Interim Results

RNS Number : 1598C

Hunting PLC

28 August 2008

 



For Immediate Release

28 August 2008

Hunting PLC

('Hunting' or 'the Company')

Half Year Results

Hunting PLC, the international energy services company today announces its Half Year Results for the six month period ended 30 June 2008.

Operational Highlights

·        Shareholder approval obtained on 26 August for the disposal of Gibson Energy – for a total consideration of CAN$1,270m subject to adjustments

 

·        Hunting Energy Services division (“HES”) to acquire complementary businesses as demand for products and technical expertise continues to outpace industry supply

 

·        Strong performance in HES’ division

 

·        Strong order visibility in certain of HES’ units into 2009

 

·        Other Hunting businesses remain in line with management expectations

Financial Highlights *

·        Revenue in period £201.2m (2007: £214.5m)

 

·        EBITDA pre-exceptional items for continuing operations increased 14% to £32.1m (2007: £28.2m)

 

·        Profit from continuing operations before exceptional items increased 11% to £23.9m (2007: £21.5m)

 

·        Basic EPS before exceptional items increased 32% in the period to 9.6p (2007: 7.3p)

 

·        Interim Dividend increased 14% to 2.9p (2007 : 2.55p)

(* - Stated for Hunting's Continuing Businesses, with Gibson Energy classified as a Discontinued Operation)

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

'The unprecedented activity in the oil and gas industry continues to drive demand for our products and services, which is reflected in our excellent results today. The Hunting Energy Services division is well placed to continue its growth from the Well Construction and Completion businesses as hydrocarbon exploration requires more complex and innovative solutions to secure resources and reserves.

'With the proceeds of the sale of Gibson Energy, we are confident of adding complementary and earnings enhancing businesses.'

For further information please contact:

Hunting PLC Dennis Proctor, Chief Executive Peter Rose, Finance Director	Tel: [phone]
Buchanan Communications Ben Willey Catherine Breen Chris McMahon	Tel: [phone]

Notes to Editors:

About Hunting PLC

Hunting PLC is an international energy services provider to the world's leading oil and gas companies in the upstream and midstream sectors. 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.

  Half Year Report

Hunting PLC, the international energy services company, announces its half year results for the six months to 30 June 2008.

INTRODUCTION

As announced on 6 August 2008, the Company entered into an agreement for the sale of Gibson Energy. The sale was approved by the shareholders at an Extraordinary General Meeting of the Company held on 26 August 2008. Completion of the sale, which remains subject to regulatory approval by the Canadian authorities, is expected to be in October 2008 when, subject to completion adjustments, proceeds of CAN$1,270 million are due to be received.

The results of Gibson Energy have been reported as discontinued operations and have been excluded from the profit before tax shown in the income statement. Prior period results have been restated to report Gibson Energy's results as discontinued.

For continuing operations, Hunting Energy's half year results reflect excellent operational improvements due in part to the continued rise of commodity prices in the period. Further, prior year capital expenditures, productivity enhancements and cost containment enabled the company to continue to grow the profitability of the business and see significant improvements in its backlog. Some business units' strong order visibility continues through the first half of 2009. In every global market, activity gains approach double digit levels. Forecasts are for the second half of 2008 to generate activity levels experienced in the robust period of 2006 when we saw profit growth in excess of 50%. It is further anticipated to continue into 2009.

RESULTS SUMMARY

Revenue for the half year to 30 June 2008 decreased from £214.5m to £201.2m partly due to contract delivery timing in our North Sea operations. There were no exceptional items in the period (2007 - £2.5m). Profit from continuing operations before exceptional items increased by 11% to £23.9m (2007 - £21.5m) and after exceptional items profit from continuing operations increased by 26% to £23.9m (2007 - £19.0m). Pre-tax profit, before exceptional items, increased by 10% to £21.3m (2007 - £19.3m) and, after exceptional items, pre-tax profits increased by 27% to £21.3m (2007 - £16.8m). The profit from continuing operations for the period was £14.2m (2007 - £9.6m) after a tax charge of £7.1m (2007 - £7.2m). Profit from discontinued operations, which reports the after tax result of Gibson Energy, was £20.1m (2007 - £14.1m).

Basic earnings per share from continuing operations before exceptional items was 9.6p (2007 - 7.3p), an increase of 32% and after exceptional items 9.6p (2007 - 5.3p).

A dividend for the half year of 2.90p per share (2007 - 2.55p) will be paid on 21 November 2008 to shareholders on the register at the close of business on 31 October 2008.

OPERATIONAL REVIEW

The revenue and operating results of each division are included in the financial analysis in note 2 of this report.

HUNTING ENERGY SERVICES

Hunting Energy Services, with manufacturing facilities throughout the world, is a supplier of proprietary products and services to the upstream oil and gas companies. Profit from operations in the first half increased by 6% from £21.9m to £23.2m.

The primary driver for Hunting Energy is drilling activity in the form of rig count and footage drilled, both of which continued to increase. Growth in horizontal drilling, deepwater offshore and high pressure/high temperature environments provide the company numerous opportunities for its unique and patented products for well construction and completion. Growth in Southeast Asia and the Middle East has added additional gains to the expected record year of completions in North America.

Well Construction - Profit from operations increased by 43% to £5.7m (2007 - £4.0m). 

Well Completion - Profit from operations decreased by 11% to £13.7m (2007 - £15.4m). This is due to contract delivery timing principally in our North Sea operations.

Exploration and Production - 5 out of 11 wells were successfully completed during the period, 1 gas, 4 oil and gas. Full production and higher commodity prices have resulted in a 100% increase in profit from operations to £3.0m (2007 - £1.5m).

Hunting Energy France - Profit from operations decreased by 20% to £0.8m (2007 - £1.0m).

OTHER

Gibson Shipbrokers had an increase in profit from operations to £1.6m (2007 - £0.7m).

KEY FINANCIAL POINTS OF THE CONTINUING GROUP

•	EBITDA (as defined in note 16) - pre-exceptional items £32.1m (2007 - £28.2m)

•	Capital expenditure £15.8m (2007 - £24.1m) of which £11.3m (2007 - £14.0m) was replacement expenditure and £4.5m (2007 - £10.1m) was new business expenditure

•	Depreciation and amortisation £8.2m (2007 - £6.7m)

•	Net debt £139.7m (2007 - £138.8m)

OUTLOOK

For 2008, the oil and gas industry has once again experienced a significant increase in commodity prices. We are pleased with the first half results and improvement should continue for the second half. In spite of recently declining commodity prices, the industry remains as robust as ever, with human resources its largest obstacle. Oil and gas reservoirs around the world are displaying higher decline rates and with increasing emphasis on maximising resource recovery rates, the industry is facing a new world in terms of service intensity and technology requirements. The assets of your Company are unique and strategically located for this ever growing opportunity.

Richard Hunting	Dennis Proctor
Chairman	Chief Executive
28 August 2008

Consolidated Income Statement

(Unaudited)

				Six months		Six months
				ended		ended		Year ended
				30 June		30 June		31 December
				2008		2007		2007
		Notes		£m		£m		£m
Revenue		2		201.2		214.5		398.7
Cost of sales				(138.0)		(156.4)		(286.6)
Gross profit				63.2		58.1		112.1
Other operating income				1.0		2.2		4.4
Operating expenses*				(40.3)		(41.3)		(67.5)
Profit from continuing operations		2		23.9		19.0		49.0
Interest income				2.8		4.9		9.6
Interest expense and similar charges				(5.7)		(7.4)		(15.8)
Share of post-tax profits in associates				0.3		0.3		2.2
Profit before tax from continuing operations				21.3		16.8		45.0
Taxation		4		(7.1)		(7.2)		(17.9)
Profit for the period from continuing operations				14.2		9.6		27.1
Profit for the period from discontinued operations		5		20.1		14.1		35.4
Profit for the period				34.3		23.7		62.5
Attributable to:
Shareholders of the parent				32.7		21.0		57.4
Minority interests				1.6		2.7		5.1
				34.3		23.7		62.5
Earnings per 25p Ordinary share
Basic - from continuing operations				9.6p		5.3p		16.9p
- from discontinued operations				15.4p		10.8p		27.1p
- from continuing and discontinued operations				25.0p		16.1p		44.0p
Diluted - from continuing operations				9.3p		5.1p		16.2p
- from discontinued operations				14.9p		10.4p		26.1p
- from continuing and discontinued operations				24.2p		15.5p		42.3p

*Operating expenses include exceptional charges of £nil (six months ended 30 June 2007 - £2.5m; year ended 31 December 2007 - £2.3m) as described in note 3.

Consolidated Statement of Recognised Income and Expense

(Unaudited)

		Six months		Six months
		ended		ended		Year ended
		30 June		30 June		31 December
		2008		2007		2007
		£m		£m		£m
Profit for the period		34.3		23.7		62.5
Exchange adjustments net of tax		(3.4)		3.4		16.4
Revaluation of property, plant and equipment net of tax		-		-		51.6
Fair value gains and losses net of tax:
- gains on cash flow hedges		0.2		-		-
- gains transferred to income statement on disposal of cash    flow hedges		(0.1)		-		(0.2)
Actuarial losses on defined benefit pension schemes		(17.1)		(12.5)		(12.5)
- taxation		4.8		3.8		3.8
Impairment of revalued assets sold during the year net of    tax		-		(1.0)		(1.0)
Net (expense) income recognised directly in equity		(15.6)		(6.3)		58.1
Total recognised income and expense for the period		18.7		17.4		120.6
Attributable to:
Shareholders of the parent		17.1		14.8		115.4
Minority interests		1.6		2.6		5.2
		18.7		17.4		120.6

Consolidated Balance Sheet

(Unaudited)

				At		At		At
				30 June		30 June		31 December
				2008		2007		2007
		Notes		£m		£m		£m
ASSETS
Non-current assets
Property, plant and equipment				111.8		221.0		321.0
Goodwill				40.9		57.7		72.4
Other intangible assets				1.8		5.3		13.9
Interests in associates				10.3		8.4		10.5
Available for sale investments				0.2		0.2		0.2
Retirement benefit assets				8.7		24.1		25.2
Trade and other receivables				1.6		2.7		2.8
Deferred tax assets				3.8		9.5		7.1
				179.1		328.9		453.1
Current assets
Inventories				82.3		131.9		142.1
Trade and other receivables				85.4		209.7		244.3
Investments				-		0.6		0.9
Cash and cash equivalents				61.2		112.9		79.8
Assets classified as held for sale		9		553.1		18.8		-
				782.0		473.9		467.1
LIABILITIES
Current liabilities
Trade and other payables				106.2		225.9		262.1
Current tax liabilities				11.3		4.1		7.1
Borrowings				81.7		150.3		89.2
Provisions				4.0		4.1		4.5
Liabilities classified as held for sale		9		279.2		16.8		-
				482.4		401.2		362.9
Net current assets				299.6		72.7		104.2
Non-current liabilities
Borrowings				124.8		92.7		130.7
Deferred tax liabilities				20.5		76.4		98.1
Retirement benefit obligations				-		1.3		1.1
Other payables				-		2.3		0.1
Provisions				8.3		15.1		15.4
				153.6		187.8		245.4
Net assets				325.1		213.8		311.9
Shareholders' equity
Share capital		10		33.0		32.9		32.9
Share premium		10		90.0		87.2		87.2
Other reserves		10		69.7		7.7		73.3
Retained earnings		10		119.8		75.7		107.5
		10		312.5		203.5		300.9
Minority interests		10		12.6		10.3		11.0
Total equity		10		325.1		213.8		311.9

Consolidated Cash Flow Statement

(Unaudited)

		Six months		Six months
		ended		ended		Year ended
		30 June		30 June		31 December
		2008		2007		2007
		£m		£m		£m
Operating activities
Continuing operations:
Profit from operations		23.9		19.0		49.0
Exceptional charges		-		2.5		2.3
Depreciation, amortisation and impairment		8.2		6.7		14.5
Profit on disposal of investments		-		-		(0.2)
Loss (profit) on disposal of property, plant and equipment		1.7		(0.5)		2.8
Decrease (increase) in inventories		3.8		(9.1)		(9.4)
Increase in receivables		(4.7)		(17.0)		(16.6)
Decrease in payables		(8.6)		(1.2)		(10.1)
Taxation paid		(3.8)		(3.1)		(6.7)
UK pension scheme contribution		-		(5.6)		(5.6)
Other non-cash flow items		(0.8)		(0.3)		(1.0)
Discontinued operations		17.5		4.6		39.2
Net cash inflow (outflow) from operating activities		37.2		(4.0)		58.2
Investing activities
Continuing operations:
Dividends received from associates		0.2		0.1		0.1
Purchase of subsidiaries		-		(1.5)		(9.1)
Cash acquired with subsidiaries		-		-		0.8
Disposal of a subsidiary		-		-		1.1
Net bank overdrafts disposed of with subsidiary		-		-		3.3
Purchase of associates		-		-		(0.2)
Loans to associates		-		(2.0)		-
Loans from associates		0.9		0.3		0.5
Purchase of investments		(0.1)		-		-
Proceeds from disposal of investments		-		-		0.2
Proceeds from disposal of property, plant and equipment		1.6		2.5		2.4
Purchase of property, plant and equipment		(15.8)		(24.1)		(38.3)
Purchase of intangible assets		-		-		(0.1)
Discontinued operations		(20.9)		(19.0)		(45.1)
Net cash outflow from investing activities		(34.1)		(43.7)		(84.4)
Financing activities
Continuing operations:
Interest received		2.5		4.0		6.5
Interest paid		(8.0)		(8.6)		(16.0)
Equity dividends paid		-		-		(10.1)
Minority interest dividend paid		-		-		(1.9)
Share capital issued		0.2		0.1		0.1
Purchase of treasury shares		(2.5)		(16.8)		(18.2)
Disposal of treasury shares		0.4		4.2		4.2
Proceeds from new borrowings		13.3		54.9		76.0
Repayment of borrowings		(4.4)		(4.9)		(12.4)
Purchase of deposits		-		-		(0.3)
Repayment of deposits		0.9		-		-
Capital element of finance leases		(0.1)		-		-
Discontinued operations		0.1		(0.1)		(0.1)
Net cash inflow from financing activities		2.4		32.8		27.8
Net inflow (outflow) in cash and cash equivalents		5.5		(14.9)		1.6

  Consolidated Cash Flow Statement (continued)

(Unaudited)

		Six months		Six months
		ended		ended		Year ended
		30 June		30 June		31 December
		2008		2007		2007
		£m		£m		£m
Net inflow (outflow) in cash and cash equivalents		5.5		(14.9)		1.6
Cash and cash equivalents at beginning of period		19.7		16.9		16.9
Effect of foreign exchange rates		-		(0.1)		1.2
Re-classified as held for sale		(5.6)		3.2		-
Cash and cash equivalents at end of period		19.6		5.1		19.7
Cash and cash equivalents and bank overdrafts
at the end of the period comprise:
Cash and cash equivalents		61.2		112.9		79.8
Bank overdrafts included in borrowings		(41.6)		(107.8)		(60.1)
		19.6		5.1		19.7

  Notes to the Half Year Report

1. BASIS OF ACCOUNTING

The financial information contained in this half year report complies with IAS 34 Interim Financial Reporting, as adopted by the European Union, and with the Disclosure and Transparency Rules of the Financial Services Authority. The presentation of the half year report is consistent with the 2007 Annual Report and Accounts, except where necessary the comparatives have been reclassified or extended from the previously reported half year and annual results to take into account any presentational changes made in this half year report.

The financial information has been prepared on the basis of the accounting policies set out in the Group's 2007 Annual Report and Accounts with the exception that IFRIC 11 - IFRS 2 - Group and Treasury Share Transactions and IFRIC 14 - IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction were adopted for the six months ended 30 June 2008. IFRIC 12 - Service Concession Arrangements has not yet received EU endorsement and has therefore not been adopted. Although the adoption represents a change in accounting policy, comparative figures for 2007 have not been restated as the changes do not impact the results or financial position of the Group. 

This half year report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. A copy of the statutory accounts for the year ended 31 December 2007 has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified.

2. SEGMENTAL REPORTING

Business Segments

Results from operations

		Six months ended 30 June 2008
				Inter-
		Total gross		segmental		Total		Profit from
		revenue		revenue		revenue		operations
		£m		£m		£m		£m
Results from continuing operations:
Hunting Energy Services
Well Construction		54.0		(4.5)		49.5		5.7
Well Completion		105.7		(4.9)		100.8		13.7
Exploration and Production		7.2		-		7.2		3.0
Hunting Energy France		9.0		-		9.0		0.8
		175.9		(9.4)		166.5		23.2
Other operating divisions		34.7		-		34.7		0.7
Total from continuing operations		210.6		(9.4)		201.2		23.9
Results from discontinued operations:
Gibson Energy
Marketing		1,125.6		(124.9)		1,000.7		11.2
Truck Transportation		70.0		(7.7)		62.3		7.0
Terminals and Pipelines		242.1		(207.1)		35.0		10.0
Propane Distribution and Marketing		119.4		-		119.4		4.6
Moose Jaw Refinery		110.5		(40.9)		69.6		(0.8)
Total from discontinued operations		1,667.6		(380.6)		1,287.0		32.0

Profit from operations for Gibson Energy excludes depreciation and amortisation charges from 30 April 2008 as referred to in note 5.

  Notes to the Half Year Report (continued)

2. SEGMENTAL REPORTING (continued)

		Six months ended 30 June 2007
				Inter-
		Total gross		segmental		Total		Profit from
		revenue		revenue		revenue		operations
Results from continuing operations:		£m		£m		£m		£m
Hunting Energy Services
Well Construction		38.7		(2.8)		35.9		4.0
Well Completion		122.9		(11.7)		111.2		15.4
Exploration and Production		5.3		-		5.3		1.5
Hunting Energy France		12.9		-		12.9		1.0
		179.8		(14.5)		165.3		21.9
Other operating divisions		49.2		-		49.2		(2.9)
Total from continuing operations		229.0		(14.5)		214.5		19.0

The other operating divisions segment includes an exceptional charge of £2.5m for the six months ended 30 June 2007 (see note 3).

Results from discontinued operations:
Gibson Energy
Marketing		627.5		(96.7)		530.8		2.9
Truck Transportation		57.1		(5.0)		52.1		5.8
Terminals and Pipelines		136.6		(124.8)		11.8		6.6
Propane Distribution and Marketing		30.6		-		30.6		2.2
Moose Jaw Refinery		65.0		(27.6)		37.4		3.5
Total from discontinued operations		916.8		(254.1)		662.7		21.0

Following a re-organisation of Gibson Energy's divisions in the second half of 2007, the gross revenue, inter-segmental revenue and total revenue figures for the six months ended 30 June 2007 have been re-presented on the same basis as the new divisional structure.

		Year ended 31 December 2007
				Inter-
		Total gross		segmental		Total		Profit from
		revenue		revenue		revenue		operations
Results from continuing operations:		£m		£m		£m		£m
Hunting Energy Services
Well Construction		78.8		(6.0)		72.8		8.2
Well Completion		226.2		(18.7)		207.5		34.1
Exploration and Production		11.7		-		11.7		4.4
Hunting Energy France		22.5		-		22.5		2.6
		339.2		(24.7)		314.5		49.3
Other operating divisions		84.2		-		84.2		(0.3)
Total from continuing operations		423.4		(24.7)		398.7		49.0

The other operating divisions segment includes an exceptional charge of £2.3m for the year ended 31 December 2007 (see note 3).

Results from discontinued operations:
Gibson Energy
Marketing		1,407.1		(193.2)		1,213.9		3.4
Truck Transportation		121.5		(10.9)		110.6		12.5
Terminals and Pipelines		295.2		(265.6)		29.6		15.5
Propane Distribution and Marketing		102.2		(0.1)		102.1		4.6
Moose Jaw Refinery		150.2		(55.6)		94.6		13.5
Total from discontinued operations		2,076.2		(525.4)		1,550.8		49.5

Gibson Energy's profits from operations for the six months ended 30 June 2007 and the year ended 31 December 2007 have been re-presented to exclude central costs previously allocated to the division. All central costs have been allocated to continuing operations. 

  Notes to the Half Year Report (continued)

3. EXCEPTIONAL CHARGES

		Six months		Six months
		ended		ended		Year ended
		30 June		30 June		31 December
		2008		2007		2007
		£m		£m		£m
Exceptional charges comprise:
Impairment of assets classified as held for sale		-		2.5		-
Disposal of a subsidiary		-		-		2.3
		-		2.5		2.3

4. TAXATION

The taxation charge for the six months ended 30 June 2008 is calculated by applying the estimated annual Group effective rate of tax to the profit for the period. The estimated pre-exceptional items tax rate for the year ended 31 December 2008 relating to continuing operations, which has been applied for the six months ended 30 June 2008, is 33% (six months ended 30 June 2007 - 38%). The estimated tax rate after exceptional items for the year ended 31 December 2008 relating to continuing operations, which has been applied for the six months ended 30 June 2008, is 33% (six months ended 30 June 2007 - 43%)

The income statement does not include any exceptional items for the six months ended 30 June 2008. Included in the tax charge to the income statement for the six months ended 30 June 2007 and the year ended 31 December 2007 are tax credits in respect of exceptional items of £0.1m and £0.2m respectively.

5. DISCONTINUED OPERATIONS

On 6 August 2008 the Group announced its intention to dispose of Gibson Energy. The results from discontinued operations comprise the trading results of Gibson Energy for the six months ended 30 June 2008. As a result of Gibson Energy being classified as held for sale on 30 April 2008, depreciation and amortisation ceased to be charged from this date.

		Six months		Six months
		ended		ended		Year ended
		30 June		30 June		31 December
		2008		2007		2007
		£m		£m		£m
Revenue		1,287.0		662.7		1,550.8
Cost of sales		(1,239.6)		(636.6)		(1,486.0)
Gross profit		47.4		26.1		64.8
Other operating income		0.3		1.6		0.6
Operating expenses		(15.7)		(6.7)		(15.9)
Profit from operations		32.0		21.0		49.5
Interest income		0.1		0.1		0.2
Interest expense and similar charges		(2.5)		(1.5)		(4.0)
Profit before tax		29.6		19.6		45.7
Taxation		(9.5)		(5.5)		(10.3)
Profit for the period		20.1		14.1		35.4

Interest expense and similar charges includes interest incurred on bank loans drawn on behalf of Gibson Energy by the continuing Group's central treasury function.

Notes to the Half Year Report (continued)

6. 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 period.

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 period 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:

		Six months		Six months
		ended		ended		Year ended
		30 June		30 June		31 December
		2008		2007		2007
		£m		£m		£m
Basic and diluted earnings from continuing operations attributable to Ordinary shareholders		12.6		6.9		22.0
Basic and diluted earnings from discontinued operations attributable to Ordinary shareholders		20.1		14.1		35.4
Basic and diluted earnings attributable to Ordinary shareholders		32.7		21.0		57.4
		millions		millions		millions
Basic weighted average number of Ordinary shares		130.8		130.3		130.4
Dilutive outstanding share options		4.2		5.2		4.7
Long term incentive plans		0.1		0.3		0.4
Adjusted weighted average number of Ordinary shares		135.1		135.8		135.5
		pence		pence		pence
Basic EPS from continuing operations		9.6		5.3		16.9
Basic EPS from discontinued operations		15.4		10.8		27.1
Basic EPS from continuing and discontinued operations		25.0		16.1		44.0
		pence		pence		pence
Diluted EPS from continuing operations		9.3		5.1		16.2
Diluted EPS from discontinued operations		14.9		10.4		26.1
Diluted EPS from continuing and discontinued operations		24.2		15.5		42.3
EPS adjusted for exceptional items is as follows:
		pence		pence		pence
Basic EPS from continuing operations		9.6		5.3		16.9
Add: exceptional charges after taxation		-		2.0		1.6
Basic EPS from continuing operations before exceptional items		9.6		7.3		18.5
		pence		pence		pence
Diluted EPS from continuing operations		9.3		5.1		16.2
Add: exceptional charges after taxation		-		1.8		1.6
Diluted EPS from continuing operations before exceptional items		9.3		6.9		17.8

Notes to the Half Year Report (continued)

7. DIVIDENDS

		Six months		Six months
		ended		ended		Year ended
		30 June		30 June		31 December
		2008		2007		2007
		£m		£m		£m
Ordinary dividends:
2007 final - 5.7p		7.5		-		-
2007 interim - 2.55p		-		-		3.3
2006 final - 5.2p		-		6.8		6.8
		7.5		6.8		10.1

A 2008 interim dividend of 2.9p per share, which will absorb an estimated £3.8m, was approved by the Board for payment on 21 November 2008.

8. CHANGES IN NET DEBT

						Re-
		At		Fair value		presentation	At
		1 January		and similar	Exchange	as held	30 June
		2008	Cash flow	movements	movements	for sale	2008
		£m	£m	£m	£m	£m	£m
Cash and cash equivalents		79.8	(13.0)	-	-	(5.6)	61.2
Bank overdrafts		(60.1)	18.5	-	-	-	(41.6)
		19.7	5.5	-	-	(5.6)	19.6
Investments		0.9	(0.9)	-	-	-	-
Current borrowings		(28.9)	(11.7)	-	0.6	-	(40.0)
Non-current borrowings		(130.6)	2.8	(0.1)	3.2	-	(124.7)
Finance leases		(0.3)	0.1	-	-	-	(0.2)
Net debt classified as held for sale		-	-	-	-	5.6	5.6
Total net debt		(139.2)	(4.2)	(0.1)	3.8	-	(139.7)

Notes to the Half Year Report (continued)

9. ASSETS HELD FOR SALE

The Group classified the assets and liabilities of Gibson Energy as held for sale on 30 April 2008, following the commencement of an active programme to locate a buyer. Shareholder approval of the decision to dispose of the business was obtained on 26 August 2008. Completion of the disposal is expected to be 1 October 2008 following receipt of regulatory and other approvals. 

The fair value of the net assets held for sale at 30 June 2008 was as follows:

		At
		30 June 2008
		£m
Assets classified as held for sale
Property, plant and equipment		213.5
Goodwill		32.5
Other intangible assets		12.6
Interest in associates		2.2
Available for sale investments		0.1
Deferred tax assets		3.3
Current tax asset		2.0
Inventories		79.8
Trade and other receivables		201.5
Cash and cash equivalents		5.6
		553.1
Liabilities classified as held for sale
Trade and other payables		198.7
Deferred tax liabilities		73.0
Retirement benefit obligations		1.1
Provisions		6.4
		279.2

The assets classified as held for sale at 30 June 2007 related solely to Aero Sekur, which was subsequently sold on 12 July 2007.

Notes to the Half Year Report (continued)

10. STATEMENT OF CHANGES IN EQUITY 

Six months ended 30 June 2008

		Share		Share		Other		Retained		Minority	Total
		capital		premium		reserves		earnings	Total	interests	equity
		£m		£m		£m		£m	£m	£m	£m
At 1 January 2008		32.9		87.2		73.3		107.5	300.9	11.0	311.9
Exchange adjustments		-		-		(3.4)		-	(3.4)	-	(3.4)
Depreciation transfer for
land and buildings		-		-		(1.3)		1.3	-	-	-
Actuarial losses on defined
benefit pension schemes		-		-		-		(17.1)	(17.1)	-	(17.1)
Gains on cash flow hedges
taken directly to equity		-		-		0.2		-	0.2	-	0.2
Release of fair value gains
on cash flow hedges		-		-		(0.1)		-	(0.1)	-	(0.1)
Tax on items taken directly
to equity		_		-		0.4		4.4	4.8	-	4.8
Net income (expense)
recognised directly in equity		-		-		(4.2)		(11.4)	(15.6)	-	(15.6)
Profit for the period		-		-		-		32.7	32.7	1.6	34.3
Total net income for the period		-		-		(4.2)		21.3	17.1	1.6	18.7
Dividends		-		-		-		(7.5)	(7.5)	-	(7.5)
Shares issued
- share option schemes		-		0.2		-		-	0.2	-	0.2
- LTIP awards		0.1		2.6		-		-	2.7	-	2.7
Purchase of treasury shares		-		-		-		(3.5)	(3.5)	-	(3.5)
Disposal of treasury shares		-		-		-		1.6	1.6	-	1.6
Share options
- value of employee services		-		-		0.8		-	0.8	-	0.8
- discharge		-		-		(0.2)		0.2	-	-	-
- taxation		-		-		-		0.2	0.2	-	0.2
At 30 June 2008		33.0		90.0		69.7		119.8	312.5	12.6	325.1

  Notes to the Half Year Report (continued)

10. STATEMENT OF CHANGES IN EQUITY (continued)

Six months ended 30 June 2007

	Share	Share	Other	Retained		Minority	Total
	capital	premium	reserves	earnings	Total	interests	equity
	£m	£m	£m	£m	£m	£m	£m
At 1 January 2007	32.8	85.6	5.6	79.8	203.8	7.7	211.5
Exchange adjustments	-	-	3.5	-	3.5	(0.1)	3.4
Depreciation transfer for
land and buildings	-	-	(0.4)	0.4	-	-	-
Actuarial losses on defined
benefit pension schemes	-	-	-	(12.5)	(12.5)	-	(12.5)
Impairment of revalued
assets held for sale	-	-	(1.5)	-	(1.5)	-	(1.5)
Tax on items taken
directly to equity	-	-	(1.7)	6.0	4.3	-	4.3
Net income recognised
directly in equity	-	-	(0.1)	(6.1)	(6.2)	(0.1)	(6.3)
Profit for the period	-	-	-	21.0	21.0	2.7	23.7
Total net income for the period	-	-	(0.1)	14.9	14.8	2.6	17.4
Dividends	-	-	-	(6.8)	(6.8)	-	(6.8)
Shares issued
- share option schemes	-	0.1	-	-	0.1	-	0.1
- LTIP awards	0.1	1.4	-	-	1.5	-	1.5
Purchase of treasury shares	-	-	-	(17.2)	(17.2)	-	(17.2)
Disposal of treasury shares	-	-	-	4.3	4.3	-	4.3
Share options
- value of employee services	-	-	0.6	-	0.6	-	0.6
- discharge	-	0.1	-	-	0.1	-	0.1
- taxation	-	-	2.3	-	2.3	-	2.3
Transfer between reserves	-	-	(0.7)	0.7	-	-	-
At 30 June 2007	32.9	87.2	7.7	75.7	203.5	10.3	213.8

  Notes to the Half Year Report (continued)

10. STATEMENT OF CHANGES IN EQUITY (continued) 

Year ended 31 December 2007

	Share	Share	Other	Retained		Minority	Total
	capital	premium	reserves	earnings	Total	interests	equity
	£m	£m	£m	£m	£m	£m	£m
At 1 January 2007	32.8	85.6	5.6	79.8	203.8	7.7	211.5
Exchange adjustments	-	-	14.4	-	14.4	0.1	14.5
Revaluation of property,
plant and equipment	-	-	66.2	-	66.2	-	66.2
Depreciation transfer for
land and buildings	-	-	(0.5)	0.5	-	-	-
Actuarial losses on defined
benefit pension schemes	-	-	-	(12.5)	(12.5)	-	(12.5)
Impairment of revalued assets
sold during the year	-	-	(1.5)	-	(1.5)	-	(1.5)
Release of fair value gains
on cash flow hedges	-	-	(0.3)	-	(0.3)	-	(0.3)
Tax on items taken
directly to equity	-	-	(12.0)	3.7	(8.3)	-	(8.3)
Net income recognised
directly in equity	-	-	66.3	(8.3)	58.0	0.1	58.1
Profit for the year	-	-	-	57.4	57.4	5.1	62.5
Total net income for the year	-	-	66.3	49.1	115.4	5.2	120.6
Dividends	-	-	-	(10.1)	(10.1)	(1.9)	(12.0)
Shares issued
- share option schemes	-	0.1	-	-	0.1	-	0.1
- LTIP awards	0.1	1.4	-	-	1.5	-	1.5
Purchase of treasury shares	-	-	-	(18.5)	(18.5)	-	(18.5)
Disposal of treasury shares	-	-	-	4.5	4.5	-	4.5
- taxation	-	-	-	1.9	1.9	-	1.9
Share options
- value of employee services	-	-	1.2	-	1.2	-	1.2
- discharge	-	0.1	(0.9)	0.8	-	-	-
- taxation	-	-	1.4	-	1.4	-	1.4
Disposal of subsidiary	-	-	(0.3)	-	(0.3)	-	(0.3)
At 31 December 2007	32.9	87.2	73.3	107.5	300.9	11.0	311.9

Notes to the Half Year Report (continued)

11. ACQUISITIONS

The Group acquired 100% of the share capital of Chief Hauling Contractors Inc. in Canada for a gross consideration of £6.2m on 1 June 2008. This business has been classified as part of the Gibson Energy held for sale disposal group (note 9).

Details of the acquired net assets, goodwill and consideration are set out below:

		Pre-acquisition		Provisional
		carrying values		fair values
		£m		£m
Property, plant and equipment		0.4		3.3
Goodwill		0.4		0.4
Other intangible assets		-		1.7
Inventories		0.4		0.4
Trade and other receivables		2.6		2.6
Deferred income taxes		-		(1.3)
Trade and other payables		(3.3)		(3.3)
Cash and cash equivalents		0.4		0.4
Net assets acquired		0.9		4.2
Goodwill				2.0
Consideration				6.2

Goodwill principally represents the fair value of synergies that are expected to arise as a result of the acquisition.

The consideration for the acquisition comprised £6.1m cash and £0.1m deferred cash.

Post-acquisition performance

Chief Hauling contributed the following to the Group's performance, which has been presented as part of discontinued operations (note 5), for the period from acquisition to 30 June 2008:

		£m
Revenue		1.9
Profit from operations		0.4
Profit before tax		0.4

If the acquisition had been made on 1 January 2008, Chief Hauling would have contributed the following to the Group's performance, presented as part of discontinued operations, for the period to 30 June 2008:

		£m
Revenue		9.7
Profit from operations		0.5
Profit before tax		0.5

  Notes to the Half Year Report (continued)

12. DEFINED BENEFIT PENSION SCHEMES

During the six months ended 30 June 2008, the impact of actuarial losses has been to reduce the carrying value of the retirement benefit asset by £17.1m, which after deferred tax of £4.8m, reduces Group net assets by £12.3m. This reduction has been recognised in the Consolidated Statement of Recognised Income and Expense with no impact on the Consolidated Income Statement.

13. CAPITAL COMMITMENTS

Group capital expenditure committed to the purchase of property, plant and equipment, but not provided for in these financial statements amounted to £11.0m (at 30 June 2007 - £9.7m; at 31 December 2007 - £13.1m).

14. RELATED PARTY TRANSACTIONS

Associates and non-wholly owned subsidiaries

During the six months ended 30 June 2008, the Continuing Group sold goods with a value of £1.0m to associates and bought goods worth £0.1m from associates. Management and other fees of £0.3m were charged to associates. Royalty income of £0.4m was received from associates. At the period end the Continuing Group owed £0.1m.

During the six months ended 30 June 2008, interest bearing loans to the Continuing Group from associates increased by £0.4m net to £3.8m. Balances at 30 June 2008 on interest bearing loans from associates were £3.7m for sterling loans and £0.1m for US dollar loans. Interest on US dollar loans was paid at US Prime rate +0.5% and on sterling loans at UK base rate +1%. Interest of £0.1m was paid during the period. At the period end the Continuing Group also owed associates £5.6m on interest free loans.

The Continuing Group sold goods worth £0.6m to non-wholly owned subsidiaries and bought goods worth £0.2m from non-wholly owned subsidiaries during the six months ended 30 June 2008. The Continuing Group was owed £1.0m at the period end by non-wholly owned subsidiaries.

During the six months ended 30 June 2008 non-wholly owned subsidiaries repaid loans worth £5.0m to the Continuing Group. The Continuing Group received interest of £0.7m during the period on these loans. Interest is charged at UK base rate +1%. Loans from non-wholly owned subsidiaries to the Continuing Group fell by £2.3m during the period. The Continuing Group owed £19.1m on sterling loans and £3.6m on US dollar loans at the period end. Interest of £0.7m was paid on these loans during the period. Interest was paid at UK base rate +1% and US Prime rate +0.5%.

Gibson Energy purchased goods worth £3.4m during the six months ended 30 June 2008 from associates and owed £1.0m at the period end.

All interests in subsidiaries and associates are in the equity shares of those companies.

15. POST BALANCE SHEET EVENTS

On 6 August 2008 the Group announced its intention to dispose of Gibson Energy for approximately £626m, on which it will generate a significant profit. The activities of the division have been treated as discontinued operations, as shown in note 5, and its assets and liabilities have been classified as held for sale, as shown in note 9. Shareholder approval of the decision to dispose of the business was obtained at an Extraordinary General Meeting held on 26 August 2008. Completion of the disposal is expected to be 1 October 2008 following receipt of regulatory and other approvals.

16. EBITDA

Earnings before interest, tax, depreciation and amortisation ('EBITDA') comprises:

	Six months		Six months
	ended		ended
	30 June		30 June
	2008		2007
	£m		£m
Profit from continuing operations (per income statement)	23.9		19.0
Add:     Exceptional charges (per cash flow statement)	-		2.5
Depreciation, amortisation and impairment (per cash flow statement)	8.2		6.7
	32.1		28.2

 

END

 

 

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