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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Bateman Lit | LSE:BNLN | London | Ordinary Share | NL0000683829 | EUR0.10 |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 2.90 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
TIDMBNLN RNS Number : 7645P Bateman Litwin N.V. 30 March 2009 BATEMAN LITWIN N.V. ("Bateman Litwin" or "the Company" or "the Group") HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2008 Amsterdam, the Netherlands, 31 March 2009 - Bateman Litwin (AIM: BNLN) today announces its half year results for the six month period ended 31 December 2008. Bateman Litwin is a supplier of technology, engineering, procurement and project management services to the world's energy and resource industries. Financial Summary * Revenue of US$342.0 million (1H 2007/08: US$444.3 million) * Normalised1 EBITDA of US$3.4 million (1H 2007/08: US$24.6 million) * Normalised1 profit before tax of US$3.7 million (1H 2007/08: US$18.1 million) * Pre-tax exceptional operating charges of US$13.6 million (1H 2007/08: nil): * US$8.5 million provision for a Delta-T legacy project * US$5.1 million provision for a terminated European waste to energy project * Pre-tax exceptional non-operating (and non-cash) exceptional charges of US$20.9 million (1H2007/08: US$7.2 million gain): * * US$12.5 million hedging loss (1H2007/08: US$7.2 million gain) * US$8.3 million Delta-T goodwill impairment charge * Reported2 loss before tax of US$30.8 million (1H 2007/08: US$25.3 million profit before tax) * Normalised1 EPS (diluted) of 0.8 US cents (1H 2007/08: 15.0 US cents) * Reported2 loss per share (diluted) of 26.7 US cents (1H 2007/08: EPS US 20.0 US cents) * Backlog as at 31 December 2008 US$1.0 billion (FY2007/08: US$1.3 billion) 1Normalised figures are calculated before exceptional items 2Reported figures are calculated after exceptional items Operational Developments * The Group's workforce was reduced by 5.0 per cent over the period. Since 31 December 2008, the workforce has been decreased by a further 4.6 per cent, and this process is ongoing * An additional eleven Delta-T legacy projects were completed during the period. The final two legacy projects are expected to complete imminently * After period end, the Group received contract awards in excess of US$100 million Funding Developments * The Company has agreed revised banking covenants that were previously in breach following the announcement of its 2007/08 financial results * In the context of current trading and the global banking crisis, management is taking steps to prevent a breach of the revised covenants and to secure further banking facilities * After the period end, BSG Resources provided a US$7 million loan, bringing the total loan provided by BSG Resources to US$17 million Commenting on the results, David Lamont, CEO of Bateman Litwin, said: "The new executive team continues to address the considerable challenges of the inherited contracts whilst operating in a deteriorating economic environment. We are committed to establishing a culture of operational discipline leading to the successful execution of all projects. Consequently, there have been a number of changes to the executive team during and after the period under review. Our priority is to close out legacy issues across the Group, which I believe we have begun to demonstrate. We are pleased to announce the completion of nearly all Delta-T inherited projects. We have withdrawn from a legacy contract in Europe that would have failed to create adequate returns to shareholders. Finally, we have re-negotiated the banking covenants that were previously in breach following the publication of our 2007/08 results, although we recognise the challenges of securing additional facilities in the current environment. The Group continues to benefit from a backlog of over US$1 billion. The markets in which we operate, however, remain challenging and addressing legacy issues has come at a higher cost than originally expected. As a result, the Board is targeting the Group to break even at the EBITDA level for the year ending 30 June 2009. We are, however, encouraged by recent contract awards in all our business units, including three technology awards, totaling over US$100 million. Furthermore, we have reasonable expectations of significant follow on work from projects currently underway. We therefore look to the medium and long term with a continued sense of optimism." Enquiries: +---------------------------------------------+---------------------------+ | Bateman Litwin | Tel: + 44 (0)20 7799 8307 | | David Lamont, Chief Executive Officer | | | Davis Larssen, Chief Financial Officer | | | Ingrid Boon, Investor Relations Manager | | | | | +---------------------------------------------+---------------------------+ | Credit Suisse Securities (Europe) Limited | Tel: +44 (0)20 7888 8888 | | Nominated advisor and joint broker | | | Jon Grussing | | | Will MacLaren | | | | | +---------------------------------------------+---------------------------+ | Oriel Securities Limited | Tel: +44 (0)20 7710 7600 | | Joint broker | | | Richard Crawley | | | Pelham Public Relations | | +---------------------------------------------+---------------------------+ | Archie Berens | Tel: +44 (0)20 7337 1509 | +---------------------------------------------+---------------------------+ | | | +---------------------------------------------+---------------------------+ Chairman's Statement Introduction The Board is committed to improving operational performance and financial accountability. Cash generation, cost management, robust customer negotiations and disciplined execution of our US$1bn backlog remain our priority, notwithstanding the current economic environment. Financial Performance In the six months ended 31 December 2008, the Group reported revenue of US$342.0 million (1H 2007/08: US$444.3 million). Normalised EBITDA was US$3.4 million (1H 2007/08: US$24.6 million). Pre-tax operating exceptional charges for the period were US$13.6 million (1H 2007/08: nil). These consisted of a US$8.5 million provision for a Delta-T legacy project and a US$5.1 million provision for a European waste to energy project. There were pre-tax non-operating (and non-cash) exceptional charges totaling US$20.9 million (1H 2007/08: US$7.2 million gain) for a US$8.3 million Delta-T impairment charge (1H 2007/08: nil) and a US$12.5 million hedging loss (1H 2007/08: US$7.2 million hedging gain). The normalised profit before tax was US$3.7 million, compared to US$18.1 million for the comparable period. The reported loss before tax was US$30.8 million compared to US$25.3 million profit before tax for the comparable period. The was a tax credit for the six months ended 31 December 2008 of US$2.0 million (1H 2007/08: US$3.3 million tax expense). Reported loss after tax for the period was US$28.8 million versus US$22.0 million profit after tax in the comparable period. Normalised diluted earnings per share for the six months ended 31 December 2008 were 0.8 US cents (1H 2007/08:15.0 US cents per share). Reported diluted loss per share for the six months ended 31 December 2008 was 26.7 US cents (1H 2007/08:20.0 US cents earnings per share). No dividend was declared for the half year (1H 2007/08: 3.5 US cents per share). The Group backlog as at 31 December 2008 was approximately US$1.0 billion (FY2007/08: US$1.3 billion). Board and Management Changes During the period, we were pleased to ratify the appointment of Davis Larssen as the Group Chief Financial Officer effective as of 19 December 2008. Max Abitbol, formerly the Chief Executive Officer of Litwin, Eyal Cohen, formerly Chief Financial Officer of Bateman Litwin and Steve Major, formerly Bateman Litwin Chief Operating Officer, each stepped down as executive directors and left the Company during the period. In addition to the appointment of Davis Larssen as Chief Financial Officer, Thomas (Mac) McDaniel was appointed as the Managing Director of Delta-T and the Americas, effective as of 15 September 2008, whilst Paul Grogan joined the Company as the Group Human Resources Director, effective as of 1 September 2008. Operational Update We are actively addressing the underperforming areas of the business. Most notably, we are pleased to report progress on the following legacy issues. Energy Project in Europe The Company has withdrawn from a waste to energy project in Europe. Following a thorough review of the project's risk profile it was concluded that the project would have failed to create adequate returns for our shareholders. A negotiated settlement with the client was agreed to terminate the contract. Delta-T Legacy Projects During the period, an additional eleven Delta-T legacy projects were completed. In total, the seventeen legacy projects completed to date are performing at or above nameplate capacity. The final two projects are expected to conclude in the near future, dramatically reducing the division's operational and financial risk profile. A provision of US$8.5 million for a Delta-T legacy project was taken during the period. The charge related to rework on several tanks and the total rebuild of one tank, following their failure despite the tanks having previously been approved by tank inspectors. Whilst the issue is subject to a claim, a provision has been made. In line with IFRS requirements, the Company conducted a half-yearly review of the value of its goodwill and intangibles. In light of the continued uncertainty in the bio-ethanol market, the Board considered a US$8.3 million Delta-T goodwill impairment charge was appropriate. The bio-ethanol market, however, continues to be volatile. Recent statements by the new US administration suggest that the Renewable Fuels Standard, which mandates the volume of renewable fuel required to be blended with gasoline, may be increased from 10 per cent to 15 per cent. This should directly strengthen demand for bio-ethanol. Reduction in cost base The Group initiated a review to right size the organisation. During the first half, the Group's workforce was reduced by 5.0 per cent to 1,943. Rationalisation is continuing and, since the period end, the workforce has been reduced by a further 4.6 per cent to 1,853. Strength of Backlog As the new management team closes out legacy issues, I am confident that their focus on managing contracting exposure and ensuring diligent and controlled execution of our US$1 billion backlog will increase shareholder value. After the period end, the Group secured over US$100 million of contract awards. Details are given in the operational review. Funding Developments The Company is pleased to have agreed revised banking covenants that were previously in breach following the announcement of its 2007/08 financial results. Management is very focused on operating within the Group's covenants although, given current trading and the economic background, we acknowledge this will be challenging. Furthermore, in the context of the global banking crisis, additional banking facilities are proving harder to secure. After the period end, BSG Resources provided a US$7 million loan as part of the US$10 million credit facility negotiated in October 2008. Following a previous US$10 million loan granted in October 2008 this brings the total loan provided by BSG Resources to US$17 million. Outlook Our core proposition to re-build sustainable shareholder value is firstly, to resolve outstanding legacy issues; secondly, to instill a sense of operational discipline and rigour that suffered historically as the Company focused on top line growth; and finally, once the business has been stabilised, which I believe we are well on the way to achieving, to focus on extracting the maximum possible value from the Group's technology expertise. Roy A Franklin, Chairman CEO Review We are prioritising disciplined project execution as well as urgently reducing business risk. This entails focusing on our core Engineering and Technology capabilities while ensuring an acceptable risk profile in relation to our contracting exposure. In the first half of this financial year, we have remained cash focused and cost conscious. Our progress largely revolves around internal Group improvements specifically on the following key elements: * * Developing a senior management team with appropriate ability and a co-ordinated structure * Being more selective with regards to projects * Prioritising the successful execution of the backlog * Frequent and detailed review of project performance * Regular detailed senior management engagement across the Group * Identifying potential issues early and resolving them quickly * Imposing strict discipline and common procedures * Simplifying the Group structure to facilitate internal communications and co-ordination of business activities across business units Strength of Backlog Of our US$1 billion backlog, circa 75 per cent represents large infrastructure type projects with secured funding. We have reasonable expectations of meaningful follow on work in this category. The largest such contract is our project to develop a fertilizer grade phosphoric acid plant in Saudi Arabia for the Ma'aden Phosphate Company - Government owned organization. The Group has recently received two additional awards for this project together worth over US$76 million. Other projects include power contracts with a backlog of approximately US$130 million as well as an oil and gas project in the FSU and a project to develop storage tanks in North Africa. The remaining 25 per cent of the backlog focuses on the completion of technology and other smaller engineering contracts. This element of the backlog has not expanded as fast as anticipated as customers are deferring further investment decisions given the marked change in the world economy. There is an increasing quantity of pending bids and contract awards in the global market. This has arisen for a number of reasons including: a severe reduction in project financing availability, declining commodity prices, project postponements due to an expected fall in capital expenditure costs and customers choosing to preserve cash. Furthermore, customers are slowing progress on ongoing projects for many of the same reasons. Whilst this has decreased demand for our services in the short term, the medium to long term can be viewed with a degree of optimism, reinforcing the value of our current focus on execution excellence and efficiency. HSE During the first half, the Group accumulated over four million hours of work incurring only four very minor injuries. Furthermore, as at 31 December 2008 the total hours worked on the Kashagan project reached just under 9 million hours without a single lost time injury. We are proud of these achievements, however, we are not complacent and we are endeavouring to improve our HSE performance in the second half of the financial year. Strategy Our immediate focus is to stabilise the Group by closing out legacy issues and establishing a disciplined execution culture. This has naturally resulted in a reduction of new business activity, especially given the current market slowdown. We continue to bid selectively, however, for valued projects. In line with our renewed strategy, projects must be based on our core Technology and/or Engineering capability and must not expose the Group to inequitable risk. With this in mind, the Company continues to undertake new engineering, procurement and construction ("EPC") projects but with great attention to contracting strategy, active partnering and appropriate risk distribution. Our Technology and Engineering elements create a richer revenue stream than that of high volume pass through procurement and construction, without the inherent risk and exposure. Improved profit and cash generation will position the Group to reinvest in many of the exciting applications and extensions of our existing Technology and Engineering bases. Operations Overview Bateman Litwin provides solutions for complex industrial projects in seven industry segments. These segments are: * * Oil and gas * Power * Waste to energy * Chemical technologies * Solvent extraction and electro-winning technologies * Coal tar technology * Ethanol technology The Group consists of three business units that deliver engineering and technology expertise to clients around the world. TEM Bateman Litwin's Technologies, Eastern Europe and Middle Eastern ("TEM") division provides proprietary solvent extraction, electrowinning and chemical technology solutions to customers in the mineral and metals industries worldwide. In addition, it provides engineering management services for a wide range of industrial projects to clients in Eastern Europe and the Middle East. TEM was restructured into its current format during the period following several top management departures. Rafi Kleinberger who was formally head of Bateman Litwin's Solvent Extraction business unit now heads the division. Rafi has vast experience in operations management as well as an in-depth understanding of the Company's technology know-how. The division contributed 30 per cent to the Group's revenue during the period. This arose largely from an ongoing oil and gas project in the FSU as projects in the minerals and metals industries experienced delays due to clients assessing the extent of the current economic downturn before committing to new investments. During the period, TEM focused sharply on costs and reduced employee numbers by 18 per cent. In the first half, TEM completed a solvent extraction demonstration plant for the extraction of metals for Japanese Pacific Metal Corporation ("Pamco"), allowing the business unit to enter the fast growing Japanese market. Pamco is one of the largest metal producers in the world. Our research and development team formulated the specific solvent extraction process. This completes the first stage of the project which started in January 2008 under a very tight schedule. After the period end the division was pleased to have been awarded two new projects. The Solvent Extraction Business Unit signed a memorandum of understanding ("MOU") for US$36.8 million with Vale, Chile to provide an 18,500 tonne per annum copper solvent extraction and electrowinning plant on an EPC basis. The scope and the budget for the EPC portion of the contract has been agreed under the MOU. TEM has also recently been awarded a EUR60 million EPC contract for the provision of infrastructure and civil works and associated equipment and materials for an industrial plant located in Nalanda, 90 kilometers from Patna, the Indian state capital of Bihar. The contract will start in April 2009 and is expected to be completed in 30 months. Delta-T In September 2008, the Group was pleased to announce the appointment of Thomas (Mac) McDaniel as Managing Director of Delta-T and Bateman Litwin North and South America. Mac's initial focus was to ensure the successful completion of all existing Delta-T contracts adding necessary execution discipline and rigour. An additional eleven legacy projects were completed during the period, contributing 13 per cent to Group revenue. This brings the total concluded legacy projects to seventeen out of nineteen all of which are operating at or above nameplate capacity. The two remaining projects are currently undergoing performance testing and should finish in their entirety shortly. One of these projects resulted in a provision of US$8.5 million. The charge related to rework on several tanks and the total rebuild of one tank, following their failure, despite the tanks having previously been approved by tank inspectors. Whilst the issue is subject to a claim, a provision has been made. During the period and subsequently, the division has reduced its workforce by 54 per cent. Delta-T is pleased to announce it has been awarded an engineering, procurement and technology contract by Tate & Lyle to supply molecular sieve dehydration equipment for its corn wet milling operations in the United States. This follows collaboration with Tate & Lyle on a project in Szabadegyhaza, Hungary. We are delighted that Delta-T's technology has received further endorsement from a blue chip company such as Tate & Lyle. Looking forward, Delta-T's 15 per cent U.S. market share, based on its technology licensing agreements, provides a ready market. Furthermore, despite unfavourable economics limiting the new build environment for ethanol plants, the industry is focused on improving installed plant throughput and efficiencies. Many of these plants were developed with older technology providing considerable opportunities to apply Delta-T's well regarded and tested technologies and practices to the existing population. Thus, Delta-T has, and continues to, develop a portfolio of products and services to modernise and improve plant efficiencies by up to 20 per cent through increased ethanol production as well as reduced energy and water consumption. With approximately 9 billion gallons of ethanol capacity currently in use, U.S. ethanol is the third largest contributor to the gasoline market in America behind oil imports from Canada and Saudi Arabia (source: Ethanol Across America; 8 August 2008) This clearly demonstrates that ethanol is an established mainstream product and an important element of fuel transport supply. Current legislation mandates 15 billion gallons of corn ethanol capacity by 2015. President Obama has stated an overall goal of 60 billion barrels of bio-fuels a year by 2030 (source: barackobama.com). The Board believes that renewed underlying political support, through the Obama administration, will underpin the long-term development of the bio-ethanol market, despite current market conditions. Litwin The Litwin division provides a complete range of services in the oil and gas, power, waste-to-energy and process industries in Europe, the Middle East and Africa. In addition, its coal tar distillation unit provides technology that allows for the separation and distillation of coal tar for downstream chemical applications. Litwin contributed approximately 55 per cent to Group revenue during the period. France, Saudi Arabia, Morocco and China were the largest contributing markets. The total workforce for the division has remained stable as additional manning requirements on the phosphate project in Saudi Arabia have offset a reduction of 7 per cent in Litwin France. The division withdrew from a waste to energy project in Europe during the period. Following a thorough review of the project's risk profile it was concluded that the project would have failed to create adequate returns for our shareholders. A negotiated settlement with the client was agreed to terminate the contract. The division is currently executing four projects on behalf of Gaz de France, with whom it enjoys a strong and continuing relationship. Of these, three are in oil and gas, namely the Oscar 1 and Oscar 2 projects, for the reconstruction of gas storage facilities, awarded in December 2006 and in June 2008 respectively and the Beynes contract for the re-development of an underground gas storage facility, awarded in June 2008. The fourth project is to supply a 200 MW power station in St-Brieuc, France awarded in June 2007. The unit continues to work on the storage and distribution facility for Horizon Tangiers Terminal SA in Morocco, awarded in January 2008. The foundations for four of the tanks have now been laid and the procurement process is progressing well. Three projects are being executed for the Ma'aden Phosphate Company, a state-owned mining company in Saudi Arabia. The projects are for the development of a 1.5 million tonne per annum fertilizer grade phosphoric acid plant awarded in June 2007 and two related material handling systems awarded in July and November 2008. All three projects are making good progress. With regards to our PROABD coal tar distillation unit, we are currently completing three projects in China: for Angang Steel Limited, a large steel producer in the Liaoning Province; for Laigang Steel Group Limited, a steel producer in the Shandong Province; and for Seastar Chemical, located in Henan Province. Furthermore, after the period end, the division was awarded a EUR4 million contract by the Chinese group Anyang Baoshuo Tar Chemical Co. Ltd for a 100,000 tonnes per year pitch reforming and granulation plant. The division will supply the basic engineering for the whole plant as well as the detailed engineering for the proprietary equipment. During the period, Litwin successfully completed commissioning of the first line for a US$96 million waste to energy project in France. The second line is expected to be operational by 2010. The division also completed one of two projects for the OCP Group in Morocco. The 32 MW Jorf Lasfar thermal power plant is part of the largest integrated phosphoric acid and fertilizer complex in the world. The project was delivered on time and according to contract specifications. The remaining power project for the OCP Group, awarded in April 2008, is proceeding according to schedule. Also in Morocco, the 40 MW cogeneration power plant for Samir is expected to complete in the second half of the financial year. Finally, the Noel-Pons 180 MW combined heat and power plant for Enertherm was successfully completed with timely delivery and commissioning in November 2008. Moreover, the maintenance costs for the plant have been reduced due to remote control functionality. The gas turbine power plant is producing power used to heat the business district of La Defense outside Paris. David T Lamont, Chief Executive Officer Financial Review Summary of Major Financial Developments Revenue Group revenue for the period was US$342.0 million, down 23 per cent (1H 2007/08: US$444.3 million). This principally reflects a 52 per cent decline to US$18.2 million (1H 2007/08: US$37.9 million) in the Advanced Technologies division over the comparable period. This is due to mining houses postponing capital expenditure in light of significantly lower commodity prices affecting our solvent extraction and chemical technologies businesses. Revenue in the Energy division declined to US$323.8 million versus US$406.4 million in the comparable half-year period. The decline was not as dramatic as that in the Advanced Technologies division as several regions experienced strong growth. In Saudi Arabia revenue increased approximately six times versus the comparable period reflecting our phosphate project for Ma'aden while in Morocco revenue increased 44 per cent versus the comparable period demonstrating our strong power business. Finally, in China revenue increased to circa US$14 million compared to US$1.5 million reported for the period ended 31 December 2007 reflecting the application of our coal tar distillation technologies. Revenue, however, declined significantly at Delta-T and to a lesser extent in the FSU and France. With regards to Delta-T, the division is focused on completion of all legacy projects and smaller technology projects moving away from higher risk EPC type projects. Revenue declines in the FSU were due to ongoing delays and execution difficulties while revenue decreased 14 per cent in France mostly reflecting a slowdown in new projects awarded. Gross Profit Normalised1 gross profit margin was 13.1 per cent versus 13.6 per cent reported in 1H 2007/08. On a reported2 basis, the gross profit margin declined to 9.1 per cent compared to 13.6 per cent in 1H 2007/08. In comparison, however, to the gross profit margin reported at the end of the June 2008 financial year the margin has improved significantly on a normalised and reported basis. The normalised1 gross profit margin of 13.1 per cent for 1H 2008/09 compares to 9.3 per cent for the year ended 30 June 2008. The reported2 gross profit margin of 9.1 per cent for 1H 2008/09 compares to 1.7 per cent for the year ended 30 June 2008. This is a result of improved operational risk management and closure of legacy issues. +-----------+------------+-----------+------------+-----------+------------+-----------+ | | For the six months ended | For the year ended | +-----------+-------------------------------------------------+------------------------+ | | 31 December 2008 | 31 December 2007 | 30 June 2008 | +-----------+------------------------+------------------------+------------------------+ | US$M | Normalised | Reported | Normalised | Reported | Normalised | Reported | +-----------+------------+-----------+------------+-----------+------------+-----------+ | Revenue | 342.0 | 342.0 | 444.3 | 444.3 | 863.7 | 816.1 | +-----------+------------+-----------+------------+-----------+------------+-----------+ | Cost of | (297.3) | (310.9) | (384.1) | (384.1) | (783.2) | (802.4) | | Sales | | | | | | | +-----------+------------+-----------+------------+-----------+------------+-----------+ | Gross | 44.7 | 31.1 | 60.2 | 60.2 | 80.5 | 13.7 | | Profit | | | | | | | +-----------+------------+-----------+------------+-----------+------------+-----------+ | % | 13.1% | 9.1% | 13.6% | 13.6% | 9.3% | 1.7% | +-----------+------------+-----------+------------+-----------+------------+-----------+ Operating Exceptional Items Pre-tax exceptional operating charges amounted to US$13.6 million for the period (1H 2007/08: nil) comprising: * Ethanol project in North America US$8.5 million * Waste to energy project in Europe US$5.1 million The ethanol provision relates to a legacy project which required rework on several tanks and the total rebuild of one tank, following their failure despite the tanks having previously been approved by tank inspectors. Whilst the issue is subject to a claim a provision has been made. This legacy project, as well as one other, is expected to complete shortly bringing to a closure the 19 projects inherited through the Delta-T acquisition. The provision for a European waste to energy project is a result of a review of the contract under the Group's new operational risk criteria which the project failed to satisfy. The Group has subsequently agreed a settlement with the client in order to exit the project. The goodwill impairment charge relates to the Delta-T acquisition reflecting the volatile nature of the bio-ethanol market. EBITDA Normalised1 EBITDA for the period was US$3.4 million compared to US$24.6 million for the half year ended 31 December 2007. The normalised1 EBITDA margin was 1.0 per cent versus 5.5 per cent in 1H 2007/08 reflecting a 16 per cent increase in SG&A costs and the lower revenue contribution. EBIT The normalised1 EBIT loss for the 2008/09 half year was US$5.4 million compared to a profit of US$18.4 million for the six month period ended 31 December 2007. Normalised1 EBIT margin was (1.6) per cent in 2008/09 (2007/08: 4.1 per cent). Along with the decrease in EBITDA the fall in the EBIT margin was largely due to an 17 per cent increase in amortization to US$5.1 million. The increase is mainly a result of amortization for the full six month period compared to just over four months for the comparable given Delta-T was acquired 22 August 2007. Non-operating Exceptional Items Pre-tax non-operating and non-cash exceptional charges amounted to US$20.9 million for the period (1H 2007/08: US$7.2 million hedging gain) comprising: * Goodwill impairment charge US$8.3 million * Hedging loss US$12.5 million The goodwill impairment charge (1H 2007/08: nil) relates to the Delta-T acquisition. The hedging loss (1H 2007/08: US$7.2 million gain) is discussed below under Finance Income and Expenses. Finance Income and Expenses +------------------------------+-------------+-------------+ | | For the six months | | | ended | +------------------------------+---------------------------+ | | 31 December | +------------------------------+---------------------------+ | | 2008 | 2007 | +------------------------------+-------------+-------------+ | |(unaudited) |(unaudited) | +------------------------------+-------------+-------------+ | Finance income | 12.3 | 3.2 | +------------------------------+-------------+-------------+ | Finance expense | (3.1) | (3.4) | +------------------------------+-------------+-------------+ | Normalised net finance | 9.2 | (0.3) | | expense/income | | | +------------------------------+-------------+-------------+ | Exceptional hedging | (12.5) | 7.2 | | loss/gain | | | +------------------------------+-------------+-------------+ | Reported net finance expense | (3.3) | 7.0 | | / income | | | +------------------------------+-------------+-------------+ Normalised1 finance income for the period of US$12.3 million (1H 2007/08: US$3.2 million) was composed of approximately US$4.8 million of interest income and a reclassification US$6.4 million of foreign exchange gains on an energy project previously accounted for in cost of sales as well as circa US$1.1 million of other foreign exchange gains. Normalised1 finance expense for the period of US$3.0 million (1H 2007/08: US$3.4 million) comprised mainly of interest expenses on loans. For the period ending 31 December 2007 there was an exceptional non-cash US$7.2 million hedging gain from the mark to market of the Euro to the US$ at 31 December 2007. This was a result of a hedge implemented in July 2007 for a phosphate project in Saudi Arabia to ensure that the project costs of Euro's were predictable while receiving US$ revenue. Whilst commercially effective, this particular hedge was not effective from an IFRS standpoint. Since then the US$ has strengthened considerably against the Euro resulting in a US$12.5 million exceptional non-cash hedging loss at 31 December 2008. The hedging contract will expire in November 2010 at which point a commercially effective and an IFRS effective hedge will be implemented, if required, in line with the Group accounting policy for new hedges. This policy requires new hedges to meet the requirements for an IFRS effective hedge which will result in the mark to market of any hedged exchange gain or loss to be reflected through the balance sheet, with any future change in the economic value offset in a timely manner through project results rather than as a financial income or expense. Result before Tax Normalised1 profit before tax was US$3.7 million compared to US$18.1 million in 2007/08. The reported2 loss before tax after exceptional items was US$30.8 million compared to a profit of US$25.3 million in 2007/08. Taxation The reported2 tax credit for the period was US$2.0 million compared to a tax expense of US$3.3 million in 1H 2007/08. The table below outlines the tax related to exceptional charges: Exceptional Items +------------+------------+---------+---------+----------+------------+------------+---------+----------+ | | For the six months ended 31 | | For the six months ended | | | December 2008 | | 31 December 2007 | +------------+-------------------------------------------+------------+---------------------------------+ | US$M | Normalised | EU | Hedging | Reported | US$M | Normalised | Hedging | Reported | | | | Project | | | | | | | +------------+------------+---------+---------+----------+------------+------------+---------+----------+ | | | | | | | | | | +------------+------------+---------+---------+----------+------------+------------+---------+----------+ | Result | 3.7 | (5.1) | (12.5) | (30.8) | Result | 18.1 | 7.2 | 25.3 | | before tax | | | | | before tax | | | | +------------+------------+---------+---------+----------+------------+------------+---------+----------+ | Tax | (2.9) | 1.8 | 3.2 | 2.0 | Tax | (1.5) | (1.8) | (3.3) | +------------+------------+---------+---------+----------+------------+------------+---------+----------+ | Result | 0.8 | (3.3) | (9.3) | (28.8) | Result | 16.6 | 5.4 | 22.0 | | after tax | | | | | after tax | | | | +------------+------------+---------+---------+----------+------------+------------+---------+----------+ | | | | | | | | | | +------------+------------+---------+---------+----------+------------+------------+---------+----------+ Earnings per Share Normalised1 basic earnings per share for the period were 0.8 US cents (1H 2007/08: 16.1 US cents). This was calculated on a basic weighted average number of shares of 107,328,719 (1H 2007/08: 100,634,711). The diluted weighted average number of shares in issue for the period was 113,149,025 (1H 2007/08: 108,127,793) resulting in a normalised1 earnings per share of 0.8 US cents (1H 2007/08: 15.0 US cents). Balance Sheet Working Capital There was a working capital deficit of US$107.2 million (FY 2007/08: US$136.3 million deficit). The improvement in working capital was due to a significant decrease in construction contract liabilities largely due to the timing of payments and receipts on large EPC projects. In addition, current liabilities included US$22.1 million of long term loans re-classed as short term loans due to IFRS IAS74 and IAS69 - see accounting notes 8.1 and 8.2. Net Cash and Equivalents The total cash and cash equivalents, including long-term deposits, at 31 December 2008 was US$132.9 million (30 June 2008: US$160.1 million). Of the total cash, US$82.6 million (30 June 2008: US$90.3million) represented cash deposits against guarantees resulting in free cash at 31 December 2008 of US$50.3 million (30 June 2008: US$69.8 million). The net cash and cash equivalents after deducting short and long term loans of US$77.2 million (30 June 2008: US$46.7 million) was US$55.7 million (30 June 2008: US$113 .4 million). Cash Flow Cash Flow used in Operations Cash flow used in operations for the period was US$53.5 million (1H 2007/08: inflow of US$0.5 million). The principal reasons for the decline was the decrease in construction contract liabilities reflecting increased supplier payments as the Group executed a large number of EPC projects during the period and the loss of US$27.4 million reported from operating activities. Cash Flow from Investing Activities Cash flow from investing activities was US$18.4 million (1H 2007/08: US$49.8 million outflow). The primary reason for the inflow was a reduction in long-term cash deposits held as collateral against guarantees, which are now reported as short term deposits as the Group neared completion on several projects. Cash flow From Financing Activities Cash flow from financing activities decreased to US$30.6 million (1H 2007/08: US$75.1 million). The inflow reflects a loan US$25 million from Discount Bank and a US$10 million loan from BSG Resources. Covenants The Company is pleased to have agreed revised banking covenants that were previously in breach following the announcement of its 2007/08 financial results. Management is very focused on operating within the Group's covenants although, given current trading and the economic background, we acknowledge this will be challenging. Furthermore, in the context of the global banking crisis the securing of additional banking facilities is an ongoing impediment to the Group's development. Guarantees A guarantee is a financial obligation given to the customer to protect it against supplier non-performance. The financial obligation is provided through the supplier's banks in the form of bonds, to which the supplier secures the bond with a cash deposit. Total outstanding guarantees at the end of the period were US$337 million, compared to US$373.5 million at 30 June 2008. As noted in Net Cash and Equivalents above, US$82.6 million represented cash deposits against these guarantees (30 June 2008: US$90.3million). Post Balance Sheet Events In March 2009, BSG Resources provided a US$7 million loan as part of the US$10 million credit facility negotiated in October 2008. Following a previous US$10 million loan granted in October 2008 this brings the total loan provided by BSG Resources to US$17 million. Backlog Backlog for the end of the reported period was approximately US$1 billion. This represents over one and a quarter years of operations in terms of 2007/08 revenue. +---------+-----------+-----------+------------+ | US$M | 1H | 1H | 1H 2006/07 | | | 2008/09 | 2007/08 | | +---------+-----------+-----------+------------+ | Backlog | 1,020 | 1,270 | 734 | +---------+-----------+-----------+------------+ 1Normalised figures are calculated before exceptional items 2Reported figures are calculated after exceptional items Davis M Larssen, Chief Financial Officer Consolidated Balance Sheet Amounts in US$'000 +---------------------------+------+----------------+---------------+--------------+ | | | As at 31 December | As at 30 | | | | | June | +---------------------------+------+--------------------------------+--------------+ | |Note | 2008 | 2007 | 2008 | +---------------------------+------+----------------+---------------+--------------+ | | | (unaudited) | (unaudited) | | +---------------------------+------+----------------+---------------+--------------+ | ASSETS | | | | | +---------------------------+------+----------------+---------------+--------------+ | Intangible assets | | 82,290 | 92,421 | 87,340 | +---------------------------+------+----------------+---------------+--------------+ | Goodwill | | 31,277 | 56,755 | 40,504 | +---------------------------+------+----------------+---------------+--------------+ | Property, plant and | 5 | 24,715 | 17,904 | 26,185 | | equipment | | | | | +---------------------------+------+----------------+---------------+--------------+ | Long term Deposits | | 48,992 | 59,969(*) | 71,644 | +---------------------------+------+----------------+---------------+--------------+ | Other financial assets | | 2,389 | 2,845 | 18,188 | +---------------------------+------+----------------+---------------+--------------+ | Deferred taxation | | 15,152 | 5,317 | 11,979 | +---------------------------+------+----------------+---------------+--------------+ | Non-current assets | | 204,815 | 235,211 | 255,840 | +---------------------------+------+----------------+---------------+--------------+ | Construction contracts in | | 35,140 | 64,088 | 88,775 | | progress | | | | | +---------------------------+------+----------------+---------------+--------------+ | Trade and other | | 260,903 | 255,990 | 220,211 | | receivables | | | | | +---------------------------+------+----------------+---------------+--------------+ | Income tax receivable | | 282 | 494 | 194 | +---------------------------+------+----------------+---------------+--------------+ | Cash and cash equivalents | | 83,882 | 155,581(*) | 88,408 | +---------------------------+------+----------------+---------------+--------------+ | Current assets | | 380,207 | 476,153 | 397,588 | +---------------------------+------+----------------+---------------+--------------+ | Total assets | | 585,022 | 711,364 | 653,428 | +---------------------------+------+----------------+---------------+--------------+ | EQUITY AND LIABILITIES | | | | | +---------------------------+------+----------------+---------------+--------------+ | Issued capital | | 15,622 | 16,385 | 17,720 | +---------------------------+------+----------------+---------------+--------------+ | Capital reserves | 7.1 | 100,154 | 100,457 | 100,346 | +---------------------------+------+----------------+---------------+--------------+ | Hedging and foreign | 7.2 | 2,778 | 4,216 | 11,042 | | currency translation | | | | | | reserve | | | | | +---------------------------+------+----------------+---------------+--------------+ | Accumulated | | (81,148) | 38,820 | (52,456) | | (losses)/profits | | | | | +---------------------------+------+----------------+---------------+--------------+ | Equity attributable to | | 37,406 | 159,878 | 76,652 | | equity holders of the | | | | | | parent | | | | | +---------------------------+------+----------------+---------------+--------------+ | Minority interest | | 1,695 | 1,574 | 1,771 | +---------------------------+------+----------------+---------------+--------------+ | Total equity | | 39,101 | 161,452 | 78,423 | +---------------------------+------+----------------+---------------+--------------+ | Borrowings | 8 | 30,626 | 33,165 | 16,695(*) | +---------------------------+------+----------------+---------------+--------------+ | Loan from shareholder | | 10,000 | - | - | +---------------------------+------+----------------+---------------+--------------+ | Non-current provisions | | 4,822 | 3,221 | 4,308 | +---------------------------+------+----------------+---------------+--------------+ | Investment in associates | | 142 | - | 43 | +---------------------------+------+----------------+---------------+--------------+ | Other financial | | 11,844 | - | - | | liabilities | | | | | +---------------------------+------+----------------+---------------+--------------+ | Deferred tax liability | | 1,040 | 1,287 | 2,686 | +---------------------------+------+----------------+---------------+--------------+ | Non-current liabilities | | 58,474 | 37,673 | 23,732 | +---------------------------+------+----------------+---------------+--------------+ | Construction contract | | 138,106 | 193,990 | 218,696 | | liabilities | | | | | +---------------------------+------+----------------+---------------+--------------+ | Trade, other payables and | | 299,787 | 284,167(*) | 284,490 | | accruals | | | | | +---------------------------+------+----------------+---------------+--------------+ | Current provisions | | 6,739 | 7,637 | 10,331 | +---------------------------+------+----------------+---------------+--------------+ | Income tax payable | | 6,287 | 6,975 | 7,730 | +---------------------------+------+----------------+---------------+--------------+ | Borrowings | 8 | 36,528 | 19,470(*) | 30,026(*) | +---------------------------+------+----------------+---------------+--------------+ | Current liabilities | | 487,447 | 512,239 | 551,273 | +---------------------------+------+----------------+---------------+--------------+ | Total liabilities | | 545,921 | 549,912 | 575,005 | +---------------------------+------+----------------+---------------+--------------+ | Total equity and | | 585,022 | 711,364 | 653,428 | | liabilities | | | | | +---------------------------+------+----------------+---------------+--------------+ (*) Reclassified (see note 2(d)) Consolidated Income Statement Amounts in US$'000 +------------------------------+------+-------------+-------------+--------------+ | | |For the six months ended |For the year | | | | 31 December | ended 30 | | | | | June | +------------------------------+------+---------------------------+--------------+ | |Note | 2008 | 2007 | 2008 | +------------------------------+------+-------------+-------------+--------------+ | | |(unaudited) |(unaudited) | | +------------------------------+------+-------------+-------------+--------------+ | | | | | | +------------------------------+------+-------------+-------------+--------------+ | Revenue | | 342,023 | 444,290 | 816,081 | +------------------------------+------+-------------+-------------+--------------+ | Cost of sales | | (310,903) | (384,081) | (802,396) | +------------------------------+------+-------------+-------------+--------------+ | | | | | | +------------------------------+------+-------------+-------------+--------------+ | Gross profit | | 31,120 | 60,209 | 13,685 | +------------------------------+------+-------------+-------------+--------------+ | % | | 9.1% | 13.6% | 1.7% | +------------------------------+------+-------------+-------------+--------------+ | | | | | | +------------------------------+------+-------------+-------------+--------------+ | Other income | | - | 4 | 3,198 | +------------------------------+------+-------------+-------------+--------------+ | Selling, general and | | (41,313) | (35,611) | (50,126) | | administrative expenses | | | | | +------------------------------+------+-------------+-------------+--------------+ | Other expenses | | (46) | (19) | (1,795) | +------------------------------+------+-------------+-------------+--------------+ | | | | | | +------------------------------+------+-------------+-------------+--------------+ | EBITDA | | (10,239) | 24,583 | (35,038) | +------------------------------+------+-------------+-------------+--------------+ | % | | (3.0%) | 4.1% | (4.3%) | +------------------------------+------+-------------+-------------+--------------+ | | | | | | +------------------------------+------+-------------+-------------+--------------+ | Amortisation and | | (13,466) | (4,376) | (30,012) | | impairment of | | | | | | intangible Assets | | | | | +------------------------------+------+-------------+-------------+--------------+ | Depreciation | | (3,684) | (1,829) | (4,475) | +------------------------------+------+-------------+-------------+--------------+ | | | | | | +------------------------------+------+-------------+-------------+--------------+ | EBIT | | (27,389) | 18,378 | (69,525) | +------------------------------+------+-------------+-------------+--------------+ | % | | (8.0%) | 4.1% | (8.5%) | +------------------------------+------+-------------+-------------+--------------+ | | | | | | +------------------------------+------+-------------+-------------+--------------+ | Finance income | | 12,261 | 10,392 | 18,339 | +------------------------------+------+-------------+-------------+--------------+ | Finance expenses | | (15,548) | (3,432) | (11,851) | +------------------------------+------+-------------+-------------+--------------+ | Share of profit /(loss) of | | (99) | - | (160) | | associates | | | | | +------------------------------+------+-------------+-------------+--------------+ | | | | | | +------------------------------+------+-------------+-------------+--------------+ | Result before tax | | (30,775) | 25,338 | (63,197) | +------------------------------+------+-------------+-------------+--------------+ | % | | (9.0 %) | 5.7% | (7.7%) | +------------------------------+------+-------------+-------------+--------------+ | | | | | | +------------------------------+------+-------------+-------------+--------------+ | Income tax | 9 | 2,007 | (3,315) | (2,433) | +------------------------------+------+-------------+-------------+--------------+ | Effective Tax Rate | | 6.5% | 13.1% | (3.8%) | +------------------------------+------+-------------+-------------+--------------+ | | | | | | +------------------------------+------+-------------+-------------+--------------+ | Result after tax | | (28,768) | 22,023 | (65,630) | +------------------------------+------+-------------+-------------+--------------+ | % | | (8.4%) | 5.0% | (8.0%) | +------------------------------+------+-------------+-------------+--------------+ | | | | | | +------------------------------+------+-------------+-------------+--------------+ | Attributable to: | | | | | +------------------------------+------+-------------+-------------+--------------+ | Equity holders of the parent | | (28,692) | 21,586 | (66,355) | +------------------------------+------+-------------+-------------+--------------+ | Minority interest | | (76) | 437 | 725 | +------------------------------+------+-------------+-------------+--------------+ | | | | | | +------------------------------+------+-------------+-------------+--------------+ | | | | | | +------------------------------+------+-------------+-------------+--------------+ | Earnings per share (US$ | 12 | | | | | cents) | | | | | +------------------------------+------+-------------+-------------+--------------+ | | | | | | +------------------------------+------+-------------+-------------+--------------+ | Basic | | (26.7) | 21.4 | (64.3) | +------------------------------+------+-------------+-------------+--------------+ | | | | | | +------------------------------+------+-------------+-------------+--------------+ | Diluted | | (26.7) | 20.0 | (64.3) | +------------------------------+------+-------------+-------------+--------------+ Consolidated Cash Flow Statement Amounts in US$'000 +---------------------------------+------+--------------+-------------+------------+ | | | For the six months ended | For the | | | | 31 December |year ended | | | | | 30 June | +---------------------------------+------+----------------------------+------------+ | |Note | 2008 | 2007 | 2008 | +---------------------------------+------+--------------+-------------+------------+ | | | (unaudited) |(unaudited) | | +---------------------------------+------+--------------+-------------+------------+ | | | | | | +---------------------------------+------+--------------+-------------+------------+ | Cash flows from operating | | | | | | activities | | | | | +---------------------------------+------+--------------+-------------+------------+ | Profit/(loss) from operating | | (27,389) | 18,378 | (69,525) | | activities | | | | | +---------------------------------+------+--------------+-------------+------------+ | Non-cash adjustments | 10.1 | 32,864 | 1,373(*) | 33,398 | +---------------------------------+------+--------------+-------------+------------+ | Changes in operating assets | 10.2 | 12,943 | (59,488)(*) | (65,704) | +---------------------------------+------+--------------+-------------+------------+ | Changes in operating | 10.3 | (67,588) | 42,868(*) | 76,063 | | liabilities | | | | | +---------------------------------+------+--------------+-------------+------------+ | Interest paid | | (2,045) | (1,354)(*) | (3,205) | +---------------------------------+------+--------------+-------------+------------+ | Income tax paid | 10.4 | (2,330) | (1,309) | (5,672) | +---------------------------------+------+--------------+-------------+------------+ | Net cash (used in)/from | | (53,545) | 468 | (34,645) | | operating activities | | | | | +---------------------------------+------+--------------+-------------+------------+ | | | | | | +---------------------------------+------+--------------+-------------+------------+ | Cash flows from investing | | | | | | activities | | | | | +---------------------------------+------+--------------+-------------+------------+ | Property, plant and equipment | | (5,389) | (3,004) | (13,147) | | purchased at cost | | | | | +---------------------------------+------+--------------+-------------+------------+ | Property, plant and equipment | | 131 | 192 | 280 | | proceeds on disposal | | | | | +---------------------------------+------+--------------+-------------+------------+ | Disposal of subsidiary | 11.2 | - | (5) | 847 | +---------------------------------+------+--------------+-------------+------------+ | Acquisition of a subsidiaries, | 11.1 | - | (4,568) | (5,332) | | net cash acquired | | | | | +---------------------------------+------+--------------+-------------+------------+ | Interest received | | 943 | 2,387(*) | 5,528 | +---------------------------------+------+--------------+-------------+------------+ | Investment in long-term | | 22,652 | (42,247)(*) | (53,922) | | deposits | | | | | +---------------------------------+------+--------------+-------------+------------+ | Increase in investment in | | - | - | (207) | | associate companies | | | | | +---------------------------------+------+--------------+-------------+------------+ | Long-term loan | | 35 | (2,524) | (1,971) | +---------------------------------+------+--------------+-------------+------------+ | Net cash (used in)/from | | 18,372 | (49,769) | (67,924) | | investing activities | | | | | +---------------------------------+------+--------------+-------------+------------+ | | | | | | +---------------------------------+------+--------------+-------------+------------+ | Cash flows from financing | | | | | | activities | | | | | +---------------------------------+------+--------------+-------------+------------+ | Dividends paid | | - | - | (6,871) | +---------------------------------+------+--------------+-------------+------------+ | Repayment of long-term | | (4,838) | (2,722) | (8,218) | | borrowings | | | | | +---------------------------------+------+--------------+-------------+------------+ | Loan from shareholder | | 10,000 | - | - | +---------------------------------+------+--------------+-------------+------------+ | Increase in long-term | | 25,000 | 42,208 | 47,473 | | borrowings | | | | | +---------------------------------+------+--------------+-------------+------------+ | Proceeds on issue of shares | | - | 25,690 | 25,784 | +---------------------------------+------+--------------+-------------+------------+ | Increase/(decrease) in | | 485 | 9,882 | 2,985 | | short-term borrowings | | | | | +---------------------------------+------+--------------+-------------+------------+ | Net cash from financing | | 30,647 | 75,058 | 61,153 | | activities | | | | | +---------------------------------+------+--------------+-------------+------------+ | | | | | | +---------------------------------+------+--------------+-------------+------------+ | Increase/(decrease) in cash and | | (4,526) | 25,757 | (41,416) | | cash equivalents | | | | | +---------------------------------+------+--------------+-------------+------------+ | Cash and cash equivalents at | | 88,408 | 129,824 | 129,824 | | the beginning of the period | | | | | +---------------------------------+------+--------------+-------------+------------+ | Net cash and cash equivalents | 10.5 | 83,882 | 155,581 | 88,408 | | at end of the period | | | | | +---------------------------------+------+--------------+-------------+------------+ (*) Reclassified (see note 2(d)). Consolidated Statement of Changes in Equity Amounts in US$'000 +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | | Attributable to equity holders of the parent | | | +---------------------------+-------------------------------------------------------------+----------+----------+ | For the six months ended | Issued | Capital | Hedging | Retained | Total |Minority | Total | | 31 December | capital |reserves | and | earnings/ | |interest | equity | | | | |translation |(accumulated | | | | | | | | reserves | losses) | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Balance at 1 July 2008 | 17,720 | 100,346 | 11,042 | (52,456) | 76,652 | 1,771 | 78,423 | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Foreign currency exchange | (2,098) | - | 599 | - | (1,499) | - | (1,499) | | translation | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Gain/(loss) on cash flow | - | - | (8,863) | - | (8,863) | - | (8,863) | | hedge | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Net income recognized | 15,622 | 100,346 | 2,778 | (52,456) | 66,290 | 1,771 | 68,061 | | directly in equity | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Result for the period | - | - | - | (28,692) | (28,692) | (76) | (28,768) | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Total recognized income | 15,622 | 100,346 | 2,778 | (81,148) | 37,598 | 1,695 | 39,293 | | and expense | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Recognition of | - | 426 | - | - | 426 | - | 426 | | share-based payments | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Share buy-back costs | - | (618) | - | - | (618) | - | (618) | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Balance at 31 December | 15,622 | 100,154 | 2,778 | (81,148) | 37,406 | 1,695 | 39,101 | | 2008 (unaudited) | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Balance at 1 July 2007 | 11,901 | 78,180 | 1,638 | 20,782 | 112,501 | - | 112,501 | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Minority interest arising | - | - | - | - | - | 1,137 | 1,137 | | from acquisition of | | | | | | | | | subsidiary | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Adjustments of other | - | (316) | - | 316 | - | - | - | | reserve | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Foreign currency exchange | 1,183 | - | 2,578 | - | 3,761 | - | 3,761 | | translation | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Net income recognized | 13,084 | 77,864 | 4,216 | 21,098 | 116,262 | 1,137 | 117,399 | | directly in equity | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Result for the period | - | - | - | 21,586 | 21,586 | 437 | 22,023 | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Total recognized income | 13,084 | 77,864 | 4,216 | 42,684 | 137,848 | 1,574 | 139,422 | | and expense | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Issue of share capital | 3,301 | 22,483 | - | - | 25,784 | - | 25,784 | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Dividend | - | - | - | (3,864) | (3,864) | - | (3,864) | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Recognition of | - | 110 | - | - | 110 | - | 110 | | share-based payments | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Balance at 31 December | 16,385 | 100,457 | 4,216 | 38,820 | 159,878 | 1,574 | 161,452 | | 2007 (unaudited) | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ Consolidated Statement of Changes in Equity Amounts in US$'000 +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | | Attributable to equity holders of the parent | | | +---------------------------+-------------------------------------------------------------+----------+----------+ | For the year ended 30 | Issued | Capital | Hedging | Retained | Total |Minority | Total | | June 2008 | capital |reserves | and | earnings/ | |interest | equity | | | | |translation |(accumulated | | | | | | | | reserves | losses) | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Balance at 1 July 2007 | 11,901 | 78,180 | 1,638 | 20,782 | 112,501 | - | 112,501 | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Minority interest arising | - | - | - | - | - | 1,137 | 1,137 | | from acquisition of | | | | | | | | | subsidiary | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Adjustments of other | - | (710) | - | 710 | - | - | - | | reserve | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Foreign currency exchange | 2,518 | - | 2,425 | - | 4,943 | - | 4,943 | | translation | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Gain/(loss) on cash flow | - | - | 6,343 | - | 6,343 | - | 6,343 | | hedge | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Decrease in holdings of | - | - | - | - | - | (91) | (91) | | subsidiary | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Net income recognized | 14,419 | 77,470 | 10,406 | 21,492 | 123,787 | 1,046 | 124,833 | | directly in equity | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Transfer to profit and | - | - | 636 | - | 636 | - | 636 | | loss on cash flow hedge | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Result for the period | - | - | - | (66,355) | (66,355) | 725 | (65,630) | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Total recognized income | 14,419 | 77,470 | 11,042 | (44,863) | 58,068 | 1,771 | 59,839 | | and expense | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Issue of share capital | 3,301 | 22,483 | - | - | 25,784 | - | 25,784 | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Dividend | - | - | - | (7,593) | (7,593) | - | (7,593) | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Recognition of | - | 393 | - | - | 393 | - | 393 | | share-based payments | | | | | | | | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ | Balance at 30 June 2008 | 17,720 | 100,346 | 11,042 | (52,456) | 76,652 | 1,771 | 78,423 | +---------------------------+----------+----------+-------------+--------------+----------+----------+----------+ Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2008 1.Corporate information The condensed consolidated interim financial statements of Bateman Litwin N.V. ("the Company") for the six-month period ended 31 December 2008 were authorised for issue in accordance with a resolution of the board of directors on 30 March 2008. The Company is domiciled in the Netherlands at Haaksbergweg 59, Amsterdam. The address of the registered office and the principal places of business are disclosed on the last page. The main activities of the Company and its subsidiaries are set out in Note 3 - Segment information. 2.Summary of significant accounting policies (a) Statement of compliance The half year condensed consolidated financial statements of the Company and all its subsidiaries were prepared in accordance with International Financial Reporting Standards (IFRS), IAS 34 'Interim Financial Reporting'. They do not include all of the information required in the full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 30 June 2008. (b) Basis of preparation (i) The condensed consolidated financial statements are presented in US dollars, rounded to the nearest thousand, as the majority of the Group's contracts are denominated in US dollars. The statements are prepared on the historical cost basis except for derivative financial instruments and available-for-sale investments, which are stated at fair value. (ii) Going concern - The Company has re-negotiated its banking covenants that were previously in breach following the announcement of its 2007/08 results. In the context of current and 12 months forecasted trading, coupled with the global banking crisis, management is taking steps to prevent a breach of the revised covenants and to secure further banking facilities. Management concludes that there is a reasonable expectation that the Group has alternative resources to continue in operational existence for the foreseeable future. For this reason, management continues to adopt the going concern basis in preparing the accounts. Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2008 2.Summary of significant accounting policies (continued) (c) Accounting policies The accounting policies and methods of computation adopted in the preparation of these condensed consolidated financial statements are consistent with those followed in the preparation of the Group's financial statements for the year ended 30 June 2008. (d) Reclassification Some of the balances which were disclosed in the financial statements for the year ended 30 June 2008 and for the six month period ended 31 December 2007 were reclassified. The reason for the reclassification was to align the previous period with the current period classification. For the year ended 30 June 2008: The reclassification in the balance sheet was: * Certain long term loans were reclassified from noncurrent borrowings to current borrowings. The reason for the reclassification was having a standard repayable on demand clause and breach of covenants (see note 8) For the six month period ended 31 December 2007: The reclassifications in the balance sheet were: * Deposits, cash and short term investments: part of the balance was reclassified to long term deposits. * Current portion of long term loans were reclassified from trade and other payables to borrowings. The reclassifications in the cash flow statement were: * Long term deposits were reclassified as cash flows from investing activities having previously been classified as cash and cash equivalents. * Interest paid and interest received were reclassified and presented in operating activities and investing activities instead of net interest income presented in operating activities. * Changes in mark to market derivative assets were classified as non cash adjustments instead of changes in operating assets. Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2008 3. Segment information The core activities of the Group are international process-orientated engineering, contracting and project management. These activities operate in two primary divisions, namely Energy and Advanced Technologies. Although activities in these sectors are diverse, they are in principle subject to similar risks and return. The Energy Division includes gas and power compression, crude oil refinery, environmental protection, effluent treatment and engineering. The Advanced Technologies Division provides unique technology solutions (principally in solvent extraction) for the conversion of natural resources into marketable products in the phosphates, food, pharmaceutical, petrochemical, fertilizer and mineral industries. The business segment table presents revenue and profit information and certain asset and liability information regarding business segments for the six months ended 31 December 2007 and 2008 as well as for the year ended 30 June 2008. Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2008 Business segments Amounts in US$'000 +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | | Advanced Technologies | Energy | Total | +---------------------------+----------------------------------------+----------------------------------------+---------------------------------------+ | | For the six months | For the | For the six months | For the | For the six months | For the | | | ended |year ended | ended |year ended | ended | year | | | 31 December | 30 June | 31 December | 30 June | 31 December | ended | | | | | | | | 30 June | +---------------------------+---------------------------+------------+---------------------------+------------+---------------------------+-----------+ | | 2008 | 2007 | 2008 | 2008 | 2007 | 2008 | 2008 | 2007 | 2008 | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | |(unaudited) |(unaudited) | |(unaudited) |(unaudited) | |(unaudited) |(unaudited) | | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | Revenue | | | | | | | | | | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | Sales to external | 18,224 | 37,888 | 69,681 | 323,799 | 406,402 | 746,400 | 342,023 | 444,290 | 816,081 | | customers | | | | | | | | | | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | Inter-segment sales | 16 | 51 | 110 | - | 206 | 320 | 16 | 257 | 430 | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | Total revenue | 18,240 | 37,939 | 69,791 | 323,799 | 406,608 | 746,720 | 342,039 | 444,547 | 816,511 | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | | | | | | | | | | | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | Result | | | | | | | | | | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | Segment result | 906 | 2,498 | 1,914 | (28,295) | 15,880 | (71,438) | (27,389) | 18,378 | (69,524) | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | Net finance | 2,535 | (487) | (1,286) | (5,822) | 7,447 | 7,773 | (3,287) | 6,960 | 6,487 | | income/(expenses) | | | | | | | | | | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | Share of loss of | - | - | - | (99) | - | (160) | (99) | - | (160) | | associates | | | | | | | | | | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | Result before income tax | 3,441 | 2,011 | 628 | (34,216) | 23,327 | (63,825) | (30,775) | 25,338 | (63,197) | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | | | | | | | | | | | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | Income tax (expense) | (611) | 60 | 141 | 2,618 | (3,375) | (2,574) | 2,007 | (3,315) | (2,433) | | /benefit | | | | | | | | | | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | | | | | | | | | | | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ | Net profit | 2,830 | 2,071 | 769 | (31,598) | 19,952 | (66,399) | (28,768) | 22,023 | (65,630) | +---------------------------+-------------+-------------+------------+-------------+-------------+------------+-------------+-------------+-----------+ Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2008 4. Exceptional Items The Group presents certain items as "exceptional". These are items which, in management's judgment, need to be disclosed by virtue of their size or incidence in order to obtain a proper understanding of the financial information. This disclosure is based on management internal information and it is a non-IFRS disclosure. For the period ended December 2008, the following exceptional items were reported: Legacy projects There was a pre tax exceptional charge of US$8.5 million relating to increased costs to complete an Ethanol project in North America. In addition, there was a pre tax exceptional charge of US$5.1 million relating to a waste-to-energy project in Europe. Following a thorough review of Bateman Litwin's internal risk management, the risk profile of the project was considered unacceptable. A negotiated settlement with the client was agreed to terminate the contract. In the year ended June 30, 2008 the Group recognized a US$20.0 million loss with regard to a 'lump sum' legacy oil and gas project in the FSU. Due to the nature of the project, potential exists for further significant cost overruns in the future. To minimize this exposure for both the Group and the client, discussions are well underway with the client to amend the contract to an 'at cost' arrangement which would be similar to a reimbursable arrangement. Management expects that under such an arrangement it will be able to work with the client to minimize the cost overruns and remove the risk of needing to incur further losses. Although the arrangements with the client have not yet been formalized, management has accounted for the project accordingly. Impairment charges There was a pre tax US$8.3 million impairment charge for the period which relates to goodwill impairment arising from the Delta-T acquisition in North America. Ineffective hedging loss/gain The marking to market of an ineffective hedge resulted in a US$12.5 million exceptional non-cash loss at 31 December 2008. This particular hedge was implemented in July 2007 for a phosphate project in Saudi Arabia to ensure the Euro project costs were predictable while receiving US dollar revenue. The hedging contract will expire in November 2010 at which point management will replace with an effective hedging instrument in line with the Group's revised hedging strategy. This policy requires the mark to market of any hedged exchange gain or loss to be reflected through the balance sheet with any future change in the economic value offset through project results rather than as a financial income or expense. Exceptional items for the six months period ended 31 December 2007: Ineffective hedging loss/gain In the first half of 2007/08, an exceptional non-cash US$7.2 million ineffective hedging gain was recognised due to the mark to market of the US dollar against the Euro at 31 December 2007. This hedging gain relates to the same hedge discussed above for a project in Saudi Arabia. Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2008 +----------------+------------+-------------+----------+--+------------+-------------+----------+--+------------+-------+---------+----------+ | | Pro-forma | Pro-forma | | | Pro-forma | Pro-forma | | | Pro-forma | Pro-forma | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+------------+-----------------+----------+ | | Normalised | Exceptional | Reported | | Normalised | Exceptional | Reported | | Normalised | Exceptional | Reported | | | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+------------+-----------------+----------+ | US$'000 | For the six months ended | | For the six months ended | | For the year ended 30 June 2008 | | | 31 December 2008 | | 31 December 2007 | | | +----------------+-------------------------------------+--+-------------------------------------+--+-----------------------------------------+ | Revenue | 342,023 | - | 342,023 | | 444,290 | - | 444,290 | | 863,725 | -47,644 | 816,081 | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Cost of | -297,263 | -13,640 | -310,903 | | -384,081 | | -384,081 | | -783,160 | -19,236 | -802,396 | | sales | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Gross | 44,760 | -13,640 | 31,120 | | 60,209 | - | 60,209 | | 80,565 | -66,880 | 13,685 | | profit | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | % | 13.1% | | 9.1% | | 13.6% | | 13.6% | | 9.3% | n/a | 1.7% | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Other | - | | - | | 4 | | 4 | | 3,198 | - | 3,198 | | income | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Selling, | -41,313 | | -41,313 | | -35,611 | | -35,611 | | -48,156 | -1,970 | -50,126 | | general | | | | | | | | | | | | | and | | | | | | | | | | | | | administrative | | | | | | | | | | | | | expenses | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Other | -46 | | -46 | | -19 | | -19 | | -1,795 | - | -1,795 | | expenses | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | EBITDA | 3,401 | -13,640 | -10,239 | | 24,583 | - | 24,583 | | 33,812 | -68,850 | -35,038 | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | % | 1.0% | | -3.0% | | 5.5% | | 5.5% | | 3.9% | n/a | -4.3% | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Amortisation | -5,131 | -8,335 | -13,466 | | -4,376 | | -4,376 | | -10,625 | -19,387 | -30,012 | | of | | | | | | | | | | | | | Intangible | | | | | | | | | | | | | Assets | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Depreciation | -3,684 | | -3,684 | | -1,829 | | -1,829 | | -4,475 | - | -4,475 | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | EBIT | -5,414 | -21,975 | -27,389 | | 18,378 | - | 18,378 | | 18,712 | -88,237 | -69,525 | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | % | -1.6% | | -8.0% | | 4.1% | | 4.1% | | 2.2% | n/a | -8.5% | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Finance | 12,261 | | 12,261 | | 3,150 | 7,242 | 10,392 | | 11,774 | 6,565 | 18,339 | | income | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Finance | -3,026 | -12,522 | -15,548 | | -3,432 | | -3,432 | | -11,851 | - | -11,851 | | expenses | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Share of | -99 | | -99 | | - | | - | | -160 | - | -160 | | profit/ | | | | | | | | | | | | | (loss) of | | | | | | | | | | | | | associates | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Result | 3,722 | -34,497 | -30,775 | | 18,096 | 7,242 | 25,338 | | 18,475 | -81,672 | -63,197 | | before | | | | | | | | | | | | | tax | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | % | 1.1% | | -9.0% | | 4.1% | | 5.7% | | 2.1% | n/a | -7.7% | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Income | -2,939 | 4,946 | 2,007 | | -1,468 | -1,847 | -3,315 | | -4,348 | 1,915 | -2,433 | | tax | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Effective | 79.0% | 14.3% | 6.5% | | 8.1% | 25.5% | 13.1% | | 23.5% | 2.3% | -3.8% | | Tax Rate | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Result | 783 | -29,551 | -28,768 | | 16,627 | 5,396 | 22,023 | | 19,087 | -79,757 | -65,630 | | after tax | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | % | 0.2% | | -8.4% | | 3.7% | | 5.0% | | 2.2% | n/a | -8.0% | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Attributable | | | | | | | | | | | | | to: | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Equity | 859 | -29,551 | -28,692 | | 16,190 | 5,396 | 21,586 | | 18,362 | -79,757 | -66,355 | | holders | | | | | | | | | | | | | of the | | | | | | | | | | | | | parent | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Minority | -76 | - | -76 | | 437 | - | 437 | | 725 | - | 725 | | interest | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Earnings | | | | | | | | | | | | | per share | | | | | | | | | | | | | (in US$ | | | | | | | | | | | | | cents) | | | | | | | | | | | | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Basic | 0.8 | | -26.7 | | 16.1 | | 21.4 | | 17.8 | | -64.3 | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+--------------------+---------+----------+ | Diluted | 0.8 | | -26.7 | | 15.0 | | 20.0 | | 16.7 | | -64.3 | +----------------+------------+-------------+----------+--+------------+-------------+----------+--+------------+-------+---------+----------+ Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2008 5. Property, plant and equipment During the period, the Group spent US$5.1 million on capital investments. This included leasehold improvement costs on a previously committed office relocation for a subsidiary as well as purchase of vehicles and computers. 6. Dividends The Company did not declare or pay dividends during the period. (1H 2007/08: the Company declared dividends of US$3.9 million which were paid after the balance sheet date). 7.Share capital and capital reserves 7.1 Capital Reserves Amounts in US$'000 +---------------------------------+----------+----------+----------+----------+ | | Share | Other | Share | Total | | | premium |reserves | options | | | | | | reserve | | +---------------------------------+----------+----------+----------+----------+ | Balance at 1 July 2008 | 99,384 | - | 962 | 100,346 | +---------------------------------+----------+----------+----------+----------+ | Recognition of share based | - | - | 426 | 426 | | payments | | | | | +---------------------------------+----------+----------+----------+----------+ | Share buy-back costs | (618) | - | - | (618) | +---------------------------------+----------+----------+----------+----------+ | Balance at 31 December 2008 | 98,766 | - | 1,388 | 100,154 | | (unaudited) | | | | | +---------------------------------+----------+----------+----------+----------+ | | | | | | +---------------------------------+----------+----------+----------+----------+ | Balance at 1 July 2007 | 76,901 | 710 | 569 | 78,180 | +---------------------------------+----------+----------+----------+----------+ | Shares issued at premium | 22,483 | - | - | 22,483 | +---------------------------------+----------+----------+----------+----------+ | Other reserve adjustments | - | (316) | - | (316) | +---------------------------------+----------+----------+----------+----------+ | Recognition of share based | - | - | 110 | 110 | | payments | | | | | +---------------------------------+----------+----------+----------+----------+ | Balance at 31 December 2007 | 99,384 | 394 | 679 | 100,457 | | (unaudited) | | | | | +---------------------------------+----------+----------+----------+----------+ | | | | | | +---------------------------------+----------+----------+----------+----------+ | Balance at 1 July 2007 | 76,901 | 710 | 569 | 78,180 | +---------------------------------+----------+----------+----------+----------+ | Recognition of share-based | - | - | 393 | 393 | | payments | | | | | +---------------------------------+----------+----------+----------+----------+ | Shares issued at premium | 22,483 | - | - | 22,483 | +---------------------------------+----------+----------+----------+----------+ | Other reserve adjustments | - | (710) | - | (710) | +---------------------------------+----------+----------+----------+----------+ | Balance at 30 June 2008 | 99,384 | - | 962 | 100,346 | +---------------------------------+----------+----------+----------+----------+ Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2008 7.2 Hedging and foreign currency translation reserves Amounts in US$'000 +-------------------------------------------+----------+-------------+------------+ | | Hedging | Foreign | Total | | | reserve | currency | | | | | translation | | | | | reserve | | +-------------------------------------------+----------+-------------+------------+ | | | | | +-------------------------------------------+----------+-------------+------------+ | Balance at 1 July | 6,343 | 4,699 | 11,042 | | 2008 | | | | +-------------------------------------------+----------+-------------+------------+ | Unrecognized | (8,863) | - | (8,863) | | losses on cash | | | | | flow hedge | | | | +-------------------------------------------+----------+-------------+------------+ | Foreign currency | - | 599 | 599 | | exchange | | | | | translation | | | | +-------------------------------------------+----------+-------------+------------+ | Balance at 31 | (2,520) | 5,298 | 2,778 | | December 2008 | | | | | (unaudited) | | | | +-------------------------------------------+----------+-------------+------------+ | | | | | +-------------------------------------------+----------+-------------+------------+ | Balance at 1 July | (636) | 2,274 | 1,638 | | 2007 | | | | +-------------------------------------------+----------+-------------+------------+ | Foreign currency | - | 2,578 | 2,578 | | exchange | | | | | translation | | | | +-------------------------------------------+----------+-------------+------------+ | Balance at 31 | (636) | 4,852 | 4,216 | | December 2007 | | | | | (unaudited) | | | | +-------------------------------------------+----------+-------------+------------+ | | | | | +-------------------------------------------+----------+-------------+------------+ | Balance at 1 July | (636) | 2,274 | 1,638 | | 2007 | | | | +-------------------------------------------+----------+-------------+------------+ | Transfer to profit | 636 | - | 636 | | and loss on cash | | | | | flow hedge | | | | +-------------------------------------------+----------+-------------+------------+ | Unrecognized gains | 6,343 | - | 6,343 | | on cash flow hedge | | | | +-------------------------------------------+----------+-------------+------------+ | Foreign currency | - | 2,425 | 2,425 | | exchange | | | | | translation | | | | +-------------------------------------------+----------+-------------+------------+ | Balance at 30 June | 6,343 | 4,699 | 11,042 | | 2008 | | | | +-------------------------------------------+----------+-------------+------------+ 8.Long term loans classification 8.1Breach of covenants The Company was in breach of certain loan covenants at its balance sheet date of 31 December 2008. Consequently, certain loans could have been recalled. The Company has since re-negotiated its banking covenants and received a waiver for the covenants that were previously in breach. According to IFRS, IAS 1.74, however, when an entity breaches a provision of a long-term loan arrangement, on or before the end of a reporting period, such that the liability becomes payable on demand, the liability must be classified as a current liability. This is the case even if the lenders agreed after the reporting period and before the authorization of the financial statements for issue, not to demand payment as a result of the breach. Management is taking steps to prevent any breach of the revised covenants and expects the loan re-payment schedules to be according to that of the original loan agreements. Due to the above breach of covenants, however, at 31 December 2008, US$14.7 million of long -term loans have been classified as current liabilities. 8.2Repayment on demand clause One of the Company's long term loans includes a standard repayable on demand clause. Although this clause has not been activated, and there have been no discussions with the bank concerning this, according to IFRS, IAS 1. 69, this loan should be classified as a current liability as the entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Due to this classification, US$ 7.4 million of long term loans have been classified as current liabilities. 9. Income tax The tax income benefit for the six months ended 31 December 2008 was US$2,007,000. This represents 6.5 per cent of the result before tax (H1 2007/08: 13 per cent). The tax benefit for the six months ended 31 December 2008 was calculated by applying the estimated annual average effective tax rate to the pretax results for that period. The net tax benefit for the period is derived from deferred tax assets recognized on losses for tax purpose for which the probability of utilizing them is more likely than not, offset by tax expenses of profitable entities. Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2008 10. Notes to the consolidated cash flow statement Amounts in US$'000 +---------------------------------------------------+--------------+-------------+------+-----------+ | | For the six months ended | For the year | | | 31 December | ended | | | | 30 June | +---------------------------------------------------+----------------------------+------------------+ | | 2008 | 2007 | 2008 | +---------------------------------------------------+--------------+-------------+------------------+ | | (unaudited) | (unaudited) | | +---------------------------------------------------+--------------+-------------+------------------+ | 10.1 | | | | | Non-cash | | | | | adjustments | | | | +---------------------------------------------------+--------------+-------------+------------------+ | Depreciation | 3,684 | 1,829 | 4,475 | | of property, | | | | | plant and | | | | | equipment | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Amortisation | 5,211 | 4,376 | 10,625 | | of | | | | | intangibles | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Impairment | 8,335 | - | 19,387 | | of | | | | | goodwill | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Loss/(Surplus) | 24 | 14 | 9 | | on disposal of | | | | | property, | | | | | plant and | | | | | equipment | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Loss | - | - | 1,135 | | /(Surplus) | | | | | on | | | | | disposal | | | | | of | | | | | subsidiary | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Share | 99 | | 160 | | in | | | | | loss | | | | | /(profit) | | | | | of | | | | | associates | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Foreign | 5,431 | 1,953 | 1,574 | | currency | | | | | adjustments | | | | | to | | | | | non-current | | | | | assets and | | | | | liabilities | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Share-based | 426 | 110 | 393 | | payment | | | | | expenses | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Mark | 12,522 | (7,242)(*) | (7,266) | | to | | | | | market | | | | | derivative | | | | | assets | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Revaluation | 182 | 115 | - | | of | | | | | available-for-sale | | | | | financial assets | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Provisions | (3,050) | 218 | 2,906 | | and | | | | | accruals | | | | | raised and | | | | | utilised | | | | | during the | | | | | year | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | | 32,864 | 1,373 | 33,398 | +---------------------------------------------------+--------------+--------------------+-----------+ | | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | 10.2 | | | | | Changes | | | | | in | | | | | operating | | | | | assets | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Construction | 53,635 | 13,803 | (10,884) | | contracts in | | | | | progress | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Trade | (40,692) | (73,291)(*) | (54,820) | | and | | | | | other | | | | | receivables | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | | 12,943 | (59,488) | (65,704) | +---------------------------------------------------+--------------+--------------------+-----------+ | | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | 10.3 | | | | | Changes | | | | | in | | | | | operating | | | | | liabilities | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Construction | (80,590) | (28,608) | (3,902) | | contract | | | | | liabilities | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Trade, | 13,002 | 71,476(*) | 79,965 | | other | | | | | payables | | | | | and | | | | | accruals | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | | (67,588) | 42,868 | 76,063 | +---------------------------------------------------+--------------+--------------------+-----------+ | | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | 10.4 | | | | | Income | | | | | tax | | | | | paid | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Payable | (7,536) | (2,409) | (2,409) | | at | | | | | beginning | | | | | of the | | | | | year | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Current | (799) | (4,899) | (10,317) | | taxation | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Acquisition | - | (482) | (482) | | of | | | | | subsidiary | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | Payable | 6,005 | 6,481 | 7,536 | | at year | | | | | end | | | | | (**) | | | | +---------------------------------------------------+--------------+--------------------+-----------+ | | (2,330) | (1,309) | (5,672) | +---------------------------------------------------+--------------+--------------------+-----------+ | | | | | +---------------------------------------------------+--------------+-------------+------+-----------+ (*) Reclassified (see note 2(d)). (**) Relates to net income tax payable and receivable Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2008 Amounts in US$'000 +-------------------------------------------------------+-------------+-------------+-----------+ | | At 31 December | At 30 | | | | June | +-------------------------------------------------------+---------------------------+-----------+ | | 2008 | 2007 | 2008 | +-------------------------------------------------------+-------------+-------------+-----------+ | |(unaudited) |(unaudited) | | +-------------------------------------------------------+-------------+-------------+-----------+ | 10.5 | | | | | Net cash | | | | | and cash | | | | | equivalents | | | | | (*) | | | | +-------------------------------------------------------+-------------+-------------+-----------+ | For the purposes of the consolidated | | | | | cash flow statement, cash and cash | | | | | equivalents comprise the following: | | | | +-------------------------------------------------------+-------------+-------------+-----------+ | Cash | 5,317 | 6,404 | 11,954 | | at | | | | | bank | | | | | and | | | | | in | | | | | hand | | | | +-------------------------------------------------------+-------------+-------------+-----------+ | Short-term | 78,565 | 149,177 | 76,454 | | deposits | | | | +-------------------------------------------------------+-------------+-------------+-----------+ | | 83,882 | 155,581 | 88,408 | +-------------------------------------------------------+-------------+-------------+-----------+ (*) At 31 December 2008 an amount of US$82,573,000 (31 December 2007: US$75,777,000) was held on short and long term deposit as security for the issuing of bank guarantees by various financial institutions. Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2008 11. Business combinations 11.1 Delta-T Corporation ("Delta-T") On 22 August 2007 Bateman Litwin completed the acquisition of 100 per cent of Delta-T, a leading US-based bio ethanol technology provider, for a total consideration of US$45 million in cash and 11.8 million new ordinary shares in Bateman Litwin. In addition US$ 1.2 million of expenses were incurred during the acquisition process. The 11.8 million shares were conditional upon Delta-T's financial performance during 2007. Subsequently, Bateman Litwin now anticipates the return of the 11.8 million shares, in line with the agreed formula in the sale and purchase agreement. Amounts in US$'000 +---------------------------+--------------+------------+----------------+ | | Book value |Fair value | Fair value on | | | |adjustment | acquisition | +---------------------------+--------------+------------+----------------+ | Net assets acquired: | | | | +---------------------------+--------------+------------+----------------+ | Technology | - | 75,801 | 75,801 | +---------------------------+--------------+------------+----------------+ | Brand name | - | 7,370 | 7,370 | +---------------------------+--------------+------------+----------------+ | Contractual rights | - | 7,100 | 7,100 | +---------------------------+--------------+------------+----------------+ | Other intangible assets | 344 | 987 | 1,331 | +---------------------------+--------------+------------+----------------+ | Property, plant and | 2,591 | - | 2,591 | | equipment | | | | +---------------------------+--------------+------------+----------------+ | Construction contracts in | 30,373 | - | 30,373 | | progress | | | | +---------------------------+--------------+------------+----------------+ | Trade and other | 69,607 | - | 69,607 | | receivables | | | | +---------------------------+--------------+------------+----------------+ | Bank and cash balances | 41,979 | - | 41,979 | +---------------------------+--------------+------------+----------------+ | Trade and other payables | (110,191) | - | (110,191) | +---------------------------+--------------+------------+----------------+ | Construction contract | (119,522) | 4,818 | (114,704) | | liabilities | | | | +---------------------------+--------------+------------+----------------+ | Long-term loans | (399) | - | (399) | +---------------------------+--------------+------------+----------------+ | Deferred tax liability | - | (1,927) | (1,927) | +---------------------------+--------------+------------+----------------+ | Minority interest | (1,137) | - | (1,137) | +---------------------------+--------------+------------+----------------+ | | (86,355) | 94,149 | 7,794 | +---------------------------+--------------+------------+----------------+ | | | | | +---------------------------+--------------+------------+----------------+ | Goodwill | | | 38,406 | +---------------------------+--------------+------------+----------------+ | Total consideration, | | | 46,200 | | satisfied by cash | | | | +---------------------------+--------------+------------+----------------+ | | | | | +---------------------------+--------------+------------+----------------+ | | | | | +---------------------------+--------------+------------+----------------+ | Net cash outflow arising | | | | | on acquisition: | | | | +---------------------------+--------------+------------+----------------+ | Cash consideration paid | | | 46,200 | +---------------------------+--------------+------------+----------------+ | Cash and cash equivalents | | | (41,979) | | acquired | | | | +---------------------------+--------------+------------+----------------+ | | | | 4,221 | +---------------------------+--------------+------------+----------------+ Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2008 11.2 Disposal of subsidiary In September 2007, the Company sold all of its investment in Overseas International Constructors GmbH ("OIC") and North Caspian Constructors B.V. ("NCC"), two joint ventures involved in the construction of the Main Works Construction of the Kashagan oil field in Kazakhstan. The net assets of the subsidiaries at the date of disposal were as follows: +---------------------------------------+------------------+ | | Amounts in | | | US$'000 | +---------------------------------------+------------------+ | Property, plant and equipment | 108 | +---------------------------------------+------------------+ | Construction contracts in progress | 5,489 | +---------------------------------------+------------------+ | Trade receivables | 7,633 | +---------------------------------------+------------------+ | Bank balances and cash | 1,802 | +---------------------------------------+------------------+ | Trade payables | (11,668) | +---------------------------------------+------------------+ | | 3,127 | +---------------------------------------+------------------+ | Gain/(loss) on disposal | 420 | +---------------------------------------+------------------+ | Total consideration | 3,547 | +---------------------------------------+------------------+ | | | +---------------------------------------+------------------+ | Cash consideration received | 2,956 | +---------------------------------------+------------------+ | Deferred sales proceeds (*) | 591 | +---------------------------------------+------------------+ | | 3,457 | +---------------------------------------+------------------+ | | | +---------------------------------------+------------------+ | Net cash inflow arising on disposal: | | +---------------------------------------+------------------+ | Consideration paid in cash and cash | 2,956 | | equivalents | | +---------------------------------------+------------------+ | Less: cash and cash equivalent | (1,862) | | balances disposed of | | +---------------------------------------+------------------+ | | 1,094 | +---------------------------------------+------------------+ (*) The deferred sales proceeds is pending resolution of tax settlements with the Kazakh tax authorities. Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2008 12. Earnings per share The calculation of the basic and diluted earnings per share attributable to the ordinary equity shareholders is based on the following data: Amounts in US$'000 +---------------------------------------+-------------+-------------+--------------+ | | For the six months ended |For the year | | | | ended 30 | | | 31 December | June | +---------------------------------------+---------------------------+--------------+ | | 2008 | 2007 | 2008 | +---------------------------------------+-------------+-------------+--------------+ | Earnings | (unaudited) | (unaudited) | | +---------------------------------------+-------------+-------------+--------------+ | Earnings/(loss) for the purposes of | (28,692) | 21,586 | (66,355) | | basic earnings per share (profit | | | | | /(loss) for the year attributable to | | | | | equity holders of the parent) | | | | +---------------------------------------+-------------+-------------+--------------+ | | | | | +---------------------------------------+-------------+-------------+--------------+ | | For the six months ended |For the year | | | | ended 30 | | | 31 December | June | +---------------------------------------+---------------------------+--------------+ | | 2008 | 2007 | 2008 | +---------------------------------------+-------------+-------------+--------------+ | Number of shares | (unaudited) | (unaudited) | | +---------------------------------------+-------------+-------------+--------------+ | Weighted average number of ordinary | 107,328,716 | 100,634,711 | 103,175,840 | | shares for the purpose of basic | | | | | earnings per share | | | | +---------------------------------------+-------------+-------------+--------------+ | Effect of dilutive potential | 5,820,309 | 7,493,082 | 6,960,334 | | ordinary shares: | | | | | Share options | | | | +---------------------------------------+-------------+-------------+--------------+ | Weighted average number of ordinary | 113,149,025 | 108,127,793 | 110,136,174 | | shares for the purposes of diluted | | | | | earnings per share | | | | +---------------------------------------+-------------+-------------+--------------+ | | | | | +---------------------------------------+-------------+-------------+--------------+ | Earnings per share (US$ | | | | | cents) | | | | +---------------------------------------+-------------+-------------+--------------+ | Basic: | (26.7) | 21.4 | (64.3) | +---------------------------------------+-------------+-------------+--------------+ | Diluted: | (26.7) | 20.0 | (64.3) | +---------------------------------------+-------------+-------------+--------------+ 13. Related party disclosures The parent company of Bateman Litwin N.V. is Bateman B.V. (54.9 per cent ownership at 31 December 2008). The ultimate parent company is Balda Foundation; a private company organized under the law of Liechtenstein, whose registered office address is at 6 Heilig Kreuz 9490, Vaduz, Liechtenstein. The transactions between subsidiaries of the Company have been eliminated on consolidation. This includes the sale of services and the provision of loans between various company entities. Shareholder related party transactions The Group has previously entered into projects in which the Bateman B.V. shareholder has an interest. There were no such transactions during the period ended 31 December 2008. In October 2008, BSG Resources (a related company to the parent company) provided a US$10 million loan and a guaranteed credit line of up to US$10 million to the Group. In March 2009, after the balance sheet date, BSG Resources provided a US$7 million loan as part of the US$10 million credit line facility. Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2008 14.Contingencies Mantova project - Litwin France SA ("Litwin") and Bateman B.V. were involved in legal claims against Stolt, the former owner of Litwin, concerning a claim with an Italian client. The parties agreed to arbitration which concluded, due to technical reasons, in favour of Stolt for approximately EUR700,000. An indemnification agreement is in place between Litwin and Bateman B.V., indemnifying Litwin for this liability. There is no impact on the Company's income statement. In June 2008, a contract was signed between Litwin France SA and a client for the construction of a waste-to-energy plant in Europe. Following attempts to renegotiate the contract due to a change in circumstances, Bateman Litwin has subsequently reached a negotiated settlement with the client. An adequate provision was recorded in the six month period ended 31 December 2008. 15. Events after the balance sheet date In March 2009, BSG Resources provided a US$7 million loan as part of a US$10 million credit line agreed in October 2008 (see note 13). Besides the above, no other events have occurred subsequent to the balance sheet date that require any adjustments to the financial results of the Group. Bateman Litwin N.V. Incorporated and registered in the Netherlands No. 33164026 Street and postal address Haaksbergweg 59 1101 BR Amsterdam The Netherlands Auditors Deloitte Accountants B.V. Orlyplein 10 1043 DP Amsterdam PO Box 58110 1040 HC Amsterdam The Netherlands Legal counsel Buren van Velzen Guelen Berwin Leighton Paisner Johan de Wittlann 15 Adelaide House 2517 JR The Hague London Bridge PO Box 18511 London EC4R 9HA 2502 EM The HagueUnited Kingdom The Netherlands Nominated adviser and joint broker Credit Suisse Securities (Europe) Limited One Cabot Square London E14 AQJ United Kingdom Joint broker Oriel Securities Limited 125 Wood Street London EC2V 7AN United Kingdom Public relations Pelham Public Relations 12 Arthur Street London EC4R 9AB Shares traded on the Alternative Investment Market (AIM) of the London Stock Exchange Trading symbol: BNLN Global offices Netherlands (Amsterdam) +31-20-5640491 France (Paris) + 33-1-72255252 USA (Williamsburg) +1-757-9410188 Kazakhstan (Atyrau) +7-7122-586606 Chile (Santiago) +56-2-6949331 Switzerland (Altendorf) +41-55-451-2730 United Kingdom (London) +44-20-77998300 Website: www.Bateman-Litwin.com This information is provided by RNS The company news service from the London Stock Exchange END IR DGGDXLSXGGCG
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