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Kvaerner E&C (42GL)

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Monday 30 June, 2003

Kvaerner E&C

Final Results

Kvaerner E&C PLC
30 June 2003

                                        
                                Kvaerner E&C PLC
                                        
                            Registered Number: 1125
                                        
                                        
                                        
                     REPORT AND ACCOUNTS FOR THE YEAR ENDED
                                        
                                31 DECEMBER 2002
                                        

DIRECTORS' REPORT

The directors have pleasure in submitting their report and accounts for the year
ended 31 December 2002.

Principal activities

The activities of each of the principal subsidiaries and associates of the
Kvaerner E&C PLC Group are listed on page 26.

Results, review of operations and dividend

The main business areas that the Group operates in continued to enjoy
satisfactory levels of activity given current market conditions. Turnover for
the year was £313.9 million (year ended 31 December 2001 £527.2 million). The
profit before tax for the year was £6.6 million (year ended 31 December 2001
profit £133.1 million).

An interim dividend of £6.5 million was declared and paid on 29 August 2002 in
respect of the issued ordinary share capital. The directors do not propose to
recommend the payment of a final dividend in respect of the year ended 31
December 2002 (year ended 31 December 2001 £nil).

Information relating to the movements in the fixed assets is set out in note 9
to the accounts.

Board of directors

The directors who served during the year were as follows :

P C Bond (resigned 16 June 2003)

K N Henry (Chief Executive) (resigned 25 June 2003)

T Ramstad (appointed 12 June 2003)

O-K Sivertsen (appointed 12 June 2003)

T G Snow (resigned 28 June 2002)

J Tautra (appointed 12 June 2003)

J C Wilson

No chairman has been appointed.

Directors' share interests

No director had any notifiable interest in the shares of the Company or of the
ultimate holding company Aker Kvaerner ASA (formerly Kvaerner ASA) requiring to be
disclosed under the Companies Act 1985.

Charitable and Political Contributions

During the year, the Group made charitable contributions of £3,000 (year ended
31 December 2001 £9,000). There were no political contributions in either the
current year or the prior year.

Employment policies

The Group is committed to a policy of providing equal opportunities for all,
regardless of race, religion, sex or disability.

The Group is committed to training and management development, so as to ensure a
supply of trained and skilled employees.

The Group keeps employees informed about its current activities and progress by
various methods, including in-house publications.

DIRECTORS' REPORT (continued)

Policy and practice on payment of suppliers

Statutory Regulations issued under the Companies Act 1985 require a public
company to make a statement of its policy and practice on the payment of trade
creditors. As a holding company with no business other than the holding of
shares in companies of the Aker Kvaerner Group, the Company has no trade
creditors but for the information of shareholders the Business Areas and
Business Units are responsible for agreeing terms and conditions under which
business transactions with their suppliers are conducted. The Business Units
will confirm in statements included in their annual report and accounts that
payments to suppliers are made in accordance with agreed terms, provided that
the supplier is also complying with all relevant terms and conditions.

Auditors

KPMG Audit Plc have signified their willingness to continue in office, and, in
accordance with Section 384 of the Companies Act 1985, a resolution for their
re-appointment will be proposed at the forthcoming Annual General Meeting.

By Order of the Board


J C Wilson

Director





June 2003

Registered office:

Kvaerner House

68 Hammersmith Road

London W14 8YW

Registered number: 1125

STATEMENT OF DIRECTORS' RESPONSIBILITIES

Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
Company and of the Group and of the profit or loss for that period. In preparing
those financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently;

make judgements and estimates that are reasonable and prudent;

state whether applicable accounting standards have been followed subject to any
material departures disclosed and explained in the financial statements;

prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the group will continue in business.

The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the financial statements comply with
the Companies Act 1985. They have general responsibility for taking such steps
as are open to them to safeguard the assets of the Group and to prevent and
detect fraud and other irregularities.


INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF KVAERNER E&C PLC

We have audited the financial statements on pages 5 to 26. We have also audited
the information in the directors' remuneration report that is described as
having been audited.

This report is made solely to the company's members, as a body, in accordance
with section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the company's members those matters we are required to
state to them in an auditor's report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company's members as a body, for our audit work,
for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

The directors are responsible for preparing the directors' report and, as
described on page 3, the financial statements in accordance with applicable
United Kingdom law and accounting standards. Our responsibilities, as
independent auditors, are established in the United Kingdom by statute, the
Auditing Practices Board, the Listing Rules of the Financial Services Authority
applicable to issuers of listed debt securities, and by our profession's ethical
guidance.

We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Companies Act
1985. We also report to you if, in our opinion, the directors' report is not
consistent with the financial statements, if the Company has not kept proper
accounting records, if we have not received all the information and explanations
we require for our audit, or if information specified by law regarding
directors' remuneration and transactions with the Group is not disclosed.

Basis of opinion

We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the Group's circumstances, consistently
applied and adequately disclosed

We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.

Opinion

In our opinion the financial statements give a true and fair view of the state
of affairs of the Company and of the Group as at 31 December 2002 and of the
profit of the Group for the year then ended and have been properly prepared in
accordance with the Companies Act 1985.


KPMG Audit Plc

Chartered Accountants

Registered Auditor

London

June 2003

CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the year ended 31 December 2002
                                                      Year ended    Year ended
                                                          31 Dec        31 Dec
                                                            2002          2001
                                             Notes          £000          £000

Turnover        - continuing operations                  300,162       423,203
                - discontinued operations                 13,698       104,038

                                                 2       313,860       527,241
Cost of sales   - continuing operations                               (404,095)
                - discontinued operations               (284,720)      (83,173)
                                                         (13,155)
                                                        (297,875)     (487,268)
Gross profit    - continuing operations                   15,442        19,108
                - discontinued operations                    543        20,865

                                                          15,985        39,973
Net 
administration 
expenses        - continuing operations                  (32,225)      (27,708)
                - discontinued operations                   (824)      (16,648)
                                                         (33,049)      (44,356)
Operating (loss)/
profit        - continuing operations                    (16,783)       (8,600)
              - discontinued operations                     (281)        4,217

                                              2, 3       (17,064)       (4,383)
Share of associates' operating profit            2           862         1,215
Operating loss                                   4       (16,202)       (3,168)
Profit on disposal of operations                 4         7,095             -
discontinued in 2001
(Loss)/profit on termination of                  4          (606)      113,137
discontinued operations
Profit on fixed asset disposals                                -         2,801
(Loss)/profit on ordinary activities before               (9,713)      112,770
interest and taxation
Net interest receivable                          6        16,359        20,284
Profit on ordinary activities before                       6,646       133,054
taxation
Tax on profit on ordinary activities             7        (2,912)         (290)
Profit on ordinary activities after                        3,734       132,764
taxation
Minority interests                              25           631           229
Profit attributable to shareholders             22         4,365       132,993
Dividends:                                       8        (6,500)            -
Ordinary dividend                                8          (807)       (1,228)
Cumulative preference dividend
Retained (loss)/profit                                    (2,942)      131,765

A note of historical cost profits and losses has not been included as part of
these financial statements as there is no difference between the results as
disclosed in the consolidated profit and loss account and the results on an
unmodified historical cost basis.

The accompanying notes are an integral part of this consolidated profit and loss
account.

CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

For the year ended 31 December 2002
                                                      Year ended    Year ended
                                                          31 Dec        31 Dec
                                                            2002          2001
                                                            £000          £000

Profit for the financial year attributable to              4,365       132,993
shareholders
Currency translation differences on foreign currency
net investments taken directly to reserves
                                                            (781)         (433)
Total recognised gains and losses relating to the          3,584       132,560
year

There is no material difference between the profit on ordinary activities before
taxation stated in the consolidated profit and loss account and its historical
cost equivalent.

The accompanying notes are an integral part of this consolidated statement of
total recognised gains and losses.

BALANCE SHEETS

As at 31 December 2002
                                     Group       Group     Company     Company
                                    31 Dec      31 Dec      31 Dec      31 Dec
                                      2002        2001        2002        2001
                         Notes        £000        £000        £000        £000

Fixed assets                 9       3,585       5,704          15          81
Tangible assets             11           -           -      93,235     109,913
Investments in              12       4,451       5,120           -           -
subsidiaries
Investments in
associates
                                     8,036      10,824      93,250     109,994
Current assets              13           -         362           -           -
Stocks                      14     549,909     622,721     331,899     284,581
Debtors                     15      60,453      48,260       5,679       1,718
Cash at bank and on
deposit
                                   610,362     671,343     337,578     286,299
Creditors: amounts          16      (1,615)          -      (1,615)          -
falling due within one
year
Borrowings                  17    (251,806)   (308,474)   (161,001)   (201,706)
Other creditors
Net current assets                 356,941     362,869     174,962      84,593
Total assets less                  364,977     373,693     268,212     194,587
current liabilities
Creditors: amounts
falling due after more
than one year
Borrowings                               -      (1,615)          -      (1,615)
Other creditors             18      (1,044)     (1,720)          -           -
Provisions for              19      (1,524)     (3,559)          -           -
liabilities and
charges
                            20
Net assets                         362,409     366,799     268,212     192,972
Capital and reserves
Called up share             21     186,089     186,089     186,089     186,089
capital
Share premium account       21         316         316         316         316
Revaluation reserve         22          15          30          15          30
Profit and loss             22     165,309     169,017      81,792       6,537
account
Equity shareholders'               351,729     320,377     268,212     157,897
funds
Non-equity                               -      35,075           -      35,075
shareholders' funds

Shareholders' funds         23     351,729     355,452     268,212     192,972
Equity minority             25      10,680      11,347           -           -
interests
                                   362,409     366,799     268,212     192,972


The accompanying notes form an integral part of these balance sheets.

These accounts were approved by the Board of Directors on June 2003 and signed
on its behalf by:



J C Wilson

Director



NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2002

1                Accounting policies

The following accounting policies have been applied consistently in dealing with
items which are considered material in relation to the Group's financial
statements. The company has adopted FRS19 'Deferred tax' in these financial
statements. The comparative figures have been restated accordingly. This does
not have a material effect on prior year balances.

a                Accounting convention

The financial statements have been prepared under the historical cost accounting
rules as modified by the revaluation of certain fixed assets and in accordance
with applicable accounting standards and with the Companies Act 1985.

b              Basis of consolidation

The consolidated financial statements include the accounts of the Company and
its subsidiary undertakings made up to 31 December. Unless otherwise stated, the
acquisition method of accounting has been adopted. Under this method, the
results of the subsidiary undertakings acquired or disposed of in the year are
included in the consolidated profit and loss account and its interest in their
net assets, (other than goodwill), is included in investments in the
consolidated balance sheet. An associate is an undertaking in which the Group
has a long-term interest, usually from 20% to 50% of the equity voting rights,
and over which it exercises significant influence. The Group's share of the
profits less losses of associates is included in the consolidated profit and
loss accounts and its interest in their net assets, (other than goodwill), is
included in investments in the consolidated balance sheet. In the Company's own
accounts, investment in subsidiary undertakings is stated at valuation less any
impairment in the value of the investment. Under section 230(4) of the Companies
Act 1985 the Company is exempt from the requirement to present its own profit
and loss account. The loss for the financial year dealt with in the financial
statements of the holding company was £7.5 million (year ended 31 December 2001
profit - £21.3 million).

c              Cash flow statement

The Company is exempt from the requirements of FRS 1 to include a cash flow
statement as part of its Accounts as it is a wholly owned subsidiary of Aker
Kvaerner ASA (formerly Kvaerner ASA), a company registered in Norway, which
produces consolidated accounts which incorporate the results of Kvaerner E&C PLC
and are publicly available.

d              Foreign currencies

Trading results denominated in foreign currencies are translated into sterling
at average rates of exchange during the year.

Assets and liabilities are translated into sterling at the rates ruling at the
year end except where rates of exchange are fixed under contractual
arrangements.

Differences on exchange arising from the translation of the opening net assets
of foreign subsidiaries, associates and branches denominated in foreign
currency, and any related loans are taken to reserves together with the
differences between profit and loss accounts translated at average rates and
rates ruling at the year end. Other exchange differences are taken to the profit
and loss account when they arise.

e                Turnover

Turnover represents the sales value of work done.

f               Taxation

Overseas taxation is based on profits of overseas subsidiaries and on other
overseas income. No provision is made for any tax on capital gains not covered
by losses that could arise from the future disposal of any fixed assets shown in
the Accounts at valuation, nor for any tax arising in the event of the
distribution of profits retained by overseas subsidiaries and associates.

Deferred taxation is provided on all timing differences that have originated but
not reversed by the balance sheet date and which could give rise to an
obligation to pay more or less tax in the future.

NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002

g              Tangible assets and depreciation

Freehold and long leasehold properties owned and occupied as business premises
are included in fixed assets at their latest valuation plus subsequent additions
at cost. Provision for impairment in the value of a property to below its
carrying value is charged to the profit and loss account. For other freehold and
long leasehold buildings, depreciation is provided on the straight line method
on a 3 to 30 year anticipated life.

For other fixed assets, depreciation is provided on a straight line method based
on anticipated lives as follows:

Plant and machinery, fixtures, fittings and equipment - 3 to 10 years.

Short term leasehold land and buildings are amortised over the period of the
lease.

h              Leased assets

Assets held under finance leases are included under tangible fixed assets at
their capital value and depreciated over the shorter of the lease term and their
useful lives. Leasing payments consist of capital and finance charge elements
and the finance element is charged to the profit and loss account. The annual
rentals under operating leases are charged to the profit and loss account.

i               Fixed asset investments

Shares in subsidiaries and associated companies are stated at cost less amounts
written off where, in the opinion of the directors, there has been a permanent
diminution in the value of a subsidiary. In assessing impairment, the directors
consider the subsidiary's long term profit earning potential. Shares in
associates are stated at their net asset value. Other investments are stated at
cost less amounts written off.

j               Long term contract work in progress

Amounts recoverable on contracts (other than small works) are valued at
anticipated net sale value of work done after provision for contingencies and
anticipated future losses on contracts. Claims are included in the valuation of
contracts and credited to profit and loss account when entitlement has been
established.

Small works are valued at the lower of cost plus attributable overheads and net
sales value.

Cash received on account of contracts is deducted from amounts recoverable on
contracts. Such amounts which have been received and exceed amounts recoverable
are included in creditors. Contract provisions in excess of amounts recoverable
are included in accruals and deferred income.

k              Stocks

Stocks are valued at the lower of cost and net realisable value.

l               Goodwill

Goodwill arising on the acquisition of subsidiary undertakings and businesses,
representing any excess of the fair value of the consideration given over the
fair value of the identifiable assets and liabilities acquired, is capitalised
and written off on a straight line basis over its useful economic life, which is
between seven and a maximum of twenty years. Provision is made for any
impairment.

Goodwill arising on acquisitions in the year ended 31 December 1997 and earlier
periods was written off to reserves in accordance with the accounting treatment
then in force. As permitted by the current accounting standard the goodwill
previously written off has not been reinstated in the balance sheet. On disposal
or closure of a previously acquired business, the attributable amount of
goodwill written off to reserves is included in determining the profit or loss
on disposal.

m                Research and development

Research and development expenditure is written off in the year in which it is
incurred.

NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002

n                Pensions

The group employees are members of defined benefit and defined contribution
pension schemes operated by the Kvaerner PLC group under which contributions are
paid by the group companies and by employees.

The assets of the schemes are held in trustee administered funds separate from
the finances of the group.

The group companies contributions are based on the expected cost of pensions
across the Kvaerner PLC group as a whole and are charged to the profit and loss
account so as to spread the cost of pensions over the service lives of employees
within the Kvaerner PLC group schemes.

The group companies contributions are affected by a deficit on the Kvaerner PLC
group schemes but the Kvaerner E&C PLC group is unable to identify it's share of
the underlying assets and liabilities in the scheme on a consistent and
reasonable basis. Therefore, contributions are accounted for as it were a
defined contribution scheme. As at 31 December 2002, the deficit on the Kvaerner
PLC group schemes was £224 million (£157 million net of deferred tax).

Details of the actuarial valuation of the Kvaerner PLC group schemes are
contained in the report and accounts of Kvaerner PLC.



NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002

2              Analysis by class of business and geographical area
                                                  Operating  Operating *Net operating *Net operating
                                                  (loss)/    (loss)/      assets/liab    assets/liab
                                                                               2002           2001
                                 Turnover 2001     profit     profit           £000           £000
                Turnover 2002             £000       2002       2001
                         £000                        £000       £000

By class of           313,860          527,241    (17,670)    (4,383)       256,947        269,127
business:
Engineering                 -                -          -          -         42,292         46,266
and
construction
Plastics and
other
engineering
                      313,860          527,241    (17,670)    (4,383)       299,239        315,393
By                    114,981          227,407    (10,213)    10,863        333,345        356,251
geographical
area - origin:

United                114,096          193,085     (5,439)   (13,356)       (19,747)       (14,687)
Kingdom
Europe                 57,003           80,259     (1,787)     1,769        (14,329)       (16,710)
Asia and               27,780           26,490       (231)    (3,659)           (30)        (9,461)
Africa
Australasia
                      313,860          527,241    (17,670)    (4,383)       299,239        315,393
By                     84,968          134,888
geographical
area -
destination:
United                123,358          203,343
Kingdom
Europe                  3,735            3,862
Americas               73,995          153,848
Asia and               27,804           31,300
Africa
Australasia
and
elsewhere
                      313,860          527,241

*   Net operating assets/liabilities represent fixed assets, stocks, debtors, 
creditors (excluding borrowings) and provisions.

Share of associates pre-tax results and assets

                                       Operating     Net interest         Profit        Net assets
                      Turnover            Profit                      before tax
                 2002     2001    2002     2001    2002    2001    2002     2001     2002     2001
                 £000     £000    £000     £000      £m    £000    £000     £000     £000     £000

Engineering &   3,373    3,922            1,215      10      18     872    1,234    4,451    5,120
Construction
                                   862
                3,373    3,922     862    1,215      10      18     872    1,234    4,451    5,120

Dividends in the year from associates amounted to £316,000 (2001 £108,000)

NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002

3                Operating profit/(loss)
Operating profit/(loss) is stated after charging/     
(crediting) the following items                       Year ended    Year ended
                                                          31 Dec        31 Dec
                                                            2002          2001
                                                            £000          £000

Auditors' remuneration                                       170           324
audit - group                                                 25            24
audit - company                                               67            61
other
Depreciation and amounts written off tangible fixed        2,337         4,122
assets
- owned                                                        -           158
- held under finance leases                                    -           160
Amortisation of goodwill                                       -         4,033
Research and development - current year
expenditure
Operating lease rentals                                      931         1,985
- plant and machinery                                      2,342         4,283
- other

4.             Net profit on disposals                 Year ended   Year ended
                                                           31 Dec       31 Dec
                                                             2002         2001
                                                             £000         £000

Profit on disposal of operations discontinued in            7,095            -
2001
(Loss)/profit on termination of discontinued                 (606)     113,137
operations
Profit on fixed asset disposals                                 -        2,801
                                                            6,489      115,938


NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002


5                Directors and group employees
                                                      Year ended    Year ended
                                                          31 Dec        31 Dec
                                                            2002          2001
                                                               £             £
The emoluments of the directors of the Company were:   1,109,585     1,162,711

Emoluments
                                                       1,109,585     1,162,711
Emoluments of the highest paid director :
Basic emoluments                                         808,079       577,700
                                                         808,079       577,700

In addition to the emoluments shown above, Mr T G Snow received compensation for
loss of office of

£183,726 upon his departure from Kvaerner on 28 June 2002.

Pensions

The number of directors who were members of defined benefit pension schemes was
2 (2001, 3). The amount

of accrued pension at the year end for the highest paid director was £Nil (31
December 2001, £Nil).
                      Year ended                 Year ended
                          31 Dec                     31 Dec
                            2002                       2001
                            £000                       £000
Other
information on
directors and
employees:
Director and
employee costs:

Wages and                  74,436                   110,777
salaries
Social security             7,442                    10,197
costs
Employers'                  4,141                     5,663
pension
contributions
                           86,019                   126,637

                                                               2002       2001
                                                             Number     Number
Average monthly number of persons employed by the Group
(including executive directors):                              2,012      3,138
Engineering and construction                                      -          -
Plastics and other engineering
                                                              2,012      3,138


6. Net interest receivable            
                  Year ended           Year ended
                      31 Dec               31 Dec
                        2002                 2001
                        £000                 £000

Interest             (2,302)              (2,730)
payable to
group
undertakings
Interest               (228)                 (86)
payable on
other loans
Interest             (2,530)              (2,816)
receivable from
group
undertakings
Other interest       17,427               20,220
receivable
                      1,462                2,880
Net interest         16,359               20,284
receivable



NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002

Tax on profit on ordinary activities
Analysis of tax charge in the year
                                                     Year ended    Year ended
                                                         31 Dec        31 Dec
                                                           2002          2001
                                                           £000          £000

Amounts attributable to associated undertakings             344           404
UK prior year tax                                           694             -
Foreign tax on profits for the year                       1,874          (114)
                                                          2,912           290

There is no potential unprovided liability for deferred taxation on a group
basis.

Factors affecting the current tax charge

The tax assessed for the year is lower than the standard rate of corporation tax
in the UK. The differences

are as follows:-
                                                      Year ended    Year ended
                                                          31 Dec        31 Dec
                                                            2002          2001
                                                            £000          £000

Profit/(loss) on ordinary activities before                6,646       133,054
taxation
Taxation charge at UK corporation tax rate of
30% (2001: 30%)                                            1,994        39,916
Effects of
Group relief for which no payment is made                 (2,518)       (9,568)
Capital allowances in excess of depreciation                (267)         (557)
Movement on provisions                                       191          (254)
Expenditure not deductible for tax                         2,204        16,874
Non-taxable income                                             -       (32,819)
Net increase/(utilisation) of tax losses                     310       (13,950)
Adjustments in respect of prior years                        694             -
Overseas tax rates                                           304           648
                                                           2,912           290

Factors affecting future tax charges

The Group has tax losses in a number of jurisdictions (principally the United
Kingdom, Netherlands and Australia). To the extent that profits arise in these
jurisdictions, and the available tax losses can be used to shelter this income
from tax, future tax charges will be reduced.


8.             Dividends                         Year ended         Year ended
                                                     31 Dec             31 Dec
                                                       2002               2001
                                                       £000               £000

Ordinary dividend                                     6,500                  -
Cumulative preference dividend                          807              1,228
                                                      7,307              1,228



NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002

9. Tangible fixed assets                  
                               Land and     Land and      Land and
                              buildings    buildings     buildings      
                               freehold    leasehold     leasehold    Plant and   
                     Total         £000    long term    short term    machinery
                      £000                      £000          £000         £000
Group
Cost or valuation:  25,892        1,636          185           202       23,869

1 January 2002         258            -            -             -          258
Exchange                 -          185         (185)          184         (184)
adjustments
Reclassification       846            -            -            39          807
Additions           (3,109)           -            -             -       (3,109)
Disposals
31 December 2002    23,887        1,821            -           425       21,641

Depreciation:       20,188        1,506           63            38       18,581
1 January 2002         232            -            -             -          232
Exchange                 -           63          (63)          184         (184)
adjustments
Reclassification     2,337           23            -            43        2,271
Charge for the      (2,455)           -            -             -       (2,455)
year
Disposals
31 December 2002    20,302        1,592            -           265       18,445
Net book value:
31 December 2002     3,585          229            -           160        3,196
1 January 2002       5,704          130          122           164        5,288

                               Land and     Land and      Land and
                              buildings    buildings     buildings    
                     Total     freehold    leasehold     leasehold    Plant and
                      £000         £000    long term    short term    machinery   
                                                £000          £000         £000

Historical cost      3,570          214            -           160        3,196
valuation
31 December 2002
1 January 2002       5,674          100          122           164        5,288


All major properties were valued by Jones Lang Wootton, Chartered Surveyors, on
an open market existing use basis as at 30 September 1993. Minor properties were
valued on an open market existing use basis jointly with the Kvaerner Group's
Chartered Surveyors. All of the valuations were carried out in accordance with
the Statements of Asset Valuation Practice and Guidance Notes published by the
Royal Institution of Chartered Surveyors.

The net book value of leased assets included within plant and machinery,
fixtures, fittings and equipment is £1,000 (31 December 2001 £16,000).






NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002
9.  Tangible fixed assets (continued)                               

                                                         Land and
                                                        buildings    Plant and
                                               Total     freehold    machinery
                                                £000         £000         £000
Company
Cost:                                            233           15          218
1 January 2002                                     -            -            -
Reclassification                                (218)           -         (218)
Disposals
31 December 2002                                  15           15            -
Depreciation:
1 January 2002                                   152            -          152
Reclassification                                   -            -            -
Charge for the year                               30            -           30
Disposals                                       (182)           -         (182)
31 December 2002                                   -            -            -
Net book value:
31 December 2002                                  15           15            -
1 January 2002                                    81           15           66

                                                                         Group
                                                            Group         2001
                                                             2002         £000
                                                             £000

Capital commitments:                                           47           39
Authorised and contracted for

The Company has no capital commitments as at 31 December 2002 (31 December 2001
£Nil).

10                Obligations under operating leases

Annual commitments under non-cancellable operating leases are as follows:

                                 Land and      Other      Land and      Other
                                buildings     31 Dec     buildings     31 Dec
                                   31 Dec       2002        31 Dec       2001
                                     2002       £000          2001       £000
                                     £000                     £000
Group
Expiry date                           297          1           404        161
Within one year                     1,718      1,059         2,178        746
Between two and five years              -          -           435          -
After five years
                                    2,015      1,060         3,017        907





NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002

  11   Investments in subsidiaries
       Company
                                                 Cost    Provisions        Net
                                                 £000          £000       £000

1 January 2002                                192,457       (82,544)   109,913
Additions                                           -       (16,678)   (16,678)
Disposals                                           -             -          -
                                              192,457       (99,222)    93,235
The principal subsidiaries are shown on
page 26.

 12   Investments in associates
      Group

                                                                      Share of
                                                                    net assets
                                                                          £000

1 January 2002                                                           5,120
Exchange adjustments                                                      (428)
Additions                                                                    -
Disposals                                                                    -
Reclassification of associates to                                            -
subsidiary undertakings
Retained loss for the year                                                (241)
Total investments at 31 December                                         4,451
2002

Total investments at 31 December                                         5,120
2001

        13                Stocks
                           Group                    31 Dec   31 Dec
                                                      2002                2001
                                                      £000                £000

Raw materials and stocks                                 -                 362
Manufacturing work in progress                           -                   -

                                                         -                 362






NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002

14            Debtors                   Group      Group    Company    Company
                                       31 Dec     31 Dec     31 Dec     31 Dec
                                         2002       2001       2002       2001
                                         £000       £000       £000       £000 #

Trade debtors                          50,544     53,175          -          -
Other debtors and prepayments          13,299     20,129        323      1,985
Amounts recoverable on contracts       29,087     27,760          -          -
Amounts owed by group undertakings    456,979    521,657    331,576    282,596
                                      549,909    622,721    331,899    284,581

Of which amounts falling due after more than one year
Other debtors and prepayments                             -    1,301    -    -

15 Cash at bank and on deposit

Of the total cash and bank balances on the balance sheet, £44.7 million are
deposits held in bank sub-accounts that are part of a Aker Kvaerner ASA (formerly
Kvaerner ASA) group pooling system. In consequence, to the extent that other Aker
Kvaerner ASA group companies have withdrawn amounts from the group pooling
system, such amounts represent a receivable from the Aker Kvaerner ASA group.

16            Borrowings: amounts        Group     Group    Company    Company
falling due within one year
                                        31 Dec    31 Dec     31 Dec     31 Dec
                                          2002      2001       2002       2001
                                          £000      £000       £000       £000
Borrowings:                              1,331         -      1,331          -
5 5/8% Secured Loan stock 2003             284         -        284          -
4 7/8% Secured Loan stock 2003
                                         1,615         -      1,615          -

The Company and its UK subsidiaries have given floating charges over their
undertakings, assets and property in respect of the Company's issues of:
5 5/8% Secured Loan stock 2003                                      £1,330,511
4 7/8% Secured Loan stock 2003                                        £284,272
17            Creditors: amounts                   Group    Company    Company
falling due within one year
                                        Group     31 Dec     31 Dec     31 Dec
                                       31 Dec       2001       2002       2001
                                         2002       £000       £000       £000
                                         £000

Other creditors:                       22,002     14,771          -
Payments in excess of contract         24,092     38,553          -          -
valuation
Trade creditors and bills payable           -      8,903          -         21
Dividends payable on preference        14,257     38,564      3,948      8,903
shares
Other creditors including sundry        1,290        805          5      8,695
taxes
Taxation                              136,634    148,275    155,742          -
Amounts owed to group undertakings        119        359          -    182,900
Amounts owed to associates             53,412     58,244      1,306          -
Accruals and deferred income                                             1,187
                                      251,806    308,474    161,001    201,706


NOTES TO THE FINANCIAL STATEMENTS (continued)

31 December 2002

18  Borrowings: amounts falling due after more than one year     
                                                              31 Dec    31 Dec
                                                                2002      2001
                                                                £000      £000
Borrowings:
Company                                                            -     1,331
5 5/8% Secured Loan stock 2003                                     -       284
4 7/8% Secured Loan stock 2003
Subsidiaries                                                       -     1,615
Finance leases                                                     -         -
Group                                                              -     1,615
Aggregate amounts, including instalments,    repayable:
Between one and two years                                          -     1,615
Between two and five years                                         -         -
After five years                                                   -         -
                                                                   -     1,615



19            Creditors: amounts falling due after more than  31 Dec    31 Dec
one year
                                                                2002      2001
                                                                £000      £000
Other creditors:
Group                                                          1,044     1,720
Accruals and deferred income

20            Provisions for liabilities and charges        Group      Company
                                                             £000         £000

1 January 2002                                              3,559            -
Exchange translation differences                               27            -
Charged/(released) to profit and loss account               1,255            -
Expenditure during the year                                (3,317)           -
31 December 2002                                            1,524            -

At 31 December 2002, provisions for the group included amounts in respect of
deferred tax, building dilapidations and warranties in respect of businesses
sold.



NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002
21    Called up share capital

                            31 December    31 December               31 December
                                   2002           2001                      2001

                                   £000         Number                      £000
                      Number
Authorised:
Ordinary       1,000,000,000    250,000    620,000,000                   155,000
shares of
25p
3.5%                       -          -     24,889,000                    24,889
Cumulative
Redeemable
Preference                 -          -     10,186,000                    10,186
shares of
£1
3.5%
Convertible
Cumulative
Redeemable
Preference
shares of
£1
Authorised                      250,000                                  190,075
share
capital
Allotted,
called up and
fully paid:
Ordinary         744,355,148    186,089    604,055,148                   151,014
shares of
25p
3.5%                       -          -     24,889,000                    24,889
Cumulative
Redeemable
Preference                 -          -     10,186,000                    10,186
shares of
£1
3.5%
Convertible
Cumulative
Redeemable
Preference
shares of
£1
Called up                       186,089                                  186,089
share
capital

During the year the authorised share capital was increased from £190,075,000 to
£250,000,000 by the creation of an additional 239,700,000 Ordinary shares of 25p
each. 140,300,000 Ordinary shares of 25p each were allotted and issued, as fully
paid, and the proceeds used to redeem at par the 3.5% Cumulative Redeemable
Preference shares of £1 each and the 3.5% Convertible Cumulative Redeemable
Preference shares of £1 each. As a consequence of the redemption, the Preference
shares were cancelled and the authorised but un-issued shares resulting
therefrom were subdivided and converted into Ordinary shares of 25p.

Share premium account                                              31 December
                                                                          2002
                                                               and 31 December
                                                                          2001

                                                                          £000
Share premium account attributable to equity shareholders                  316


NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002
22            Reserves                           Profit and        Revaluation
                                    Total              loss            reserve
                                     £000           account               £000
                                                       £000

Group                             169,047           169,017                 30
1 January 2002                       (781)             (781)                 -
Foreign exchange adjustments        4,365             4,365                  -
Profit for the year                (7,307)           (7,307)                 -
Dividends                               -                15                (15)
Revaluation realised
31 December 2002                  165,324           165,309                 15
Company
1 January 2002                      6,567             6,537                 30
Loss for the year                  (7,453)           (7,453)                 -
Dividends received                 90,000            90,000                  -
Dividends paid                     (7,307)           (7,307)                 -
Revaluation realised                    -                15                (15)
31 December 2002                   81,807            81,792                 15

23            Reconciliation of movements in shareholders'   31 Dec     31 Dec
funds
                                                               2002       2001
                                                               £000       £000

Profit/(loss) for the year attributable to shareholders       4,365    132,993
Foreign exchange adjustments                                   (781)      (433)
Dividends                                                    (7,307)    (1,228)
Reverse preference share appropriation                            -     (7,675)
Net increase/(decrease) to shareholders' funds               (3,723)   123,657
Opening shareholders' funds                                 355,452    231,795
Closing shareholders' funds                                 351,729    355,452

24            Profit of the Company

The consolidated profit for the financial year includes a loss of £7,453,000
(2001, profit of £21,255,000) which is dealt with in the financial statements of
the Company. As permitted by Section 230 of the Companies Act 1985, no profit
and loss account is provided in respect of the Company.

25            Minority interests                                        Equity
                                                                          £000

At 1 January 2002                                                       11,347
Loss on ordinary activities after taxation                                (631)
Dividends paid                                                               -
Exchange differences                                                       (36)
At 31 December 2002                                                     10,680



NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002

26 Derivatives and Other Financial Instruments

Financial Risk Management Policy

Kvaerner E&C PLC and its subsidiaries are members of the Aker Kvaerner ASA
(formerly Kvaerner ASA) group of companies (with ultimate holding company Aker
Kvaerner ASA) and are governed by prudent financial policies and procedures
implemented for the whole of Aker Kvaerner ASA group. Kvaerner Financial Services
(Group Treasury), manage on a day to day basis all treasury activity of the
group, including but not limited to foreign exchange and interest rate risk
management of the Kvaerner E&C PLC group.

The Aker Kvaerner ASA group Financial Policy provides strict guidelines as
regards use of financial derivatives and other financial instruments, and the
aim is to reduce the group's exposure to foreign exchange and interest rate
movements. The Kvaerner E&C PLC group does not use such instruments for
speculative purposes and does not trade in financial instruments. The Kvaerner E
&C PLC group of companies only use such instruments to hedge transaction
exposures deriving from the cash flows of commercial contracts.

Foreign Currency Risk

The Kvaerner E&C PLC group's transactional foreign currency exposures derive
from its contractual based business operations in the area of Engineering and
Construction. These businesses often enter into large contracts with contract
duration of more than one year. The Group's policy requires all Business Units
to hedge with Group Treasury all trade generated exposures at the time of
commitment, by way of entering into forward currency contracts and currency
option agreements. The Kvaerner E&C PLC group of companies have no currency
options outstanding as at 31 December 2002.

The Kvaerner E&C PLC group's net assets and liabilities in currencies other than
sterling are selectively hedged to reduce the effect of currency movements on
the Group's sterling balance sheet. The policy is to minimise this effect by
matching the currency assets with currency liabilities by way of debt or forward
currency contracts.

Short term trade debtors and creditors have been omitted from all disclosures
(other than the foreign currency exposures).

Interest rate risk

The Aker Kvaerner ASA group's exposure to interest rate fluctuations on its
borrowings, deposits and other interest bearing items is managed centrally by
Group Treasury and any hedge by use of interest rate derivatives, interest rate
swaps and options etc., are therefore only used at Group Treasury level. The
Kvaerner E&C PLC group has no interest rate swaps outstanding as at 31 December
2002.

The Group's financial assets include cash held in bank accounts that are part of
the Aker Kvaerner ASA group's cash pooling arrangements, loans to the Aker
Kvaerner ASA group, long term debtors and cash held in other bank accounts, but
exclude short term trade debtors. Forward currency contracts taken out to hedge
translation exposure have been included. Interest on bank accounts within the
pooling arrangements is linked to base rate for sterling deposits and prime rate
for US Dollar deposits. Interest on bank deposits is based on the prevailing
short-term money market interest rates at time of deposit.

Financial assets                 Total            Floating            Interest
                                    £m                Rate                Free
                                                        £m                  £m

Sterling                         456.1               436.6                19.5
Other                             53.3                34.2                19.1
                    Total        509.4               470.8                38.6

The gross financial liabilities of the Kvaerner E&C PLC group includes issued
bonds, loan stock, preference shares and other bank and Aker Kvaerner ASA group
borrowings but excludes short term trade creditors. Forward currency contracts
taken out to hedge translation exposure are also included.

NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002

26 Derivatives and Other Financial Instruments (cont.)
                                                                                             Weighted
                                                                                        average years
Financial                                                                   Weighted   for which rate
Liabilities    Total    Floating Rate    Fixed Rate    Interest Free    average rate         is fixed
                  £m               £m            £m               £m
Sterling        70.0              0.5           1.6             67.9            5.48%           1.7
Borrowings
Other           55.2             35.0                           20.2
      Total    125.2             35.5           1.6             88.1

The interest rate on floating rate financial liabilities is linked to the inter-bank offer rate. The
interest rate on amounts due to and from group undertakings is based on LIBOR.
Maturity of financial liabilities

The maturity profile of the Group's financial liabilities at 31 December 2002 was as follows:

                                                                       Borrowings             Total
                                                                               £m                £m

In 1 year or less or on demand                                              123.1             123.1
More than 1 year but not more                                                 2.1               2.1
than 2 years
More than 1 year but not more                                                   -                 -
than 5 years

                          Total                                             125.2             125.2

Borrowing facilities

The Group has no undrawn committed borrowing facilities at 31 December 2002.
Currency exposure

As noted above the Group's policy is that all currency exposures are hedged back into the base
currency of the company using forward currency contracts as soon as they arise. Therefore transaction
exposure giving rise to net currency gains and losses is not considered significant.
However, the profile of the net outstanding forward currency contracts re transaction exposures, as
at 31 December 2002, is listed below:

                                                                  Original                
                                                                currency                   Sterling
Currency                                      Net buy           Net sale       Net buy     Net sale
                                                    m                  m            £m           £m
Euros                                             0.8                0.3           0.1          0.2
Norwegian Krone                                   3.4                              3.4
Sterling                                                             4.5                        2.8
US Dollars                                                           0.6                        0.2
Australian Dollars
                                     Total                                         3.5          3.2



NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002

26 Derivatives and Other Financial Instruments (cont.)
Fair values
Set out below is a comparison by category of book values and fair values of the Group's
financial assets and liabilities at 31 December 2002
                                                           £m         Book           Fair
                                                                     Value          Value
                                                                        £m             £m
Primary financial instruments held or issued to finance the          509.4          509.4
Group's operations
Financial assets
Financial liabilities                                                125.2          125.2

Derivative financial instruments held to manage the currency             -           (0.2)
profile

Forward foreign currency contracts (transaction hedges)

Forward foreign currency contracts (translation hedges)

Listed below are the main characteristics of the bonds and loan stocks.


        Carrying Value   Interest Rate   Interest Period                    Final Maturity

Type               £m
Loan              1.3            5.625     Semi-annual                            30/9/03
Stock
2003
Loan              0.3            4.875     Semi-annual                            30/9/03
Stock
2003

Gains and losses on hedges
The Kvaerner E&C PLC group of companies as members of the Aker Kvaerner ASA group uses an
accounting principle including percentage of completion as a basis for its recognition of
operating revenues and operating costs. Transactional currency hedges are therefore
integrated with the underlying project accounting method and are recognised in the profit
and loss account in line with the completion ratio of the contracts under construction. For
those transaction currency hedges that have matured in the current accounting year, the
recognition of profit or loss from the hedge is treated as operating revenue or operating
costs. For those transaction currency hedges that are outstanding as at 31 December 2002
(see table above), an element has been recognised as part of the contract completion
accounting. The remaining un-accrued element will be recognised in line with the completion
ratio of the relevant contracts. A summary of the total (accrued and un-accrued) gains and
losses for all such hedges outstanding as at 31 December 2002 is as follows:

                                               £m     Gains 2002    Loss 2002    Net 2002

   Gains and losses arising in previous years not              -         (0.2)       (0.2)
   recognised in year
   Gains and losses not recognised in the year
   arising in the year
   Gains and losses on hedges at 31.12.02                      -         (0.2)       (0.2)
   Of which:                                                   -         (0.2)       (0.2)
   Gains and losses expected to be recognised in               -            -           -
   2003
   Gains and losses expected to be recognised in
   2004 or later



NOTES TO THE FINANCIAL STATEMENTS (continued)

For the year ended 31 December 2002

27                Contingencies

Legal proceedings

With its extensive worldwide operations, Group companies are in the course of
its activities involved in numerous legal disputes. Provisions have been made to
cover the expected outcome of the disputes to the extent that negative outcomes
are likely and reliable estimates can be made. However, the final outcome of
these cases will always be subject to uncertainties and resulting liabilities
may exceed booked provisions.

Project risks and uncertainties

The Group's operations are subject to long term contracts, many of which are
fixed-price, turnkey contracts that are awarded on a competitive bidding basis.
Failure to meet schedule or performance guarantees or increases in contract
costs can result in non-recoverable costs, which could exceed revenues realised
from the applicable project. Where a project is identified as loss making,
forward loss provisions are made using the best available information.

28            Ultimate parent undertaking

The ultimate parent company is Aker Kvaerner ASA (formerly Kvaerner ASA),
incorporated in Norway, which heads the largest group in which the results of
the Company are consolidated.

Copies of the financial statements can be obtained from Kvaerner PLC at Kvaerner
House, 68 Hammersmith Road, London, W14 8YW.





PRINCIPAL SUBSIDIARIES

31 December 2002


Listed below are the principal subsidiaries which are wholly owned and
registered in England and Wales, unless stated otherwise below, and carry on
their activities principally in the country of their incorporation. All
subsidiaries shown are direct subsidiaries of the Company except where marked +.

                ENGINEERING AND CONSTRUCTION

Process engineering

Kvaerner E&C UK Limited

+  Aker Kvaerner Netherlands BV (formerly Kvaerner Process (Netherlands) 
   BV) - Netherlands

+  Kvaerner E&C Australia Pty Ltd - Australia

Total engineering, procurement, construction management and commissioning
services to the hydrocarbons, chemicals and polymers, pharmaceutical and
transportation industries.

Offices in London, Portsmouth, Warrington, Stockton, The Netherlands, Australia
and Germany.


PRINCIPAL ASSOCIATES

31 December 2002

Listed below is the principal associate which is not directly held by the
Company, its country of incorporation, its main areas of operation and details
of its issued capital and the percentage held.


                           Principal area of     Issued capital        Percentage
                           operation                                   held
Kvaerner Powergas India    India                 235,000 INR Ordinary  49
Limited                                          shares



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