Tom Ehret, Chief Executive Officer, said, "I am particularly satisfied with the results for the full year which are in line with our expectations and indicate that our overall project delivery has been further improved. Over the last 12 months we have added a net 1,200 new employees and we are in the process of adding five additional ships to our fleet. These additions will allow us to grow roughly in line with the market in 2007 providing a platform for further growth in the years ahead. From a corporate perspective we have improved the efficiency and flexibility of our capital structure by issuing $500 million of Convertible Notes, initiating a share buyback program and refinancing our credit facilities.
Our growth over the last two years has been extraordinary with revenue rising from $1.1 billion in 2004 to $2.1 billion in 2006. Throughout this period we have been successful in achieving a balance between our growth and the delivery of our projects. Recognizing both the considerable future prospects for our sector, and the strength of our company, the Board have resolved to recommend a dividend of $0.20 per share for payment in 2007, marking a new level of maturity for Acergy."
Acergy Africa and Mediterranean -- The Erha and Okume projects were satisfactorily completed and good progress made on EPC2B, which is now in its final phase. With an increased scope of work, the installation phase of Greater Plutonio began at the end of the fourth quarter with the new J-Lay system on the Acergy Polaris performing ahead of expectations during this initial phase. Good project results during the quarter compensated for the Acergy Polaris being out of action for most of the quarter for a planned major upgrade. In the third quarter of 2007 the challenging deepwater Moho Bilondo project moves into the installation phase. 2006 was a good year for Africa and the Mediterranean with record revenues, high levels of asset utilisation and timely project delivery.
Acergy Northern Europe and Canada -- All of the ships in the North Sea again saw high levels of utilization in the fourth quarter. The Langeled contract was very successfully completed with the Acergy Piper moving on to the Ekofisk pipelay at quarter end. A divers' strike affected operations in the North Sea causing delays and extra costs to reschedule programs. We also experienced delays on the Britannia Satellites project due to trenching difficulties and bad weather. Despite these setbacks Northern Europe and Canada has again turned in a very satisfying performance for the full year.
Acergy North America and Mexico -- The fourth quarter saw further deterioration in the discontinued operations on the remaining project in Trinidad due primarily to project close-out costs. This project was substantially completed in January 2007. The break even result from continuing operations was achieved by support for international operations as well as a limited contribution from domestic projects.
Acergy South America -- The Acergy Condor and Acergy Harrier, on long term contract to Petrobras, delivered improved margins from high levels of utilization throughout the quarter. The Pertinacia will become the third ship on long term day rate contract to Petrobras in the second quarter of 2007. The PRA-1 lump sum contract, our first of this type for Petrobras, progressed towards the installation phase which is commencing during the first quarter of 2007 with the Acergy Discovery.
Acergy Asia and Middle East -- Positive results on the Sakhalin projects were partly offset by operational delays on the Dai Hung and Kerisi projects where progress was slower than anticipated due partly to the knock on effect of the North Sea divers' strike. The process of building up the infrastructure in Asia to manage large deepwater projects gathered momentum throughout the year. This made the breakeven target for the full year a real challenge, which was met following successful resolution of a tax case. Contract tendering for the Sapura 3000 and Toisa Proteus remains very active.
The new build and conversion programs on ships progressed throughout the fourth quarter of 2006 against a backdrop of supplier delays and cost escalations. The Pertinacia is expected to transit to Brazil to start her contract with Petrobras in the second quarter of 2007. The Polar Queen, which is now in the final part of her conversion, should be operational in the second quarter of 2007. The Toisa Proteus and the Acergy Viking are also expected to join the fleet in the second quarter and the Sapura 3000, in which we have a 50% interest through our Sapura Acergy joint venture, is expected to be operational in the third quarter of 2007. The Skandi Acergy is expected to join the fleet in the second quarter of 2008.
Net operating revenue from continuing operations for the fourth quarter of 2006 increased to $612.8 million from $463.4 million in the same period in 2005, due to continued high activity levels in West Africa and the North Sea.
Net operating income from continuing operations for the fourth quarter was $72.6 million, compared to $56.6 million for the same period in 2005. The increase was due to satisfactory project completion and higher utilization of major assets.
Non-consolidated joint ventures contributed $3.5 million in the fourth quarter as expected compared to $12.4 million for the equivalent quarter in 2005. This was partly due to the Stanislav Yudin in the Seaway Heavy Lifting joint venture, being in dry dock during the period and other project specific joint ventures coming to an end.
The Adjusted EBITDA margin from continuing operations(b) for the three months ended November 30, 2006 was 14.4%, compared to 17.6% for the same period in 2005. This reduction was partly due to the Acergy Polaris planned upgrade and a lower level of activity in joint ventures.
Income from continuing operations was $74.2 million for the fourth quarter, compared to $53.9 million in the same period in 2005. After including a loss from discontinued operations of $6.2 million, net income from all operations for the quarter ended November 30, 2006 was $68.0 million. This compares to net income from all operations of $99.1 million for the same period in 2005 after a gain of $45.2 million from discontinued operations.
The cash and cash equivalents position at the quarter end was $717.5 million, compared to $325.3 million at the quarter ended August 31, 2006. Total advance billings at the quarter end was $234.8 million, compared to $265.3 million at the quarter ended August 31, 2006. Due to the completion of the issue of the Convertible Notes during the period, debt at quarter end was $509.5 million, compared to $9.5 million at the quarter ended August 31, 2006. Capital expenditure in the fourth quarter was $36.7 million.
Net operating revenue for the full year from continuing operations was $2,124.2 million, a 43% increase on net operating revenue from continuing operations of $1,483.3 million for the full year 2005. The increase was driven mainly by the significant growth in SURF activity in West Africa and the North Sea.
Net operating income from continuing operations for the full year was $286.7 million, compared to $152.0 million for the same period in 2005. The increase was due to a higher level of activity and satisfactory project completion.
Non-consolidated joint ventures had a good year with a $41.3 million contribution compared to $26.9 million for the full year in 2005, an improvement broadly in line with consolidated activities. Seaway Heavy Lifting and NKT Flexibles were the major contributors with project specific joint ventures all performing well throughout the year.
The Adjusted EBITDA(b) margin from continuing operations for the year ended November 30, 2006 was 16.9%, compared to 14.8% for the same period in 2005 reflecting strong project execution and good performance in joint ventures.
Net income from discontinued operations was $15.8 million after a $35.1 million gain on the sale of assets.
Under the share buyback program initiated in September 2006, a total of 914,800 shares, representing 0.47% of issued shares, had been purchased as at November 30, 2006. 4,849,700 shares, representing 2.49% of issued shares, had been purchased as at February 12, 2007. These shares are held as Treasury shares in addition to the 879,121 Common Shares held indirectly as ADR's also in Treasury.
The Board has resolved to recommend the payment of a dividend of $0.20 per share for 2007, subject to shareholder approval, at the annual general meeting.
The backlog for continuing operations as at November 30, 2006 was $2.6 billion, of which approximately $1.7 billion is for execution throughout 2007. The group also held an additional $301 million in pre-backlog at the quarter end.
In $ millions as at: Nov.30.06 Aug.31.06 Nov.30.05 -------------------- --------- --------- --------- Backlog (1) 2,587 2,618 2,194 Pre-Backlog (2) 301 302 518 (1) Backlog restated to exclude amounts related to discontinued operations in Acergy North America and Mexico of $11.2 million (November.30.06), $16.3 million (August.31.06) and $23.5 million (November.30.05). Backlog reflects the stated value of signed contracts. (2) Pre-backlog reflects the stated value of signed letters of intent and the expected value of escalations on frame agreements
Following rapid growth over the past two years and progressive improvements in project execution, Acergy delivered solid results in 2006. The focus of the group in 2007 will be to consolidate activities with the delivery of new ships and the integration of new people. Our total quality management program will play an important part in this process, we believe, by laying the foundation for a further improvement in our margin generation in future years.
The group therefore anticipates revenue growth of approximately 10% for 2007, and we expect to return to a more rapid rate of growth thereafter. Backlog is expected to grow particularly in West Africa, where the volume of bids outstanding at year end was 70% up on the previous year, and in Asia where the level of bidding is three times the level at this time last year.
The group now has market visibility through to 2012 with strong financial resources to support growth. Management expects that the strong market conditions that we have been experiencing over recent months will be maintained. Acergy is on course to sustain its growth through the end of the decade with a significant part of the project work for the next three years already at, or close to, the bidding stage.
Acergy S.A. is a seabed-to-surface engineering and construction contractor for the offshore oil and gas industry worldwide. We plan, design and deliver complex, integrated projects in harsh and challenging environments. We operate internationally as one group -- globally aware and locally sensitive, sharing our expertise and experience to create innovative solutions. We are more than solution providers, we are solution partners -- ready to make long-term investments in our people, assets, know-how and relationships in support of our clients.
Fourth Quarter Ended Twelve Months Ended(a) -------------------- ---------------------- In $ millions Nov.30.06 Nov.30.05 Nov.30.06 Nov.30.05 ------------- --------- --------- --------- --------- Net operating revenue from continuing operations $ 612.8 $ 463.4 $ 2,124.2 $ 1,483.3 Gross profit 110.7 84.6 394.5 238.5 Net operating income from continuing operations 72.6 56.6 286.7 152.0 Income from continuing operations 74.2 53.9 220.9 106.4 Income/(Loss) from discontinued operations (6.2) 18.1 (19.3) 6.0 Gain on disposal of discontinued operations - 27.1 35.1 27.1 Net income $ 68.0 $ 99.1 $ 236.7 $ 139.5 Fourth Quarter Ended Twelve Months Ended(a) -------------------- ---------------------- PER SHARE DATA Nov.30.06 Nov.30.05 Nov.30.06 Nov.30.05 -------------- --------- --------- --------- --------- Earnings per share from continuing operations (Diluted) $ 0.36 $ 0.27 $ 1.10 $ 0.54 Earnings per share from discontinued operations (Diluted) $ (0.03) $ 0.23 $ 0.08 $ 0.17 Net earnings per share (Diluted) $ 0.33 $ 0.50 $ 1.18 $ 0.71 Weighted-average number of common shares and common share equivalents outstanding (Diluted) (millions) 210.0 196.3 201.1 195.5 Recommended dividend per share $ 0.20 - $ 0.20 - (a) Figures have been extracted from the audited Consolidated Financial Statements for 2005 and 2006 Highlights -- High volume quarter with $612.8 million in net operating revenue from continuing operations -- Solid quarterly net income of $74.2 million from continuing operations, in line with expectations -- Full year adjusted EBITDA from continuing operations(b) of $358.3 million representing a margin of 16.9% -- $500 million of Convertible Notes issued in the quarter -- Recommendation to introduce a dividend of $0.20 per share
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