Full Year Results

RNS Number : 6442H

Hunting PLC

25 February 2010

 



For Immediate Release

25 February 2010

Hunting PLC

("Hunting", the "Company" or the "Group")

Full Year Results

Hunting PLC (LSE:HTG), the international energy services company today announces its full year results for the year ended

31 December 2009.

Financial Highlights - for continuing operations

·      Revenue £359.9m (2008 - £418.5m)

·      Profit from operations before exceptional items £35.8m (2008 - £58.8m)

·      Profit from operations £36.4m (2008 - £7.9m)

·      Basic earnings per share before exceptional items 17.7p (2008 - 26.4p)

·      Basic earnings per share 18.2p (2008 - (3.6)p)

·      Second interim dividend of 7.0p payable on 31 March 2010 to shareholders on the register on 5 March 2010 - total for 2009 - 10.5p (2008 - 9.9p)*

·      Net cash of £365.0m (2008 - £372.3m)

* This second interim dividend replaces the final dividend that would normally be approved at the Annual General Meeting of the Company to be held in April 2010 and paid thereafter.

Corporate Highlights

·      Three acquisitions completed during the year totalling £47.3m:

o    National Coupling Company, a leading developer and manufacturer of subsea hydraulic equipment, for a consideration of £31.8m

o    PT SMB Industri, an oil country tubular goods premium threading operation, for a consideration of £6.3m

o    Welltonic, a provider of well intervention products and services, for a consideration of £9.2m

·      Broadened global footprint 2010 - 28 facilities (2009 - 22)

·      Disposal of Hunting Energy France for a consideration of £11.1m

Segmental Results - before exceptional items, interest and share of post-tax profits of associates

	2009				2008
	Revenue £m		Profit from operations  £m		Revenue £m		Profit from operations £m
Hunting Energy Services
Well Construction		77.9		3.3		112.0		13.5
Well Completion		176.2		20.3		189.8		26.6
Well Intervention		29.4		4.0		23.3		4.6
Exploration and Production		5.6		0.3		14.8		5.9
Gibson Shipbrokers		20.8		0.7		31.2		6.9
Field Aviation		50.0		7.2		47.4		1.3
Total		359.9		35.8		418.5		58.8

Commenting on the results, Dennis Proctor Chief Executive Officer of Hunting said:

"Against the backdrop of the severe economic environment and challenging market conditions in the oil and gas industry, Hunting has delivered a robust performance during 2009.  The Group continues to show good growth in its Asia Pacific markets, an area where further expansion is planned in 2010, as our other core markets recover in line with global demand for our products and services. 

"We have also employed our cash to execute three acquisitions during the year, which consolidates our offering in a number of key regions.  We look to the coming year with confidence."

For further information please contact:

Hunting PLC Dennis Proctor, Chief Executive Peter Rose, Finance Director	Tel: [phone]
Buchanan Communications Ben Willey Richard Darby	Tel: [phone]

Notes to Editors:

About Hunting PLC

Hunting PLC is an international energy services provider to the world's leading upstream oil and gas companies. Established in 1874, it is a fully listed public company traded on the London Stock Exchange. The Company maintains a corporate office in Houston and is headquartered in London. As well as the United Kingdom, the Company has principal operations in Canada, China, Holland, Hong Kong, Indonesia, Mexico, Singapore, United Arab Emirates and the United States of America.

Chairman's Statement

The Company has produced satisfactory results in a difficult year. Profit before tax from continuing operations before exceptional items in 2009 was £38.5m (2008 - £56.6m), a 32% decrease.

Throughout the year, the strong balance sheet has been a bonus and has enabled us to make several acquisitions of compatible businesses without recourse to borrowings. However, low interest rates meant that cash in the bank earned relatively little interest.

Markets for hydrocarbons ultimately determine demand for our products and services and, in the early part of the year, fears of a global depression were at their height. Reduced demand for oil and gas meant that prices for these commodities were very low. Since then, fortunately, the global oil price has recovered to a level satisfactory to both producers and consumers.

Natural gas prices, however, especially in North America, have lost their traditional link to oil prices and, though now recovered slightly, current low natural gas prices are due mainly to the availability of huge new resources of shale gas in the United States and current storage levels.

The international arena for the Company, outside North America, has proved much stronger and we have enjoyed good results in South East Asia, in the Middle East and in North West Europe.

Within our principal operating company, Hunting Energy Services, the Well Completion business continued to perform to expectations - aided by strong international markets. However, Well Construction income was lower than planned due to reduced North American rig counts.

Our Exploration and Production operation in the southern US suffered from lower natural gas prices and from reduced production caused by long-term damage from the 2008 hurricanes in the Gulf of Mexico.

Gibson Shipbrokers had a difficult year in dismal shipping markets, but nevertheless achieved a small profit. By contrast, Field Aviation, our Canadian-based aircraft completion facility, had an excellent year with satisfactory deliveries to several important customers.

The Company has used its resources and the lull in the previous breakneck rate of expansion to invest in new, more efficient facilities where we can see that these will be required in the longer term. Significant capital investments are underway in Casper, Wyoming; Conroe, Texas; Fordoun, south of Aberdeen, Scotland; and in Wuxi, China.

Earnings per share for continuing operations before exceptional items were 17.7p, a decrease of 33% on the previous year. We are declaring a second interim dividend for 2009 of 7.0p per share payable on 31 March 2010, giving a total of 10.5p for the year, a 6% increase. This second interim dividend will replace the final dividend that would normally be approved at the Annual General Meeting of the Company to be held in April 2010 and paid thereafter.

During the year, Hector McFadyen, a non-executive Director of the Company since 2002, retired from the Board. My colleagues and I thank him for his diligent enquiry and wise counsel, and wish him well in the future.

We recruited two new non-executive Directors to the Board. John Hofmeister, a resident of Houston, Texas, was formerly President of Shell Oil Company US. He is the founder and CEO of the charity Citizens for Affordable Energy. John Nicholas, who lives in Buckinghamshire, England, was the Group Finance Director of Tate & Lyle plc. He is a member of the Financial Reporting Review Panel.

The Company has had a petroleum-related presence in Paris, France since before the Second World War. We sold those interests at the end of the year to a group including some of the former management team. Our best wishes go with them.

I said last year that we were well placed to survive the buffeting from the world economic storm. We have indeed survived in good health and the worst of the storm has abated. Moreover, we have taken steps to grow the business both organically and by acquisition, a process which continues in 2010.

I thank all our staff for their splendid efforts in a tough year.

Richard Hunting,

Chairman

Business Review

 

Chief Executive's Review

With the worldwide rig count average falling 31% (42% in the US and Canada) from 2008 levels, it was inevitable that your Group could not sustain its five year double digit growth. The global economic downturn combined with rapidly declining oil prices and a natural gas surplus, the oil and gas industry hesitated to push ambitious drilling programs. Accordingly, the estimated 39,068 oil and gas wells drilled in the US represented a 37% decline from 2008 levels. Canadian wells drilled were an average of 9,570, a 43% decline. The North American slump was primarily driven by excess natural gas in storage. Conversely, international wells drilled, excluding China and Russia, were down only 8% as national oil companies and, to a lesser extent, international oil companies, directed their efforts toward oil drilling to replace reserves.

While the overall market fell significantly, the Group achieved profit before tax from continuing operations before exceptional items of £38.5m a 32% decline from 2008. Return on capital for continuing operations was a respectable 19% (2008 - 21%). Not until the fourth quarter of 2009 did evidence appear of genuine recovery and promise of future growth. The bright spot for the oil and gas industry continues to be international, as rapidly growing spending is driven by national oil companies. Hunting Energy Services' Asia Pacific operations experienced a 68% growth in profit from operations during the year.

During the year, management quickly took steps to reduce costs and overheads but maintained its efforts to utilise a strong balance sheet to acquire companies, which will expand product offerings and manufacturing capacity. Further, new capital projects were initiated to add 0.3m square feet of plant space to the existing 1.0m square feet.

The three acquisitions in the year were:

1.	National Coupling Company ("NCC") - a leading developer and manufacturer of subsea hydraulic equipment and chemical injection systems located in Texas. Consideration: £31.8m.
2.	PT SMB Industri - an oil country tubular goods ("OCTG") premium threading operation located in Batam, Indonesia, acquired for the purpose of additional capacity to serve existing customers and the rapidly growing markets in the Middle East and Asia. Consideration: £6.3m.
3.	Welltonic - a provider of well intervention products and services located in Aberdeen, Singapore and Dubai. Consideration: £9.2m.

Acquisitions completed in 2009

Date		Company		Consideration			Segment
15 June		National Coupling Company Inc.		£31.8m			Well Intervention
31 July		PT SMB Industri		£6.3m			Well Completion
10 December		Welltonic		£9.2m			Well Intervention
					£47.3m

New capital project initiatives include:

	1.	A new manufacturing facility in Wuxi, China for completion in May 2010.
	2.	Expansion of the Casper, Wyoming facility for completion late 2010.
3.		A new facility in Conroe, Texas - June 2010 completion.
4.		A new facility in Houma, Louisiana - completion 2011.

In December 2009, the Hunting Energy France ("HEF"), operations were sold to Finergy, a new company established by a group of French investors, including two directors of HEF for a total consideration of £11.1m.

Business Development

Capital expenditure for the Group reduced to £21.6m (2008 - £34.8m) primarily due to early period economic and commodity price uncertainty in the exploration and production division. New business development comprised £11.7m (2008 - £10.6m) and £9.9m (2008 - £24.2m) was replacement capital.

Hunting Energy Services' capital expenditure in 2009 was £21.1m (2008 - £34.1m), of which £1.9m (2008 - £8.8m) was for exploration and production expenditure. The balance of £19.2m includes expenditure of £4.2m on manufacturing facilities in the US and China, together with completion of a £7.4m upgrade programme on the Company's pipe management handling facility in Scotland.

Health, Safety and the Environment

Hunting Energy Services' US manufacturing incident rate for 2009 was 2.59 versus 3.38 in 2008, which remains far below the Bureau of Labor statistics' industry average of 7.5.

The European facilities' accident statistics were again below the industry average in engineering and manufacturing. The Aberdeen facility received the Five Star Award for the eleventh consecutive year.

The Asian facilities reported only one incident in 2009. Workplace Safety and Health legislative requirements are strictly adhered to and the staff are focused on the risk analysis related to each job function within the manufacturing operation.

No environmental issues occurred in the year and all of Hunting Energy Services' primary manufacturing facilities are ISO 14001 Environmental Management System certified. Our goals are simply put - no accidents, no harm to people and no damage to the environment.

Outlook

Dependent on geopolitics, climate, currency and supply/demand issues, an accurate view of 2010 activity is problematic. Early forecasts suggest an 11% increase in worldwide exploration and production spending. Despite a continued surplus of natural gas, the US rig count for natural gas is anticipated to increase 25% from 2009 lows as operators are making healthy returns at current prices; much of their production is hedged at higher prices; and many operators need to drill to hold acreage positions. US oil drilling should continue to rise if commodity prices remain at current levels. Indeed, the oil-driven rig count grew 140% by December 2009 from its low in June 2009.

In Canada, lacking a shale play to drive drilling activity, the rig count is expected to improve only 2-3%. For the first time in many years, more rigs will be drilling for oil than natural gas.

Given the international rig count is more than 75% weighted toward oil, forecasts expect a 10% improvement in activity assuming commodity prices hold within the recent price bands. While the international rig count is 40-45% of the global rig count, their exploration and production spending exceeds North American by 200%.

The above rig count improvements are certainly welcomed over 2009, but they are far from 2008 levels. Caution remains apparent in operator forecasts as global economies, excluding China, remain flat to modest growth expectations. The anomaly of oil prices to US natural gas prices (16 to 1) reflects a global commodity price for oil, versus a regional one for natural gas.

For Hunting, the focus remains toward drilling activity in areas of high temperatures, high pressure and usually at depths beyond 12,000 feet. International and national oil companies that operate in this environment remain committed to replacing and adding to their reserve base due to growing depletion rates and global demand. They must therefore extract hydrocarbons from increasingly difficult-to-access and complex formations resulting in higher cost oil service offerings.

From recent acquisitions and the development of new manufacturing facilities, the Group, in 2010, will have 28 facilities (22 in 2009) to respond to its global customer base. New products will complete the testing phase in 2010 and 1) improve operator drilling, completion or intervention activities, 2) enhance profit margins for Hunting and 3) expand the Company's technology base to create value.

Acquisition opportunities are ongoing and management intends to conclude those that improve the Company's global footprint, product offering and technology base to create value. The timing of potential acquisitions is the only uncertainty.

Hunting views 2010 with optimism of further progress across the Group. Much of the progress will be weighted towards the second half as operators commit to further drilling programs, new Hunting facilities are completed and recent acquisitions are fully absorbed. The level of progress will be dependent upon regional activity and, as always, commodity prices driving rig count.

The global economic slump has done very little to calm the macroeconomic tailwinds. Oil and gas reserves are depleting and production for most companies is declining. The world is still gaining approximately 200,000 people every day. Of equal importance, a large middle class is leading to new levels of energy demand. The Company is poised to capitalise on any future upturn in its markets and benefit from industry fundamentals that hold great promise for the future.

Operating Review

Hunting manufactures or distributes those products that enable the extraction of oil and gas. Operators continue to test the boundaries of hydrocarbon production whether in high pressure, high temperature, deep on or offshore wells or geopolitically sensitive environments. The Company's unique technologies and 28 strategically located manufacturing facilities provide products with lower costs, greater safety and efficient deliverability regardless of the drilling or production environment. This is complemented by an advanced quality system that assures each product is globally produced to the same stringent requirements.

The primary market driver for Hunting is simply expressed: The world demand for oil and gas determines global rig count = footage drilled and/or completed = total tons (footage) of tubulars required and number of ancillary components.

Group Income Statement

			Restated
	2009		2008
	£m		£m
Continuing operations:
Revenue	359.9		418.5
EBITDA	50.6		75.7
Depreciation, amortisation and impairment	(14.8)		(16.9)
Profit from operations before exceptional items	35.8		58.8
Net interest income (expense)	1.8		(3.4)
Share of associates	0.9		1.2
Profit before tax	38.5		56.6
Taxation	(12.2)		(18.7)
Profit for the year before exceptional items	26.3		37.9
Earnings per share before exceptional items	17.7p		26.4p
Earnings per share - total
Continuing operations	18.2p		(3.6)p
Discontinued operations	3.7p		236.0p
Group	21.9p		232.4p
Average exchange rates to sterling
US Dollar	1.57		1.86
Canadian Dollar	1.78		1.96
Euro	1.12		1.26
Average number of employees	1,889		1,988

The income statement for 2008 has been restated to reflect the Group's change in accounting policy. Exceptional items from continuing operations during the year are a gain of £0.6m (2008 - £50.9m loss) - see note 3. Exceptional items from discontinued operations after tax are a gain of £3.9m (2008 - £268.1m) - see note 5.

Hunting Energy Services

Hunting Energy Services recorded a profit from operations before exceptional items of £27.9m versus £50.6m in 2008.

At the end of the year, there were 1,280 (2008 - 1,369) employees under four business platforms: Well Construction, Well Completion, Well Intervention and Exploration & Production.

Segmental Results

The Group reports through a divisional structure arranged into the following operating segments:

										Restated
				2009						2008
				Profit from						Profit from
		Revenue		Operations				Revenue		Operations
		£m		£m		Margin		£m		£m		Margin
Hunting Energy Services
Well Construction		77.9		3.3		4%		112.0		13.5		12%
Well Completion		176.2		20.3		12%		189.8		26.6		14%
Well Intervention		29.4		4.0		14%		23.3		4.6		20%
Exploration and Production		5.6		0.3		5%		14.8		5.9		40%
		289.1		27.9		10%		339.9		50.6		15%
Gibson Shipbrokers		20.8		0.7		3%		31.2		6.9		22%
Field Aviation		50.0		7.2		14%		47.4		1.3		3%
Group		359.9		35.8		10%		418.5		58.8		14%
Exceptional items (note 3)				0.6						(50.9)
Group profit from operations				36.4						7.9

Well Construction profit from operations before exceptional items was £3.3m (2008 - £13.5m). The year-on-year profit decline reflects reduced demand for drilling tools and trenchless technologies following the significant decline in drilling activity, particularly in North America.

The Well Construction platform provides products and services used by customers for the drilling phase of oil and gas wells. It also provides products and services associated with trenchless drilling that complements the infrastructure of underground construction associated with telecommunications, utility build-outs and remediation. This platform has four product categories associated with it: Premium Connections, Drilling Tools, OCTG and Trenchless Technologies.

Premium Connections: Hunting's premium connection product offerings include the established SEAL-LOCK brand of connections along with specialised technologies to assist customers in the design and implementation of drilling strategies. Premium connections are patented thread designs, which enable tubulars and ancillary components to be connected together. These thread forms exceed the performance characteristics of the materials being joined. From SEAL- LOCK products and engineered products like the Annular Pressure Release System the Company continues a legacy of providing customers what they need - when they need it - for any drilling environment.

Drilling Tools:Hunting's drilling tool product offering includes mud motors for increased efficiencies in drilling of oil and gas wells, along with vibration dampening systems (shock tools), non-magnetic drill collars, state of the art hard banding and carbon coating systems. These offerings, along with a global footprint provide the customer the ability to drill wells, straight or directional, in faster time at a lower cost.

OCTG:Hunting Oil Country Tubular Goods product offering provides customers with various casing sizes used in the construction phase of oil and gas well development. Relationships with major steel manufacturers along with alliance agreements with suppliers provide the customer with OCTG casing from a just-in-time logistics.

Trenchless Technologies: Hunting provides drill stem and associated accessories to assist in trenchless drilling within the telecommunication and underground utility industries. The business is expected to benefit from the remediation of antiquated utilities and further expansion of the telecommunication build-out.

Well Completionprofit from operations before exceptional items was £20.3m (2008 - £26.6m). The profit decline from 2008 tracks the fall in oil and gas commodity prices and industry slow down, resulting in customers deferring well completion activities. Demand for premium tubing products and manufactured components associated with well completions was also affected by financial market issues restricting the availability of credit to customers to fund projects.

The Well Completion platform provides products and services associated with the completion phase of oil and gas wells - the production of the hydrocarbons. Under this platform are three business units: Premium Tubing, Manufacturing and Thread Protection.

Premium Tubing:Hunting's premium tubing product offering includes OCTG tubing in Two-Step, semi premium tubing and API tubing. Two-Step tubing is supported by the SEAL-LOCK TSHP, TSHD and XP premium tubing connections, the semi premium market is supported by the TKC connection line and API tubing is purchased and delivered from mill and supplier sourcing.

Manufacturing:Hunting's manufacturing platform includes accessories, couplings, blast joints, pup joints and numerous components, to which Hunting premium connections or licensed connections are applied. In conjunction with the manufacturing aspects of the business, the Company provides inventory management services of customer completion inventory, which includes maintenance and replacement of completion assemblies before and after use in oil and gas wells, primarily focused on deep completion along with high temperatures and high pressure activities. The business also is an Original Equipment Manufacturer ("OEM") for all of the major oilfield service companies.

Thread Protection: Hunting's thread protection platform provides composite or plastic thread protectors, SEAL-LUBE thread compound, Preserve-A-Thread corrosion protection and CLEAR-RUN advanced tubular systems. The thread protector business services OCTG manufacturers as well as customers which need protectors for products they thread. SEAL-LUBE thread sealant is an anaerobic compound, which converts to a solid polymer in the absence of air, improving seal integrity of threaded connections. Preserve-A-Thread is a corrosion inhibitor, which is compatible with other make-up compounds, thus reducing the costs of re-cleaning threads prior to the application of thread compound. CLEAR-RUN advanced tubular system provides the customer an environmentally sound makeup solution that does not include make-up compounds utilised in most drilling activities.

Well Intervention profit from operations before exceptional items was £4.0m (2008 - £4.6m). The acquisitions of NCC and Welltonic contributed to the 2009 results. However, the year-on-year decline reflects reduced demand for intervention products, in part due to a slow-down in capital projects following reduced oil and gas commodity pricing and the accessibility by customers to project finance to fund activities.

The Well Intervention platform provides products and services used by customers for the production, maintenance and restoration of existing oil and gas wells. While Well Construction and Well Completion activities may only "touch" the well one time, Well Intervention products may do so numerous times during the production life of the well. Under this platform are two businesses: Well Intervention and Hunting Subsea.

Well Intervention:Hunting's well intervention business unit provides pressure control equipment, control panels/skids, E-line (wireline) and slickline tools. The pressure control offering provides BOP's and associated products and accessories, which allow well pressure to be managed. E-line and slickline tools assist in the logging and restoration of oil and gas wells. Hunting maintains OEM licenses from the major oilfield service providers for this equipment.

Hunting Subsea (National Coupling Company): Hunting Subsea manufactures hydraulic valves and couplings plus provides weldment services and chemical injection systems ("CIS"). Hydraulic valves and couplings are manufactured to the highest tolerances using state of the art technology for assured sustainability in the harsh subsea environment. Weldment services are provided for the welding of hydraulic couplings to flow tubes of the highest grades of materials. The chemical injection systems are designed to service single or multiple subsea field developments. The systems are remotely operated and equipped with real-time measurement capabilities utilising a positive displacement metering system.

Exploration and Production("E&P") profit from operations before exceptional items was £0.3m (2008 - £5.9m).

Exploration and Production includes the Group's oil and gas production activities in the Southern US and offshore Gulf of Mexico. The Group takes minority, non-operating equity holdings and currently participates in over 70 oil and gas production facilities.

These properties were directly affected by Hurricane Ike in the fall of 2008 when it cut a widespread path into the shallow Gulf where most of the E&P division's wells and platforms are located. Extensive surface and subsurface damage was incurred and many of the wells had to be shut-in for periods of up to one year. Because of the long shut-in periods, production flow was damaged and some wells are no longer commercially viable. As a result, the division showed reduced production year-on-year, together with an adjustment to reserves for permanently damaged wells. On a Net Equivalent Barrel ("NEB") basis, production was down 40% compared to the previous year. Full year output of 243,000 NEB, combined with low average prices for both oil and natural gas, resulted in decreased revenues with only marginal profit from operations. Drilling activity was curtailed due to the lack of promising prospects; the division participated in three onshore wells with no success; and no offshore wells were drilled. Year end reserves of oil and gas on an SEC volumetric basis were 1.3m NEB compared with 1.8m NEB at the end of 2008.

Exploration and Production - Oil and Gas Reserves

	1 January 2009			Reserve Movement			Production			31 December 2009
Oil	702			(84)			(61)			557
Gas	1,072			(187)			(182)			703
Oil and Gas		1,774			(271)			(243)			1,260

All figures are Net Equivalent Barrels '000

Other Operating Divisions

Gibson Shipbrokers,headquartered in London, displayed resilience to the global recession and severe fall of shipping rates by generating a profit from operations before exceptional items in 2009 of £0.7m (2008 - £6.9m) following a record performance in 2008.

Gibson consolidated its staffing and its global expansion as the world markets contracted in 2009. Purposeful recruitment was 4% over that same period in 2008. Growth in Gibson is an amalgam of trainees, juniors and experienced brokers from the international arena. Gibson has a high retention of committed and highly experienced staff with over 21% of the staff having in excess of 10 years service and 17% of the staff in excess of 15 years shipping market experience with the company.

Gibson is active in the crude oil, clean and dirty products markets, LPG and LNG sectors. It is also active within the shipping of chemicals, biofuels, vegoils, palmoils and smaller product shipments, which make up the specialised sector. Bulk iron ore, coal and grain are strong sectors for Gibson as is the offshore sector, which not only services the drilling, exploration and oilfield services sectors but is also active in the cable, pipe laying, seismic and emergent renewable sectors. Sale and Purchase remains an active segment for Gibson not only brokering re-sales but also new builds and the ship demolition markets. A strong Research department analyses the often volatile energy shipping markets and, utilising their database and market intelligence, they offer in-depth consultancy for an increasing number of clients in the shipping and financial sectors.

Field Aviationis recognised worldwide as a modifier of aircraft for special mission roles. The business specialises in providing solutions for paramilitary, military and specialised air support operators who require timely deployment of cost effective and reliable airborne platforms.

The Aircraft Modification Centre in Toronto carries out the design, installation, testing and certification of aircraft modification. Interior modification capabilities transform regional airliners into VIP or corporate shuttle aircraft. Leading-edge avionics modifications keep aircraft productive, profitable and technologically advanced.

As a build-to-print aircraft parts manufacturer, the Parts Manufacturing facility in Calgary specialises in the production of parts and spares for the international commercial and military aerospace industry. The business manufactures airframe parts and accessories for both current-production aircraft and out-of-production aircraft.

2009 was an exceptional year with strong performance from both the modification and manufacturing businesses. Field delivered a profit from operations before exceptional items for the year of £7.2m (2008 - £1.3m) on revenue of £50.0m (2008 - £47.4m). The aircraft modification business had an outstanding year successfully completing major aircraft modification programs for customers including US Customs and Border Protection, Icelandic Coast Guard and Japanese Coast Guard. Production capability for the next 6 months is already presold with good profits expected for 2010.

During 2009 the closure of the Calgary based aircraft maintenance repair and overhaul facility was completed. This allowed the business to focus on its profitable activities in 2009.

Performance Measures

A number of performance measures are used to compare the development, underlying business performance and position of the Group and its business segments. These are used collectively and periodically reviewed to ensure they remain appropriate and meaningful monitors of the Group's performance.

Key Performance Indicators	Description	2009	2008
Revenue	Revenue generated by continuing operations.	£359.9m	£418.5m
EBITDA	Earnings before interest, tax, depreciation, amortisation and impairments	£50.6m	£75.7m
Profit from operations	Profit from continuing operations before exceptional items.	£35.8m	£58.8m
Return on capital employed (ROCE)	Measures profit before interest and tax, before exceptional items, as a percentage of average gross capital employed. Average gross capital employed is the average of the aggregate of total equity and the net cash/debt at the start and end of the year. This measure is also used as a benchmark for target acquisitions and capital expenditure proposals.	19%	21%
Earnings per share (EPS)	Earnings from continuing operations, before exceptional items, attributable to Ordinary shareholders divided by the weighted average number of Ordinary shares outstanding at the year end.	17.7p	26.4p
Dividend per share (DPS)	Reflects the cash returned to Ordinary shareholders. Figures shown are calculated on the accruals basis.	10.5p	9.9p
Free cash flow	Profit from continuing operations adjusted for working capital, tax, replacement capital expenditure and interest.	£39.5m	£24.4m
Inventory and WIP days	Inventory and WIP at the year end divided by revenue per day	118 days	105 days
Trade receivable days	Trade receivables at the year end divided by revenue per day	50 days	71 days
Other performance measures	Description
Health and safety measures	Monitor lost time accidents and incident rates
Quality and efficiency measures	Monitor production and non-conformance reports
Number of employees	Number of employees at the end of the period

Indicators of future Group performance closely monitored by management include:

Key Market Indicators	Description
Drilling rig activity	International average rig count - December average	1,024	1,078
	North America rig count - December average	1,485	2,143
Oil price	WTI price at the period end - per barrel	US$79.36	US$44.60
Natural gas price	Henry Hub price - per 1,000 cubit feet Mcf - December average	US$5.50	US$5.99
Exchange rates	Average and spot exchange rates.

 

Finance Director's Review

Results

2009 was an extremely challenging year, with volatile market conditions affecting our core activities throughout the period. Despite this trading environment the financial statements, which follow, report robust trading results, together with a strong balance sheet.

Group revenues were down year-on-year from £418.5m to £359.9m primarily due to lower US activity levels at Well Construction and Exploration and Production. Well Intervention reported improved revenues gained from acquisitions completed in the year.

Profit from operations benefitted from cost saving measures implemented during the year, however reduced trading volumes, particularly from Well Construction, impacted profits. Results from Exploration and Production and Gibson Shipbrokers were adversely affected by reduced volumes and lower market prices, while record results from Field Aviation and new profit streams from acquisitions partly compensated.

Included within profit from operations are charges for dry hole costs of £0.4m, acquisition costs written off of £0.5m and net inventory provisions of £3.9m.

Profit from continuing operations before exceptional items was £35.8m (2008 - £58.8m) (profit from continuing operations increased to £36.4m from £7.9m reported in 2008).

Profit before tax from continuing operations before exceptional items was £38.5m (2008 - £56.6m) (profit before tax from continuing operations was £39.1m (2008 - £5.7m)).

Net Finance Income

Net finance income moved from a net charge of £3.4m in 2008 to net income of £1.8m in 2009 following receipt of the Gibson Energy sale proceeds in December 2008.

Exceptional Items

In April 2009, following agreement of the Gibson Energy completion accounts, additional sale proceeds of £17.6m were received and the gain on recognition of these has been offset by an increase in related provisions of £16.0m for indemnities and warranties. The net £1.6m credit, together with £0.6m foreign exchange losses, have been released to the income statement.

In December 2009 the sale of Hunting Energy France completed realising a net gain of £2.9m. The gain includes the release of £3.1m foreign exchange gains from the cumulative translation reserve.

Earnings per Share

Basic earnings per share before exceptional items for all operations decreased 68% from 57.6p in 2008 to 18.4p in 2009 and for continuing operations by 33% to 17.7p (2008 - 26.4p). Basic earnings per share for all operations was 21.9p (2008 - 232.4p) and for continuing operations was 18.2p (2008 - (3.6)p). The average number of shares used in calculating the earnings per share in 2009 was 131.1m compared to 130.9m in 2008.

Taxation

The 2009 tax charge on continuing operations before exceptional items was £12.2m (2008 - £18.7m) and reflects an effective rate of 32% (2008 - 33%). The lower rate in 2009 is mainly due to the increased weighting of profits arising in lower tax jurisdictions particularly in SE Asia.

Net Assets

Net assets at 31 December 2009 were materially unchanged at £561.8m compared with £557.3m at 31 December 2008. The net increase of £4.5m reflects the £31.7m retained result for the year, offset by £13.8m dividend payments and adverse foreign exchange movements and other items of £13.4m.

Summary Balance Sheet

		2009		2008
		£m		£m
Total assets		817.7		874.2
Total liabilities		(255.9)		(316.9)
Net assets		561.8		557.3
Net cash		365.0		372.3

Pensions

The Group continues to account for pensions in accordance with IAS 19, and at the year end the net surplus on the Group's balance sheet was £8.0m (2008 - £7.6m) which related to the UK defined benefit scheme. This scheme was closed to new entrants in 2002.

Liquidity and Funding

The Group has sufficient net cash and credit facilities to meet its anticipated funding requirements over the short and medium term. Credit facilities which total £181.9m include committed bank facilities of £135.0m and uncommitted facilities of £46.9m. The committed bank facilities include a £125.0m five year multi-currency borrowing facility expiring in September 2010 on which renewal discussions will commence later in the year.

Net Cash

The year ended with net cash of £365.0m (2008 - £372.3m). At 31 December 2009, the Group balance sheet shows borrowings of £38.6m. These are borrowings drawn on the Group's UK overdraft facilities which are subject to a legal right of set-off against funds held in UK current accounts. Under International Financial Reporting Standards ("IFRS") these balances are required to be shown gross.

Cash Flow

Free cash flow, defined as profit from operations adjusted for working capital, tax, replacement capital expenditure and interest, generated during the year was £39.5m compared to a £24.4m cash inflow in 2008. Total capital expenditure was £21.6m (2008 - £34.8m) comprising replacement spend of £9.9m (2008 - £24.2m) and growth spend of £11.7m (2008 - £10.6m). The year on year reduction in capital spend was principally due to exploration and production spend which reduced from £8.8m in 2008 to £1.9m in 2009.

Three acquisitions completed during the year absorbing £44.4m of cash and £17.6m of additional proceeds from the sale of Gibson Energy were received in April 2009, together with £6.4m from the sale of Hunting Energy France in December 2009.

Summary Cash Flow

				Restated
		2009		2008
		£m		£m
Cash from Operations		56.4		58.1
Replacement Capital		(9.9)		(24.2)
Interest and tax		(7.0)		(9.5)
Free Cash Flow		39.5		24.4
Disposals		24.0		524.4
Acquisitions		(44.4)		(1.6)
Growth Capital Expenditure		(11.7)		(10.6)
Dividends		(13.8)		(11.3)
Foreign Exchange		(1.8)		2.1
Other		(2.0)		(4.6)
Cash (outflow) inflow
- continuing		(10.2)		522.8
- discontinued		2.9		(11.3)
Cash (outflow) inflow - Group		(7.3)		511.5

Treasury Risk Management

The Group operates a centralised Treasury service with policies and procedures approved by the Board. These cover funding, banking relationships, foreign currency, interest rate exposures, cash management and the investment of surplus cash.

Currency options are used to reduce currency risk movements on the Group's results, by hedging approximately 50% of each year's budgeted US dollar earnings into sterling. Currency exposure on the balance sheet is, where practical, reduced by financing assets with borrowings in the same currency. Spot and forward foreign exchange contracts are used to cover the net exposure of purchases and sales in non-domestic currencies.

Surplus cash is invested in AAA Money Market Funds and in bank deposits.

Change in Accounting Policy

The Group has changed its accounting policy of carrying property at valuation to carrying these at historical cost. This change in policy follows the disposal of Gibson Energy in 2008 and with it the majority of the Group's freehold properties. The impact on the Group's continuing operations is not material. Prior period figures have been restated to reflect this change in policy.

Critical Accounting Policies

The Group accounts are prepared using accounting policies in accordance with IFRS.

The preparation of these accounts require the use of estimates, judgements and assumptions that affect the reported amount of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities. Directors' estimates are based on historical experience, consultation with experts and other methods that they believe are reasonable and appropriate.

Employee Benefits

The Group operates a defined benefit pension scheme in the UK, which was closed to new entrants with effect from 31 December 2002, as well as a number of defined contribution schemes within the Group. The defined benefit scheme is accounted for under IAS 19 and the main actuarial assumptions used are shown in the table below.

Actuarial Assumptions

	2009	2008
Rate of inflation	3.7%	2.9%
Discount rate	5.6%	6.4%
Expected future lifetime (yrs)	24.0	23.8

Expected future lifetime is the number of years a 65 year old male is expected to live based on current mortality tables.

Property, Plant and Equipment and Other Intangible Assets

The Group's property, plant and equipment and other intangible assets are subject to annual rates of depreciation intended to spread the cost of the assets over their estimated service life. These rates are regularly reviewed.

Goodwill

The carrying value of goodwill held on balance sheet is reviewed for impairment at least annually. The review compares the carrying value with the estimated future cash flows from the business unit to which the goodwill relates. The cash flows are based on management's view of future trading prospects. Any shortfall identified is treated as an impairment and written off.

Taxation

The effective tax rate for the full year is 32% and is the combined rate arising from the regional mix of Group results. The rate also takes into account the estimated future utilisation of tax losses and the agreements with regional tax authorities of corporate tax computations.

Deferred Tax

A deferred tax asset and liability are recorded within the financial statements at 31 December 2009 of £4.6m and £18.4m respectively. These balances are derived from assumptions which include the future utilisation of trading losses and provisions at assumed tax rates.

Share Based Payments

The estimated cost of grants and awards of equity instruments is spread evenly over the vesting period.

Available for Sale Financial Assets

The equity warrant received as part consideration on the disposal of Gibson Energy is held as an available for sale financial asset at its fair value. The fair value of the warrant is based on management's best estimate of the recoverable amount given current global market conditions.

Provisions

Provisions amounting to £78.9m are held on balance sheet at the year-end. These are based on Directors' estimates of the future cost of current obligations.

 

Primary Risks and Uncertainties Facing the Business

The Group has an established risk management monitoring and review process. The process requires all businesses to identify, evaluate and monitor risks and take steps to reduce, eliminate or manage the risk. Group risks are reviewed by the Board at least three times a year. In addition Risk Management is an agenda item at every Board meeting.

The primary risk and uncertainties facing the business which could have a material adverse impact on the Group include:

Commodity Prices

Although not under the control of the Group, a material movement in commodity pricing could impact demand for the Group's products and services. Inventory levels are closely managed to mitigate against exposure to commodity price movement.

Effective Control Over Subsidiaries

Group subsidiaries operate within a framework with a degree of autonomy vested in local management. The operations of subsidiaries are subject to regular checking by management through board and management meetings, regular reporting and contact together with external and internal audit.

Acquisitions and Capital Expenditure Programme

Acquisitions and capital expenditure are an integral part of the continuing Group's expansion and development. The Board is actively involved in monitoring and assessing the acquisition and capital expenditure programme to mitigate against the risk of poor investment decisions. All acquisitions and capital expenditure above discretionary limits require Board approval prior to commitment.

Global Recession

A prolonged global recession could impact demand for the Group's products and services. Management and the Board continue to closely monitor trading results and forecasts. In addition overheads are monitored regularly to ensure the cost base is actively managed.

Health, Safety and Environmental ("HS&E")

The adherence to Group HS&E policy and local regulations is discussed at all Board meetings. There is regular HS&E compliance reporting to the Board.

Loss of Key Executives

Remuneration packages are regularly reviewed to ensure key executives and senior management are remunerated in line with market rates. External consultants are engaged to provide guidance on best practice.

Adequacy of Provisions

The Group holds £78.9m of provisions for warranties, indemnities and vacant leasehold properties. The timing and amount of any provisions that may be payable remains uncertain.

Fluctuation in Currency Exchange Rates

The Group has significant overseas operations, hence results are denominated in a variety of currencies. As a result, the Group's financial statements, which are reported in sterling, are subject to the effects of foreign exchange rate fluctuations with respect to currency conversions, together with the Group's ability to hedge these risks and the cost of such hedging.

Dennis Proctor,

Chief Executive

Peter Rose,

Finance Director

Responsibility Statement

The Directors confirm that the Annual Report and Accounts 2009, which include the Business Review, the Report of the Directors', the financial statements, together with the accounting policies and related notes, comply with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority in respect of the requirement to produce an annual financial report.

The Directors' confirm that to the best of their knowledge and belief:

• the financial statements have been prepared in accordance with International Financial Reporting Statements ("IFRSs") as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company; and

• the Business Review includes a fair review of the development and performance of the business and the position of the Company and Group, together with a description of the principal risks and uncertainties they face.

By order of the Board

Peter Rose

Finance Director

25 February 2010

Consolidated Income Statement

For the Year ended 31 December 2009

														Restated
					Before						Before
					exceptional		Exceptional				exceptional			Exceptional
					items		items		Total		items			items			Total
					2009		2009		2009		2008			2008			2008
			Notes		£m		£m		£m		£m			£m			£m
Revenue			2		359.9		-		359.9		418.5			-			418.5
Cost of sales					(261.4)		-		(261.4)		(292.5)			(16.2)			(308.7)
Gross profit					98.5		-		98.5		126.0			(16.2)			109.8
Other operating income					5.0		-		5.0		4.4			-			4.4
Operating expenses					(67.7)		0.6		(67.1)		(71.6)			(34.7)			(106.3)
Profit from continuing operations			2		35.8		0.6		36.4		58.8			(50.9)			7.9
Interest income					6.2		-		6.2		7.0			-			7.0
Interest expense					(4.4)		-		(4.4)		(10.4)			-			(10.4)
Share of post-tax profits of associates					0.9		-		0.9		1.2			-			1.2
Profit before tax from continuing operations					38.5		0.6		39.1		56.6			(50.9)			5.7
Taxation			4		(12.2)		-		(12.2)		(18.7)			11.7			(7.0)
Profit for the year:
From continuing operations					26.3		0.6		26.9		37.9			(39.2)			(1.3)
From discontinued operations			5		0.9		3.9		4.8		40.9			268.1			309.0
Profit for the year					27.2		4.5		31.7		78.8			228.9			307.7
Profit attributable to:
Owners of the parent					24.2		4.5		28.7		75.3			228.9			304.2
Minority interests					3.0		-		3.0		3.5			-			3.5
					27.2		4.5		31.7		78.8			228.9			307.7
Earnings per share
Basic	- from continuing operations		6						18.2p								(3.6)p
	- from discontinued operations		6						3.7p								236.0p
	- Group total								21.9p								232.4p
Diluted	- from continuing operations		6						17.8p								(3.6)p
	- from discontinued operations		6						3.6p								236.0p
	- Group total								21.4p								232.4p

The income statement for the year ended 31 December 2008 has been restated to reflect the Group's change in accounting policy from carrying property at valuation to carrying these at historical cost.

Consolidated Statement of Comprehensive Income

For the Year ended 31 December 2009

				Restated
		2009		2008
		£m		£m
Profit for the year		31.7		307.7
Other comprehensive income after tax:
Exchange adjustments		(9.8)		40.4
Release of foreign exchange adjustments on disposal of subsidiary		(3.1)		(13.8)
Fair value gains and losses:
- gain on available for sale financial asset arising during the period		1.3		1.2
- gains (losses) originating on cash flow hedges arising during the period		0.6		(3.1)
- losses transferred to income statement on disposal of cash flow hedges		2.2		0.4
Actuarial losses on defined benefit pension schemes		(0.3)		(14.4)
Other comprehensive income after tax		(9.1)		10.7
Total comprehensive income for the year		22.6		318.4
Total comprehensive income attributable to:
Owners of the parent		19.7		314.6
Minority interests		2.9		3.8
		22.6		318.4

 

Consolidated Balance Sheet

At 31 December 2009

						Restated		Restated
				2009		2008		2007
				£m		£m		£m
ASSETS
Non-current assets
Property, plant and equipment				121.4		119.6		241.8
Goodwill				54.1		29.3		72.4
Other intangible assets				4.3		1.2		13.9
Interests in associates				11.7		10.8		10.5
Available for sale financial assets				29.8		28.5		0.2
Retirement benefit assets				8.0		7.6		25.2
Trade and other receivables				3.6		1.6		2.8
Deferred tax assets				4.6		5.9		7.1
				237.5		204.5		373.9
Current assets
Inventories				116.4		124.3		142.1
Trade and other receivables				60.2		124.0		244.3
Investments				-		-		0.9
Cash and cash equivalents				403.6		421.4		79.8
				580.2		669.7		467.1
LIABILITIES
Current liabilities
Trade and other payables				109.7		164.8		262.1
Current tax liabilities				8.3		13.6		7.1
Borrowings				38.0		49.1		89.2
Provisions				61.4		56.2		4.5
				217.4		283.7		362.9
Net current assets				362.8		386.0		104.2
Non-current liabilities
Borrowings				0.6		-		130.7
Deferred tax liabilities				18.4		16.5		79.7
Retirement benefit obligations				-		-		1.1
Other payables				2.0		-		0.1
Provisions				17.5		16.7		15.4
				38.5		33.2		227.0
Net assets				561.8		557.3		251.1
Equity attributable to owners of the parent
Share capital				33.1		33.0		32.9
Share premium				90.2		90.0		87.2
Other components of equity				28.0		38.7		11.9
Retained earnings				397.2		383.4		108.1
				548.5		545.1		240.1
Minority interests				13.3		12.2		11.0
Total equity				561.8		557.3		251.1

 

Consolidated Statement of Changes in Equity

		Year ended 31 December 2009
						Other
		Share		Share		components		Retained				Minority		Total
		capital		premium		of equity		earnings		Total		interests		equity
		£m		£m		£m		£m		£m		£m		£m
At 1 January		33.0		90.0		47.5		383.5		554.0		12.2		566.2
Change in accounting policy		-		-		(8.8)		(0.1)		(8.9)		-		(8.9)
At 1 January as restated		33.0		90.0		38.7		383.4		545.1		12.2		557.3
Comprehensive income
Profit for the year		-		-		-		28.7		28.7		3.0		31.7
Exchange adjustments		-		-		(9.7)		-		(9.7)		(0.1)		(9.8)
Release of foreign exchange adjustments on disposal of subsidiary		-		-		(3.1)		-		(3.1)		-		(3.1)
Fair value gains and losses:
- gain on available for sale financial assets arising during the period		-		-		1.3		-		1.3		-		1.3
- gains originating on cash flow hedges arising during the period		-		-		0.6		-		0.6		-		0.6
- losses transferred to income statement on disposal of cash flow hedges		-		-		2.2		-		2.2		-		2.2
Actuarial losses on defined benefit pension schemes		-		-		-		(0.3)		(0.3)		-		(0.3)
Total other comprehensive income		-		-		(8.7)		(0.3)		(9.0)		(0.1)		(9.1)
Total comprehensive income		-		-		(8.7)		28.4		19.7		2.9		22.6
Transactions with owners
Dividends		-		-		-		(13.8)		(13.8)		(1.8)		(15.6)
Shares issued
- share option schemes		0.1		0.1		-		-		0.2		-		0.2
Purchase of Treasury shares		-		-		-		(7.9)		(7.9)		-		(7.9)
Disposal of Treasury shares		-		-		-		4.0		4.0		-		4.0
- taxation		-		-		-		0.2		0.2		-		0.2
Share options
- value of employee services		-		-		1.0		-		1.0		-		1.0
- discharge		-		0.1		(1.6)		1.5		-		-		-
Transfer between reserves		-		-		(1.4)		1.4		-		-		-
Total transactions with owners		0.1		0.2		(2.0)		(14.6)		(16.3)		(1.8)		(18.1)
At 31 December		33.1		90.2		28.0		397.2		548.5		13.3		561.8

 

Consolidated Statement of Changes in Equity

		Year ended 31 December 2008
						Other
		Share		Share		components		Retained				Minority		Total
		capital		premium		of equity		earnings		Total		interests		equity
		£m		£m		£m		£m		£m		£m		£m
At 1 January		32.9		87.2		73.3		107.5		300.9		11.0		311.9
Change in accounting policy		-		-		(61.4)		0.6		(60.8)		-		(60.8)
At 1 January as restated		32.9		87.2		11.9		108.1		240.1		11.0		251.1
Comprehensive income
Profit for the year		-		-		-		304.2		304.2		3.5		307.7
Other comprehensive income
Exchange adjustments		-		-		40.1		-		40.1		0.3		40.4
Release of foreign exchange adjustments on disposal of subsidiary		-		-		(13.8)		-		(13.8)		-		(13.8)
Fair value gains and losses:
- gain on available for sale financial assets arising during the period		-		-		1.2		-		1.2		-		1.2
- losses originating on cash flow hedges arising during the period		-		-		(3.1)		-		(3.1)		-		(3.1)
- losses transferred to income statement on disposal of cash flow hedges		-		-		0.4		-		0.4		-		0.4
Actuarial losses on defined benefit pension schemes		-		-		-		(14.4)		(14.4)		-		(14.4)
Total other comprehensive income		-		-		24.8		(14.4)		10.4		0.3		10.7
Total comprehensive income		-		-		24.8		289.8		314.6		3.8		318.4
Transactions with owners
Dividends		-		-		-		(11.3)		(11.3)		(2.6)		(13.9)
Shares issued
- share option schemes		-		0.1		-		-		0.1		-		0.1
- LTIP awards		0.1		2.6		-		-		2.7		-		2.7
Purchase of Treasury shares		-		-		-		(7.5)		(7.5)		-		(7.5)
Disposal of Treasury shares		-		-		-		2.6		2.6		-		2.6
- taxation		-		-		-		1.4		1.4		-		1.4
Share options
- value of employee services		-		-		2.4		-		2.4		-		2.4
- discharge		-		0.1		(0.4)		0.3		-		-		-
Total transactions with owners		0.1		2.8		2.0		(14.5)		(9.6)		(2.6)		(12.2)
At 31 December		33.0		90.0		38.7		383.4		545.1		12.2		557.3

Consolidated Statement of Cash Flows

For the Year ended 31 December 2009

						Restated
				2009		2008
				£m		£m
Operating activities
Continuing operations:
Profit from operations				36.4		7.9
Exceptional items				(0.6)		50.9
Depreciation, amortisation and impairment				14.8		16.9
Loss on disposal of property, plant and equipment				1.6		2.0
Proceeds from disposal of property, plant and equipment held for rental				2.0		2.6
Purchase of property, plant and equipment held for rental				(7.3)		(13.6)
Decrease (increase) in inventories				2.3		(21.4)
Decrease (increase) in receivables				48.1		(23.5)
(Decrease) increase in payables				(38.5)		29.2
Taxation (paid) received				(10.0)		(7.2)
Other non-cash flow items				(7.7)		(3.9)
Discontinued operations				3.2		28.4
Net cash inflow from operating activities				44.3		68.3
Investing activities
Continuing operations:
Dividends received from associates				0.2		1.0
Purchase of subsidiaries				(44.3)		(1.6)
Net cash acquired with subsidiaries				1.4		-
Disposal of subsidiaries				26.5		525.9
Net cash disposed of with subsidiary				(2.5)		(1.5)
Closure of business				-		(0.7)
Loans to associates				-		(0.4)
Loans from associates repaid				(0.5)		(1.5)
Loans to associates repaid				1.0		-
Proceeds from disposal of property, plant and equipment				0.7		1.8
Purchase of property, plant and equipment				(14.3)		(21.2)
Purchase of intangibles and investments				(0.1)		(0.1)
Discontinued operations				(0.3)		(35.4)
Net cash (outflow) inflow from investing activities				(32.2)		466.3
Financing activities
Continuing operations:
Interest received				4.9		5.8
Interest paid				(1.9)		(8.1)
Equity dividends paid				(13.8)		(11.3)
Minority interest dividend paid				(1.8)		(2.6)
Share capital issued				0.2		0.2
Purchase of treasury shares				(7.7)		(6.2)
Disposal of treasury shares				3.9		1.3
Capital element of finance leases				(1.3)		-
Proceeds from new borrowings				0.6		-
Repayment of borrowings				-		(162.2)
Repayment of deposits				-		0.9
Discontinued operations				-		(4.3)
Net cash outflow from financing activities				(16.9)		(186.5)
Net cash (outflow) inflow in cash and cash equivalents				(4.8)		348.1
Cash and cash equivalents at the beginning of period				372.4		19.7
Effect of foreign exchange rates				(1.8)		4.6
Cash and cash equivalents at end of the year				365.8		372.4
Cash and cash equivalents at the end of the year comprise:
Cash and cash equivalents				403.6		421.4
Bank overdrafts included in borrowings				(37.8)		(49.0)
				365.8		372.4

Notes

1. Basis of Accounting

The financial information has been prepared in accordance with the Companies Act 2006 and those International Financial Reporting Standards ("IFRSs") as adopted by the European Union and IFRIC Interpretations. The information has been prepared on a going concern basis under the historical cost convention as modified by the revaluation of available for sale financial assets and those financial assets and liabilities held for trading.

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2009 or 31 December 2008, but is derived from those accounts. Statutory accounts for 2008 have been delivered to the Registrar of Companies and those for 2009 will be delivered in due course. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006. Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards ("IFRS") this announcement does not itself contain sufficient information to comply with IFRS.

Change in accounting policy from carrying property at valuation to historic cost

The Group has elected to change its accounting policy from carrying property at valuation to carrying it at historical cost under IAS 16 Property, Plant and Equipment. The accounting policy for depreciation remains unchanged. The property portfolio of the Group has reduced significantly following the disposal of Gibson Energy on 12 December 2008 and the significance of property, plant and equipment on the balance sheet has declined. In addition, the majority of Hunting's peers use historical cost and so the use of historical cost will improve comparability.

Prior year comparatives have been restated to reflect this change in policy, as required by IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

Notes continued

1. Basis of Accounting continued

The impact of this change in accounting policy is set out below:

		Year ended 31 December 2008 (as previously reported)		Change in accounting policy	Restated Year ended 31 December 2008		Hunting Energy France Discontinued Operation	Year ended 31 December 2008 as presented
		£m		£m	£m		£m	£m
Consolidated Income Statement:
Gross Profit		120.1		-	120.1		(10.3)	109.8
Other operating income		4.7		-	4.7		(0.3)	4.4
Operating expenses		(114.8)		0.2	(114.6)		8.3	(106.3)
Net finance costs		(3.2)		-	(3.2)		(0.2)	(3.4)
Share of post-tax profits in associates		1.2		-	1.2		-	1.2
Taxation		(7.7)		(0.1)	(7.8)		0.8	(7.0)
Profit for the year:
From continuing operations		0.3		0.1	0.4		(1.7)	(1.3)
From discontinued operations		256.3		51.0	307.3		1.7	309.0
Profit for the year		256.6		51.1	307.7		-	307.7
Earnings per share:
Basic EPS		193.4p		39.0p	232.4p		-	232.4p
Diluted EPS		187.4p		45.0p	232.4p		-	232.4p
Consolidated Statement of Comprehensive Income:
Profit for the year		256.6		51.1	307.7		-	307.7
Other comprehensive income after tax:
Exchange adjustments		44.2		(3.8)	40.4		-	40.4
Release of foreign exchange    adjustments on disposal of subsidiary		(18.0)		4.2	(13.8)		-	(13.8)
Impairment of revalued assets		(0.4)		0.4	-		-	-
Other components of comprehensive income		(15.9)		-	(15.9)		-	(15.9)
Other comprehensive income after tax		9.9		0.8	10.7		-	10.7
Total comprehensive income for the year		266.5		51.9	318.4		-	318.4

Notes continued

1. Basis of Accounting continued

			Year ended 31 December 2008 (as previously reported)	Change in accounting policy	Restated Year ended 31 December 2008
			£m	£m	£m
Consolidated Balance Sheet:
Property, plant and equipment			130.6	(11.0)	119.6
Deferred tax liabilities			(18.6)	2.1	(16.5)
Other assets and liabilities			454.2	-	454.2
Net assets			566.2	(8.9)	557.3
Share capital			33.0	-	33.0
Share premium			90.0	-	90.0
Revaluation reserve			9.6	(9.6)	-
Foreign currency translation reserve			33.1	0.8	33.9
Retained earnings			383.5	(0.1)	383.4
Other reserves			4.8	-	4.8
Minority interests			12.2	-	12.2
Total equity			566.2	(8.9)	557.3

The impact of the change in accounting policy on the 2007 results was to reduce profit for the year from discontinued operations by £0.2m.

2. Segmental Reporting

The Group reports on six operating segments in its internal management reports. The Group's segments are strategic business units that offer different products and services to international oil and gas companies, the aviation and shipping sector.

As indicated in the Chief Executive's Review in the Annual Report and Accounts for 2008, a new segment, Well Intervention, has been identified and reported in internal management reports. Although the Well Intervention segment does not currently meet the requirements of a reportable segment, management has concluded that this segment should be reported separately as it is an area of strategic focus of the business and is expected to materially contribute to Group revenue in the future.

The Well Construction segment provides products and services used by customers for the drilling phase of oil and gas wells along with associated equipment used by the underground construction industry for telecommunication infrastructure build-out.

The Well Completion segment provides products and services used by customers for the completion phase of oil and gas wells.

The Well Intervention segment provides products and services used by customers for the production, maintenance and restoration of existing oil and gas wells.

Notes continued

2. Segmental Reporting continued

The Exploration and Production segment includes the Group's oil and gas exploration and production activities in the Southern US and offshore Gulf of Mexico.

Gibson Shipbrokers is a global energy shipping broker headquartered in London. Crude oil, fuel oil and bio fuels are actively shipped along with dry bulk such as coal, iron ore and grain. The company is also involved in the shipping of liquefied petroleum gas ("LPG"), petrochemicals and liquefied natural gas ("LNG").

Field Aviation is an aircraft service organisation providing modification, installation, distribution, maintenance and manufacturing services for regional, business and government operators worldwide.

The following tables present the results of the operating segments on the same basis as that used for internal reporting purposes to Dennis Proctor, the Chief Operating Decision Maker ("CODM"). The information for the year ended 31 December 2008 has been re-presented to show the Well Intervention operating segment and to take into account the change in accounting policy from carrying property at valuation to carrying these at historical cost.

The Group measures the performance of its operating segments based on revenue and profit from operations, before any exceptional items. Accounting policies used for segment reporting reflect those used for the Group. Inter-segment sales are priced on an arms-length basis. Costs and overheads incurred centrally are apportioned to the operating segments on the basis of time attributed to those operations by senior executives.

Notes continued

2. Segmental Reporting continued

 

Results from operations

		Year ended 31 December 2009
								Profit from
								operations
		Total		Inter-				before
		gross		segmental		Total		exceptional		Exceptional
		revenue		revenue		revenue		items		items		Total
		£m		£m		£m		£m		£m		£m
Continuing operations:
Hunting Energy Services
Well Construction		80.0		(2.1)		77.9		3.3		-		3.3
Well Completion		184.7		(8.5)		176.2		20.3		-		20.3
Well Intervention		29.4		-		29.4		4.0		-		4.0
Exploration and Production		5.6		-		5.6		0.3		-		0.3
		299.7		(10.6)		289.1		27.9		-		27.9
Other Operating Divisions
Gibson Shipbrokers		20.8		-		20.8		0.7		-		0.7
Field Aviation		50.0		-		50.0		7.2		-		7.2
		70.8		-		70.8		7.9		-		7.9
Total from continuing operations		370.5		(10.6)		359.9		35.8		-		35.8
Exceptional items not apportioned to business segments								-		0.6		0.6
Profit from continuing operations								35.8		0.6		36.4
Net finance income								1.8		-		1.8
Share of post-tax profits in associates								0.9		-		0.9
Profit before tax from continuing operations								38.5		0.6		39.1
Discontinued operations:
Gibson Energy		-		-		-		-		1.0		1.0
Hunting Energy France		18.9		-		18.9		1.2		2.8		4.0
Total from discontinued operations		18.9		-		18.9		1.2		3.8		5.0
Net finance costs								0.1		-		0.1
Taxation								(0.4)		0.1		(0.3)
Profit from discontinued operations								0.9		3.9		4.8

Notes continued

2. Segmental Reporting continued

		Restated
		Year ended 31 December 2008
								Profit from
								operations
		Total		Inter-				before
		gross		segmental		Total		exceptional		Exceptional
		revenue		revenue		revenue		items		items		Total
		£m		£m		£m		£m		£m		£m
Continuing operations:
Hunting Energy Services
Well Construction		118.4		(6.4)		112.0		13.5		(13.4)		0.1
Well Completion		193.6		(3.8)		189.8		26.6		(4.9)		21.7
Well Intervention		23.3		-		23.3		4.6		-		4.6
Exploration and Production		14.8		-		14.8		5.9		(16.2)		(10.3)
		350.1		(10.2)		339.9		50.6		(34.5)		16.1
Other Operating Divisions
Gibson Shipbrokers		31.2		-		31.2		6.9		-		6.9
Field Aviation		47.4		-		47.4		1.3		(2.8)		(1.5)
		78.6		-		78.6		8.2		(2.8)		5.4
Total from continuing operations		428.7		(10.2)		418.5		58.8		(37.3)		21.5
Exceptional items not apportioned to business segments*								-		(13.6)		(13.6)
Profit from continuing operations								58.8		(50.9)		7.9
Net finance costs								(3.4)		-		(3.4)
Share of post-tax profits in associates								1.2		-		1.2
Profit before tax from continuing operations								56.6		(50.9)		5.7

 * Exceptional items not apportioned to business segments primarily relate to head office provisions.

Discontinued operations:
Gibson Energy
Marketing		2,567.8		(779.9)		1,787.9		6.6		-		6.6
Truck Transportation		147.3		(18.1)		129.2		16.8		-		16.8
Terminals and Pipelines		502.8		(434.1)		68.7		17.5		-		17.5
Propane Distribution and Marketing		229.5		(17.5)		212.0		7.7		-		7.7
Moose Jaw Refinery		302.6		(129.6)		173.0		10.8		-		10.8
Profit on disposal		-		-		-		-		258.8		258.8
		3,750.0		(1,379.2)		2,370.8		59.4		258.8		318.2
Hunting Energy France		21.5		-		21.5		2.3		-		2.3
Total from discontinued operations		3,771.5		(1,379.2)		2,392.3		61.7		258.8		320.5
Net finance costs								(4.1)		-		(4.1)
Share of post-tax losses in associates								(0.2)		-		(0.2)
Taxation								(16.5)		9.3		(7.2)
Profit from discontinued operations								40.9		268.1		309.0

Profit from operations for Gibson Energy excludes depreciation and amortisation charges from 30 April 2008.

Notes continued

2. Segmental Reporting continued

Segment Assets

		2009		2008
		£m		£m
Continuing operations:
Hunting Energy Services
Well Construction		98.2		123.6
Well Completion		154.9		166.0
Well Intervention		62.0		20.7
Exploration and Production		22.3		26.3
		337.4		336.6
Other Operating Divisions
Gibson Shipbrokers		7.4		9.6
Field Aviation		11.1		31.5
		18.5		41.1
Interests in associates		11.7		10.8
Total segment assets - continuing operations		367.6		388.5
Discontinued operations:
Hunting Energy France		-		19.3
Total segment assets - discontinued operations		-		19.3
Unallocated assets - continuing operations:
- current and deferred taxes		4.6		5.7
- retirement benefit assets		8.0		7.6
- net cash		403.6		419.4
- other*		34.2		35.3
- elimination of inter-segment balances		(0.3)		(3.8)
Unallocated assets - discontinued operations:
- current and deferred taxes		-		0.2
- net cash		-		2.0
Total assets		817.7		874.2

*Other assets include the equity warrant of £29.6m (2008 - £28.3m) and the bond received on the disposal of Hunting Energy France £2.2m (2008 - £nil).

Notes continued

2. Segmental Reporting continued

 

Other segment items

		2009				2008
				Amortisation				Amortisation
				of intangible				of intangible
		Depreciation		assets		Depreciation		assets
		£m		£m		£m		£m
Continuing operations:
Hunting Energy Services
Well Construction		3.9		-		5.2		-
Well Completion		5.5		-		4.3		-
Well Intervention		1.8		0.6		1.1		0.3
Exploration and Production		2.3		-		5.3		-
		13.5		0.6		15.9		0.3
Other Operating Divisions
Gibson Shipbrokers		0.2		-		0.2		-
Field Aviation		0.5		-		0.5		-
Total - continuing operations		14.2		0.6		16.6		0.3
Discontinued operations:
Gibson Energy
Marketing		-		-		0.2		-
Truck Transportation		-		-		1.5		0.1
Terminals and Pipelines		-		-		1.5		-
Propane Distribution and Marketing		-		-		1.3		0.4
Moose Jaw Refinery		-		-		0.1		0.1
Hunting Energy France		0.3		-		0.3		-
Total - discontinued operations		0.3		-		4.9		0.6

Notes continued

2. Segmental Reporting continued

Geographical information

The Group mainly operates in five geographical areas. The UK is the domicile of Hunting PLC. The table below shows revenues from external customers which are attributed to individual countries on the basis of the location in which the sale originated. Information on the location of non-current assets is also presented below. Non-current assets exclude financial instruments, defined benefit assets and deferred tax assets.

		External revenue				Non-current assets
		2009		2008		2009		2008
		£m		£m		£m		£m
Continuing operations:
UK		108.7		112.5		72.4		59.2
USA		100.3		153.7		112.3		95.2
Canada		94.0		103.5		23.0		20.9
Rest of Europe		17.3		15.9		2.7		2.9
Singapore		38.1		32.9		14.3		7.3
Other		1.5		-		0.2		0.2
		359.9		418.5		224.9		185.7
Discontinued operations:
Canada		-		2,370.8		-		-
Rest of Europe		18.9		21.5		-		5.3
		378.8		2,810.8		224.9		191.0

Major customer information

The Group had no (2008 - nil) customers who accounted for more than 10% of the Group's external revenue during the year.

Company

The Company's business is to invest in its subsidiaries and, therefore, it operates in a single segment.

Notes continued

3.  Exceptional Items

	Year ended 31 December 2009 £m	Year ended 31 December 2008 £m
Exceptional items comprise:
Impairment of goodwill	-	16.3
Impairment of property, plant and equipment	-	16.8
Property provisions	0.9	10.6
Other exceptional (credits) charges	(1.5)	7.2
	(0.6)	50.9

The Group has released £1.5m of surplus provisions relating to warranties given in respect of a former subsidiary  and £0.9m of additional provisions have been booked following a reassessment of leasehold property exposures.  During 2008, a goodwill impairment charge was recognised, following a downturn in business activity levels. Property, plant and equipment impairment of £16.8m in 2008 included an oil and gas development expenditure impairment of £16.2m. The Group also increased its property provisions by £10.6m in 2008 for onerous lease obligations as a result of additional remediation and dilapidation costs, the impact of the economic downturn on the recoverability of rental income, the fall in interest rates and changes in legislation resulting in property rates being paid on vacant properties.

4. Taxation

				Restated
		2009		2008
		£m		£m
The tax charge (credit) in the income statement comprised:
Current tax
- current year expense		9.0		12.8
- adjustment in respect of prior years		(0.9)		0.7
Deferred tax
- origination and reversal of temporary differences		1.5		(7.4)
- previously unrecognised tax losses and credits		2.6		0.9
Total tax charged to the income statement - continuing operations		12.2		7.0

The tax charge to the income statement includes tax of £nil (2008 - £11.7m credit) in respect of exceptional items. Tax includes £nil (2008 - £5.5m credit) in respect of the impairment of oil and gas development expenditure and £nil (2008 - £3.0m credit) in respect of property provisions.

The weighted average applicable tax rate for continuing operations before exceptional items is 31.7% (2008 - 32.8%). The lower rate in 2009 is mainly due to the increased weighting of profits arising in lower tax jurisdictions particularly in SE Asia.

Notes continued

5.  Discontinued Operations

On 22 December 2009, the Group sold Hunting Energy France SA, its French-based business, which provided petrochemical equipment to the French, international and associated industries.

On 6 August 2008, the Group entered into an agreement for the sale of Gibson Energy Inc. (Gibson Energy), its midstream services operation. The sale was completed on 12 December 2008.

The results from discontinued operations comprise the trading results of Hunting Energy France, Gibson Energy and the gains on disposal as follows:

		2009			2008
	Hunting Energy France £m	Gibson Energy £m	Total £m	Hunting Energy France £m	Restated Gibson Energy £m	Total £m
Trading Results
Revenue	18.9	-	18.9	21.5	2,370.8	2,392.3
Cost of sales	(9.1)	-	(9.1)	(11.2)	(2,303.7)	(2,314.9)
Gross profit	9.8	-	9.8	10.3	67.1	77.4
Other operating income	0.1	-	0.1	0.3	0.5	0.8
Operating expenses	(8.7)	-	(8.7)	(8.3)	(8.2)	(16.5)
Profit from operations	1.2	-	1.2	2.3	59.4	61.7
Interest income	0.1	-	0.1	0.2	0.2	0.4
Interest expense and similar charges	-	-	-	-	(4.5)	(4.5)
Share of post-tax loss in associates	-	-	-	-	(0.2)	(0.2)
Profit before tax	1.3	-	1.3	2.5	54.9	57.4
Taxation	(0.4)	-	(0.4)	(0.8)	(15.7)	(16.5)
Profit for the year	0.9	-	0.9	1.7	39.2	40.9
Gain on disposal:
Gain on sale before tax	2.8	1.0	3.8	-	258.8	258.8
Taxation	0.1	-	0.1	-	9.3	9.3
Gain on sale after tax	2.9	1.0	3.9	-	268.1	268.1
Total profit from discontinued operations	3.8	1.0	4.8	1.7	307.3	309.0

Under the terms of the sale of Gibson Energy, the consideration payable by the purchaser was subject to the preparation and agreement of completion accounts. These have been agreed in 2009 and result in an additional cash consideration payable by the purchaser of £17.6m, which was received on 20 April 2009.

Provisions held in respect of the Gibson Energy disposal have been reassessed and result in additional provisions for tax indemnities, warranties and corporation tax of £16.0m. Foreign exchange losses of £0.6m have also been recognised. These offset the additional consideration received and result in an additional profit on disposal before tax of £1.0m.

The gains on disposal of Gibson Energy and Hunting Energy France are exempt from taxation due to the availability of the "Substantial Shareholding Exemption".

Tax relief is available on certain costs included in the profit on disposal but which are not included in the taxable gain.

Notes continued

6. Earnings Per Share

Basic earnings per share is calculated by dividing the earnings attributable to Ordinary shareholders by the weighted average number of Ordinary shares outstanding during the year.

For diluted earnings per share, the weighted average number of outstanding Ordinary shares is adjusted to assume conversion of all dilutive potential Ordinary shares. The dilution in respect of share options applies where the exercise price is less than the average market price of the Company's Ordinary shares during the year and the possible issue of shares under the Group's long term incentive plans.

Reconciliations of the earnings and weighted average number of Ordinary shares used in the calculations are set out below:

From continuing operations

								Restated
		2009						2008
				Weighted		Earnings				Weighted		Earnings
				average		per				average		per
				number of		Ordinary				number of		Ordinary
		Earnings		shares		share		Earnings		shares		share
		£m		millions		pence		£m		millions		pence
Profit before exceptional items attributable to shareholders of the parent and for basic EPS		23.3		131.1		17.7		34.4		130.9		26.4
Exceptional items after tax		0.6		-				(39.2)		-
Profit (loss) attributable to shareholders of the parent and for basic EPS		23.9		131.1		18.2		(4.8)		130.9		(3.6)
Effect of dilutive shares:
Options		-		2.2				-		-
Long term incentive plans		-		0.5				-		-
Diluted EPS		23.9		133.8		17.8		(4.8)		130.9		(3.6)

From continuing and discontinued operations

								Restated
		2009						2008
				Weighted		Earnings				Weighted		Earnings
				average		per				average		per
				number of		Ordinary				number of		Ordinary
		Earnings		shares		share		Earnings		shares		share
		£m		millions		pence		£m		millions		pence
Profit before exceptional items attributable to shareholders of the parent and for basic EPS		24.2		131.1		18.4		75.3		130.9		57.6
Exceptional items after tax		4.5		-				228.9		-
Profit attributable to shareholders of the parent and for basic EPS		28.7		131.1		21.9		304.2		130.9		232.4
Effect of dilutive shares:
Options		-		2.2				-		-
Long term incentive plans		-		0.5				-		-
Diluted EPS		28.7		133.8		21.4		304.2		130.9		232.4

Notes continued

6. Earnings Per Share continued

 

From discontinued operations

								Restated
		2009						2008
				Weighted		Earnings				Weighted		Earnings
				average		per				average		per
				number of		Ordinary				number of		Ordinary
		Earnings		shares		share		Earnings		shares		share
		£m		millions		pence		£m		millions		pence
Profit before exceptional items attributable to shareholders of the parent and for basic EPS		0.9		131.1		0.7		40.9		130.9		31.2
Exceptional items after tax		3.9		-				268.1		-
Profit attributable to shareholders of the parent and for basic EPS		4.8		131.1		3.7		309.0		130.9		236.0
Effect of dilutive shares:
Options		-		2.2				-		-
Long term incentive plans		-		0.5				-		-
Diluted EPS		4.8		133.8		3.6		309.0		130.9		236.0

7.  Property, Plant and Equipment

The Group has changed its accounting policy of carrying property at valuation to carrying these at historical cost. The impact was to reduce the net book value of property, plant and equipment at 31 December 2008 from £130.6m to £119.6m.

During 2009, the net book value of property, plant and equipment increased from £119.6m to £121.4m due to additions of £31.2m offset by disposals of £5.6m, depreciation of £14.5m and foreign exchange movements of £9.3m.

The Group made three acquisitions during the year. The net assets acquired included property, plant and equipment with a fair value of £10.7m (see note 12).

The additions also include £6.2m for freehold land and buildings, £1.9m for oil and gas exploration and development and £12.4m for plant, machinery and motor vehicles.

Equipment with a carrying value of £3.8m was disposed of during the year. The Group disposed of a subsidiary during the year which had net assets including £1.8m of property, plant and equipment.

8.  Capital Commitments

Group capital expenditure committed, for the purchase of property, plant and equipment, but not provided for in the financial statements amounted to £8.5m (2008 - £4.2m).

Notes continued

9. Changes in Net Cash

		Acquisitions
		(excluding
		cash, cash			At
	At	equivalents			31
	1 January	and		Exchange	December
	2009	overdrafts)	Cash flow	movements	2009
	£m	£m	£m	£m	£m
Cash and cash equivalents	421.4	-	(15.6)	(2.2)	403.6
Bank overdrafts	(49.0)	-	10.8	0.4	(37.8)
	372.4	-	(4.8)	(1.8)	365.8
Non-current borrowings	-		(0.6)	-	(0.6)
Finance leases*	(0.1)	(1.5)	1.4	-	(0.2)
Net cash	372.3	(1.5)	(4.0)	(1.8)	365.0

*Of the £1.4m cash flow arising on finance leases, £1.3m relates to continuing operations and £0.1m relates to discontinued operations.

10.  Provisions

A reassessment of provisions held for tax indemnities and warranties in respect of the Gibson Energy disposal has resulted in additional provisions of £16.0m being made. Additional provisions of £0.9m have also been booked following a reassessment of leasehold property exposures. Surplus provisions of £1.5m, relating to warranties given in respect of a former subsidiary, have been released. During the period, £10.2m of provisions held at the start of the year were utilised, of which £4.7m were in respect of Gibson Energy and £2.5m were in respect of onerous leases.

11. Dividends Paid

		2009				2008
		Pence				Pence
		per share		£m		per share		£m
Group and Company
Ordinary dividends:
2009 interim paid		3.5		4.6		-		-
2008 final paid		7.0		9.2		-		-
2008 interim paid		-		-		2.9		3.8
2007 final paid		-		-		5.7		7.5
Total dividends paid		10.5		13.8		8.6		11.3

The Directors have agreed to pay a second interim dividend of 7.0p per share, which will be paid on 31 March 2010 to shareholders on the register at the close of business on 5 March 2010. This second interim dividend will replace the final dividend that would normally be approved at the Annual General Meeting to be held in April 2010 and paid thereafter.

Notes continued

12. Acquisitions

During the year, the Group made the following acquisitions:  National Coupling Company Inc.  ("NCC") on 12 June 2009; PT SMB industri ("PT SMB") on 31 July 2009 and the Welltonic group of companies on 10 December 2009.  The acquisitions of NCC and PT SMB were for 100% of the share capital.  The Group acquired 100% of the share capital of Welltonic Limited, Welltonic Asia Pte Limited and Welltonic Inc. and 49% of the share capital of Welltonic LLC.

Details of the acquired net assets, goodwill and consideration are set out below.

	National Coupling		PT SMB		Welltonic		Total
	Pre- acquisition carrying values £m	Provisional fair values £m	Pre- acquisition carrying values £m	Provisional fair values £m	Pre- acquisition carrying values £m	Provisional fair values £m	Pre- acquisition carrying values £m	Provisional fair values £m
Property, plant and equipment	4.5	5.2	2.6	3.4	1.8	2.1	8.9	10.7
Other intangible assets	-	3.2	-	-	-	0.2	-	3.4
Inventories	2.6	2.6	0.2	0.2	0.3	0.3	3.1	3.1
Trade and other receivables	3.0	3.0	0.2	0.2	1.8	1.8	5.0	5.0
Deferred tax asset	-	0.4	-	-	-	-	-	0.4
Deferred tax liabilities	-	-	-	(0.1)	-	-	-	(0.1)
Trade and other payables	(1.1)	(1.1)	(0.1)	(0.1)	(0.9)	(0.9)	(2.1)	(2.1)
Finance leases liabilities	(1.3)	(1.3)	-	-	(0.2)	(0.2)	(1.5)	(1.5)
Current tax	-	-	-	-	(0.3)	(0.3)	(0.3)	(0.3)
Cash and cash equivalents	-	-	-	-	1.4	1.4	1.4	1.4
Net assets acquired	7.7	12.0	2.9	3.6	3.9	4.4	14.5	20.0
Goodwill		19.8		2.7		4.8		27.3
Consideration		31.8		6.3		9.2		47.3
Consideration comprised:
Cash		31.2		5.2		7.0		43.4
Deferred cash		0.2		0.9		1.9		3.0
Costs		0.4		0.2		0.3		0.9
		31.8		6.3		9.2		47.3

Goodwill on the acquisition of NCC represents the value of the assembled workforce at the time of acquisition, specific knowledge and technical skills that will enhance Hunting's facilities, and the prospective future economic benefits expected to accrue from enhancing the portfolio of products and services to the Group's customers.

Goodwill on the acquisition of PT SMB principally represents the value of the assembled workforce at the time of acquisition, the technical skills and prospective future economic benefits expected to accrue to the Group.  Goodwill on the acquisition of Welltonic is attributable to future synergies and business opportunities arising from the integration of the business into the Group.

Intangible assets recognised on acquisition include £2.9m for patents and £0.5m for trade names.

Notes continued

12. Acquisitions continued

Post-acquisition performance:

The acquired companies contributed the following to the Group's performance from the date of acquisition to 31 December 2009:

	£m
Revenue	10.9
Profit from operations	1.7
Profit before taxation	1.5

Full year performance: 

If the acquisitions had been made on 1 January 2009, the acquired companies would have contributed the following Group's performance during 2009

	£m
Revenue	24.1
Profit from operations	4.1
Profit before taxation	3.3

13. Related Party Transactions

Group

The following related party transactions took place between wholly-owned subsidiaries of the Group and associates during the year.

	2009	2008
	£m	£m
Transactions:
Sales of goods and services	1.7	10.5
Purchase of goods and services	(0.4)	(0.4)
Sale of property, plant and equipment	-	(2.8)
Royalties receivable	0.1	0.6
Management and other fees receivable	0.1	0.4
Loans from associates repaid	(0.5)	(1.5)
Loans to associates repaid	1.0	-
Interest payable on loans from associates	-	(0.2)
Dividends received from associates	0.2	1.0
Year end balances:
Interest bearing loans owed to associates	(1.3)	(1.8)
Interest free loans owed to associates	(5.6)	(5.6)
Receivables from associates	0.2	1.3

Notes continued

13. Related Party Transactions continued

The following related party transactions took place between wholly-owned subsidiaries of the Group and non-wholly owned subsidiaries during the year:

	2009  £m	2008 £m
Transactions:
Sales of goods and services	0.4	2.0
Purchase of goods and services	(0.2)	(1.7)
Administrative expenses recharged	(0.1)	-
Loans from non-wholly owned subsidiaries repaid	(10.6)	(0.3)
Loans to non-wholly owned subsidiaries repaid	-	5.0
Loans received from non-wholly owned subsidiaries	-	0.1
Loan issued to non-wholly owned subsidiaries	(1.3)	-
Interest payable on loans from non-wholly owned subsidiaries	(0.3)	(1.0)
Interest receivable on loans from non-wholly owned subsidiaries	-	0.8
Year end balances:
Interest bearing loans owed to non-wholly owned subsidiaries	(13.2)	(21.5)
Amounts owed by non-wholly owned subsidiaries	0.2	3.6

The interest rate on US denominated loans is US dollar LIBOR + 1.5%, and on sterling loans is UK base rate + 1%.

The outstanding balances at the year end are unsecured and have no fixed date for repayment.  No expense has been recognised in the period for bad or doubtful debts in respect of amounts owed by associates and non-wholly owned subsidiaries.

All interests in subsidiaries and associates are in the equity shares of those companies.

The key management of the Company comprises the executive and non-executive Directors only.  The Directors of the Company had no material transactions other than as a result of their service agreements.

 

END

 

 

FR PGUUGPUPUGBC