Hunting Regulatory News (HTG)

3 Mar 2005 07:01

Hunting PLC03 March 2005 3 March 2005 Preliminary results For the year ended 31 December 2004 Hunting PLC, the international energy services Company, today announces itspreliminary results for the year ended 31 December 2004. • Turnover £1,255m (2003: £1,195m) +5%• Adjusted operating profit £30.8m* (2003: £25.2m) (Statutory operating profit £27.0m (2003: £25.2m)) +22%• Adjusted pre-tax profit £25.2m* (2003: £21.1m) (Statutory pre-tax profit £15.4m (2003: £21.1m)) +19%• Adjusted basic earnings per share 12.7p per share* (2003: 6.4p) (Statutory basic earnings per share 6.2p (2003: 6.4p)) +98%• Ordinary dividend per share 4.5p (2003: 3.5p) +29% * before exceptional items Commenting on the outlook for the Group, Dennis Proctor, Hunting's ChiefExecutive, said: "The industry is forecasting 2005 to be the busiest year for drilling since1985. "The limiting factors in meeting these forecasts may be the availability ofcertain equipment and labour. In general, the increase in global spending willbe approximately 5%, with many independent operators expanding their explorationand production budgets far above that. As we begin 2005, oil inventories remaintight and some experts question how much excess capacity remains in the majoroil producing countries to help meet continued demand growth. Natural gascontinues to be a primary driver for increased drilling as 50% depletion ratesafter one year are more common. Internationally, the world demand for naturalresources is expected to continue and sustain the recent price levels. "The Company's recent performance trend, coupled with the positive outlook fromour customer base, should provide excellent opportunities for our assets,shareholders and staff in 2005." Cont/...2 For further information, please contact: Hunting PLC 020 7321 0123Dennis Proctor, Chief ExecutiveDennis Clark, Finance Director Hogarth Partnership Limited 020 7357 9477Andrew JaquesEdward Westropp Notes to Editors: Hunting PLC is an international oil services company providing support solutionsto the world's largest oil and gas companies. Chairman's Statement Profit before taxation for the year to 31 December 2004 was £25.2m, prior toexceptional items of £9.8m, (2003 - £21.1m) a 19% increase. Confidence in the energy industries we serve increased during the course of2004, resulting in a long-delayed improvement in exploration and developmentdrilling to address the worldwide production challenge. However, the continuing weakness of the US dollar relative to sterling, ourreporting currency, reduced what would otherwise have been an even moresatisfactory result. Hunting Energy Services, the Group's engineering operation providingsophisticated goods for the hydrocarbon drilling and production sector,benefited from another year of high commodity prices - with oil and gascompanies increasing their expenditure, particularly in the second half. There was strong activity onshore in the United States, especially in the RockyMountain region, but offshore drilling in the Gulf of Mexico remained flat. OurNorth Sea customer base proved to be substantially more active than we hadexpected at the start of the year. Gibson Energy, the Group's Canadian based midstream operation, had anothersuccessful year following our purchase of the outstanding 36% minority in thecompany. Oil purchasing, transportation, blending, storage and marketing wereall very busy and the Canwest Propane subsidiary, Canada's second largestdistributor of that gas, expanded its operations in British Columbia. Our US-based exploration and production company, Tenkay Resources, was affectedby delays in new production coming on stream and by the unusually severehurricane season in the Gulf of Mexico but succeeded in increasing its reservebase once again. The E.A. Gibson Shipbrokers operation continued its strongcontribution, benefiting from high tanker and dry cargo rates. In August we cancelled and repaid the 8.25% cumulative convertible preferenceshares in order to improve the Group's capital structure and returns toshareholders. I am pleased to report that basic earnings per share (beforeexceptional items) were 12.7p, an increase of 98% on 2003. We are recommending afinal dividend of 3.0p per share, giving a total of 4.5p for the year, a 29%increase on the previous year. Our confidence for 2005 and future years is strengthened by these results and,barring unforeseen events, I expect continued progress.The Board wishes to thank our staff for their outstanding contribution to oursuccess. Richard HuntingChairman Chief Executive's Review Introduction Additional supply capacity of oil and gas has clearly become the focus of theupstream and midstream industries we serve. Rig activity continues to climb asmany operators saw their reserve replacement in 2004 fall to 75% of productionfollowing historical levels of 100% or better. Hunting benefited in 2004 fromsustained higher commodity prices and increased spending by our customers.Positive signs exist in all markets we serve and we expect the trend experiencedin 2004 to continue. The reserve replacement shortfall combined with limitedworldwide excess oil production capacity of 2% or less sets the stage forcontinued increases in drilling, exploration, production and transportation. In conjunction with an improvement in profits, the Company reduced its long termdebt including the convertible preference shares by 29% and litigation matterswere settled thereby reducing our exposure to future earnings impairment. Your Company's strategy is reflected in its strong position in four key areasthat management continues to enhance: 1. Proprietary Technology - In Hunting Energy Services, numerous products are patented including premium connections, burst discs, make up processes for tubulars, coating of threads and thread protectors. 2. Geographic Position - From Canada to China, Hunting has plants, properties, equipment and people to serve its global customers with local talent and products. 3. Market Share Strength - Gibson Truck Transportation, Iberia Manufacturing, E.A. Gibson Shipbrokers and Tianjin Huaxin Premium Connections, the China Threading venture, all have leading shares in their respective product or service markets. 4. Asset Utilisation - In Gibson Energy, the marketing division utilises pipelines, storage tanks, terminals and truck transportation to obtain various grades of heavy oil and blend them with diluents to produce a lighter grade, higher priced crude for sale. The diversity of the Group's activities and skills enables us to balanceearnings in a cyclical industry while achieving increases in gross margins. Higher oil and gas prices enabled Tenkay Resources to continue increasing itsreserve base. Greater oil demand, primarily in Southeast Asia and developingcountries, resulted in significantly increased tanker rates thereby providingexcellent results for E.A. Gibson Shipbrokers. With the return to health of themajor telecommunication companies, our drill rod manufacturer in Iberia,Louisiana saw its output improve 50% year-on-year in 2004. It is expected thatthe telecommunication industry will spend billions of dollars for fibre opticcable installations to residential and commercial consumers. Drilling activity across Western Canada including conventional, oil sands andshallow gas sectors is high and only limited by the ability to find sufficientqualified personnel to fill all the jobs. There were 21,000 wells drilled in2004 of which 73% were targeted towards gas. Such increased activity offers ourCanadian assets excellent opportunities for continued performance and growth. Business Developments In May 2004, the Company sold its under-performing assets of five inch and aboveoil country tubular goods for £25.6m. These assets were primarily targetedtoward the deepwater Gulf of Mexico activity that has been depressed over thelast two years and is not expected to experience sustained improvement in theforeseeable future. In August 2004, the Company cancelled and repaid its 8.25%convertible preference shares thereby reducing the cost of the Group's debtfinancing. Our reported results in sterling suffered from the negative impact ofexchange rate movements, which have understated the profit improvement and thehigher rates of tax in North America compared to the UK. Health, Safety and the Environment The Company remains diligent in efforts to continuously improve the health andsafety aspects of its operating divisions. In Gibson Energy, the lost timeincident record was 32% less than the Alberta Provincial average in 2004. Itstruck transportation division has reduced its incident rate by 17% over the lasttwo years, while operating over 40 million miles per year. Its largestterminals, Hardisty and Edmonton, handled over 250,000 barrels per day of crudeand achieved a zero lost time incident record in 2004. In Hunting Energy, onlyone lost time injury was recorded in its seven manufacturing plants in spite ofincreased man-hours and the addition of new employees. In Aberdeen, the facilitywas awarded a second consecutive National Safety Award by the British SafetyCouncil. For the seventh consecutive year, it received the Five Star rating forsafety. No environmental issues occurred and one facility in Houston receivedthe new ISO 14001 Environmental Management Specification. Simply put, our goals are - No accidents, No harm to people and No damage to theenvironment. Operational Review Turnover for the year increased to £1,255m (2003 - £1,195m) with operatingprofits before exceptional items of £30.8m compared to £25.2m in 2003. Pre-taxprofit before exceptional items increased to £25.2m from £21.1m in 2003 andearnings per share before exceptional items increased 98% to 12.7p (2003 -6.4p). GIBSON ENERGY 2004 2003 £m £mTurnover 1,002.9 939.6Operating Profit 14.7 13.6 Crude oil prices continue to be the driver for higher activity levels in theCanadian oil and gas industry and this contributed to an 8% increase inoperating profits for Calgary, Alberta based Gibson Energy. Heavy oil, bitumenand synthetic oil volumes from Northern Alberta and Fort McMurray averaged overone million barrels per day eclipsing conventional oil as a majority ofAlberta's production volume. This combined with record levels of drillingactivity led to a recovery in truck transportation and excellent marketingresults. Further development of these large non-conventional reserves willprovide many opportunities for the expansion of Gibson's marketing,transportation and distribution business. Marketing accounted for 50% of Gibson's operating profits. Good volumes andfavourable margins for crude oil, diluents, trading, custom terminaling andgains from higher priced inventory were achieved. New volumes of well sitefluids from Moose Jaw, natural gas trading and the Hardisty fractionation plantgenerated increased profits over prior years. Despite commodity price volatilityduring the year, Gibson's risk management systems minimised the exposure tolarge market swings. Expansion began in the fourth quarter of 2004 foradditional storage, terminaling and piping of heavy crude through the Edmontoncorridor. This project will complete by mid-year 2005. Truck Transportation recorded operating profits of £2.5m versus £1.3m in 2003.Additional hauling in the Lloydminster area as well as new developments fromAthabasca and Northern frontiers provided an excellent recovery over the prioryear. LPG and propane volumes remained steady but asphalt hauling was belowexpectations due to seasonal weather and the high cost of supplies. Oil and Gas Operations accounted for 33% of Gibson Energy's operating profitswith steady volumes throughout the year. Pipeline volumes for conventional oilin the Hardisty area declined but were offset by increased tariffs, stabilisedrevenues and volume increases from the new Athabasca pipeline connections.Edmonton terminal volumes from Suncor Fort McMurray steadily increasedthroughout the year. Canwest and Natural Gas Liquids accounted for 11% of Gibson Energy's operatingprofits. A new rail terminal was commissioned in November 2004 and the Canwestbranch in Surrey, British Columbia will provide growth opportunities and morecost efficient distribution. Trading at Moose Jaw Asphalt remained difficult due to the higher costs ofasphalt feed stock and heavy crude oil. These increased costs resulted in lowermargin asphalt sales to various provincial and regional governments. However,the division experienced a record year for asphalt and tops volumes. The plantcontinues to provide profitable service opportunities for Gibson TruckTransportation and Marketing. Robust commodity prices are expected to continue in 2005 and expectations arefor another strong year of activity. Gibson Energy's leadership position inexisting mid-stream assets, people and services should provide excellentopportunities. HUNTING ENERGY SERVICES 2004 2003 £m £mTurnover 159.9 168.6Operating Profit 8.8 5.4 Houston, Texas based Hunting Energy Services has enjoyed a significantimprovement year over year, driven by higher oil and gas prices as well as rigactivity reaching levels not seen since 1985. Most of the growth in drillingactivity was land based as the offshore Gulf of Mexico rig count recorded itsworst year of activity since 1993, 11% off the 2003 level. With oil and gas operators reporting record earnings, the momentum for expandingexploration and production is now being generated. Seismic activity hasprogressed, rig rates in some cases have doubled over the past few months andthere is evidence that both long and short-term contracts are being issued. InMay, the company sold its inventory of oil country tubular goods in sizes 5 inchoutside diameter and above but retained its more profitable proprietary productsof 41/2 inch outside diameter and below. The company continues to focus onproprietary products with market niche opportunities that enable it to be aleading supplier to its customer base. Hunting Energy continues to develop new products for complex well applicationsboth on and offshore. Proprietary connection testing is on going in China fornational oil companies and the Tianjin Huaxin Premium Connections threadingoperation remains at full capacity. While the offshore Gulf of Mexico market hasless opportunity for proprietary products, the company continued newdevelopments in large diameter connections for depths of 25-30,000 feet. Duringthe year, the company developed the Clear Run product for use on oil countrytubular goods. Clear Run removes the need for environmentally damaginglubricants and storage compounds from the process of well construction andgreatly improves the speed at which this piping can be deployed. Manufacturing The manufacturing division had its best performance since 2001 with turnoverincreasing 15% year over year. The manufacturing segment of Hunting Energy isdivided into three product lines: • Accessory Manufacturing is comprised of those ancillary products connected to the casing or tubing necessary to complete an oil or gas well. Customers include the major oil and gas companies as well as Original Equipment Manufacturers ("OEMs"). These products are often required in a time sensitive fashion thereby warranting significantly higher gross margins. • Drill Rod Manufacturing. Since 2001, the company has provided trenchless drill rods, similar to that of oil country tubular goods, to the telecommunication industry. As more and more fibre optic cable is laid in a trenchless fashion, the demand for drill rod and accessories has increased. Activity for 2004 was up 60% over 2003 and due to the financial recovery of the telecommunication industry, expectations are for continued expansion and improvement in this market. • Mud Motors. Hunting entered the mud motor business three years ago and now has 300 motors throughout the Rocky Mountain region, primarily for natural gas drilling through hard rock. The patented technology within the motors enables operators to drill a well straighter and/or faster thereby reducing overall cost. This division will expand into Grand Junction, Colorado in 2005. The manufacturing segment of Hunting Energy is the highest gross margin divisiondue to the requirement for quick deliveries, proprietary product manufacturingand geographic location. As major OEMs continue to outsource much of theirbusiness, Hunting manufacturing must respond with additional capacity. Thiscombined with expected increases in drilling activity has justified theconstruction of a new threading facility in Houston and a large diameteraccessory facility in Houma, Louisiana. International In the North Sea, the transition from major operators to independents took placethroughout the year resulting in a very good performance for the operations inAberdeen. Although rig activity is lower, the customer base of Hunting'sfacility has grown and with steel prices higher, margins have improved. Thecompany continues to qualify its products in China for national oil companiesand the Tianjin Huaxin Premium Connections threading operation remains at fullcapacity. Discussions are underway to expand this facility as China's energydemand continues to grow. The Singapore facility also had an excellent year in2004 with expectations of increased exploration and production activity in theregion. In December 2004, a larger manufacturing plant was acquired toaccommodate this growth. TENKAY RESOURCES 2004 2003 £m £mTurnover 8.4 10.4Operating Profit 3.2 4.3 Tenkay Resources turnover was down 19% from 2003 as a result of various delaysin new wells coming on stream and temporary curtailment of production due topipeline and platform damage from the unusually severe hurricanes in the Gulf ofMexico. However, strong product pricing for oil and natural gas generallycontinued throughout the year. Tenkay Resources increased its reserve base onceagain and the production increases that were expected in the second half of 2004are now being realised in the first quarter of 2005. Tenkay Resourcesparticipated in the drilling of 19 wells offshore Louisiana and Texas with 13successes. On a Net Equivalent Barrel ("NEB") basis, 411,000 bbls were producedover the twelve month period, and at year end, the reserves of oil and gas on anSEC basis were 2.3m NEB compared with 2.1m NEB at the end of the previous year.In addition to new wells, several workovers/recompletions are underway that areexpected to further enhance production in the current year. E. A. GIBSON SHIPBROKERS 2004 2003 £m £mTurnover 18.8 14.9Operating Profit 2.5 1.8 Record freight levels in the Crude and Dry Bulk sectors were mainly responsiblefor another very satisfactory year. E. A. Gibson's results, although affected bythe weakness of the US Dollar, were complemented by strong returns from the LPGProducts and Specialist Tankers segments. The performance of the latter wasparticularly encouraging and benefited from the acquisition of the specialistbroker BE Moors, completed earlier in the year, giving E. A. Gibson entry intothe chemical and 'veg' oil tanker sectors. HUNTING ENERGY FRANCE 2004 2003 £m £mTurnover 12.5 11.4Operating Profit 1.0 0.7 Operating profit improved by 43% over 2003 with a strong contribution fromInterpec for compressors and pumps and from Larco, which benefited from a changein the mix of its oil storage products. Roforge successfully introduced a newrange of valves during the year but was adversely affected by raw material priceincreases. OTHER 2004 2003 £m £mTurnover 52.6 50.5Operating Profit 0.6 (0.6) Field Aviation Field Aviation Canada had an excellent year in 2004 with operating profitsincreasing by 87%. In 2004 Field Aviation confirmed its position as a world leader in themodification of aircraft for Special Missions by being chosen to provide threenew maritime patrol aircraft to the Swedish Coast Guard. The new aircraft willbe delivered to Field's Toronto facility in 2006 and modified with specialisedequipment to enforce immigration, customs, pollution and fishing regulations aswell as performing search and rescue missions. Other customers for these typesof modifications include Australia, Denmark and the US Department of HomelandSecurity. Parts manufacturing continues to do well in the niche markets it hasestablished. Commercial Aviation showed some improvement in the year butcontinues to suffer from the ongoing difficulties of oversupply and low pricingplaguing the airline industry. Hunting Specialised Products Sales increased over the previous year but not sufficiently for the company tobreak into profit. During 2004 the Custom Packaging operation was closed andoperations relocated to one site in the USA (Cincinnati) and one in the UK(Widnes). Opportunities in pipeline rehabilitation offer an exciting future andduring the year the company was awarded a development contract with Transco plc.The company also successfully completed several above ground linings with itspolymer application system. Aero Sekur Italian defence budget cuts adversely impacted both cash flow and the acceptancetesting of manufactured goods in the second half of the year. However, thecompany was awarded six new R&D contracts by the Ministry of Defence and thereis increased customer interest in its technological capability. Outlook The industry is forecasting 2005 to be the busiest year for drilling since 1985and expecting the limiting factors on activity to come from the availability ofcertain equipment and labour. In general, the increase in global spending isexpected to be approximately 5%, with many independent operators expanding theirexploration and production budgets far above that. As we begin 2005, oil inventories remain tight and some experts question howmuch excess capacity remains in the major oil producing countries to help meetcontinued demand growth. Natural gas continues to be the primary driver forincreased drilling as 50% depletion rates after one year are more common.Internationally, the world demand for natural resources is expected to continueand sustain the recent price levels. The Company's recent performance trend,coupled with the positive outlook from our customer base, should provideexcellent opportunities for our assets, shareholders and staff in 2005. Dennis ProctorChief Executive Finance Director's Review 2004 saw a significant increase in the activities and profitability of HuntingEnergy Services and with an improved return from most other areas of the Group,operating profit before exceptional charges increased by 22% over 2003. Netinterest payable including interest on the £47.9m cumulative convertiblepreference shares which were cancelled and repaid on 6 August 2004 was higher at£5.6m (2003 - £4.1m). The repayment of the 8.25% preference shares with theirhigh interest coupon should lead to improved future returns. In the first half of the year operating profit before exceptional charges was£12.7m (2003 - £10.9m) and pre-tax profit was £10.1m (2003 - £8.4m). In thesecond half of the year, operating profit before exceptional items increased to£18.1m (2003 - £14.3m) and pre-tax profit before exceptional items to £15.1m(2003 - £12.7m). The £3.8m exceptional charge included within operating profitincludes the costs and anticipated future rental deficit of a UK leaseholdproperty where the previous tenant went into liquidation. Other exceptionalcharges of £6.0m comprise the settlement of a claim on the disposal of a formersubsidiary in 2001 and the closure of Hunting Custom Packaging in the US. Earnings Per Share Basic earnings per share before exceptional items increased to 12.7p (2003 -6.4p) on an average of 101.0m shares outstanding during the year. Basic earningsper share after exceptional items but before goodwill amortisation increased to8.8p (2003 - 8.5p). International Financial Reporting Standards ("IFRS") The Group has adopted IFRS with effect from 1 January 2005 and will be reportingthe 2005 interim results in compliance with IFRS. Excluding mark-to-marketadjustments which cannot be predicted, the implementation of IFRS is notexpected to affect earnings materially; balance sheet reserves will be affectedby a number of transitional changes including deferred taxation. Exchange Rates Both the US and Canadian Dollars weakened during the year relative to Sterlingwith the US Dollar averaging 1.83 (2003 - 1.64) and the Canadian Dollaraveraging 2.38 (2003 - 2.29). Year end rates for the US and Canadian Dollarsagainst Sterling were 1.93 (2003 - 1.78) and 2.30 (2003 - 2.30) respectively. Taxation The taxation charge for the year excluding exceptional items was £9.5m, aneffective rate of 37.7% (2003 - 34.6%). 2003 benefited from the initial changesin the Group's Canadian corporate structure. Financing and Risk Management The Group's centralised Treasury is a service centre with policies andprocedures approved by the Board. These cover funding, banking relationships,foreign currency, interest rate exposures and cash management. The policies andprocedures covering oil and gas price exposure managed by Gibson Energy areapproved by the Board. On 12 May 2004, Hunting Energy Services sold its US tubular assets business inthe five inch and above oil country tubular goods sector, for £25.6m in cash. On 1 July 2004, US$50m Private Placement Notes were repaid and on 6 August 2004the £47.9m 8.25% cumulative convertible preference shares were cancelled andrepaid at par. Currency options are used to reduce currency risk movements on the Group'sresults, by hedging approximately 50% of each year's budgeted Canadian and USDollar earnings into Sterling. Currency exposure on the balance sheet is, wherepractical, reduced by financing assets with borrowings in the same currency.Forward foreign exchange contracts are used to cover the net exposure ofpurchases and sales in non-domestic currencies. Fluctuations in the sellingprice of crude oil inventories are managed by using futures, swaps and options. Interest expense is hedged by using interest rate swaps, interest rate caps,forward rate agreements and currency swaps. At 31 December 2004, interest rateswaps and caps covered 43.5% of net borrowings. On 17 December 2004, the issue of US$70m Private Placement Notes was concluded.These have a maturing profile commencing in January 2008 with final payment inJanuary 2012. The proceeds of these Notes and other facilities were used toprepay the £45m three year term loan that was due to mature in July 2005. The Private Placement, the committed multi-currency facilities, and otherborrowing lines provide total facilities of £201m, £160m of which are committed.As at 31 December 2004, £144m was drawn down. These facilities provide the Groupwith adequate liquidity to meet anticipated future requirements. Net interest payable of £5.6m (2003 - £4.1m) was 5.5 times covered beforeexceptional items. Dividends An interim dividend of 1.5p per share (2003 - 1.25p) was paid on 25 November2004. A final dividend of 3.0p per share payable on 29 June 2005 to shareholderson the Register at 10 June 2005 is now proposed, giving a total of 4.5p (2003 -3.5p) for the year. Cash Flow Free cash flow, that is cash flow before new business acquisitions, assetdisposals and cancellation and repurchase of share capital, increased to £18.1mcompared to £4.8m in 2003. Capital expenditure in the year was £22.1m (2003 -£28.2m) which included £8.5m in Gibson Energy, £6.5m in Tenkay Resources and£5.0m in Hunting Energy Services. In total £13.2m was replacement capital and£8.9m new business expenditure. Net debt excluding the convertible preference shares, increased during the yearto £130.6m from £126.6m. Gearing, defined as net debt as a percentage ofshareholders' funds and minority interests, increased from 77% to 111% followingthe repayment of the preference shares. Pensions In 2004 the Group accounted for pensions under SSAP 24 'Accounting for PensionCosts'. A review of the financial position of the Group's UK Defined BenefitScheme ("the Scheme") was undertaken as at 5 April 2004. Included in theConsolidated Balance Sheet at 31 December 2004 is £25.8m representing thepension prepayment on a SSAP 24 basis (£18.1m net of deferred tax). The fundingposition of the UK Defined Benefit Scheme under FRS 17 principles shows that at31 December 2004 assets exceeded liabilities by £24.0m. The Scheme remainsfunded on both a SSAP 24 and a FRS 17 basis. On 31 December 2002 the Scheme wasclosed to new UK employees who are now offered membership of a definedcontribution scheme. Going Concern The Directors, after making enquiries and on the basis of current financialprojections and the facilities available, believe that the Company and the Grouphave adequate financial resources to continue in operation for the foreseeablefuture. For this reason, they continue to adopt the going concern basis inpreparing the financial statements. Dennis ClarkFinance Director Consolidated Profit and Loss AccountFor the Year ended 31 December 2004 Before Exceptional Total Total exceptional items 2004 2003 items 2004 2004 Notes £m £m £m £m Turnover 1 1,255.1 - 1,255.1 1,195.4Cost of sales (1,161.5) - (1,161.5) (1,112.9) -------- -------- ------- -------Gross profit 93.6 - 93.6 82.5Net operating expenses (after goodwill amortisation of £2.7m (2003 - £2.1m)) (62.9) (3.8) (66.7) (57.0) -------- -------- ------- -------Group 30.7 (3.8) 26.9 25.5operatingprofitShare of operatingprofit (loss) inassociated undertakings 0.1 - 0.1 (0.3) -------- -------- ------- -------Total 1 30.8 (3.8) 27.0 25.2operatingprofitExceptionalitemsSale andtermination of operations - (6.0) (6.0) - -------- -------- ------- -------Profit on ordinaryactivities beforeinterest 30.8 (9.8) 21.0 25.2Interest receivableand 0.8 - 0.8 1.3similar incomeInterestpayable and similarcharges (6.4) - (6.4) (5.4) -------- -------- ------- -------Profit on ordinaryactivities beforetaxation 25.2 (9.8) 15.4 21.1Taxation (9.5) 3.2 (6.3) (7.3) -------- -------- ------- -------Profit after 15.7 (6.6) 9.1 13.8taxationEquityminority interests (0.5) - (0.5) (3.4) -------- -------- ------- -------Profit for thefinancial year 15.2 (6.6) 8.6 10.4Dividends(including non-equity) (6.9) - (6.9) (7.5) -------- -------- ------- -------Retainedprofit for the year 8.3 (6.6) 1.7 2.9 ======== ======== ======= ======= Basic earnings per 25pordinary share 12.7p (6.5)p 6.2p 6.4p ======== ======== ======= =======Diluted earnings per25p ordinary share 6.1p 6.4p ======= ======= There are no material differences between the results disclosed above and theresults on an unmodified historical cost basis. The profit for the year arises from the Group's continuing operations. Consolidated Statement of Total Recognised Gains and LossesFor the Year ended 31 December 2004 2004 2003 £m £mProfit for the financial year 8.6 10.4Currency translation differences on foreigncurrency net investments (2.3) 2.5 ------- -------Total recognised gains and losses for the year 6.3 12.9 ======= ======= Consolidated Balance SheetAt 31 December 2004 2004 2003 £m £mFixed assetsIntangible assets 44.8 49.1Tangible assets 158.1 160.5Investment in joint ventures and associatedundertakings 8.7 13.0Other investments 3.8 5.6 -------- -------- 215.4 228.2 -------- --------Current assetsStocks 75.7 93.2Debtors: amounts falling due within one year 140.5 135.3 : amounts falling due after more than one year 29.2 23.1Investments - 0.4Cash at bank and in hand 15.1 15.3 -------- -------- 260.5 267.3Creditors: amounts falling due within one year (174.7) (147.0) -------- --------Net current assets 85.8 120.3 -------- -------- Total assets less current liabilities 301.2 348.5 Creditors: amounts falling due after morethan one year (132.3) (136.5) Provisions for liabilities and charges (51.0) (47.2) -------- -------- 117.9 164.8 ======== ======== Capital and reservesCalled up share capital 25.3 73.2Share premium 41.5 41.5Revaluation reserve 16.6 17.8Profit and loss account 30.8 29.2Treasury shares - (0.1) Shareholders' funds -------- --------Equity interests 114.2 113.7Non-equity interests - 47.9 -------- -------- 114.2 161.6Equity minority interests 3.7 3.2 -------- -------- 117.9 164.8 ======== ======== Reconciliation of Movements in Consolidated Shareholders' FundsFor the Year ended 31 December 2004 2004 2003 £m £m Profit for the financial year 8.6 10.4Dividends - ordinary (4.5) (3.6) - preference (2.4) (3.9) -------- --------Retained profit for the year 1.7 2.9Currency translation differences on foreigncurrency net investments (2.3) 2.5Goodwill reinstated on closure of operations 1.0 -Allotment of Treasury shares 0.1 -Cancellation and repayment of preferenceshares (47.9) - -------- --------Net (reduction) addition to shareholders'funds (47.4) 5.4 Opening shareholders' funds 161.6 156.2 -------- --------Closing shareholders' funds 114.2 161.6 ======== ======== Consolidated Cash Flow StatementFor the Year ended 31 December 2004 2004 2003 £m £mNet cash inflow from operating activities 42.6 48.5 -------- --------Returns on investments and servicing of financeInterest received 3.1 1.3Interest paid (8.7) (5.2)Dividends received from associated undertakings 3.5 -Preference dividends paid (2.4) (3.9)Dividends paid to minorities - (0.4) -------- --------Net cash (outflow) from returns on investmentsand servicing of finance (4.5) (8.2) -------- -------- Taxation received (paid) 6.6 (1.7) -------- --------Capital expenditure and financial investmentPurchase of tangible fixed assets (22.1) (28.2)Sale of tangible fixed assets 6.0 10.9Purchase of trade investments - (0.2)Sale of investments 2.4 -Loans advanced to associated undertakings - (0.1) -------- --------Net cash (outflow) from capital expenditure andfinancial investment (13.7) (17.6) -------- --------Acquisitions and disposalsPurchase of minority interests in subsidiaryundertakings (0.1) (43.7)Purchase of subsidiary undertakings andbusinesses (1.5) (0.5)Purchase of joint venture and associatedundertakings (0.2) (0.4)Net proceeds from disposal of subsidiaryundertakings 19.9 1.1Net cash disposed of with subsidiaryundertakings - (0.4) -------- --------Net cash inflow (outflow) from acquisitions anddisposals 18.1 (43.9) -------- -------- Equity dividends paid (3.8) (3.3) -------- --------Net cash inflow (outflow) before use of liquidresources and financing 45.3 (26.2) -------- --------Management of liquid resourcesNet movement in short term money market deposits 0.4 1.4 -------- --------FinancingIncrease in borrowings due within one year 6.4 0.1(Decrease) increase in borrowings due beyond oneyear (4.8) 32.1Capital element of finance leases (0.3) (0.1)Cancellation and repayment of preference sharecapital (47.9) - -------- --------Net cash (outflow) inflow from financing (46.6) 32.1 -------- --------(Decrease) increase in cash (0.9) 7.3 ======== ======== Notes to the Financial Statements 1 SEGMENTAL ANALYSIS Turnover and pre-exceptional operating profit, including joint venture and associated undertakings but beforenet interest costs and taxation, are shown below. 2004 2004 2004 2003 2003 2003 Turnover Operating Net assets Turnover Operating Net assets profit (loss)* (liabilities) profit (loss) (liabilities) £m £m £m £m £m £mACTIVITYOil and gasmarketing anddistribution 1,002.9 14.7 121.3 939.6 13.6 137.7Oilfieldservices andtubularproducts 159.9 8.3 79.7 168.6 5.4 114.6Share ofassociatedundertakings - 0.5 1.6 - - 1.2Explorationand otheractivities 92.3 7.7 43.5 87.2 6.5 42.6Share of jointventure and - (0.4) 7.1 - (0.3) 11.8associatedundertakings ------- -------- -------- ------- ------- ------- 1,255.1 30.8 253.2 1,195.4 25.2 307.9 ======= ======== ======= ======= Net funding (130.6) (126.6)Pension fundprepayment(net) 18.1 15.2Centralliabilities (22.8) (31.7) -------- ------- 117.9 164.8 ======== ======= AREA OFOPERATIONEurope - UK 55.1 1.3 6.8 42.4 (1.3) 13.1- Continent 28.8 1.1 21.2 27.7 0.8 7.8Canada 1,059.3 20.2 148.3 989.8 19.2 165.7US 107.3 7.7 66.9 132.6 6.5 96.9Share of jointventure - UK - - - - 0.1 0.8Share ofassociates -UK - (0.4) 7.1 - (0.4) 11.0Share ofassociates -Other - 0.5 1.6 - - 1.2Other 4.6 0.4 1.3 2.9 0.3 11.4 ------- -------- -------- ------- ------- ------- 1,255.1 30.8 253.2 1,195.4 25.2 307.9 ======= ======== ======= =======Net funding (130.6) (126.6)Pension fundprepayment(net) 18.1 15.2Centralliabilities (22.8) (31.7) -------- ------- 117.9 164.8 ======== ======= Inter-divisional turnover is not material and turnover by destination is not materially different to the areaof operation. *Segmental analysis is provided at pre-exceptional operating profit level as most of the Group's financing isarranged centrally and interest is not specifically attributable to individual activities or geographic areas.Of the exceptional items, £2.9m related to other activities and £6.9m related to businesses disposed of inearlier years. All of the Group's activities are from continuingoperations. 2. The above figures have been extracted from the Group's full financial statements which, for the year ended31 December 2003, have been delivered and for the year ended 31 December 2004, will be delivered to theRegistrar of Companies. Both carry an unqualified audit report. The extracts do not constitute statutoryaccounts within the meaning of section 240 of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange