Half year results for the six months to 30 June...
John Wood Group PLC
Half year results for the six months to 30 June 2011
Performing well and positioned for good longer term growth
John Wood Group PLC ("Wood Group" or the "Group") is a market leader in
engineering design, production enhancement and support, and integrated
industrial gas turbine maintenance services for customers in the oil & gas and
power generation industries around the world. Wood Group employs approximately
35,000 people1 and operates in over 50 countries.
Financial Highlights
Total revenue6 of $2,828.8m (2010: $2,409.7) up 17%
Total EBITA2,6 of $192.0m (2010: $153.3m) up 25%
Revenue from continuing operations, including PSN since acquisition and
excluding Well Support, of $2,481.8m (2010: $1,959.7m) up 27%, and EBITA from
continuing operations of $133.6m (2010: $99.8m) up 34%
Profit from continuing operations before tax and exceptional items of $102.4m
(2010: $68.8m) up 49%
Post tax exceptional gain of $2,154.0m (2010: nil)
Basic earnings per share, including net exceptional gain of $2,154.0m, of
444.0 cents (2010:15.8 cents)
Adjusted diluted earnings per ordinary share3 of 25.2 cents (2010: 17.4 cents)
up 45%
Interim dividend of 3.9 cents (2010: 3.4 cents) up 15%
Completed arrangements to return cash to shareholders of £1.1bn
Group Highlights
Following the acquisition of PSN and disposal of the Well Support division,
the refocused Group is well positioned as:
A world leading engineering business with strong market positions in upstream,
subsea & pipelines ("Engineering")
The world leading production facilities support provider, formed by the merger
of PSN and Wood Group's Production Facilities business ("Wood Group PSN")
The world leading independent provider of integrated maintenance services for
industrial gas turbines ("Gas Turbine Services"("GTS"))
Operating Highlights
Engineering
Good first half revenue growth and margin improvement
Strong performance in upstream and subsea & pipelines
Continued order book strength and good bidding pipeline
Wood Group PSN
Good activity levels in the North Sea
Improved geographic coverage
First half benefitting from strong performance in the US, held back by start
up delays in Australia and Oman
Integration progressing well and strong second half performance anticipated
GTS
Maintenance EBITA up over 20%
Power Solutions contracts progressing well
Strong growth in 2011 expected from improved Maintenance performance and good
contribution from Power Solutions in the second half
In their half year report, Sir Ian Wood, Chairman, and Allister Langlands,
Chief Executive, of Wood Group, state:
"The Group has delivered good growth in the first half and anticipates that
full year performance will be in line with expectations.
"The first half of 2011 has been a period of exciting change for the Group as
we completed our strategic repositioning to focus on world leading positions
in engineering, production facilities support and gas turbine services.
Following the acquisition of PSN, the disposal of the Well Support division
and the return of cash to shareholders, we are well positioned to deliver good
longer term growth.
"Market conditions have continued to improve during the period with global
exploration & production spending forecast to increase in 2011 and 2012.
Despite the recent volatility in financial and commodity markets, we continue
to see good momentum across our business.
"The longer term fundamentals for oil & gas development & production, and gas
fired power generation remain strong. Reflecting continuing confidence in our
longer term outlook, we have declared a 15% increase in the interim dividend."
Information:
Wood Group
Alan Semple 01224 851 000
Nick Gilman
Andrew Rose
Carolyn Smith
Brunswick
Patrick Handley 020 7404 5959
Nina Coad
Notes
For footnotes see page 20
Interim Statement
Introduction
The first half of 2011 has been a period of exciting change for the Group as
we completed our strategic repositioning to focus on leading positions in
engineering, production facilities support and gas turbine services. In April,
we completed the acquisition of PSN for a consideration of $1.0bn and the
disposal of the Well Support division for $2.8bn. We also announced our
intention to return cash to shareholders following the Well Support disposal.
In June, we announced the results of our tender offer and details of the B/C
share scheme to complete arrangements to return cash to shareholders of
£1.1bn.
In Engineering, we entered the year with a strong order book and have seen
good revenue growth and margin improvement. Wood Group PSN was formed by the
merger of Wood Group Production Facilities with PSN and has delivered good
revenue growth. Integration is progressing well and we are successfully
working towards delivering expected synergies. In GTS, we have seen an
improved Maintenance performance and are increasingly confident of a strong
contribution from Power Solutions in the second half.
Market conditions have continued to improve during the period with global
exploration & production ("E&P") spending in 2011 forecast to be up by over
10% on 2010. The group has delivered good growth in the first half and
anticipates that full year performance will be in line with expectations. The
longer term fundamentals for oil & gas development & production, and gas fired
power generation remain strong. Overall, we believe the refocused Group is
well positioned to deliver good longer term growth.
Trading Performance
Interim Interim
June 2011 June 2010
$m $m Change
Total revenue 2,828.8 2,409.7 17%
Revenue from continuing operations 2,481.8 1,959.7 27%
Total EBITA 192.0 153.3 25%
EBITA from continuing operations 133.6 99.8 34%
Total EBITA margin % 6.8% 6.4% 0.4% pts
Continuing operations EBITA margin % 5.4% 5.1% 0.3% pts
Profit from continuing operations before tax
and exceptional items 102.4 68.8 49%
exceptional items
Basic EPS (cents) 444.0 15.8 n/m
Adjusted diluted EPS3 (cents) 25.2 17.4 45%
Note: Total revenue and EBITA figures represent the sum of the Group's
continuing operations and Well Support activity up to the date of disposal.
Continuing operations revenue and EBITA figures include the results of PSN
since acquisition.
Total revenue increased by 17% and total EBITA was up 25%. Revenue from
continuing operations increased by 27% in the first half reflecting a strong
increase in activity across all three divisions and the inclusion of PSN
results from 20 April. EBITA from continuing operations increased by 34% to
$133.6m. Continuing operations EBITA margin ("margins") increased by 0.3
percentage points. The margin movement reflects improved margins in
Engineering, and the high margin contribution of PSN during the period since
acquisition, partially offset by lower margins in GTS due to the second half
weighting of Power Solutions profit recognition in 2011.
Adjusted diluted EPS increased by 45% to 25.2 cents, largely as a result of
the increased EBITA in the period, combined with lower net finance expense and
a lower effective tax rate.
Dividend
Reflecting continuing confidence in our longer term outlook, we have declared
a 15% increase in the interim dividend to 3.9 cents (2010: 3.4 cents). The
dividend will be paid on 24 September 2011 to shareholders on the Register at
2 September 2011.
Markets
Conditions in oil & gas markets continued to improve in the first half and
commodity prices remained strong. Despite the recent volatility in financial
and commodity markets, we continue to see good momentum across our business.
We are seeing improved activity levels in our engineering business and we are
encouraged by forecasts of increased E&P spend in 2011 and 2012 of more than
10% per annum. It is expected that the number of oil & gas installations will
continue to grow and, as installations and reservoirs mature, the market for
our brownfield production support services will expand as operators
increasingly focus on asset integrity, process safety, operational assurance
and production enhancement.
Economic conditions for power customers remain relatively weak in Europe and
North America but we anticipate some improvement in outlook for our
Maintenance services. The longer term growth in global energy demand,
relatively favourable gas prices, and environmental considerations continue to
support the longer term market for gas fired power generation.
Divisional highlights
Engineering
We offer a broad range of engineering services to the upstream; subsea,
pipeline and midstream; and downstream, process and industrial sectors. These
include conceptual studies, engineering, project and construction management,
automation projects and control systems upgrades.
Interim Interim
June 2011 June 2010
$m $m Change
Revenue 688.5 595.5 16%
EBITA 72.5 57.9 25%
EBITA margin % 10.5% 9.7% 0.8% pts
People1 8,000 6,600 21%
Revenue increased by 16%. We entered the year with order book at the higher
end of our typical range due to increased bidding volumes during the second
half of 2010. This contributed to good growth in activity in upstream and
subsea & pipelines during the period, partially offset by a slight reduction
in downstream. EBITA increased 25% in the period with margin increasing from
9.7% to 10.5%. The margin movement principally reflected higher volumes,
together with slightly improved utilisation and pricing.
Headcount increased from 6,600 to 8,000 primarily as a result of increased
activity levels in upstream and subsea & pipelines, together with the addition
of around 300 people through the acquisitions of Dar E&C and PI Consult in
Saudi Arabia.
Upstream activity accounted for around 40% of Engineering revenue. Volumes
have increased, although we are still being impacted by delays in the
progression and sanctioning of certain projects by operators. We are active on
a number of projects including the Chevron Jack & St Malo topsides design in
the US Gulf of Mexico, the Noble Alen project in Equatorial Guinea and the
detailed design scope for the Hess Tioga gas plant expansion onshore US. The
Canadian oil sands market, where we are currently working on projects
including Cenovus Foster Creek, showed the strongest signs of recovery. In
Saudi Arabia, we were awarded a multi-year engineering services framework
agreement by Saudi Aramco. We also announced the establishment of a joint
venture in Malaysia, which has recently been awarded its first contracts.
Our subsea and pipeline business accounted for around 40% of Engineering
revenue and continues to perform well, most notably in Australia where we are
working on a number of projects including Chevron Gorgon and Woodside Browse.
We are currently working on over 20 major subsea projects globally, including
key projects for BP in Angola and Shell in Malaysia. We continued to be active
in our onshore pipelines business, particularly in the US shale regions.
Our downstream, process and industrial activities accounted for around 20% of
revenue. The market in the US remains soft, although we are beginning to see
some early signs of improvement.
Outlook
Our order book continues to be strong and we have a good bidding pipeline. We
continue to see opportunities for growth to broaden our international presence
and extend our services. Estimates of forecast E&P spend into 2012 and beyond
underpin our confidence in good longer term growth.
Wood Group PSN
We provide life of field support to producing assets through brownfield
engineering and modifications, production enhancement, operations and
maintenance, training and abandonment services on a reimbursable basis.
Interim Interim
June 2011 June 2010
$m $m Change
Revenue 1,296.9 976.0 33%
EBITA 65.1 49.2 32%
EBITA margin % 5.0% 5.0% -
People1 24,000 14,400 n/m
Revenue and EBITA include the results of PSN from the date of acquisition on
20 April 2011 to 30 June 2011, amounting to revenue of $274.4m and EBITA of
$24.6m.
Wood Group PSN was created through the merger of Wood Group Production
Facilities with PSN, to create the global market leader in brownfield
production facilities support, which now employs around 24,000 people
worldwide.
Revenue increased by 33% and EBITA increased by 32% in the period, principally
due to the post acquisition contribution of PSN. Financial performance in Wood
Group's Production Facilities business was held back by start up delays in
Australia and Oman, offset to some extent by a strong performance in the US.
A key driver for the acquisition of PSN was to further internationalise the
combined business. The North Sea remains our largest market, and accounted for
around 40%7 of revenue compared to 54% for Wood Group's Production Facilities
business in 2010. We are seeing good activity levels in the North Sea and
continue to be active for a range of clients on longer term contracts
including BP, Shell and Talisman. In June we also successfully extended our
contract with Taqa Bratani for a further 5 years.
North America accounted for around 30%7 of revenue. We are experiencing strong
demand for our US onshore services, particularly in the shale regions where we
have around 800 people. We are also seeing steady performance in the Gulf of
Mexico where we have recently been awarded the commissioning work for the Jack
& St. Malo development for Chevron. In Canada, the acquisition of PSN
positions us well in the offshore East coast market, where we are providing
services to Exxon's Hebron development.
We continue to increase our presence in international markets outside the
North Sea and North America, which represent around 30%7 of revenue. Australia
remains a key market for the division where we have a significant level of
resource and are working for Exxon in the Bass Strait and ENI in the Timor
Sea. Performance in Wood Group's Production Facilities business was held back
by start up delays in Australia and Oman. In Africa, we continue to be active
on contracts in Angola, Cameroon, Chad, Equatorial Guinea and Nigeria. In
Russia, we have recently extended our contract with SEIC in Sakhalin for a
further five years and, in Kazakhstan, we now have over 1,000 people working
for TengizChevroil and AGIP KCO.
Outlook
The integration of Wood Group Production Facilities and PSN is progressing
well. Management and reporting structures are in place and we are working
towards delivering expected synergies.
Performance in the North Sea and North America, and some improvement in
international markets should lead to a strong second half.
Wood Group PSN has an excellent track record in the key brownfield engineering
& construction and operations & maintenance segments. Looking forward, we
believe there will be opportunities to deliver high quality, high integrity
services in good long term growth markets as the industry increasingly focuses
on operational assurance, competency, reliability and asset integrity.
GTS
We are a leading provider of services and solutions for clients in the oil &
gas and power markets on a worldwide basis. Our aftermarket Maintenance
activities include facility operations & maintenance and repair & overhaul of
gas, wind and steam turbines, pumps and other high-speed rotating equipment.
Our Power Solutions business provides power plant engineering, procurement &
construction and construction management services to the owners of
power-generation facilities.
Interim Interim
June 2011 June 2010
$m $m Change
Revenue 480.5 371.2 29%
EBITA 22.5 20.1 12%
EBITA margin % 4.7% 5.4% (0.7% pts)
People1 3,400 3,400 -
Overall, revenue was up 29%. Maintenance revenue increased by 4% from $340m to
$355m. Power Solutions revenue increased from $31m to $125m reflecting good
progress on our EPC contracts with GWF and Dorad, which were both awarded in
the fourth quarter of 2010.
EBITA was up 12% in the period. Maintenance EBITA increased by over 20% due to
somewhat improved market conditions and the benefit of cost reduction measures
taken in 2010. Given the percentage completion of the Dorad and GWF contracts,
we did not recognise any Power Solutions profit in the first half. The
projects are progressing well and we are increasingly confident of a good
profit contribution in the second half.
Headcount remains unchanged, with the impact of cost reductions made in 2010
being offset by increased headcount in our Power Solutions business.
Demand for our Maintenance services in the oil & gas market providing support
for turbines used in power generation, gas compression and transmission,
remains robust. Performance in the period was impacted by downtime on certain
test cells leading to overhaul delays. We are confident of delivering an
improved performance in the second half.
Our power & industrial Maintenance activities, which provide support for
turbines used for power generation and industrial applications, saw a good
performance on some of our longer term contracts. We were also successful with
the award of various new longer term agreements including the Municipal
Utility District Financing Authority in Sacramento California, EGASA in Peru
and PlusPetrol in Argentina.
Outlook
We continue to anticipate a strong recovery for the year, with an improved
performance in our Maintenance business and the timing of profit recognition
in Power Solutions resulting in a significant second half weighting.
Economic conditions for power customers remain relatively weak in Europe and
North America but we anticipate some improvement in outlook for our
Maintenance services. In Power Solutions, we have good visibility on work into
2012 and 2013 and are actively pursuing further opportunities to add to our
order book. The longer term growth in global energy demand, relatively
favourable gas prices, and environmental considerations continue to support
the longer term market for gas fired power generation.
Well Support
Interim Interim
June 2011 June 2010
$m $m
Revenue 347.0 450.0
EBITA 58.4 53.5
EBITA margin % 16.8% 11.9%
People1 - 3,700
Well Support continued to perform strongly up to the date of disposal on 26
April, generating EBITA of $58.4m from revenue of $347.0m.
Financial Review
Financial performance
Interim Interim Full Year
June 2011 June Dec 2010
$m 2010 $m
$m
Total revenue 2,828.8 2,409.7 5,063.1
Well Support revenue (347.0) (450.0) (947.1)
Revenue from continuing operations 2,481.8 1,959.7 4,116.0
Total EBITA 192.0 153.3 344.8
Well Support EBITA (58.4) (53.5) (128.1)
EBITA from continuing operations 133.6 99.8 216.7
Total EBITA margin 6.8% 6.4% 6.8%
EBITA margin from continuing operations 5.4% 5.1% 5.3%
Amortisation (26.9) (14.0) (29.0)
Operating profit from continuing
operations before exceptional items 106.7 85.8 187.7
Net finance expense (4.3) (17.0) (34.0)
Profit from continuing operations before
tax and exceptional items 102.4 68.8 153.7
Taxation on continuing operations before (30.2) (22.0) (56.9)
exceptional items
Profit for the period from continuing 72.2 46.8 96.8
operations before exceptional items
Profit from discontinued operations, net 36.7 34.4 90.4
of tax
Profit for the period before exceptional 108.9 81.2 187.2
items
Exceptional items, net of tax 2,154.0 - (21.4)
Profit for the period 2,262.9 81.2 165.8
Basic EPS (cents) 444.0 15.8 32.4
Adjusted diluted EPS (cents) 25.2 17.4 39.7
The results for the first six months have been impacted by the acquisition of
PSN on 20 April 2011 and the disposal of the Well Support division on 26 April
2011. The review of our trading performance is contained within the Divisional
commentary above.
The amortisation charge for the half year of $26.9m includes $17.1m (30 June
2010: $4.9m) of amortisation relating to other intangible assets arising from
acquisitions, of which $11.8m is in relation to the PSN acquisition. The other
intangible asset recognised in relation to the acquisition of PSN was $194.5m
and will be amortised over a period of 5 years. The expected charge for the
eight months post acquisition in 2011 is around $47.0m and for the full year
2012 is $49.0m. We continue to regard the amortisation charge relating to
intangible assets arising from acquisitions to be a relatively subjective
measure, and as a result continue to believe that performance is best measured
excluding this figure. This is the reason our key reporting measures for
profit and earnings per share exclude the impact of amortisation.
The net continuing finance expense before exceptional items in the first half
of $4.3m is analysed further below:
Interim Interim Full year
June 2011 June 2010 Dec 2010
$m $m $m
Interest on debt 5.3 10.8 20.0
Non utilisation fees 1.5 2.7 5.1
Non cash charges on pension and
deferred consideration 0.3 1.0 1.8
Bank fees and charges 0.4 3.4 8.9
Total finance charge 7.5 17.9 35.8
Finance income (3.2) (0.9) (1.8)
Net continuing finance expense 4.3 17.0 34.0
before exceptional items
Interest cover, based on EBITA from continuing operations, is strong at 31.1
times (30 June 2010: 5.9 times).
The effective tax rate on continuing operations was 29.5% (30 June 2010:
29.9%).
Interim Interim Full year
June 2011 June 2010 Dec 2010
$m $m $m
Underlying tax charge 35.2 22.0 56.9
Credit in relation to deferred tax on
amortisation of other intangible (5.0) - -
assets (a)
Tax charge per financial statements 30.2 22.0 56.9
Profit from continuing operations 102.4 68.8 153.7
before tax and exceptional items
Add other intangible assets - 4.9 10.5
amortisation (a)
Adjusted profit 102.4 73.7 164.2
Effective tax rate on continuing
operations before exceptional items 29.5% 29.9% 34.7%
A tax credit has been recognised on the amortisation of other intangible
assets during 2011, therefore the adjustment to profit before tax shown for
2010 is no longer required.
The higher effective rate on continuing operations for the full year 2010
relates primarily to unrecognised tax losses. Without these, the underlying
rate would have been around 30%.
Adjusted diluted EPS for the six months to 30 June 2011 increased by 45% to
25.2c, largely as a result of the increased EBITA in the period, combined with
lower net finance expense and a lower effective tax rate.
Exceptional Items
In the period the Group recorded a post tax exceptional gain of $2,154.0m. A
pre tax gain of $2,267.2m was generated in relation to the disposal of our
Well Support division, on which tax of $77.5m was payable. This amount was
offset by pre tax exceptional charges of $22.9m in relation to a receivable in
Libya and $23.0m for the acquisition, subsequent integration and associated
bank fees in respect of the PSN transaction, on which tax credits of $10.2m
have been recognised. Further details are provided in Note 3 to the interim
financial statements.
Costs in relation to the return of cash to shareholders of $14.5m were
incurred and a foreign exchange loss of $28.8m arose on the sterling balances
held in anticipation of the return of cash and these have been taken directly
to equity.
Return of cash and share consolidation
In February 2011 we announced that, following the completion of the
acquisition of PSN and the disposal of our Well Support Division to GE, we
intended to make a return of cash to shareholders of not less than $1.7bn. In
May 2011 we announced that the Board had decided that the most appropriate
process for effecting the return of cash was, in the first instance, a tender
offer of up to £1.1bn, followed by a subsequent B/C share scheme.
At the close of the tender offer on 2 June 2011, 65.9m Wood Group shares,
representing approximately 12.2 % of the issued ordinary share capital, had
been tendered and were purchased by the Group at a price of 625 pence per
share, for a total value of £411.9m. Following completion of the tender offer,
the Company announced that it would complete the return of cash through a
return of 140 pence per share to all shareholders on the register on 1 July
2011. The return was made through a B/C share scheme, which was substantially
completed on 4 July 2011.
At the date of this report we have successfully completed the return of
£1.1bn, with a further £4.7m expected to be returned when the B shares issued
pursuant to the deferred capital option under the B/C share scheme are
redeemed in April 2012.
Concurrent with the B/C Share Scheme, the Company undertook a share capital
consolidation. The purpose of the share capital consolidation was to seek to
ensure that, subject to market fluctuations, the market price of Wood Group
ordinary shares immediately following the B/C share issue was approximately
the same as the market price immediately beforehand. The share capital
consolidation should also allow historical and future financial information in
relation to the Company to be compared on a per-share basis before and after
the B/C share scheme.
The amount returned under the B/C share scheme represented approximately 21.9
% of the Company's market capitalisation on 10 June 2011. As a result of the
share capital consolidation, the number of ordinary shares in issue has been
reduced by a broadly equivalent percentage, shareholders having received 7 new
ordinary shares for every 9 existing ordinary shares held. Following the
cancellation of the ordinary shares purchased under the tender offer, there
were 474.9m ordinary shares in issue at the close of trading on 1 July 2011.
On 4 July 2011, following the completion of the share capital consolidation,
there were 369.4m new ordinary shares in issue.
The weighted average number of fully diluted shares in the six months to 30
June 2011 was 526.9m. As the consolidation took place after 30 June 2010 it
has no impact on the current period but the table below sets out the
anticipated impact on the full year 2011 weighted average number of shares.
Analysis of movements in ordinary shares
Closing Weighted Average Anticipated Anticipated
30 June 2011 30 June 2011 Weighted Closing
All figures are in million Average
shares FY 2011 FY 2011
Ordinary shares - opening 530.3 530.3 530.3 530.3
balance
PSN acquisition 10.5 4.1 7.3 10.5
Tender offer (65.9) (10.6) (38.5) (65.9)
B/C share and consolidation - - (52.8) (105.5)
Ordinary shares - closing 474.9 523.8 446.3 369.4
balance
Shares held by employee share (11.6) (14.2) (11.5) (9.0)
trusts
Basic shares for EPS purposes 463.3 509.6 434.8 360.4
Effect of dilutive shares 13.9 17.3 15.5 13.9
477.2 526.9 450.3 374.3
Fully diluted shares for EPS
purposes
Note - The anticipated numbers above assume that there are no further changes
to the capital structure of the Group, that no further dilutive options are
issued and that the share price remains at 30 June 2011 levels.
Adjusted diluted EPS of 25.2 cents for the period is calculated by taking
total profit for the period attributable to the owners of the parent of
$2,262.7m less exceptional items net of tax of $2,154.0m plus amortisation net
of tax of $23.9m to give adjusted earnings of $132.6m, and dividing this by
the fully diluted weighted average number of shares in the period of 526.9m.
Cash flow and net debt
Interim Interim Full year
June 2011 $m June 2010 $m Dec 2010
$m
Opening net debt (15.1) (87.9) (87.9)
Cash generated from operations
217.8 191.3 421.9
pre working capital
Working capital movements (87.7) (80.4) 23.5
(excluding Well Support)
Working capital movements related (77.6) (9.7) (42.9)
to Well Support
Cash generated from operations 52.5 101.2 402.5
Acquisitions and capex (989.4) (91.3) (146.6)
Disposals 2,745.9 - -
Return of cash to shareholders (681.0) - -
Tax paid (58.5) (48.8) (99.3)
Interest, dividends and other (37.7) (65.1) (89.9)
Exchange movements on net debt (31.6) 11.8 6.1
Decrease/(increase) in net debt 1,000.2 (92.2) 72.8
Closing net cash / (debt) 985.1 (180.1) (15.1)
The funding position of the Group has been impacted significantly in the first
half of the year by the acquisition of PSN, the disposal of Well Support and
the tender offer. Throughout the period the Group has maintained a level of
core gross debt as set out below.
Interim Interim Full Year
June 2011 June 2010 Dec 2010
$m $m $m
Average gross (debt) (282.9) (382.8) (364.3)
Closing net cash / (debt) 985.1 (180.1) (15.1)
The return of cash to shareholders in July 2011 resulted in an outflow of
$1,075.1m which, together with other adjustments in relation to the completion
of the Well Support disposal, would result in adjusted pro forma net debt of
around $125m at 30 June 2011.
Cash generated from operations pre working capital increased by $26.5m to
$217.8m. The working capital outflows of $87.7m and $77.6m (2010: $80.4m and
$9.7m) shown above were due primarily to the impact of seasonally reduced
working capital at December 2010, combined with higher activity compared to
the second half of 2010. The Well Support disposal structure includes a
working capital adjustment mechanism. It is anticipated that the working
capital position will improve in the second half, and that the refocused Group
will be less working capital intensive.
Cash paid in relation to acquisitions, primarily the PSN acquisition, totalled
$929.4m (30 June 2010: $16.3m), deferred consideration paid in respect of
prior period acquisitions decreased to $9.2m (30 June 2010: $42.2m) and
payments for capex and intangible assets increased to $50.8m (30 June 2010:
$32.8m).
The reduction in tax, interest, dividend and other largely relates to the
purchase of shares by the employee share trust in the first half of 2010,
offset by higher tax and dividend payments in the first half of 2011.
In February 2011, the Group renegotiated its $800m bilateral borrowing
facilities which has resulted in lower pricing.
Gearing and capital efficiency
Due to the significant changes in the Group structure during the first 6
months of 2011 comparison with prior periods is not meaningful.
Foreign exchange and constant currency reporting
The Group's revenue and EBITA can be impacted by movements in foreign exchange
rates, including the effect of retranslating the results of subsidiaries with
various functional currencies into US dollars at different exchange rates.
Movements in the average US dollar rate to other major currencies in which we
operate between the first half of 2010 and the first half of 2011, would have
had the impact of reducing the growth in total EBITA for the Group by
approximately 5% or $5m on a constant currency basis.
Group Outlook
The Group has delivered good growth in the first half and anticipates that
full year performance will be in line with expectations.
The first half of 2011 has been a period of exciting change for the Group as
we completed our strategic repositioning to focus on world leading positions
in engineering, production facilities support and gas turbine services.
Following the acquisition of PSN, the disposal of the Well Support division
and the return of cash to shareholders, we are well positioned to deliver good
longer term growth.
Market conditions have continued to improve during the period with global
exploration & production spending forecast to increase in 2011 and 2012.
Despite the recent volatility in financial and commodity markets, we continue
to see good momentum across our business and the longer term fundamentals for
oil & gas development & production, and gas fired power generation remain
strong.
Sir Ian Wood
Chairman
Allister G Langlands
Chief Executive
23 August 2011
***********************
Footnotes
1 Number of people includes both employees and contractors at 30 June.
2 Total EBITA represents operating profit from continuing operations pre
exceptional items of $106.7m (2010: $85.8m) before the deduction of
amortisation of $26.9m (2010: $14.0m) and including Well Support EBITA of
$58.4m (2010: $53.4m) and EBITA is provided as it is a key unit of measurement
used by the Group in the management of its business.
3 Adjusted diluted earnings per share is calculated by dividing earnings
before exceptional items and amortisation, net of tax, by the weighted average
number of ordinary shares in issue during the period, excluding shares held by
the Group's employee share ownership trusts and adjusted to assume conversion
of all potentially dilutive ordinary shares.
4 Interest cover is EBITA from continuing operations divided by the net
continuing finance expense.
5 Unless stated otherwise, comparisons of financial performance are between
the six months to 30 June 2011 and the six months to 30 June 2010.
6 Total revenue and total EBITA are the sum of the Group's continuing
operations and the activity of the Well Support business up to the date of
disposal. These are non-GAAP measures. Continuing operations revenue and EBITA
figures include the results of PSN since acquisition.
7 Annualised geographical revenue split based on annualised Wood Group PSN
figures.
John Wood Group PLC
Interim Financial Statements 2011
John Wood Group PLC
Group income statement
for the six month period to 30 June 2011
Unaudited Interim June Unaudited Interim June Audited Full Year December
2011 2010 2010
Pre- Pre- Pre-
except- Except- except- Except- except- Except-
Note ional ional Total ional ional Total ional ional Total
items items $m items items $m items items $m
$m $m $m $m $m $m
Revenue from 2 2,481.8 - 2,481.8 1,959.7 - 1,959.7 4,116.0 - 4,116.0
continuing operations
Cost of sales (2,032.5) - (2,032.5) (1,587.0) - (1,587.0) (3,360.7) - (3,360.7)
Gross profit 449.3 - 449.3 372.7 - 372.7 755.3 - 755.3
Administrative (342.6) (42.1) (384.7) (286.9) - (286.9) (567.6) (27.6) (595.2)
expenses
Operating profit 2 106.7 (42.1) 64.6 85.8 - 85.8 187.7 (27.6) 160.1
Finance income 3.2 - 3.2 0.9 - 0.9 1.8 - 1.8
Finance expense (7.5) (3.8) (11.3) (17.9) - (17.9) (35.8) - (35.8)
Profit before taxation
from continuing 102.4 (45.9) 56.5 68.8 - 68.8 153.7 (27.6) 126.1
operations
Taxation 9 (30.2) 10.2 (20.0) (22.0) - (22.0) (56.9) 6.2 (50.7)
Profit for the period 72.2 (35.7) 36.5 46.8 - 46.8 96.8 (21.4) 75.4
from continuing
operations
Profit from 36.7 2,189.7 2,226.4 34.4 - 34.4 90.4 - 90.4
discontinued
operations, net of tax
Profit for the period 108.9 2,154.0 2,262.9 81.2 - 81.2 187.2 (21.4) 165.8
Equity attributable to
owners of the parent:
Owners of the parent 108.7 2,154.0 2,262.7 81.1 - 81.1 187.4 (21.4) 166.0
Non-controlling 0.2 - 0.2 0.1 - 0.1 (0.2) - (0.2)
interests
108.9 2,154.0 2,262.9 81.2 - 81.2 187.2 (21.4) 165.8
Earnings per share
(expressed in cents
per share)
Basic 8 21.3 422.7 444.0 15.8 - 15.8 36.6 (4.2) 32.4
Diluted 8 20.6 408.8 429.4 15.3 - 15.3 35.4 (4.1) 31.3
Results of discontinued operations represent the post-tax profits of the Well
Support division which was divested on 26 April 2011 together with the
post-tax gain on divestment.
John Wood Group PLC
Group statement of comprehensive income
for the six month period to 30 June 2011
Unaudited Unaudited Audited
Interim Interim Full Year
June June December
2011 2010 2010
$m $m $m
Profit for the period 2,262.9 81.2 165.8
Other comprehensive income
Actuarial gains on retirement benefit liabilities - - 1.0
Movement in deferred tax relating to retirement - - (0.3)
benefit liabilities
Cash flow hedges 7.1 1.1 3.3
Net exchange movements on retranslation of 12.7 (13.5) 3.1
foreign currency net assets
Total comprehensive income for the period 2,282.7 68.8 172.9
Total comprehensive income for the period is
attributable to:
Owners of the parent 2,282.3 69.1 172.8
Non-controlling interests 0.4 (0.3) 0.1
2,282.7 68.8 172.9
John Wood Group PLC
Group balance sheet
as at 30 June 2011
Unaudited Unaudited Audited
Interim Interim Full Year
June June December
2011 2010 2010
Note $m $m $m
Assets
Non-current assets
Goodwill and other intangible assets 5 1,694.0 662.3 677.5
Property plant and equipment 146.7 247.5 238.2
Long term receivables 42.4 6.6 43.4
Derivative financial instruments 3.5 0.3 0.1
Deferred tax assets 70.7 61.9 100.2
1,957.3 978.6 1,059.4
Current assets
Inventories 416.2 649.2 663.8
Trade and other receivables 1,246.5 1,034.5 1,050.8
Income tax receivable 13.9 36.0 25.2
Derivative financial instruments 4.0 2.3 1.2
Cash and cash equivalents 13 1,186.8 131.7 180.1
2,867.4 1,853.7 1,921.1
Liabilities
Current liabilities
Borrowings 13 29.2 33.0 30.1
Derivative financial instruments 1.3 2.7 0.3
Trade and other payables 1,218.3 1,027.7 1,139.5
Income tax liabilities 130.1 50.2 60.8
1,378.9 1,113.6 1,230.7
Net current assets 1,488.5 740.1 690.4
Non-current liabilities
Borrowings 13 172.5 278.8 165.1
Derivative financial instruments 2.1 2.9 2.7
Deferred tax liabilities 63.5 7.2 2.3
Retirement benefit liabilities 10 25.3 32.7 33.3
Other non-current liabilities 86.4 39.8 82.0
Provisions 29.3 50.1 47.2
379.1 411.5 332.6
Net assets 3,066.7 1,307.2 1,417.2
Equity attributable to owners of the
parent
Share capital 23.3 26.3 26.3
Share premium 321.8 315.8 315.8
Retained earnings 2,516.2 917.2 1,007.6
Other reserves 194.2 38.5 56.6
3,055.5 1,297.8 1,406.3
Non-controlling interests 11.2 9.4 10.9
Total equity 3,066.7 1,307.2 1,417.2
John Wood Group PLC
Group statement of changes in equity
for the six month period to 30 June 2011
Equity
attributable Non-
Share Share Retained Other to owners of controlling Total
Capital Premium Earnings Reserves the parent interests Equity
Note $m $m $m $m $m $m $m
At 1 January 2010 26.3 315.8 877.6 50.5 1,270.2 10.8 1,281.0
Profit for the period - - 81.1 - 81.1 0.1 81.2
Other
comprehensive
income:
Cash flow hedges - - - 1.1 1.1 - 1.1
Net exchange - - - (13.1) (13.1) (0.4) (13.5)
movements on
retranslation of
foreign currency
net assets
Total comprehensive - - 81.1 (12.0) 69.1 (0.3) 68.8
income for the period
Transactions with owners:
Dividends paid 4 - - (35.7) - (35.7) (1.1) (36.8)
Credit relating to 14 - - 7.8 - 7.8 - 7.8
share based charges
Shares purchased by - - (20.5) - (20.5) - (20.5)
employee share trusts
Shares disposed of by - - 3.1 - 3.1 - 3.1
employee share trusts
Exchange movements in - - 3.8 - 3.8 - 3.8
respect of shares held by
employee share trusts
At 30 June 2010 26.3 315.8 917.2 38.5 1,297.8 9.4 1,307.2
At 1 January 2011 26.3 315.8 1,007.6 56.6 1,406.3 10.9 1,417.2
Profit for the period - - 2,262.7 - 2,262.7 0.2 2,262.9
Other comprehensive
income:
Cash flow hedges - - - 7.1 7.1 - 7.1
Net exchange movements - - - 12.5 12.5 0.2 12.7
on retranslation of foreign
currency net assets
Total comprehensive - - 2,262.7 19.6 2,282.3 0.4 2,282.7
income for the period
Transactions with owners:
Dividends paid 4 - - (39.3) - (39.3) (0.2) (39.5)
Credit relating to share 14 - - 2.2 - 2.2 - 2.2
based charges
Shares disposed of by - - 9.9 - 9.9 - 9.9
employee share trusts
Exchange movements in - - (1.9) - (1.9) - (1.9)
respect of shares held by
employee share trusts
Shares issued in respect 5 0.6 - - 114.4 115.0 - 115.0
of the PSN acquisition
Purchase of shares under 7 (3.6) - (675.7) 3.6 (675.7) - (675.7)
tender offer
Expenses relating to return 7 - - (43.3) - (43.3) - (43.3)
of cash to shareholders
Adjustment relating to - 6.0 (6.0) - - - -
options exercised under
share symmetry scheme
Non-controlling interests - - - - - 0.4 0.4
arising on business
combinations
Purchase of non- - - - - - (0.3) (0.3)
controlling interests
At 30 June 2011 23.3 321.8 2,516.2 194.2 3,055.5 11.2 3,066.7
The figures presented in the above tables are unaudited.
Other reserves include the capital redemption reserve, capital reduction
reserve, merger reserve, currency translation reserve and the hedging reserve.
The capital redemption reserve was credited with $3.6m during the period as a
result of the purchase of shares under the tender offer. The merger reserve
was credited during the period with $114.4m as a result of the issue of shares
as part of the PSN acquisition.
John Wood Group PLC
Group cash flow statement
for the six month period to 30 June 2011
Unaudited Unaudited Audited
Interim Interim Full Year
June 2011 June 2010 December
2010
Note $m $m $m
Cash generated from operations 12 52.5 101.2 402.5
Tax paid (58.5) (48.8) (99.3)
Net cash (used in)/from operating activities (6.0) 52.4 303.2
Cash flows from investing activities
Acquisition of subsidiaries (net of cash and 5 (917.4) (16.3) (20.9)
borrowings acquired)
Deferred consideration payments (9.2) (42.2) (47.7)
Proceeds from divestment of subsidiaries 6 2,745.9 - -
(net of cash and borrowings divested and
divestment costs)
Cash impact of exceptional items (11.2) - (8.0)
Purchase of property plant and equipment (38.0) (26.4) (54.4)
Proceeds from sale of property plant and 1.0 2.7 5.6
equipment
Purchase of intangible assets (12.8) (6.4) (15.6)
Proceeds from disposal of other intangible 0.6 - -
assets
Purchase of non-controlling interests (0.8) - -
Investment by non-controlling interests - - 0.8
Net cash from/(used in) investing activities 1,758.1 (88.6) (140.2)
Cash flows from financing activities
(Repayment of)/proceeds from bank loans (1.6) 30.1 (97.3)
Purchase of shares under tender offer 7 (675.7) - -
Expenses relating to return of cash to (5.3) - -
shareholders
Purchase of shares in employee share trusts - (21.8) (22.1)
Disposal of shares in employee share trusts 9.9 3.1 6.3
Interest received 2.5 1.2 2.3
Interest paid (12.2) (13.5) (28.6)
Dividends paid to shareholders 4 (39.3) (35.7) (53.1)
Dividends paid to non-controlling interests (0.2) (1.1) (1.1)
Net cash used in financing activities (721.9) (37.7) (193.6)
Net increase/(decrease) in cash and cash 1,030.2 (73.9) (30.6)
equivalents
Effect of exchange rate changes on cash and (23.5) (3.0) 2.1
cash equivalents
Opening cash and cash equivalents 180.1 208.6 208.6
Closing cash and cash equivalents 1,186.8 131.7 180.1
John Wood Group PLC
Notes to the interim accounts
for the six month period to 30 June 2011
1. Basis of preparation
The interim report and accounts for the six months ended 30 June 2011 has been
prepared in accordance with the Disclosure and Transparency Rules of the
Financial Services Authority and with IAS 34 `Interim financial reporting' as
adopted by the European Union. The interim report and accounts should be read
in conjunction with the Group's 2010 Annual Report and Accounts which have
been prepared in accordance with IFRSs as adopted by the European Union.
The interim report and accounts have been prepared on the basis of the
accounting policies set out in the Group's 2010 Annual Report and Accounts and
those new standards discussed below which are applicable from 1 January 2011.
The interim report and accounts do not comprise statutory accounts within the
meaning of section 434 of the Companies Act 2006. The interim accounts were
approved by the Board of Directors on 22 August 2011. The results for the six
months to 30 June 2011 and the comparative results for six months to 30 June
2010 are unaudited. The comparative figures for the year ended 31 December
2010 do not constitute the statutory financial statements for that year. Those
financial statements have been delivered to the Registrar of Companies and
include the auditor's report which was unqualified and did not contain any
statement under Section 498 of the Companies Act 2006.
After making enquiries, the directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future.
The Group therefore continues to adopt the going concern basis in preparing
the consolidated interim financial statements.
Functional 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's financial statements are therefore prepared in US
dollars.
The following exchange rates have been used in the preparation of these
accounts:
June 2011 June 2010
Average rate £1 = $ 1.6150 1.5243
Closing rate £1 = $ 1.6055 1.5189
Disclosure of impact of new and future accounting standards
Amended standards and interpretations not relevant to the Group
The following revisions and amendments to standards and interpretations are
mandatory as of 1 January 2011 but are currently not relevant to the Group and
have no impact to the Group's interim financial statements:
IAS 24 (revised) "Related party disclosures"
Amendments to IAS 32 Financial instruments: Presentation on classification of
rights issues
Amendment to IFRS 1, First time adoption on financial instruments disclosures
Amendment to IFRIC 14, "Pre-payments of a Minimum Funding Requirement"
IFRIC 19, "Extinguishing financial liabilities with equity instruments"
Standards, amendments and interpretations to existing standards that are not
yet effective and have not been early adopted by the Group
The following standards and amendments and interpretations to existing
standards have been published and are mandatory for the Group's accounting
periods beginning on or after 1 January 2012 or later periods, but the Group
has not early adopted them:
IFRS 9, 'Financial instruments'
IFRS 10, 'Consolidated financial statements'
IFRS 11, 'Joint arrangements'
IFRS 12, 'Disclosures of interests in other entities'
IFRS 13, 'Fair value measurement'
IAS 19 (revised 2011) 'Employee benefits'
IAS 27 (revised 2011) 'Separate financial statements'
IAS 28 (revised 2011) 'Associates and joint ventures'
The Group is currently assessing the impact that the new standards and
amendments may have to the Group's financial statements.
2. Segmental reporting
The segment information provided to the Chief Operating Decision Maker for the
reportable operating segments for the period included the following:
Business segments
Revenue EBITDA (2) EBITA (2) Operating profit
Un- Un- Audited Un- Un- Audited Un- Un- Audited Un- Un- Audited
audited audited Full audited audited Full audited audited Full audited audited Full
Interim Interim Year Interim Interim Year Interim Interim Year Interim Interim Year
June June 2010 June June 2010 June June 2010 June June 2010
2011 2010 2011 2010 2011 2010 2011 2010
$m $m $m $m $m $m $m $m $m $m $m $m
Engineering 688.5 595.5 1,239.1 76.7 62.4 130.2 72.5 57.9 122.0 42.1 50.2 106.0
Wood Group 1,296.9 976.0 2,041.1 70.5 53.9 112.2 65.1 49.2 101.4 30.0 46.1 88.6
PSN (3)
Gas Turbine 480.5 371.2 804.9 28.1 27.0 60.0 22.5 20.1 46.1 19.7 17.2 18.8
Services
Central costs (4) - - - (24.8) (24.7) (48.1) (26.2) (26.0) (50.8) (26.9) (26.3) (51.3)
Gas Turbine 15.9 17.0 30.9 (0.3) (1.2) (1.6) (0.3) (1.4) (2.0) (0.3) (1.4) (2.0)
Services - to be
divested (5)
Well Support - 347.0 450.0 947.1 70.0 69.9 165.9 58.4 53.5 128.1 58.4 53.5 128.1
divested (7)
Total (6) 2,828.8 2,409.7 5,063.1 220.2 187.3 418.6 192.0 153.3 344.8 123.0 139.3 288.2
Remove Well (347.0) (450.0) (947.1) (70.0) (69.9) (165.9) (58.4) (53.5) (128.1) (58.4) (53.5) (128.1)
Support (7)
Total 2,481.8 1,959.7 4,116.0 150.2 117.4 252.7 133.6 99.8 216.7 64.6 85.8 160.1
continuing
Finance 3.2 0.9 1.8
income
Finance (11.3) (17.9) (35.8)
expense
Profit before 56.5 68.8 126.1
taxation from
continuing
operations
Taxation (20.0) (22.0) (50.7)
Profit for the 36.5 46.8 75.4
period from
continuing
operations
Profit from 2,226.4 34.4 90.4
discontinued
operations
Profit for the 2,262.9 81.2 165.8
period
Notes
Following the acquisition of PSN and the divestment of the Well Support
division the Group's reportable segments are now Engineering, Wood Group PSN
and Gas Turbine Services. Management considers these segments to be the most
appropriate in light of the change in the structure of the Group.
Total continuing EBITDA represents operating profit of $64.6m (2010 : $85.8m)
before continuing depreciation of property, plant and equipment of $16.6m
(2010 : $17.6m) , amortisation of $26.9m (2010 : $14.0m) and continuing
exceptional items of $42.1m (2010 : nil) . Well Support depreciation includes
$1.8m (2010 : $2.8m) of rental inventory depreciation. 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.
The results of Wood Group PSN include the trading activity of PSN from the
date of acquisition, 20th April 2011 to 30th June 2011.
Central costs include the costs of certain management personnel in both the UK
and the US, along with an element of Group infrastructure costs. Certain
foreign exchange gains and losses are also included within central costs.
The GTS business to be divested is an Aero engine overhaul company which the
Group has decided to dispose of.
Figures on the total row are the sum of continuing activity and Well Support
activity up to the date of disposal excluding the gain on divestment.
The results of the Well Support division represent the trading activity of
that division from 1st January 2011 to 26th April 2011, the date the division
was divested.
Revenue arising from sales between segments is not material.
2. Segmental reporting (continued)
Segment assets Unaudited Unaudited Audited
Interim Interim Full Year
June June December 2010
2011 2010
$m $m $m
Engineering 735.3 566.1 604.9
Wood Group PSN 2,000.2 742.5 740.8
Gas Turbine Services 883.4 878.9 857.1
Well Support - 594.8 636.1
Gas Turbine Services - to be divested 28.3 24.8 23.0
Unallocated 1,177.5 25.2 118.6
4,824.7 2,832.3 2,980.5
Unallocated segment assets includes cash, income tax and deferred tax balances.
3. Exceptional items
Unaudited Unaudited Audited
Interim Interim Full Year
June 2011 June 2010 December 2010
$m $m $m
Exceptional items included in continuing operations
Acquisition costs 9.5 - 6.6
Integration and restructuring charge 9.7 - 21.0
Political disruption in North Africa 22.9 - -
42.1 - 27.6
Bank fees relating to PSN acquisition 3.8 - -
45.9 - 27.6
Taxation (10.2) - (6.2)
35.7 - 21.4
Exceptional items included in discontinued operations
Gain on divestment of subsidiaries (2,267.2) - -
Taxation 77.5 - -
(2,189.7) - -
Exceptional items post-tax (2,154.0) - 21.4
Acquisition costs of $9.5m relating to the purchase of PSN have been expensed
in the period. $6.6m of costs were expensed in relation to this transaction in
2010.
A charge of $9.7m has been recorded in the period in respect of costs relating
to the integration of PSN with the existing Wood Group Production Facilities
business and the closure of a training facility in Louisiana, USA. The
restructuring charge in 2010 relates to the Gas Turbine Services division and
the majority of the costs were in respect of the closure of a repair facility
in Connecticut, USA.
There are doubts over the Group's ability to recover $22.9m of engineering
related receivables following political and social unrest in Libya and
therefore the outstanding balance has been provided in full.
Bank fees of $3.8m relating to the acquisition of PSN have been expensed in
the period.
The gain on divestment of subsidiaries of $2,267.2m relates to the sale of the
Well Support division in April 2011. Further details of the divestment are
provided in note 6.
A tax charge of $77.5m has been recorded in relation to the gain on divestment
of subsidiaries. A tax credit of $10.2m has been recorded in relation to
exceptional items in continuing operations in the period.
4. Dividends
Unaudited Unaudited Audited
Interim Interim Full Year
June 2011 June 2010 December 2010
$m $m $m
Dividends on equity shares
Final paid 39.3 - -
Second interim paid - 35.7 35.7
Interim paid - - 17.4
Total dividends 39.3 35.7 53.1
After the balance sheet date, the directors declared an interim dividend of
3.9 cents per share which will be paid on 24 September 2011. The interim
financial report does not reflect this dividend payable, which will be
recognised in equity attributable to owners of the parent as an appropriation
of retained earnings in the year ended 31 December 2011.
5. Business combinations
The fair value of assets and liabilities acquired through business
combinations in the period were as follows:
PSN Other Total
$m $m $m
Property plant and equipment 24.4 3.0 27.4
Other intangible assets 194.5 - 194.5
Inventories - 7.0 7.0
Trade and other receivables 289.4 19.3 308.7
Cash 40.0 6.3 46.3
Bank borrowings (370.2) (1.3) (371.5)
Trade and other payables (201.5) (28.5) (230.0)
Income tax liabilities (42.4) 0.2 (42.2)
Deferred tax (60.4) - (60.4)
Provisions (6.3) (0.7) (7.0)
Total identifiable net (liabilities)/assets acquired (132.5) 5.3 (127.2)
Goodwill 817.8 17.0 834.8
Non-controlling interests (0.4) - (0.4)
Consideration 684.9 22.3 707.2
Consideration satisfied by:
Cash 569.9 22.3 592.2
Issue of shares 115.0 - 115.0
Total consideration transferred 684.9 22.3 707.2
The Group acquired 100% of the share capital of Production Services Network
Limited (`PSN') on 20 April 2011 for a total consideration of $684.9m. $569.9m
was paid in cash and $115.0m of shares were issued as part of the transaction.
The Group repaid PSN's borrowings of $370.2m immediately following the
acquisition. $194.5m of other intangible assets were recognised on
acquisition.
The total identifiable net liabilities of PSN are stated after recording fair
value adjustments of $25.1m. The fair value adjustments relate mainly to tax
issues.
Goodwill of $834.8m has been recognised on the acquisitions in the period.
This, together with the other intangible assets of $194.5m recognised on the
acquisitions, contribute to the increase in goodwill and other intangible
assets in the period.
The acquisition of PSN advances Wood Group's strategy of maintaining an
appropriate balance between oil & gas development and later cycle production
support, creating global market leading positions, developing long term
customer relationships, extending services and broadening international reach.
Wood Group PSN will be a global leader in brownfield production services and
be well positioned for growth across the oil & gas industry.
Other acquisitions include the purchase of Dar E&C and PI Consult in Saudi
Arabia in June 2011. In addition, the Group made deferred consideration
payments of $9.2m relating to acquisitions in previous periods.
The outflow of cash equivalents on the acquisitions made during the period is
analysed as follows:
$m
Cash consideration 592.2
Cash acquired (46.3)
Borrowings acquired 371.5
Cash outflow 917.4
The results of the Group, if the acquisition of PSN had been made at the
beginning of the period, would have been as follows:
$m
Continuing revenue 2,845.1
Continuing EBITA 155.6
From the date of acquisition to 30 June 2011, PSN contributed $274.4m to
revenue and $24.6m to EBITA.
6. Divestments
In April 2011, the Group divested of its Well Support division to GE for a
gross consideration of $2,850.0m. Details of the assets and liabilities
disposed of were as follows:
$m
Property plant and equipment 127.8
Goodwill and other intangible assets 31.9
Inventories 291.4
Trade and other receivables 238.8
Deferred tax assets 24.3
Cash and cash equivalents 44.4
Borrowings (3.5)
Trade and other payables (245.7)
Net income tax liabilities (24.7)
Provisions (19.5)
Net assets divested 465.2
Gross proceeds received 2,821.8
Disposal costs (89.4)
Gain on divestment 2,267.2
Tax (77.5)
Gain on divestment after tax 2,189.7
The inflow of cash and cash equivalents in relation to the divestment of the
Well Support division is analysed as follows:
$m
Gross proceeds received (a) 2,821.8
Divestment costs paid (35.0)
Cash divested (44.4)
Borrowings divested 3.5
Net cash inflow from divestment 2,745.9
(a) Of the total agreed sale proceeds of $2,850.0m, $28.2m relating to the
divestment of a business in the Middle East remains outstanding. The
divestment of this business is expected to be completed in the second half of
2011. The gain on sale calculation will be finalised following agreement of
the working capital adjustment with GE and this is expected to be completed
before year-end.
7. Return of cash to shareholders
In February 201l the Group announced its intention to return cash to
shareholders. The first part of the return was via a tender offer which was
completed in June 2011 and which resulted in the purchase by the company of
65.9m shares at £6.25 per share. The total cost of $675.7m (£411.9m) was
recorded as a reduction in retained earnings in the period. The second part of
the return was via the B/C share scheme and this was completed in July 2011
and resulted in a payment of £660.1m ($1,075.1m) being made to shareholders. A
further payment of £4.7m ($7.7m) will be made in April 2012. These payments
will also be recorded as a reduction in retained earnings. Expenses of $43.3m
relating to the return of cash, including a $28.8m exchange loss on the
retranslation of sterling cash held in anticipation of the return to
shareholders, have also been deducted from retained earnings.
8. Earnings per share
Unaudited Unaudited Audited Full Year
Interim Interim December 2010
June 2011 June 2010
Earnings Earnings Earnings
attrib- attrib- attrib-
utable Number of Earnings utable Number of Earnings utable Number of Earnings
to equity shares per share to shares per to shares per share
share- (millions) (cents) equity (millions) share equity (millions) (cents)
holders share- (cents) share-
($m) holders holders
($m) ($m)
Basic 2,262.7 509.6 444.0 81.1 512.4 15.8 166.0 512.6 32.4
Effect of dilutive - 17.3 (14.6) - 16.3 (0.5) - 17.0 (1.1)
ordinary shares
Diluted 2,262.7 526.9 429.4 81.1 528.7 15.3 166.0 529.6 31.3
Exceptional items, (2,154.0) - (408.8) - - - 21.4 - 4.0
net of tax
Amortisation, 23.9 - 4.6 11.0 - 2.1 23.0 - 4.4
net of tax
Adjusted diluted 132.6 526.9 25.2 92.1 528.7 17.4 210.4 529.6 39.7
Adjusted basic 132.6 509.6 26.0 92.1 512.4 18.0 210.4 512.6 41.0
Basic discontinued 2,226.4 509.6 436.9 34.4 512.4 6.7 90.4 512.6 17.6
The calculation of basic earnings per share (`EPS') 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 trusts. 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
types 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 Plan. Adjusted EPS is disclosed
to show the results excluding exceptional items and amortisation, net of tax.
9. Taxation
The taxation charge for the six months ended 30 June 2011 reflects an
anticipated rate of 29.5% on continuing profit before taxation and exceptional
items for the year ending 31 December 2011 (June 2010 : 29.9%).
A number of changes to the UK Corporation tax system were announced in the
June 2010 Budget Statement. The Finance Act 2010 includes legislation to
reduce the main rate of corporation tax from 28% to 27% from 1 April 2011.
Further reductions to the main rate are proposed to reduce the rate by 1% per
annum to 23% by 1 April 2014. No changes had been substantively enacted at the
balance sheet date and therefore there is no impact on these financial
statements.
10. Retirement benefit liability
In June 2011, the Group made a one-off payment of $8.1m (£5.0m) to the Group
retirement benefit scheme, reducing the scheme liability. No interim
revaluation of the pension liability has been carried out at 30 June 2011 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
2011 Annual Report and Accounts.
11. Related party transactions
The following transactions were carried out with the Group's joint ventures in
the six months to 30 June. These transactions comprise sales and purchase of
goods and services in the ordinary course of business.
Unaudited Unaudited Audited
Interim Interim Full Year
June 2011 June 2010 December 2010
$m $m $m
Sales of goods and services to joint ventures 27.0 47.7 102.2
Purchase of goods and services from joint ventures 8.0 21.0 49.3
Receivables from joint ventures 26.5 37.8 43.0
Payables to joint ventures 4.2 14.1 5.7
12. Cash generated from operations
Unaudited Unaudited Audited
Interim Interim Full Year
June 2011 June 2010 December
2010
$m $m $m
Reconciliation of operating profit to cash
generated from operations:
Operating profit from continuing operations 106.7 85.8 187.7
before exceptional items
Operating profit from discontinued 58.4 53.5 128.1
operations before exceptional items
Adjustments for:
Depreciation 26.4 31.2 66.3
Loss on disposal of property plant and 0.8 0.2 3.4
equipment
Amortisation 26.9 14.0 29.0
Share based charges 2.2 7.8 16.7
Decrease in provisions (5.7) (2.6) (6.2)
Changes in working capital (excluding effect
of acquisition and divestment of
subsidiaries)
Increase in inventories (36.0) (39.9) (53.9)
Increase in receivables (131.2) (52.6) (33.8)
Decrease in payables 1.9 2.4 68.3
Exchange differences 2.1 1.4 (3.1)
Cash generated from operations 52.5 101.2 402.5
13. Reconciliation of cash flow to movement in net (debt)/cash
At 1 Exchange At 30 June
January movements 2011
2011 Cash flow $m $m
$m $m
Cash and cash equivalents 180.1 1,030.2 (23.5) 1,186.8
Short term borrowings (30.1) 1.4 (0.5) (29.2)
Long term borrowings (165.1) 0.2 (7.6) (172.5)
Net (debt)/cash (15.1) 1,031.8 (31.6) 985.1
14. Share based charges
Share based charges comprise $8.5m (2010: $7.8m) relating to options granted
under the Group's executive share option schemes and share awards under the
Long Term Incentive Plan. This amount is included in administrative expenses.
In addition, and included within exceptional items, are $3.6m of charges that
have been accelerated following the divestment of the Well Support division.
Also included within exceptional items were payments made to Well Support
employees in relation to share based charges. In accordance with the
requirements of IFRS2, the fair value of these payments, $9.9m, has been
deducted from reserves. The $2.2m credit to reserves comprises the $8.5m and
$3.6m mentioned above less the $9.9m fair value adjustment.
15. Capital commitments
At 30 June 2011 the Group had entered into contracts for future capital
expenditure amounting to $15.7m. The capital expenditure relates to property
plant and equipment and has not been provided in the financial statements.
16. Post balance sheet events
The second part of the return of cash to shareholders, the B/C share scheme,
was completed in July 2011 when £660.1m ($1,075.1m) was paid to shareholders.
A number of shareholders elected to defer their return of cash until April
2012 and accordingly, a further £4.7m ($7.7m) will be returned on that date.
16. Contingent liabilities
In February 2010, the Group, and several other parties, were notified of a
legal claim from a customer in respect of work carried out in 2008. The Group
is in the process of lodging its formal defence. Management continues to
believe that the Group is in a strong position to defend the claim, and do not
believe that it is probable that any material liability will arise as a
result.
Statement of directors' responsibilities
for the six month period to 30 June 2011
The directors confirm that the interim report and accounts have been prepared
in accordance with IAS 34 as adopted by the European Union and that the
interim report includes a fair review of the information required by DTR 4.2.7
and DTR 4.2.8, namely:
â- an indication of important events that have occurred during the first six
months and their impact on the accounts and a description of the principal
risks and uncertainties for the remaining six months of the year; and
â- material related party transactions in the first six months and any
material changes in the related party transactions described in the last
annual report.
The directors of John Wood Group PLC are listed in the Group's 2010 Annual
Report and Accounts with the exception of the following changes in the period
:
J Renfroe resigned on 20 April 2011, R Keiller was appointed on 26 April 2011,
J Ogren resigned on 11 May 2011 and J Wilson was appointed on 1 August 2011.
A G Langlands
Chief Executive
A G Semple
Group Finance Director
22 August 2011
Independent review report
to John Wood Group PLC
for the six month period to 30 June 2011
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half year report for the six months ended 30 June 2011 which
comprises the Group income statement, statement of comprehensive income,
balance sheet, statement of changes in equity, cash flow statement and related
notes. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information in the condensed set of
financial statements.
Directors' responsibilities
The interim report, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of
the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. This report, including the conclusion, has been prepared for and only
for the Company for the purpose of the Disclosure and Transparency Rules of
the Financial Services Authority and for no other purpose. We do not, in
producing this report, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, `Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2011 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
Aberdeen
22 August 2011
Notes:
(a) The maintenance and integrity of the John Wood Group PLC web site is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that may have occurred to the interim report
since it was initially presented on the web site.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
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 2 September 2011 as published in the Financial Times on 3 September
2011.
Officers and advisers
Secretary and Registered Office Registrars
R Brown Equiniti
John Wood Group PLC Aspect House
John Wood House Spencer Road
Greenwell Road Lancing
ABERDEEN West Sussex
AB12 3AX BN99 6DA
Tel: 01224 851000 Tel: 0871 384 2649
Stockbrokers Auditors
JPMorgan Cazenove Limited PricewaterhouseCoopers LLP
Credit Suisse Chartered Accountants and Statutory Auditors
Financial calendar
6 months ended Year ending
30 June 2011 31 December
2011
Results announced 23 August 2011 Early March
2012
Ex-dividend date 31 August 2011 April 2012
Dividend record 2 September April 2012
date 2011
Dividend payment 24 September May 2012
date 2011
Annual General May 2012
Meeting
The Group's Investor Relations website can be accessed at www.woodgroup.com.
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