Annual report and accounts 2008
Hamworthy Annual report and accounts 2008
Continuing
our success
Hamworthy plc
Fleets Corner
Poole
Dorset
BH17 0JT
www.hamworthy.com
China
Hamworthy Shanghai
Representative Ofﬁce
Room 8B
Yi Dian Plaza
No. 7 46 ZhaoJiaBang Road
Shanghai 20030
Hamworthy Dalian
Representative Ofﬁce
Room 2013
No. 4 Xiu Zhu Road
Dalian 116001
Hamworthy Guangzhou
Representative Ofﬁce
Room 910
Fuying Building
No. 164 Changyang Road
Haizu District
Guangzhou 510250
Hamworthy (Suzhou) Ltd
121 Dengwei Road
Suzhou New District
Jiangsu Province 215011
Denmark
Hamworthy Svanehøj A/S
6 Fabriksparken
PO Box 30
DK-9230 Svenstrup J
Germany
Hamworthy Serck Como GmbH
Pankauer Str. 16–18 D-21502
Geesthacht
India
Hamworthy India Pvt Ltd
35 Mittal Chambers
Nariman Point
Mumbai – 400 021
Korea
Hamworthy Ltd –
Oil & Gas Division
8th FloorY oosung Plaza Building
#655–6 Woo-dong
Haeundae-Gu
Busan (612–020)
Hamworthy Ltd – Marine Division
Room 1224
OceanTower Building
#760–3 Woo 1-Dong
Haeundae-Gu
Busan 612-021
Netherlands
Hamworthy BV
Aploniastraat 33
3084 CC Rotterdam
Norway
Hamworthy Moss AS
PO Box 1053
NO–1510 Moss
Hamworthy Gas Systems AS
PO Box 144
NO–1371 Asker
Hamworthy Pump Systems AS
PO Box 53
NO–1371 Asker
Singapore
Hamworthy Pte Ltd
15 Benoi Crescent
Singapore 629978
Spain
Hamworthy Pumps Systems AS
Avda DoctorTouron
ES–36600 Villagarcia de Arosa
Pontevedra
UAE
Hamworthy Middle East (FZC)
PO Box 120691
SAIF Zone
Sharjah
UK
Hamworthy Water Systems Ltd
Fleets Corner
Poole
Dorset BH17 0JT
Hamworthy Pump Systems
Fleets Corner
Poole
Dorset BH17 0JT
USA
Hamworthy Inc
1011 Highway 6 South
Suite 208
Houston
Texas 77077
Hamworthy Inc
8000 NW31 Street
Unit 13
Miami
Florida 33122
Hamworthy Inc
1418 Edwards Avenue
Suite B
New Orleans
Louisiana 70123
Our global reach -
Hamworthy offices Company overview
02 Hamworthy at a glance
04 Chairman’s statement
06 Chief Executive’s
strategic review
Business review
08 Business review
09 Marketplace and Outlook
10 Gas systems
12 Pump systems
14 Water systems
16 Inert gas systems
18 Financial review
Governance
20 Board of Directors
22 Directors’ report
25 Directors’ remuneration report
28 Corporate governance
Group Accounts
29 Independent auditors’ report
30 Consolidated income statement
30 Statement of GroupT otal
Recognised Income
and Expense
31 Consolidated balance sheet
32 Consolidated cash flow
statement
33 Accounting policies
37 Notes to the accounts
Parent Company Accounts
61 Independent auditors’ report
62 Balance sheet
62 Statement ofT otal Recognised
Gains and Losses
63 Accounting policies
64 Notes to the accounts
70 Notice of
Annual General Meeting
72 Financial calendar 2008
72 Senior management
ibc Glossary & Advisers
Designed and produced by RadleyY eldar www.ry.com
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Glossary
FPSO
Floating Production
Storage and Offloading
FSRU
Floating Storage
Regasification Unit
IMO
International Martime
Organisation
LEG
Liquefied Ethylene Gas
LNG
Liquefied Natural Gas
LPG
Liquefied Petroleum Gas
NOx
Nitrogen Oxides
SOx
Sulphur Oxides
VOC
Volatile organic compound
Registered ofﬁce
Hamworthy plc
Fleets Corner
Poole Dorset BH17 0JT
Company registration number
713225
Auditors
PricewaterhouseCoopers LLP
Savannah House
3 Ocean Way
Ocean Village
Southampton
Hants SO14 3T J
Nominated adviser
Hawkpoint Partners Limited
41 Lothbury
London EC2R 7AE
Broker
Collins Stewart Europe Limited
9th Floor, 88 Wood Street
London EC2V 7QR
Financial public relations
Abchurch Communications Limited
100 Cannon Street
London EC4N 6EU
Solicitors
Blake LapthornTarlo Lyons
Kings Court
21 Brunswick Place Southampton
Hants SO15 2AQ
Registrars
Capita Registrars
Northern House Woodsome Park
Fenay Bridge
Huddersfield
WestY orkshire HD8 0LA
Advisers Hamworthy is a market-leading global company providing specialist
equipment and service to marine and offshore and onshore oil and
gas markets.We provide a wide range of innovative solutions for
our customers across a number of long-term growth markets.
Our leading position in key sectors, track record of success and
financial strength provide the solid foundations from which we will
further develop and grow the business.
Our goal is to continue to deliver enhanced shareholder value through
long-term earnings growth. As well as an overview of our business
and a review of recent performance, this report presents our strategy
dedicated to continuing our success. Company overview Business review Governance Accounts
Financial highlights Operational highlights
01 Hamworthy plc
First ever marine LNG reliquefaction systems
successfully complete sea trials
m See page 10
Significant increase in investment in research
and development with first of type contracts
for LNG fuel systems for gas engine driven
ships and deepwell LNG pumps
m See pages 10 and 12
Continued improvement in manufacturing cost
base with the transfer of major gas systems
assembly from Norway to our China facility
m See pages 16 and 17
Group aftersales expands further its
service network
m See page 08
06 07 08 05 04
137 .0
90.6
113.9
190.8
231.8
Turnover (£m)
£231 .8m
+2 1 .5 %
06 07 08 05 04
9.1
6.4
7 .5
13.1
16.5
Operating profit (£m)
£1 6.5m
+25 .8 %
06 07 08 05 04
206.8
84.6
121.0
268.2
311.8
Closing order book (£m)
£31 1 .8m
+1 6 .3 %
06 07 08 05 04
208.0
125.6
152.9
245.7
228.1
Order intake (£m)
£228. 1 m
 - 7. 2%
06 07 08 05 04
1 7.1
11.5
15.4
22.8
28.7
Earnings per share (p)*
28.7p
+25.9 %
*Earnings per share figures for financial years 2004 and 2005 are shown on
a pro forma basis to eliminate the effect of changes in share capital and loan
structure at the time of flotation. Hamworthy at a glance
02 Hamworthy plc
Divisional summary
Turnover
£66.6m
+20.9 %
 29%
of Group
revenue
Operating profit*
£7 .3m
+32.4 %
 38%
of Group
profit
Geographical sales
Far East
44%
Rest of world 
7%
Europe 
49%
Turnover
£98.9m
+1 0 . 4 %
 42%
of Group
revenue
Operating profit*
£5.5m
+1 7 . 4 %
 29%
of Group
profit
Geographical sales
Far East
84%
Europe
16%
Gas systems
Providing engineering design, procurement and
construction supervision of gas handling solutions for
marine, offshore and onshore applications.The core
technologies are reliquefaction systems for LPG, LEG
and LNG carriers, liquefaction systems for offshore
and onshore LNG production, LNG regasification
systems for FSRUs and LNG fuel systems.
Markets
Gas production and transportation
Oil production and transportation
Pump systems
Deliver a range of high technology pump systems and
in-service support for ships and offshore installations;
deepwell pumps for oil, gas and chemical carriers,
pump room systems for large oil carriers and engine
room pumps for all types of ships.
Markets
Gas production and transportation
Oil production and transportation
Merchant shipping
Cruise ships
*Excluding unallocated corporate expenses. Company overview Business review Governance Accounts
03 Hamworthy plc
Inert gas systems
Providing safety related systems that generate
inert gases for use on-board ships carrying volatile
cargoes and offshore installations.
Markets
Oil production and transportation
Gas production and transportation
Turnover
£22.5m
+30.9 %
 10% 
of Group 
revenue
Operating profit*
£1 .4m
+41 .2%
 7% 
of Group 
profit
Geographical sales
Far East
73%
Rest of world 
5%
Europe 
22%
Turnover
£43.8m
+51 . 5%
19%
of Group 
revenue
Operating profit*
£5.0m
+1 1 .7%
 26%
of Group
profit
Geographical sales
Americas
11%
Rest of world
2%
Far East 
8%
Europe 
79%
Water systems
Provides systems and in-service support for
wastewater management and freshwater generation
to the marine and offshore markets.The solutions
allow customers to meet current and impending
environmental legislation.
Markets
Cruise ships
Merchant shipping
Oil production and transportation
Gas production and transportation
*Excluding unallocated corporate expenses. Chairman’s statement
04 Hamworthy plc
I am pleased to report the continuing strength of the Hamworthy
Group with delivery of another set of excellent results.
06 07 08 05 04
1 7.1
11.5
15.4
22.8
28.7
Earnings per share
28.7p
+25.9 %
06 07 08 05 04
6.00p
3.24p
4.20p
6.90p
7.94p
Declared dividends
7. 94p
+1 5 . 0 % In the year to 31 March 2008 operating profit
rose by 25.8% to £16.5 million (2007: £13.1million)
with earnings per share increasing by 25.9% to 28.7p
(2007: 22.8p). All four operating divisions contributed
to this growth.The closing order book was 16.3%
higher at £31 1 .8 million (2007: £268.2 million) despite
a fall in order intake to £228.1 million (2007: £245.7
million). Operating cash flow was particularly strong
with net operating cash inflow of £19.3 million
(2007: £9.7 million) equal to 1 16.8% of operating
profit (2007: 73.4%).
The Group maintains a strong order book providing
good visibility for the operating businesses. We are
confident in the future growth of the business and
are investing accordingly.The lower order intake
this year was primarily due to the peaking of Qatar
LNG carrier orders in gas systems in the prior year.
The Group continued its track record of innovation
and maintained its leading position in its principal
market sectors. A significant increase in research
and development expenditure has maintained the
pace of new products being offered to customers
and broadens further the opportunities for growth.
This success has enabled us to maintain our
progressive dividend policy.Y our directors are
recommending a final ordinary dividend of 5.29p
per share which, if approved, would result in a 15%
increase in the total dividend declared in respect of
the year to 7 .94p per share (2007: 6.90p). Subject to
shareholders’ approval the final dividend will be paid
on 21 July 2008 to all shareholders on the register
on 27 June 2008.
Joe Oatley joined Hamworthy as Chief Executive
on 3 September 2007 . Joe, together with the board
and the senior executive team, has carried out a
detailed review of strategy.The result of this review
will sharpen our approach to internal and external
business processes whilst developing further the
theme of growth by market led innovation. We are
confident that the Group can achieve consistent
long-term earnings growth through extending its
presence in growth markets, developing its people
and improving operational performance. We will also
seek to acquire businesses at appropriate valuations
where these contribute to our strategic objectives.
The Group takes seriously its responsibilities to
the environment. Its principal sites are now
compliant with Environmental Standard ISO 14001
and its technical product innovations help customers
to reduce the impact of their operations on the
marine and offshore environment with emission
and discharge control and safe handling of
hazardous substances.
We recognise the critical role that our employees
play in the Group’s success. Our ability to recruit,
retain and develop our people is an important part
of Hamworthy’s strategy. On behalf of the board
I thank all employees for another year of significant
achievement and look forward to their involvement
in the next stage of our future growth.
The Group increasingly seeks to develop products
and systems for long-term growth markets.
The breadth of those opportunities and balance
across a number of sectors should mitigate exposure
to cyclical demand in individual sectors. With a proven
ability to design, develop and provide innovative
products and systems to those markets and a strong
future order book, the board is confident that the
Group’s strategy will result in continued growth.
Gordon Page CBE DL
Chairman
Company overview Business review Governance Accounts
05 Hamworthy plc Chief Executive’s strategic review
06 Hamworthy plc
I came to Hamworthy plc in September 2007 with high
expectations and those expectations have been more than
fully met.The Company has a well respected brand and has
delivered impressive returns to shareholders since flotation
in 2004. I am pleased to say that I believe we have both the
opportunities and the capability to continue to deliver sustained
earnings growth and enhanced shareholder value. Company overview Business review Governance Accounts
07 Hamworthy plc
Our goal is to continue to deliver enhanced
shareholder value through long-term earnings
growth and we have a new strategy in place
to deliver this.
Our Group strategy
I have visited all of our operations worldwide and
met with many of our employees and customers.
I have also undertaken a strategic review of the
business and implemented a thorough strategic
planning process throughout the Group.The purpose
of this process is to ensure that we have the best
information available to inform the development of
our Group strategy and to involve our key people in
determining the changes we will need to make to
continue the success of the Group.
Our goal is to continue to deliver enhanced
shareholder value through long-term earnings growth.
Our strategy to deliver this is outlined below.
Balanced business in long-term growth markets
In order to protect our shareholders against individual
market cycles, we aim to have a balance of earnings
across a number of specialist markets. In doing so
we target markets with long-term growth prospects.
Our main market today is the new building of
specialist ship types, predominantly oil and gas
carriers and cruise ships. Looking forward, we are
putting increased focus on growing our position in
related markets with different cycles with particular
emphasis on oil and gas production. We are also
increasing our aftersales services across our whole
range of existing and new businesses. In addition to
maintaining a balanced business we believe these
markets will deliver higher margins and thus improve
Group returns.
Leadership through market-led innovation
We aim to be market leaders in our target market
segments.We achieve this leadership by having a deep
understanding of our customers’ needs and responding
quickly to those needs by developing innovative
solutions both for today and in the future. Developing
world-class solutions is crucial to our continued growth
and we plan to increase our investment in research and
development to achieve this.
Operational excellence
We are putting increased emphasis on margin
enhancement through improved operational
efficiency throughout our businesses.This spans
the introduction of new processes for project
management, continued development of lean
methodologies in our manufacturing plants and
expansion of our Group sourcing capability in China.
By putting more focus on operational effectiveness
we believe we will improve our returns to
shareholders and fund an increased level of
investment in research and development.
Flexible cost base
We aim to reduce our fixed cost base by focusing on
the parts of our value chain where the most value is
added. In doing this we will have a structure which is
better able to flex with market demand and also
minimise the invested capital in the business.
Acquisitions
We have a strong track record of organic growth and
we expect this to continue. We will seek acquisitions
to augment this growth by buying new technologies,
gaining access to new markets or enhancing market
positions for our existing businesses.
We recognise that any strategy is only as good as
the people who implement it. Hamworthy has a
highly skilled and experienced workforce and we are
implementing a more formal talent management
process to develop and grow that skill base across
the Group. We continue to believe we have an
exceptional team capable of delivering the strategy.
Joe Oatley
Chief Executive
Group strategy
Balanced businesses
in long-term growth markets
Leadership through
market-led innovation
Operational excellence
Flexible cost base
Acquisitions Business review
08 Hamworthy plc
Operating profit margins increased to 7 .1% (2007:
6.9%) with a particularly strong second half year
performance of 8.3%.The closing order book, which
is translated into sterling using the year end rates of
exchange, was 16.3% higher than the prior year end.
Across all its divisions the Group continued to invest
in future innovation with a near 50% increase in
expenditure on research and development compared
to 2007 . Significant new products introduced during
the year include deepwell pumps for LNG cargo
applications, LNG fuel systems for lower emission
gas engine driven ships and the upgrading of the
smaller desalination plant range designed to be
manufactured in our Chinese factory.This pace of
development provides a range of opportunities for
future growth.
The performance of individual businesses is reviewed
in the divisional review on pages 10 to 17 .The Group’s
aftersales businesses operate within the separate
divisions but with a common customer facing
organisation.The Group continued to invest in
this capability during the year.This included a 25%
increase in the number of direct customer support
personnel, the establishment of a new team in
Shanghai and the merging of separate support
teams in the UK.
Aftersales turnover rose to £29.3 million (2007:
£24.3 million), the constituent parts of which are
included within the divisional sales reported in the
divisional review on pages 10 to 17 .The increase
in business is one mark of the progress in our
mission of developing best practice to provide a
consistent, high level of service to customers.
Despite the high utilisation of capacity in most
of the Group’s manufacturing sites, the business
successfully met the challenge of improving stock
availability in a market where short lead times are
of great importance.
Hamworthy is able to report another year of successful performance
and development.The Group has delivered increased profits,
improved margins and retained a strong order book providing good
visibility for its operating businesses. Operating profits translated at
the same average exchange rates as the previous year increased by
17 .5%.The strengthening against sterling of the basket of functional
currencies in which the Group’s subsidiaries operate improved the
reported operating profit by a further 8.3% relative to 2007 in the
consolidated sterling income statement. Company overview Business review Governance Accounts
09 Hamworthy plc
Markets
The Group primarily operates in markets with long-
term growth characteristics.There are two principal
drivers of this long-term growth.
The first is increasing environmental legislation and
awareness.This is a driver behind the growth of
many of the Group’s businesses from water systems,
where environmental legislation is driving the need
for more sophisticated water treatment systems
on board ships, to gas systems where natural gas
is being preferred as an energy source as it is the
cleanest of the hydrocarbon fuels.
The second is the growing demand for energy and
the increasing geographical dislocation between
consumption and production. Coupled with a move
towards the increasing use of natural gas as a
fuel source this is driving increased demand for
investment across the gas supply chain.
The Group operates in four main markets: gas
production and transportation; oil production and
transportation; cruise ships; and merchant shipping.
In gas production and transportation, deliveries of
both LNG and LPG carriers are currently at historical
highs, driven by very high levels of ordering in 2005
and 2006. As this new shipping capacity comes on
stream the focus of investment will shift away from
shipping towards other parts of the gas supply chain:
onshore and offshore production and regasification.
The Group has successfully responded to this shift
by innovating system solutions across the broader
LNG supply chain.
The oil production and transportation market is
exhibiting similar dynamic, with current high levels of
deliveries of tankers but a shift towards increasing
investment in offshore production. As previously stated
in the Group’s latest interim report, a number of key
FPSO projects have experienced delays, largely due
to geopolitical issues. However, activity levels have
increased markedly in this area in the last quarter.
The cruise ship market continues to be robust with
the main constraint to growth being a lack of capacity
at the European shipyards where these vessels are
built. A number of the major Korean shipyards are
beginning to invest in developing the capabilities
needed to deliver cruise ships in the future.
The merchant shipping market achieved a record level
of deliveries in 2007 , driven by the global demand
for transportation of both raw materials and finished
goods. Shipyards continue to have very full order
books with most major yards full into 201 1 .
Outlook
The near-term outlook for the Group is secure, being
underpinned by a strong order book which the Group
expects will deliver another year of strong sales.
In the medium-term, the security of this strong order
book is expected to be maintained with a change
in product mix reflecting the changing dynamics in
the Group’s markets. It is anticipated that there will
be a shift in emphasis towards the strong growth
segments of onshore and offshore production of oil
and gas, LNG regasification and cruise ships, and
away from the gas carrier and tanker markets with
demand for new vessels reducing as fleet capacity
expands.The Group aims to drive an improvement in
margins through increased emphasis on operational
efficiency across all businesses. In the long term,
the fundamental growth drivers of environmental
legislation and energy demand remain very strong.
The Group is pursuing a strategy that makes it well
positioned to take advantage of these dynamics and
the board therefore looks forward with confidence.
Growth drivers
Environmental
Increasing environmental legislation
Increasing environmental awareness
Economic
Growing demand for energy
Increasing geographic dislocation
Move towards natural gas
The Group operates in four main markets
Gas transportation and production
Oil transportation and production
Cruise ships
Merchant shipping 10 Hamworthy plc
T urnover rose to £98.9 million (2007: £89.6 million)
and operating profit rose to £5.5 million
(2007: £4.7 million). T urnover grew in both the
LNG and LPG segments.
Margins improved significantly in the second half
year to 6.9%, compared to the first half year of 4.1%
which was affected by recognising additional costs to
complete a turnkey land-based LNG system.This also
represents a marked increase on the 5.2% margin
achieved in 2007 .
During the year the first 10 “Q-Flex” ships equipped
with Hamworthy LNG reliquefaction equipment
successfully completed sea trials.These are the
largest LNG carriers to enter service for the Qatar
gas fields and are a significant demonstration of the
Group’s ability to deliver innovative systems to meet
new market requirements.
The previous two financial years saw a particularly
concentrated period of ordering of LNG reliquefaction
systems for LNG carriers to serve the Qatar Gas field.
Consequently order intake reduced to £69.7 million
(2007: £106.3 million).The division has successfully
pursued a strategy of extending its technology to
applications across the LNG supply chain. During the
year this resulted in securing two further contracts for
floating regasification systems in South America and
the Middle East and a first order for LNG fuel systems
for gas engine driven ships.This latter application is
an emerging market for coastal vessels where a gas
fuelled engine is used in order to reduce emissions
of nitrous and sulphur oxides and particulates.
The offshore market also offers significant potential in
the medium term particularly for liquefaction plant on
LNG FPSOs.There are now several projects seeking
to build such vessels and, whilst the timing of order
placement is uncertain and unlikely to affect the
next financial year, contract sizes are likely to be
significantly higher than those in the Group’s existing
order book.
The total number of permanent and contract staff
in this division rose from 173 to 242.T o help meet
the challenge of continuing growth, the business
has invested over £1 million in a state-of-the-art
information technology system commissioned during
2007 .T ogether with improved business processes
and controls, this will further help improve the return
on sales as the business grows.
Gas systems
Growth drivers
Environmental
Increasing environmental legislation
Increasing environmental awareness
Economic
Growing demand for energy
Increasing geographic dislocation
Move towards natural gas
m
See page
09
Products
LNG liquefaction systems
LNG, LPG and LEG reliquefaction systems
LNG regasification systems
LNG fuel systems
VOC recovery systems
Markets
Gas production and transportation
Oil production and transportation
42% of
Group revenue Company overview Business review Governance Accounts
11 Hamworthy plc
Market-led innovation
is ensuring our long-
term growth potential
Hamworthy secured its first order during
the year for an LNG fuel system for gas
engine driven ships from Rolls Royce.
LNG is increasingly being employed for
powering ships where there are new
regulations being introduced to tackle
emission of NOx, SOx and particulates.
This is a good example of where our gas
systems engineers are able to identify
and respond to market requirements
and employ their core skills in gas
handling technology to rapidly develop
new applications.
Per Helge Madsen
LNG Business Development
Norway
28.0
44.8
57 .7
89.6
98.9
Sales (£m)
53.2
69.3
111 .9
106.3
69.7
Order intake (£m)
0.1
2.7
3.0
4.7
5.5
Operating profit (£m)
04 05 06 07 08 04 05 06 07 08 04 05 06 07 08 12 Hamworthy plc
Pump systems
T urnover rose to £66.6 million (2007: £55.1 million)
with operating profit rising to £7 .3 million (2007:
£5.5 million).T urnover grew in deepwell pumps for
tankers and LPG carriers, pump room systems for
oil and product tankers and engine room pumps
for marine and offshore applications.The business
saw slow progress in contract awards from the
FPSO market due to operational and political
rather than economic factors although these are
now showing signs of increased activity.
Margins improved to 10.9% (2007: 10.0%) largely due
to the benefit of increased volumes combined with
material cost efficiency gains in deepwell pumps from
continued focus on low-cost sourcing.
Order intake fell to £65.5 million (2007: £75.5 million)
due to a fall in deepwell pumps orders following an
unprecedented level of intake in the prior year from
the LPG carrier sector. Each of pump room systems,
engine room systems and fire fighting pumps
experienced strong growth.The business had notable
successes in securing orders for engine room pumps
in the offshore sector and in pump room systems for
tankers.The division continues to enjoy a strong order
book, up from £71 .7 million to £85.6 million.
The division has greater in-house manufacturing
activity than other parts of the Group. Both principal
plants in Denmark and Singapore continue to work
at full capacity with Singapore delivering a record
number of pumps following its capacity and
operational improvements over the last two years.
This in-house capability is matched with progress
on outsourcing of parts production to low cost
regions, an area in which the Group has developed
considerable expertise.
Following a successful development and cryogenic
test programme the Group achieved first deliveries of
deepwell pumps for LNG applications.This will enable
the Group to extend its range of deepwell pumps
from the LPG and Ethylene carrier market, where it
has a world leadership position, to the wider LNG
carrier market. A new range of pumps designed
specifically for the offshore fire fighting supply vessel
market will allow the Group to extend its presence
in that market.
Growth drivers
Environmental
Increasing environmental legislation
Increasing environmental awareness
Economic
Growing demand for energy
Increasing demand/supply dislocation m
See page
09
29% of
Group revenue
Products
Deepwell cargo pump systems
Pump room systems
Engine room pumps
Fire fighting pump systems
Markets
Gas production and transportation
Oil production and transportation
Merchant shipping
Cruise ships Company overview Business review Governance Accounts
13 Hamworthy plc
Our broad portfolio
is maintaining a balance
of earnings across our
niche markets
Hamworthy, who already lead the
market for LPG deepwell pumps,
delivered its first LNG pumps for a unique
multi-cargo coastal gas carrier in 2008.
The pumps, which traditionally handle
LPG and Ethylene at minus 104°C, were
redesigned to pump LNG cargoes at
minus 163°C.Tests were carried out in
our Danish site using liquid Nitrogen to
verify pump performance at cryogenic
conditions.The successful introduction of
this new product opens up the market of
small LNG and combined LPG-LEG-LNG
vessels used in coastal gas cargo
distribution for remote locations.
Lau Halkjær
Senior R&D Engineer
Hamworthy Svanehøj
Denmark
38.8
46.0
61 .3
75.5
65.5
3.8
2.4
4.0
5.5
7 .3
Sales (£m) Order intake (£m) Operating profit (£m)
04 05 06 07 08 04 05 06 07 08 04 05 06 07 08
35.6
38.2
44.0
55.1
66.6 14 Hamworthy plc
Water systems
T urnover rose to £43.8 million (2007: £28.9 million)
and operating profit rose to £5.0 million (2007:
£4.5 million).T urnover grew in both waste water
treatment systems and in fresh water generation
systems. Growth was also partly driven by the
effect of the first full year of sales of the Serck
Como acquisition.
Margins fell to 1 1 .4% (2007: 15.5%).This was due
to both the dilutive effect of the full year of the
Serck Como acquisition and particular cost pressures
on advanced waste treatment plants.These cost
pressures are now largely overcome as the business
focuses on improved project implementation and
continues to benefit from low-cost manufacturing
in China.
Order intake rose to £63.2 million (2007: £35.4 million).
The order book rose to a record level of £64.4 million
(£38.7 million).
The Serck Como business acquired in the prior year
is now fully integrated into the Group and performing
ahead of expectations.The business consolidated its
position as world leader in desalination plant for cruise
ships and has a forward order book of almost two
years’ sales value.The business has completed a
design upgrade to its single stage desalination
systems for the merchant shipping market and the
assembly of these is now being transferred from
Germany to the Group’s low cost manufacturing
facility in China.
The waste water business both delivered a record
number of small sewage treatment plants for
the general shipping market during the year and
increased significantly the receipt of orders for
advanced waste water systems to the cruise market,
confirming the Group as the market leader in these
sectors.The Group was the first major supplier to
receive type approval for sewage treatment plant
under IMO’s new, more stringent standards.
The Group has been selected as supplier of the
advanced waste water systems for the UK Royal
Navy’s future aircraft carriers. Orders have been
received for the initial work scope and this is
expected to be extended during 2008.
Growth drivers
Environmental
Increasing environmental legislation
Increasing environmental awareness
Economic
Growing demand for energy
Increasing demand/supply dislocation m
See page
09
19% of
Group revenue
Products
Advanced wastewater treatment systems
Black and grey water treatment systems
Vacuum toilet systems
Desalination plant
Markets
Gas production and transportation
Oil production and transportation
Cruise ships
Merchant shipping Company overview Business review Governance Accounts
15 Hamworthy plc
Environmental
legislation is driving
the long-term growth
of many of our
businesses
Being the world’s number one in the
field of onboard sewage treatment
systems it was natural that Hamworthy
was one of the first companies to
develop a system capable of meeting
new international regulations on
overboard discharge. From 1 January
2010 all ships will need to comply with
the new regulations. Hamworthy, which
is also recognised as a leader in the field
of advance water systems for cruise
ships, was the first major supplier to be
awarded Lloyds Register type approval.
Ken Cooksley
Senior Development
Engineer
Hamworthy Water Systems
UK
16.6
20.0 19.6
35.4
63.2
2.7
2.2
2.9
4.5
5.0
Sales (£m) Order intake (£m) Operating profit (£m)
04 05 06 07 08 04 05 06 07 08 04 05 06 07 08
16.4  
14.3
18.8
28.9
43.8 16 Hamworthy plc
T urnover rose to £22.5 million (2007: £17 .2 million)
with operating profit rising to £1.4 million
(2007: £1.0 million).T urnover growth was driven
by demand both from tankers and gas ships,
including the first deliveries and successful sea
trials for the new LNG Q-Flex carriers.
Margins recovered in the second half and improved
to 6.0% for the full year (2007: 5.6%). Manufacture
of all major products has now been moved from
Norway to China. Order intake rose from an already
strong performance in the prior year to £29.8 million
(2007: £28.5 million).The order book rose to a record
level of £40.0 million (2007: £27 .1 million).
The business has focused its development efforts on
systems for offshore FPSOs, LNG and LPG carriers
and nitrogen generator systems. Its success in these
latter areas is illustrated by a doubling of sales to gas
ships and recent success in securing a multi-ship
order in Korea for chemical tanker nitrogen generator
systems. Hamworthy Moss is now the leading inert
gas systems supplier in the Korean market.
Consistent with the pump systems business,
the slow progress in contract awards for FPSOs
reported in the interim report continued through the
third quarter. Activity has increased during the last
few months on several orders which the business
is pursuing and order placements are expected
soon.This remains a strong medium-term sector
for Hamworthy.
Inert gas systems
Growth drivers
Environmental
Increasing environmental legislation
Increasing environmental awareness
Economic
Growing demand for energy
Increasing demand/supply dislocation m
See page
09
10% of
Group revenue
Products
Inert gas generators
Nitrogen generators
Flue gas systems
Markets
Gas production and transportation
Oil production and transportation Company overview Business review Governance Accounts
17 Hamworthy plc
Operational
excellence
is driving long-term
improvement in
margins
During the year Hamworthy completed
the transfer of all major inert gas
fabrication and assembly to a Group
factory in Suzhou, China. As well as the
factory in Suzhou we have established
a Group sourcing team who target
savings of over 40% against conventional
alternatives. Savings made by the team
compared with original suppliers are now
running at £1 .7m per annum and we
will strive to exceed this as the team
continues to grow in 2009.
Stephen Liu
Group Sourcing Manager
Hamworthy Suzhou
China
1 7. 0
1 7. 6
15.2
28.5
29.8
0.4
1 .0
0.8
1 .0
1.4
Sales (£m) Order intake (£m) Operating profit (£m)
04 05 06 07 08 04 05 06 07 08 04 05 06 07 08
10.7
16.6 16.5
1 7. 2
22.5 Financial review
18 Hamworthy plc
Basis of reporting
The Group financial statements in this report have
been prepared in accordance with International
Financial Reporting Standards (IFRS) and the
associated International Financial Reporting
Interpretation Council (IFRIC) interpretations each
as adopted for use in the EU.The financial statements
of the parent company have been presented in
accordance with UK GAAP .
Accounting policies
The Group has reviewed its accounting policies in
accordance with IAS 8 and determined that they are
appropriate for the Group.
Operating performance
T urnover increased by 21 .5% to £ 231 .8 million
(2007: £190.8 million) and operating profits rose
by 25.8% to £ 16.5 million (2007: £13.1million).
Group operating margins increased to 7 .1%
(2007: 6.9%). All four divisions demonstrated
growth in both turnover and operating profit.
The Group generated 7 4% of its operating profits
before central costs in reporting currencies other
than sterling, the most significant being euro,
Danish kroner, Norwegian kroner, Singapore dollars
and Chinese renminbi.The weighted average rate
for these currencies has strengthened by 6.6%
compared to the prior year which had the effect
of increasing sterling consolidated turnover by
£14.0 million and operating profits by £1 .1 million.
Profit before taxation rose 28.0% to £17 .4 million
(2007: £13.6 million) with a rise in net interest income
to £0.9 million (2007: £0.5 million).
The Group’s undelivered order book increased from
£268.2 million to £31 1 .8 million.
T axation
The tax charge of £4.6 million (2007: £3.8 million)
represents an effective rate of 26.6% (2007: 27 .8%).
The Group generates taxable profits in a number of
jurisdictions where the underlying rate of corporation
tax is lower than the UK.The most notable differences
are in China and Singapore.The net effect of these
lower underlying foreign tax rates is equivalent to
4.0% of the profit before taxation. Several of these
jurisdictions have also changed their underlying rates
of corporation tax during the year which has had a
net reduction in the Group’s tax charge equivalent to
1 .4% of profit before taxation. Note 8 to the financial
statements provides details of the tax charge.
Earnings per share
Basic earnings per share increased from 22.8p per
share to 28.7p per share and fully diluted earnings
per share increased from 21 .9p to 28.6p. Note 10
to the financial statements provides details of
these calculations.
Hamworthy has had a further successful year, delivering increased
revenues and profits, integrating the Group’s first acquisition since
flotation and improving future prospects with increased order
books across all product groups.
06 07 08 05 04
00.0
00.0
00.0
00.0 231.8
00.0
311.8
08
16.5
06 07 08 05 04
137 .0
90.6
113.9
190.8
231.8
Turnover (£m)
£231 .8m
+2 1 .5 %
06 07 08 05 04
9.1
6.4
7 .5
13.1
16.5
Operating profit (£m)
£1 6.5m
+25 .8 %
06 07 08 05 04
206.8
84.6
121.0
268.2
311.8
Closing order book (£m)
£31 1 .8m
+1 6 .3 %
07 08
00.0
228.1
06 07 08 05 04
208.0
125.6
152.9
245.7
228.1
Order intake (£m)
£228. 1 m
 - 7. 2% Company overview Business review Governance Accounts
19 Hamworthy plc
Dividend
The directors are recommending a final ordinary
dividend of 5.29p per share. If approved by
shareholders this would result in a total dividend
declared in respect of the year of 7 .94p per share
when added to the interim dividend of 2.65p per
share paid in December 2007 .
Financing, cash flow and treasury
The Group maintains a focus on controlling working
capital requirements and resultant cash flows.
Despite the volatility in net flows in the larger contract
based businesses, the Group continues to be a strong
generator of cash.The Group had a particularly strong
net cash flow in the first half of the year under review
and maintained that benefit through the second half.
A summary of cash flows and the change in net funds
is set out below. Operating cash flow amounted to
£19.3 million (2007: £9.7 million) which is 1 16.8%
(2007: 73.4%) of operating profit.The conversion
of operating profit to operating cash flow averaged
103.6% for the last three years.The net funds
position at the year end was £48.0 million (2007:
£27 .0 million). Further detail relating to the cash flows
and movements in net funds of the Group is given in
the consolidated cash flow statement on page 32 and
in notes 28 and 29 to the financial statements.
2008 2007
£’000 £’000
Operating profit 16,536 13,140
Depreciation and other
non-cash movements 2,185 1,678
Change in working capital
and provisions 2,596 (1,774)
Net capital expenditure (2,007) (3,393)
Operating cash flow 19,310 9,651
Net interest received 887 653
Taxation paid (2,005) (1,253)
Free cash flow 18,192 9,051
Dividends paid (3,184) (2,804)
Outflow for acquisitions
and net debt acquired (628) (5,680)
Movements in funding
and exchange movements 6,622 (933)
Increase/(decrease) in net funds 21,002 (366)
All businesses are responsible for management of
cash and working capital locally. Principal operating
companies then participate in a cash pooling
arrangement under which a central treasury function
manages the most efficient use of funds across
activities.The Group has historically hedged
approximately two-thirds of the interest rate exposure
on its term debt.The hedge currently in place caps
the LIBOR rate within the interest charge at 6.39%
on the proportion of debt hedged. As that debt will
fall below £3.0 million during 2008 the interest hedge
will cease in June 2008.
The Group’s businesses are global and each can
contract in several currencies.The Group’s policy
is to hedge all currency transaction exposures at the
time of entering into the contractual commitment
back to the relevant contracting business’ local
currency.The significant majority of this hedging
is operated through the central treasury function.
The Group’s principal operating businesses are
required to reconcile their exposures and related
hedges and report them to the treasury function as
part of their financial reporting routines.The Group
intends that its hedging procedures qualify for hedge
accounting as far as is practical to do so.This will
result in any gain or loss volatility of hedge derivatives
initially being recorded in a separate component of
equity and not through the Income Statement.
The Group’s primary banking and finance facilities are
provided by Barclays Bank plc under the terms of a
Facilities Agreement originally dated December 2002
as since amended.The facility includes a £9.0 million
five year term loan of which £3.0 million remains
outstanding (2007: £4.9 million) and a revolving
and related ancillary facility for overdraft, foreign
exchange transactions and letters of credit, bonds,
guarantees and indemnities. In addition the Group
has further facilities held directly by its subsidiaries
with local banks.
Paul Crompton
Finance Director
Joe Oatley
Chief Executive Board of Directors
20 Hamworthy plc
From left to right:
Gordon Page CBE DL
Non-executive Chairman
Mr Page, age 64, joined the board in June 2004.
He is chairman of FKI plc, AirTanker Holdings Limited
and PH Warr plc. He is a non-executive director of
Cobham plc and Lockheed Martin UK Holdings
Limited. He is Pro-Chancellor, Cranfield University,
a Governor of Canford School and Chairman of the
Department for Business Enterprise and Regulatory
Reform Industrial Development Advisory Board.
Mr Page previously held a number of senior
commercial and marketing positions at Rolls-Royce
plc. He was chairman of Cobham plc from 2001 to
2008 and is a past president of the Royal Aeronautical
Society, the Society of British Aerospace Companies
and the Chartered Management Institute. He was
awarded the CBE in 2000, an Honorary Doctorate
of Science from Cranfield University in 2003 and
appointed as a Deputy Lieutenant of Dorset in 2006.
He is chairman of the nomination committee.
Joe Oatley MA
Chief Executive
Mr Oatley, age 39, joined the Company in September
2007 as Chief Executive having spent three years
as managing director of Weir Strachan & Henshaw.
Prior to that his experience was predominantly in
the engineering sector in a variety of roles including
managing director, in strategy development and
acquisitions. Mr Oatley has a Masters Degree in
Engineering from Cambridge University.
Paul Crompton BA FCA
Finance Director
Mr Crompton, age 47 , joined the Company as
finance director in 1994. A graduate in finance and
business studies, he is a chartered accountant
having spent five years at Ernst &Y oung. Prior to
joining Hamworthy, Mr Crompton held senior board
positions within the electronics and aerospace
industries. He is a director of the Lewis-Manning
T rust and of PD SuperannuationT rust Limited
and chairman ofT rustees of the Hamworthy
Pension Scheme. Company overview Business review Governance Accounts
21 Hamworthy plc
Alan Frost BSc FIA
Non-executive director
Mr Frost, age 63, joined the board in June 2004
and is also currently the chairman ofT eachers
Building Society, chairman of Bournemouth
University and Dorset Opera, and a non-executive
director of NFU Mutual Insurance Society Limited
and INVESCO Pensions Ltd. Mr Frost has over
40 years of experience in the financial services
sector, including ten years as managing director
of Abbey Life Assurance and chief executive of
United Assurance Group plc. He is the senior
independent director and is chairman of the
audit committee.
JamesWilding MA FCA
Non-executive director
Mr Wilding, age 48, joined the board in 2002.
He is a managing director at AlixPartners, the
performance improvement and restructuring firm,
and previously was a principal of Nikko Principal
Investments Limited, the private equity house.
Mr Wilding is a chartered accountant and was a
partner at PricewaterhouseCoopers from 1994 to
2000. He is chairman of the remuneration committee. Directors’ report
22 Hamworthy plc
The directors present their report and the audited financial statements for the year ended 31 March 2008.
Business review
This business review has been prepared to provide additional information to shareholders to assist in understanding the Group’s strategies
and the potential for those strategies to succeed. The Chairman’s statement on pages 4 to 5, the Strategy review on pages 6 to 7 and the
Business review on pages 8 to 9 all contain further information related to this business review and are to be incorporated into this Directors’
report by reference.
This Business review contains forward-looking statements which have been made by the directors in good faith based on information
available to them up to the time of their approval of this report and must be treated with caution due to the uncertainties including economic,
business and other risk factors inherent in any such forward-looking information.
The principal activities of the Company have been acting as holding company and provider of group management services. The principal
activities of the Group are the design, manufacture and supply of products and systems for marine and oil and gas related industries.
The Group monitors progress and drives the business through the use of various financial and non-financial performance indicators including
those of:
• order intake and order book coverage;
• market shares for sales to shipbuilders and major retrofit contracts;
• absolute growth in sales and profitability of aftermarket sales;
• customer satisfaction measures;
• employee safety and development;
• environmental standards and compliance therewith;
• assessment and monitoring of key risks.
The Group’s commitment to environmental and health and safety performance is described in the Corporate governance report on page 28.
Performance for the year end 31 March 2008
A summary of key financial results is set out in the table below.
Revenue Operating profit
2008 2007 2008 2007
£’000 £’000 £’000 £’000
Gas systems 98,940 89,631 5,484 4,671
Pump systems 66,550 55,065 7 ,255 5,481
Water systems 43,776 28,894 4,997 4,472
Inert gas systems 22,549 17 ,231 1,351 957
Central – – (2,551) (2,441)
231,815 190,821 16,536 13,140
2008 2007
£’000 £’000
Closing order book 311,827 268,230
Operating cash flow 19,310 9,651
The Group made further progress in developing its balanced portfolio of businesses and growing revenue and earnings streams through both
organic and acquisitive growth. Details of the divisional performances are given in the Business review on pages 10 to 17 .
Risks
There are a number of potential risks and uncertainties which could have a material impact on the Group’s long-term performance and could
cause actual results to differ from those expected.
The directors have identified the following as being principal risks facing the Group:
• contract or product failure;
• competition;
• exposure to multi-currency markets;
• new shipbuilding market trends;
• resource sufficient to support future growth;
• uncertainty on timing of order placements. Company overview Business review Governance Accounts
23 Hamworthy plc
The Group has implemented actions to mitigate the effects of these risks. Those relating to financial risk are described in detail in the
Financial review on pages 18 to 19 and in note 30 to the financial statements. Mitigating actions for other risks include the maintenance of
quality approval systems and accreditations, investment in project management systems, commitment to innovation led by market
requirements and the maintenance of a balanced portfolio of businesses and market sectors.
The Group’s internal controls systems, including the system of assessment and management of risk, are described in the Corporate
governance report on page 28.
Employees
The Group places considerable value on the involvement of its employees and keeps them informed on matters affecting them as employees
and on the various factors affecting the performance of the Group.
The Group’s employment policies include a commitment to equal opportunities regardless of sex, age, race, ethnic origin or other forms of
discrimination.
It is the policy of the Group to give full and fair consideration to applications made by disabled persons taking into consideration the respective
aptitudes and abilities of the applicants concerned. In the event of members of staff becoming disabled every effort is made to ensure their
continued employment within the Group and to provide specialised training where appropriate.
Dividends
The directors propose the payment of a final dividend in respect of the year to 31 March 2008 of 5.29p per share (2007: 4.6p per share).
The Company paid an interim dividend during the financial year of 2.65p per share (2007: 2.3p per share).
Directors
The following directors held office during the year:
P Crompton
JM Oatley (appointed 3 September 2007)
KG Derrick (resigned 31 August 2007)
GF Page – non-executive Chairman
AJ Frost – non-executive director
JN Wilding – non-executive director.
In accordance with article 87 .1 of the Company’s Articles of Association P Crompton retires by rotation at the forthcoming AGM and, being
eligible, offers himself for re-election. JM Oatley was appointed by the board of directors during the year and, in accordance with article 82
of the Company’s Articles of Association, offers himself for election at the forthcoming AGM.
None of the directors had a material interest in any contract of significance to which the Company, or its subsidiaries, was a party during the
financial year. There were no contractual relationships between the non-executive directors and companies with which they are connected
and the Hamworthy plc group.
Other than the interests of directors disclosed in the Directors’ remuneration report the Company had been notified at 9June 2008 of the
following substantial interests in the Company’s issued ordinary share capital:
Number of % of issued
ordinary share
Registered holder shares capital
New Smith Asset Management LLP 3,037 ,818 6.70%
Schroders Investment Management Limited 2,771,253 6.11%
Liontrust Asset Management plc 2,578,834 5.69%
Insight Investment Management (Global) Limited 2,496,246 5.51%
Baillie Gifford & Co 2,368,665 5.23%
Rathbone Brothers plc 2,250,832 4.97%
Hermes Pensions Management 1,863,797 4.11%
Fidelity International Limited 1,610,700 3.55%
Directors’ remuneration
Details of the remuneration of directors and their interests in the share capital of the Company are provided in the Directors’ remuneration
report on pages 25 to 27 .
Financial instruments
The Group holds and utilises financial instruments in the management of its operations. It is the policy of the Group that no trading in
financial instruments shall be undertaken. The main risks from the Group’s financial instruments relate to interest rates, liquidity risk
and foreign exchange risk. The board reviews and agrees policies for managing each of these risks and they are set out in note 30 to the
financial statements.
Research and development
During the year the Group expensed to the consolidated income statement, net of amounts capitalised to and amortised from intangible
assets, £1,904,000 (2007: £1,321,000) in respect of research and development on marine and offshore products and systems. Directors’ report (continued)
24 Hamworthy plc
Creditor payment policy
It is the Group’s policy to agree terms with its suppliers which are appropriate for the markets in which they operate and to abide by such
terms where suppliers have also met their obligations. Creditor days as at 31 March 2008 were 49 days (2007: 34 days).
Donations
The Company made no political donations in the year. The Company made charitable donations of £1,600 during the year (2007: £1,000)
including the following payments of £200 or more.
Montacute School £250
SCOPE £250
Beaucroft School £250
Langside School £200
Life Education Dorset £250.
Directors’ responsibilities
The directors are required by company law to prepare financial statements for each financial year that give a true and fair view of the state of
affairs of the Company and the Group and of the profit or loss of the Group for that period. The directors are required to prepare the financial
statements on the going concern basis unless it is inappropriate to presume that the Company or the Group will continue in business.
The directors confirm that suitable accounting policies have been used and applied consistently throughout the year. They confirm that
reasonable and prudent judgements and estimates have been made in preparing the financial statements for the year ended 31 March 2008
and that applicable accounting standards have been followed. The financial statements have been prepared on the going concern basis.
The directors are responsible for keeping accounting records that disclose with reasonable accuracy at any time the financial position of the
Company and the Group and enable them to ensure that the financial statements comply with the Companies Act 1985.
They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The maintenance and integrity of the Group website is the responsibility of the directors. The work carried out by the auditors does not involve
consideration of these matters and accordingly the auditors accept no responsibility for any changes that may have been made to the financial
statements since they were initially presented.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
Disclosure of information to auditors
As far as each of the directors is aware, there is no relevant audit information of which the Group’s auditors are unaware; and they have taken
all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish
that the Group’s auditors are aware of that information.
Annual General Meeting
The Annual General Meeting (AGM) of the Company will take place at the Verona Suite, The Italian Villa, Compton Acres, 164 Canford Cliffs
Road, Poole, Dorset BH13 7ES on 14 July 2008 at 2.00 pm. Full details of the resolutions to be put to the meeting are given in the notice of
the AGM to be found at pages 70 to 71 of this Annual report and accounts.
Share capital
An ordinary resolution will be put to the shareholders at the AGM to renew the directors’ authority to issue and allot ordinary shares.
The nominal value of ordinary shares to which this authority will be limited is £755,422. A special resolution will also be put to the
shareholders at the AGM which renews the authority of the directors to allot ordinary shares without first offering them to existing
shareholders in proportion to their existing holdings. This authority is limited to 5% of the issued share capital.
The Companies Act 1985 permits a company to purchase its own shares provided the purchase has been authorised by the members in
general meeting. A special resolution will be put to the shareholders at the AGM to authorise the Company to purchase up to 5% of the
issued share capital at a maximum price 5% above the average middle market quotation according to the London Stock Exchange for the
five days’ preceding any purchase.
In all cases the above resolutions will expire at the earlier of the next AGM in 2009 or 15 months after the date of the resolutions.
Auditors
PricewaterhouseCoopers LLP have indicated their willingness to continue in office and a resolution proposing their reappointment will be
made at the AGM.
By order of the board.
Peter Dawes
Company Secretary
9 June 2008 Company overview Business review Governance Accounts
Directors’ remuneration report
25 Hamworthy plc
The Company is listed on AIM and as such is not required to prepare a formal remuneration report. However, in line with best practice the
Company has prepared this report in order to enable a better understanding of directors’ remuneration.
Remuneration committee
The remuneration committee consists exclusively of independent non-executive directors and its members are JN Wilding (Chairman),
GF Page and AJ Frost. The committee also consults with the Chief Executive. It meets at least twice per year and has delegated responsibility
for recommending to the board the remuneration and other benefits of the executive directors and senior executives. The full terms of
reference of the committee are available on the Company’s website or on request from the Company Secretary.
The committee has access to external remuneration data and professional advice. In 2007 it sought advice from Kepler Associates on various
matters relating to executive remuneration and long-term incentives.
Remuneration policy
The board’s policy is to recruit, motivate and retain senior executives of high calibre by rewarding them with competitive but responsible
salary and benefit packages. A significant proportion of executive remuneration is performance related, both short-term and long-term,
including participation in share incentive schemes which are closely aligned with the interests of shareholders.
The remuneration packages for executive directors comprise the following main elements:
• basic annual salary;
• annual bonus payments in respect of the performance of the individual and the Group calculated as a percentage of salary;
• share-based long-term incentives via participation in the Company’s Share Option Plan and Share Matching Plan;
• retirement benefits under the Company’s defined contribution pension scheme;
• other benefits.
The board’s intention is to combine appropriate levels of fixed pay with incentive schemes that provide executives with the ability to earn
above median levels for true out-performance and encourage executive co-investment in the Company’s shares.
Basic salaries
Basic salaries are reviewed by the committee annually to take effect on 1 April. In setting basic salaries the committee assesses individual
responsibilities, experience and performance and considers external market data. During 2007 the committee sought benchmarking advice
from Kepler Associates on comparative remuneration data and have built on the results of that advice in 2008.
Annual bonus payments
Executive directors participate in the annual cash bonus scheme under which bonuses of between 0% and 100% of basic salary are payable.
Bonuses are awarded following consideration of the performance of the Group, achievement of profit and cash targets and the individual’s
contribution to that performance. The principles of this scheme also apply to annual bonuses payable to the Group’s senior executives.
Where an executive has specific responsibility for a division or subsidiary in the Group the performance of that business unit is considered
along with the Group performance. Bonus awards were paid to KG Derrick in respect of the period from 1 April 2007 to the date of his
retirement and to JM Oatley from the date of commencement of his employment to 31 March 2008.
Long-term incentives
The Company operates long-term incentives for executive directors and senior executive managers in the form of the Share Option Plan and
a complementary co-investment Share Matching Plan. These schemes aim to encourage participants to contribute to the performance of the
Company and participate in the Company’s success along with other shareholders.
It is the intention of the board to grant share options to reward performance and align the interests of executives with those of shareholders.
Share options are granted at the discretion of the committee. Exercise of options is subject to the committee’s performance criteria set at
the time of award.
For awards granted prior to 31 March 2007 this requires that growth in earnings per share over the following three year period shall be in
excess of the rise in the Consumer Price Index plus 3% per annum. Following the review of remuneration advised on by Kepler Associates
in 2007 , the vesting of subsequent awards has been conditional on an equally weighted measure of earnings per share growth and total
shareholder return (TSR). The minimum performance for any vesting is an earnings per share growth of CPI plus 5% and a TSR equal to the
average of the UK Industrial and Oil and Gas indices over a three year period. The percentage vesting rises from 25% to 100% in proportion
to increases in these two performance measures up to earnings per share growth of CPI plus 20% and TSR of 115% of the above indices.
Details of options held by the executive directors under the plan are given in the tables on page 27 .
The Share Matching Plan is designed to encourage the acquisition and retention of the Company’s shares. Participation is by the invitation
of the committee which grants awards to executive directors and senior executive managers. Awards of matching shares are granted to
participants on the basis of one matching share for each share already owned or for every two vested but unexercised share options held.
Vesting of awards is subject to retention of the participant’s initial qualifying holding over a three year period and the meeting of performance
criteria over that period. The percentage of awards vesting at the end of the three years is calculated by reference to the growth in earnings
per share over a three year period. The percentage rises proportionally from 25% for earnings per share growth of CPI plus 5% to 100% for
earnings per share growth of CPI plus 20%. Details of the participation by executive directors is given below.
Retirement benefits
The executive directors are members of the Hamworthy Pension Scheme, a UK defined contribution scheme. The scheme provides for
pension benefits payable on retirement and for a lump sum benefit payable to dependants in the event of death in service.
Prior to his retirement KG Derrick elected to sacrifice some of his basic salary in exchange for additional payments made to his account
under the scheme. Full details are given in the tables below. Directors’ remuneration report (continued)
26 Hamworthy plc
Other benefits
The executive directors receive private health insurance and allowances in lieu of company cars and fuel. JM Oatley received a cash amount of
£30,000 on commencement of employment as compensation for certain accrued benefits lost as a result of leaving his previous employment.
Service contracts
Service agreements for executive directors are for no fixed term and are terminable on 12 months’ notice from the Company or six months’
notice from the director. There are no provisions for compensation in event of early termination.
Non-executive directors
The non-executive directors do not have service contracts and nor do they participate in any share option scheme, long-term incentive plan or
pension scheme. GF Page, AJ Frost, and JN Wilding have each been appointed under letters of engagement which commenced on 21 July
2004 and can be terminated by either party giving three months’ notice. Fees payable under the terms of their appointments are shown
in the tables on page 26. The fees payable in respect of the appointment of JN Wilding are paid to his principal employer.
External appointments
It is the Company’s policy to allow executive directors to hold external appointments and to receive payment therefrom provided such
appointments are agreed by the board in advance. During the year no executive director was a director of another public company.
Directors’ emoluments
The remuneration of the directors including the highest paid director and chairman was as follows:
Salary and Annual Other T otal Total
fees bonus benefits 2008 2007
£ ££ £ £
Executive
P Crompton 160,000 112,000 10,321 282,321 255,132
JM Oatley (appointed 3 September 2007) 116,667 82,000 36,842 235,509 –
KG Derrick (resigned 31 August 2007 33,800 72,600 5,288 111,688 270,917
Non-executive
GF Page 70,000 –– 70,000 62,500
AJ Frost 39,000 –– 39,000 36,500
JN Wilding 39,000 –– 39,000 36,500
T otal 458,467 266,600 52,451 777 ,518 661,549
Other benefits include private medical insurance cover and allowances in lieu of company cars and fuel. For JM Oatley the figure also includes
a sum of £30,000 paid to him on commencement of employment as compensation for certain accrued benefits lost as a result of leaving his
previous employment.
The Company also reimbursed JM Oatley a sum of £60,000 against submission of invoices in respect of certain relocation expenses.
The Company settled the income tax otherwise payable by JM Oatley on this reimbursement. These amounts are not included above.
Directors’ pension benefits
The executive directors participate in the Hamworthy Pension Scheme, a UK defined contribution scheme.
Employer contributions to the Hamworthy Pension Scheme were as follows:
2008 2007
£ £
P Crompton 20,000 16,125
JM Oatley 14,583 --
KG Derrick 54,714 97 ,132
T otal 89,297 113,257
The Company contributes to the scheme at the rate of 12.5% of basic salary for executive directors. During the period prior to his retirement
KG Derrick entered into a salary sacrifice agreement under which his basic salary was reduced by £40,575 (2007: £67 ,625) in consideration for
additional employer contributions to his fund within the Hamworthy Pension Scheme. The above tables reflect the lower salary and additional
pension contributions. Company overview Business review Governance Accounts
27 Hamworthy plc
Directors’ interests in shares
The interests of the directors in the ordinary shares of the Company were as follows:
31 March 31 March
2008 2007
P Crompton 52,233 27 ,523
JM Oatley 4,760 –*
AJ Frost 59,705 54,564
GF Page 41,000 31,000
JN Wilding 36,700 36,700
*At date of appointment.
All directors’ interests are beneficially held. There has been no change in the interests set out above since the balance sheet date to one
month before the notice of the AGM.
The directors’ interests in options over the ordinary share capital of the Company and movements therein during the year are set out below.
The options granted during the year are exercisable from the third to the tenth anniversary of the grant date. The exercise of all options is
subject to meeting the remuneration committee’s performance criteria.
Number of options
At price on
Date of Exercise At 1 April 31 March exercise
grant price 2007 Granted Exercised 2008 date
P Crompton 20.07 .04 109.0p 407 ,000 – 407 ,000 – 610.0p
11 .07 .07 582.5p – 27 ,468 – 27 ,468
JM Oatley 03.09.07 606.0p – 33,000 – 33,000
The market price on the date of exercise is the value for tax purposes agreed with the shares valuation office of the HM Revenue & Customs.
The closing mid-market price of the Company’s ordinary shares on 31 March 2008 was 452.0p.
In addition P Crompton also holds awards over 22,504 shares (31 March 2007: nil) under the Company’s Share Matching Plan. These were
awarded on 3 August 2007 when the market price, as agreed with the shares valuation division of the HM Revenue & Customs, was 592.5p
per share.
JN Wilding
Chairman of the Remuneration Committee Corporate governance
28 Hamworthy plc
Introduction
The Company is listed on AIM. Although the rules of AIM do not
require the Company to comply with the Combined Code on
Corporate Governance (‘the Code’) the Company fully supports the
principles set out in the Code and will seek to comply wherever
practical, given both the size and resources available to the Company.
Details are provided below of how the Company applies those parts
of the Code which it believes to be appropriate.
The board
The Company has appointed non-executive directors to bring an
independent view to the board and to provide a balance to the
executive directors. The board of directors comprises two executive
directors and three non-executive directors, one of whom is the
chairman (GF Page) and one of whom is the senior independent
director (AJ Frost).
The board considers that each of the non-executive directors is
independent within the meaning of the Code.
The board generally meets every other month and receives a board
pack with information deemed necessary for the board to discharge
its duties. Over the year these packs will include financial data,
reporting on health and safety, controls and risk assessments and
individual reports from each of the executive directors and members
of the senior management team. The board has responsibility for
formulating, reviewing and approving the Group’s strategy, budgets,
major items of expenditure, acquisitions and the annual and interim
directors’ report and financial statements.
During the year the board carried out a formal assessment of its
performance and effectiveness using the services of an outside
consultant (Edis-Bates Associates), as a result of which a number
of process improvements will be introduced to the conduct of the
board and its committees.
Board committees
The board has established three committees: audit, remuneration and
nominations, all having written terms of delegated responsibilities.
Each is chaired by a different non-executive director. The Company
Secretary is secretary to each committee. A copy of each committee’s
terms of reference can be found at the Company’s website
www.hamworthy.com.
Audit committee
The audit committee consists of GF Page, AJ Frost and JN Wilding
and is chaired by AJ Frost. It meets at least three times a year
including attendance from the external auditors and internal personnel
as required. The committee is responsible for ensuring that the
appropriate financial reporting procedures are properly maintained
and reported on and for meeting the auditors and reviewing their
reports relating to the Group’s accounts and internal control systems.
The committee also receives all internal operational review reports
and any matters reported under the Group’s whistleblowing policy.
Remuneration committee
The remuneration committee consists of GF Page, AJ Frost, and
JN Wilding and is chaired by JN Wilding. It meets at least twice a
year and is responsible for reviewing the performance of the
executive directors and other senior executives and for determining
appropriate levels of remuneration. The chief executive is invited to
participate in the committee on matters except consideration of his
own remuneration. The committee’s remuneration report is set out
on pages 25 to 27 .
Nomination committee
The nomination committee consists of GF Page, AJ Frost, JN Wilding
and JM Oatley and is chaired by GF Page. It makes recommendations
on all new board appointments.
Shareholder relations
The Company meets with institutional shareholders and analysts
as appropriate and uses its website to encourage communication
with private, existing and prospective shareholders. Hamworthy plc
welcomes feedback from investors about its published reports and
website. Please address your feedback to our investor relations team
by e-mail to investor@hamworthy.com or in writing to Hamworthy plc,
Fleets Corner, Poole, Dorset BH17 0JT .
Internal control and risk management
The Group operates a system of internal control and intends to
develop and review that system in accordance with the guidance
published by the Institute of Chartered Accountants in England and
Wales. The internal control system is designed to manage rather than
eliminate the risk of failure to achieve business objectives. The board
is responsible for the system of internal control and for reviewing
its effectiveness. It can only provide reasonable, but not absolute,
assurance against material misstatement or loss.
The board operates a formal process of risk assessment and
reporting. Each major business unit carries out formal risk
assessments annually and regularly updates these during the
year. The assessments are carried out using, where appropriate, a
standard categorisation of risk. Reports on the assessments and
mitigation actions of all significant risks are provided to the board.
The Group does not have an internal audit function due to the small
size of the Company’s administrative function, the high level of
director review and authorisation of transactions. However, the
Company undertakes a programme of operational reviews designed
to visit all major businesses on a regular basis. The finance director
is responsible for that programme and its reporting to the audit
committee and it is integrated into the risk assessment programme.
The board recognises that an essential part of its responsibility is the
effective safeguarding of assets, the proper recognition of liabilities
and the accurate reporting of results. The Group has a comprehensive
system for regular reporting to the board. This includes an annual
planning and budgeting system with budgets approved by the board.
The financial reporting system compares against budget and prior year
and reconsiders its financial year forecast all on a monthly basis.
The board has established a formal policy of authorisation setting out
matters which requires its expressed approval and certain authorities
delegated to the executive directors.
The Group operates in a multi-currency environment and is exposed to
a number of foreign currency risks. The board has set a policy for the
management and reporting of those risks and this is set out in more
detail in the Financial review on pages 18 and 19 and in note 30 to the
financial statements.
In compliance with AIM rules the Company has established a policy
and share dealing code relating to dealing in the Company’s shares
by directors, employees and connected persons.
The Company has established, operates and publicises within the
Group and via its website a whistleblowing policy. This provides the
necessary access for, and protection of, employees wishing to bring
matters they suspect as being malpractice or impropriety to the
attention of the relevant person.
The Company maintains appropriate insurance cover in respect of
legal actions against directors as well as against material loss or claims
against the Group, and reviews the adequacy of cover regularly.
The Group operates formal assessment and reporting systems in
respect of its health and safety and environmental performance.
With the exception of the Group’s German business all of the Group’s
principal business sites have achieved accreditation under OHSAS
18001 health and safety standard and ISO 14001 environmental
standard. The German Hamworthy Serck Como business already
operates in compliance with these standards and will seek formal
accreditation to both in 2008.
There were no notifiable environmental impacts at any Hamworthy
site during the financial year. Company overview Business review Governance Accounts
Independent auditors’ report
T o the shareholders of Hamworthy plc
29 Hamworthy plc
We have audited the group financial statements of Hamworthy plc
for the year ended 31 March 2008 which comprise the Consolidated
Income Statement, the Consolidated Balance Sheet, the Consolidated
Cash Flow Statement, the Statement of Group Total Recognised
Income and Expense and the related notes. These group financial
statements have been prepared under the accounting policies set
out therein.
We have reported separately on the parent company financial
statements for Hamworthy plc for the year ended 31 March 2008.
Respective responsibilities of directors
and auditors
The directors’ responsibilities for preparing the Annual Report and the
group financial statements in accordance with applicable law and
International Financial Reporting Standards (IFRS) as adopted by the
European Union are set out in the Statement of directors’
responsibilities.
Our responsibility is to audit the group financial statements in
accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland). This report,
including the opinion, has been prepared for and only for the
Company’s members as a body in accordance with Section 235 of
the Companies Act 1985 and for no other purpose. We do not, in
giving this opinion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
We report to you our opinion as to whether the group financial
statements give a true and fair view and whether the group
financial statements have been properly prepared in accordance
with the Companies Act 1985 and Article 4 of the IAS Regulation.
We also report to you whether, in our opinion, the information
given in the Directors’ Report is not consistent with the group
financial statements.
In addition we report to you if, in our opinion, we have not received all
the information and explanations we require for our audit, or if
information specified by law regarding directors’ remuneration and
other transactions is not disclosed.
We read other information contained in the Annual Report, and
consider whether it is consistent with the audited group financial
statements. This other information comprises only the Chairman’s
Statement, the Chief Executive’s strategy statement, the Business
Review, the Financial Review, the Directors’ Remuneration Report, the
Directors’ Report and the Corporate Governance statement. We
consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the group
financial statements. Our responsibilities do not extend to any other
information.
Basis of audit opinion
We conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of evidence relevant
to the amounts and disclosures in the group financial statements.
It also includes an assessment of the significant estimates and
judgements made by the directors in the preparation of the group
financial statements, and of whether the accounting policies are
appropriate to the group’s circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the group financial statements are free from material
misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements.
Opinion
In our opinion:
– the group financial statements give a true and fair view, in
accordance with IFRSs as adopted by the European Union, of the
state of the group’s affairs as at 31 March 2008 and of its profit
and cash flows for the year then ended;
– the group financial statements have been properly prepared in
accordance with the Companies Act 1985 and Article 4 of the
IAS Regulation; and
– the information given in the Directors’ report is consistent with
the group financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
Southampton
9 June 2008 Consolidated income statement
for the year ended 31 March 2008
30 Hamworthy plc
2008 2007
Note £’000 £’000 £’000 £’000
Revenue 1 231,815 190,821
Cost of sales (179,855) (144,029)
Gross profit 51,960 46,792
Distribution expenses (2,529) (1,708)
Administrative expenses (32,895) (31,944)
(35,424) (33,652)
Group operating profit 3 16,536 13,140
Finance income 6 1,747 1,225
Finance expense 7 (860) (756)
Profit before taxation 17 ,423 13,609
Taxation 8 (4,638) (3,782)
Profit for the year 25 12,785 9,827
Basic earnings per share 10 28.7p 22.8p
Diluted earnings per share 10 28.6p 21 .9p
Statement of GroupT otal Recognised Income and Expense
for the year ended 31 March 2008
2008 2007
Note £’000 £’000
Profit after taxation 12,785 9,827
Currency translation differences on foreign currency net investments 4,098 (868)
Net fair value gain on cash flow hedge 9,578 43
Movement on deferred tax relating to cash flow hedge 22 (1,951) (1,371)
Deferred tax on employee share option schemes 22 (1,831) 1,301
Deferred tax on unrelieved losses carried forward 22 2,164 –
Actuarial gain/(loss) in pension schemes 27 640 (196)
Movement in deferred tax relating to pension deficit 22 (185) (274)
T otal recognised income and expense for the year 25,298 8,462
The statement of changes in equity can be found in note 25 to the financial statements. Company overview Business review Governance Accounts
31 Hamworthy plc
Consolidated balance sheet
as at 31 March 2008
2008 2007
Note £’000 £’000
Non-current assets
Intangible assets 12 12,367 12,358
Property, plant and equipment 14 10,183 8,979
Derivative financial instruments 30 3,259 1,076
Deferred taxation assets 22 3,835 3,287
29,644 25,700
Current assets
Inventories 15 58,768 28,917
Trade and other receivables 17 47 ,200 36,127
Derivative financial instruments 30 9,187 2,877
Cash and cash equivalents 18 52,346 32,486
167 ,501 100,407
Current liabilities
Borrowings 20 (2,604) (1,887)
Trade and other payables 19 (78,830) (51,420)
Derivative financial instruments 30 (1,828) (701)
Corporation tax (1,687) (1,616)
(84,949) (55,624)
Non-current liabilities
Borrowings 20 (1,695) (3,554)
Trade and other payables 19 (28,426) (17 ,744)
Derivative financial instruments 30 (675) (449)
Deferred taxation liabilities 22 (8,785) (4,024)
Provisions 21 (6,382) (3,166)
Retirement benefit obligations 27 (2,106) (2,526)
(48,069) (31,463)
Net assets 64,127 39,020
Capital and reserves
Called up share capital 23 2,266 2,157
Share premium account 25 18,958 16,686
Other reserves 25 4,525 (3,102)
Retained earnings 25 38,378 23,279
Shareholders’ funds 64,127 39,020
The financial statements on pages 30 to 60 were approved by the board of directors on 9 June 2008 and signed on its behalf by:
J M Oatley P Crompton
Director Director 32 Hamworthy plc
Consolidated cash flow statement
for the year ended 31 March 2008
2008 2007
Note £’000 £’000
Cash flows from operating activities
Cash generated from operations 28 21,317 13,044
Interest paid (860) (576)
Interest received 1,747 1,229
Corporate taxes paid (2,005) (1,253)
Net cash inflow from operating activities 20,199 12,444
Cash flow from investing activities
Purchase of property, plant and equipment 14 (1,492) (2,276)
Purchase of intangible fixed assets 12 (543) (965)
Proceeds from disposal of property, plant and equipment 77 3
Capitalised expenditure on development costs 12 (49) (155)
Acquisition of subsidiary net of cash acquired – (4,832)
Payment of deferred consideration (628) –
Net cash used in investing activities (2,635) (8,225)
Cash flows from financing activities
Issue of share capital 2,381 –
Shares acquired in Employee Share Matching Plan (400) –
Dividends paid 9 (3,184) (2,804)
Repayment of loans (2,004) (1,815)
Net cash flows from financing activities (3,207) (4,619)
Net increase/(decrease) in cash and cash equivalents 29 14,357 (400)
Cash and cash equivalents including overdrafts at beginning of year 18 32,486 33,705
Effect of foreign exchange rate changes 4,895 (819)
Cash and cash equivalents including overdrafts at end of year 18 51,738 32,486 Company overview Business review Governance Accounts
33 Hamworthy plc
Accounting policies
The principal accounting policies adopted in the preparation of these
financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise
stated.
General information
These financial statements are the consolidated financial statements
of Hamworthy plc, a public limited company registered and domiciled
in the United Kingdom and its subsidiaries (‘the Group’). The address
of the registered office is Fleets Corner, Poole, Dorset BH17 0JT .
Basis of preparation
These financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS) and IFRIC
interpretations endorsed by the European Union (EU) and with those
parts of the Companies Act 1985 applicable to companies reporting
under IFRS.
The financial statements have been prepared under the historical cost
convention as modified by the revaluation of derivative contracts and
retirement benefit obligations which are held at fair value. A summary
of the more important Group accounting policies, which have been
applied consistently across the Group, is set out below, together with
an explanation of where changes have been made to previous policies
on the adoption of new accounting standards in the year.
The following new standard and amendment to an existing standard
have been adopted from 1 April 2007:
IFRS 7 Financial instruments: Disclosures; and the related
amendment to IAS 1 on capital disclosures.
This introduces new disclosures relating to the Group’s financial
instruments and policies for managing capital but does not have any
impact on the classification and valuation of the Group financial
instruments.
The following interpretation to an existing standard was adopted but
does not have an impact upon the reporting of the Group’s operations:
IFRIC 11 IFRS 2 – Group and Treasury Share Transactions.
The following interpretations to existing standards would be effective
for the current year but are not considered relevant to the Group’s
operations:
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 8 Scope of IFRS 2.
IFRIC 9 Reassessment of Embedded Derivatives.
IFRIC 10 Interim Financial Reporting and Impairment.
Basis of consolidation
The financial statements represent a consolidation of the Company
and its subsidiary undertakings (‘the Group’) as at the balance sheet
date and for the year then ended. Subsidiaries acquired or disposed of
during the year are included in the consolidated financial statements
from, or up to, the date upon which control passed, being the ability
to govern the financial and operating policies of the investee entity so
as to obtain benefits from its activities. This is considered to be the
effective date of acquisition or disposal, as appropriate.
On acquisition, the assets and liabilities and contingent liabilities of a
subsidiary are measured at their fair values at the date of acquisition.
Any excess of the cost of acquisition over fair values of the identifiable
net assets acquired is recognised as goodwill. Any deficiency of the
cost of acquisition below the fair values of the identifiable net assets
acquired (i.e. discount on acquisition) is credited to the Income
Statement in the period of acquisition.
Where necessary, adjustments are made to the financial statements
of subsidiaries to bring the accounting policies used into line with
those used by the Group.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Revenue recognition
Revenue is measured at the fair value of the consideration received
and represents amounts receivable for goods and services provided
in the normal course of business, net of discounts, VAT and other
sales related taxes, and excluding inter-company sales.
Sales of goods and services are recognised when goods are
despatched or services rendered. Revenue from construction
contracts is recognised in accordance with the Group’s accounting
policy on construction contracts (see below).
Segmental reporting
For reporting purposes the results of the Group are allocated between
four reporting product groups. These operate in specific product and
market areas and are as described in note 2. The Group accounting
policies are applied consistently across the four divisions. Head Office
costs are shown separately.
Foreign currency translation
The functional and presentational currency of the parent company
is UK Pounds sterling. Group companies use their local currency as
their functional currency. Transactions denominated in currencies
other than the functional currency are recorded at the rates of
exchange prevailing on the dates of the transactions. At each balance
sheet date, monetary assets and liabilities that are denominated in
foreign currencies are retranslated at the rates prevailing on the
balance sheet date, with any gains or losses being included in net
profit or loss for the period.
On consolidation the assets and liabilities of the Group’s overseas
operations are translated at exchange rates prevailing on the balance
sheet date. Income and expense items are translated at the average
exchange rates for the period. Exchange differences arising, if any,
are dealt with through the Group’s reserves, until such time as the
subsidiary is sold whereupon the cumulative exchange differences
relating to the net investment in that foreign subsidiary are recognised
as part of the profit or loss on disposal in the Income Statement.
However, cumulative exchange differences arising prior to 1 April
2005 remain in equity as permitted by IFRS 1 .
In order to hedge its exposure to certain foreign exchange risks
the Group enters into forward contracts and options (see below for
details of the Group’s accounting policies in respect of such derivative
financial instruments).
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate. The Group has elected to treat
goodwill and fair value adjustments arising on acquisitions before
the date of transition to IFRS as sterling denominated assets
and liabilities.
Financial instruments
The use of derivative financial instruments is governed by the Group’s
policies approved by the board of directors which provide written
principles on the use of financial derivatives.
All derivative financial instruments are recorded in the balance sheet
at fair value. Where derivatives do not qualify for hedge accounting,
any gains or losses on remeasurement are immediately recognised in
the Income Statement. Where derivatives qualify for cash flow hedge
accounting, recognition of any resultant gain or loss will initially be
recorded in a separate component of equity (‘Other Reserves’).
In order to qualify for hedge accounting, the Group is required to
document from inception the relationship between the item being
hedged and the hedging instrument. The Group is also required to
document and demonstrate an assessment of the relationship
between the hedged item and the hedging instrument, which
shows that the hedge will be highly effective on an ongoing basis.
This effectiveness testing is performed at each period end to ensure
that the hedge remains highly effective. Accounting policies (continued)
34 Hamworthy plc
Cash flow hedge accounting
Derivative financial instruments are classified as cash flow hedges
when they hedge the Group’s exposure to variability in cash flows that
is either attributable to a particular risk associated with a recognised
asset or liability or a highly probable forecasted transaction.
Changes in the fair value of derivative financial instruments that are
designated as effective hedges of future cash flows are recognised
directly in equity and the ineffective portion is recognised immediately
in the Income Statement. The associated cumulative gain or loss is
removed from equity and recognised in the Income Statement in the
same period or periods during which the hedged transaction affects
the Income Statement.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated or exercised, or no longer qualifies for
hedge accounting. At that time any cumulative gain or loss on the
hedging instrument recognised in equity is retained in equity until the
forecasted transaction occurs. If a hedged transaction is no longer
expected to occur the net cumulative gain or loss recognised in equity
is transferred to the Income Statement.
Derivative instruments qualifying for cash flow hedging are principally
forward foreign exchange transactions and interest rate swaps.
Derivatives embedded in other financial instruments or other host
contracts are treated as separate derivatives when their risks and
characteristics are not closely related to those of host contracts and
the host contracts are not carried at fair value with unrealised gains
or losses reported in the Income Statement.
The Group does not use derivative financial instruments for
speculative purposes.
T rade receivables
Trade receivables do not carry any interest and are stated at their
fair value as reduced by appropriate allowances for estimated
irrecoverable amounts. Allowances for irrecoverable amounts are
made when there is evidence that the Group may not be able to
collect the amount due. The impairment recorded is the difference
between the carrying value of the receivables and the estimated
future cash flows. Any impairment required is recorded in the
Income Statement in administrative expenses.
T rade payables
Trade payables do not carry any interest and are stated at their
fair value.
Leases
Rentals payable under operating leases are charged to income on a
straight-line basis over the term of the relevant lease.
Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation in respect of a past event and it is probable
that settlement will be required of an amount that can be reliably
estimated.
Provisions for warranty costs are recognised at the date of sale of the
relevant products, at the directors’ best estimate of the expenditure
required to settle the Group’s liability.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take
a substantial period of time to get ready for their intended use or sale,
are added to the cost of those assets until such time as the assets are
substantially ready for their intended use or sale. All other borrowing
costs are recognised in the Income Statement in the period in which
they are incurred.
Property, plant and equipment
Tangible fixed assets are stated at cost or valuation, net of
depreciation and provision for impairment. Cost includes expenditure
that is directly attributable to the acquisition of the item including the
costs of acquiring or constructing the asset and costs incurred
subsequently to add to, or enhance the asset. Depreciation is
provided on all tangible fixed assets at rates calculated to write off
the cost or valuation, less estimated residual value, of each asset
on a straight-line basis over its expected useful economic life at the
following annual rates:
Freehold land Nil
Freehold buildings 2%–5%
Leasehold buildings 2%–10% or over the life
of the lease if different
Plant, machinery
and equipment 20%–33%
Assets under construction Nil
Estimated residual values and useful lives are reviewed annually and
adjusted where necessary.
Intangible fixed assets
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group’s interest in the fair value of the identifiable
assets and liabilities of subsidiary undertakings at the date of
acquisition. Goodwill arising on acquisitions prior to 1 April 2005 has
been retained at the previous UK GAAP amounts subject to being
tested for impairment at that date. Goodwill written off to reserves
under UK GAAP prior to 1998 has not been reinstated and is not
included in determining any subsequent profit or loss on disposal.
Goodwill is recognised as an asset and reviewed for impairment
annually or where there are indications that the carrying value may
not be recoverable. Any impairment is recognised immediately in the
Income Statement and is not subsequently reversed.
Negative goodwill arising on acquisition before the date of transition
to IFRS has been eliminated through reserves on transition.
Research and development expenditure – internally generated
Expenditure on research activities is recognised as an expense in the
period in which it is incurred.
Development costs are written off as incurred until it can be
demonstrated that the conditions for capitalisation in IAS 38
(Intangible Assets) are met, at which point further costs are
capitalised as intangible assets until the intangible asset is readily
available for production, and amortised on a straight-line basis over
their useful lives.
Other intangible assets
Intangible assets acquired by the Group, other than goodwill, are
stated at cost less accumulated amortisation and impairment losses.
Intangible assets are amortised over the asset’s estimated useful life
on a straight-line basis as follows:
Software three to five years
Development costs three years
Customer contracts one to three years
Customer relationships ten years
Impairment of fixed tangible assets and intangible assets
excluding goodwill
At each balance sheet date the Group reviews the carrying amounts
of its tangible and intangible assets to determine whether there
is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the
asset is estimated to determine the extent of any impairment loss.
The recoverable amount is the higher of the asset’s value in use and
its fair value less costs to sell. Value in use is calculated using cash
flow projections for the asset (or group of assets where cash flows
are not identifiable for specific assets) discounted at the Group’s
cost of capital. Company overview Business review Governance Accounts
35 Hamworthy plc
If the recoverable amount of an asset (or cash generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset (cash
generating unit) is reduced to its recoverable amount. An impairment loss is
recognised as an expense in the Income Statement, unless the relevant
asset is carried at a revalued amount, in which case the impairment loss is
treated as a revaluation decrease.
Retirement benefit costs
The Company provides pension arrangements to the majority of full
time UK employees through a money purchase (defined contribution)
scheme, and similar schemes exist across other countries in which
the Group operates, except Norway and Germany. Contributions
and pension costs are based on pensionable salary and are charged
as an expense as they fall due. The Group has no further payment
obligations once the contributions have been paid.
Employees in Norway and Germany participate in funded defined
benefit pension plans. The cost of benefits accruing during the year in
respect of current and past service is charged against operating profit.
The expected return on the scheme’s assets and the change in the
present value of the scheme’s liabilities arising from the passage of
time are included in other finance costs. Actuarial gains and losses are
recognised in the Statement of Group Total Recognised Income and
Expense. The balance sheet includes the surplus/deficit in the scheme
taking assets at their year end market values and liabilities at their
actuarially calculated values discounted at year end AA corporate
bond interest rates.
Payments made to state-managed retirement benefit schemes are
dealt with as payments to defined contribution schemes where the
Group’s obligations under the schemes are equivalent to those arising
in a defined contribution retirement benefit scheme.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost comprises direct materials and, where applicable, direct labour
costs and those overheads that have been incurred in bringing the
inventories to their present location and condition. Cost is calculated
using the FIFO method. Net realisable value represents the estimated
selling price less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution. Provision is made for
obsolete, slow-moving or defective items where appropriate.
Construction contracts
Where the outcome of a construction contract can be estimated
reliably, revenue and costs are recognised by reference to the stage
of completion of the contract activity at the balance sheet date.
This is measured using a matrix of indicators applicable to the contract
including costs incurred, man hours expended, deliveries made and
engineering work completed. Variations in contract work, claims and
incentive payments are included to the extent that they have been
agreed with the customer.
When it is probable that total contract costs will exceed total contract
revenue, the expected loss is recognised as an expense immediately.
T axation including deferred tax
The tax expense represents the sum of current tax and deferred tax.
Tax is recognised in the Income Statement except to the extent that
it relates to items recognised in equity in which case it is recognised
in equity.
The current tax is based on taxable profit for the year calculated using
tax rates that have been enacted or substantially enacted by the
balance sheet date.
Deferred tax is provided using the balance sheet liability method on
temporary differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases
used in the computation of taxable profit. In principle deferred tax
liabilities are recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable
that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are
not recognised if the temporary difference arises from goodwill or
from the initial recognition (other than in a business combination) of
other assets or liabilities in a transaction that affects neither the tax
profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply
in the period when the liability is settled or the asset is realised.
Tax assets and liabilities are offset when there is a legally enforceable
right to offset current tax assets against current tax liabilities and
when the deferred income taxes relate to the same fiscal authority.
Share-based payment
The Group operates equity settled share-based compensation
plans through two share option schemes. The fair value of options
awarded is calculated at the time of grant and is charged to the
Income Statement on a straight-line basis over the vesting period
based on an estimate of the number of options that will actually vest.
The Group has adopted a Black-Scholes model to calculate the fair
value of options. The Group has also introduced a complementary
co-investment share matching plan, details of which are given in note
24. The fair value of these matching shares are calculated at the date
of award based upon the market value of the issued shares and are
charged to the Income Statement on a straight-line basis over the
vesting period based on an estimate of the number of options that
will actually vest.
Dividends
Dividends are recognised as a liability in the same period in which
they are fully authorised.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at
banks and in hand and short-term deposits with an original maturity
of three months or less.
For the purpose of the consolidated cash flow statement, cash and
cash equivalents consist of cash and cash equivalents as defined
above, net of outstanding bank overdrafts.
Significant judgements, assumptions and estimates
In the process of applying the Group’s accounting policies,
management has made a number of judgements, and the preparation
of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on management’s best knowledge of the amount, event or
actions, actual results ultimately may differ from those estimates.
The key assumptions concerning the future and other key sources
of estimation uncertainty at the balance sheet date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year
are discussed below.
Retirement benefit costs
The Group operates defined benefit pension schemes that provide
benefits to a number of current and former employees. The value of
the deficit is particularly sensitive to the market value of the scheme’s
assets, discount rates and actuarial assumptions related to mortality.
Further details are given in note 27 .
Revenue recognition for fixed price contracts
The Group derives revenue from long term projects, most of which
are normally fixed price contracts which may extend for a significant
period of time. While fixed price contracts are in progress, revenue
is recognised based on their expected profitability and extent of
completion. Profit is only taken once the outcome of the contract
can be estimated reliably, however unforseen future events may
adversely impact the accuracy of those estimates. Further details
are given in note 16. Accounting policies (continued)
36 Hamworthy plc
Current and deferred taxation
Legislation related to taxation is complex and its impact on the Group
may be uncertain. In preparing the Group’s financial statements
management estimates its taxation liability having taken appropriate
professional advice. Determination of an agreed amount of taxation
payable may take several years, and the final amounts paid may differ
from the liabilities recorded in these financial statements.
The recognition of assets and liabilities related to deferred taxation
also requires the exercise of management judgement, in particular the
extent to which assets should be recognised.
Impairment of goodwill
The Group determines whether goodwill is impaired at least on an
annual basis. This requires an estimation of the value in use of the
cash-generating units to which the goodwill is allocated. Estimating
the value in use requires the Group to make an estimate of the
expected future cash flows from the cash-generating unit and also to
choose a suitable discount rate in order to calculate the present value
of those cash flows. Further details are given in note 13. The carrying
amount of goodwill at 31 March 2008 was £9,998,000 (2007:
£9,998,000).
Accounting standards not yet effective
At the date of authorisation of these financial statements, the
following relevant Standards and Interpretations which have not
been applied in these financial statements were in issue but not
yet effective:
International Financial Reporting Standards (IFRS)
IFRS 8 Operating Segments (effective for periods
beginning on or after 1 January 2009)
IAS 1 Presentation of Financial Statements
(revised 2007) (effective for periods beginning on or after
1 January 2009) – introduces changes to the
titles of the main financial statements,
although their usage is not required, and the
incorporation of a statement of changes in
equity in to the main financial statements.
IAS 23 Borrowing Costs (effective (amended 2007)
(amended 2007) for periods beginning on or after
1 January 2009).
IFRS 3R Business Combinations (effective for periods
(revised 2008) beginning on or after 1 July 2009) – the main
anticipated impact is the requirement that all
acquisition-related costs are to be expensed
and will therefore no longer form part of the
cost of the investment.
IAS 27 Consolidated and Separate Financial
(revised 2008) Statements (effective for periods beginning
on or after 1 July 2009).
International Financial Reporting Interpretations Committee
(IFRIC)
IFRIC 12 Service Concession Arrangements – effective
from 1 January 2008.
IFRIC 13 Customer Loyalty Programmes – effective
from 1 July 2008.
IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their
Interaction – effective from 1 January 2008.
With the exception of IFRS 3R and acquisition-related costs, the
directors anticipate that the adoption of these Standards and
Interpretations in future periods will have no material impact on the
financial statements of the Group except for additional disclosures
when the relevant standards come into effect.
Financial risk management
Financial risk factors
The Group’s operations expose it to a number of financial risks
including foreign currency risk, interest rate risk and liquidity risk.
These risks are managed centrally by the Group’s treasury function in
accordance with board approved objectives, policies and authorities.
There are internal audit procedures to ensure local compliance.
Foreign exchange risk
The Group operates internationally and is subject to foreign exchange
risks on future commercial transactions. The principal exposures arise
in respect of variations in the cross rates between sterling, euro,
US dollar, Singapore dollar and Norwegian kroner. The Group seeks to
hedge all its transactional currency exposures through the use
of forward currency contracts. The Group does not hedge balance
sheet or income and expenditure translation exposures, or undertake
trading in financial instruments.
Interest rate risk
The Group’s exposure to market risk for changes in interest rates
relates primarily to its borrowings under a Senior Credit Agreement.
The Group has entered into interest rate capping arrangements to
cover approximately two-thirds of the interest payments under this
Agreement.
Liquidity risk
The Group’s cash flows and funds are managed in a central treasury
function under a cash pooling structure. The Group maintains the most
appropriate mix of short, medium and long-term borrowings from the
Group’s lenders. Details of available facilities are set out in note 20.
Credit risk
The Group is not subject to significant concentration of credit risk
with exposure spread across a number of companies across the
world. Policies are maintained to ensure that the Group makes sales to
customers with appropriate credit history. Letters of credit or other
appropriate instruments are put in place to reduce credit risk where
considered necessary.
The Group is also subject to credit risk on counter parties to its liquid
funds and its derivative financial instruments which it controls by
only dealing with highly-rated counterparties. The ratings are
constantly monitored.
Capital management
The Group manages its capital to ensure that entities in the Group
will be able to continue as a going concern while maximising the
return to shareholders through the optimisation of the debt and
equity structure. The capital structure of the Group consists of
borrowings (disclosed in note 20), cash and cash equivalents and
equity attributable to equity holders of the parent, comprising issued
capital, reserves and retained earnings as disclosed in notes 23
and 25. The Group balances its overall capital structure through the
payment of dividends, new share issues, and the use of debt facilities.
Details of the Group’s policy regarding employee share ownership and
the Group’s share option programme can be found in the Director’s
remuneration report on pages 25 to 27 .
From time to time the Group purchases its own shares on the market
through an employee benefit trust, and these are intended to be
used for issuing shares under the Group’s Share Co-investment
Incentive Plan. The timing of these purchases is at the discretion of
the trustees. The Group does not have a defined share buy-back plan.
There were no changes in the Group’s approach to capital
management during the year other than the introduction of the
incentive plan. Neither the Company nor any of its subsidiaries are
subject to any externally-imposed capital requirements. Company overview Business review Governance Accounts
Notes to the accounts
37 Hamworthy plc
1 Revenue
The analysis of the Group’s revenue is as follows:
2008 2007
£’000 £’000
Sale of goods and services 126,762 96,817
Revenue from construction contracts 105,053 94,004
231,815 190,821
Group service revenue is assessed as being incidental to sales of goods and is not considered to be a material component of revenue.
2 Business and geographical segments
Business segments
For management purposes, the Group is currently organised into four operating divisions – pump systems, gas systems, water systems and
inert gas systems. These divisions are the basis on which the Group reports its primary segment information.
The principal activities of each segment are as follows:
– The pump systems division designs and manufactures a range of cargo and general duty pumps and pump systems.
– The gas systems division’s principal activity is the design and supply of systems which handle the phase change of petroleum products and
natural gas cargos between vapour and liquid.
– The water systems division provides advanced, environmentally-friendly solutions for the on-board treatment of liquid waste products and
the generation of fresh water through desalination plant.
– The inert gas systems division provides products which supply oxygen-depleted air to the ship’s cargo tanks to prevent explosion during the
transportation of oil and chemical cargos.
Segment information about these businesses is presented below.
Gas Pump Water Inert gas Elimi-
systems systems systems systems nations T otal
2008 2008 2008 2008 2008 2008
2008 £’000 £’000 £’000 £’000 £’000 £’000
Revenue
External sales 98,940 66,550 43,776 22,549 – 231,815
Inter-segment sales 2,968 9,333 11,297 9,118 (32,716) –
Total revenue 101,908 75,883 55,073 31,667 (32,716) 231,815
Inter-segment sales are charged at prevailing market prices.
Result
Segment result 5,484 7 ,255 4,997 1,351 – 19,087
Unallocated corporate expenses (2,551)
Group operating profit 16,536
Finance income 1,747
Finance expense (860)
Profit before taxation 17 ,423
Taxation (4,638)
Profit for the year 12,785 Notes to the accounts (continued)
38 Hamworthy plc
2 Business and geographical segments continued
Gas Pump Water Inert gas Un-
systems systems systems systems allocated T otal
2008 2008 2008 2008 2008 2008
Other information £’000 £’000 £’000 £’000 £’000 £’000
Capital additions 770 712 411 45 146 2,084
Depreciation and amortisation 552 602 699 107 65 2,025
Balance sheet
Assets
Segment assets 109,149 38,754 17 ,788 12,053 – 177 ,744
Unallocated corporate assets 19,401
Consolidated total assets 197 ,145
Liabilities
Segment liabilities (83,770) (23,548) (11,940) (5,755) – (125,013)
Unallocated corporate liabilities (8,005)
Consolidated total liabilities (133,018)
Segment assets and liabilities are those assets and liabilities that are employed by a division in its operating activities. Segment assets include intangible
assets, property, plant and equipment, inventories, trade and other receivables, cash and cash equivalents and derivative financial instruments. Segment
liabilities include borrowings, trade and other payables, provisions, derivative financial instruments and retirement benefit obligations. Unallocated assets
and liabilities include cash balances, derivative financial instruments and share-based payments and external borrowings.
Gas Pump Water Inert gas Elimi-
systems systems systems systems nations Total
2007 2007 2007 2007 2007 2007
2007 £’000 £’000 £’000 £’000 £’000 £’000
Revenue
External sales 89,631 55,065 28,894 17 ,231 – 190,821
Inter-segment sales 1,282 7 ,827 11,756 3,527 (24,392) –
Total revenue 90,913 62,892 40,650 20,758 (24,392) 190,821
Inter-segment sales are charged at prevailing market prices.
Result
Segment result 4,671 5,481 4,472 957 – 15,581
Unallocated corporate expenses (2,441)
Group operating profit 13,140
Finance income 1,225
Finance expense (756)
Profit before taxation 13,609
Taxation (3,782)
Profit for the year 9,827 Company overview Business review Governance Accounts
39 Hamworthy plc
2 Business and geographical segments continued
Gas Pump Water Inert gas Un-
systems systems systems systems allocated Total
2007 2007 2007 2007 2007 2007
Other information £’000 £’000 £’000 £’000 £’000 £’000
Capital additions 1,257 1,731 331 15 62 3,396
Depreciation and amortisation 162 614 573 92 37 1,478
Balance sheet
Assets
Segment assets 56,293 28,972 17 ,984 7 ,239 – 110,488
Unallocated corporate assets 15,619
Consolidated total assets 126,107
Liabilities
Segment liabilities (41,162) (18,594) (11,081) (5,716) – (76,553)
Unallocated corporate liabilities (10,534)
Consolidated total liabilities (87 ,087)
Geographical segments
The Group’s operations are located in the UK, Norway, Denmark, Singapore, Germany, China, the USA, Korea and the Netherlands.
The following table provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the goods/services:
2008 2007
£’000 £’000
Revenue by geographical destination:
UK 17 ,125 13,229
Europe 68,208 62,876
The Far East 135,296 103,309
Rest of the World 11,186 11,407
231,815 190,821
The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment and intangible assets,
analysed by the geographical area in which the assets are located:
Additions to property,
Carrying amount of plant and equipment
segment net assets and intangible assets
2008 2007 2008 2007
£’000 £’000 £’000 £’000
UK 44,506 29,591 206 165
Europe 1,319 (468) 1,267 2,084
The Far East 6,739 4,345 572 1,142
Rest of the World 167 467 39 5
52,731 33,935 2,084 3,396 Notes to the accounts (continued)
40 Hamworthy plc
3 Operating profit
The operating profit for the year is stated after charging/(crediting):
2008 2007
£’000 £’000
Net foreign exchange (gains)/losses (208) 1,094
Research and development costs 1,904 1,321
Depreciation of property, plant and equipment 1,288 1,061
Amortisation of internally generated intangible assets included in other operating expenses 737 417
Operating lease rentals – plant and machinery 303 259
Operating lease rentals – land and buildings 1,736 1,194
(Profit) on disposal of property, plant and equipment (57) (2)
Cost of inventories recognised as expense 142,435 115,411
Write-downs of inventories recognised as an expense 233 524
Reversals of write-downs of inventories recognised in the period – (1)
Staff costs (note 5) 43,273 32,810
The analysis of auditors’ remuneration is as follows:
2008 2007
£’000 £’000
Audit services – statutory audit 163 183
Other services:
Audit related – regulatory 18 78
Further assurance 6 6
Taxation compliance 19 26
Taxation advisory 7 15
Other not covered above 2 88
Total non-audit fees 52 213
Included in the Group statutory audit fee is £25,000 (2007: £25,000) in respect of the parent company, £nil included in ‘audit related –
regulatory’ (2007: £42,000) and £1,000 included in ‘Other’ (2007: £65,000).
4 Profit attributable to ordinary shareholders
In accordance with the concession granted under Section 230(1) of the Companies Act 1985 the profit and loss account of Hamworthy plc
has not been separately presented in these financial statements. The profit for the year attributable to shareholders dealt with in the financial
statements of Hamworthy plc under UK GAAP is £5,048,000 (2007: £2,874,000). Company overview Business review Governance Accounts
41 Hamworthy plc
5 Employee and staff costs
The average number of employees during the year including directors by function was as follows:
2008 2007
Number Number
Production 654 581
Selling and marketing 86 80
Spares and service 112 102
Administration 146 135
998 898
Total employee costs comprised:
2008 2007
£’000 £’000
Wages and salaries 36,081 27 ,013
Social security costs 4,948 4,116
Other pension costs – defined benefit schemes 951 688
Other pension costs – defined contribution schemes 1,076 791
Share-based payments 217 202
43,273 32,810
The remuneration of the directors was as follows:
2008 2007
£’000 £’000
Emoluments 778 662
Company contributions to money purchase schemes 89 113
867 775
The emoluments of the highest paid director were £282,321 (2007: £270,917). In addition Company contributions to money purchase pension
schemes in respect of this director were £20,000 (2007: £97 ,132). At 31 March 2008 retirement benefits were accruing under money purchase
schemes in respect of two directors (2007: two).
Included in the above figures is an amount paid to the employing company of a non-executive director for the services of that director of
£39,000 (2007 £36,500).
6 Finance income
2008 2007
£’000 £’000
Bank interest receivable 1,747 1,225
7 Finance expense
2008 2007
£’000 £’000
Interest payable on bank loans and overdrafts 660 574
Amortisation of issue costs 120 120
Net return on pension scheme assets and liabilities 80 62
860 756 Notes to the accounts (continued)
42 Hamworthy plc
8T axation
2008 2007
£’000 £’000
The taxation charge/(credit) comprises:
Overseas tax 2,497 1,284
UK tax 216 1,395
Adjustments in respect of prior years (4) (23)
Total current tax 2,709 2,656
Deferred tax in respect of UK companies 675 360
Deferred tax in respect of overseas companies 1,254 766
T axation 4,638 3,782
Income tax for the UK is calculated at the standard rate of UK Corporation Tax of 30% (2007: 30%) on the estimated assessable profit for the
year. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.
The total charge for the year can be reconciled to the accounting profit as follows:
2008 2007
£’000 £’000
Profit on ordinary activities before tax 17 ,423 13,609
Tax at 30% thereon 5,227 4,083
Effect of:
Expenses not deductible for tax purposes 49 88
Unrecognised accelerated capital allowances and other temporary differences 66 14
Changes in respect of prior year’s charge (4) (23)
Lower tax rate on overseas earnings (700) (380)
T otal tax charge for the year 4,638 3,782
In addition to the taxation expense charged to the Income Statement, deferred tax charges of £4,037 ,000 (2007: £1,645,000) and deferred tax
credits of £nil (2007: £1,301,000) have been recognised in equity in the year as shown in the Statement of Group Total Recognised Income
and Expense.
With effect from 1 April 2008, the UK Corporation Tax rate was reduced from 30% to 28% but the impact upon the Group’s tax charge and
deferred tax balances was not material.
9 Equity dividends paid
2008 2007
£’000 £’000
Final paid in respect of year ended 31 March 2007 (4.60p per share) 1,984 –
Interim paid in respect of year ended 31 March 2008 (2.65p per share) 1,200 –
Final paid in respect of year ended 31 March 2006 (4.20p per share) – 1,812
Interim paid in respect of year ended 31 March 2007 (2.30p per share) – 992
3,184 2,804
The directors propose the payment of a final dividend of 5.29p per share, amounting to £2,397 ,711 in respect of the year to 31 March 2008
(2007: 4.6p per share amounting to £1,984,456). The proposed final dividend is subject to approval by shareholders at the Annual General
Meeting and has not been included as a liability in these financial statements. If authorised it will be paid on 21 July 2008 to shareholders
who are on the register of members as at 27 June 2008. Company overview Business review Governance Accounts
43 Hamworthy plc
10 Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the year.
For diluted earnings per share the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential
ordinary shares where, on options granted, exercise price is less than the average market price of the Company’s ordinary shares during
the year.
The calculation of the basic and diluted earnings per share is based on the following data:
Y ear ended 31 March 2008 Year ended 31 March 2007
Weighted Weighted
average average
number Per share number Per share
Earnings of shares amount Earnings of shares amount
£’000 ’000 pence £’000 ’000 pence
Basic EPS 12,785 44,557 28.7 9,827 43,140 22.8
Effect of dilutive securities 117 1,709
Diluted EPS 12,785 44,674 28.6 9,827 44,849 21 .9
11 Subsidiaries
The following information relates to the principal subsidiary undertakings of the Company. In all cases the holding is 100% of the ordinary
shares and the principal activity of the undertaking is the design, manufacture and sale of equipment for marine and offshore applications.
Hamworthy Water Systems Limited incorporated and operating in England*
Hamworthy Svanehøj AS incorporated and operating in Denmark
Hamworthy Gas Systems AS incorporated and operating in Norway*
Hamworthy Pump Systems AS incorporated and operating in Norway*
Hamworthy Moss AS incorporated and operating in Norway*
Hamworthy Pte Limited incorporated and operating in Singapore
Hamworthy Korea Limited incorporated and operating in Korea
Hamworthy BV incorporated and operating in the Netherlands*
Hamworthy Inc incorporated and operating in USA*
Hamworthy Marine Inc incorporated and operating in USA*
Hamworthy (Suzhou) Limited incorporated and operating in Peoples Republic of China
Hamworthy International Limited incorporated and operating in England*
Hamworthy Serck Como GmbH incorporated and operating in Germany
*Denotes shareholdings held directly by the Company.
12 Intangible assets
The movements in goodwill and other intangible fixed assets are as follows:
2008 2007
Note £’000 £’000
Goodwill 13 9,998 9,998
Other intangible fixed assets (as below) 2,369 2,360
12,367 12,358
Customer Customer Development
contracts relationships Software costs Total
£’000 £’000 £’000 £’000 £’000
Cost
1 April 2006 –– 1,303 255 1,558
Additions – purchased –– 965 155 1,120
Recognised on acquisition of subsidiary 440 969 28 – 1,437
Disposals –– (188) – (188)
Exchange adjustments –– (57) (2) (59)
1 April 2007 440 969 2,051 408 3,868
Additions – purchased –– 543 49 592
Exchange adjustments –– 323 – 323
At 31 March 2008 440 969 2,917 457 4,783 Notes to the accounts (continued)
44 Hamworthy plc
12 Intangible assets continued
Customer Customer Development
contracts relationships Software costs Total
£’000 £’000 £’000 £’000 £’000
Amortisation
1 April 2006 –– 1,155 178 1,333
Charge for the year 165 40 76 136 417
Disposals –– (188) – (188)
Exchange adjustments –– (52) (2) (54)
1 April 2007 165 40 991 312 1,508
Charge for the year 190 108 371 68 737
Exchange adjustments –– 169 – 169
At 31 March 2008 355 148 1,531 380 2,414
Net book value
31 March 2008 85 821 1,386 77 2,369
31 March 2007 275 929 1,060 96 2,360
Values ascribed to customer contracts and relationships represent the fair value of acquired customer contracts and related customer
relationships, both contractual and non-contractual, held by the acquired company at the date of acquisition by the Group.
Values ascribed to software represent the fair value of purchased technology and software rights and licenses, where it is appropriate to
recognise such items as assets.
Values ascribed to development costs represent the directly attributable costs of internally generated development knowledge from the point
at which an individual project meets the requirements for capitalisation until it is available for utilisation in the business.
All of these assets are recognised at fair value to purchase or acquire and are amortised over their estimated useful lives. Fair values of
acquired Intangible Fixed Assets have been assessed by reference to the future estimated cash flows arising from the application of assets,
discounted at an appropriate rate to present value, or by reference to the amount that would have been paid in an arm’s length transaction
between knowledgeable and willing parties.
13 Goodwill
2008 2007
£’000 £’000
Cost
At 1 April 9,998 7 ,082
Arising on acquisition of subsidiaries – 2,916
At 31 March 9,998 9,998
Accumulated impairment losses
At 1 April and 31 March – –
Net book value
31 March 9,998 9,998
Goodwill is allocated to the Group’s cash generating units (CGUs) which principally comprise its individual business operations. For each CGU
the Group has determined its recoverable amount. The recoverable amount is determined based on value in use calculations. No impairment
charge was required in the year (2007: £nil) and the cumulative impairment charge recognised to date was £nil (2007: £nil). The key
assumptions used in the calculations were:
– The forecast operating cash flows for the next four years based on approved budgets and plans. These budgets and plans are based on past
performance and expectations for the market development of the CGU.
– An estimate of the long-term effective tax rate for the CGU.
– An estimate of the long-term growth rate for the CGU.
The resulting cash flows were discounted using a post tax discount rate of 11%.
Sensitivity analysis has determined that there is sufficient headroom in all of the key assumptions before the carrying value becomes
impaired. For instance, the discount rate would have to more than double to result in an impairment charge for the two CGUs that comprise
the majority of the goodwill carrying value, these being Hamworthy Water Systems Limited and Hamworthy Serck Como GmbH. Company overview Business review Governance Accounts
45 Hamworthy plc
14T angible fixed assets
Freehold Leasehold
land and land and Plant and
buildings buildings equipment Total
£’000 £’000 £’000 £’000
Cost
1 April 2006 2,710 1,690 4,113 8,513
Additions 386 27 1,863 2,276
Acquired on acquisition of subsidiaries 1,982 – 273 2,255
Disposals –– (93) (93)
Exchange adjustments (171) (126) (534) (831)
1 April 2007 4,907 1,591 5,622 12,120
Additions 56 193 1,243 1,492
Disposals –– (481) (481)
Exchange adjustments 1,180 204 1,817 3,201
At 31 March 2008 6,143 1,988 8,201 16,332
Depreciation
1 April 2006 371 350 2,051 2,772
Charge for the year 165 53 843 1,061
Disposals –– (92) (92)
Exchange adjustments (43) (94) (463) (600)
1 April 2007 493 309 2,339 3,141
Charge for the year 174 47 1,067 1,288
Disposals –– (461) (461)
Exchange adjustments 473 162 1,546 2,181
At 31 March 2008 1,140 518 4,491 6,149
Net book value
31 March 2008 5,003 1,470 3,710 10,183
31 March 2007 4,414 1,282 3,283 8,979
Of the net book value of freehold land and buildings £537 ,000 relates to the value of land (2007: £457 ,000) and £1,570,000 is subject to a
mortgage through Dresdner Bank AG as detailed in note 20 (2007: £1,410,000). The Group has commitments under contracts placed for future
capital expenditure not provided for in the financial statements of £151,000 (2007: £309,000).
15 Inventories
2008 2007
£’000 £’000
Raw materials 7 ,930 6,755
Work in progress 55,284 25,232
Finished goods 5,036 3,257
68,250 35,244
Payments on account (9,482) (6,327)
58,768 28,917
There is no material difference between the book value and the replacement cost of the inventories shown. Notes to the accounts (continued)
46 Hamworthy plc
16 Construction contracts
Construction contracts in progress at the balance sheet date:
2008 2007
£’000 £’000
Amounts due from contract customers included in trade and other receivables 7 ,749 408
Amounts due to contract customers included in trade and other payables (43,196) (29,781)
(35,447) (29,373)
Contract costs incurred plus recognised profits less recognised losses to date 214,057 120,325
Less: progress billings (161,118) (91,619)
52,939 28,706
No retentions are held by customers for contract work, and advances received from customers for contract work amounted to £nil
(2007: £nil).
No amounts receivable from customers arising from construction contracts are due for settlement after more than 12 months.
17T rade and other receivables
2008 2007
£’000 £’000
Trade receivables (net of impairment provision) 31,209 29,254
Amounts recoverable on contracts 7 ,749 408
Other receivables 7 ,128 5,834
Prepayments and accrued income 1,114 631
47 ,200 36,127
The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables (excluding construction
contracts) is set out in note 30.
The directors consider that the carrying amount of trade and other receivables approximates their fair value.
18 Cash and cash equivalents
Cash and cash equivalents include the following for the purposes of the cash flow statement:
2008 2007
£’000 £’000
Cash and cash equivalents 52,346 32,486
Bank overdrafts (see note 20) (608) –
51,738 32,486
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less.
The carrying amount of these assets approximates their fair value. Company overview Business review Governance Accounts
47 Hamworthy plc
19T rade and other payables
2008 2007
£’000 £’000
Current liabilities
Payments received on account 12,962 3,765
Trade payables 28,349 15,736
Amounts payable on contracts 14,770 12,037
Payroll and other taxes including social security 3,808 2,753
Accruals and deferred income 11,622 9,441
Other liabilities 7 ,319 7 ,688
78,830 51,420
Non-current liabilities
Amounts payable on contracts 28,426 17 ,744
Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs.
The directors consider that the carrying amount of trade payables approximates to their fair value.
20 Borrowings
2008 2007
£’000 £’000
Current
Bank overdrafts 608 –
Bank loans 2,116 2,007
Less issue costs (120) (120)
2,604 1,887
Non-current liabilities
Bank loans 1,737 3,718
Less issue costs (42) (164)
1,695 3,554
T otal 4,299 5,441
2008 2007
£’000 £’000
The borrowings are repayable as follows:
On demand or within one year 2,604 1,887
Within one to two years 1,057 1,979
Within two to three years 239 1,168
Within three to four years 399 407
4,299 5,441
Less: amount due for settlement within 12 months (shown under current liabilities) (2,604) (1,887)
Amount due for settlement after 12 months 1,695 3,554
At 31 March 2008 the Group held a revolving facility comprising a term loan facility of £9 million (2007: £9 million), committed overdraft
facilities of £3.5 million (2007: £3.5 million) and committed revolving facilities of £90 million for documentary credits, guarantees and
ancillaries (2007: £90 million) all at Barclays Bank plc. In addition the Group has uncommitted overdraft and ancillary facilities of £1 .60 million
(2007: £1 .81 million) held with Den Danske Bank AS, a term loan of £0.8 million (2007: £0.8 million) with Dresdner Bank AG and overdraft
and ancillary facilities totalling £10.76 million (2007: £5.45 million) with Dresdner Bank AG, HSH Nordbank AG and DBV-Winterthur.
£0.1 million (2007: £nil) of bank overdraft is unsecured from Den Danske Bank AS. Bank loans and overdrafts at Barclays Bank PLC are secured
against a fixed charge over Group assets under the terms of a debenture. The term loan held with Dresdner Bank AG is secured by a mortgage
over freehold property. Interest on the bank loans is charged at LIBOR plus a margin. The Barclays Bank PLC loan is being repaid by variable
half yearly instalments, and the Dresdner Bank loan by variable instalments to 2018. The debt issue costs are set against the loan they were
raised against and are being written off over the five year period of the loan on a straight line basis.
Of the Group’s borrowings £0.8 million is denominated in euros and £0.1 million is denominated in Danish kroner (2007: £0.8 million – euro).
All other borrowings are denominated in sterling. Notes to the accounts (continued)
48 Hamworthy plc
20 Borrowings continued
The weighted average interest rates paid were as follows:
2008 2007
% %
Bank overdrafts 5.40 4.90
Bank loans 6.20 7 .20
The directors estimate the fair value of the Group’s borrowings as follows:
2008 2007
£’000 £’000
Bank overdrafts 608 –
Bank loans 3,691 5,441
The Group has the following undrawn borrowing facilities in various currencies, all at floating interest rates:
2008 2007
£’000 £’000
Expiring within one year 5,692 6,328
Expiring beyond one year 6,000 4,100
11,692 10,428
21 Provisions
Warranty
and
contracts Redundancy Total
£’000 £’000 £’000
At 1 April 2006 2,147 240 2,387
Charged to the Income Statement 1,411 19 1,430
Acquisition of subsidiaries 194 – 194
Utilised in the year (700) (38) (738)
Exchange difference (93) (14) (107)
At 1 April 2007 2,959 207 3,166
Charged to the Income Statement 3,831 – 3,831
Utilised in the year (1,011) (75) (1,086)
Exchange difference 445 26 471
At 31 March 2008 6,224 158 6,382
2008
Included in non-current liabilities 6,224 158 6,382
2007
Included in non-current liabilities 2,959 207 3,166
Warranties are routinely given to customers in respect of certain products. Any costs in meeting claims, for which the warranty provision has
been established, are expected to occur within two years of the balance sheet date. Contract provisions are made where, based upon
management’s best estimate, the expected benefits from certain specific contracts are less than the cost of meeting those contract
obligations. The periods over which these are expected to unwind varies by contract.
The redundancy provision relates to estimated costs of restructuring certain of the Group’s activities in Norway and Korea. It is anticipated that
most of these costs will be incurred in the next three financial years. Company overview Business review Governance Accounts
49 Hamworthy plc
22 Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior
reporting period.
Provisions
Accelerated and other
capital Pension Share-based Financial temporary
allowances liabilities payments instruments differences Total
£’000 £’000 £’000 £’000 £’000 £’000
At 1 April 2006 (444) 482 711 601 (675) 675
(Credit)/charge to the income statement 35 (135) 52 – (1,078) (1,126)
(Credit)/charge to reserves – 274 1,301 (1,371) – 204
On acquisition of subsidiaries – 170 –– (703) (533)
Foreign exchange adjustments 15 9– – 19 43
At 1 April 2007 (394) 800 2,064 (770) (2,437) (737)
(Credit)/charge to income statement 18 47 (124) – (1,870) (1,929)
(Credit)/charge to reserves – (185) (1,831) (1,951) 2,164 (1,803)
Foreign exchange adjustments (3) 57 –– (535) (481)
At 31 March 2008 (379) 719 109 (2,721) (2,678) (4,950)
Deferred tax liabilities (379) –– (3,377) (5,029) (8,785)
Deferred tax assets – 719 109 656 2,351 3,835
At 31 March 2008 (379) 719 109 (2,721) (2,678) (4,950)
Deferred tax liabilities (394) –– (893) (2,737) (4,024)
Deferred tax assets – 800 2,064 123 300 3,287
At 31 March 2007 (394) 800 2,064 (770) (2,437) (737)
Deferred tax balances for balance sheet purposes are analysed as follows:
2008 2007
£’000 £’000
Deferred tax liabilities are due as follows:
Deferred tax liability falling due within one year (2,493) (747)
Deferred tax liability falling due after one year (6,292) (3,277)
(8,785) (4,024)
Deferred tax assets are recoverable as follows:
Deferred tax asset to be recovered within one year 583 2,233
Deferred tax asset to be recovered after one year 3,252 1,054
3,835 3,287
At the balance sheet date there are no unrecognised deferred tax assets or liabilities. Notes to the accounts (continued)
50 Hamworthy plc
23 Called up share capital
2008 2007
Nominal Nominal
Number value Number value
‘000 £’000 ‘000 £’000
Authorised:
Ordinary shares of £0.05p each 60,000 3,000 60,000 3,000
Issued, allotted and fully paid:
At 1 April 43,140 2,157 43,140 2,157
Issued during the year 2,185 109 ––
At 31 March 45,325 2,266 43,140 2,157
The Company has one class of ordinary shares which carry no right to fixed income.
The Company issued the following ordinary shares at 109p pursuant to the exercise of options under the Hamworthy plc Unapproved Share
Option Plan 2004 during the current financial year: No ordinary shares were issued in the previous financial year.
2008
Date of issue Number
26 July 2007 1,945,000
14 August 2007 145,000
4 September 2007 50,000
7 December 2007 25,000
28 January 2008 20,000
2,185,000
Potential issue of ordinary shares
Options to subscribe for shares in the Company are held under both the Hamworthy plc Unapproved Share Option Plan 2004 and the
Hamworthy plc Company Share Option Plan 2004 as follows. All options are granted at the market price at the date of grant. The number of
shares subject to options, the periods in which they were granted and the periods in which they may be exercised are given below.
Exercise
price 2008 2007
Year of grant pence Exercise period Number Number
Unapproved Share Option Plan 2004
2004–2005 109.0 2007–2014 25,000 2,210,000
2005–2006 210.5 2007–2014 110,000 130,000
2005–2006 329.0 2008–2015 26,346 26,346
2006–2007 335.0 2009–2016 26,248 26,248
2007–2008 582.5 2010–2017 219,868 –
2007–2008 606.0 2010–2017 33,000 –
Approved Share Option Plan 2004
2005–2006 210.5 2007–2014 20,000 20,000
2007–2008 582.5 2010–2017 34,750 – Company overview Business review Governance Accounts
51 Hamworthy plc
24 Share-based payments
The Company has two share option schemes: the Hamworthy plc Unapproved Share Option Plan 2004 and the Hamworthy plc Company
Share Option Plan 2004. All options are granted at the market price at the date of grant.
Details of the share options outstanding during the year are as follows:
2008 2007
Weighted Weighted
Number average Number average
of share exercise of share exercise
options price options price
Outstanding at the beginning of the year 2,412,594 120.2p 2,386,346 1 17 .8p
Granted during the year 323,618 584.9p 26,248 335.0p
Forfeited during the year (56,000) 449.6p ––
Exercised during the year (2,185,000) 109.0p ––
Outstanding at the end of the year 495,212 435.9p 2,412,594 120.2p
Exercisable at the end of the year 25,000 109.0p ––
The options outstanding at 31 March 2008 had a weighted average exercise price of 435.9p (2007: 120.2p), and a weighted average
remaining contractual life of 8.4 years (2007: 7 .4 years). During the year options were granted on 12 July 2007 with an estimated fair value of
115p per share and £291,245 in aggregate, and 33,000 options granted on 4 September 2007 with an estimated fair value of 119p per share
and £34,405 in aggregate. In the prior year options were granted on 26 June 2006 with an estimated fair value of 89.0p per share and £23,361
in aggregate.
In respect of options exercised during the year, the weighted average share price at the date of exercise was 606p per share (2006: £nil).
The inputs into the Black-Scholes model are as follows:
2008 2007
Weighted average share price 436p 120p
Weighted average exercise price 436p 120p
Expected volitility 29% 33%
Expected life 3.7years 3.8 years
Risk free rate 4.96% 4.95%
Expected dividend yield 2.01% 4.75%
Expected volatility was determined by calculating the actual volatility of the Group’s share price since flotation in July 2004. The expected life
used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and
behavioural considerations.
The Group recognised total expenses of £217 ,000 and £202,000 related to equity-settled share-based payment transactions in 2008 and
2007 respectively.
Matching shares
Hamworthy plc operates a complementary co-investment share matching plan, designed to encourage the acquisition and retention of
Hamworthy shares by relevant personnel. Participation is by invitation of the remuneration committee on grant award and is expected to be
the executive managers of the Group. Participants are awarded matching ordinary shares in Hamworthy plc, up to a limit related to basic
annual salary, in the ratio of:
– one for every one share already beneficially owned, and
– one for every two vested but unexercised share options held
Further details are given in the Directors’ Remuneration Report on pages 25 to 27 . The number of shares acquired by the trust during the year
was 66,550 at a total cost of £396,000. Notes to the accounts (continued)
52 Hamworthy plc
25 Statement of changes in equity
Share
Share premium Other Retained
capital account reserves earnings
£’000 £’000 £’000 £’000
1 April 2006 2,157 16,686 (1,774) 16,293
Retained profit for the year ––– 9,827
Dividends authorised ––– (2,804)
Actuarial loss in pension schemes ––– (196)
Movement in deferred taxation on pension scheme deficit ––– (274)
Employee share option schemes ––– 1,301
Increase in fair value of cash flow hedging derivatives –– 43 –
Tax effect of increase in fair value of cash flow hedging derivatives –– (1,371) –
Exchange adjustments ––– (868)
At 1 April 2007 2,157 16,686 (3,102) 23,279
Retained profit for the year ––– 12,785
Dividends authorised ––– (3,184)
Actuarial gain in pension schemes ––– 640
Movement in deferred taxation on pension scheme deficit ––– (185)
Employee share option schemes ––– 1,345
Shares in employee share matching scheme ––– (400)
Share issue 109 2,272 ––
Increase in fair value of cash flow hedging derivatives –– 9,578 –
Tax effect of increase in fair value of cash flow hedging derivatives –– (1,951) –
Exchange adjustments ––– 4,098
At 31 March 2008 2,266 18,958 4,525 38,378
26 Operating lease commitments
At the balance sheet date the Group had outstanding commitments for minimum lease payments due under non-cancellable operating leases,
which expire as follows:
Land and buildings Plant and machinery
2008 2007 2008 2007
£’000 £’000 £’000 £’000
Expiring within one year 1,086 175 212 166
Expiring between two and five years 4,528 2,083 181 236
Expiring after five years 2,063 1,967 – –
7 ,677 4,225 393 402 Company overview Business review Governance Accounts
53 Hamworthy plc
27 Pension
Defined benefit schemes
The Group operates a number of funded defined benefit pension schemes in Norway. The most recent valuations of plan assets and the
present value of the defined benefit obligation were carried out as at 31 March 2008 by an independent qualified actuary. The present value of
the defined benefit obligation, the related current service cost and past service cost were measured using the projected unit credit method.
The major assumptions used by the actuary were:
At 31 March
2008 2007
Discount rate 4.40% 4.40%
Rate of increase in salaries 4.25% 4.00%
Rate of increase of pensions in payment 1.75% 1 .70%
Expected return on scheme assets 5.50% 5.50%
Inflation assumption 2.25% 2.25%
Average life expectancy:
Male 82.6 yrs 82.6 yrs
Female 84.9 yrs 84.9 yrs
The Group also operates a defined benefit pension scheme in Germany through Hamworthy Serck Como GmbH. A valuation of plan
assets and the present value of the defined benefit obligation was carried out as at 31 March 2008 by an independent qualified actuary.
The present value of the defined benefit obligation, the related current service cost and past service cost were measured using the projected
unit credit method.
The major assumptions used by the actuary were:
At 31 March
2008 2007
Discount rate 5.70% 4.25%
Rate of increase in salaries 3.00% 0.25%
Rate of increase of pensions in payment 2.00% 2.50%
Expected return on scheme assets 4.00% 4.00%
Inflation assumption 2.00% 2.50%
The mortality assumptions used were in accordance with the “Richttafeln 2005 G” reference tables published by Dr. Klaus Heubeck
The amounts recognised in the Income Statement in respect of these defined benefit schemes are as follows:
2008 2007
£’000 £’000
Current service cost including Social Security costs (1,118) (688)
Curtailment of benefits 167 –
Total operating charge (951) (688)
Expected return on scheme assets 309 242
Interest on liabilities (389) (304)
Net return charged to other finance costs (80) (62)
Of the charge for the year £951,000 (2007: £688,000) has been included in administrative expenses. Notes to the accounts (continued)
54 Hamworthy plc
27 Pension continued
Actuarial gains and losses have been reported in the Statement of Group Total Recognised Income and Expense as follows:
2008 2007
£’000 £’000
Actual returns less expected return on scheme assets 4 14
Changes in the assumptions underlying the present value of liabilities 636 (210)
Actuarial gain/(loss) recognised in SGTRIE 640 (196)
Cumulative actuarial gain/(loss) recognised in SGTRIE 444 (196)
The assets of the Norwegian schemes are invested through an insurance company which was unable to provide an accurate breakdown of the
assets into differing classes. The asset of the German scheme is a prepaid life assurance policy maturing on the retirement date of members.
Movements in the present value of defined benefit obligations were as follows:
2008 2007
£’000 £’000
At 1 April 8,436 6,479
Current service cost 1,118 688
Interest cost 389 304
Actuarial (gains)/losses (1,750) 210
Exchange differences 1,461 (299)
Benefits paid (240) (254)
Liabilities acquired on acquisition of subsidiary – 1,308
At 31 March 9,414 8,436
Movements in the fair value of scheme assets were as follows:
2008 2007
£’000 £’000
At 1 April 5,910 4,759
Expected return on plan assets 309 242
Actuarial gains/(losses) (1,110) 14
Exchange difference 1,010 (243)
Contributions from scheme participants 1,371 991
Benefits paid (182) (120)
Assets acquired on acquisition of subsidiary – 267
At 31 March 7 ,308 5,910
The five year history of experience adjustments is as follows:
2008 2007 2006 2005 2004
£’000 £’000 £’000 £’000 £’000
Present value of defined benefit obligations (9,414) (8,436) (6,479) (5,487) (4,540)
Fair value of scheme assets 7 ,308 5,910 4,759 3,933 3,260
(Deficit) in the scheme (2,106) (2,526) (1,720) (1,554) (1,280)
Experience adjustments on scheme assets
Amount 4 14 69 (370) (150)
Percentage of scheme assets (%) 0.1% 0.2% 1 .5% 9.4% 4.6% Company overview Business review Governance Accounts
55 Hamworthy plc
27 . Pension continued
The estimated amounts of contributions expected to be paid to the schemes during the 2008/09 financial year is £1,351,000.
Defined contribution schemes
The Group also contributes to other defined contribution and state pension schemes.
The Group’s UK operations contribute to a company defined contribution scheme, the Hamworthy Pension Scheme. The Group makes
employer contributions, pays administration costs of the scheme and pays premiums for insured life cover benefits.
Total amounts charged to defined contribution and state schemes in the year to 31 March were:
2008 2007
£’000 £’000
Hamworthy Pension Scheme 397 391
Other state schemes 679 400
1,076 791
28 Cash flow from operating activities
The consolidated cash flow has been prepared using the temporal method by translating the cash flows of overseas subsidiaries at the rates
applicable for the monthly reporting period in which they fall.
2008 2007
£’000 £’000
Profit after taxation 12,785 9,827
Adjustments for:
Tax 4,638 3,782
Depreciation 1,288 1,061
Amortisation of intangible fixed assets 737 417
(Profit) on sale of fixed assets (57) (2)
Finance income (1,747) (1,225)
Finance expense 860 756
Share-based payments 217 202
Operating cash flows before movements in working capital and provisions 18,721 14,818
(Increase) in inventories (41,446) (22,684)
(Increase) in trade and other receivables (25,874) (14,813)
Increase in trade and other payables 69,542 35,933
Increase/(decrease) in provisions 374 (210)
Cash generated from operations 21,317 13,044
29 Reconciliation of net cash flow to movement in net funds
2008 2007
£’000 £’000
Net increase/(decrease) in cash and cash equivalents in the year 14,357 (400)
Non-cash movements in cash and cash equivalents 4,895 (819)
Movement in cash and cash equivalents in the year 19,252 (1,219)
Movement in borrowings 2,004 1,815
Non-cash movements in borrowings (254) (114)
On acquisition of subsidiary – (848)
Net funds at the beginning of the year 27 ,045 27 ,411
Net funds at the end of the year 48,047 27 ,045 Notes to the accounts (continued)
56 Hamworthy plc
30 Derivative financial instruments and risk management
The main risks from the Group’s financial instruments are interest rate risk, liquidity risk and foreign exchange risk. The board reviews and
agrees policies for managing each of these risks and they are summarised below.
Interest risk
The Group finances its operations through a mixture of retained profits, term loan under a Senior Credit Agreement with Barclays Bank plc and
local loan and overdraft facilities held by subsidiaries. The Group’s exposure to market risk for changes in interest rates relates primarily to its
borrowings under the Senior Credit Agreement, upon which interest is paid at a rate of 1 .5% above LIBOR, and to its cash resources which
are invested at variable rates. A 10% increase in interest rates throughout the year would have increased profit after tax by £0.1 million (2007:
£0.1 million) with an equal but opposite effect for a fall in interest rates, all other variables remaining constant.
Liquidity risk
The Group has a strong cash flow and funds generated from operations are managed in a central treasury function under a cash pooling
structure. The Group maintains the most appropriate mix of short, medium and long-term borrowings from the Group’s lenders.
The following are the contractual maturities of financial liabilities:
Carrying 6 mths
amount or less 6–12 mths 1–2 years 2–4 years 5 years +
2008 £’000 £’000 £’000 £’000 £’000 £’000
Non-derivative financial liabilities
Bank loans (3,691) (1,038) (958) (1,057) (239) (399)
Trade and other payables (107 ,256) (49,891) (28,939) (17 ,013) (11,413) –
Bank overdraft (608) (608) ––––
Derivative financial liabilities
Forward foreign exchange contracts used for hedging (2,503) (1,069) (759) (673) (2) –
(114,058) (52,606) (30,656) (18,743) (11,654) (399)
Carrying 6 mths
amount or less 6–12 mths 1–2 years 2–4 years 5 years +
2007 £’000 £’000 £’000 £’000 £’000 £’000
Non-derivative financial liabilities
Bank loans (5,441) (923) (964) (1,979) (1,168) (407)
Trade and other payables (69,164) (36,298) (15,122) (10,077) (7 ,666) (1)
Bank overdraft ––––––
Derivative financial liabilities
Forward foreign exchange contracts used for hedging (1,150) (535) (166) (208) (241) –
(75,755) (37 ,756) (16,252) (12,264) (9,075) (408)
Foreign currency risk
The currencies most important to the Group’s financial position and results of operations were those which are typically linked by monetary
policy at fixed exchange rates to the euro as well as US dollars, sterling, Norwegian kroner and Singapore dollars. The Group seeks to hedge
all its transactional currency exposures arising from sales and purchases by operating units in currencies other than the unit’s functional
currency through the use of forward contracts. The value of forward exchange contracts in the Group’s main operating currencies at the
balance sheet date were as follows:
USD EUR NOK SGD DKK
2008 000s 000s 000s 000s 000s
Buy 61,279 30,051 1 ,572,345 59,394 109,505
Sell (253,447) (52,296) (756,562) (24,275) (41,548)
Net (192,168) (22,245) 815,783 35,119 67 ,957
USD EUR NOK SGD DKK
2007 000s 000s 000s 000s 000s
Buy 27 ,384 41,412 1,818,617 49,719 48,804
Sell (304,887) (35,556) (430,846) (22,402) (19)
Net (277 ,503) 5,856 1,387 ,771 27 ,317 48,785
The Group does not hedge balance sheet translation exposures and therefore any foreign exchange differences on retranslation of these
assets and liabilities are taken to the Income Statement of the companies and the Group.
The Group’s operating units hold monetary assets and monetary liabilities that are denominated in currencies other than the operating
currency of the operating unit involved. These balances are retranslated at the balance sheet date. The Group’s exposure to foreign currency
risk for these balances for its most important currencies at the balance sheet date was as follows: Company overview Business review Governance Accounts
57 Hamworthy plc
30 Derivative financial instruments and risk management continued
USD EUR NOK SGD DKK
2008 000s 000s 000s 000s 000s
Cash and cash equivalents 12,756 56 329,701 1,030 1,598
Trade and other receivables 20,594 1,573 4,671 547 660
Trade and other payables (7 ,491) (9,231) (4,792) (601) (8,486)
Gross balance sheet exposure 25,859 (7 ,602) 329,580 976 (6,228)
USD EUR NOK SGD DKK
2007 000s 000s 000s 000s 000s
Cash and cash equivalents 19,188 35 119,926 1 11,213
Trade and other receivables 21,552 1,905 4,248 272 565
Trade and other payables (3,259) (3,058) (8,578) (54) (3,761)
Gross balance sheet exposure 37 ,481 (1,118) 115,596 219 8,017
The most significant exchange rates applied during the year were:
Reporting date
Average rate mid-spot rate
2008 2007 2008 2007
US dollar 2.0117 1 .9122 1.9875 1 .9614
Euro 1.4020 1 .4872 1.2543 1 .4735
Norwegian kroner 10.8976 11 .9460 10.1000 11 .9723
Danish kroner 10.4391 11 .0323 9.3536 10.9789
Singapore dollar 2.9246 2.9599 2.7391 2.9781
Sensitivity analysis
A 10% strengthening of sterling against these currencies at 31 March would have increased/(decreased) equity and profit by the amounts
shown below, assuming all other variables remained constant:
Equity Profit after taxation
2008 2007 2008 2007
£’000 £’000 £’000 £’000
US dollar (71) (66) (5) (10)
Euro (243) (204) (102) (62)
Norwegian kroner (2,119) (1,376) (388) (362)
Danish kroner (711) (567) (309) (190)
Singapore dollar (868) (640) (156) (78)
An equal but opposite effect would have been the impact of a 10% weakening of sterling.
Credit risk
Exposure to credit risk
The principal financial assets are cash and cash equivalents, trade and other receivables and derivative financial instruments.
The Group exposure to credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with
high credit ratings awarded by international credit rating agencies and these ratings are constantly monitored and are currently all rated at
S&P A rating or above.
The Group is not subject to significant concentration of credit risk with exposure spread across a number of companies across the world.
Policies are maintained to ensure that the Group makes sales to customers with appropriate credit history. Letters of credit or other
appropriate instruments are put in place to reduce credit risk where considered necessary. The credit quality of the Group’s trade receivables
is considered by management to be very good as a high proportion of customers are large global companies with whom the Group trades on
a long-term basis. This is further evidenced by the low rate of impairment provided and amounts written off. Notes to the accounts (continued)
58 Hamworthy plc
30 Derivative financial instruments and risk management continued
The carrying amount of financial assets represents the maximum credit exposure. At the reporting date the principal financial assets were:
2008 2007
Note £’000 £’000
Loans and receivables
Trade receivables 17 31,209 29,254
Amounts recoverable on contracts 17 7 ,749 408
Cash and cash equivalents 18 52,346 32,486
Derivatives used for hedging
Forward foreign exchange contracts:
– current assets 9,187 2,877
– non-current assets 3,259 1,076
103,750 66,101
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
2008 2007
Geographic distribution of customers: £’000 £’000
UK 2,664 2,447
Europe 15,350 11,500
Far East 11,084 13,292
Rest of world 2,111 2,015
T rade receivables (net of impairment provision) 31,209 29,254
The carrying amounts of trade and other receivables are denominated in the following currencies:
2008 2007
£’000 £’000
Pound sterling 4,909 4,163
Euro 4,791 3,983
Norwegian kroner 28,045 21,149
Danish kroner 4,137 2,935
Singapore dollar 4,082 2,728
Other 1,236 1,169
47 ,200 36,127
The ageing of trade receivables at the reporting date was as follows:
2008 2008 2007 2007
£’000 £’000 £’000 £’000
Gross Impairment Gross Impairment
Not past due 17 ,820 – 24,573 –
Past due 0 – one month 5,490 141 3,077 165
Past due two – six months 3,014 352 1,734 215
Past due six – 12 months 5,583 205 417 291
More than one year 190 190 241 117
32,097 888 30,042 788
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
2008 2007
£’000 £’000
Balance at 1 April 788 1,029
Provision for receivables impairment 320 282
Receivables written off (4) –
Unused amounts reversed (308) (523)
Foreign exchange movements 92 –
Balance at 31 March 888 788 Company overview Business review Governance Accounts
59 Hamworthy plc
30 Derivative financial instruments and risk management continued
This allowance has been determined by reference to the recoverability of specific overdue debts. No allowance for impairment is made
against Other receivables. The creation and reversal of provisions for impaired trade receivables are included in administrative expenses
in the Income Statement.
Derivatives and financial instruments
The Group’s financial instruments, other than derivatives, comprise borrowings, cash and liquid resources and various items such as trade
debtors and trade creditors that arise from its operations. The main purpose of these financial instruments is to manage the Group’s
operations. It is, and has been throughout the period under review, the policy of the Group that no trading in financial instruments shall
be undertaken.
Interest rate caps
The Group has entered into interest rate capping agreements during the year in order to manage its interest rate risk on the Senior Credit
Agreement. Approximately two-thirds of the interest rate payments under the Senior Credit Agreement are covered by these capping
agreements. Under the capping agreements the Group receives from counterparties any amounts by which that LIBOR portion rises above
a cap rate and pays to counterparties any amounts by which LIBOR falls below a floor rate. The current capping agreement provides for a
cap of 6.39% and a floor of 2.93%.
Currency derivatives
Currency derivatives are used to hedge future transactions and cash flows, and the Group’s resultant exposure to movements in foreign
exchange rates. These are primarily in the form of foreign currency forward contracts and options, and are denominated in the currencies of
the Group’s principal operating markets.
At the balance sheet date, the total notional amount of outstanding forward foreign exchange contracts to which the Group is committed,
based upon contractual undiscounted cash flows, are as follows:
2008 2007
£’000 £’000
Foreign currency options 50,580 60,695
Forward foreign exchange contracts 221,747 171,205
All derivative financial instruments are recorded in the balance sheet at fair value. Changes in the fair value of derivative financial instruments
that are designated as effective hedges of future cash flows are recognised directly in equity and the ineffective portion is recognised
immediately in the Income Statement. The Group recognised total gains of £241,000 (2007: £nil) related to ineffective hedging transactions.
The fair values of derivative financial instruments, based upon market prices of comparable instruments, as at the balance sheet date were
as follows:
2008 2007
Assets Liabilities Assets Liabilities
£’000 £’000 £’000 £’000
Current assets/liabilities
Interest rate swaps
– cash flow hedges –– ––
– fair value hedges –– ––
Forward foreign exchange contracts
– cash flow hedges 9,187 (1,828) 2,877 (701)
9,187 (1,828) 2,877 (701)
Non - current assets/liabilities
Interest rate swaps
– cash flow hedges –– ––
– fair value hedges –– ––
Forward foreign exchange contracts
– cash flow hedges 3,259 (675) 1,076 (449)
3,259 (675) 1,076 (449) Notes to the accounts (continued)
60 Hamworthy plc
30 Derivative financial instruments and risk management continued
The periods in which the cash flows associated with derivatives that are cash flow hedges are expected to occur, based upon contractual
undiscounted cash flows, are as follows:
Carrying Notional Less than 1–2 2–5
amount cash flow 1 year years years
2008 £’000 £’000 £’000 £’000 £’000
Forward foreign exchange contracts
– assets 12,446 168,135 118,071 50,064 –
– liabilities (2,503) 104,192 75,858 28,186 148
9,943 272,327 193,929 78,250 148
Carrying Notional Less than 1–2 2–5
amount cash flow 1 year years years
2007 £’000 £’000 £’000 £’000 £’000
Forward foreign exchange contracts
– assets 3,953 153,066 108,950 26,688 17 ,428
– liabilities (1,150) 78,834 50,685 19,536 8,613
2,803 231,900 159,635 46,224 26,041
31 Ultimate parent company
The ultimate parent company of the Group is Hamworthy plc. There were no shareholders with overall control of the Company as at 31 March
2008 or 31 March 2007 .
32 Contingent liabilities
At 31 March 2008 contingent liabilities exist in respect of bank guarantees in relation to performance bonds totalling £22,667 ,000 (2007:
£11,652,000).
The Group routinely enters into a range of contractual arrangements in the ordinary course of events which can give rise to claims or potential
litigation against Group companies. It is the Group’s policy to make specific provisions at the balance sheet date for all liabilities including
warranty costs and guarantees which, in the opinion of the directors, are expected to result in a significant loss. The directors have reviewed
the open claims and pending litigation against the Group at the year end and concluded that no material unprovided loss is likely to accrue to
the Group from any such unprovided claims.
33 Related party transactions
Transactions between Group undertakings, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
Compensation of key management personnel
The remuneration of directors and other members of the Group’s Executive Committee during the year was as follows:
2008 2007
£’000 £’000
Wages and salaries paid to employees 1,477 1,150
Social security costs 129 83
Other pension costs – defined benefit schemes 68 31
Other pension costs – defined contribution schemes 119 134
Share-based payments 65 147
1,858 1,545
The directors of the Group had no material transactions with the Company during the year, other than as a result of service agreements.
The remuneration of directors and key executives is determined by the remuneration committee, having regard to the performance of
individuals and market trends. Details of the directors remuneration are disclosed in the Directors’ remuneration report on pages 25 to 27 . Company overview Business review Governance Accounts
Independent auditors’ report
T o the shareholders of Hamworthy plc
61 Hamworthy plc
We have audited the parent company financial statements of
Hamworthy plc for the year ended 31 March 2008 which comprise the
Balance sheet, the Statement of Total Recognised Gains and Losses
and the related notes. These parent company financial statements
have been prepared under the accounting policies set out therein.
We have reported separately on the group financial statements of
Hamworthy plc for the year ended 31 March 2008.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual report and the
parent company financial statements in accordance with applicable
law and United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice) are set out in the Statement
of directors’ responsibilities.
Our responsibility is to audit the parent company financial statements
in accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland). This report,
including the opinion, has been prepared for and only for the
Company’s members as a body in accordance with Section 235 of
the Companies Act 1985 and for no other purpose. We do not, in
giving this opinion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
We report to you our opinion as to whether the parent company
financial statements give a true and fair view and whether the parent
company financial statements have been properly prepared in
accordance with the Companies Act 1985. We also report to you
whether, in our opinion, the information given in the Directors’ report
is consistent with the parent company financial statements.
In addition we report to you if, in our opinion, the Company has not
kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if information
specified by law regarding directors’ remuneration and other
transactions is not disclosed.
We read other information contained in the Annual report, and
consider whether it is consistent with the audited parent company
financial statements. This other information comprises only the
Chairman’s Statement, the Chief Executive’s strategy statement, the
Business Review, the Financial Review, the Directors’ Remuneration
Report, the Directors’ Report and the Corporate Governance
statement. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with
the parent company financial statements. Our responsibilities do not
extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of evidence relevant
to the amounts and disclosures in the parent company financial
statements. It also includes an assessment of the significant
estimates and judgements made by the directors in the preparation
of the parent company financial statements, and of whether the
accounting policies are appropriate to the Company’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the parent company financial statements are free
from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the
overall adequacy of the presentation of information in the parent
company financial statements.
Opinion
In our opinion:
– the parent company financial statements give a true and fair view,
in accordance with United Kingdom Generally Accepted Accounting
Practice, of the state of the Company’s affairs as at 31 March 2008;
and
– the parent company financial statements have been properly
prepared in accordance with the Companies Act 1985; and
– the information given in the Directors’ report is consistent with the
parent company financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
Southampton
9 June 2008 Balance sheet
as at 31 March 2008
62 Hamworthy plc
2008 2007
Note £’000 £’000
Fixed assets
Tangible fixed assets 4 70 34
Investments 5 28,331 28,638
28,401 28,672
Current assets
Debtors 6 15,195 10,229
Cash at bank and in hand 48,692 26,420
63,887 36,649
Creditors: Amounts falling due within one year 7 (58,837) (35,871)
Net current assets 5,050 778
T otal assets less current liabilities 33,451 29,450
Creditors: Amounts falling due after more than one year 8 (958) (2,836)
Net assets 32,493 26,614
Capital and reserves
Share capital 10 2,266 2,157
Share premium account 12 20,438 16,686
Other reserves 12 426 504
Profit and loss account 12 9,363 7 ,267
T otal shareholders’ funds 13 32,493 26,614
The financial statements on pages 62 to 69 were approved by the board of directors on 9 June 2008 and signed on its behalf by:
J M Oatley P Crompton
Director Director
Statement ofT otal Recognised Gains and Losses
for the year ended 31 March 2008
2008 2007
Note £’000 £’000
Profit after taxation 5,048 2,874
Employee share option schemes 12 154 411
T otal recognised gains and losses for the year 5,202 3,285
The reconciliation of the movement in the Company’s shareholders’ funds can be found in note 13 to the financial statements. Company overview Business review Governance Accounts
Accounting policies
63 Hamworthy plc
Statement of accounting policies
A summary of the principal accounting policies, all of which have been
applied consistently throughout the year and, except for changes
noted below, the preceding period, is set out below.
Basis of accounting
The financial statements have been prepared under the historical
cost convention and in accordance with United Kingdom
Accounting Standards.
T angible fixed assets
Tangible fixed assets are stated at cost or valuation, net of
depreciation and provision for impairment. Depreciation is provided
on all tangible fixed assets at rates calculated to write off the cost or
valuation, less estimated residual value, of each asset on a straight
line basis over its expected useful life at the following annual rates:
Plant, machinery and equipment 20%–33%
Investments
Fixed asset investments are stated at cost less provision for any
diminution in value.
T axation
Current UK corporation tax is provided at amounts expected to be
paid (or recovered) using the tax rates and laws that have been
enacted or substantially enacted by the balance sheet date.
Deferred taxation is recognised in respect of all timing differences
that have originated but not reversed at the balance sheet date where
transactions or events that result in an obligation to pay more tax in
the future or a right to pay less tax in the future have occurred at the
balance sheet date. Timing differences are differences between the
Company’s taxable profits and its results as stated in the financial
statements that arise from the inclusion of gains and losses in tax
assessments in periods different from those in which they are
recognised in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore
recognised only when, on the basis of all available evidence, it can
be regarded as more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing
differences can be deducted.
Deferred tax is measured at the average tax rates that are expected
to apply in the periods in which the timing differences are expected
to reverse, based on tax rates and laws that have been enacted or
substantially enacted by the balance sheet date. Deferred tax is
measured on a non-discounted basis.
Leases
Rentals under operating leases are charged on a straight line basis
over the lease term, even if the payments are not made on such
a basis.
Deferred finance costs
Issue costs associated with bank loans are deducted from the gross
proceeds in the balance sheet. Financial Reporting Statement 4
‘Capital Instruments’ requires such costs to be allocated over the term
of the loan at a constant rate on the carrying value using the effective
interest rate. The Company has applied a policy of amortising the cost
over the term of the loan at a constant rate, but this is not materially
different to using the effective interest rate.
Pension scheme arrangements
The Company provides pension arrangements to the majority of full
time UK employees through a money purchase scheme, operated by
Barnett Waddingham LLP . Contributions and pension costs are based
on pensionable salary and are recorded in the period in which they fall.
Foreign exchange
Transactions in foreign currencies are recorded at the rate of
exchange at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet
date are reported at the rates of exchange prevailing at that date or
at a contracted rate if applicable. Any gain or loss arising from a
change in exchange rates subsequent to the date of the transaction
is included as an exchange gain/loss in the profit and loss account.
Financial instruments
Amounts payable or receivable in respect of interest rate cap,
floor and swap agreements are recognised in the interest
payable/receivable charge/credit on an accruals basis. The interest
differential amounts due to/from the counterparty on such
agreements are accrued until the settlement date and are recognised
as an adjustment to interest expense.
Share-based payment
The Company operates equity settled share-based compensation
plans through two share option schemes. The fair value of options
awarded is calculated at the time of grant and is charged to the
Income Statement on a straight-line basis over the vesting period
based on an estimate of the number of options that will actually
vest. The Group has adopted a Black-Scholes model to calculate the
fair value of options. The Company also participates in the Group’s
complementary co-investment share matching plan, details of which
are given in note 11 . The fair value of these matching shares is
calculated at the date of award based upon the market value of the
issued shares and is charged to the income statement on a straight-
line basis over the vesting period based on an estimate of the number
of options that will actually vest.
Related party transactions and cash flow statement
The Company is the ultimate parent undertaking of the Hamworthy
Group and is therefore included in the consolidated financial
statements of that Group, which are publicly available. Consequently
the Company has taken advantage of the exemptions from preparing
a cash flow statement under the terms of Financial Reporting
Standard 1 (Revised 1996) – Cash Flow Statements, and the
exemptions under Financial Reporting Standard 8 – Related Party
Disclosures relating to the disclosure of transactions with other
Group companies. Notes to the accounts
1 Profit for the year
As permitted by Section 230 of the Companies Act 1985 the Company has elected not to present its own profit and loss account for the year.
Hamworthy plc reported a profit for the financial year ended 31 March 2008 of £5,048,000 (2007: £2,874,000).
2 Employees
The remuneration of the directors was as follows:
2008 2007
£’000 £’000
Emoluments 778 662
Company contributions to money purchase schemes 89 113
867 775
The emoluments of the highest paid director were £282,321 (2007: £270,917). In addition Company contributions to money purchase pension
schemes in respect of this director were £20,000 (2007: £97 ,132). At 31 March 2008 retirement benefits were accruing under money purchase
schemes in respect of two directors (2007: 2).
The average number of employees during the year including directors by function was as follows:
2008 2007
Number Number
Administration 11 10
Their aggregate remuneration comprised:
2008 2007
£’000 £’000
Wages and salaries paid to employees 1,418 885
Social security costs 104 107
Other pension costs 125 137
Share-based payments 43 78
1,690 1,207
In addition an amount was paid to the employing company of a non-executive director for the services of that director of £39,000
(2007: £36,500).
3 Equity dividends paid
2008 2007
£’000 £’000
Final paid in respect of year ended 31 March 2007 (4.60p per share) 1,984 –
Interim paid in respect of year ended 31 March 2008 (2.65p per share) 1,200 –
Final paid in respect of year ended 31 March 2006 (4.20p per share) – 1,812
Interim paid in respect of year ended 31 March 2007 (2.30p per share) – 992
3,184 2,804
The directors propose the payment of a final dividend of 5.29p per share, amounting to £2,397 ,711 in respect of the year to 31 March 2008
(2007: 4.6p per share amounting to £1,984,456). The proposed final dividend is subject to approval by shareholders at the Annual General
Meeting and has not been included as a liability in these financial statements. If authorised it will be paid on 21 July 2008 to shareholders
who are on the register of members as at 27 June 2008.
64 Hamworthy plc 4T angible fixed assets
Plant and
machinery
£’000
Cost
1 April 2007 110
Additions 66
At 31 March 2008 176
Depreciation
1 April 2007 76
Charge for the year 30
At 31 March 2008 106
Net book value
31 March 2008 70
31 March 2007 34
The Company has no commitments under contracts placed for future capital expenditure not provided for in the financial statements
(2007: £nil).
5 Investments
Investments in subsidiary undertakings
£’000
Cost
1 April 2007 28,638
Options granted under FRS 20 112
Additions 704
Disposals (1,123)
At 31 March 2008 28,331
The following information relates to the principal subsidiary undertakings of the Company. In all cases the holding is 100% and the principal
activity of the undertaking is the design, manufacture and sale of equipment for marine and offshore applications.
Hamworthy Water Systems Limited incorporated and operating in England*
Hamworthy Svanehøj AS incorporated and operating in Denmark
Hamworthy Gas Systems AS incorporated and operating in Norway*
Hamworthy Pump Systems AS incorporated and operating in Norway*
Hamworthy Moss AS incorporated and operating in Norway*
Hamworthy Pte Limited incorporated and operating in Singapore
Hamworthy Korea Limited incorporated and operating in Korea
Hamworthy BV incorporated and operating in the Netherlands*
Hamworthy Inc incorporated and operating in USA*
Hamworthy Marine Inc incorporated and operating in USA*
Hamworthy (Suzhou) Limited incorporated and operating in Peoples Republic of China
Hamworthy International Limited incorporated and operating in England*
Hamworthy Serck Como GmbH incorporated and operating in Germany
* Denotes shareholdings held directly by the Company.
Hamworthy International Limited
The Company was allotted a further 703,500 shares in Hamworthy International Limited at par of £1 .00 per share in respect of the total
consideration for the disposal of Hamworthy (Suzhou) Limited.
Disposal of Hamworthy (Suzhou) Limited
The Company disposed of 100% of the share capital of Hamworthy (Suzhou) Limited to Hamworthy International Limited for a total
consideration of £703,500.
65 Hamworthy plc
Accounts Governance Business review Company overview 6 Debtors
2008 2007
£’000 £’000
Amounts owed by Group undertakings 12,317 9,545
Other debtors 262 54
Prepayments and accrued income 207 65
Corporation tax 940 501
Deferred tax – share-based payments 1,469 64
15,195 10,229
Amounts owed by Group undertakings are intercompany loans in various currencies which form part of the central treasury and cash pooling
arrangements, with interest being charged at prevailing market rates.
7 Creditors: amounts falling due within one year
2008 2007
£’000 £’000
Bank loans and overdrafts 1,880 1,780
Trade payables 38 –
Amounts owed to group undertakings 56,098 32,774
Other creditors 10 22
Taxation and social security 32 21
Accruals and deferred income 779 1,274
58,837 35,871
Amounts owed to Group undertakings are intercompany loans in various currencies which form part of the central treasury and cash pooling
arrangements, with interest being charged at prevailing market rates.
8 Creditors: amounts falling due after more than one year
2008 2007
£’000 £’000
Bank loans and overdrafts maturing:
Within one to two years 958 1,880
Within two to five years – 956
958 2,836
9 Loans and other borrowings
2008 2007
£’000 £’000
Gross bank loans and overdrafts 3,000 4,900
Less issue costs (162) (284)
2,838 4,616
Maturity of gross debt:
Within one year or on demand 1,880 1,780
Within one to two years 958 1,880
Within two to five years – 956
2,838 4,616
The bank loans and overdrafts are secured against a fixed charge over Group assets under the terms of a debenture to Barclays Bank plc.
Interest on the bank loans is charged at LIBOR plus a margin of 1 .5%. The loan is being repaid by variable half-yearly instalments.
The debt issue costs are set against the loan they were raised against and are being written off over the five year period of the loan
on a straight-line basis.
66 Hamworthy plc
Notes to the accounts (continued) 10 Called up share capital
2008 2007
Nominal Nominal
Number Value Number Value
’000 £’000 ’000 £’000
Authorised:
Ordinary shares of £0.05p each 60,000 3,000 60,000 3,000
Issued and fully paid:
At 1 April 43,140 2,157 43,140 2,157
Issued during the year 2,185 109 ––
At 31 March 45,325 2,266 43,140 2,157
The Company has one class of ordinary shares which carry no right to fixed income.
The Company issued the following ordinary shares at 109p pursuant to the exercise of options under the Hamworthy plc Unapproved Share
Option Plan 2004 during the current financial year. No ordinary shares were issued in the previous financial year.
2008
Date of issue Number
26 July 2007 1,945,000
14 August 2007 145,000
4 September 2007 50,000
7 December 2007 25,000
28 January 2008 20,000
2,185,000
Potential issue of ordinary shares
Options to subscribe for shares in the Company are held under both the Hamworthy plc Unapproved Share Option Plan 2004 and the
Hamworthy plc Company Share Option Plan 2004 as follows. All options are granted at the market price at the date of grant. The number
of shares subject to options, the periods in which they were granted and the periods in which they may be exercised are given below.
Exercise
price Exercise 2008 2007
Year of grant pence period Number Number
Unapproved share option plan 2004
2004–2005 109.0 2007–2014 25,000 2,210,000
2005–2006 210.5 2007–2014 110,000 130,000
2005–2006 329.0 2008–2015 26,346 26,346
2006–2007 335.0 2009–2016 26,248 26,248
2007–2008 582.5 2010–2017 219,868 –
2007–2008 606.0 2010–2017 33,000 –
Approved share option plan 2004
2005–2006 210.5 2007–2014 20,000 20,000
2007–2008 582.5 2010–2017 34,750 –
67 Hamworthy plc
Accounts Governance Business review Company overview 11 Share-based payments
The Company has two share option schemes: the Hamworthy plc Unapproved Share Option Plan 2004 and the Hamworthy plc Company
Share Option Plan 2004. All options are granted at the market price at the date of grant.
Details of the share options outstanding during the year are as follows:
2008 2007
Weighted Weighted
Number of average Number of average
share exercise share exercise
options price options price
Outstanding at the beginning of the year 2,412,594 120.2p 2,386,346 117 .8p
Granted during the year 323,618 584.9p 26,248 335.0p
Forfeited during the year (56,000) 449.6p ––
Exercised during the year (2,185,000) 109.0p ––
Outstanding at the end of the year 495,212 435.9p 2,412,594 120.2p
Exercisable at the end of the year 25,000 109.0p –
The options outstanding at 31 March 2008 had a weighted average exercise price of 435.9p (2007: 120.2p), and a weighted average remaining
contractual life of 8.4 years (2007: 7 .4 years). During the year options were granted on 12 July 2007 with an estimated fair value of 115p per
share and £291,245 in aggregate, and 33,000 options granted on 4 September 2007 with an estimated fair value of 119p per share and
£34,405 in aggregate. In the prior year options were granted on 26 June 2006 with an estimated fair value of 89.0p per share and £23,361
in aggregate.
In respect of options exercised during the year, the weighted average share price at the date of exercise was 606p per share (2006: £nil).
The inputs into the Black-Scholes model are as follows:
2008 2007
Weighted average share price 436p 120p
Weighted average exercise price 436p 120p
Expected volatility 29% 33%
Expected life 3.7 years 3.8 years
Risk free rate 4.96% 4.95%
Expected dividend yield 2.01% 4.75%
Expected volatility was determined by calculating the actual volatility of the Group’s share price since flotation in July 2004. The expected life
used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and
behavioural considerations. The Company recognised total expenses of £42,579 (2007: £78,398) related to equity-settled share-based
payment transactions. Subsidiary companies made a cash contribution to the Company of £1 .48 million (2006: £nil)
in the year in respect of share options exercised in the year.
Matching shares
Hamworthy plc has put in place a complementary co-investment share matching plan, designed to encourage the acquisition and retention of
Hamworthy shares by relevant personnel. Participation is by invitation of the remuneration committee on grant award and is expected to be
the executive managers of the Group. Participants are awarded matching ordinary shares in Hamworthy plc, up to a limit related to basic
annual salary, in the ratio of
– one for every one share already beneficially owned, and
– one for every two vested but unexercised share options held
Further details are given in the Directors’ remuneration report on pages 25 to 27 . The number of shares acquired by the trust during the year
was 66,550 at a total cost of £396,000.
68 Hamworthy plc
Notes to the accounts (continued) 12 Reserves
Share
premium Share option Profit and
account reserve loss account
£’000 £’000 £’000
1 April 2007 16,686 504 7 ,267
Retained profit for the year –– 5,048
Shares issued during the year 2,272 ––
Capital contribution from subsidiary undertakings 1,480 ––
Share-based payments – (78) 232
Dividends paid in the year –– (3,184)
At 31 March 2008 20,438 426 9,363
The share option reserve relates to provisions made in accordance with FRS 20 for shares allocated under the Company share option schemes.
13 Reconciliation of movement in shareholders’ funds
2008 2007
£’000 £’000
Profit for the financial year 5,048 2,874
Equity dividends paid (3,184) (2,804)
Share capital issued 2,381 –
Capital contribution from subsidiary undertakings 1,480 –
Share-based payments 211 178
Movement in deferred taxation on share-based payments (57) 24
Net change in shareholders’ funds 5,879 272
Opening shareholders’ funds at 1 April 26,614 26,342
Closing shareholders’ funds at 31 March 32,493 26,614
14 Operating lease commitments
Annual commitments under operating leases are as follows:
Land and buildings Plant and machinery
2008 2007 2008 2007
£’000 £’000 £’000 £’000
Expiring between two and five years 24 24 – –
15 Ultimate parent company
There are no shareholders with overall control of the Company as at 31 March 2008 or 31 March 2007 .
16 Contingent liabilities
At 31 March 2008 contingent liabilities exist in respect of bank guarantees in relation to performance bonds totalling £nil (2006: £628,000).
17 Related party transactions
Exemption has been taken under FRS 8 from disclosing related party transactions between the Company and its subsidiary undertakings.
The directors of Hamworthy PLC had no material transactions with the Company during the year, other than as a result of service agreements.
Details of the directors remuneration are disclosed in the Directors’ remuneration report on pages 25 to 27 .
69 Hamworthy plc
Accounts Governance Business review Company overview Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the 32nd Annual General Meeting (AGM) of the Company will be held at the Verona Suite, Italian Villa,
Compton Acres, 164 Canford Cliffs Road, Poole Dorset BH13 7ES on Monday 14 July 2008 at 2.00pm to transact the following business:
Ordinary Business
1 . To receive the directors’ report and the audited financial statements for the year ended 31 March 2008.
2. To approve the report on directors’ remuneration.
3. To declare a final dividend of 5.29p per ordinary share for the year ended 31 March 2008 to be paid on 21 July 2008 to members whose
names appear on the register of members at the close of business on 27 June 2008.
4. To re-elect JM Oatley as a director of the Company
5. To re-elect P Crompton as a director of the Company
6. To re-appoint PricewaterhouseCoopers LLP as the Company’s auditors and to authorise the directors to determine their remuneration.
Special Business
7 . To consider and, if thought fit, to pass the following resolution which will be proposed as an Ordinary Resolution:
THAT , subject to and in accordance with article 5 of the Company’s articles of association the directors of the Company be and they hereby are
generally and unconditionally authorised, for the purposes of Section 80 of the Companies Act 1985 (‘the Act’) to exercise all the powers of
the Company to allot relevant securities (as defined by Section 80(2) of the Act) up to an aggregate amount of £755,000 for a period expiring
(unless previously renewed, varied or revoked by the Company in general meeting) on the earlier of the conclusion of the AGM in 2009
or a date 15 months from the date of this Resolution except that the Company may before such expiry make an offer or agreement which
would or might require relevant securities of the Company to be allotted after such expiry and the directors may allot relevant securities in
pursuance of that offer or agreement as if the above authority conferred by this Resolution had not expired and provided further that the
authority hereby conferred shall be in substitution for, and to the exclusion of, the existing authority conferred upon the directors on
23 July 2007 to the extent unused.
8. To consider and, if thought fit, to pass the following resolution which will be proposed as a Special Resolution:
THAT , subject to the passing of Resolution 7 above, the directors be and hereby are generally empowered pursuant to Section 95 of the
Companies Act 1985 (‘the Act’) to allot equity securities (within the meaning of Section 94 (2) of the Act) for cash and/or to sell or transfer
shares held by the Company in treasury (as the directors shall deem appropriate) pursuant to the authority conferred on them under Section 80
of the Act by Resolution 7 above as if Section 89(1) of the Act did not apply under any such allotment provided that this power shall be limited:
(a) to the allotment of equity securities in connection with any rights issue or other pro-rata offer in favour of the holders of ordinary shares
of 10p each in the Company where the equity securities respectively attributable to the interests of all such holders of shares are
proportionate (as nearly as may be) to the respective numbers of shares held by them, provided that the directors of the Company may
make such arrangements in respect of overseas holders of shares as they consider necessary or convenient; and
(b) to the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities and/or the sale or transfer of shares held by
the Company in treasury (as the directors shall deem appropriate) up to an aggregate nominal amount of £113,000.
and such power shall expire at the earlier of the conclusion of the AGM in 2009 or 15 months from the date of this Resolution save that the
Company may before such expiry make an offer or agreement which would or might require equity securities of the Company to be allotted
after such expiry and the directors may allot equity securities in pursuance of such offer or agreement as if the authority conferred by this
Resolution had not expired and provided further that the authority hereby conferred shall be in substitution for, and to the exclusion of, the
existing authority conferred on the directors on 23 July 2007 to the extent unused.
9. To consider and, if thought fit, to pass the following resolution which will be proposed as a Special Resolution:
THAT , the Company be generally and unconditionally authorised pursuant to Article 14 of the Company's Articles of Association and pursuant
to Section 166 of the Companies Act 1985 (‘the Act’) to make market purchases (as defined in Section 163 of the Act) of ordinary shares of
5p each in the capital of the Company (‘Shares’) provided that
(a) the maximum number of Shares hereby authorised to be purchased is 2,266,250 being 5% of the current issued ordinary share capital
of the Company, and
(b) the minimum price which may be paid for such Shares is the nominal value thereof and the maximum price (excluding expenses) which
may be paid for such Shares is an amount equal to 105% of the average of the middle market quotations for a Share taken from the
listing of the Alternative Investment Market of the London Stock Exchange plc over the five business days immediately preceding the
day on which the contract for purchase is made, and
(c) the authority shall expire on the earlier of the conclusion of the next AGM in 2009 or a date 15 months from the date of this Resolution,
save that the Company may before such expiry make a contract to purchase Shares which would or might be executed in whole or part
after such expiry and the Company may make a purchase of Shares in pursuance of such a contract as if the authority conferred by this
Resolution had not expired.
By order of the board.
Peter Dawes Registered Office
Company Secretary Fleets Corner
9 June 2008 Poole
Dorset BH17 0JT
70 Hamworthy plc Notes
1 . A form of proxy is enclosed for use by shareholders and, if appropriate, must be deposited with the Company’s registrars, Capita Registrars, Proxy Department,
The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU not less than 48 hours before the time of the Annual General Meeting (‘ AGM’). Appointment of a
proxy does not preclude a shareholder from attending the AGM and voting in person.
2. A member entitled to attend and vote at the AGM may appoint one or more proxies (who need not be a member of the Company) to attend and to speak and to vote
on his or her behalf whether by show of hands or on a poll. A member can appoint more than one proxy in relation to the meeting, provided that each proxy is appointed
to exercise the rights attaching to different shares held by him. In order to be valid an appointment of proxy (together with any authority under which it is executed or a
copy of the authority certified notarially) must be returned by one of the following methods:
– in hard copy form by post, by courier or by hand to the Company’s registrars, Capita Registrars, Proxy Department,The Registry, 34 Beckenham Road, Beckenham,
Kent BR3 4TU; or
– in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures set out below;
and in each case must be received by the Company not less than 48 hours before the time of the meeting.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the AGM and any adjournment thereof
by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have
appointed a voting service provider(s) should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment, or instruction, made by means of CREST to be valid, the appropriate CREST message (a ‘CREST Proxy Instruction’) must be properly
authenticated in accordance with Euroclear UK & Ireland Limited’s (‘EUI’) specifications and must contain the information required for such instructions, as described in
the CREST manual.The message regardless of whether it relates to the appointment of a proxy or to an amendment to the instruction given previously to the appointed
proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID RA 10) by the latest time(s) for receipt of proxy appointments specified in
the Notice of Meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST
Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner described by CREST . The Company may treat as
invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5) of the Uncertificated Securities Regulations 2001 . CREST members and where
applicable, their CREST sponsors or voting service providers should note that EUI does not make available special procedures in CREST for any particular messages.
Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy instructions. It is therefore the responsibility of the CREST member
concerned to take (or, if CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his or her
CREST sponsor or voting service provider(s) take(s) such action as shall be necessary to ensure that the message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and, where applicable their CREST sponsors or voting service providers are referred, in particular, to those sections
of the CREST Manual concerning practical limitations of the CREST system and timings.
3. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, in order to be able to attend and vote at the AGM or any adjourned meeting (and also for
the purpose of calculating how many votes a person may cast), a person must have his/her name entered on the register of members of the Company by 6.00pm on
12 July 2008 (or 6.00pm on the date two days before any adjourned meeting). Changes to entries on the register of members after this time shall be disregarded in
determining the rights of any person to attend or vote at the meeting.
4. The following documents are available for inspection at the registered office of the Company during normal business hours on any weekday and will be available at the
place of the AGM from at least 15 minutes prior to and until the conclusion of the meeting:
– Directors’ service contracts
– Register of directors’ interests
5. Any electronic communication received by the Company, including the lodgement of an electronic proxy form, that is found to contain any virus will not be accepted.
6. A map showing the location of Compton Acres can be found at the Company’s website, www.hamworthy.com/agmmap
71 Hamworthy plc
Accounts Governance Business review Company overview 72 Hamworthy plc
Financial calendar 2008
3 June preliminary announcement of results for the year
ended 31 March 2008
25 June ex-dividend date in respect of the dividend on
ordinary shares
27 June record date for receipt of the dividend on
ordinary shares
14 July Annual General Meeting
21 July payment of final dividend for the year ended
31 March 2008
17 November preliminary date for announcement of interim results
for the six months ending 30 September 2008
Nick Chapple, Aftersales Director
Mr Chapple joined Hamworthy in 1996 having previously worked
in corporate planning and development roles and in fleet support
at Vosper Thornycroft. He has a degree from Cambridge University.
Willy Larsen, Managing Director – Pump Systems
Mr Larsen joined Hamworthy Svanehøj AS in 1994. He was educated
as a naval architect and has over 35 years of marine experience
in owners, consultancy, shipbuilding and ships’ equipment.
T ore Lunde, Managing Director – Gas Systems
Mr Lunde joined Hamworthy Gas Systems AS in 2000. He holds a
Masters degree in Naval Architecture and has 16 years’ management
experience with Exxon Mobil and Total.
Dr. JoeThomas, Managing Director – Water Systems
Dr. Thomas joined Hamworthy in 1995. He holds a BSc degree
and PhD in naval architecture from Newcastle University and
is a chartered engineer. With 30 years’ experience, he has held
a number of technical and management positions included five
years working in the Far East.
Arne Vedøy, Divisional Director – Inert Gas Systems
Mr Vedøy has responsibility for the Group’s inert gas systems
business having previously been managing director of the Gas
Systems division since 1998. He held various positions in Kvaerner
Ships’ Equipment Division including Managing Director in Singapore
and had overall responsibility for the Liquid Cargo Handling Division.
Senior management Company overview
02 Hamworthy at a glance
04 Chairman’s statement
06 Chief Executive’s
strategic review
Business review
08 Business review
09 Marketplace and Outlook
10 Gas systems
12 Pump systems
14 Water systems
16 Inert gas systems
18 Financial review
Governance
20 Board of Directors
22 Directors’ report
25 Directors’ remuneration report
28 Corporate governance
Group Accounts
29 Independent auditors’ report
30 Consolidated income statement
30 Statement of GroupT otal
Recognised Income
and Expense
31 Consolidated balance sheet
32 Consolidated cash flow
statement
33 Accounting policies
37 Notes to the accounts
Parent Company Accounts
61 Independent auditors’ report
62 Balance sheet
62 Statement ofT otal Recognised
Gains and Losses
63 Accounting policies
64 Notes to the accounts
70 Notice of
Annual General Meeting
72 Financial calendar 2008
72 Senior management
ibc Glossary & Advisers
Designed and produced by RadleyY eldar www.ry.com
Directors’ photography by George Brooks.
Printed by CTD who are FSC and ISO 14001 certiﬁed.
This document is printed on Era Silk, which is produced from
50% genuine waste pulp, the balance being ECF pulp from
well-managed/certiﬁed forests.The paper is alsoForest Stewardship
Council certiﬁed and manufactured at an ISO 14001 accredited mill.
Glossary
FPSO
Floating Production
Storage and Offloading
FSRU
Floating Storage
Regasification Unit
IMO
International Martime
Organisation
LEG
Liquefied Ethylene Gas
LNG
Liquefied Natural Gas
LPG
Liquefied Petroleum Gas
NOx
Nitrogen Oxides
SOx
Sulphur Oxides
VOC
Volatile organic compound
Registered ofﬁce
Hamworthy plc
Fleets Corner
Poole Dorset BH17 0JT
Company registration number
713225
Auditors
PricewaterhouseCoopers LLP
Savannah House
3 Ocean Way
Ocean Village
Southampton
Hants SO14 3T J
Nominated adviser
Hawkpoint Partners Limited
41 Lothbury
London EC2R 7AE
Broker
Collins Stewart Europe Limited
9th Floor, 88 Wood Street
London EC2V 7QR
Financial public relations
Abchurch Communications Limited
100 Cannon Street
London EC4N 6EU
Solicitors
Blake LapthornTarlo Lyons
Kings Court
21 Brunswick Place Southampton
Hants SO15 2AQ
Registrars
Capita Registrars
Northern House Woodsome Park
Fenay Bridge
Huddersfield
WestY orkshire HD8 0LA
Advisers Hamworthy is a market-leading global company providing specialist
equipment and service to marine and offshore and onshore oil and
gas markets.We provide a wide range of innovative solutions for
our customers across a number of long-term growth markets.
Our leading position in key sectors, track record of success and
financial strength provide the solid foundations from which we will
further develop and grow the business.
Our goal is to continue to deliver enhanced shareholder value through
long-term earnings growth. As well as an overview of our business
and a review of recent performance, this report presents our strategy
dedicated to continuing our success. Annual report and accounts 2008
Hamworthy Annual report and accounts 2008
Continuing
our success
Hamworthy plc
Fleets Corner
Poole
Dorset
BH17 0JT
www.hamworthy.com
China
Hamworthy Shanghai
Representative Ofﬁce
Room 8B
Yi Dian Plaza
No. 7 46 ZhaoJiaBang Road
Shanghai 20030
Hamworthy Dalian
Representative Ofﬁce
Room 2013
No. 4 Xiu Zhu Road
Dalian 116001
Hamworthy Guangzhou
Representative Ofﬁce
Room 910
Fuying Building
No. 164 Changyang Road
Haizu District
Guangzhou 510250
Hamworthy (Suzhou) Ltd
121 Dengwei Road
Suzhou New District
Jiangsu Province 215011
Denmark
Hamworthy Svanehøj A/S
6 Fabriksparken
PO Box 30
DK-9230 Svenstrup J
Germany
Hamworthy Serck Como GmbH
Pankauer Str. 16–18 D-21502
Geesthacht
India
Hamworthy India Pvt Ltd
35 Mittal Chambers
Nariman Point
Mumbai – 400 021
Korea
Hamworthy Ltd –
Oil & Gas Division
8th FloorY oosung Plaza Building
#655–6 Woo-dong
Haeundae-Gu
Busan (612–020)
Hamworthy Ltd – Marine Division
Room 1224
OceanTower Building
#760–3 Woo 1-Dong
Haeundae-Gu
Busan 612-021
Netherlands
Hamworthy BV
Aploniastraat 33
3084 CC Rotterdam
Norway
Hamworthy Moss AS
PO Box 1053
NO–1510 Moss
Hamworthy Gas Systems AS
PO Box 144
NO–1371 Asker
Hamworthy Pump Systems AS
PO Box 53
NO–1371 Asker
Singapore
Hamworthy Pte Ltd
15 Benoi Crescent
Singapore 629978
Spain
Hamworthy Pumps Systems AS
Avda DoctorTouron
ES–36600 Villagarcia de Arosa
Pontevedra
UAE
Hamworthy Middle East (FZC)
PO Box 120691
SAIF Zone
Sharjah
UK
Hamworthy Water Systems Ltd
Fleets Corner
Poole
Dorset BH17 0JT
Hamworthy Pump Systems
Fleets Corner
Poole
Dorset BH17 0JT
USA
Hamworthy Inc
1011 Highway 6 South
Suite 208
Houston
Texas 77077
Hamworthy Inc
8000 NW31 Street
Unit 13
Miami
Florida 33122
Hamworthy Inc
1418 Edwards Avenue
Suite B
New Orleans
Louisiana 70123
Our global reach -
Hamworthy offices