Final Results
Expro International Group PLC
02 June 2004
For Immediate Release
2 June 2004
EXPRO INTERNATIONAL GROUP PLC
("Expro" or "the Group")
Preliminary results for the twelve months ending 31 March 2004
Expro International Group PLC, the oil field services company, today announces
preliminary results for the twelve months ending 31 March 2004.
Year Year
ending ending
31 March 2004 31 March 2003 Change
Turnover* £208.4m £223.7m (7%)
Operating (loss) / profit* £(2.0)m £22.4m
Operating profit before goodwill
amortisation and exceptional items* £16.5m £24.8m (33%)
(Loss) / profit before tax £(4.5)m £34.4m
Profit before tax, goodwill
amortisation and exceptional items £14.0m £20.0m (30%)
Basic (loss) /EPS (15.0)p 37.8p
Basic EPS before goodwill
amortisation and exceptional items* 13.0p 22.1p (41%)
Dividend per share 10.9p 10.9p Maintained
* includes share of joint-ventures (2003 turnover restated - see note 2)
The above numbers have been extracted from the Group Consolidated Profit and
Loss Account and note 5.
•Results in line with expectations
•Dividend maintained
•Challenging market conditions in shallow water Gulf of Mexico ("GOM") and
Asia, and delays of project awards in Deep Water West Africa
•Steady progress in implementing new strategy
•Strengthening enquiry levels and order book
•Technology portfolio is now stronger than ever
Commenting on the results, Graeme Coutts, Chief Executive, said: "Whilst much of
the business made positive progress during the year, difficult market conditions
in some of our businesses continued to adversely impact the overall result.
Overcapacity in the shrinking Gulf of Mexico shallow water market, shortfalls in
investment in Asia, and delays to project approvals in Africa, all proved
particularly challenging.
The high operational gearing of the business meant that a relatively modest
revenue shortfall has been magnified in profit terms, with losses in a number of
territories leading to a higher effective tax rate. In respect to some of our
shallow water Gulf of Mexico businesses this has also led to an impairment of
goodwill.
Confident that the recently implemented recovery programme is beginning to show
early signs of success, the Board has maintained the final dividend."
- Ends -
For further information please contact:
Expro International Group PLC On 2 June: 020 7067 0700
Graeme Coutts, Chief Executive Thereafter: 01189 591 341
Michael Speakman, Group Finance Director
Colin Ainger, Executive Director
Weber Shandwick Square Mile 020 7067 0700
Mike Kirk, Rachel Taylor, Stephanie Badjonat
An analyst meeting will be held at 09.30 this morning at the offices of Weber
Shandwick Square Mile, Fox Court, 14 Gray's Inn Road, London, WC1X 8WS
EXPRO INTERNATIONAL GROUP PLC
("Expro" or "the Group")
Preliminary results for the twelve months ending 31 March 2004
Chairman's and Chief Executive's Statement
Results Summary
The difficult market conditions highlighted in last year's Annual Report
continued throughout the year ended 31 March 2004. Overcapacity in the shrinking
Gulf of Mexico ("GOM") shallow water market and shortfalls in operators'
investments in Asia and Africa had a particularly adverse impact on our
operations. Although global commodity prices have remained high, our major
clients have, in general, preferred to distribute the benefit of higher cash
flow to their shareholders, rather than expand their Exploration and Production
programmes. In addition, the timing of major projects has remained a challenge
throughout the year, particularly deep water projects, which continue to be
subject to unpredictable delays. Against this demanding market backdrop,
turnover on a restated FRS 5 basis held up relatively well, falling a modest
6.8% to £208.4m for the group, including its share of joint ventures.
In the second half of the year, in response to market conditions, a new group
strategy was implemented incorporating several cost reduction and strategic
investment programmes. Cost reduction was primarily focused on GOM operations
and more appropriate deployment of resources in Asia Pacific, while significant
investment was given to technology, sales and marketing. In devising and
implementing the group's new strategy, we have focused on internal initiatives
to drive improvements in performance, as market conditions are unlikely to
improve significantly in the short term. It is pleasing to note that, in a
number of areas, we are beginning to see the benefits of our new approach, which
should lead to improved performance in the financial year to 31 March 2005, and
particularly beyond. However, none of the benefits of these actions have been
realised in the second half of the year to 31 March 2004 and, as a result
pre-tax profits, excluding goodwill amortisation and exceptional items, at
£14.0m* was 29.8% below prior year, with EPS on the same basis at 13.0p*, down
41.2%.
Unrecoverable losses in a number of overseas locations have led to a higher
overall effective tax rate. The exceptional goodwill impairment of £16.1m is
primarily a consequence of poor performing operations in the shallow water GOM.
The combination of these has produced a loss before taxation for the year of £4.5m.
Although the trading results for the year are disappointing our financial
position remains robust with net debt of £44.9m, gearing at the year end of
60.5% and interest cover of 6.6* times.
In December 2003, Expro acquired the Well Tractoring business of SmarTract Inc.
and the In-Well Wireless Communications business from Flight Refuelling Limited,
part of Cobham plc. These two asset acquisitions are key components of the
development of the group's technology strategy and provide valuable
opportunities for future growth.
*Before goodwill amortisation and exceptional items as extracted from the
consolidated profit and loss account.
Dividend
Despite the difficulties experienced by the business in the year, the Board is
recommending a final dividend of 7.1p per ordinary share, bringing the total
dividend for the year to 10.9p, unchanged from last year. This recommendation
reflects the Board's confidence that Expro is on track to restore performance
against a new business strategy. The dividend will be paid on 30 July 2004 to
shareholders on the register on 2 July 2004.
Overview
In terms of drilling activity, the worldwide rig count was ahead by 11% compared
to 2002. However, the vast majority of the increased activity was in the
domestic land markets of North America and Canada where Expro has a relatively
small but growing presence. Despite strong commodity prices for both oil and gas
throughout the year, the much publicised shallow water Gulf of Mexico market
continued to disappoint. This market suffered continued depressed rig activity
levels throughout the year, eventually falling to a ten year low. Outside the
domestic United States, market conditions were broadly stable despite the
impact of project delays and slippage which are now common place in key areas
such as West Africa.
Board Composition and Changes
During the year several key Board changes were made. Firstly, the Board would
like to thank John Dawson, who retired as Group Chief Executive after 23 years
of outstanding service. The group also lost the services of Eric Woolley who
resigned his position as Group Finance Director. Graeme Coutts, previously the
group's Chief Operating Officer, replaced John as Chief Executive and Eric was
replaced by Michael Speakman who joined Expro as Group Finance Director in March
2004 after a long career with the merged TI/Smiths Group plc. In addition, the
Board would like to express its gratitude to Ian Clubb who retires as a non -
executive director at the Annual General Meeting in July 2004. Ian has served in
this capacity for ten years bringing an outstanding contribution to the group
during a period of considerable change. We are also pleased to welcome the Rt.
Hon. Tim Eggar as a non - executive director, appointed on 1 March 2004. Tim's
wide experience in the sector and of international energy markets will be
invaluable.
Group Strategy
Expro has long enjoyed a reputation within the global oil and gas services
industry for technology and quality. The dynamics of this industry are such that
we have to continually refine our strategy to ensure we are positioned correctly
to take advantage of new challenges and opportunities. A mid-year review of the
business by the new management team highlighted that this business is capable of
delivering outstanding value, though we were not aligned optimally to the needs
of our clients, and furthermore our approach in the market place was not sharp
enough. Expro normally operates in the upper quartile of profitability within
our peer group, and the review confirmed that our product portfolio remained
capable of delivering this upper quartile performance. Driving performance for
Expro lay around certain key markets, geographic distribution and management
vigour.
The challenge for Expro is clearly defined in the group strategy, which is to
ensure Expro remains a leading upstream oil and gas technology and service
provider specialising in two sectors, Well Performance and Production
Optimisation.
The business was restructured to focus on restoring performance through;
•geographic reorganisation to focus on markets which will deliver
sustainable growth in business performance;
•aggressive investment in high value technology aimed at assisting our
clients to realise a step change in their business performance; and
•increased investment in sales support systems and highly skilled, high
energy personnel to promote Expro in our chosen business areas.
During the second half of the year, all aspects of the refocused strategy began
to take effect. In Well Performance we have our Cased Hole Services ("CHS")
products, where we offer a range of technologies and services for the
maintenance of existing wells and the installation of new producing wells. The
market drivers for these activities are a combination of client capital
expenditure for new well construction and operating expenditure for existing
wells. Virtually all wells require these types of service throughout their
economic life.
Our CHS technology offering varies according to geography. In most areas of the
world where we operate, we have a business aligned mainly to our clients'
operating expenditure. This position delivers a high degree of stable and
predictable earnings, particularly in areas such as the North Sea, where our
clients are highly focused on maintaining production from mature wells in
decline. However, in the United States, our business is almost entirely aligned
to the introduction of new capital wells which have a relatively short life
span. In this region, Expro was over-exposed to the shallow Gulf of Mexico shelf
market. This market has continued to disappoint, leading to highly competitive
conditions and over-capacity within the service industry. Recognising that this
position is likely to continue, we have increased our emphasis on the
introduction of the Excape(R) perforating technology for land well applications.
In the area of new technology we added two very exciting components to our CHS
offering in the year. The acquisition of the Houston based SmarTract well
tractor business, and the addition of the new Wireless Well Solutions business
created from the acquisition of a technology from Cobham plc, will greatly
enhance our technology position.
Our Subsurface Systems ("SSS") business continues to play an important role in
the group's financial performance, as it includes two of our high margin
businesses, Subsea safety systems and Tronic connectors. It also includes our
strategic QuantX joint venture with Baker Hughes. Whilst these businesses are
not directly related they share similar market drivers. All are project focused
and generally relate to new capital wells which are completed as subsea wells on
the sea floor. The nature of this market is cyclical and often subject to
project delay. The outlook for the global subsea market, particularly wells in
deeper water, is currently positive. For example, our new ultra deep water
subsea safety tools, now available with state of the art electro-hydraulic
control systems, are allowing us to regain market share, previously lost to our
competitor in key markets such as West Africa and the Gulf of Mexico. This will
go some way to offsetting the expected decline in mid-water areas, particularly
in the North Sea.
Within Tronic, the fundamental drive for seabed wells and associated power
requirements is very positive. Once again the cyclical nature of the procurement
cycle can mask the underlying positive dynamics of this business. Tronic is
beginning the new financial year with a considerably stronger order book than
twelve months ago.
Finally we continued to make good progress with our 50% share of the Expro
operated and managed QuantX joint venture. The same fundamentals are driving
business progress with the enhanced combination of the Baker Hughes geographic
reach and technology integration also assisting.
Turning to Production Optimisation where our Surface and Environmental Systems
("SES") business is primarily aimed at providing small plant, topside processing
equipment for temporary, semi-permanent and occasionally permanent field
development applications. This niche gives our clients a range of viable options
to exploit fields, by providing a means to evaluate new reservoirs by flow
testing through general purpose temporary equipment, capitalising on early cash
flow through semi-permanent spreads, or full field development through the
deployment of purpose built equipment specifically designed to meet life of
field conditions. Expro's business niche is aimed at small field applications
where both speed and a quality service come together to provide the client with
a lease option to exploit his asset. Operational expertise, health, safety and
environmental protection are paramount and set Expro apart from its competitors.
During the year, operations continued for Shell on the Soroosh field in the
Persian Gulf. This operation, now in its final year, has received internal
acclaim within Shell International for operational uptime, efficiency and HSE
performance. In addition, new independent North Sea operators such as Tuscan
Energy, with their Ardmore project, are taking advantage of our capability.
We have recently announced Expro's largest single contract award, won by our
Production Solutions group, which will see considerable expenditure in the
current year, preparing plant and equipment for operational start up in the
summer of 2005. The Early Production Facility ("EPF") for ExxonMobil on the
Sakhalin Island Chayvo facility will be a key project for Expro.
Outlook
Outwith the domestic land markets of the United States and Canada, the overall
market for oil and gas services does not show any particular signs of a strong
recovery in the short term. Despite high oil and gas prices, activity with the
drill bit remains cautious or subject to delay. In key markets, such as the UK
Continental Shelf ("UKCS"), activity declines are expected as major integrated
players exit and new independent operators arrive. West Africa remains buoyant,
though subject to delays, as our clients come to terms with protracted approval
processes. Likewise the former Soviet Union states are also subject to delay for
the same reason.
Expro will drive success through increased efficiency, continuing to invest in
new technology, refocused geographic targets and increased vigour in our
approach to clients - all key parts of our strategy. The balance of new
technology initiatives and the attractiveness of our current portfolio,
bolstered by the arrival of organic and acquired technology, provide new
foundations for the business.
We believe that there are initial signs, through our increased tender activity
and order book position, that an underlying recovery is underway, although the
real impact of this will not be apparent until 2005/06. Against this backdrop,
we believe Expro to be well set for progress.
Dr Chris Fay, CBE Graeme Coutts
Chairman Chief Executive 1 June 2004
Operations Review
Expro operates its business in three regions and has a presence in over 40
countries worldwide. The Europe-FSU Region, headquartered in Aberdeen, covers
the UK, Norway, Continental Europe, Former Soviet Union and Western Russia. The
Africa-Asia Region, managed from its new hub in Dubai UAE, covers Africa, Middle
East, Asia and Australia. The Americas Region spans North and South America,
with headquarters in Houston.
Europe-FSU revenue, including share of joint ventures, was £94 million,
virtually unchanged on the prior year. Within the region, North Sea revenue was
up 7% despite a slow down in capital investment. Our clients continue to focus
on maintaining production from mature wells and this, coupled with increased
market share, resulted in higher revenue.
In Africa-Asia revenue, including share of joint ventures, was £74 million, down
13%. Africa's revenue remained steady in US$ terms despite generally weak oil
and gas industry conditions. The region saw growth of 25% in West Africa and
this is expected to continue as deepwater activity builds. The weakness in Asia
was compounded by the relatively high fixed cost base and action was taken in
the second quarter to correctly position the business, balancing capacity with
demand in the short term, whilst retaining the ability to respond to future
growth. The benefits of this re-structuring should become evident in the coming
year.
In the Americas the expected upturn in activity in the Gulf of Mexico, which is
where the core of Expro's business lies, did not materialise. In fact shelf rig
activity declined through the second half of the year. This was in stark
contrast to US onshore activity. Again, action was taken to balance capacity
with expected demand, at the same time accelerating the development of the
onshore Excape(R) perforating business in North America and introducing new
deepwater intervention technology in the Gulf of Mexico.
Following on from previous year on year improvements, the group's HSE
performance in 2003/4 showed a further 33% improvement in Lost Time Injuries
("LTI"). This places Expro ahead of its peers. Further demanding targets have
been set for the coming year.
Cased Hole Services
A strong performance saw revenue up 4% on the prior year despite the effect of
the weaker US$.
In Europe we saw the benefit of a full year of the EGIS (Expro Group Integrated
Services) contracts, providing well management services on all of Shell's North
Sea oil platforms and mobile rigs. The extension of contracts with Talisman,
Total and Chevron/Texaco together with a new contract for Apache on the former
bp Forties field, means that Expro is either managing or performing well
maintenance operations on platforms that deliver around 40% of the UK's oil and
gas production.
In Africa and the Middle East, CHS revenue was up 38% on the prior year due to
increased activity offshore Angola, work for Marathon on the Alba Field offshore
Equatorial Guinea, for Woodside on their Chinguetti discovery offshore
Mauritania and for Sasol onshore Mozambique. Work also started on the Anaran
Field for Norsk Hydro in Iran. In September, Expro was awarded a three year
contract by PDO Oman to provide fluid sampling and analysis services as part of
a major production rejuvenation programme. This uses Expro's proprietary GOLD
system, providing laboratory standard PVT analysis in the field.
In China, Expro was awarded its first major Tubing Conveyed Perforating ("TCP")
contract outside the United States. The contract covers a total of 80 wells in
Bohai Bay for CNOOC. Facilities were put in place for the start of the contract
in July. Unfortunately project delays meant that fewer wells were completed in
the year, although work is continuing.
In the rest of Asia, CHS revenue was largely unchanged on the prior year,
although a drop in revenue in Australia was offset by increased activity in
Thailand.
The decline in rig activity in the shallow water areas of the Gulf of Mexico,
had a significant impact on the company's performance in the Americas. Core TCP
and wireline activity was worst affected. An imbalance in supply from all the
service companies put pressure on rates and hence margins. These activities
together with subsea operations have been consolidated in to a single base in
Broussard, Louisiana and aligned with the current market conditions. In
particular, resources have been redeployed to focus on the on-shore activity
provided through Expro's Excape(R) technology. Activity onshore in Canada and in
the United States showed significant growth.
The Excape(R) perforating technology is rapidly gaining industry acceptance. A
total of twenty two jobs were completed in the year compared to only three in
the prior year.
Subsurface Systems
Demand for the three product lines that make up Subsurface Systems (subsea
intervention, subsea connectors and permanent downhole instrumentation) is
driven by the number of subsea well completions which reflect our clients'
capital expenditure patterns and the phasing of major projects.
Revenue from the supply, operation and maintenance of intervention systems in
mature areas such as the North Sea and Gulf of Mexico increased over the prior
year. In the North Sea, activity in Norway was particularly strong. In the Gulf
of Mexico, Expro's new deepwater electro-hydraulic (EH) intervention system was
deployed for the first time in 1,250 metres water depth on Pioneer's Tomahawk
prospect. The system is designed to operate in 3,300 metres. This provides Expro
with a state of the art intervention system for use in deepwater areas such as
West Africa and the Gulf of Mexico.
Delays to some major projects in West Africa led to a fall in our subsea
intervention revenue during the year. However, the number of tenders awaiting
award at the year end was higher than in previous years and includes major
projects offshore Angola, Nigeria, Congo and India. During the year, the group
was awarded a contract to provide intervention services on Addax Petroleum's
Okwari development offshore Nigeria, where work is due to start early in the new
financial year. In November, Expro was awarded a contract to provide subsea
intervention services on Santos' Exeter/Mutineer development offshore Western
Australia on which work has already commenced.
Revenue from the manufacture and supply of Tronic subsea connectors was down on
the prior year's record level. After a relatively weak first half, activity
levels picked up and Tronic has entered the new financial year with a strong
order book. The market for subsea power connectors, as opposed to the core
hydraulic connectors is increasing as subsea technology develops. Tronic has a
dominant position in this sector of the market. A major contract was recently
awarded to Tronic for the supply of electrical connectors for Santos' Exeter/
Mutineer development offshore Western Australia.
Revenue from the group's 50% share of the Expro operated and managed QuantX
joint venture was in line with our expectations. This was the joint venture's
first year. Significant progress was made establishing the new company in the
market, drawing on the geographical reach of Expro and its partner, Baker
Hughes.
Surface and Environmental Systems
Overall revenue was 3% down on the prior year, but this was due almost entirely
to the weaker US$.
In the North Sea, well testing and well clean-up activity was up on the prior
year despite a drop in overall North Sea activity. This reflected an increase in
market share, due in part to higher activity with some of the new operators
entering the North Sea. Revenue was further boosted by the start up of
production on the Ardmore Field in September, where Expro is providing and
operating the production facilities. Expro was also awarded a contract to
provide production and testing facilities on a vessel being constructed for
Bourbon Offshore in Norway. Work started in December and was completed in May
2004. Both these projects have been managed by the group's Production Solutions
business unit.
In Africa and the Middle East, revenue was unchanged on the prior year, despite
the weaker US$. A significant increase in testing and clean up work offshore
West Africa more than offset a drop in activity in North Africa, where the
Ohanet development drilling programme for BHP in Algeria came to an end. Work
offshore West Africa included the testing of four wells for bp in their
deepwater and ultra deepwater blocks offshore Angola plus two wells for
ExxonMobil in the same area. Expro also provided testing services for Woodside
on their successful Chinguetti deepwater exploration well offshore Mauritania.
This followed well clean up and testing programmes for Canadian Natural
Resources on their Espoir and Baobob developments offshore Cote D'Ivoire.
In Asia, testing and clean up operations for Santos in the Australian Cooper
Basin continued but at reduced levels. This was more than offset by testing work
for ConocoPhillips on their Bayu Undan development in the Timor Sea. A 40%
reduction in Surface and Environmental revenue in Asia was mainly due to the
significant downturn in production equipment revenue in Indonesia. This was due
to ongoing projects coming to an end and delays in approval of new projects. The
new regional structure introduced in the second quarter of the financial year
addressed the changing dynamics of the market in the Asia region. As the year
ended, a number of contract awards were pending, one of which, for a large early
production facility in Sakhalin, Eastern Russia, has recently been awarded. This
is the group's single largest contract award and reinforces our leading
position in the Production Solutions market place.
Expro is currently providing production facilities on four fields around the
world. In addition to those recently commissioned on the Ardmore Field in the
North Sea, operations continued through the year on the Ikdam FPSO offshore
Tunisia, on the Agbani FPF offshore Nigeria and on the ESP-1 production jack up
in the Persian Gulf. The contract for the ESP-1 early production facility on
Shell's Soroosh field was extended and is due to end in August 2004. The ESP-1,
where Expro and its partners provide the operating personnel, and the Agbani
achieved over 1 million man-hours without an LTI and production uptime exceeded
98%.
- Ends -
For further information please contact:
Expro International Group PLC On 2 June: 020 7067 0700
Graeme Coutts, Chief Executive Thereafter: 01189 591 341
Michael Speakman, Group Finance Director
Colin Ainger, Executive Director
Weber Shandwick Square Mile 020 7067 0700
Mike Kirk, Rachel Taylor, Stephanie Badjonat
Consolidated Profit and Loss Account
For the year ended 31 March 2004
2004 2003 (restated -note 2)
-------------------------------------- --------------------------------------
Before goodwill Goodwill and Before goodwill Goodwill and
and exceptional exceptional and exceptional exceptional
items items Total items items Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Turnover:
Group and share of joint ventures 2 208,395 - 208,395 223,659 - 223,659
Less: share of joint ventures 2 (12,655) - (12,655) (5,743) - (5,743)
--------- --------- --------- --------- --------- ---------
Group turnover- continuing operations 2 195,740 - 195,740 217,916 - 217,916
Cost of sales (173,376) - (173,376) (184,493) - (184,493)
--------- --------- --------- --------- --------- ---------
Gross profit 22,364 - 22,364 33,423 - 33,423
--------- --------- --------- --------- --------- ---------
Other operating expenses -------------------------------------- --------------------------------------
Goodwill amortisation - (2,372) (2,372) - (2,388) (2,388)
Exceptional provision for goodwill
impairment 3a - (16,125) (16,125) - - -
Other expenses (9,411) - (9,411) (9,375) - (9,375)
-------------------------------------- --------------------------------------
--------- --------- --------- --------- --------- ---------
Total other operating expenses (9,411) (18,497) (27,908) (9,375) (2,388) (11,763)
--------- --------- --------- --------- --------- ---------
Operating profit / (loss) - continuing
operations:
Group 12,953 (18,497) (5,544) 24,048 (2,388) 21,660
Share of operating profit in joint
ventures 3,566 - 3,566 722 - 722
--------- --------- --------- --------- --------- ---------
Group and share of joint ventures 16,519 (18,497) (1,978) 24,770 (2,388) 22,382
Exceptional gain on partial sale of
interest in business on formation of
joint venture 3b - - - - 16,550 16,550
Exceptional loss on termination of
discontinued operations 3c - - - - (489) (489)
Less: prior year provision 3c - - - - 735 735
--------- --------- --------- --------- --------- ---------
Profit / (loss) on ordinary activities
before finance charges 16,519 (18,497) (1,978) 24,770 14,408 39,178
Finance charges (net) (2,488) - (2,488) (4,794) - (4,794)
--------- --------- --------- --------- --------- ---------
Profit / (loss) on ordinary activities
before taxation 14,031 (18,497) (4,466) 19,976 14,408 34,384
Tax on profit/ (loss) on ordinary
activities 4 (5,428) - (5,428) (5,354) (4,036) (9,390)
--------- --------- --------- --------- --------- ---------
Profit / (loss) on ordinary activities
after taxation 8,603 (18,497) (9,894) 14,622 10,372 24,994
Minority equity interests (9) - (9) (20) - (20)
--------- --------- --------- --------- --------- ---------
Profit / (loss) for the financial year 8,594 (18,497) (9,903) 14,602 10,372 24,974
Dividends paid and proposed 5 (7,202) - (7,202) (7,210) - (7,210)
--------- --------- --------- --------- --------- ---------
Retained profit / (loss) for the year 1,392 (18,497) (17,105) 7,392 10,372 17,764
--------- --------- --------- --------- --------- ---------
Earnings / (losses) per ordinary share 6
Basic - - (15.0) p - - 37.8 p
Diluted - - (15.0) p - - 37.7 p
Basic before goodwill amortisation
and exceptional items 13.0 p - 13.0 p 22.1 p - 22.1 p
Consolidated Statement of Total Recognised Gains and Losses
For the year ended 31 March 2004
2004 2003
£'000 £'000
(Loss) / profit for the financial year (9,903) 24,974
Translation loss on foreign currency net investments (14,114) (7,347)
Gain on foreign currency borrowings 6,943 4,563
-------- -------
(17,074) 22,190
-------- -------
Consolidated Balance Sheet
31 March 2004
31 March 31 March
2004 2003
Restated
(note 1)
£'000 £'000
Fixed assets
Patents and licences 6,810 1,055
Goodwill 19,327 38,059
-------- --------
Intangible assets 26,137 39,114
Tangible assets 58,077 65,531
Investments 7 7
Investments in joint ventures:
-------- --------
- share of gross assets 12,496 12,474
- share of gross liabilities (6,012) (8,392)
- goodwill 757 932
-------- --------
7,241 5,014
-------- --------
91,462 109,666
-------- --------
Current assets
Stocks and work-in-progress 16,296 16,696
Debtors
- due within one year 69,174 61,402
- due after one year 419 8,775
Cash at bank and in hand 14,541 28,104
------- -------
100,430 114,977
Creditors: Amounts falling due within one year (49,932) (52,314)
------- -------
Net current assets 50,498 62,663
------- -------
Total assets less current liabilities 141,960 172,329
Creditors: Amounts falling due after more than one year (59,407) (70,844)
Provisions for liabilities and charges (8,374) (3,039)
------- -------
Net assets 74,179 98,446
------- -------
Capital and reserves Note
Called-up share capital 6,615 6,615
Share premium account 7 61,650 61,650
Capital reserve 7 24 24
Profit and loss account 7 5,858 30,134
------- -------
Shareholders' funds, being equity interests 74,147 98,423
Minority equity interests 32 23
------- -------
Total capital and reserves 74,179 98,446
------- -------
Consolidated Cash Flow Statement
For the year ended 31 March 2004
31 March 31 March
2004 2003
£'000 £'000
Note Restated
(Note 1)
Net cash inflow from operating activities 8 27,990 53,013
------- -------
Returns on investments and servicing of finance
Interest received 432 109
Interest paid (3,237) (5,461)
------- -------
Net cash outflow for returns on investments and
servicing of finance (2,805) (5,352)
------- -------
Taxation (10,278) (6,993)
------- -------
Net cash outflow for capital expenditure and
financial investment (13,401) (12,758)
------- -------
Acquisitions and disposals (3,867) 18,979
Equity dividends paid (7,202) (7,197)
------- -------
Cash (outflow) / inflow before financing (9,563) 39,692
------- -------
Financing
Issue of ordinary share capital - 356
Decrease in debt (4,000) (5,676)
------- -------
(4,000) (5,320)
------- -------
(Decrease) / increase in cash in the year (13,563) 34,372
------- -------
Notes to the preliminary results
31 March 2004
1. The financial information set out above does not constitute the Company's
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
The statutory accounts of the Company for the year ended 31 March 2003 have been
delivered to the Registrar of Companies. The auditors' report on those accounts
was unqualified and did not contain any statements under Section 237(2) or (3)
of the Companies Act 1985.
The auditors' report for the year ended 31 March 2004 is unqualified and does
not contain any statements under Section 237 (2) or (3) of the Companies Act
1985. These accounts have been prepared using the same accounting policies as in
the 31 March 2003 statutory accounts with the exception of the adoption of
'Amendment to FRS5 Reporting the substance of transactions: Revenue recognition'
which has resulted in certain sub-contractor costs recharged to customers being
recorded as turnover in the current year rather than as part of cost of sales,
and an amendment to the group's accounting policy for replacement components for
operational equipment which has resulted in a reclassification from tangible
fixed assets to stocks and work-in-progress. The prior year turnover, cost of
sales, tangible fixed assets and stocks and work-in-progress have been restated
accordingly with no impact on operating profit. These accounts will be delivered
to the Registrar of Companies following the Annual General Meeting on 7 July
2004.
2. Segmental information
Turnover by Business Stream
---------------------------- Surface &
Cased Hole Subsurface Environmental
Services Systems Systems Total
2004 2003 2004 2003 2004 2003 2004 2003
(Restated) (Restated) (Restated) (Restated)
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Total 88,054 84,837 42,002 57,795 78,339 81,027 208,395 223,659
Less: Share of joint ventures - - (7,232) - (5,423) (5,743) (12,655) (5,743)
-------- -------- -------- -------- -------- -------- -------- --------
Group turnover 88,054 84,837 34,770 57,795 72,916 75,284 195,740 217,916
-------- -------- -------- -------- -------- -------- -------- --------
Segment profit 7,755 10,684 7,129 13,217 4,564 7,169 19,448 31,070
-------- -------- -------- -------- -------- --------
Common costs (8,867) (9,410)
Exceptional provision for
goodwill impairment (14,950) - - - (1,175) - (16,125) -
-------- -------- -------- -------- -------- -------- -------- --------
Operating (loss)/profit (5,544) 21,660
Share of joint ventures'
operating profit - - 863 - 2,703 722 3,566 722
-------- -------- -------- -------- -------- -------- -------- --------
Operating (loss) / profit from
group and share of joint ventures (1,978) 22,382
Exceptional items reported after
operating profit - 246 - 16,550 - - - 16,796
-------- -------- -------- -------- -------- --------
Finance charges (net) (2,488) (4,794)
-------- --------
(Loss)/profit on ordinary
activities before taxation (4,466) 34,384
-------- --------
Segment net assets 48,565 58,921 34,133 39,677 41,381 48,088 124,079 146,686
-------- -------- -------- -------- -------- --------
Unallocated net liabilities (49,900) (48,240)
-------- --------
Net assets 74,179 98,446
-------- --------
Unallocated net liabilities and common costs consist of the net liabilities, group borrowings and common costs of the
group head office which cannot reasonably be allocated to the business streams.
2. Segmental information (continued)
Turnover by geographical origin* Europe/FSU(a) Africa/ME (b) Asia Pacific Americas Total
2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
(Restated) (Restated) (Restated) (Restated) (Restated)
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Total 93,994 93,762 52,932 53,650 21,063 31,677 40,406 44,570 208,395 223,659
Less: Share of joint ventures (2,243) - (8,679) (5,743) (99) - (1,634) - (12,655) (5,743)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Group turnover 91,751 93,762 44,253 47,907 20,964 31,677 38,772 44,570 195,740 217,916
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Segment profit/(loss) 18,103 16,836 7,000 11,953 (2,174) 1,896 (3,481) 385 19,448 31,070
------- ------- ------- ------- ------- ------- ------- -------
Common costs (8,867) (9,410)
Exceptional provision for
goodwill impairment (16,125) -
------- -------
Operating(loss)/profit (5,544) 21,660
Share of joint ventures'
operating profit 28 - 3,475 722 114 - (51) - 3,566 722
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Operating(loss)/profit from
group and share of joint
ventures (1,978) 22,382
Exceptional items reported
after operating profit - 1,455 - 8,748 - - - 6,593 - 16,796
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Finance charges (net) (2,488) (4,794)
------- -------
(Loss)/profit on ordinary
activities before taxation (4,466) 34,384
------- -------
Segment net assets 51,345 61,890 24,340 15,721 12,266 16,647 36,128 52,428 124,079 146,686
------- ------- -------- -------- ------- ------- ------- ------- ------- -------
Unallocated net liabilities (49,900) (48,240)
------- -------
Net assets 74,179 98,446
------- -------
Unallocated net liabilities and common costs represent the net liabilities, group borrowings and common costs of the
group head office which cannot reasonably be allocated on a geographic basis.
* There is no material difference between turnover by origin and turnover by destination
a. Former Soviet Union
b. Middle East
The adoption of 'Amendment to FRS5 Reporting the substance of transactions:
Revenue recognition' has resulted in certain sub-contractor costs recharged to
customers being recorded as turnover in the current year rather than as part of
cost of sales. Turnover and cost of sales have been restated accordingly by
increasing both by £13,071,000 (2003 £14,427,000) resulting in no impact on
operating profit.
3. Exceptional items
(a) Exceptional provision for goodwill impairment
In accordance with FRS11 'Impairment of Fixed Assets and Goodwill' the carrying
value of the group's subsidiary undertakings has been compared to their
recoverable amounts, represented by their value in use to the group. This review
has resulted in an exceptional provision for impairment of £16,125,000,
primarily against the carrying value of goodwill related to the acquisitions of
Production Wireline Solutions on 20 May 2001 (impairment provision of £6,196,000
resulting in a written down value of £Nil) and Tripoint Inc. acquired on 1
February 2000 (impairment provision of £7,519,000 resulting in a written down
value of £4,169,000). In addition, impairment provisions of £2,410,000 have been
made against other previous acquisitions. The discount rate applied to the cash
flows to arrive at the valuations was 9.1%.
(b) Prior year exceptional gain on partial sale of interest in business on
formation of joint venture
During the prior year the group transferred its Permanent Monitoring business
into a newly formed joint venture enterprise, QuantX Wellbore Instrumentation
comprising three joint venture companies. In consideration for a 50% holding in
the joint venture companies, Baker Hughes Inc. paid the Expro group £18,979,000
cash which resulted in a realised exceptional gain before taxation of
£16,550,000. Tax on the exceptional gain was £4,036,000. As a result of this
transaction, the group and Baker Hughes Inc each hold 50% in each of the joint
venture companies. At any time after 31 March 2004, the group has the option to
sell to Baker Hughes Inc., and Baker Hughes Inc. has the option to purchase from
the group, all of the group's remaining equity interests in the joint venture
companies at a price based on the adjusted earnings for the year immediately
prior to the exercise of the option. As at 1 June 2004 neither option has been
exercised.
(c) Prior year exceptional (profit) / loss on termination of discontinued
operations
During the prior year the group completed the closure of its cased hole services
business in Venezuela with the final charges and associated provisions recorded
resulting in an exceptional profit from the release of excess provisions.
4. Tax on (loss) / profit on ordinary activities
The taxation charge comprises:
2004 2003
£'000 £'000
Current tax
UK corporation tax charge 4,351 4,300
Double tax relief (1,101) (1,347)
------- -------
3,250 2,953
Foreign tax 3,699 8,384
------- -------
6,949 11,337
Adjustments to UK corporation tax in respect of prior years (844) -
------- -------
Total current tax 6,105 11,337
Deferred tax: Origination and reversal of timing differences (677) (1,947)
------- -------
Total tax on (loss) /profit on ordinary activities 5,428 9,390
------- -------
5. Dividends paid and proposed
2004 2003
£'000 £'000
Dividend paid on 30 January 2004 of 3.8p (2003 - 3.8p) per
ordinary share 2,510 2,510
Proposed final dividend of 7.1p (2003 - 7.1p) per ordinary
share 4,692 4,700
------- -------
7,202 7,210
------- -------
The proposed final dividend, subject to shareholder's approval at the Annual
General Meeting on 7 July 2004, will be paid on 30 July 2004, to shareholders on
the register at 2 July 2004.
6. Earnings / (losses) per ordinary share
The calculations of earnings per share are based on the following profits and
numbers of shares.
2004 2003
£'000 £'000
(Loss) / profit for the financial year for Basic and
Diluted earnings per share (9,903) 24,974
Goodwill amortisation group and joint ventures 2,372 2,388
Exceptional provision for goodwill impairment 16,125 -
Exceptional gain after tax on partial sale of interest
in business on formation of joint venture - (12,514)
Exceptional gain on discontinued operations - (246)
-------- --------
Earnings before goodwill and exceptional items 8,594 14,602
-------- --------
Number of shares
-------------------
2004 2003
Weighted average number of shares ranking for
dividend used for Basic earnings per share 66,075,394 66,034,624
Dilutive effect of share options: - 88,222
- Executive share scheme
- Employee share scheme 21,595 41,254
---------- ----------
Weighted average number of shares used for
Diluted earnings per share 66,096,989 66,164,100
---------- ----------
The directors believe that the presentation of basic earnings per share before
goodwill amortisation and exceptional items assists with understanding the
underlying performance of the group.
7. Reserves
Share Profit
premium Capital and loss
account reserve account
£'000 £'000 £'000
Group
Beginning of year 61,650 24 30,134
Currency translation difference on foreign
currency net investments - - (14,114)
Currency translation difference on related
borrowings - - 6,943
Retained loss for the year - - (17,105)
------- -------- --------
End of year 61,650 24 5,858
------- -------- --------
Cumulative goodwill written off against reserves was £47,186,000 (2003 -
£47,186,000).
8. Cash flow information
Reconciliation of operating (loss) / profit to net operating cash inflow
2004 2003
(restated)
£'000 £'000
Operating (loss) / profit (5,544) 21,660
Depreciation and amortisation 19,399 19,933
Exceptional provision for goodwill impairment 16,125 -
Loss on sale of tangible fixed assets 26 133
Decrease / (increase) in stocks and work-in-progress 400 (553)
Decrease in debtors 584 15,809
Decrease in creditors and provisions (3,000) (4,058)
Exceptional cash inflow related to termination of
discontinued operation (note 3c) - 89
------- -------
Net cash inflow from operating activities 27,990 53,013
------- -------
Reconciliation of net cash flow to movement in net debt
2004 2003
(restated)
£'000 £'000
(Decrease) / increase in cash in the year (13,563) 34,372
Cash flow from decrease in debt finance 4,000 5,676
------- -------
(Increase) / decrease in net debt resulting from cash
flows (9,563) 40,048
Translation difference 7,121 5,701
------- -------
Movement in net debt in the year (2,442) 45,749
Net debt at beginning of year (42,424) (88,173)
------- -------
Net debt at end of year (44,866) (42,424)
------- -------
Analysis of net debt
Other
Beginning Cash non cash End of
of year flow changes year
£'000 £'000 £'000 £'000
Cash at bank and in hand 28,104 (13,563) - 14,541
Debt due after 1 year (70,528) 4,000 7,121 (59,407)
------- ------- ------- -------
(42,424) (9,563) 7,121 (44,866)
------- ------- ------- -------
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