Final Results - Part 2

Wood Group (John) PLC 10 March 2003 PART 2 John Wood Group PLC Group profit and loss account for the year to 31 December 2002 Note 2002 2001 US$m US$m Revenues (including share of joint ventures) Continuing operations 1,689.6 1,445.8 Acquisitions 44.9 36.6 _________ _________ 1,734.5 1,482.4 Discontinued operations 3.6 41.4 _________ _________ Revenues (including share of joint ventures) 1 1,738.1 1,523.8 Less: share of revenues of joint ventures (305.6) (243.9) _________ _________ Group revenues 1,432.5 1,279.9 Cost of sales (1,091.6) (958.5) _________ _________ Gross profit 340.9 321.4 Net operating expenses 2 (249.1) (248.2) _________ _________ Operating profit of Group undertakings (after $10.8m (2001 : $9.2m) goodwill 91.8 73.2 amortisation) Share of operating profit in joint ventures (after $1.8m (2001 : $1.4m) goodwill 31.5 24.0 amortisation) Share of operating profit in associates 6.5 6.5 _________ _________ Total operating profit: Group and share of joint ventures and associates 2 129.8 103.7 Total operating profit comprises: _________ _________ Continuing operations 129.4 101.3 Acquisitions 0.9 2.2 _________ _________ 130.3 103.5 Discontinued operations (0.5) 0.2 _________ _________ Exceptional items Loss on the termination of discontinued operations 5 - (13.6) _________ _________ Profit on ordinary activities before interest 129.8 90.1 Net interest payable - Group 6 (8.3) (13.5) - joint ventures 6 (2.7) (3.2) - associates 6 (4.1) (3.8) _________ _________ Profit on ordinary activities before taxation 114.7 69.6 Taxation on profit on ordinary activities 7 (44.4) (29.0) _________ _________ Profit on ordinary activities after taxation 70.3 40.6 Equity minority interests 23 (6.0) (5.5) _________ _________ Profit for the financial year 64.3 35.1 Dividends 8 (16.1) (10.6) Appropriations 8 - (8.5) _________ _________ Retained profit for the financial year 22 48.2 16.0 _________ _________ Basic earnings per ordinary share 9 15.7c 7.4c Diluted earnings per ordinary share 9 13.8c 6.7c Adjusted earnings per ordinary share before goodwill amortisation 9 16.5c 13.2c John Wood Group PLC Group Balance sheet as at 31 December 2002 2002 2001 Note US$m US$m Fixed assets Intangible assets 10 227.3 156.2 Tangible assets 11 206.7 126.7 Investments in joint ventures 12 _________ __________ Share of gross assets 280.0 255.2 Share of gross liabilities (209.2) (194.0) _________ __________ Goodwill arising on acquisition 9.4 9.1 80.2 70.3 Investments in associates 12 8.8 7.2 Other investments 12 1.2 1.2 _________ __________ Total investments 90.2 78.7 _________ __________ 524.2 361.6 _________ __________ Current assets Stocks 13 152.6 153.4 Debtors 14 349.2 306.0 Cash at bank and in hand 56.2 129.3 _________ __________ 558.0 588.7 _________ __________ Creditors: amounts falling due within one year Bank loans and overdrafts 15 (10.7) (3.3) Other creditors 15 (281.6) (232.1) _________ __________ (292.3) (235.4) _________ __________ Net current assets 265.7 353.3 _________ __________ Total assets less current liabilities 789.9 714.9 Creditors: amounts falling due after one year Bank loans 16 (222.7) (382.4) Other creditors 16 (17.0) (2.9) _________ __________ (239.7) (385.3) _________ __________ Provisions for liabilities and charges 18 (11.4) (14.3) _________ __________ Net assets excluding pension liability 538.8 315.3 Pension liability 25 (16.3) (5.3) _________ __________ Net assets including pension liability 522.5 310.0 _________ __________ Capital and reserves Called up share capital 19 23.3 105.6 Share premium account 20 200.3 - Capital reduction reserve 21 88.1 - Profit and loss account 22 196.2 190.4 _________ __________ Total shareholders' funds 507.9 296.0 Comprising _________ __________ Equity shareholders' funds 507.9 197.0 Non-equity shareholders' funds - 99.0 _________ __________ Equity minority interests 23 14.6 14.0 _________ __________ 522.5 310.0 _________ __________ John Wood Group PLC Statement of total recognised gains and losses for the year to 31 December 2002 2002 2001 Note US$m US$m Profit for the financial year 64.3 35.1 Actuarial loss recognised in the pension scheme 25 (14.0) (10.1) Movement in deferred tax relating to pension liability 25 4.2 3.1 Exchange movement on retranslation of foreign currency net assets (1.2) (8.5) ___________ ___________ Total recognised gains for year 53.3 19.6 Prior year adjustments - 29.3 ___________ ___________ Total gains recognised since last annual report 53.3 48.9 ___________ ___________ Included in the above are total recognised gains of US$17.0m (2001: US$12.2m) in respect of joint ventures and gains of US$1.6m (2001 : US$1.5m) in respect of associates. There is no material difference between the profit on ordinary activities before taxation, the retained profit for the year stated above and their historical cost equivalents. Reconciliation of movement in shareholders' funds for the year to 31 December 2002 2002 2001 Note US$m US$m Profit for the financial year 64.3 35.1 Dividends and other appropriations 8 (16.1) (19.1) ___________ _____________ 48.2 16.0 Issue of new shares 216.2 0.1 Redemption of convertible redeemable preference shares (29.6) - Expenses of share issue (11.9) - Non-equity shares - appropriation adjustments 8 - 8.5 Actuarial loss recognised in the pension scheme net of deferred tax 25 (9.8) (7.0) Exchange movement on retranslation of foreign currency net assets (1.2) (8.5) Exchange movement on retranslation of share capital - (0.7) ___________ _____________ Net increase in shareholders' funds 211.9 8.4 Shareholders' funds at 1 January 296.0 287.6 ___________ _____________ Shareholders' funds at 31 December 507.9 296.0 ___________ _____________ John Wood Group PLC Group cash flow statement for the year to 31 December 2002 Note 2002 2001 US$m US$m Operating activities Net cash inflow from operating activities 30 127.9 90.1 Dividends from joint ventures 7.7 6.6 __________ __________ 135.6 96.7 __________ __________ Returns on investments and servicing of finance Interest received 7.5 8.6 Interest paid (15.5) (23.7) Non-equity dividends paid (6.5) (6.6) __________ __________ (14.5) (21.7) __________ __________ Taxation UK corporation tax paid (0.4) (5.5) Overseas tax paid (22.6) (23.9) __________ __________ (23.0) (29.4) __________ __________ Capital expenditure and financial investment Purchase of tangible fixed assets (105.9) (51.1) Sale of tangible fixed assets 5.1 0.2 Disposal of investments 12 0.2 0.2 Repayment of loans from joint ventures 6.2 2.5 __________ __________ (94.4) (48.2) __________ __________ Acquisitions and disposals Acquisition of minority interests 23 (18.2) (5.4) Purchase of subsidiary undertakings, net of cash acquired 24 (77.1) (27.0) Investment in joint ventures 12 (0.6) (0.3) Deferred consideration 24 (0.4) (2.8) __________ __________ (96.3) (35.5) __________ __________ Equity dividends paid (7.5) (1.5) __________ __________ Net cash outflow before management of liquid resources and financing (100.1) (39.6) __________ __________ Management of liquid resources (Increase)/decrease in cash placed on deposit 32 (0.9) 36.0 __________ __________ Financing (Decrease)/increase in bank loans 32 (153.6) 23.8 Issue of ordinary shares 216.2 0.1 Redemption of convertible redeemable preference shares (29.6) - Expenses of share issue (11.9) - __________ __________ Net cash inflow from financing 21.1 23.9 __________ __________ (Decrease)/increase in cash 32 (79.9) 20.3 __________ __________ John Wood Group PLC Accounting policies for the year to 31 December 2002 The financial statements are prepared under the historical cost convention and in accordance with applicable Accounting Standards in the United Kingdom. A summary of the more important Group accounting policies which have been consistently applied, is set out below. Basis of consolidation The Group financial statements are the result of the consolidation of the financial statements of the Group's subsidiary undertakings from the date of acquisition or up until the date of disposal as appropriate. All Group companies prepare accounts to 31 December. Reporting currency The Group's earnings stream is primarily US dollars and the principal functional currency is the US dollar, being the most representative currency of the Group. The Group financial information is therefore prepared in US dollars. The following sterling to US dollar exchange rates have been used in the preparation of these accounts:- Average rate Closing rate ________________________________________________________________________ __________________ ___________________ Year ended 31 December 2001 1.4419 1.4554 Year ended 31 December 2002 1.5037 1.6099 ________________________________________________________________________ __________________ ___________________ Revenue recognition Revenue is recognised only when it is probable that the economic benefits associated with a transaction will flow to the Group and the amount of revenue can be measured reliably. Revenue from product sales is recognised when the significant risks and rewards of ownership have been transferred to the buyer, which is normally upon delivery of products and customer acceptance, if any. Revenue from services is recognised as the services are rendered, including revenues based on contractual rates per man hour in respect of multi-year service contracts. Incentive performance revenues are recognised upon completion of agreed objectives. Revenues are stated net of sales taxes and discounts. Joint ventures and associates The Group's share of profits less losses of joint ventures and associates is included in the Group profit and loss account and the Group's share of their net assets is included in the Group balance sheet. In addition, the Group's share of revenues, operating profit, interest and tax of joint ventures and operating profit, interest and tax of associates is separately disclosed. Goodwill Goodwill arising on consolidation represents the excess of the cost of an acquisition over the fair value of the Group's share of the net assets of the acquired subsidiary, joint venture, or associate at the date of acquisition. Goodwill is amortised using the straight line method over its estimated life, not to exceed 20 years. When estimating the life of goodwill for each acquisition the principal factors that the Group takes into account are the nature and foreseeable life of the acquired business, the stability and foreseeable life of the industry to which the goodwill relates and the effects of product obsolescence and changes in demand for the acquired business. John Wood Group PLC Accounting policies for the year to 31 December 2002 Tangible fixed assets Tangible fixed assets are stated at historical cost less aggregate depreciation. No depreciation is charged with respect to freehold land and assets in course of construction. Transfers from fixed assets to current assets are undertaken at the lower of cost and net realisable value. Depreciation is calculated on the straight line method over the estimated useful life of the asset, as follows: Freehold buildings 25-50 years Long leasehold buildings 25-50 years Short leasehold buildings period of lease Plant and equipment 3-10 years When estimating the useful life of an asset group, the principal factors the Group takes into account are the durability of the assets, the intensity at which the assets are expected to be used and the expected rate of technological developments. Impairment The Group performs impairment reviews in respect of fixed assets and goodwill whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. An impairment loss is recognised when the recoverable amount of an asset, which is the higher of the asset's net realisable value and its value in use, is less than its carrying amount. Stocks Stocks, which include raw materials, work in progress and finished goods, are stated at the lower of cost and net realisable value. Product based companies determine cost by weighted average methods using standard costing to gather raw material, labour and overhead costs. These costs are adjusted, where appropriate, to correlate closely the standard costs to the actual costs incurred based on variance analysis. Service based companies' stocks consist of spare parts and other consumables. Serialised parts are costed using the specific identification method and other materials are generally costed using the first in, first out method. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. Allowance is made for obsolete and slow-moving items, based upon annual usage by part. Long-term contracts Revenue on long-term contracts is recognised according to the stage reached in the contract by reference to the value of work done. A prudent estimate of the profit attributable to work completed is recognised once the outcome of the contract can be assessed with reasonable certainty. Provision is made for all foreseeable losses. The amount by which the revenue exceeds payments on account is shown under debtors as amounts recoverable on contracts. Any excess of payments on account over revenue recorded on contracts are classified under creditors due within one year. Deferred taxation Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more, or a right to pay less, tax in the future have occurred at the balance sheet date, with the following exceptions:- â€¢ provision is made for gains on disposal of fixed assets that have been rolled over into replacement assets only where, at the balance sheet date, there is a commitment to dispose of the replacement assets. â€¢ provision is made for the tax that would arise on remittance of the retained earnings of overseas subsidiaries only to the extent that, at the balance sheet date, dividends have been declared or there is a binding commitment. â€¢ on the basis of all available evidence deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax is measured on a non-discounted basis at the rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date. John Wood Group PLC Accounting policies for the year to 31 December 2002 Foreign currencies Profit and loss accounts of entities that prepare their results in a currency other than the US dollar are translated into US dollars at average rates of exchange for the year and assets and liabilities are translated into US dollars at the rates of exchange ruling at 31 December. Exchange differences arising on translation of net assets in such entities held at the beginning of the year, together with those differences resulting from the restatement of profits and losses from average to year end rates, are taken to reserves. Other exchange differences are taken directly to profit and loss account. Exchange differences arising on non US dollar currency borrowings raised to finance equity investments denominated in a non US dollar currency, and which are designated as and are hedges of such investments, are taken to reserves on consolidation and offset against the exchange differences arising on these assets. In each individual entity, transactions in overseas currencies are translated at the exchange rates ruling at the date of the transaction or, where forward contracts have been arranged, at the contractual rates. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rates ruling at the balance sheet dates or at a contractual rate if applicable and any exchange differences are taken to the profit and loss account. In 2002, John Wood Group PLC (Company) changed its functional currency from sterling to US dollars as the majority of the company's transactions are now US dollar denominated. In 2001 the functional currency of the group changed from sterling to US dollars, and the company's equity share capital which was denominated in sterling was translated at the exchange rate ruling at the balance sheet date, with exchange differences taken to reserves. In 2002, as a result of the IPO, significant sterling denominated share capital was raised. The directors now consider it is more appropriate to record the equity share capital at the exchange rate ruling on the date it was raised in line with the functional currency of the parent company. There has been no impact of this change on the results for the period. Financial instruments The Group uses derivative financial instruments to hedge its exposures to fluctuations in interest and foreign exchange rates. Instruments accounted for as a hedge are designated as a hedge at the inception of contracts. Receipts and payments on interest rate instruments are recognised as adjustments to interest expense over the life of the instrument. Gains and losses on foreign currency hedges are recognised on maturity of the underlying transaction. Operating leases As lessee Payments made under operating leases are charged to the profit and loss account on a straight line basis over the period of the lease. As lessor Operating lease rental income arising from leased assets is recognised in the profit and loss account on a straight line basis over the period of the lease. Pension costs In 2001, the Group adopted early FRS 17 'Retirement Benefits'. The Group operates a defined benefit scheme and a number of defined contribution schemes. The assets of these schemes are held in separate trustee administered funds. The defined benefit scheme's assets are measured using market values. Pension scheme liabilities are measured by an actuary using the projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. The increase in the present value of the liabilities of the Group's defined benefit pension schemes expected to arise from employee service in the period is charged to operating profit. The expected return on the schemes' assets and the increase during the period in the present value of the schemes' liabilities arising from the passage of time are included in other finance income. Actuarial gains and losses are recognised in the consolidated statement of total recognised gains and losses. The pension scheme's surpluses to the extent that they are considered recoverable, or deficits are recognised in full and presented on the face of the balance sheet net of the related deferred tax. The Group's contributions to defined contribution schemes are charged to the profit and loss account in the period to which the contributions relate. John Wood Group PLC Accounting policies for the year to 31 December 2002 Use of estimates The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue during the reporting period. Actual results could differ from those estimates. Warranties Provision is made for the estimated liability on all products and services still under warranty, including claims already received, based on past experience. Employee share schemes The Group has a number of share option schemes. The Group grants options at the current fair market value and as a result there is no charge arising on the grant of options during the period. Employers' National Insurance Contributions become payable on the exercise of unapproved share options issued after 5 April 1999 on the difference between the market value of the Company's ordinary shares at the date of exercise and the exercise price of the underlying options. Provision for this liability is made based upon the market value of options at the balance sheet date and spread over the vesting period of the options. The Group is deemed to have control of the assets, liabilities, income and costs of its employee share ownership trust. It has therefore been included in the financial statements of the Group. Business segments The Group provides services and products to the oil and gas and power industries worldwide. The Group is organised into three business segments: - Engineering & Production Facilities - Well Support - Gas Turbine Services The Engineering and Production Facilities operations provide engineering services and production facilities management and support services to major integrated, independent and national oil companies. The Well Support operations provide services and products for well completion and throughout the life of the well to support continued production. The Gas Turbine Services operations offer comprehensive gas and steam turbine aftermarket maintenance, repair and overhaul services for oil and gas and pipeline customers, electric utilities, independent and merchant power producers and consolidated energy companies. John Wood Group PLC Notes to the financial statements for the year to 31 December2002 1. Segmental reporting Business segments Revenues EBITDA (1) EBITA (1) Operating profit 2002 2001 2002 2001 2002 2001 2002 2001 US$m US$m US$m US$m US$m US$m US$m US$m Engineering & Production Facilities Group 823.7 612.3 82.5 61.5 75.7 56.8 69.2 51.4 Joint 169.1 134.4 19.3 11.5 16.0 8.5 15.6 8.1 Ventures _______ __________ ________ ________ _________ _________ _________ _________ 992.8 746.7 101.8 73.0 91.7 65.3 84.8 59.5 _______ __________ ________ ________ _________ _________ _________ _________ Well Support Group 354.8 405.3 32.7 39.5 22.5 30.5 20.4 28.2 Joint 5.2 6.8 (0.5) - (0.8) (0.3) (0.8) (0.3) Ventures _______ __________ ________ ________ _________ _________ _________ _________ 360.0 412.1 32.2 39.5 21.7 30.2 19.6 27.9 _______ __________ ________ ________ _________ _________ _________ _________ Gas Turbine Services Group 220.7 198.0 32.3 26.9 25.0 20.6 22.8 19.1 Joint 131.3 102.7 20.5 18.7 18.1 17.2 16.7 16.2 Ventures _______ __________ ________ ________ _________ _________ _________ _________ 352.0 300.7 52.8 45.6 43.1 37.8 39.5 35.3 _______ __________ ________ ________ _________ _________ _________ _________ Total excluding discontinuing operations 1,704.8 1,459.5 186.8 158.1 156.5 133.3 143.9 122.7 Gas Turbine 33.3 64.3 (2.3) (7.7) (3.5) (9.0) (3.5) (10.0) Services - discontinuing operations (2) _______ __________ ________ ________ _________ _________ _________ _________ Total 1,738.1 1,523.8 184.5 150.4 153.0 124.3 140.4 112.7 Comprising _______ __________ ________ ________ _________ _________ _________ _________ - Group 1,432.5 1,279.9 145.2 120.2 119.7 98.9 108.9 88.7 - Joint 305.6 243.9 39.3 30.2 33.3 25.4 31.5 24.0 Ventures _______ __________ ________ ________ _________ _________ _________ _________ Central costs (16.5) (14.3) (17.1) (15.5) (17.1) (15.5) Share of 6.5 6.5 operating profit in associates (5) _______ __________ ________ ________ _________ _________ _________ _________ Total 1,738.1 1,523.8 168.0 136.1 135.9 108.8 129.8 103.7 _______ __________ ________ ________ _________ _________ Exceptional - (13.6) items (4) Net interest (15.1) (20.5) payable Profit before 114.7 69.6 taxation _________ _________ Note: (1) EBITDA represents operating profit (including the share of joint ventures) before deduction of depreciation, goodwill amortisation, and impairment charges. EBITA represents EBITDA less depreciation (including the share of joint venture depreciation). (2) The discontinuing operations in the Gas Turbine Services business relate to Aero engine overhaul companies. The discontinuing revenues and operating losses above includes the discontinued revenues and operating losses respectively, as shown on the face of the profit and loss account. (3) Revenues arising from sales between segments are not significant and have been eliminated in the above analysis. (4) The exceptional items in 2001 relate to discontinued operations. (5) The Group's associate is not part of any of the current business segments. John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 1. Segmental reporting (continued) 2002 2001 Net operating assets US$m US$m Engineering & Production Facilities - Group 226.2 147.4 - Joint Ventures 42.0 40.0 __________ ___________ 268.2 187.4 __________ ___________ Well Support - Group 179.9 205.1 - Joint Ventures 2.6 2.9 __________ ___________ 182.5 208.0 __________ ___________ Gas Turbine Services - Group 207.6 117.1 - Joint Ventures 73.7 76.9 __________ ___________ 281.3 194.0 __________ ___________ Total allocated excluding discontinuing operations 732.0 589.4 Gas Turbine Services - discontinuing operations 22.1 29.1 Unallocated (16.3) (2.6) __________ ___________ Net operating assets 737.8 615.9 Net debt - Group (177.2) (256.4) Net debt - Joint Ventures (38.1) (49.5) __________ ___________ Net assets 522.5 310.0 __________ ___________ The impact of acquisitions on Group revenues and operating profit in the year of acquisition is as follows:- 2002 2001 US$m US$m Revenues Engineering & Production Facilities 27.3 19.5 Well Support - - Gas Turbine Services 17.6 17.1 ________ __________ Total revenues 44.9 36.6 ________ __________ Operating profit Engineering & Production Facilities (0.1) 1.2 Well Support - (0.1) Gas Turbine Services 1.0 1.1 ________ __________ Total operating profit 0.9 2.2 ________ __________ John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 1. Segmental reporting (continued) Geographical segments Europe North America Rest of World Total 2002 2001 2002 2001 2002 2001 2002 2001 US$m US$m US$m US$m US$m US$m US$m US$m Revenues by destination Group 467.0 414.3 720.7 615.5 244.8 250.1 1,432.5 1,279.9 Joint ventures 141.1 104.3 63.0 54.0 101.5 85.6 305.6 243.9 _____ ______ _____ ______ _____ ______ ______ _______ Total revenues 608.1 518.6 783.7 669.5 346.3 335.7 1,738.1 1,523.8 _____ ______ _____ ______ _____ ______ ______ _______ Revenues by origin Group 494.5 428.4 777.1 687.9 160.9 163.6 1,432.5 1,279.9 Joint ventures 171.5 147.8 65.1 49.1 69.0 47.0 305.6 243.9 _____ ______ _____ ______ _____ ______ ______ _______ Total revenues 666.0 576.2 842.2 737.0 229.9 210.6 1,738.1 1,523.8 _____ ______ _____ ______ _____ ______ ______ _______ Operating profit Group 21.6 10.3 51.6 45.0 18.6 17.9 91.8 73.2 Joint ventures 15.6 13.6 6.3 5.6 9.6 4.8 31.5 24.0 Associates 5.5 3.4 0.2 3.1 0.8 - 6.5 6.5 _____ ______ _____ ______ _____ ______ ______ _______ Total operating profit 42.7 27.3 58.1 53.7 29.0 22.7 129.8 103.7 _____ ______ _____ ______ _____ ______ Exceptional items - (13.6) Net interest payable (15.1) (20.5) ______ _______ Profit before taxation 114.7 69.6 ______ _______ 2002 2001 US$m US$m Net operating assets Europe 120.0 106.9 North America 467.9 415.6 Rest of World 149.9 93.4 ______ ______ Net operating assets 737.8 615.9 Net debt - Group (177.2) (256.4) Net debt - Joint Ventures (38.1) (49.5) ______ _______ Net assets 522.5 310.0 ______ _______ John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 2. Total operating profit Continuing operations Acquisitions Discontinued Total operations 2002 2001 2002 2001 2002 2001 2002 2001 US$m US$m US$m US$m US$m US$m US$m US$m Revenues 1,689.6 1,445.8 44.9 36.6 3.6 41.4 1,738.1 1,523.8 including share of joint ventures Less share (305.6) (243.2) - (0.7) - - (305.6) (243.9) of revenues of joint ventures _________ _________ _______ ________ _______ ________ ___________ ________ Group 1,384.0 1,202.6 44.9 35.9 3.6 41.4 1,432.5 1,279.9 revenues Cost of (1,049.6) (901.4) (38.4) (27.5) (3.6) (29.6) (1,091.6) (958.5) sales _________ _________ _______ ________ _______ ________ ___________ ________ Gross profit 334.4 301.2 6.5 8.4 - 11.8 340.9 321.4 Net (243.0) (230.7) (5.6) (5.9) (0.5) (11.6) (249.1) (248.2) operating expenses _________ _________ _______ ________ _______ ________ ___________ ________ Operating 91.4 70.5 0.9 2.5 (0.5) 0.2 91.8 73.2 profit of Group undertakings Share of 31.5 24.3 - (0.3) - - 31.5 24.0 operating profit in joint ventures Share of 6.5 6.5 - - - - 6.5 6.5 operating profit in associates _________ _________ _______ ________ _______ ________ ___________ ________ Total 129.4 101.3 0.9 2.2 (0.5) 0.2 129.8 103.7 operating profit _________ _________ _______ ________ _______ ________ ___________ ________ Total operating profit is stated after charging: 2002 2001 US$m US$m Depreciation of tangible fixed assets - Group 26.1 22.5 - joint ventures 6.0 4.8 Amortisation of intangible assets - Group 10.8 9.2 - joint ventures 1.8 1.4 Hire and operating lease payments Plant and equipment 4.9 4.8 Land and buildings 24.7 20.7 Auditors' remuneration - UK Audit 0.9 0.8 IPO work 0.7 0.5 Other services - 0.9 Auditors' remuneration - overseas Audit 0.2 0.2 Tax 0.4 0.1 Other services 0.1 0.1 Net operating expenses comprise: Administrative expenses 238.3 238.0 Exceptional items - impairments - 1.0 Goodwill amortisation - Group 10.8 9.2 _________ ____________ 249.1 248.2 _________ ____________ John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 3. Employee numbers and staff costs Number Number 2002 2001 The average monthly number of persons employed by the Group during the year was as follows: Europe 2,606 2,587 North America 4,979 4,185 Rest of the World 2,045 847 _________ ___________ 9,630 7,619 _________ ___________ Direct production 7,878 5,952 Management and staff 1,752 1,667 _________ ___________ 9,630 7,619 _________ ___________ US$m US$m Total staff costs in respect of these persons amounted to: Wages and salaries 539.7 409.8 Social security costs 50.7 39.4 Pension costs - defined benefit schemes (note 25) 3.7 3.4 Pension costs - defined contribution schemes (note 25) 14.5 9.6 _________ ___________ 608.6 462.2 _________ ___________ The above figures exclude employees of joint ventures and associates and contract staff. The average number of employees of the joint ventures in 2002 was 2,292 (2001 : 2,097). 4. Directors' emoluments 2002 2001 US$'000 US$'000 Aggregate emoluments 2,176 1,869 Aggregate gains made on the exercise of share options 568 490 Amounts receivable under long term incentive schemes 239 307 Company contributions to defined contribution schemes 12 10 3 directors exercised share options in the year (2001 : 2). Retirement benefits are accruing to 2 directors under a defined contribution scheme (2001 : 2) and 3 directors under defined benefit schemes (2001 : 3). Aggregate emoluments exclude sums paid to third parties. Full details of individual directors' remuneration are given in the Directors' Remuneration Report. John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 5. Exceptional items Operating exceptional items Impairments In 2001, the Group performed impairment reviews in respect of property, plant and equipment and goodwill when subsidiaries experienced sustained losses as a result of the deterioration of market conditions in the aero sector, resulting in impairment charges of US$1.0m. Non-operating exceptional items Loss on sale/termination of discontinued operations The Group closed its aero engine overhaul business in Connecticut in March 2002 and decided to divest of its other aero engine overhaul business. A charge of US$13.6m was made in 2001 to reduce the carrying value of stocks and fixed assets and to provide for closure costs in respect of the business in Connecticut. A related tax credit of US $4.1m was provided against this charge. 6. Net interest payable 2002 2001 US$m US$m Interest receivable on short term deposits 6.9 9.0 Interest payable on bank loans and overdrafts (15.5) (22.6) Other finance income (note 25) 0.3 0.1 _________ ___________ Total Group (8.3) (13.5) Joint ventures (2.7) (3.2) Associates (4.1) (3.8) _________ ___________ Net interest payable (15.1) (20.5) _________ ___________ 7. Taxation on profit on ordinary activities 2002 2001 US$m US$m Current tax: UK corporation tax at 30% (2001 : 30%) 5.8 4.0 Overseas tax 32.1 17.3 Joint ventures 7.5 7.0 Associates 1.0 1.3 Adjustments in respect of prior years (0.5) 1.3 _________ ___________ 45.9 30.9 Deferred tax: Origination and reversal of timing differences (1.3) 1.3 Joint ventures - 0.4 Adjustments in respect of prior years (0.2) (3.6) _________ ___________ (1.5) (1.9) _________ ___________ Total tax charge 44.4 29.0 _________ ___________ Included in 2001 overseas current tax above is a credit of US$4.1m relating to non-operating exceptional items (see note 5). John Wood Group PLC Notes to the financal statements for the year to 31 December 2002 7. Taxation on profit on ordinary activities (continued) Tax on recognised gains and losses not included in the profit and loss account comprise a US$4.2m (2001 : US$3.1m) deferred tax credit in respect of the movement on the Group's net pension liability. The current tax charge on profit on ordinary activities before exceptional items and goodwill amortisation varied from the rate of corporate tax expected on the basis of the locations of the Group's operations due to the following factors: 2002 2001 US$m US$m Corporate tax at expected rate 34.78% (2001 : 32.00%) 44.3 29.9 Deductible amortisation (1.3) (0.4) Non-recognition of losses 0.9 0.6 Effect of exceptional items - (4.1) Permanent differences 1.0 1.7 Effect of deferred tax 1.5 1.9 Adjustments to current tax charge for prior periods (0.5) 1.3 ________ ___________ Current tax charge 45.9 30.9 ________ ___________ 8. Dividends and appropriations 2002 2001 US$m US$m Dividends on non-equity shares First convertible preference shares 0.2 1.4 Second convertible preference shares 0.4 1.8 First convertible redeemable preference shares 0.6 1.4 Second convertible redeemable preference shares 0.7 3.2 ________ ___________ 1.9 7.8 Dividends on equity shares Ordinary shares: Interim paid 1 cent per share 4.7 - Final proposed 2 cents per share (2001 : 2 pence per share) 9.5 2.8 ________ ___________ Total dividends 16.1 10.6 ________ ___________ Appropriations Redemption premium on convertible redeemable preference shares - 5.9 Amortisation of share issue expenses - 0.3 Exchange movement on convertible redeemable preference shares - 2.3 ________ ___________ Total Appropriations - 8.5 ________ ___________ John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 9. Earnings per ordinary share 2002 2001 _________ ________ ________ ___________________ ________ Number of Per-share Number of Per-share Shares Amount Shares Amount Earnings Earnings US$m Millions Cents US$m Millions Cents Profit for the financial year 64.3 35.1 Less: Preference dividends and redemption premium (1.9) (13.7) ________ _________ ________ ________ _________ ________ Basic EPS 62.4 396.2 15.7 21.4 288.1 7.4 ________ ________ Effect of dilutive securities: Options - 18.8 0.5 23.1 Convertible preference shares 1.9 50.4 3.2 65.0 ________ _________ ________ ________ _________ ________ Diluted EPS 64.3 465.4 13.8 25.1 376.2 6.7 ________ ________ Convertible redeemable preference shares - - 10.5 52.9 Goodwill amortisation 12.6 - 10.6 - Effect of exceptional items net of tax and minority interests: Impairments - - 1.0 - Loss on sale/termination of discontinued operations net of tax - - 9.5 - ________ _________ ________ ________ _________ ________ Adjusted EPS before goodwill amortisation 76.9 465.4 16.5 56.7 429.1 13.2 ________ _________ ________ ________ _________ ________ The earnings per share calculations reflect the sub-division of each ordinary share of 10 pence into 3 ordinary shares of 31/3 pence each, upon admission to the official list of the UK Listing Authority on 5 June 2002. Shares held by the Group's employee share ownership trusts are excluded from the number of shares in calculating basic, diluted and adjusted EPS. Adjusted EPS is disclosed to show the results excluding the impact of exceptional items and goodwill amortisation. The impact of the conversion of all preference shares is taken into account for periods prior to IPO. The effect of convertible redeemable preference shares was anti dilutive in 2001 and was not taken into account in the calculation of diluted EPS for that period. John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 10. Intangible fixed assets - Goodwill Joint ventures Subsidiaries US$m US$m Cost At 1 January 2002 9.6 181.6 Exchange adjustments - 1.2 Additions 0.8 81.4 ______________ ____________ At 31 December 2002 10.4 264.2 ______________ ____________ Aggregate amortisation At 1 January 2002 0.5 25.4 Exchange adjustments - 0.7 Charge for the year 0.5 10.8 ______________ ____________ At 31 December 2002 1.0 36.9 ______________ ____________ Net book value At 31 December 2002 9.4 227.3 ______________ ____________ At 31 December 2001 9.1 156.2 ______________ ____________ All goodwill relates to the excess of cost of acquisition over the fair value of the Group's share of the net assets acquired. 11. Tangible fixed assets Land and buildings Leasehold Plant and Freehold Long Short equipment Total US$m US$m US$m US$m US$m _________ __________ _________ ____________ _________ Cost At 1 January 2002 22.2 21.4 3.4 178.5 225.5 Exchange adjustments 0.4 0.8 - 1.1 2.3 Additions 3.1 1.9 1.8 99.1 105.9 Disposals (0.2) (3.5) - (10.5) (14.2) Acquisitions 0.2 - - 5.6 5.8 Reclassification to stocks - - - (3.1) (3.1) _________ __________ _________ ____________ _________ At 31 December 2002 25.7 20.6 5.2 270.7 322.2 _________ __________ _________ ____________ _________ Aggregate depreciation At 1 January 2002 5.7 6.1 1.6 85.4 98.8 Exchange adjustment 0.4 - - 0.5 0.9 Charge for the year 0.7 2.3 0.3 22.8 26.1 Disposals (0.2) (1.4) - (6.9) (8.5) Reclassification to stocks - - - (1.8) (1.8) _________ __________ _________ ____________ _________ At 31 December 2002 6.6 7.0 1.9 100.0 115.5 _________ __________ _________ ____________ _________ Net book value At 31 December 2002 19.1 13.6 3.3 170.7 206.7 _________ __________ _________ ____________ _________ At 31 December 2001 16.5 15.3 1.8 93.1 126.7 _________ __________ _________ ____________ _________ Plant and equipment include assets in progress of US$60.4m (2001 : US$9.6m). Freehold land and buildings includes land at cost of US$3.2m (2001 : US$ 2.9m). Plant and equipment includes assets held for lease to customers, under operating leases, of US$25.1m (2001 : US$14.7m). John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 12. Investments Joint Other Ventures Associates Investments US$m US$m US$m ______________ _____________ ______________ Cost At 1 January 2002 72.1 7.2 1.2 Exchange adjustments (4.3) 0.2 0.2 Additions 0.6 - - Share of profit retained 13.6 1.4 - Disposals - - (0.2) ______________ _____________ ______________ At 31 December 2002 82.0 8.8 1.2 ______________ _____________ ______________ Amounts provided At 1 January 2002 1.8 - - Movement in year - - - ______________ _____________ ______________ At 31 December 2002 1.8 - - ______________ _____________ ______________ Net book value At 31 December 2002 80.2 8.8 1.2 ______________ _____________ ______________ At 31 December 2001 70.3 7.2 1.2 ______________ _____________ ______________ Net Book value represents cost less amounts provided, plus the share of post-acquisition profits retained in joint ventures and associates. Set out below are additional disclosures required in respect of the Group's share in its joint ventures and associates of the following: 2002 2001 Joint Joint Ventures Associates Ventures Associates US$m US$m US$m US$m Goodwill on acquisition (see note 10) 9.4 - 9.1 - Share of: Intangible fixed assets 10.0 23.0 11.0 23.2 Tangible fixed assets 53.0 30.2 55.7 27.6 Current assets 217.0 52.7 188.5 47.5 Liabilities due within one year (188.4) (59.2) (149.5) (50.0) Liabilities due after one year (18.4) (35.5) (39.6) (39.6) Provisions (2.4) (2.4) (4.9) (1.5) _________ __________ ________ __________ Goodwill and share of net assets 80.2 8.8 70.3 7.2 _________ __________ ________ __________ The Group has a 30% interest in its associate ASCO plc, a company incorporated in Great Britain. The Group's share of the revenues of the associate for the year was US$236.2m (2001 : US$233.0m). John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 12. Investments (continued) The parent company and the group have investments in the following subsidiary undertakings and joint ventures which principally affect the profits or net assets of the group. To avoid a list of excessive length investments which are not considered significant have been omitted. Country of incorporation or registration Ownership Name of subsidiary or joint venture interest % Principal activity Engineering & Production Facilities: Wood Group Engineering (North Sea) Limited UK 100 Engineering design, maintenance and management SIGMA 3 (North Sea) Limited UK 33.3* Engineering design, maintenance and management Mustang Engineering Holdings Inc. USA 86.7 Engineering design Alliance Wood Group Engineering L.P. USA 100 Engineering design J P Kenny Engineering Limited UK 100 Engineering design SIMCO Consortium Venezuela 49.5* Operations and maintenance services Wood Group Production Services, Inc. USA 100 Operations and maintenance services Operators and Consulting Services, Inc. USA 100 Operations and maintenance services Well Support: Wood Group ESP, Inc. USA 100 Electric submersible pumps Corporacion ESP de Venezuela CA Venezuela 100 Electric submersible pumps Wood Group Pressure Control, L.P. USA 100 Valves and wellhead equipment Wood Group Logging Services Inc. USA 100 Logging services Gas Turbine Services: Wood Group Light Industrial Turbines UK 100 Gas turbine repair and Limited overhaul Wood Group Engineering Services Jersey 100 Gas turbine repair and overhaul (Middle East) Limited Rolls Wood Group (Repair & Overhauls) UK 50* Gas turbine repair and overhaul Limited Wood Group Heavy Industrial Turbines Ltd UK 100 Heavy industrial turbine repair TransCanada Turbines Limited Canada 50* Gas turbine repair and overhaul Thomason Mechanical Corporation USA 100 Heavy industrial turbine repair The proportion of voting power held equates to the ownership interest, other than for joint ventures (marked *) which are jointly controlled. Other Investments Other investments comprise investments in own shares held by the Group's employee share ownership trusts. Details are as follows: Investment in own shares 2002 2001 US$m US$m Cost 5,371,890 (2001: 6,834,630) own shares 1.2 1.2 _______ ___________ John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 13. Stocks 2002 2001 US$m US$m Raw materials 29.8 26.0 Work in progress 35.7 30.8 Finished goods and goods for resale 87.1 96.6 _______ ___________ 152.6 153.4 _______ ___________ 14. Debtors 2002 2001 US$m US$m Due within one year: Trade debtors 272.7 238.9 Amounts due by joint ventures 34.5 28.1 Other debtors 17.7 18.9 Prepayments and accrued income 19.4 14.5 _______ __________ 344.3 300.4 Due after more than one year: Amount due by associate 3.3 2.9 Other debtors 0.5 0.4 Deferred taxation (see note 18) 1.1 2.3 _______ __________ 349.2 306.0 _______ __________ The amount due by associate is a sterling loan to ASCO plc. From 30 September 2001, US$5.7m of the loan was converted into non-equity shares in ASCO. No interest was received on this loan up to 30 September 2001 but is receivable as a special dividend at 5% above LIBOR on a sale of the shares in ASCO. From 30 September 2001 interest was charged on the outstanding loan at 2% above LIBOR. 15. Creditors: amounts falling due within one year 2002 2001 US$m US$m Bank loans and overdrafts 10.7 3.3 ______ ___________ Other creditors comprise: Trade creditors 102.1 98.5 Amounts due to joint ventures 3.4 4.4 Corporation tax 21.4 10.6 Other taxation and social security 12.7 9.8 Other creditors 19.2 15.9 Accruals and deferred income 113.2 84.1 Dividends payable 9.5 7.4 Deferred consideration 0.1 1.4 ______ ___________ 281.6 232.1 ______ ___________ 292.3 235.4 ______ ___________ John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 16. Creditors: amounts falling due after one year 2002 2001 US$m US$m Bank loans 222.7 382.4 Deferred consideration 12.5 - Other creditors (payable between one and two years) 4.5 2.9 ______ ___________ 239.7 385.3 ______ ___________ Bank loans comprise: Repayable between one and two years - 382.4 Repayable between two and five years 222.7 - ______ ___________ 222.7 382.4 ______ ___________ The bank loans are unsecured and interest is charged at between 60 basis points and 75 basis points above LIBOR. At 31 December 2002 the margin payable was 60 basis points based on the level of gearing and interest cover. Deferred consideration of $6.7m is payable between one and two years and $5.8m is payable between two and five years. Further detail of deferred consideration is given in note 24. 17. Financial instruments The Group's financial instruments, other than derivatives, comprise borrowings, cash and liquid resources, and various items, such as trade debtors and trade creditors that arise directly from its operations. The Group also enters into derivative transactions (primarily interest rate swaps and forward foreign currency contracts). The purpose of such transactions is to manage the interest rate and currency risks arising from the Group's operations. It is, and has been throughout the period under review, the Group's policy that no trading in financial instruments is undertaken. The main risks arising from the Group's financial instruments are interest rate risk, liquidity risk and foreign currency risk. The Board reviews and agrees policies for managing each of these risks and these are summarised below. Interest rate risk The Group finances its operations through a mixture of retained profits and bank borrowings. The Group borrows in the desired currencies at floating rates of interest and then uses interest rate swaps and caps to generate the desired interest profile and to manage the Group's exposure to interest rate fluctuations. The Group's current policy is to keep between 25% and 75% of its borrowings at fixed rates of interest. At the year-end, approximately 56% of the Group's borrowings were at fixed rates after taking account of interest rate swaps. Liquidity risk As regards liquidity, the Group's policy has throughout the year been that, to ensure continuity of funding, at least 90% of its borrowings should mature in more than a year. At the year-end, 96% per cent of the Group's borrowings were due to mature in more than four years. Short-term flexibility is achieved by overdraft facilities and sterling cash balances. John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 17. Financial instruments (continued) Foreign currency risk The Group is exposed to foreign exchange risk arising from various currencies, primarily US dollars and pounds sterling. The Group also has significant overseas subsidiaries which operate in North America and South America and whose revenues and expenses are denominated predominantly in US dollars. In order to protect the Group's US dollar balance sheet from the movements in the exchange rates, the Group finances its net investment in most overseas subsidiaries primarily by means of borrowings denominated in their functional currency. The Group has not hedged its investment in companies with a sterling functional currency as these investments were made when the Group reported in sterling. The Group is therefore exposed to exchange movements in reserves on the retranslation of these companies at closing rate. Some of the sales of the Group's businesses are to customers in foreign locations. These sales are priced in local currency but invoiced in the currencies of the customers involved. Where possible, the Group's policy is to eliminate all significant currency exposures on sales at the time of sale through forward currency contracts. The recently introduced exchange controls in Venezuela will potentially result in increased foreign currency risk whilst they are in place. Short-term debtors and creditors Short-term debtors and creditors have been excluded from all the following disclosures, other than the currency risk disclosures. Interest rate risk profile of financial liabilities The interest rate risk profile of the Group's financial liabilities at 31 December, after taking account of the interest rate and currency swaps used to manage the interest and currency profile, was as follows: Financial Floating rate liabilities financial Fixed rate on which no liabilities financial interest is Total liabilities paid US$m US$m US$m US$m US Dollars - Financial liabilities 215.8 90.8 125.0 - Canadian Dollars - financial liabilities 20.1 20.1 - - Other currencies - financial liabilities 10.0 10.0 - - __________ ____________ __________ ___________ At 31 December 2002 245.9 120.9 125.0 - __________ ____________ __________ ___________ US Dollars - Financial liabilities 362.4 252.4 110.0 - - Convertible redeemable preference shares 88.1 60.0 28.1 - Sterling - Convertible preference shares 3.1 - - 3.1 Canadian Dollars - financial liabilities 19.4 19.4 - - Other currencies - financial liabilities 3.9 3.9 - - __________ ____________ __________ ___________ At 31 December 2001 476.9 335.7 138.1 3.1 __________ ____________ __________ ___________ All the Group's creditors falling due within one year (other than bank and other borrowings) are excluded from the above tables either due to the exclusion of short-term items or because they do not meet the definition of a financial liability, for example tax balances. John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 17. Financial instruments (continued) The Group has entered into US$125m of interest rate swaps from floating to fixed rates as at 31 December 2002 (2001 : US$110m). The weighted average interest rate excluding margin (currently 0.6%) for fixed rate financial liabilities was 4.5% (2001 : 4.8%). This rate is fixed for between 4 and 5 years (2001 : 5 years). Floating rate financial liabilities bear interest at rates, based on relevant national LIBOR equivalents, which are fixed in advance for periods of between one month and three months. Interest rate risk of financial assets The Group has no significant financial assets, other than short term deposits, cash at bank and short-term loans to associates and joint ventures. 2002 2001 Cash at Loans to Loans to bank and Short-term associates Cash at Short-term associates in hand deposits and joint bank and deposits and joint ventures Total in hand ventures Total ________ ________ ___________ ______ ________ ________ ___________ ________ US$m US$m US$m US$m US$m US$m US$m US$m Currency Sterling 13.9 21.5 3.3 38.7 79.4 21.8 2.9 104.1 US Dollars 4.9 3.3 2.3 10.5 17.0 - 8.5 25.5 Other currencies 12.6 - 8.6 21.2 11.1 - 8.6 19.7 ________ ________ ___________ ______ ________ ________ ___________ ________ At 31 December 31.4 24.8 14.2 70.4 107.5 21.8 20.0 149.3 ________ ________ ___________ ______ ________ ________ ___________ ________ Floating rate 31.4 - 14.2 45.6 107.5 - 20.0 127.5 Fixed rate - 24.8 - 24.8 - 21.8 - 21.8 ________ ________ ___________ ______ ________ ________ ___________ ________ At 31 December 31.4 24.8 14.2 70.4 107.5 21.8 20.0 149.3 ________ ________ ___________ ______ ________ ________ ___________ ________ Fixed rate short-term deposits are placed with banks for periods of up to 12 months and have earned interest at between 4% and 7.1% in 2002 (5.8% to 7.4% in 2001). Floating rate cash earns interest at between UK base rate and UK base rate less 10 basis points. No interest was charged on the loan to associate up to 30 September 2001 but interest is receivable as a special dividend at 5% above LIBOR on a sale of shares in ASCO plc. From 30 September 2001, interest was charged at floating market rates including an appropriate margin (see note 14). Interest on loans to joint ventures is charged at floating market rates. Maturity of financial liabilities The maturity profile of the carrying amount of the group's financial liabilities other than short-term trade creditors and accruals at 31 December was as follows: 2002 2001 Convertible redeemable preference shares Deferred consideration Debt Total Debt Total ______________ _______ _______ _______ ____________ ______ US$m US$m US$m US$m US$m US$m In one year or less, or on demand - 10.7 10.7 3.3 - 3.3 In more than one year but not more than two 6.7 - 6.7 382.4 - 382.4 years In more than two years but not more than five 5.8 222.7 228.5 - 88.1 88.1 years ______________ _______ _______ _______ ____________ ______ 12.5 233.4 245.9 385.7 88.1 473.8 ______________ _______ _______ _______ ____________ ______ John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 17. Financial instruments (continued) Borrowing facilities The group has undrawn committed borrowing facilities available at 31 December 2002 of US$369.2m (2001 : US$92.1m) in respect of which all conditions precedent had been met at that date. These are floating rate facilities and were renewed on 9 April 2002. These facilities expire on 9 April 2007. Fair values of financial assets and financial liabilities The following table provides a comparison by category of the carrying amounts and the fair values of the Group's financial assets and financial liabilities at 31 December 2001 and 2002. Fair value is the amount at which a financial instrument could be exchanged in an arm's length transaction between informed and willing parties, other than a forced or liquidation sale and excludes accrued interest. Where available, market values have been used to determine fair values. Where market values are not available, fair values have been calculated by discounting expected cash flows at prevailing interest and exchange rates. Set out below the table is a summary of the methods and assumptions used for each category of financial instrument. 2002 2001 Book value Fair value Book value Fair value Primary financial instruments held or US$m US$m US$m US$m issued to finance the group's operations: Short-term borrowings (10.7) (10.7) (3.3) (3.3) Long-term borrowings (222.7) (222.7) (382.4) (382.4) Deferred consideration (12.5) (12.5) - - Convertible preference shares - - (3.1) (78.8) Convertible redeemable preference shares - - (88.1) (95.9) Loans to joint ventures 10.9 10.9 17.1 17.1 Loans to associate 3.3 3.3 2.9 2.9 Short-term deposits 24.8 24.8 21.8 21.8 Cash at bank and in hand 31.4 31.4 107.5 107.5 ____________ ____________ ____________ ____________ Derivative financial instruments held to manage the interest rate and currency profile: Interest rate swaps - (6.1) - 1.4 Forward foreign currency contracts (1.3) (1.3) - - ____________ ____________ ____________ ____________ Under the Group's accounting policy, forward contracts that are entered into in order to hedge foreign currency assets and liabilities are revalued to balance sheet rates with net unrealised gains/losses being shown as part of the underlying asset or liability being hedged. Changes in the value of the swap as a result of changes in interest rates are not included in the book value of the relevant asset or liability. At 31 December 2002, the Group had entered into forward contracts to sell Â£31.0m for US dollars at rates between Â£1 = $1.5656 and Â£1 = $1.5716. These contracts were entered to hedge sterling assets in dollar functional companies. John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 17. Financial instruments (continued) Summary of methods and assumptions Interest rate swaps, currency swaps and Fair value is based on market price of comparable forward foreign currency contracts instruments at the balance sheet date. Forward foreign currency contracts have been valued at spot rate on the balance sheet date as the contracts mature within one year. Short-term deposits, short and long-term The fair value of short-term deposits, short and borrowings, deferred consideration and long-term loans and overdrafts, deferred consideration loans to joint ventures and associates and loans to joint ventures and associates approximates to the carrying amount because of the short maturity of interest rates in respect of these instruments. The long term loans are generally rolled over for periods of three months or less. Preference shares The fair value of the convertible preference shares at 31 December 2001 was based on the higher of fair market value in respect of share options and the latest transaction price. The dividend payable on the convertible redeemable preference shares equated to the market rate for long-term borrowings. The fair value applied was therefore the par value plus the portion of the 20% redemption premium payable accrued to that date. Currency exposures To mitigate the effect of the currency exposures arising from its net investments overseas the Group either borrows in the local currencies of its main operating units or swaps other borrowings, using currency swaps, into such local currencies. Gains and losses arising on net investments overseas and the financial instruments used to hedge the currency exposures are recognised in the statement of total recognised gains and losses. The Group has typically not hedged its net investments in sterling functional companies. The tables below show the extent to which Group companies have monetary assets and liabilities in currencies other than their local currency. Foreign exchange differences on retranslation of these assets and liabilities are taken to the profit and loss account of the Group companies and the Group. Net foreign currency monetary assets/ (liabilities) US Other Sterling dollars currencies Total US$m US$m US$m US$m 2002 Functional currency of group operation: Sterling - 6.1 12.2 18.3 US Dollars 5.1 - (4.6) 0.5 Other currencies 0.3 5.5 0.1 5.9 ________ __________ ___________ _________ Total 5.4 11.6 7.7 24.7 ________ __________ ___________ _________ John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 17. Financial instruments (continued) Net foreign currency monetary assets/ (liabilities) US Other Sterling dollars currencies Total US$m US$m US$m US$m 2001 Functional currency of group operation: Sterling - 26.9 0.8 27.7 US Dollars (0.3) - (3.2) (3.5) Other currencies 0.1 4.8 0.8 5.7 ________ __________ __________ _________ Total (0.2) 31.7 (1.6) 29.9 ________ __________ __________ _________ Hedges Where possible, the Group enters into forward foreign currency contracts to eliminate the currency exposures that arise on revenues denominated in foreign currencies immediately those revenues are transacted. It also uses interest rate swaps to manage its interest rate profile. Changes in the fair value of instruments used as hedges are not recognised in the financial statements until the hedged position matures. 18. Provisions for liabilities and charges 2002 2001 US$m US$m Deferred taxation (note a) - - Warranty provisions (note b) 5.2 5.2 Other provisions (note c) 6.2 9.1 __________ __________ 11.4 14.3 __________ __________ The movement in the provisions comprises: Deferred Warranty Other Taxation Provisions Provisions US$m US$m US$m __________ ___________ ___________ At 1 January 2002 - 5.2 9.1 Acquisitions - 0.5 - Exchange adjustments 0.3 - (0.1) Charge/(credit) for the year (1.5) 2.5 0.2 Reclassification as joint venture tax 0.4 - - Payments during the year - (3.0) (3.0) Reclassification from creditors 1.9 - - Reclassification to debtors (note 14) (1.1) - - __________ ___________ ___________ At 31 December 2002 - 5.2 6.2 __________ ___________ ___________ John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 18. Provisions for liabilities and charges (continued) a. Deferred taxation Deferred taxation included in these financial statements comprises net corporation tax receivable deferred by:- 2002 2001 US$m US$m Fixed asset timing differences 5.0 3.2 Short term timing differences (6.1) (5.5) _______ ___________ (1.1) (2.3) _______ ___________ Deferred income tax liabilities have not been established for the withholding and other taxes that would be payable on the unremitted earnings of certain subsidiaries and joint ventures, as such amounts are continually reinvested. The Group has unrecognised tax losses of US$26.1m (2001 : US$34.9m) to carry forward against future taxable income. b. Warranty provisions At 31 December 2002, a warranty provision of US$5.2m (2001 : US$5.2m) was recognised in respect of guarantees provided in the normal course of business relating to contract performance. The provision is estimated based on past claims history and it is expected that most of these costs will be incurred in the next financial year. c. Other provisions At December 2002, provisions of US$6.2m (2001 : US$9.1m) have been recognised, mainly for expected claims or other costs arising from the termination or disposal of operations. It is expected most of these costs will be incurred within the next 1 to 2 years. John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 19. Share capital 2002 2001 US$m US$m Authorised 720,000,000 ordinary shares of 3 1/3p each (2001 : nil) 34.9 - Nil A ordinary shares of 10p each (2001 : 105,899,810) - 15.4 Nil ordinary shares of 10p each (2001 : 47,430,020) - 6.9 Nil first convertible preference shares of Â£1 each (2001 : 1,125,883) - 1.6 Nil second convertible preference shares of Â£1 each (2001 : 1,041,134) - 1.5 Nil first convertible redeemable preference shares of US$1 each (2001 : - 50.0 50,000,000) Nil second convertible redeemable preference shares of US $1 each (2001 : - 75.0 75,000,000) _________ __________ 34.9 150.4 _________ __________ Allotted, called up and fully paid 479,893,340 ordinary shares of 3 1/3p each (2001 : nil) 23.3 - Nil A ordinary shares of 10p each (2001 : 81,924,810) - 11.9 Nil ordinary shares of 10p each (2001 : 16,821,490) - 2.5 _________ __________ Equity share capital 23.3 14.4 _________ __________ Nil first convertible preference shares of Â£1 each (2001 : 1,125,833) - 1.6 Nil second convertible preference shares of Â£1 each (2001 : 1,041,134) - 1.5 Nil first convertible redeemable preference shares of US $1 each (2001 : - 28.1 28,140,000) Nil second convertible redeemable preference shares of US $1 each (2001 : - 60.0 60,000,000) _________ __________ Non equity share capital - 91.2 _________ __________ Called-up share capital 23.3 105.6 _________ __________ On 9 January 2002, 50,000 ordinary shares of 10 pence each were issued at a price of 311/2 pence per share, on exercise of options granted under the John Wood Group PLC 1994 Approved Executive Share Option Scheme. Also, on 9 January 2002, 33,090 ordinary shares of 10 pence each were issued at a price of 34 pence per share, on exercise of options granted under the John Wood Group PLC 1996 Unapproved Executive Share Option Scheme. On 5 April 2002, 25,000 ordinary shares of 10 pence each were issued at a price of 34 pence per share, on exercise of options granted under the John Wood Group PLC 1994 Approved Executive Share Option Scheme. On 9 April 2002, 25,000 ordinary shares of 10 pence each were issued at a price of 311/2 pence per share, on exercise of options granted under the John Wood Group PLC 1994 Approved Executive Share Option Scheme. Also, on 9 April 2002, 594,650 ordinary shares of 10 pence each were issued at a price of 34 pence per share, on exercise of options granted under the John Wood Group PLC 1994 Approved Executive Share Option Scheme, and 743,540 ordinary shares of 10 pence each were issued at a price of 34 pence per share, on exercise of options granted under the John Wood Group PLC 1996 Unapproved Executive Share Option Scheme. On 5 June 2002, the Company was listed on the London Stock Exchange. Upon admission there were the following changes to the Company's share capital:- i) Each ordinary share of 10 pence was subdivided into 3 ordinary shares of 3 1/3 pence and the A ordinary shares were reclassified as ordinary shares. ii) The authorised share capital of the company was increased to 720,000,000 ordinary shares of 3 1/3 pence each. John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 19. Share capital (continued) iii) 75,951,635 new ordinary shares of 3 1/3 pence each were issued at a price of 195 pence each. iv) 2,167,017 first and second convertible preference shares of Â£1 each were converted into 65,010,510 ordinary shares of 3 1/3 pence each. v) Of the 88,140,000 first and second convertible redeemable preference shares of US$1 each, 24,667,577 shares were redeemed at a price of $1.20 per share. vi) The remaining 63,472,423 convertible redeemable preference shares of $1 each were converted to 38,083,455 3 1/3 pence ordinary shares. On 16 August 2002, 75,000 ordinary shares of 3 1/3 pence each were issued at a price of 11 1/3 pence per share, on exercise of options granted under the John Wood Group PLC 1996 Unapproved Executive Share Option Scheme On 23 December 2002, 120,000 ordinary shares of 3 1/3 pence each were issued at a price of 12 1/3 pence per share, on exercise of options granted under the John Wood Group 1994 Approved Executive Share Option Scheme. Share options The following options to subscribe for new ordinary shares were outstanding at 31 December 2002:- Number of ordinary Exercise shares under option price Year of Exercise period Grant 2002 2001 (per share) From To 1995 210,000 435,000 10 1/2p 20.11.2000 20.11.2005 1996 - 249,270 11 1/3p 18.11.2001 18.11.2006 1997 678,960 4,693,530 11 1/3p 05.04.2002 05.04.2007 1997 300,000 300,000 12 2/3p 24.12.2002 24.12.2007 1998 2,224,080 2,294,280 15 2/3p 16.10.2003 16.10.2008 2000 7,710,000 8,250,000 17 1/3p 20.06.2005 20.06.2010 2000 210,000 210,000 18 1/3p 13.11.2005 13.11.2010 2001 1,545,000 1,575,000 93 1/3p 13.06.2006 13.06.2011 2001 6,180,000 6,406,500 83 1/3p 31.12.2006 31.12.2011 2002 46,500 - 83 1/3p 28.02.2007 28.02.2012 2002 255,000 - 83 1/3p 14.03.2007 14.03.2012 2002 1,545,000 - 83 1/3p 05.04.2007 05.04.2012 2002 105,000 - 83 1/3p 12.04.2007 12.04.2012 __________ ___________ 21,009,540 24,413,580 __________ ___________ The number of shares granted under option has been increased threefold and the exercise price reduced to one third of its previous level to reflect the subdivision of ordinary shares. Details of the Group's Executive Share Option Schemes are set out in the Directors' Remuneration Report. In addition to the above options, employee share ownership trusts exist which may buy existing ordinary shares which will then be available to be provided under option to employees. Share options are granted at the current market value of underlying shares at the grant date. At 31 December 2002, additional options have been granted over 2,475,540 (2001 : 3,936,810) existing ordinary shares held by the trusts at exercise prices ranging from 11 1/3p to 15 2/3p (2001: 11 1/3p to 15 2/3p per share). There are no performance criteria attached to the exercise of the options outstanding at 31 December 2002. John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 20. Share premium account 2002 2001 US$m US$m At 1 January - - Arising on shares issued 212.2 - Share issue expenses written off (11.9) - ___________ ___________ At 31 December 200.3 - ___________ ___________ 21. Capital reduction reserve 2002 2001 US$m US$m Arising on conversion of convertible redeemable preference shares 88.1 - ___________ ___________ A Capital Redemption Reserve was created on the conversion of the convertible redeemable preference shares immediately prior to the IPO. In December 2002, the Court of Session confirmed the reduction of the Capital Redemption Reserve under section 136 of the Companies Act 1985. The capital reduction reserve was not part of distributable reserves at 31 December 2002. 22 Profit and loss account Parent and Subsidiary Joint Undertakings Ventures Associates Group US$m US$m US$m US$m At 1 January 2002 162.7 27.4 0.3 190.4 Exchange movement on retranslation of foreign currency net assets 2.9 (4.3) 0.2 (1.2) Redemption of convertible redeemable preference shares (29.6) - - (29.6) Capitalisation of reserves in relation to the conversion of convertible redeemable preference shares (1.8) - - (1.8) Retained profit for the year 33.2 13.6 1.4 48.2 Actuarial loss recognised in the pension scheme net of deferred tax (9.8) - - (9.8) ________________ ____________ ____________ __________ At 31 December 2002 157.6 36.7 1.9 196.2 ________________ ____________ ____________ __________ Exchange adjustments include US$3.4m (2001: US$(8.2)m) arising from the re-translation of foreign currency loans that have been offset against the re-translation of foreign currency net assets. The profit and loss account reserve includes US$(16.3)m (2001 : US$(5.3)m) stated after deferred taxation of US$7.0m (2001 : US$2.3m) in respect of pension scheme liabilities of the Group's UK defined benefit scheme. John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 23. Equity minority interests 2002 2001 US$m US$m At 1 January 14.0 10.3 Profit and loss account 6.0 5.5 Acquisition of minority interests (5.4) (1.8) _________ __________ At 31 December 14.6 14.0 _________ __________ In May 2002, the Group acquired a further 6.63% shareholding in Mustang Engineering Holdings Inc for cash of US$16.1m. Other minority interests were acquired during the year for cash of US$2.1m. Minority interests acquired resulted in additional goodwill of US$13.1m. 24. Acquisitions The assets and liabilities acquired in respect of acquisitions during the year are included below: Thomason Other acquisitions Total Book Fair value Provisional Book Fair value Provisional Book Fair value Provisional value adjustments fair value value adjustments fair value value adjustments fair value US$m US$m US$m US$m US$m US$m US$m US$m US$m Fixed assets Tangible 2.4 - 2.4 3.4 - 3.4 5.8 - 5.8 assets Current assets Stocks 0.6 (0.1) 0.5 3.3 - 3.3 3.9 (0.1) 3.8 Debtors 10.2 (0.4) 9.8 13.0 - 13.0 23.2 (0.4) 22.8 Liabilities Bank (3.1) - (3.1) (7.0) - (7.0) (10.1) - (10.1) overdraft Creditors (4.0) (0.2) (4.2) (7.0) (0.2) (7.2) (11.0) (0.4) (11.4) _____ __________ __________ ______ __________ _________ _____ _________ ________ Tangible net 6.1 (0.7) 5.4 5.7 (0.2) 5.5 11.8 (0.9) 10.9 assets _____ __________ __________ _____ _________ Goodwill 37.9 30.4 68.3 __________ _________ _________ 43.3 35.9 79.2 __________ _________ _________ Satisfied by Cash 42.6 24.4 67.0 Deferred consideration 0.7 11.5 12.2 __________ _________ _________ 43.3 35.9 79.2 __________ _________ _________ The Group has used acquisition accounting for all purchases and, in accordance with the Group's accounting policy, the goodwill arising on consolidation of US$68.3m has been capitalised and will be amortised over periods, not exceeding 20 years. The fair value adjustments relate to the write down of stocks and debtors and to the provision for liabilities not fully reflected in the balance sheets of the acquired entities at the date of acquisition. The fair value adjustments contain some provisional amounts, which will be finalised in the 2003 financial statements when the detailed acquisition investigations have been completed. John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 24. Acquisitions (continued) Thomason Mechanical Corporation and its sister company, Bender Machine Inc were acquired on 3 October 2002. Thomason's profit after tax for the year ended 30 September 2002 was $0.7m. Bender's profit after tax for the year to 30 June 2002 amounted to $0.9m. In the period from 1 July 2002 to 3 October 2002 Bender incurred a loss of $0.1m. Other companies acquired during 2002 included Operators and Consulting Services Inc, acquired in June 2002, Industrial Repair Service Inc, acquired in August 2002, Santos Barbosa, acquired in September 2002, and Rotary Electrical acquired in October 2002. The financial impact of acquisitions is shown on the face of the profit and loss account and in note 2. Companies acquired during the year have contributed US$1.7m to operating cash inflows. Deferred consideration payments of US$0.4m were made during the year in respect of acquisitions made in prior periods. Deferred consideration of US$5.6m has been provided in respect of acquisitions made in 2002. Deferred consideration of $6.6m has been provided in respect of acquisitions made in prior periods. These provisions have been discounted where appropriate. Analysis of the net outflow of cash in respect of acquisitions: US$m Cash consideration 67.0 Bank overdraft 10.1 _________ Net outflow of cash in respect of acquisitions 77.1 _________ 25. Pension commitments The Group has established a number of pension schemes around the world covering many of its employees. One of the Group's pension schemes in the UK is a defined benefit scheme, which is contracted out of the state scheme, and provides benefits based on final pensionable salary. The assets of the scheme are held separately from those of the Group, being invested with independent investment companies in trustee administered funds. The most recent actuarial valuation of the main UK pension scheme was at 5 April 2001. The valuation of the scheme used the projected unit method and was carried out by a professionally qualified actuary. The principal assumptions made by the actuary were: 2002 2001 2000 % % % Rate of increase in pensionable salaries 4.35 4.50 5.50 Rate of increase of pensions in payment 2.35 2.50 2.50 Discount rate 5.60 6.00 6.00 Inflation assumption 2.35 2.50 2.50 John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 25. Pension commitments (continued) The assets of the scheme and the expected rate of return were: Long-term Long-term Long-term rate of rate of rate of return return return expected expected expected 31 December Value at 31 December Value at 31 December Value at 2002 31 December 2001 31 December 2000 31 December 2002 2001 2000 % US$m % US$m % US$m Equities 7.50 36.7 8.00 36.1 8.40 40.6 Bonds 5.00 7.1 5.50 7.1 5.50 7.2 ___________ ___________ __________ ___________ ___________ ____________ Total market value of 43.8 43.2 47.8 assets Present value of scheme (67.1) (50.8) (45.1) liabilities ___________ ____________ ____________ (Deficit)/surplus in the (23.3) (7.6) 2.7 scheme Related deferred tax asset/ (liability) 7.0 2.3 (0.8) ___________ ____________ ____________ Net pension (liability)/ (16.3) (5.3) 1.9 asset ___________ ____________ ____________ Analysis of amount charged to operating profit in respect of defined benefit schemes 2002 2001 US$m US$m Current service 3.7 3.4 Past service cost - - _________ _________ Total operating charge 3.7 3.4 _________ _________ Movement in (deficit)/surplus during the year 2002 2001 US$m US$m (Deficit)/surplus in the scheme at the beginning of the year (7.6) 2.7 Movement: Current service cost (3.7) (3.4) Contributions 3.4 3.3 Exchange adjustments (1.7) (0.2) Other finance income 0.3 0.1 Actuarial loss (14.0) (10.1) _________ _________ Deficit in the scheme at the end of the year (23.3) (7.6) _________ _________ Analysis of the amount credited to other finance income 2002 2001 US$m US$m Expected return on pension scheme assets 3.6 3.0 Interest on pension scheme liabilities (3.3) (2.9) _________ _________ Net return 0.3 0.1 _________ _________ Analysis of amount recognised in statement of total recognised gains and losses 2002 2001 US$m US$m Actual return less expected return on pension scheme assets (11.6) (8.0) Experience gains and losses arising on the scheme liabilities 0.1 0.2 Changes in the assumptions underlying the present value of the scheme liabilities (2.5) (2.3) _________ _________ Actuarial loss recognised in statement of total recognised gains and losses (14.0) (10.1) _________ _________ John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 25. Pension commitments (continued) Analysis of movement in deferred tax asset/(liability) 2002 2001 US$m US$m Asset/(liability) at beginning of the year 2.3 (0.8) Movement in deferred tax relating to pension liability 4.2 3.1 Exchange adjustments 0.5 - _________ ________ Asset at end of the year 7.0 2.3 _________ ________ History of experience gains and losses 2002 2001 Difference between the actual and expected return on scheme assets: Amount (US$m) (11.6) (8.0) Percentage of scheme assets (26%) (19%) Changes in the assumptions underlying the present value of the scheme liabilities: Amount (US$m) (2.5) (2.3) Percentage of scheme assets (6%) (5%) Experience gains and losses on scheme liabilities: Amount (US$m) 0.1 0.2 Percentage of scheme assets 0% 0% Total amount recognised in statement of total recognised gains and losses: Amount (US$m) (14.0) (10.1) Percentage of scheme assets (32%) (24%) The valuation at 31 December 2002 showed an increase in the deficit of US$7.6m to US$23.3m. Company contributions in 2002 were US$3.7m, which represents 11.3% of pensionable pay and employee contributions were 6% of pensionable pay. The Group also has a defined contribution plan in the UK and certain US and overseas subsidiaries operate their own defined contribution pension arrangements. Contributions are charged to the profit and loss account as they become payable in accordance with the rules of the schemes. The total pension cost for the Group in respect of these schemes was US$14.5m (2001 : US$9.6m). Contributions outstanding at 31 December 2002 in respect of these schemes amounted to US$6.3m (2001 : US$4.2m). 26. Capital commitments 2002 2001 US$m US$m At the balance sheet date the following capital commitments existed for tangible fixed assets: Contracted for but not provided 19.3 1.9 _______ __________ The Group's share of contracted capital commitments of joint ventures is not significant. There are financial commitments relating to the purchase of shares from certain subsidiary minority shareholders based on the profits of these subsidiaries and the payments extend over a number years. The remaining 13.3% of Mustang Engineering Holdings Inc. is due to be acquired over the next three years. John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 27. Commitments under operating leases Land and Plant and Land and Plant and Buildings Equipment Buildings Equipment __________ ___________ __________ ___________ 2002 2002 2001 2001 US$m US$m US$m US$m Payments falling due in respect of operating leases which expire: Within one year 1.7 1.4 1.8 0.4 Within two to five years 16.5 4.4 13.3 8.5 Later than five years 5.1 0.9 3.6 - __________ ___________ __________ ___________ 23.3 6.7 18.7 8.9 __________ ___________ __________ ___________ 28. Contingent liabilities At the balance sheet date the Group had cross guarantees without limit extended to the Group's principal bankers in respect of sums advanced to subsidiaries. At 31 December 2002 the Group has outstanding guarantees of US$20.7m (2001 : US$21.6m) in respect of joint venture bank arrangements. The Group has no guarantees in respect of its associate's banking arrangements. 29. Related party transactions Included in the profit and loss account are sales, costs and expenses which arise from transactions between the Group and its joint ventures and associated undertakings. Such transactions mainly comprise sales and purchases of goods in the ordinary course of business and in total amounted to: 2002 2001 US$m US$m Sales to joint ventures 91.3 72.5 Sales to associated undertakings - - Charges from joint ventures 7.7 6.6 Charges from associated undertakings - - __________ __________ Details of balances due to and from joint ventures and associates are provided in notes 14 and 15. In addition, Sir Ian Wood holds a controlling interest in J W Holdings Limited. During the year, the Group charged J W Holdings Limited US$0.1m (2001 : US$0.2m) for management services provided under normal commercial terms. John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 30. Net cash inflow from operating activities 2002 2001 US$m US$m Operating profit of Group undertakings 91.8 73.2 Depreciation on tangible fixed assets 26.1 22.5 Loss on sale of fixed assets 0.6 - Impairments - 1.0 Amortisation of goodwill 10.8 9.2 Decrease/(increase) in stocks 7.3 (13.6) Increase in debtors (8.0) (26.7) (Increase)/decrease in amounts due from joint ventures (13.5) 0.1 Increase in creditors 17.2 30.9 Decrease in other provisions (3.0) (0.9) Exchange adjustments (1.4) (5.6) ___________ ___________ Net cash inflow from operating activities 127.9 90.1 ___________ ___________ 31. Reconciliation of net cash flow to movement in net debt 2002 2001 US$m US$m (Decrease)/increase in cash in the period (79.9) 20.3 Cash flow from increase/(decrease) in liquid resources 0.9 (36.0) Cash flow from decrease/(increase) in debt 153.6 (23.8) ___________ ___________ Change in net debt resulting from cash flows 74.6 (39.5) Other non-cash items Exchange adjustments 4.6 (1.2) ___________ ___________ Movement in net debt in period 79.2 (40.7) Net debt at beginning of period (256.4) (215.7) ___________ ___________ Net debt at 31 December (177.2) (256.4) ___________ ___________ 32. Analysis of net debt At 31 At 1 January Cash Exchange December 2002 Flow Movement 2002 US$m US$m US$m US$m Cash 107.5 (79.9) 3.8 31.4 Deposits treated as liquid resources 21.8 0.9 2.1 24.8 ______________ __________ ____________ ____________ Cash in hand and at bank 129.3 (79.0) 5.9 56.2 Bank loans and overdrafts (3.3) (6.6) (0.8) (10.7) Bank loans due after 1 year (382.4) 160.2 (0.5) (222.7) ______________ __________ ____________ ____________ Net debt (256.4) 74.6 4.6 (177.2) ______________ __________ ____________ ____________ John Wood Group PLC Notes to the financial statements for the year to 31 December 2002 Shareholder information Low-cost share dealing service Cazenove & Co Limited provide a low-cost share dealing service in Wood Group shares which enables investors to buy or sell for a brokerage fee maximum of 1% or 0.5% for transactions of more than Â£5,000 (plus 0.5% stamp duty on purchases) with a minimum charge of Â£10. Details may be obtained by telephoning Cazenove on 020 7588 2828. Please note that this service is only available for dealing by post. Payment of dividends The Company declares its dividends in US dollars. As a result of the shareholders being mainly UK based, dividends will be paid in sterling, but if you would like to receive your dividends in dollars please request the company's Registrar to send you an election form. All shareholders will receive dividends in sterling unless requested in writing. If you are a UK based shareholder the company encourages you to have your dividends paid through the BACS (Banker's Automated Clearing Services) system. The benefit to shareholders of the BACS payment method is that the Registrar posts the tax vouchers directly to them, whilst the dividend is credited on the payment date to the shareholder's Bank or Building Society account. Shareholders who have not yet arranged for their dividends to be paid direct to their Bank or Building Society account and wish to benefit from this service should request the Company's Registrar to send them a Dividend/Interest mandate form. Sterling dividends will be translated at the closing mid-point spot rate on 9 May 2003 as published in the Financial Times on 10 May 2003. Officers and advisers Secretary and Registered Office Registrars C E M Watson Lloyds TSB Registrars Scotland John Wood Group PLC 117 Dundas Street John Wood House EDINBURGH Greenwell Road EH3 5ED ABERDEEN Tel: 0870 601 5366 AB12 3AX Tel: 01224 851000 F.A.O. Jon Wilson Stockbrokers Auditors Cazenove & Co Limited PricewaterhouseCoopers LLP Credit Suisse First Boston Chartered Accountants Financial calendar Results announced 10 March 2003 Ex-dividend date 7 May 2003 Dividend record date 9 May 2003 Annual General Meeting 22 May 2003 Dividend payment date 29 May 2003 Wood Group has developed an Investor Relations website which can be accessed at www.woodgroup.com This information is provided by RNS The company news service from the London Stock Exchange

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