Hamworthy plc

Hamworthy plc

May 30, 2006 02:28 ET

Hamworthy plc: Preliminary Results for the Year Ended 31 March 2006

LONDON, UNITED KINGDOM--(CCNMatthews - May 30, 2006) - Hamworthy plc, (LSE:HMY) a world leader in the design and manufacture of innovative marine and offshore fluid handling systems, announces its preliminary results for the year ended 31 March 2006.

Financial highlights

- Turnover increased by over 20% to Pounds Sterling 137 million (2005: Pounds Sterling 113.9 million)

- Pre-tax profits up by nearly 29% to Pounds Sterling 8.5 million (2005: Pounds Sterling 6.6 million)

- Adjusted(i) earnings per share rose by 10.6% to 16.7p (2005: 15.1p after adjustment, 18.4p on a statutory basis)

- Proposed final ordinary dividend of 4.2p per share that increases the total dividend for the year to 6.0p per share (2005: 3.24p)

- Closing order book up by 71% to Pounds Sterling 206.8 million (2005: Pounds Sterling 121 million)


The strength of the current order book gives the Company confidence that the results for the new year may exceed its expectations.

Commenting on the results, Gordon Page CBE, Chairman of Hamworthy plc, said: "These are excellent results and provide a solid foundation for continued future growth."

(i) adjustment of 2005 figure for the share capital increase at time of flotation

For further information:

Hamworthy plc
Kelvyn Derrick, Chief Executive Tel: +44 (0) 1202 662662
kderrick@hamworthy.com www.hamworthy.com
Paul Crompton, Finance Director Tel: +44 (0) 1202 662662
pcrompton@hamworthy.com www.hamworthy.com

Collins Stewart Limited
Chris Wells, Corporate Finance Tel: +44 (0) 20 7523 8318
cwells@collins-stewart.com www.cstplc.com

Media enquiries:
Henry Harrison-Topham / Katherine Murphy Tel: +44 (0) 20 7398 7700
henry.ht@abchurch-group.com www.abchurch-group.com

Chairman's statement

The Group has recorded a second year of outstanding growth since flotation which is a tribute to the expertise and commitment of all of its employees. I thank them all on behalf of the board.

Turnover for the year increased by over 20% to Pounds Sterling 137.0 million (2005: Pounds Sterling 113.9 million). Operating profit before amortisation rose by 21.5% to Pounds Sterling 9.1 million (2005: Pounds Sterling 7.5 million) and profit before taxation rose by nearly 29% to Pounds Sterling 8.5 million (2005: Pounds Sterling 6.6 million). Net cash flow from operating activities was Pounds Sterling 12.6 million (2005: Pounds Sterling 8.6 million) and at the end of the year the Group had net funds of Pounds Sterling 27.4 million (2005: Pounds Sterling 2.5 million).

Earnings per share, after adjusting for the issue of new shares at the time of flotation, rose by 10.6% to 16.7p (2005: 15.1p after adjustment, 18.4p on a statutory basis). Your directors are recommending a final ordinary dividend of 4.2p per share which, if approved, would result in a total dividend declared in respect of the year of 6.0p per share (2005: 3.24p). Subject to shareholders' approval, the final dividend will be paid on 31 July 2006 to all shareholders on the register on 7 July 2006.

Order intake for the year was a record at Pounds Sterling 208.0 million, 36% higher than the previous year. The undelivered order book at the end of the year was 71% ahead of 2005 at Pounds Sterling 206.8 million. This is a solid foundation for future growth and is an indication of the Group's success in developing its four core businesses to leading positions in their world-wide markets. A review of the outlook for gas systems, inert gas systems, pump systems and wastewater systems mainly in the marine sector, provides evidence for sustained organic growth. The Group is continuing to develop a range of new technologies in these sectors to maintain its competitive advantage.

In December the Group raised Pounds Sterling 17.5 million before costs through the issue of 6.1 million ordinary shares. The principal objective was to strengthen the balance sheet and support the working capital and bonding requirements of substantial growth. The Group will look for strategic acquisitions which fit strict criteria for enhancing the business and shareholder value. Much of the industry in which the Group operates is fragmented and significant consolidation is expected over time. The Group intends to play a pro-active role in this process.

The Group is on programme to introduce International Financial Reporting Standards (IFRS) for the year ending 31 March 2007, a year earlier than required for AIM companies. Further development of the Group's corporate governance policies has continued and the board has completed an evaluation of its own performance. An external evaluation will be considered at an appropriate time. In an ambitious programme, all Group sites will seek accreditation to environmental standard ISO 14001 during 2007/8 and all manufacturing sites will seek accreditation to the Occupational Health and Safety Series (OHSAS 18001) by the end of this reporting year.

Since flotation, the Group has grown rapidly. It is not only much larger but also more broadly based and has a significantly increased presence in its key markets in the Far East and in Europe. Its products are technologically advanced and meet current customer requirements. Further cost-effective technology developments will come to market over the next few years. The longer term strategic outlook is good with several opportunities for acquisition likely to become available.

The board looks forward to future growth with confidence.

G F Page, Chairman

Chief executive's review

The Group continued its record of achieving strong organic growth increasing turnover by 20.3% and operating profit before amortisation by 21.5%. The profit increase was across most of the business with the biggest contributor being Pump Systems which produced Pounds Sterling 3.8 million of operating profit (2005: Pounds Sterling 2.4 million).

A key element of the Group's strategy is to serve a diversity of market segments with a balanced portfolio of products. This, coupled with our continued emphasis on market-led innovation together with market share gains, often through leadership in low cost manufacture and procurement, is a formula suited to the long term and provides the best prospect of continuing the impressive organic growth rate.

The Group's order performance was another record. Order intake for the year at Pounds Sterling 208.0 million was 36% ahead of the prior year and the closing order book at Pounds Sterling 206.8 million 71% ahead with all product groups up. This leaves the business poised for further growth in the years to come. Spares and service turnover improved to Pounds Sterling 21.2 million (2005: Pounds Sterling 19.9 million), the growth coming from pumps and inert gas systems with a contribution from the embryonic gas spares and service business.

For the first time over half the Group's turnover was sold in the Far East with 6% in the UK and 35% in the rest of Europe. The Group has over the years established particularly strong positions in Korea and China through its own sales and service companies. Korea is the number one shipbuilder in the world with a formidable position in sophisticated vessels such as liquefied natural gas (LNG) carriers. China is now challenging Japan for the number two position.

The Group's success in obtaining record orders and the continuing strong prospects places emphasis on the need to accelerate further the increase in capacity, not just in manufacturing facilities, but also recruiting qualified staff of the highest calibre and supporting them with a first class IT infrastructure. In 2006/07 capital expenditure on expansion of manufacturing capacity and IT systems will be higher than previously anticipated.

Market conditions

Overall the market remains favourable. Industrial production across the Asian economies is growing at close to 8% per annum with the US and Europe at 1.5% per annum. One of the consequences of this high industrial growth is a high oil price which has in turn increased the level of upstream activity in oil and gas. That in turn has led to a sharp upturn in new projects and strong order levels for offshore production and storage vessels (FPSOs), LNG carriers and liquefied petroleum gas (LPG) carriers.

In aggregate 2,000 ships were ordered in 2005, the third year at this historically high level. Ship yards are full until 2008 and now selling berths in 2009 and 2010. Delivery forecasts for all ship types of importance to the Group are strong in the medium term with the exception of product and crude tankers where a reduction in ship deliveries is expected from 2009. The product development and market planning policies of the Group take this data into account and direct resources to those areas with the best medium term demand prognosis. One example is very large crude carriers (VLCCs) which are expected to exhibit continuing strong deliveries beyond 2009 in contrast to smaller tankers. Hamworthy has engineered a new cargo pump system for these vessels and has already had success in China in obtaining orders worth Pounds Sterling 5 million in the early part of 2006/07. Hamworthy's broad product range and global presence gives it more strategic flexibility than most of its competitors in this respect.

Gas systems

Turnover rose to Pounds Sterling 57.7 million (2005: Pounds Sterling 44.8 million). Operating profit rose to Pounds Sterling 3.0 million (2005: Pounds Sterling 2.7 million). There was a change in mix with the first QatarGas II LNG reliquefaction contracts and an upturn in LPG reliquefaction more than replacing the North Sea volatile organic compound (VOC) contract which dominated the prior year. The aggregate order intake in the year grew strongly to Pounds Sterling 111.9 million (2005: Pounds Sterling 69.3 million). To support this burgeoning order intake there has been a significant increase in infrastructure and staff numbers, up from 46 in April 2004 to 127 in April 2006.

During 2005/06 the Group took orders for 12 further shipsets of LNG reliquefaction equipment for the QatarGas II contract, worth in excess of Pounds Sterling 50 million, bringing the total number to 20. To date the Group's market share of this business is 100% but it is unwise to assume a single supplier position can be maintained. The Group's medium term goal is to maintain a substantial market share and to diversify into LNG ships for other fields as well as QatarGas. Innovative development of the technology means that Hamworthy can now offer a lower energy consumption version of its existing LNG reliquefaction technology bringing both operating cost and environmental benefits to the ship owner.

The Group secured an important breakthrough by obtaining its first orders for LPG reliquefaction equipment from Hyundai Heavy Industries, the world's largest shipbuilding group, which constructs more LPG carriers than any other yard. In aggregate, contracts for five shipsets worth in excess of Pounds Sterling 20 million were obtained from Hyundai as well as a further five shipsets for other Korean and Japanese yards.

The third important order success was the contract to build an onshore gas to liquid (GTL) plant for Norwegian gas distribution company, Gasnor, at Kollsnes outside Bergen. The Group sees further opportunities elsewhere for sales of GTL systems both for applications similar to that at Kollsnes or for smaller systems principally for the recovery of organic waste gas from landfill.

It has been confirmed in the Norwegian press that the Group has been engaged with the Norwegian ship owner, Leif Hoegh & Co, in the development of onboard LNG regasification plants. The market will arise where the preferred solution for the discharge of LNG is to maintain the vessel offshore and regasify onboard in order to avoid the need for a terminal on land. Many new terminals will be built to handle the increasing volumes of LNG particularly in the US. Hamworthy's technology meets the environmental requirements of the US authorities and prototype plants have already been built to test the new technology.

The Group is actively working on the development of its technology to meet the need for dealing with gases associated with offshore oil production. Recent environmental legislation prohibits the continued flaring of such associated gases and oil companies are thus seeking alternatives.

The Group has set up an after-market organisation for gas systems designed to handle preventative maintenance, spare parts and supervision, and commissioning at yards. The rapid growth in new product sales in recent years is the basis for this opportunity.

Inert gas systems

Turnover fell slightly to Pounds Sterling 16.5 million (2005: Pounds Sterling 16.6 million). Operating profit fell to Pounds Sterling 0.8 million (2005: Pounds Sterling 1.0 million). The reduction in sales and profit followed the delayed order intake of offshore contracts and some unusually high costs of product development.

This business has for a while been focusing on improving its product offering and market share in the offshore sector on FPSOs and on LNG and LPG carriers, not least because of the weakness in the demand forecast for tankers from 2009 onwards. For the first time in 2005/06 the order intake for inert gas plant for FPSOs and gas ships exceeded that for tankers, an indication of the success in targeting these sectors.

Within the next few months the development and testing of the inert gas plant for the largest sizes of LNG carrier will have been completed in the specialist test facility in Moss, Norway.

The move of standard products to Suzhou in China has continued with the proportion of components sourced domestically increased to 95%. As a consequence the number of manufacturing employees in the Moss plant has been reduced, and the renegotiated lease terms for the Moss site allow for flexibility in the amount of factory space in future years.

Pump systems

Turnover rose to Pounds Sterling 44.0 million (2005: Pounds Sterling 38.2 million). Operating profit rose to Pounds Sterling 3.8 million (2005: Pounds Sterling 2.4 million). Both deepwell and conventional pumps improved profitability with increases in market share in some key areas plus the benefit of the cost saving by rationalising sales and order processing out of Norway for pump room systems and spares completed in 2004/05.

For deepwell pumps turnover increased by 36% to Pounds Sterling 24.9 million driven by increased market share for our new ranges of oil-lubricated cargo pumps on ships and the beginning of the upturn in the offshore business. Order intake was well ahead of sales at nearly Pounds Sterling 40.0 million powered by orders for deepwell pumps for LPG ships, where the Group enjoys a high market share, and the success of the offshore pump unit based in Norway. This relatively young unit is responsible for sales to FPSOs of Hamworthy deepwell and conventional pump room pumps and third party products. Working with oil companies, oil contractors and shipyards it had its most successful year ever since its inception, in total taking orders for products on six FPSO projects destined for fields as far apart as China and Mexico.

The rest of the pump business comprises conventional pump room cargo pumps, fire fighting pumps, and general purpose engine room pumps together with replacement pumps and spares. The order intake at Pounds Sterling 21.9 million was modestly ahead of sales at Pounds Sterling 19.1 million but a few large orders were deferred into the early part of 2006/07 including the Group's first orders for pump room pumps on VLCCs worth around Pounds Sterling 5 million. The engine room pump order intake was particularly strong notably for offshore and replacement marine applications both of which are higher margin products.

This strong performance on order intake has put pressure on capacity at both the Singapore plant for conventional pumps and the Aalborg, Denmark, plant for deepwell pumps. Capacity has been increased in both plants and this will be accelerated in the current year. In Singapore capacity will be increased immediately by 25% by a range of measures with a further increase in late 2006 after the installation of two new CNC machining centres costing Pounds Sterling 0.9 million. In Aalborg 2006 will see an expansion in assembly space. Output from both plants has already been assisted by an increase in sub-contract, particularly in the case of Aalborg where more machined stainless steel castings have been purchased from China.

The Singapore business is exposed to a limited extent to increasing bronze prices stemming particularly from the copper content. Since these are suffered also by competitors the impact is mitigated, but for some long lead time contracts the business is unable to secure supplies of bronze ingots as far ahead as required by the delivery. It is estimated that the cost of bronze ingot inflation in 2005/06 was no more than Pounds Sterling 150,000.

Wastewater systems

Turnover rose to Pounds Sterling 18.8 million (2005: Pounds Sterling 14.3 million). Operating profit rose to Pounds Sterling 2.9 million (2005: Pounds Sterling 2.2 million). The increase was driven by sales of advanced membrane bioreactor and conventional sewage treatment systems for the cruise sector, for a superyacht and for the second of the Type 45 destroyers for the Royal Navy. Pounds Sterling 1.0 million of the turnover increase arose from a high pressure compressor business which falls within the responsibility of wastewater systems. It is a mature niche product range which finds application in the exploration and production of oil and gas offshore and on land. In total its sales were Pounds Sterling 4.0 million of that accounted for within the wastewater systems product group.

The rate of building of new cruise ships moved further into its recovery phase. For larger cruise ships over 60,000 gross tonnes the rate of delivery is expected to rise from four in 2005 to an average of twelve annually through the period from 2008 to 2012. Some of these ships will be fitted with conventional waste treatment and others with advanced membrane treatment. The Group expects that the proportion of the more expensive advanced system will increase in the latter part of the period. Hamworthy's intention is to retain its share of wastewater systems on these cruise ships at around 50% and that figure is borne out by the orders for wastewater systems so far placed for cruise ships on order.

The Group continues to maintain a leading market share on the ships ordered by all parts of the Carnival Group, the world's largest cruise line. An important breakthrough was to obtain the first order on a Royal Caribbean cruise ship for retrofit of an advanced system. The order was obtained and the contract concluded during the year. Royal Caribbean is carrying out retrofit of its fleet and the Group believes it can obtain a respectable share of this business following a successful first contract.

The high volume small wastewater business for merchant vessels continues to grow with unit sales up to 490, 15% above the prior year. This success is based on high quality, low cost production from the Suzhou facility of the Group which now manufactures all wastewater systems and the majority of inert gas systems. This facility increased its output by 33% above the prior year.

The environment, health and safety

The Group intends to seek formal accreditation to environmental standard ISO 14001 for all sites during 2007/08. As a pilot the site at Moss, Norway, will undergo final assessments to this standard during 2006/07. During 2005/06 there were no notifiable environmental impacts at any Hamworthy site.

Solid progress was made to achieve the target of gaining accreditation to the Occupational Health and Safety Assessment Series (OHSAS 18001) for all Hamworthy manufacturing sites before the end of 2006/07. Three sites will complete their final external assessment this summer with the other sites being completed by the autumn. The health and safety performance of each site is continually reviewed and compared with the industry benchmark. During the year there were no fatalities or major injuries on any site.


The Group is now seeing increased prospects for selective acquisitions. Given the satisfactory growth rate achieved organically management is not under pressure to conclude an acquisition which is not strategically desirable and sensibly priced.


The Group is well positioned to continue growing strongly, exploiting its global presence and innovation capabilities to target higher growth market segments or entirely new market opportunities. The Group's highly qualified, experienced and dedicated employees provide a key foundation for its continued growth.

The strength of the current order book gives us confidence that the results for the new year may exceed the Company's expectations. In addition, the Company intends, in due course, to complement organic growth by strategic, well priced acquisitions.

Kelvyn Derrick, Chief Executive

Financial review

Hamworthy has had a successful year, delivering strong revenue and profits growth and consolidating its future prospects with increased order books across all product groups.

Operating performance

Turnover increased by 20.3% to Pounds Sterling 137.0 million (2005:Pounds Sterling 113.9 million) with three of the Group's four product areas achieving double digit growth. Operating profits before amortisation rose 21.5% to Pounds Sterling 9.1 million (2005: Pounds Sterling 7.5 million) and after amortisation by 22.5% to Pounds Sterling 8.9 million (2005:Pounds Sterling 7.3 million).

The Group generated 69% of its operating profits before central costs in reporting currencies other than sterling the most significant being Danish Kroner, Norwegian Kroner, Singapore dollars and Chinese Renminbi. The average rates for these currencies have strengthened by 2.2% compared to prior year yielding a Pounds Sterling 0.2 million increase in operating profits.

Profit before taxation rose 28.9% to Pounds Sterling 8.5 million (2005: Pounds Sterling 6.6 million) partly as a result of the Group's net interest charge being reduced following receipt of the proceeds of the December 2005 share placing.

The Group's undelivered order book increased from Pounds Sterling 121.0 million to Pounds Sterling 206.8 million.


The tax charge of Pounds Sterling 2.0 million (2005: Pounds Sterling 1.0 million) represents an effective rate of 24.0% (2005: 15.5%). The Group generates taxable profits in jurisdictions where the underlying rate of corporation tax is lower than UK. The most notable differences are in China and Singapore. The effect of these lower underlying foreign tax rates is 2.9% of the profit before taxation. The charge is further reduced by Pounds Sterling 0.3 million (2005: Pounds Sterling 0.9 million), equal to a rate effect of 3.4%, due to allowances not recognised as deferred tax assets at the previous year end.

Earnings per share

Basic earnings per share fell from 18.4p per share to 16.7 p per share. This fall is the result of issue of new shares at the time of the Company's flotation on the AIM in July 2004. Adjusting for that share issue in the prior year's figures results in a 10.6% rise from 15.1p to 16.7 p in the pro forma basic earnings per share. The Company issued 6.1 million shares in December 2005 which have increased the weighted average number of shares in the basic earnings per share calculation by 1.78 million. Note 5 provides details of these calculations.


The directors are recommending a 4.2p per share final ordinary dividend. If approved by shareholders this would result in a total dividend declared in respect of the year of 6.0p per share when added to the interim dividend of 1.8p per share paid in December 2005. In 2005 a final dividend of 3.24p was paid subsequent to the year end in respect of the period from date of flotation to 31 March 2005.

Financing, cash flow and treasury

All of the Group's operations give major focus to their cash flows and the management of working capital. The Group is a strong generator of cash although its net cash positions are subject to volatility in the short term. Net cash flow from operating activities was Pounds Sterling 12.6 million (2005: Pounds Sterling 8.5 million).

In December 2005 the Company raised Pounds Sterling 17.5 million before costs through the issue of 6.1 million ordinary shares. This was done to support growth in the order book and its consequential bonding and working capital requirements and provide a more convincing demonstration of our ability to execute a growing order book of larger contracts. The placing helped the Company to increase its advance payment bonding facilities up to Pounds Sterling 80 million.

The net funds position at the year end was Pounds Sterling 27.4 million (2005: Pounds Sterling 2.5 million).

In addition to the local management of cash and working capital the Group operates a central treasury function. All principal operating companies participate in a cash pooling arrangement providing a more efficient use of funds across activities. The Group hedges approximately 2/3 of the interest rate exposure on its term debt. This caps the LIBOR rate within the interest charge at 6.39% on the proportion of debt hedged.

The Group operates globally and each business can contract in numerous currencies. The Group's policy is to hedge all currency transaction exposures at the time of entering into the contractual commitment back to the relevant contracting business' local currency. This is operated through the central treasury function. The Group's principal operating businesses routinely reconcile their exposures and related hedges and report that to the treasury function.

The Group's primary banking and finance facilities are provided by Barclays Bank plc under the terms of a Facilities Agreement originally dated December 2002 as since amended. The facility includes a Pounds Sterling 9.0 million five year term debt of which Pounds Sterling 6.7 million remains outstanding (2005: Pounds Sterling 8.3 million) and a revolving and related ancillary facility for overdraft, foreign exchange transactions and letters of credit, bonds, guarantees and indemnities. Coincident with the share issue, Barclays further extended the facility for bonds, guarantees and indemnities in December 2005 to accommodate the Group's growing requirements.

Accounting policies

The Group has adopted for the first time FRS17 Retirement benefits and FRS21 Events after the balance sheet date. This gives rise to prior year adjustments set out in note 3.

International Financial Reporting Standards (IFRS)

The directors announced in last year's report and accounts they expected to adopt IFRS as the basis for financial reporting for the year ended 31 March 2007. That remains the directors' intent and a programme of work is underway to plan for that conversion. A conversion statement showing the effect of the changes on the March 2006 financial statements will be produced at or before the date of reporting the Group's interim results for September 2006.

Paul Crompton, Finance Director

Consolidated Profit and Loss Account
for the year ended 31 March 2006

Unaudited Restated
2006 2005
Pounds Pounds Pounds Pounds
Sterling Sterling Sterling Sterling
Note '000 '000 '000 '000

Turnover 2 136,996 113,896
Cost of sales (103,037) (85,225)
--------- ---------

Gross profit 33,959 28,671
Distribution expenses (1,699) (1,353)
Administrative expenses (23,316) (20,015)
--------- --------
(25,015) (21,368)
--------- ---------

Operating profit 8,944 7,303
Net interest payable (434) (701)
--------- ---------

Profit on ordinary
activities before taxation 8,510 6,602
Tax on profit on ordinary
activities 4 (2,043) (1,026)
--------- ---------

Profit on ordinary
activities after taxation 6,467 5,576
Equity dividends (1,866) 0

--------- ---------
Retained profit for the
financial year 4,601 5,576
--------- ---------
--------- ---------

Basic earnings per share 5 16.7p 18.4p
Diluted earnings per share 5 16.1p 18.0p

There is no difference between the profit on ordinary activities before taxation and the profit for the year stated above and their historical cost equivalents.

Statement of Group Total Recognised Gains and Losses
for the year ended 31 March 2006

Unaudited Restated
2006 2005
Pounds Pounds
Sterling Sterling
Note '000 '000

Profit for the financial year 6,467 5,576
Currency translation differences on
foreign currency net investments 691 139
Actuarial loss in pension scheme (8) (250)
Movement in deferred tax on pension
deficit 41 431
--------- ---------
Total recognised gains for the year 7,191 5,896
Prior year adjustment 3 (476)
Total gains recognised since last
annual report 6,715

The prior year amounts have been restated to reflect the adoption of FRS 17 and FRS 21 and to reallocate certain overhead costs as set out in note 3.

Balance Sheet
as at 31 March 2006

Group Company
Unaudited Unaudited
Unaudited Restated Unaudited Restated
2006 2005 2006 2005
Pounds Pounds Pounds Pounds
Sterling Sterling Sterling Sterling
'000 '000 '000 '000

Fixed assets
Intangible assets Goodwill 6,660 7,082 0 0
goodwill (913) (1,220) 0 0
---------- --------- --------- ---------
5,747 5,862 0 0
Tangible fixed
assets 5,685 5,762 23 24
Investments 0 0 22,334 22,334
---------- --------- --------- ---------
11,432 11,624 22,357 22,358
---------- --------- --------- ---------
Current assets
Stocks 33,795 22,181 0 0
Debtors 28,794 16,961 10,547 8,790
Cash at bank and in hand 34,268 11,337 30,398 5,027
---------- --------- --------- ---------
96,857 50,479 40,945 13,817
Creditors: Amounts falling
due within one year (65,940) (41,488) (32,675) (23,633)

---------- --------- --------- ---------

Net current assets/
(liabilities) 30,917 8,991 8,270 (9,816)
---------- --------- --------- ---------

Total assets less current
liabilities 42,349 20,615 30,627 12,542
Creditors: Amounts falling
due after more
than one year (4,494) (6,172) (4,494) (6,172)
Provisions for liabilities
and charges (3,722) (2,647) 0 0
Pension scheme liability (1,213) (1,109) 0 0
---------- --------- --------- ---------
Net Assets 32,920 10,687 26,133 6,370
---------- --------- --------- ---------
---------- --------- --------- ---------

Capital and reserves
Share capital 2,157 1,850 2,157 1,850
Share premium account 16,686 85 16,686 85
Profit and loss account 14,077 8,752 7,290 4,435
---------- --------- --------- ---------
Equity shareholders' funds 32,920 10,687 26,133 6,370
---------- --------- --------- ---------
---------- --------- --------- ---------

The prior year amounts have been restated to reflect the adoption of FRS 17 and FRS 21 as set out in note 3.

Consolidated Cash Flow Statement
for the year ended 31 March 2006

Unaudited Unaudited
2006 2005
Pounds Pounds Pounds Pounds
Sterling Sterling Sterling Sterling
Note '000 '000 '000 '000

Net cash inflow from
operating activities 6 12,602 8,558
Returns on investments
and servicing of finance
Interest received 351 131
Interest paid (668) (752)
Issue costs of new bank loans 0 (606)
--------- ---------
Net cash outflow from returns
on investments &
servicing of finance (317) (1,227)
Taxation (1,027) (814)
Capital expenditure and
financial investment
Purchase of tangible fixed
assets (824) (685)
Sale of tangible fixed assets 19 67
--------- ---------
Net cash outflow for capital
expenditure and
financial investment (805) (618)
Purchase of subsidiary
undertakings 0 (786)
Cash acquired with subsidiary
undertakings 0 273
--------- ---------
Net cash outflow for
acquisitions 0 (513)
Equity dividends paid to
shareholders (1,866) 0
--------- -----------
Net cash inflow before use of
liquid resources
and financing 8,587 5,386
Issue of ordinary share capital 17,500 1,300
Costs of share issue (592) (56)
Repayment of loans (1,600) (1,200)
Increase in borrowings 0 790
--------- ---------
Net cash inflow from
financing 15,308 834
--------- -----------
Increase in net cash 7 23,895 6,220
--------- -----------
--------- -----------

Notes to the Accounts

1. Nature of financial information

The financial statements for Hamworthy plc have yet to be approved for the year ended 31 March 2006. The financial information set out in this announcement does not constitute the Company's statutory accounts for the year ended 31 March 2006 or 31 March 2005. The financial information for the year ended 31 March 2005 is, subject to the restatements as set out in note 3, derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 237 (2) or Section 237 (3) of the Companies Act 1985. The statutory accounts for the year ended 31 March 2006 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The preliminary results have been prepared in accordance with applicable accounting standards. The particular accounting policies adopted are, except for first adoption of FRS 17 and FRS 21 as set out in note 3, the same as those adopted in the financial statements for the year ended 31 March 2005.

2. Segmental information
2006 2005
Pounds Pounds
Sterling Sterling
'000 '000
Turnover by class of business:
Pump systems 43,953 38,192
Gas systems 57,745 44,838
Wastewater systems 18,840 14,282
Inert gas systems 16,458 16,584
--------- ---------
136,996 113,896
--------- ---------
--------- ---------

Turnover by destination:
United Kingdom 8,568 9,001
Europe 47,985 54,003
Middle and Far East 72,919 43,463
Rest of world 7,524 7,429
--------- ---------
136,996 113,896
--------- ---------
--------- ---------

Turnover by country of origin:
United Kingdom 20,385 14,341
Europe 101,122 90,198
Middle and Far East 11,731 6,852
Rest of world 3,758 2,505
--------- ---------
136,996 113,896
--------- ---------
--------- ---------

Operating profit by class of
Pump systems 3,819 2,442
Gas systems 3,001 2,666
Wastewater systems 2,882 2,232
Inert gas systems 779 1,039
Central costs including goodwill
amortisation (1,537) (1,076)
--------- ---------
8,944 7,303
--------- ---------
--------- ---------

Operating profit by location:
United Kingdom 3,219 2,335
Europe 4,210 3,648
Middle and Far East 1,490 1,257
Rest of world 25 63
--------- ---------
8,944 7,303
--------- ---------
--------- ---------

Net assets including goodwill by
United Kingdom 32,476 6,223
Europe (5,340) (1,873)
Middle and Far East 5,308 6,359
Rest of world 476 (22)
--------- ---------
32,920 10,687
--------- ---------
--------- ---------

3. Prior year adjustment

The Group has adopted for the first time FRS 17 Retirement benefits and FRS 21 Events after the balance sheet date. This gives rise to prior year adjustments and the restatement of the previous year's financial statements. The effect of these changes on the Group's opening shareholders' funds is shown below. The effect on the Company's opening shareholders funds is to add back the Pounds Sterling 1,200,000 final dividend declared in respect of the financial year to 31 March 2005.

FRS 17 FRS 21 Total
Pounds Pounds Pounds
Sterling Sterling Sterling
'000 '000 '000

Adjustment to opening shareholders
funds at 1 April 2004 (849) 0 (849)

Adjustment to the profit and
loss account for the year ended
31 March 2005 192 1,200 1,392

Adjustment to the statement of
total recognised gains and
losses for the
year ended 31 March 2005 181 181

Adjustment to opening
shareholders funds 1 April 2005 (476) 1,200 724

The adoption of FRS 17 results in a decrease in staff costs of Pounds Sterling 357,000 (2005: Pounds Sterling 212,000), an increase in other financing charges of Pounds Sterling 58,000 (2005: Pounds Sterling 20,000), an increase in the profit before tax for the year of Pounds Sterling 299,000 (2005: Pounds Sterling 192,000) and an additional increase in the total recognised gains and losses of Pounds Sterling 33,000 (2005: Pounds Sterling 181,000).

Under FRS 21 recognition of the final declared dividends of Pounds Sterling 1,811,895 in respect of the year ended 31 March 2006 and Pounds Sterling 1,200,000 in respect of the year ended 31 March 2005 is deferred until the date of approval by the shareholders. This therefore increases the retained profits for the year ended 31 March 2006 and 31 March 2005 respectively and increases the closing shareholders' funds at those balance sheet dates by these same amounts.

The Group has also changed the allocation of certain overhead costs as between cost of sales and administrative expenses in order to better reflect the nature of these costs. These changes increase cost of sales and decrease administrative expenses by Pounds Sterling 237,000 in the year to 31 March 2005 compared to those previously reported.

4. Tax on profit on ordinary activities

2006 2005
Pounds Pounds
Sterling Sterling
'000 '000
The taxation charge/(credit) comprises:
Overseas tax 514 435
UK tax/Group relief payable to former
group companies 541 489
Adjustments in respect of prior years 131 (34)
--------- ---------
Total current tax 1,186 890
Deferred tax in respect of UK companies 198 11
Deferred tax in respect of overseas
companies 659 125
--------- ---------
Tax on profits on ordinary activities 2,043 1,026
--------- ---------
--------- ---------

The tax assessed for the period differs from that resulting from
applying the standard rate of corporation tax in the UK of 30%
(2005: 30%)

The differences are explained below
2006 2005
Pounds Pounds
Sterling Sterling
'000 '000

--------- ---------
Profit on ordinary activities before tax 8,510 6,602
--------- ---------
Tax @ 30% thereon 2,553 1,981
Effect of:
Expenses not deductible for tax purposes 69 77
Accelerated capital allowances
and other timing differences (1,322) (950)
Changes in respect of prior year's charge 131 (34)
Lower tax rate on overseas earnings (245) (184)
--------- ---------
Total current tax 1,186 890
--------- ---------
--------- ---------

The total tax charge for the year is reduced by allowances brought forward which were not recognised as deferred tax assets at 31 March 2005. This is not expected to have any material effect on future total tax charges.

5. 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 in issue during the year.

For diluted earnings per share the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential ordinary shares where, on options granted, exercise price is less than the average market price of the Company's ordinary shares during the year.

In July 2004 as part of the Company's flotation the fully paid nominal value of share capital was increased from Pounds Sterling 550,000 to Pounds Sterling 1,850,000. A pro forma earnings per share figure has been calculated which assumes the share capital immediately post flotation had been in existence from the start of that financial year The directors believe presentation of this pro forma figure provides a more informative reflection of the earnings per share performance.

On 16 December 2005 the company issued a further 6,140,351 shares.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

Year Ended 31 March 2006 Year Ended 31 March 2005
Weighted Weighted
average average
Earnings no Per Earnings no Per
Pounds of share Pounds of share
Sterling shares amount Sterling shares amount
'000 000's pence '000 000's pence

Basic EPS 6,467 38,783 16.7 5,576 30,375 18.4
Effect of
securities 1,361 566
--------- ------- ------ --------- -------- ------
Diluted EPS 6,467 40,144 16.1 5,576 30,941 18.0

Proforma earnings
per share
Basic EPS 6,467 38,783 16.7 5,576 30,375 18.4
Increase in number
of shares in the
period prior
to flotation 6,625
--------- ------- ------ --------- -------- ------
Pro forma basic
EPS 6,467 38,783 16.7 5,576 37,000 15.1
--------- ------- ------ --------- -------- ------
--------- ------- ------ --------- -------- ------

6. Cash flow from operating activities

The consolidated cash flow has been prepared using the temporal method by translating the cash flows of overseas subsidiaries at the rates applicable for the monthly reporting period in which they fall. In the audited financial statements for the year ended 31 March 2005 the closing rate/net investment method was used. This translated the cash flows of overseas subsidiaries at the period end closing rate of exchange. This change has been made in order to eliminate translation exchange differences from the individual cash flows as the majority of the group's cash flows are designated in currencies other than sterling.

2006 2005
Pounds Pounds
Sterling Sterling
Group '000 '000

Operating profit 8,944 7,303
Depreciation of tangible fixed assets 1,161 1,169
Amortisation of intangible fixed assets 115 156
Profit on sale of fixed assets (16) (54)
(Increase) in stocks (10,422) (9,224)
(Increase)/decrease in debtors (11,899) 31,972
Increase/(decrease) in creditors 24,967 (22,958)
(Decrease)/increase in provisions (248) 194
--------- ---------
Net cash inflow 12,602 8,558
--------- ---------
--------- ---------

7. Reconciliation of movement in net debt

As at As at
1 April Cash Non-cash 31 March
2005 Flow movements 2006
Pounds Pounds Pounds Pounds
Sterling Sterling Sterling Sterling
'000 '000 '000 '000

Cash at bank and in hand 11,337 23,401 (470) 34,268
Overdrafts (1,044) 494 (13) (563)
10,293 23,895 (483) 33,705

Debt due within one year (1,600) (200) 0 (1,800)
Debt due after one year (6,172) 1,800 (122) (4,494)
Total debt (7,772) 1,600 (122) (6,294)

Net funds 2,521 25,495 (605) 27,411

Non-cash movements relate to exchange differences and the unamortised issue costs of new bank loans.

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