Interim Results

Expro International Group PLC 24 November 2005 24 November 2005 EXPRO INTERNATIONAL GROUP PLC ("Expro" or "the Group") Interim results for the six months ended 30 September 2005 Expro International Group PLC, the oilfield services company, today announces interim results for the six months ended 30 September 2005. Six months ended Year ended 30 September 31 March 2005 2004 2005 Revenue - continuing operations Â£131.6m Â£100.6m Â£211.3m Operating profit Â£13.6m Â£8.2m Â£12.5m Headline operating profit (a) Â£13.6m Â£9.7m Â£19.0m Basic EPS continuing & discontinued 10.4p 7.0p 5.7p Headline EPS (b) 10.0p 8.0p 13.6p Dividends per share 3.8p 3.8p 10.9p Net bank borrowings (c) Â£52.8m Â£47.3m Â£53.7m (a) Based on continuing operations before significant non-recurring items as extracted from the consolidated income statement (b) Based on continuing operations before significant non-recurring items and basic number of shares, as calculated under Note 6 Comment on EPS under previously adopted standards is provided on Page 1 of the Chairman's and Chief Executive's Statement (c) Net bank borrowings are bank loans less cash and cash equivalents, as calculated under Note 9 â€¢ Results in line with expectations â€¢ The strategy continues to deliver financial performance â€¢ Enquiry levels and order book continue to increase, fuelled by advances in technology and increased customer focus combined with improved market conditions â€¢ Additional investment to resource future demand â€¢ Dividend maintained Commenting on the results, Graeme Coutts, Chief Executive, said, "I am very pleased to announce today a set of results that not only fulfil our short term performance goals, but also incorporate initiatives that evidence our continued commitment to strategic investment for the future. Headline EPS under IFRS of 10.0p is a significant growth on prior year and is equivalent to 11.1p under our previous accounting requirements. The execution of the strategy has generated strong revenue growth and, combined with the group's operating leverage, has not only offset adverse currency movements, and funded investments in the future, but also provided continued growth in earnings. The market outlook for the second half and beyond remains positive." - Ends - For further information please contact: Expro International Group PLC On 24 November: 020 7067 0700 Graeme Coutts, Chief Executive Thereafter: 0118 959 1341 Michael Speakman, Finance Director Weber Shandwick Square Mile 020 7067 0700 James Chandler/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") Interim results for the six months ended 30 September 2005 Chairman's and Chief Executive's Statement There has been a continued improvement in market conditions for upstream oil and gas services during the last six months, driven by a combination of increased global economic demand for oil and gas and a general tightening of supply. The supply issue predominantly results from strong discipline displayed by the Organisation of Petroleum Exporting Countries ("OPEC") and several years of low activity levels in drilling and well intervention. This has resulted in heavy production declines and a low rate of reserves replacement. This improved environment has provided a robust platform for Expro to implement global growth strategies. With oil prices being sustained above USD 30 per bbl, client capital and operating expenditure levels have risen. Our customers are focusing on increasing production from existing wells, bringing on additional production from existing reserves through developing new fields, and adding new reserves by increasing exploration activities. These conditions play heavily to Expro's strengths, and the Group is well placed to take advantage of the late cycle element of these improved market conditions. As anticipated at the time of our preliminary results announcement in June, demand for our products and services has strengthened in the first half of the year, driven by the implementation of our focused strategy published two years ago and assisted by the aforementioned improvement in market conditions. The headline EPS(a) at 10.0p is an increase of 25% compared to the same period last year. Shareholders will recognise that since we last reported there have been changes to UK GAAP and we have now adopted IFRS for the first time for reporting purposes. It has not been possible to allocate the effect of each of these changes, but EPS under the previously adopted reporting standards, pre-goodwill and exceptional items, would be 11.1p. The earnings benefit of the 31% improvement in revenue, compared to the corresponding period in the prior year, is masked by unfavourable foreign exchange effects and specific expenditures which should result in improved revenues in the future. The Group operates a consistent hedging policy that largely protects earnings within a twelve month time horizon, consequently delaying the impact of currency fluctuations, and in this period the foreign exchange hedges that have unwound are less beneficial compared to those that matured last year. The investments in infrastructure relate mainly to expanding capacity and capability in Group Engineering and to growing Expro's strategic hub in West Africa. IFRS Expro published its IFRS prior period restatements on 15 November 2005 and a full copy of these restatements can be found on the Group's website at: http://www.exprogroup.com/corpus/Investors/RFR151105.asp The most significant differences between UK GAAP and IFRS that contribute to changes in reported financial information are: â€¢inclusion of the net deficit on defined benefit pension schemes within the balance sheet â€¢reversal of goodwill amortisation charges, partially offset by increased impairment costs â€¢recognition of dividends only when paid or approved â€¢adjustments for deferred tax â€¢capitalisation, as finance leases, buildings previously disclosed as held under operating leases The transition to IFRS had no impact on the Group's reported cash balances. (a) Based on continuing operations before significant non-recurring items and basic number of shares, as calculated under Note 6 Dividend The Board remains confident in the long term outlook for the Group and therefore believes that it is appropriate to declare a maintained interim dividend of 3.8p per share (2004: 3.8p per share). This will be payable on 31 January 2006 to shareholders on the register at 31 December 2005. Business strategy As indicated in the pre-close trading statement of 28 September 2005, Expro has made several key management appointments to ensure both strategic and operational delivery are maintained. The current Group businesses have been re-organised to give additional focus and to capitalise on the strong market dynamics. This structural management change is designed to improve further the organisation's alignment with our markets and customers. The Global Businesses, comprising businesses which are driven by customer capital expenditure, are areas where Expro has clear market leadership. They are, in the main, highly technically differentiated and require strong project management skills. Robin Mair has assumed overall responsibility for this division, which includes our market leading global subsurface systems brands of Tronic/Matre and Subsea Safety Tools ("SST"), as well as our Early Production Facilities ("EPF"). The Regional Businesses, under the direction of Gavin Prise, are the technologies and services which are predominantly local, infrastructure dependent, and driven by client operating expenditure. This division encompasses our Cased Hole Services ("CHS") and well testing offerings. Additionally, the strategic importance placed by Expro on future development and commercial exploitation of rigless technologies has been reinforced by the appointment of Trevor Burgess as our first Managing Director of this emerging business. Business segment overview As previously described, the business now operates in two distinct segments, which are driven by different market characteristics. Global Businesses Our Global Businesses are driven predominantly by the increase in customer capital expenditure. This segment consists of our deepwater businesses; Tronic connectors, Matre instruments, SST and our 50% stake in the QuantX joint venture, coupled with our capital intensive EPF business. All of these businesses have made strong progress within the period with total segment revenues up by 39% to Â£55 million compared to the corresponding period in the prior year. Tronic, Matre and QuantX have all benefited from the increased capital spend and project sanctions in the deepwater markets of the world. With the exception of QuantX, Expro holds leading market positions in this subsurface arena. Our focused strategy to position Expro as the supplier of choice for the provision of seabed and well access technologies has resulted in increased market shares in strong market conditions. Demand for all products and services has improved. Most notable has been the performance of Tronic which has positioned itself to meet future industry demands for seabed power and instrumentation connectors. The integration of the acquired Matre instrumentation business with Tronic is driving the market to buy combined, system based, solutions. Our SST business strengthened considerably in the period due to prior investment made in the development of this technology. These investments in new deep and ultra-deep water tools have allowed us to take advantage of the emerging deepwater field developments, many of which are now sanctioned for future development. Much of our forward order book lies in this area with over USD 100 million of announced contracts phased over the coming years. The period under review also included the highly successful installation and commissioning of the EPF for ExxonMobil on Sakhalin Island. This achievement is acknowledged by our client as outstanding, with first gas processed on time and within budget. This major contract commenced towards the end of the period under review and will extend throughout 2006. The final product line within our global portfolio is QuantX where we held a 50% stake in a joint venture with Baker Hughes. As announced in the pre-close statement in September, our partner elected to exercise the right to acquire the business outright. The consideration of USD 27.2 million is based on a predetermined formula and the transaction has an effective date of 31 October 2005. Regional Businesses The Group continues to service its customers from a three region geographic structure; Europe and Former Soviet Union, Africa Asia Middle East and the Americas. Expro's strategy is to manage product lines which have short term call-out characteristics on a local, regional basis. These product lines demand local infrastructure to serve markets which are predominantly mature in nature, lower in technology requirement and where we may have a number of local competitors. These markets are also more resilient to change in customer spend patterns and provide steady revenues, driven mostly by our customer operating expenditure needs. The specific product lines are CHS, a range of temporary in-well products and services designed to maintain and enhance productivity from wells, and Surface Welltest, a range of temporarily deployed production vessels capable of measurement and disposal of hydrocarbon well effluent in an environmentally sound manner. Our key strategic focus is to optimise asset utilisation in markets where Expro has developed or is developing critical mass. In these cases both Expro and our customers enjoy economies of scale. Total income from the combined regional businesses has increased by 25% to Â£77 million on a like for like basis compared to the corresponding period last year. Our biggest regional business remains Europe and Former Soviet Union where income increased by 22% to Â£34 million versus the corresponding period last year, with the majority coming from the North Sea area. During the period under review, we announced over USD 100 million of major contract awards which has given us a strong position and increased visibility in a very active market. The North Sea remains an important and growth market for the Group. The region is making slow progress in the Former Soviet Union. Like many of our peers, we are attracted to these emerging markets but we are equally cautious over timing and commitment to the establishment of a local call-off infrastructure. Our Africa Asia Middle East region covers vast geographic markets. Total income for the region increased by 35% to Â£27 million. All areas showed progress most notably within West Africa where the Group has secured an excellent position providing well clean up services for the up-coming deepwater developments. The newly established regional management office in Dubai is allowing us to increase our understanding of the important but complex Middle East markets. Turning to the Americas, where Group performance has historically been disappointing, we are delighted to note that our strategy to re-engineer our business portfolio is showing positive effects. In the 2003/04 year Expro had experienced trading exposure to the volatile shallow water Gulf of Mexico market. This year, despite severe weather disruption, our business has delivered an increase in income of 18% to Â£15 million. This encouraging position reflects the focused strategy to improve the quality of our earnings and lessen our dependency on the shallow water commodity markets. The outlook for our Americas business is now somewhat more positive and the Group's strong Houston presence is increasingly pivotal in our global customer strategies. Technology Expro remains firmly committed to the development and commercialisation of technology to help our customers meet their future requirements in all areas relating to our core businesses. The emerging deep water developments continue to offer us opportunities to progress our business through the application of our considerable experience of operating in this environment. To enable us to remain at the forefront of this market, in September 2005 the Group opened a new Technology Centre located in Aberdeen, Scotland. This centre houses over 80 professional engineers and management focused on technology and project delivery. This commitment is recognised by our customers as further evidence of the Group's intention to be the market leader in the area of subsea wells and associated technologies. As already mentioned above, this commitment is further evidenced by the recent appointment of Trevor Burgess as Managing Director for our rigless technology business. Trevor will assume responsibility for the ongoing joint industry project with bp, Shell and Chevron. Outlook The outlook for the upstream services sector remains positive, but, in the long term, cyclical. As a late cycle player, Expro has yet to experience the full effects of the current up-cycle, but our strong order book indicates the benefit to Expro of the improving market. We continue to field high levels of customer enquiry and build on a record level of order backlog. We have invested heavily in our strategy to re-establish Expro as a leading provider of services and investment will continue at levels which will enable the Group to benefit from the up-cycle in the market and the success of our strategy. The outlook for the remainder of this year remains favourable, and our strategic goal remains unchanged; our objective is to reward shareholders with profitable growth beyond the cycle. Dr Chris Fay, CBE Graeme Coutts 23 November 2005 Chairman Chief Executive Officer CONSOLIDATED INCOME STATEMENT for the six months ended 30 September 2005 Six months ended Year ended 31 30 September March 2005 2004 2005 Note Â£000's Â£000's Â£000's Continuing operations Revenue 2 131,647 100,648 211,273 Operating costs (118,050) (92,490) (198,772) ---------- ---------- ---------- Operating profit 13,597 8,158 12,501 -------------------------------------------------------------------------------- Comprising: Headline operating profit 13,597 9,704 19,018 Provision for goodwill impairment - - (4,971) Provision for inventory obsolescence - (1,546) (1,546) ---------- ---------- ---------- Operating profit 13,597 8,158 12,501 -------------------------------------------------------------------------------- Share of post tax profit from joint venture operations 2 - 2,034 2,038 -------------------------------------------------------------------------------- Comprising: Headline post tax profit - 1,296 1,300 Provision for goodwill impairment - (726) (726) Credit from release of provision - 1,464 1,464 ---------- ---------- ---------- Share of post tax profit from joint venture operations - 2,034 2,038 -------------------------------------------------------------------------------- ---------- ---------- ---------- 13,597 10,192 14,539 Investment income 1,847 1,498 3,055 Finance costs (4,140) (3,241) (6,643) ---------- ---------- ---------- Profit before tax 11,304 8,449 10,951 Tax on profit on ordinary activities 3 (4,215) (3,971) (7,829) ---------- ---------- ---------- Profit after tax from continuing operations 7,089 4,478 3,122 Discontinued operations Share of post tax profit from discontinued joint venture operations 4 348 136 658 ---------- ---------- ---------- Profit for the period 7,437 4,614 3,780 Ordinary dividends 5 (5,181) (4,692) (7,204) ---------- ---------- ---------- Retained profit/(loss) for the period 2,256 (78) (3,424) ========== ========== ========== Attributable to: Equity holders of the parent 2,186 (90) (3,425) Minority interest 70 12 1 ---------- ---------- ---------- 2,256 (78) (3,424) ========== ========== ========== Earnings per share From continuing operations 6 Basic 10.0p 6.8p 4.7p Diluted 9.8p 6.8p 4.7p From continuing and discontinued operations 6 Basic 10.4p 7.0p 5.7p Diluted 10.3p 7.0p 5.7p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the six months ended 30 September 2005 Six months ended Year ended 30 September 31 March 2005 2004 2005 Â£000's Â£000's Â£000's Profit for the period 7,437 4,614 3,780 Net income recognised directly in equity Fair value losses on cash flow hedges (2,200) - - Translation of foreign operations 4,250 (36) (1,962) (Loss)/gain on movement in retirement benefit obligation (2,586) 77 (7,847) Tax on items taken directly to equity 673 (114) 2,233 ---------- ---------- ---------- 137 (73) (7,576) ---------- ---------- ---------- Total recognised income and expense for the period 7,574 4,541 (3,796) ========== ========== ========== Attributable to: Equity holders of the parent 7,504 4,529 (3,797) Minority interest 70 12 1 ---------- ---------- ---------- 7,574 4,541 (3,796) ========== ========== ========== Effects of changes in accounting policy: Attributable to equity holders of the parent - Increase in retained earnings at the beginning of the year 621 - - ========== ========== ========== The effects of changes in accounting policy arise from the adoption of IAS 32 and IAS 39 with effect from 1 April 2005. CONSOLIDATED BALANCE SHEET at 30 September 2005 30 September 31 March 2005 2004 2005 Note Â£000's Â£000's Â£000's Non-current assets Goodwill 20,954 21,286 18,166 Other intangible assets 10,535 7,362 7,119 Property, plant and equipment 89,236 65,408 72,426 Investment in joint ventures - 8,496 3,242 Deferred tax assets 5,367 2,493 3,470 Derivative financial instruments 72 - - ---------- ---------- ---------- 126,164 105,045 104,423 ---------- ---------- ---------- Current assets Inventories 16,971 14,424 15,213 Trade and other receivables 91,414 65,636 74,789 Cash and cash equivalents 9 9,573 13,213 5,009 Assets in disposal group held for sale 4 3,786 - - ---------- ---------- ---------- 121,744 93,273 95,011 ---------- ---------- ---------- Current liabilities Trade and other payables (51,345) (37,071) (45,290) Retirement benefit obligation (2,946) (2,793) (2,806) Current tax liabilities (8,964) (5,034) (6,625) Obligations under finance leases 9 (688) (332) (478) Derivative financial instruments (1,417) - - Provisions (115) (350) (349) ---------- ---------- ---------- (65,475) (45,580) (55,548) ---------- ---------- ---------- ---------- ---------- ---------- Net current assets 56,269 47,693 39,463 ---------- ---------- ---------- Non-current liabilities Retirement benefit obligation (23,890) (13,312) (21,076) Deferred tax liabilities (3,109) (4,013) (1,629) Obligations under finance leases 9 (8,049) (6,568) (6,496) Derivative financial instruments (235) - - Bank loans 9 (62,331) (60,513) (58,715) Provisions (2,754) (5,581) (2,780) ---------- ---------- ---------- (100,368) (89,987) (90,696) ---------- ---------- ---------- ---------- ---------- ---------- Total liabilities (165,843) (135,567) (146,244) ---------- ---------- ---------- ---------- ---------- ---------- Net assets 82,065 62,751 53,190 ========== ========== ========== Shareholders' equity Share capital 8 7,319 6,615 6,646 Share premium account 281 61,650 929 Own shares (407) (7) (407) Capital reserve - 24 - Share options reserve 640 39 417 Hedging and translation reserve 894 (36) (1,963) Retained earnings 73,201 (5,578) 47,535 ---------- ---------- ---------- Total shareholders' equity 81,928 62,707 53,157 Minority interest in equity 137 44 33 ---------- ---------- ---------- Total equity 82,065 62,751 53,190 ========== ========== ========== CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 September 2005 Six months ended Year ended 30 September 31 March 2005 2004 2005 Note Â£000's Â£000's Â£000's Net cash inflow from operating activities 9 8,988 12,669 32,786 ---------- ---------- ---------- Investing activities Interest received 273 432 407 Proceeds on disposal of property, plant and equipment 314 11 181 Purchase of property, plant and equipment (22,758) (9,277) (29,080) Purchase of other intangible assets (213) (47) (317) Acquisition of subsidiary undertaking 7 (6,269) - (6,421) Cash acquired in subsidiary undertaking 7 281 - 553 Deferred consideration from disposal of joint venture 4,797 - - Payment of deferred consideration (291) - (59) Net repayment of loans from joint venture operations - - 33 ---------- ---------- ---------- Net cash used in investing activities (23,866) (8,881) (34,703) ---------- ---------- ---------- Financing activities Issue of share capital 25,258 - 959 Own shares acquired by ESOP trust - - (400) Dividends paid (5,181) (4,692) (7,204) Repayment of obligations under finance leases (635) (446) (992) ---------- ---------- ---------- Net cash from/(used in) financing activities 19,442 (5,138) (7,637) ---------- ---------- ---------- Net increase/(decrease) in cash and cash equivalents 4,564 (1,350) (9,554) Cash and cash equivalents at beginning of the year 5,009 14,563 14,563 ---------- ---------- ---------- Cash and cash equivalents at end of the period 9,573 13,213 5,009 ========== ========== ========== NOTES TO THE INTERIM RESULTS 1 Basis of preparation For the year ended 31 March 2006 the Group is required to prepare consolidated financial statements under International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB"). These financial statements will be prepared in accordance with IFRS that are in force at that time, comprising those International Accounting Standards, International Financial Reporting Standards and related interpretations SIC-IFRIC interpretations), subsequent amendments to those standards and related interpretations and future standards and related interpretations that have been issued by the IASB and endorsed by the European Commission. IFRS that are currently in issue are subject to ongoing interpretation and endorsement by the IASB, its committees, and other regulatory bodies applicable to the Group. In particular the European Commission has yet to endorse the amendment to IAS 19 Employee Benefits that permits immediate recognition of all actuarial gains and losses on defined benefit post-retirement pension schemes outside of the income statement. Furthermore, changes to IAS 39 Financial Instruments: Recognition and Measurement ("IAS 39") concerning the requirements for assigning a fair value to financial liabilities and the circumstances in which hedge accounting may be applied have also not been endorsed by the European Commission at this time. Management has used its best knowledge of the expected standards and interpretations, facts and circumstances, and accounting policies that will be applied when the Group prepares its first set of IFRS consolidated financial statements as at 31 March 2006. Therefore, until such time as the Group prepares these financial statements, in accordance with standards endorsed by the European Commission at that time, the possibility cannot be excluded that the financial information presented herein may require adjustment. The Interim Results have been prepared under the historical cost convention. The comparative figures presented for the year ended 31 March 2005 and for the six month period ended 30 September 2004, which were previously reported in accordance with United Kingdom Generally Accepted Accounting Practice ("UK GAAP") have been restated to conform to these same accounting policies. The reconciliation of certain key financial information from UK GAAP to IFRS along with the accounting policies and methods of computation adopted as part of the transition to IFRS were published on 15 November 2005, and are available on the Group's website at http://www.exprogroup.com/corpus/Investors/RFR151105.asp. The Group has elected to apply the exemption from restatement of comparative information for IAS 32 Financial Instruments: Disclosure and Presentation ("IAS 32") and IAS 39. As such, UK GAAP rules have been applied to derivatives, financial assets and financial liabilities and to hedging relationships for the information presented for the year ended 31 March 2005 and for the six month period ended 30 September 2004. The adjustments required for differences between UK GAAP and IAS32 and IAS39 have been determined and have been recognised at 1 April 2005. The effect of these adjustments is shown in the consolidated statement of recognised income and expense. The results for the six months ended 30 September 2005 and the comparative results for the six months ended 30 September 2004, as restated for the effects of IFRS, have not been audited by the Company's auditors or reviewed in accordance with APB Bulletin 1999/4. The comparative information for the year ended 31 March 2005, as restated for the effects of IFRS, does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. A copy of the statutory accounts for that year prepared in accordance with UK GAAP has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified. Operations discontinued in the period are detailed in Note 4. The results of these operations are separately disclosed within the consolidated income statement, requiring changes to the disclosure of financial information previously presented for the year ended 31 March 2005 and for the six month period ended 30 September 2004. 2. Segmental information During the period since 31 March 2005 management of the Group has been re-organised into two distinct operations - Global Businesses and Regional Businesses - as follows: Global Businesses provides products and services which are driven by customer capital expenditure. These products and services, which are often based upon bespoke engineering or technology based solutions, are delivered remotely over a long term, typically offshore project. Regional Businesses provides services which are driven by customer operating expenditure. Customer requirement is often for a shorter period of time and delivery is made through, and supported by, the Group's locally established infrastructure. These Global and Regional businesses, which have different market characteristics, are the basis on which the Group reports its primary segment information. Segment information previously reported for the year ended 31 March 2005 and for the six month period ended 30 September 2004 has been represented in accordance with the current management structure. Six months ended Year ended 30 September 31 March 2005 2004 2005 Â£000's Â£000's Â£000's Segment revenue Global Businesses 54,804 39,311 79,670 Regional Businesses 76,843 61,337 131,603 ---------- ---------- ---------- Total 131,647 100,648 211,273 ---------- ---------- ---------- Segment result Global Businesses - group 11,053 7,373 15,615 - share of joint venture (post-tax) - 2,034 2,038 ---------- ---------- ---------- 11,053 9,407 17,653 Regional Businesses 10,425 5,069 4,588 ---------- ---------- ---------- Total result 21,478 14,476 22,241 Unallocated corporate expenses (7,881) (4,284) (7,702) ---------- ---------- ---------- 13,597 10,192 14,539 Investment income 1,847 1,498 3,055 Finance costs (4,140) (3,241) (6,643) ---------- ---------- ---------- Profit before tax 11,304 8,449 10,951 Tax (4,215) (3,971) (7,829) Profit for the period from discontinued operations 348 136 658 ---------- ---------- ---------- Profit for the period 7,437 4,614 3,780 ========== ========== ========== Profit for the period arising from discontinued operations represents the Group's share of the post tax profit of joint venture operations which were disposed of subsequent to 30 September 2005 (Note 4). Revenues by geographical segment are outlined below: Six months ended Year ended 30 September 31 March 2005 2004 2005 Â£000's Â£000's Â£000's Global Businesses Europe FSU (a) 25,777 21,440 41,426 Africa Asia ME (b) 21,988 12,473 28,459 Americas 7,039 5,398 9,785 ---------- ---------- ---------- 54,804 39,311 79,670 ---------- ---------- ---------- Regional Businesses Europe FSU (a) 34,419 28,308 60,015 Africa Asia ME (b) 27,168 20,108 44,149 Americas 15,256 12,921 27,439 ---------- ---------- ---------- 76,843 61,337 131,603 ---------- ---------- ---------- Total Europe FSU (a) 60,196 49,748 101,441 Africa Asia ME (b) 49,156 32,581 72,608 Americas 22,295 18,319 37,224 ---------- ---------- ---------- 131,647 100,648 211,273 ========== ========== ========== (a) Former Soviet Union (b) Middle East 3. Tax on profit on ordinary activities Six months ended Year ended 30 September 31 March 2005 2004 2005 Â£000's Â£000's Â£000's Current tax UK corporation tax 1,687 1,506 2,381 Foreign tax 3,100 1,986 5,451 ---------- ---------- ---------- 4,787 3,492 7,832 Deferred tax (572) 479 (3) ---------- ---------- ---------- Total 4,215 3,971 7,829 ========== ========== ========== The tax charge for the six months to 30 September 2005 has been based on an estimated effective rate for the year to 31 March 2006 of 37.3%. This compares with the UK standard rate of 30%, with the difference largely attributable to foreign profits taxed at rates higher than the UK rate and expenses not deductible for tax purposes. 4. Discontinued operations On 31 August 2005, Baker Hughes Inc. exercised its option to purchase from the Group its remaining equity interests in the joint venture companies QuantX Wellbore Instrumentation Limited, QuantX Wellbore Instrumentation LLC and QuantX Wellbore Instrumentation (International) Limited including the subsidiaries of QuantX Wellbore Instrumentation Limited, Blenheim Technology Group Limited and Plus Design Limited. The sale to Baker Hughes Inc. and transfer of ownership was completed on 31 October 2005 for a purchase price of USD 27.2 million, settled in cash on 15 November 2005. At 30 September 2005, these operations have been classified as a disposal group held for sale and presented separately in the consolidated balance sheet. The results of the discontinued operations are disclosed separately in the consolidated income statement and the prior period results have been restated accordingly. 5. Dividends Six months ended Year ended 30 September 31 March 2005 2004 2005 Â£000's Â£000's Â£000's Amounts recognised as distributions to equity holders in the period Final dividend paid for the year ended 31 March 2005 of 7.1p (2004: 7.1p) per ordinary share 5,181 4,692 4,692 Interim dividend paid for the year ended 31 March 2005 of 3.8p per ordinary share - - 2,512 ---------- ---------- ---------- 5,181 4,692 7,204 ========== ========== ========== A proposed interim dividend of 3.8 pence per ordinary share was approved by the Board after 30 September 2005 and has not been included as a liability at the balance sheet date. 6. Earnings per share The calculation of the basic and diluted earnings per share is based on the following information: Six months ended Year ended 30 September 31 March Earnings per share - continuing and 2005 2004 2005 discontinued Â£000's Â£000's Â£000's Earnings Profit for the period 7,437 4,614 3,780 Less minority interest (70) (12) (1) ---------- ---------- ---------- Earnings attributable to equity holders of the parent - continuing and discontinued 7,367 4,602 3,779 Less discontinued operations (348) (136) (658) ---------- ---------- ---------- Earnings for the purpose of basic earnings per share - continuing 7,019 4,466 3,121 Goodwill impairment in group and joint ventures - 726 5,756 Provision for inventory obsolescence - 1,546 1,546 Credit from release of joint venture provisions - (1,464) (1,464) ---------- ---------- ---------- Earnings for the purpose of headline earnings per share - continuing 7,019 5,274 8,959 ========== ========== ========== Number of shares Weighted average number of ordinary shares for the purposes of basic and adjusted earnings per share 70,536,545 66,075,394 66,110,613 Effect of dilutive potential ordinary shares: Share options 1,041,912 57,828 617,745 ---------- ---------- ---------- Weighted average number of ordinary shares for the purposes of diluted earnings per share 71,578,457 66,133,222 66,728,358 ========== ========== ========== Earnings per share From continuing operations Basic 10.0p 6.8p 4.7p ========== ========== ========== Diluted 9.8p 6.8p 4.7p ========== ========== ========== Headline 10.0p 8.0p 13.6p ========== ========== ========== From continuing and discontinued operations Basic 10.4p 7.0p 5.7p ========== ========== ========== Diluted 10.3p 7.0p 5.7p ========== ========== ========== Headline earnings per share is based on continuing operations before significant non-recurring items and on the basic number of shares. The directors believe that presentation of headline earnings per share assists in understanding the underlying performance of the Group. 7. Acquisition of subsidiary On 11 April 2005 the Group acquired Downhole Video International which is the market leading supplier to the oil and gas industry of downhole video services. The acquisition comprised a 100% interest in Downhole Video International Inc. (registered in the USA) and its subsidiary companies, Downhole Video Canada Inc. (registered in Canada), Downhole Video International Limited (registered in the British Virgin Islands) and a 75% interest in Downhole Video Far East Pty Limited (registered in Singapore). Fair value Book value adjustment Fair value Â£000's Â£000's Â£000's Net assets acquired Property, plant and equipment 724 - 724 Other intangible assets 44 3,611 3,655 Inventories 212 - 212 Trade and other receivables 1,087 - 1,087 Cash and cash equivalents 281 - 281 Trade and other payables (424) - (424) Obligations under finance leases (141) - (141) Deferred tax liability - (1,351) (1,351) Less: Minority interest's share of net assets (31) - (31) ---------- ---------- ---------- 1,752 2,260 4,012 Goodwill 2,257 ---------- Total consideration 6,269 ========== Satisfied by: Cash 6,192 Directly attributable costs 77 ---------- 6,269 ========== Net cash outflow arising on acquisition: Cash consideration 6,269 Cash and cash equivalents acquired (281) -------- 5,988 ======== The most significant factor contributing towards goodwill was the value attributed to the acquired workforce. The acquisition has been accounted for with an effective date of 1 April 2005. 8. Share issue On 2 June 2005, 6,640,000 new ordinary shares of 10 pence each were placed at a price of 390 pence per share. The share issue was credited as fully paid and ranked pari passu in all respects with Expro's existing ordinary shares. 9. Cash flow information Six months ended Year ended 30 September 31 March 2005 2004 2005 Â£000's Â£000's Â£000's Operating profit 13,597 8,158 12,501 Depreciation of property, plant and equipment 11,134 8,834 18,991 Amortisation of intangible assets 873 510 1,300 Impairment of goodwill - - 4,971 Loss on disposal of property, plant and equipment 397 155 1,123 Share based payments charge 223 39 416 Movement in retirement benefit obligation (285) (130) 230 Provision for inventory obsolescence - 1,546 1,546 ---------- ---------- ---------- Operating cash flows before movement in working capital 25,939 19,112 41,078 (Increase)/decrease in inventories (704) 326 1,124 (Increase)/decrease in trade and other receivables (16,934) 1,541 (180) Increase/(decrease) in trade and otherpayables 5,034 (3,317) (506) ---------- ---------- ---------- Cash generated by operations 13,335 17,662 41,516 Income taxes paid (2,513) (3,379) (5,752) Interest paid (1,834) (1,614) (2,978) --------- ---------- ---------- Net cash inflow from operating activities 8,988 12,669 32,786 ========== ========== ========== Analysis of net debt Other 1 April Cash non-cash Foreign 30 September 2005 flow changes exchange 2005 Â£'000's Â£'000's Â£'000's Â£'000's Â£'000's Cash and cash equivalents 5,009 4,564 - - 9,573 Bank loans (58,715) - - (3,616) (62,331) --------- --------- --------- --------- --------- Net bank borrowings (53,706) 4,564 - (3,616) (52,758) Finance leases (6,974) 635 (2,279) (119) (8,737) --------- --------- --------- --------- --------- (60,680) 5,199 (2,279) (3,735) (61,495) ========= ========= ========= ========= ========= Finance lease obligations reported under UK GAAP at 1 April 2005 were increased by Â£6,704,000 on transition to IFRS. Reported net debt has been restated accordingly. Other non-cash changes include additional obligations under finance leases of Â£1,978,000, of which Â£141,000 was acquired with the DHVI business, and notional interest on finance leases of Â£301,000. This information is provided by RNS The company news service from the London Stock Exchange

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