TIDMVELO
RNS Number : 7980Q
Velosi Limited
20 April 2009
Velosi Limited
("Velosi", "the Group" or "the Company")
Preliminary Results
For the year ended 31 December 2008
Velosi Limited ("Velosi" or the "Group"), a provider of asset integrity and
health, safety, and environment (HSE) services to a number of major national and
multinational oil and gas companies, is pleased to announce its preliminary
unaudited results for the year ended 31 December 2008.
HIGHLIGHTS IN 2008
Record Financial Performance
* Turnover up by 56% to US$182.1 million (2007: US$117.0 million)
* Profit before tax up by 30% to US$14.9 million (2007: US$11.4 million)
* EPS up 12% to US$0.22 per share (2007: US$ 0.19)
* Cash flow from operations increased substantially to US$13.2 million (2007:
US$0.7 million)
* Net cash reserves of US$17.8 million creating a strong financial position
* Low level of debt with gearing of 1%
* Final dividend proposed of US$0.01 per share
Operational achievements
* Strong forward order book providing excellent visibility on future revenues
* Acquisition of PSC Europe SRL (PSC Italy) added an annualised US$9.1 million in
revenue and US$1.5 million in operating profit
* Opened new offices in Angola, Ghana, Vietnam, Saudi Arabia, and Korea
* Introduced new management structure
* More cautious approach to expansion in light of the continued global market
uncertainty
John Hogan, Chairman, commented:
"Following a strong performance in 2007, Velosi continued this trend in 2008
delivering a record set of financial results with strong cash generation. The
Group has made substantial operational progress, venturing into new geographic
locations, increasing market share in existing markets, and expanding its
service offerings. Trading for the first three months of the current financial
year has been in line with our expectations and the Board remains confident
about the outlook for 2009."
For further information, please contact:
+------------------+--------------------+------------------------------+
| Velosi | Dr Nabil Abdul | 020 7930 0777 |
| | Jalil | |
| | Joe Vincent | |
+------------------+--------------------+------------------------------+
| Strand Partners | James Harris | 020 7409 3494 |
| | Warren Pearce | |
+------------------+--------------------+------------------------------+
| Charles Stanley | Mark Taylor | 020 7149 6000 |
| | Freddy Crossley | |
+------------------+--------------------+------------------------------+
| Cardew Group | Tim Robertson | 020 7930 0777 |
| | Catherine Maitland | |
+------------------+--------------------+------------------------------+
CHAIRMAN'S STATEMENT
Introduction
2008 was a very successful year for the Group. The substantial increase in
revenue and profit was driven by continued high levels of investment in
infrastructure by the world's major oil and gas companies. New infrastructure
projects and services supplied for on-going projects continue to take centre
stage in the Group's activities.
Due to the industry's focus on safety and protection of the environment, the oil
and gas sector is still investing heavily in ensuring that its plant, equipment
and structures are safeguarded to the highest standards. This creates an
unremitting demand for Velosi's services, acting as a one-stop centre on a
global basis for asset integrity and HSE services.
Despite the significant fall in oil prices precipitated by the global slow down
in demand, the outlook for the Group remains positive as it continues to win new
long-term contracts both in existing markets and more importantly in new markets
such as Angola, Russia, Brunei and Saudi Arabia. Our confidence in the future
performance of the Group is derived from the following factors:
* Good demand driven by new projects and the need to maintain existing projects
with concerns over safety and the environment making the services Velosi
provides a key investment for all major oil and gas companies;
* Excellent forward visibility on future revenue streams with 38% of long-term
contracts having more than 3 years to run;
* Major oil and gas companies increasingly using Velosi as a one-stop centre on a
global basis;
* Growth in market share expected to offset any future slowdown in oil and gas
expenditure;
* Increasing focus on long-term contract wins in new markets and parts of North
Africa and South America over next 12-24 months;
* Strong financial base with excellent cash generation and approximately US$18
million of net cash at the year end (2007: Approximately US$4 million) to
support commercial objectives; and
* Balanced approach to future investment taking account of the current
environment, and allocating resources to areas only where the Company can
achieve significant returns.
Financial Performance
These record results are a direct reflection of the success of Velosi's
strategy. For the financial year under review, the Group achieved a 55.6%
increase in revenue to US$182.1 million (2007: US$117.0 million). Underlying
organic growth in revenues was 26%, and the Group won 14 new contracts of which
6 were in new markets. The Group also registered an increase in profit before
tax of 30.1% to US$14.9 million (2007: US$11.4 million). Operating profit
before interest and tax increased by 28.9% to US$14.4 million (2007: US$11.2
million) and profit after tax and minority interests increased by 24.9% to
US$9.3 million (2007: US$7.5 million). Cash flow from operations increased
substantially to US$13.2 million from US$0.7 million in 2007. Net cash flow from
operating activities was US$9.9 million (2007: Outflow of US$0.7 million).
During the year, the Group acquired a 60% interest in PSC Italy, an
Italian-based company providing inspection and expediting services for a total
consideration of EUR1.8 million (approximately US$2.54 million). The acquisition
has been immediately earnings enhancing.
Basic earnings per share after minority interests increased by 11.9% to 21.7
cents compared to 19.4 cents in the previous year, while fully diluted earnings
per share after minority interests based on the weighted average issued share
capital as at 31 December 2008 was 19.6 cents compared to 18.2 cents in the
previous year.
At 31 December 2008 the Group had net cash reserves of US$17.8 million, built
through a combination of increased operating profits, a reduction in capital
spending over 2007 levels, and the raising of GBP4.42 million through a placing
of new shares in March 2008. This places the Group in a strong position both to
fund its on-going activities and to be responsive to opportunities as they arise
in the market.
Dividend
Backed by positive results, the Board is pleased to propose a final dividend of
US$0.01 per share (2007: US$0.01). The Board intends to continue paying
dividends in the future while maintaining a suitable level of dividend cover and
retaining the majority of earnings to fund the development of the Group's
business. Subject to shareholders' approval at the Annual General Meeting, the
dividend will be paid on 31 July 2009 to shareholders on the register on 3 July
2009.
Strategy
2008 was another year of significant expansion. Since our flotation in 2006, the
Company has increased its revenue base by almost four times, and now employs
approximately 2,500 people. Our strategy has been to expand Velosi so that the
skills it was providing so successfully in regional pockets could be deployed on
a global basis, while at the same time increasing the range of services we
provide. There is no doubt we have achieved a large part of our objectives as we
are now operating on a global basis, and are winning 'one-stop centre' contracts
to provide services for individual companies in a number of markets.
To accommodate the increased size of the Group, Velosi has put in place a new
management structure by creating four new regional manager roles, reporting
directly to the Chief Executive Officer, who respectively control the Group's
principal geographic areas of activity, i.e. Africa, Australasia, Europe and the
Middle East.
Looking ahead, our strategic focus is to continue to enter new geographic
markets, growing market share in existing markets, and expanding the Group's
service offerings organically, via joint ventures and through acquisitions.
The Group's acquisition of a 60% stake in PSC Italy in 2008 has resulted in an
agreement with Saipem, a subsidiary of Italian oil and gas company ENI, to
provide inspection and expediting services in China, India, Korea, Europe, and
America. The acquisition of PSC Italy has been one of the Group's most
successful acquisitions to date.
Elsewhere Velosi has won important contracts across the world, particularly in
the Middle East and Africa. In Qatar, Oman, and Saudi Arabia, the Group was
awarded contracts in those regions by RasGas, Petroleum Development Oman (PDO)
and Saudi Aramco respectively. In Angola, the Group won its largest contract to
date with Chevron.
In line with our growth plans and the Company's goal of becoming a leading
Integrated Inspection, Maintenance and Engineering Support Provider, our 65%
owned subsidiary, K2 Specialist Services Pte Ltd (K2) continues to develop its
service portfolio and in August 2008 launched its Hotwork Enclosure System. The
system allows for oil and gas operators to conduct hotwork operations in live
process areas without the requirement of shutting down the process plant. This
provides the client with a safe and extremely cost effective solution for
on-going maintenance works without costly shut downs. K2 utilised the Hotwork
Enclosure System during a maintenance campaign for Shell Bukom in Singapore and
on an offshore production facility in Vietnam.
Appreciation
On behalf of the Board, I wish to extend my thanks to all our employees
worldwide for their commitment, hard work and perseverance throughout the year.
Outlook
Velosi's success in securing new contracts and 100% retention of existing
contracts reflects the confidence our clients have in our services and
capabilities on a global basis. Demand has been driven by new projects and the
need to maintain existing projects with concerns over safety and the
environment, making the services Velosi provides a 'must-have' investment for
the major oil and gas companies. However, the Group is not growing complacent
and is keenly focused on continuing to grow the business in the context of a
changing and more challenging market environment.
The Group is investing in new ways to make our services more cost effective and
to keep up with clients' technological advancements. This is particularly
important with world oil and gas prices set to remain weak in 2009 and possibly
into 2010, creating a natural desire to reduce costs and pressures on labour
cost inflation. Velosi's services remain critical for the establishment of new,
and the maintenance of on-going, infrastructure projects. However, the Group is
positioning itself to assist its clients by developing innovative cost effective
solutions and working alongside them to achieve their objectives of reducing
costs. In addition, our ability to increase market share and over the longer
term diversify our services will help to counter any further reduction in
expenditure.
The Group is closely focused on making the business operate on a streamlined
cost base and has adopted a more conservative approach to expansion, as a result
of the current economic environment, whilst ensuring that it does not forego
commercial opportunities. The Board will continue to focus on cash generation,
and with US$18 million in net cash on the balance sheet and gearing of 1%, the
Group has a strong financial platform from which to grow the business in 2009
and over the longer term.
Trading for the first three months of the current financial year has been in
line with our expectations. A high level of the revenues forecast for the
remainder of 2009 are already secured against existing contracts thereby giving
the Board confidence that the Group will deliver another good performance in
2009.
John Hogan
Chairman
20 April 2009
OPERATIONAL REVIEW
2008 has been a year of expansion for the Group, both through our extended
service offerings, entrance into new markets and through our acquisition of a
controlling interest in PSC Italy. Trading for the first three months of the
current financial year has been in line with our expectations and the Board
remains confident about the outlook for 2009.
Operational Highlights
Africa
* Three-year engineering services contract with Bulk Oil Storage and
Transportation Company Limited (BOST) in Ghana
* Contract with Chevron Angola for the provision of construction management and
inspection services personnel
Australasia
* Three-year quality assurance, quality control and quality surveillance services
contract with ConocoPhillips Indonesia Inc Ltd
* Since the year end, a three-year specialised services contract with Samsung
Heavy Industries Co Ltd (SHI) for the assembly and installation of derricks
Europe
* Two and a half-year frame agreement with BP Norge AS providing quality assurance
and quality control services for BP, marking the Group's maiden contract in
Norway
* Three-year inspection and expediting services with Saipem, a subsidiary of ENI
* Acquisition of PSC Italy
Middle East
* Five-year general inspection services contract with Saudi Aramco
* Two-year asset integrity services with Al Khafji Joint Operations (KJO), a joint
venture between Aramco Gulf Operations and Kuwait Gulf Oil Company
* Three-year contract with RasGas for the provision of specialised inspection
personnel
* Three-year contract with Dolphin Energy for the provision of quality control
inspection services, including vendor inspection services
* Since the year end, re-awarded a four-year quality assurance, quality control,
and third party inspection services contract with PDO
Overview
In 2008, Velosi's investment across the business, with continued infrastructure
investment and the need for operational efficiency amongst the oil and gas and
petrochemical companies, contributed to the Group winning a number of
significant new contracts globally. We believe that these contracts will
underpin the Group's growth in 2009 despite the global slow down.
Velosi's expansion of its diverse range of services to include Asset Integrity
Management Services, Hotwork Enclosures, Project Management Consultancy and
Sub-sea Services; the opening up of new markets; and recent acquisitions, offer
both existing and potential clients the added benefit of a one-stop centre. The
Group's new markets are performing well and there are evident synergies among
the Group's Strategic Business Units (SBUs), with cross-selling being filtered
through the Group's subsidiaries, branches and representative offices. SBUs are
the Group's subsidiaries, providing specialised services within our core
activities.
A significant portion of the Group's revenue is recurrent due to term contracts
and on-going regulatory activities.
Europe
Turnover: US$44.3 million (2007: US$15.2 million), Contribution to Group Sales:
24.4% (2007: 13.0%)
Europe saw the highest growth in turnover during the period, with an increase of
192.2%. The acquisition of PSC Italy not only contributed to the significant
increase in earnings, but will also give Velosi a strong platform from which to
expand its presence in Italy's rapidly growing natural gas market. This was
demonstrated in an agreement with Saipem, a subsidiary of the Italian oil and
gas company ENI, to provide inspection and expediting services in China, India,
Korea, Europe and America.
Another significant breakthrough was the three-year quality assurance and
quality control contract from BP Norge AS. Under this new contract, Velosi will
provide quality assurance and quality control for BP, including verification,
certification, and enhancement services, at fabrication sites in Norway and the
rest of Europe for the Valhall Re-Development Project located in the Norwegian
sector of the North Sea, and for the Skarv Project, located in deepwater
offshore Norway. This is our first contract with BP in Europe and also provides
an opportunity for us to develop our presence across Scandinavia.
The operating results for Europe during the period were however dampened by the
provision of bad debts of approximately US$1.4 million in Intec (UK) Ltd
(Intec). This was primarily due to a client having filed for administration.
Australasia
Turnover: US$32.6 million (2007: US$12.1 million), Contribution to Group Sales:
17.9% (2007: 10.4%)
Following its strong performance in 2007, Australasia recorded a commendable
169.4% increase in turnover during the period.
In June 2008, ConocoPhillips Indonesia awarded a three-year quality assurance,
quality control and quality surveillance services contract worth US$7.8 million.
Under this contract Velosi will audit and inspect pipe mills, valve suppliers,
fabrication yards, and project sites, to verify that the planning and execution
of manufacturing, construction, and testing are carried out to meet the criteria
in purchase orders and main contracts. This new contract will increase Velosi's
presence in Indonesia, Europe, the USA, Malaysia, Singapore, and China, through
work with international vendors.
K2, the Group's SBU in Singapore, was awarded a contract worth US$2.75 million
from PPL shipyard, Singapore, for the assembly and installation of five new
build jackup derricks, with the option for the contract to be extended to cover
an additional three derricks. K2 commenced work in June 2008 and has already
started the assembly of the second new build jackup, with the first five
derricks due to be completed in June 2009.
In addition, COSCO shipyard, Nantong, China, awarded a contract to K2 for the
supply of specialised equipment, manpower, and technical know-how to carry out
the assembly and installation of the drilling package on the semi-submersible
Sevan 650 drilling rig. The project commenced in July 2008..
Since the year end, K2 has been awarded a three-year contract with Samsung Heavy
Industries Co Ltd (SHI) worth in excess of US$20 million. SHI is one of the
world's leading shipbuilders, constructing vessels with leading-edge technology
including drill ships, ultra-large container ships, liquefied natural gas (LNG)
carriers, and floating production storage and offloading units (FPSOs). Under
the SHI contract, K2 will provide specialised services for the assembly and
installation of at least 20 derricks. The project will require highly trained
rope access derrick builders to work on steel erection, the installation of
electrical, mechanical and hydraulic equipment, and structural surveying and
alignment as required. The contract commenced at SHI's shipyard on Geoje Island,
South Korea, on 13 March 2009.
All the countries in the region enjoyed healthy growth with notable performance
from our operations in Vietnam, K2 in Singapore, and QA Management Services Pty
Ltd (QAM) in Australia. Vietnam's turnover increased 334% to approximately
US$3.6 million while K2's turnover increased 309% to over US$12.8 million. QAM,
the Group's SBU in Australia, increased its turnover 152% to approximately
US$3.7 million.
Middle East
Turnover: US$59.8 million (2007: US$34.2 million), Contribution to Group Sales:
32.9% (2007: 29.2%)
The establishment of Velosi Asset Integrity Ltd (VAIL) in 2007, which offers
specialised services to the oil and gas, and petrochemical industries globally,
expanded our range of services to include higher-end consultancy services. This
strategic move has resulted in another two new contract wins with KJO and Abu
Dhabi Gas Liquefaction Company Ltd (ADGAS) respectively.
KJO, a joint venture between Aramco Gulf Operations and Kuwait Gulf Oil Company,
awarded a US$2.2 million, two-year contract to Velosi, effective from April
2008. The project is an asset integrity service which covers Reliability and
Maintenance Effectiveness Implementation and is based in Saudi Arabia.
ADGAS has agreed a Static Equipment Inspection and Task Planning contract with
Velosi's asset integrity unit. The Abu Dhabi-based contract will last 18 months,
effective from May 2008.
Velosi's Qatar office has won a new contract from our existing client RasGas,
for the provision of specialised inspection personnel. It is an exclusive
three-year contract and commenced in November 2008. Velosi Qatar has also
recently been awarded a three-year contract by Dolphin Energy, a new client,
following a competitive tendering process, commencing November 2008.
Velosi Oman (50% owned by Velosi), has been re-awarded a quality assurance,
quality control and third party inspection services contract with PDO. The new
contract commences in June 2009, covering a period of four years. The contract
originally commenced in December 2003, and was due to expire in May 2009.
The growth in revenue achieved in the Middle Eastern region during the period,
although considerable, has been partly offset by rising overhead costs such as
employment-related costs as well as increases in accommodation expenses.
Americas
Turnover: US$17.5 million (2007: US$17.5 million) Contribution to Group Sales:
9.6% (2007: 14.9%)
In spite of the global economic challenges faced in this region in 2008,
substantial efforts have been made to further strengthen the various divisions.
Velosi America continued to grow steadily during the year, entering into master
service agreements with new clients, and at the same time renewing agreements
with existing clients. Major clients in this region include UOP (Honeywell) Inco
Australia, Gulf Interstate Engineering, CB&I, GE Vetco Gray, Enersul, J. Ray
McDermott, and KBR.
During the year, the Russian Certification Services Division continued to
service its major clients such as General Electric, CMI EPTI, National Oilwell
Varco, and Ventech Engineers. Significant efforts have been made in 2009 to
develop the Russian and Kazakhstan certification work for companies in Canada,
and a gradual increase of orders from Canadian companies is expected towards the
end of 2009. Moving forward, the region is set to develop its inspection
business further, and focus on winning long-term contracts.
Africa
Turnover: US$26.5 million (2007: US$36.6 million), Contribution to Group Sales:
14.5% (2007: 31.3%)
As anticipated, revenue from Africa reduced against the previous year as a
result of the on-going negotiations with Richard Ogunmakin's estate regarding
the future ownership and operation of Velosi Nigeria.
The newly established Angolan office has successfully won a substantial new
contract with Chevron. Under the terms of the contract, Velosi will provide
Construction Management and Inspection Services personnel to Chevron's oil and
gas production operations in Cabinda, Angola. During the year, Velosi Angola
contributed revenue of US$6.9 million, the highest registered in this region.
In January 2008, Velosi Ghana commenced a three-year contract with BOST,
providing engineering services for the supervision of BOST-AT&V (BATV) project.
The project includes the construction of 90,000 cubic meter fuel storage tanks
to be located on three sites, i.e. Accra Plain Depot, Akosombo Site, and
Savelugu Site; and a 70 kilometer 12-inch diameter pipeline from the Accra Plain
Depot to the Akosombo Site. During the year, Velosi Ghana contributed revenue of
US$1.3 million, an increase of 709% from last year.
Central Asia
Turnover: US$1.3 million (2007: US$-), Contribution to Group Sales: 0.7%
(2007:-%)
The contract with Exxon Neftegas Ltd in Sakhalin Island awarded in 2007,
contributed approximately US$1.3 million in revenue to the region. The contract
which commenced in 2008, provides Corrosion Control Inspection and
Non-Destruction Testing services.
FINANCIAL REVIEW
The Company's consolidated financial statements for the year ended 31 December
2008 have been prepared under International Financial Reporting Standards
(IFRS).
For the year ended 31 December 2008, the Group demonstrated another year of
strong financial growth with operating profit increasing 28.9% to US$14.4
million (2007: US$11.2 million), and strong cash flow generation, with cash flow
from operations increasing substantially, to US$13.2 million (2007: US$0.7
million). Net cash flow from operating activities was US$9.9 million (2007:
Outflow of US$0.7 million). Turnover increased 55.6% to US$182.1 million (2007:
US$117.0 million). The growth in turnover was principally driven by operations
in Europe and Australasia, where turnover increased 192.2% and 169.4%
respectively. During the year, the Middle East, the largest contributing region
to Group turnover, contributed 32.9% to total sales, followed by Europe and
Australasia, contributing 24.4% and 17.9% respectively.
Profit from ordinary activities before tax for the year was up 30.1% from
US$11.4 million in 2007, to US$14.9 million. The Group recorded an increase of
19.5% in profit after tax, and of the US$11.7 million (2007: US$9.8 million),
US$2.3 million was attributable to minority shareholders of the Group (2007:
US$2.3 million).
Taxation
The effective tax rate for the Group for the year ended 31 December 2008 was 22%
(2007: 15%) and the tax charge was US$3.2 million (2007: US$1.7 million). The
effective tax rate for the Group is directly correlated with the contributions
from the different countries in which we trade and their varying tax rates.
Share Capital
During the year, share capital increased by US$100,000 mainly due to the
institutional placing of 3,842,000 new ordinary shares of US$0.02 each, which
represented 8.8% of the enlarged issued share capital of the Company. 868,966
new ordinary shares of US$0.02 each were issued as final payment for the
acquisition of 60% of Intec, the acquisition of which was announced in 2007.
214,836 new ordinary shares of US$0.02 each were issued to the shareholders of
K2 for the achievement of its performance targets, in accordance with the
agreement dated 19 October 2007; and 83,438 new ordinary shares of US$0.02 each
in lieu of payment for the acquisition of 14% of Kurtec Inspection Services Sdn
Bhd.
Acquisitions and Cash Flow
During the year, the Group acquired a 60% interest in PSC Italy, an
Italian-based company providing inspection and expediting services, for a total
consideration of GBP1.8 million (approximately US$2.54 million) Cash outflow for
the Group from investing activities reduced by US$6.6 million to US$3.1 million
from US$9.7 million in 2007. This was due to the Group adopting a more cautious
approach to expansion in light of the continued global market uncertainty.
Net cash inflow from operating activities increased to US$9.9 million from a net
cash outflow of US$0.7 million in 2007. This was largely due to the increase in
operating profit, and reduction in debtors' days. Furthermore, the cash inflow
from operating activities took into account tax paid of US$2.8 million in 2008
compared with US$1.2 million in 2007.
There was a net cash inflow from financing activities of US$7.7 million,
compared to US$2.9 million in 2007. The increase of US$4.8 million was mainly
due to the proceeds from the institutional placing of 3,842,000 new ordinary
shares of US$0.02 each on 20 March 2008. The proceeds were used to satisfy the
working capital requirements of new contracts secured in 2008, and expansion
into new geographical territories.
Administrative Expenses
Administrative Expenses for the year amounted to US$32.1 million (2007: US$18.1
million), with the increase due to the consolidation of PSC Italy's management
overheads, full year contribution of management overheads from entities that
were acquired in 2007, namely Intec and K2, the increase of staff strength and
salaries in the Middle East in line with its increased activity, and the Group's
continuing investment in marketing to enhance market share in both new and
existing areas. The opening of new offices in Angola, Ghana, Vietnam, Saudi
Arabia, and Korea, also partly contributed to the increase in administrative
expenses. The Group's continuing investment in IT, such as the development of
the Group Intranet to facilitate sales and contracts reporting, also contributed
to the increase in costs.
Profit Attributable to Minority Interests
Profits attributable to minority interests were US$2.3 million (2007: US$2.3
million). This was mainly due to the stronger performance of the Group's
part-owned subsidiaries including K2 and QAM in Australasia; Velosi
Certification W.L.L (Qatar) and Velosi Saudi Arabia LLC in the Middle East; and
Velosi Ghana Ltd in Africa.
Earnings Per Share and Dividends
Basic earnings per share after minority interests based on the weighted average
issued share capital as at 31 December 2008 were 21.7 cents (2007: 19.4 cents),
and fully diluted earnings per share after minority interest based on the
weighted average issued share capital as at 31 December 2008 were 19.6 cents
(2007: 18.2 cents). As at 31 December 2008, the Group had net assets of US$1.41
per share.
As stated in the Chairman's Statement, the Board is proposing a final dividend
of US$0.01 per share (2007: US$0.01). The dividend will be paid, subject to
shareholder approval at the Annual General Meeting, on Friday 31 July 2009, to
shareholders on the register on Friday 3 July 2009, in sterling converted at the
prevailing exchange rate.
+-------------------------------+------------+-----------+-----------+----+------------+
| |
+--------------------------------------------------------------------------------------+
| |
+--------------------------------------------------------------------------------------+
| CONSOLIDATED INCOME STATEMENT |
+--------------------------------------------------------------------------------------+
| FOR THE YEAR ENDED 31 DECEMBER 2008 |
+--------------------------------------------------------------------------------------+
| | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
| | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
| | | | 2008 | | 2007 |
+-------------------------------+------------+-----------+-----------+----+------------+
| | | | Unaudited | | Audited |
+-------------------------------+------------+-----------+-----------+----+------------+
| | | Notes | US$'000 | | US$'000 |
+-------------------------------+------------+-----------+-----------+----+------------+
| | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
| Continuing operations | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
| | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
| Revenue | | 6 | 182,072 | | 116,997 |
+-------------------------------+------------+-----------+-----------+----+------------+
| Cost of sales | | | (136,509) | | (89,152) |
+-------------------------------+------------+-----------+-----------+----+------------+
| Gross profit | | | 45,563 | | 27,845 |
+-------------------------------+------------+-----------+-----------+----+------------+
| | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
| Other operating income | | | 883 | | 1,435 |
+-------------------------------+------------+-----------+-----------+----+------------+
| | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
| Administrative expenses | | | (32,057) | | (18,121) |
+-------------------------------+------------+-----------+-----------+----+------------+
| Operating profit | | | 14,389 | | 11,159 |
+-------------------------------+------------+-----------+-----------+----+------------+
| Finance costs | | | (533) | | (253) |
+-------------------------------+------------+-----------+-----------+----+------------+
| Share of profit of associated | | | 1,006 | | 520 |
| companies | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
| Profit on ordinary activities | | | 14,862 | | 11,426 |
| before tax | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
| | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
| Income tax expense | | 4 | (3,208) | | (1,670) |
+-------------------------------+------------+-----------+-----------+----+------------+
| Profit on ordinary activities | | | 11,654 | | 9,756 |
| after tax | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
| | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
| Minority interest | | | (2,348) | | (2,301) |
+-------------------------------+------------+-----------+-----------+----+------------+
| Profit from continuing | | | 9,306 | | 7,455 |
| operations and attributable | | | | | |
| to equity holders | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
| | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
| | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
| Basic earnings per share | | 2 | 21.7c | | 19.4c |
+-------------------------------+------------+-----------+-----------+----+------------+
| Diluted earnings per share | | 2 | 19.6c | | 18.2c |
| | | | | | |
+-------------------------------+------------+-----------+-----------+----+------------+
+----+----+----------------------+--------------+-----------+-----------+-----+------------+
| |
+------------------------------------------------------------------------------------------+
| |
+------------------------------------------------------------------------------------------+
| CONSOLIDATED BALANCE SHEET |
+------------------------------------------------------------------------------------------+
| AS AT 31 DECEMBER 2008 |
+------------------------------------------------------------------------------------------+
| |
+------------------------------------------------------------------------------------------+
| | | | | | | | |
+----+----+----------------------+--------------+-----------+-----------+-----+------------+
| | | | | | 2008 | | 2007 |
+----+----+----------------------+--------------+-----------+-----------+-----+------------+
| | | | | | Unaudited | | Audited |
+----+----+----------------------+--------------+-----------+-----------+-----+------------+
| | | | | | US$'000 | | US$'000 |
+----+----+----------------------+--------------+-----------+-----------+-----+------------+
| Assets |
+------------------------------------------------------------------------------------------+
| | | | | | |
+--------------------------------+--------------+-----------+-----------+-----+------------+
| Non-current assets | | | | | |
+--------------------------------+--------------+-----------+-----------+-----+------------+
| Goodwill | | 8,307 | | 7,341 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Other intangible assets | | 1,744 | | 1,662 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Property, plant and equipment | | 8,261 | | 6,920 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Investment in associated companies | | 1,338 | | 869 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Other investments | | - | | 9 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Deferred tax assets | | 400 | | 88 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| | | 20,050 | | 16,889 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Current assets | | | | |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Inventories | | 2,271 | | 1,056 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Trade and other receivables | | 61,668 | | 46,362 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Amount due from a related party | | 1,057 | | 1,394 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Amount due from associated companies | | 1,127 | | 981 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Tax recoverable | | 126 | | 90 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Cash and cash equivalents | | 20,641 | | 7,967 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| | | 86,890 | | 57,850 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| | | | | |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Non-current asset held for sale | | - | | 900 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| | | | | |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Total assets | | 106,940 | | 75,639 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| | | | | |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Equity and liabilities | | | | |
+-----------------------------------------------+-----------+-----------+-----+------------+
| | | | | |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Capital and reserves | | | | |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Share capital | | 887 | | 787 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Share premium | | 32,422 | | 21,310 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Share based payment reserve | | 755 | | 425 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Revaluation reserve | | 287 | | 287 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Translation reserve | | (2,164) | | (63) |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Retained earnings | | 22,875 | | 14,004 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Total equity attributable to equity holders | | 55,062 | | 36,750 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| | | | | |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Minority interest | | 7,293 | | 5,729 |
+-----------------------------------------------+-----------+-----------+-----+------------+
| Total equity | | 62,355 | | 42,479 |
+----+----+----------------------+--------------+-----------+-----------+-----+------------+
+------------------------------------------+-----------+-----------+-----+------------+
| | | | | |
+------------------------------------------+-----------+-----------+-----+------------+
| | | | | |
+------------------------------------------+-----------+-----------+-----+------------+
| | | | | |
+------------------------------------------+-----------+-----------+-----+------------+
| | | 2008 | | 2007 |
+------------------------------------------+-----------+-----------+-----+------------+
| | | Unaudited | | Audited |
+------------------------------------------+-----------+-----------+-----+------------+
| | | US$'000 | | US$'000 |
+------------------------------------------+-----------+-----------+-----+------------+
| | | | | |
+------------------------------------------+-----------+-----------+-----+------------+
| Current liabilities | | | | |
+------------------------------------------+-----------+-----------+-----+------------+
| | | | | |
+------------------------------------------+-----------+-----------+-----+------------+
| Trade and other payables | | 33,447 | | 20,820 |
+------------------------------------------+-----------+-----------+-----+------------+
| Amount due to a related party | | 142 | | 42 |
+------------------------------------------+-----------+-----------+-----+------------+
| Amount due to associated companies | | 16 | | 229 |
+------------------------------------------+-----------+-----------+-----+------------+
| Bank and other borrowings | | 2,923 | | 3,856 |
+------------------------------------------+-----------+-----------+-----+------------+
| Current tax liabilities | | 2,421 | | 1,761 |
+------------------------------------------+-----------+-----------+-----+------------+
| Hire purchase liabilities | | 658 | | 219 |
+------------------------------------------+-----------+-----------+-----+------------+
| Deferred consideration | | 2,673 | | 4,477 |
+------------------------------------------+-----------+-----------+-----+------------+
| | | 42,280 | | 31,404 |
+------------------------------------------+-----------+-----------+-----+------------+
| Non-current liabilities | | | | |
+------------------------------------------+-----------+-----------+-----+------------+
| Deferred tax liabilities | | 37 | | 24 |
+------------------------------------------+-----------+-----------+-----+------------+
| Provision for employees end of service | | 818 | | 211 |
| benefits | | | | |
+------------------------------------------+-----------+-----------+-----+------------+
| Bank and other borrowings | | 343 | | 548 |
+------------------------------------------+-----------+-----------+-----+------------+
| Hire purchase liabilities | | 933 | | 951 |
+------------------------------------------+-----------+-----------+-----+------------+
| Other non-current liabilities | | 174 | | 22 |
+------------------------------------------+-----------+-----------+-----+------------+
| | | 2,305 | | 1,756 |
+------------------------------------------+-----------+-----------+-----+------------+
| | | | | |
+------------------------------------------+-----------+-----------+-----+------------+
| Total liabilities | | 44,585 | | 33,160 |
+------------------------------------------+-----------+-----------+-----+------------+
| | | | | |
+------------------------------------------+-----------+-----------+-----+------------+
| Total equity and liabilities | | 106,940 | | 75,639 |
+------------------------------------------+-----------+-----------+-----+------------+
+--------------------------------------------------+------+-----------+----+-----------+
| |
+--------------------------------------------------------------------------------------+
| |
+--------------------------------------------------------------------------------------+
| CONSOLIDATED CASH FLOW STATEMENT |
+--------------------------------------------------------------------------------------+
| FOR THE YEAR ENDED 31 DECEMBER 2008 |
+--------------------------------------------------------------------------------------+
| | | 2008 | | 2007 |
| | | Unaudited | | Audited |
| | | | | US$'000 |
| | | US$'000 | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Cash flows from operating activities | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Profit on ordinary activities for the year | | 14,862 | | 11,426 |
+--------------------------------------------------+------+-----------+----+-----------+
| | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Adjustments for: | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Depreciation | | 1,707 | | 1,056 |
+--------------------------------------------------+------+-----------+----+-----------+
| (Gain) / loss on disposal of | | (120) | | 6 |
| property, plant and equipment | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Property, plant and equipment | | 37 | | 5 |
| written off | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Amortisation of intangible | | 331 | | 75 |
| assets | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Loss on disposal of shares in a | | - | | 18 |
| subsidiary | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Impairment in other investments | | 9 | | - |
+--------------------------------------------------+------+-----------+----+-----------+
| Negative goodwill written off | | - | | (1) |
+--------------------------------------------------+------+-----------+----+-----------+
| Allowance for doubtful debts | | 3,568 | | 1,080 |
+--------------------------------------------------+------+-----------+----+-----------+
| Allowance for doubtful debts | | (8) | | - |
| written back | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Bad debts written off | | 211 | | 28 |
+--------------------------------------------------+------+-----------+----+-----------+
| Provision for retirement | | 744 | | 106 |
| benefit | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Retirement benefit paid | | (137) | | (5) |
+--------------------------------------------------+------+-----------+----+-----------+
| Share of profit in associated | | (1,006) | | (520) |
| companies | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Interest expense | | 533 | | 253 |
+--------------------------------------------------+------+-----------+----+-----------+
| Interest income | | (244) | | (210) |
+--------------------------------------------------+------+-----------+----+-----------+
| Unrealised foreign exchange | | 485 | | - |
| loss | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Issue of share options | | 330 | | 289 |
+--------------------------------------------------+------+-----------+----+-----------+
| | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Operating cash flows before movements in working | | 21,302 | | 13,606 |
| capital | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Increase in inventories | | (1,216) | | (57) |
+--------------------------------------------------+------+-----------+----+-----------+
| Increase in receivables | | (16,349) | | (14,498) |
+--------------------------------------------------+------+-----------+----+-----------+
| Increase in payables | | 9,494 | | 1,652 |
+--------------------------------------------------+------+-----------+----+-----------+
| | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Cash generated from operations | | 13,231 | | 703 |
+--------------------------------------------------+------+-----------+----+-----------+
| Interest paid | | (533) | | (253) |
+--------------------------------------------------+------+-----------+----+-----------+
| Tax paid | | (2,770) | | (1,190) |
+--------------------------------------------------+------+-----------+----+-----------+
| Net cash from / (used in) operating activities | | 9,928 | | (740) |
+--------------------------------------------------+------+-----------+----+-----------+
| | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Cash flows from investing activities | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Acquisition of property, plant and | | (2,687) | | (3,376) |
| equipment | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Receipts from sale of property, | | 448 | | 172 |
| plant and equipment | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Acquisition of new subsidiary | | (1,168) | | (6,415) |
| companies, net of cash | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Purchase of unquoted shares | | - | | (9) |
+--------------------------------------------------+------+-----------+----+-----------+
| Advance to associated companies | | (358) | | (598) |
+--------------------------------------------------+------+-----------+----+-----------+
| Dividend income from an associated | | 414 | | 324 |
| company | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Interest received | | 244 | | 210 |
+--------------------------------------------------+------+-----------+----+-----------+
| | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
| Net cash used in investing activities | | (3,107) | | (9,692) |
+--------------------------------------------------+------+-----------+----+-----------+
| | | | | |
+--------------------------------------------------+------+-----------+----+-----------+
+-----------------------------------------------+----------+-----------+----+-----------+
| | | 2008 | | 2007 |
| | | Unaudited | | Audited |
| | | | | |
| | | US$'000 | | US$'000 |
| | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| Cash flows from financing activities | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| Proceeds from issue of | | 8,660 | | 3,275 |
| shares | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| Share issue expenses | | (445) | | (69) |
+-----------------------------------------------+----------+-----------+----+-----------+
| Repayments of term loans | | (132) | | (143) |
+-----------------------------------------------+----------+-----------+----+-----------+
| Repayments of hire purchase | | (251) | | (238) |
| liabilities | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| Advance from / (repayments | | 437 | | (245) |
| to) a related party | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| Advance from directors | | 109 | | 722 |
+-----------------------------------------------+----------+-----------+----+-----------+
| Dividend paid to | | (435) | | (383) |
| shareholders of Velosi | | | | |
| Limited | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| Dividend paid to minority | | (208) | | (60) |
| shareholders of subsidiary | | | | |
| companies | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| Net cash from financing activities | | 7,735 | | 2,859 |
+-----------------------------------------------+----------+-----------+----+-----------+
| | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| Net increase / (decrease) in cash and cash | | 14,556 | | (7,573) |
| equivalents | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| Foreign exchange translation differences | | (876) | | (234) |
+-----------------------------------------------+----------+-----------+----+-----------+
| | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| Cash and cash equivalents at the beginning of | | 4,111 | | 11,918 |
| the year | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| Cash and cash equivalents at the end of the | | 17,791 | | 4,111 |
| year | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| Cash and cash equivalents comprise: | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| Current assets - Cash and cash | | 20,641 | | 7,967 |
| equivalents | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| Current liabilities - Bank | | (2,850) | | (3,856) |
| overdraft | | | | |
+-----------------------------------------------+----------+-----------+----+-----------+
| | | 17,791 | | 4,111 |
+-----------------------------------------------+----------+-----------+----+-----------+
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| |
+------------------------------------------------------------------------------------------------------------------------------------------------+
| |
+------------------------------------------------------------------------------------------------------------------------------------------------+
| |
+------------------------------------------------------------------------------------------------------------------------------------------------+
| CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY |
+------------------------------------------------------------------------------------------------------------------------------------------------+
| FOR THE YEAR ENDED 31 DECEMBER 2008 |
+------------------------------------------------------------------------------------------------------------------------------------------------+
| |
+------------------------------------------------------------------------------------------------------------------------------------------------+
| Group | | | | | | | Total | | Minority | | Total | |
| | Share | | Share | | | | US$'000 | | Interest | | US$'000 | |
| | Capital | | Premium US$'000 | | | | | | US$'000 | | | |
| | US$'000 | | | | Reserves | | | | | | | |
| | | | | | US$'000 | | | | | | | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Unaudited | | | | | | | | | | | | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Balance at 1 January 2008 | 787 | | 21,310 | | 14,653 | | 36,750 | | 5,729 | | 42,479 | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Exchange reserve arising on | - | | - | | (2,101) | | (2,101) | | (727) | | (2,828) | |
| translation of financial | | | | | | | | | | | | |
| statements of overseas | | | | | | | | | | | | |
| subsidiaries | | | | | | | | | | | | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Share allotment | 100 | | 11,112 | | - | | 11,212 | | - | | 11,212 | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Profit for the year | - | | - | | 9,306 | | 9,306 | | 2,348 | | 11,654 | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Acquisition of subsidiary | - | | - | | - | | - | | 151 | | 151 | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Issue of share options | - | | - | | 330 | | 330 | | - | | 330 | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Dividend paid | - | | - | | (435) | | (435) | | (208) | | (643) | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| | | | | | | | | | | | | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Balance at 31 December 2008 | 887 | | 32,422 | | 21,753 | | 55,062 | | 7,293 | | 62,355 | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| | | | | | | | | | | | | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Audited | | | | | | | | | | | | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Balance at 1 January 2007 | 763 | | 18,128 | | | | 26,257 | | | | 28,764 | |
| | | | | | 7,366 | | | | 2,507 | | | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Exchange reserve arising on | - | | - | | (74) | | (74) | | 183 | | 109 | |
| translation of financial | | | | | | | | | | | | |
| statements of overseas | | | | | | | | | | | | |
| subsidiaries | | | | | | | | | | | | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Share allotment | 24 | | 3,182 | | - | | 3,206 | | - | | 3,206 | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Profit for the year | - | | - | | 7,455 | | 7,455 | | 2,301 | | 9,756 | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Acquisition of subsidiary | - | | - | | - | | - | | 780 | | 780 | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Disposal of shares in | - | | - | | - | | - | | 18 | | 18 | |
| subsidiary | | | | | | | | | | | | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Issue of share options | - | | - | | 289 | | 289 | | - | | 289 | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Dividend paid | - | | - | | (383) | | (383) | | (60) | | (443) | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| | | | | | | | | | | | | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| Balance at 31 December 2007 | 787 | | 21,310 | | 14,653 | | 36,750 | | 5,729 | | 42,479 | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
| | | | | | | | | | | | | |
+-----------------------------+-------------+---+-----------------+---+--------------+---+--------------+---+--------------+---+---------------+-+
PRELIMINARY RESULTS ANNOUNCEMENT - NOTES
1. Basis of preparation
The financial information set out in this preliminary results announcement does
not constitute the Group's financial statements for the year ended 31 December
2008.
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union and using
the accounting policies which are consistent with those adopted in the financial
statements for the year ended 31 December 2007.
Whilst the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement criteria of
IFRS, it does not include sufficient information to comply with IFRS.
The auditors have yet to sign their report on the 2008 financial statements. The
financial statements for the year ended 31 December 2008 will be finalised on
the basis of the financial information presented by the Directors in this
preliminary announcement, and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting. Whilst the auditors have not yet
reported on the financial statements for the year ended 31 December 2008, they
anticipate issuing an unqualified report.
The financial information for the year ended 31 December 2007 is derived from
the financial statements for that year. The auditors have reported on the 2007
financial statements, their report was unqualified.
The financial information set out in this announcement was approved by the board
on 17 April 2009.
2. Earnings per share
The basic and diluted earnings per share is calculated by reference to the
earnings attributable to ordinary shareholders divided by the number of shares
in issue as at 31 December, as follows:
+-------------------------------------------------+---------------+-------------+
| | Year ended | Year ended |
| | 31 December | 31 December |
| | 2008 | 2007 |
| | US$'000 | US$'000 |
+-------------------------------------------------+---------------+-------------+
| Profit after taxation and minority interest | 9,306 | 7,455 |
+-------------------------------------------------+---------------+-------------+
| Weighted average number of shares for the | Number | Number |
| purpose of calculating basic earnings per share | 42,809,629 | 38,389,734 |
| Effect of dilutive potential ordinary shares | - | 1,858,702 |
| Share Options | - | 476,749 |
| Warrants | 4,463,847 | 332,773 |
| Deferred consideration | | |
+-------------------------------------------------+---------------+-------------+
| Weighted average number of shares for the | 47,273,476 | 41,057,958 |
| purpose of calculating diluted earnings per | | |
| share | | |
+-------------------------------------------------+---------------+-------------+
| | | |
+-------------------------------------------------+---------------+-------------+
| Basic earnings per share based on the weighted | 21.7c | 19.4c |
| average issued share capital as at 31 December | | |
| | | |
+-------------------------------------------------+---------------+-------------+
| Diluted earnings per share based on the | 19.6c | 18.2c |
| weighted average issued share capital as at 31 | | |
| December | | |
| | | |
+-------------------------------------------------+---------------+-------------+
3. Dividends
The Directors propose a final dividend of US$0.01 per ordinary share to
shareholders in respect of the financial year ending 31 December 2008 (2007:
US$0.01).
4. Income tax expense
+----------------------------------------+----------+----------+----------+
| | | 2008 | 2007 |
+----------------------------------------+----------+----------+----------+
| | | | |
| | | US$'000 | US$'000 |
+----------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------+----------+----------+----------+
| Foreign tax | | | |
+----------------------------------------+----------+----------+----------+
| Overseas tax payable | | 3,446 | 1,740 |
+----------------------------------------+----------+----------+----------+
| Total current tax | | 3,446 | 1,740 |
+----------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------+----------+----------+----------+
| Deferred tax | | | |
+----------------------------------------+----------+----------+----------+
| Movement in deferred tax position | | (352) | (133) |
+----------------------------------------+----------+----------+----------+
| Taxation on profit from ordinary | | 3,094 | 1,607 |
| activities | | | |
+----------------------------------------+----------+----------+----------+
| Add: Share of taxation of associated | | 114 | 63 |
| companies | | | |
+----------------------------------------+----------+----------+----------+
| | | 3,208 | 1,670 |
+----------------------------------------+----------+----------+----------+
The tax on the Group's profit before tax differs from the the oretical amount
that would arise using the weighted average tax rate applicable to profits for
the consolidated entities as follows:
+----------------------------------------+----------+----------+----------+
| | | 2008 | 2007 |
+----------------------------------------+----------+----------+----------+
| | | | |
| | | US$'000 | US$'000 |
+----------------------------------------+----------+----------+----------+
| Profit on ordinary activities | | 13,856 | 10,906 |
| before taxation (excluding | | | |
| share of results of associated | | | |
| companies) | | | |
+----------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------+----------+----------+----------+
| Profit on ordinary activities at | | 1,978 | 1,534 |
| 14.28% (2007: 14.06%) | | | |
+----------------------------------------+----------+----------+----------+
| Tax effects of: | | | |
+----------------------------------------+----------+----------+----------+
| Difference in tax rates of foreign | | 1,045 | 235 |
| countries | | | |
+----------------------------------------+----------+----------+----------+
| Effect of reduction in tax rate | | 6 | (1) |
+----------------------------------------+----------+----------+----------+
| Expenses not deductible for tax | | 76 | 306 |
| purposes | | | |
+----------------------------------------+----------+----------+----------+
| Tax redemption and rebates | | (39) | (11) |
+----------------------------------------+----------+----------+----------+
| Utilisation of tax losses | | 12 | - |
+----------------------------------------+----------+----------+----------+
| Utilisation of capital allowance | | (60) | (25) |
+----------------------------------------+----------+----------+----------+
| Deferred tax liabilities not | | 103 | 151 |
| recognised | | | |
+----------------------------------------+----------+----------+----------+
| Non-taxable income | | (25) | (391) |
+----------------------------------------+----------+----------+----------+
| Adjustment on prior year current tax | | 12 | 4 |
+----------------------------------------+----------+----------+----------+
| Others | | (14) | (195) |
+----------------------------------------+----------+----------+----------+
| | | 3,094 | 1,607 |
+----------------------------------------+----------+----------+----------+
| Add: Share of taxation of associated | | 114 | 63 |
| companies | | | |
+----------------------------------------+----------+----------+----------+
| | | 3,208 | 1,670 |
+----------------------------------------+----------+----------+----------+
The applicable tax of the Group is derived from the consolidation of all Group
companies' applicable tax based on their respective domestic tax rates.
The applicable tax rate of the Group has increased from 14.06% to 14.28% mainly
due to the higher proportion of income contributed by the higher tax
jurisdiction countries.
5. Acquisition
Pursuant to an agreement dated 17 September 2008, Velosi International Italy Srl
acquired a 60% stake in PSC Europe SRL (PSC Italy) for an aggregate
consideration of EUR1.8 million (approximately US$2.54 million). The consideration
is to be satisfied by an initial payment of EUR0.9 million (approximately US$1.27
million) in cash and a further deferred consideration of up to EUR0.9 million
(approximately US$1.27 million) to be paid on the basis of the business
performance in the period from 1st January 2008 to 31st December 2010, in either
cash and / or shares (at the election of the vendors). In addition, there are
two call and put options over the remaining 40% interest in PSC Italy. The first
option is exercisable for six months post 31 December 2010 for up to 50% of the
balance of the vendors' shares. The second option is exercisable for twelve
months, commencing five years from the date of acquisition, for the remaining
shares. The option price will be settled in cash and will be based on a pro-rata
percentage of a multiple of six times the average audited profit after tax and
minority interests of PSC Italy for the 3 years preceding the exercise of the
respective call or put option.
Goodwill on acquisition
+-------------------------------------------+-------------------------------------------+--------+---------+---------+
| | | | US$'000 | US$'000 |
+ +-------------------------------------------+--------+---------+---------+
| | | | Book | Fair |
| | | | Value | Value |
+-------------------------------------------+-------------------------------------------+--------+---------+---------+
| Purchase consideration | | | | |
+-------------------------------------------+-------------------------------------------+--------+---------+---------+
| Cash | | | 1,269 | 1,269 |
| Contingent consideration to be paid in | | | 1,269 | 1,269 |
| cash or shares | | | | |
+-------------------------------------------+-------------------------------------------+--------+---------+---------+
| Total purchase consideration | | | 2,538 | 2,538 |
+-------------------------------------------+-------------------------------------------+--------+---------+---------+
| Net assets/ (liabilities) acquired | | | 54 | (23) |
+-------------------------------------------+-------------------------------------------+--------+---------+---------+
| Identifiable intangibles acquired | | | - | (537) |
+-------------------------------------------+-------------------------------------------+--------+---------+---------+
| Goodwill | | | - | 1,978 |
+-------------------------------------------+-------------------------------------------+--------+---------+---------+
The assets and liabilities arising on this acquisition have been provisionally
determined.
Acquisitions made by the Group are satisfied in part by contingent deferred
consideration. The Group re-estimates the amounts due as deferred contingent
consideration where necessary, with any corresponding adjustments being made to
goodwill.
+----------------------------------+----------------------------------+-----------+---------+---------+
| | PSC Italy | Intec | K2 | Total |
+ +----------------------------------+-----------+---------+---------+
| | US$'000 | US$'000 | US$'000 | US$'000 |
+----------------------------------+----------------------------------+-----------+---------+---------+
| | | | | |
+----------------------------------+----------------------------------+-----------+---------+---------+
| Deferred contingent | | | | |
| consideration | | | | |
+----------------------------------+----------------------------------+-----------+---------+---------+
| Outstanding as at 1 January 2008 | - | 2,520 | 1,957 | 4,477 |
+----------------------------------+----------------------------------+-----------+---------+---------+
| Foreign exchange translation | - | (252) | (60) | (312) |
| difference | | | | |
+----------------------------------+----------------------------------+-----------+---------+---------+
| Acquisition in the year | 1,269 | - | - | 1,269 |
+----------------------------------+----------------------------------+-----------+---------+---------+
| Consideration settled in the | - | (2,268) | (493) | (2,761) |
| year | | | | |
+----------------------------------+----------------------------------+-----------+---------+---------+
| | | | | |
+----------------------------------+----------------------------------+-----------+---------+---------+
| | | | | |
+----------------------------------+----------------------------------+-----------+---------+---------+
| Deferred contingent | 1,269 | - | 1,404 | 2,673 |
| consideration outstanding as at | | | | |
| 31 December 2008 | | | | |
+----------------------------------+----------------------------------+-----------+---------+---------+
The provisional deferred consideration consists of cash and shares.
6. Segmental reporting
The directors consider that the Group's activities represent a single class of
business. The analysis of the Group's turnover, gross profit, assets,
liabilities, additions to property, plant and equipment and depreciation by
geographical origin of customers are set out below:
+----------------------------------------+----------+------------+--------------+
| | | 2008 | 2007 |
+----------------------------------------+----------+------------+--------------+
| | | | US$'000 |
| | | US$'000 | |
+----------------------------------------+----------+------------+--------------+
| Turnover | | | |
+----------------------------------------+----------+------------+--------------+
| Europe | | 44,336 | 15,174 |
+----------------------------------------+----------+------------+--------------+
| Middle East | | 59,788 | 34,172 |
+----------------------------------------+----------+------------+--------------+
| Americas | | 17,522 | 17,464 |
+----------------------------------------+----------+------------+--------------+
| Africa | | 26,464 | 36,608 |
+----------------------------------------+----------+------------+--------------+
| Australasia | | 32,632 | 12,115 |
+----------------------------------------+----------+------------+--------------+
| Central Asia | | 1,330 | - |
+----------------------------------------+----------+------------+--------------+
| Others | | - | 1,464 |
+----------------------------------------+----------+------------+--------------+
| | | 182,072 | 116,997 |
+----------------------------------------+----------+------------+--------------+
+-------------------------------------------+--------+----------+--------------+
| Gross Profit | | | |
+-------------------------------------------+--------+----------+--------------+
| Europe | | 9,317 | 2,921 |
+-------------------------------------------+--------+----------+--------------+
| Middle East | | 12,854 | 8,315 |
+-------------------------------------------+--------+----------+--------------+
| Americas | | 4,432 | 4,707 |
+-------------------------------------------+--------+----------+--------------+
| Africa | | 5,969 | 5,804 |
+-------------------------------------------+--------+----------+--------------+
| Australasia | | 12,357 | 5,511 |
+-------------------------------------------+--------+----------+--------------+
| Central Asia | | 634 | - |
+-------------------------------------------+--------+----------+--------------+
| Others | | - | 587 |
+-------------------------------------------+--------+----------+--------------+
| | | 45,563 | 27,845 |
+-------------------------------------------+--------+----------+--------------+
| | | | |
+-------------------------------------------+--------+----------+--------------+
| Carrying amount of assets | | | |
+-------------------------------------------+--------+----------+--------------+
| Europe | | 17,279 | 16,106 |
+-------------------------------------------+--------+----------+--------------+
| Middle East | | 33,141 | 19,472 |
+-------------------------------------------+--------+----------+--------------+
| Americas | | 6,449 | 6,897 |
+-------------------------------------------+--------+----------+--------------+
| Africa | | 22,844 | 14,830 |
+-------------------------------------------+--------+----------+--------------+
| Australasia | | 22,844 | 17,198 |
+-------------------------------------------+--------+----------+--------------+
| Central Asia | | 1,218 | - |
+-------------------------------------------+--------+----------+--------------+
| Others | | 3,165 | 1,136 |
+-------------------------------------------+--------+----------+--------------+
| | | 106,940 | 75,639 |
+-------------------------------------------+--------+----------+--------------+
| | | | |
+-------------------------------------------+--------+----------+--------------+
| Liabilities | | | |
+-------------------------------------------+--------+----------+--------------+
| Europe | | 10,387 | 10,862 |
+-------------------------------------------+--------+----------+--------------+
| Middle East | | 9,268 | 5,403 |
+-------------------------------------------+--------+----------+--------------+
| Americas | | 3,064 | 2,708 |
+-------------------------------------------+--------+----------+--------------+
| Africa | | 12,732 | 8,073 |
+-------------------------------------------+--------+----------+--------------+
| Australasia | | 7,388 | 5,762 |
+-------------------------------------------+--------+----------+--------------+
| Central Asia | | 751 | - |
+-------------------------------------------+--------+----------+--------------+
| Others | | 995 | 352 |
+-------------------------------------------+--------+----------+--------------+
| | | 44,585 | 33,160 |
+-------------------------------------------+--------+----------+--------------+
| | | | |
+-------------------------------------------+--------+----------+--------------+
| Additions to property, plant and | | | |
| equipment | | | |
+-------------------------------------------+--------+----------+--------------+
| Europe | | 95 | 908 |
+-------------------------------------------+--------+----------+--------------+
| Middle East | | 696 | 1,349 |
+-------------------------------------------+--------+----------+--------------+
| Americas | | 30 | 5 |
+-------------------------------------------+--------+----------+--------------+
| Africa | | 642 | 1,352 |
+-------------------------------------------+--------+----------+--------------+
| Australasia | | 1,754 | 751 |
+-------------------------------------------+--------+----------+--------------+
| Central Asia | | 12 | - |
+-------------------------------------------+--------+----------+--------------+
| Others | | 3 | 11 |
+-------------------------------------------+--------+----------+--------------+
| | | 3,232 | 4,376 |
+-------------------------------------------+--------+----------+--------------+
| | | | |
+-------------------------------------------+--------+----------+--------------+
| Depreciation | | | |
+-------------------------------------------+--------+----------+--------------+
| Europe | | 162 | 86 |
+-------------------------------------------+--------+----------+--------------+
| Middle East | | 497 | 292 |
+-------------------------------------------+--------+----------+--------------+
| Americas | | 11 | 4 |
+-------------------------------------------+--------+----------+--------------+
| Africa | | 421 | 327 |
+-------------------------------------------+--------+----------+--------------+
| Australasia | | 612 | 330 |
+-------------------------------------------+--------+----------+--------------+
| Central Asia | | 3 | - |
+-------------------------------------------+--------+----------+--------------+
| Others | | 1 | 17 |
+-------------------------------------------+--------+----------+--------------+
| | | 1,707 | 1,056 |
+-------------------------------------------+--------+----------+--------------+
| | | | |
+-------------------------------------------+--------+----------+--------------+
7. Share Capital
a) Share Capital
+--------------------------------------+---------+---------+----------+----------+
| | Group | Group | Company | Company |
| | 2008 | 2007 | 2008 | 2007 |
+--------------------------------------+---------+---------+----------+----------+
| | US$'000 | US$'000 | US$'000 | US$'000 |
+--------------------------------------+---------+---------+----------+----------+
| Authorised: | | | | |
+--------------------------------------+---------+---------+----------+----------+
| 4,400,000,000 (2007: 4,400,000,000) | 88,000 | 88,000 | 88,000 | 88,000 |
| Ordinary shares of US$0.02 each | | | | |
+--------------------------------------+---------+---------+----------+----------+
| | | | | |
+--------------------------------------+---------+---------+----------+----------+
| Issued: | | | | |
+--------------------------------------+---------+---------+----------+----------+
| 44,341,580 (2007: 39,332,340) | 887 | 787 | 887 | 787 |
| Ordinary shares of US$0.02 each | | | | |
+--------------------------------------+---------+---------+----------+----------+
b) Share issued during the year
+------------------+-------+---------+----------+--------------+----------+-----------+
| | Note | Issue value per | Shares | Share | Share |
| | | share | | Capital | Premium |
+------------------+-------+--------------------+--------------+----------+-----------+
| | | GBP | US$ | | US$'000 | US$'000 |
+------------------+-------+---------+----------+--------------+----------+-----------+
| At 1 January | | | | 39,332,340 | 787 | 21,310 |
| 2008 | | | | | | |
+------------------+-------+---------+----------+--------------+----------+-----------+
| Share issued on | (i) | 1.45 | 2.85 | 83,438 | 2 | 235 |
| 11 February 2008 | | | | | | |
+------------------+-------+---------+----------+--------------+----------+-----------+
| Share issued on | (ii) | 1.17 | 2.29 | 214,836 | 4 | 488 |
| 6 March 2008 | | | | | | |
+------------------+-------+---------+----------+--------------+----------+-----------+
| Share issued on |(iii) | 1.15 | 2.25 | 3,842,000 | 77 | 8,583 |
| 27 March 2008 | | | | | | |
+------------------+-------+---------+----------+--------------+----------+-----------+
| Share issued on | (iv) | 1.45 | 2.64 | 868,966 | 17 | 2,251 |
| 2 September 2008 | | | | | | |
+------------------+-------+---------+----------+--------------+----------+-----------+
| Share issue | | - | - | - | - | (445) |
| costs | | | | | | |
+------------------+-------+---------+----------+--------------+----------+-----------+
| | | | | 44,341,580 | 887 | 32,422 |
+------------------+-------+---------+----------+--------------+----------+-----------+
On 11 February 2008 (i), 83,438 new ordinary shares were issued in lieu of
payment for the acquisition of 14% of Kurtec Inspection Services Sdn Bhd.
On 6 March 2008 (ii), 214,836 new ordinary shares were issued to shareholders of
K2 Specialist Services Pte Ltd (K2), pursuant to an agreement dated 19 October
2007 between K2 and Velosi Industries Sdn Bhd, and based on achievement of
performance targets by K2 for the financial year ending December 31, 2007.
On 27 March 2008 (iii), Charles Stanley Securities on behalf of the Company,
completed an institutional placing (the Placing) of 3,842,000 new Ordinary
Shares which represent 8.8% of the enlarged issued share capital of the Company.
On 2 September 2008 (iv), 868,966 new ordinary shares were issued to
shareholders of Intec (UK) Ltd (Intec), in lieu of payment of the remaining
balance of purchase consideration of GBP1.26 million for the acquisition of 60%
interest in Intec pursuant to an agreement dated 19 October 2007.
8. Nature of financial information
These preliminary results will be available on the Company's website
www.velosi.com. Further copies can be obtained from the registered office at
28-34 Hill Street, St Helier, Jersey, JE4 8PN.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR MGGMDRNGGLZM
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