Final Results
Velosi Limited
21 April 2008
Velosi Limited
('Velosi', 'the Group' or 'the Company')
Preliminary Results
For the year ended 31 December 2007
Velosi Limited ('Velosi' or the 'Group'), a provider of asset integrity and HSE
services to a number of major national and multinational oil and gas companies,
is pleased to announce its preliminary results for the year ended 31 December
2007.
Financial Highlights
• Turnover increased 67% to US$117.0 million (2006: US$70.2 million)
• Operating profit increased 47% to US$11.2 million (2006: US$7.6 million)
• Profit before tax up 43% to US$11.4 million (2006: US$8.0 million)
• Profit after tax and minority interests increased 25% to US$7.5 million
(2006: US$6.0 million)
• Proposed dividend of US 1 cent per share (2006: US 1 cent per share)
• March 2008, raised £4.42 million via an institutional Placing of
3,842,000 new Ordinary Shares
Operational Highlights
• New offices established in Angola, Russia, Ghana, Vietnam, Thailand, The
Netherlands and Indonesia
• Acquired K2 Specialist Services Pte Ltd and Intec UK Limited, increasing
the Group's range of services and geographic reach
• Significant new contracts have been won globally, both with new and
existing major oil and gas clients
• Expanded range of services to include Asset Integrity Management
Services. Although one of the more recent additions to the Group, these
services have already secured contracts totalling more than US$5.7 million
over a four year period
• Sustained high levels of activity and investment in the oil and gas
sector continue to drive demand and growth for Velosi's core services
John Hogan, Chairman, commented:
'I am pleased to report our preliminary results for the year ended 31 December
2007. With revenue growth across all areas of the globe, 2007 has been a year of
expansion for the Group, both through our extended service offerings and through
our acquisitions. Turnover for the period increased 67% and profit before tax
was up 43%. We won a significant number of contracts during 2007 and I am
pleased to report that this trend has continued into 2008. Trading for the first
three months of the current financial year has been in line with the Board's
expectations and with market conditions remaining favourable, the Board remains
confident on the outlook for 2008 and beyond.'
For further information, please contact:
Velosi Dr Nabil Abdul Jalil 020 7930 0777
Joe Vincent
Strand Partners James Harris 020 7409 3494
Warren Pearce
Charles Stanley Mark Taylor 020 7149 6000
Freddy Crossley
Cardew Group Tim Robertson 020 7930 0777
Emma Consett
CHAIRMAN'S STATEMENT
Following a strong performance in 2006, Velosi has continued this trend in 2007
delivering an excellent set of financial results. The Group has made substantial
operational progress, venturing into new geographic locations, increasing market
share in existing markets and expanding its service offerings. I am therefore
very pleased to present the performance of the Group for the financial year
ended 31 December 2007.
At the point of listing on AIM, Velosi's revenue was equally weighted on
maintenance-related services and new builds or project-related services. It is
evident today however, that new builds and project-related services are taking
centre stage in the Group's activities, which is a reflection of the ever
increasing levels of investment in infrastructure within the oil and gas
industry.
As the emphasis on the safety of industrial plants continues to increase, the
oil and gas sector continues to invest heavily in ensuring that its assets are
safeguarded to the highest standards. This creates an unremitting demand for
Velosi's asset integrity management and health, safety, and environment (HSE)
services, which covers quality assurance and quality control services.
Performance
The positive results are a reflection of the success of Velosi's strategy. For
the financial year under review, the Group achieved a 67% increase in revenue to
US$117.0 million (2006: US$70.2 million). The Group also registered an increase
in profit before tax of 43% to US$11.4 million (2006: US$8.0 million).
Underlying operating profit before interest and tax increased by 47% to US$11.2
million (2006: US$7.6 million) and profit after tax and minority interests
increased by 25% to US$7.5 million (2006: US$6.0 million).
Basic earnings per share after minority interests based on the weighted average
issued share capital as at 31 December 2007 was US$0.19 compared to US$0.20 in
the previous year, while fully diluted earnings per share after minority
interests based on the weighted average issued share capital as at 31 December
2007 was US$0.18 compared to US$0.20 in the previous year.
The slight reduction in earnings per share is mainly due to the dilution effect
of the Group reorganisation in 2006, in preparation for the IPO.
The acquisitions of K2 Specialist Services Pte Ltd ('K2') and Intec UK Limited
('Intec') in October 2007, have been immediately earnings enhancing,
contributing a combined total of US$10.8 million to Group revenue and US$1.5
million to Group operating profit in the period to 31 December 2007.
Dividend
Backed by positive results, the Board is pleased to propose a final dividend of
US$0.01 per share (2006: US$0.01). The Board intends to continue paying
dividends in the future while maintaining a suitable level of dividend cover and
retaining the majority of earnings to fund the development of the Group's
business. Subject to shareholder approval at the Annual General Meeting, the
dividend will be paid on 25 July 2008 to shareholders on the register on Friday
27 June 2008.
Strategy
During the year, Velosi continued to focus on its strategy of entering new
geographic markets, growing market share in existing markets and expanding its
service offerings organically, via joint ventures, and through acquisitions.
New offices were established in Angola, Russia, Ghana, Vietnam, The Netherlands,
Thailand and Indonesia during the period, and new contract wins have already
been secured in Angola, Russia, Vietnam and Indonesia.
The acquisition of K2 increased Velosi's presence and market share in Asia and
Australasia, the Middle East and Central Asia and expanded our service offerings
in rope access services. The acquisition of Intec further strengthened the
Group's service offerings in manpower supply, with Intec supplying highly
skilled and high-calibre personnel who are in great demand.
Velosi is becoming ever less reliant on local market expertise and is instead
establishing itself as a regional player. With our wide-ranging services and new
acquisitions during the year, Velosi is consolidating its resources and
capabilities to meet the current and future needs of the industry.
In line with Velosi's tagline of 'Global Reach, Local Service', we continue to
retain high-quality individuals and to recruit experts with extensive regional
and technical knowledge. Whenever necessary, we provide additional training to
ensure that our people have the latest know-how in delivering excellent
services.
Share Placing
Since the year end the Company successfully raised £4.42 million through the
issue of 3,842,000 new ordinary shares at a placing price of 115 pence per share
to institutional investors ('the Placing'). The net proceeds of the Placing will
be used to augment existing working capital facilities and for the development
of the Group's business.
Appreciation
On behalf of the Board, I wish to extend my thanks to all our employees
worldwide for their commitment, hard work and perseverance throughout the year.
Outlook
We continue to strengthen our market position by investing in new ways to make
our services more cost effective and to keep up with clients' technological
advancements. Velosi's continued success in securing new contracts has
demonstrated the confidence of our clients in our asset integrity management
services capabilities.
The outlook is that world oil and gas prices should continue to remain high,
underpinning sustained high levels of activity and investment in the oil and gas
sector. This will lead to continuing demand and growth for Velosi's core service
businesses.
In addition to prospects for continuing growth in the oil and gas sector we are
looking to diversify into other areas such as nuclear power and mining
industries which also require asset integrity management and HSE services. To
broaden our technical competence, we are also considering related areas such as
engineering design, sub sea services, training and consultancy and laboratory
services.
Trading for the first three months of the current financial year has been in
line with market expectations and the Board is confident that Velosi will
continue to grow and generate excellent returns during the remainder of 2008 and
beyond. With an ever expanding global network and with dedicated and highly
skilled employees, the Board remains optimistic about the Group's trading
outlook going forward.
JOHN HOGAN
CHAIRMAN
18 April 2008
OPERATIONS REVIEW
Highlights
Africa
• 2 year contract with Gulf of Suez Petroleum Company, a division of BP,
promoting the Group to full service supplier status in Egypt for the first
time
• 6 month interim contract with Shell Petroleum Development Nigeria to
provide quality control and inspection services
• Since the year end, a new contract with Chevron Angola
Asia & Australasia
• 4 year contract with BP Indonesia for asset integrity management services
• 1 year manpower supply contract with Truong Son JOC, a joint operating
company comprised of PetroVietnam, Petronas Carigali and Talisman
• Acquisition of K2 Specialist Services Pte Ltd
Americas
• Extension of Chevron Escravos contract
• Global services contract with ExxonMobil for manpower supply and
inspection services
• Global master services agreement with ConocoPhilips for manpower supply
and inspection services
Europe
• Contract with Shell EP Europe providing source inspection and expediting
of procured products from all four Shell operations in Europe
• Agreement with CONFAPI, diversifying service offering in Italy
• 3 year contract with Thames Water covering the inspection of lifting
equipment and pressure vessels
• 2 year master agreement with Technimont to provide inspection and
expediting services
• Acquisition of Intec UK Limited
Middle East
• Maiden asset integrity management service contract with Takreer Ruwais
refinery in Abu Dhabi
Central Asia
• 5 year contract with Exxon Neftegas Ltd in Sakhalin Island, Russia, to
provide corrosion control, inspection and non-destructive testing services
In 2007, Velosi's investment across the business, combined with the favourable
market conditions which substantially increased infrastructure investment
amongst the oil and gas and petrochemical companies, contributed to the Group
winning a number of significant new contracts globally.
With new offices established in Angola, Ghana, Indonesia, Russia, Thailand, The
Netherlands and Vietnam during the period, the Group has witnessed an increase
in both existing and new clientele providing an extremely positive outlook for
2008. These new offices together with the acquisitions of Steel Test (Pty) Ltd
('Steel Test') and Plant Design Engineers Sdn Bhd ('PDE') in 2006, and K2 and
Intec during the year under review have strengthened the Group's geographical
reach.
Velosi's expansion of its diverse range of services to include Asset Integrity
Management Services, the opening up of new markets and recent acquisitions offer
both existing and potential clients the added benefit of a one-stop centre. The
Group's new markets are performing well and there are evident synergies among
the Group's strategic business units ('SBUs'), with cross-selling being filtered
through the Group's 47 companies, 3 branches and 7 representative offices. SBUs
are the Group's subsidiaries, providing specialised services within our core
activities.
Although being one of the more recent additions to the Group, the Asset
Integrity Management Services Division has garnered notable contracts in the
Emirates and Indonesia, totalling more than US$5.7 million.
Vendor Inspection Services have successfully renewed most framework agreements
within the last 12 months and a significant number of new framework agreements
have been signed in most of the offices. A major portion of the revenue is
recurrent due to these term contracts and on-going regulatory activities.
ASIA & AUSTRALASIA
Turnover: US$13.5 million (2006: US$3.5million), Contribution to Group Sales:
11.6% (2006: 5.0%)
Asia and Australasia saw the highest growth in turnover during the period, with
an increase of 286%. Previous investments in marketing and operational
infrastructure fuelled this growth, with the most notable increases seen in
Indonesia, Singapore and Vietnam.
The Group's Australian SBU showed excellent growth over the year, signing
framework agreements with four high profile Australian Engineering, Procurement
and Construction (EPC) contractors, with an estimated value of approximately
US$3.8 million over the next 2 to 3 years.
In August 2007, BP Indonesia awarded Velosi a four-year technical services
contract worth approximately US$4.7 million for asset integrity management and
documentation services for onshore and offshore assets.
Offices were successfully established in Thailand and Vietnam during the year
and, in June 2007, Velosi Vietnam signed a manpower supply contract worth
approximately US$1.3 million per annum with Truong Son JOC, a joint operating
company comprising of PetroVietnam, Petronas Carigali and Talisman. Both offices
are currently undergoing a large recruitment drive in order to cope with the
recent increased operational and marketing activities in their respective
regions.
Singapore experienced an increase in activity and broadening of its range of
services, in addition to the rig inspection services, following significant
involvement with Nabors in the Middle East. Third Party Inspection of materials
and equipment, and engineering services were introduced to boost the Group's
capabilities in this vibrant sector of the oil and gas hub in the South East
Asian region. With the rapidly increasing conversion and refurbishment of
Floating Production Storage and Offloading (FPSO) units, and the order books of
most shipyards booked for the next couple of years, this strategic move by the
Group proved timely. Orders executed during the period included design
consultancy in naval architecture, structural marine systems, piping,
mechanical, electrical and instrumentation (E&I), and mooring analysis for
load-outs.
In October 2007, K2 and its associated safety training subsidiary company, SEA
Team Solutions Pte Ltd (SEA Team), was acquired. K2 provides inspection, testing
and engineering support services in remote and extreme environments to the oil
and gas industry. K2 operates from its head quarters in Singapore, which is
supported by regional satellite and representative offices in China, Korea,
Vietnam and Malaysia. Operations are spread between three market sectors -
Exploration and Drilling - Mobile offshore drilling units (MODU), Offshore
Production - Fixed offshore platforms and floating production storage and
offloading (FPSO) and Downstream Processing - Petro Chemical and refinery
facilities. K2 incorporates the unique technique of Industrial Rope Access under
the guidelines of Industrial Rope Access Trade Association (IRATA), an
efficient, cost effective alternative to traditional forms of access such as
scaffolding.
K2 saw significant growth in 2007, with sales increasing 181% to US$8.5 million.
This growth was driven largely by the Exploration and Drilling market sector,
which saw K2 significantly increase its market share in China and Korea and
complete projects on some of the world's largest and most technologically
advanced deep water drilling facilities. The introduction of K2's rig management
software in late 2007 also contributed to the growth. This software technology
allows Velosi to offer clients a single system to manage their various
inspection requirements. We see this system continuing to add to our growth in
2008 and beyond.
SEA Team is dedicated to providing industry-recognised accredited safety
training, which is focused on working at height and fall prevention. Moving
forward, SEA Team is looking to increase its training centres to areas such as
Malaysia, Vietnam and Thailand.
Malaysian-based PDE, acquired in December 2006, continued to expand its business
horizons by entering new markets in Indonesia, Vietnam, Brunei, Singapore, Phil
ippines, Croatia and US.
EUROPE
Turnover: US$15.2 million (2006: US$5.8 million), Contribution to Group Sales:
13% (2006: 8.3%)
After Asia and Australasia, Europe experienced the largest proportionate
increase in turnover of 160%. This increase was largely attributed to the Shell
EP Europe contract, which was signed in January 2007 to provide source
inspection and expediting of procured products from all four Shell operations in
Europe, and to the contribution from Intec following its acquisition in October
2007.
The acquisition of Intec has provided the Group with contract and permanent
personnel of proven ability ranging from senior management and chartered
engineers through to specialist skilled workers. Most business for 2007 was
predominantly in the power, engineering, aviation and the oil and gas markets
with the main contributor being engineering in terms of contract or temporary
manpower, and the largest clients being Alstom, Costain, London Underground,
Atlantic and Fujitsu. Intec's business strategy going forward is to focus on
optimising the sales from several worldwide manpower agreements that Velosi has
signed with oil and gas multi-nationals.
With the introduction of new offices in The Netherlands and the acquisition of
Intec, the importance of Europe to the Group is expected to continue to rise
significantly. Additionally, the award of a contract in July 2007 by Thames
Water in the UK, for the inspection of lifting equipment and pressure vessels
will further enhance growth in this region.
The demand for certification services is continually increasing and efforts to
diversify services in the region are ongoing. In Italy, in addition to the
contract with CONFAPI, which was signed in March 2007, Technimont Italy entered
into a Master Agreement with Velosi to provide inspection and expediting
services in August.
MIDDLE EAST
Turnover: US$34.2 million (2006: US$21.6 million), Contribution to Group Sales:
29.2% (2006: 30.8%)
Based in the Emirates, Velosi Asset Integrity Ltd ('VAIL') offers specialised
services to the oil and gas and petrochemical industries globally. Although VAIL
was only incorporated in November 2007, this new business unit has received
encouraging reviews and our clients' confidence has been reflected with the
award of a US$1 million contract for the Takreer Ruwais Refinery shutdown.
Further contract awards with SNGPL Pakistan for a technical audit job cemented
VAIL's strong position within the market. With more proposals under evaluation,
the future of VAIL is very encouraging, with the focus on higher-end consultancy
services.
The Qatari operations have once again proved to be one of the Group's highest
growth areas, with turnover increasing 70% to approximately US$25 million. This
increase has come about from a varied and wide spectrum of existing and new
projects such as the term contracts with Qatar Petroleum, RasGas, Qatar Gas, JGC
and new orders from Dodsal and Fernas. Abu Dhabi's turnover also increased 18%
to US$6.5 million.
Similarly Kuwait's turnover increased a significant 169% to US$3.6 million. The
existing contract with Al-Khafji Joint Operations (KJO) was the key contributing
factor to the growth in turnover, in addition to the existing contracts with
Kuwait Oil Company (KOC) and Saudi Arabian Chevron-KGOC Joint Operations.
Oman, a 50% associate company of the Group also contributed US$0.6 million to
the Group profit before tax. It is a preferred service provider for many
companies like Petroleum Development Oman (PDO), Occidental Oman, Oman LNG, Oman
Gas Company, Oman Refineries, and Daleel Petroleum. Velosi Oman is presently
providing quality assurance, quality control and third party inspection services
to PDO.
The growth in revenue experienced in the Middle Eastern region during the
period, although considerable, has been partly offset by rising overhead costs
such as employment-related costs as well as increases in accommodation expenses.
AFRICA
Turnover: US$36.6 million (2006: US$25.5million), Contribution to Group Sales:
31.3% (2006: 36.3%)
Africa remained the largest contributor to revenue within the Group in the
period under review, experiencing a 44% increase in turnover. The revenue growth
in the region is attributable primarily to the consolidation of the first full
year sales from Steel Test, increased sales in both Ghana and Egypt and a
six-month interim contract with Shell Petroleum Development Nigeria.
In April 2007, Velosi Egypt was awarded a full services supplier contract for
the first time by the Gulf of Suez Petroleum Company, a division of BP, which is
expected to open up new opportunities for the Group.
During 2006 a new office was established in Luanda, Angola. Since the year end,
Velosi has been awarded a contract with CABGOC (a Chevron-Sonangol Joint
Venture) and the Group remains well placed to bid and win further orders in this
oil- and gas-rich region.
Steel Test continues to excel and increase its market share. The company's sales
improved from US$3.6 million in 2006 to US$4.8 million in 2007, an increase of
33 per cent.
The decision to incorporate a company in Ghana (Velosi Ghana Ltd) was taken
before offshore oil was discovered in that region. Current work in Ghana
involves construction supervision of two storage tanks that are being built in
the north of the country. Velosi Ghana Ltd has also been selected to act as a
Client Representative on a project to supervise the construction of two
pipelines and various storage tanks around the country with a contract duration
scheduled for 36 months. The recent news that Ghana's offshore oil reserves are
in the region of one billion barrels is expected to give impetus to the oil and
gas industry in Ghana and will provide additional opportunities for the Group.
In the interim results for the six months ended 30 June 2007, announced on 24
September 2007, the Board of Velosi sadly reported that Richard Ogunmakin,
General Manager of Velosi Nigeria had been fatally wounded. Richard was a
significant shareholder in Velosi Nigeria and negotiations are ongoing with
Richard's estate regarding the future ownership and operation of Velosi Nigeria.
There is no certainty that the outcome of these negotiations will be favourable
to the Group. The Group is confident however, that any reduction in the
contribution from Nigeria will be compensated for by the significant growth in
revenues from both existing and new regions, such as Europe and Angola, and that
the Group's outlook for 2008 and beyond remains unchanged.
AMERICAS
Turnover: US$17.5 million (2006: US$13.8million), Contribution to Group Sales:
14.9% (2006: 19.6%)
During the period under review, revenue increased by 26.8%, driven primarily by
the demand for verification services from Chevron. In addition, ExxonMobil
awarded a Global Services Contract covering manpower supply and inspection and
similarly, in August 2007, ConocoPhilips awarded a Global Master Services
Agreement to supply inspection, manpower and expediting services.
CENTRAL ASIA
Turnover: US$ -, Contribution to Group Sales: -%
In September 2007, Velosi was awarded its first significant contract in Russia -
a five-year contract by ExxonMobil Neftegas Ltd. in Sakhalin Island. The
contract, which is due to commence in the second quarter of 2008, provides
Corrosion Control Inspection and Non-Destructive Testing services.
The Group has also incorporated a new company in the main commercial centre of
Yuzhno-Sakhalin, which will be the base from which further new business in the
Russian Far East can be developed.
Although relatively new to the Group, Velosi Kazakhstan is prequalifying with
several national and multinational oil and gas clients.
FINANCIAL REVIEW
Highlights
Year ended 2007 2006 Change
31 December US$'000 US$'000 %
Revenue 116,997 70,209 67
Operating profit 11,159 7,619 47
Profit before tax 11,426 7,976 43
Profit after tax and minority interests 7,455 5,970 25
Weighted average earnings per share US$0.19 US$0.20 (5)
Shareholders' funds 36,750 26,257 40
The Company's consolidated financial statements for the year ended 31 December
2007 have been prepared under the International Financial Reporting Standards (
IFRS).
For the year ended 31 December 2007, the Group demonstrated another year of
strong financial performance. Turnover increased 67% to US$117.0 million (2006:
US$70.2 million). The growth in turnover was principally driven by operations in
Asia and Australasia, and Europe, where turnover increased 286% and 160%
respectively. During the year, Africa, the largest contributing region to Group
turnover, contributed 31.3% to total sales, followed by the Middle East and the
Americas contributing 29.2% and 14.9% respectively.
Profit from ordinary activities before tax for the year was up 43% from US$8.0
million in 2006 to US$11.4 million. The Group recorded an increase of 42% in
profit after tax, and of the US$9.8 million (2006: US$6.9 million), US$2.3
million was attributable to minority shareholders of the Group (2006: US$0.9
million).
Taxation
The effective tax rate for the Group for the year ended 31 December 2007 was 15%
(2006: 14%) and the tax charge was US$1.7 million (2006: US$1.1 million). The
effective tax rate for the Group is directly correlated with the contributions
from the different regions and their varying tax rates.
Share Capital
During the year the share capital increased by US$24,000 due, in part, to the
issuance of 117,683 and 74,752 new ordinary shares of US$0.02 each as part
payment for the acquisitions of 51% of PDE and 51% of Steel Test respectively.
The acquisitions of PDE and Steel Test were announced in 2006.
Another factor which contributed to the increase in share capital is the
issuance of 1,000,000 ordinary shares of US$0.02 each to Mr John Peter Hepworth,
as a condition attached to the acquisition of Intec. In addition, 431,000 share
options were issued during the year under an employee share option scheme.
Acquisitions and Cash Flow
During the year, the Group acquired a 65% interest in K2, a Singapore-based
company providing Inspection, Testing, Integrity Management and Engineering
services for a total consideration of SGD5.6 million (approximately US$3.9
million). During the year, the Group also acquired a 60% interest in Intec, a
UK- based manpower supply company for a total consideration of £1.344 million
(approximately US$2.7 million). Both acquisitions were announced to shareholders
on 22 October 2007. Cash outflow for the Group from investing activities was
US$9.7 million (2006: US$2.1 million).
There was a net cash outflow from operating activities of US$1.0 million,
compared to a net cash inflow from operating activities of US$0.6 million in
2006. The decrease was mainly due to an increase in tax paid and interest paid
of US$1.2 million and US$0.3 million respectively. The increase in receivables
of US$14.5 million also contributed to the decrease in cash from operating
activities.
Since the year end, Charles Stanley Securities, on behalf of the Company,
completed an institutional placing ('the Placing'), on 20 March 2008, of
3,842,000 new Ordinary Shares of US$0.02 each ('the Placing Shares') at a price
of 115 pence per new Ordinary Share to raise approximately £4.42 million before
expenses. The Placing Shares represent 8.8 per cent of the enlarged issued share
capital of the Company. The proceeds of the Placing will be used to augment the
Group's existing working capital facilities and for the development of the
Group's business. In particular, the new funds will be used to satisfy the
working capital requirements of the new contracts secured by the Group and for
expansion into new geographical territories.
Administrative Expenses
Administrative Expenses for the year amounted to US$18.1 million (2006: US$9.0
million), with the increase largely attributable to the opening of new offices
in Angola, Russia, Ghana, Vietnam and Indonesia. Another factor which
contributed to the increase in administrative expenses was the increased
marketing efforts in new areas, and the set up of a Group Marketing Division in
Abu Dhabi. In addition, the cost of implementing and standardising the Group
Quality Assurance and HSE Policies also contributed to the increase. As stated
in the Operations Review, the rising employment-related costs and accommodation
expenses largely contributed to the increase in overhead costs in the Middle
Eastern region.
The investment in IT such as the development of the Group Intranet and the use
of the latest video conferencing facilities to ensure cost effective
communication amongst companies in the Group has further contributed to the
increase in costs.
Profit Attributable to Minority Interests
Profits attributable to minority interests were US$2.3 million (2006: US$0.9
million). The increase was mainly due to the stronger performance of the Group's
part-owned subsidiaries i.e. Steel Test in Africa; Velosi Certification Services
LLC (Qatar) in the Middle East; K2, PT Java Velosi Mandiri, Velosi Certification
Services (India) Pvt. Ltd. and PDE in Asia; and Intec in Europe.
Earnings Per Share and Dividends
Basic earnings per share after minority interests based on the weighted average
issued share capital as at 31 December 2007 were 19.4 cents (2006: 20.1 cents)
and fully diluted earnings per share after minority interest based on the
weighted average issued share capital as at 31 December 2007 were 18.2 cents
(2006: 19.6 cents). As at 31 December 2007, the Group had net assets of US$1.08
per share.
As stated in the Chairman's Statement, the Board is declaring a final dividend
of US$0.01 per share (2006: US$0.01). The dividend will be paid, subject to
shareholder approval at the Annual General Meeting, on Friday 25 July 2008, to
shareholders on the register at Friday 27 June 2008, in sterling converted at
the prevailing exchange rate.
VELOSI LIMITED
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
--------------------------------------------------------------------------------
2007 2006
US$'000 US$'000
Continuing operations
Revenue 116,997 70,209
Cost of sales (89,152) (54,227)
-------- ---------
Gross profit 27,845 15,982
-------- ---------
Other operating income 1,435 591
Administrative expenses (18,121) (8,954)
-------- ---------
Operating profit 11,159 7,619
-------- ---------
Finance costs (253) (141)
Share of profit of associated
companies 520 498
-------- ---------
Profit on ordinary activities
before tax 11,426 7,976
Income tax expense (1,670) (1,106)
-------- ---------
Profit on ordinary activities
after tax 9,756 6,870
-------- ---------
Minority interest (2,301) (900)
-------- ---------
Profit from continuing operations
and attributable to
equity holders 7,455 5,970
======== =========
Basic earnings per share based on
the weighted average issued share
capital as at 31 December 19.4c 20.1c
-------- ---------
Diluted earnings per share based
on the weighted average issued
share capital as at 31 December 18.2c 19.6c
-------- ---------
VELOSI LIMITED
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2007
--------------------------------------------------------------------------------
2007 2006
US$'000 US$'000
Assets
Non-current assets
Goodwill 7,341 2,114
Intangible assets 1,662 -
Property, plant and equipment 6,920 3,187
Investment in associated companies 869 732
Other investments 9 -
Deferred tax assets 88 76
-------- ---------
16,889 6,109
-------- ---------
Current assets
Cash and cash equivalents 7,967 12,170
Inventories 1,056 999
Trade and other receivables 46,362 24,349
Amount due from related parties 1,394 1,310
Amount due from associated companies 981 425
Tax recoverable 90 14
-------- ---------
57,850 39,267
-------- ---------
Non-current asset held for sale 900 -
-------- ---------
Total assets 75,639 45,376
======== =========
VELOSI LIMITED
CONSOLIDATED BALANCE SHEET- continued
AS AT 31 DECEMBER 2007
--------------------------------------------------------------------------------
2007 2006
US$'000 US$'000
Capital and reserves
Share capital 787 763
Share premium 21,310 18,128
Share based payment reserve 425 136
Revaluation reserve 287 287
Translation reserve (63) 11
Retained profit 14,004 6,932
-------- ---------
Total Equity attributable to equity holders 36,750 26,257
======== =========
Minority interest 5,729 2,507
-------- ---------
Total equity 42,479 28,764
-------- ---------
Current liabilities
Trade and other payables 20,820 14,365
Amount due to related parties 42 204
Amount due to associated companies 229 271
Bank and other borrowings 3,856 252
Current tax liabilities 1,761 1,106
Hire purchase liabilities 219 91
Deferred consideration 4,477 -
-------- ---------
31,404 16,289
-------- ---------
Non-current liabilities
Deferred tax liabilities 24 93
Provision for employees end of service
benefits 211 112
Bank and other borrowings 548 -
Hire purchase liabilities 951 81
Other non-current liabilities 22 37
-------- ---------
1,756 323
-------- ---------
Total liabilities 33,160 16,612
-------- ---------
Total equity and liabilities 75,639 45,376
-------- ---------
VELOSI LIMITED
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
--------------------------------------------------------------------------------
2007 2006
US$'000 US$'000
Cash flows from operating activities
Profit on ordinary activities for the year 11,426 7,976
Adjustments for:
Depreciation 1,056 329
(Gain) / loss on disposal of property, plant
and equipment 6 (24)
Property, plant and equipment written off 5 -
Amortisation of intangible assets 75 -
Loss on disposal of shares in a subsidiary 18 -
Negative goodwill written off (1) (16)
Allowance for doubtful debts 1,080 1,160
Allowance for doubtful debt written back - (128)
Bad debts written off 28 63
Provision for retirement benefit 106 41
Retirement benefit paid (5) (25)
Share of profit in associated companies (520) (498)
Interest expense 253 141
Interest income (210) (119)
Unrealised foreign exchange gain - (222)
Proceeds from issue of share options 289 89
-------- --------
Operating cash flows before movements in
working capital 13,606 8,767
-------- --------
Increase in inventories (57) (470)
Increase in receivables (14,498) (12,875)
Increase in payables 1,652 5,704
-------- --------
Cash generated from operations 703 1,126
Interest paid (253) (141)
Tax paid (1,190) (322)
-------- --------
Net cash from operating activities (740) 663
-------- --------
Cash flows from investing activities
Acquisition of property, plant and equipment (3,376) (817)
Receipts from sale of property, plant and
equipment 172 42
Acquisition of new subsidiary companies, net
of cash (6,415) (1,755)
Acquisition of new associated companies, net
of cash - (10)
Incorporation of new subsidiary companies - (10)
Purchase of unquoted shares (9) -
(Advance to)/ Repayment from associated
companies (598) 125
Dividend income from associated company 324 194
Interest received 210 119
-------- --------
Net cash used in investing activities (9,692) (2,112)
-------- --------
VELOSI LIMITED
CONSOLIDATED CASH FLOW STATEMENT- continued
FOR THE YEAR ENDED 31 DECEMBER 2007
--------------------------------------------------------------------------------
2007 2006
US$'000 US$'000
Cash flows from financing activities
Proceeds from issue of shares 3,275 20,102
Listing expenses paid (69) (1,164)
Repayments of term loan (143) -
Repayments of hire purchase liabilities (238) (70)
Repayments to related parties (245) (6,762)
Advance from/ (Repayments to) directors 722 (98)
Dividend paid to shareholders of Velosi Limited (383) -
Dividend paid to minority shareholders of
subsidiary companies (60) -
-------- --------
Net cash from financing activities 2,859 12,008
-------- --------
Net (decrease)/ increase in cash and cash
equivalents (7,573) 10,559
Foreign exchange translation differences (234) 125
Cash and cash equivalents at the beginning of
the year 11,918 1,234
-------- --------
Cash and cash equivalents at the end of the
year 4,111 11,918
======== ========
Cash and cash equivalents comprise:
Current assets - Cash and cash equivalents 7,967 12,170
Current liabilities - Bank overdraft (3,856) (252)
-------- --------
4,111 11,918
======== ========
VELOSI LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2007
----------------------------------------------------
Share Share Minority
capital premium Reserves Total interest Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1
January 2007 763 18,128 7,366 26,257 2,507 28,764
Exchange reserve
arising on translation
of financial
statements of
overseas subsidiaries - - (74) (74) 183 109
Share allotment 24 3,182 - 3,206 - 3,206
Profit for the year - - 7,455 7,455 2,301 9,756
Acquisition of
subsidiary - - - - 780 780
Disposal of shares in
subsidiary - - - - 18 18
Issue of share
options - - 289 289 - 289
Dividend paid - - (383) (383) (60) (443)
-------- ------- -------- ------- ------- -------
Balance at 31
December 2007 787 21,310 14,653 36,750 5,729 42,479
-------- ------- -------- ------- ------- -------
Balance at 1 January
2006 - - 1,249 1,249 770 2,019
Exchange reserve
arising on translation of
financial statements of
overseas subsidiaries - - 11 11 - 11
Share allotment 763 18,128 - 18,891 - 18,891
Profit for the year - - 5,970 5,970 900 6,870
Acquisition of
subsidiary - - - - 837 837
Issue of share
options - - 89 89 - 89
Issue of warrants - - 47 47 - 47
-------- ------- -------- ------- ------- -------
Balance at 31
December 2006 763 18,128 7,366 26,257 2,507 28,764
-------- ------- -------- ------- ------- -------
VELOSI LIMITED
PRELIMINARY RESULTS ANNOUNCEMENT - NOTES
1. Basis of preparation
The financial information set out in this preliminary results announcement does
not constitute the Group's financial statements for the year ended 31 December
2007.
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union and using
the accounting policies which are consistent with those adopted in the financial
statements for the year ended 31 December 2006.
The auditors have yet to sign their report on the 2007 financial statements. The
financial statements for the year ended 31 December 2007 will be finalised on
the basis of the financial information presented by the Directors in this
preliminary announcement.
The financial information for the year ended 31 December 2006 is derived from
the financial statements for that year. The auditors have reported on the 2006
financial statements, their report was unqualified.
The financial information set out in this announcement was approved by the board
on 18 April 2008.
2. Earnings per share
The basic and diluted earnings per share is calculated by reference to the
earnings attributable to ordinary shareholders divided by the number of shares
in issue as at 31 December 2007, as follows:
Year ended Year ended
31 December 31 December
2007 2006
US$'000 US$'000
Profit after taxation and minority
interest 7,455 5,970
--------- ---------
Number Number
Weighted average number of shares for the purpose of
calculating basic earnings per share 38,389,734 29,763,876
Effect of dilutive potential ordinary shares
Share options 1,858,702 596,389
Warrants 476,749 181,556
Deferred consideration 332,773 -
--------- ---------
Weighted average number of shares for
the purpose of calculating diluted
earnings per share 41,057,958 30,541,821
--------- ---------
Basic earnings per share based on the weighted
average issued share capital as at 31 December 19.4c 20.1c
--------- ---------
Diluted earnings per share based on the weighted
average issued share capital as at 31 December 18.2c 19.6c
--------- ---------
In order to recognise the group reorganisation in 2006 in the preparation of the
comparative earnings per share, ordinary shares issued as part of the group
reorganisation are included in the calculation of weighted average number of
shares for all periods presented.
3. Dividends
The Directors proposed to recommend a final dividend of US$0.01 per ordinary
share to shareholders in respect of the financial year ending 31 December 2007
(2006: US$0.01).
4. Income tax expense
2007 2006
US$'000 US$'000
Foreign tax
Overseas tax payable 1,740 1,129
-------- --------
Total current tax 1,740 1,129
Deferred tax
Movement in deferred tax position (133) (80)
-------- --------
Taxation on profit from ordinary activities 1,607 1,049
Add: Share of taxation of associated companies 63 57
-------- --------
1,670 1,106
======== ========
The tax on the group's profit before tax differs from the theoretical amount
that would arise under the weighted average tax applicable to profits of the
consolidated entities as follows:
2007 2006
US$'000 US$'000
Profit on ordinary activities before taxation (excluding
share of results of associated companies) 10,906 7,478
======== ========
Profit on ordinary activities at 14.06% (2006:13.15%) 1,534 984
Tax effects of:
Difference in tax rates of foreign countries 235 374
Effect of reduction in tax rate (1) -
Expenses not deductible for tax purposes 306 12
Tax redemption and rebates (11) (1)
Utilisation of tax losses - (1)
Utilisation of capital allowance (25) (15)
Deferred tax liabilities not recognised 151 -
Non-taxable income (391) (168)
Others (195) (136)
Adjustment on prior year tax 4 -
-------- --------
1,607 1,049
Add: Share of taxation of associated companies 63 57
-------- --------
1,670 1,106
======== ========
5. Post Balance Sheet Events
On 20 March, Charles Stanley Securities, on behalf of the Company, completed an
institutional placing ('the Placing'), of 3,842,000 new Ordinary Shares of
US$0.02 each ('the Placing Shares') at a price of 115 pence per new Ordinary
Share to raise approximately £4.42 million before expenses. The Placing Shares
represent 8.8 per cent of the enlarged issued share capital of the Company. The
Placing Price of 115 pence per share represented a 1.3 per cent discount to the
middle market closing price of 116.5 pence per Ordinary Share on 19 March 2008.
The proceeds of the Placing will be used to augment the Company's existing
working capital facilities and for the development of the Group's business. In
particular, the new funds will be used to satisfy the working capital
requirements of the new contracts secured by the Group and for expansion into
new geographical territories. Following the admission of the Placing Shares to
trading on AIM on 27 March 2008, the Company now has 43,472,614 Ordinary Shares
in issue. The Directors have now utilised the Company's authority to issue the
new ordinary shares granted at the Annual General Meeting of the Company held on
7 June 2007.
6. Acquisitions
Pursuant to an agreement dated 19 October 2007, Velosi Industries Sdn Bhd
acquired a 65% interest in K2 and 51% interest in Sea Team, for a total purchase
consideration of SGD5.6 million (approximately US$3.915 million), out of which
SGD2.8 million (approximately US$1.958) million was paid in cash. Provisional
payments of the remaining balance is US$1.957 million which represents the net
present value of the estimated amounts payable. This amount is to be paid by way
of issuance of new Velosi shares to be issued in three tranches, subject to the
achievement of certain performance targets by K2 in the three financial years
ending December 31, 2009. In addition, there is a call and put option over the
remaining 35% interest in K2 for an amount based on a multiple of five times the
audited profit after tax and minority interests for the year preceding the
exercise of the option.
US$'000
Purchase consideration
Cash 1,958
Shares 1,957
-------
Total purchase consideration 3,915
Fair value of net assets acquired (781)
Identifiable net assets (1,221)
-------
Goodwill 1,913
=======
Pursuant to an agreement dated 19 October 2007, Velosi Europe Limited acquired a
60% interest in Intec for a total purchase consideration of £1.344 million
(approximately US$2.688 million), out of which £84,000 (approximately
US$168,000) was paid in cash and the remaining balance of £1.26 million by way
of issuance of 868,966 new Velosi shares at 145 pence each.
Purchase consideration US$'000
Cash 168
Shares 2,520
-------
Total purchase consideration 2,688
Fair value of net assets acquired (478)
Identifiable net assets (516)
-------
Goodwill 1,694
=======
On 1st May 2007 Velosi Industries Sdn Bhd acquired 51% of Plant Design Engineers
and 100% of Plant Design Innovasi, for a total consideration of US$ 1,094,391.
US$'000
Consideration 1,094
-------
Fair value of net assets acquired (4)
Goodwill 1,090
=======
On 1st February 2007 Velosi Certification Services LLC acquired 70% of PT Java
for a total consideration of US$ 1.
US$'000
Consideration 1
-------
Fair value of net liabilities acquired 343
Goodwill 344
=======
A further adjustment of US$ 186k has arisen during the year following the
reassessment of the provisionally determined fair values of QA Management
Services Pty Ltd acquired during the period ended 31 December 2006.
The assets and liabilities arising on all current year acquisitions have been
provisionally determined.
Acquisitions made by the Group are satisfied in part by contingent deferred
consideration. The Group re-estimates the amounts due as deferred contingent
consideration where necessary, with any corresponding adjustments being made to
goodwill.
Intec K2 Total
US$'000 US$'000 US$'000
Provisional
Deferred contingent consideration
Outstanding as at 1 January 2007 - - -
Acquisition in the year 2,688 3,915 6,603
Cash consideration paid in the year (168) (1,958) (2,126)
------- ------- -------
Provisional
Deferred contingent consideration
outstanding as at 31 December 2007 2,520 1,957 4,477
======= ======= =======
The provisional deferred consideration consist of cash and shares.
7. Segmental reporting
The directors consider that the Group's activities represent a single class of
business. The analysis of the Group's turnover, gross profit, assets,
liabilities, additions to property, plant and equipment and depreciation by
geographical origin of customers are set out below:
2007 2006
US$'000 US$'000
Turnover
Europe 15,174 5,841
Middle East 34,172 21,609
Americas 17,464 13,772
Africa 36,608 25,467
Asia 12,115 3,002
Others 1,464 518
-------- --------
116,997 70,209
======== ========
Gross Profit
Europe 2,921 1,913
Middle East 8,315 5,890
Americas 4,707 3,244
Africa 5,804 3,283
Asia 5,511 1,452
Others 587 200
-------- --------
27,845 15,982
======== ========
Carrying amount of assets
Europe 16,106 10,586
Middle East 19,472 11,629
Americas 6,897 5,538
Africa 14,830 11,146
Asia 17,198 5,846
Others 1,135 631
-------- --------
75,638 45,376
======== ========
Liabilities
Europe 10,862 2,222
Middle East 5,403 3,994
Americas 2,708 2,123
Africa 8,073 6,846
Asia 5,766 1,141
Others 352 286
-------- --------
33,164 16,612
======== ========
Additions to property, plant and equipment
Europe 908 47
Middle East 1,349 657
Americas 5 8
Africa 1,352 9
Asia 751 185
Others 11 4
-------- --------
4,376 910
======== ========
Depreciation
Europe 86 21
Middle East 292 135
Americas 4 4
Africa 327 22
Asia 330 139
Others 17 8
-------- --------
1,056 329
======== ========
8. Nature of financial information
These preliminary results will be available on the Company's website
www.velosi.com. Further copies can be obtained from the registered office at
28-34 Hill Street, St Helier, Jersey, JE4 8PN.
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 2 hours ago First Tin
- 2 hours ago First Tin
- 2 hours ago Woodside Energy Group Ltd NPV (DI)
- 15 hours ago Luceco
- 16 hours ago Legal & General Group