Final Results

RNS Number : 9013N

Hunting PLC

26 February 2009

 



For Immediate Release

26 February 2009

Hunting PLC

('Hunting' or the 'Company')

Full Year Results

Hunting PLC (LSE:HTG), the international energy services company today announces its Full Year Results for the year ended 31 December 2008.

 

Financial Highlights – all pre-exceptional items

 

·          Revenue on continuing operations increased to £440.0m (2007: £398.7m)	+10%
·          Profit before taxation from continuing operations increased to £58.9m (2007: £47.3m)	+25%
·          Earnings per share up to 27.5p (2007: 18.5p)	+49%
·          Final dividend of 7.0p recommended – total for 2008: 9.9p (2007: 8.25p)	+20%
·          Net cash of £372.3m following the elimination of net borrowings

 

Corporate Highlights

 

·          Disposal of Gibson Energy completed in December 2008 for total consideration of £517m

·          Due diligence commenced on a number of acquisition opportunities

 

Operational Highlights – all pre-exceptional items

 

·          Strong revenue growth in Well Construction of 54% at £112.0m (2007: £72.8m)

o   Profit from operations of £13.4m (2007: £8.2m)

·          Revenue growth of 3% in Well Completion at £213.1m (2007: £207.5m)

o   Profit from operations of £31.4m (2007: £34.1m)

·          Exploration and Production profits up 34% to £5.9m (2007: £4.4m) despite 10% decrease in production due to hurricanes

·          Gibson Shipbrokers record year, record profit of £6.9m (2007: £2.9m)

·          Hunting Energy France profit from operations of £2.0m (2007: £2.6m)

Commenting on the results, Dennis Proctor Chief Executive Officer of Hunting said:

'2008 was another year of good growth in our core Hunting Energy Services operations, which reflects our excellent product and services offering to the global energy industry. With the successful completion of the Gibson disposal, we will deploy this significant capital to acquiring complementary businesses, which will be earnings enhancing for our shareholders.'

'The global economic environment is now impacting the energy industry and although Hunting is exceptionally well placed to weather this turbulence our short term focus is on cash containment, investment in more efficient plants and introducing new products to customers.'

For further information please contact:

Hunting PLC Dennis Proctor, Chief Executive Peter Rose, Finance Director	Tel: [phone]
Buchanan Communications Ben Willey Richard Darby	Tel: [phone]

Notes to Editors:

About Hunting PLC

Hunting PLC is an international energy services provider to the world's leading upstream oil and gas companies. Established in 1874, it is a fully listed public company traded on the London Stock Exchange. The Company maintains a corporate office in Houston and is headquartered in London. As well as the United Kingdom, the Company has principal operations in Canada, China, France, Holland, Hong Kong, Singapore, United Arab Emirates and the United States of America.

Chairman's Statement

I am pleased to report another year of successful results for the Company. Profit before tax from continuing operations and before exceptional items in 2008 was £58.9m (2007 - £47.3m), a 25% increase. Profit before tax from continuing operations was £8.0m (2007 - £45.0m).

During the year we focused the Company more directly on the upstream energy services market by disposing of our large Canadian midstream business, Gibson Energy. Profit for the year, disclosed as discontinued operations, from Gibson's operations was £38.2m (2007 - £35.4m). Proceeds of some £517.1m from that sale, including the warrant, completed in December 2008, have eliminated the Company's net borrowings and are expected to be used to make earnings enhancing acquisitions in the upstream arena.

Our markets have seen extraordinary turmoil during the past few months, with a ramp up in oil prices to unprecedented heights in mid 2008, followed by an even more precipitate fall. The underlying causes are well understood, with the credit crunch leading to strong recessionary falls in demand for energy as well as for other commodities. In the short term, most of the Company's continuing operations order books remain strong but we will be affected by the reduction in capital expenditure budgets announced by several major industry customers.

We occupy an important niche in the energy production equation, and the current oversupply of crude oil is likely to be a brief phenomenon which will inevitably be replaced by future shortages and higher prices. The Company is in a strong position to take advantage of this environment, with our significant cash reserves and extensive range of products and services.

Overall, Hunting Energy Services exceeded its 2007 performance. Well Construction profits increased by 63% due mainly to continued drilling by our customers for oil and gas in shale deposits in the United States and as a result of additional capital expenditure within the division. Well Completion reports a modest reduction over the previous year with contract timing issues in Aberdeen in the early months but a fine run at the end. Our Exploration and Production activities in the southern United States did well thanks to high commodity prices for most of the year.

London-based Gibson Shipbrokers performed well, more than doubling its result over last year with high market rates in summer and autumn producing excellent income.

Earnings per share for continuing operations before exceptional items were 27.5p, an increase of 49% on the previous year. We are recommending a final dividend of 7p per share, giving a total of 9.9p for the year, a 20% increase.

Peter Rose became Finance Director at the AGM in April 2008, succeeding Dennis Clark in that position. Peter joined the Company in July 1997, initially as Group Financial Controller, and has also been Company Secretary since August 2004.

Dennis Clark retired from the Board and from Hunting PLC at the 2008 AGM. He joined the Group in 1972 and had been Finance Director of the Company since 1989. My colleagues and I are grateful for all that he did and wish him a long and happy retirement.

I would like to thank all the directors and staff of Gibson Energy for their dedication, enterprise and fine work ever since that company's formation, by Hunting, in 1953, and wish them well under their new ownership. With the sale, Terry Gomke left Hunting PLC and we thank him for his service on the Board.

Your Company has once again had an excellent year. The world economic storm surrounds us and makes a forward view in the short term particularly difficult. Nevertheless, we are well placed to survive the buffeting. Strategic focus on proprietary technology, market share leadership, global footprint and concentration on the vertical pipeline will ensure our position in a recovering market.

I thank all our staff for enabling the Company to produce another fine performance in challenging times.

Richard Hunting

Chairman

Business Review

Chief Executive's Review

In spite of the global economic downturn occurring in the later months of 2008, Hunting PLC is delighted to report excellent results for the year with a number of our operating facilities reporting record earnings. Further, management was able to conclude the sale of Gibson Energy on 12 December 2008, during a period of severe credit issues. This sale has enabled the Company to enter the new-year with no debt, a strong cash balance of £372.3m and the opportunity to capitalise on acquisitions having lower valuations than the recent past. Accordingly, your Company is in an admirable position to weather the short term of reduced energy demand and lower commodity prices.

The oil and gas industry experienced historical highs and lows throughout the year including US$147.27 per barrel on 11 July and natural gas averaging US$13.06 mcf for the month of June, then ending the year at US$44.60 per barrel and US$5.99 mcf respectively. In addition, the second half of the year saw two major hurricanes wreak havoc on the Gulf of Mexico operations resulting in a loss of oil and gas production for over a month. In February 2008, the Canadian rig count reached a high of 647. In the US, the rig count high point was attained in September at 2,031, as did the international rig count of 1,108. By year end, the US had fallen 15%, Canada 44% and International 2%. It is important to note, most of the North American rig decline is attributable to medium and shallow gas drilling to which the Company does not provide significant products and services.

Profits before tax from continuing operations before exceptional items grew 25% year-on-year on 10% annual revenue growth reflecting margin improvement from price increases, equipment utilisation and manpower efficiencies. Return on gross capital employed was 37%.

Business Development

Capital expenditure for continuing operations reduced to £35.0m (2007 - £38.3m) of which £10.6m (2007 - £14.1m) was new business development and £24.4m (2007 - £24.2m) replacement capital. Hunting Energy Services invested £34.3m (2007 - £36.7m) in capital expenditures during 2008 of which £8.8m (2007 - £7.0m) was for exploration and production expenditure. The balance of £25.5m included expenditure of £2.9m for additional facilities in Monterrey, Mexico and Houston, Texas. A further £22.6m was for new rental tools or equipment as well as new machinery.

Health, Safety and the Environment

Hunting Energy Services' US manufacturing operations incurred a total of 10 recordable incidents in 2008. Approximately 50% of the incidents were inexperienced workers with less than one year's employment. Hunting's incident rate of 2.7% remains far below the Bureau of Labor Statistics' industry average of 7.5%.

Our European facilities' accident statistics were again below the level of the industry average in engineering and manufacturing. The company received its second British Safety Council Sword of Honour. It is rare to win this accolade once - only 40 are awarded worldwide each year - but winning it twice is testament to the company's rigorous health and safety practices. To receive a Sword, companies have to be able to demonstrate their ability to manage health and safety risks via a proven culture of aiming for best practice, which is promoted through an entire organisation.

No environmental issues occurred in the year and all of Hunting Energy Services' primary manufacturing facilities are ISO 14001 Environmental Management System certified. Our goals remain no accidents, no harm to people and no damage to the environment.

  Outlook

With a declining rig count, primarily in North America, the oil and gas service industry will experience a decline in revenue and profits specifically in the medium and shallow oil and gas well drilling. Deep water activity, high temperature - high pressure wells, national oil company projects and well intervention activity will be impacted but not to the same degree. The Company's plan for 2009 is to:

•	Contain and reduce costs

•	Continue new product development

•	Replace existing facilities with more efficient plants to prepare for the eventual upturn

•	Acquire companies that complement and strengthen existing operations and products

•	Improve further its' Health, Safety and Environmental record

The Company will adjust to the short term economic pressures without losing sight of the eventual recovery later on. We remain confident that when the global economies recover, demand will rebound strongly, driven largely by the growth economies which were so pervasive during the oil price rise, namely China and India.

Our operating and growth strategy is to expand our proprietary technology, geographic footprint, market share strength and asset utilisation.

Operating Review

The Company's technology and capacity investments will further its earning's growth as demand for oil and gas continues to grow in the future. Hunting's five year compounded growth rate of 52% is exceptional and Hunting's 2,077 dedicated employees will continue to deliver excellent value to its shareholders.

Hunting Energy Services

Hunting Energy Services recorded a profit from operations before exceptional items of £52.7m versus £49.3m in 2007, a 7% increase. At the end of the year, there were 1,475 (2007 - 1,476) employees under four business platforms; Well Construction, Well Completion, Exploration & Production and Hunting Energy France.

The Well Construction platform provides products and services used by customers for the drilling phase of oil and gas wells along with associated equipment used by the underground construction industry for telecommunication infrastructure build out. Products and services in oil and gas activity are focused on well depths greater than 10,000 feet and most often in high temperature, high pressure environments. Technology is the key asset to the products within this division, including proprietary connections for oil country tubular goods and accessories, proprietary mud motors and non-magnetic drill collars and shock tools.

The trenchless business focuses on supplying drill rods and ancillary tools to manufacturers and dealers for underground utility installations. For North America, this application is expected to grow from the various stimulus spending proposals by the US government.

  The Well Completion platform provides products and services used by customers for the completion phase of oil and gas wells. This includes production tubing, accessories, couplings, blast joints, pup joints and numerous other components, all requiring Hunting's proprietary connections. Major oil and gas operators as well as major OEM service companies are the primary customer base.

This division also provides wireline and slickline tools for testing, cleaning and inspecting of the oil and gas well that has been on production for some time. The products and services in this division will be utilised throughout the life of an oil and gas well and provide numerous opportunities for repeat activity.

Patented products are the clam blow-out preventer for wireline applications as well as the variball roller system. Given the growth and successful application of various products within this Group, financial reporting will be segregated for 2009.

All products are processed and/or manufactured at Hunting Energy's 17 facilities located throughout the world. Two additional facilities will be added in 2009, one in Mexico and one in Indonesia.

Exploration and Production includes the Group's oil and gas exploration and production activities in the Southern US and offshore Gulf of Mexico. The Group takes minority non-operating equity holdings and currently participates in over 80 oil and gas production facilities.

The first half of 2008 saw record high prices for oil and natural gas, and the second half of the year experienced greatly diminished prices compounded by Hurricanes Gustav and Ike which struck the Gulf Coast. As a result, the E&P Division showed reduced production year on year, but full year revenues were at a record level. On a Net Equivalent Barrel ('NEB') basis, production was down 10% compared to 2007 due to wells being shut-in as a result of damage from the hurricanes. Full year output of 409,000 NEB combined with high average prices resulted in increased revenues, with profit from operations at 135% of the previous year. The division participated in the drilling of 17 wells with 9 successes - 5 gas, 3 oil and gas, and 1 oil. Year end reserves of oil and gas on an SEC basis were 1.8 NEB compared with 2.2 NEB at the end of 2007.

Income Statement

		2008		2007		Increase
		£m		£m
Continuing operations:
Revenue		440.0		398.7		10%
EBITDA		78.3		65.8		19%
Depreciation, amortisation and impairment		(17.4)		(14.5)
Profit from operations before exceptional items		60.9		51.3		19%
Net interest charge		(3.2)		(6.2)
Share of associates		1.2		2.2
Profit before tax		58.9		47.3		25%
Taxation		(19.4)		(18.1)
Profit for the year before exceptional items		39.5		29.2
Earnings per share before exceptional items		27.5p		18.5p		49%
Earnings per share from
continuing operations		(2.5)p		16.9p
discontinued operations		195.9p		27.1p
Group		193.4p		44.0p
Average exchange rates to sterling
US Dollar		1.86		2.00
Canadian Dollar		1.96		2.15
Euro		1.26		1.46
Average number of employees		2,094		2,176

Exceptional items from continuing operations during the year are a loss of £50.9m - see further discussion on exceptional items on page 10.

Exceptional items from discontinued operations during the year after tax are a gain of £218.1m - see further discussion on page 10.

Hunting Energy France comprises the Group's French based businesses which provide petrochemical equipment to the French and international energy and associated industries. The 2008 result was a 23% decline in profit from operations over 2007. This reduction was a function of postponement of key components to customers following the credit crunch of 2008. However, its high specification forge and cast valve division more than doubled its profit from operations year-on-year.

Hunting Specialized Products is a US based business supplying products and services for the trenchless rehabilitation of deteriorated pipelines. At the end of 2008 the Specialized Products operations were discontinued and in January 2009 the sale of substantially all the assets of Specialized Products was agreed. In addition to the loss from operations before exceptional items of £0.6m (2007 - £nil) the company recorded a charge of £2.0m against the cost of closure of the business.

The Group reports through a divisional structure arranged into the following business segments:

Segmental Results

				2008						2007
				Profit from						Profit from
		Revenue		Operations				Revenue		Operations
		£m		£m		Margin		£m		£m		Margin
Hunting Energy Services
Well Construction		112.0		13.4		12%		72.8		8.2		11%
Well Completion		213.1		31.4		15%		207.5		34.1		16%
Exploration and Production		14.8		5.9		40%		11.7		4.4		38%
Hunting Energy France		21.5		2.0		9%		22.5		2.6		12%
		361.4		52.7		15%		314.5		49.3		16%
Other operating divisions		78.6		8.2		10%		84.2		2.0		2%
Group		440.0		60.9		14%		398.7		51.3		13%
Exceptional items				(50.9)						(2.3)
Group profit from operations				10.0						49.0

Other Operating Divisions

E.A. Gibson Shipbrokers, global energy shipping brokers, posted record income and profit figures for the year ending 2008. Despite inconsistent markets, the depth and breadth of shipping expertise was enhanced by organic growth and global expansion into Singapore and Houston, complementing the existing Shanghai and Hong Kong offices. Recruitment for 2008 was approximately 20% over that of 2007.

Gibson Shipbrokers are headquartered in London, which remains the centre of international maritime excellence. From this hub, crude oil, fuel oil and clean products are actively shipped along with dry bulk such as coal and iron ore. Gibson is equally strong on LPG and LNG shipping and is active in the specialised markets of vegoil, chemicals, small products and the topical biofuel sectors. An expanding Offshore section increasingly relates to a similar client base to Hunting Energy Services whilst the Sale & Purchase team enjoyed success on re-sales, demolition and new building orders. The consultancy team continues to secure an increasing volume of research commissions from premier accounts.

Field Aviation Canada. The principal operation of Field is the conversion of all types of aircraft for special missions. Fields' Aircraft Modification Centre in Toronto provides aircraft modification, system and kit supply and installation services for regional, business and government including Special Electronic Mission Aircraft to operators worldwide.

In 2008, Field delivered a profit from operations of £1.3m (2007 - £0.3m loss) on revenues of £47.4m (2007 - £54.9m) before restructuring costs of £2.8m. The 2008 trading result was a significant improvement over 2007 with both the aircraft modification and parts manufacturing businesses returning to profit. During 2008 the business was restructured to focus on the aircraft modification work. The closure of the Calgary based aircraft maintenance repair and overhaul facility was announced at the end of 2008. Field's Calgary based aircraft parts manufacturing facility is retained and reported increased revenue and with a very strong order book extending well beyond the end of 2009, this growth is expected to continue. In January 2009 Field also disposed of Navair Inc, a supplier of products and services to the wireless communication industry.

In 2008, Field successfully completed major aircraft modification programmes for customers including US Customs and Japanese Coast Guard. Production capability for the next 12 months is already pre-sold with strong profits expected for 2009.

  Performance Measures

A number of performance measures are used to compare the development, underlying business performance and position of the Group and its business segments. These are used collectively and periodically reviewed to ensure they remain appropriate and meaningful monitors of the Group's performance.

•	Earnings before interest, tax, depreciation and amortisation ('EBITDA').

•	Profit before taxation ('PBT').

•

Return on capital employed ('ROCE') - measures the profit before interest expressed as a percentage of the capital employed. Capital employed is the average of the aggregate of total equity and the net debt/cash at the start and end of the financial period. Also used as a benchmark for target acquisitions or capital expenditure proposals.

•	Earnings per share ('EPS').

•	Free cash flow.

•	Health and Safety arrangements within the Group are monitored through regular reporting to the Board.

Each of these performance measures are commented upon within the tables contained in the Annual Report.

Indicators of future Group performance closely monitored by management include:

•	Drilling rig activity.

•	Oil and gas commodity prices.

•	Order book/backlog.

Finance Director's Review

Sale of Gibson Energy

On 12 December 2008, the Company completed the sale of Gibson Energy Holdings Inc (Gibson Energy) for a consideration of £517.1m realising a pre-tax profit on sale of £208.8m. The consideration includes a deferred element held in the form of a warrant over preferred equity shares ('warrant') in the parent company of the purchaser. The terms of the warrant are more fully explained in the financial statements and in view of current global market conditions, together with an assessment of its recoverability, a 50% impairment has been booked against the original book value of the warrant. At the year end, the warrant is held as an available for sale financial asset at a fair value of £28.3m.

Trading profits generated by Gibson Energy up to the date of completion of the sale are included within discontinued operations. Prior year comparatives have been restated to show Gibson Energy as a discontinued activity.

Results and profits

Group revenue increased by 10% from £398.7m to £440.0m and profit from continuing operations before exceptional items was up 19% at £60.9m from £51.3m on improved margins (profit from continuing operations was down from £49.0m to £10.0m).

Profit before tax from continuing operations before exceptional items reported 25% growth at £58.9m (2007 - £47.3m) (profit before tax from continuing operations was £8.0m (2007 - £45.0m)).

Net Finance costs

Net finance costs reduced year-on-year by 48% to £3.2m (2007 - £6.2m) benefiting from lower interest rates and the receipt of Gibson Energy disposal.

Exchange Rates

		2008				2007
		Average		Year End		Average		Year End
US Dollar		1.86		1.44		2.00		1.99
Canadian Dollar		1.96		1.77		2.15		1.96
Rates quoted to sterling

Exceptional items

Exceptional items contributed £178.9m to the year's result. The more significant components are noted below:

1.	Gibson Energy was sold during the year generating a profit before tax on disposal of £208.8m. After tax the gain was £218.1m.

2.	Goodwill impairment reviews undertaken during the year have resulted in a £16.3m impairment charge.

3.	Property plant and equipment impairment of £16.8m includes an oil and gas reserve impairment charge of £16.2m resulting from the fall in commodity prices during the year.

4.	A review of group leasehold property commitments, which are vacant or sublet to third parties, has given rise to additional provisions of £10.6m.

5.	Other exceptional items of £7.2m include restructuring costs and warranty provisions.

Earnings per share

Basic earnings per share before exceptional items for all operations increased by 24% from 45.6p in 2007 to 56.7p in 2008 and for continuing operations by 49% to 27.5p (2007 - 18.5p). Basic earnings per share for all operations was 193.4p (2007 - 44p) and for continuing operations was (2.5)p (2007 - 16.9p). The average number of shares used in calculating the earnings per share in 2008 was 130.9m compared to 130.4m in 2007.

Taxation

The 2008 tax charge on continuing operations before exceptional items was £19.4m (2007 - £18.1m) and reflects an effective rate of 33% (2007 - 38%). The lower rate in 2008 is mainly due to increased profits in lower tax jurisdictions particularly in SE Asia and a reduced UK corporate tax rate.

No tax is expected to be paid on the profit on sale of Gibson Energy, as the Company expects to qualify for relief under current UK tax legislation.

Net assets

Net assets increased by £254.3m to £566.2m at 31 December 2008 (2007 - £311.9m). The increase was mainly attributable to the £218.1m post-tax profit on disposal of Gibson Energy together with the retained result for the year and foreign exchange gains of £50.5m on the retranslation of the Group's overseas subsidiaries. Total liabilities improved following the receipt of Gibson Energy sale proceeds allowing all bank debt to be repaid.

Summary Balance Sheet

		2008		2007
		£m		£m
Total assets		885.2		920.2
Total liabilities		(319.0)		(608.3)
Net assets		566.2		311.9
Net cash (debt)		372.3		(139.2)

Pensions

The Group continues to account for pensions in accordance with IAS 19 and at the end of the year the net surplus on the Group's balance sheet was £7.6m (2007 - £24.1m) which related to the UK defined benefit scheme which was closed to new entrants in 2002. The reduction in the net surplus relating to the UK defined benefit scheme is mainly due to the cost of de-risking the scheme's liabilities through the purchase of an insurance annuity policy for active members. This cost has been charged to the SORIE.

Net cash

The year ended with net cash of £372.3m (2007 - net debt £139.2m). At 31 December 2008, the Group balance sheet shows bank borrowings of £49.1m. These are borrowings drawn on our UK overdraft facilities which are subject to a legal right of set-off against funds held in our UK current accounts. Under International Financial Reporting Standards (IFRS) these balances require to be shown gross.

Cash flow

Free cash flow, defined as profit from operations adjusted for working capital, tax, replacement capital expenditure and interest, generated during the year was £25.5m compared to a £11.0m cash outflow in 2007. Total capital expenditure was £35.0m (2007 - £38.3m) comprising replacement spend of £24.4m (2007 - £24.2m) and growth spend of £10.6m (2007 - £14.1m). Disposals, principally the sale of Gibson Energy, raised £524.4m (2007 - £10.6m) in the year and dividends absorbed £11.3m (2007 - £10.1m).

Summary Cash Flow

			2008		2007
			£m		£m
	Cash from Operations		60.7		25.7
	Replacement Capital Expenditure		(24.4)		(24.2)
	Interest and tax		(10.8)		(12.5)
	Free Cash Flow		25.5		(11.0)
	Disposals		524.4		10.6
	Acquisitions		(1.6)		(9.2)
	Growth Capital Expenditure		(10.6)		(14.1)
	Dividends		(11.3)		(10.1)
	Foreign Exchange		2.1		(11.9)
	Other Movements		(4.7)		(14.7)
	Cash inflow (outflow) – continuing		523.8		(60.4)
	Cash outflow – discontinued		(12.3)		(9.5)
	Cash inflow (outflow) – group total		511.5		(69.9)

Liquidity and Funding

The Group has sufficient net cash and credit facilities to meet its anticipated funding requirements over the short and medium term. The credit facilities which total £194.4m include committed bank facilities of £142.5m and uncommitted facilities of £51.9m. The committed bank facilities include a £125m five year multi-currency borrowing facility expiring in September 2010.

Treasury Risk Management

The Group operates a centralised Treasury service with policies and procedures approved by the Board. These cover funding, banking relationships, foreign currency, interest rate exposures, cash management and the investment of surplus cash.

Currency options are used to reduce currency risk movements on the Group's results, by hedging approximately 50% of each year's budgeted US Dollar earnings into sterling. Currency exposure on the balance sheet is, where practical, reduced by financing assets with borrowings in the same currency. Spot and forward foreign exchange contracts are used to cover the net exposure of purchases and sales in non-domestic currencies.

Prior to the receipt of Gibson Energy sale proceeds and the elimination of debt, interest expense was hedged by using interest rate swaps, interest rate caps, forward rate agreements and currency swaps.

Surplus cash is invested in AAA Money Market Funds and in bank deposits.

Critical Accounting Policies

The Group accounts are prepared using accounting policies in accordance with IFRS.

The preparation of these accounts require the use of estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities. Directors' estimates are based on historical experience, consultation with experts and other methods that they believe are reasonable and appropriate.

  Employee Benefits

The Group operates a defined benefit pension scheme in the UK, which was closed to new entrants with effect from 31 December 2002, as well as a number of defined contribution schemes within the Group. The defined benefit scheme is accounted for under IAS 19 and the main actuarial assumptions used are shown in the table below.

Actuarial assumptions	2008		2007
Rate of inflation	2.9%		3.5%
Discount rate	6.4%		5.7%
Expected future lifetime (yrs)	23.8		23.7

Expected future lifetime is the number of years a 65 year old male is expected to live based on current mortality tables.

Property Plant and Equipment

The Group's property plant and equipment is subject to annual rates of depreciation intended to spread the cost of the assets over their estimated service life. These rates are regularly reviewed.

Goodwill

The carrying value of goodwill held on balance sheet is reviewed for impairment at least annually. The review compares the carrying value with the estimated future cash flows from the business unit to which the goodwill relates. The cash flows are based on management's view of future trading prospects. Any shortfall identified is treated as an impairment and written off.

Taxation

The effective tax rate for the full year is 33% and is the combined rate arising from the regional mix of Group results. The rate also takes into account the estimated future utilisation of tax losses and the agreement with regional tax authorities of corporate tax computations.

Deferred Tax

A deferred tax asset and liability are recorded within the financial statements at 31 December 2008 of £5.9m and £18.6m respectively. These balances are derived from assumptions which include the future utilisation of trading losses and provisions at assumed tax rates.

Share Based Payments

The estimated cost of grants of equity instruments is spread evenly over the vesting period.

Available for Sale Financial Assets

The warrant over preferred equity shares in the parent of the purchaser of Gibson Energy is held as an available for sale financial asset at its fair value. The fair value of the warrant is based on management's best estimate of the recoverable amount given current global market conditions.

Provisions

Provisions amounting to £72.9m are held on balance sheet at the year end. These are based on Directors' estimates of the future cost of current obligations.

Dennis Proctor	Peter Rose
Chief Executive	Finance Director

Consolidated Income Statement

For the Year ended 31 December 2008

				Before						Before
				exceptional		Exceptional				exceptional		Exceptional
				items		items		Total		items		items		Total
				2008		2008		2008		2007		2007		2007
		Notes		£m		£m		£m		£m		£m		£m
Revenue		2		440.0		–		440.0		398.7		–		398.7
Cost of sales				(303.7)		(16.2)		(319.9)		(286.6)		–		(286.6)
Gross profit				136.3		(16.2)		120.1		112.1		–		112.1
Other operating income				4.7		–		4.7		4.4		–		4.4
Operating expenses				(80.1)		(34.7)		(114.8)		(65.2)		(2.3)		(67.5)
Profit from continuing
operations		2		60.9		(50.9)		10.0		51.3		(2.3)		49.0
Interest income				7.2		–		7.2		9.6		–		9.6
Interest expense and similar
charges				(10.4)		–		(10.4)		(15.8)		–		(15.8)
Share of post-tax profits in
associates		2		1.2		–		1.2		2.2		–		2.2
Profit before tax from
continuing operations				58.9		(50.9)		8.0		47.3		(2.3)		45.0
Taxation		3		(19.4)		11.7		(7.7)		(18.1)		0.2		(17.9)
Profit from continuing
operations				39.5		(39.2)		0.3		29.2		(2.1)		27.1
Profit from discontinued
operations				38.2		218.1		256.3		35.4		–		35.4
Profit for the year				77.7		178.9		256.6		64.6		(2.1)		62.5
Attributable to:
Shareholders of the parent				74.2		178.9		253.1		59.5		(2.1)		57.4
Minority interests				3.5		–		3.5		5.1		–		5.1
				77.7		178.9		256.6		64.6		(2.1)		62.5
Earnings per share
Basic       – from continuing
operations		4						(2.5)p						16.9p
– from discontinued
operations		4						195.9p						27.1p
– group total								193.4p						44.0p
Diluted    – from continuing
operations		4						(2.4)p						16.2p
– from discontinued
operations		4						189.8p						26.1p
– group total								187.4p						42.3p

Consolidated Statement of Recognised Income and Expense

For the Year ended 31 December 2008

				2008		2007
				£m		£m
Profit for the year				256.6		62.5
Exchange adjustments net of tax				44.2		16.4
Release of foreign exchange adjustments on disposal of subsidiary, net of tax				(18.0)		-
Revaluation of property, plant and equipment net of tax				-		51.6
Impairment of revalued assets, net of tax				(0.4)		(1.0)
Fair value gain on available for sale financial asset, net of tax				1.2		-
Fair value gains and losses net of tax:
- losses originating on cash flow hedges				(3.1)		-
- losses (gains) transferred to income statement
on disposal of cash flow hedges				0.4		(0.2)
Actuarial losses on defined benefit pension schemes				(19.6)		(12.5)
- taxation				5.2		3.8
Net income recognised directly in equity				9.9		58.1
Total recognised income and expense for the year				266.5		120.6
Attributable to:
Shareholders' equity				262.7		115.4
Minority interests				3.8		5.2
				266.5		120.6

Consolidated Balance Sheet

At 31 December 2008

			2008		2007
			£m		£m
ASSETS
Non-current assets
Property, plant and equipment - at cost			101.3		158.0
Property, plant and equipment - at valuation			29.3		163.0
Goodwill			29.3		72.4
Other intangible assets			1.2		13.9
Interests in associates			10.8		10.5
Available for sale financial assets			28.5		0.2
Retirement benefit assets			7.6		25.2
Trade and other receivables			1.6		2.8
Deferred tax assets			5.9		7.1
			215.5		453.1
Current assets
Inventories			124.3		142.1
Trade and other receivables			124.0		244.3
Investments			-		0.9
Cash and cash equivalents			421.4		79.8
			669.7		467.1
LIABILITIES
Current liabilities
Trade and other payables			164.8		262.1
Current tax liabilities			13.6		7.1
Borrowings			49.1		89.2
Provisions			56.2		4.5
			283.7		362.9
Net current assets			386.0		104.2
Non-current liabilities
Borrowings			-		130.7
Deferred tax liabilities			18.6		98.1
Retirement benefit obligations			-		1.1
Other payables			-		0.1
Provisions			16.7		15.4
			35.3		245.4
Net assets			566.2		311.9
Shareholders' equity
Share capital			33.0		32.9
Share premium			90.0		87.2
Other reserves			47.5		73.3
Retained earnings			383.5		107.5
			554.0		300.9
Minority interests			12.2		11.0
Total equity			566.2		311.9

Cash Flow Statement

For the Year ended 31 December 2008

			2008		2007
			£m		£m
Operating activities
Continuing operations:
Profit (loss) from operations			10.0		49.0
Exceptional items			50.9		2.3
Depreciation, amortisation and impairment			17.4		14.5
Profit on disposal of investments			(0.1)		(0.2)
Loss on disposal of property, plant and equipment			2.0		2.8
Increase in inventories			(21.9)		(9.4)
Increase in receivables			(21.9)		(16.6)
Increase (decrease) in payables			28.1		(10.1)
Taxation paid			(8.7)		(6.7)
UK pension scheme contribution			-		(5.6)
Other non-cash flow items			(3.8)		(1.0)
Discontinued operations			27.3		39.2
Net cash inflow from operating activities			79.3		58.2
Investing activities
Continuing operations:
Dividends received from associates			1.0		0.1
Purchase of subsidiaries			(1.6)		(9.1)
Cash acquired with subsidiaries			-		0.8
Disposal of subsidiaries			525.9		1.1
Net (cash) bank overdrafts disposed of with subsidiary			(1.5)		3.3
Closure of business			(0.7)		-
Purchase of associates			-		(0.2)
Loans to associates			(0.4)		-
Loans from associates repaid			(1.5)		-
Loans from associates			-		0.5
Purchase of investments			(0.1)		-
Proceeds from disposal of investments			-		0.2
Proceeds from disposal of property, plant and equipment			4.4		2.4
Purchase of property, plant and equipment			(35.0)		(38.3)
Purchase of intangible assets			-		(0.1)
Discontinued operations			(35.2)		(45.1)
Net cash inflow (outflow) from investing activities			455.3		(84.4)
Financing activities
Continuing operations:
Interest received			6.1		6.5
Interest paid			(8.2)		(12.3)
Equity dividends paid			(11.3)		(10.1)
Minority interest dividend paid			(2.6)		(1.9)
Share capital issued			0.2		0.1
Purchase of treasury shares			(6.2)		(18.2)
Disposal of treasury shares			1.3		4.2
Proceeds from new borrowings			-		76.0
Repayment of borrowings			(162.2)		(12.4)
Purchase of deposits			-		(0.3)
Repayment of deposits			0.9		-
Capital element of finance leases			(0.1)		-
Discontinued operations			(4.4)		(3.8)
Net cash (outflow) inflow from financing activities			(186.5)		27.8
Net cash inflow in cash and cash equivalents			348.1		1.6
Cash and cash equivalents at beginning of period			19.7		16.9
Effect of foreign exchange rates			4.6		1.2
Cash and cash equivalents at end of the year			372.4		19.7
Cash and cash equivalents and bank overdrafts at the end of the year comprise:
Cash and cash equivalents			421.4		79.8
Bank overdrafts included in borrowings			(49.0)		(60.1)
			372.4		19.7

Notes

1. BASIS OF ACCOUNTING

The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain property, plant and equipment, available for sale investments, financial assets and financial liabilities held for trading.

These financial statements have been prepared in accordance with the Companies Act 1985 and those IFRS standards as adopted by the European Union and IFRIC interpretations, which are effective as at 31 December 2008.

2. SEGMENTAL REPORTING

Business segments

Results from operations

				Year ended 31 December 2008
								Profit from
		Total		Inter-				operations
		gross		segmental		Total		before excep-		Exceptional
		revenue		revenue		revenue		tional items		items		Total
		£m		£m		£m		£m		£m		£m
Continuing operations:
Hunting Energy Services
Well Construction		118.4		(6.4)		112.0		13.4		(13.4)		-
Well Completion		216.9		(3.8)		213.1		31.4		(4.9)		26.5
Exploration and Production		14.8		-		14.8		5.9		(16.2)		(10.3)
Hunting Energy France		21.5		-		21.5		2.0		-		2.0
		371.6		(10.2)		361.4		52.7		(34.5)		18.2
Other Operating Divisions		78.6		-		78.6		8.2		(2.8)		5.4
Total from continuing operations		450.2		(10.2)		440.0		60.9		(37.3)		23.6
Exceptional items not apportioned to business segments*								-		(13.6)		(13.6)
								60.9		(50.9)		10.0
Discontinued operations:
Gibson Energy
Marketing		2,567.8		(779.9)		1,787.9		6.5		-		6.5
Truck Transportation		147.3		(18.1)		129.2		15.9		-		15.9
Terminals and Pipelines		502.8		(434.1)		68.7		17.5		-		17.5
Propane Distribution and Marketing		229.5		(17.5)		212.0		7.7		-		7.7
Moose Jaw Refinery		302.6		(129.6)		173.0		10.5		-		10.5
Profit on disposal		-		-		-		-		208.8		208.8
Total from discontinued operations		3,750.0		(1,379.2)		2,370.8		58.1		208.8		266.9

* Exceptional items not apportioned to business segments primarily relate to head office provisions.

Notes

2. SEGMENTAL REPORTING (continued)

				Year ended 31 December 2007
								Profit from
		Total		Inter-				operations
		gross		segmental		Total		before excep-		Exceptional
		revenue		revenue		revenue		tional items		items		Total
		£m		£m		£m		£m		£m		£m
Results from continuing operations:
Hunting Energy Services
Well Construction		78.8		(6.0)		72.8		8.2		-		8.2
Well Completion		226.2		(18.7)		207.5		34.1		-		34.1
Exploration and Production		11.7		-		11.7		4.4		-		4.4
Hunting Energy France		22.5		-		22.5		2.6		-		2.6
		339.2		(24.7)		314.5		49.3		-		49.3
Other Operating Divisions		84.2		-		84.2		2.0		(2.3)		(0.3)
Total from continuing operations		423.4		(24.7)		398.7		51.3		(2.3)		49.0
Results from discontinued operations:
Gibson Energy
Marketing		1,407.1		(193.2)		1,213.9		3.4		-		3.4
Truck Transportation		121.5		(10.9)		110.6		12.5		-		12.5
Terminals and Pipelines		295.2		(265.6)		29.6		15.5		-		15.5
Propane Distribution and Marketing		102.2		(0.1)		102.1		4.6		-		4.6
Moose Jaw Refinery		150.2		(55.6)		94.6		13.5		-		13.5
Total from discontinued operations		2,076.2		(525.4)		1,550.8		49.5		-		49.5

The above analysis of profit from operations for the year ended 31 December 2007 has been re-presented to exclude central costs previously allocated to Gibson Energy. All central costs have been allocated to continuing operations.

Inter-segmental revenues are priced on an arms-length basis. Costs incurred centrally are apportioned to the operating units on the basis of the time attributed to those operations by senior executives.

The share of post-tax profits in associates is derived from the following business segments:

	2008		2007
	£m		£m
Hunting Energy Services - Well Completion	1.1		0.9
Central	0.1		1.3
	1.2		2.2

Notes

2. SEGMENTAL REPORTING (continued)

Business segments

Assets and liabilities

		2008				2007
		Segment		Segment		Segment		Segment
		assets		liabilities		assets		liabilities
		£m		£m		£m		£m
Continuing operations:
Hunting Energy Services
Well Construction		125.4		19.6		93.5		12.9
Well Completion		195.2		93.3		143.6		51.7
Exploration and Production		26.4		2.7		31.1		1.4
Hunting Energy France		19.3		7.7		15.7		6.8
		366.3		123.3		283.9		72.8
Other operating divisions		41.6		31.6		29.8		21.7
Interests in associates
Hunting Energy Services - Well Completion		5.0		-		4.4		-
Central		5.8		-		5.8		-
		10.8		-		10.2		-
Total segment assets and liabilities - continuing
operations		418.7		154.9		323.9		94.5
Discontinued operations:
Gibson Energy
Marketing		-		-		130.1		88.2
Truck Transportation		-		-		73.1		10.4
Terminals and Pipelines		-		-		111.6		9.2
Propane Distribution and Marketing		-		-		91.6		42.7
Moose Jaw Refinery		-		-		72.3		9.6
		-		-		478.7		160.1
Interests in associates
Propane Distribution and Marketing		-		-		0.3		-
Total segment assets and liabilities - discontinued
operations		-		-		479.0		160.1
Total segment assets and liabilities		418.7		154.9		802.9		254.6
Unallocated assets and liabilities - continuing operations:
- current and deferred taxes		5.9		32.2		3.7		31.7
- retirement benefit assets		7.6		-		25.2		-
- net cash/debt		421.4		49.1		67.9		135.6
- central assets and liabilities		33.5		84.7		6.0		30.3
- elimination of inter-segment balances		(1.9)		(1.9)		(1.2)		(1.2)
Unallocated assets and liabilities - discontinued operations:
- current and deferred taxes		-		-		3.4		73.5
- net cash/debt		-		-		12.8		84.3
- elimination of inter-segment balances		-		-		(0.5)		(0.5)
Total assets and liabilities		885.2		319.0		920.2		608.3

Segment assets comprise property, plant and equipment, intangibles, goodwill, inventories and receivables. Assets owned centrally and employed by a segment are allocated to that segment.

Segment liabilities comprise trade payables, provisions and other operating liabilities.

  Notes

3. TAXATION

		2008		2007
		£m		£m
The tax charge (credit) in the income statement comprised:
Current tax
- current year expense		13.6		12.0
- adjustment in respect of prior years		0.7		2.7
Deferred tax
- origination and reversal of temporary differences		(7.5)		5.4
- changes in tax rates		-		(0.4)
- previously unrecognised tax losses and credits		0.9		(1.8)
Total tax charged to the income statement - continuing operations		7.7		17.9

The tax charge to the income statement includes a tax credit of £11.7m (2007 - £0.2m) in respect of exceptional charges. The tax credit includes £5.5m in respect of the impairment of oil and gas development expenditure and £3.0m in respect of property provisions.

The weighted average applicable tax rate for continuing operations before exceptional items is 32.9% (2007 - 38.3%). The lower rate in 2008 is mainly due to increased profits in lower tax jurisdictions particularly in SE Asia and a reduced UK corporate tax rate.

4. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the earnings attributable to Ordinary shareholders by the weighted average number of Ordinary shares outstanding during the year.

For diluted earnings per share, the weighted average number of outstanding Ordinary shares is adjusted to assume conversion of all dilutive potential Ordinary shares. The dilution in respect of share options applies where the exercise price is less than the average market price of the Company's Ordinary shares during the year and the possible issue of shares under the Group's long term incentive plan.

Reconciliations of the earnings and weighted average number of Ordinary shares used in the calculations are set out below:

From continuing operations

				2008						2007
				Weighted		Earnings				Weighted		Earnings
				average		per				average		per
				number of		Ordinary				number of		Ordinary
		Earnings		shares		share		Earnings		shares		share
		£m		millions		pence		£m		millions		pence
Profit before exceptional items
attributable to shareholders
of the parent and for basic EPS		36.0		130.9		27.5		24.1		130.4		18.5
Exceptional items after tax		(39.2)		-				(2.1)		-
(Loss) profit attributable to
shareholders of the parent
and for basic EPS		(3.2)		130.9		(2.5)		22.0		130.4		16.9
Effect of dilutive shares:
Options		-		3.7				-		4.7
Long term incentive plan		-		0.5				-		0.4
Diluted EPS		(3.2)		135.1		(2.4)		22.0		135.5		16.2

Notes

4. EARNINGS PER SHARE (continued)

From continuing and discontinued operations

				2008						2007
				Weighted		Earnings				Weighted		Earnings
				average		per				average		per
				number of		Ordinary				number of		Ordinary
		Earnings		shares		share		Earnings		shares		share
		£m		millions		pence		£m		millions		pence
Profit before exceptional items
attributable to shareholders of
the parent and for basic EPS		74.2		130.9		56.7		59.5		130.4		45.6
Exceptional items after tax		178.9		-				(2.1)		-
Profit attributable to
shareholders of the parent
and for basic EPS		253.1		130.9		193.4		57.4		130.4		44.0
Effect of dilutive shares:
Options		-		3.7				-		4.7
Long term incentive plan		-		0.5				-		0.4
Diluted EPS		253.1		135.1		187.4		57.4		135.5		42.3

From discontinued operations

				2008						2007
				Weighted		Earnings				Weighted		Earnings
				average		per				average		per
				number of		Ordinary				number of		Ordinary
		Earnings		shares		share		Earnings		shares		share
		£m		millions		pence		£m		millions		pence
Profit before exceptional items
attributable to shareholders of
the parent and for basic EPS		38.2		130.9		29.2		35.4		130.4		27.1
Exceptional items after tax		218.1		-				-		-
Profit attributable to
shareholders of the parent
and for basic EPS		256.3		130.9		195.9		35.4		130.4		27.1
Effect of dilutive shares:
Options		-		3.7				-		4.7
Long term incentive plan		-		0.5				-		0.4
Diluted EPS		256.3		135.1		189.8		35.4		135.5		26.1

  Notes

5. DIVIDENDS PAID

		2008				2007
		Pence				Pence
		per share		£m		per share		£m
Group and Company
Ordinary dividends:
2008 interim paid		2.90		3.8		-		-
2007 final paid		5.70		7.5		-		-
2007 interim paid		-		-		2.55		3.3
2006 final paid		-		-		5.20		6.8
Total dividends paid		8.60		11.3		7.75		10.1

A final dividend of 7.0p per share (2007 - 5.7p per share) has been proposed by the Board amounting to a distribution of £9.2m (2007 - £7.5m). The proposed final dividend is subject to approval by the shareholders at the Annual General Meeting and has not been provided for in these financial statements.

6. The above figures have been extracted from the Group's full financial statements for the year ended 31 December 2008, which will be delivered to the Registrar of Companies. Those financial statements carry an unqualified audit opinion. They have been prepared in accordance with the Companies Act 1985 and International Financial Reporting Standards as adopted in the European Union. The accounting policies are set out in those financial statements. These extracts do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985.

 

END

 

 

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