REG - Hunting PLC - 2014 Full Year Results <Origin Href="QuoteRef">HTG.L</Origin> - Part 3
05/03/2015 07:01
- Part 3: For the preceding part double click ID:nRSE5858Gb
149.0 144.7 27.4 28.1 11.8 12.7
Rest of Asia Pacific 50.5 72.2 3.6 2.3 22.4 23.7
Asia Pacific 199.5 216.9 31.0 30.4 34.2 36.4
Middle East, Africa and Other 19.9 18.6 1.9 0.7 14.6 10.5
1,376.4 1,285.6 217.6 198.8 1,139.4 1,186.8
Other Activities
USA 10.1 8.0 0.2 1.2 15.6 26.5
Continuing operations 1,386.5 1,293.6 217.8 200.0 1,155.0 1,213.3
Discontinued operations:
UK 40.4 35.4 (1.4) (0.8) - 2.9
Other 7.0 5.0 1.9 (0.7) - 0.2
47.4 40.4 0.5 (1.5) 1,155.0 1,216.4
Unallocated assets:
Deferred tax assets 1.2 3.1
Retirement benefit assets 30.9 29.6
Total non-current assets 1,187.1 1,249.1
3.1
Retirement benefit assets
30.9
29.6
Total non-current assets
1,187.1
1,249.1
Gibson Shipbrokers' results for the year ended 31 December 2013 and non-current assets at 31 December 2013 have been
re-presented from other activities to discontinued operations. At 31 December 2014, its assets and liabilities have been
presented as held for sale as disclosed in note 13.
Major Customer Information
The Group received $155.5m of revenue from the Halliburton Company Group which is 11% of the Group's revenue from external
customers. The revenue is reported in the Well Construction, Well Completion and Well Intervention segments. The Group had
no customers in 2013 who accounted for more than 10% of the Group's external revenue during the year.
4. Revenue
Group
Sale of goods 1,154.5 1,076.4
Revenue from services 110.3 94.9
Revenue from rental equipment 121.7 122.3
Continuing operations 1,386.5 1,293.6
Continuing operations
1,386.5
1,293.6
5. Amortisation and Exceptional Items
Impairment of property, plant and equipment (note 10) 9.6 7.9
Fair value uplift to inventories charge - 4.3
Dry hole costs (note 10) 1.7 2.6
Charged to cost of sales 11.3 14.8
Amortisation of intangible assets (note 12) 42.8 43.4
Impairment of goodwill (note 11) 49.6 -
Release of foreign exchange on liquidation of subsidiaries 4.8 -
Excess property provision release (4.6) -
Settlement of litigation and associated legal expenses - 2.9
Charged to operating expenses 92.6 46.3
Amortisation and exceptional items 103.9 61.1
Taxation on amortisation and exceptional items (note 7) (20.5) (23.3)
Continuing operations 83.4 37.8
Continuing operations
83.4
37.8
Following a valuation of oil and gas reserves at 31 December 2014 performed for impairment purposes, an impairment charge
of $9.6m (2013 - $7.9m) was incurred in the year reflecting a decline in the oil price and a reduction in reserve estimates
compared to those at 31 December 2013. The recoverable amount of oil and gas development expenditure is based on value in
use. These calculations use discounted cash flow projections based on estimated oil and gas reserves, future production and
the income and costs in generating this production. Cash flows are based on productive lives between one and fifteen years
and are discounted using a nominal pre-tax rate of 13% (2013 - 13%).
Under IFRS, at acquisition, inventory values are adjusted from their carrying values (generally at cost of production) to a
fair value, which includes profit attributable to the degree of completion of the inventory. This uplift is charged to the
income statement as the inventory is sold, thereby reducing reported operating profits. In 2014, the charge was $nil (2013
- $4.3m) relating to acquisitions completed in the second half of 2011.
Dry hole costs of $1.7m (2013 - $2.6m) were incurred and paid during the year from Exploration and Production activities.
A goodwill impairment charge of $40.0m (2013 - $nil) has been recognised in relation to the Electronics CGU and $9.6m (2013
- $nil) has been recognised in relation to the Drilling Tools CGU. Further details can be found in note 11.
Foreign exchange losses of $4.8m (2013 - $nil) relating to cumulative foreign exchange differences previously recognised in
the foreign currency translation reserve have been transferred to the income statement in relation to central non-operating
companies which have entered into voluntary liquidation.
Property provisions of $4.6m (2013 - $nil) have been released as they are no longer required following the signing of a
lease termination agreement with the owner of a leasehold property.
During 2013, the Group settled a pre-acquisition litigation case brought against one of its subsidiaries. The settlement
cost and associated legal expenses amounted to $2.9m.
6. EBITDA
Group
EBITDA is a non-GAAP measure. Underlying EBITDA is defined as profit from continuing operations before interest, tax,
depreciation, amortisation and exceptional items. The Board uses underlying EBITDA as one of the measures of performance of
the Group. Reported EBITDA is defined as profit from continuing operations before interest, tax, depreciation and
amortisation.
The following table provides a reconciliation of underlying EBITDA to reported EBITDA:
Reported profit from continuing operations (page 15) 113.9 138.9
Add: amortisation and exceptional items (note 5) 103.9 61.1
Add: depreciation 52.0 44.0
Underlying EBITDA 269.8 244.0
Less: exceptional items impacting EBITDA (0.2) (7.2)
Reported EBITDA 269.6 236.8
Reported EBITDA
269.6
236.8
7. Taxation
Group
Current tax
- current year expense 58.4 (19.1) 39.3 63.7 (22.2) 41.5
- adjustments in respect of prior years (6.5) - (6.5) (7.9) - (7.9)
51.9 (19.1) 32.8 55.8 (22.2) 33.6
Deferred tax
- origination and reversal of temporary differences 2.6 (1.4) 1.2 (2.0) (1.4) (3.4)
- change in tax rate - - - (0.1) - (0.1)
- adjustments in respect of prior years 2.7 - 2.7 (1.6) 0.3 (1.3)
5.3 (1.4) 3.9 (3.7) (1.1) (4.8)
Taxation - continuing operations 57.2 (20.5) 36.7 52.1 (23.3) 28.8
(3.7)
(1.1)
(4.8)
Taxation - continuing operations
57.2
(20.5)
36.7
52.1
(23.3)
28.8
The weighted average applicable tax rate for continuing operations before amortisation and exceptional items is 27% (2013
restated - 26%).
The tax credit in the income statement of $20.5m (2013 - $23.3m) for amortisation and exceptional items comprises credits
of $16.4m (2013 - $16.5m) on the amortisation of intangible assets, $3.7m (2013 - $3.1m) on the impairment of oil and gas
development expenditure, $0.7m (2013 - $1.0m) on dry hole costs, $0.7m (2013 - $nil) on the release of foreign exchange
on liquidation of subsidiaries, $nil (2013 - $1.6m) on the fair value uplift to inventories charge, $nil (2013 - $1.1m)
on the settlement of litigation costs and a charge of $1.0m (2013 - $nil) on the excess property provision release.
The total tax charge for the year is higher (2013 - lower) than the standard rate of UK corporation tax of 21.5% (2013 -
23.25%) for the following reasons:
Profit before tax from continuing operations 108.5 136.4
Tax at 21.5% (2013 - 23.25%) 23.3 31.7
Permanent differences including tax credits (4.0) (0.4)
Recognition of previously unrecognised deferred taxes (0.1) (0.2)
Non-tax deductible (untaxed) exceptional items 11.1 0.1
Higher rate of tax on overseas profits 10.2 6.9
Change in tax rates - (0.1)
Adjustments in respect of prior years (3.8) (9.2)
Taxation - continuing operations 36.7 28.8
Taxation - continuing operations
36.7
28.8
Tax effects relating to each component of other comprehensive income were as follows:
Exchange adjustments (19.4) 1.5 (17.9) (1.7) 0.8 (0.9)
Release of foreign exchange losses 4.8 (1.0) 3.8 - - -
Fair value gains and losses:
- gain transferred to income statement on redemption of available for sale investment (0.2) - (0.2) - - -
- gain on available for sale investment arising during the year - - - 0.2 - 0.2
- (losses) gains originating on cash flow hedges arising during the year (0.1) - (0.1) 1.8 (0.3) 1.5
- gains transferred to income statement on disposal of cash flow hedges (1.7) 0.4 (1.3) (0.2) - (0.2)
Remeasurement of defined benefit pension schemes 1.7 (0.2) 1.5 2.3 0.5 2.8
(14.9) 0.7 (14.2) 2.4 1.0 3.4
1.5
2.3
0.5
2.8
(14.9)
0.7
(14.2)
2.4
1.0
3.4
In respect of the tax on the remeasurement of defined benefit pension schemes, a $0.2m charge (2013 - $0.2m) arises on the
current year's movement and $nil (2013 - $0.7m credit) is due to a change in tax rates.
In July 2013, the UK Government enacted a change in the UK corporation tax rate from 23% to 21% effective from 1 April 2014
and to 20% from 1 April 2015. The impact of the change in rate to 21% has been recognised in calculating the effective rate
of tax for the year ended 31 December 2014. The UK deferred tax balances at 31 December 2014 have been recalculated at the
new rates. The changes have not had a material impact on the Group's deferred tax balances.
8. Discontinued Operations
Group
The results from discontinued operations were as follows:
Trading results:
Revenue 47.4 - - 47.4 40.4 - - 40.4
Gross profit 47.4 - - 47.4 40.4 - - 40.4
Other operating income 0.4 - - 0.4 0.1 - - 0.1
Other operating expenses (47.3) - - (47.3) (42.0) - - (42.0)
Profit (loss) from operations 0.5 - - 0.5 (1.5) - - (1.5)
Finance income 0.2 - - 0.2 0.2 - - 0.2
Finance expense - - - - (0.1) - - (0.1)
Profit (loss) before tax 0.7 - - 0.7 (1.4) - - (1.4)
Taxation (0.4) - - (0.4) - - - -
Profit (loss) for the year 0.3 - - 0.3 (1.4) - - (1.4)
Gain on disposal:
Gain (loss) on sale before tax - 0.9 0.2 1.1 - (0.2) 15.7 15.5
Taxation - - - - - - (0.1) (0.1)
Gain (loss) on sale after tax - 0.9 0.2 1.1 - (0.2) 15.6 15.4
Total profit (loss) from discontinued operations 0.3 0.9 0.2 1.4 (1.4) (0.2) 15.6 14.0
(0.2)
15.6
15.4
Total profit (loss) from discontinued operations
0.3
0.9
0.2
1.4
(1.4)
(0.2)
15.6
14.0
Gibson Shipbrokers
The Group has classified Gibson Shipbrokers as held for sale at 31 December 2014, as sale negotiations are at an advanced
stage such that it is highly probable that the company will be sold within twelve months of the balance sheet date. The
results of Gibson Shipbrokers have been re-presented as a discontinued operation.
Field Aviation
On 27 April 2012, the Group sold its aviation engineering services business, Hunting Canadian Airport Holdings Ltd and its
subsidiaries, including Field Aviation Company Inc. (together referred to as "Field Aviation"). Under the terms of the
sale, Hunting PLC and the purchaser established an environmental escrow account to address ongoing site condition costs
relating to Field Aviation's hangar facilities in Calgary. Additionally, part of the consideration was deferred in the form
of an interest-bearing promissory note issued to Hunting PLC, repayable by the purchaser on or before 31 December 2018. On
30 September 2014, the promissory note was repaid in full and the environmental escrow account was wound up, with remaining
funds distributed between Hunting PLC and the purchaser. This resulted in a gain of $0.9m included within discontinued
items.
Gibson Energy
The sale of Gibson Energy Inc., Hunting's Canadian midstream services operation, was completed on 12 December 2008.
Subsequent gains reported relate to the settlement of tax items.
9. Earnings per Share
Group
Basic earnings per share ("EPS") is calculated by dividing the earnings attributable to Ordinary shareholders by the
weighted average number of Ordinary shares outstanding during the year.
For diluted earnings per share, the weighted average number of outstanding Ordinary shares is adjusted to assume conversion
of all dilutive potential Ordinary shares. The dilution in respect of share options applies where the exercise price is
less than the average market price of the Company's Ordinary shares during the year and the possible issue of shares under
the Group's long-term incentive plans.
Reconciliations of the earnings and weighted average number of Ordinary shares used in the calculations are set out below:
Basic and diluted earnings attributable to Ordinary shareholders:
From continuing operations 67.8 103.9
From discontinued operations 1.4 14.0
Total 69.2 117.9
Basic and diluted earnings attributable to Ordinary shareholders before amortisation and exceptional items:
From continuing operations 67.8 103.9
Add: amortisation and exceptional items after taxation (note 5) 83.4 37.8
Total 151.2 141.7
From discontinued operations 1.4 14.0
Less: exceptional items after taxation (1.1) (15.4)
Total 0.3 (1.4)
Total
0.3
(1.4)
Basic weighted average number of Ordinary shares 147.3 146.5
Dilutive outstanding share options 0.6 1.1
Long-term incentive plans 3.2 2.4
Adjusted weighted average number of Ordinary shares 151.1 150.0
Adjusted weighted average number of Ordinary shares
151.1
150.0
Basic EPS:
From continuing operations 45.9 71.0
From discontinued operations 1.0 9.5
46.9 80.5
Diluted EPS:
From continuing operations 44.8 69.4
From discontinued operations 1.0 9.2
45.8 78.6
Earnings per share before amortisation and exceptional items
Basic EPS:
From continuing operations 102.6 96.8
From discontinued operations 0.2 (1.0)
102.8 95.8
Diluted EPS:
From continuing operations 100.0 94.5
From discontinued operations 0.2 (1.0)
100.2 93.5
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