Final Results
Velosi Limited
16 April 2007
Velosi Limited ('Velosi' or 'the Group')
Preliminary Results
For the year ended 31 December 2006
Highlights
Velosi the provider of quality assurance, quality control and asset integrity
services to the international oil and gas industry is pleased to announce its
maiden preliminary full year results for 2006.
• Turnover increased by 117% to US$70.2 million (2005: US$32.5 million)
• Profit before tax rose by 119% to US$8.0 million (2005: $3.6 million)
• Basic earnings per share of US$0.298
• Successful admission to AIM, raising £10 million before expenses
• Final dividend of 1 US cent per share
• Three acquisitions were announced during the year expanding the Group's
geographic reach
• Service offering expanded through organic growth, acquisitions and joint
ventures
John Hogan, Chairman, commented:
'I am pleased to report our maiden full-year results following our admission to
AIM in August 2006. We generated significant increases in turnover and profit
before tax of 117% and 119% respectively, primarily driven by the significant
growth of our operations in Africa and the Middle East. We have won several new
contracts since the year-end and we continue to implement our growth strategy of
expanding our geographical reach and service offering. The outlook for 2007 is
positive, with continuing high levels of investment in global oil and gas
infrastructure creating strong demand for our services.'
For further information, please contact:
Velosi Dr Nabil Abdul Jalil 020 7930 0777
Joe Vincent
Strand Partners James Harris 020 7409 3494
Warren Pearce
Charles Stanley Mark Taylor 020 7739 8200
Freddy Crossley
Cardew Group Tim Robertson 020 7930 0777 / 07900 927 650
Eden Mendel 020 7930 0777 / 07887 676 603
Emma Consett 020 7930 0777 / 07971 468 308
CHAIRMAN'S STATEMENT
I am delighted to announce the maiden preliminary results for the Group
following our admission to AIM in August 2006. For the year ended 31 December
2006, Velosi has delivered an excellent set of results.
The continuing strength of oil and gas prices in the period under review led to
an increase in the already high levels of investment in oil and gas
infrastructure, and this has consequently driven growth across the Group. In
addition, major oil and gas multinationals have increased their investment in
safety and maintenance measures to further reduce the risks of accidents and
leakages, and resulting adverse publicity, such as that which occurred during
2006. This has created an increase in demand for our services.
Results
Sales revenue increased 117% to US$70.1m (2005: US$32.3m) and profit before tax
increased by 119% to US$8.0m. (2005: US$3.6m). Underlying operating profit
before interest and taxation increased by 114% to US$7.6m (2005: US$3.6m).
Profit after tax and minority interests increased by 107% to US$6.0m (2005:
US$2.9m).
Basic earnings per share after minority interests were 29.8 cents and fully
diluted earnings per share after minority interests were 27.0 cents. On the
basis that the Group was quoted on AIM for the full period of 2006, the basic
earnings per share after minority interests were 15.7 cents.
Cash generated from operating activities was US$0.6 million for 2006, compared
to US$0.5 million in 2005. The increase was mainly due to an operating profit of
US$8.0 million and an increase in trade and other payables of US$5.7 million,
which was offset by an increase in trade and other receivables of US$12.9
million. Proceeds from the flotation were used to repay loans from Velosi
Malaysia amounting to US$4.1 million, and also used to pay down factoring
facilities in Nigeria, which at 31 December 2006, amounted to US$0.3 million. At
31 December 2006, cash and cash equivalents for the Group were US$11.9 million
and the Group had no long-term bank borrowings.
Dividend
The Board is pleased to announce the Group's maiden dividend of 1 cent (0.5
pence) per share. This is a result of the Board's confidence in the Group's
operating cash flows. The Board intends to continue paying dividends in the
future while maintaining a suitable level of dividend cover and retaining the
majority of earnings to fund the development of the Group's business. Subject
to shareholder approval at the annual general meeting, the dividend will be paid
on Wednesday 4 July 2007 to shareholders on the register on Friday 15 June
2007.
Review of Operations
During the year, the Group grew its service offering both organically and
through acquisition. We have added to our range of services and have packaged
some existing services together in order to create an increasingly competitive
product offering. The Group has also developed in-house capabilities in rig
inspection, commissioning and infra-red thermography and we have increased our
investment in training to further our expertise in risk-based,
reliability-centred inspection, and other asset integrity management techniques.
Three acquisitions were announced during the year to 31 December 2006. In August
2006, the Group completed the acquisition of a 51% majority stake in QA
Management Services Pty Ltd ('QAM'), an Australia-based quality assurance
inspection company for AUS$612,000 (US$477,360). In December 2006, the Group
announced the acquisitions of 51% majority stakes in both Steel Test (Pty) Ltd
('Steel Test') and Plant Design Engineers Sdn Bhd ('PDE') for an aggregate
consideration of US$2,879,000.
A common challenge among all companies operating in the oil and gas industry is
that of attracting and retaining high-calibre individuals and providing
top-level training. We are successfully addressing this challenge through our
decentralized structure, which enables Velosi to recruit local experts who have
extensive regional and technical knowledge. Additional training is provided by
the Group as necessary. Our experience is that offering local experts employment
in their own country significantly improves our retention of high-calibre
talent.
On behalf of the Board, I would like to take this opportunity to thank all of
our employees worldwide for their dedication and continued hard work.
Outlook
Investment in oil and gas infrastructure remains high and your Board believes
that there is no indication of a slow down. On the contrary, events in 2006
appear to have fuelled international awareness of the importance of quality
assurance and quality control in the oil and gas sector.
Velosi is well positioned to exploit this continued investment through its
expanding geographical reach and service offerings and will continue to
implement its strategy of growing organically and through acquisition.
Our development of new inspection systems and tools, additional services
garnered through our local partnerships and acquisitions, and our expanding
geographical reach, position the Group favourably to take advantage of the large
number of new oil and gas projects requiring quality assurance and quality
control services. Since the year-end, the Group has secured a number of contract
wins, as further described in the Operations Review, that demonstrate the
success of this strategy. The Board is therefore confident of the future
prospects of the Group and that Velosi will continue to grow and to generate
excellent returns during the forthcoming year.
John Hogan
Chairman
13 April 2007
OPERATIONS REVIEW
During the period under review, the Group continued to pursue its strategy of
entering new geographical markets, growing market share in existing markets and
expanding through joint ventures and acquisitions. To better reflect the Group's
global reach and strategic focus on expanding its areas of operations we are
reporting the results by region rather than by business division as we did for
the 2006 Interim results. For continuity however, a summary of our business
divisional results is provided at the end of this review.
All geographic regions experienced increased activity during 2006. Notable
growth in turnover was experienced in emerging markets where the Group had, in
previous years, invested in marketing and operational infrastructure. For
example West Africa and Asia/Australia grew at 192% and 185% respectively.
Turnover in the Middle East region grew at 92% with significant increases in
workloads from national oil and gas companies particularly in Qatar and Kuwait.
Similarly in the US, turnover increased 85% due to heightened activity amongst
the US oil and gas multi-nationals. Turnover in the UK/Europe region grew at 59%
during 2006.
West Africa (Turnover: US$24.7 million; Contribution to Group sales: 35.2%)
Operations in Nigeria have grown rapidly as the Group continues to consolidate
its position by offering source inspections and project verification services to
the major oil and gas multi-national corporations in this region. Our office in
Lagos, Nigeria, established in 2004, now functions as a fully-fledged operations
centre supporting our contract commitments in the region.
The Group is involved in major projects including the construction of a gas to
liquid processing facility in Escravos, Nigeria, and in the development of the
Agbami oil and gas field in the central Niger delta, offshore Nigeria.
To further expand operations in West Africa, Velosi Angola Lda was incorporated
in late 2006 and the Group is currently in the process of incorporating a
subsidiary in Ghana. Activities in this region are expected to commence in the
first half of 2007.
South Africa (Turnover: US$0.5 million; Contribution to Group sales: 0.7%)
Velosi entered this market in December 2006 with its acquisition of a 51%
majority stake in Steel Test (Pty) Ltd, a South African-based company which
specialises in tube inspection, a technique used extensively during plant and
equipment maintenance. Steel Test is a market leader in the region and has built
a dominant position in the power generating industry. By leveraging Velosi's
global coverage, the acquisition carries with it the potential for Velosi to
open up new markets in the power generation industry worldwide.
Since completion of the acquisition, Steel Test has been awarded the contract
for the inspection of the Tutuka Power Station in South Africa. The contract
runs for a period of 19 months and covers the inspection of five condensers. In
addition, it was announced that Steel Test has secured new contracts with Sirte
Oil Company, one of the principal companies operating under the National Oil
Corporation of Libya, and with SGS SA, a multinational inspection company, for
the inspection of a fertilizer plant in Pakistan.
Middle East (Turnover: US$21.6 million; Contribution to Group sales: 30.8%)
The Group continues to diversify Velosi's range of services in the Middle East
with the addition of specialist non-destructive testing, CCTV inspection, rig
inspection and Asset Integrity Management services. Through this diversification
the customer base is being expanded, particularly among the oil and gas
supporting players such as Tekfen Construction, Medgulf Construction, Abu Dhabi
Oil Refinery Co, and Petrofac. Our business units in Kuwait and Qatar have
secured several long-term contracts with Kuwait Oil, Qatar Petroleum and RasGas
Co. Ltd. In addition, a term contract with Petroleum Development Oman, covering
a range of quality assurance, pipeline and facilities inspection, and source
inspection and expediting services, is currently underway.
In March 2006, Velosi was awarded a five-year contract by Kuwait Gulf Oil to
provide a range of project verification services for the exploration and
production of the Al-khafji field, jointly developed by Kuwait Gulf Oil and
Saudi Aramco. The contract provides quality management and construction, and
quality supervision for the installation of new, and the refurbishment of
existing, oil and gas facilities both onshore and offshore, which has helped
Velosi to firmly establish its presence in the Middle East. It is hoped that the
activity in Kuwait will act as a springboard from which Velosi can expand into
other countries in the region such as Saudi Arabia.
In Qatar, Velosi secured a term contract with RasGas, a major gas producer, to
provide construction site inspection for major plant expansions. Velosi also
secured two contracts with Qatar Petroleum for a range of services required for
onshore and offshore oil and gas field development and for source inspection.
US (Turnover: US$13.8 million; Contribution to Group sales: 19.6%)
The Group continues to target the global operations of the US oil and gas
multi-nationals based in Houston. Velosi America secured new Master Service
Agreements with Nabors Industries, and J. R. McDermott, and a Quality Assurance
Standing Agreement with Chevron USA, through which a range of services are being
provided to their operations world-wide in countries such as the U.S, Middle
East and Russia (Sakhalin Island). During 2006, Velosi America also expanded its
service offerings to include rig inspection, and we are currently providing this
service to Nabors Drilling International.
UK and Europe (Turnover: US$5.8 million; Contribution to Group sales: 8.3%)
During the period under review, revenue increased by 58.7%. The high activity in
this region for 2006 resulted in an increase in staff training for specialist
inspection services for lifting equipment, thermography and rig inspection. The
strong demand for new services in this region has generated the funding for the
development of new inspection tracking systems and tools that can be used
throughout the Group.
Shell Exploration and Production in the UK, Nederlandse Aardolie Maatschappij
(NAM) in the Netherlands, Norske Shell in Norway and Enterprise Oil Ireland have
recently combined to form one European company, Shell EP Europe. In January
2007, in a competitive bid process Velosi was awarded an exclusive contract with
Shell EP Europe, which became effective on 1 January 2007. The contract covers
work stemming from all four of these Shell operations for source inspection and
expediting of procured products. This contract will add further impetus to
revenue growth in this region over the next three years. Velosi was previously
awarded a contract in May 2003 with Shell UK Exploration and Production covering
work for the main Shell operating centre in Aberdeen. This contract expired on
31 December 2006, with those services now being included in this new contract.
In the latter half of 2006, Velosi incorporated an 80% subsidiary, Velosi
International Italy, in Milan. Start-up operations have commenced and this unit
will spearhead the Group's entry into a new market among Italian manufacturers
for letter of credit inspection.
Velosi International Italy signed an agreement in March 2007 with CONFAPI, the
trade association for small and medium-sized businesses in the industrial
sector. Under the terms of the agreement, Velosi Italy will act as CONFAPI's
inspection agency verifying letters of credit from CONFAPI member companies
requiring loans. This arrangement is renewable at the end of the three-year
agreement period. CONFAPI represents more than 50,000 businesses throughout
Italy across sectors such as manufacturing, chemicals and food among others.
CONFAPI works with all of the major Italian banks and credit institutions. The
agreement presents Velosi Italy with a unique opportunity for rapid in-depth
penetration of the Italian credit services market and will serve to diversify
Velosi's service offering in Italy.
Asia and Australia (Turnover: US$3.5 million; Contribution to Group sales: 5.0%)
With the completion of our 51% acquisition of QAM in August 2006, the Group has
gained a strong foot-hold in the oil and gas sector in Australia. QAM has also
allowed the Group to diversify its business outside that of the oil and gas
sector and, consequently, Velosi is now offering services to Australian mining
companies both domestically and internationally. QAM finalised a contract with
Sinclair Knight Merz to provide inspection services to a copper mine in Chile,
and has also been successful in securing contracts for third party inspection
services for Dairi Prima Minerals in Indonesia and for the Ravensthorpe nickel
mine in Australia.
In Asia, while Velosi Brunei, a 50% associate company, experienced a decrease in
activity due to a drop in fabrication and construction work in Brunei, Malaysia,
Singapore and India all experienced an increase in activity.
In December 2006, Velosi acquired a 51% majority stake in a Malaysia-based
company, PDE. PDE provides 3-D laser scanning of oil and gas facilities to
create virtual models from which maintenance and modification design blueprints
can be accurately developed. Through this acquisition, the Group can now apply
state-of-the-art technology to facilities inspection. In addition, PDE provides
a foundation for Velosi to develop its engineering design capability.
Since the completion of the acquisition, Velosi announced that PDE was awarded a
seven-month contract by BP West Java Ltd for the provision of laser scan
services at the BP West Java Rehabilitation Project.
Russia and Central Asia
In late 2005, the Group established Velosi Russia and Velosi Kazakhstan. During
the period under review, these offices have built their marketing and business
infrastructures and have undergone audits to obtain the necessary registrations
from Government Ministries.
Subsequent to the year-end, Velosi Kazakhstan finalised the registration of its
office in Atyrau and will be submitting pre-qualifications to major oil and gas
companies operating in Central Asia. Similarly, Velosi Russia is pre-qualifying
for additional work in Sakhalin Island.
Velosi America is also active on Sakhalin Island where it is providing services
to ExxonMobil.
Business Divisions summary
The services offered by Velosi are grouped into four business divisions: Quality
Enhancement, Project Verification, Certification and Engineering Support
Divisions.
Quality Enhancement Division
Our Quality Enhancement Division provides maintenance-related and vendor
inspection services. This division generated US$27.8 million (2005: $16.1
million) or 39.6% (2005: 49.9%) of revenue. New contracts were awarded by Shell
EP Europe, Qatar Petroleum, Total and Techsen, increasing activity within the
division. Furthermore our development of new services, notably in the risk-based
and other asset management based inspection areas, have widened our service
offering.
During the year under review the Quality Enhancement Division expanded its
geographic reach to Australia and South Africa with the completion of our
respective acquisitions of QAM, in August 2006, and Steel Test, in December
2006.
Project Verification Division
The Group's Project Verification Division, which provides verification services
during the construction of plant and facilities, generated US$38.5 million
(2005: $8.6 million) or 54.8% (2005: 26.7%) of revenue. We continue to
experience a high level of demand in this division from our West African
operations, due to work with Mobil Producing Nigeria and Chevron, both of which
are undertaking major oil and gas development projects in this region.
Recent contract awards from RasGas, Qatar Petroleum and Master Service/QA
Standing Agreements secured in the US are expected to add further growth in this
division.
Certification Division
Velosi is accredited by international technical authorities to certify plants
and equipment such as pressure equipment, conveying equipment, heavy lifting
equipment, and boilers as being compliant with strict statutory requirements.
This division generated US$2.7 million (2005: $4.6 million) or 3.9% (2005:
14.2%) of revenue. The lower contribution from this division in the period under
review than the corresponding period in 2005 is due to the completion of our
Russian Certification Services contract with Exxon in the period.
In September 2006, we announced a new joint venture with Rina, the Italian
marine classification provider. The new 50:50 joint venture company, called
RINA-V, provides offshore project certification to oil and gas companies, and to
the offshore industry, and will significantly add to the capabilities and
business opportunities for the Group going forward.
Engineering Support Division
The Group provides engineering support to its clients through recruitment and
placements of specialised technical personnel. This division generated US$1.2
million (2005: $3.0 million) or 1.7% (2005: 9.2%) of revenue. This division
currently services many of the major oil and gas companies.
FINANCIAL REVIEW
Financial Highlights
Year ended 2006 2005 Change
31 December US$'000 US$'000 %
Revenue 70,209 32,343 117
Operating profit 7,619 3,564 114
Profit before tax 7,976 3,644 119
Profit after tax and minority interests 5,970 2,886 107
Earnings per share US$0.3 n/a
Shareholders' funds 26,257 1,249 2,003
Overview
The Company's financial statements for the year ended 31 December 2006 have been
prepared under the International Financial Reporting Standards (IFRS).
The maiden preliminary results for the Group, for the year ended 31 December
2006, demonstrated a strong performance with record sales and profits. Turnover
increased 117% to US$70.2 million (2005: US$32.3 million). This growth was
principally driven by operations in Africa and the Middle East, where turnover
increased 192% and 92% respectively.
Profit from ordinary activities before tax for the period was up 119% from
US$3.6 million in 2005 to US$8.0 million. The Group recorded an increase of 108%
in profit after tax and of the US$6.9 million (2005: US$ 3.3 million), US$0.9
million was attributable to minority shareholders of the Group (2005: US$0.4
million).
The effective tax rate for the Group for the year ended 31 December 2006 was 14%
(2005: 9%) and the tax charge was US$1.1 million (2005: US$0.3 million). The
effective tax rate for the Group is directly correlated with the contributions
from the different regions and their varying tax rates. For the period under
review, the Group had a greater contribution from higher tax jurisdiction
countries, which resulted in the increased tax rate from 2005. This trend is
expected to be broadly the same in 2007.
In August 2006, the Group listed on AIM and successfully raised £10 million
(approximately US$19.5 million) through the issuance of 11,111,111 shares at 90
pence each. Proceeds from the listing were used to repay existing loans, provide
working capital, provide financing for acquisitions and planned expansions into
new regions.
During the year, the Group made three acquisitions funded largely out of the
proceeds from the flotation. In August 2006 the Group completed the acquisition
of QAM and, since the year-end, completed the acquisitions of Steel Test and
PDE, which were announced to shareholders on 15 December 2006. Cash outflow for
the Group from these investing activities was US$2.1 million (2005: US$0.2
million).
Cash generated from operating activities was US$0.6 million for 2006, compared
to US$0.5 million in 2005. The increase was mainly due to an operating profit of
US$8.0 million and increase in trade and other payables of US$5.7 million, which
was offset by an increase in trade and other receivables of US$12.9 million.
Proceeds from the flotation were used to repay loans from Velosi Malaysia
amounting to US$4.1 million, and also used to pay down factoring facilities in
Nigeria, which as at 31 December 2006 amounted to US$0.3 million. At 31 December
2006, cash and cash equivalents for the Group were US$11.9 million and the Group
had no long-term bank borrowings.
Fixed overhead costs for the period amounted to US$9.0 million (2005: US$5.1
million), with the increase largely attributable to the opening of offices in
Italy, Kazakhstan, Russia, Angola, and South Africa. The Group's senior
management responsible for marketing and administration was also strengthened
during the period in order to support the increasing size and needs of the
Group.
Profits attributable to minority interests were US$0.9m (2005: US$0.4m). This
increase was mainly a result of the stronger performance of the Group's
part-owned subsidiaries in Velosi Certification W.L.L (Qatar) in the Middle East
and Velosi Superintendend Nigeria Ltd and Steel Test (Pty) Ltd in Africa
Basic earnings per share after minority interests were 29.8 cents (2005: 120
cents) and fully diluted earnings per share after minority interests were 27.0
cents (2005: 120 cents). Calculated on the basis that the Group was quoted on
AIM for the full period of 2006, the basic earnings per share amounted to 15.7
cents. As at 31 December 2006, the Group had net assets of 69 cents per share.
The Board is declaring a maiden dividend of 1 cent per share which will be paid
in sterling converted at the prevailing exchange rate at the time of payment.
Subject to shareholder approval at the annual general meeting, the dividend will
be paid on Wednesday 4 July 2007 to shareholders on the register on Friday 15
June 2007.
The notes to the financial statements form an integral part of these financial
statements.
VELOSI LIMITED
AUDITED CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD ENDED 31 DECEMBER 2006
Proforma
2006 2005
USD '000 USD '000
Continuing operations
Revenue 70,209 32,343
Cost of sales (54,227) (24,103)
-------- --------
Gross profit 15,982 8,240
-------- --------
Other operating income 591 414
Administrative expenses (8,954) (5,090)
-------- --------
Operating profit 7,619 3,564
Finance costs (141) (147)
Share of profit of associated companies 498 227
-------- --------
Profit on ordinary activities before tax 7,976 3,644
Income tax expense (1,106) (341)
-------- --------
Profit on ordinary activities after tax 6,870 3,303
-------- --------
Minority interest (900) (417)
Profit from continuing operations and attributable to
equity holders 5,970 2,886
======== ========
Basic earnings per share based on the issued share capital 29.8c 120c
as at 31 December 2006 -------- --------
Diluted earnings per share based on the issued share capital 27.0c 120c
as at 31 December 2006 -------- --------
VELOSI LIMITED
AUDITED CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2006
Proforma
2006 2005
USD'000 USD'000
Assets
Non-current assets
Goodwill on acquisition 2,114 960
Property, plant and equipment 3,187 1,350
Investment in associated companies 732 631
Deferred tax assets 76 -
-------- ---------
6,109 2,941
-------- ---------
Current assets
Cash and cash equivalents 12,170 2,300
Inventories 999 529
Trade and other receivables 24,349 10,973
Amount due from related parties 1,310 453
Amount due from associated companies 425 280
Tax recoverable 14 -
-------- ---------
39,267 14,535
-------- ---------
Total assets 45,376 17,476
======== =========
Equity and liabilities
Current liabilities
Trade and other payables 14,365 8,048
Amount due to related parties 204 3,591
Amount due to associated companies 271 -
Bank and other borrowings 252 1,066
Current tax liabilities 1,106 116
Hire purchase liabilities 91 3
-------- ---------
16,289 12,824
-------- ---------
Non-current liabilities
Deferred tax liabilities 93 1
Amount due to related parties - 2,517
Provision for employees end of service
benefits 112 95
Hire purchase liabilities 81 13
Other non-current liabilities 37 7
-------- ---------
323 2,633
-------- ---------
Total liabilities 16,612 15,457
-------- ---------
Proforma
2006 2005
USD'000 USD'000
Capital and reserves
Share capital 763 -
Share premium 18,128 -
Share options 89 -
Warrants 47 -
Revaluation reserve 287 287
Statutory reserve 90 82
Voluntary reserve 24 4
Exchange reserve 11 -
Retained profit 6,818 876
-------- ---------
26,257 1,249
Minority Interest 2,507 770
-------- ---------
Total equity 28,764 2,019
-------- ---------
Total equity and liabilities 45,376 17,476
======== =========
VELOSI LIMITED
AUDITED CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD ENDED 31 DECEMBER 2006
2006 Proforma 2005
USD'000 USD'000
Cash flows from operating activities
Profit for the year 7,976 3,644
Adjustments for:
Depreciation 329 213
(Gain) / Loss on disposal of property,
plant and equipment (24) 4
Negative goodwill written off (16) -
Allowance for doubtful debts 1,160 181
Allowance for doubtful debt written back (128) -
Bad debts written off 63 -
Provision for retirement benefit 41 -
Retirement benefit paid (25) -
Share of profit in associated companies (498) (227)
Interest expense 141 147
Interest income (119) (2)
Unrealised foreign exchange gain (222) -
-------- --------
Operating cash flows before movements in
working capital 8,678 3,960
-------- --------
(Increase)/decrease inventories (470) 70
Increase in receivables (12,875) (4,434)
Increase in payables 5,704 1,248
-------- --------
Cash generated from operations 1,037 844
Interest paid (141) (147)
Tax paid (322) (213)
-------- --------
Net cash from operating activities 574 484
-------- --------
Cash flows from investing activities
Acquisition of property, plant and
equipment (817) (180)
Receipts from sale of property, plant and
equipment 42 -
Acquisition of new subsidiary companies,
net of cash (1,755) (18)
Acquisition of new associated companies,
net of cash (10) -
Incorporation of new subsidiary companies (10) -
Repayment from / (Advance to) associate co 125 (62)
Dividend income from associated company 194 79
Interest received 119 2
-------- --------
Net cash used in investing activities (2,112) (179)
-------- --------
Cash flows from financing activities
Proceeds from issue of shares 20,102 -
Listing expenses paid (1,164) -
Proceeds from issue of share options 89 -
Repayments of hire purchase liabilities (70) -
Repayment to related parties (6,762) (140)
Repayment to directors (98) (70)
-------- --------
Net cash from financing activities 12,097 (210)
-------- --------
2006 Proforma 2005
USD'000 USD'000
-------- --------
Net increase in cash and cash equivalents 10,559 95
Foreign exchange translation differences 125 -
Cash and cash equivalents at the beginning
of the year 1,234 1,139
-------- --------
Cash and cash equivalents at the end of
the year 11,918 1,234
======== ========
Cash and cash equivalents comprise:
Current assets - Cash and cash equivalents 12,170 2,300
Current liabilities - Bank overdraft (252) (1,066)
-------- --------
11,918 1,234
======== ========
VELOSI LIMITED
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD ENDED 31 DECEMBER 2006
Group
--------------------------------------------------
Share Share Minority
capital Premium Reserves Total Interest Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Balance at 1
January 2006 - - 1,249 1,249 770 2,019
Exchange
reserve
arising on
translation
of financial
statements
of overseas
subsidiaries - - 11 11 - 11
Share
allotment 763 18,128 - 18,891 - 18,891
Profit for
the year - - 5,970 5,970 900 6,870
Acquisition
of Subsidiary 837 837
Issue of
share options 89 89 89
Issue of
warrants 47 47 47
-------- ------- ------- ------- ------- --------
Balance at
31 December
2006 763 18,128 7,366 26,257 2,507 28,764
======== ======= ======= ======= ======= ========
Group
Share Share Minority
capital Premium Reserves Total Interest Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Balance at
1 January
2005
(Proforma) - - (1,637) (1,637) 179 (1,458)
Profit for
the year - 2,886 2,886 417 3,303
Acquisition
of
Subsidiary 174 174
-------- ------- ------- ------- ------- --------
Balance at
31
December
2005
(Proforma) - - 1,249 1,249 770 2,019
======== ======= ======= ======= ======= ========
VELOSI LIMITED
PRELIMINARY RESULTS ANNOUNCEMENT - NOTES
1. Business of Velosi Limited
Velosi Limited was incorporated in Jersey on 28 March 2006. Between 24th April
and 10th May 2006, the Company acquired its interest in its subsidiary and
associated undertakings such that the Company is now the holding company for the
Group. The principal activity of the Group is the provision of quality assurance
and control, general inspection, corrosion and monitoring and manpower supply
services to the oil and gas industry.
2. Basis of preparation and significant accounting policies
Velosi Limited was incorporated in Jersey on 28 March 2006. Since this date, the
Company acquired its interests in its subsidiary and associated undertakings
such that the Company is now the holding company for the Group.
The financial information has been prepared under the historical cost
convention, and this is the first year that financial statements have been
prepared in accordance with applicable International Financial Reporting
Standards (IFRS). The accounting policies are consistent with those disclosed in
the Company's AIM Admission Document.
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiaries made up to 31 December each year. The results
of subsidiaries acquired or disposed of during the year are dealt with in the
consolidated income statement from or up to their effective dates of acquisition
or disposal respectively.
The consolidated financial information is presented in US Dollars because the
Group is expected to transact more of its business in US Dollars than any other
currency.
The Consolidated Financial Information on the Group has been prepared for each
of the periods ending 31 December 2005 and 31 December 2006 on the basis of a
Group reconstruction applying Merger Accounting principles as though the current
Group structure had been in place throughout this period.
All inter-company transactions and balances within the group are eliminated on
consolidation.
Control is normally evidenced when the Company, or a company which it controls,
owns more than 50% of the voting rights of a company's share capital.
3. Earnings per share
The basic and diluted earnings per share is calculated by reference to the
earnings attributable to ordinary shareholders divided by the number of shares
in issue as at 31 December 2006, as follows:
Year ended Year ended
31 December 31 December
2006 2005
USD'000 USD'000
Profit after taxation and minority
interest 5,970 2,886
--------- ---------
Weighted average number of shares for
the purpose of calculating basic
earnings per share 20,031,708 2,410,068
Effect of dilutive potential ordinary
shares
Share Options 1,636,708 -
Warrants 476,749 -
--------- ---------
Weighted average number of shares for
the purpose of calculating diluted
earnings per share 22,145,165 2,410,068
--------- ---------
Basic earnings per share based on the issued share
capital as at 31 December 2006 29.8c 120c
--------- ---------
Diluted earnings per share based on the issued share
capital as at 31 December 2006 27.0c 120c
--------- ---------
Prior to the IPO on 21st August, there were less shares in issue, which leads to
a relatively large earnings per share figure being shown for the periods prior
to the IPO. As a result these figures are not directly comparable.
4. Dividends
The Directors proposed to recommend a final dividend of USD0.01 per ordinary
share to shareholders in respect of the financial year ending 31 December 2006.
5. Taxation on profit from ordinary activities
Group Group
2006 2005
USD'000 USD'000
UK corporation tax
UK corporation tax in respect of year 1 -
Foreign tax
Overseas tax payable 1,128 315
-------- --------
Total current tax 1,129 315
Deferred tax
Movement in deferred tax position (80) -
-------- --------
Taxation on profit from ordinary activities 1,049 315
Add: Share of taxation of associated companies 57 26
-------- --------
1,106 341
======== ========
The tax assessed on the profit for the year is lower than the standard rate of
corporation tax in the UK of 30% (2005: 30%). The differences are reconciled
below:
Group Group
2006 2005
USD'000 USD'000
Profit on ordinary activities before taxation (excluding
share of results of associated companies) 7,478 3,417
======== ========
Profit on ordinary activities at the standard rate
of corporation tax in the UK 2,243 1,025
Tax effects of:
Difference in tax rates of foreign countries (439) (14)
Expenses not deductible for tax purposes 478 47
Tax redemption and rebates - -
Utilisation of tax losses (142) (8)
Utilisation of capital allowance (120) -
Deferred tax liabilities/(assets) not recognized - (2)
Non-taxable income (950) (732)
Others (21) (1)
-------- --------
1,049 315
Add: Share of taxation of associated companies 57 26
-------- --------
1,106 341
======== ========
6. Post Balance Sheet Events
Subsequent to the year end, Velosi Industries Sdn Bhd, a subsidiary of the
Company, acquired 51 per cent of the issued share capital of Plant Design
Engineering Sdn Bhd, pursuant to an agreement dated 13 December 2006, for a
total purchase consideration of MYR4.0million (USD1.09million), out of which
MYR3.2 million was paid in cash and the remaining to be paid by way of issuance
of 117,683 new ordinary shares of US$0.02 each in the share capital of the
Company.
Segmental reporting
The directors consider that the Group's activities represent a single class of
business. The analysis of the Group's turnover, profit before tax and minority
interests, assets, liabilities, additions to plant, property and equipment and
depreciation by geographical origin of customers is set out below:
2006 2005
USD'000 USD'000
Turnover
United Kingdom 5,841 3,680
Middle East 21,609 11,235
United States of America 13,772 7,465
Africa 25,467 8,730
Asia 3,002 1,233
Others 518 -
-------- --------
70,209 32,343
======== ========
Gross Profit
United Kingdom 1,913 1,142
Middle East 5,890 2,912
United States of America 3,244 2,382
Africa 3,283 981
Asia 1,452 823
Others 200 -
-------- --------
15,982 8,240
======== ========
Carrying amount of assets
United Kingdom 10,586 2,372
Middle East 11,629 6,231
United States of America 5,538 1,747
Africa 11,146 4,088
Asia 5,846 3,038
Others 631 -
-------- --------
45,376 17,476
======== ========
Liabilities
United Kingdom 2,222 2,385
Middle East 3,994 5,584
United States of America 2,123 1,567
Africa 6,846 2,963
Asia 1,141 2,958
Others 286 -
-------- --------
16,612 15,457
======== ========
Additions to plant, property & equipment
United Kingdom 47 65
Middle East 657 63
United States of America 8 2
Africa 9 6
Asia 185 360
Others 4 -
-------- --------
910 496
======== ========
Depreciation
United Kingdom 21 51
Middle East 135 74
United States of America 4 6
Africa 22 -
Asia 139 82
Others 8 -
-------- --------
329 213
======== ========
8. Nature of financial information
The financial information set out above does not represent statutory financial
statements for Velosi Limited or for any of the entities comprising the Velosi
Group. The Company is not required to prepare or file statutory financial
statements in the UK and has not done so.
These preliminary results will be available on the Company's website
www.velosi.com. Further copies can be obtained from the registered office at 44
Esplande, St Helier, Jersey, JE4 8PM.
This information is provided by RNS
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