Interim Results

Hunting PLC 7 September 2000 Hunting PLC Interim Results Announcement Hunting PLC, the Oil Services and Defence Group, announces results for the six months to 30 June 2000. * Profit before tax of £13.3m (1999: £12.4 m). * Excellent recovery by the Oil Division with operating profits during six months up to June 2000 of £13.7m (1999: £1.9m) * Interim dividend of 3p per share (1999: 3p) payable on 3 January 2001 to shareholders on the register on 22 September 2000. * Defence Division performance hit by operational difficulties at Irvin Italy and cessation of AWE contract. Operating profit for first six months £3.7m (1999: £11.2m) Commenting today, Ken Miller, Chief Executive of Hunting PLC said: 'We have an excellent recovery in the Oil Division, supported by our acquisition of Iberia earlier this year which made a strong contribution. The better market conditions were also helpful to Gibson Petroleum. 'Despite the cessation of the AWE contract, the outlook for the Defence Division remains positive. Operational difficulties at Irvin Italy are in the process of being resolved and we anticipate an improved performance in the second half. In the meantime following our strategic review, we are continuing our negotiations with a number of interested parties.' Enquiries to - Hunting PLC 020 7321 0123 Ken Miller Chief Executive Dennis Clark Finance Director Brunswick Group Limited Richard Bassett/Asa Larsson 020 7404 5959 OVERVIEW Profit before tax was £13.3m in the six months to June 2000, an improvement on the £12.4m achieved in the corresponding period of 1999. Operating profit at £17.4m was 16% higher due to the excellent recovery by the Oil Division which has seen a progressive improvement in the market for its products and services, augmented by a strong performance from Iberia, which was acquired this year. However the Defence Division had a difficult six months. The contract to run the Atomic Weapons Establishment came to an end on 31 March and the results from Irvin were disappointing. The Board has declared an unchanged interim dividend of 3p per share payable on 3 January 2001 to shareholders on the register on 22 September 2000. 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 international offshore oil industry and the trenchless drilling market. Activity levels in the oil industry recovered strongly in the first half of 2000, particularly in North America. Turnover improved from £214.7m to £404.5m, £143m of the increase being due to the higher value of crude oil and related sales in Canada. Operating profits recovered strongly from £1.9m in the first half of 1999 to £13.7m in the six months to June 2000 reflecting the improved market conditions. Gibson Petroleum, based in Alberta Canada, benefited from better market conditions with a buoyant performance in crude oil marketing. There were improved performances in LPGs and transportation and a positive contribution from the natural gas plants acquired last year. During the six months, the company purchased the assets of an LPG transportation business at a cost of £0.9m and has a number of business acquisitions under review. Hunting Oilfield Services has started to recover from the significant contraction in its markets in 1998 and 1999, although the European operations are lagging behind the US and Canada in activity levels. There is scope for further improvement when our North Sea customers become more active which we expect to happen later this year. Iberia, which was acquired for £23.1m in January made an excellent contribution. Iberia supplies drill pipe and related accessories to the trenchless drilling market and has significant international growth potential. Elsewhere in the division, Tenkay Resources participated in a very promising gas discovery in the Gulf of Mexico. This well should be on production before the end of the year. DEFENCE DIVISION The Defence Division is principally involved in facilities management, the provision of weapons and communication systems and support infrastructure, primarily for the UK Ministry of Defence. The operating profit for the six months of £3.7m was down on the £11.2m achieved in the first half of 1999 as a result of the cessation of the AWE contract at the end of the first quarter and a disappointing performance from Irvin. Operational difficulties were encountered by Irvin Italy and these are in the process of being resolved. The AWE contract made a positive contribution prior to its successful handover to new contractors at the end of March. Hunting Engineering achieved a similar result to the first half of 1999 with work on the Apache Attack Helicopter continuing on schedule. The construction of camps for British troops in Kosovo was completed during the period providing our forces with high quality accommodation. The Division is working on a number of potential opportunities with a total value in excess of £1bn which includes such projects as Battle Group Thermal Imager, Future Command Liaison Vehicle and Light Mobile Artillery Weapons System. Contract Services performed satisfactorily and significant effort is being applied into new contract opportunities. FINANCIAL Net borrowings at £98.6m, were up from £73.8m at December 1999, with gearing increasing from 42% last December to 56%. The increased borrowings were mainly due to the acquisition of Iberia for £23.1m. Capital expenditure was £12.7m compared with £7.1m in the first half of 1999. Most of this expenditure relates to the Oil Division. TAXATION The Group's effective tax rate has risen from 29% in 1999 to 36% for the period to 30 June 2000 due to unrelieved tax losses being incurred overseas and increased trading profits being earned in overseas areas with higher tax rates. OUTLOOK The Oil Division's markets remain encouraging and we expect this situation to continue into next year. The Defence Division's results should show an improvement in the second half. We have strengthened the Board with the appointment of two executive Directors, Terry Gomke and Dennis Proctor, and a non-executive Director, Iain Paterson, all with international oil experience. At our Annual General Meeting on 26 April, we announced that we are reviewing all options for the future of our Defence Division. Negotiations are continuing and an announcement will be made when we have reached a definitive stage. The expected sale of this Division will enable greater financial resource to be applied to the Oil Division where we see significant expansion opportunities. Richard Hunting Ken Miller Chairman Chief Executive Consolidated Balance Sheet (Unaudited) Notes Six months Six months Year to to 30 June to 30 June 31 2000 1999 December 1999 £m £m £m Turnover Continuing operations 2 618.8 457.9 1,051.6 Cost of sales (552.6) (386.9) (907.7) ------ ------ ------ Gross profit 66.2 71.0 143.9 Net operating expenses (50.0) (56.6) (110.2) Continuing operations 16.2 12.5 31.9 Discontinued operations - 1.9 1.8 Group operating profit 16.2 14.4 33.7 Share of operating profit in joint ventures and associated undertakings 1.2 0.6 2.0 ------ ------ ------ Profit on ordinary activities before interest 2 17.4 15.0 35.7 Net interest payable (4.1) (2.6) (5.6) ------ ------ ------ Profit on ordinary activities before taxation 13.3 12.4 30.1 Taxation on profit on ordinary activities 3 (4.9) (3.6) (8.7) ------ ------ ------ Profit on ordinary activities after taxation 8.4 8.8 21.4 Equity minority interests (2.7) (3.0) (7.5) ------ ------ ------ Profit for the period 5.7 5.8 13.9 Dividends (including non equity) 4 (5.0) (5.0) (13.2) ------ ------ ------ Retained profit for the period 0.7 0.8 0.7 ------ ------ ------ Earnings per 25p ordinary share Basic 5 3.7p 3.8p 10.0p ------ ------ ------ Diluted 5 3.7p 3.8p 10.0p ------ ------ ------ Consolidated Statement of Total Recognised Gains and Losses Profit for the period 5.7 5.8 13.9 Currency translation differences on foreign currency net investments 2.8 3.3 1.8 ------ ------ ------ Total recognised gains and losses for the period 8.5 9.1 15.7 ------ ------ ------ Consolidated Balance Sheet (Unaudited) At At At 30 June 30 June 31 2000 1999 December 1999 Notes £m £m £m Fixed assets Tangible assets 135.3 121.3 124.1 Intangible assets 27.4 5.5 6.2 Investment in joint ventures Share of gross assets 8.6 8.0 7.6 Share of gross liabilities (6.3) (7.0) (6.3) 2.3 1.0 1.3 Investments in associated undertakings 3.1 2.4 2.8 Other investments 18.2 18.5 18.6 ------ ------ ------ 186.3 148.7 153.0 Working capital Stocks 105.8 102.9 108.2 Debtors 190.6 163.8 206.2 Creditors (202.9) (182.6) (210.9) 93.5 84.1 103.5 Provisions for liabilities and charges (5.5) (5.3) (5.9) Net borrowings 6 (98.6) (53.7) (73.8) ------ ------ ------ 175.7 173.8 176.8 ------ ------ ------ Capital and reserves Called up share capital 73.1 73.8 73.8 Share premium 41.0 41.0 41.0 Revaluation reserve 20.4 19.0 20.2 Special capital reserve 7 0.7 - - Profit and loss account (2.0) (1.9) (4.6) Shareholders' funds Equity interests 85.3 83.3 81.8 Non-equity interests 47.9 48.6 48.6 133.2 131.9 130.4 Equity minority interests 42.5 41.9 46.4 ------ ------ ------ 175.7 173.8 176.8 ------ ------ ------ Reconciliation of Movements in Consolidated Shareholders' Funds Profit for the period 5.7 5.8 13.9 Dividends (5.0) (5.0) (13.2) ------ ------ ------ Retained profit for the period 0.7 0.8 0.7 Currency translation differences on foreign currency net investments 2.8 3.3 1.8 Preference share capital repaid (0.7) - - Goodwill written back on disposals - - 0.1 ------ ------ ------ Net addition to shareholders' funds 2.8 4.1 2.6 Opening shareholders' funds 130.4 127.8 127.8 ------ ------ ------ Closing shareholders' funds 133.2 131.9 130.4 ______ ______ ______ Consolidated Cash Flow Statement (Unaudited) Notes Six Six Year to months to months to 31 30 June 30 June December 2000 1999 1999 £m £m £m Net cash inflow from operating activities Operating profit 17.4 15.0 35.7 Depreciation and amortisation 8.0 6.7 13.7 Other non cash flow items (1.6) (0.9) (3.2) Decrease (increase) in stocks 3.8 (0.1) (5.9) Decrease (increase) in debtors 15.6 (8.6) (48.2) (Decrease) increase in creditors and provisions (12.7) 2.7 24.8 ------ ------ ------ 30.5 14.8 16.9 ------ ------ ------ Returns on investments and servicing of finance Net interest paid (2.9) (2.5) (5.0) Preference dividends paid (2.0) (2.0) (4.0) Dividends paid to minorities (6.3) - (1.0) ------ ------ ------ (11.2) (4.5) (10.0) ------ ------ ------ Taxation paid (2.2) (1.7) (6.7) ------ ------ ------ Capital expenditure and financial investment Purchase of tangible fixed assets (12.2) (7.8) (14.9) Sale of tangible fixed assets 1.1 1.0 5.8 Purchase of associated undertakings and other investments (0.9) (0.4) (0.4) ------ ------ ------ (12.0) (7.2) (9.5) ------ ------ ------ Acquisitions and disposals Purchase of subsidiary undertakings (24.1) (3.6) (13.0) Net cash acquired with subsidiary undertakings 1.3 1.2 1.3 Net proceeds from disposal of operations - 1.6 1.5 Loans repaid by associated undertakings - 0.2 0.2 ------ ------ ------ (22.8) (0.6) (10.0) ------ ------ ------ Equity dividends paid (3.0) (5.8) (6.3) ------ ------ ------ Net cash (outflow) inflow before use of liquid resources and financing (20.7) (5.0) (25.6) Management of liquid resources Net movement in short term money market deposits 6 5.0 (11.3) (8.7) Financing Repayment of preference share capital 7 (0.7) - - (Decrease) increase in borrowings due within one year 6 (3.8) 15.6 9.8 Increase (decrease) in borrowings due beyond one year 6 24.4 (16.6) 10.2 Capital element of finance leases 6 (0.1) (0.1) (0.3) ------ ------ ------ 19.8 (1.1) 19.7 ------ ------ ------ Increase (decrease) in cash 4.1 (17.4) (14.6) ====== ====== ====== Notes to the Interim Statement 1 BASIS OF PREPARATION The interim financial information has been prepared on the basis of the accounting policies set out in the Group's 1999 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 1999 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 2000 30 June 1999 31 December 1999 Turn- Opera- Turn- Opera- Turn- Opera- over ting over ting over ting Profit profit Profit Activity £m £m £m £m £m £m Oil 405.8 12.5 215.7 1.3 514.0 7.5 Less share of joint venture undertakings (1.3) - (1.0) - (2.1) - Share of joint venture undertakings - 0.8 - 0.5 - 1.2 Share of associated undertakings - 0.4 - 0.1 - 0.8 ----- ----- ----- ----- ----- ----- 404.5 13.7 214.7 1.9 511.9 9.5 Defence 214.3 3.7 243.2 11.2 539.7 24.4 ----- ----- ----- ----- ----- ----- Continuing operations 618.8 17.4 457.9 13.1 1,051.6 33.9 Discontinued operations - Aviation - - - 1.9 - 1.8 ----- ----- ----- ----- ----- ----- 618.8 17.4 457.9 15.0 1,051.6 35.7 ----- ----- ----- ----- ----- ----- The Oil Division turnover includes £276 million of crude oil and related sales in the six months to 30 June 2000 (six months to 30 June 1999 £133 million). 3 TAXATION The taxation charge for the six months ended 30 June 2000 is calculated by applying the Directors' best estimate of the 2000 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 2000 1999 1999 £m £m £m Preference dividends: Paid 2.0 2.0 4.0 Ordinary dividends: Interim proposed 3.0 3.0 3.0 Final proposed - - 6.2 ------ ------ ------ 5.0 5.0 13.2 ------ ------ ------ 5 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 2000 1999 1999 £m £m £m Profit attributable to shareholders 5.7 5.8 13.9 Less: preference dividends (2.0) (2.0) (4.0) ------ ------ ------ Earnings attributable to Ordinary shareholders 3.7 3.8 9.9 Effect of dilutive share options - - - ------ ------ ------ Adjusted earnings 3.7 3.8 9.9 ------ ------ ------ Weighted average number of Ordinary shares 100.2 100.2 100.2 Dilutive outstanding share options - 0.1 - ------ ------ ------ Adjusted weighted average number of Ordinary shares 100.2 100.3 100.2 ------ ------ ------ Basic EPS 3.7p 3.8p 10.0p ------ ------ ------ Diluted EPS 3.7p 3.8p 10.0p ------ ------ ------ Notes to the Interim Statement continued 6 ANALYSIS OF CHANGES IN NET DEBT At At 1 January Cash Exchange 30 June 2000 flow movements 2000 £m £m £m £m Cash at bank and in hand 28.3 6.7 0.6 35.6 Overdrafts (4.3) (2.6) - (6.9) ------ 4.1 ------ Borrowings due after one year (75.9) (24.4) (3.8) (104.1) Borrowings due within one year (31.5) 3.8 (0.2) (27.9) Finance leases (0.5) 0.1 - (0.4) ------ (20.5) ------ Money market deposits 10.1 (5.0) - 5.1 ------ ------ ------ ------ Total net debt (73.8) (21.4) (3.4) (98.6) ====== ====== ====== ====== 7 SPECIAL CAPITAL RESERVE The special capital reserve arose as a result of the cancellation and repayment of the Company's 6% Cumulative Preference Shares which became effective on 23 June 2000. In order to ensure that creditors were not adversely affected, an amount equal to the nominal value of the 6% Cumulative Preference Shares was credited to a non-distributable special capital reserve. Since 30 June 2000, all relevant creditors have been repaid and the entire amount standing to the credit of the special capital reserve has therefore been released to the Company's distributable reserves which have been increased accordingly.

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