REG - Hunting PLC - Results for the year ended 31 December 2023

HuntingAnnouncement

29/02/2024 07:00

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RNS Number : 8690E  Hunting PLC  29 February 2024

 For Immediate Release  29 February 2024

 

Hunting PLC

 

("Hunting" or "the Company" or "the Group")

 

Results for the year ended 31 December 2023

 

Strong year of revenue and profit growth, supported by international and
offshore markets

 

Hunting PLC (LSE:HTG), the precision engineering group, today announces its
results for the year ended 31 December 2023.

 

Financial Highlights

 

 ·                 Order book increased by 19% to $565.2m.
 ·                 Revenue increased by 28% to $929.1m.
 ·                 Non-oil and gas revenue increased 59% from $47.6m to $75.9m.
 ·                 Gross margin improved to 25% from 24%.
 ·                 EBITDA, ahead of previous guidance provided, and increased by 98% to $103.0m.
 ·                 EBITDA margin of 11% up from 7%.
 ·                 $83.1m of previously unrecognised deferred tax assets recognised at year-end.
 ·                 Total dividends declared in the year of 10.0 cents per share, up from 9.0
                   cents in 2022.

 

Commenting on the results Jim Johnson, Chief Executive, said:

 

"Hunting has delivered a strong year of growth across most of its product
groups, demonstrating the underlying strength of our market drivers, with
security of supply and affordable energy remaining key investment themes.

 

"Our offshore and international businesses have delivered robust growth as we
continue to build a more balanced and diversified business, underpinned by the
strong technology and intellectual property that makes Hunting a market leader
in precision engineered products across our markets.

 

"The growth and composition of our record order book demonstrates how much
Hunting has evolved in terms of more diverse revenue and better visibility on
earnings, and provides confidence in our near and longer-term outlook, as we
deliver the Hunting 2030 Strategy."

 

Strategic Highlights

 

 ·                 Launch of Hunting's 2030 Strategy at the Capital Markets Day in September 2023
                   which included:
                   o                                         Leveraging Hunting's global presence and high-technology product offering, to
                                                             drive multiple end-market sales growth.
                   o                                         Delivering EBITDA margin growth through higher utilisation, stronger pricing
                                                             and operating efficiencies.
                   o                                         Improved shareholder returns, with increased return on capital, along with an
                                                             11% increase in total declared dividends in 2023.
                   o                                         Driving sector leading technology delivered through innovation and supported
                                                             by robust intellectual property.
                   o                                         Progressing the sustainability agenda with positive trends in key
                                                             non-financial metrics.
 ·                 Strong progress on revenue diversification with non-oil and gas sales of
                   $75.9m.
 ·                 EBITDA conversion and good cash generation reported with $50.9m inflow
                   delivered in H2 2023.

 

 

Financial Summary

 

Financial Performance measures as defined by the Group*

 

                                        2023        2022       Variance
 Revenue                                $929.1m     $725.8m    +$203.3m
 Non-oil and gas revenue                $75.9m      $47.6m     +$28.3m
 EBITDA**                               $103.0m     $52.0m     +$51.0m
 EBITDA margin**                        11%         7%         +4pp
 Adjusted profit before tax**           $50.0m      $10.2m     +$39.8m
 Adjusted diluted earnings per share**  20.3 cents  4.7 cents  +15.6 cents
 Free cash flow**                       $(0.5)m     $(60.4)m   +$59.9m
 Total cash and bank**                  $(0.8)m     $24.5m     -$25.3m
 Net assets                             $957.1m     $846.2m    +$110.9m
 ROCE**                                 6%          1%         +5pp

 Final dividend proposed***             5.0 cents   4.5 cents  +0.5 cents

 

Financial Performance measures as derived from IFRS

 

                                                      2023        2022         Variance
 Operating profit                                     $61.0m      $2.0m        +$59.0m
 Profit before tax                                    $50.0m      $(2.4)m      +$52.4m
 Diluted earnings per share                           70.0 cents  (2.8) cents  +72.8 cents
 Net cash inflow (outflow) from operating activities  $49.3m      $(36.8)m     +$86.1m

* Adjusted results exclude adjusting items agreed by the Audit Committee and
Board.

** Non-GAAP measure. Please see the 2023 Annual Report and Accounts pages 239
to 244.

*** Payable on 10 May 2024 to shareholders on the register on 12 April 2024,
subject to approval at the Company's 2024 AGM.

 

Outlook Statement

 

The global outlook for energy in the year ahead will be driven by similar
themes to those reported in 2023.

 

Geopolitical tensions and potential supply disruptions are a continuing threat
to the oil and gas supply/demand balance, and while commodity prices trended
lower in the past year, it is likely that they will remain in a range that
supports sustained activity levels during 2024.

 

Offshore market momentum is poised to continue to increase in the coming years
as major development cycles in South America and South West Africa continue to
accelerate.

 

The North American onshore drilling market is likely to be stable during 2024,
with the US more focused on oil production. Additional LNG capacity is likely
to come on-stream later in the year, which will support new natural gas
drilling in the second half. Projected growth in international sales should
also offset shifts in US onshore market dynamics.

 

The Middle East will also likely show a continuation of the activity levels
reported in 2023. Despite the pause in oil production expansion in Saudi
Arabia being announced in recent weeks, natural gas drilling in-country will
continue to grow to meet local demand, underpinning steady activity levels in
the year ahead.

 

In India, the Group's facility is shortly to receive its API threading licence
which will enable premium threading activities to accelerate. Management sees
a positive profit contribution from our joint venture in 2024, given the
growth momentum in-country.

 

Across Asia Pacific, traditional energy demand as well as energy transition
initiatives will continue to drive growth, with geothermal opportunities being
captured as market activity increases, particularly in the Philippines and
Indonesia.

 

For Hunting, the Group's OCTG product group should deliver another year of
growth, as activity in South America continues to increase, coupled with
stable activity in the US and Canada. Our EMEA OCTG operations will continue
to support projects in Brazil, while in Asia Pacific, larger tenders continue
to be announced, which should lead to new orders being secured. Hunting's
Perforating Systems business will continue to roll-out its leading technology
to clients across North America, while continuing to grow internationally
where markets such as Argentina present good opportunities due to reduced
import tariffs being announced.

 

Our Subsea Spring and Stafford businesses should also deliver a further year
of strong results as orders for ExxonMobil and other major operators across
South America continue to be progressed. The Enpro business should also
support this growth profile given the orders secured in the second half of
2023.

 

Hunting will continue to drive its non-oil and gas diversification through the
Advanced Manufacturing businesses. Momentum remains strong, with opportunities
in aerospace and defence being pursued, supporting our 2030 strategic
objectives.

 

In summary, the Board sees a further year of growth ahead, given our diverse,
international product offering, with management remaining comfortable with
current market guidance.

 

Operational and Corporate Highlights - Delivering on the Hunting 2030 Strategy

 

 Record $91m OCTG contract award with Cairn Oil and Gas
 ·                   On 30 May 2023, the Company announced a record contract that management
                     estimates to be worth up to $91m with Cairn Oil and Gas, Vedanta Limited, for
                     the supply of Hunting's SEAL-LOCK XD(TM) premium connection along with OCTG.

 Continued launch of new technology and innovative products
 ·                   The Group continues to develop and introduce new technology to clients.
                     Research and development initiatives focus on increasing in-field safety,
                     while also delivering completion efficiencies and lowering drilling and
                     development costs for clients. With approximately one-third of North American
                     horizontal wells relying exclusively on oriented perforating techniques,
                     Hunting launched the H-4 Perforating System™ during the year, first to the
                     US onshore and then in Q4 2023 to customers in Canada.

 Expansion into high growth Indian energy markets
 ·                   In Q2 2023, the Company completed the construction and commissioning of its
                     new threading facility at Nashik Province, India, with its joint venture
                     partner, Jindal SAW Ltd. The official opening of the facility took place in
                     September 2023. Hunting's precision engineered premium connection technology
                     will be applied to Jindal SAW's premium seamless casing and tubing.

 Strong growth in Subsea businesses
 ·                   The Subsea Technologies operating segment was formed on 1 January 2023. The
                     segment completed a number of significant orders in the year, especially in
                     Guyana, as investment in offshore projects increased. Revenue increased 43% to
                     $98.6m, with an EBITDA margin of 14% compared to 5% in 2022. The Spring
                     business had a number of material order wins for its titanium stress joints in
                     the year for floating production, storage and offloading vessels in Guyana and
                     the Turkish area of the Black Sea. The segment ended the year with an order
                     book of $152.2m, including a strong backlog for Enpro.

 Enhanced strategic supply channels for OCTG to support energy transition
 strategy
 ·                   On 5 June 2023, the Company announced a ten-year strategic alliance with
                     Zhejiang Jiuli Hi-Tech Metals Co. Ltd ("Jiuli"), for the supply of corrosion
                     resistant alloys ("CRA") for OCTG, geothermal and carbon capture and storage
                     ("CCUS") applications. The partnership brings together Hunting's SEAL-LOCK(TM)
                     premium connection technology with Jiuli's CRA, such as duplex/super duplex
                     and high nickel-based alloys, for downhole casing and production tubing
                     applications, which meet some of the harshest well conditions in the
                     traditional oil and gas industry as well as the emerging CCUS and geothermal
                     markets.

 Entered new marketing, manufacturing and technology partnership to expand
 product offering
 ·                   On 13 July 2023, Hunting announced a collaboration agreement with CRA-Tubulars
                     B.V., to further develop the Company's presence in energy transition markets.
                     The collaboration provides the Company with access to novel titanium composite
                     tubing technology, which is showing strong potential in CCUS project
                     applications.

 Continued restructuring to increase operational efficiencies and returns on
 capital
 ·                   Hunting is continuing to drive stronger internal operational efficiencies
                     throughout its global footprint, which will lower our operating costs and
                     lower our carbon footprint. During the year, Hunting Titan closed its Oklahoma
                     City operating site and transferred the manufacture of perforating systems to
                     the

                     Group's Pampa, Texas, and Monterrey, Mexico, facilities. A distribution centre
                     has been retained in Oklahoma City to continue to service clients in the
                     Mid-Continent Region of the US.
 ·                   Within the EMEA operating segment, the manufacturing and assembly operations
                     of the Group's main well testing site are to be transferred from the
                     Netherlands to Dubai in 2024, which will lead to the closure of a facility at
                     Velsen-Noord, with activities in the Netherlands to be merged into a single
                     location.
 ·                   In January 2024, further consolidation of our footprint and cost base in the
                     UK continued as the Enpro operations were transferred to the existing
                     Badentoy, Aberdeen facility.
 ·                   During H1 2023, the Group has completed a disposal process of all but one of
                     its US onshore and offshore oil and gas producing assets, which are held by
                     Hunting's wholly owned subsidiary, Tenkay Resources, Inc ("Tenkay"). The Group
                     has negotiated the transfer of the majority of the non-producing assets and
                     respective future plug and abandonment liabilities, which have reduced
                     Hunting's possible exposure to future decommissioning costs.

 

Group Results Narrative

 

For access to narrative on the Group's results (incorporating the Company
Chair's and Chief Executive's Statements, Outlook, Market Analysis, Product
Line and Segmental Review and Group Financial Review) for the year ended 31
December 2023 please click on the following link.

http://www.rns-pdf.londonstockexchange.com/rns/8690E_1-2024-2-28.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8690E_1-2024-2-28.pdf)

Financial Statements and Notes to the Accounts

 

For access to the Financial Statements and Notes to the Accounts for the year
ended 31 December 2023 please click on the following link.

http://www.rns-pdf.londonstockexchange.com/rns/8690E_2-2024-2-28.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8690E_2-2024-2-28.pdf)

Listing Rules / Disclosure Guidance and Transparency Rules Information

 

For access to Hunting's Key Performance Indicators, Business Model and
Strategy, ESG and Sustainability, Risk Management (including Principal Risks),
and the Statement of the Directors' Responsibilities for the year ended 31
December 2023, please click on the following link.

http://www.rns-pdf.londonstockexchange.com/rns/8690E_3-2024-2-28.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8690E_3-2024-2-28.pdf)

Page number references refer to the full Annual Report when available.

 

The linked documents provide access to all major financial and operational
disclosures contained in the Group's 2023 Annual Report and Accounts. The
complete 2023 Annual Report and Accounts will be published on 14 March 2024
and can then be accessed at www.huntingplc.com (http://www.huntingplc.com) .

 

The financial information set out in the above links does not constitute the
Company's statutory accounts for the years ended 31 December 2023 or 31
December 2022, but is extracted from those accounts. Statutory accounts for
2022 have been delivered to the Registrar of Companies and those for 2023 will
be delivered in due course. The auditor has reported on those accounts; their
reports were unqualified, did not draw attention to any matter by way of
emphasis without qualifying their report and did not contain statements under
s498(2) or (3) of the Companies Act 2006. Whilst the financial information
included in this preliminary announcement has been computed in accordance with
International Financial Reporting Standards, this announcement does not itself
contain sufficient information to comply with IFRS.

 

Analyst Briefing and Webcast

 

Hunting PLC will host an analyst briefing and webcast at the offices of CMS
Cannon Place, 78 Cannon St, London EC4N 6AF on 29 February 2024 commencing at
9:00a.m. GMT. Attendees should arrive by 8:45a.m. to clear building security
in good time.

 

The live webcast can be accessed by copying and pasting the following link
into your browser:

 

https://stream.buchanan.uk.com/broadcast/65b93d2f6371e5b884f62831
(https://stream.buchanan.uk.com/broadcast/65b93d2f6371e5b884f62831)

 

Analysts and investors wishing to participate in a Q&A session can do so
by submitting questions via the chat function of the webcast and these will be
addressed by management during the live webcast. If you have any queries
relating to this then please email hunting@buchanan.uk.com
(mailto:hunting@buchanan.uk.com) .

 

For further information please contact:

 

 Hunting PLC                        Tel: +44 (0) 20 7321 0123

 Jim Johnson, Chief Executive

 Bruce Ferguson, Finance Director

 lon.ir@hunting-intl.com

 Buchanan                           Tel: +44 (0) 20 7466 5000

 Ben Romney

 Barry Archer

 

Notes to Editors:

 

About Hunting PLC

 

Hunting is a global engineering group that provides precision-engineered
equipment and premium services, which add value for our customers. Established
in 1874, it is a premium listed public company traded on the London Stock
Exchange. The Company maintains a corporate office in Houston and is
headquartered in London. As well as the United Kingdom, the Company has
operations in China, Indonesia, Mexico, Netherlands, Norway, Saudi Arabia,
Singapore, United Arab Emirates and the United States of America.

 

The Group reports in US dollars across five operating segments: Hunting Titan;
North America; Subsea Technologies; Europe, Middle East and Africa ("EMEA");
and Asia Pacific.

 

Hunting PLC's Legal Entity Identifier is 2138008S5FL78ITZRN66.

 

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