Final Results
Wood Group (John) PLC
08 March 2004
John Wood Group PLC
Final results for the year ended 31 December 2003
Wood Group is a market leader in the provision of engineering design, production
support and industrial gas turbine services to customers in the oil & gas and
power generation industries. Operating in 34 countries, Wood Group employs over
13,000 people.
Financial highlights
•Revenues up 15% to $1,992.6 million (2002: $1,738.1 million)
•EBITA increased to $137.2 million (2002: $135.9 million)1
•Operating profit of $122.9 million (2002: $129.8 million)
•Profit before tax $83.0 million, after exceptional charges of $20.0
million (2002: $114.7 million)
•Adjusted diluted earnings per share 15.4 cents (2002: 16.5 cents)2
•Net cash inflow from operating activities increased to $144.9 million
(2002: $127.9 million)
•Investment and capital spend of $96.4 million (2002: $202.2 million)
•Final dividend of 2.2 cents per ordinary share (2002: 2.0 cents); total
for the year 3.3 cents (2002: 3.0 cents)
Divisional highlights
Engineering & Production Facilities
•Revenues up 10% to $1,095.2 million (2002: $992.8 million) and EBITA up
4% to $95.8 million (2002: $91.7 million)
•Involved in key deepwater engineering projects in the Gulf of Mexico,
West Africa and Asia Pacific with a growing engineering presence in
midstream and downstream
•New contract award for FEED work on Kerr-McGee's Constitution development
announced today
•Important production facilities contract wins in the North Sea, and
successful growth in West Africa, Colombia and Brunei
Well Support
•Revenues up 15% to $412.6 million (2002: $360.0 million) and EBITA up
45% to $31.4 million (2002: $21.7 million)
•Successful international expansion continuing - significant contract wins
in Argentina, Saudi Arabia and Russia. Acquisition of Barber Industries in
Canada
Gas Turbine Services
•Revenues up 29% to $455.4 million (2002: $352.0 million) but EBITA down
26% to $31.9 million (2002: $43.1 million)3
•29% revenue growth, 15% organic. Disappointing EBITA performance,
particularly in the second half of the year - reflecting difficult power
market
•Extending and broadening service offering, to include turbine controls
and power station operations & maintenance. Since the year end, acquired
Z.TEC to accelerate our heavy industrial turbine growth in continental
Europe
Sir Ian Wood, Chairman, Wood Group, commented:
'The year saw good revenue growth, but only marginal EBITA growth mainly
reflecting the difficult conditions in the power market. During the year, we
continued to enhance our market leadership and differentiation in our chosen
growth areas.
'In 2004, we believe we will see continuing growth in Well Support and further
successful international development of our Production Facilities activities. We
also anticipate some recovery in Gas Turbine Services following a number of
initiatives to reduce costs and enhance performance. However, as indicated in
previous statements, continuing industry-wide delays in large deepwater
engineering projects will hold back our overall performance. Looking to 2005 and
beyond, we are well positioned to exploit key growth segments of the oil & gas
and power industries, and are confident we will deliver good medium-term
growth.'
- Ends -
Information:
Wood Group
Sir Ian Wood Chairman & Chief Executive 020 7404 5959 on 8th March
Allister Langlands Deputy Chief Executive Thereafter 012244 851000
Alan Semple Finance Director
Nick Gilman Investor Relations Manager
Chris Watson Financial Controller
Carolyn Smith Corporate Communications 01224 851099
Brunswick
Patrick Handley 020 7404 5959
Stuart Bruseth
Katya Reynier
Note:
1 EBITA represents operating profit before amortisation, and share of
associates.
2 Adjusted diluted earnings per share is stated after adding back exceptional
items and amortisation. Diluted earnings per share for the period was 8.4 cents
(2002: 13.8 cents).
3 Gas Turbine Services figures exclude discontinuing operations.
The non-statutory financial terms are provided as they are the key units of
measurement used by the Company in the management of its business.
Chairman's Statement
After achieving in excess of 15% compound annual growth in revenues and EBITA
over the previous five years, the marginal increase in EBITA this year, mainly
due to difficult conditions in the power market, was less than satisfactory. Our
2003 revenues showed good growth to $1,992.6 million (2002: $1,738.1 million),
but EBITA only rose to $137.2 million (2002: $135.9 million) and adjusted
earnings per ordinary share was 15.4 cents (2002: 16.5 cents). The recommended
final dividend of 2.2 cents per ordinary share takes the total dividend for the
year to 3.3 cents (2002: 3.0 cents).
Engineering & Production Facilities delivered a good performance. Engineering
enjoyed high activity levels and Production Facilities won a number of
significant new contracts in both our established and newer markets. Well
Support delivered a much improved performance in the year. Pressure Control is
continuing to extend its presence outside the US and ESP has recently won its
most significant contract in Russia. Gas Turbine Services had a difficult year
with the continuing surplus of generation capacity in North America, together
with the poor financial condition of certain of the independent power producers,
contributing to both delay of gas turbine overhaul work and increased pricing
pressure.
We continued our investment programme with total capital spend at $96.4 million
(2002: $202.2 million), including the acquisitions of KCI and Barber Industries,
and $74.5 million of capital expenditure.
Delivering growth and returns
Our strategy for medium term growth is focused on our broad range of
complementary activities in five growth areas in the oil & gas and power
markets. During the year we continued to gain market share and achieve good
revenue growth from both acquisitions and organic developments.
•In deepwater topsides, subsea and offshore pipeline engineering we are
involved in 60% of current deepwater projects in the Gulf of Mexico,
including some initial work on Chevron Texaco's Tahiti development, Gulf
Terra's Atwater Valley project and Kerr McGee's Constitution development. In
West Africa, we are currently working on Chevron Texaco's Agbami and
Benguela-Belize projects. In Asia Pacific, we worked on Unocal's West Seno
development and Murphy's Kikeh discovery.
•In production support and enhancement services we were awarded five-year
contracts by both TOTAL and Talisman Energy (UK) Limited (Talisman) to
support their UK North Sea assets - further confirmation of our leading role
in reducing our clients' operating costs, enhancing their production and
improving health, safety and environmental performance. In West Africa we
are supporting Marathon's facilities onshore and offshore in Equatorial
Guinea, and, in Brunei, a Wood Group led JV is now working with Brunei Shell
Petroleum to manage and upgrade certain of its assets.
•Our internationalisation of Well Support is progressing well. Wood Group
ESP (electric submersible pumps) won a five-year, $50 million contract with
Repsol in Argentina and further extended its operations in Ecuador, China
and Russia and is now well positioned to win more business in these areas.
Pressure Control has good growth potential in Canada following the
acquisition of Barber Industries and has continued to win international
market share, including contracts in Saudi Arabia, Venezuela, Australia and
Oman.
•In the industrial gas turbines aftermarket we have increased our controls
and operations & maintenance capabilities, and have broadened our service
offering, including new electrical generator service facilities in the UK
and the US. We also opened our new Heavy Industrial Turbine Center of
Excellence in Connecticut and expanded our facility in Thailand. Since the
year-end, we have completed the acquisition of Z.TEC to accelerate our heavy
industrial turbine growth in continental Europe.
•In outsourcing and managed services our spread of life of field oil & gas
and power industry support services has helped us win significant long-term
contracts in all three businesses. In the North Sea we now have the
capability to be the safety case duty holder - which is particularly
relevant to the requirements of the newer entrants. Worldwide we believe we
are a leader in the provision of long-term production enhancement
performance contracts using electric submersible pumps. In the power
industry we are winning contracts covering the full maintenance
responsibility, including the gas turbines, generators, controls and field
service.
The global infrastructure of the Group, our strong client relationships, our
know-how, our project and risk management services and our flexible performance
contracting solutions have all contributed to the revenue growth this year.
Our People
My sincere thanks go to the Board for their continuing hard work and wise
counsel. Bill Edgar will retire in May after nine successful years. I look
forward to welcoming Trevor Noble and Les Thomas to lead the continuing
development of Engineering & Production Facilities. Deputy Chief Executive,
Allister Langlands, has taken on the role of Chief Executive of Gas Turbine
Services and I am encouraged by the initiatives he has already put in place to
drive performance improvement. Above all, my warm thanks to all our employees -
more than 13,000 in 34 countries - for their customer care, their skills, their
commitment and their enthusiasm and dedication in driving our further growth.
Outlook
Overall, we expect the world oil & gas markets to show year-on-year growth of
some 5% against a continuing backdrop of stable and relatively strong commodity
prices in 2004. We believe we will see continuing growth in our Well Support
activities and further successful international development in Production
Facilities. We also anticipate some recovery in Gas Turbine Services following a
number of initiatives to reduce costs and enhance performance. However, as
indicated in previous statements, we believe continuing industry-wide delays in
the progress of large deepwater engineering projects will hold back our overall
performance in 2004.
Our strategy remains robust and our activities are well positioned to exploit
key growth segments in worldwide oil & gas and power markets. We are continuing
to gain market share in key target markets and achieving good revenue growth
from both organic and acquisition developments. Overall, we are well positioned
in fundamentally strong markets and are confident we will deliver good medium
term growth.
Engineering & Production Facilities
Engineering & Production Facilities continued to extend its capability and
expertise, and delivered strong growth in 2003.
Engineering & Production Facilities provides a broad range of life-of-field
engineering, modifications, maintenance and operations services to oil and gas
customers worldwide. 2003 saw revenues increase 10% to $1,095.2 million (2002:
$992.8 million) and EBITA increase 4% to $95.8 million (2002: $91.7 million).
Engineering
We offer a broad range of engineering services in the design of oil and gas
production, transportation and processing facilities, with expertise in:
• upstream engineering: including deepwater topsides facilities;
lightweight topsides; subsea engineering and onshore processing facilities
• midstream engineering: including offshore & onshore pipeline
engineering; compression and LNG/GTL
• downstream engineering: including refining and petrochemicals
In North America, Mustang Engineering (Mustang) and Alliance Engineering
(Alliance) had a strong year working on more than 60% of current deepwater
projects in the Gulf of Mexico. This includes 'pre' Front End Engineering Design
(FEED) work on ChevronTexaco's Tahiti and GulfTerra's Atwater Valley Project. In
the North Sea, BP's Clair project is progressing well. In West Africa, detailed
engineering for a compliant piled tower in support of ChevronTexaco's
Benguela-Belize development in offshore Angola is under way. In Asia Pacific,
Mustang and JP Kenny continue to work on Murphy's Kikeh discovery - the deepest
development to date in Asia Pacific. Alliance provided conceptual and detailed
engineering, plus fabrication and commissioning support, to the Su Tu Den FPSO
project offshore Vietnam, which delivered first oil two weeks ahead of the
original schedule and received the ConocoPhillips Spirit award for excellence.
As we have previously indicated, a number of the larger deepwater engineering
projects worldwide are experiencing longer than anticipated delays before
sanction. Notwithstanding this, the economics of deepwater projects remain very
compelling. Deepwater is expected to account for in excess of 20% of the world's
production that comes on stream between now and 2010. This will require a
deepwater capital spend, including engineering, of around $50 billion during the
period. We believe that our strong market position and leading independent
engineering capability will win us a significant share of the engineering work
to be awarded.
In mid and shallow water, there were some important awards during the year. In
Venezuela, Alliance and Vepica are working together to provide engineering and
project management services for the ConocoPhillips offshore Corocoro
development. We provided engineering services to BP's Tangguh pipeline in
Indonesia and on the Phu My to Ho Chi Minh city pipeline in Vietnam. Leading on
from this, in 2004, we will begin the engineering construction management of the
Phu My pipeline. Ionik - the Group's materials engineering specialists - was
awarded a materials/integrity assurance program on ChevronTexaco's existing
pipelines in Angola. Additionally, JP Kenny won the initial FEED work, followed
by the construction management, for a new offshore pipeline system to transport
gas from Algeria to Europe.
With the anticipated significant growth in gas production, and LNG (liquefied
natural gas) and GTL (gas to liquids) processing, we are growing our midstream
capabilities and have worked with Syntroleum in the detailed design and
construction of their greenfield GTL demonstration plant in Tulsa.
In downstream, we are working on a number of clean fuel projects in the US and
expect to see further work as the 2006 date for implementation of new clean fuel
legislation approaches. In addition, we are growing our activities in the
Pharmaceutical sector.
Production Facilities
We offer a broad range of production facilities support to our clients around
the world, with expertise in:
• production enhancement: water injection; gas injection and gas
compression; debottlenecking and maintaining high operational uptime of
facilities
• maintenance management; maintenance systems design; life-of-field
modifications engineering, planning & execution; operations and maintenance
support and; in conjunction with our Gas Turbine Services division, rotating
equipment repair & maintenance
We enjoyed high overall activity levels in the North Sea throughout the year.
Our major contracts with Shell (through Sigma 3, a joint venture company) and BP
successfully undertook significant modifications on a number of the key North
Sea producing fields.
During the year we were awarded a five year £250 million contract with Talisman
to provide engineering, construction, operations and maintenance services to all
of their nine UK assets and the Flotta terminal. We are now supporting Apache on
the former BP Forties field assets and we were awarded a major five-year
contract by TOTAL for the provision of engineering, procurement, construction
and ancillary services for all of its UK North Sea assets.
The North Sea is continuing to evolve with new asset owners looking to
reinvigorate production both through incremental exploration and production
enhancement. We now have the capability to take on the Safety Case 'duty holder'
role taking operational responsibility for the production assets with the client
benefiting from world-leading maintenance and operations performance and access
to supply chain leverage through a reward based contract.
In the Gulf of Mexico we are carrying out field management for in excess of 35
offshore manned facilities for a number of local operators, including Unocal,
Apache and Forest. In Colombia, we commenced new five-year contracts to expand,
operate and maintain two early production facilities on the Florena and Recetor
fields. In Venezuela, the Wood Group managed SIMCO consortium has continued to
provide water injection services to PDVSA. In Brazil, we continue to provide
maintenance and modifications services to Petrobras' offshore facilities in the
Campos basin and recently secured a four-year contract to support four offshore
drilling installations. In Trinidad and Tobago, our new joint venture, NM Wood
Group, now has the capability to provide engineering, operations and maintenance
services.
We are also developing our production facilities activities in the Eastern
Hemisphere. In West Africa, we entered into a major two-year contract with
Marathon to provide operations support to the company's offshore production and
gas re-injection and its onshore gas processing and export facilities in
Equatorial Guinea. In Brunei, a Wood Group-led joint venture entered into a
five-year $160 million contract with Brunei Shell Petroleum for the management
and execution of engineering, fabrication, offshore construction and maintenance
services to upgrade certain of its offshore facilities in Brunei Darussalam.
Senior management succession
Bill Edgar will retire in May after nine very successful years as Group Director
for Engineering & Production Facilities. He will be replaced by two new
Executives - Trevor Noble and Les Thomas - who have just joined us and will both
join the main board in May. Trevor will lead the engineering activities and Les
the production facilities activities. Both have very significant experience from
highly successful careers in the industry and will play a key role in driving
the growth of the division.
Well Support
In 2003, we continued the development of our international business, added
long-term contracts and further enhanced our product range.
Well Support supplies solutions, products and services to increase production
rates and recovery from oil and gas reservoirs. It is among the market leaders
worldwide in artificial lift using electric submersible pumps (ESPs), in the
provision of surface wellheads and valves, and, in the Gulf of Mexico and in
South America, in the provision of electric and slickline services.
Well Support achieved an improved performance in 2003 with revenues of $412.6
million (2002: $360.0 million) and EBITA of $31.4 million (2002: $21.7 million).
Wood Group ESP
As the world's oilfields mature there is an increasing need for artificial lift
to drive production, and ESPs are the fastest growing form of artificial lift.
We are the third largest global provider of ESPs for use in artificial lift.
We believe that the Group's service focus is important in securing longer-term
contracts. In 2003, we were awarded a five-year, $50 million,
pay-for-performance (PFP) contract to supply electric submersible pumping
systems and services to Repsol in Argentina. The contract includes the
maintenance and repair of pumps currently owned by Repsol, together with the
installation, maintenance and repair of new units to be supplied by Wood Group
ESP. Together with our other PFP contracts, including those with PD Oman and
Joint Operations in Kuwait, we are now supporting approximately 2,000 wells
around the world on a long-term basis.
The drive to penetrate new markets continues. Wood Group ESP has just won its
most significant contract to date in the Russian market and is entering new
markets in the Middle East and Asia Pacific.
An important factor for customers in choosing our services and products is the
efficiency and run lives of our ESPs. During the year we received six US patents
for novel technologies related to electric submersible and surface pumping
systems. The innovations are designed to increase run lives, reduce total
operating costs and provide maximum serviceability of the systems all of which
can improve the performance and profitability of pay-for-performance contracts.
Joe Brady, who led Centrilift's very significant growth in the electric
submersible pump sector, has joined us as Chairman of Wood Group ESP.
Wood Group Pressure Control
Wood Group Pressure Control maintained its position as the second largest US and
fourth largest worldwide supplier of surface wellheads and valves.
In the first half of 2003, Wood Group Pressure Control acquired the assets of
Barber Industries (Barber) for $10.7 million. Barber is an established
manufacturer and supplier of wellhead equipment, valves and safety systems to
oil & gas production and pipeline industries in Canada. The acquisition will
help Wood Group Pressure Control grow its market share in Canada, and the
expansion of the customer base and the integration of the product lines is
providing further opportunities around the world.
A number of important contract wins in 2003 enabled Wood Group Pressure Control
to continue to grow, both in the US market and in the international arena. Among
these were an extension to our ConocoPhillips contract and increasing levels of
activity with a number of US independents. In addition, in the international
arena, contracts were secured in Saudi Arabia, Venezuela, Australia and Oman.
Wood Group Pressure Control, like Wood Group ESP, provides a combined product
and service offering. Apache North Sea have recently awarded us the contract for
the provision and maintenance of surface wellheads and valves on the Forties
Field in the North Sea.
Wood Group Logging Services
Wood Group Logging Services provides services and products focused on well
monitoring and mechanical downhole operations including electric and slickline
well logging and the supply of permanent monitoring gauges. During the year, we
continued to extend our service offering throughout the Gulf of Mexico, Texas
and Louisiana.
Wood Group Production Technology continues to make good progress and introduced
the 25,000 psi-rated version of its ROC(TM) family of downhole permanent
monitoring gauges, offering greater reliability and the ability to operate in
higher pressure, higher temperature environments. An early example of the
success of this product is the contract from Shell for installation of 12 of
these gauges in the Princess and Llano field wells in the Gulf of Mexico.
Wood Group Logging Services in Argentina delivered good growth in the year and
continues to benefit from a relatively strong local market.
Gas Turbine Services
The world leading independent in the repair and overhaul of industrial gas
turbines
Wood Group Gas Turbine Services is a world leading independent provider of
maintenance, repair and overhaul services for industrial gas turbines and
related high speed rotating equipment used for compression, transmission and
power generation in the oil & gas and power generation industries. Our market
differentiations are technology and the broad range of services that we provide,
positioning us to win longer-term contracts across multiple engine types and
across a wide range of activities.
2003 revenues increased by 29% to $455.4 million (2002: $352.0 million), but
EBITA decreased by 26% to $31.9 million (2002: $43.1 million).*
In aero-derivative gas turbines, we have three businesses that are either
original equipment manufacturer (OEM) joint ventures or OEM approved. Rolls Wood
Group, our joint venture with Rolls-Royce, opened two new state of the art
facilities for Rolls-Royce RB211 and Avon gas turbine overhaul and repair in
Aberdeen. Long-term contract wins included Statoil in Norway for their fleet of
Rolls-Royce engines on both the onshore gas terminal at Karsto and on the
offshore Heidrun platform. TransCanada Turbines, our Calgary-based joint venture
with TransCanada Pipelines, secured a $50 million, eight-year, long term service
agreement with a leading US power utility, for the maintenance of General
Electric and Rolls-Royce gas turbines, drawing on our ability to service
multiple engine types. Wood Group Pratt & Whitney, our joint venture with Pratt
& Whitney, continued to perform satisfactorily despite the difficult North
American power market.
Our Light Industrial Turbine (LIT) activities include the repair and overhaul of
the Siemens (Ruston) and Solar turbine range. Contracts awarded included a
six-year service agreement with British Nuclear Fuels (BNFL) to provide
maintenance services to certain of their generating equipment and controls at
the Westinghouse UK Fuel Business at Springfields, Preston, and a five-year
contract from Talisman in the North Sea to provide maintenance services for 45
gas turbines covering a range of manufacturers on seven of their North Sea
facilities.
Our Heavy Industrial Turbine (HIT) activities delivered a disappointing EBITA
performance, particularly in the second half. They were negatively impacted by
increased pricing pressure, resulting from the continuing power market
overcapacity and weak financial condition of some of the North American
independent power producers. This is unlikely to improve materially in 2004, but
we believe will provide a good market growth opportunity in the medium term.
Power markets in the rest of the world continue to grow.
We extended our HIT service offering with the opening of a Centre of Excellence
in Connecticut for component repair and rotor overhaul, and new generator repair
facilities in the US and the UK. Our new contracts included an estimated $11.5
million long-term maintenance services contract with GWF Energy in the US, that
covers field service, component repair and parts supply and is expected to run
until 2013. Our continuing investment in field services is providing pull
through opportunities for component repair and supply of parts, and our recent
Z.TEC acquisition will provide a strong foothold for growth of field services in
Europe. We continued to invest in extending our range of re-engineered parts
using advances in technology to generate improvements in reliability and
functionality for our customers. We have extended our services to include
turbine controls retrofits and have also expanded into power station operations
and maintenance.
Wood Group Power Solutions, a business providing packaged power solutions, won a
major contract with Drummond Limited for the design, procurement and
installation and commissioning of a 65 MW power plant, consisting of one General
Electric LM6000 and one General Electric LM2500 industrial gas turbine, to the
company's expanded coal mining operations in northern Colombia.
In gas turbine accessories and components, we have a number of businesses with
strong niche market positions. The component repair business in Dundee, UK has
retained its contract with the UK Ministry of Defence for the repair of engine
components for Tornado fighter aircraft. In the US, Fuel Systems won a
three-year order with Dominion Energy for the overhaul and repair of GE engine
fuel nozzles at its Chesterfield power station in Virginia.
* Figures exclude discontinuing activities
Financial Review
In 2003, the Group enjoyed strong growth in revenue and operating cash flows
Trading Performance
Details of Group-wide developments and the market conditions in the year are
laid out in the Chairman's statement and the operating reviews.
Group revenues increased by 15% to $1,992.6 million (2002: $1,738.1 million)
reflecting a year of strong activity for the Group, with good revenue growth in
all three divisions.
Group EBITA increased marginally by 1% to $137.2 million (2002: $135.9 million)
reflecting increased EBITA in both Engineering & Production Facilities and Well
Support offset by reduced EBITA in Gas Turbine Services. The overall EBITA
margin ('margin') fell from 7.8% in 2002 to 6.9%, as a result of lower margins
in Engineering & Production Facilities and Gas Turbine Services, offset to some
extent by increased margins in Well Support.
The lower overall margin in Engineering & Production Facilities is as a result
of a decline in margin in engineering activities, which includes the impact of
higher business development costs, partly offset by an increase in the
production facilities margin. The decline in Gas Turbine Services margin is as a
result of a number of factors, including: greater field service revenues;
investment in the development of new businesses; pricing pressures due to the
difficult power market; lower than anticipated activity levels in certain of our
workshops, particularly in the second half; and certain other one-off costs.
Well Support's margins increased due to higher volumes in our manufacturing
businesses combined with improved cost control.
The share of operating profit in associates fell to $1.3 million, which compares
to $6.5 million for 2002, reflecting the difficult trading conditions faced by
ASCO plc (ASCO) in 2003.
Amortisation, including the share of joint venture amortisation, increased from
$12.6 million in 2002 to $15.6 million in 2003 as a result of the acquisitions
made during both 2002 and 2003. Total operating profit decreased to $122.9
million (2002: $129.8 million) as a result of the lower profit from ASCO and
higher amortisation.
Exceptional items
The Group no longer exercises any significant influence over ASCO, and the
likelihood of receiving any proceeds from its investment is considered remote.
Accordingly, the Group has written off its investment, resulting in an
exceptional charge of $13.8 million. The Group has ceased to equity account for
its interest in ASCO with effect from December 2003.
There was an exceptional net loss on the disposal of tangible fixed assets
amounting to $3.5 million in 2003. This amount included a loss of $5.9 million
on an early production facility which was sold back to the customer, at their
request. This is partly offset by a gain of $2.4 million in respect of the
excess of insurance recoveries over the book value of fixed assets destroyed in
a fire at a Rolls Wood Group facility in 2002.
There was a further exceptional loss of $2.7 million relating to the closure
costs of the Group's discontinued aero engine overhaul operations.
Interest and Taxation
Net interest payable by the Group and joint ventures was $15.1m compared to
$11.0m in 2002. The increase in interest cost includes the impact of higher
non-US dollar interest costs where local borrowings are used to hedge currency
exposures, particularly in South America. The Group had interest cover1 of 9.1
times (2002: 12.4 times). The share of interest payable by ASCO was $4.8 million
(2002: $4.1 million). From December 2003 we will no longer reflect our share of
ASCO's interest cost in the Group's financial statements.
The tax charge of $37.8 million, which includes a credit of $1.3 million in
respect of exceptional items, reflects an effective tax rate 33.0% of profit
before tax, amortisation, impairments and exceptional items and compares to a
rate of 34.9% in 2002. The reduction in the tax rate is due to an increased
proportion of profits being earned in lower tax jurisdictions.
Earnings Per Share and Dividends
Diluted earnings per share was 8.4 cents compared to 13.8 cents in 2002 and was
impacted by the exceptional charges in the current year. The adjusted diluted
earnings per share before amortisation and exceptional items decreased to 15.4
cents (2002: 16.5 cents), as a result of a 2% reduction in adjusted earnings and
a 5% increase in the weighted average number of shares in issue. A final
recommended dividend of 2.2 cents per share (2002: 2.0 cents) takes the total
dividend for the year to 3.3 cents (2002: 3.0 cents).
Shareholders' Funds
Shareholders' funds increased by $33.4 million to $541.3 million. The increase
comprises retained profits of $25.7 million, $7.3 million of exchange movements
and other movements of $0.4 million.
Operating Cash Flow
The Group enjoyed strong cash flow from operating activities of $144.9 million
in 2003 compared to $127.9 million in 2002, an increase of 13% or $17.0 million.
The operating profit after adding back non-cash items was $141.4 million, and
working capital reduced by $4.0 million in spite of a significant increase in
revenues. Dividends from joint ventures increased to $11.7 million compared to
$7.7 million in 2002.
Capital Investment
There was continued investment in acquisitions and capital expenditure in 2003.
Capital expenditure totalled $74.5 million compared to $105.9 million in 2002.
The investment of $18.5 million in acquisitions in 2003 included the acquisition
of KCI and Barber Industries and compares with $77.1 million in 2002. The
disposals of Enterprise Engineering and WG Drilling Products resulted in net
proceeds of $7.3 million.
Net Debt and Financial Instruments
Net debt reduced by $2.2 million to $175.0 million at December 2003 from $177.2
million at December 2002 as a result of the net cash flows described above, less
an amount of $17.3 million invested in Group shares by employee share trusts in
order to satisfy the future exercise of options. The Group's gearing ratio2 has
decreased from 35% at December 2002 to 32% at December 2003.
Group borrowings are primarily US dollar denominated. Of the total long-term
borrowings of $230.9 million, $125.0 million are at a fixed rate of interest
averaging 4.4%, excluding margin. The Group's policies in respect of financial
instruments are set out in note 17 to the financial statements.
1 Interest cover is defined as EBITA divided by net group and joint venture
interest payable.
2 Gearing is calculated as net debt divided by shareholders funds.
John Wood Group PLC
Group profit and loss account
for the year to 31 December 2003
Note 2003 2002
US$m US$m
Revenues (including share of joint ventures)
Continuing operations 1,980.1 1,689.6
Acquisitions 12.5 44.9
------ ------
1,992.6 1,734.5
Discontinued operations - 3.6
------ ------
Revenues (including share of joint ventures) 1 1,992.6 1,738.1
Less: share of revenues of joint ventures (287.6) (305.6)
------ ------
Group revenues 1,705.0 1,432.5
Cost of sales (1,317.7) (1,091.6)
------ ------
Gross profit 387.3 340.9
------ ------
Net operating expenses 2 (300.6) (249.1)
------ ------
Operating profit of Group undertakings (after
US$14.3m (2002 : US$10.8m) goodwill amortisation) 86.7 91.8
Share of operating profit in joint ventures (after
US$1.3m (2002 : US$1.8m) goodwill amortisation) 34.9 31.5
Share of operating profit in associates 1.3 6.5
------ ------
Total operating profit: Group and share of joint
ventures and associates 2 122.9 129.8
Total operating profit comprises:
------ ------
Continuing operations 122.6 129.4
Acquisitions 0.3 0.9
------ ------
122.9 130.3
Discontinued operations - (0.5)
------ ------
Exceptional items
Loss on sale of fixed assets 5 (3.5) -
Loss on termination of discontinued operations 5 (2.7) -
------ ------
Profit on ordinary activities before interest 116.7 129.8
Amounts written off investments 5 (13.8) -
Net interest payable - Group 6 (12.6) (8.3)
- joint ventures 6 (2.5) (2.7)
- associates 6 (4.8) (4.1)
------ ------
Profit on ordinary activities before taxation 83.0 114.7
Taxation on profit on ordinary activities 7 (37.8) (44.4)
------ ------
Profit on ordinary activities after taxation 45.2 70.3
Equity minority interests 23 (3.9) (6.0)
------ ------
Profit for the financial year 41.3 64.3
Dividends 8 (15.6) (16.1)
------ ------
Retained profit for the financial year 22 25.7 48.2
------ ------
Basic earnings per ordinary share 9 8.7c 15.7c
Diluted earnings per ordinary share 9 8.4c 13.8c
Adjusted earnings per ordinary share 9 15.4c 16.5c
John Wood Group PLC
Group Balance sheet
as at 31 December 2003
2003 2002
Note US$m US$m
Fixed assets
Intangible fixed assets 10 220.4 227.3
Tangible fixed assets 11 174.2 206.7
Investments in joint ventures 12
------- -------
Share of gross assets 274.4 280.0
Share of gross liabilities (180.8) (209.2)
Goodwill arising on acquisition 10.0 9.4
------- -------
103.6 80.2
Investments in associates 12 - 8.8
Other investments 12 19.8 1.2
------- -------
Total investments 123.4 90.2
------- -------
518.0 524.2
------- -------
Current assets
Stocks 13 180.5 152.6
Debtors 14 415.3 349.2
Cash at bank and in hand 69.8 56.2
------- -------
665.6 558.0
------- -------
Creditors: amounts falling due within one year
Bank loans and overdrafts 15 (13.9) (10.7)
Other creditors 15 (336.7) (281.6)
------- -------
(350.6) (292.3)
------- -------
Net current assets 315.0 265.7
------- -------
Total assets less current liabilities 833.0 789.9
Creditors: amounts falling due after one year
Bank loans 16 (230.9) (222.7)
Other creditors 16 (7.5) (17.0)
------- -------
(238.4) (239.7)
------- -------
Provisions for liabilities and charges 18 (15.3) (11.4)
------- -------
Net assets excluding pension liability 579.3 538.8
Pension liability 25 (19.3) (16.3)
------- -------
Net assets including pension liability 560.0 522.5
------- -------
Capital and reserves
Called up share capital 19 23.4 23.3
Share premium account 20 200.8 200.3
Capital reduction reserve 21 88.1 88.1
Profit and loss account 22 229.0 196.2
------- -------
Total shareholders' funds 541.3 507.9
Equity minority interests 23 18.7 14.6
------- -------
560.0 522.5
------- -------
John Wood Group PLC
Statement of total recognised gains and losses
for the year to 31 December 2003
Note 2003 2002
US$m US$m
Profit for the financial year 41.3 64.3
Actuarial loss recognised in the pension scheme 25 (1.2) (14.0)
Movement in deferred tax relating to pension liability 25 0.4 4.2
Exchange movement on retranslation of foreign currency
net assets 7.3 (1.2)
------- -------
Total recognised gains for year 47.8 53.3
------- -------
Included in the above are total recognised gains of US$32.3m (2002: US$17.0m) in
respect of joint ventures and losses of US$2.6m (2002 : gains of US$1.6m) in
respect of associates.
There is no material difference between the profit on ordinary activities before
taxation, the retained profit for the year stated above and their historical
cost equivalents.
Reconciliation of movement in shareholders' funds
for the year to 31 December 2003
Note 2003 2002
US$m US$m
Profit for the financial year 41.3 64.3
Dividends 8 (15.6) (16.1)
------- -------
25.7 48.2
Issue of new shares 0.6 216.2
Redemption of convertible redeemable preference shares - (29.6)
Expenses of share issue - (11.9)
Actuarial loss recognised in the pension scheme net of
deferred tax 25 (0.8) (9.8)
UITF 17 charge 0.6 -
Exchange movement on retranslation of foreign currency
net assets 7.3 (1.2)
------- -------
Net increase in shareholders' funds 33.4 211.9
Shareholders' funds at 1 January 507.9 296.0
------- -------
Shareholders' funds at 31 December 541.3 507.9
------- -------
John Wood Group PLC
Group cash flow statement
for the year to 31 December 2003
Note 2003 2002
US$m US$m
Operating activities
Net cash inflow from operating activities 30 144.9 127.9
Dividends from joint ventures 11.7 7.7
------- -------
156.6 135.6
------- -------
Returns on investments and servicing of finance
Interest received 2.6 7.5
Interest paid (13.9) (15.5)
Non-equity dividends paid - (6.5)
------- -------
(11.3) (14.5)
------- -------
Taxation
UK corporation tax paid (6.0) (0.4)
Overseas tax paid (32.6) (22.6)
------- -------
(38.6) (23.0)
------- -------
Capital expenditure and financial investment
Purchase of tangible fixed assets (74.5) (105.9)
Sale of tangible fixed assets 23.0 5.1
Purchase of other investments 12 (17.3) -
Disposal of other investments 12 0.4 0.2
Repayment of loans from joint ventures 3.3 6.2
------- -------
(65.1) (94.4)
------- -------
Acquisitions and disposals
Acquisition of minority interests 23 (0.2) (18.2)
Purchase of subsidiary undertakings, net of cash acquired 24 (18.5) (77.1)
Disposal of subsidiary undertakings, net of cash disposed 24 7.3 -
Investment in joint ventures 12 (2.8) (0.6)
Purchase of other intangibles (3.2) -
Deferred consideration 24 (0.4) (0.4)
Additional paid in capital from minority shareholders 23 0.3 -
------- -------
(17.5) (96.3)
------- -------
Equity dividends paid (14.7) (7.5)
------- -------
Net cash inflow/(outflow) before management of liquid
resources and financing 9.4 (100.1)
------- -------
Management of liquid resources
Decrease/(increase) in cash placed on deposit 32 3.3 (0.9)
------- -------
Financing
Increase/(decrease) in bank loans 32 2.2 (153.6)
Issue of ordinary shares 0.6 216.2
Redemption of convertible redeemable preference shares - (29.6)
Expenses of share issue - (11.9)
------- -------
Net cash inflow from financing 2.8 21.1
------- -------
Increase/(decrease) in cash 32 15.5 (79.9)
------- -------
John Wood Group PLC
Accounting policies
for the year to 31 December 2003
The financial statements are prepared under the historical cost convention and
in accordance with applicable Accounting Standards in the United Kingdom. A
summary of the more important Group accounting policies which have been
consistently applied, is set out below.
Basis of consolidation
The Group financial statements are the result of the consolidation of the
financial statements of the Group's subsidiary undertakings from the date of
acquisition or up until the date of disposal as appropriate. All Group companies
prepare accounts to 31 December.
Reporting currency
The Group's earnings stream is primarily US dollars and the principal functional
currency is the US dollar, being the most representative currency of the Group.
The Group financial information is therefore prepared in US dollars.
The following sterling to US dollar exchange rates have been used in the
preparation of these accounts:-
Average rate Closing rate
-------------------------------- ----------- -----------
£1 = US$ £1 = US$
Year ended 31 December 2002 1.5037 1.6099
Year ended 31 December 2003 1.6406 1.7901
-------------------------------- ----------- -----------
Revenue recognition
Revenue is recognised only when it is probable that the economic benefits
associated with a transaction will flow to the Group and the amount of revenue
can be measured reliably. Revenue from product sales is recognised when the
significant risks and rewards of ownership have been transferred to the buyer,
which is normally upon delivery of products and customer acceptance, if any.
Revenue from services is recognised as the services are rendered, including
revenues based on contractual rates per man hour in respect of multi-year
service contracts. Incentive performance revenues are recognised upon completion
of agreed objectives. Revenues are stated net of sales taxes and discounts.
Joint ventures and associates
The Group's share of profits less losses of joint ventures and associates is
included in the Group profit and loss account and the Group's share of their net
assets is included in the Group balance sheet. In addition, the Group's share of
revenues, operating profit, interest and tax of joint ventures and operating
profit, interest and tax of associates is separately disclosed.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of an
acquisition over the fair value of the Group's share of the net assets of the
acquired subsidiary, joint venture, or associate at the date of acquisition. G
oodwill is amortised using the straight line method over its estimated life, not
to exceed 20 years. When estimating the life of goodwill for each acquisition
the principal factors that the Group takes into account are the nature and
foreseeable life of the acquired business, the stability and foreseeable life of
the industry to which the goodwill relates and the effects of product
obsolescence and changes in demand for the acquired business.
John Wood Group PLC
Accounting policies
for the year to 31 December 2003
Tangible fixed assets
Tangible fixed assets are stated at historical cost less aggregate depreciation.
No depreciation is charged with respect to freehold land and assets in course of
construction. Transfers from fixed assets to current assets are undertaken at
the lower of cost and net realisable value.
Depreciation is calculated on the straight line method over the estimated useful
life of the asset, as follows:
Freehold buildings 25-50 years
Long leasehold buildings 25-50 years
Short leasehold buildings period of lease
Plant and equipment 3-10 years
When estimating the useful life of an asset group, the principal factors the
Group takes into account are the durability of the assets, the intensity at
which the assets are expected to be used and the expected rate of technological
developments.
Impairment
The Group performs impairment reviews in respect of fixed assets and goodwill
whenever events or changes in circumstance indicate that the carrying amount may
not be recoverable. An impairment loss is recognised when the recoverable amount
of an asset, which is the higher of the asset's net realisable value and its
value in use, is less than its carrying amount.
Stocks
Stocks, which include raw materials, work in progress and finished goods, are
stated at the lower of cost and net realisable value. Product based companies
determine cost by weighted average methods using standard costing to gather raw
material, labour and overhead costs. These costs are adjusted, where
appropriate, to correlate closely the standard costs to the actual costs
incurred based on variance analysis. Service based companies' stocks consist of
spare parts and other consumables. Serialised parts are costed using the
specific identification method and other materials are generally costed using
the first in, first out method.
Net realisable value is the estimated selling price in the ordinary course of
business, less the costs of completion and selling expenses. Allowance is made
for obsolete and slow-moving items, based upon annual usage by part.
Long-term contracts
Revenue on long-term contracts is recognised according to the stage reached in
the contract by reference to the value of work done. A prudent estimate of the
profit attributable to work completed is recognised once the outcome of the
contract can be assessed with reasonable certainty. Provision is made for all
foreseeable losses. The amount by which the revenue exceeds payments on account
is shown under debtors as amounts recoverable on contracts. Any excess of
payments on account over revenue recorded on contracts are classified under
creditors due within one year.
Deferred taxation
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more, or a right to pay less, tax in
the future have occurred at the balance sheet date, with the following
exceptions:-
• provision is made for gains on disposal of fixed assets that have been
rolled over into replacement assets only where, at the balance sheet date,
there is a commitment to dispose of the replacement assets.
• provision is made for the tax that would arise on remittance of the
retained earnings of overseas subsidiaries only to the extent that, at the
balance sheet date, dividends have been declared or there is a binding
commitment.
• on the basis of all available evidence deferred tax assets are
recognised only to the extent that the Directors consider that it is more
likely than not that there will be suitable taxable profits from which the
future reversal of the underlying timing differences can be deducted.
Deferred tax is measured on a non-discounted basis at the rates that are
expected to apply in the periods in which timing differences reverse, based on
tax rates and laws enacted or substantively enacted at the balance sheet date.
John Wood Group PLC
Accounting policies
for the year to 31 December 2003
Foreign currencies
Profit and loss accounts of entities that prepare their results in a currency
other than the US dollar are translated into US dollars at average rates of
exchange for the year and assets and liabilities are translated into US dollars
at the rates of exchange ruling at 31 December. Exchange differences arising on
translation of net assets in such entities held at the beginning of the year,
together with those differences resulting from the restatement of profits and
losses from average to year end rates, are taken to reserves. Other exchange
differences are taken directly to the profit and loss account.
Exchange differences arising on non US dollar currency borrowings raised to
finance equity investments denominated in a non US dollar currency, and which
are designated as hedges of such investments, are taken to reserves on
consolidation and offset against the exchange differences arising on these
assets.
In each individual entity, transactions in overseas currencies are translated at
the exchange rates ruling at the date of the transaction or, where forward
contracts have been arranged, at the contractual rates. Monetary assets and
liabilities denominated in foreign currencies are retranslated at the exchange
rates ruling at the balance sheet dates or at a contractual rate if applicable
and any exchange differences are taken to the profit and loss account.
In 2002, as a result of the IPO, significant sterling denominated share capital
was raised. The directors consider it appropriate to record equity share capital
in the accounts of John Wood Group PLC at the exchange rate ruling on the date
it was raised.
Financial instruments
The Group uses derivative financial instruments to hedge its exposures to
fluctuations in interest and foreign exchange rates. Instruments accounted for
as a hedge are designated as a hedge at the inception of contracts. Receipts and
payments on interest rate instruments are recognised as adjustments to interest
expense over the life of the instrument. Gains and losses on foreign currency
hedges are recognised on maturity of the underlying transaction.
Operating leases
As lessee
Payments made under operating leases are charged to the profit and loss account
on a straight line basis over the period of the lease.
As lessor
Operating lease rental income arising from leased assets is recognised in the
profit and loss account on a straight line basis over the period of the lease.
Finance leases
As lessor
Finance lease rental income arising from leased assets is recognised in the
profit and loss account so as to produce a constant rate of return on the net
cash investment. Amounts receivable under finance leases represent the
outstanding amounts due under these agreements less amounts allocated to future
periods.
Pension costs
The Group has adopted FRS 17 'Retirement Benefits'. The Group operates a defined
benefit scheme and a number of defined contribution schemes. The assets of these
schemes are held in separate trustee administered funds. The defined benefit
scheme's assets are measured using market values. Pension scheme liabilities are
measured by an actuary using the projected unit method and discounted at the
current rate of return on a high quality corporate bond of equivalent term and
currency to the liability. The increase in the present value of the liabilities
of the Group's defined benefit pension schemes expected to arise from employee
service in the period is charged to operating profit. The expected return on the
schemes' assets and the increase during the period in the present value of the
schemes' liabilities arising from the passage of time are included in other
finance income/expense. Actuarial gains and losses are recognised in the
consolidated statement of total recognised gains and losses.
The pension scheme's surpluses, to the extent that they are considered
recoverable, or deficits are recognised in full and presented on the face of the
balance sheet net of the related deferred tax.
The Group's contributions to defined contribution schemes are charged to the
profit and loss account in the period to which the contributions relate.
John Wood Group PLC
Accounting policies
for the year to 31 December 2003
Use of estimates
The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue during the
reporting period. Actual results could differ from those estimates.
Warranties
Provision is made for the estimated liability on all products and services still
under warranty, including claims already received, based on past experience.
Employee share schemes
The Group has a number of share option schemes. Other than for options granted
under the Long Term Retention Plan ('LTRP'), the Group grants options at the
current market value and as a result there is no charge arising on the grant of
these options. For options granted under the LRTP a charge is made to the profit
and loss account for the difference between the market value of the options and
the exercise price at the grant date, in accordance with the requirements of
UITF 17 'Employee Share Schemes'. The charge is accrued over the vesting period
of the options.
Employers' National Insurance Contributions become payable on the exercise of
unapproved share options issued after 5 April 1999 on the difference between the
market value of the Company's ordinary shares at the date of exercise and the
exercise price of the underlying options. Provision for this liability is made
based upon the market value of options at the balance sheet date and spread over
the vesting period of the options.
The Group is deemed to have control of the assets, liabilities, income and costs
of its employee share ownership trust. It has therefore been included in the
financial statements of the Group.
Business segments
The Group provides services and products to the oil and gas and power industries
worldwide. The Group is organised into three business segments:
- Engineering & Production Facilities
- Well Support
- Gas Turbine Services
Engineering & Production Facilities provides a broad range of life-of-field
engineering, modifications, maintenance and operations services to oil and gas
customers worldwide. Well Support supplies solutions, products and services to
increase production rates and recovery from oil and gas reservoirs. It is among
the market leaders worldwide in artificial lift using electric submersible
pumps, in the provision of surface wellheads and valves and, in the Gulf of
Mexico and in South America, in the provision of electric and slickline
services. Gas Turbine Services is a world leading independent provider of
maintenance, repair and overhaul services for industrial gas turbines and
related high speed rotating equipment used for compression, transmission and
power generation in the oil and gas and power generation industries.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December2003
1. Segmental reporting
Business segments
Revenues EBITDA (1) EBITA (1) Operating profit
2003 2002 2003 2002 2003 2002 2003 2002
US$m US$m US$m US$m US$m US$m US$m US$m
Engineering &
Production
Facilities
Group 941.0 823.7 91.4 82.5 77.4 75.7 69.9 69.2
Joint Ventures 154.2 169.1 21.4 19.3 18.4 16.0 17.9 15.6
------ ------ ------ ------ ------ ------ ------ ------
1,095.2 992.8 112.8 101.8 95.8 91.7 87.8 84.8
------ ------ ------ ------ ------ ------ ------ ------
Well Support
Group 408.4 354.8 45.1 32.7 31.3 22.5 28.8 20.4
Joint Ventures 4.2 5.2 0.2 (0.5) 0.1 (0.8) 0.1 (0.8)
------ ------ ------ ------ ------ ------ ------ ------
412.6 360.0 45.3 32.2 31.4 21.7 28.9 19.6
------ ------ ------ ------ ------ ------ ------ ------
Gas Turbine
Services
Group 326.2 220.7 24.2 32.3 14.2 25.0 9.9 22.8
Joint Ventures 129.2 131.3 20.1 20.5 17.7 18.1 16.9 16.7
------ ------ ------ ------ ------ ------ ------ ------
455.4 352.0 44.3 52.8 31.9 43.1 26.8 39.5
------ ------ ------ ------ ------ ------ ------ ------
Total
excluding
discontinuing
operations 1,963.2 1,704.8 202.4 186.8 159.1 156.5 143.5 143.9
Gas Turbine
Services -
discontinuing
operations (2) 29.4 33.3 (1.8) (2.3) (2.6) (3.5) (2.6) (3.5)
------ ------ ------ ------ ------ ------ ------ ------
Total 1,992.6 1,738.1 200.6 184.5 156.5 153.0 140.9 140.4
Comprising
------ ------ ------ ------ ------ ------ ------ ------
- Group 1,705.0 1,432.5 158.9 145.2 120.3 119.7 106.0 108.9
- Joint
Ventures 287.6 305.6 41.7 39.3 36.2 33.3 34.9 31.5
------ ------ ------ ------ ------ ------ ------ ------
Central
costs (17.6) (16.5) (19.3) (17.1) (19.3) (17.1)
Share of
operating
profit in
associates (4) 1.3 6.5
------ ------ ------ ------ ------ ------ ------ ------
Total 1,992.6 1,738.1 183.0 168.0 137.2 135.9 122.9 129.8
====== ====== ====== ====== ====== ======
Exceptional
items (5) (20.0) -
Net interest
payable (19.9) (15.1)
------ ------
Profit before
taxation 83.0 114.7
====== ======
Note:
(1) EBITDA represents operating profit (including the share of joint ventures)
before deduction of depreciation (US$45.8m) and goodwill amortisation
(US$15.6m). EBITA represents EBITDA less depreciation (including the share of
joint venture depreciation). These financial terms are provided as they are the
key units of measurement used by the Group in the management of its business.
(2) The discontinuing operations in the Gas Turbine Services business relate to
Aero engine overhaul companies. The discontinuing revenues and operating losses
above includes the discontinued revenues and operating losses respectively, as
shown on the face of the profit and loss account.
(3) Revenues arising from sales between segments are not significant and have
been eliminated in the above analysis.
(4) The Group's associate, ASCO plc was not part of any of the above business
segments. The Group ceased to account for ASCO plc as an associate with effect
from 15 December 2003.
(5) The exceptional items in 2003 are split between continuing operations
US$3.5m, discontinued operations US$2.7m and amounts written off investments
US$13.8m
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
1. Segmental reporting (continued)
2003 2002
Net operating assets US$m US$m
Engineering & Production Facilities
- Group 189.5 226.2
- Joint Ventures 47.2 42.0
------- -------
236.7 268.2
------- -------
Well Support
- Group 208.9 179.9
- Joint Ventures 3.2 2.6
------- -------
212.1 182.5
------- -------
Gas Turbine Services
- Group 223.1 207.6
- Joint Ventures 86.8 73.7
------- -------
309.9 281.3
------- -------
Total allocated excluding discontinuing operations 758.7 732.0
Gas Turbine Services - discontinuing operations 20.7 22.1
Unallocated (30.6) (17.5)
------- -------
Net operating assets 748.8 736.6
Investment in own shares 19.8 1.2
Net debt - Group (175.0) (177.2)
Net debt - Joint Ventures (33.6) (38.1)
------- -------
Net assets 560.0 522.5
======= =======
The impact of acquisitions on Group revenues and operating profit in the year of
acquisition is as follows:-
2003 2002
US$m US$m
Revenues
Engineering & Production Facilities 2.0 27.3
Well Support 10.5 -
Gas Turbine Services - 17.6
------ -------
Total revenues 12.5 44.9
------ -------
Operating profit
Engineering & Production Facilities - (0.1)
Well Support 0.3 -
Gas Turbine Services - 1.0
------ -------
Total operating profit 0.3 0.9
------ -------
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
1. Segmental reporting (continued)
Geographical segments
Europe North America Rest of World Total
2003 2002 2003 2002 2003 2002 2003 2002
US$m US$m US$m US$m US$m US$m US$m US$m
Revenues by
destination
Group 450.9 467.0 879.4 720.7 374.7 244.8 1,705.0 1,432.5
Joint
ventures 122.3 141.1 84.3 63.0 81.0 101.5 287.6 305.6
------ ------ ------ ------ ------ ------ ------ ------
Total
revenues 573.2 608.1 963.7 783.7 455.7 346.3 1,992.6 1,738.1
------ ------ ------ ------ ------ ------ ------ ------
Revenues by
origin
Group 503.0 494.5 941.3 777.1 260.7 160.9 1,705.0 1,432.5
Joint
ventures 148.0 171.5 92.5 65.1 47.1 69.0 287.6 305.6
------ ------ ------ ------ ------ ------ ------ ------
Total
revenues 651.0 666.0 1,033.8 842.2 307.8 229.9 1,992.6 1,738.1
------ ------ ------ ------ ------ ------ ------ ------
Operating
profit
Group 30.5 21.6 31.9 51.6 24.3 18.6 86.7 91.8
Joint
ventures 16.8 15.6 6.7 6.3 11.4 9.6 34.9 31.5
Associates 1.5 5.5 (1.0) 0.2 0.8 0.8 1.3 6.5
------ ------ ------ ------ ------ ------ ------ ------
Total
operating
profit 48.8 42.7 37.6 58.1 36.5 29.0 122.9 129.8
------ ------ ------ ------ ------ ------
Exceptional
items (20.0) -
Net interest
payable (19.9) (15.1)
------ ------
Profit before
taxation 83.0 114.7
------ ------
2003 2002
US$m US$m
Net operating
assets
Europe 113.5 118.8
North
America 502.0 467.9
Rest of
World 133.3 149.9
------ ------
Net operating
assets 748.8 736.6
Investment in
own shares 19.8 1.2
Net debt -
Group (175.0) (177.2)
Net debt -
Joint
Ventures (33.6) (38.1)
------ ------
Net assets 560.0 522.5
------ ------
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
2. Total operating profit : Group and share of joint ventures and associates
Continuing operations Acquisitions Discontinued operations Total
2003 2002 2003 2002 2003 2002 2003 2002
US$m US$m US$m US$m US$m US$m US$m US$m
Revenues
including
share of
joint
ventures 1,980.1 1,689.6 12.5 44.9 - 3.6 1,992.6 1,738.1
Less share
of revenues
of joint
ventures (287.6) (305.6) - - - - (287.6) (305.6)
------ ------ ------ ------ ------ ------ ------ ------
Group
revenues 1,692.5 1,384.0 12.5 44.9 - 3.6 1,705.0 1,432.5
Cost of
sales (1,308.9) (1,049.6) (8.8) (38.4) - (3.6) (1,317.7) (1,091.6)
------ ------ ------ ------ ------ ------ ------ ------
Gross
profit 383.6 334.4 3.7 6.5 - - 387.3 340.9
Net
operating
expenses (297.2) (243.0) (3.4) (5.6) - (0.5) (300.6) (249.1)
------ ------ ------ ------ ------ ------ ------ ------
Operating
profit of
Group
undertakings 86.4 91.4 0.3 0.9 - (0.5) 86.7 91.8
Share of
operating
profit in
joint
ventures 34.9 31.5 - - - - 34.9 31.5
Share of
operating
profit in
associates 1.3 6.5 - - - - 1.3 6.5
------ ------ ------ ------ ------ ------ ------ ------
Total
operating
profit 122.6 129.4 0.3 0.9 - (0.5) 122.9 129.8
------ ------ ------ ------ ------ ------ ------ ------
Total operating profit is stated after charging: 2003 2002
US$m US$m
Depreciation of tangible fixed assets
Group 40.3 26.1
Joint ventures 5.5 6.0
Amortisation of intangible assets
Group 14.3 10.8
Joint ventures 1.3 1.8
Hire and operating lease payments
Plant and equipment 10.1 4.9
Land and buildings 23.5 24.7
Auditors' remuneration - UK
Audit 0.9 0.9
IPO work - 0.7
Tax 0.1 -
Auditors' remuneration - overseas
Audit 0.3 0.2
Tax 0.2 0.4
Other services - 0.1
Net operating expenses comprise:
Administrative expenses 286.3 238.3
Goodwill amortisation - Group 14.3 10.8
------- -------
300.6 249.1
------- -------
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
3. Employee numbers and staff costs
Number Number
2003 2002
The average monthly number of persons employed by the Group
during the year was as follows:
Europe 2,858 2,606
North America 5,596 4,979
Rest of the World 2,717 2,045
------- -------
11,171 9,630
------- -------
Direct production 9,102 7,878
Management and staff 2,069 1,752
------- -------
11,171 9,630
------- -------
US$m US$m
Total staff costs in respect of these persons amounted to:
Wages and salaries 611.3 539.7
Social security costs 50.2 50.7
Pension costs - defined benefit schemes (note 25) 4.6 3.7
Pension costs - defined contribution schemes (note 25) 13.3 14.5
------- -------
679.4 608.6
------- -------
The above figures exclude employees of joint ventures and contract staff. The
average number of employees of the joint ventures in 2003 was 2,115 (2002 :
2,292).
4. Directors' emoluments
2003 2002
US$'000 US$'000
Aggregate emoluments 2,762 2,176
Aggregate gains made on the exercise of share options 1,665 568
Amounts receivable under long term incentive schemes - 239
Company contributions to defined contribution schemes 13 12
3 directors exercised share options in the year (2002 : 3). Retirement benefits
are accruing to 2 directors under a defined contribution scheme (2002 : 2) and 3
directors under defined benefit schemes (2002 : 3).
Aggregate emoluments exclude sums paid to third parties, which are disclosed in
the Directors Remuneration Report.
Full details of individual directors' remuneration are given in the Directors'
Remuneration Report.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
5. Exceptional items
2003 2002
US$m US$m
Loss on sale of fixed assets
Loss on sale of tangible fixed assets (3.5) -
Loss on termination of discontinued operations
Closure costs (2.7) -
Amounts written off investments
Amounts written off investment in ASCO plc (13.8) -
(i) Loss on sale of fixed assets
The net loss of US$3.5m on asset disposals includes a loss of US$5.9m on fixed
assets disposed of in the Engineering & Production Facilities division during
December 2003. This loss is partially offset by a gain of US$2.4m in respect of
the excess of insurance recoveries over the book value of fixed assets destroyed
by a fire at our Rolls Wood Group joint venture facility in 2002. A net tax
charge of US$0.7m has been made in respect of these items.
(ii) Loss on termination of discontinued operations
In 2001, a charge of US$13.6m was made in respect of closure costs of the
Group's aero engine overhaul business based in Connecticut, which was closed in
March 2002. A further charge of US$2.7m has been made during 2003 in respect of
the remaining fixed assets and stock and certain liabilities. A tax credit of
US$1.0m has been booked in respect of this provision.
(iii) Amounts written off investments
During the year, ASCO plc ('ASCO') has considered various options for
refinancing its overall capital structure. The refinancing initiatives are
continuing, however it is believed that the overall debt is at such a level as
to make the prospects remote of the Group receiving any proceeds from its
investment in ASCO. The Group effectively no longer exercises significant
influence and accordingly has ceased to account for it as an associate with
effect from 15 December 2003. As a result the Group has transferred the
investment to 'Other Investments' and written it off in full resulting in a
charge of US$13.8m. The Group has no further financial obligation in relation to
ASCO. A tax credit of US$1.0m has been booked in relation to the amounts written
off.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
6. Net interest payable
2003 2002
US$m US$m
Interest receivable on short term deposits 2.0 6.9
Interest payable on bank loans and overdrafts (14.0) (15.5)
Other finance (expense)/income (note 25) (0.6) 0.3
------- -------
Total Group (12.6) (8.3)
Joint ventures (2.5) (2.7)
Associates (4.8) (4.1)
------- -------
Net interest payable (19.9) (15.1)
------- -------
7. Taxation on profit on ordinary activities
2003 2002
US$m US$m
Current tax:
UK corporation tax at 30% (2002 : 30%) 9.2 5.8
Overseas tax 26.3 32.1
Joint ventures 6.7 7.5
Associates (0.7) 1.0
Adjustments in respect of prior years (4.0) (0.5)
------- -------
37.5 45.9
Deferred tax:
Origination and reversal of timing differences (2.0) (1.3)
Adjustments in respect of prior years 3.6 (0.2)
------- -------
1.6 (1.5)
------- -------
Tax on exceptional items (see note 5) (1.3) -
------- -------
Total tax charge 37.8 44.4
------- -------
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
7. Taxation on profit on ordinary activities (continued)
Tax on recognised gains and losses not included in the profit and loss account
comprise a US$0.4m (2002 : US$4.2m) deferred tax credit in respect of the
movement on the Group's net pension liability.
The current tax charge on profit on ordinary activities before exceptional items
and goodwill amortisation varied from the rate of corporate tax expected on the
basis of the locations of the Group's operations due to the following factors:
2003 2002
US$m US$m
Profit on ordinary activities before tax, exceptional items and
goodwill amortisation 118.6 127.3
------- -------
Corporate tax at expected rate 31.78% (2002 : 34.78%) 37.7 44.3
Deductible amortisation (2.1) (1.3)
Non-recognition of losses 3.0 0.9
Permanent differences 0.9 1.0
Effect of deferred tax 2.0 1.5
Adjustments to current tax charge for prior periods (4.0) (0.5)
------- -------
Current tax charge 37.5 45.9
------- -------
8. Dividends
2003 2002
US$m US$m
Dividends on non-equity shares
First convertible preference shares - 0.2
Second convertible preference shares - 0.4
First convertible redeemable preference shares - 0.6
Second convertible redeemable preference shares - 0.7
------- -------
- 1.9
Dividends on equity shares
Ordinary shares:
Interim paid 1.1 cent per share (2002 : 1.0 cent per share) 5.2 4.7
Final proposed 2.2 cents per share (2002 : 2.0 cents per share) 10.4 9.5
------- -------
Total dividends 15.6 16.1
------- -------
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
9. Earnings per ordinary share
2003 2002
------ ------ ------ ------ ------ ------
Number Per- Number Per-
of share of share
Earnings Shares Amount Earnings Shares Amount
US$m Millions Cents US$m Millions Cents
Profit for the
financial year 41.3 64.3
Less:
Preference dividends - (1.9)
------ ------ ------ ------ ------ ------
Basic EPS 41.3 473.9 8.7 62.4 396.2 15.7
------ ------
Effect of dilutive
securities:
Options - 16.7 - 18.8
Convertible
preference
shares - - 1.9 50.4
------ ------ ------ ------ ------ ------
Diluted EPS 41.3 490.6 8.4 64.3 465.4 13.8
------ ------
Goodwill
amortisation 15.6 12.6
Effect of
exceptional items,
net of tax :
Loss on sale
of fixed
assets 4.2 -
Loss on
termination of
discontinued
operations 1.7 -
Amounts
written off
investments 12.8 -
------ ------ ------ ------ ------ ------
Adjusted EPS
before
goodwill
amortisation
and
exceptional
items 75.6 490.6 15.4 76.9 465.4 16.5
------ ------ ------ ------ ------ ------
Shares held by the Group's employee share ownership trusts are excluded from the
number of shares in calculating basic, diluted and adjusted EPS. Adjusted EPS is
disclosed to show the results excluding the impact of goodwill amortisation and
exceptional items, net of tax.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
10. Intangible fixed assets - Goodwill
Joint ventures Subsidiaries
US$m US$m
Cost
At 1 January 2003 10.4 264.2
Exchange adjustments - 1.5
Additions 1.1 6.4
Disposals - (0.7)
-------- --------
At 31 December 2003 11.5 271.4
-------- --------
Aggregate amortisation
At 1 January 2003 1.0 36.9
Exchange adjustments - 0.5
Charge for the year 0.5 14.3
Disposals - (0.7)
-------- --------
At 31 December 2003 1.5 51.0
-------- --------
Net book value
At 31 December 2003 10.0 220.4
-------- --------
At 31 December 2002 9.4 227.3
-------- --------
All goodwill relates to the excess of cost of acquisition over the fair value of
the Group's share of the net assets acquired. Intangible fixed assets
(subsidiaries) includes US$3.2m of other intangibles (2002 : US$0.1m). In
addition to the joint venture amortisation of US$0.5m above, joint venture
operating profits are stated after deducting US$0.8m of goodwill amortisation.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
11. Tangible fixed assets
Land and buildings
Leasehold Plant and
Freehold Long Short equipment Total
US$m US$m US$m US$m US$m
------- ------- ------ -------- -------
Cost
At 1 January 2003 25.7 20.6 5.2 270.7 322.2
Exchange adjustments 1.2 0.2 2.0 8.4 11.8
Additions 1.3 1.2 10.9 71.6 85.0
Disposals (0.2) - (1.3) (48.6) (50.1)
Acquisitions 3.3 - - 2.0 5.3
Company sold - - (0.8) (2.1) (2.9)
Reclassification of land and
buildings 4.3 (17.3) 13.0 - -
Reclassification as current
assets - - - (57.1) (57.1)
------- ------- ------ -------- -------
At 31 December 2003 35.6 4.7 29.0 244.9 314.2
------- ------- ------ -------- -------
Aggregate depreciation
At 1 January 2003 6.6 7.0 1.9 100.0 115.5
Exchange adjustment 0.3 - 0.4 6.2 6.9
Charge for the year 1.9 0.6 2.1 35.7 40.3
Disposals - - (0.7) (14.1) (14.8)
Company sold - - - (1.8) (1.8)
Reclassification of land and
buildings 0.9 (5.3) 4.4 - -
Reclassification as current
assets - - - (6.1) (6.1)
------- ------- ------ -------- -------
At 31 December 2003 9.7 2.3 8.1 119.9 140.0
------- ------- ------ -------- -------
Net book value
At 31 December 2003 25.9 2.4 20.9 125.0 174.2
------- ------- ------ -------- -------
At 31 December 2002 19.1 13.6 3.3 170.7 206.7
------- ------- ------ -------- -------
Plant and equipment include assets in progress of US$7.4m (2002 : US$60.4m).
Freehold land and buildings includes land at cost of US$3.9m (2002 : US$ 3.2m).
Plant and equipment includes assets held for lease to customers, under operating
leases, of US$25.8m (2002 : US$25.1m).
Amounts reclassified as current assets include inventory now held for resale of
US$12.9m and assets leased to customers under finance leases of US$38.1m.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
12. Investments
Joint Other
Ventures Associates Investments
US$m US$m US$m
-------- -------- --------
Cost
At 1 January 2003 82.0 8.8 1.2
Exchange adjustments 4.9 0.2 1.7
Additions 2.8 4.4 17.3
Reclassification of loan - 3.2 -
Share of profit/(losses) retained 15.7 (2.8) -
Disposals - - (0.4)
Transfer to other investments - (13.8) 13.8
Amounts written off investments - - (13.8)
-------- -------- --------
At 31 December 2003 105.4 - 19.8
-------- -------- --------
Amounts provided
At 1 January 2003 and 31 December 2003 1.8 - -
-------- -------- --------
Net book value
At 31 December 2003 103.6 - 19.8
-------- -------- --------
At 31 December 2002 80.2 8.8 1.2
-------- -------- --------
Net book value represents cost less amounts provided, plus the share of
post-acquisition profits retained in joint ventures.
From 15 December 2003, the Group ceased to account for its investment in ASCO
plc as an associate. As a result the investment in ASCO was transferred to other
investments and written off in full (see note 5 for further details).
Set out below are additional disclosures required in respect of the Group's
share in its joint ventures of the following:
2003 2002
US$m US$m
Goodwill on acquisition (see note 10) 10.0 9.4
Share of:
Intangible fixed assets 10.4 10.0
Tangible fixed assets 54.2 53.0
Current assets 209.8 217.0
Liabilities due within one year (142.0) (188.4)
Liabilities due after one year (35.0) (18.4)
Provisions (3.8) (2.4)
-------- --------
Goodwill and share of net assets 103.6 80.2
-------- --------
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
12. Investments (continued)
The parent company and the group have investments in the following subsidiary
undertakings and joint ventures which principally affect the profits or net
assets of the group. To avoid a list of excessive length investments which are
not considered significant have been omitted.
Country of Ownership
Name of subsidiary incorporation interest
or joint venture or registration % Principal activity
Engineering &
Production
Facilities:
Wood Group
Engineering
(North Sea)
Limited UK 100 Engineering design, operations
maintenance and management
SIGMA 3 (North
Sea) Limited UK 33.3* Engineering design, operations
maintenance and management
Mustang Engineering
Holdings Inc. USA 86.7 Engineering design
Alliance Wood Group
Engineering L.P. USA 100 Engineering design
J P Kenny Engineering
Limited UK 100 Engineering design
SIMCO Consortium Venezuela 49.5* Operations maintenance and
management
Wood Group Production
Services, Inc. USA 100 Operations maintenance and
management
Operators and Consulting
Services, Inc. USA 100 Operations maintenance and
management
Petrosercol S.A. Colombia 100 Operations maintenance and
management
Well Support:
Wood Group ESP, Inc. USA 100 Electric submersible pumps
Corporacion ESP de
Venezuela CA Venezuela 100 Electric submersible pumps
Wood Group Pressure
Control, L.P. USA 100 Valves and wellhead equipment
Wood Group Logging
Services Inc. USA 100 Logging services
Gas Turbine
Services:
Wood Group Light
Industrial Turbines
Limited UK 100 Gas turbine repair and
overhaul
Wood Group Engineering
Services Jersey 100 Gas turbine repair and overhaul
(Middle East)Limited
Rolls Wood Group (Repair
& Overhauls) Limited UK 50* Gas turbine repair and
overhaul
Wood Group Heavy
Industrial Turbines Ltd UK 100 Gas turbine repair and
overhaul
TransCanada Turbines
Limited Canada 50* Gas turbine repair and
overhaul
Thomason Mechanical
Corporation USA 100 Gas turbine repair and
overhaul
The proportion of voting power held equates to the ownership interest, other
than for joint ventures (marked *) which are jointly controlled.
Other Investments
Other investments comprise investments in own shares held by the Group's
employee share ownership trusts. Details are as follows:
Investment in own shares 2003 2002
US$m US$m
Cost
10,103,930 (2002: 5,371,890) own shares 19.8 1.2
-------- --------
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
13. Stocks
2003 2002
US$m US$m
Raw materials 26.6 29.8
Work in progress 31.7 35.7
Finished goods and goods for resale 122.2 87.1
-------- --------
180.5 152.6
-------- --------
14. Debtors
2003 2002
US$m US$m
Due within one year:
Trade debtors 306.7 272.7
Amounts receivable under finance leases 11.8 -
Amounts due by joint ventures 21.2 34.5
Other debtors 24.2 17.7
Prepayments and accrued income 23.0 19.4
-------- --------
386.9 344.3
Due after more than one year:
Amount due by associate - 3.3
Amounts receivable under finance leases 28.1 -
Other debtors 0.3 0.5
Deferred taxation (see note 18) - 1.1
-------- --------
415.3 349.2
-------- --------
Total amounts receivable under finance leases, including amounts allocated to
future periods of $11.2m is US$51.1m (2002 : nil). Rentals receivable during the
year under finance leases amounted to US$12.1m (2002 : nil). The cost of assets
acquired during the year for onward finance leasing was US$24.9m (2002 : nil).
15. Creditors: amounts falling due within one year
2003 2002
US$m US$m
Bank loans and overdrafts 13.9 10.7
-------- --------
Other creditors comprise:
Trade creditors 113.5 102.1
Amounts due to joint ventures 15.9 3.4
Corporation tax 10.1 21.4
Other taxation and social security 13.5 12.7
Other creditors 19.0 19.2
Accruals and deferred income 149.4 113.2
Dividends payable 10.4 9.5
Deferred consideration 4.9 0.1
-------- --------
336.7 281.6
-------- --------
350.6 292.3
-------- --------
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
16. Creditors: amounts falling due after one year
2003 2002
US$m US$m
Bank loans 230.9 222.7
Deferred consideration 2.6 12.5
Other creditors (payable between one and two years) 4.9 4.5
-------- --------
238.4 239.7
-------- --------
Bank loans comprise:
Repayable between two and five years 230.9 222.7
-------- --------
The bank loans are unsecured and interest is charged at between 60 basis points
and 75 basis points above LIBOR. At 31 December 2003 the margin payable was 60
basis points based on the level of gearing and interest cover.
Deferred consideration of US$1.3m is payable between one and two years and
US$1.3m is payable between two and five years.
17. Financial instruments
The Group's financial instruments, other than derivatives, comprise borrowings,
cash and liquid resources, and various items, such as trade debtors and trade
creditors that arise directly from its operations. The Group also enters into
derivative transactions (primarily interest rate swaps and forward foreign
currency contracts). The purpose of such transactions is to manage the interest
rate and currency risks arising from the Group's operations. It is, and has been
throughout the period under review, the Group's policy that no trading in
financial instruments is undertaken.
The main risks arising from the Group's financial instruments are interest rate
risk, liquidity risk and foreign currency risk. The Board reviews and agrees
policies for managing each of these risks and these are summarised below.
Interest rate risk
The Group finances its operations through a mixture of retained profits and bank
borrowings. The Group borrows in the desired currencies at floating rates of
interest and then uses interest rate swaps to generate the desired interest
profile and to manage the Group's exposure to interest rate fluctuations. The
Group's current policy is to maintain approximately 50% of its borrowings at
fixed rates of interest. At the year-end, approximately 51% of the Group's
borrowings were at fixed rates after taking account of interest rate swaps.
Liquidity risk
As regards liquidity, the Group's policy has throughout the year been that, to
ensure continuity of funding, at least 90% of its borrowings should mature in
more than a year. At the year-end, 94% per cent of the Group's borrowings were
due to mature in more than three years. Short-term flexibility is achieved by
overdraft facilities.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
17. Financial instruments (continued)
Foreign currency risk
The Group is exposed to foreign exchange risk arising from various currencies,
primarily US dollars and pounds sterling. The Group also has significant
overseas subsidiaries which operate in North America and South America and whose
revenues and expenses are denominated predominantly in US dollars. In order to
protect the Group's US dollar balance sheet from the movements in the exchange
rates, the Group finances its net investment in most overseas subsidiaries
primarily by means of borrowings denominated in their functional currency. The
Group has not hedged its investment in companies with a sterling functional
currency as these investments were made when the Group reported in sterling. The
Group is therefore exposed to exchange movements in reserves on the
retranslation of these companies at closing rate.
Some of the sales of the Group's businesses are to customers in foreign
locations. These sales are priced in local currency but invoiced in the
currencies of the customers involved. Where possible, the Group's policy is to
eliminate all significant currency exposures on sales at the time of sale
through forward currency contracts. The existing exchange controls in Venezuela
will result in increased foreign currency exposure whilst they are in place
although there has been no material impact to date.
Short-term debtors and creditors
Short-term debtors and creditors have been excluded from all the following
disclosures, other than the currency risk disclosures.
Interest rate risk profile of financial liabilities
The interest rate risk profile of the Group's financial liabilities at 31
December 2003, after taking account of the interest rate and currency swaps used
to manage the interest and currency profile, was as follows:
Total Floating rate Fixed rate
financial financial financial
liabilities liabilities liabilities
US$m US$m US$m
US Dollars 166.6 41.6 125.0
Canadian Dollars 31.3 31.3 -
Australian Dollars 11.3 11.3 -
GBP Sterling 16.1 16.1 -
Euros 15.6 15.6 -
Colombian Peso's 10.5 10.5 -
Other currencies 0.9 0.9 -
-------- -------- --------
At 31 December 2003 252.3 127.3 125.0
-------- -------- --------
US Dollars 215.8 90.8 125.0
Canadian Dollars 20.1 20.1 -
Other currencies 10.0 10.0 -
-------- -------- --------
At 31 December 2002 245.9 120.9 125.0
-------- -------- --------
All the Group's creditors falling due within one year (other than bank and other
borrowings) are excluded from the above tables either due to the exclusion of
short-term items or because they do not meet the definition of a financial
liability, for example tax balances.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
17. Financial instruments (continued)
The Group has entered into US$125m of interest rate swaps from floating to fixed
rates as at 31 December 2003 (2002 : US$125m).
The weighted average interest rate excluding margin (currently 0.6%) for fixed
rate financial liabilities was 4.4% (2002 : 4.5%). This rate is fixed for
between 3 and 4 years (2002 : between 4 and 5 years).
Floating rate financial liabilities bear interest at rates, based on relevant
national LIBOR equivalents, which are fixed in advance for periods of between
one month and three months.
Interest rate risk of financial assets
The Group has no significant financial assets, other than short term deposits,
cash at bank and short-term loans to joint ventures.
2003 2002
Cash
Cash at
at bank Loans to
bank Short- Loans and Short- associates
and in term to joint in term and joint
hand deposits ventures Total hand deposits ventures Total
------ ------ ------ ------ ------ ------ ------ ------
US$m US$m US$m US$m US$m US$m US$m US$m
Currency
Sterling 2.8 7.7 - 10.5 13.9 21.5 3.3 38.7
US
Dollars 26.0 14.8 0.4 41.2 4.9 3.3 2.3 10.5
Other
currencies 18.5 - 8.9 27.4 12.6 - 8.6 21.2
------ ------ ------ ------ ------ ------ ------ ------
At 31
December 47.3 22.5 9.3 79.1 31.4 24.8 14.2 70.4
------ ------ ------ ------ ------ ------ ------ ------
Floating
rate 47.3 - 9.3 56.6 31.4 - 14.2 45.6
Fixed
rate - 22.5 - 22.5 - 24.8 - 24.8
------ ------ ------ ------ ------ ------ ------ ------
At 31
December 47.3 22.5 9.3 79.1 31.4 24.8 14.2 70.4
------ ------ ------ ------ ------ ------ ------ ------
Fixed rate short-term sterling deposits have earned interest at between 3.1% and
4.7% in 2003 (4% to 7.1% in 2002). US$ short term deposits have earned interest
at rates between 0.8% and 1.7% in 2003. Floating rate sterling cash earns
interest at between UK base rate and UK base rate less 10 basis points. US$ cash
and cash denominated in other currencies earns interest at varying market rates
applicable to each currency.
Interest on loans to joint ventures is charged at floating market rates.
Maturity of financial liabilities
The maturity profile of the carrying amount of the group's financial liabilities
other than short-term trade creditors and accruals at 31 December was as
follows:
2003 2002
Deferred Deferred
conside- conside-
ration Debt Total ration Debt Total
------- ------ ------ ------- ------ ------
US$m US$m US$m US$m US$m US$m
In one year or
less, or on
demand 4.9 13.9 18.8 - 10.7 10.7
In more than
one year but
not more than
two years 1.3 - 1.3 6.7 - 6.7
In more than
two years but
not more than
five years 1.3 230.9 232.2 5.8 222.7 228.5
------- ------ ------ ------- ------ ------
7.5 244.8 252.3 12.5 233.4 245.9
------- ------ ------ ------- ------ ------
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
17. Financial instruments (continued)
Borrowing facilities
The group has undrawn committed borrowing facilities available at 31 December
2003 of US$331.1m (2002 : US$369.2m) in respect of which all conditions
precedent had been met at that date. These are floating rate facilities which
expire on 9 April 2007.
Fair values of financial assets and financial liabilities
The following table provides a comparison by category of the carrying amounts
and the fair values of the Group's financial assets and financial liabilities at
31 December 2002 and 2003. Fair value is the amount at which a financial
instrument could be exchanged in an arm's length transaction between informed
and willing parties, other than a forced or liquidation sale and excludes
accrued interest. Where available, market values have been used to determine
fair values. Where market values are not available, fair values have been
calculated by discounting expected cash flows at prevailing interest and
exchange rates. Set out below the table is a summary of the methods and
assumptions used for each category of financial instrument.
2003 2002
Book Fair Book Fair
value value value value
Primary financial instruments held or issued US$m US$m US$m US$m
to finance the group's operations:
Short-term borrowings (13.9) (13.9) (10.7) (10.7)
Long-term borrowings (230.9) (230.9) (222.7) (222.7)
Deferred consideration (7.5) (7.5) (12.5) (12.5)
Loans to joint ventures 9.3 9.3 10.9 10.9
Loans to associate - - 3.3 3.3
Short-term deposits 22.5 22.5 24.8 24.8
Cash at bank and in hand 47.3 47.3 31.4 31.4
-------- -------- -------- --------
Derivative financial instruments held to
manage the interest rate and currency
profile:
Interest rate swaps - (6.6) - (6.1)
Forward foreign currency contracts (1.0) (1.0) (1.3) (1.3)
-------- -------- -------- --------
Under the Group's accounting policy, forward contracts that are entered into in
order to hedge foreign currency assets and liabilities are revalued to balance
sheet rates with net unrealised gains/losses being shown as part of the
underlying asset or liability being hedged. Changes in the value of the swap as
a result of changes in interest rates are not included in the book value of the
relevant asset or liability.
At 31 December 2003, the Group had entered into forward contracts to sell £32.0m
(2002 : £31.0m) for US dollars at rates between £1 = $1.7418 and £1 = $1.7800
(2002 : £1 = $1.5656 to £1 = $1.5716). These contracts were entered to hedge
sterling assets in dollar functional companies.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
17. Financial instruments (continued)
Summary of methods and assumptions
Interest rate swaps, currency Fair value is based on market price of comparable
swaps and forward foreign instruments at the balance sheet date. Forward
currency contracts foreign currency contracts have been valued at
spot rate on the balance sheet date as the
contracts mature within one year.
Short-term deposits, short The fair value of short-term deposits, short and
and long-term borrowings, long-term loans and overdrafts, deferred
deferred consideration and consideration and loans to joint ventures and
loans to joint ventures and associates approximates to the carrying amount
associates because of the short maturity of interest rates in
respect of these instruments. The long term loans
are generally rolled over for periods of three
months or less.
Currency exposures
To mitigate the effect of the currency exposures arising from its net
investments overseas the Group either borrows in the local currencies of its
main operating units or swaps other borrowings, using currency swaps, into such
local currencies. Gains and losses arising on net investments overseas and the
financial instruments used to hedge the currency exposures are recognised in the
statement of total recognised gains and losses. The Group has typically not
hedged its net investments in sterling functional companies.
The tables below show the extent to which Group companies have monetary assets
and liabilities in currencies other than their local currency. Foreign exchange
differences on retranslation of these assets and liabilities are taken to the
profit and loss account of the Group companies and the Group.
Net foreign currency monetary assets/(liabilities)
US Other
Sterling dollars currencies Total
US$m US$m US$m US$m
2003
Functional currency of
group operation:
Sterling - 1.1 0.5 1.6
US Dollars - - 0.8 0.8
Other currencies - 1.4 - 1.4
-------- -------- -------- --------
Total - 2.5 1.3 3.8
-------- -------- -------- --------
Net foreign currency monetary assets/(liabilities)
US Other
Sterling dollars currencies Total
US$m US$m US$m US$m
2002
Functional currency of
group operation:
Sterling - 6.1 12.2 18.3
US Dollars 5.1 - (4.6) 0.5
Other currencies 0.3 5.5 0.1 5.9
-------- -------- -------- --------
Total 5.4 11.6 7.7 24.7
-------- -------- -------- --------
Hedges
Where possible, the Group enters into forward foreign currency contracts to
eliminate the currency exposures that arise on revenues denominated in foreign
currencies immediately those revenues are transacted. It also uses interest rate
swaps to manage its interest rate profile. Changes in the fair value of
instruments used as hedges are not recognised in the financial statements until
the hedged position matures.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
18. Provisions for liabilities and charges
2003 2002
US$m US$m
Deferred taxation (note a) 0.5 -
Warranty provisions (note b) 8.7 5.2
Other provisions (note c) 6.1 6.2
-------- --------
15.3 11.4
-------- --------
The movement in the provisions comprises:
Deferred Warranty Other
Taxation Provisions Provisions
US$m US$m US$m
------- ------- -------
At 1 January 2003 (1.1) 5.2 6.2
Exchange adjustments (0.3) 0.3 -
Charge/(credit) for the year 1.6 6.7 0.4
Payments during the year - (3.5) (0.5)
Company sold 0.3 - -
------- ------- -------
At 31 December 2003 0.5 8.7 6.1
------- ------- -------
The deferred tax asset of US$1.1m at 31 December 2002 was disclosed in debtors
(see note 14).
a. Deferred taxation
Deferred taxation included in these financial statements comprises net
corporation tax receivable deferred by:-
2003 2002
US$m US$m
Fixed asset timing differences 9.4 5.0
Short term timing differences (8.9) (6.1)
-------- --------
0.5 (1.1)
-------- --------
Deferred income tax liabilities have not been established for the withholding
and other taxes that would be payable on the unremitted earnings of certain
subsidiaries and joint ventures, as such amounts are continually reinvested. The
Group has unrecognised tax losses of US$32.5m (2002 : US$26.1m) to carry forward
against future taxable income.
b. Warranty provisions
At 31 December 2003, a warranty provision of US$8.7m (2002 : US$5.2m) was
recognised in respect of guarantees provided in the normal course of business
relating to contract performance. The provision is estimated based on past
claims history and it is expected that most of these costs will be incurred in
the next financial year.
c. Other provisions
At December 2003, provisions of US$6.1m (2002 : US$6.2m) have been recognised,
mainly for expected claims or other costs arising from the termination or
disposal of operations. It is expected most of these costs will be incurred
within the next 1 to 2 years.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
19. Share capital
2003 2002
US$m US$m
Authorised
720,000,000 ordinary shares of 3 1/3p each (2002 : 720,000,000) 34.9 34.9
-------- --------
Allotted, called up and fully paid
482,648,960 ordinary shares of 3 1/3p each (2002 : 479,893,340) 23.4 23.3
-------- --------
During the year, 2,755,620 ordinary shares of 3 1/3 pence were issued at prices
varying from 10 1/2 pence per share to 15 2/3 pence per share, on exercise of
options granted under the John Wood Group 1994 Approved Executive Share Option
Scheme and the John Wood Group 1996 Unapproved Executive Share Option Scheme.
Share options
The following options to subscribe for new ordinary shares were outstanding at
31 December 2003:-
Number of ordinary shares
Year of under option Exercise price Exercise period
Grant 2003 2002 (per share) From To
1995 60,000 210,000 10 1/2p 20.11.2000 20.11.2005
1997 105,000 678,960 11 1/3p 05.04.2002 05.04.2007
1997 - 300,000 12 2/3p 24.12.2002 24.12.2007
1998 642,420 2,224,080 15 2/3p 16.10.2003 16.10.2008
2000 7,515,000 7,710,000 17 1/3p 20.06.2005 20.06.2010
2000 210,000 210,000 18 1/3p 13.11.2005 13.11.2010
2001 1,485,000 1,545,000 93 1/3p 13.06.2006 13.06.2011
2001 6,037,500 6,180,000 83 1/3p 31.12.2006 31.12.2011
2002 24,000 46,500 83 1/3p 28.02.2007 28.02.2012
2002 255,000 255,000 83 1/3p 14.03.2007 14.03.2012
2002 1,522,500 1,545,000 83 1/3p 05.04.2007 05.04.2012
2002 105,000 105,000 83 1/3p 12.04.2007 12.04.2012
2003 500,000 - 161 1/4p 07.01.2007 07.01.2013
2003 4,067,500 - 158p 30.09.2007 30.09.2013
--------- ---------
22,528,920 21,009,540
--------- ---------
Details of the Group's Executive Share Option Schemes are set out in the
Directors' Remuneration Report. Share options are granted at the current market
value of the underlying shares at the grant date.
There are no performance criteria attached to the exercise of the options
granted prior to 2003. Options granted to directors under the new share option
scheme implemented in 2003 are subject to performance criteria as set out in the
Directors Remuneration Report.
In addition to the above options, employee share ownership trusts exist which
may buy existing ordinary shares which will then be available to be provided
under option to employees. At 31 December 2003, additional options have been
granted over 707,580 (2002 : 2,475,540) existing ordinary shares held by the
trusts at exercise prices ranging from 12 2/3p to 15 2/3p per share (2002:
11 1/3p to 15 2/3p per share).
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
19. Share capital (continued)
Long Term Retention Plan
The following options granted under the group's long term retention plan
('LTRP') were outstanding at 31 December 2003:-
Number of ordinary shares
Year of under option Exercise price Exercise period
Grant 2003 2002 (per share) From To
2003 1,880,927 - 3 1/3p 02.07.2007 02.07.2013
2003 20,772 - 3 1/3p 11.08.2007 11.08.2013
2003 41,545 - 3 1/3p 08.09.2007 08.09.2013
--------- ---------
1,943,244 -
--------- ---------
Options granted under the group's LTRP are granted at par value (3 1/3 pence per
share). There are no performance criteria attached to the exercise of options
under the LTRP.
20. Share premium account
2003 2002
US$m US$m
At 1 January 200.3 -
Arising on shares issued 0.5 212.2
Share issue expenses written off - (11.9)
-------- --------
At 31 December 200.8 200.3
-------- --------
21. Capital reduction reserve
2003 2002
US$m US$m
At 1 January 88.1 -
Arising on conversion of convertible redeemable preference
shares - 88.1
-------- --------
At 31 December 88.1 88.1
-------- --------
A capital redemption reserve was created on the conversion of the convertible
redeemable preference shares immediately prior to the IPO in June 2002. In
December 2002, the Court of Session confirmed the reduction of the capital
redemption reserve under section 136 of the Companies Act 1985. The capital
reduction reserve is part of distributable reserves at 31 December 2003.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
22 Profit and loss account
Parent and
Subsidiary Joint
Undertakings Ventures Associates Group
US$m US$m US$m US$m
At 1 January 2003 157.6 36.7 1.9 196.2
Exchange movement on
retranslation of foreign
currency net assets 2.2 4.9 0.2 7.3
Retained profit/(loss) for the year 12.8 15.7 (2.8) 25.7
UITF 17 charge 0.6 - - 0.6
Actuarial loss recognised in
the pension scheme net of
deferred tax (0.8) - - (0.8)
Reclassification on disposal of
associate (0.7) - 0.7 -
--------- -------- -------- --------
At 31 December 2003 171.7 57.3 - 229.0
--------- -------- -------- --------
Exchange adjustments include US$5.0m (2002: US$3.4m) arising from the
re-translation of foreign currency loans that have been offset against the
re-translation of foreign currency net assets.
The profit and loss account includes US$(19.3)m (2002 : US$(16.3)m) stated after
deferred taxation of US$8.2m (2002 : US$7.0m) in respect of pension scheme
liabilities of the Group's UK defined benefit scheme.
23. Equity minority interests
2003 2002
US$m US$m
At 1 January 14.6 14.0
Profit and loss account 3.9 6.0
Acquisition of minority interests (0.1) (5.4)
Additional paid in capital 0.3 -
-------- --------
At 31 December 18.7 14.6
-------- --------
Minority interests were acquired during the year for cash of US$0.2m and
resulted in additional goodwill of US$0.1m.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
24. Acquisitions
The assets and liabilities acquired in respect of acquisitions during the year
are included below:
Fair value Provisional
Book value adjustments fair value
US$m US$m US$m
Fixed assets
Tangible assets 5.3 - 5.3
Current assets
Stocks 3.1 - 3.1
Debtors 6.2 - 6.2
Liabilities
Bank overdraft (0.9) - (0.9)
Creditors (3.5) (0.5) (4.0)
--------- --------- ---------
Tangible net assets 10.2 (0.5) 9.7
--------- ---------
Goodwill 7.9
---------
17.6
---------
Satisfied by
Cash 17.6
---------
The Group has used acquisition accounting for all purchases and, in accordance
with the Group's accounting policy, the goodwill arising on consolidation of
US$7.9m has been capitalised and will be amortised over periods not exceeding 20
years. The fair value adjustments relate to the provision for liabilities not
fully reflected in the balance sheets of the acquired entities at the date of
acquisition. The fair value adjustments contain some provisional amounts, which
will be finalised in the 2004 financial statements when the detailed acquisition
investigations have been completed. The goodwill addition of US$7.9m above is
offset by deferred consideration released during the year.
Companies acquired or disposed of during the year have not had a significant
impact on operating cash flows.
Deferred consideration payments of US$0.4m were made during the year in respect
of acquisitions made in prior periods.
Analysis of the net outflow of cash in respect of acquisitions:
US$m
Cash consideration 17.6
Bank overdraft 0.9
--------
Net outflow of cash in respect of acquisitions 18.5
--------
During the year the Group disposed of its interests in Wood Group Drilling
Products and Enterprise Engineering Services Ltd.
Analysis of the net cash inflow of cash in respect of disposals:
US$m
Cash consideration 6.5
Bank overdraft 0.8
--------
Net cash inflow in respect of disposals 7.3
--------
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
25. Pension commitments
The Group has established a number of pension schemes around the world covering
many of its employees.
One of the Group's pension schemes in the UK is a defined benefit scheme, which
is contracted out of the state scheme, and provides benefits based on final
pensionable salary. The assets of the scheme are held separately from those of
the Group, being invested with independent investment companies in trustee
administered funds.
The most recent actuarial valuation of the main UK pension scheme was at 5 April
2001. The valuation of the scheme used the projected unit method and was carried
out by a professionally qualified actuary. The principal assumptions made by the
actuary were:
2003 2002 2001
% % %
Rate of increase in pensionable salaries 4.75 4.35 4.50
Rate of increase of pensions in payment 2.75 2.35 2.50
Discount rate 5.40 5.60 6.00
Inflation assumption 2.75 2.35 2.50
The assets of the scheme and the expected rate of return were:
Long-term Long-term Long-term
rate of rate of rate of
return return return
expected Value at expected Value at expected Value at
31 December 31 December 31 December 31 December 31 December 31 December
2003 2003 2002 2002 2001 2001
% US$m % US$m % US$m
Equities 7.50 56.6 7.50 36.7 8.00 36.1
Bonds 5.10 8.2 5.00 7.1 5.50 7.1
Cash 3.75 0.7 - - - -
------- ------- ------- ------- ------- -------
Total 65.5 43.8 43.2
market
value of
assets
Present
value
of scheme
liabilities (93.0) (67.1) (50.8)
------- ------- -------
Deficit in the
scheme (27.5) (23.3) (7.6)
Related deferred
tax asset 8.2 7.0 2.3
------- ------- -------
Net pension liability (19.3) (16.3) (5.3)
------- ------- -------
Analysis of amount charged to operating profit in respect of defined benefit
schemes
2003 2002
US$m US$m
Total operating charge
Current service 4.6 3.7
-------- --------
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
25. Pension commitments (continued)
Movement in deficit during the year
2003 2002
US$m US$m
Deficit in the scheme at the beginning of the year (23.3) (7.6)
Movement:
Current service cost (4.6) (3.7)
Contributions 4.9 3.4
Exchange adjustments (2.7) (1.7)
Other finance (expense)/income (0.6) 0.3
Actuarial loss (1.2) (14.0)
-------- --------
Deficit in the scheme at the end of the year (27.5) (23.3)
-------- --------
Analysis of the amount charged to other finance (expense)/income
2003 2002
US$m US$m
Expected return on pension scheme assets 3.4 3.6
Interest on pension scheme liabilities (4.0) (3.3)
-------- --------
Net finance (expense)/income (0.6) 0.3
-------- --------
Analysis of amount recognised in statement of total recognised gains and losses
2003 2002
US$m US$m
Actual return less expected return on pension scheme assets 6.3 (11.6)
Experience gains and losses arising on the scheme liabilities 0.5 0.1
Changes in the assumptions underlying the present value of
the scheme liabilities (8.0) (2.5)
-------- --------
Actuarial loss recognised in statement of total recognised
gains and losses (1.2) (14.0)
-------- --------
Analysis of movement in deferred tax asset
2003 2002
US$m US$m
Asset at beginning of the year 7.0 2.3
Movement in deferred tax relating to pension liability 0.4 4.2
Exchange adjustments 0.8 0.5
-------- --------
Asset at end of the year 8.2 7.0
-------- --------
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
25. Pension commitments (continued)
History of experience gains and losses
2003 2002
Difference between the actual and expected return on scheme
assets:
Amount (US$m) 6.3 (11.6)
Percentage of scheme assets 9% (26%)
Changes in the assumptions underlying the present value of the
scheme liabilities: Amount (US$m) (8.0) (2.5)
Percentage of scheme assets (12%) (6%)
Experience gains and losses on scheme liabilities:
Amount (US$m) 0.5 0.1
Percentage of scheme assets 1% 0%
Total amount recognised in statement of total recognised gains
and losses:
Amount (US$m) (1.2) (14.0)
Percentage of scheme assets (2%) (32%)
The valuation at 31 December 2003 showed an increase in the deficit from
US$23.3m to US$27.5m. Company contributions in 2003 were US$4.6m. Company
contributions represented 11.3% of pensionable pay until July 2003 when they
were increased to 13.8%. Employee contributions represented 6% of pensionable
pay until July 2003 when they were increased to 7.5%. The defined benefit scheme
was closed to new employees with effect from 6 April 2003 with transitional
arrangements for existing employees.
The Group also has a defined contribution plan in the UK and certain UK, US and
overseas subsidiaries operate their own defined contribution pension
arrangements. Contributions are charged to the profit and loss account as they
become payable in accordance with the rules of the schemes. The total pension
cost for the Group in respect of these schemes was US$13.3m (2002 : US$14.5m).
Contributions outstanding at 31 December 2003 in respect of these schemes
amounted to US$7.8m (2002 : US$6.3m).
26. Capital commitments
2003 2002
US$m US$m
At the balance sheet date the following capital commitments
existed for tangible fixed assets:
Contracted for but not provided 3.9 19.3
-------- --------
The Group's share of contracted capital commitments of joint ventures is not
significant. There are financial commitments relating to the purchase of shares
from certain subsidiary minority shareholders based on the profits of these
subsidiaries and the payments extend over a number years. The remaining 13.3% of
Mustang Engineering Holdings Inc. is due to be acquired over the next three
years.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
27. Commitments under operating leases
Land and Plant and Land and Plant and
Buildings Equipment Buildings Equipment
-------- -------- -------- --------
2003 2003 2002 2002
US$m US$m US$m US$m
Annual commitments under
non-cancellable operating leases
expiring:
Within one year 2.4 1.7 1.7 1.4
Within two to five years 15.8 4.4 16.5 4.4
Later than five years 7.8 0.3 5.1 0.9
-------- -------- -------- --------
26.0 6.4 23.3 6.7
-------- -------- -------- --------
28. Contingent liabilities
At the balance sheet date the Group had cross guarantees without limit extended
to the Group's principal bankers in respect of sums advanced to subsidiaries. At
31 December 2003 the Group has outstanding guarantees of US$18.5m (2002 :
US$20.7m) in respect of joint venture bank arrangements.
29. Related party transactions
Included in the profit and loss account are sales, costs and expenses which
arise from transactions between the Group and its joint ventures. Such
transactions mainly comprise sales and purchases of goods in the ordinary course
of business and in total amounted to:
2003 2002
US$m US$m
Sales to joint ventures 84.0 91.3
Charges from joint ventures 7.7 7.7
-------- --------
Details of balances due to and from joint ventures are provided in notes 14 and
15.
In addition, Sir Ian Wood holds a controlling interest in J W Holdings Limited.
During the year, the Group charged J W Holdings Limited US$0.1m (2002 : US$0.1m)
for management services provided under normal commercial terms.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
30. Net cash inflow from operating activities
2003 2002
US$m US$m
Operating profit of Group undertakings 86.7 91.8
Depreciation on tangible fixed assets 40.3 26.1
Loss on sale of fixed assets 0.1 0.6
Amortisation of goodwill 14.3 10.8
(Increase)/decrease in stocks (18.3) 7.3
Increase in debtors (20.4) (8.0)
Decrease/(increase) in amounts due from joint ventures 15.0 (13.5)
Increase in creditors 24.3 17.2
Increase/(decrease) in other provisions 3.4 (3.0)
UITF 17 charge 0.6 -
Exchange adjustments (1.1) (1.4)
-------- --------
Net cash inflow from operating activities 144.9 127.9
-------- --------
31. Reconciliation of net cash flow to movement in net debt
2003 2002
US$m US$m
Increase/(decrease) in cash in the period 15.5 (79.9)
Cash flow from (decrease)/increase in liquid resources (3.3) 0.9
Cash flow from (increase)/decrease in debt (2.2) 153.6
-------- --------
Change in net debt resulting from cash flows 10.0 74.6
Other non-cash items
Exchange adjustments (7.8) 4.6
-------- --------
Movement in net debt in period 2.2 79.2
Net debt at beginning of period (177.2) (256.4)
-------- --------
Net debt at 31 December (175.0) (177.2)
-------- --------
32. Analysis of net debt
At At 31
1 January Cash Exchange December
2003 Flow Movement 2003
US$m US$m US$m US$m
Cash 31.4 15.5 0.4 47.3
Deposits treated
as liquid resources 24.8 (3.3) 1.0 22.5
-------- -------- -------- --------
Cash in hand and
at bank 56.2 12.2 1.4 69.8
Bank loans and
overdrafts (10.7) (2.7) (0.5) (13.9)
Bank loans due
after 1 year (222.7) 0.5 (8.7) (230.9)
-------- -------- -------- --------
Net debt (177.2) 10.0 (7.8) (175.0)
-------- -------- -------- --------
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
33. Post balance sheet events
On 1 January 2004, the Group acquired 100% of the share capital of Z.TEC GmbH
Energy Service a company based in Moers, Germany, providing services to heavy
industrial gas turbine users in Germany and other parts of Central Europe.
John Wood Group PLC
Notes to the financial statements
for the year to 31 December 2003
Shareholder information
Payment of dividends
The Company declares its dividends in US dollars. As a result of the
shareholders being mainly UK based, dividends will be paid in sterling, but if
you would like to receive your dividends in dollars please request the company's
Registrar to send you an election form. All shareholders will receive dividends
in sterling unless requested in writing. If you are a UK based shareholder the
company encourages you to have your dividends paid through the BACS (Banker's
Automated Clearing Services) system. The benefit to shareholders of the BACS
payment method is that the Registrar posts the tax vouchers directly to them,
whilst the dividend is credited on the payment date to the shareholder's Bank or
Building Society account. Shareholders who have not yet arranged for their
dividends to be paid direct to their Bank or Building Society account and wish
to benefit from this service should request the Company's Registrar to send them
a Dividend/Interest mandate form. Sterling dividends will be translated at the
closing mid-point spot rate on 7 May 2004 as published in the Financial Times on
8 May 2004.
Officers and advisers
Secretary and Registered Office Registrars
I Johnson Lloyds TSB Registrars Scotland
John Wood Group PLC PO Box 28448
John Wood House Finance House
Greenwell Road Orchard Brae
ABERDEEN EDINBURGH
AB12 3AX EH4 1WQ
Tel: 01224 851000 Tel: 0870 601 5366
Stockbrokers Auditors
Cazenove & Co. Ltd PricewaterhouseCoopers LLP
Credit Suisse First Boston Chartered Accountants
Financial calendar
Results announced 8 March 2004
Ex-dividend date 5 May 2004
Dividend record date 7 May 2004
Annual General Meeting 19 May 2004
Dividend Payment Date 26 May 2004
Wood Group has developed an Investor Relations website which can be accessed at
www.woodgroup.com
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