Hunting Regulatory News (HTG)

28 Feb 2008 07:00

Hunting PLC28 February 2008 28 February 2008 HUNTING PLC Preliminary results For the year ended 31 December 2007 Hunting PLC ("Hunting", the "Group" or the "Company"), the international energyservices company, today announces its preliminary results for the year ended 31December 2007. • Revenue £1,949.5m (2006: £1,810.4m) +8%• Profit from operations £98.5m (2006: £86.3m) +14%• Profit before tax and exceptional items £93.0m (2006: £85.8m) +8%• Profit before tax £90.7m (2006: £80.8m) +12%• Basic earnings per share 44.0p per share (2006: 37.6p) +17%• Total Ordinary dividend per share 8.25p (2006: 7.5p) +10% Commenting on the outlook for the Group, Dennis Proctor, Hunting's ChiefExecutive, said: "The Company sees heightened oil and gas activity for the foreseeable future andis uniquely positioned to serve the global market of nationals and oil majorsand provide sustained growth. With a strong balance sheet, a tested strategy anddedicated employees, Hunting PLC will continue delivering excellent value to itsshareholders." For further information, please contact: Hunting PLC 020 7321 0123 Dennis Proctor, Chief ExecutiveDennis Clark, Finance Director Hogarth Partnership Limited 020 7357 9477 Andrew JaquesAnthony Arthur 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 I am pleased to report the Company's third consecutive year of record results.Profit before taxation in 2007 was £90.7m (2006 - £80.8m), a 12% increase. The Company continues to be focused on North America with increasingcontributions from the international arena. The energy markets we serve arevolatile, but your Company has performed well, increasing its pre-tax profitsdespite sterling (our reporting currency) strengthening significantly againstthe US and Canadian dollars in which we mainly trade. Two significant international trends from the last few years have comeincreasingly to the fore. Hydrocarbon resources have become harder to find anddeliver to consumers. The world's oil and gas reserves, once mainly in the handsof the major international oil companies, are now substantially controlled bystate-owned national oil companies. Both of these trends play to the Company'sstrengths. Deeper and higher pressure reserves require disproportionately largequantities of our highly engineered upstream products, while national oilcompanies often require more from the oil service industry than do the oilmajors. Gibson Energy, the Company's midstream services operation was once again busyand successful in the very active Western Canadian scene, producing similarresults to last year. Even more attention is being paid by the company to theincreasing proportion of hydrocarbon production deriving from conventional heavyoil and from the huge Athabasca tar sands reserves. The key performers in 2007were the Truck Transportation operation (with the largest crude oil fleet inWestern Canada) and the Terminals and Pipelines operation. Although theMarketing Division found that very high oil price levels and volatility impactedon some of its trading opportunities, it remained highly profitable. Hunting Energy Services concentrates on the upstream side of the oil industry,providing sophisticated equipment mainly for below-ground applications. Itproduced profits more than 36% above last year, thanks to excellent markets andefficient production, especially in US Manufacturing, in the North Sea and inSouth-East Asia. Capital expenditure increased substantially to meet continued high demand and toreplace equipment which has been working flat-out for some years. A number ofsmaller acquisitions were also made. Basic earnings per share were 44.0p, an increase of 17% on the previous year. Weare recommending a final dividend of 5.7p per share, giving a total of 8.25p forthe year, a 10% increase. We intend to appoint a new Finance Director, Peter Rose CA, with effect from theCompany's Annual General Meeting. Peter has been with us since July 1997,initially as Group Financial Controller and also as Company Secretary sinceAugust 2004. There are no other matters relating to the appointment of PeterRose that need to be disclosed pursuant to Listing Rule 9.6.13. The current Finance Director, Dennis Clark, has been in the post since theformation of Hunting PLC in 1989. He originally joined the Group in 1972 and hashad a distinguished career, culminating in his active involvement in theremarkable growth of the past few years. I would like to extend my gratitude andthat of the rest of the Board and of his colleagues for Dennis's outstandingachievements. This has been a fine year for your Company. Although the world economic outlookis cloudier than in recent years, it seems certain that hydrocarbon demand andthe need for our products and services will continue to be strong. I expect theCompany to continue to perform well. I thank our staff for their hard work and dedication during another successfulyear. Richard Hunting Chairman Business Review Chief Executive's Review Energy and the demand for it continues to dominate the global media and thepolitical arena. This demand has enabled your Company to once again reportdouble digit percentage growth for 2007. Fears of a contraction in global energydemand due to a potential recession appear to be overblown in light of the rapidindustrialisation occurring in the developing world. Drilling for oil andnatural gas in the United States reached a twenty-two year high in 2007, whileproducers expanded their search for new reserves in the ageing onshore basinsand the Gulf of Mexico. Global activity also continues to expand due to evergrowing price increases of oil and gas. Further commitments of capital for heavyoil expansion in Canada were announced throughout the year. Prior yearinvestments by Hunting PLC for new capacity and new operational locations withinthese arenas further assisted gains in 2007. On a constant US dollar currency basis, pre-tax profits for the Company grew 18%on a 17% revenue growth, reflecting a significant margin improvement from priceincreases, equipment utilisation and manpower efficiencies. In anticipation offuture growth, capital expenditure grew 14% to £62.0m and gearing rose from 33%to 45%. Exploration budgets for the oil and gas companies worldwide are expectedto increase by 11% in 2008 thereby supporting this larger use of capital. Freecashflow was £17.4m in the year (2006 - £57.8m). The oil and gas industry can be viewed as "worlds apart." For the US and Canada,80% of drilling activity is comprised of natural gas wells. Internationally, themajority of the activity is directed toward oil. The North American rig countdeclined in Canada, primarily as a result of higher costs for shallow wellexploration and production. However, the Company does not provide products andservices for shallow well applications, but instead focuses on more complex,technology driven, deeper applications. For petroleum and the internationalarena, unrelenting demand growth is constantly running up against weak supplygains. In spite of record upstream investment, production growth continues todisappoint, primarily in the non-OPEC regions. As a result, any capacity gainswill be from the national oil companies and OPEC, while currently world surplusproduction capacity remains extremely thin. High oil prices will continue tofund the non-conventional projects such as Canadian oil sands and deep wateractivity. While alternative energy has equal print space to global hydrocarbons,subsidies are required for any meaningful expansion. Accordingly, the Companysees heightened oil and gas activity for the foreseeable future. Business Developments Capital expenditure increased to £62.0m (2006 - £54.2m) of which £30.6m was newbusiness expansion and £31.4m on replacement capital. A further £30.2m was spenton acquisitions in the year. Gibson Energy invested £23.7m with £16.5m for new business and £7.2m onreplacement capital. Truck Transportation invested £3.6m on replacement trailers and £6.2m for theacquisition of Boychuk, an independent trucking company operating in Alberta andBritish Columbia. An acquisition of £2.5m for Rev Fluids benefited Moose Jaws Well Site FluidDivision. A further £25.1m was spent for a TOPS pipeline and rail spur upgrades. At Canwest Propane, Western and Del's Propane companies were acquired for £4.1m.In addition, the acquisition of MP Energy in Eastern Canada for £8.8m occurredin the second half of 2007, which increased volumes in wholesale distribution. Hunting Energy Services invested £36.5m in capital expenditure during 2007 ofwhich £7.0m was for exploration and production expenditure. The balance of£29.5m included expenditure of £8.3m for additional facilities in Casper,Wyoming and new tools and spare parts for Performance mud motor equipment. Inthe US manufacturing facilities, spending on the oil country tubular goodsfinishing facility in Houston, deep water accessory manufacturing facility inHouma, Louisiana and the expansion of the Lafayette, Louisiana facility totalled£3.0m for the year. Additional equipment in Asia, Aberdeen and Holland totalledapproximately £2.0m. Hunting Oryx was acquired in October for £8.6m. HuntingOryx is a distributor of non-magnetic drill collars. Health, Safety and the Environment Gibson Energy's lost time incident record was 26% below the Alberta Provincialaverage in 2007. Gibson was also recognised for its commitment to Health, Safetyand the Environment as a recipient of the 2007 Certificate of Recognition (COR),an industry health and safety standard, with a score at the 90% level. Gibsonand its affiliates received the following awards related to Health, Safety andEnvironment of their employees and community in which they operate. 1. Work Safe Alberta 2006 Best Performer Award. 2. Leader status in the EnviroVista, Environmental Leadership Program, awarded to Gibson's "Bulk Petroleum Storage and Transfers Facility" in Hardisty by the Minister for Alberta Environment. 3. Chemical Shipper's Safety Award - awarded to the Moose Jaw Refinery by the Canadian Pacific Railway for demonstrating excellence in transportation safety. 4. CNR Safe Handling - awarded to the Moose Jaw Refinery and Gibson's Edmonton Terminal by the Canadian National Railway as part of the "Partners in Responsible Care Gold Award". Hunting Energy Services' US manufacturing operations incurred a total oftwenty-six recordable accidents which reduced by 20% from 2006. Approximately50% of the incidents were by inexperienced workers with less than one year'semployment at Hunting. Hunting's incident rate of 2.69 remains far below theBureau of Labour Statistics industry average of approximately 7.5. The European facilities' accident statistics were once again below the level ofthe industry average in engineering and manufacturing. Therefore, the Companyapplied for their sixth consecutive National Safety Award by the British SafetyCouncil and retained the Five Star rating for the tenth consecutive year. No environmental issues occurred in the year and all of Hunting Energy Services'primary manufacturing facilities are ISO 14001 Environmental Management Systemcertified. Our goals remain simply put - no accidents, no harm to people and no damage tothe environment. Outlook Oil accounts for more than 95% of transportation energy, and transportation isan economic necessity. There are no easy energy substitutes. In addition, thesoaring oil use throughout the developing world will challenge the oil and gasindustry's ability to meet future demand. Some experts' view of an annual 4%average depletion rate for existing fields is often rebutted with a level of 8%,thus posing a further obstacle to supply growth. At current commodity pricelevels, oil and gas producers are once again increasing their investment toboost reserves and production capabilities. The 11% investment growth will placeadditional pressure on the existing and over stretched manpower resources, butwill continue to provide excellent growth opportunities for the oil serviceindustry. Technology has played a very important role in finding hydrocarbons. However,technology has enabled producers to extract the hydrocarbons faster and morecompletely, but often at the expense of a reservoir's longevity. Futureproduction, often at greater well depths, or deeper and larger miningoperations, will require further technology improvements. In the Canadian heavy oil fields, volume increases will place an increasedstrain on midstream delivery and storage assets. No abatement of investmentgrowth is foreseen to bring these known and secure volumes of oil to markets inthe US. Hunting PLC is uniquely positioned to capitalise on the above scenario. Quality,mature assets and record spend on new assets, whether on trucks, storage orrefinery capacity in Canada or manufacturing facility expansion throughout theworld will provide sustained growth. Operating Review Income Statement 2007 2006 Increase £m £mRevenue 1,949.5 1,810.4 +8% ------- ------- EBITDA 127.8 119.6 +7%Depreciation and amortisation (27.0) (28.3) ------- -------Profit from operations excluding exceptional 100.8 91.3 +10%itemsNet interest charge (10.0) (8.1)Share of associates 2.2 2.6 ------- -------Profit before tax and exceptional charges 93.0 85.8 +8%Exceptional charges (2.3) (5.0) ------- -------Profit before tax 90.7 80.8 +12%Taxation (28.2) (28.6) ------- -------Profit after tax 62.5 52.2 ------- -------Earnings per share - pence 44.0 37.6 +17%Average exchange rates to sterlingUS Dollar 2.00 1.84Canadian Dollar 2.15 2.09Euro 1.46 1.47Average number of employees 2,782 2,572 The Group reports through a divisional structure arranged into the followingbusiness segments: Segmental Results 2007 2006 Profit from Profit from Revenue Operations Revenue Operations £m £m Margin £m £m MarginGibson EnergyMarketing 1,219.4 3.3 0.3% 1,160.0 7.7 0.7%Truck 110.6 12.2 11% 103.8 9.6 9%TransportationTerminals and 29.6 15.2 51% 19.6 12.4 63%PipelinesPropaneDistributionand Marketing 96.6 4.5 5% 53.1 3.4 6%Moose Jaw 94.6 13.2 14% 92.5 14.2 15%Refinery ----- ------- ------ ------- 1,550.8 48.4 3% 1,429.0 47.3 3% ----- ------- ------ -------Hunting EnergyServicesWell Completion 207.5 34.9 17% 188.4 24.9 13%Well 72.8 8.4 12% 73.5 8.8 12%ConstructionExploration and 11.7 4.5 38% 10.0 2.0 20%ProductionHunting Energy 22.5 2.6 12% 16.0 1.2 8%France ----- ------- ------ ------- 314.5 50.4 16% 287.9 36.9 13% ----- ------- ------ -------Other operating 84.2 2.0 2% 93.5 7.1 8%divisions ----- ------- ------ -------Group 1,949.5 100.8 5% 1,810.4 91.3 5% ----- ------Exceptional (2.3) (5.0)charges ------- -------Group profit from operations 98.5 86.3 ------- ------- The Company's technology investments will further its earnings growth from wellcost savings to completion and production improvements. Its market sharestrength in Truck Transportation in Canada; proprietary tubular connections;global manufacturing capacity; and crude oil tanker brokering will providefurther margin enhancement. The respective synergistic assets ofGibson Energy and Hunting Energy will continue to maximise profit from eachbarrel of crude oil and each operator purchase order. Hunting's five yearcompounded annual growth rate of 41% is exceptional. With a strong balancesheet, a tested strategy and 2,782 dedicated employees, Hunting PLC willcontinue delivering excellent value to its shareholders. Gibson Energy For Canada, crude oil remained the dominant commodity for increased activity in2007, while natural gas well completions experienced a 25% decline. 2007 was ayear of extreme volatility for crude oil price markets which experienced a largeyear on year gain in West Texas intermediate posting from US$54.35 to US$91.74/barrel. This was offset by an even larger increase in heavy/sour differentialsfor Canadian crude oil from the $16/barrel range to over $40/barrel at year end.This factor combined with the reversal in future contracts from contango(increasing future prices) to backwardation (decreasing future prices) has madetrading unpredictable. Accordingly provisions were recorded in the fourthquarter from mark to market derivatives which are regularly placed to protectphysical volumes traded into the future. The extraordinarily wide differentialfor the heavy oil prices in December actually devalued inventories as West Texasintermediate prices increased. This movement caused the results for Moose JawRefinery and the Marketing group to end the year at levels near 2006. As aresult, year on year operating profits for Gibson Energy were £48.4m (2006 -£47.3m). Marketing activities comprise the buying, selling and blending of crude oil,diluent, natural gas and well site fluids across North America. The price riskon volumes purchased and inventories is managed through publicly tradedcommodity instruments. Gibson remains one of Canada's largest independent crudeoil marketing companies dealing with all of the major, intermediate and smallerCanadian producing companies and income trusts. It is focused on the physicalbuying and selling of hydrocarbon products utilising proprietary risk managementtechniques and strong customer relationships to minimise risk and optimiseprofitability. Marketing accounted for 6.8% of Gibson's profit from operations.While trading margins from marketing were robust during most of the year,volatile movement in differentials had an impact in the fourth quarter. Inaddition, extraordinary gains from the Suncor oil sands coker fire in 2006 werenot repeated, as diluent was not in historical short supply. Blending volumes,however, at the eleven custom terminals were near expectations, but margins werelower than in 2006. Further, the Edmonton North terminal began the yearpositively with good results through mid-year, but suffered negatively from widedifferentials and lower inventory values in October and December. Truck Transportation operates a fleet of 1,180 trailers and 660 tractors thatmove in excess of 93 million barrels of oil equivalent per year across WesternCanada and the Northwestern United States. Truck Transportation accounted for25.2% of Gibson's profit from operations - a 27% profit improvement over 2006.It is the largest crude oil truck hauler in Western Canada. The large scale ofits fleet operations allows Gibson to carry out logistically complex and highmargin jobs regardless of the volume or destination. A strong focus on health,safety and environmental performance is maintained, given the fact that thesecombined units travel approximately143,000 miles per day. Terminals and Pipelines operations incorporate an infrastructure of over 270miles of pipelines and eleven terminals with a storage capacity exceeding 2.3million barrels. These assets provide tariff based pipeline services and feebased storage and terminaling services for crude oil and diluent products. Thecustom terminals capture the spreads between high and low quality crude oilthrough its blending, terminaling and transportation service offerings. Thisdivision accounted for 31.4% of Gibson Energy's profit from operations, a 23%year on year improvement. Volumes from Suncor's Fort McMurray operationssteadily increased throughout the year as did overall heavy crude volumes. TheHardisty Terminal Frac Plant is capable of processing approximately 5,000barrels per day of NGL into butane, propane and other by-products. Propane Distribution and Marketing includes the operations of Canwest PropaneLimited, the second largest Canadian retail distributor of propane, utilising afleet of over 200 fully equipped delivery and service trucks and operatingthrough forty-eight strategically located branch offices and storage facilitiesacross Western Canada and the Northwest US. Volumes almost doubled in 2007 to480 million litres and represented 9.3% of Gibson's operating profits - a 32%increase. Moose Jaw Refinery processes approximately 3.9 million barrels of heavy crudeeach year into A Grade asphaltic and lighter distillate products including roadasphalt, roofing flux and well site fluids. These products are shipped via railcars and trucks from Moose Jaw Refinery to markets in the US and Western Canada.The facility produced 1,400 barrels per day for the paving industry, 3,500barrels per day for roofing flux in the housing industry, 1,700 barrels per dayfor well site fluids in the exploration and production industry, and 3,900barrels per day for TOPS utilised in heavy oil blending throughout the year. Hunting Energy Services Hunting Energy Services recorded profit from operations of £50.4m versus £36.9min 2006 - a 37% increase. At the year end, there were 1,476 employees under fourbusiness platforms; Well Construction, Well Completion, Exploration andProduction and Hunting Energy France. Well Construction and Well Completion,through generic growth of its global footprint, an expansion of its productofferings and new technology, benefited from the excellent market conditions.Hunting's Exploration and Production and Hunting Energy France both had year onyear improvements from higher margins and exploration successes. The Well Construction platform provides products and services used by customersfor the drilling phase of oil and gas wells along with associated equipment usedby the underground construction industry for telecommunication infrastructurebuild out. The oil and gas activity is focused on drilling depths of 10,000 feetand deeper, typically in high temperature, high pressure applications. Thetrenchless business focuses on supplying drill rods and ancillary tools tomanufacturers and dealers for underground utility installations. Technology isthe key asset to the products within this division, including premiumconnections for oil country tubular goods, mud motors and non-magnetic drillcollars. These products are processed and/or manufactured at Hunting Energy's 15facilities strategically located throughout the world. These facilities operatedon a six day, 24 hour basis throughout most of the year. The Well Completion platform provides products and services used by customersfor the completion and intervention phases of oil and gas wells. Its customerbase includes the major oil and gas operators as well as the major OEM servicecompanies. This platform reported record revenue and profits driven by newertechnologies, additional capacity and higher margins. Expansion of the wireline/slickline division included Houston and Southeast Asia and proprietary productssuch as Clear Run have been expanded into North America. The 79 patented products within the Well Construction and Well Completiondivisions are key to Hunting Energy's success. These unique technologies enableoil and gas operators to: 1. Complete wells faster with high speed mud motors. 2. Make-up tubulars faster with redundant sealing for high pressure applications. 3. Have connections capable of extreme yield strength for the deepest of well completions. 4. Use environmentally safe thread compounds for threaded products on tubulars and accessories. 5. Intervene in existing wells through a unique and easy to repair "clam" blow out preventor for wireline applications. These and many others will lower operator costs and provide pricing leverage. Hunting Energy France comprises the Group's French based businesses whichprovide petrochemical equipment to the French and international energy andassociated industries. The 2007 result was a significant increase over 2006following a strong level of activity. Interpec in particular benefited from astrong order back log for China and the Middle East. Roforge commissioned a building extension in July which improves manufacturingefficiency and will provide for future growth of the company. Setmat and Larco jointly have successfully secured orders for the metering ofbio fuel truck loading terminals. Exploration and Production includes the Group's oil and gas exploration andproduction activities in the Southern US and offshore Gulf of Mexico. The Grouptakes minority non-operating equity holdings and currently participates in over seventy oil and gas production facilities. Markedly higher prices for oil and stable prices for natural gas, in conjunctionwith increased production levels, contributed to a successful year for the Texasbased Exploration and Production division. On a Net Equivalent Barrel ("NEB")basis, production was up 20% compared to 2006 as a result of successful drillingin the shallow waters of the Gulf of Mexico and onshore Texas and Louisiana. Thecompany participated in the drilling of 16 wells with 8 successes - 5 gas, 1 oiland gas, 2 oil. Full year output of 457,000 NEB was enhanced primarily by highernatural gas production as a result of new wells. Profit from operations increased 125% as compared to 2006. Year-end reserves of oil and gas on an SEC basis were 2.2m NEB compared with 2.3m NEB at the end of the previous year. Hunting Specialized Products is a US based business supplying products andservices for the trenchless rehabilitation of pipelines. Revenues increased over 11% on the previous year as a result of the recentlylaunched structural rehabilitation products; PolySpray and HydraWrap. Investment in product and service development was maintained to support theproduct development. Other Operating Divisions E. A. Gibson Shipbrokers is an international London based shipbroker engaged inthe transportation of crude oil and other petroleum products, liquefied naturaland petroleum gas and other related services. Despite a weaker US dollar to sterling exchange rate, Gibson's revenues remainedstrong. Challenging trading conditions for Tankers were offset by improved results fromGas and Specialised Tankers and in particular by the strong performance of theDry Cargo and Sale & Purchase Departments which achieved increases of over 70%and 40% respectively. Further expansion is expected during the year in the Far East to take advantageof identified opportunities. Field Aviation Canada modifies, repairs and overhauls regional aircraft forinternational customers from Canadian facilities in Toronto and Calgary. The Toronto Modification Center had a number of excellent projects that weresuccessfully completed during the year, including US Customs and AustralianCoastwatch aircraft. However, delays in the delivery of three Swedish CoastGuard aircraft affected results. Customer acceptance of these aircraft is now inprogress with departure planned for April 2008. Production capability for thenext 18 months is already presold with strong profits expected for 2008 and2009. The Calgary Maintenance, Repair and Overhaul Facility made its highest profitfor many years, even though the strength of the Canadian versus the US dollarincreased competition for commercial heavy maintenance work in North America.The manufacturing facility was reorganised in the year to address the expectedgrowth over the coming two years. Current production deliveries extend into2009. Performance Measures A number of performance measures are used to compare the development, underlyingbusiness performance and position of the Group and its business segments. Theseare used collectively and periodically reviewed to ensure they remainappropriate and meaningful monitors of the Group's performance. • Earnings before interest, tax, depreciation and amortisation ("EBITDA"). • Profit before taxation ("PBT"). • Return on capital employed ("ROCE") - measures the profit before interest expressed as a percentage of the capital employed. Capital employed is the average of the aggregate of total equity and the net debt at the start and end of the financial period. Also used as a benchmark for target acquisitions or capital expenditure proposals. • Earnings per share ("EPS"). • Free cash flow. • Health and Safety arrangements within the Group are monitored through regular reporting to the Board. Each of these performance measures are commented upon within the tablescontained in the Annual Report. Indicators of future Group performance closely monitored by management include: • Drilling rig activity. • Oil and gas commodity prices. • Order book/backlog. Finance Director's Review Results Overview Another strong year with revenues and margins at record levels. Revenue was £1,949.5m (2006 - £1,810.4m) with profit from operations up 14% at£98.5m (2006 - £86.3m). This was achieved, even though both the US and Canadiandollars weakened against sterling. Profit before tax recorded a 12% increase at £90.7m (2006 - £80.8m). If the 2007results had been translated using 2006 rates the profit before tax would havebeen £4.1m higher. The results include a £2.3m exceptional charge relating to the disposal of ourformer Italian company, Aero Sekur. Net Finance Costs Net finance costs increased to £10.0m (2006 - £8.1m) following acquisitions, theincrease in capital expenditure and higher levels of working capital. Interestcover was 10 times. Exchange Rates 2007 2006 Average Year End Average Year End US Dollar 2.00 1.99 1.84 1.96Canadian Dollar 2.15 1.96 2.09 2.28 Rates quoted to sterling Earnings Per Share Basic earnings per share increased by 17% from 37.6p in 2006 to 44.0p in 2007.The average number of shares used in calculating the earnings per share in 2007was 130.4m compared to 128.9m in 2006. Taxation The tax charge for 2007 was £28.2m (2006 - £28.6m) which reflects an effectiverate of 31.1% (2006 - 35.4%). The lower rate than in previous years is primarilya result of a significant reduction in Canadian Federal Tax effective December2007. Balance Sheet 2007 2006 £m £mTotal assets 920.2 735.3Total liabilities (608.3) (523.8) ------ -------Net assets 311.9 211.5 ------ -------Net debt 139.2 69.3Gearing ratio 45% 33% Net Assets Net assets at 31 December 2007 increased by 47% and include the result of aproperty revaluation which added £66.2m to property, plant and equipment at theyear end and the retained result for the year of £62.5m. Capital expenditure andacquisitions together with high commodity prices contributed to the 25% increasein total assets year on year. Property Revaluation Group properties were revalued at 31 December 2007 giving rise to an uplift of£66.2m in Group property values. The resultant after tax increase to the Grouprevaluation reserve was £51.0m. The increase is principally due to the strongeconomic conditions driving property values in Alberta, Canada. Net Debt Net debt increased to £139.2m (2006 - £69.3m). Gearing increased from 33% at theend of 2006 to 45% at 31 December 2007. Pensions The Group continues to account for pensions in accordance with IAS 19 and at theend of the year the net surplus on the Group's balance sheet was £24.1m (2006 -£27.7m) of which £25.2m (2006 - £30.1m) related to the UK defined benefit schemewhich was closed to new entrants in 2002. An additional cash contribution of£5.6m was paid to the UK defined benefit scheme in January 2007 to fund theforecast cost on a buyout basis. Liquidity, Resources and Capital Expenditure 2007 2006 £m £mCash from Operations 78.2 104.5Tax Paid (20.0) (11.2)Replacement Capital Expenditure (31.4) (27.4)Interest (9.4) (8.1) ----- -----Free Cash Flow 17.4 57.8Acquisitions (30.8) (1.0)Growth Capital Expenditure (30.6) (26.8)Dividends (10.1) (8.2)Foreign exchange (11.9) 10.3Other Movements (3.9) (4.4) ----- -----(Increase) Decrease in Net Debt (69.9) 27.7 ----- ----- Free cash flow, defined as profit from operations adjusted for working capital,tax, replacement capital expenditure and interest, generated during the year,was £17.4m compared to £57.8m in 2006. Total capital expenditure was £62.0m(2006 - £54.2m) and included £23.7m in Gibson Energy and £36.5m (2006 - £31.3m)in Hunting Energy Services which includes £7.0m (2006 - £10.2m) related to Exploration and Production. A further £30.2m was spent on acquisitions in the year (£30.8m cash was paid during the year). Liquidity and Funding The Group has sufficient credit facilities to meet its anticipated fundingrequirements over the short and medium term. These facilities, which total£269.6m, include committed bank facilities of £172.5m, US$70m (£35.2m) PrivatePlacement Notes which mature in 2012 and uncommitted facilities of £61.9m. Thecommitted bank facilities include a £125m five year multi-currency borrowingfacility expiring in September 2010. Dennis Proctor Dennis ClarkChief Executive Finance Director Consolidated Income StatementFor the Year ended 31 December 2007 2007 2006 Notes £m £mRevenue 2 1,949.5 1,810.4 Cost of sales (1,772.6) (1,639.8) ------ ------Gross profit 176.9 170.6Other operating income 5.0 7.5Operating expenses* (83.4) (91.8) ------ ------Profit from operations 2 98.5 86.3Interest income 9.8 8.3Interest expense and similar charges (19.8) (16.4)Share of post-tax profits in associates 2 2.2 2.6 ------ ------Profit before tax 90.7 80.8Taxation 3 (28.2) (28.6) ------ ------Profit for the year 62.5 52.2 ------ ------ Attributable to:Shareholders of the parent 57.4 48.4Minority interests 5.1 3.8 ------ ------ 62.5 52.2 ------ ------ Earnings per shareBasic earnings per 25p ordinary share 4 44.0p 37.6pDiluted earnings per 25p ordinary share 4 42.3p 35.7p Dividend declared per share - interim 5 2.55p 2.3pDividend declared per share - final 5 5.70p 5.2p The profit for the year arises from the Group's continuing operations. *Operating expenses include exceptional charges of £2.3m (2006 - £5.0m). Consolidated Statement of Recognised Income and ExpenseFor the Year ended 31 December 2007 Group 2007 2006 £m £mProfit for the year 62.5 52.2 ----- -----Exchange adjustments net of tax 16.4 (15.8)Revaluation of property, plant and equipment net of tax 51.6 -Fair value gains and losses net of tax:- gains originating on cash flow hedges - 0.4- (gains) transferred to income statement on disposal ofcash flow hedges (0.2) -Actuarial (losses) gains on defined benefit pensionschemes (12.5) 2.6- taxation 3.8 (0.6)Impairment of revalued assets sold during the year, netof tax (1.0) - ----- -----Net income (expense) recognised directly in equity 58.1 (13.4) ----- -----Total recognised income and expense for the year 120.6 38.8 ----- -----Attributable to:Shareholders' equity 115.4 35.4Minority interests 5.2 3.4 ----- ----- 120.6 38.8 ----- ----- Consolidated Balance SheetAt 31 December 2007 2007 2006 £m £mASSETSNon-current assetsProperty, plant and equipment - at cost 158.0 146.5Property, plant and equipment - at valuation 163.0 48.1Goodwill 72.4 53.0Other intangible assets 13.9 4.0Interests in associates 10.5 8.0Available for sale financial assets 0.2 0.2Retirement benefit assets 25.2 30.1Trade and other receivables 2.8 2.8Deferred tax assets 7.1 12.4 ------ ------ 453.1 305.1 ------ ------Current assetsInventories 142.1 120.0Trade and other receivables 244.3 191.1Investments 0.9 0.6Cash and cash equivalents 79.8 118.5 ------ ------ 467.1 430.2 ------ ------LIABILITIESCurrent liabilitiesTrade and other payables 262.1 226.6Current tax liabilities 7.1 8.8Borrowings 89.2 108.5Provisions 4.5 4.2 ------ ------ 362.9 348.1 ------ ------Net current assets 104.2 82.1 ------ ------Non-current liabilitiesBorrowings 130.7 79.9Deferred tax liabilities 98.1 76.3Retirement benefit obligations 1.1 2.4Other payables 0.1 1.9Provisions 15.4 15.2 ------ ------ 245.4 175.7 ------ ------Net assets 311.9 211.5 ------ ------Shareholders' equityShare capital 32.9 32.8Share premium 87.2 85.6Other reserves 73.3 5.6Retained earnings 107.5 79.8 ------ ------ 300.9 203.8Minority interests 11.0 7.7 ------ ------Total equity 311.9 211.5 ------ ------ Consolidated Cash Flow Statement For the Year 31 December 2007 Group 2007 2006 £m £mOperating activities Profit (loss) from operations 98.5 86.3Exceptional charges 2.3 5.0Depreciation and amortisation 27.0 28.3Profit on disposal of investments (0.2) -Loss on disposal of property, plant and equipment 2.6 2.9Increase in inventories (20.1) (25.3)Increase in receivables (37.3) (11.9)Increase in payables 12.6 25.0Taxation paid (20.0) (11.2)UK pension scheme contribution (5.6) (5.6)Other non-cash flow items (1.6) (0.2) ------ ------Net cash inflow from operating activities 58.2 93.3 ------ ------Investing activitiesDividends received from associates 0.1 0.2Purchase of subsidiaries (30.7) (1.0)Cash acquired with subsidiaries 0.8 0.1Disposal of a subsidiary 1.1 -Net bank overdrafts disposed of with subsidiary 3.3 -Closure of a subsidiary - (1.0)Purchase of associates (0.3) (0.2)Loans to associates - (0.6)Loans from associates 0.5 2.9Proceeds from disposal of investments 0.2 -Proceeds from disposal of property, plant andequipment 2.9 1.1Purchase of property, plant and equipment (62.0) (54.2)Purchase of intangible assets (0.3) (0.7) ------ ------Net cash outflow from investing activities (84.4) (53.4) ------ ------Financing activitiesInterest received 6.7 6.4Interest paid (16.1) (14.5)Equity dividends paid (10.1) (8.2)Minority interest dividend paid (1.9) (0.9)Share capital issued 0.1 3.3Purchase of Treasury shares (18.2) (12.4)Disposal of Treasury shares 4.2 4.0Proceeds from new borrowings 76.0 11.9Repayment of borrowings (12.4) (14.6)Purchase of deposits (0.3) (0.6)Capital element of finance leases (0.2) (0.6) ------ ------Net cash inflow (outflow) from financing activities 27.8 (26.2) ------ ------Net inflow in cash and cash equivalents 1.6 13.7Cash and cash equivalents at beginning of year 16.9 4.5Effect of foreign exchange rate changes 1.2 (1.3) ------ ------Cash and cash equivalents at the end of the year 19.7 16.9 ------ ------ ------ ------Cash and cash equivalents and bank overdrafts at theend of the year comprise:Cash and cash equivalents 79.8 118.5Bank overdrafts included in borrowings (60.1) (101.6) ------ ------ 19.7 16.9 ------ ------ Notes 1. BASIS OF ACCOUNTING The financial information contained in this report has been prepared under thehistorical cost convention as modified by the revaluation of certain property,plant and equipment, available for sale investments, financial assets andfinancial liabilities held for trading. It has been prepared in accordance withthe Companies Act 1985 and those IFRS standards as adopted by the European Unionand IFRIC interpretations which are effective as at 31 December 2007. Notes 2. SEGMENTAL REPORTING Business segments Results from operations Year ended 31 December 2007 Total Inter- gross segmental Total Profit from revenue revenue revenue operations £m £m £m £mGibson Energy Marketing 1,407.1 (187.7) 1,219.4 3.3Truck Transportation 121.5 (10.9) 110.6 12.2Terminals and Pipelines 295.2 (265.6) 29.6 15.2Propane Distribution andMarketing 102.2 (5.6) 96.6 4.5Moose Jaw Refinery 150.2 (55.6) 94.6 13.2 ------- --------- -------- ------- 2,076.2 (525.4) 1,550.8 48.4 ------- --------- -------- -------Hunting Energy ServicesWell Completion 226.2 (18.7) 207.5 34.9Well Construction 78.8 (6.0) 72.8 8.4Exploration and Production 11.7 - 11.7 4.5Hunting Energy France 22.5 - 22.5 2.6 ------- --------- -------- ------- 339.2 (24.7) 314.5 50.4 ------- --------- -------- -------Other operating divisions 84.2 - 84.2 (0.3) ------- --------- -------- ------- Total 2,499.6 (550.1) 1,949.5 98.5 ------- --------- -------- ------- Year ended 31 December 2006 Total Inter- gross segmental Total Profit from revenue revenue revenue operations £m £m £m £mGibson Energy Marketing 1,354.0 (194.0) 1,160.0 7.7Truck Transportation 113.1 (9.3) 103.8 9.6Terminals and Pipelines 292.1 (272.5) 19.6 12.4Propane Distributionand Marketing 53.1 - 53.1 3.4Moose Jaw Refinery 167.4 (74.9) 92.5 14.2 ------- -------- -------- ------- 1,979.7 (550.7) 1,429.0 47.3 ------- -------- -------- -------Hunting Energy ServicesWell Completion 213.4 (25.0) 188.4 24.9Well Construction 80.6 (7.1) 73.5 8.8Exploration andProduction 10.0 - 10.0 2.0Hunting Energy France 16.0 - 16.0 1.2 ------- -------- -------- ------- 320.0 (32.1) 287.9 36.9 ------- -------- -------- -------Other operating divisions 93.5 - 93.5 7.1 ------- -------- -------- ------- Total 2,393.2 (582.8) 1,810.4 91.3 ------- -------- --------Exceptional charges notapportioned to businesssegments (5.0) -------Profit from operations 86.3 ------- Notes 2. SEGMENTAL REPORTING (continued) Inter-segmental revenues are priced on an arms-length basis. Costs incurredcentrally are apportioned to the operating units on the basis of the timeattributed to those operations by senior executives. The exceptional chargesduring 2006 related to the discontinuance of operations and were not thereforeapportionable to the business segments shown above. The share of post-tax profits in associates is derived from the followingbusiness segments: 2007 2006 £m £mHunting Energy Services - Well Completion 0.9 1.1Central 1.3 1.5 -------- -------- 2.2 2.6 -------- -------- Business segments Assets and liabilities 2007 2006 Segment Segment Segment Segment assets liabilities assets liabilities £m £m £m £mGibson EnergyMarketing 130.1 88.2 130.6 75.6Truck Transportation 73.1 10.4 41.4 12.3Terminals and Pipelines 111.6 9.2 56.7 3.9Propane Distributionand Marketing 91.6 42.7 33.3 9.3Moose Jaw Refinery 72.3 9.6 31.2 8.8 ------ ------- ------ ------ 478.7 160.1 293.2 109.9 ------ ------- ------ ------Hunting Energy ServicesWell Completion 143.6 51.7 113.5 58.0Well Construction 93.5 12.9 75.9 13.1Exploration andProduction 31.1 1.4 28.9 1.3Hunting Energy France 15.7 6.8 10.6 4.8 ------ ------- ------ ------ 283.9 72.8 228.9 77.2 ------ ------- ------ ------Other operating divisions 29.8 21.7 38.5 26.7 ------ ------- ------ ------Interests in associatesGibson Energy - PropaneDistribution andMarketing 0.3 - 0.2 -Hunting Energy Services- Well Completion 4.4 - 3.3 -Central 5.8 - 4.5 - ------ ------- ------ ------ 10.5 - 8.0 - ------ ------- ------ ------Total segment assetsand liabilities 802.9 254.6 568.6 213.8 Unallocated assets andliabilities:- current and deferredtaxes 7.1 105.2 12.4 85.1- retirement benefitassets 25.2 - 30.1 -- net debt 80.7 219.9 119.1 188.4- central assets andliabilities 6.0 30.3 5.3 36.7- elimination ofinter-segmentalbalances (1.7) (1.7) (0.2) (0.2) ------ ------- ------ ------Total assets andliabilities 920.2 608.3 735.3 523.8 ------ ------- ------ ------ Segment assets comprise property, plant and equipment, intangibles, goodwill,inventories and receivables. Assets owned centrally and employed by a segmentare allocated to that segment. Segment liabilities comprise trade payables, provisions and other operatingliabilities. Notes 3. TAXATION The tax charged to the income statement arises as follows: 2007 2006 £m £mUK 9.8 5.7Non-UK 18.4 22.9 -------- ------- 28.2 28.6 -------- ------- 4. EARNINGS PER SHARE Basic and diluted earnings per share are calculated as follows: 2007 2006 Weighted Weighted average Earnings average Earnings number of per number of per Ordinary Ordinary Ordinary Ordinary Earnings shares share Earnings shares share £m millions pence £m millions penceProfitattributable toshareholders of the parent and forbasic EPS 57.4 130.4 44.0 48.4 128.9 37.6 Effect of dilutivesharesOptions - 4.7 - 6.4Long termincentive - 0.4 - 0.5plans ------ ------- ------ ------Diluted EPSAdjusted earnings 57.4 135.5 42.3 48.4 135.8 35.7 ------ ------- ------ ------ 5. DIVIDENDS PAID 2007 2006 Pence Pence per share £m per share £mGroup and Company Ordinary dividends:2007 interim paid 2.55 3.3 - -2006 final paid 5.20 6.8 - -2006 interim paid - - 2.3 3.02005 final paid - - 4.0 5.2 ------ ----- ------ -----Total dividends paid 7.75 10.1 6.3 8.2 ------ ----- ------ ----- The Directors recommend a final Ordinary dividend of 5.7p per share (2006 - 5.2pper share) payable on 1 July 2008 to shareholders on the register at 30 May2008. 6. The above figures have been extracted from the Group's full financialstatements for the year ended 31 December 2007, which will be delivered to theRegistrar of Companies. Those financial statements carry an unqualified auditopinion. They have been prepared in accordance with the Companies Act 1985 andInternational Financial Reporting Standards as adopted by the European Union.The accounting policies are set out in those financial statements. Theseextracts do not constitute statutory accounts within the meaning of section 240of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange