Results for the year ended 31 December 2023

Hunting PLC

29 February 2024

 

For Immediate Release

29 February 2024

Hunting PLC

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

Results for the year ended 31 December 2023

Strong year of revenue and profit growth, supported by international and offshore markets

Hunting PLC (LSE:HTG), the precision engineering group, today announces its results for the year ended 31 December 2023.

Financial Highlights

·	Order book increased by 19% to $565.2m.
·	Revenue increased by 28% to $929.1m.
·	Non-oil and gas revenue increased 59% from $47.6m to $75.9m.
·	Gross margin improved to 25% from 24%.
·	EBITDA, ahead of previous guidance provided, and increased by 98% to $103.0m.
·	EBITDA margin of 11% up from 7%.
·	$83.1m of previously unrecognised deferred tax assets recognised at year-end.
·	Total dividends declared in the year of 10.0 cents per share, up from 9.0 cents in 2022.

Commenting on the results Jim Johnson, Chief Executive, said:

"Hunting has delivered a strong year of growth across most of its product groups, demonstrating the underlying strength of our market drivers, with security of supply and affordable energy remaining key investment themes.

"Our offshore and international businesses have delivered robust growth as we continue to build a more balanced and diversified business, underpinned by the strong technology and intellectual property that makes Hunting a market leader in precision engineered products across our markets.

"The growth and composition of our record order book demonstrates how much Hunting has evolved in terms of more diverse revenue and better visibility on earnings, and provides confidence in our near and longer-term outlook, as we deliver the Hunting 2030 Strategy."

Strategic Highlights

·	Launch of Hunting's 2030 Strategy at the Capital Markets Day in September 2023 which included:
	o	Leveraging Hunting's global presence and high-technology product offering, to drive multiple end-market sales growth.
	o	Delivering EBITDA margin growth through higher utilisation, stronger pricing and operating efficiencies.
	o	Improved shareholder returns, with increased return on capital, along with an 11% increase in total declared dividends in 2023.
	o	Driving sector leading technology delivered through innovation and supported by robust intellectual property.
	o	Progressing the sustainability agenda with positive trends in key non-financial metrics.
·	Strong progress on revenue diversification with non-oil and gas sales of $75.9m.
·	EBITDA conversion and good cash generation reported with $50.9m inflow delivered in H2 2023.

Financial Summary

Financial Performance measures as defined by the Group*

	2023	2022	Variance
Revenue	$929.1m	$725.8m	+$203.3m
Non-oil and gas revenue	$75.9m	$47.6m	+$28.3m
EBITDA**	$103.0m	$52.0m	+$51.0m
EBITDA margin**	11%	7%	+4pp
Adjusted profit before tax**	$50.0m	$10.2m	+$39.8m
Adjusted diluted earnings per share**	20.3 cents	4.7 cents	+15.6 cents
Free cash flow**	$(0.5)m	$(60.4)m	+$59.9m
Total cash and bank**	$(0.8)m	$24.5m	-$25.3m
Net assets	$957.1m	$846.2m	+$110.9m
ROCE**	6%	1%	+5pp
Final dividend proposed***	5.0 cents	4.5 cents	+0.5 cents

Financial Performance measures as derived from IFRS

	2023	2022	Variance
Operating profit	$61.0m	$2.0m	+$59.0m
Profit before tax	$50.0m	$(2.4)m	+$52.4m
Diluted earnings per share	70.0 cents	(2.8) cents	+72.8 cents
Net cash inflow (outflow) from operating activities	$49.3m	$(36.8)m	+$86.1m

* Adjusted results exclude adjusting items agreed by the Audit Committee and Board.

** Non-GAAP measure. Please see the 2023 Annual Report and Accounts pages 239 to 244.

*** Payable on 10 May 2024 to shareholders on the register on 12 April 2024, subject to approval at the Company's 2024 AGM.

Outlook Statement

The global outlook for energy in the year ahead will be driven by similar themes to those reported in 2023.

Geopolitical tensions and potential supply disruptions are a continuing threat to the oil and gas supply/demand balance, and while commodity prices trended lower in the past year, it is likely that they will remain in a range that supports sustained activity levels during 2024.

Offshore market momentum is poised to continue to increase in the coming years as major development cycles in South America and South West Africa continue to accelerate.

The North American onshore drilling market is likely to be stable during 2024, with the US more focused on oil production. Additional LNG capacity is likely to come on-stream later in the year, which will support new natural gas drilling in the second half. Projected growth in international sales should also offset shifts in US onshore market dynamics.

The Middle East will also likely show a continuation of the activity levels reported in 2023. Despite the pause in oil production expansion in Saudi Arabia being announced in recent weeks, natural gas drilling in-country will continue to grow to meet local demand, underpinning steady activity levels in the year ahead.

In India, the Group's facility is shortly to receive its API threading licence which will enable premium threading activities to accelerate. Management sees a positive profit contribution from our joint venture in 2024, given the growth momentum in-country.

Across Asia Pacific, traditional energy demand as well as energy transition initiatives will continue to drive growth, with geothermal opportunities being captured as market activity increases, particularly in the Philippines and Indonesia.

For Hunting, the Group's OCTG product group should deliver another year of growth, as activity in South America continues to increase, coupled with stable activity in the US and Canada. Our EMEA OCTG operations will continue to support projects in Brazil, while in Asia Pacific, larger tenders continue to be announced, which should lead to new orders being secured. Hunting's Perforating Systems business will continue to roll-out its leading technology to clients across North America, while continuing to grow internationally where markets such as Argentina present good opportunities due to reduced import tariffs being announced.

Our Subsea Spring and Stafford businesses should also deliver a further year of strong results as orders for ExxonMobil and other major operators across South America continue to be progressed. The Enpro business should also support this growth profile given the orders secured in the second half of 2023.

Hunting will continue to drive its non-oil and gas diversification through the Advanced Manufacturing businesses. Momentum remains strong, with opportunities in aerospace and defence being pursued, supporting our 2030 strategic objectives.

In summary, the Board sees a further year of growth ahead, given our diverse, international product offering, with management remaining comfortable with current market guidance.

Operational and Corporate Highlights - Delivering on the Hunting 2030 Strategy

Record $91m OCTG contract award with Cairn Oil and Gas
·	On 30 May 2023, the Company announced a record contract that management estimates to be worth up to $91m with Cairn Oil and Gas, Vedanta Limited, for the supply of Hunting's SEAL-LOCK XDTM premium connection along with OCTG.
Continued launch of new technology and innovative products
·	The Group continues to develop and introduce new technology to clients. Research and development initiatives focus on increasing in-field safety, while also delivering completion efficiencies and lowering drilling and development costs for clients. With approximately one-third of North American horizontal wells relying exclusively on oriented perforating techniques, Hunting launched the H-4 Perforating System™ during the year, first to the US onshore and then in Q4 2023 to customers in Canada.
Expansion into high growth Indian energy markets
·	In Q2 2023, the Company completed the construction and commissioning of its new threading facility at Nashik Province, India, with its joint venture partner, Jindal SAW Ltd. The official opening of the facility took place in September 2023. Hunting's precision engineered premium connection technology will be applied to Jindal SAW's premium seamless casing and tubing.
Strong growth in Subsea businesses
·	The Subsea Technologies operating segment was formed on 1 January 2023. The segment completed a number of significant orders in the year, especially in Guyana, as investment in offshore projects increased. Revenue increased 43% to $98.6m, with an EBITDA margin of 14% compared to 5% in 2022. The Spring business had a number of material order wins for its titanium stress joints in the year for floating production, storage and offloading vessels in Guyana and the Turkish area of the Black Sea. The segment ended the year with an order book of $152.2m, including a strong backlog for Enpro.
Enhanced strategic supply channels for OCTG to support energy transition strategy
·	On 5 June 2023, the Company announced a ten-year strategic alliance with Zhejiang Jiuli Hi-Tech Metals Co. Ltd ("Jiuli"), for the supply of corrosion resistant alloys ("CRA") for OCTG, geothermal and carbon capture and storage ("CCUS") applications. The partnership brings together Hunting's SEAL-LOCKTM premium connection technology with Jiuli's CRA, such as duplex/super duplex and high nickel-based alloys, for downhole casing and production tubing applications, which meet some of the harshest well conditions in the traditional oil and gas industry as well as the emerging CCUS and geothermal markets.
Entered new marketing, manufacturing and technology partnership to expand product offering
·	On 13 July 2023, Hunting announced a collaboration agreement with CRA-Tubulars B.V., to further develop the Company's presence in energy transition markets. The collaboration provides the Company with access to novel titanium composite tubing technology, which is showing strong potential in CCUS project applications.
Continued restructuring to increase operational efficiencies and returns on capital
·	Hunting is continuing to drive stronger internal operational efficiencies throughout its global footprint, which will lower our operating costs and lower our carbon footprint. During the year, Hunting Titan closed its Oklahoma City operating site and transferred the manufacture of perforating systems to the Group's Pampa, Texas, and Monterrey, Mexico, facilities. A distribution centre has been retained in Oklahoma City to continue to service clients in the Mid-Continent Region of the US.
·	Within the EMEA operating segment, the manufacturing and assembly operations of the Group's main well testing site are to be transferred from the Netherlands to Dubai in 2024, which will lead to the closure of a facility at Velsen-Noord, with activities in the Netherlands to be merged into a single location.
·	In January 2024, further consolidation of our footprint and cost base in the UK continued as the Enpro operations were transferred to the existing Badentoy, Aberdeen facility.
·	During H1 2023, the Group has completed a disposal process of all but one of its US onshore and offshore oil and gas producing assets, which are held by Hunting's wholly owned subsidiary, Tenkay Resources, Inc ("Tenkay"). The Group has negotiated the transfer of the majority of the non-producing assets and respective future plug and abandonment liabilities, which have reduced Hunting's possible exposure to future decommissioning costs.

Group Results Narrative

For access to narrative on the Group's results (incorporating the Company Chair's and Chief Executive's Statements, Outlook, Market Analysis, Product Line and Segmental Review and Group Financial Review) for the year ended 31 December 2023 please click on the following link.

http://www.rns-pdf.londonstockexchange.com/rns/8690E_1-2024-2-28.pdf

Financial Statements and Notes to the Accounts

For access to the Financial Statements and Notes to the Accounts for the year ended 31 December 2023 please click on the following link.

http://www.rns-pdf.londonstockexchange.com/rns/8690E_2-2024-2-28.pdf

Listing Rules / Disclosure Guidance and Transparency Rules Information

For access to Hunting's Key Performance Indicators, Business Model and Strategy, ESG and Sustainability, Risk Management (including Principal Risks), and the Statement of the Directors' Responsibilities for the year ended 31 December 2023, please click on the following link.

http://www.rns-pdf.londonstockexchange.com/rns/8690E_3-2024-2-28.pdf

Page number references refer to the full Annual Report when available.

The linked documents provide access to all major financial and operational disclosures contained in the Group's 2023 Annual Report and Accounts. The complete 2023 Annual Report and Accounts will be published on 14 March 2024 and can then be accessed at www.huntingplc.com.

The financial information set out in the above links does not constitute the Company's statutory accounts for the years ended 31 December 2023 or 31 December 2022, but is extracted from those accounts. Statutory accounts for 2022 have been delivered to the Registrar of Companies and those for 2023 will be delivered in due course. The auditor has reported on those accounts; their reports were unqualified, did not draw attention to any matter by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) of the Companies Act 2006. Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards, this announcement does not itself contain sufficient information to comply with IFRS.

Analyst Briefing and Webcast

Hunting PLC will host an analyst briefing and webcast at the offices of CMS Cannon Place, 78 Cannon St, London EC4N 6AF on 29 February 2024 commencing at 9:00a.m. GMT. Attendees should arrive by 8:45a.m. to clear building security in good time.

The live webcast can be accessed by copying and pasting the following link into your browser:

https://stream.buchanan.uk.com/broadcast/65b93d2f6371e5b884f62831

Analysts and investors wishing to participate in a Q&A session can do so by submitting questions via the chat function of the webcast and these will be addressed by management during the live webcast. If you have any queries relating to this then please email [e-mail].

For further information please contact:

Hunting PLC Jim Johnson, Chief Executive Bruce Ferguson, Finance Director [e-mail]	Tel: [phone]
Buchanan Ben Romney Barry Archer	Tel: [phone]

Notes to Editors:

About Hunting PLC

Hunting is a global engineering group that provides precision-engineered equipment and premium services, which add value for our customers. Established in 1874, it is a premium 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 operations in China, Indonesia, Mexico, Netherlands, Norway, Saudi Arabia, Singapore, United Arab Emirates and the United States of America.

The Group reports in US dollars across five operating segments: Hunting Titan; North America; Subsea Technologies; Europe, Middle East and Africa ("EMEA"); and Asia Pacific.

Hunting PLC's Legal Entity Identifier is 2138008S5FL78ITZRN66.

 

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