Interim Results
6th September 2002
HUNTING PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2002
In line with the market expectations, Hunting announces interim results that reflect the global decline in drilling
activity in the oil sector.
* Operating profit £10.8m (2001: £24.4m)
* Profit before tax and exceptional items £8.1m (2001: £20.9m)
* Earnings per share - basic before exceptional items 1.3p (2001: 7.3p)
* Acquisition of Moose Jaw Asphalt and successful integration into Gibson Energy
* Outlook - the underlying fundamentals for increased drilling continue to improve. Hunting is well positioned to
benefit from future economic recovery
Commenting on the results, Dennis Proctor, Hunting PLC Chief Executive, said:
'This has been a difficult period for the oil industry with a 25% decline in global drilling. However, this is a
cyclical business and industry forecasts indicate a gradual increase in oil and gas drilling activity over the coming
months. The acquisitions made last year have now been fully integrated into the business and this combined with a
continued focus on cost containment puts Hunting in a good position to benefit from any upturn in the market.'
Enquiries:
Hunting PLC 020 7321 0123
Dennis Proctor, Chief Executive
Dennis Clark, Finance Director
Brunswick Group Limited 020 7404 5959
Tom Buchanan, Melissa McVeigh, Chloé MacEwen
Notes to Editors:
Hunting PLC is an international oil services company providing support solutions to the world's largest oil and gas
companies.
Interim Report
The first six months of 2002 have been a difficult period for the oil industry as set out in the trading update on 26
June 2002. The difficulties experienced by many energy trading companies and a gas stockpile created by an
exceptionally warm winter in North America have contributed to a 25% decline in global drilling. As a conseqence the
Company's North American activities generated lower results compared with the first half of 2001. Looking forward, the
underlying fundamentals for increased drilling continue to improve following weak first half gas production volumes and
upward budget revisions from several oil and gas companies.
Profit before tax for the six months to 30 June 2002 is £8.1m, compared with £20.9m before exceptional items in the
corresponding period last year. Total operating profit of £10.8m compares with £24.4m in the first half of 2001.
Basic earnings per share are 1.3p per share compared with 7.3p per share before exceptional items in the first half of
2001.
ACQUISITION
During the first six months, the Group acquired Moose Jaw Asphalt Inc. in Saskatchewan, Canada for £14.1m which is a
leading supplier of road grade asphalt throughout western Canada and the northern United States. This company has been
successfully integrated into Gibson Energy. Due to seasonal demand, much of the expected earnings will occur in the
second half of 2002. The acquisition activity undertaken in 2001 has been successfully consolidated into the Group.
OIL AND GAS MARKETING AND DISTRIBUTION
Gibson Energy, based in Calgary, Canada, experienced significant declines in major market barometers. Canadian rig
activity at 30 June 2002 was 203, compared with 312 at 30 June 2001, a 35% reduction. Wells drilled in the six month
period to 30 June 2002 were 5,703 versus last year's 8,406, a 33% decline. The reduction in Canadian heavy oil prices
during the end of 2001 and into 2002 caused lower volumes which adversely affected the demand for crude oil and
diluent. Marketing margins were also significantly below the first half of 2001. An extended wet weather season
caused delays in the removal of road ban restrictions and the utilisation of the truck transportation and services
required for crude oil, asphalt, LPG and drilling rig activity. The propane division benefited from the weather and
the acquisitions made in 2001. Gibson's oil terminal and pipeline operating profit was down due to reduced pipeline
volume receipts at its Hardisty Terminal, combined with reduced blending activities. For the second half of 2002,
increased revenue is anticipated from the recovery of heavy crude oil prices, increased demand for diluent,
transportation and manufacturing services and the commissioning of new diesel facilities at the Edmonton Terminal.
Turnover and operating profit in the six months to 30 June 2002 was £274m and £4.7m respectively compared with £346m
and £13.0m in the first half of 2001.
OIL SERVICES AND TUBULAR PRODUCTS
Hunting Oilfield Services, headquartered in Houston, Texas, experienced significantly lower rig activity in the first
half of 2002 compared with the first half of 2001, an approximate 33% decline. This is primarily a result of gas
prices in January extending below US $2.00 per mcf. However, since then a steady trend to above US $3.00 per mcf has
occurred and the low average monthly rig count of 750 reached in April has trended upwards to 840 in early August. The
consequence of a record warm winter was an early build up of gas in storage and significantly lower drilling activity
combined with lower gas prices. This caused a reduction in oil country tubular goods operating profit. The trenchless
products and services division continues to face a telecommunications industry in turmoil although it remains well
positioned for any upturn.
Turnover for the period to 30 June 2002 was £126m compared with £117m in the first half of 2001 with operating profit
of £4.8m compared with £10.6m.
Turnover increased as a result of six months' contribution from tubular acquisitions made in 2001. Operating profits
have been adversely affected by the tightening of traditionally lower margins in these businesses, and lower returns
from the trenchless products activity.
EXPLORATION AND OTHER ACTIVITIES
Tenkay Resources continues to participate in a number of promising oil and gas discoveries with four successes out of
eight drilled.
EA Gibson Shipbrokers' performance, while below the corresponding period in 2001, represented a good achievement given
difficult market conditions.
FINANCIAL
Net borrowings increased to £111.5m from £73.2m reflecting a more normal position, with gearing increasing from 36% to
55%. Capital expenditure in the period was £17.6m of which £6.1m was for new business development.
TAXATION
The effective tax rate was 39.5% which compares with 43.1% before exceptional items (as restated) for the year to 31
December 2001.
DIVIDEND
As stated in the 2001 Annual Report, the Company's future dividend policy, following the payment of a 10p special
dividend last year, will be more closely aligned to earnings and investment needs than previously and more appropriate
to a focused oil services group. In respect of the results to 30 June 2002, an interim dividend of 1p per share (2001:
2p per share) will be paid on 5 December 2002 to shareholders on the Register at the close of business on 20 September
2002.
NON EXECUTIVE DIRECTORS
On 4 September 2002 Hector J McFadyen was appointed to the Board. He brings considerable experience of the North
American oil and gas industry. Alan Fryer who joined the Board in 1994 will be retiring on 19 September 2002, and we
thank him for his invaluable contribution.
OUTLOOK
Both Gibson Energy and Hunting Oilfield Services have started to see a recovery. Commodity prices remain strong and
while there is a diminished expectation as to the extent of an imminent recovery in oil and gas drilling activity,
industry forecasts remain for a gradual increase in the coming months.
With the added strength of acquisitions made last year, the Company is well positioned to benefit from this recovery.
Richard Hunting Dennis Proctor
Chairman Chief Executive
6 September 2002
Consolidated Profit and Loss Account
(Unaudited)
Six Six
months to months to Year to
30 June 30 June 31 December
2002 2001 2001
Notes £m £m £m
Restated Restated
Turnover 2 434.9 579.6 1,035.3
Cost of sales (395.9) (514.7) (919.2)
__________ __________ _________
Gross profit 39.0 64.9 116.1
Net operating expenses (28.3) (40.5) (72.0)
__________ __________ __________
Group operating profit 10.7 24.4 44.1
Share of operating profit in associated undertakings 0.1 - -
Total operating profit - before goodwill amortisation 12.0 25.2 45.7
Goodwill amortisation (1.2) (0.8) (1.6)
Total operating profit 2 10.8 24.4 44.1
Exceptional items:
Profit on disposal of discontinued operations - 39.3 30.1
Impairment of net assets of de-consolidated subsidiary - (2.7) (2.7)
__________ __________ __________
Profit on ordinary activities before interest 10.8 61.0 71.5
Net interest payable (2.7) (3.5) (6.1)
__________ __________ __________
Profit on ordinary activities before taxation 8.1 57.5 65.4
Taxation on profit on ordinary activities 4 (3.2) (14.5) (21.5)
__________ __________ __________
Profit on ordinary activities after taxation 4.9 43.0 43.9
Equity minority interests (1.6) (2.5) (4.5)
__________ __________ __________
Profit for the period 3.3 40.5 39.4
Dividends (including non equity) 5 (3.0) (14.0) (19.9)
__________ __________ __________
Retained profit for the period 0.3 26.5 19.5
__________ __________ __________
Earnings per 25p ordinary share
Basic 6 1.3 p 38.5 p 35.3 p
__________ __________ __________
Diluted 6 1.3 p 38.4 p 35.3 p
Basic before exceptional items 6 1.3 p 7.3 p 12.9 p
__________ __________ __________
The profit for the six months to 30 June 2002 arises from the Group's continuing operations.
The comparative figures for 2001 have been restated for the adoption of FRS 19 'Deferred tax'.
Consolidated Statement of Total Recognised Gains and Losses
Profit for the period 3.3 40.5 39.4
Currency translation differences on foreign currency net investments (0.9) 5.0 (1.8)
__________ __________ __________
Total recognised gains and losses for the period 2.4 45.5 37.6
__________ __________
Prior year adjustment 1 (7.9)
__________
Total gains and losses recognised since last annual report (5.5)
__________
Consolidated Balance Sheet
(Unaudited)
At At At
30 June 30 June 31 December
2002 2001 2001
Notes £m £m £m
Restated Restated
Fixed assets
Intangible assets 41.0 32.1 36.7
Tangible assets 155.9 150.4 138.4
Investment in associates 1.6 3.3 1.0
Other investments 7.1 6.8 6.8
__________ __________ __________
205.6 192.6 182.9
Working capital
Stocks 113.1 161.7 123.9
Debtors 168.1 194.1 156.8
Creditors (146.6) (220.4) (169.2)
134.6 135.4 111.5
Provisions for liabilities and charges (25.2) (13.7) (18.7)
Net borrowings 7 (111.5) (97.4) (73.2)
__________ __________ __________
203.5 216.9 202.5
__________ __________ __________
Capital and reserves
Called up share capital 73.1 73.1 73.1
Share premium 41.5 41.0 41.2
Revaluation reserve 14.2 23.4 14.1
Profit and loss account 31.8 37.0 32.5
Shareholders' funds
Equity interests 112.7 126.6 113.0
Non-equity interests 47.9 47.9 47.9
160.6 174.5 160.9
Equity minority interests 42.9 42.4 41.6
__________ __________ __________
203.5 216.9 202.5
__________ __________ __________
Reconciliation of Movements in Consolidated Shareholders' Funds
Profit for the period 3.3 40.5 39.4
Dividends (3.0) (14.0) (19.9)
_________ _________ _________
Retained profit for the period 0.3 26.5 19.5
Currency translation differences on foreign currency net investments (0.9) 5.0 (1.8)
Share capital issued 0.3 - 0.2
Goodwill written back on disposals - 10.6 10.6
_________ _________ _________
Net (reduction) addition to shareholders' funds (0.3) 42.1 28.5
Opening shareholders' funds (originally £168.8m before deducting prior year 160.9 132.4 132.4
adjustment of £7.9m)
_________ _________ _________
Closing shareholders' funds 160.6 174.5 160.9
_________ _________ _________
Consolidated Cash Flow Statement
(Unaudited)
Six Six
months to months to Year to
30 June 30 June 31 December
2002 2001 2001
Notes £m £m £m
Net cash inflow from operating activities
Operating profit 10.8 24.4 44.1
Depreciation and amortisation 10.7 10.3 19.0
Other non cash flow items (0.2) (1.3) (2.0)
Decrease (increase) in stocks 13.0 (11.4) (10.4)
(Increase) decrease in debtors (10.5) (24.8) 3.3
(Decrease) increase in creditors (21.4) 4.2 1.7
__________ __________ __________
2.4 1.4 55.7
__________ __________ __________
Returns on investments and servicing of finance
Net interest paid (1.7) (3.3) (5.8)
Preference dividends paid (2.0) (2.0) (3.9)
Dividends paid to minorities - (1.8) (1.8)
__________ __________ __________
(3.7) (7.1) (11.5)
__________ __________ __________
Taxation paid (6.4) (10.1) (12.5)
__________ __________ __________
Capital expenditure and financial investment
Purchase of tangible fixed assets (17.6) (15.4) (26.2)
Sale of tangible fixed assets 0.8 1.7 2.1
Purchase of trade investments (0.1) (0.6) (0.9)
__________ __________ __________
(16.9) (14.3) (25.0)
__________ __________ __________
Acquisitions and disposals
Purchase of subsidiary undertakings (17.7) (39.9) (51.5)
Net cash (overdrafts) acquired with subsidiary undertakings 1.8 - (0.7)
Purchase of associated undertaking (0.6) - -
Purchase of minority interests in subsidiary undertaking (0.1) - -
Net proceeds from disposal of operations - 69.4 95.9
Net cash disposed of with subsidiary undertakings - (0.4) (16.4)
Net proceeds from disposal of associated undertakings 0.1 3.7 4.1
Proceeds from disposal of other investments - 8.1 8.7
__________ __________ __________
(16.5) 40.9 40.1
__________ __________ __________
Equity dividends paid - (3.0) (21.1)
__________ __________ __________
Net cash (outflow) inflow before use of liquid resources and financing (41.1) 7.8 25.7
Management of liquid resources
Net movement in short term money market deposits 7 (0.5) 7.1 5.7
__________ __________ __________
Financing
Ordinary share capital issued 0.3 - 0.2
Increase (decrease) in borrowings due within one year 7 7.4 (0.1) (0.3)
Increase (decrease) in borrowings due beyond one year 7 20.6 (20.3) (24.8)
Capital element of finance leases 7 (0.1) (0.3) (0.2)
__________ __________ __________
28.2 (20.7) (25.1)
__________ __________ __________
(Decrease) increase in cash 7 (13.4) (5.8) 6.3
__________ __________ __________
Notes to the Interim Report
1. BASIS OF PREPARATION
The interim financial information has been prepared on the basis of the accounting policies set out in the Group's 2001
Annual Report and Accounts with the exception that FRS 19 'Deferred tax' has been adopted in this interim report. The
adoption represents a change in accounting policy and the comparative figures for both 30 June 2001 and 31 December
2001 have been restated accordingly. 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 this interim report does not constitute statutory accounts as defined
in section 240 of the Companies Act 1985. The financial information for the year ended 31 December 2001 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 2002 30 June 2001 31 December 2001
Turnover Operating Turnover Operating Turnover Operating
profit profit profit
Activity £m £m £m £m £m £m
Oil and gas marketing and distribution 274.1 4.7 345.8 13.0 587.3 19.0
Oilfield services and tubular products 126.1 4.8 116.8 10.6 268.3 21.5
Exploration and other activities 34.7 1.2 43.4 2.3 79.5 4.7
Share of associated undertakings - 0.1 - - - -
__________ __________ _________ __________ _________ __________
Continuing operations 434.9 10.8 506.0 25.9 935.1 45.2
Discontinued operations Defence` - - 73.6 (1.5) 100.2 (1.1)
Share of associated
__________ __________ _________ __________ _________ __________
434.9 10.8 579.6 24.4 1,035.3 44.1
__________ __________ _________ __________ _________ __________
The oil and gas marketing and distribution turnover includes £222m of crude oil and related sales in the six months to
30 June 2002 (six months to 30 June 2001: £277m).
3 ANALYSIS OF CONTINUING AND DISCONTINUED ACTIVITIES
The analysis of continuing and discontinued activities during the six months to 30 June 2001 and the year to 31
December 2001 is set out below.
Six months to 30 June 2001 Year to 31 December 2001
Continuing Dis- Total Continuing Continuing Dis- Total
Ongoing continued Ongoing Acquisitions continued
£m £m £m £m £m £m £m
Restated Restated Restated Restated Restated Restated
Turnover 506.0 73.6 579.6 774.7 160.4 100.2 1,035.3
Cost of sales (447.8) (66.9) (514.7) (678.5) (148.9) (91.8) (919.2)
_______ _______ _______ _______ _______ _______ _______
Gross profit 58.2 6.7 64.9 96.2 11.5 8.4 116.1
Net operating expenses (32.3) (8.2) (40.5) (57.1) (5.4) (9.5) (72.0)
_______ _______ _______ _______ _______ _______ _______
Group operating profit 25.9 (1.5) 24.4 39.1 6.1 (1.1) 44.1
Share of operating profit in associated - - - - - - -
undertakings
_______ _______ _______ _______ _______ _______ _______
Total operating profit 25.9 (1.5) 24.4 39.1 6.1 (1.1) 44.1
Exceptional items:
Profit on disposal of discontinued operations - 39.3 39.3 - - 30.1 30.1
Impairment of net assets of de-consolidated (2.7) - (2.7) (2.7) - - (2.7)
subsidiary
_______ _______ _______ _______ _______ _______ _______
Profit on ordinary activities before interest 23.2 37.8 61.0 36.4 6.1 29.0 71.5
_______ _______ _______ _______ _______ _______ _______
4 TAXATION
The taxation charge for the six months to 30 June 2002 is calculated by applying the best estimate of
the 2002 annual effective rate of tax to the profit for the period.
5 DIVIDENDS
Six months to Six months to Year to
30 June 30 June 31 December
2002 2001 2001
£m £m £m
Preference dividends:
Paid 2.0 2.0 3.9
Ordinary dividends:
Interim 1.0 2.0 2.0
Special - 10.0 10.0
Final - - 4.0
______________ ______________ ______________
3.0 14.0 19.9
______________ ______________ ______________
6 EARNINGS PER SHARE
Basic and diluted earnings per share have been calculated using the following bases:
Six months to Six months to Year to
30 June 30 June 31 December
2002 2001 2001
£m £m £m
Restated Restated
Profit attributable to shareholders 3.3 40.5 39.4
Less: preference dividends (2.0) (2.0) (3.9)
______________ ______________ ______________
Earnings attributable to Ordinary shareholders 1.3 38.5 35.5
______________ ______________ ______________
Weighted average number of Ordinary shares 100.6 100.2 100.3
Dilutive outstanding share options - 0.2 -
______________ ______________ ______________
Adjusted weighted average number of Ordinary shares 100.6 100.4 100.3
______________ ______________ ______________
pence pence pence
Basic EPS 1.3 38.5 35.3
Less: exceptional items after taxation - (31.2) (22.4)
______________ ______________ ______________
Basic EPS before exceptional items 1.3 7.3 12.9
______________ ______________ ______________
Diluted EPS 1.3 38.4 35.3
______________ ______________ ______________
7 ANALYSIS OF CHANGES IN NET DEBT
Acquisition
debt
(excluding
At 1 Jan Cash cash and Exchange At 30 June
2002 flow overdrafts) movements 2002
£m £m £m £m £m
Cash at bank and in hand 17.5 (12.0) - (0.3) 5.2
Overdrafts (2.6) (1.4) - - (4.0)
__________
(13.4)
__________
Borrowings due after one year (83.2) (20.6) - 2.6 (101.2)
Borrowings due within one year (10.8) (7.4) - 0.5 (17.7)
Finance leases (0.2) 0.1 (0.3) - (0.4)
__________
(27.9)
__________
Money market deposits 6.1 0.5 - - 6.6
__________ __________ __________ __________ __________
Total net debt (73.2) (40.8) (0.3) 2.8 (111.5)
__________ __________ __________ __________ __________
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