Interim Results
HUNTING PLC
10 September 1999
Hunting PLC, the Oil Services and Defence Group, announces results for the
six months to 30 June 1999.
* Profit before tax of £12.4 million (1998: £19.2 million).
* Interim dividend of 3p per share (1998: 3p) payable on 5 January 2000
to shareholders on the register on 24 September 1999.
* Important new contracts for Defence Division (including £100 million
contract for Kosovo).
* Encouraging prospects for Oil Division with recovery of oil price,
cost savings and new contracts.
Commenting today, Ken Miller, Chief Executive of Hunting PLC said:
'We believe we have turned the corner in the Oil Division after a
disappointing period marked by exceptionally low oil prices. The Oil
Division has improved its competitive position and following further
reductions in our cost base, should now benefit from the strong recovery in
oil prices we have seen in the past few months.'
'The outlook for Defence remains positive and a number of important new
contracts have been secured, notably a £100million contract to provide
temporary field accommodation for British troops in Kosovo. We see
considerable potential in this area and with the recent acquisition of
Kudos and the joint venture with a French group, GIAT, we are well placed
in this market.'
Enquiries to -
Hunting PLC 0171 321 0123
Ken Miller Chief Executive
Dennis Clark Finance Director
Brunswick Group Limited
Richard Bassett/Sara Musgrave 0171 404 5959
OVERVIEW
Significantly reduced activity levels in the oil industry were the main
factor in pre-tax profits reducing to £12.4 million in the six months ended
30 June 1999 from £19.2 million in the first half of 1998. However,
following the recovery in oil prices in recent months, we are now starting
to see an upturn in demand for our services which should benefit our Oil
Division in the second half. Profits from the Defence Division, after
absorbing bid costs, were below the first six months of last year.
However, a number of important new contracts were secured, the most
significant being a £100 million contract to provide temporary field
accommodation for British troops in Kosovo.
The Board has declared an interim dividend of 3p (1998 - 3p) per share
payable on 5 January 2000 to shareholders on the register on 24 September
1999.
OIL DIVISION
The principal activities of the Oil Division are the provision of
marketing, pipeline, transportation and terminalling services in Canada and
tubular and related services to the offshore oil industry internationally.
With activity levels falling away significantly in the second half of 1998
and the first quarter of 1999 following the collapse in oil prices, the
first half of 1999 was very difficult with turnover falling to £215 million
from £293 million and operating profit reducing to £1.9 million from £12.3
million in the corresponding period last year. Although prices have
improved dramatically from their lowest levels in February 1999, there is
an inevitable time lag before this translates into an increase in activity
levels. We are just starting to see this improvement and expect this trend
will continue in the second half of the year.
Gibson Petroleum faced increased competition in particular at its Hardisty
Terminal and lower activity levels reduced volumes further in pipelines,
terminals and transportation activities. Here again it is only recently
that this situation has started to reverse. The company has completed a
major restructuring of its activities resulting in a reduced cost base
which will benefit future results. Natural gas liquids again performed
strongly and the company expanded by acquiring a natural gas processing
facility which could lead to further such acquisitions.
Hunting Oilfield Services International was particularly affected by the
contraction in the market and experienced significant volume reductions in
the six-month period to 30 June 1999. Cost savings have improved the
company's competitive position and with the award of a five-year contract
in July 1999 to supply BP Amoco's North Sea tubular requirements, the
business is well placed to benefit from the initiatives taken and from the
upturn in activity now starting to occur.
Other subsidiaries in the Division achieved slightly reduced levels of
profit compared to the first half of 1998, although prospects are
encouraging for an improvement in the second half of the year.
DEFENCE DIVISION
The Defence Division is principally involved in facilities management, the
provision of weapon and communication systems and support infrastructure,
primarily for the Ministry of Defence (MoD).
The operating profit for the six months of £11.2 million was down on the
£13.2 million achieved in the first half of 1998 due mainly to bid costs on
the major programmes in which the Division is seeking to participate.
Performance on the Atomic Weapons Establishment management contract
remained very satisfactory. A new ten year contract, for which there is
strong competition, is due to commence on 1 April 2000. We lead a powerful
consortium, in which we have a 43.35 per cent interest, which has been
strengthened by the inclusion of the Defence Evaluation and Research
Agency. We have submitted a very competitive bid. MoD is due to announce
the result towards the end of the year.
Hunting Engineering had a similar first half to that of 1998 with work on
the Apache Attack Helicopter continuing on schedule. The Tactical Ground-
to Air radio system successfully entered service with the army. New MoD
business secured totalled in excess of £200 million covering £50 million
for the supply of batteries and chargers under Project Bowman, the Army's
new communications system, £50 million for an Integrated Biological
Detection System and recently one for £100 million for the supply of camps
for British troops in Kosovo. The company expanded further into this
market area in April with the acquisition of Kudos, a UK company producing
temporary buildings for military and civilian use and through a joint
venture with GIAT Industries of France to manufacture military shelters and
support buildings. We see considerable potential in this market area.
Irvin's results were disappointing in the first half but the satisfactory
order book should result in an improved performance in the second half of
the year.
Contract Services had a strong first half year and we are confident of the
potential in this business area.
FINANCIAL
Borrowings at £53.7 million were up from £43.2 million at December 1998,
with gearing increasing from 26 per cent last December to 31 per cent as at
30 June 1999. Interest cover in the six months was 5.8 times.
Capital expenditure was £7.1 million compared to £11.7 million in the first
half of 1998. The majority of the expenditure relates to the Oil Division.
Millennium compliance remains on schedule for completion well before the
year end. The costs associated with this programme should not be
significant.
OUTLOOK
The Oil Division is seeing the signs of a recovery in its markets and we
expect this trend to continue. The outlook for the Defence Division, with
its recent contract achievements, is also positive.
We continue to assess expansion opportunities in both Divisions. Overall,
we are confident we can take advantage of improved market conditions in the
second half of the year.
Richard Hunting Ken Miller
Chairman Chief Executive
10 September 1999
Consolidated Profit and Loss Account
(Unaudited)
Notes Six months Six months Year to
to 30 June to 30 June 31
1999 1998 December
1998
£m £m £m
Turnover
Continuing operations 2 457.9 538.5 956.2
Discontinued operations 2 - 25.6 25.6
_______ _______ _______
457.9 564.1 981.8
Cost of sales (386.9) (479.6) (824.0)
_______ _______ _______
Gross profit 71.0 84.5 157.8
Net operating expenses (56.6) (59.6) (108.5)
Continuing operations 12.5 24.3 47.2
Discontinued operations 1.9 0.6 2.1
Group operating profit 14.4 24.9 49.3
Share of operating profit in
joint venture
and associated undertakings
0.6 1.2 1.7
_______ _______ _______
Total operating profit 2 15.0 26.1 51.0
Exceptional items:
Loss on disposal or
termination
of discontinued operations - (7.6) (13.1)
Loss on disposal of
continuing operations - - (0.2)
Less provisions set up in
1997 - 4.0 8.2
_______ _______ _______
Profit on ordinary activities
before interest 15.0 22.5 45.9
Net interest payable (2.6) (3.3) (5.5)
_______ _______ _______
Profit on ordinary activities
before taxation 12.4 19.2 40.4
Taxation on profit on
ordinary activities 3 (3.6) (6.1) (11.3)
_______ _______ _______
Profit on ordinary activities
after taxation 8.8 13.1 29.1
Equity minority interests (3.0) (4.1) (7.5)
_______ _______ _______
Profit for the period 5.8 9.0 21.6
Dividends (including non
equity) 4 (5.0) (5.0) (13.2)
_______ _______ _______
Retained profit for the
period 0.8 4.0 8.4
_______ _______ _______
Earnings per 25p ordinary
share
Basic 5 3.8p 7.0p 17.6p
_______ _______ _______
Diluted 5 3.8p 7.0p 17.5p
_______ _______ _______
Consolidated Statement of Total Recognised Gains and Losses
Profit for the period 5.8 9.0 21.6
Currency translation
differences on
foreign currency net
investments 3.3 (1.5) (3.8)
_______ _______ _______
Total recognised gains and
losses for the period 9.1 7.5 17.8
_______ _______ _______
Consolidated Balance Sheet
(Unaudited)
At At At
30 June 30 June 31
1999 1998 December
1998
Notes £m £m £m
Fixed assets
Tangible assets 121.3 112.8 113.8
Intangible assets 5.5 3.2 3.5
Investment in joint venture:
Share of gross assets 8.0 8.0 7.4
Share of gross liabilities (7.0) (7.3) (6.6)
1.0 0.7 0.8
Investments in associates 2.4 4.4 4.5
Other investments 18.5 18.4 18.2
______ ______ ______
148.7 139.5 140.8
Working capital
Stocks 102.9 93.1 98.7
Debtors 163.8 175.7 153.5
Creditors and provisions (187.9) (192.3) (186.0)
78.8 76.5 66.2
Net borrowings 6 (53.7) (53.8) (43.2)
______ ______ ______
173.8 162.2 163.8
______ ______ ______
Capital and reserves
Called up share capital 73.8 73.7 73.8
Share premium 41.0 40.4 41.0
Revaluation reserve 19.0 18.6 18.4
Profit and loss account (1.9) (8.3) (5.4)
Shareholders' funds
Equity interests 83.3 75.8 79.2
Non-equity interests 48.6 48.6 48.6
131.9 124.4 127.8
Equity minority interests 41.9 37.8 36.0
______ ______ ______
173.8 162.2 163.8
______ ______ ______
Reconciliation of Movements in Consolidated
Shareholders' Funds
Profit for the period 5.8 9.0 21.6
Dividends (5.0) (5.0) (13.2)
______ ______ ______
Retained profit for the
period 0.8 4.0 8.4
Currency translation
differences on foreign
currency net investments 3.3 (1.5) (3.8)
New share capital subscribed - 0.9 1.6
Goodwill movements on
acquisitions and disposals - - 0.6
______ ______ ______
Net addition to shareholders'
funds 4.1 3.4 6.8
Opening shareholders' funds 127.8 121.0 121.0
______ ______ ______
Closing shareholders' funds 131.9 124.4 127.8
______ ______ ______
Consolidated Cash Flow Statement
(Unaudited)
Notes Six months Six Year to
to 30 June months to 31
1999 30 June December
1998 1998
£m £m £m
Net cash inflow from
operating activities
Operating profit 15.0 26.1 51.0
Depreciation and amortisation 6.7 12.9 13.8
Other non cash flow items (0.9) (1.8) (2.7)
(Increase) decrease in stocks (0.1) 8.6 (0.3)
(Increase) decrease in
debtors (8.6) 5.7 28.9
Increase (decrease) in
creditors and provisions 2.7 (36.2) (34.9)
_____ _____ _____
14.8 15.3 55.8
_____ _____ _____
Dividends received from
associated undertakings - - 0.1
_____ _____ _____
Returns on investments and
servicing of finance
Net interest paid (2.5) (1.9) (4.8)
Preference dividends paid (2.0) (2.0) (4.0)
Dividends paid to minorities
- - (3.7)
_____ _____ _____
(4.5) (3.9) (12.5)
_____ _____ _____
Taxation paid (1.7) (9.3) (14.7)
_____ _____ _____
Capital expenditure and
financial investment
Purchase of tangible fixed
assets (7.8) (12.1) (23.0)
Sale of tangible fixed assets
1.0 1.2 1.7
Purchase of associated
undertakings and other
investments (0.4) (1.1) (1.2)
Purchase of asset for resale
- (3.5) (3.5)
Purchase of own shares - (0.6) (0.5)
_____ _____ _____
(7.2) (16.1) (26.5)
_____ _____ _____
Acquisitions and disposals
Purchase of subsidiary
undertakings (3.6) (4.5) (4.9)
Net cash (overdraft) acquired
with subsidiary undertakings
1.2 (0.6) (0.5)
Net proceeds from disposal of
operations 1.6 36.4 35.6
(Cash) overdraft disposed of
with subsidiary undertakings
- (1.5) (1.8)
Loans repaid by associated
undertakings 0.2 - -
_____ _____ _____
(0.6) 29.8 28.4
_____ _____ _____
Equity dividends paid (5.8) - (6.3)
_____ _____ _____
Net cash (outflow) inflow
before use of liquid
resources and financing 6 (5.0) 15.8 24.3
Management of liquid
resources
Net movement in short term
money market deposits 6 (11.3) (18.2) 1.4
Financing
Issue of ordinary share
capital - 0.9 1.6
Increase (decrease) in
borrowings due within one
year 6 15.6 (4.8) 9.1
(Decrease) increase in
borrowings due beyond one
year 6 (16.6) 1.7 (14.1)
Capital element of finance
leases 6 (0.1) (0.3) (0.6)
_____ _____ _____
(1.1) (2.5) (4.0)
_____ _____ _____
(Decrease) increase in cash
(17.4) (4.9) 21.7
_____ _____ _____
Notes to the Interim Statement
BASIS OF PREPARATION
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's 1998 Annual Report and Accounts.
Fixed annual charges are apportioned to the interim period on the basis of
time elapsed and other expenses are accrued in accordance with the same
principles used in the preparation of the annual accounts. The financial
information contained in the interim statement does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985.
The financial information for the year ended 31 December 1998 is an
abridged version of the statutory accounts for that year. Those accounts,
upon which the auditors issued an unqualified opinion, have been filed with
the Registrar of Companies.
2 SEGMENTAL ANALYSIS OF TURNOVER AND OPERATING PROFIT
Six months to Six months to Year to
30 June 1999 30 June 1998 31 December 1998
Turnover Operat- Turnover Operat- Turnover Operat-
ing ing ing
Profit profit Profit
Activity £m £m £m £m £m £m
Oil 215.7 1.3 294.1 11.1 468.9 21.3
Less share of
joint venture
undertaking
(1.0) - (1.3) - (2.3) -
Share of joint
venture
undertaking
- 0.5 - 0.8 - 1.4
Share of
associate
undertakings - 0.1 - 0.4 - 0.3
_____ _____ _____ _____ _____ _____
214.7 1.9 292.8 12.3 466.6 23.0
Defence 243.2 11.2 245.7 13.2 489.6 25.9
_____ _____ _____ _____ _____ _____
Continuing
operations 457.9 13.1 538.5 25.5 956.2 48.9
Discontinued
operations
- Aviation - 1.9 25.6 0.6 25.6 2.1
_____ _____ _____ _____ _____ _____
457.9 15.0 564.1 26.1 981.8 51.0
_____ _____ _____ _____ _____ _____
The Oil Division turnover includes £133 million of crude oil sales in the
six months to 30 June 1999 (six months to 30 June 1998 £166 million). The
operating profit from discontinued operations of £1.9 million consists
mainly of the release of earlier years provisions made against Aviation
activities.
3 TAXATION
The taxation charge for the six months ended 30 June 1999 is calculated by
applying the Directors' best estimate of the 1999 annual effective rate of
tax to the profit for the period.
Notes to the Interim Statement
continued
4 DIVIDENDS
Six Six Year
months to months to to
30 June 30 June 31 December
1999 1998 1998
£m £m £m
Preference dividends:
Paid and accrued 2.0 2.0 4.0
Ordinary dividends:
Interim proposed 3.0 3.0 5.7
Interims paid - - 3.0
Final proposed - - 0.5
_____ _____ _____
5.0 5.0 13.2
_____ _____ _____
EARNINGS PER SHARE
Basic and diluted earnings per share have been calculated using the
following bases:
Six Six Year
months to months to to
30 June 30 June 31 December
1999 1998 1998
£m £m £m
Profit attributable to shareholders
5.8 9.0 21.6
Less: preference dividends (2.0) (2.0) (4.0)
_____ _____ _____
Earnings attributable to Ordinary 3.8 7.0 17.6
shareholders
Effect of dilutive share options - - -
_____ _____ _____
Adjusted earnings 3.8 7.0 17.6
_____ _____ _____
Weighted average number of Ordinary
shares 100.2 99.7 99.9
Dilutive outstanding share options
0.1 0.9 0.6
_____ _____ _____
Adjusted weighted average number of
Ordinary shares 100.3 100.6 100.5
_____ _____ _____
Basic EPS 3.8p 7.0p 17.6p
_____ _____ _____
Diluted EPS 3.8p 7.0p 17.5p
_____ _____ _____
Notes to the Interim Statement
continued
6 ANALYSIS OF CHANGES IN NET DEBT
At 1 Acquisitions At 30
January Cash and Exchange June
1999 flow disposals movements 1999
£m £m £m £m £m
Cash at bank and in
hand 42.7 (15.0) - - 27.7
Overdrafts (3.9) (2.4) - - (6.3)
_____
(17.4)
_____
Borrowings due after
one year (61.2) 16.6 - (4.9) (49.5)
Borrowings due
within one year (21.4) (15.6) (0.2) (0.4) (37.6)
Finance leases (0.8) 0.1 - - (0.7)
_____
1.1
_____
Money market
deposits 1.4 11.3 - - 12.7
_____ _____ _____ _____ _____
Total net debt (43.2) (5.0) (0.2) (5.3) (53.7)
_____ _____ _____ _____ _____
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