Hunting plc (LON:HTG), the international energy services group, today announced its results for the six months to 30 June 2019.
Financial Summary * / **
· Revenue $508.9m (H1 2018 – $442.8m)
· Underlying EBITDA $77.4m (H1 2018 – $72.6m) ***
· Underlying profit from operations $55.6m (H1 2018 – $53.5m)
· Reported profit from operations of $41.1m (H1 2018 – $38.9m)
· Underlying diluted earnings per share 23.6 cents (H1 2018 – 25.0 cents)
· Reported diluted earnings per share 17.3 cents (H1 2018 – 19.1 cents)
· Interim dividend declared of 5.0 cents (H1 2018 – 4.0 cents)
· Net cash of $33.4m (31 December 2018 – $61.3m net cash) ***
* – Underlying results are before amortisation of acquired intangible assets and exceptional items. Reported results are based on the statutory results as reported under International Financial Reporting Standards.
** – Financial data for H1 2019 includes the adoption of IFRS 16 Leases from 1 January 2019. Prior period financial information has not been restated.
*** – EBITDA and net cash are non-GAAP measures. Please refer to pages 31 and 25 of the Half Year 2019 report for further information.
· Continued focus on the introduction of new technology to clients:
o Launch of the H-2 and E-SUB Perforating Systems.
o Additional completion products introduced to customers include the T-Set One setting tool, a new power charge offering and a new Release Tool.
o New size variants of premium and semi-premium threadforms: SEAL-LOCK™, WEDGE-LOCK™ and TEC-LOCK™ developed and certified for introduction to clients.
· Capacity expansion and automation programmes within Hunting Titan:
o Automated production cells for the manufacture of perforating guns at Pampa, Texas, being fully commissioned Q3.
o Energetics expansion programme at Milford, Texas, provides a production capacity in excess of 1 million shaped charges per month.
· Hunting Titan maintains market share in the US, despite challenging US onshore markets, which adversely impacted operating profit:
o Period-on-period increase in the number of Perforating System units and ControlFire™ addressable switches sold.
o Perforating gun margins adversely impacted in period, as excess conventional perforating gun inventories were sold off.
o Price reductions on certain product lines to respond to market environment.
· US and Asia Pacific operating segments reporting good period-on-period growth as general market conditions continue to stabilise:
o Strong increase in downhole measurement tool orders received, benefiting the Advanced Manufacturing group.
o Premium and Semi-Premium Connection orders increasing for onshore and offshore drilling programmes.
o International drilling markets showing signs of improvement as OCTG orders completed for Oman, China and Australia.
o US segment now incorporates the results from our Exploration and Production operations that were previously disclosed separately.
· Europe, Middle East and Africa operating segment reports good period-on-period revenue increases as activity in the North Sea and Middle East support growth. Profitability significantly improved in the period as a result of market recovery and as restructuring actions take effect.
· Canada operating segment impacted by government mandated production slowdown in Alberta, coupled with extremely poor weather in January and February, leading to oil and gas production ceasing for a short time.
· Acquisition of the business and assets of RTI Energy Systems Inc. (“RTIES”) completed on 16 August 2019 for cash consideration of $12.5m:
o Complementary bolt-on acquisition in line with strategic objectives to add technological products and capabilities to address customer demand.
o RTIES being integrated into the Group’s Subsea business.
· 15% increase in revenue reported in the period as performance of US, EMEA and Asia Pacific segments deliver growth.
· Gross margin of 29% (H1 2018 – 31%) and EBITDA margin of 15% (H1 2018 – 16%) achieved in the period – impacted by Hunting Titan.
· Strong net cash position reported at 30 June 2019 of $33.4m, which includes $47.1m for lease liabilities (Net cash reported at 30 June 2018 of $39.0m and 31 December 2018 of $61.3m both exclude lease liabilities).
· The Group generated a statutory cash inflow of $19.6m in the period.
· Interim dividend of 5.0 cents declared (H1 2018 – 4.0 cents), absorbing cash of approximately $8.3m (H1 2018 – $6.6m), payable to shareholders on 23 October 2019, with a record date of 4 October 2019.
· Adoption of IFRS 16 Leases from 1 January 2019 benefits EBITDA with the removal of $4.6m of lease costs at the half year point. On a like-for-like basis EBITDA is in line with H1 2018. Prior period financials have not been restated for IFRS 16, as the standard is being adopted with effect from 1 January 2019. Additional depreciation of $4.0m in the half year is charged to the income statement on the capitalised lease assets and accordingly operating profit benefits by a net $0.6m at the half year point. Additional finance charges of $1.1m are recognised in the half year results and result in a net $0.5m deterioration in profit before tax from the adoption of IFRS 16. The balance sheet as at 30 June 2019 now reflects capitalised right-of-use assets of $39.6m and $47.1m of lease liabilities.
Commenting on the results Jim Johnson, Chief Executive, said:
“The first half of 2019 has delivered a strong set of results under difficult market conditions. Despite the general market uncertainty within the oil and gas industry, Hunting’s businesses are performing well, with management focused on delivering the Group’s strategy of focused growth based on proprietary technology and ongoing lean manufacturing initiatives which allows us to build on a strong market share.
“We are pleased to have concluded the RTI Energy Systems acquisition. This business adds a strong product suite to the Group’s offshore technology portfolio and gives Hunting access to leading global deep-water projects. The acquisition also delivers on our stated strategic goal of targeting investments that provide complementary technologies to the offshore oil and gas industry.
“The Board is pleased with today’s results, but given the volatile market and global economic conditions will continue to update investors regularly on the Group’s performance for the balance of the year.”
Half Year Management Report
For access to the Half Year Management Report narrative for the six months to 30 June 2019 please click on the following link.
Financial Statements and Notes to the Accounts
For access to the Condensed Consolidated Financial Statements and Notes for the six months to 30 June 2019 please click on the following link.
The attached documents provide complete access to the Group’s 2019 Half Year Report. The Report can also be accessed at www.huntingplc.com.
Analyst Briefing and Webcast
Hunting PLC will host an analyst briefing on Thursday 29 August 2019 at 10:00a.m. at the offices of Buchanan, 107 Cheapside, London, EC2V 6DN.
An audio webcast will be available on: