RNS Number : 6229I
Wellstream Holdings PLC
16 March 2010
 



WELLSTREAM HOLDINGS PLC

 

RESULTS FOR THE YEAR ENDED

31 DECEMBER 2009

 

 

Wellstream, a leading designer and manufacturer of bespoke flexible pipeline products, systems and solutions for the oil and gas industry, today announces its results for the year ended 31 December 2009.

 

Financial Highlights

 

2009

2008

Change

Revenue

400.7

369.9

 8.3%

Profit before tax
excluding restructuring costs

47.8

77.5

(38.3%)

Profit before tax

42.8

77.5

(44.8%)

Diluted EPS(a)

34.2 pence

52.3 pence

(34.6%)

Cash from operations

62.7

49.5

26.7%

DPS

10 pence

10 pence

-

(GBP £ millions unless stated otherwise)

 

 

Operational Highlights

·     Solid operational performance with throughput increasing 19% to 436nKm(b)

·     Project awards included the initial phases of the Tupi development in Brazil

·     Improved operational efficiency and reduced cost base

·     Backlog(c) in excess of £160m

·     Net debt reduced to £38.7m (2008: £65.8m) and strong cash flow generation

·     Dividend maintained at 10 pence per share

 

Commenting on the results, Alasdair MacDonald, Acting CEO, said:

 

"We are pleased to report another year of strong results with record revenue, significantly improved operating cash flow and reduced net debt.  Despite difficult market conditions in 2009, we experienced a positive performance across the Group particularly in Brazil.

 

Outside of Brazil, the market remains challenging and we are continuing to focus on managing our cost base and maintaining excellent operational performance. 

 

Looking forward, the potential for significant growth in Brazil is clear and evidence of an improvement in market activity elsewhere supports some optimism, although the Board's near term outlook remains unchanged.  Longer term, the fundamentals of the sector remain compelling."

 

 

For further information, please contact:

 

On the day:

Thereafter:

Alasdair MacDonald - Acting CEO

+44 (0) 20 7353 4200

+44 (0)191 295 9000

Chris Gill - Finance Director

+44 (0) 20 7353 4200

+44 (0)191 295 9000

Jason Nunn - Investor Relations

+44 (0) 20 7353 4200

+44 (0)20 7968 8200




Peter Hewer, Martin Robinson

Tulchan Communications

+44 (0) 20 7353 4200

+44 (0) 20 7353 4200

 

 

Conference Calls

 

A presentation for analysts and investors will be held at 9.00 am (GMT) today. This presentation will have a call in facility which will be in listen only mode.

 

The presentation is available for download on the company webpage (www.wellstream.com)

 

To participate in the call, dial:

+44 (0) 1452 568 051 (access code 59406114). 

 

A recording will also be available for 7 days after the call, dial:

+44 (0) 1452 55 00 00 (access code: 59406114#).

 

 

Notes to Editors:

 

Wellstream

Wellstream is a leading designer and manufacturer of bespoke flexible pipeline products, systems and solutions for the oil and gas industry. Wellstream's portfolio includes established product lines for use as dynamic flexible risers and static flowlines in deep and ultra-deepwater environments.  In addition, newer product lines designed for use in high temperature/high pressure drilling and well service applications have also been introduced.  With over 850 employees internationally, Wellstream has offices and facilities in the UK, USA, Brazil, and Australia.

 

Notes to Results:

Wellstream has presented these supplemental measures because they are used by

Wellstream in managing its business performance, although not all are measures of profit or operating performance recognised under IFRS.

a)   Diluted EPS represents Profit for the year divided by the weighted average diluted number of ordinary shares in issue.

b)   Normalised kilometre (nKm) is based on the work centre hours required to produce a standard 8 inch ID pipe.  A relative scale factor is applied to other pipes to convert actual production lengths and composition into nKm.

c)   Revenue Backlog is the aggregate of revenue that has not been recognised in the accounts from contracts that have been entered into and from contracts that the directors are confident will be entered into and revenue that the directors are confident will arise in the next year from the Petrobras Framework Agreement.  Further revenue from the Framework Agreement and orders from customers in the form of limited non-binding commitments are not included in revenue backlog.

d) Source: Wellstream and Douglas Westwood Ltd



Chairman's Statement

I am pleased to report that against difficult trading conditions, the Group has maintained a strong operational performance, with revenue growth, lower net debt and earnings in line with expectations. 

 

The rapid fall in oil prices at the end of 2008, and the on-going financial crisis in the first half of 2009, significantly interrupted the investment phase and pace of offshore developments outside Brazil.  However, a recovery during the second half of 2009 has left current oil prices substantially above the level required to ensure offshore developments are economic.  This and returning customer confidence as the global economy recovers, leaves the Board more optimistic regarding the outlook for the business.

 

As a manufacturer of specialist products, the Group is uniquely positioned to benefit from long term growth within a critical sector of the Oil and Gas industry.  During the year we completed the expansion of our production capacity, extended our product qualification envelope and improved the operational efficiency of the Group.  This, will enable us to capitalise on the significant growth opportunities that are clearly available.

 

Financial Performance

The Group achieved record revenues in the 12 months to 31 December 2009 of £400.7m (2008: £369.9m). Profitability was below that achieved in a record 2008, nevertheless, the Group generated diluted earnings per share of 34.2p (2008 52.3p); the second highest result the Group has ever achieved.  Operating activities generated strong cash flow of £39.7m (2008: £36.3m) and we propose to maintain our full year dividend at 10p (2008: 10p).

 

Operations

Throughout the year Wellstream's business in Brazil has performed exceptionally well and the production facility has run close to full capacity.  Our Brazilian team has secured a number of key contracts to supply flexible products for the initial phases of the Tupi project - the first major Pre-Salt development. In June we also commenced a major programme that will see us qualify a broad range of Wellstream products for use in deepwater Pre-Salt developments.  This positions the Group well for what is a significant market opportunity.

 

Outside of Brazil, trading conditions have been more challenging during 2009.  The financial crisis in 2008 resulted in customers postponing final investment decisions and in response to this market weakness we undertook a Group wide cost reduction programme.

 

Notwithstanding the difficult market, the Group has moved forward on a number of fronts and 2009 has seen some significant achievements for the business including;

 

·     Successful delivery of the TUPI Extended Well Test (EWT) project for Petrobras

·     On-going awards under the four year Framework Agreement with Petrobras which total some £200 million

·     Securing additional leased land adjacent to our Niterói facility

·     Manufacture of the first high pressure, (15,000psi) risers for Anadarko Petroleum's Caesar Tonga project in the Gulf of Mexico

·     Successful divestment of our onshore FlexSteelTM business

·     Substantial completion of our first major installation project through the Seastream Joint Venture.

 

Further, 2009 has seen the Group achieve its best ever safety performance with a Lost Time Incident (LTI) free year in Newcastle and a record safety performance in Niterói.  This is a fantastic achievement and the result of a long-standing and continuing focus on delivering the highest safety standards across the entire business.

 

Board of Directors

During the year we appointed two directors to the Board, Luis Araujo and Alasdair MacDonald.  Both bring significant sector experience and abilities and I look forward to working closely with them.

 

Gordon Chapman, our CEO was unfortunately taken ill and is recuperating at home.  The Board and staff wish him well for a speedy recovery. Alasdair MacDonald was appointed as Acting CEO in his absence and I thank him for his contribution.

 

Outlook

The Group has successfully addressed a number of challenges in 2009 which positions us well to benefit from an upturn in the oil and gas industry as a whole, and the subsea sector in particular.

 

The flexible pipeline market has seen compound growth rates of 7%-10% per annum(d) and the drivers for this growth are still very much intact.  The outlook for the sector remains positive despite short term uncertainty outside Brazil and our focus on developing criticaltechnology and integrated solutions will allow us to further benefit from this.  Looking forward, the potential for significant growth in Brazil is clear and evidence of an improvement in market activity elsewhere supports some optimism, although the Board's near term outlook remains unchanged.

 

Finally, I pay tribute to the professionalism of our staff whose hard work and dedication have delivered this strong operational performance.

 

John Kennedy

Chairman

Chief Executive's Review

 

Financial Highlights

 


2009

2008


Revenue

400.7

369.9


Operating profit before restructuring costs of £5.0m (2008:£nil)

51.2

81.0


Cash from operations

62.7

49.5


Backlog (c)

168.4

331.4


(GBP £ millions)

 

We are pleased to report another year of strong results with record revenue, significantly improved operational cash flow and reduced net debt. This is an excellent performance, especially in Brazil, that has been achieved against challenging trading conditions.

 

2009 Significant events

·     Delivery of the TUPI extended well test project

·     The award of the TUPI qualification programme

·     Completion of a 39% increase in capacity with minimal disruption

·     Leased additional land adjacent to the Niterói facility

·     Manufacture of the 15,000 psi high pressure risers for Anadarko's Caesar Tonga project

·     Successful divestment of our onshore FlexSteel operations for £19.6m to Prime Natural Resources Inc

·     Substantial completion of the Group's first major installation project

 

We have delivered a Lost Time Incident (LTI) free year in Newcastle and achieved our best ever safety performance in Niterói.  This is a tremendous achievement and complements our objective to be a worldwide leader in QHSE performance.

 

We look forward with optimism as the Oil and Gas industry continues to explore ever deeper and more remote oil and gas fields where the production facilities are dependent upon flexible pipe.  The Group has performed very well in a buoyant Brazilian market and exceeded its operational targets.  The long term future is bright and the restructuring steps taken during the year will maintain the Group's ability and skills to take advantage of the long term growth within our sector.

 

Service

"We commit, we deliver, no excuses" is our mantra.  We have a long tradition of excellent customer service and responsiveness which is one of our key differentiators over our competitors.  We are very proud of our quality record where our design specifications and attention to detail have resulted in an excellent record of delivering flexible pipe that has performed beyond customer expectations.  This is a tribute to our organisation and to our people who continue to demonstrate a dedication to meeting customer needs and I record my thanks to them.

 

Strategy

Wellstream's strategy continues to be one of building a leadership position as a supplier of bespoke engineered flexible pipeline products for the hydrocarbon industry around the world.  This leadership position is being built through superior customer relationships, innovation, technology, engineering, manufacturing and project delivery excellence.  The business will continue to deliver growth organically and through alliances and acquisitions as opportunities arise.

 

Currently we are focussing on: -

·     Qualification of new materials for sour service and deepwater applications

·     Research and development of high pressure technologies

·     Enhancing local R&D capabilities

·     Offering an Integrity Management Service in order to monitor in-service performance of installed products

·     Developing and acquiring installation equipment to provide a differentiated technology for installation services whilst optimising our timing according to market conditions

 

Major highlights during the year

Major highlights during the year include securing additional leased land adjacent to the Niterói plant of approximately 55,000m2.  This gives us the capacity to further expand the Brazil factory as the market dictates and to offer logistics support and other services.  The site is particularly well located in relation to the new Pre-Salt TUPI discovery and we are pleased to have secured the flexibility that this facility offers.  This will also place us in a stronger position to access the wider South Atlantic basin including the target market of West Africa.

 

Earlier in the year we increased capacity in the Niterói facility by 80%, to 270nKms pa, which together with an increase of 15% in Newcastle to 300nKms pa, gives a total capacity Group wide of 570 nKms pa.  Total throughput for the plants increased by 19% to 436nKms in 2009 (2008: 367nKms)

 

We were awarded the contract to supply flowlines and risers for the TUPI Pre-Salt Extended Well Test (EWT) project.  Subsequently we were pleased to be awarded the contract to supply flexible pipelines for further phases of the project.  This, along with the Caesar Tonga contract for 15,000 psi high pressure risers, demonstrates our customers' confidence in Wellstream's cutting edge technology expertise.

 

We divested our FlexSteelTM onshore business for £19.6m in September to Prime Natural Resources Inc.  This has enabled us to concentrate more fully on our core offshore business.

 

During the year we also undertook a cost restructuring exercise to position the Group for the downturn.  During this process we have been careful to retain the knowledge and skills critical to remaining a world class manufacturer and to be able to rapidly respond to a recovery in the market.

 

We substantially completed our first major installation contract offshore North Western Australia under the Seastream joint venture.  A total of 54Kms of flexible pipe product was installed using Wellstream equipment.  The completion of this project represents a significant milestone for the business and the experience gained allows us to look forward with confidence to delivery of future installation projects.

 

Offshore market overview and future trends

The repercussions of the financial crisis and the dramatic fall in oil prices at the end of 2008 were felt throughout the oil and gas industry during 2009.  These two factors combined to cause delays in project awards throughout the year.  However, a recovery in the second half of 2009 has seen oil prices stabilise around $60/bbl to $70/bbl.  Long term, the fundamentals of the sector in which Wellstream operates remain very positive, and current oil prices are substantially above the level required to ensure floating production projects are economic and this should set the stage for a recovery.

 

Despite the slow down in contract awards, the number of FPSO projects in the bidding phase has remained constant and the number of FPSO's being planned has increased from last year.  Between 2009 and 2013, annual expenditure on FPSO systems is expected to increase by 40% from $4.4bn to $6.2bn.(d)

 

Oil and Gas remains the world's dominant energy source, and accessible resources onshore and in shallow water areas offshore are diminishing. Oil companies are therefore continuing to focus on exploring and developing offshore in deepwater utilising subsea and floating production technologies.  Flexible pipelines are a critical element of the majority of these developments; connecting the wellheads to the surface via flexible flowlines and risers.  Thus, the increased use of these facilities in combination with subsea completions has been one of the drivers for rapid growth in Wellstream's business.

 

National Oil Companies, and in particular Petrobras, continued to invest significantly during 2009 in order to sustain their long term growth plans.  Petrobras has stated that they require 4,000km of flexible pipe products between 2009 and 2013; primarily to develop their recent Pre-Salt discoveries.  This demand, combined with increasing activity levels driven by other International and Independent Oil companies in Brazil, will underpin production in our Brazilian facility going forward.

 

Elsewhere, long term demand growth is evident in both Asia and West Africa and this potential is further supplemented by the recent increase in interest around FLNG (Floating Liquefied Natural Gas) developments; all of which will require significant volumes of flexible pipeline products.

 

The market for flexible pipelines and risers is a subset of a larger "deepwater pipeline" market which includes alternative rigid pipeline solutions. These compete with flexible solutions and converting these developments into projects that utilise flexible pipeline products provides the potential for growth.  Conversion of these projects has the potential to grow the market by over 50%. Enabling this growth and increasing the adoption rate of flexible pipeline technology is central to Wellstream's strategy.

 

In addition to project development driven demand, 2009 has seen an increase in the number of enquires regarding integrity management for either aging installed infrastructure, or complex new developments.  This therefore, is seen as an emerging market segment which presents Wellstream with significant opportunities for further growth.

 

Technology

The 2008 Annual report highlighted the 1,034bar (15,000psi) pressure rating programme undertaken with Anadarko Petroleum and described some of the work that would be undertaken.  As with all developments that significantly enhance the performance envelope, it has successfully employed cross-functional teams, utilising specialists from R&D, engineering, analysis, materials, testing and manufacturing.  This has ensured that we have met the stringent industry safety standards and also the performance criteria for the high pressure market.

 

The programme through 2009 has continued to produce results which really showcase the capability of the proposed high pressure riser design.  Static tests, including burst, tension and hydrostatic collapse results, continue to prove the synergy of our design methodologies in predicting product performance.  For the hydrostatic collapse, there was the added benefit that the results presented capability beyond 3,000m, far exceeding current market requirements. 

 

Moving into 2010, the dynamic fatigue tests continue to progress well and the milestones for in-service lifetime have already been met, and the programmes now continue as validation data for our in-house software that is used to predict service life.

 

Building on the success of the TUPI EWT, we are participating in the TUPI qualification programme, which encompasses Gas Lift, Water Injection, Gas Injection and Production structures, and is planned to be concluded in 2010.  This programme is enhancing our database for materials exposed to super-critical carbon dioxide and for full product tests at the extremes of the Pre-Salt design envelope.

Our commitment to the Pre-Salt began ahead of the main TUPI qualification contract, resulting in significant progress on our materials tests with more than 3000 samples.  This programme is therefore already supplying valuable data to our design teams to meet the challenges on the Pre-Salt. Likewise, the full-scale tests are already underway with an extensive programme of almost 100 tests for the TUPI structures and again, some structures are presenting successful results far exceeding the field requirements of 2,500m.

 

We will continue to build our local R&D capability in Brazil where we will focus on the demands of the deepwater Pre-Salt but also to enhance our global provision.  We are developing our relationship with the Federal University of Rio de Janeiro - COPPE, where a number of research programmes have already been identified, as well as the Petrobras research centre CENPES. We also work with 5 other Universities in Brazil.  In both the UK and US, our focus will be to continue to support global operations and enhance focus on product innovation and monitoring technology.

 

Projects

 

Brazil

During the year 36 projects were worked on for Petrobras ranging in value from £0.3million up to £55million.  Most notable were the Cachalote, Petrobras P51, Marlim Leste Module 2 and Barracuda Caratinga projects.  Also completed during the year was the Peregrino project for Statoil's South Atlantic Holdings.

 

Rest of the World

A diverse range of projects were undertaken, generally smaller in scale than in Brazil. Projects were undertaken for Maersk, ConocoPhillips, ExxonMobil, Chevron, Anadarko Petroleum, BHP Billiton, Total, BP, StatoilHydro, Mariner, Halliburton, CNR and PetroSA.

 

Installation

Seastream largely completed the base scope of its first major project in North Western Australia.  Seastream performed the offshore works over a 9 month period utilising the new build Sea Trucks' construction vessel "Jascon 25".

 

 

Supply Chain

During 2009 the supply chain risks arising from the global economic recession were successfully managed.  We experienced some disruption in the first half due to a one off material processing challenge.  While this impacted the business in H1 we were able to mitigate its effects and supplies for the remainder of the year were unaffected.

 

Increased localisation of supplies into Brazil was a key feature of the year.  This helped to offset the risks arising from the global recession by reduced logistics costs and lead times and the widening of the pool of available suppliers.

 

Renewal of key long term agreements will provide for continuity of competitive supply and the development of new products to support the company's product development objectives.  To achieve economies of scale the key raw materials of carbon steels, stainless steels and polymers continue to be sourced globally with local supply prioritised where applicable.

 

The Company continues to reinforce ethical trading within the supply chain working closely with the HSEQ function to monitor key competencies in this field.  We conduct regular visits to suppliers to monitor their performance, facilities and systems including environmental management systems.

 

The Supply Chain is an integral part of the Company's corporate risk monitoring process to ensure that all potential risks and sustainability are fully assessed and managed.

 

Risks and Uncertainties

Wellstream employs a comprehensive risk management system where risk is evaluated at the operational level and then cascaded upwards through management to the Audit Committee and Board.  The Chief Executive Officer is responsible for risk within the Group.  The Audit Committee reviews the risk management process and reports its findings to the Board.

 

Risk mapping is used which includes an assessment of operational, financial, strategic, compliance and environmental risks and mitigating actions.  Key risks highlighted at the 2009 year-end include:

 

Petrobras is a key customer of Wellstream

Petrobras commanded over 59% of Wellstream's business in 2009 and we continue to focus on diversifying our client base.

 

Supply chain

Wellstream's supply chain is critical to the operation and for certain material types there are sole source vendors for which the risk is elevated.  Through 2009 we have worked closely with the suppliers and have maintained good levels of quality and delivery after some initial disruption and attendant materials processing issues experienced in the first quarter.  There have been no major interruptions to the supply base during the remainder of the year.  The establishment of effective long term vendor framework agreements remains an integral part of the supply chain strategy.

 

Customer concentration

Wellstream's business is founded on a relatively small number of high value customers including Petrobras.  If requested project lead times from these customers change significantly, revenue and margin performance could be put at risk. In order to mitigate this, Wellstream continues to broaden its customer base, develop new relationships in selected regions and apply the principle of focussed account management to its strategically targeted customer base.

 

Volatility of the oil and gas industry

The price of oil and gas and levels of business confidence across oil and gas markets are key drivers for Wellstream's business.  The trends towards the use of deepwater, floating production and subsea technologies are also important.  A sustained and significant reduction in oil and gas prices and/or a reduction in business confidence or continued volatility as seen over recent months could have an adverse impact on the level of customer spending.  To mitigate this exposure Wellstream strives to maintain in-depth market intelligence, to gather and use client feedback and to plan capacity, throughput and its cost base so that any downturn can be weathered effectively.

 

Margin pressure and competition risk

The current downturn has inevitably put pressure on margin as we react to industry drivers to cut cost and remain competitive.  These pressures are likely to persist. By aggressively challenging our cost base we have retained our competitiveness.  We are beginning to see some signs of the pressures easing with increasing FPSO deliveries.  Reduced backlog worldwide has led to increased competitive pressure and competitor expansion may increase these pressures further however barriers to entry remain high.

 

Installation

Where it is a customer preference, we can offer flexible pipe on an installed basis utilising EPCI style contracting, managing all the services necessary to install flexible pipe and other water column ancillaries.  Risks of offering our flexible pipe on an installed basis can differ from those associated with flexible pipe supply; in particular possible project delays, broader competition impacting project margin and potential execution risk.  We manage this by closely monitoring project execution and by negotiating appropriate contractual terms.

 

Treasury and financial risk are referred to in the Financial Overview.

 

Alasdair MacDonald

Acting Chief Executive Officer

15 March 2010



FINANCIAL OVERVIEW

Revenue for the year ended 31 December 2009, including that from the discontinued Onshore business, increased by 8.3 % to £400.7m (2008: £369.9m).  Profit before Taxation of £42.8m (2008: £77.5m) was impacted by generally lower margins in the Offshore business that were further diluted by an increase in installation revenue to £55.3m (2008: £13.6m) upon which lower margin was earned and restructuring costs of £5.0m.

 

On 30 September 2009 the Groups Onshore business was sold to Prime Natural Resources Inc for £19.6m generating a profit of £5.0m on disposal.

 

The Group's Profit for the year of £34.5m (2008: £52.7m) contributed to improved Net Debt at the year end of £38.7m (2008: £65.8m) and diluted earnings per share of 34.2p (2008: 52.3p).

 

Revenue

Revenue for the year ended 31 December 2009 increased by 8.3% to £400.7m (2008: £369.9m). This included £14.6m (2008: £13.7m) from the discontinued Onshore operations.

 

Offshore revenue grew by 8.4% to £386.1m (2008: £356.2m) driven by the continuing ramp up of production in the Niteroi facility and increased installation revenues offset, to some extent, in the Newcastle facility where revenue generation reduced during the year.  A weaker product mix, primarily in the Newcastle facility, and a generally deflationary environment for input costs caused a reduction of 19% in the average revenue per normalised kilometre of offshore pipe.

 

Gross Margin

Gross Profit for the year ended 31 December 2009 was £87.9m (2008: £117.8m).

 

Offshore Gross Profit of £86.44m (2008: £118.3m) benefitted from installation activities albeit with a dilutive margin.  The core offshore pipe business delivered a lower contribution versus 2009; material cost reductions of 14% per normalised kilometre only partially offset the corresponding reduction in revenue and additional production costs were incurred in Brazil as a result of its increased capacity.

 

Gross Profit in the discontinued Onshore operations was £1.43m (2008: £0.5m loss) which reflected a mix change towards larger diameter, higher pressure product being sold into a developing South American market.

 

Operating Profit

Administrative expenses were £37.8m (2008: £37.8m). Underlying these expenses is a build up in the Brazilian infrastructure and lower costs in the UK.  Leverage achieved over this cost base reflects increased installation activity and initial savings from cost reduction plans announced during 2009.

 

Resultant Operating profit before restructuring costs of £51.2m (2008: £81.0m) includes a net contribution of £0.4m (2008: £3.1m loss) from the discontinued Onshore operations.  Operating profit before restructuring costs was £25.9m in the second half of the year versus £25.3m in the first half.

 

During the year the Newcastle facility saw reducing activity and backlog as a result of a general slowdown in market demand outside of Brazil.  Consequently it was necessary to address the Group's global cost base, the cost of these actions was £5.0m. Initial savings were evident in the latter months of 2009 and will be seen increasingly through 2010.

 

Financing Costs

Net financing costs incurred in the year totalled £3.4m (2008: £3.5m). The first half of the year was characterised by lower interest rates than were seen in 2008.  The second half of the year reflected higher interest rate margins payable under the Group's increased facilities offset, to some extent, by interest received on cash held overseas. 

 

Profit before Tax

Profit before taxation of £42.8m (2008: £77.5m) is stated after restructuring costs of £5.0m and a contribution from discontinued operations of £0.4m.

 

Taxation

The effective rate of taxation for the Group was 31.0% (2008: 30.5%).  A relative increase in profits earned in Brazil, which are taxed at 34% underlies the increased average rate.

 

Sale of Onshore Operations

On 30 September 2009 Wellstream completed the sale of all assets that comprised its Onshore operation for a consideration of £19.6m.  All proceeds from this sale have been received and a post tax profit on sale of £5.0m recorded.

 

Revenue from the discontinued onshore operations was £14.6m (2008: £13.7m) in the period, generating operating profit of £0.4m (2008: £3.1m loss).

 

EPS

Earnings per share for the year ended 31 December 2009 was 34.6p (2008: 52.9p) and diluted earnings per share was 34.2p (2008: 52.3p).  Profit earned on the sale of Onshore operations offset the restructuring costs in the year.  Second half earnings per share of 17.7p were marginally ahead of the 16.9p earned in the first half.

 

Dividend

It is the Company's aim to pay a dividend covered some 4-5 times by profit after tax across the trading cycle.  The Company paid an interim dividend of 4p (2008: 4p) in October 2009 and proposes a final dividend of 6p per share (2008: 6p).  If approved the final dividend will be payable on 11 June 2010 to shareholders on the register at the close of business on 21 May 2010.  The ex dividend date will be 19 May 2010.

 

Operating cash flow

Cash flow from operations was £62.7m (2008: £49.5m). Focus throughout the year on working capital was evidenced by significantly lower inventory and trade debtor balances. At the year end inventory represented 10 weeks production (2008: 13 weeks) and debtors amounted to 29 days sales (2008: 76 days).  However, lower activity in the Newcastle facility during Q4 2009 and the ensuing reduction in customer deposits, left overall working capital, excluding provisions, £4.2m below that of 2008.

 

Taxation payments of £21.1m (2008: £10.0m) include an acceleration of Brazilian tax.

 

The net cash increase from operating activities in the year was £39.7m (2008: £36.3m)

 

Capital Expenditure and Receipts

Net capital expenditure of £16.9m (2008: £51.1m) included completion of the Brazil capacity expansion, purchase of installation equipment and background expenditure on reels and plant and machinery. 

 

Financing Activities

During the year net proceeds on new financing amounted to £4.8m; the Group utilised a net £3.0m of additional debt from its increased UK facility and a further £1.8m under its ICMS (sales tax) facility with the Rio State Government.

 

Net Debt

Net Debt at 31 December 2009 of £38.7m (2008: £65.8m) included net cash of £34.8m (2008: £0.1m).  This cash balance was largely held overseas reflecting significant debtor receipts late in the year and the increased size of operations outside of the UK.

 

Treasury and Financial Risk

The Group's day to day cash requirements and its capital investment programme are financed through loan and debt facilities totalling £150m (2008: £96.9m).  These were refinanced in July 2009 by Lloyds and Bank of Scotland with additional capacity being provided by Barclays.  This refinancing was undertaken primarily to underwrite capital expenditure and working capital associated with an enhancement of the Group's Offshore installation capability.

 

The new facility comprises an amortising term loan of £60m, drawn-down periodically on short term fixed interest rates and a revolving credit facility that is accessed when needed either on short term fixed interest rates or at variable interest rates.  Since draw-down the majority of debt has been provided under the term loan.  This facility reduces at the end of each six month period by £5m, commencing June 2010, until its expiry in December 2012.  The Group also has a facility to draw down a local currency denominated loan of up to £26.8m with the Rio State government, to date £13.4m of this facility has been utilised.

 

Although a substantial part of the Group's revenue and profit is earned outside of the UK, subsidiaries generally trade in either local currency or Sterling.  As a result, the Group is not normally exposed to significant foreign exchange transactional risk.  The Group does occasionally generate revenue in a third party currency and, where this occurs, the potential risk is assessed against any natural hedges that exist within the Group before any financial hedges are considered.  The Group also has an exposure to foreign currency that arises upon the translation of overseas results into Sterling.

 

The Group did not hold any financial instruments to hedge either currency or interest rates at the year end or at the date of this report though increased activity in Brazil did necessitate hedging consequent currency exposures that arose during the second half of 2009.

 

The nature of the Group's offshore business necessitates it trading with a limited number of customers and the acceptance of the credit risk that ensues from a number of large contracts with these customers.  The Group seeks to contract its business in such a way that it receives regular stage payments from its customers that are appropriate to the stage of completion of the contract.  This payment profile is approved by senior management in advance of accepting a contract and is monitored subsequent to acceptance at regular intervals.  This approach and the Group's customer profile which consist largely of national and international oil companies with well established and substantial credit histories, significantly mitigates the risk of financial loss from default.

 

Going Concern

The Directors have considered current business conditions, financial forecasts including cash flows and sensitivities, internal planning and control procedures and financial risks summarised above together with those identified in the Chief Executive's Review.  Whilst acknowledging each carries with it some uncertainty, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, the directors continue to adopt the going concern basis in preparing the accounts.

 

Chris Gill

Finance Director

15 March 2010


Income Statement







For the year ended 31 December 2009
















Continuing

Discontinued


Continuing

Discontinued



Notes

operations

operations

Total

operations

operations

Total



2009

2009

2009

2008

2008

2008



£000

£000

£000

£000

£000

£000









Revenue

2,3

386,071

14,630

400,701

356,223

13,712

369,935

Cost of sales


(299,631)

(13,204)

(312,835)

(237,915)

(14,222)

(252,137)

















Gross profit/ (loss)


86,440

1,426

87,866

118,308

(510)

117,798









Administrative expenses


(36,800)

(1,015)

(37,815)

(35,239)

(2,556)

(37,795)

Other operating income


1,128

17

1,145

995

6

1,001

















Operating profit/ (loss) before restructuring costs

3

50,768

428

51,196

84,064

(3,060)

81,004

















Restructuring costs

4

(5,041)

-

(5,041)

-

-

-

















Total operating profit/ (loss)

4

45,727

428

46,155

84,064

(3,060)

81,004

















Foreign exchange losses on financing

6

(676)

-

(676)

(96)

-

(96)

Finance income

7

1,775

-

1,775

1,150

-

1,150

Finance expenses

8

(4,474)

-

(4,474)

(4,582)

-

(4,582)

















Profit/ (loss) before tax


42,352

428

42,780

80,536

(3,060)

77,476

















Income tax expense

9

(13,382)

120

(13,262)

(25,620)

872

(24,748)

















Profit/ (loss) after tax


28,970

548

29,518

54,916

(2,188)

52,728

















Gain on disposal of operation

10

-

5,021

5,021

-

-

-

















Profit/ (loss) for the year (all attributable to equity

28,970

5,569

34,539

54,916

(2,188)

52,728

holders of the parent)
























Earnings per share
















Basic (p)

12

29.0

5.6

34.6

55.1

(2.2)

52.9

Diluted (p)

12

28.7

5.5

34.2

54.5

(2.2)

52.3



 






Statement of Comprehensive Income





For the year ended 31 December 2009




















2009

2008







£000

£000









Exchange differences on translation of foreign operations, net of tax

13,787

8,603

Recycling of cumulative foreign exchange adjustments on disposal of operation, net of tax

(1,547)

-









Net income recognised directly in equity






12,240

8,603









Profit for the year






34,539

52,728









Total comprehensive income (all attributable to equity holders of the parent)

46,779

61,331

 



 

 Statement of Changes in Equity





As at 31 December 2009













Capital





Share

Share

Translation

redemption

Retained




capital

premium

reserve

reserve

earnings

Total



£000

£000

£000

£000

£000

£000









At 1 January 2008


996

66,697

7,351

30

27,714

102,788

















Profit for the period (attributable to equity holders of the parent)


                       -

                       -

                         -

                       -

              52,728

               52,728

Exchange differences on translation of foreign operations, net of tax


                       -

                       -

                  8,603

                       -

                       

-

                 8,603

















Total recognised income (attributable to equity holders of the parent)


                       -

                       -

                  8,603

                       -  

              52,728

               61,331

Dividends paid


-

-

-

-  

(3,986)

(3,986)

Charge in relation to share options and tax thereon


                       -

                       -

                         -

                       -  

                1,664

                 1,664









Balance at 31 December








2008 and 1 January 2009


996

66,697

15,954

30

78,120

161,797









Profit for the period (attributable to equity holders of


                       -

                       -

                         -

                       -

34,539

34,539

the parent)








Exchange differences on translation of foreign


                       -

                       -

13,787

                       -

                       -

13,787

operations, net of tax








Recycling of cumulative foreign exchange gains, net


                       -

                       -

(1,547)

                     
-

                       -

(1,547)

of tax
















Total recognised income (attributable to equity holders of the parent)


-

-

12,240

-

34,539

46,779

Dividends paid


-

-

-

-

(9,974)

(9,974)

Issue of share capital


2

52

-

-

-

54

Charge in relation to share options and tax thereon


-

-

-

-

1,093

1,093









Balance at 31 December 








2009


998

66,749

28,194

30

103,778

199,749

 



 

Balance sheet




As at 31 December 2009




Notes

2009

2008



£000

 £000

Non-current assets




Investments


-

-

Intangible assets


922

-

Goodwill


39,107

39,107

Property, plant and equipment

13

118,671

107,332



158,700

146,439





Current assets




Inventories

14

36,529

50,082

Current tax debtor


1,599

-

Trade and other receivables

15

140,040

180,652

Cash and cash equivalents


34,771

7,407



212,939

238,141

Total assets


371,639

384,580





Current liabilities




Trade and other payables

16

(78,232)

(128,200)

Provisions

17

(3,436)

-

Current tax liabilities


-

(12,438)

Interest bearing loans and borrowings


(10,000)

(6,803)



(91,668)

(147,441)

Net current assets


121,271

90,700





Non-current liabilities




Interest bearing loans and borrowings


(61,547)

(66,417)

Deferred tax liabilities


(18,675)

(8,925)

Total liabilities


(171,890)

(222,783)

Net assets


199,749

161,797





Shareholders' equity




Share capital


998

996

Share premium account


66,749

66,697

Translation reserve


28,194

15,954

Capital redemption reserve


30

30

Retained earnings


103,778

78,120

Total equity


199,749

161,797



 

Cash flow statement



For the year ended 31 December 2009






2009

2008


£000

£000

Operating Activities



Profit after tax

29,518

52,728

Share based payments

818

2,126

Depreciation of property, plant and equipment

10,379

8,134

Gain on disposal of property, plant and equipment

(1,663)

(636)

Finance income

(1,775)

(1,150)

Finance expenses

4,474

4,582

Tax

13,262

24,748

Foreign exchange losses on financing

676

96

Decrease/ (increase) in inventories

9,457

(17,981)

Decrease/ (increase) in receivables

48,497

(41,713)

(Increase)/ decrease in payables

(50,973)

18,545

Cash from operations

62,670

49,479

Income taxes paid

(21,069)

(9,997)

Interest received

1,073

1,150

Interest paid

(2,945)

(4,375)

Net cash increase from operating activities

39,729

36,257




Investing activities



Purchases of property, plant and equipment

(19,797)

(51,865)

Proceeds on disposal of property, plant and equipment

2,926

752

Costs of disposal of operation

(286)

-

Proceeds on disposal of operation

19,561

-

Net cash used in investing activities

2,404

(51,113)




Financing activities



Gross proceeds of new debt

61,781

60,936

Repayments of debt

(57,000)

(42,000)

Net proceeds on new financing

4,781

18,936

Debt refinancing costs

(2,151)

(150)

Dividends paid

(9,974)

(3,986)

Proceeds on issue of share capital

54

-

Net cash (decrease)/ increase from financing activities

(7,290)

14,800




Net increase/ (decrease) in cash and cash equivalents

34,843

(56)

Foreign exchange movements on translation of cash balances

(676)

(96)

Cash and cash equivalents at beginning of year

604

756




Cash and cash equivalents at end of year

34,771

604

Cash and cash equivalents and bank overdrafts at end of year comprise:

 



Cash and cash equivalents

34,771

7,407

Bank overdrafts

-

(6,803)


34,771

604

 



 

Notes to the Accounts




1.  Accounting Policies




The announcement is prepared on the basis of the accounting policies as stated in the 2009 half yearly report.



Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRSs, this announcement does not in itself contain sufficient information to comply with IFRSs.



The Company expects to publish full financial statements that comply with IFRSs in March 2010.



2.  Revenue




An analysis of the Group's revenue is as follows:



2009


£000



Revenue from construction contracts  - continuing operations

386,071

Revenue from sale of other products - discontinued operations

14,630

13,712


400,701



Other operating income - continuing

1,128

Other operating income - discontinued

17

Finance income (see note 7)

1,775





403,621

372,086

3.  Operating segments








The Group's reportable segments are as follows:








Offshore   - The design, production and installation of flexible unbonded pipelines for use in the offshore oil and gas industry.





Onshore   - The design and production of flexible unbonded pipelines for use in the onshore oil and gas industry.





On 30 September 2009 the group disposed of its Onshore operations, the results of which are presented as discontinued.





Subsequently, management monitor the Group's continuing Offshore operations as one segment and the chief operating decision maker assesses performance and makes resource allocation decisions based on the results of that segment.





Segment revenues and results








The following is an analysis of the Group's revenue and results by reportable segment in 2009:







Continuing

Discontinued

Consolidated


Offshore

Onshore

year ended


2009

2009

2009


£000

£000

£000

Revenue




External sales

386,071

14,630

400,701





Result




EBITDA before restructuring costs*

60,114

1,461

61,575





Depreciation **



(10,379)





Operating profit before restructuring costs



51,196





* EBITDA before restructuring costs is defined as earnings before interest, tax, depreciation, amortisation and restructuring costs, and represents the measure of segment results reviewed by the Group's chief operating decision maker.

** See note 4 for split of depreciation between continuing and discontinued operations.



 

 

The following is an analysis of the Group's revenue and results by reportable segment in 2008:






Continuing

Discontinued

Consolidated


Offshore

Onshore

year ended


2008

2008

2008


£000

£000

£000

Revenue




External sales

356,223

13,712

369,935





Result




EBITDA

91,173

(2,035)

89,138





Depreciation



(8,134)





Operating profit



81,004





The accounting policies of the reportable segments are the same as the Group's accounting policies.   Figures reported to the Board, as presented above, are based on the financial information used to produce the entity's financial statements.

 

Segment assets






2009

2008



£000

£000





Onshore


-

19,285

Offshore


371,639

365,295





Segment assets


371,639

384,580





Unallocated assets  


-

-





Consolidated assets


371,639

384,580





For the purposes of monitoring segment performance and allocating resources between segments, the Board monitors the tangible, intangible and financial assets attributable to each segment. In 2008, inter-segmental funding was excluded from the segment asset disclosure, and goodwill was allocated entirely to the Offshore segment.  Assets used jointly by reportable segments were allocated on the basis of the revenues earned by individual reportable segments.





Segment liabilities


2009

2008



£000

£000





Onshore


2,773

Offshore


153,215

211,085





Segment liabilities


153,215

213,858





Deferred tax liabilities


18,675

8,925





Consolidated liabilities


171,890

222,783





For the purposes of monitoring segment performance and allocating resources between segments, the Board monitors the external liabilities attributable to each segment. In 2008 inter-segmental funding was excluded from the segment liabilities disclosure.



Geographic  information






Revenue from external customers:


2009

2008



£000

£000





UK


15,934

5,790

Rest of world


384,767

364,145







400,701

369,935





Included in revenues from external customers derived from outside of the UK is £237,533,000 (2008 - £239,340,000) derived from customers in Brazil, £80,692,000 (2008 - £71,379,000) from customers in Australia and £29,989,000 (2008 - £7,138,000) from customers in the USA.





Non-current assets by location


2009

2008



£000

£000





UK


97,755

92,217

Rest of world


60,945

54,222







158,700

146,439





Included in non-current assets located outside of the UK is £60,221,000 (2008 - £48,970,000) of assets located in Brazil.





Information about major customers








Included in offshore revenue is an amount of £237,533,000 (2008 - £202,309,000) arising from sales to the Group's largest customer and £76,730,000 (2008 - £47,089,000) to the Group's second largest customer. The Group's next four largest customers each contributed between £11,000,000 and  £16,000,000 to revenue.

 

 






4.  Operating profit










Operating profit for the year has been arrived at after charging / (crediting):

Continuing

Discontinued

Continuing

Discontinued


2009

2009

2008

2008


£000

£000

£000

£000






Net foreign exchange gains

(561)

(63)

(1,878)

(415)

Restructuring costs

5,041

-

-

-

Research and development

3,566

-

4,006

-

Depreciation of property, plant and equipment

9,346

1,033

7,108

1,026

Gain on disposal of fixed assets

(611)

(1,052)

(1,011)

375

Trade receivables impairment

(253)

-

833

-

Movement in provisions for inventory impairment

1,010

-

(953)

-

Cost of inventories (raw materials)

210,883

7,802

167,161

8,580

Staff costs (see note 5)

48,021

3,681

46,543

3,248






Net foreign exchange gains on trading items represent the effect of movements in exchange rates of foreign currency denominated working capital and other trading items during the year.

 

Restructuring costs are separately disclosed in the income statement, in line with IAS1, and represent a charge for redundancy costs arising from a restructuring of the business during the year.

 

An analysis of amounts payable by the Group to the Company's auditors, Deloitte LLP, and their associates is provided below:





2009

2008


£000

£000




Fees payable to the company's auditors for the audit of the Company's annual accounts

48

55




Fees payable to the Company's auditors and their associates for other services:



The audit of the Company's subsidiaries, pursuant to legislation

124

121

Other services pursuant to legislation

45

41




Total audit and audit related fees

217

217




Tax advisory

-

10

Tax compliance

148

163

Remuneration services

66

112




Total non-audit fees

214

285


431

502

 



 

5.  Staff costs

2009


2008


Continuing operations

Discontinued operations

Total


Continuing operations

Discontinued operations

Total


£000

£000

£000


£000

£000

£000

Staff costs during the year (including directors)








Wages and salaries

39,367

3,322

42,689


37,558

2,889

40,447

Social security costs

6,414

112

6,526


5,579

250

5,829

Other pension costs

1,422

247

1,669


1,280

109

1,389

Share based payments

818

-

818


2,126

-

2,126










48,021

3,681

51,702


46,543

3,248

49,791









Social security costs include National insurance payable in relation to share based payment expenses in addition to Employers' National Insurance contributions on wages and salaries.










2009


2008


Continuing operations

Discontinued operations

Total


Continuing operations

Discontinued
operations

Total

Average number of persons employed








Administration

 223

17

 240


232

17

249

Sales

26

5

31


18

7

25

Manufacturing

808

39

847


744

58

802










1,057

61

1,118


994

82

1,076









Details of directors' remuneration are given in the Directors' Remuneration Report in the full 2009 Annual Report.

 

6.  Foreign exchange losses on financing






2009

2008



£000

£000





Foreign exchange losses on financial liabilities held at amortised cost - continuing operations

676

96





Exchange movements on financing arise on the retranslation of the Group's foreign currency bank accounts.





7.  Finance income






2009

2008



£000

£000

Interest income on loans and receivables




Interest on bank deposits


1,775

1,150

Total finance income- continuing operations


1,775

1,150





8.  Finance expenses






2009

2008



£000

£000

Interest expense on financial liabilities held at amortised cost




Interest on bank overdrafts and loans


2,655

4,045

Amortisation of arrangement fees


391

224



3,046

4,269





Write off of arrangement fees on extinguishing of related debt


760

-

Bank charges


668

313





Total finance expenses- continuing operations


4,474

4,582





9.  Income tax expense






2009

2008



£000

£000

Current tax




Current tax charge


5,661

22,734

Adjustments in respect of prior years


(340)

333







5,321

23,067





Deferred tax




Origination and reversal of temporary differences


7,941

384

One off charge arising from the abolition of IBAs


-

1,087

Adjustments in respect of prior years


-

210







7,941

1,681





Total income tax in the income statement


13,262

24,748

 

Income tax expense from discontinued operations








2009

2008




£000

£000






Current tax on discontinued operations



120

                          872

Tax on profit on disposal



(1,202)

                              -









(1,082)

872

 






UK corporation tax is calculated at 28% of the estimated assessable profit / (loss) for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.







2009

2009

2008

2008


%

£000

%

£000

Reconciliation of effective tax rate:





Profit before tax


42,780


77,476











Tax calculated at UK corporation tax rate 

28.00%

11,978

28.50%

22,081






Non deductible expenses

0.80%

 341

0.57%

442

Research and development tax relief

-0.58%

(248)

-0.43%

(336)

Impact of abolition of IBAs

-

-

1.40%

1,087

Effect of higher tax rates in overseas jurisdictions

2.82%

1,208

1.00%

775

Adjustment in respect of previous years

-0.79%

(340)

0.70%

543

Other timing differences

0.75%

323

0.20%

156






Effective tax rate and tax expense for the year

31.00%

13,262

31.94%

24,748







Income

Deferred

Total

Deferred


Tax

Tax

Tax

Tax


2009

2009

2009

2008


£000

£000

£000

£000

Tax recognised directly in equity:





Tax on foreign exchange gains charged to equity

(3,949)

                            
-

(3,949)

                              -  

Tax on share based payments credited/ (charged) to equity

                            
-

143

143

(462)

 



 

10.  Business Disposal








On 30 September 2009 the Group completed the disposal of FlexSteel, its onshore flexible pipe business. The results of FlexSteel up to the date of disposal are shown on the face of the income statement, and include a gain on disposal. Details of the disposed net assets, consideration and the gain on disposal are set out below:



2009

2009



£000

£000

Gross consideration (satisfied by cash)



19,561





Net assets disposed of:




Property plant and equipment


(4,056)


Inventories


(6,123)


Receivables and other assets


(3,935)


Current liabilities


946






Net assets of disposal group



(13,168)





Recycling of cumulative foreign exchange gains on disposal of operation



1,547

Costs directly attributable to the disposal



(1,717)





Gain on disposal before tax



6,223

Tax



(1,202)





Gain on disposal after tax



5,021









Cash flows relating to discontinued operations were:



2009




£000

Net cash flows from operating activities



6,637

Investing activities (net)



175

Financing activities



-

Proceeds from disposal of discontinued operations



19,561

Disposal costs of discontinued operations



(286)








26,087

 

11.  Dividends on equity shares







2009

2008

Amounts recognised as distributions to equity holders in the year:

£000

£000




Dividends paid during the year:



Interim dividend paid for the year ended 31 December 2008 of 4p per share

-

3,986

Final dividend paid for the year ended 31 December 2008 of 6p per share

5,984

-

Interim dividend paid for the year ended 31 December 2009 of 4p per share

3,990

-




Dividends proposed during the year:



Final dividend proposed for the year ended 31 December 2009 of 6p per share

5,986

  -




The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 12 May 2010 and, in accordance with IAS 10, has not been recorded as a liability in these financial statements.











 

12.  Earnings per share
















Basic earnings per ordinary share is calculated by dividing earnings by the weighted average number of ordinary shares in issue during the year. 









Diluted earnings per ordinary share uses the same earnings figure as the basic calculation except that the weighted average number of shares has been adjusted to reflect the dilutive effect of the outstanding share options allocated under employee share schemes where the market value exceeds the option price.  It is assumed that all dilutive potential ordinary shares are converted at the beginning of the accounting period.  Diluted earnings per ordinary share is calculated by dividing earnings by the diluted average number of ordinary shares.









Reconciliations of the earnings and weighted average number of shares used in the calculations are outlined below:











2009




2008



Weighted average

Earnings per



Weighted average

Earnings per


number of

Ordinary



number of

Ordinary

Earnings

shares

share


Earnings

shares

share

From continuing operations

£000


(pence)


£000


(pence)









For basic earnings per ordinary share

28,970

99,711,536

29.0


54,916

99,621,531

55.1









For diluted earnings per ordinary share

28,970

100,951,386

 28.7


54,916

100,889,516

54.5











2009




2008




Weighted  average

Earnings per



Weighted average

Earnings per



number of

Ordinary



number of

Ordinary


Earnings

shares

share


Earnings

shares

share

From discontinued operations

£000


(pence)


£000


(pence)









For basic earnings per ordinary share

5,569

99,711,536

5.6


(2,188)

99,621,531

(2.2)









For diluted earnings per ordinary share

5,569

100,951,386

5.5


(2,188)

100,889,516

(2.2)











2009




2008




Weighted average

Earnings per



Weighted average

Earnings per



number of

Ordinary



number of

Ordinary


Earnings

shares

share


Earnings

shares

share

From total operations

£000


(pence)


£000


(pence)









For basic earnings per ordinary share

34,539

99,711,536

34.6


52,728

 99,621,531

52.9









For diluted earnings per ordinary share

34,539

100,951,386

34.2


52,728

100,889,516

52.3

















The difference between the weighted average number of ordinary shares for the purpose of basic and diluted earnings per share is due to the dilutive effect of the Company's Performance Share Plan, Save As You Earn Scheme and the Chairman's award.


 



 

13.  Property, plant and equipment







Assets in the course of construction

Leasehold improvements

Freehold land and buildings

Plant and equipment

Total






£000

£000

£000

£000

£000

Cost






At 1 January 2008

 2,225

357

15,938

60,169

78,689

Additions

26,305

87

400

27,399

54,191

Transfers

(16,568)

-

6,783

9,785

-

Exchange differences

 852

48

-

2,210

3,110

Disposals

-

-

-

(408)

(408)







At 1 January 2009

12,814

492

23,121

99,155

135,582

Additions

8,798

-

12

10,024

18,834

Transfers

(21,568)

6,225

4,436

10,907

-

Exchange differences

-

434

-

8,776

9,210

Disposals

-

-

-

(3,205)

(3,205)

Business disposal

(21)

(175)

-

(7,400)

(7,596)













At 31 December 2009

23

6,976

27,569

118,257

152,825







Depreciation






At 1 January 2008

-

81

2,931

16,327

19,339

Charge for year

-

69

816

7,249

8,134

Exchange differences

-

30

-

1,039

1,069

Eliminated on disposals

-

-

-

(292)

(292)







At 1 January 2009

-

180

3,747

24,323

28,250

Charge for year

-

268

1,121

8,990

10,379

Exchange differences

-

125

-

882

1,007

Eliminated on disposals

-

(16)

-

(1,926)

(1,942)

Business disposal

-

(106)

-

(3,434)

(3,540)







At 31 December 2009

-

451

4,868

28,835

34,154







Net book value






At 31 December 2009

23

6,525

22,701

89,422

118,671

At 31 December 2008

12,814

312

19,374

74,832

107,332







The amount of land included in freehold land and buildings that is not depreciated is £710,000 (2008 - £570,000).

During the year property, plant and equipment with a net book value of £4,056,000 was disposed of as part of the sale of FlexSteel. Included in the depreciation charge for the year is £1,033,000 in respect of those assets.





14.  Inventories


2009

2008



£000

£000





Raw materials


27,547

38,826

Work in progress


8,982

6,829

Finished goods


-

4,427







36,529

50,082







 





15.  Trade and other receivables


2009

2008



£000

£000





Trade receivables

31,875

78,304

Impairment provision

(580)

(833)



31,295

77,471





Amounts due from contract customers


79,013

70,656

Prepayments

3,120

9,308

Other receivables

26,612

23,217






140,040

180,652





The directors consider that the carrying amount of trade and other receivables approximates their fair value.





16.  Trade and other payables


2009

2008



£000

£000





Trade payables


19,391

33,067

Accruals and deferred income


35,405

32,212

Amounts due to contract customers


9,174

52,467

Other payables


14,262

10,454







78,232

128,200

 

Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.


The average credit period taken for credit purchases is 47 days (2008 - 61 days)


The directors consider that the carrying amount of trade and other payables approximates their fair value as they are short term.

 

17.  Provisions


During 2009 the Group undertook a restructuring exercise which gave rise to redundancy costs totalling £5,041,000.  In accordance with IAS 37 a provision of £3,436,000 has been recognised at the balance sheet date which reflects management's best estimate of the Group's liability in respect of these redundancy costs. All amounts are expected to be paid within 12 months of the balance sheet date.


18.  The financial statements set out above do not constitute the Company's statutory accounts for the year ended 31 December 2009 and 2008.  Statutory accounts for 2008 have been delivered to the Registrar of Companies and those for 2009 will be delivered following the Company's Annual General Meeting.


The Auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006 or equivalent preceding legislation.

 

 


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