Interim Results
15 Mai 2009 - 8:02AM
UK Regulatory
TIDMSOGP
RNS Number : 2898S
Sovereign Oilfield Group plc
15 May 2009
+---------------------------------------+---------------------------------------+
| FOR IMMEDIATE RELEASE | 15 May 2009 |
+---------------------------------------+---------------------------------------+
| Ref: 0904 | |
+---------------------------------------+---------------------------------------+
SOVEREIGN OILFIELD GROUP Plc
("Sovereign" or "the Company" or "the Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008
Sovereign Oilfield Group Plc ("Sovereign" or "the Group"), the Aberdeen-based
diversified oilfield services group, has announced its unaudited financial
results for the six month period to 30 September 2008.
Financial Highlights
+------------------------+----------------+---------------+----------------+
| | 2008 | 2007 | |
+------------------------+----------------+---------------+----------------+
| * Turnover | GBP47.7m | GBP46.0m | (up 4%) |
+------------------------+----------------+---------------+----------------+
| * EBITDA | GBP2.0m | GBP2.9m | (down 31%) |
+------------------------+----------------+---------------+----------------+
| * Operating (loss) / | (GBP0.5m) | GBP2.1m | (down 124%) |
| profit | | | |
+------------------------+----------------+---------------+----------------+
| * (Loss) / profit | (GBP3.2m) | GBPnil | |
| before tax | | | |
+------------------------+----------------+---------------+----------------+
| * Adjusted losses per | 7.87p | 0.15p | |
| share | | | |
+------------------------+----------------+---------------+----------------+
Graham Burgess, Chief Executive Officer of Sovereign, said:
"Our Fabrication businesses continue to meet expectations on turnover and
profitability in a slowing market, while DDS has continued to distinctly
under-perform and pulled down the performance of the Drilling Division for this
period.
Difficult banking conditions during and since the end of the period hindered
refinancing so finance costs for the period are high, however the company has
recently agreed revised terms with existing Lenders that significantly reduce
the cost of our debt and improve cash flow in future.
In addition asset disposals during and since the end of period have yielded cash
to pay down debt and your Board remain confident about the Group's prospects."
Executive Chairman's Statement
I am pleased to present the Group's unaudited interim results for the period
ended 30 September 2008.
The Group has today issued its audited financial statements for the year ended
31 March 2008 and shareholders will be aware that following the publication of
the year-end results and this Interim Statement it is expected that restoration
to trading of our Ordinary Shares on AIM will commence shortly pending posting
of the 2008 Annual report to Shareholders.
The delay in publication of our accounts is well documented in the 2008 Annual
Report and therefore I propose to restrict this statement to the trading
performance of the Group for the half year to
30 September 2008.
The sales for the half year were GBP47.7m (2007: GBP46.0m) and gross
contribution was GBP11.3m (2007: GBP12.5m). Our overheads, including exceptional
costs of GBP0.5m, were GBP12.8m (2007: GBP10.4m) resulting in an operating loss
of GBP0.5m (2007: profit GBP2.1m). Exceptional costs relate to abortive deal
costs and bank refinancing. The Group disposed of certain buildings during the
period resulting in a surplus of GBP1.0m (2007: GBPnil). Finance costs amounted
to GBP2.7m (2007: GBP2.1m) resulting in a half year loss before taxation of
GBP3.2m (2007: GBPnil).
All of our Group fabrication companies continued to perform well in a slowing
market with turnover of GBP34.3m and operating profit of GBP3.7m, comparable to
the prior periods. The division continued to deliver first class products to a
blue chip customer base in the North Sea and Middle East.
Our drilling businesses had slightly increased turnover at GBP13.4m (2007:
GBP11.9m) but an operating loss of GBP2.0m (2007: profit GBP0.3m) as the
drilling companies continued to have mixed results. Diamant Drilling Services
SA, ("DDS") our Belgian based drill bit business, which we have since sold,
accounted for the bulk of this underperformance. DDS has been classified as a
discontinued operation in these financial statements.
Central costs, including exceptional costs of GBP0.4m, were GBP2.2m for the half
year (2007: GBP1.8m). Reduction of overhead costs, both centrally and throughout
the operating subsidiaries, remains a focus of your Board.
Our basic and diluted loss per ordinary share amounted to 6.9p (2007: 0.15p).
The Directors are unable to recommend the payment of a dividend.
Trading conditions throughout the Group were affected by falling oil prices, a
slowdown in the progress of projects and subsequently by the world-wide
recession. The oil sector and the business area of, in particular, our
fabrication businesses, has seen less impact than other sectors.
The suspension of our listing in September caused some customers and suppliers
to question the financial stability of the Group, and removal of credit
insurance by some insurers exacerbated this. High interest charges also added to
the stress on the business, however continued strict cash management and good
levels of trading, as well as the support of Lenders, have allowed most of the
Group companies to continue to trade profitably.
The publication of the 2008 Annual Report and these Interim Statements, together
with recently agreed new banking facilities, will hopefully restore any loss of
confidence in the Group.
As reported, DDS was sold in March 2009. The Board have undertaken a full
strategic review of both of our trading divisions and have already agreed to
dispose of Vertec Engineering Ltd and some assets of Labtech Services Ltd,
details of which have been announced. In addition it is expected that further
strategic disposals will be announced in due course.
The year-end results for 2009 will continue to reflect the tough trading
conditions but the Board remains committed to returning the Group to
profitability as quickly as possible.
Graham Burgess
Executive Chairman
Condensed Group Income Statement
For the six months ended 30 September 2008
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| | Unaudited Interim September 2008 | Unaudited | Audited |
| | | Interim | Full |
| | | September | Year |
| | | 2007 | March |
| | | | 2008 |
| | | | |
+--------------------------------+-------------------------------------------+-----------+---------+
| | | Continued | Discontinued | Total | | |
| | | Operations | Operations | | | |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| |Note | GBPm | GBPm | GBPm | GBPm | GBPm |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Revenue | 2 | 44.6 | 3.1 | 47.7 | 46.0 | 94.6 |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Cost of sales | | (34.1) | (2.3) | (36.4) | (33.5) | (71.0) |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Gross profit | | 10.5 | 0.8 | 11.3 | 12.5 | 23.6 |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Administrative expenses | | (10.1) | (2.2) | (12.3) | (10.4) | (23.7) |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Other expenses | | (0.4) | (0.1) | (0.5) | - | - |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Other operating income | | - | - | - | - | 0.2 |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Group trading (loss) / profit | | - | (1.5) | (1.5) | 2.1 | 0.1 |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Gain on sale of property, | | 1.0 | - | 1.0 | - | - |
| plant and equipment | | | | | | |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Group operating (loss) / | 2 | 1.0 | (1.5) | (0.5) | 2.1 | 0.1 |
| profit | | | | | | |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Finance revenue | | - | - | - | - | 0.2 |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Finance costs | | (2.6) | (0.1) | (2.7) | (2.1) | (7.8) |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| | | (2.6) | (0.1) | (2.7) | (2.1) | (7.6) |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Loss before taxation | | (1.6) | (1.6) | (3.2) | - | (7.5) |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Tax credit | 3 | 0.4 | - | 0.4 | - | 0.1 |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Loss for the financial period | | (1.2) | (1.6) | (2.8) | - | (7.4) |
| attributable to equity holders | | | | | | |
| of the parent | | | | | | |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| | | | | | | |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Loss per share (pence) | | | | | | |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Basic, for loss for the period | 4 | | | (6.91) | (0.15) | (43.46) |
| attributable to ordinary | | | | | | |
| equity holders of the parent | | | | | | |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Diluted, for loss for the | 4 | | | (6.91) | (0.15) | (43.46) |
| period attributable to | | | | | | |
| ordinary equity holders of the | | | | | | |
| parent | | | | | | |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Adjusted loss per share | | | | | | |
| (pence) | | | | | | |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Basic, for loss for the period | 4 | | | (7.87) | (0.15) | (14.48) |
| attributable to ordinary | | | | | | |
| equity holders of the parent | | | | | | |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| Diluted, for loss for the | 4 | | | (7.87) | (0.15) | (14.48) |
| period attributable to | | | | | | |
| ordinary equity holders of the | | | | | | |
| parent | | | | | | |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| | | | | | | |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
| | | | | | | |
+--------------------------------+------+------------+--------------+--------+-----------+---------+
Condensed Group Statement of Recognised Income and Expense
For the six months ended 30 September 2008
+-----------------------------------+--------------+--------------+--------------+
| | Unaudited | Unaudited | Audited |
| | Interim | Interim | Full Year |
| | September | September | March |
| | 2008 | 2007 | 2008 |
+-----------------------------------+--------------+--------------+--------------+
| | GBPm | GBPm | GBPm |
+-----------------------------------+--------------+--------------+--------------+
| Income and expense recognised | | | |
| directly in equity | | | |
+-----------------------------------+--------------+--------------+--------------+
| Exchange differences on | 1.2 | 0.8 | 0.8 |
| retranslation of foreign | | | |
| operations | | | |
+-----------------------------------+--------------+--------------+--------------+
| Net income recognised directly in | 1.2 | 0.8 | 0.8 |
| equity | | | |
+-----------------------------------+--------------+--------------+--------------+
| Loss for the period | (2.8) | - | (7.4) |
+-----------------------------------+--------------+--------------+--------------+
| Total recognised income and | (1.6) | 0.8 | (6.6) |
| expense for the period | | | |
+-----------------------------------+--------------+--------------+--------------+
| Attributable to: | | | |
+-----------------------------------+--------------+--------------+--------------+
| Equity holders of the parent | (1.6) | 0.8 | (6.6) |
+-----------------------------------+--------------+--------------+--------------+
| Minority interest | - | - | - |
+-----------------------------------+--------------+--------------+--------------+
| | (1.6) | 0.8 | (6.6) |
+-----------------------------------+--------------+--------------+--------------+
Condensed Group Balance Sheet
As at 30 September 2008
+------------------------------------+---------+------------+------------+----------+
| | | Unaudited | Unaudited | Audited |
| | | Interim | Interim | Full |
| | | September | September | Year |
| | | 2008 | 2007 | March |
| | | | | 2008 |
+------------------------------------+---------+------------+------------+----------+
| | Note | GBPm | GBPm | GBPm |
+------------------------------------+---------+------------+------------+----------+
| Assets | | | | |
+------------------------------------+---------+------------+------------+----------+
| Non-current assets | | | | |
+------------------------------------+---------+------------+------------+----------+
| Property, plant and equipment | 5 | 11.3 | 13.1 | 14.2 |
+------------------------------------+---------+------------+------------+----------+
| Intangible assets | | 13.9 | 15.7 | 14.2 |
+------------------------------------+---------+------------+------------+----------+
| Financial assets | | 0.1 | 0.1 | 0.1 |
+------------------------------------+---------+------------+------------+----------+
| Deferred tax asset | | - | 0.3 | - |
+------------------------------------+---------+------------+------------+----------+
| | | 25.3 | 29.2 | 28.5 |
+------------------------------------+---------+------------+------------+----------+
| Current assets | | | | |
+------------------------------------+---------+------------+------------+----------+
| Trade and other receivables | | 23.7 | 25.3 | 25.7 |
+------------------------------------+---------+------------+------------+----------+
| Inventories | | 5.6 | 8.1 | 6.2 |
+------------------------------------+---------+------------+------------+----------+
| Cash and short-term deposits | | 0.7 | 3.7 | 1.4 |
+------------------------------------+---------+------------+------------+----------+
| | | 30.0 | 37.1 | 33.3 |
+------------------------------------+---------+------------+------------+----------+
| Assets of discontinued operations | | 5.5 | - | - |
+------------------------------------+---------+------------+------------+----------+
| Total assets | | 60.8 | 66.3 | 61.8 |
+------------------------------------+---------+------------+------------+----------+
| | | | | |
+------------------------------------+---------+------------+------------+----------+
| Current liabilities | | | | |
+------------------------------------+---------+------------+------------+----------+
| Trade and other payables | | 21.4 | 19.4 | 19.7 |
+------------------------------------+---------+------------+------------+----------+
| Interest-bearing loans and other | 6 | 30.7 | 0.5 | 33.2 |
| borrowings | | | | |
+------------------------------------+---------+------------+------------+----------+
| Income tax payable | | - | 1.0 | 0.2 |
+------------------------------------+---------+------------+------------+----------+
| | | 52.1 | 20.9 | 53.1 |
+------------------------------------+---------+------------+------------+----------+
| | | | | |
+------------------------------------+---------+------------+------------+----------+
| Non-current liabilities | | | | |
+------------------------------------+---------+------------+------------+----------+
| Interest-bearing loans and other | 6 | 0.3 | 30.4 | 1.0 |
| borrowings | | | | |
+------------------------------------+---------+------------+------------+----------+
| Deferred tax liabilities | | 1.6 | 2.5 | 2.4 |
+------------------------------------+---------+------------+------------+----------+
| Provisions | | 0.1 | 0.1 | 0.1 |
+------------------------------------+---------+------------+------------+----------+
| | | 2.0 | 33.0 | 3.5 |
+------------------------------------+---------+------------+------------+----------+
| Liabilities of discontinued | | 3.6 | - | - |
| operations | | | | |
+------------------------------------+---------+------------+------------+----------+
| Total liabilities | | 57.7 | 53.9 | 56.6 |
+------------------------------------+---------+------------+------------+----------+
| Net assets | | 3.1 | 12.4 | 5.2 |
+------------------------------------+---------+------------+------------+----------+
| | | | | |
+------------------------------------+---------+------------+------------+----------+
| Capital and Reserves | | | | |
+------------------------------------+---------+------------+------------+----------+
| Equity share capital | | 11.7 | 10.7 | 11.7 |
+------------------------------------+---------+------------+------------+----------+
| Treasury shares | | (0.3) | (0.3) | (0.3) |
+------------------------------------+---------+------------+------------+----------+
| Currency translation | | 1.2 | 0.8 | 0.7 |
+------------------------------------+---------+------------+------------+----------+
| Other reserves | | 0.2 | - | - |
+------------------------------------+---------+------------+------------+----------+
| Retained earnings | | (9.7) | 1.2 | (6.9) |
+------------------------------------+---------+------------+------------+----------+
| Sovereign Oilfield Group | | 3.1 | 12.4 | 5.2 |
| shareholders' equity and total | | | | |
| equity | | | | |
+------------------------------------+---------+------------+------------+----------+
Condensed Group Cash Flow Statement
For the six months ended 30 September 2008
+------------------------------------------+------+------------+------------+-------------+
| | | Unaudited | Unaudited | Audited |
| | | Interim | Interim | Full |
| | | September | September | Year |
| | | 2008 | 2007 | March |
| | | | | 2008 |
+------------------------------------------+------+------------+------------+-------------+
| | | GBPm | GBPm | GBPm |
+------------------------------------------+------+------------+------------+-------------+
| Operating activities | | | | |
+------------------------------------------+------+------------+------------+-------------+
| Loss for the period | | (2.8) | - | (7.4) |
+------------------------------------------+------+------------+------------+-------------+
| Adjustments to reconcile loss for the | | | | |
| period to net cash flow from operating | | | | |
| activities | | | | |
+------------------------------------------+------+------------+------------+-------------+
| Tax on continuing operations | | (0.4) | - | (0.1) |
+------------------------------------------+------+------------+------------+-------------+
| Net finance costs | | 2.7 | 2.1 | 7.6 |
+------------------------------------------+------+------------+------------+-------------+
| Gain on disposal of property, plant and | | (1.0) | - | - |
| equipment | | | | |
+------------------------------------------+------+------------+------------+-------------+
| Depreciation and impairment of property, | | 0.8 | 0.6 | 1.5 |
| plant and equipment | | | | |
+------------------------------------------+------+------------+------------+-------------+
| Amortisation and impairment of | | 0.3 | 0.3 | 1.4 |
| intangible assets | | | | |
+------------------------------------------+------+------------+------------+-------------+
| Share-based payments | | - | 0.2 | 0.1 |
+------------------------------------------+------+------------+------------+-------------+
| Receipt of treasury shares | | - | - | (0.3) |
+------------------------------------------+------+------------+------------+-------------+
| (Increase) / decrease in inventories | | (1.0) | (1.5) | 0.7 |
+------------------------------------------+------+------------+------------+-------------+
| Increase in trade and other receivables | | (1.4) | (2.1) | (1.9) |
+------------------------------------------+------+------------+------------+-------------+
| Increase in trade and other payables | | 4.4 | 0.5 | 1.0 |
+------------------------------------------+------+------------+------------+-------------+
| Cash generated from operations | | 1.6 | 0.1 | 2.6 |
+------------------------------------------+------+------------+------------+-------------+
| Income taxes paid | | - | (0.4) | (1.1) |
+------------------------------------------+------+------------+------------+-------------+
| Net cash flow from operating activities | | 1.6 | (0.3) | 1.5 |
+------------------------------------------+------+------------+------------+-------------+
| Investing activities | | | | |
+------------------------------------------+------+------------+------------+-------------+
| Sale of property, plant and equipment | | 4.7 | 0.4 | 0.8 |
+------------------------------------------+------+------------+------------+-------------+
| Outflow on acquisition of subsidiary | | - | (8.2) | (8.3) |
| undertakings | | | | |
+------------------------------------------+------+------------+------------+-------------+
| Payments to acquire property, plant and | | (2.1) | (2.0) | (4.1) |
| equipment | | | | |
+------------------------------------------+------+------------+------------+-------------+
| Payments to acquire intangible assets | | (0.1) | (0.3) | (0.3) |
+------------------------------------------+------+------------+------------+-------------+
| Net cash flow from investing activities | | 2.5 | (10.1) | (11.9) |
+------------------------------------------+------+------------+------------+-------------+
| Financing activities | | | | |
+------------------------------------------+------+------------+------------+-------------+
| Purchase of own shares | | - | (0.3) | (0.3) |
+------------------------------------------+------+------------+------------+-------------+
| Interest paid | | (2.0) | (0.9) | (3.2) |
+------------------------------------------+------+------------+------------+-------------+
| Refinancing costs | | - | (0.3) | (0.4) |
+------------------------------------------+------+------------+------------+-------------+
| Repayment of factored debt | | - | (0.9) | (0.9) |
+------------------------------------------+------+------------+------------+-------------+
| New borrowings | | - | 12.0 | 14.5 |
+------------------------------------------+------+------------+------------+-------------+
| Repayments of borrowings | | (2.9) | - | (2.4) |
+------------------------------------------+------+------------+------------+-------------+
| New finance leases and hire purchase | | - | 0.2 | 0.2 |
| contracts | | | | |
+------------------------------------------+------+------------+------------+-------------+
| Repayment of capital element of finance | | (0.2) | (0.2) | (0.3) |
| leases and hire purchase contracts | | | | |
+------------------------------------------+------+------------+------------+-------------+
| Net cash flow from financing activities | | (5.1) | 9.6 | 7.2 |
+------------------------------------------+------+------------+------------+-------------+
| Decrease in cash and cash equivalents | | (1.0) | (0.8) | (3.2) |
+------------------------------------------+------+------------+------------+-------------+
| Effect of exchange rates on cash and | | 0.3 | (0.1) | - |
| cash equivalents | | | | |
+------------------------------------------+------+------------+------------+-------------+
| Opening cash and cash equivalents | | 1.4 | 4.6 | 4.6 |
+------------------------------------------+------+------------+------------+-------------+
| Closing cash and cash equivalents | | 0.7 | 3.7 | 1.4 |
+------------------------------------------+------+------------+------------+-------------+
Notes to the Financial Statements
1. Accounting policies for the six months ended 30 September 2008
Basis of preparation
The financial statements have been prepared in accordance with IFRS and IFRIC
interpretations endorsed by the European Union (EU) and with those parts of the
Companies Act 1985, applicable to companies reporting under IFRS.
The Directors have prepared the financial statements on the going concern basis
which assumes that the Company will continue in operational existence for the
foreseeable future.
The Company and the Group meet their day to day working capital requirements and
medium term funding requirements through banking facilities. At 30 September
2008 the Group owed GBP30.4m to its Lenders and was in breach of its banking
covenants. As at that date the Group had obtained a standstill from its Lenders
in the form of an amendment and waiver letter regarding the defaults at 30
September 2008. Subsequent to the period end, as disclosed in Note 6, the Group
has agreed to an amendment of terms in respect of debt facilities in place at 30
September 2008.
The new banking terms agreed (subject to the conditions below) provide for a
waiver of all outstanding defaults and a standstill regarding the repayment of
debt until 31 May 2010 and the resumption of the normal debt repayment profile
thereafter, a reduction in margin payable on both senior and mezzanine
facilities and a revised covenant package.
The revised covenant package incorporates financial covenants with regard to
quarterly revenue and EBITDA. The failure of these covenant tests renders the
entire facilities repayable on demand at the option of the lenders.
The Directors have prepared trading and cash flow forecasts for a period in
excess of one year from the date of approval of these financial statements which
project that covenant tests will be met and facility limits will not be exceeded
over the duration of the forecasts. The forecasts prepared make assumptions
about the Group's ability to sustain its business model and the Directors have
been actively monitoring the trading position in relation to the continued
volatility in the financial markets. The forecasts also assume an element of
cost reduction, particularly with regard to corporate overhead.
The Group's business model has been subject to independent analysis, and
sensitivities conducted to flex the assumptions to assess the robustness of the
model.
As part of the revised banking terms and conditions subsequent to the
refinancing, the Group agreed to the disposal of one of its subsidiaries Vertec
Engineering Limited and to dispose of certain assets of Labtech Services
Limited.
Although the proposed terms are fully valid and binding, if this condition is
not fulfilled prior to end May 2009 the revised terms will become invalid.
The Group was pleased to issue an announcement on 11 May 2009 stating that we
concluded the sale of these businesses, subject to shareholder approval. A
general meeting is due to be held on 27 May 2009 to ratify this transaction,
which requires a majority vote. The Directors intend to vote in favour of the
resolutions, amounting to 10,084,900 Ordinary Shares representing 58.24 per cent
of the issued Ordinary Shares. John Graham Burgess and Dr Peter Gjedboe Felter
have provided irrevocable undertakings to vote in favour of the Resolutions,
their combined shareholding amounting to 56.895 percent of the issued Ordinary
Shares, which will result in the resolution being carried.
Taking in to account the above, until the shareholder vote has been conducted an
uncertainty exists as to whether the Group will meet the conditions under which
new facilities have been agreed. The Directors have a reasonable expectation
that the Company and the Group have adequate resources to continue in
operational existence for the foreseeable future and have therefore concluded
that it is appropriate to adopt the going concern basis in preparing these
financial statements.
The Group has chosen not to adopt IAS 34 Interim Financial Statements, in
preparing these interim financial statements, and therefore this information is
not wholly compliant with IFRS. The accounting policies are consistent with
those of the annual financial statements for the year ended 31 March 2008.
New standards, amendments to standards and interpretations, which are applicable
for the financial year ending 31 March 2009, have had no impact on the
accounting policies.
Taxes on income in the interim periods are accrued using the tax rate that would
be applicable to expected total annual earnings.
The comparative figures for the year ended 31 March 2008 do not constitute
statutory financial statements for the purpose of section 240 of the Companies
Act 1985. They have been extracted from the Company's published accounts. The
Report of the Auditors on those accounts was unqualified and did not contain a
statement under either section 237(2) or (3) of the Companies Act 1985. These
financial statements should be read in conjunction with the 2008 financial
statements.
Net current liabilities
At 30 September 2008 the Company had net current liabilities, excluding
discontinued operations, of GBP22.1m. This was due to the reclassification of
the entire amount of interest-bearing loans and other borrowings of GBP30.4m
being classified as current on the basis that the Company's Lenders were in a
position to serve the Company notice to repay the bank loans on demand at 30
September 2008. Had it not been for such classification, the Company would have
had net current assets, excluding discontinued operations, of GBP7.8m.
2. Segmental reporting
Primary segment - business segments
Drilling Services - selling or renting drilling equipment and contracting
personnel for the oil and gas industry
Fabrication Services - selling fabrication and manufacturing services for the
oil and gas industry
Corporate and other - Sovereign head office and other non-trading company costs
Segment results
+--------------------------+------------+-------------+--------------+------------+
| | Drilling | Fabrication | Corporate / | Total |
| | GBPm | GBPm | other | GBPm |
| | | | GBPm | |
+--------------------------+------------+-------------+--------------+------------+
| At 30 September 2008 | | | | |
+--------------------------+------------+-------------+--------------+------------+
| Revenue | 13.4 | 34.3 | - | 47.7 |
+--------------------------+------------+-------------+--------------+------------+
| | | | | |
+--------------------------+------------+-------------+--------------+------------+
| Operating profit / | (2.0) | 3.7 | (2.2) | (0.5) |
| (loss) | | | | |
+--------------------------+------------+-------------+--------------+------------+
+--------------------------+------------+------------+--------------+------------+
| At 30 September 2007 | | | | |
+--------------------------+------------+------------+--------------+------------+
| Revenue | 11.9 | 34.1 | - | 46.0 |
+--------------------------+------------+------------+--------------+------------+
| | | | | |
+--------------------------+------------+------------+--------------+------------+
| Operating profit / | 0.3 | 3.6 | (1.8) | 2.1 |
| (loss) | | | | |
+--------------------------+------------+------------+--------------+------------+
+--------------------------+------------+------------+--------------+------------+
| At 31 March 2008 | | | | |
+--------------------------+------------+------------+--------------+------------+
| Revenue | 26.0 | 68.6 | - | 94.6 |
+--------------------------+------------+------------+--------------+------------+
| | | | | |
+--------------------------+------------+------------+--------------+------------+
| Operating profit / | (1.8) | 6.2 | (4.3) | 0.1 |
| (loss) | | | | |
+--------------------------+------------+------------+--------------+------------+
3. Income tax expense
The current income tax charge is GBPnil (2007: GBPnil). There is a tax charge of
GBP0.4m relating to capital gains on the property disposals and a subsequent
release of provision for deferred tax liabilities of GBP0.7m. No provision has
been made for tax losses incurred in the period.
4.(Loss) / Earnings per ordinary share
Basic (loss) / earnings per share amounts are calculated by dividing (loss)
/ profit for the period attributable to ordinary equity holders of the parent by
the weighted average number of Ordinary Shares outstanding during the period.
Diluted (loss) / earnings per share amounts are calculated by dividing the
(loss) / profit for the period attributable to ordinary equity holders of the
parent by the weighted average number of Ordinary Shares outstanding during the
period plus the weighted average number of Ordinary Shares that would be issued
on the conversion of all the dilutive potential Ordinary Shares into Ordinary
Shares.
The following reflects income and share data used in the basic and diluted
(loss) / earnings per share computations:
+----------------------------------------------+------------+------------+------------+
| | Six months | Six months | Year ended |
| | ended 30 | ended 30 | 31 March |
| | September | September | 2008 |
| | 2008 | 2007 | Audited |
| | Unaudited | Unaudited | GBPm |
| | GBPm | GBPm | |
+----------------------------------------------+------------+------------+------------+
| Loss for the period from continuing | (1.2) | - | (7.4) |
| operations | | | |
+----------------------------------------------+------------+------------+------------+
| Diluted loss attributable to equity holders | (1.2) | - | (7.4) |
| of the Company | | | |
+----------------------------------------------+------------+------------+------------+
+---------------------------------------------+------------+------------+------------+
| | Six months | Six months | Year ended |
| | ended 30 | ended 30 | 31 March |
| | September | September | 2008 |
| | 2008 | 2007 | Audited |
| | Unaudited | Unaudited | million |
| | million | million | |
+---------------------------------------------+------------+------------+------------+
| Basic weighted average number of Shares | 16.9 | 17.0 | 17.1 |
+---------------------------------------------+------------+------------+------------+
| Dilutive potential ordinary shares: | | | |
+---------------------------------------------+------------+------------+------------+
| Deferred consideration | - | - | - |
+---------------------------------------------+------------+------------+------------+
| Diluted weighted average number of Shares | 16.9 | 17.0 | 17.1 |
+---------------------------------------------+------------+------------+------------+
There have been no other transactions involving Ordinary Shares or potential
Ordinary Shares between the reporting date and the date of completion of these
financial statements.
Loss per share from continuing operations before exceptional items
The Group presents as exceptional items on the face of the income statement,
those material items of income and expense which, because of the nature and
expected frequency of the events giving rise to them, merit separate
presentation to allow shareholders to understand better the elements of
financial performance in the period, so as to facilitate comparison with prior
periods and to assess better trends in financial performance.
To this end, basic and diluted (loss)/earnings from continuing operations per
share is also presented on this basis and using the weighted average number of
Ordinary Shares for both basic and diluted amounts as per the table above. The
amounts for earnings per share from continuing operations before exceptional
items are as follows:
+--------------------------------------------+------------+--------------+------------+
| | Six months | Six months | Year ended |
| | ended 30 | ended 30 | 31 March |
| | September | September | 2008 |
| | 2008 | 2007 | Audited |
| | Unaudited | Unaudited | |
+--------------------------------------------+------------+--------------+------------+
| Basic loss per share from continued | (6.91) | (0.15) | (43.46) |
| operations (pence) | | | |
+--------------------------------------------+------------+--------------+------------+
| Diluted loss per share from continued | (6.91) | (0.15) | (43.46) |
| operations (pence) | | | |
+--------------------------------------------+------------+--------------+------------+
Net profit from continuing operations before exceptional items and
attributable equity holders of the parent is derived as follows:
+--------------------------------------------+------------+--------------+------------+
| | Six months | Six months | Year ended |
| | ended 30 | ended 30 | 31 March |
| | September | September | 2008 |
| | 2008 | 2007 | Audited |
| | Unaudited | Unaudited | |
+--------------------------------------------+------------+--------------+------------+
| | GBPm | GBPm | GBPm |
+--------------------------------------------+------------+--------------+------------+
| Loss attributable to equity holders of the | (1.2) | - | (7.4) |
| parent - continuing operations | | | |
+--------------------------------------------+------------+--------------+------------+
| Exceptional items after tax - attributable | (0.1) | - | 5.6 |
| to equity holders of the parent | | | |
+--------------------------------------------+------------+--------------+------------+
| Diluted loss from continued operations | (1.3) | - | (1.8) |
| before exceptional items attributable to | | | |
| equity holders of the parent | | | |
+--------------------------------------------+------------+--------------+------------+
5. Property, plant and equipment
Capital expenditure during the period amounted to GBP2.1m (2007: GBP2.0m) and
property sold on a leaseback arrangement netted a gain of GBP1.0m.
6. Interest-bearing loans and borrowings
The bank overdrafts and loans are secured by a floating charge over certain of
he Group's assets and pledges over the shares of the parent company and its
subsidiaries.
The Group breached its banking covenants during the year ended 31 March 2008
and new banking arrangements were put in place by the Group's Lenders as part
of a standstill agreement at 31 March 2008. The
classification of the Company's bank loans are based on the contractual
position at 31 March 2008.
The Group continues to classify repayments of principal as current on the basis
that the Company's Lenders are in position to serve the Company with a notice to
repay the bank loans on demand. No such notices have been served and the Group
has waivers in place for the breaches which occurred during the period to 30
September 2008. The loans are due for repayment in January 2012.
The Group has senior facilities of GBP15.8m and mezzanine facilities of
GBP14.6m. The senior facilities bear interest at six-month LIBOR plus 3.5% to
8.5% (2007: LIBOR plus 3.5%) whilst the mezzanine facilities bear interest at
six-month LIBOR plus 6% to 11% (2007: LIBOR plus 6%), plus a payment in kind of
6% to 7% (2007: 6%). The payment in kind is not payable until January 2012 and
GBP1.4m is included for the payment in kind in current instalments due on bank
loans. Commitment fees of 0.625% were payable on undrawn facilities until these
facilities were withdrawn.The Group's borrowings are floating rate and the
effective interest rate is six-month LIBOR plus 13.1%.
Subsequent to the period end, the Group has agreed revised banking terms with
its Lenders which are set out in Note 28 of the annual financial statements for
the year ended 31 March 2008.
The main risks arising from the Group's financial instruments remain unchanged
from those reported in Note 23 of the annual financial statements.
7.Post Balance Sheet Event
Restructuring of Financing Arrangements
At 31 March 2008 the Group obtained a standstill from its Lenders in the form of
an amendment and waiver letter regarding defaults at 31 March 2008. Contained
within the letter were amendments to the terms of the Senior Facility Agreement
and the Mezzanine Facility Agreement with reference to the ratcheting of
interest margins from 3.5% to 8.5% on the senior facility and from 6% to 11% on
the mezzanine facility over a period of time. In addition, the Company was
required to pay a fee equal to 1% of the aggregate commitments, being GBP0.5m.
Conditions relating to the disposal of DDS were also included.
Existing financial covenants were revised as part of the amendment and waiver
letter, such covenants including tests around interest cover, senior leverage,
leverage and capital expenditure.
Further to the amendment and waiver letter issued in respect of defaults at 31
March 2008, deferral letters were received on 30 May 2008 and 24 September 2008
which deferred these defaults, including covenant test dates in respect of the
financial covenants for the period expiring 31 March 2008 and 30 June 2008 to a
maximum longstop date of 17 October 2008.
Subsequent to the period end, prior to the date of issue of the interim
financial statements, the Group has agreed to an amendment of terms in respect
of credit facilities in place at 31 March 2008. The new terms agreed provide for
a waiver of all outstanding defaults until 31 May 2010, a reduction in margin
payable on both senior and mezzanine facilities and a revised covenant package.
No restructuring or arrangement fees are payable with regard to the negotiation
of new commercial terms.
Under the new terms, for the period from 1 June 2009 to 31 March 2010 the senior
facilities will bear interest at LIBOR plus 4%, whilst the mezzanine facilities
will bear interest at a payment in kind of 6.5%. For the period from 1 April
2010 to 31 March 2011 the senior facilities will bear interest at LIBOR plus 5%,
whilst the mezzanine facilities will bear interest at LIBOR plus 6.5%, plus a
payment in kind of 3.5%.
We estimate that the revised terms which cover the period to 31 March 2011, will
result in net savings in finance costs of GBP3.4m.
The revised covenant package incorporates financial covenants with regard to
quarterly revenue and EBITDA, which the Board believe are acceptable.
As part of the conditions subsequent, the Group agreed to the disposal of Vertec
and certain Labtech assets. The Group was pleased to issue an announcement on 11
May 2009 that we agreed the sale of the shares of Vertec and rental cabin assets
of Labtech for GBP5.45m, subject to shareholder approval. A general meeting is
due to be held on 27 May 2009 to ratify this transaction. The Directors
unanimously recommend Shareholders vote in favour of the Resolutions as the
Directors intend to do in respect of their beneficial shareholdings amounting to
10,084,900 Ordinary Shares representing 58.24 per cent of the issued Ordinary
Shares. All proceeds will be used to pay down existing debt levels.
Disposal of Diamant Drilling Services SA
In March 2009, the Group announced the sale of DDS, which was consistently loss
making, to Logan Oil Tools Inc for consideration of up to approximately Euros
527,000. The consideration of up to Euros 250,000 cash will be paid in 3 months
from the date of disposal and a further contribution of up to Euros 277,000,
dependent on certain performance criteria, will become due within 6 months
following completion. At the Balance Sheet date the recoverable amount has been
determined on its fair value less costs to sell. The goodwill associated with
this company of GBP0.7m was written off in full, in the year to 31 March 2008.
Operating losses of GBP2.1m incurred in the financial year 2008/9 prior to the
company's disposal will be included in the consolidated results for the 2008/9
financial year.
Further information:
Sovereign Oilfield Group Plc Tel:
01224 261900
Graham Burgess, Executive Chairman
Julie Cowie, Finance Director
Buchanan Communications Tel: 0207
466 5000
Tim Thompson/Catherine Breen
Charles Stanley Securities - Nominated Advisor Tel: 0207 149 6000
Mark Taylor/Freddy Crossley
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SFDFILSUSEII
Sovereign Oilfield (LSE:SOGP)
Historical Stock Chart
Von Mai 2024 bis Jun 2024
Sovereign Oilfield (LSE:SOGP)
Historical Stock Chart
Von Jun 2023 bis Jun 2024
