Interim Results
Velosi Limited
28 September 2006
Velosi Limited ('Velosi' or 'the Company')
Unaudited Interim Results
for the six months ended 30 June 2006
HIGHLIGHTS
Velosi provides quality assurance and quality control services to a number of
leading national and multinational oil and gas companies, including BP, Shell,
ExxonMobil, and Chevron.
• Turnover increased by 113% to US$28.8 million (2005: US$13.5 million)
• Profit before tax rose by 124% to US$3.6 million (2005: $1.6 million)
• Basic and diluted earnings per share of US$0.547
• Successfully admitted to AIM, raising £10 million before expenses
• Earnings per share of US$0.072 (based on the issued share capital on
Admission of 38,139,905 shares)
• Acquired 51% of the issued share capital of QA Management Services Pty
Ltd. based in Australia for a cash consideration of AU$612,000 following
admission to AIM
• Joint venture announced with RINA Industry since period end
John Hogan, Chairman, commented:
'I am pleased to report our maiden interim results following our admission to
AIM in August 2006. We generated significant increases in turnover and profit
before tax of 113% and 124% respectively, primarily driven by the demand for our
services from the major oil and gas multinationals. The continued high levels of
investment in oil and gas infrastructure bodes well for the future, creating a
positive outlook for the second half of the year and beyond. We continue to win
new contracts and we are continuing to expand our service capabilities
demonstrated by the new joint venture with RINA Industry, announced today.'
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
Chairman's Statement
I am very pleased to announce our maiden interim results following the Company's
successful admission to AIM in August 2006. We have delivered a very strong
trading performance, reporting substantial increases in both sales and
profitability of 113% and 124% respectively. We believe the Company is well
positioned as one of the few companies able to provide quality assurance and
quality control services on a global basis to oil and gas multinationals.
During the period under review, we have secured a number of new contracts with
clients such as ExxonMobil, Kuwait Gulf Oil Co., Aramco Overseas Co., Techsen,
Total, Qatar Petroleum and RasGas which together have driven the growth in the
period and provide visibility on future earnings. Our objective is to continue
to expand into new markets, in particular, Central Asia, Russia and Africa,
increase our market share in existing markets and expand our service
capabilities through further joint ventures and acquisitions.
FINANCIAL REVIEW
For the half year ended 30 June 2006, turnover increased 113% to US$28.8 million
(2005: US$13.5 million), and profit before tax rose 124% to US$3.6 million
(2005: US$1.6 million). Gross profit margin was 23.3% (2005: 24.2%). These
increases primarily reflect Velosi's ability to capitalise on the strong recent
growth in the oil and gas sector and its increasing role as a key service
provider to the major oil and gas multinationals. Earnings per share were 7.2
cents (based on the Company's issued share capital on Admission of 38,139,905
shares).
The slight decrease in gross profit margins in the reporting period compared to
the previous corresponding period were primarily due to costs incurred in
subcontracting services in Nigeria. The additional working capital raised on
listing should enable the company to provide a higher proportion of those
services directly for future contracts, leading to anticipated improvements in
margins. It should additionally be noted that gross margins may fluctuate from
period to period according to the mix of services provided.
At the time of our admission to AIM, we successfully raised £10 million (before
expenses). The net proceeds of the placing are being used to repay existing
loans, provide financing for the Group's acquisitions and planned expansion into
new regions and provide working capital.
Dividend
As declared in our admission document, the Board has decided that the first
dividend to be paid by the Company will be the final dividend for the period
ended 31 December 2006.
OPERATIONAL REVIEW
Velosi operates through four principal offices in the USA, the UK, Malaysia and
the UAE and has operational or representative offices in a further 27 countries
worldwide. The majority of the operating and regional offices are strategically
located in close proximity to significant oil and gas production areas and/or
equipment manufacturing industrial centres.
Velosi is well positioned to benefit from the expanding oil and gas market. The
industry is highly capital intensive, investing heavily in quality assurance and
quality control for oil rigs, sub-sea pipelines, refineries and power and
petrochemical plants. This is necessary to minimise interruptions to production,
environmental and/or asset damage and dangers to the health and safety of
personnel. As a result, a significant market has been created for companies
providing technical services, such as Velosi, to exploit.
Velosi provides its services to the oil and gas industry under four principal
divisions:
Quality Enhancement:
For the six months to 30 June 2006, this division generated US$14.44 million
representing 50.1% of Group turnover. Velosi provides the ongoing
maintenance-related and vendor inspection services for oil and gas facilities,
petrochemical and power plants and industrial complexes worldwide. This division
continues to grow due to recent awards from Kuwait Oil Company, Techsen, Total
and Qatar Petroleum in the Middle East.
Geographically this division will expand its services to Australia with the
completion of our 51% acquisition of QA Management Services in that country.
Project Verification:
For the six months to 30 June 2006, this division generated US$12.39 million
representing 43.0% of Group turnover. Velosi ensures that assets under
construction are assembled to certain standards of quality. Velosi professionals
monitor construction, guarding against compromises in quality and safety and
ensuring that suppliers manufacture according to the precise product
specifications.
We continue to see a high level of demand in this division especially from our
West African operations, due to the Mobil Producing Nigeria and Chevron
contracts covering several operating projects in the region.
The MPN contract involves predominantly offshore coverage of the fabrication,
erection and commissioning of multiple offshore production, drilling and living
quarter platforms, as well as oversight of the laying/installation of sub-sea
pipelines off the coast of Nigeria. For Chevron, we are providing services for
the Agbami oilfield development in the Central Niger delta and for the
installation of the Escravos gas to liquid processing facility onshore in
Nigeria.
Middle East operations are also expanding with RasGas awarding us the LNG Plant
expansion contract in Qatar in May 2006.
Certification:
For the six months to 30 June 2006, this division generated US$1.51 million
representing 5.2% of Group turnover. 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. Much of this equipment must be
certified on a regular basis, creating the opportunity for sustainable revenues.
The new joint venture RINA-V, announced today, significantly extends our
capabilities in this marketplace.
Engineering Support:
For the six months to 30 June 2006,this division generated US$0.46 million
representing 1.7% of Group turnover. Velosi provides specialised technical
manpower to leading companies in the oil and gas and petrochemical sectors,
typically on contracts ranging between three months and three years. Velosi
maintains a database of internationally located qualified engineers from where
the manpower is sourced.
In the second quarter of 2006, ExxonMobil made Velosi part of a select panel of
suppliers for the provision of Technical Manpower Supply on a worldwide basis.
This elevation to preferred supplier status should benefit the Engineering
Support division going forward.
JOINT VENTURE
We have also announced today a new 50:50 joint venture with RINA Industry, part
of the RINA Group, a leading international certification body.
The new joint venture company, called RINA-V, will add complete offshore
certification and marine warranty surveying to Velosi's service offerings
thereby allowing Velosi to enter the rapidly expanding offshore certification
market.
RINA is a member of IACS (International Association of Classification Societies)
and is, therefore, able to provide certification and quality assurance services
to the offshore industry covering the whole life-cycle, from design appraisal
and construction supervision to life extension and requalification. Through the
RINA-V partnership, RINA can now take advantage of Velosi's extensive personnel
resources and worldwide reach.
RINA-V will initially operate out of the UAE and service clients in Qatar,
Kuwait, Oman, UAE, Nigeria, Angola, India, Malaysia, Brunei, Indonesia and
Russia and CIS countries.
OUTLOOK
Looking ahead, Velosi continues to pursue its strategy of entering new
geographical markets, growing market share in existing markets and expanding
through joint ventures and acquisitions. We continue to compete favourably on
price and technical competence on a global basis and these advantages ensure
Velosi is well positioned to secure key contracts from the major oil and gas
multinationals.
In the first half of this financial year we secured a series of important new
contracts with ExxonMobil, Kuwait Gulf Oil Co., Aramco Overseas Co., Techsen,
Total, Qatar Petroleum and RasGas. These wins demonstrate the demand for
Velosi's expertise and provide visibility on the Group's future revenue streams.
Together with the Group's strengthened balance sheet and enhanced profile
following its listing on the AIM market, the Board looks forward to the future
with confidence.
JOHN HOGAN
CHAIRMAN
28 September 2006
VELOSI LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 30 JUNE 2006
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
USD'000 USD'000 USD'000
(unaudited) (unaudited) (unaudited)
Turnover 28,794 13,520 32,343
Cost of sales (22,081) (10,243) (24,103)
________ ________ ________
Gross Profit 6,713 3,277 8,240
Other Income 180 167 414
Administrative expenses (3,442) (1,847) (5,090)
________ ________ ________
Operating profit 3,451 1,597 3,564
Finance Costs (120) (62) (147)
Share of Profit of Associated
Companies 262 66 227
________ ________ ________
Profit on ordinary activities
before taxation 3,593 1,601 3,644
Taxation on profit on ordinary
activities (554) (285) (341)
________ ________ ________
Profit on ordinary activities
retained for the period 3,039 1,316 3,303
________ ________ ________
Attributable to:
Equityholders of the Company 2,735 1,158 2,886
Minority Interests 304 158 417
________ ________ ________
3,039 1,316 3,303
________ ________ ________
Number of ordinary shares
As at 30 June 5,000,000 5,000,000 5,000,000
As at Admission 38,139,905 38,139,905 38,139,905
Earnings per ordinary share
Basic and diluted 54.7 cents 23.2 cents 57.8 cents
VELOSI LIMITED
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2006
30 June 30 June 31 December
2006 2005 2005
USD'000 USD'000 USD'000
(unaudited) (unaudited) (unaudited)
Non-current assets
Tangible fixed assets 1,816 1,300 1,350
Goodwill 960 960 960
Investment in Associated Companies 881 601 631
________ ________ ________
3,657 2,861 2,941
Current Assets
Inventories 2,604 941 529
Debtors 17,241 8,166 11,706
Cash at bank and in hand 2,040 1,361 2,300
________ ________ ________
21,885 10,468 14,535
________ ________ _______
Total assets 25,542 13,329 17,476
________ ________ ________
Current Liabilities
Trade and Other Payables 16,935 10,648 11,758
Bank Borrowings 828 - 1,066
________ ________ ________
17,763 10,648 12,824
________ ________ ________
Net Current Assets / (Liability) 4,122 (180) 1,711
Non-Current Liabilities
Deferred Tax Liabilities - 1 1
Other Liabilities 2,703 2,648 2,632
________ ________ ________
2,703 2,649 2,633
________ ________ ________
Total Liabilities 20,466 13,297 15,457
________ ________ ________
Net Assets 5,076 32 2,019
________ ________ ________
Equity
Share Capital 100 -** -**
Share premium account - - -
Reserves 290 326 373
Retained Earnings 3,611 (805) 876
________ ________ ________
4,001 (479) 1,249
Minority Interests 1,075 511 770
________ ________ ________
5,076 32 2,019
________ ________ ________
** represents 2 ordinary shares of USD0.02 each
VELOSI LIMITED
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2006
Six months Six months Year ended
ended ended 31 December
30 June 2006 30 June 2005 2005
USD'000 USD'000 USD'000
(unaudited) (unaudited) (unaudited)
Net cash (used in) / generated from
operating activities (540) 642 484
Cashflow from Investing activities
Purchase of property, plant and
equipment (602) (307) (180)
Repayment from /(Advances to)
Associated Companies 30 (121) (62)
Interest Received 1 1 2
Acquisition of subsidiaries (net of
cash acquired) (13) (18) (18)
Proceeds from proposed issue of shares
to minority shareholders 840 - -
Dividend received from an associated
company 79
________ ________ ________
Net cash from / (used in) investing
activities 256 (445) (179)
________ ________ ________
Financing activities
Drawdown on Hire Purchase facility 94 3 -
Repayment to related parties (180) (51) (140)
Advances from / (Repayment to)
Directors 348 73 (70)
________ ________ ________
Net cash from financing activities 262 25 (210)
________ ________ ________
Net increase/(decrease) in cash and
cash equivalents (22) 222 95
Cash and cash equivalents at 1 January 1,234 1,139 1,139
________ ________ ________
Cash and cash equivalents at end of
period 1,212 1,361 1,234
________ ________ ________
Cash and cash equivalents at end of
period comprises:
Cash at bank and in hand 2,040 1,361 2,300
Bank Borrowings (828) - (1,066)
________ ________ ________
Net cash (used in)/from financing
activities 1,212 1,361 1,234
________ ________ ________
VELOSI LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS
FOR THE SIX MONTHS ENDED 30 JUNE 2006
30 June 30 June 31 December
2006 2005 2005
USD'000 USD'000 USD'000
(unaudited) (unaudited) (unaudited)
Profit for the financial
period / year 3,039 1,316 3,303
Issue of shares 100 - -
Minority interest (304) (158) (417)
Currency translation
differences on foreign
currency net investments (83) - -
________ ________ ________
Net increase / (reduction)
in shareholders' funds 2,752 1,158 2,886
Opening shareholders' funds 1,249 (1,637) (1,637)
________ ________ ________
Closing shareholders' funds 4,001 (479) 1,249
________ ________ ________
VELOSI LIMITED
INTERIM 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
The financial information has been prepared under the historical cost
convention, and in accordance with applicable International Financial Reporting
Standards (IFRS). The accounting policies are consistent with those disclosed in
the Company's AIM Admission Document and which will be adopted in the Company's
annual financial statements
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 30 June 2005 and 30 June 2006 and the year ended 31
December 2005 on the basis of a Group reconstruction applying Merger Accounting
principles as though the current Group structure had been in place throughout
this period.
3. Increase in paid up capital
At the date of incorporation the Company had an authorised share capital of
£250,000,000 divided into 5,000,000,000 ordinary shares of £0.05 each, of which
2 ordinary shares were issued.
On 23 April 2006 the authorised share capital of the Company was converted by
shareholders' unanimous written resolution to US$88,000,000 divided into
4,400,000,000 ordinary shares of US$0.02.
The paid up capital of Velosi Limited was increased from 2 ordinary shares of
USD0.02 each to 5,000,000 ordinary shares of USD0.02 each on 31 May 2006.
On 15 August 2006, the Board resolved to issue four Ordinary Shares for every
one Ordinary Share held by Shareholders of the Company as at 14 August 2006,
thereby increasing the paid up capital to 25,000,000 ordinary shares.
Pursuant to an agreement dated 9 August 2006, a total of 395,211 new ordinary
shares were issued upon admission in lieu of part payment for the acquisition of
51per cent of Kurtec Inspection Services Sdn Bhd.
1,550,250 new ordinary shares were issued to pre admission subscribers who had
made offers to subscribe between 30 March 2006 and 5 April 2006.
Upon admission, 11,111,111 new ordinary shares were issued to investors and a
further 83,333 new ordinary shares were issued to Strand Partners in lieu of
part of the Nominated Advisor fees, thereby increasing the total issued capital
to 38,139,905 ordinary shares.
4. 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 30 June 2006, as follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
USD'000 USD'000 USD'000
Profit after taxation and
minority interest 2,735 1,158 2,886
________ ________ ________
Number of shares as at 30 June 2006 5,000,000 5,000,000 5,000,000
Number of shares on admission to AIM 38,139,905 38,139,905 38,139,905
Basic and diluted earnings per share 54.7c 23.2c 57.8c
Earnings per share based on the
issued share capital on Admission 7.2c 3.0c 7.6c
5. Dividends
The Directors do not propose to pay an interim dividend at this time. The
Directors do intend, subject to the availability of distributable reserves, to
recommend a final dividend to shareholders in respect of the financial year
ending 31 December 2006.
6. Post Balance Sheet events
Pursuant to an agreement dated 9 August 2006 Velosi Australia Pty Ltd, a
subsidiary of the Company, agreed to acquire 51 per cent of the issued share
capital of QA Management Services Pty Ltd for AU$612,000, together with an
option to acquire the remaining share capital for a price set at the higher of
AU$550,880 and a multiple of future profits.
On 21 August 2006 the Company issued 11,111,111 new ordinary shares of $0.02
each to investors for a total cash consideration of £10,000,000.
On 21 August 2006 the Company's issued share capital was admitted to AIM.
7. Segmental Reporting
A geographical analysis of the turnover and profit before tax in the period is
given below:
Six months ended Six months ended Year ended
30 June 30 June 31 December
2006 2005 2005
USD '000 USD '000 USD '000
Turnover
United Kingdom 2,850 1,854 3,680
Middle East 9,124 4,751 11,235
United States of America 5,396 3,434 7,465
Africa 9,967 2,830 8,730
Asia 1,457 651 1,233
________ ________ ________
28,794 13,520 32,343
======== ======== ========
Profit before tax
United Kingdom 126 58 99
Middle East 2,160 817 1,828
United States of America 328 230 865
Africa 447 142 250
Asia 532 354 602
________ ________ ________
3,593 1,601 3,644
======== ======== ========
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. The first statutory financial
statements of Velosi Limited will be in respect of the period ending 31 December
2006.
These interim 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.
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