) Dividends received from associated undertakings 3.5 - Preference dividends paid (2.4) (3.9) Dividends paid to minorities - (0.4) -------- -------- Net cash (outflow) from returns on investments and servicing of finance (4.5) (8.2) -------- -------- Taxation received (paid) 6.6 (1.7) -------- -------- Capital expenditure and financial investment Purchase of tangible fixed assets (22.1) (28.2) Sale of tangible fixed assets 6.0 10.9 Purchase of trade investments - (0.2) Sale of investments 2.4 - Loans advanced to associated undertakings - (0.1) -------- -------- Net cash (outflow) from capital expenditure and financial investment (13.7) (17.6) -------- -------- Acquisitions and disposals Purchase of minority interests in subsidiary undertakings (0.1) (43.7) Purchase of subsidiary undertakings and businesses (1.5) (0.5) Purchase of joint venture and associated undertakings (0.2) (0.4) Net proceeds from disposal of subsidiary undertakings 19.9 1.1 Net cash disposed of with subsidiary undertakings - (0.4) -------- -------- Net cash inflow (outflow) from acquisitions and disposals 18.1 (43.9) -------- -------- Equity dividends paid (3.8) (3.3) -------- -------- Net cash inflow (outflow) before use of liquid resources and financing 45.3 (26.2) -------- -------- Management of liquid resources Net movement in short term money market deposits 0.4 1.4 -------- -------- Financing Increase in borrowings due within one year 6.4 0.1 (Decrease) increase in borrowings due beyond one year (4.8) 32.1 Capital element of finance leases (0.3) (0.1) Cancellation and repayment of preference share capital (47.9) - -------- -------- Net cash (outflow) inflow from financing (46.6) 32.1 -------- -------- (Decrease) increase in cash (0.9) 7.3 ======== ======== Notes to the Financial Statements 1 SEGMENTAL ANALYSIS Turnover and pre-exceptional operating profit, including joint venture and associated undertakings but before net interest costs and taxation, are shown below. 2004 2004 2004 2003 2003 2003 Turnover Operating Net assets Turnover Operating Net assets profit (loss)* (liabilities) profit (loss) (liabilities) £m £m £m £m £m £m ACTIVITY Oil and gas marketing and distribution 1,002.9 14.7 121.3 939.6 13.6 137.7 Oilfield services and tubular products 159.9 8.3 79.7 168.6 5.4 114.6 Share of associated undertakings - 0.5 1.6 - - 1.2 Exploration and other activities 92.3 7.7 43.5 87.2 6.5 42.6 Share of joint venture and - (0.4) 7.1 - (0.3) 11.8 associated undertakings ------- -------- -------- ------- ------- ------- 1,255.1 30.8 253.2 1,195.4 25.2 307.9 ======= ======== ======= ======= Net funding (130.6) (126.6) Pension fund prepayment (net) 18.1 15.2 Central liabilities (22.8) (31.7) -------- ------- 117.9 164.8 ======== ======= AREA OF OPERATION Europe - UK 55.1 1.3 6.8 42.4 (1.3) 13.1 - Continent 28.8 1.1 21.2 27.7 0.8 7.8 Canada 1,059.3 20.2 148.3 989.8 19.2 165.7 US 107.3 7.7 66.9 132.6 6.5 96.9 Share of joint venture - UK - - - - 0.1 0.8 Share of associates - UK - (0.4) 7.1 - (0.4) 11.0 Share of associates - Other - 0.5 1.6 - - 1.2 Other 4.6 0.4 1.3 2.9 0.3 11.4 ------- -------- -------- ------- ------- ------- 1,255.1 30.8 253.2 1,195.4 25.2 307.9 ======= ======== ======= ======= Net funding (130.6) (126.6) Pension fund prepayment (net) 18.1 15.2 Central liabilities (22.8) (31.7) -------- ------- 117.9 164.8 ======== ======= Inter-divisional turnover is not material and turnover by destination is not materially different to the area of operation. *Segmental analysis is provided at pre-exceptional operating profit level as most of the Group's financing is arranged centrally and interest is not specifically attributable to individual activities or geographic areas. Of the exceptional items, £2.9m related to other activities and £6.9m related to businesses disposed of in earlier years. All of the Group's activities are from continuing operations. 2. The above figures have been extracted from the Group's full financial statements which, for the year ended 31 December 2003, have been delivered and for the year ended 31 December 2004, will be delivered to the Registrar of Companies. Both carry an unqualified audit report. The extracts do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange

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