Interim Results
Wood Group (John) PLC
13 September 2005
John Wood Group PLC
Interim results for the six months to 30 June 2005
Strong revenue and EBITA growth in all divisions
Cash placing to raise approximately $90m
John Wood Group PLC ('Wood Group', the 'Group') is a market leader in
engineering design, production support and industrial gas turbine services for
customers in the oil & gas and power generation industries around the world.
Operating in 36 countries, Wood Group's businesses employ over 14,000 people.
Financial Highlights (Note 1)
• Revenues of $1,327.0m (2004: $1,040.8m) up 27%
• EBITA of $69.2m (2004: $53.7m) up 29% (Note 2)
• Operating profit of $67.2m (2004: $26.9m, after impairment and
restructuring charges of $24.9m) up 150%
• Profit before tax of $56.2m (2004: $18.0m, after impairment and
restructuring charges of $24.9m) up 212%
• Adjusted diluted earnings per ordinary share of 7.8 cents (2004: 5.9
cents) up 32%. Basic earnings per share of 7.6 cents (2004: 1.9 cents)
up 300% (Note 3)
• Declared interim dividend of 1.3 cents (2004: 1.2 cents) up 8% (Note 4)
Operating Highlights
• Strong global oil & gas market - good demand for the Group's services
• Cash placing expected to raise approximately $90m - to strengthen the
balance sheet and increase flexibility to pursue our growth strategy
• Engineering & Production Facilities:
• Engineering - upstream active on fast-track upgrades and winning a
healthy mix of work on new developments in deep and shallow water, and
stronger activity in our downstream business. Developing presence in
Europe, Africa, Middle East and Asia Pacific
• Production Facilities - continuing high activity levels in North
Sea, building presence in new regions around the world
• Well Support - very good performance in all businesses. Strong US
performance and further international development:
• ESP - further growth in Russia and a successful start-up of Chad
contract
• Pressure Control - contract wins in Mexico and the Middle East, and
further development of Chinese manufacturing capabilities
• Logging Services - leading position in cased hole electric wireline
in Argentina
• Gas Turbine Services - US power market more stable, with our
restructuring delivering anticipated benefits. Differentiation through
re-engineering parts and entering into more long-term contracts
Commenting on the results, Sir Ian Wood, Chairman and Chief Executive, Wood
Group, said:
'The overall oil & gas markets are healthy, with good demand for Wood Group's
services. We are confident 2005 will show strong growth in line with our July
trading update and believe that our business development programme will deliver
continuing growth in 2006 and beyond.'
ENQUIRIES:
Wood Group
Alan Semple Finance Director 01224 851000
Nick Gilman IR Manager
Carolyn Smith Communications Manager
Brunswick
Patrick Handley/ Nina Coad 020 7404 5959
Notes
1 All figures are prepared on the basis detailed in note 1 to the interim
accounts.
2 EBITA represents operating profit of $67.2m (2004: $26.9m), before deduction
of impairment and restructuring charges of $nil (2004: $24.9m) and amortisation
of $2.0m (2004: $1.9m). This financial term is provided as it is a key unit of
measurement used by the Group in the management of its business.
3 Shares held by the Group's employee share ownership trusts are excluded from
the number of shares in calculating earnings per ordinary share. Adjusted
diluted earnings per ordinary share is calculated on earnings before
amortisation, and impairment and restructuring charges, net of tax. Adjusted
diluted earnings per ordinary share is based on the diluted number of shares,
taking account of employee share schemes where the effect of these is dilutive.
4 In accordance with International Financial Reporting Standards ('IFRS'), the
interim dividend declared is not reflected in these accounts. The dividend will
be reflected in the accounts when paid.
Interim Statement - six months to 30 June 2005
The Group has made good progress in the first half, with strong revenue and
EBITA growth in all divisions.
In the six months to June 2005, revenues increased to $1,327.0m (2004:
$1,040.8m) and EBITA increased to $69.2m (2004: $53.7m). During the period we
invested $61.8m (2004: $86.7m) and as at 30 June 2005 gearing (Note 5) was 70%,
compared to 62% as at 30 June 2004 and interest cover (Note 6) was 6.3 times
(2004: 6.0 times).
Background to and reasons for the cash placing
Wood Group has grown substantially over the last three and a half years,
increasing revenues by over 70%, and investing $200m in acquisitions and $140m
in capital expenditure in excess of depreciation.
The Board believes that the current strong conditions in the oil & gas market
will continue and wishes to maintain the growth strategy of targeted geographic
expansion and broadening of the service provision to take advantage of the
opportunities. This will involve further investment and resources to develop
our client base, including the majors, independents and the national oil
corporations, in key oil and gas regions in Europe, Africa, the Middle East and
Asia Pacific. We also intend to broaden our service provision:
• In Engineering & Production Facilities through extending our project
management and EPCM (Engineering, Procurement and Construction Management)
services, and increasing our involvement in midstream engineering and
downstream refinery upgrades and debottlenecking, further developing our
pre-operations, commissioning and start-up support services as well as
pursuing long term performance based modifications, maintenance & operations
contracts
• In Well Support, expanding our services in key markets such as Russia,
the Middle East and North and West Africa, and building up our manufacturing
capability in low-cost areas such as China
• In Gas Turbine Services, continuing to enhance our differentiation
through the re-engineering of parts and broadening the range of turbines
that we support.
These developments are likely to include acquisitions of local businesses,
capital expenditure on new facilities and investment in projects with our
customers. In addition, we will continue to assess larger acquisitions and
investments in our oil & gas and power activities round the world.
The Board is therefore proposing a cash placing of approximately 24 million
shares, representing 5% of the Group's issued share capital, expected to raise
approximately $90m (the 'placing'). The placing will strengthen the Group's
balance sheet and increase the flexibility to pursue our growth strategy. In
the short term, the proceeds of the placing will be used to reduce net
borrowing, reducing gearing from 70% to approximately 46% on a pro forma basis
as at 30 June 2005. (Note 7)
Dividend
Reflecting continuing confidence in our long-term strategy, we have declared an
increase in the interim dividend to 1.3 cents per share (2004: 1.2 cents per
share) which will be payable to shareholders on the register on 23 September
2005 and will be paid on 13 October 2005.
Engineering & Production Facilities
Revenues increased 29.6% to $703.0m (2004: $542.3m), and EBITA rose 20.6% to
$40.9m (2004: $33.9m). Although revenue growth was good, the EBITA margin ('
margin') decreased to 5.8% (2004: 6.3%). This is principally as a result of
higher zero margin pass-through revenues in the active North Sea market and our
extended international business development programme.
Engineering is active for a broad spread of clients. In upstream, we are
working on a range of fast-track upgrade projects and have won a healthy mix of
contracts for new developments in deep and shallow water. These include Valhall
in Norway, East Area Gas in Nigeria, Gorgon & Jansz in Australia and Shenzi in
the Gulf of Mexico. In downstream, we are also busy with a number of our
refinery clients on low sulphur gas and diesel modifications and implementing
upgrades to their facilities to take advantage of the current market conditions.
In addition, we are focusing resources in Mustang's new London offices and in
Perth, Australia to develop our client base in Europe, Africa, the Middle East
and Asia Pacific.
In Production Facilities, our clients' focus on improving the structure and
integrity of their assets and enhancing production is leading to increased
activity. In the North Sea we are working on a diverse range of long term
support contracts and upgrade projects for a number of clients. Production
Facilities in the Americas is making steady progress and our activities in West
Africa, where we have recently won further work, and Brunei are progressing
well. We are also investing in developing new international markets, where
recent wins include the contract to operate and maintain Sevan Marine's SSP 300
floating, production, storage and offloading (FPSO) vessel offshore Brazil and
multi-year, turbo-machinery operations & maintenance contracts in Mexico,
Vietnam and Indonesia.
In April, we acquired Offshore Design Limited ('ODL'), a provider of technical
and consulting services and pre-operations support. ODL has performed well
since its acquisition and made progress in further expanding its business
internationally.
Well Support
Revenues increased 26.7% to $302.1m (2004: $238.5m), EBITA increased 37.1% to
$27.0m (2004: $19.7m) and margin increased to 8.9% (2004: 8.3%). The US and
international markets for all three of our Well Support businesses - Electric
Submersible Pumps (ESP), Pressure Control and Logging Services - are strong and
we are maintaining our significant US positions, while seeing further success in
our international business development efforts.
ESP is performing well in the US and, in the significant Russian market, the
Nizhnevartovsk pump facility is making good progress. In Chad our major new
contract started up successfully. We also continue to maintain good levels of
activity in South America and the Middle East.
In addition to its significant position in the US market, Pressure Control is
making progress in growing the business internationally, with contract wins in
the UK, Russia, Mexico and the Middle East. The investment in manufacturing,
assembly and test capabilities in China is contributing to further product cost
improvements.
Logging Services operations are strong in the US, notably in the second quarter,
despite the early and active hurricane season and in Argentina, where we are now
the leader in cased hole electric wireline logging.
Gas Turbine Services
Revenues increased 24.3% to $304.4m (2004: $244.9m), EBITA increased 51.5% to
$15.0m (2004: $9.9m) and the margin increased to 4.9% (2004: 4.0%). Our oil &
gas related activities, representing about 35% of Gas Turbine Services revenues,
continue to make progress. The US power market is more stable and the
anticipated benefits from our restructuring programme, have contributed to the
improved performance. Our Power Solutions business is very active and this is
contributing to the strong revenue growth.
The focus on increasing the long term content in our activities is continuing.
We have recently won a number of operations & maintenance contracts, including a
10-year contract with Sacramento Municipality Utility District Financing
Authority announced today. We have also won a long term maintenance contract
with a wholly-owned subsidiary of Alliant Energy Corp. to provide maintenance
services to two Frame 7FA turbines. We are continuing to build on the
differentiation we enjoy through the supply of re-engineered parts and have
recently won a six-year packaged maintenance services contract, including the
supply of re-engineered parts under the Group's APM (R) (Advanced Parts
Manufacture) programme, supporting British Nuclear Fuel's Fellside CHP plant.
Outlook
In Engineering & Production Facilities, we anticipate that Engineering will
continue to be involved in a wide range of upstream, midstream and downstream
projects and that Production Facilities will enjoy strong levels of activity,
led by the North Sea. In Well Support, we expect all three businesses to
perform well. Gas Turbine Services should see a similar level of performance in
the second half, with the continuing drive to differentiation leading to further
improvement in 2006.
The overall oil & gas markets are very healthy, with good demand for the Group's
services. We are confident 2005 will show strong growth in line with our July
trading update and believe our business development programme will deliver
continuing growth in 2006 and beyond.
Interim Financial Review
The income statement for the six months to 30 June 2005 is summarised below:
Unaudited Unaudited
Interim Interim
June 2005 June 2004
US$m US$m Increase
Revenues 1,327.0 1,040.8 27%
EBITA 69.2 53.7 29%
Profit before tax 56.2 18.0 212%
Profit for the period 36.4 10.0 264%
Adjusted diluted EPS (cents) 7.8 5.9 32%
Revenues increased by $286.2m, or 27%, for the six months to June 2005
reflecting growth in all three divisions. EBITA increased by $15.5m or 29% for
the period, again increasing in all three divisions. Profit before tax has
increased by $38.2m or 212%, with profits in the prior period having been
impacted by an impairment and restructuring charge of $24.9m. Excluding this
charge, profit before tax increased by 31%. The tax charge for the period of
$19.8m (2004: $8.0m) is based on an anticipated effective tax rate for the year
of 34% on profit before tax, impairment and restructuring charges, and
amortisation. The actual effective tax rate for the year ended 31 December 2004
was 35%.
The cash flow statement for the six months to 30th June 2005 is summarised
below:
Unaudited Unaudited Unaudited
Interim Interim Full Year
June 2005 June 2004 December 2004
US$m US$m US$m
Cash generated from operations 92.7 62.1 145.2
before movements in working
capital
Working capital movements (35.5) (49.0) (66.8)
Capex and acquisitions (59.0) (74.8) (124.5)
Transactions in own shares (1.0) (14.7) (22.3)
Interest, tax, dividends and (26.4) (32.3) (77.3)
other
Increase in net debt (29.2) (108.7) (145.7)
Opening net debt (354.3) (208.6) (208.6)
Closing net debt (383.5) (317.3) (354.3)
Cash generated from operations before movements in working capital increased by
$30.6m or 49% for the six months to June 2005. Working capital outflows in the
period of $35.5m compare to $49.0m in the first half of 2004. Capital
expenditure amounted to $32.5m (2004: $39.9m) and proceeds from the disposal of
tangible fixed assets amounted to $2.8m (2004: $11.9m). The cost of acquisition
of subsidiaries, net of cash acquired, totalled $11.1m (2004: $17.3m). The Group
also acquired minority interests and made deferred consideration payments
totalling $15.2m (2004: $28.9m). Net debt increased by US$29.2m from $354.3m at
December 2004 to $383.5m at June 2005. The Group's gearing ratio increased from
67% at December 2004 to 70% at June 2005.
Net debt of $383.5m is primarily US dollar denominated in line with the currency
of the bulk of the Group's net assets. Long-term borrowings amounted to $483.0m
(December 2004: $355.0m), of which $125.0m (December 2004: $125.0m), or 26%
(December 2004: 35%), was at a weighted average fixed rate of interest of 5.0%
(December 2004: 5.0%). Net finance costs were $11.0m, which is an increase of
$2.1m compared to the same period in 2004. This increase was principally due to
the higher level of borrowings and higher US dollar interest rates. Interest
cover was 6.3 times (June 2004: 6.0 times).
Adjusted diluted earnings per ordinary share for the period increased by 32% to
7.8 cents (June 2004: 5.9 cents) and basic earnings per ordinary share increased
to 7.6 cents (June 2004: 1.9 cents).
Notes
1 All figures are prepared on the basis detailed in note 1 to the interim
accounts.
2 EBITA represents operating profit of $67.2m (2004: $26.9m), before deduction
of impairment and restructuring charges of $nil (2004: $24.9m) and amortisation
of $2.0m (2004: $1.9m). This financial term is provided as it is a key unit of
measurement used by the Group in the management of its business.
3 Shares held by Wood Group's employee share ownership trusts are excluded from
the number of shares in calculating earnings per ordinary share. Adjusted
diluted earnings per ordinary share is calculated on earnings before
amortisation, and impairment and restructuring charges, net of tax. Adjusted
diluted earnings per ordinary share is based on the diluted number of shares,
taking account of employee share schemes where the effect of these is dilutive.
4 In accordance with International Financial Reporting Standards ('IFRS'), the
interim dividend declared is not reflected in these accounts. The dividend will
be reflected in the accounts when paid.
5 Gearing represents net debt over shareholders' funds.
6 Interest cover is EBITA divided by net finance costs of $11.0m (2004: $8.9m).
7 Pro forma gearing is based on the gearing as at June 2005 adjusted to take
into account the impact of the proceeds from the cash placing of approximately
$90m.
John Wood Group PLC
Group income statement
for the six month period to 30 June 2005
Unaudited Unaudited Unaudited
Interim Interim Full Year
June 2005 June 2004 December 2004
Note US$M US$M US$M
Revenues 3 1,327.0 1,040.8 2,288.1
Cost of sales (1,062.3) (823.0) (1,818.5)
Gross profit 264.7 217.8 469.6
Administrative expenses before impairment and (197.5) (166.0) (357.8)
restructuring charges
Impairment and restructuring charges 6 - (24.9) (26.2)
Administrative expenses (197.5) (190.9) (384.0)
Operating profit 3 67.2 26.9 85.6
Finance income 1.0 0.8 1.8
Finance expense (12.0) (9.7) (21.2)
Profit before tax 56.2 18.0 66.2
Taxation 7 (19.8) (8.0) (26.8)
Profit for the period 36.4 10.0 39.4
Attributable to:
Equity shareholders 35.3 9.0 37.3
Minority interest 1.1 1.0 2.1
36.4 10.0 39.4
Earnings per share for profit attributable to
equity shareholders (expressed in cents per
share)
Basic 5 7.6 1.9 8.0
Diluted 5 7.4 1.9 7.8
All items dealt with in arriving at the profits stated above relate to
continuing operations.
John Wood Group PLC
Group balance sheet
as at 30 June 2005
Unaudited
Unaudited Unaudited Full Year
Interim Interim December
June 2005 June 2004 2004
Note US$M US$M US$M
Assets
Non-current assets
Goodwill 314.7 261.5 297.1
Intangible assets 13.8 9.1 11.8
Property plant and equipment 219.5 206.9 216.2
Long term receivables 17.6 29.2 22.6
Deferred tax assets 20.2 17.8 20.9
585.8 524.5 568.6
Current assets
Inventories 355.2 278.4 329.9
Trade and other receivables 617.4 502.2 579.3
Income tax receivable 4.2 8.2 6.8
Cash and cash equivalents 135.3 74.8 71.4
1,112.1 863.6 987.4
Liabilities
Current liabilities
Financial liabilities
- Borrowings 35.8 56.6 70.7
- Derivative financial instruments 0.2 - -
Trade and other payables 520.2 394.3 496.7
Income tax liabilities 16.5 8.7 11.8
572.7 459.6 579.2
Net current assets 539.4 404.0 408.2
Non-current liabilities
Financial liabilities
- Borrowings 483.0 335.5 355.0
- Derivative financial instruments 1.2 - -
Deferred tax liabilities 8.5 11.3 8.6
Retirement benefit liability 10 31.7 27.5 33.9
Other non-current liabilities 23.0 13.1 21.7
Provisions 15.2 15.6 15.7
562.6 403.0 434.9
Net assets 562.6 525.5 541.9
Shareholders' equity
Ordinary shares 23.9 23.5 23.5
Share premium 202.4 200.9 200.9
Other reserves 78.2 85.4 89.8
Retained earnings 244.9 204.9 215.7
Total shareholders' equity 549.4 514.7 529.9
Minority interest in equity 13.2 10.8 12.0
Total equity 562.6 525.5 541.9
John Wood Group PLC
Statement of recognised income and expense
for the six month period to 30 June 2005
Unaudited Unaudited Unaudited
Interim Interim Full Year
June June December
2005 2004 2004
US$M US$M US$M
Profit for the period/year 36.4 10.0 39.4
Actuarial loss in pension scheme - - (4.8)
Movement in deferred tax relating to pension liability - - 1.4
Cash flow hedges - fair value gains 0.4 - -
- reported in profit for the period 1.0 - -
Exchange adjustments (10.6) (2.7) 1.7
Total recognised income 27.2 7.3 37.7
Attributable to:
Equity shareholders 26.1 6.3 35.6
Minority interest 1.1 1.0 2.1
27.2 7.3 37.7
John Wood Group PLC
Consolidated statement of changes in shareholders' equity
Period to June 2005 Period to June 2004 Year ended 31 December 2004
Note Share-holders' Minority Total Share-holders' Minority Total Share-holders' Minority Total
equity interest equity equity interest equity equity interest equity
US$M US$M US$M US$M US$M US$M US$M US$M US$M
Opening 529.9 12.0 541.9 531.9 18.7 550.6 531.9 18.7 550.6
Balance
Adoption of 8 (3.3) - (3.3) - - - - - -
IAS 32 and
IAS 39
At 1 January 526.6 12.0 538.6 531.9 18.7 550.6 531.9 18.7 550.6
Profit for 35.3 1.1 36.4 9.0 1.0 10.0 37.3 2.1 39.4
the year
Dividends 4 (11.1) - (11.1) (10.3) - (10.3) (15.9) - (15.9)
Exchange (10.6) 0.1 (10.5) (2.7) (0.1) (2.8) 1.7 - 1.7
adjustments
Value of 3.9 - 3.9 1.3 - 1.3 2.9 - 2.9
services
provided
under share
based
schemes
Cash Flow 1.4 - 1.4 - - - - - -
Hedges
Actuarial - - - - - - (3.4) - (3.4)
loss in
pension
scheme, net
of deferred
tax
Issue of new 1.9 - 1.9 0.2 - 0.2 0.2 - 0.2
shares
Shares (2.0) - (2.0) (14.9) - (14.9) (22.5) - (22.5)
acquired by
ESOP trusts
Shares 1.0 1.0 0.2 - 0.2 0.2 - 0.2
disposed of
by ESOP
trusts
Exchange 3.0 - 3.0 - - - (2.5) - (2.5)
adjustments
in respect
of shares
held by ESOP
trusts
Acquisition - - - - (9.3) (9.3) - (9.3) (9.3)
of minority
interests
Minority - - - - 0.5 0.5 - 0.5 0.5
shareholding
recognised
on
conversion
from joint
venture to
subsidiary
Closing 549.4 13.2 562.6 514.7 10.8 525.5 529.9 12.0 541.9
Balance
John Wood Group PLC
Group cash flow statement
for the six month period to 30 June 2005
Unaudited Unaudited Unaudited
Interim Interim Full Year
June 2005 June 2004 Dec 2004
Note US$m US$m US$m
Cash generated from operations 11 57.2 13.1 78.4
Tax paid (11.4) (16.1) (34.7)
Net cash inflow/(outflow) from operating activities 45.8 (3.0) 43.7
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired) (11.1) (17.3) (32.9)
Acquisition of minority interests (6.2) (24.2) (24.2)
Deferred consideration payments (9.0) (4.7) (4.7)
Purchase of property, plant and equipment (32.5) (39.9) (68.4)
Proceeds from sale of property, plant and equipment 2.8 11.9 12.7
Purchase of intangible assets (3.0) (0.6) (7.0)
Net cash used in investing activities (59.0) (74.8) (124.5)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 1.9 0.2 0.2
Proceeds from new bank loans 102.8 96.6 118.0
Purchase of shares in employee share trusts (2.0) (14.9) (22.5)
Sale of shares in employee share trusts 1.0 0.2 0.2
Interest received 1.0 0.8 1.8
Interest paid (11.8) (9.7) (20.8)
Dividends paid to shareholders (11.1) (10.3) (15.9)
Net cash from financing activities 81.8 62.9 61.0
Effect of exchange rate changes on cash and cash equivalents (4.7) (1.1) 0.4
Net increase/(decrease) in cash and cash equivalents 63.9 (16.0) (19.4)
Opening cash and cash equivalents 71.4 90.8 90.8
Closing cash and cash equivalents 135.3 74.8 71.4
John Wood Group PLC
Notes to the interim accounts
for the six month period to 30 June 2005
1. Preparation of interim accounts
Introduction
Following the adoption of IAS Regulation EC 1606/2002 by the European
Parliament, John Wood Group PLC is required to prepare consolidated financial
statements in accordance with International Financial Reporting Standards
('IFRS') for periods beginning on or after 1 January 2005.
The Group will apply IFRS for the year ended 31 December 2005, and is required
to prepare 2004 comparative figures under IFRS. The Group's date of transition
to IFRS is 1 January 2004 and its first reporting period is for the six months
ended 30 June 2005. This report contains the consolidated financial results for
the 6 months ended 30 June 2005, comparatives for the 6 months ended 30 June
2004 and for the year ended 31 December 2004 under the basis of preparation set
out below.
To assist with the understanding of the impact of transition from United Kingdom
Generally Accepted Accounting Principles ('UK GAAP') to IFRS, the Group has
presented the reconciliations of UK GAAP to IFRS information as required by IFRS
1 for 1 January 2004, 31 December 2004 and 30 June 2004 in Appendix 1.
Basis of preparation
The financial information has been prepared in accordance with UK Listing Rules,
under the historical cost and fair value conventions and on the basis of the
accounting policies set out below, which the Group expects to apply to its
financial statements for 31 December 2005 and which are to be prepared in
accordance with IFRS.
Further standards and interpretations may be issued that will be applicable for
financial years beginning on or after 1 January 2005 or that are applicable to
later accounting periods but may be adopted early. The Group's first IFRS
financial statements may therefore be prepared in accordance with some different
accounting policies from the financial information presented here.
The comparative figures for the financial year ended 31 December 2004 do not
constitute the statutory financial statements for that year. Those financial
statements which were prepared under UK GAAP in accordance with the Companies
Act 1985, have been delivered to the Registrar of Companies and include the
auditors' report which was unqualified and did not contain statements under
section 237(2) or (3) of the Companies Act 1985.
2. Significant accounting policies
The Group's key accounting policies are detailed below. These policies have
been prepared on the basis of the recognition and measurement requirements of
IFRS standards that have been published at 31 December 2004 and that apply to
accounting periods beginning on or after 1 January 2005. The standards used are
either endorsed by the European Union or are expected to be endorsed at 31
December 2005, the Group's first annual reporting date at which it is required
to adopt IFRS.
In particular, the directors have assumed that the amendment to IAS 19 'Employee
Benefits' will be fully endorsed by the European Union and therefore available
for use in the annual IFRS Financial Statements for the year ended 31 December
2005.
In respect of financial instruments, the Group's policy has been to adopt IAS 32
'Financial Instruments: Disclosure and Presentation' and 39 'Financial
Instruments: Recognition and Measurement' from 1 January 2005. Comparatives for
2004 have not been restated to reflect the requirements of IAS 32 and IAS 39
and, as permitted by IFRS 1, these are accounted for under UK GAAP in accordance
with the accounting policies set out in the annual financial statements for the
year ended 31 December 2004.
Transitional arrangements
On transition to IFRS, an entity is generally required to apply IFRS
retrospectively, except where an exemption is available under IFRS 1 'First-time
Adoption of International Financial Reporting Standards'. The following is a
summary of the key elections from IFRS 1 that were made by the Group:
• The Group has elected to adopt the IFRS 1 exemption in relation to business
combinations and will only apply IFRS 3 'Business Combinations' prospectively
from 1 January 2004. As a result, the balance of goodwill under UK GAAP as at
31 December 2003 remains as the carrying value of goodwill at 1 January 2004.
• The Group has elected to adopt the IFRS 1 option to reset foreign currency
cumulative translation reserves to zero on transition to IFRS.
• The Group has elected to apply IFRS 2 to all share option grants made after
7 November 2002, but not vested at 1 January 2005.
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. Subsidiaries are
entities over which the Group has the power to govern the financial and
operating policies generally accompanying a shareholding of more than one half
of the voting rights. The Group's interests in joint ventures are accounted for
using proportional consolidation. Under this method the group includes its
share of each joint venture's income, expenses, assets, liabilities and cash
flows on a line by line basis in the consolidated financial statements. 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.
Foreign currencies
Income statements of entities whose functional currency is not the US dollar are
translated into US dollars at average rates of exchange for the period and
assets and liabilities are translated into US dollars at the rates of exchange
ruling at the balance sheet date. 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 equity. Other exchange differences are
taken directly to the income statement.
In each individual entity, transactions in overseas currencies are translated
into the relevant functional currency at the exchange rates ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the exchange rates ruling at the balance sheet
date. Any exchange differences are taken to the income statement.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
John Wood Group PLC
Notes to the interim accounts
for the six month period to 30 June 2005
The directors consider it appropriate to record sterling denominated equity
share capital in the accounts of John Wood Group PLC at the exchange rate ruling
on the date it was raised.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable. 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 services is recognised as the
services are rendered, including where based on contractual rates per man hour
in respect of multi-year service contracts. Incentive performance revenues are
recognised upon completion of agreed objectives. 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. Where revenue relates to a multi-element contract,
then each element of the contract is accounted for separately. Revenues are
stated net of sales taxes and discounts.
Revenue on lump-sum contracts for services, or construction contracts is
recognised according to the stage of completion reached in the contract by
reference to the value of work done. An estimate of the profit attributable to
work completed is recognised once the outcome of the contract can be estimated
reliably. Expected losses are recognised in full as soon as losses are
probable. The net amount of costs incurred to date plus recognised profits less
the sum of recognised losses and progress billings is disclosed as trade
receivables/trade payables.
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 or joint venture at the date of acquisition. Goodwill is
tested annually for impairment and carried at cost less accumulated impairment
losses. Goodwill is allocated to the appropriate cash generating unit for the
purpose of impairment testing.
Intangible assets
Intangible assets are recognised if it is probable that there will be future
economic benefits attributable to the asset, the cost of the asset can be
measured reliably, the asset is separately identifiable and there is control
over the use of the asset. The assets are amortised on a straight line basis
over their estimated useful lives.
Property, Plant and Equipment
Property, Plant and Equipment (P,P&E) is stated at cost less accumulated
depreciation. No depreciation is charged with respect to freehold land and
assets in the course of construction. Transfers from P,P&E 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 carries out annual impairment reviews in respect of goodwill. The
Group performs impairment reviews in respect of P,P&E and intangible assets
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.
Inventories
Inventories, 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' inventories
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.
Deferred income taxes
Deferred income tax is provided, using the full liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. The principal
temporary differences arise from depreciation on property, plant and equipment,
and tax losses carried forward; and, in relation to acquisitions, on the
difference between the fair values of the net assets acquired and their tax
base. Tax rates enacted, or substantially enacted, by the balance sheet date
are used to determine deferred income tax.
Deferred tax assets are recognised to the extent that it is probably that future
taxable profits will be available against which the temporary differences can be
utilised.
Accounting for derivative financial instruments and hedging activities
Pre 1 January 2005
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.
Post 1 January 2005
Derivatives are initially recognised at fair value on the date the contract is
entered into and are subsequently remeasured at their fair value. The method of
recognising the resulting gain or loss depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being
hedged. The Group designates certain derivatives as either: (1) hedges of the
fair value of recognised assets or liabilities or a firm commitment (fair value
hedge); (2) hedges of highly probable forecast transactions (cash flow hedges);
or (3) hedges of net investments in foreign operations (net investment hedge).
John Wood Group PLC
Notes to the interim accounts
for the six month period to 30 June 2005
Where hedging is to be undertaken, the Group documents at the inception of the
transaction the relationship between hedging instruments and hedged items, as
well as its risk management objective and strategy for undertaking various hedge
transactions. The Group also documents its assessment, both at hedge inception
and on an ongoing basis, of whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in fair values or cash
flows of hedged items.
(a) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair
value hedges are recorded in the income statement, together with any changes in
the fair value of the hedged asset or liability that are attributable to the
hedged risk.
(b) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are
designated and qualify as cash flow hedges are recognised in equity. The gain
or loss relating to the ineffective portion is recognised immediately in the
income statement.
Amounts accumulated in equity are recycled through the income statement in
periods when the hedged item affects profit or loss. However, when the forecast
transaction that is hedged results in the recognition of a non-financial asset
or liability, the cost of the asset or liability is adjusted by the gains or
losses previously held in equity.
When a hedging instrument expires or is sold, or when a hedge no longer meets
the criteria for hedge accounting, any cumulative gain or loss existing in
equity at that time remains in equity and is recognised when the forecast
transaction is ultimately recognised in the income statement. When a forecast
transaction is no longer expected to occur, the cumulative gain or loss that was
reported in equity is immediately transferred to the income statement.
(c) Net investment hedge
Hedges of net investments in foreign operations are accounted for similarly to
cash flow hedges. Any gain or loss on the hedging instrument relating to the
effective portion of the hedge is recognised in equity; the gain or loss
relating to the ineffective portion is recognised immediately in the income
statement.
Gains and losses accumulated in equity are included in the income statement when
the foreign operation is disposed of.
(d) Derivatives that do not qualify for hedge accounting
Certain derivatives, whilst providing effective economic hedges under the
Group's policy are not designated as hedges. Changes in the fair value of any
derivative instruments that do not qualify for hedge accounting are recognised
immediately in the income statement.
Fair Value Estimation
The fair value of financial instruments traded in active markets is based on
quoted market prices at the balance sheet date. The fair value of interest rate
swaps is calculated as the present value of the estimated future cash flows.
The fair value of forward foreign exchange contracts is determined using forward
exchange market rates at the balance sheet date. The carrying value of trade
receivables and payables approximate to their fair values. The fair value of
financial liabilities is estimated by discounting the future contractual cash
flows at the current market interest rate that is available to the Group for
similar financial instruments.
Operating leases
As lessee
Payments made under operating leases are charged to the income statement 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
income statement on a straight line basis over the period of the lease.
Finance leases
As lessor
Finance lease rental income arising from leased assets is recognised in the
income statement so as to produce a constant rate of return on the net cash
investment. Amounts receivable under finance leases represent the outstanding
amounts due under these agreements less amounts allocated to future periods.
Retirement benefit liability
The Group operates a defined benefit scheme and a number of defined contribution
schemes and these are accounted for under IAS 19 'Employee Benefits'. The
liability recognised in respect of the defined benefit scheme is the fair value
of the defined benefit obligations less the fair value of the scheme assets.
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 annually by an independent 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 scheme expected to arise from employee service in the period is charged
to operating profit. The expected return on the scheme assets and the increase
during the period in the present value of the scheme's liabilities arising from
the passage of time are included in finance income/expense. Actuarial gains and
losses are recognised in the consolidated statement of recognised income and
expense in the period in which they occur.
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.
The Group's contributions to defined contribution schemes are charged to the
income statement in the period to which the contributions relate.
Use of estimates and assumptions
The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of 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.
John Wood Group PLC
Notes to the interim accounts
for the six month period to 30 June 2005
Share based payments relating to Employee Share Schemes
The Group has a number of employee share schemes:-
(i) Share options granted under Employee Share Option Schemes
('ESOS') are granted at market value. A charge is booked to the income
statement as an employee benefit expense for the fair value of share options
accrued over the vesting period. The corresponding credit is taken to retained
earnings. The fair value is calculated using an option pricing model.
(ii) Share options granted under the Long Term Retention Plan
('LTRP') are granted at par value. The charge to the income statement for LTRP
shares is also calculated using an option pricing model and as with ESOS shares
the fair value of the share options is accrued over the vesting period. The
corresponding credit is also taken to retained earnings.
(iii) The Group also has a Long Term Incentive Scheme ('LTIS')
for directors and senior managers. Under the LTIS, participants are awarded
shares dependent on the achievement of certain performance targets. The charge
to the income statement for shares expected to be awarded under the LTIS is
based on the fair value of those shares at the grant date, spread over the
vesting period. The corresponding credit is taken to retained earnings. For
those shares that have a market related performance criteria, the fair value is
calculated using a Monte Carlo simulation model.
Proceeds received on the exercise of share options are credited to share capital
and share premium.
The Group is deemed to have control of the assets, liabilities, income and costs
of its employee share ownership trusts ('ESOP trusts'). They have therefore been
included in the financial statements of the Group. The cost of shares held by
the ESOP trusts is deducted from shareholders' equity.
Segmental reporting
The Group's primary reporting segments are its three operating divisions, namely
Engineering & Production Facilities, Well Support and Gas Turbine Services.
Engineering & Production Facilities provides a broad range of life-of-field
engineering, modifications, maintenance and operations services to oil and gas
customers worldwide. Well Support supplies solutions, products and services to
increase production rates and recovery from oil and gas reservoirs. It is among
the market leaders worldwide in artificial lift using electric submersible
pumps, in the provision of surface wellheads and valves and, in the Gulf of
Mexico and in South America, in the provision of electric wireline and slickline
services. Gas Turbine Services is a world leading independent provider of
maintenance, repair and overhaul services for industrial gas turbines and
related high speed rotating equipment used for compression, transmission and
power generation in the oil and gas and power generation industries.
John Wood Group PLC
Notes to the interim accounts
for the six month period to 30 June 2005
3. Segmental reporting
Business segments
Revenues EBITDA (1) EBITA (1) Operating profit
Unaudi- Unaudi- Unaudi- Unaudi- Unaudi- Unaudi- Unaudi- Unaudi- Unaudi- Unaudi- Unaudi- Unaudi-
ted ted ted ted ted ted ted ted ted ted ted ted
Interim Interim Full Interim Interim Full Interim Interim Full Interim Interim Full
30 June 30 June Year 30 June 30 June Year 30 June 30 June Year 30 June 30 June Year
2005 2004 2004 2005 2004 2004 2005 2004 2004 2005 2004 2004
US$M US$M US$M US$M US$M US$M US$M US$M US$M US$M US$M US$M
Engineering & 703.0 542.3 1,199.6 45.6 38.4 83.1 40.9 33.9 73.9 39.9 32.5 69.7
Production
Facilities
Well Support 302.1 238.5 513.9 35.1 26.6 58.4 27.0 19.7 41.2 26.9 16.7 38.3
Gas Turbine 304.4 244.9 537.9 23.1 17.3 38.4 15.0 9.9 23.5 14.4 (12.4) (0.6)
Services
Unallocated - - - (13.1) (8.3) (20.1) (13.3) (8.7) (19.8) (13.5) (8.8) (20.1)
Total 1,309.5 1,025.7 2,251.4 90.7 74.0 159.8 69.6 54.8 118.8 67.7 28.0 87.3
excluding
discontinuing
operations
Gas Turbine 17.5 15.1 36.7 - (0.7) (0.7) (0.4) (1.1) (1.4) (0.5) (1.1) (1.7)
Services -
discontinuing
operations (2)
Total 1,327.0 1,040.8 2,288.1 90.7 73.3 159.1 69.2 53.7 117.4 67.2 26.9 85.6
Net finance (11.0) (8.9) (19.4)
expense
Profit before 56.2 18.0 66.2
tax
Notes
1. EBITDA represents operating profit before deduction of impairment and
restructuring charges, depreciation and amortisation. EBITA represents EBITDA
less depreciation. EBITA and EBITDA are provided as they are units of
measurement used by the Group in the management of its business.
2. The discontinuing operations relate to an Aero engine overhaul
company which the Group has decided to divest.
3. Revenues arising from sales between segments are not material.
4. Dividends
Unaudited Unaudited Unaudited
Interim Interim Full Year
June 2005 June 2004 Dec 2004
US$m US$m US$m
Dividends on equity shares
Interim paid (1.2 cents per share) - - 5.5
Final paid (2.4 cents per share) 11.1 10.3 10.4
Total dividends 11.1 10.3 15.9
After the balance sheet date, the directors declared an interim dividend of 1.3
cents per share which will be paid on 13 October 2005.
John Wood Group PLC
Notes to the interim accounts
for the six month period to 30 June 2005
5. Earnings per share
Unaudited interim Unaudited interim Unaudited full year
June 05 June 04 Dec 04
Earnings Earnings Earnings
attributable Earnings attributable Earnings attributable Earnings
to equity Number of per to equity Number of per to equity Number of per
shareholders shares share shareholders shares share shareholders shares share
(US $m) (millions) (cents) (US $m) (millions) (cents) (US $m) (millions) (cents)
Basic 35.3 463.8 7.6 9.0 469.2 1.9 37.3 466.2 8.0
Effect of
dilutive
ordinary shares
Options and 14.5 11.0 10.4
share based
payments
Diluted 35.3 478.3 7.4 9.0 480.2 1.9 37.3 476.6 7.8
Amortisation 2.0 1.9 5.6
Impairment and - 24.9 26.2
restructuring
charges
Tax on - (7.5) (7.7)
impairment and
restructuring
charges
Adjusted diluted 37.3 478.3 7.8 28.3 480.2 5.9 61.4 476.6 12.9
Adjusted basic 37.3 463.8 8.0 28.3 469.2 6.0 61.4 466.2 13.2
The calculation of basic earnings per share for the six months ended 30 June
2005 is based on the earnings attributable to equity shareholders divided by the
weighted average number of ordinary shares in issue during the period excluding
shares held by the Group's employee share ownership trusts. Adjusted EPS is
disclosed to show the results excluding the impact of amortisation and
impairment and restructuring charges, net of tax. For the calculation of
diluted EPS, the weighted average number of ordinary shares in issue is adjusted
to assume conversion of all potentially dilutive ordinary shares. The group has
two classes of dilutive ordinary shares - share options granted to employees
under Employee Share Option Schemes and the Long Term Retention Plan; and shares
issuable under the Group's Long Term Incentive Scheme. In calculating the
diluted number of shares at 30 June 2005 it has been assumed that the
performance criteria for the vesting of the awards under the LTIS have been met,
and the shares are therefore included in the calculation.
6. Impairment and restructuring charges
An impairment and restructuring charge of US$nil (June 2004: US $24.9m, Dec 2004
: US $26.2m) was booked in the period. US$nil (June 2004: US $21.9m, Dec 2004:
US $23.4m) of this charge was booked in the Gas Turbine Services division in
respect of rationalisation of businesses and facilities, severance costs and
fixed asset impairment. US$nil (June 2004: US$3.0m, Dec 2004: US$2.8m) was
booked in the Well Support division in respect of severance costs and fixed
asset impairment.
7. Taxation
The taxation charge for the six months ended 30 June 2005 reflects an
anticipated effective taxation rate of 34% on profit before taxation,
amortisation and impairment and restructuring charges for the year ending 31
December 2005 (June 2004 : 35%).
8. IAS 32 and 39
The adoption of IAS 32 and 39 at 1 January 2005 has resulted in the recognition
of financial assets of US$0.1m and financial liabilities of US$3.4m at that
date. A corresponding reduction in equity was also recorded. The adoption of
IAS 32 and 39 does not impact prior periods.
9. Acquisitions
In April 2005, the Group acquired 100% of the share capital of Offshore Design
Ltd, a company based in Aberdeen, Scotland that provides technical support and
consulting services to the oil and gas industry.
10. Retirement benefit liability
The pension liability at 30 June 2005 is as calculated at 31 December 2004 as
adjusted for current service cost, interest cost and expected return on assets.
No interim revaluation has been carried out and accordingly there is no
actuarial gain/loss in the statement of recognised income and expense. The
figures for gains and losses for the full year together with the surplus/deficit
at the year end will be presented in the 2005 Annual Report.
John Wood Group PLC
Notes to the interim accounts
for the six month period to 30 June 2005
11. Cash flows from operating activities
Unaudited Unaudited Unaudited
Interim Interim Full Year
June 2005 June 2004 Dec 2004
US$m US$m US$m
Cash flows from operating activities
Operating profit 67.2 26.9 85.6
Adjustments for:
Depreciation 21.5 19.6 41.7
Loss on sale of property plant and equipment 0.3 0.3 0.9
Amortisation of intangibles 2.0 1.9 5.6
Adjustment in respect of employee share awards 3.9 1.3 2.9
Impairment and restructuring charges - non-cash impact - 14.1 12.5
Changes in working capital (excluding effect of acquisition of
subsidiaries)
Increase in inventories (29.1) (34.0) (74.5)
Increase in receivables (46.2) (40.7) (90.4)
Increase in payables 40.0 27.3 99.6
Decrease in provisions (0.2) (1.6) (1.5)
Exchange adjustments (2.2) (2.0) (4.0)
Cash generated from operations 57.2 13.1 78.4
John Wood Group PLC
Notes to the interim accounts
for the six month period to 30 June 2005
Appendix I - Reconciliation of UK GAAP to IFRS
(i) Reconciliation of income statement - six months ended 30 June 2004
Proportional
As Consolidation As
reported of Joint reported
under Ventures IFRS under
UK GAAP Note (a) Adjustments IFRS
Note US$M US$M US$M US$M
Revenues 1,040.8 - - 1,040.8
Share of joint venture revenues (121.3) 121.3 - -
Group revenues 919.5 121.3 - 1,040.8
Cost of Sales (732.0) (91.0) - (823.0)
Gross Profit 187.5 30.3 - 217.8
Administrative expenses (b) (155.9) (16.4) 6.3 (166.0)
(c)
(d)
Impairment and restructuring charges (24.9) - - (24.9)
Share of joint venture operating profit 13.9 (13.9) - -
Operating profit 20.6 - 6.3 26.9
Finance income 0.8 - - 0.80.8
Finance expense (9.7) - - (9.7)
Profit before tax 11.7 - 6.3 18.0
Taxation (e) (7.1) - (0.9) (8.0)
Profit for the period 4.6 - 5.4 10.0
Attributable to:
Equity shareholders 3.6 - 5.4 9.0
Minority interest 1.0 - - 1.0
4.6 - 5.4 10.0
(ii) Reconciliation of income statement - year ended 31 December 2004
Proportional
As Consolidation As
reported of Joint reported
under Ventures IFRS under
UK GAAP Note (a) Adjustments IFRS
Note US$M US$M US$M US$M
Revenues 2,288.1 - - 2,288.1
Share of joint venture revenues (285.6) 285.6 - -
Group revenues 2,002.5 285.6 - 2,288.1
Cost of Sales (1,592.2) (226.3) - (1,818.5)
Gross Profit 410.3 59.3 - 469.6
Administrative expenses (b) (338.3) (32.0) 12.5 (357.8)
(c)
(d)
Impairment and restructuring charges (26.2) - - (26.2)
Share of joint venture operating profit 27.3 (27.3) - -
Operating profit 73.1 - 12.5 85.6
Finance income 1.8 - - 1.8
Finance expense (21.2) - - (21.2)
Profit before tax 53.7 - 12.5 66.2
Taxation (e) (24.9) - (1.9) (26.8)
Profit for the year 28.8 - 10.6 39.4
Attributable to:
Equity shareholders 26.7 - 10.6 37.3
Minority interest 2.1 - - 2.1
28.8 - 10.6 39.4
Explanation of the IFRS adjustments is given
on page 17.
John Wood Group PLC
Notes to the interim accounts
for the six month period to 30 June 2005
Appendix I - Reconciliation of UK GAAP to IFRS
(iii) Reconciliation of equity at 1st January 2004 (date of transition to IFRS)
Proportional
As Consolidation As
reported of Joint reported
under Ventures IFRS under
UK GAAP Note (a) Adjustments IFRS
Note US$M US$M US$M US$M
Assets
Non-current assets
Goodwill 217.2 18.8 - 236.0
Intangible assets 3.2 1.6 - 4.8
Property plant and equipment 174.2 53.4 - 227.6
Investment in joint ventures 103.6 (103.6) - -
Long term receivables 28.4 - - 28.4
Deferred tax assets (f) 9.7 1.0 8.2 18.9
536.3 (28.8) 8.2 515.7
Current assets
Inventories 180.5 62.1 - 242.6
Trade and other receivables 386.9 66.8 - 453.7
Income tax receivable 8.1 1.3 - 9.4
Cash and cash equivalents 69.8 21.0 - 90.8
645.3 151.2 - 796.5
Liabilities
Current liabilities
Borrowings 13.9 24.3 - 38.2
Trade and other payables (g) 326.6 61.0 (10.4) 377.2
Income tax liabilities 18.2 2.0 - 20.2
358.7 87.3 (10.4) 435.6
Net current assets 286.6 63.9 10.4 360.9
Non-current liabilities
Borrowings 230.9 30.3 - 261.2
Deferred tax liabilities 10.2 1.1 - 11.3
Retirement benefit liability (f) 19.3 - 8.2 27.5
Other non-current liabilities 7.5 1.4 - 8.9
Provisions 14.8 2.3 - 17.1
282.7 35.1 8.2 326.0
Net assets 540.2 - 10.4 550.6
Shareholders' equity
Ordinary shares 23.4 - - 23.4
Share premium 200.8 - - 200.8
Other reserves 88.1 - - 88.1
Retained earnings (g) 209.2 - 10.4 219.6
Total shareholders' equity 521.5 - 10.4 531.9
Minority interest in equity 18.7 - - 18.7
Total equity 540.2 - 10.4 550.6
John Wood Group PLC
Notes to the interim accounts
for the six month period to 30 June 2005
Appendix I - Reconciliation of UK GAAP to IFRS
(iv) Reconciliation of equity at 30 June 2004
Proportional
As Consolidation As
reported of Joint reported
under Ventures IFRS under
UK GAAP Note (a) Adjustments IFRS
Note US$M US$M US$M US$M
Assets
Non-current assets
Goodwill (c) 238.2 18.3 5.0 261.5
(d)
Intangible assets (c) 3.1 1.3 4.7 9.1
Property plant and equipment (c) 158.0 51.6 (2.7) 206.9
Investment in joint ventures 100.6 (100.6) - -
Long term receivables 27.9 1.3 - 29.2
Deferred tax assets (e) 9.1 1.4 7.3 17.8
(f)
536.9 (26.7) 14.3 524.5
Current assets
Inventories 213.9 64.5 - 278.4
Trade and other receivables 450.9 51.3 - 502.2
Income tax receivable 7.8 0.4 - 8.2
Cash and cash equivalents 61.7 13.1 - 74.8
734.3 129.3 - 863.6
Liabilities
Current liabilities
Borrowings 17.0 39.6 - 56.6
Trade and other payables (g) 357.5 42.4 (5.6) 394.3
Income tax liabilities 7.0 1.7 - 8.7
381.5 83.7 (5.6) 459.6
Net current assets 352.8 45.6 5.6 404.0
Non-current liabilities
Borrowings 322.5 13.0 - 335.5
Deferred tax liabilities 9.9 1.4 - 11.3
Retirement benefit liability (f) 19.3 - 8.2 27.5
Other non-current liabilities 10.1 3.0 - 13.1
Provisions 14.1 1.5 - 15.6
375.9 18.9 8.2 403.0
Net assets 513.8 - 11.7 525.5
Shareholders' equity
Ordinary shares 23.5 - - 23.5
Share premium 200.9 - - 200.9
Other reserves 85.4 - - 85.4
Retained earnings (c)(d) 193.2 - 11.7 204.9
(e)(g)
(a) (b)
Total shareholders' equity 503.0 - 11.7 514.7
Minority interest in equity 10.8 - - 10.8
Total equity 513.8 - 11.7 525.5
John Wood Group PLC
Notes to the interim accounts
for the six month period to 30 June 2005
Appendix I - Reconciliation of UK GAAP to IFRS
(v) Reconciliation of equity at 31 December 2004
Proportional
As Consolidation As
reported of Joint reported
under Ventures IFRS under
UK GAAP Note (a) Adjustments IFRS
Note US$M US$M US$M US$M
Assets
Non-current assets
Goodwill (c)(d) 264.7 18.2 14.2 297.1
Intangible assets (c) 4.1 1.4 6.3 11.8
Property plant and equipment (c) 168.8 53.7 (6.3) 216.2
Investment in joint ventures 104.5 (104.5) - -
Long term receivables 21.9 0.7 - 22.6
Deferred tax assets (e)(f) 11.5 1.1 8.3 20.9
575.5 (29.4) 22.5 568.6
Current assets
Inventories 264.4 65.5 - 329.9
Trade and other receivables 507.0 72.3 - 579.3
Income tax receivable 9.7 (2.9) - 6.8
Cash and cash equivalents 54.4 17.0 - 71.4
835.5 151.9 - 987.4
Liabilities
Current liabilities
Borrowings 18.2 52.5 - 70.7
Trade and other payables (g) 453.6 54.2 (11.1) 496.7
Income tax liabilities 12.1 (0.3) - 11.8
483.9 106.4 (11.1) 579.2
Net current assets 351.6 45.5 11.1 408.2
Non-current liabilities
Borrowings 345.0 10.0 - 355.0
Deferred tax liabilities 7.3 1.3 - 8.6
Retirement benefit liability (f) 23.7 - 10.2 33.9
Other non-current liabilities 18.7 3.0 - 21.7
Provisions 13.9 1.8 - 15.7
408.6 16.1 10.2 434.9
Net assets 518.5 - 23.4 541.9
Shareholders' equity
Ordinary shares 23.5 - - 23.5
Share premium 200.9 - - 200.9
Other reserves 89.8 - - 89.8
Retained earnings (a) (b)(c)(d)(e)(g) 192.3 - 23.4 215.7
Total shareholders' equity 506.5 - 23.4 529.9
Minority interest in equity 12.0 - - 12.0
Total equity 518.5 - 23.4 541.9
John Wood Group PLC
Notes to the interim accounts
for the six month period to 30 June 2005
Appendix I - Reconciliation of UK GAAP to IFRS
Explanatory notes to the UK GAAP to IFRS reconciliations
(a) Joint ventures
Under UK GAAP, joint ventures are accounted for using equity accounting with the
Group's share of profits being shown in the consolidated income statement and
the Group's share of net assets included in the consolidated balance sheet. As
permitted under IFRS, the Group has used proportional consolidation to
consolidate its joint ventures. Under this method, the Group includes its share
of each joint venture's income, expenses, assets, liabilities and cash flows on
a line by line basis in the consolidated financial statements. The Group has
presented the proportional consolidation of the joint ventures as a separate
column in the UK GAAP to IFRS reconciliations. Shareholders' equity is not
impacted by the adoption of proportional consolidation.
(b) Share based payments
Under UK GAAP, charges for share based payments are based on the intrinsic value
of shares awarded at the grant date. Under IFRS, the charge is based on the
fair value of the share option awarded at the grant date. The fair value is
calculated using option pricing models and applies to all options granted after
7 November 2002 and not vested at 1 January 2005. The adjustment for the period
to June 2004 is US$0.7m and the adjustment for the year ended December 2004 is
US$1.7m.
(c) Intangible assets
Purchased intangible assets other than goodwill are recognised on acquisition
and amortised over their useful life. On the acquisition of a business, any
intangible asset that may exist separately from goodwill and that meets the
recognition criteria under IFRS should be recognised and amortised over its
useful economic life. Under IFRS, the recognition criteria for intangibles may
result in the recognition of more intangible assets than under UK GAAP. On
transition to IFRS, US$2.7m of intangible assets have been recognised on
acquisitions made in 2004. These intangible assets had a useful economic life
of less than one year and as a result were fully amortised during 2004. A
charge of US$0.7m was booked for the period to June 2004 and a charge of US$2.7m
was booked for the year ended December 2004.
Additionally, software, which was previously included in Property, Plant and
Equipment under UK GAAP has been reclassified under intangible assets as
required under IFRS. US$6.3m was reclassified at December 2004 and US$2.7m at
June 2004. Amortisation on this software is added back to operating profit for
the calculation of EBITA. Software amortisation for the period to June 2004 was
US$0.8m and the for the year to December 2004 was US$2.0m.
(d) Goodwill
Under UK GAAP, goodwill is amortised on a straight line basis over its estimated
useful life. Under IFRS 3, goodwill is not amortised but subject to an annual
impairment review. Goodwill amortisation booked in 2004 under UK GAAP has been
reversed and goodwill is carried at 1 January 2004 levels. Amortisation of
US$7.7m has been reversed for the period to June 2004 and US$16.9m has been
reversed for the year ended December 2004.
'
(e) Tax
Under UK GAAP, the provision for deferred tax is based on a timing difference
approach, whereas under IFRS a temporary difference approach is used.
Consequently, accounting under IFRS may result in the provision of additional
deferred tax. Due to the reversal of the goodwill amortisation charge for 2004
mentioned at (d) above, the book value of goodwill has increased. There has
been no change in the underyling tax basis of the goodwill in those countries
where amortisation is tax deductible and therefore additional deferred tax
arises on the increase in the temporary difference. Additional deferred tax of
US$0.9m has been provided for the period to June 2004 and additional deferred
tax of US$1.9m has been provided for the year ended December 2004.
(f) Deferred tax relating to retirement benefit liability
Under UK GAAP, the deferred tax asset in respect of the retirement benefit
liability is netted against the liability. Under IFRS the deferred tax is split
out and shown separately. The deferred tax asset at January 2004 and June 2004
amounted to US$8.2m and at December 2004, US$10.2m.
(g) Dividends
Under UK GAAP, proposed dividends are recognised at the balance sheet date. IAS
10 requires that dividends should not be recognised as a liability or charged to
the income statement until they have been declared. As a result, the dividends
accrued at December 2003 (US$10.4m), June 2004 (US$5.6m) and December 2004
(US$11.1m) under UK GAAP have been reversed and only dividends paid in the
period recognised in the financial statements.
(h) Cash flow statement
The Group cash flow statement has been prepared in
accordance with IAS 7. The changes to the Group's cash flows that were
previously presented under UK GAAP are mainly presentational although the
proportional consolidation of joint ventures results in the Group's share of its
joint venture cash flows being included on a line by line basis. Under IFRS,
the cash flow statement presents 'cash and cash equivalents' which includes
short term deposits. In the UK GAAP cash flow the movement in short term
deposits was shown separately to the movement in cash.
John Wood Group PLC
Shareholder information
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 dividend in dollars please contact the Registrars
at the address below. All shareholders will receive dividends in sterling unless
requested. 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 of the BACS payment method is that the Registrars post the
tax vouchers directly to the shareholders, 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 contact the Registrars at the address below. Sterling dividends will be
translated at the closing mid-point spot rate on 23 September 2005 as published
in the Financial Times on 24 September 2005.
Officers and advisers
Secretary and Registered Office Registrars
I Johnson Lloyds TSB Registrars Scotland
John Wood Group PLC PO Box 28448
John Wood House Finance House
Greenwell Road Orchard Brae
ABERDEEN EDINBURGH
AB12 3AX EH4 1WQ
Tel: 01224 851000 Tel: 0870 601 5366
Stockbrokers Auditors
Cazenove & Co Limited PricewaterhouseCoopers LLP
Credit Suisse First Boston Chartered Accountants
Financial calendar
6 months ended Year ending
30 June 2005 31 December 2005
Results announced 13 September 2005 Early March 2006
Ex-dividend date 21 September 2005 May 2006
Dividend record date 23 September 2005 May 2006
Annual General Meeting - May 2006
Dividend payment date 13 October 2005 May 2006
The Group's Investor Relations website 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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