Strong performance in H1 2023 with progress across all segments of the Group
Hunting PLC (LSE:HTG), the global engineering group, today announces its unaudited half year results for the six months ended 30 June 2023.
Financial Highlights
- Order book increased by 63% to $529.7m (H1 2022 $325.9m)
- Revenue increased by 42% to $477.8m (H1 2022 $336.1m)
- Gross profit $114.2m up 51% (H1 2022 $75.8m)
- Gross margin improved to 24% from 23%
- EBITDA of $48.7m (H1 2022 $23.6m)
- Adjusted operating profit $26.2m (H1 2022 $4.7m)
- Interim dividend declared 5.0 cents per share (H1 2022 4.5 cents)
Commenting on the results Jim Johnson, Chief Executive, said:
"Today's results confirm the positive trend of increased investment in the oil and gas industry following years of under investment, driven by global energy demand and increased focus on energy security. We believe that the sector is in the early days of a long term growth cycle which, coupled with our non-energy businesses, positions the Company for increased revenue and earnings going forward. All our businesses have performed well during the period, and we are particularly pleased to have continued to secure major OCTG orders, which has increased our sales order book strongly since year-end. Management believes this performance indicator provides good visibility of the Group's trading outlook in the short to medium term.
"Alongside our core oil and gas businesses, Hunting has made good progress in positioning itself as a critical provider of technology, as well as a key supplier of important raw materials for the energy transition. Management anticipates this market will provide strong growth in the long term as the world solves the challenge of energy security and low carbon. Hunting will play a major role in this complex solution and we look forward to delivering on our objectives over the coming years."
Financial Summary
Financial Performance Measures
H1 2023 $m | H1 2022 $m | Variance | |
Revenue | 477.8 | 336.1 | +42% |
EBITDA* | 48.7 | 23.6 | +106% |
EBITDA margin** | 10% | 7% | |
Adjusted operating profit* | 26.2 | 4.7 | +457% |
Adjusted operating profit margin**** | 5% | 1% | |
Adjusted diluted earnings (loss) per share* | 9.6c | (0.5)c | |
Free cash flow* | (39.8) | (3.2) | |
Total cash and bank borrowings* | (51.7) | 85.6 | |
* Non-GAAP measure ("NGM"). Please see the 2023 Half Year Report and Accounts pages 33 to 38.
** EBITDA as a percentage of revenue.
*** Adjusted results exclude adjusting items.
**** Adjusted operating profit as a percentage of revenue.
Financial Performance Measures Derived from IFRS
H1 2023 $m | H1 2022 $m | Variance | |
Operating profit | 26.2 | 1.7 | +1,441% |
Diluted earnings (loss) per share | 9.6c | (2.4)c | |
Interim dividend declared per share | 5.0c | 4.5c | +11% |
Sales order book | 529.7 | 325.9 | +63% |
Outlook Statement
Global energy markets continue to display growth, stability and resilience, despite the macroeconomic narrative from some Western economies. Activity across the oil and gas industry continues to be strong, particularly within the offshore segment of the market and drilling continues to increase in momentum in South America, West Africa, the Middle East and Asia Pacific.
On this basis, the Board believes Hunting has good momentum going into the second half of the year, with an EBITDA performance similar to what has been delivered in H1 2023. Further improvements in working capital efficiencies are expected in H2 2023, with the Group's total cash and bank borrowing position expected to unwind by the year-end as larger projects are completed in H2 2023 which will deliver strong cash generation from operating activities.
Opportunities within energy transition markets are accelerating fast, driven by legislation in North America, Europe and Asia Pacific, as well as the decarbonisation initiatives announced by many companies and governments. Hunting will continue to increase its position in this market in the months ahead, by offering new technology and critical supply channels to the many stakeholders in this increasingly important sector.
The Company's Capital Markets Day is an exciting opportunity for Hunting to reinforce its investment case to investors as global energy markets return to robust growth and as traditional and new technologies and markets contribute to the ever-increasing complexity of the energy industry and future landscape. The Group has a strong position and reputation across multiple industries and end markets, and is well positioned to deliver strong long-term cash flows and returns for stakeholders into the medium and long term.
Corporate Highlights
Further Strengthening of Sales Order Book
The Company continued to build its sales order book during the period and at 30 June 2023 this stood at $529.7m (31 December 2022 $473.0m; 30 June 2022 $325.9m). The order book comprises 4% Perforating Systems; 47% OCTG; 28% Advanced Manufacturing; 19% Subsea; and 2% Other Manufacturing. Of this order book, approximately 70% is expected to be completed by the year-end; 20% during 2024; and 10% from 2025 onwards, underlying the changing profile of Hunting's revenue visibility.
$91m Contract Award with Cairn Oil and Gas, Vedanta Limited
On 30 May 2023, the Company announced a record contract that management estimates to be worth up to $91m with Cairn Oil and Gas, Vedanta Limited, for the supply of Hunting's SEAL-LOCK XDTM Premium Connection along with OCTG. The contract is for an estimated 100 wells and is to extend up to three years for Cairn's operations in Rajasthan, India. This order supports management's belief that international market sentiment remains extremely strong as governments and countries address the challenges of energy security, the development of domestic supply and post-COVID economic recovery.
10-Year Strategic Alliance Signed with Zhejiang Jiuli Hi-Tech Metals Co. Ltd ("Jiuli")
On 5 June 2023, the Company announced a 10-year strategic alliance with Zhejiang Jiuli Hi-Tech Metals Co. Ltd ("Jiuli"), for the supply of corrosion resistant alloys ("CRA") for OCTG, Carbon Capture and Storage ("CCUS") and geothermal applications. The partnership brings together Hunting's SEAL-LOCKTM Premium Connection technology with Jiuli's CRA, such as duplex/super duplex and high nickel-based alloys, for downhole casing and production tubing applications, which meet some of the harshest well conditions in the traditional oil and gas industry as well as the emerging CCUS and geothermal markets. The partnership also adds to Hunting's existing OCTG product portfolio and enables the supply of the widest range of premium OCTG for its client base, within the international oil and gas and energy transition markets, as projects accelerate in the key areas of North America, Middle East and Africa and Asia Pacific. CCUS and geothermal are two end-markets that Hunting is pursuing as part of its strategy to become a key supplier to these sectors by providing project developers with critical supply channels and the premium connections required for these increasingly challenging technical projects, which operate in demanding sub-surface environments. All these end-markets are believed to show robust demand and growth in the medium and long term.
Collaboration Agreement with CRA-Tubulars B.V.
On 13 July 2023, Hunting announced a collaboration agreement with CRA-Tubulars B.V., to further develop the Company's presence in energy transition markets. The collaboration provides the Company with access to novel titanium composite tubing technology, which is showing strong potential in CCUS project applications. The technology has won awards within the Shell 'Game Changer' technology programme, and Hunting is exploring the use of the technology alongside its SEAL-LOCKTM Premium Connection technology. The collaboration agreement includes exclusive marketing, distribution and manufacturing rights for oil and gas and carbon capture and storage markets in North America for a period of five years.
Restructuring and Operational Efficiency
As separately announced today, Hunting is continuing to drive stronger internal operational efficiencies throughout its global footprint. Hunting Titan has commenced the closure of its Oklahoma City operating site and will transfer the manufacture of perforating systems to the Group's Pampa, Texas and Monterrey, Mexico facilities. A distribution centre will be retained to continue to service clients in the Mid-Continent Region of the USA.
Within the EMEA operating segment, the manufacturing and assembly operations of the Group's main well testing site are to be transferred from the Netherlands to Dubai, which will lead to the closure of a facility at Velsen-Noord, with activities in the Netherlands to be merged into a single location. Sales, engineering and service support functions will be maintained in the Netherlands to support European clients. Hunting's Dubai operations are to be relocated to a larger, higher efficiency facility in the UAE to accommodate the manufacturing operations of the well testing business, which also positions Hunting to capitalise on the strong market outlook for the Middle East in the long term. Hunting will retain a single facility in Velsen-Noord to support oil and gas energy transition clients across Europe.
Disposal of Exploration and Production Assets
During H1 2023, the Group has completed a disposal process of all but one of its US onshore and offshore oil and gas producing assets, which are held by Hunting's wholly-owned subsidiary, Tenkay Resources, Inc ("Tenkay"). The assets have been sold on an asset-by-asset basis to a variety of third parties. In addition, the Group has negotiated the transfer of the majority of the non-producing assets and respective future plug and abandonment liabilities, which have reduced Hunting's possible exposure to future decommissioning costs. The transfer of these non-producing assets was completed in July 2023 and, therefore, the assets were shown as held for sale at 30 June 2023. As at 24 August 2023, Tenkay retains a working interest in the South Timbalier 34 asset, for which management is continuing to pursue a disposal in the short term.
Completion of Threading Facility in India, with Joint Venture Partner Jindal SAW
In Q2 2023, the Company completed the construction and commissioning of its new threading facility at Nashik Province, India, with its joint venture partner, Jindal SAW. The official opening of the facility is planned for 19 September 2023.
Half Year Management Report
For access to the Half Year Management Report narrative for the six months to 30 June 2023 please click on the following link.
http://www.rns-pdf.londonstockexchange.com/rns/2679K_1-2023-8-23.pdf
Financial Statements and Notes to the Accounts
For access to the Financial Statements and Notes to the Accounts for the half year ended 30 June 2023 please click on the following link.
http://www.rns-pdf.londonstockexchange.com/rns/2679K_2-2023-8-23.pdf
Page number references refer to the full Half Year Report.
The linked documents provide access to all financial and operational disclosures contained in the Group's 2023 Half Year Report and Accounts and can be accessed at www.huntingplc.com
Analyst Briefing and Webcast
Hunting PLC will host an analyst briefing and webcast at the offices of Buchanan (107 Cheapside, London, EC2V 6DN) on 24 August 2023 commencing at 9:30a.m. BST.
The live webcast can be accessed via the following link.
https://stream.buchanan.uk.com/broadcast/64a58b8ca0226e2268697ad8
Analysts and investors wishing to participate in a Q&A session can do so by submitting questions via the chat function of the webcast and these will be addressed by management during the live webcast. If you have any queries relating to this then please email hunting@buchanan.uk.com.
Notes to Editors:
Hunting is a global engineering group that provides precision-manufactured equipment and premium services, which add value for our customers. Established in 1874, it is a premium listed public company traded on the London Stock Exchange. The Company maintains a corporate office in Houston and is headquartered in London. As well as the United Kingdom, the Company has operations in China, Indonesia, Mexico, Netherlands, Norway, Saudi Arabia, Singapore, United Arab Emirates and the United States of America.
The Group reports in US dollars across five operating segments: Hunting Titan; North America; Subsea Technologies; Europe, Middle East and Africa ("EMEA") and Asia Pacific.
Hunting PLC's Legal Entity Identifier is 2138008S5FL78ITZRN66.
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Contacts:
For further information please contact:
Hunting PLC
Jim Johnson, Chief Executive
Bruce Ferguson, Finance Director
lon.ir@hunting-intl.com
Tel: +44 (0) 20 7321 0123
Buchanan
Ben Romney
George Pope
Tel: +44 (0) 20 7466 5000
