REG - Hunting PLC - Half Year Results <Origin Href="QuoteRef">HTG.L</Origin> - Part 3
27/08/2015 07:02
- Part 3: For the preceding part double click ID:nRSa2142Xb
Revenue 23.4 - 23.4
Gross profit 23.4 - 23.4
Other operating expenses (23.1) - (23.1)
Profit from operations 0.3 - 0.3
Finance income 0.1 - 0.1
Finance expense (0.2) - (0.2)
Profit before tax 0.2 - 0.2
Taxation (0.2) - (0.2)
Profit for the period - - -
Total profit from discontinued operations - - -
i. The six months ended 30 June 2014 have been restated to show Gibson Shipbrokers as a discontinued operation.
Year ended 31 December 2014
Gibson Field Gibson
Shipbrokers Aviation Energy Total
$m $m $m $m
Trading results:
Revenue 47.4 - - 47.4
Gross profit 47.4 - - 47.4
Other operating income 0.4 - - 0.4
Other operating expenses (47.3) - - (47.3)
Profit from operations 0.5 - - 0.5
Finance income 0.2 - - 0.2
Profit before tax 0.7 - - 0.7
Taxation (0.4) - - (0.4)
Profit for the year 0.3 - - 0.3
Gain on disposal:
Gain on disposal before tax - 0.9 0.2 1.1
Tax on gain - - - -
Gain on disposal after tax - 0.9 0.2 1.1
Total profit from discontinued operations 0.3 0.9 0.2 1.4
7. Earnings per Share
Basic earnings per share is calculated by dividing the earnings attributable to Ordinary shareholders by the weighted
average number of Ordinary shares outstanding during the period.
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 period 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:
Restated
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
$m $m $m
Basic and diluted (loss) earnings attributable to Ordinary shareholders:
From continuing operations (52.4) 52.3 67.8
From discontinued operations 4.1 - 1.4
Total (48.3) 52.3 69.2
Basic and diluted (loss) earnings attributable to Ordinary shareholders before amortisation and exceptional items:
From continuing operations (52.4) 52.3 67.8
Add: amortisation and exceptional items after taxation 65.2 15.3 83.4
Total for continuing operations 12.8 67.6 151.2
From discontinued operations 4.1 - 1.4
Add: exceptional items after taxation (4.1) - (1.1)
Total for discontinued operations - - 0.3
millions millions millions
Basic weighted average number of Ordinary shares 147.7 147.2 147.3
Dilutive outstanding share options 0.2 0.5 0.6
Long term incentive plans 4.2 3.0 3.2
Adjusted weighted average number of Ordinary shares 152.1 150.7 151.1
cents cents cents
Basic EPS:
From continuing operations (35.5) 35.6 45.9
From discontinued operations 2.8 - 1.0
(32.7) 35.6 46.9
Diluted EPS i:
From continuing operations (35.5) 34.7 44.8
From discontinued operations 2.8 - 1.0
(32.7) 34.7 45.8
i. For the six months ended 30 June 2015 the effect of dilutive share options and long term incentive plans was anti-dilutive and therefore they have not been used to calculate diluted earnings per share.
cents cents cents
Earnings per share before amortisation and exceptional items
Basic EPS:
From continuing operations 8.7 46.0 102.6
From discontinued operations - - 0.2
8.7 46.0 102.8
Diluted EPS:
From continuing operations 8.4 44.9 100.0
From discontinued operations - - 0.2
8.4 44.9 100.2
8. Property, Plant and Equipment
During the first six months of 2015, the net book value of property, plant and equipment decreased from $473.0m to $464.9m
due to additions of $47.2m offset by foreign exchange adjustments of $1.0m, disposals of $3.3m, depreciation of $22.7m and
impairment charges of $28.3m (see note 3).
Additions include $18.8m for land and buildings, $21.6m for plant, machinery and motor vehicles, $5.9m for rental tools and
$0.9m for oil and gas exploration and development.
9. Goodwill
During the first six months of 2015, the net book value of goodwill decreased from $440.6m to $404.6m due to impairment
charges of $35.2m and foreign exchange adjustments of $0.8m.
Goodwill is allocated to the Group's cash-generating units ("CGUs") as follows:
At 30 June At 30 June At 31 December
2015 2014 2014
$m $m $m
Titan 288.2 288.4 288.4
Hunting Stafford "Subsea" 32.7 32.7 32.7
Electronics - 68.7 28.7
Dearborn 25.5 25.5 25.5
Welltonic 18.1 19.7 18.0
Drilling Tools - 15.0 4.4
Other 40.1 45.8 42.9
404.6 495.8 440.6
Impairment Tests for Goodwill
The effect on the Group of the downturn in the oil and gas sector began in Q4 2014. In preparing the 2014 Group financial
statements a goodwill impairment review was conducted resulting in a write-off of $40.0m for the Electronics CGU and $9.6m
for the Drilling Tools CGU. Business activity levels have declined more quickly and more severely than was expected at this
time. Furthermore, the recovery is expected to be a more protracted process. Management has therefore tested goodwill for
impairment across all CGUs in preparing the interim financial statements.
The recoverable amount for all CGUs has been determined based on a fair value less cost to sell approach, thereby including
currently approved growth capital projects which are in progress. The recoverable amount calculations use discounted
pre-tax nominal cash flow projections.
For the remainder of 2015 through to the end of 2018 these projections are based on management's most recent financial
forecasts and include an assessment of how the CGUs are expected to perform given current market conditions, using past
experience as a guide, and by comparison to external research such as Spears and Associates ("Spears") Drilling and
Production Outlook. For 2019 and 2020 management has forecast revenue based on Spears' projections using management's
assessment of the most relevant market and drivers (e.g. rig count, footage drilled, E&P spend) and management's assessment
of likely margin impacts.
Market conditions are currently volatile and will impact CGUs differently. The compound annual revenue growth rates
("CAGR") for the CGUs from 2014 to 2020 varies between minus 7% and positive 7%. After 2020 a terminal value has been
calculated assuming growth of cash flows above inflation of 0.5% (giving nominal growth rates between 2% and 5%) to arrive
at the fair value of the CGU from which selling cost has been deducted.
Cash flows are discounted using nominal pre-tax rates between 9% and 15%. The discount rate best reflects current market
assessments of the time value of money, the risks associated with the cash flows and the likely external rate of borrowing
of the CGU. Consideration has also been given to other factors such as currency risk, operational risk and country risk.
The key assumptions for the recoverable amount calculations are revenue growth rates, taking into account the impact these
have on margins, terminal growth rate and the pre-tax discount rates applied.
Impairment of Goodwill
Electronics - Goodwill in the Electronics CGU was impaired by $40.0m at 31 December 2014 following a prolonged period of
customer de-stocking and increased competition, in particular from the Far East, and reflecting expectations for the
downturn and recovery. As management's expectations of the depth of the downturn and speed of recovery have worsened, a
further impairment charge of $28.7m (six months ended 30 June 2014 - $nil) has been taken reducing the goodwill balance to
$nil. The CGU has a total carrying value of $29.9m (year ended 31 December 2014 - $63.7m). The cash flows have been
discounted using a nominal pre-tax rate of 11%.
Drilling Tools - The position is similar for the Drilling Tools CGU which had been adversely impacted by increased
competition and rising equipment maintenance costs. The downturn caused by the oil price decline particularly impacts this
CGU due to its focus on US shale activity and on high cost Canadian projects. An impairment of $4.3m (six months ended 30
June 2014 - $nil; year ended 31 December 2014 - $9.6m) representing the remaining goodwill balance has been charged. The
CGU has a total carrying value of $73.6m (year ended 31 December 2014 - $107.1m). The cash flows have been discounted using
a nominal pre-tax rate of 12%. In addition to the impairment of goodwill, there has also been an impairment of property,
plant and equipment and inventory in this CGU of $27.6m (see note 3).
Other CGUs - A goodwill impairment charge of $2.2m (six months ended 30 June 2014 - $nil; year ended 31 December 2014 -
$nil) has also been recognised in respect of other CGUs relating to business activities in Indonesia.
Sensitivities
Titan - The Titan CGU represents 71% (year ended 31 December 2014 - 65%) of the goodwill balance. The carrying value,
including amounts recognised on consolidation such as goodwill, is $616.4m (year ended 31 December 2014 - $654.0m). Cash
flows have been discounted using a nominal pre-tax rate of 11%. Based on management's current projections for an impairment
to be reflected the pre-tax discount rate would have to increase by 2.0%, or the revenue CAGR from 2014 to 2020 would have
to be 3.0% adverse, or the terminal growth rate 2.4% adverse.
Hunting Stafford "Subsea" - Cash flows have been discounted using a nominal pre-tax rate of 13%. Based on management's
current projections, for an impairment to be reflected, the revenue growth CAGR from 2014 to 2020 would have to be 7.5%
adverse. Management does not believe there are reasonably foreseeable changes in discount rates or terminal growth values
which would give rise to an impairment charge.
Dearborn - Cash flows have been discounted using a nominal pre-tax rate of 11%. Based on management's current projections,
for an impairment to be reflected, the pre-tax discount rate would have to increase by 1.4%, or the revenue growth CAGR
from 2014 to 2020 would have to be 1.5% adverse, or the terminal growth rate 1.5% adverse.
Welltonic - Cash flows have been discounted using a nominal pre-tax rate of 9%. Based on management's current projections,
for an impairment to be reflected, the pre-tax discount rate would have to increase by 2.5%, or the revenue growth CAGR
from 2014 to 2020 would have to be 2.9% adverse, or the terminal growth rate 3.0% adverse.
10. Other Intangible Assets
During the first six months of 2015, the net book value of other intangible assets decreased from $224.8m to $208.9m due to
amortisation charges of $19.4m on acquired intangible assets and $1.0m on purchased intangible assets, offset by $4.5m of
additions.
11. Business Disposals
On 31 March 2015, the Group sold Gibson Shipbrokers to an employee owned trust. The selling price was $3.7m with $3.0m
deferred in the form of an interest-bearing loan note and the remainder paid in cash. A curtailment gain on the Group's
pension obligations of $5.5m was also recognised upon the sale.
Details of the net assets disposed and consideration are set out below:
$m
Property, plant and equipment 0.5
Goodwill 1.8
Investments 0.7
Deferred tax assets 0.1
Trade and other receivables 10.4
Cash and cash equivalents 3.9
Trade and other payables (13.2)
Current tax liabilities (0.5)
Net assets disposed 3.7
Gain on curtailment of pension obligations (5.5)
Release of foreign exchange adjustments 0.6
Gain on disposal (note 6) 4.9
Consideration 3.7
The consideration comprised the following:
Net cash proceeds 0.7
Deferred consideration 3.0
3.7
12. Dividends Paid
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
$m $m $m
Ordinary dividends:
2014 final paid - 22.9c 33.9 - -
2014 interim paid - 8.1c - - 12.0
2013 final paid - 21.8c - 32.1 32.1
33.9 32.1 44.1
The 2014 final dividend was paid on 26 May 2015 (2013 final dividend paid on 27 May 2014). A 2015 interim dividend of 4.0c
per share, which will absorb an estimated $5.9m, has been approved by the Board for payment on 28 October 2015 to
shareholders on the register at the close of business on 9 October 2015, with an ex-dividend date of 8 October 2015. The
dividend will be paid in Sterling and the Sterling value of the dividend payable per share will be fixed and announced
approximately two weeks prior to the payment date based on the average spot exchange rate over the three business days
preceding the announcement date. The Company will announce the Sterling interim dividend amount on or around 14 October
2015.
13. Changes in Net Debt
At 1 January Reclassifiedfrom held Cash Exchange Amortisationof loan At 30 June
2015 for sale flow movements facility fees 2015
$m $m $m $m $m $m
Cash and cash equivalents 88.5 3.8 (20.2) (0.5) - 71.6
Bank overdrafts (50.5) - (0.6) (0.2) - (51.3)
38.0 3.8 (20.8) (0.7) - 20.3
Current investments 3.8 - - 0.1 - 3.9
Non-current borrowings (157.9) - (18.5) 1.1 (0.9) (176.2)
Current borrowings (14.9) - (0.9) 1.1 - (14.7)
Total net debt (131.0) 3.8 (40.2) 1.6 (0.9) (166.7)
Net debt is a non-GAAP measure and is defined as bank overdrafts, current and non-current borrowings and finance leases
less cash and cash equivalents and current investments.
14. Capital Commitments
Group capital expenditure committed, for the purchase of property, plant and equipment, but not provided for at 30 June
2015 amounted to $17.3m (at 30 June 2014 - $32.1m; at 31 December 2014 - $23.3m).
15. Financial Instruments: Fair Values
The carrying values of financial assets and liabilities approximates to their fair values. Non-current investments includes
listed equity investments and mutual funds which are measured at fair value. The fair value of listed equity investments
and mutual funds is based on quoted market prices and so the fair value measurement can be categorised in Level 1 of the
fair value hierarchy. The fair value of listed equity investments and mutual funds categorised in Level 1 of the fair value
hierarchy at 30 June 2015 was $9.5m (30 June 2014 - $8.6m; 31 December 2014 - $8.9m). There were no transfers between
levels of the fair value hierarchy used in the measurement of the fair values of financial instruments.
This information is provided by RNS
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