Hunting Annual Report 2012

← All annual reports

FY2012 Annual Report · Hunting

Loading PDF…

Hunting PLC
3 Cockspur Street
London SW1Y 5BQ
Tel: 020 7321 0123
Fax: 020 7839 2072

www.huntingplc.com

Hunting PLC Annual Report 2012

H
u
n
t
i
n
g
P
L
C
A
n
n
u
a
l

R
e
p
o
r
t
2
0
1
2

Welcome to Hunting

Professional Advisers

Solicitors
CMS Cameron McKenna LLP

Auditors
PricewaterhouseCoopers LLP

Joint Corporate Brokers
Deutsche Bank and Barclays Bank

Financial Advisers
DC Advisory Partners Limited

Insurance Brokers
Willis Limited

Pension Advisers & Actuary
Lane Clark & Peacock LLP

Financial Public Relations
Buchanan Communications Limited

Registrars & Transfer Office
Equiniti Limited
Aspect House
Spencer Road, Lancing
West Sussex BN99 6DA
Telephone: 0871 384 2173

Registered Office: 3 Cockspur Street, London SW1Y 5BQ
Registered Number: 974568 (Registered in England and Wales)
Telephone: 020 7321 0123
Facsimile: 020 7839 2072
www.huntingplc.com

Printed by Park Communications on paper
manufactured from Elemental Chlorine Free (ECF)
pulp sourced from sustainable forests

Park Communications is certified to ISO 14001:2004
Environmental Management System and is a
CarbonNeutral® company

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

“ The management team and
assets are fit for purpose and
set for growth.”

Dennis Proctor, Chief Executive

Company Overview
02 Strength in Numbers
04 Hunting at a Glance
06 Chairman’s Statement
08 Growing our Global Presence

Chief Executive’s Review

Business Review
10
12 Five Years of Progress
14 Operating Review
Financial Review
22
Review of Principal Risks
27
and Uncertainties
Corporate Social
Responsibility Report

Governance
34 Board of Directors
36 Report of the Directors
40
44
52

Corporate Governance Report
Remuneration Committee Report
Audit Committee Report

Financial Statements
54
55
56

Report of the Auditors
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Balance Sheet

57
58 Company Balance Sheet
59

Consolidated Statement of
Changes in Equity
Company Statement of Changes
in Equity
Consolidated and Company
Statement of Cash Flows
Notes to the Financial Statements

62
116 Financial Record

Other Information
117 Shareholder Information
118 Glossary
IBC Professional Advisers

For more information please visit:
www.huntingplc.com

Hunting PLC Annual Report 2012

Strength in Numbers

Employees

3,866
57.5p
+49%

+12%

Diluted EPS

PBT

8.44mHunting Energy Services Hours Worked

£123.6m
+55%

14.4mParts Produced

Hunting PLC Annual Report 2012

Operational Highlights
`` Record operational performance. Revenue increasing 36% to £825.8m (2011 – £608.8m).
`` Successful integration of recent acquisitions.
`` Further international expansion into the US, UK and China.
`` Facilities footprint now exceeding 2.7m square feet.
`` New WEDGE-LOCK™ and SEAL-LOCK™ connection products introduced in the year.
`` Sale of Field Aviation completed in the year.
`` Planned strategic investment into South Africa to capture new geographic market share.

Financial Highlights*
`` Further record year of profits:

`Z Underlying profit from continuing operations £128.8m (2011 – £81.0m).
`Z Reported profit from continuing operations £85.9m (2011 – £41.0m).
`Z Underlying diluted earnings per share from continuing operations 57.5p (2011 – 38.7p).
`Z Reported diluted earnings per share from continuing operations 40.0p (2011 – 20.3p).

`` Strong cash flows generated in year with gearing reducing to 20% (2011 – 30%).
`` Capital expenditure across global operations increasing to £61.6m (2011 – £58.0m).
`` 27% increase in final dividend proposed of 14.0p (2011 – 11.0p), subject to approval by shareholders.

* Underlying – results for the year, as reported under IFRS, adjusted for amortisation and exceptional items.
Reported – results for the year under IFRS.

Revenue

£825.8m
+36%

350Patents

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting at a Glance

Hunting’s three main manufacturing divisions
cover the entire wellbore, from surface
equipment to fracturing, from the beginning
of the well’s life cycle to the end, with its
Well Construction, Well Completion and
Well Intervention business units.

Casing & Connection
Technologies

Meeting
market demand

Our Clients
We work with the international and
national oil companies in all the major
producing regions of the world as well
as with all the major energy service
companies and independent operators
in the principal producing regions.

Well Construction
We provide products and services related
to the initial drilling and construction
phase of the wellbore. This division
includes Hunting’s new Advanced
Manufacturing Group comprised of
Hunting Innova, Hunting Dearborn
and Hunting Doffing. The division also
includes casing connection technologies
with premium proprietary threads;
annular pressure release systems; MWD/
LWD components; roller reamer,
non-magnetic drill collars; vibration
dampening units and mud motors.

The Group’s Premium Connection
business manufactures a range of
connections including the Group’s in
house designed SEAL-LOCK™ and
WEDGE-LOCK™. These proprietary
premium connections and associated
technologies are well suited to challenging
offshore environments and onshore
shale plays.

Hunting’s Drilling Tools business
provides mud motors, shock tools,
non-magnetic drill collars and other
technologies that assist in the efficient
drilling of oil and gas wells. Demand
for these products is being driven by
shale drilling activities in North America
and through international sales in
the Middle East and Asia Pacific.

Hunting Equipment Management
Services (“HEMS”) provides downhole
rental tools and equipment into the
European market and is pursuing
additional market opportunities in the
Middle East/North Africa region.

Hunting’s Oil Country Tubular Goods
(“OCTG”) business includes casing
products and management services.
The Group has key relationships with
steel manufacturers to facilitate just-in-
time logistics and inventory. Hunting has
the technology, resources, established
mill relationships and experience to
supply all tubular needs on time,
anywhere in the world.

Hunting PLC Annual Report 2012Well Completion
This division is a global manufacturer
of accessories, premium tubing,
connections and OCTG-related products
and services that are manufactured at 41
centres around the world for the
completion phase of the wellbore. The
division provides products, proprietary
technologies, engineering expertise
and services below the wellhead. The
acquisition of Hunting Titan puts the
Group into the design, manufacture
and distribution of perforating systems,
energetics, associated tools and MWD/
LWD wireline logging equipment. It
also provides a network of distribution
centres to satisfy the short order
demand that characterise onshore
field operations.

Premium tubing is supplied into the
energy industry for both conventional and
unconventional extraction from the shale
plays of North America to the established
offshore arenas and emerging regions,
including East Africa and the Middle East.

Organic growth and acquisition has
allowed for the integration of our
extensive range of pressure control
equipment technologies and wireline
and slickline products coupled with the
Group’s expertise and experience.

Hunting’s Well Completion division also
includes a thread protection group that
provides protection solutions including
SealLube™ thread compound, Preserve-
A-Thread corrosion protection and
CLEAR-RUN™ an environmentally safe
advanced tubular solution for use in zero
emission environments.

Well Intervention
This division manufactures equipment
for the maintenance and restoration
of producing wells to ensure the
optimum flow of oil or gas throughout
the well life cycle.

The Group is widely regarded within
the oil and gas industry as one of
the leading providers of Thru-Tubing
services for downhole solutions for
the coiled tubing business. Thru-Tubing
technology aligns with the suite of
well intervention tools that are now
packaged and deployed to operating
customers throughout the world.

The Subsea technologies capability
includes chemical injection systems,
hydraulic valves and couplings.

OEM

Perforating

MWD/LWD Tools &
Logging Equipment

Mud Motors

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Chairman’s Statement

“ Despite the world economic
uncertainty, global demand for
energy continued to grow.”

The Group has had another successful
year of further expansion as management
integrate the activities of the companies
acquired in 2011 and continue to invest
substantial capital in new facilities.

Underlying profit before tax from
continuing operations in 2012 was
£123.6m (2011 – £79.8m), a 55%
increase. Reported profit before tax
from continuing operations was
£80.7m (2011 – £38.8m).

Despite the world economic uncertainty,
global demand for energy continued to
grow in the year. The industry we serve
needs not only to provide for that growth
but also to replace rapidly depleting
reserves, leading to increasing demand
for our sophisticated and highly
engineered products.

Within that general picture, the great
success of new methods of extracting
unconventional oil and gas (‘the shale
revolution’) has had extraordinary effects,
particularly in the US. The resulting excess
supply of natural gas has led to low US
prices for that commodity, but similar
drilling and production methods are being
applied to ‘shale oil’. The result is that
crude oil production in the US is rising
after many years of decline.

The Group is well placed in the shale
revolution, particularly following the
2011 acquisition of Hunting Titan, and is
actively exporting their technology to
other areas of shale potential such as
Europe and the Far East.

Activity in the Gulf of Mexico has fully
returned to the levels it enjoyed prior to
the tragic Macondo incident of 2010. Our
facilities serving that market are stretched,
with further expansion under way. In
Europe, the North Sea is busy and, once
again, several of our recently expanded
facilities are experiencing high utilisation.
Similarly, our activities in South-East Asia
and in China are moving ahead strongly.

Within Hunting Energy Services, Well
Construction activities had another
highly successful year – emphasising
the deep strength of several of the core
activities we have been developing
over many years. Well Completion,
the largest contributor, had a satisfactory
year with profits well ahead of 2011.
The smaller Well Intervention activity
reported continued volatility in the year,
however activity levels are anticipated
to improve across the coming year.

Hunting PLC Annual Report 201207

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Captions L-R:
Precision machining.

Multiple part assembly.

Design engineering are
features of Hunting
products.

Your Company has once again had
a good year in strong markets and I
am confident we will be able to take
advantage of further developments
in this exciting industry.

I thank all our staff throughout the
world for our continued success.

Richard Hunting C.B.E.
Chairman
7 March 2013

For over 70 years, the Group has had
a small oil exploration and production
business in the southern US. We have
decided to produce from existing
wells but not to invest further in new
exploration and production projects,
except as contractually committed.

Gibson Shipbrokers, a world leader in its
industry, did well to produce fine results
in difficult and highly volatile markets.

Shareholders of longer standing will
know that the Group once had many
aviation-related activities in its stable. The
last of these, the Canadian company Field
Aviation, was sold during the year to the
management. We wish the company
every success in the future.

Capital expenditure on new and
replacement facilities in 2012 was even
greater than in the previous year. Despite
this, the Group generated more than
£54.6m of cash with the result that net
debt reduced by a similar amount. The
balance sheet is in excellent shape, with
financial gearing reduced during the
year from 30% to 20%.

Underlying diluted earnings per share
from continuing operations were 57.5p
(2011 – 38.7p), an increase of 49% on the
previous year. Reported diluted earnings
per share from continuing operations
were 40.0p (2011 – 20.3p).

“ Capital expenditure on new
and replacement facilities was
even greater in 2012 than in
the previous year.”

We are recommending a final dividend
for 2012 of 14.0p per share, payable on
1 July 2013 to shareholders on the register
on 14 June 2013, giving a total of 18.5p
for the year, a 23% increase.

Dividend per share (p)

12
11
10
09
18.5p

18.5

15.0

12.0

10.5

+23%

Hunting PLC Annual Report 2012

Growing our Global Presence

North America
The engineering hub for the
development and testing of new
technologies and techniques such
as those used to access the shale
plays. Leveraging the benefits of an
extensive field network through the
cross selling of products and the
concentration of manufacturing
services for both onshore and
offshore energy industries.

25 service and

distribution points

Extending and
integrating
our reach

66 facilities

“ We aim to grow market share through our
expanding manufacturing and distribution
network around the world where new
demand has been identified.”

Dennis Proctor, Chief Executive

Hunting Energy Services
has significantly broadened
its product offering and
developed its international
manufacturing presence
through regional hubs.

Hunting PLC Annual Report 2012

Asia Pacific
Expansion of regional manufacturing
base to incorporate new products
and underpin existing capability
with continued enlargement of
existing facilities and development
of new opportunities to meet local
demand. Co-location of central
services in a regional hub.

Europe and Central Asia
Engineering services and
manufacturing brought together to
provide a focused presence for high
specification machining. State of the
art pipe management facility with
high volume threading capability
servicing the expanded deep sea
and continental footprints.

Middle East and North Africa
A regrouping of business streams
into one area with a regional focus
for high end services brought
together in a single regional facility.
This brings a new impetus to
bring products to mature and
frontier projects.

41 manufacturing centres

As new products are added to the
inventory, steps have been taken to
integrate and expand the local presence in
a tailored and targeted fashion. Perforating
products are now manufactured at
facilities in Canada while regional
warehousing has been established
throughout the Group’s existing global
presence. This allows for an immediate
response to market needs.

Coiled tubing tools and pressure control
equipment have been integrated beyond
their original acquisition sites to be
replicated in regional centres within North
America and Asia Pacific. Improved
manufacturing efficiencies have been
made and Lean Manufacturing principles
embedded across our facilities to enhance
the Group’s competitive position.

These actions will facilitate new revenue
opportunities and cost efficiencies as
the Group develops its offering from
established to new growth markets.
Underpinning these strategic objectives
is the commitment to manufacture and
deliver quality assured products with a
reputation for total customer satisfaction
under the Hunting brand.

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Chief Executive’s Review

Introduction
Hunting has again reported a record
set of financial results in a year where
the Group has progressed its strategy
to internationalise its product portfolio
enhanced by the businesses acquired
in recent years. 2012 has been a year
of integration, consolidation and
further organic expansion aimed at
maximising the enlarged Group’s profit
and margin potential. Plans to further
grow the manufacturing footprint
are also under way as expansion
opportunities in new geographic
territories are considered.

The Group has reported an annual
increase in revenue of 36% to £825.8m.
The increase in business momentum
seen in the first quarter of the year,
and generally consistent demand for
our products throughout 2012, led

Group Income Statement

to underlying profit from continuing
operations increasing 59% to £128.8m
(2011 – £81.0m). Underlying diluted
earnings per share from continuing
operations increased by 49% to 57.5p
(2011 – 38.7p).

Reported profit from continuing
operations was £85.9m (2011 – £41.0m)
and reported diluted earnings per share
from continuing operations was 40.0p
(2011 – 20.3p).

Our results have been delivered against
a market backdrop where the energy
industry in North America has seen
a shift in focus from onshore natural
gas drilling to liquids-focused targets,
resulting in a 13% decline in the number
of active onshore rig units in the year.
This has been partially offset by a 19%
increase in the number of offshore active

Underlying

Reported

2012
£m

2011
£m

Change
%

2012
£m

2011
£m

Change
%

Continuing operations:
Revenue
EBITDA
Profit from operations
Profit before tax

Profit for the year
Discontinued operations:
Profit for the year

Total profit for the year

Diluted EPS – continuing

825.8
154.3
128.8
123.6

608.8
102.5
81.0
79.8

89.0

57.3

–

89.0

0.7

58.0

36
51
59
55

825.8
144.7
85.9
80.7

608.8
77.2
41.0
38.8

62.8

31.5

69.2

132.0

50.7

82.2

operations

57.5p

38.7p

40.0p

20.3p

36
87
110
108

units drilling in the Gulf of Mexico, further
supported by a 6% increase in other
regions where Hunting operates
internationally. The WTI crude oil price
has also been relatively stable throughout
the year ensuring that capital expenditure
by the major energy exploration and
services companies has been sustained.
These factors have enabled many of
Hunting’s businesses to achieve
outstanding operating results.

In the year Hunting Titan products and
components began to be manufactured
at a number of Hunting’s North
American locations to maximise cost
benefits and plans are in place to
commence manufacturing in China
during 2013. Hunting Titan’s sales reach
has been extended to Europe, the Middle
East and Asia Pacific, with personnel
being appointed at our key regional
facilities, extending sales opportunities
for perforating systems and accessories
into a wider international customer base.

Hunting’s efforts to further extend its Well
Construction, Well Completion and Well
Intervention product offering throughout
all of its international operating hubs
is also producing results. This includes
combining sales and manufacturing
capabilities of the new acquisitions into
our Canadian, European and Asia Pacific
markets and also broadening the existing
product and service lines offered by
our UK operations into larger North
American markets where new demand
has been identified.

Hunting PLC Annual Report 201211

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Within the Advanced Manufacturing
Group a number of product lines still
retain an 11 to 12 month backlog
resulting in expansion plans for the
second half of the year.

The Subsea division will return to
expected profitability following a year of
“re-certification”. Its backlog has grown
significantly with major call off from
clients expected Q2 2013 onward.

Our manufacturing and accessories
activity will benefit from a new facility
in Houma, Louisiana and the
offshore growth.

UK and Europe
A doubling of rig activity in offshore UK
combined with renewed and new supply
contracts, Hunting is optimistic about
year-over-year growth in this region. New
facilities for fracking equipment and
explosives bunkering are in place with
steady inquiries resulting. Again, some
product demand exceeds our ability to
supply and efforts are underway to solve
the issue.

Middle East and Asia Pacific
Both regions expect growth in rig count
and both regions will be providing a
larger complement of Hunting products.
Fracking equipment and explosives
distribution will be in place with
manufacturing in China. Additional
capacity has been placed in Singapore
with new sales efforts in Australia,
Indonesia, Pakistan and India.

The Board is mindful of the geopolitical
and economic issues which can
negatively impact our markets. Further,
the ability to hire/train key personnel
remains a difficult task inherent to all in
the oil and gas industry. Clients change
plans, projects are delayed and
competition can become hungrier.
Against a backdrop which is robust and
where timings remain unclear, the Group
is well positioned for further international
expansion and business growth.

In parallel to these integration initiatives,
Hunting continues to increase its
international presence. Hunting Specialty
has broadened its manufacturing
and sales reach into Canada and the
Advanced Manufacturing Group is
planning international expansion with
new markets being developed in Asia
Pacific over the coming year.

Our European and Middle East
operations continued strong recruitment
efforts during the year, supporting the
opening of our expanded facility at
Badentoy, Scotland and relocation of our
Middle East operations to new enlarged
facilities allowing service and repair
functions to be undertaken. Hunting has
also commenced a greenfield initiative in
sub-Sahara Africa, driven by increasing
sales into West Africa and strong oil and
gas exploration activities in East Africa.
In November 2012, a new management
team based in South Africa joined
the Group and were tasked to develop
further sales across the continent and
to develop plans for establishing a
manufacturing presence in the region.
While this initiative will take time to
develop, it marks a further step in the
Group’s strategy to further expand its
international manufacturing capabilities
into new geographic territories.

In a globally tighter regulatory
environment and with an increasingly
diverse operating landscape Hunting
continues to focus on new product
innovation and development. In the
year, the Group integrated its global
engineering operations, with centres
of excellence being focused at our
Aberdeen and Houston facilities. The
engineering group has a clear pipeline
of new connection products under
development with new WEDGE-
LOCK™ and SEAL-LOCK™ designs
either continuing or completing testing
in the year. As part of the coordinated
drive to be the independent supplier of
choice for premium connection product
lines, the Group has sanctioned the
construction of a new development and
testing facility in Houston. This is targeted
at accelerating approval timescales for
new product lines and reducing reliance
on third party laboratory testing.

Elsewhere in the Group, in April 2012
we concluded the sale of Field Aviation
Company Inc, for a total consideration
of £7.5m.

With this disposal, the last of its aviation
entities, Hunting is now a more focused
energy services group.

The Group continues to recruit key
personnel in all of its major business
units, strengthening its core
manufacturing, sales, human resources
and finance functions, with the global
workforce increasing 12% to 3,866 by
year-end (2011 – 3,453).

With these encouraging initiatives and
achievements, Hunting is well positioned
as an integrated global energy service
group driven by innovation for our
international customer base.

Health, Safety and Environment
During 2012 Hunting Energy Services
recorded 8.44m personnel hours, with
82 recordable incidents arising in the
year. There were no fatalities in the year
(2011 – nil).

Outlook
Our view for 2013 is a slow start with an
improving second half. This conclusion is
derived from discussions with major oil
and gas companies, independents and
OEM clients about their capital spend
forecasts. Further, order intake in Q4
2012, current backlogs, facility
expansions, product introductions and
inquiry levels are blended to conclude
that 2013 will be a year of progress.

Activity levels within our three core
reporting divisions, Well Completion,
Well Construction and Well Intervention
will be driven by factors within each of
the geographic regions they operate in:

North America
The current rig count for the US and
Canada is 11% below this period in
2012. Forecasts are evenly split between
a rising versus a falling rig count for the
year. Our belief is, with strong oil prices
prevailing, it will improve modestly
onshore and remain strong offshore.
Further improvements in drilling and
completions will provide increasing
activity and product usage despite a
lagging rig count.

Premium Connections will benefit from
the offshore demand. Accordingly, new
capacity will be added throughout the
year. Mud motor usage will lag in some
regions, climb in others but will offer little
growth due to slower natural gas
development.

Hunting PLC Annual Report 2012

Five Years of Progress

Over the past five years, Hunting PLC has been transformed from
a group of companies trading in diverse segments of the energy
sector with local geographies and various brands. Following a
programme of targeted divestment, acquisition and expansion,
the Group has become a focused leader in the provision of
equipment to the upstream energy industry, united under the
Hunting brand.

2010
Acquisition of Innova Extel
The related diversification into
electronics and volume component
manufacturing at the heart of MWD/
LWD tools used in directional drilling.
This allowed for the backward
integration of printed circuit boards
into existing tools and systems.

£710m

Acquisitions

2008
Sale of Gibson Energy
This was the single biggest step
on the road to becoming a pure
upstream energy services Group.
The disposal marked the exit from
the mid and downstream sectors that
spanned trucking, pipeline, refining
and retail operations in Canada.

2009
Acquisition of Welltonic,
PT SMB Industri and National
Coupling Company
The European, Asian and North
American operations were bolstered
by purchases which added depth
to the manufacturing base and
broadened its technical offering
within the wellbore. With these
purchases, entry was gained into the
coiled tubing market to reinforce the
existing well intervention business and
advanced manufacturing techniques
for the subsea arena.

Sale of Hunting
Energy France
A group of regional companies
that provided a range of
equipment to the French mid
and downstream markets.

Hunting PLC Annual Report 2012£130m

Expansion capital expenditure

2011
Acquisition of the
Titan Group
The largest acquisition in Hunting’s
history has allowed the Group to
become an industry leader in
perforating systems, energetics and
well logging equipment. It broadens
the product range and simplifies the
single source offering of equipment
essential to the successful
development of the wellbore.
Manufacturing of subcomponents
has been optimised with existing
facilities and taken to a global
stage, while the field distribution
network has benefited
existing Hunting
products.

2011
Acquisition of Dearborn, W.L.
Doffing and Specialty Supply
A deep strengthening of the Group’s
core capability in precision machining
of critical tolerance components used
in crucial MWD/LWD applications.
Hunting Innova, Hunting Dearborn
and Hunting Doffing form the
businesses within the Advanced
Manufacturing Group.

2012
Sale of Field Aviation
This historic event marks the
completion of the Group’s journey
from mini conglomerate at the turn
of the Millennium to an energy
services provider today.

“ I am confident we will be able
to take advantage of further
development in this exciting
industry.”

Richard Hunting C.B.E., Chairman

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Operating Review

Business Strategy
The key elements of the Group’s business
strategy to deliver long-term shareholder
value remain:
• To deliver both acquisitive and organic
growth across all of the Group’s core
operations.

• To invest and develop the business

platforms to augment:
– Proprietary products and services;
– Increased market share strength;
– Enlarged global footprint; and
– Capture of synergies from the
opportunities thus created.

Underpinning these strategic objectives
is a commitment to manufacture and
deliver the highest quality products and
services with a reputation for reliability
and on time delivery under the
Hunting brand.

Business Model
The key features of the Group’s business
model which seeks to deliver its strategic
objectives are:
• A decentralised management structure
allowing local management to identify
and react to customer or local market
requirements.

• Close monitoring, support and

direction from the centre.

• Short chains of command allowing

for faster decision making.
• Framework of controls with

discretionary limits and powers for
local management.

• Flexible cost structures which can

adapt to market conditions.

• Common standards for quality, health
and safety across global operations.

Maintaining high operational standards
across all of the Group’s activities is

rietary prod u cts, d
ology an d in
grate ne w b

n
h
c
e
t

p
o
r
P

te
n
I

e li v e r i n g M
i o n str
t
v
o
s i n e s s Technolo

t s

Pricing leverage

l f

i
n

g o

g footprint
d
P r o
a
otprint
ur
C a
a

u
n

c ts, services
p t u rin g synergies,
d c u sto mers
d in g value

with underlying profit from continuing
operations increasing in the year to
£45.7m (2011 – £28.5m). Reported profit
from continuing operations was £40.6m
(2011 – £20.7m).

The division operates globally and
comprises six business areas:
Premium Connections, Drilling Tools,
Oil Country Tubular Goods (“OCTG”),
Trenchless, Advanced Manufacturing
Group and Hunting Specialty.

Premium Connections
Hunting’s Premium Connections
business has delivered an excellent result
in the year, with demand supported
by shale related activity and increasing
global offshore drilling. Natural gas
programmes in North America slowed
during the year impacting demand
in the Marcellus, Haynesville and
East Texas gas-prone shale basins. The
switch to liquids-focused drilling
by many operators helped offset some of
the decline in momentum, as projects
continued within the Bakken, Eagle Ford
and Williston shale areas. Further to this
onshore activity, renewed drilling in the
Gulf of Mexico also supported demand
for Hunting’s connections product lines.
In the year, sales of Hunting’s proprietary
‘Annular Pressure Release Systems’
increased compared to 2011, with
sales to customers globally.

viewed as one of the building blocks in
delivering a strong financial performance.

Hunting Energy Services
Hunting Energy Services manufactures
and distributes high quality precision
engineered products and components
that enable the extraction of oil and gas.
Our customers include international
energy companies, national oil
companies and mid to large oil services
groups. Hunting continues to position its
technical expertise and operating
footprint to meet the requirements of
these customers who are developing
increasingly complex energy resources
and operating in ever increasingly
challenging conditions and locations.

During 2012 Hunting Energy Services
reported a 38% increase in revenue
to £793.4m (2011 – £574.6m) and a
63% increase in underlying profit from
continuing operations to £126.7m (2011 –
£77.6m). Reported profit from continuing
operations was £91.0m (2011 – £49.4m).

This growth has been driven by a full
year contribution from the acquisitions
made in 2011, sustained onshore drilling
activity in North America, increased
drilling in the Gulf of Mexico where rig
counts have now returned to pre-2010
levels, and a general improvement in
international rig counts particularly in the
North Sea where rigs have recovered
from the historic lows seen in 2011.

Well Construction
Hunting’s Well Construction division
includes businesses that are positioned in
the initial drilling and construction phase
of the wellbore. This division reported
revenue of £279.3m (2011 – £194.5m),

Segmental Results
The Group reports through a divisional structure arranged into the following operating segments:

Hunting Energy Services
Well Construction
Well Completion
Well Intervention

Other Activities
Exploration and Production
Gibson Shipbrokers

Group

Amortisation and exceptional items

Group profit from continuing operations

2012

Profit from
operations
£m

Revenue
£m

Margin

Revenue
£m

2011

Profit from
operations
£m

279.3
457.4
56.7

793.4

4.9
27.5

45.7
74.1
6.9

126.7

0.5
1.6

825.8

128.8

(42.9)

85.9

16%
16%
12%

16%

10%
6%

16%

194.5
327.2
52.9

574.6

8.2
26.0

608.8

28.5
41.2
7.9

77.6

1.7
1.7

81.0

(40.0)

41.0

Margin

15%
13%
15%

14%

21%
7%

13%

Hunting PLC Annual Report 2012

1515

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Product Excellence

Hole drilling, trepanning and boring
diameters vary from 0.05in to 12in
in lengths up to 32ft. This frequently
involves exotic and expensive nickel
or titanium alloys.

Hunting undertakes high precision
machining to extremely close
tolerances for components in the
global MWD/LWD industry.

Critical service applications include
prototype, first pass specialist
production and delivery of products
to exacting requirements. This requires
dedication, innovation and exemplary
quality assurance.

Quality assurance of the highest calibre

Hunting PLC Annual Report 2012

Creative
Solutions

The Group provides an innovative
and complete service throughout the
tubular cycle. Sales, management
of pipe and stock inventory are
combined with full capability for
threading premium connections
and accessories.

State of the art handling facilities have
been built to operate 24/7 to fulfill
exacting customers just-in-time needs.

Hunting Energy’s world leading pipe
management facility in Fordoun, Scotland.

Hunting PLC Annual Report 2012Operating Review continued

Extreme close tolerance
machining.

Drilling Tools
While the Group’s Drilling Tools
business has delivered its best result
since 2008, the unit has experienced a
volatile year, as the industry moved from
gas to liquids-focused shale regions.
As the effects of this shift across North
America were realised, management
responded by redeploying people and
its mud motor fleet to the busier regions,
which included the opening of a new
facility in Williston, North Dakota, to
service the demand from the Bakken
oil shale play. Management have also
initiated Lean Manufacturing protocols
across a number of the unit’s facilities
which will contribute to further
efficiencies going forward. Hunting’s
Drilling Tools are now recognised as
industry leaders with equipment
regularly being utilised to drill lateral
sections of a wellbore in excess of
10,000 feet during a single drilling cycle.

OCTG
Hunting’s OCTG business includes casing
products and management services
for customers. The Group has key
relationships with steel manufacturers
to facilitate just-in-time logistics.

Trenchless
Hunting’s Trenchless business delivered a
good result in the year, as sales benefited
from a wider distribution network driving
growth in demand for the unit’s drill stems.
The business is now planning further
international expansion with South
America and Africa identified as regions
offering good sales opportunities for its
products which includes drill stems,
premium tubing threads and mud
motor drilling components.

Advanced Manufacturing Group
The businesses within the Advanced
Manufacturing Group have reported
excellent results during 2012, with Hunting
Dearborn and Hunting Innova both
delivering record results driven by strong
demand for MWD/LWD tools.

Hunting Innova manufactures and
assembles printed circuit boards which are
utilised in MWD/LWD measuring tools.
In the year, Hunting Innova continued to
attract new customers which helped
deliver record revenues and income.
Plans to develop new markets for the unit’s
MWD/LWD tools include the establishing
of a sales and manufacturing presence in
Asia Pacific in the coming year.

Hunting Dearborn manufactures the
precision engineered housings for MWD/
LWD tools. A programme to expand the
facility was completed in the first half of
the year which will see improved lead
times for its specialist product lines.

In the year, the Advanced
Manufacturing Group made good
progress with its ‘sole supplier’ concept,
combining the capabilities of Hunting
Innova, Hunting Dearborn and Hunting
Doffing. The concept has been well
received by a number of major
international service groups.

Hunting Specialty
Hunting Specialty manufactures
precision machined MWD parts used
in directional drilling markets, including
steering tools and gyro systems and
delivered an excellent result in the
year, with the business operating at
near-capacity. Hunting Specialty has
focused its expansion plans on
increasing sales in Canada during
the year. In the future the business
will be driving further international
growth through Hunting’s regional
manufacturing hubs.

In-house training and development.

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Operating Review
continued

Well Completion
Hunting’s Well Completion division
provides products to customers during the
completion phase of an oil and gas well.
The division reported revenue of £457.4m
in 2012 (2011 – £327.2m) with underlying
profit from operations totalling £74.1m
(2011 – £41.2m). Reported profit from
continuing operations was £44.1m (2011
– £21.4m).

The division operates globally and
comprises four business areas: Hunting
Titan, Premium Tubing, Manufacturing
and Accessories and Thread Protection.

Hunting Titan
Hunting Titan manufactures perforating
gun systems, shaped charges and
associated instrumentation for the global
hydraulic fracturing market and operates
through three business lines, Perforating,
Energetics and Instrumentation. During
2012, the unit’s results were impacted by
the switch from natural gas to liquids
drilling in North America and increased
competition in the short perforating gun
segment of its markets. While drilling in
the oil focused regions offset some of this
reduced demand, management adapted
by shifting inventory to the busier shale
regions. This strategy included the
opening of two new distribution centres
in the US, with a further two planned in
Canada in the short-term. During 2012,
Lean Manufacturing initiatives were
introduced at a number of the unit’s
facilities, which has improved production
efficiencies. Development of Hunting
Titan’s international markets made
excellent progress in the year, as sales
personnel were added throughout the
Group’s international manufacturing
hubs, and plans to produce key Hunting
Titan products were progressed in
Mexico, Canada and China. In 2012,
Hunting Titan sold products to 52
countries around the world, with
management confident of generating
additional sales from these regions
going forward.

Premium Tubing
Hunting’s Premium Tubing unit, which
machines and sells premium alloy pipe,
reported a good result for 2012, despite
increased volatility due to the shift from
natural gas to liquids drilling. While the
short-term outlook for the unit is softer

Control panels and switchgear designed
for harsh field conditions.

when compared to 2012, with
increased levels of inventory being held
across the industry, Hunting remains a
key just-in-time supplier of premium
pipe product lines supporting increased
activity in the Gulf of Mexico and the
liquids-focused shales.

Manufacturing and Accessories
Hunting’s Manufacturing and Accessories
unit has seen a record performance
during 2012, with the majority of the
unit’s facilities operating at capacity
driven by the increase in offshore drilling
in the Gulf of Mexico and other
international drilling markets, including an
improving North Sea. In the final quarter
of the year, our deepwater-focused facility
in Houma, Louisiana was commissioned
which will primarily service clients in the
Gulf of Mexico and warehouse a number
of Hunting Titan product lines.

Thread Protection
Hunting’s thread protection platform
provides protection solutions including
SealLube™ thread compound, Preserve-
A-Thread corrosion protection and
CLEAR-RUN™, its environmentally
friendly advanced tubular solution. The
unit reported a good result in the year,
driven by new product lines being
introduced and qualified for use with a
number of key customers.

Well Intervention
Hunting’s Well Intervention division
supplies a range of products and
services required throughout the life
of a well to enhance and maintain
production and in 2012 reported

an underlying profit from operations
of £6.9m (2011 – £7.9m). Reported
profit from continuing operations was
£6.3m (2011 – £7.3m).

The division operates globally and
comprises two business areas: Hunting
Subsea and Hunting Welltonic.

Hunting Subsea
Hunting Subsea manufactures and
distributes precision engineered subsea
valves, couplings and chemical injector
systems. In 2012, the Subsea business
continued to report mixed trading, as
efforts to complete the recertification of
the valves and chemical injector product
lines for use in the Gulf of Mexico
extended throughout the year. Looking
forward, the Subsea business is poised
for a year of good growth driven by
increased offshore global rig counts.

Hunting Welltonic
Hunting Welltonic provides well
intervention technologies, services and
pressure control systems, to maintain and
enhance the productivity of an oil and
gas well. During 2012, the unit continued
to grow its international revenue streams
as North Sea drilling activity decreased in
the early part of the year. The business
has successfully entered markets in the
US, where demand for Thru-Tubing and
pressure control products has been
identified across the various shale
regions in the country. The business has
established a presence at Hunting’s
Conroe, Texas facility in the US and is
now exploring sales growth opportunities
in the Canadian market.

Hunting PLC Annual Report 2012Other Operating Divisions
Exploration and Production
Hunting’s Exploration and Production
division has interests in the southern US
and offshore Gulf of Mexico, holding equity
interests in over 50 production properties.
On a Net Equivalent Barrel (“NEB”) basis,
production in the year was 131,000 NEB
(2011 – 252,000 NEB), with proven reserves
at year end being 1.1m NEB (2011 – 1.2m
NEB). Due to disruptions in the region’s
gas pipeline system, primarily as a result
of inspection and maintenance work,
production volumes in the year were
significantly reduced, leading to lower
revenues and income. Additionally, the
continuing depressed natural gas price in
the US contributed to lower revenues.
Based on these operating conditions, the
business reported an underlying profit from
operations of £0.5m (2011 – £1.7m). The
reported loss from continuing operations
was £6.7m (2011 – £0.7m profit).

During 2012, the business participated in
12 onshore wells and three offshore
wells, with eight of the onshore wells and
one offshore well finding reserves,
contributing to the reserve base at year
end. Costs of £2.0m associated with
wells deemed to be uncommercial have
been written off as dry hole costs.

Following a year end valuation of
reserves, which requires individual oil
and gas properties to be impaired when
the realisable value is less than the book
value based on future production and
commodity prices, the business has
taken an impairment charge of £5.2m
reflecting lower gas prices.

The Board of Hunting has reviewed
the strategic rationale of the Exploration

and Production division and from 2013
will not be making any new capital
investment, beyond where the division
has contractual commitments. The
division will in future focus on producing
out its remaining reserves, with a view to
winding down the operation. As a result,
Exploration and Production is now
presented within other operating divisions.

Gibson Shipbrokers
Gibson continues to be one of the
foremost global shipbroking businesses
and now employs 165 personnel in the
UK, Norway, Singapore and Hong Kong,
an increase of 11% compared to 2011.
During the year, despite continuing
hostile trading conditions, good progress
has been made across the business with
fixing volumes increasing 18% year on
year leading to an increase in revenue
of 6% to £27.5m (2011 – £26.0m).
Underlying profit from operations
decreased 6% to £1.6m (2011 – £1.7m).

The business continues to be a leading
broker in crude oil, fuel oil and clean
petroleum products. The gas division
covers LNG and LPG broking. The
specialised division focuses on smaller
shipments of chemicals, biofuels,
vegoil, palm oil and lubes. The dry
bulk division focuses on Panamax and
Cape liftings of iron ore, grain and coal.

The offshore division has also grown
its subsea, seismic and renewable
energy broking activities and the sale
and purchase division remains active
covering newbuilds, resales, scrap and
valuations. A world class consultancy
department works closely with all the
divisions and undertakes commission
work for existing and new clients.

Exploration and Production – Oil and Gas Reserves (NEB 000’s)

Oil
Gas

Oil and Gas

1 January
2012

Reserve
Movement

Production

31 December
2012

579
642

1,221

73
(70)

(58)
(73)

(131)

594
499

1,093

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Operating Review continued

Performance Measures
A number of performance measures are used to compare the development, underlying business performance and position of the
Group and its business segments. These are used collectively and periodically reviewed to ensure they remain appropriate and
meaningful monitors of the Group’s performance.

Key Performance Indicators

Revenue

EBITDA*

Profit from operations*

Diluted earnings per share (“EPS”)*

Dividend per share (“DPS”)

Return on average capital employed (“ROCE”)*

Gearing ratio

Free cash flow

Capital expenditure

Inventory and WIP days

Trade receivable days

* These performance measures are based on underlying results for the year.

Other Performance Measures

Number of employees – year end

Number of recordable incidents

† This does not include recordable incidents from the acquisitions made in 2011.

Indicators of future Group performance closely monitored by management include:

Key Market Indicators

Drilling rig activity (North America) – year end

Drilling rig activity (International) – year end

WTI Oil price (per barrel) – year end

Henry Hub Natural gas price (mcf) – year end

Exchange rates US$/£ – average

Exchange rates US$/£ – year end

2012

2011

£825.8m £608.8m

£154.3m £102.5m

£128.8m

£81.0m

57.5p

18.5p

14%

20%

38.7p

15.0p

15%

30%

£86.5m

£61.6m

£38.9m

£58.0m

107 days

112 days

64 days

73 days

2012

3,866

2011

3,453

26†

2012

2,137

1,253

2011

2,432

1,180

US$91.80 US$98.83

US$3.44

US$2.96

1.59

1.63

1.60

1.55

Hunting PLC Annual Report 2012Hunting Advanced Manufacturing Group

The Advanced Manufacturing Group is
the strategic combination of Hunting
Dearborn, Hunting Doffing and Hunting
Innova capabilities under the one
Hunting brand.

This customer defined platform is targeted
to provide a single source MWD/LWD
capability to the global oil and gas
industry. It features a single part or whole
tool capability that unites precision
machining, electrical manufacturing
with product assembly.

Precision machined sections
of various logging tools.

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Financial Review

Overview
The 2012 annual report reflects another
year of strong earnings growth and
improving margins underpinned by a full
year contribution from the acquisitions
completed during 2011.

£608.8m). The year on year effect of the
acquisitions made in the latter part of
2011 added £155.2m to revenue. The
remaining £61.8m of revenue growth
from existing businesses resulted from
like-for-like growth of 11%.

The Group’s balance sheet continues to
strengthen, net assets are now in excess
of £800m, providing a sound financial
base from which to support further
expansion through organic and
acquisitive growth. Resolution of a
legacy tax dispute during the year is of
particular note providing a release of
provisions and an inflow of cash which
together with strong free cash flow from
the Group’s global operations results in
net debt improving to £163.8m from
£218.4m at 31 December 2011. The
Group’s gearing has improved as a
consequence and is now 20%.

Given the increased scale and
geographic footprint of the Group and
the ongoing programme of growth, the
framework of internal and financial
controls continues to be enhanced with
appropriate investment in IT and central
management resource.

Revenue
Group revenues increased 36%, or
£217.0m, to £825.8m in 2012 (2011 –

Well Construction was the strongest
performing division, with revenue up
44% to £279.3m (2011 – £194.5m). This
division has benefited from a full year
contribution from the Hunting Dearborn,
Hunting Doffing and Hunting Specialty
acquisitions which collectively added
£49.1m of revenue growth. Like-for-like
growth in the division was 20%. Despite
volatile conditions caused by the change
in focus for onshore drilling from gas to
oil, the Drilling Tools business performed
very well supported by the opening of
new facilities. The Premium Connections
business faced similar challenges onshore,
but was supported by increasing global
offshore activity. The other key strong
performer in this division was Hunting
Innova which forms part of the Advanced
Manufacturing Group.

Well Completion revenue was up 40%
to £457.4m (2011 – £327.2m) with the
full year impact of the Hunting Titan
acquisition adding £106.1m of revenue.
The base businesses also performed
well with like-for-like revenue up 9%.

The Manufacturing and Accessories
unit set a record performance driven
by improving global offshore markets.

The Well Intervention division has
recovered to some extent after recent
declines post-Macondo. Revenue grew
by 7% to £56.7m (2011 – £52.9m). Our
Subsea business experienced modest
year on year revenue growth in 2012
with an improved outlook for 2013 as
the sector recovers and we benefit from
the extension of our Stafford facility.
The Hunting Welltonic businesses
increased revenues by developing
new markets in the US.

Revenue from other divisions fell by a
net £1.8m. Exploration and Production
revenues fell by £3.3m due to pricing and
lower production volumes. This was
partly offset by a £1.5m improvement
from Gibson Shipbrokers on higher
trading volumes.

Revenue (£m)

825.8

608.8

12
11
10
09
£825.8m +36%

309.9

423.3

Hunting PLC Annual Report 201223

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

The following exceptional charges
arose in the year:
• Unwinding of the fair value uplift

applied to inventory taken on with
the 2011 acquisitions has resulted in
a £7.6m charge reflecting acquired
stock sold in the period. The
remaining uplift of £2.6m is
expected to be charged in 2013.
• The final charges under employee
retention schemes put in place as
part of the 2011 acquisitions were
incurred in 2012 and totalled £1.1m.

• The Exploration and Production

division incurred charges of £7.2m
as a result of £5.2m of impairments
to its oil and gas capitalised
expenditures largely due to future
commodity price expectations and
dry hole costs of £2.0m.

• £1.1m has been credited to the
income statement reflecting the
release of amounts provided on the
Hunting Doffing acquisition for profit
related earn-outs.

Reported profit from operations in 2012
for the Group was £85.9m which was
£44.9m better than 2011. This increase
was similar to the underlying improvement
with amortisation and exceptional items
relatively consistent year on year.

Taxation
The Group’s underlying tax rate for 2012
has remained at 28% (2011 – 28%),
resulting in an underlying tax charge of

Proﬁt from Operations* (£m)

81.0

128.8

12
11
10
09
£128.8m +59%

45.0

29.1

* Continuing operations before amortisation and

exceptional items.

£34.6m (2011 – £22.5m). The tax rate
reflects the weighting of profits in lower
tax jurisdictions, together with a reduced
UK corporate tax rate. The underlying
tax rate for 2013 is currently expected to
reduce to 27% as a result of reductions
in global corporate tax rates in the
countries where we operate, however,
the actual rate will be dependent on the
regional mix of profits.

Amortisation and exceptional items in
the year attracted tax credits of £16.7m
to give a net tax charge on continuing
operations in 2012 of £17.9m (2011 –
£7.3m).

Net Finance Costs
Net reported finance costs in 2012
were £6.2m (2011 – £3.2m) increasing
in line with higher average levels of
debt following the 2011 acquisition
programme.

Underlying Profit from Operations 2011 to 2012 (£m)

EBITDA from Continuing Operations
Underlying EBITDA increased to
£154.3m for 2012 and was £51.8m
ahead of 2011 largely driven by the full
year contribution from businesses
acquired in 2011.

EBITDA* (£m)

154.3

102.5

12
11
10
09
£154.3m +51%

42.8

62.6

* Continuing operations before amortisation and

exceptional items.

Profit from Continuing Operations
Underlying profit from continuing
operations increased by £47.8m, from
£81.0m in 2011 to £128.8m in 2012
with £35.2m resulting from the year
on year effect of acquisitions made in
2011. Operating margins also increased
from 13% to 16% as a result of the
improved product mix following the
2011 acquisitions.

Well Construction’s underlying profit
from operations was up 60% to £45.7m
(2011 – £28.5m) driven by the benefit
of acquisitions and improved trading in
Premium Connections, Drilling Tools
and at Hunting Innova. The division’s
operating margin also improved from
15% in 2011 to 16%.

In Well Completion, underlying profit
from operations increased by 80% to
£74.1m (2011 – £41.2m) predominantly
due to the full year contribution from
Hunting Titan, which was acquired in
September 2011, with the division’s
margin improving from 13% in 2011
to 16% in 2012 as a result of this.

In Well Intervention, whilst there was a
modest increase in revenue, underlying
profit fell by £1.0m following the
previously reported issues associated
with the tighter regulations in the Gulf
of Mexico which adversely affected the
results of our Subsea operation.

Amortisation and Exceptional Items
Intangible asset amortisation charges
increased from £12.2m in 2011 to £28.1m
in 2012 due to the full year effect of the
acquisitions made in 2011.

Hunting PLC Annual Report 2012506070809010011012013014020112012WellConstruction WellCompletion WellIntervention Other 81.017.232.9(1.0)(1.3)128.8

Financial Review continued

Earnings per Share
Underlying diluted earnings per share
for continuing operations increased
49% or 18.8p over 2011 to 57.5p in
2012. Reported diluted earnings per
share for continuing operations at 40.0p
was 19.7p above 2011.

The weighted average number of shares
used in calculating the diluted earnings
per share in 2012 was 149.5m
compared to 140.1m in 2011, with the
increase mainly due to the full year
effect of the 13.2m share placing
completed in August 2011.

Diluted EPS* (p)

12
11
10
09
57.5p

14.1

22.7

57.5

38.7

+49%

* Continuing operations before amortisation and

exceptional items.

Discontinued Operations
The reported profit for the year from
discontinued operations was £69.2m
(2011 – £50.7m) and was entirely
exceptional. The main feature of the
profit was a £56.9m gain relating to the
resolution of a legacy tax dispute in
Canada. Following the sale of Gibson
Energy in 2008, Hunting established
provisions for tax indemnities given to
the purchaser in respect of two tax

Cash Flow

disputes with the Canadian tax
authorities. The larger of the two
disputes has been settled resulting in
the gain which comprises:

• The refund of tax payments from the

tax authority totalling £17.2m received
in December 2012.

• The refund of related tax payments
from provincial authorities totalling
£8.7m, which was received on 28
February 2013.

• The release of provisions totalling

£30.7m (see note 13).

• Movements on other Gibson related

provisions totalling £0.3m.

Provisions totalling £7.7m have been
retained relating to the smaller dispute.

In addition a £1.4m gain was realised on
the sale of Field Aviation Company Inc.
in April 2012 (see note 13).

Cash Flow
The free cash flow generated in 2012
was £86.5m compared to £38.9m in
2011. The underlying improvement in
EBITDA from £102.5m to £154.3m was
the key driver of this. Working capital
movements absorbed £18.6m, with
finance costs and taxation paid absorbing
£5.2m and £15.1m respectively.

Replacement capital spend increased
from £12.8m to £27.0m largely due to
equipment replacement in the Drilling
Tools business, general machine
replacement projects across the Group,
together with £5.5m (2011 – £2.3m)

spend within the Exploration and
Production division.

Expansion capital expenditure in the
year was £34.6m (2011 – £45.2m).
Facility expansion projects across the
Group absorbed £15.7m, including key
projects at Stafford, Houma and Hunting
Dearborn. Total capital expenditure for
2012 was £61.6m compared to £58.0m
in 2011.

Payments of £2.2m were made in respect
of final price adjustments and earn-out
arrangements related to the acquisitions
made in 2011. Further payments of £1.2m
are expected in 2013 after which the
potential liabilities will be extinguished.

As described above, a £17.2m repayment
of tax was received from the Canadian
tax authorities on the resolution of a
legacy tax dispute relating to our former
subsidiary Gibson Energy.

Total dividends paid during the year
were £24.1m (2011 – £18.0m).
Dividends paid to equity shareholders of
£22.6m were 35% ahead of 2011 and
reflects the Board’s confidence in the
strength of the Group.

Movements in foreign exchange rates,
particularly the US$ against £-sterling,
which moved from 1.55 at 31 December
2011 to 1.63 at 31 December 2012,
benefited the cash flow by £9.4m
(2011 – £4.0m outflow). This is mainly
attributable to the retranslation of the
Group’s US$ borrowings at the year end.

EBITDA before amortisation and exceptional items
Working capital movements
Interest paid and bank fees
Tax paid
Replacement capital expenditure
Other operating cash and non-cash movements

Free cash flow
Expansion capital expenditure
Purchase of subsidiaries
Acquisition costs
Equity placing
Gibson Energy
Dividends to equity holders and non-controlling interests
Foreign exchange
Other
Cash flows related to discontinued operations

Movement in net debt in the year

2012
£m

154.3
(18.6)
(5.2)
(15.1)
(27.0)
(1.9)

86.5
(34.6)
(2.2)
–
–
17.2
(24.1)
9.4
4.3
(1.9)

54.6

2011
£m

102.5
(33.2)
(7.6)
(15.5)
(12.8)
5.5

38.9
(45.2)
(572.5)
(8.6)
83.5
85.3
(18.0)
(4.0)
7.8
2.2

(430.6)

Hunting PLC Annual Report 2012
Financial Capital Management
2012 was a year of integrating the
acquisitions made in 2011 into the
Group and in making our final strategic
disposal, being that of the Field Aviation
business. This combined with the
decision to cease investing in the
Exploration and Production business
leaves the Group a more focused
supplier of products and services to
the energy sector.

The Group’s financial position remains
robust, with total credit facilities of
£416.2m in place (2011 – £423.6m) of
which £375.0m (2011 – £375.0m) is
committed. The committed facility
is a £375.0m multi-currency revolving
credit facility from a syndicate of 10
banks which extends to August 2016.
Further details regarding the facility
can be found in note 30.

Net debt has reduced significantly in
the year with gearing falling to 20% at
31 December 2012 (2011 – 30%) with
an adequate level of headroom remaining
compared to the Group’s committed
credit facilities providing management with
ongoing financial flexibility. Our bank
facility covenants (note 36) require EBITDA
to cover relevant finance charges by a
minimum of 4 times and net debt to
adjusted EBITDA has a current maximum
of 3.5 times. Both key bank covenant
metrics at year end were well covered.

The maximum net debt to EBITDA
permitted will reduce to 3 times in June
2013 and will remain at that level until
the facility expires in 2016.

Return on average capital employed is a
KPI management use to assess business
unit performance. The Group’s return on
average capital employed has fallen from
the 15% reported in 2011 to 14% for
2012 due to the year on year impact
of the 2011 acquisitions.

The Board considers each ordinary
dividend proposed based on the merits
of the information available to it at the
time. Consideration is given to the
financial projections of business
performance and capital investment
needs, together with feedback from
shareholder discussions.

The Group operates a centralised
treasury function with policies and
procedures approved by the Board.
These cover funding, banking
relationships, foreign currency, interest
rate exposures, cash management and
the investment of surplus cash. Further
detail on financial risks is provided
within note 30.

Currency exposure on the balance sheet
is, where practical, reduced by financing
assets with borrowings in the same
currency. Spot and forward foreign
exchange contracts are used to cover
the net exposure of purchases and sales
in non-domestic currencies.

Balance Sheet
Whilst foreign exchange rates used in
the translation of results have remained
very similar between 2011 and 2012,
there has been a more significant
change in the closing rates used for US
dollar denominated assets and liabilities
with 2011 at US$1.55 and 2012 at
US$1.63 to £1.

Foreign exchange is the only reason for the
movement in goodwill. Other intangible
assets have also been impacted by foreign
exchange but the principal movement is
the amortisation charge of £28.1m
reflected in the year (2011 – £12.2m).

Property, plant and equipment has
increased by £17.3m with £63.4m of
additions, offset by £25.5m of depreciation,
disposals of £6.8m, impairment of £5.2m
in Exploration and Production assets and
foreign exchange of £8.6m.

Working capital has increased by
£10.6m reflecting increased activity
levels including a year on year increase
in the number of Group operational
facilities – now at 66. Inventories at the
year end include £2.6m of fair value
uplift expected to be charged to the
income statement in 2013.

Balance Sheet

Goodwill
Other intangible assets
Property, plant and equipment
Working capital
Taxation (current and deferred)
Provisions
Other net assets

Capital employed
Net debt

Net assets
Non-controlling interests

Equity attributable to owners of the parent

Gearing

2012
£m

304.5
185.2
248.5
271.8
(22.8)
(29.6)
20.0

977.6
(163.8)

813.8
(18.3)

795.5

20%

2011
£m

317.9
220.8
231.2
261.2
(33.7)
(60.5)
13.5

950.4
(218.4)

732.0
(16.8)

715.2

30%

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Financial Review continued

Provisions have reduced by £30.9m
during the year following resolution of
a Canadian tax dispute as described
above. This settlement is also the major
contributory factor to the increase in
other net assets of £6.5m, which includes
the £8.7m further tax repayments due
from Canadian provincial authorities,
received on 28 February 2013.

Overall, capital employed in the Group
has remained steady at £977.6m (2011 –
£950.4m).

Amortisation and Exceptional Items
In addition to presenting reported IFRS
GAAP results in its income statement, the
Group discloses results on an underlying
basis i.e. before amortisation and
exceptional items. This is the basis on
which the Directors assess the business in
internal reporting. In the Directors’ view
this is necessary to obtain a clear
understanding of the underlying
performance of the business. More details
on amortisation and exceptional items
can be found in note 7.

Thanks to strong free cash generation,
the overall cash inflow in 2012 of
£54.6m has reduced net debt to
£163.8m at 31 December 2012.

Net assets at 31 December 2012 were
£813.8m which, after non-controlling
interests of £18.3m, result in equity
shareholders’ funds of £795.5m. This
is an increase of £80.3m over 31
December 2011, which reflects the
retained result for the year of £128.9m,
exchange losses of £27.3m, offset by
£22.6m dividend payments together
with other gains of £1.3m.

Critical Accounting Policies
The Group accounts are prepared using
accounting policies in accordance with
IFRS. The principal accounting policies
are set out in note 45.

The preparation of these accounts
requires the use of estimates, judgements
and assumptions that affect the reported
amount of assets, liabilities, revenue and
expenses and the disclosure of contingent
assets and liabilities. Directors’ estimates
are based on historical experience,
consultation with experts and other
methods that they believe are reasonable
and appropriate.

Goodwill
The carrying value of goodwill held on
the balance sheet is reviewed for
impairment at least annually. The review
compares the carrying value with the
estimated future cash flows from the cash
generating unit to which the goodwill
relates. The cash flows are based on
management’s view of future trading
prospects. Any shortfall identified is
treated as an impairment and written off.

Property, Plant and Equipment and
Other Intangible Assets
The Group’s property, plant and
equipment and other intangible assets are
subject to annual rates of depreciation
intended to spread the cost of the assets
over their estimated service life. These
rates are regularly reviewed. The rates
currently in use are set out on page 112.
In addition if, in management’s
judgement, events or circumstances
indicate a potential impairment may have
occurred, then a review of the carrying
value of the asset will be carried out.

Provisions
Provisions amounting to £29.6m are held
on balance sheet at the year end. These
are based on Directors’ estimates of the
future cost of current obligations. The
main element of provisions is in respect
of onerous lease obligations on premises
not occupied by Group entities where
assessments have been made as to the
period properties are likely to remain
vacant and what market rents can be
achieved upon occupancy.

Taxation
The effective tax rate for the full year is
28% and is the combined rate arising
from the regional mix of Group results.
The rate takes into account the estimated
future utilisation of tax losses and the
agreements with regional tax authorities
of corporate tax computations.

Deferred Tax
Deferred tax assets and liabilities are
recorded within the financial statements
at 31 December 2012 at £7.2m and
£25.7m respectively. These balances are
derived from assumptions which include
the future utilisation of trading losses and
provisions at assumed tax rates and
eligibility for offset within a tax
jurisdiction.

Share-based Payments
The estimated cost of grants and awards
of equity instruments to Group
employees is spread evenly over the
vesting period. The actuarial assumptions
used in determining the charge to income
are set out in note 38.

Retirement Benefits
The Group operates a defined benefit
pension scheme in the UK, which was
closed to new entrants with effect from 31
December 2002, as well as a number of
defined contribution schemes within the
Group. The defined benefit scheme is
accounted for under IAS 19 and the main
actuarial assumptions used are shown
within note 32 and in the table below.

Actuarial Assumptions:

Rate of inflation
Discount rate
Expected future lifetime

2012

2011

3.1% 3.2%
4.3% 4.7%

(years) – male

24.5

24.3

Expected future lifetime

(years) – female

25.9

25.8

Expected future lifetime is the number of
years a 65 year old is expected to live
based on current mortality tables.

Hunting PLC Annual Report 2012Relationships with Key Customers
The Group’s success is defined by
relationships with its key customers. A
material reduction in orders from a major
customer, whether through competitive
action, contractual dispute, business
consolidation or change in strategy could
impact the Group’s financial performance
and prospects. The Group is also reliant
upon the conduct of its customers, given
its products are exported by those
customers across the world and used in a
range of environments, including deep
sea exploration and production. Senior
management maintains close relationships
with key customers and seeks to maintain
the highest level of service to preserve
Hunting’s reputation for quality.

Product Quality and Reliability
Product quality and reliability is critical to
the Group’s reputation with its customers.

Quality assurance standards are
monitored, measured and regulated
within the Group under the authority of a
Quality Assurance Director, who reports
directly to the Chief Executive.

Review of Principal Risks and Uncertainties

Acquisitions and Capital Investment
Acquisitions are an integral part of the
continuing Group’s recent strategy of
expansion and development. While
recent acquisitions made by the Group
have integrated well, the Board is
conscious of the potential disruption to
both the Group and acquiree, of an
acquisition process and subsequent
integration.

The Board is actively involved in
monitoring, approving and assessing
acquisitions through post acquisition
appraisals to mitigate the risk of poor
investment decisions. All acquisitions
require Board approval prior to
commitment.

The Group continues to seek
opportunities for organic growth and
maintains an active capital investment
programme. The programme
encompasses investments in new
territories, buildings, production
equipment, rental equipment and IT
systems. There is a range of risks
involved in such programmes, including
poor financial returns, management
distraction, facility disruption and risk
of IT systems failure.

The Board and senior management
follow a rigorous process of approving,
managing and monitoring capital
investments along with planning for
contingencies. All capital expenditure
above discretionary limits requires
Board approval prior to commitment.

The Group has an established risk
management monitoring and review
process described in the Corporate
Governance Report on pages 40 to 43.
The process requires all businesses
to identify, evaluate and monitor risks
and take steps to reduce, eliminate or
manage the risk. Group risks are
formally reviewed by the Board at least
three times a year and are discussed at
every Board meeting. The principal risks
identified through this process that
Hunting is exposed to, which could
have a material adverse impact are listed
below, together with the steps the
Group has taken to mitigate against
these risks. Some arise from the specific
activities undertaken by the Group
whereas others are common to many
international manufacturing companies.

Risks Specific to the Nature of
Hunting Group Businesses
Shale Drilling
The Group provides products to the oil
and gas shale drilling industry. There
may be considerable future resistance to
further oil and gas shale exploration and
development from significant sections of
the public, and a drilling moratorium or
new laws and regulations may
unfavourably impact the industry.

The Board monitors public and political
opinion and maintains an awareness of
the potential for changes to legislation
especially with regard to the US where
the Group is mainly exposed.

Raw Material Commodity Prices
Although not under the Group’s control,
a material movement in oil or gas
commodity prices could impact demand
for the Group’s products and services.

Working capital and in particular
inventory levels are closely managed
to mitigate against exposure to
commodity price movement.

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Review of Principal Risks and Uncertainties continued

Other Risks Common to International
Manufacturing Businesses
Economics and Geopolitics
The economic and political environment
in the geographic areas in which the
Group operates impacts demand for
energy and therefore the Group’s range
of products and services.

Management and the Board closely
monitor trading results, forecasts, political
developments and projected economic
trends in order to match capacity to
demand and, where possible, minimise
the impact of adverse trends on the
Group. In addition overheads are
monitored regularly to ensure the
cost base is actively managed.

Key Executives
The Group is highly reliant on the
continued service of its key executives
and senior management, who possess
commercial, engineering, technical and
financial skills that are critical to the
success of the Group. Remuneration
packages are regularly reviewed to ensure
they are remunerated in line with market
rates. External consultants are engaged to
provide guidance on best practice.

Failure to retain suitably qualified
individuals, or to attract and retain strong
management and technical staff in the
future, could have an adverse effect
upon the Group and the results of its
operations. Senior management
regularly review the availability of the
necessary skills within the Group and
seeks to find suitable staff where they
feel there is vulnerability.

Health, Safety and Environmental
(“HS&E”)
The Group is subject to a number of
HS&E laws and regulations that affect
its operations, facilities and products in
each of the jurisdictions in which it
operates. The Group is committed to
operating in compliance with all HS&E
laws and regulations relating to its
products, operations and business
activities. However, there is a risk that
it may have to incur unforeseen
expenditures to cover HS&E liabilities,
to maintain compliance with current or
future HS&E laws and regulations or to
undertake any necessary remediation.

It is difficult to estimate with any
reasonable certainty the future impact
of HS&E matters, including potential
liabilities, due to a number of factors and
especially the lengthy time intervals
often involved in resolving them. There
is regular HS&E compliance reporting to
the Board.

Effective Control Over Subsidiaries
Group subsidiaries operate within a
control framework with a degree of
autonomy vested in local management.
The control framework has been
enhanced with additional central staff in
areas such as finance and taxation, the
introduction of new IT systems and
stronger co-ordination of IT activities. The
operations of subsidiaries are subject to
regular checking by management through
board and management meetings, regular
reporting and contact together with
external and internal audit.

Fluctuation in Currency
Exchange Rates
The Group has significant overseas
operations, hence results are
denominated in a variety of currencies.
As a result, the Group’s financial
statements, which are reported in sterling,
are subject to the effects of foreign
exchange rate fluctuations with respect
to currency conversions.

The Group maintains a strategy of
financial hedging to mitigate such risk,
subject to the availability of suitable
products at the right cost.

Dennis Proctor
Chief Executive

Peter Rose
Finance Director
7 March 2013

Hunting PLC Annual Report 2012
Corporate Social Responsibility Report

“ Our commitment to
shareholders, employees
and other key stakeholders
is to create a sustainable
organisation capable of
delivering long-term
positive returns.”

Aberdeen staff raised £12,000 for the Scottish Community Foundation through various activities including
a 54 mile highland hike.

Introduction
Hunting is an international energy
services company, which manufactures
and supplies products and services to the
global energy industry.

The Group operates from 66 facilities in
the key energy producing regions of the
world. Being at the forefront of delivering
energy solutions to many customers,
Hunting is committed to developing
relationships with key stakeholders –
employees, shareholders, customers,
suppliers and communities within the
areas we operate.

This report describes the policies and
responsibilities which the Group has
adopted as a responsible global
corporate citizen.

Financial Metrics
Hunting is committed to a business
strategy which targets long-term growth
in the value of the Group’s assets. We
are committed to investing capital to
maintain our organic growth profile,
while acquiring complementary
businesses which deliver similar growth.

Selected key performance
indicators include:
• Revenue
• Profit from operations
• Diluted earnings per share
• Free cash flow
• Return on capital employed
• Gearing
• Dividends per share

The Business Strategy and Business
Model are outlined on page 14 of this
Annual Report. The strategy of the
Group is to provide value added
products and services, focusing on
proprietary technologies and know-
how, incorporating product lines which
capture market share within each
product segment in which we invest.

Our commitment to shareholders,
employees and other key stakeholders
is to create a sustainable organisation,
capable of delivering long-term positive
returns and providing stability to our
employees.

Shareholders
Communicating with the Company’s
shareholders is of key importance to
the Directors. The methods of
communication to our shareholders
and employees include press releases
issued to the London Stock Exchange,
institutional investor presentations, which
are published on the Group’s website
and other communications including the
in-house corporate publication, the
Hunting Review, which is published
twice a year.

The Chief Executive and Finance
Director meet with major shareholders
at least twice a year, following the
announcement of the Group’s half
and full year results, and whenever
requested by a shareholder. The
Chairman and the Senior Independent
Director also meet with major
shareholders annually to discuss strategy,
governance and other matters.

The Company is listed on the London
Stock Exchange and is subject to
regulation by the Financial Services
Authority in the United Kingdom as well
as compliance with UK Company Law.
The Group is also subject to the laws
and regulations of the jurisdictions in
which it operates.

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Corporate Social Responsibility Report continued

“ The Group is committed
to mutually developing an
environment of honesty,
integrity and respect.”

Geographic split of employees
2011–2012

2,182

2,273

493

578

219
244

56
65

Canada

Rest of
Europe
Asia
Paciﬁc

Other

13
29

2011
2012

490

677

Above and left: Hunting PLC and Texas staff have entered into a two year commitment to support New Danville,
a self sustaining community to help adults with limiting disabilities. Over $100,000 was donated in 2012.

Employees
Our people are our most valuable asset
and the Group recognises that its success
and reputation depends upon their
efforts, integrity and commitment. Our
people create Hunting’s competitive edge
and we aim to ensure that our customers’
expectations are met and exceeded.
Responsibility for employees lies with
local management, which allows local
cultural issues to be appropriately
managed and the necessary development
programmes to be structured accordingly.

It is important for the Group to retain key
employees, as well as attracting high
quality individuals. This remains a major
challenge for the oil and gas industry.
Hunting has developed a supportive
work environment that promotes
development, learning and advancement
to ensure that its employees realise their
potential. Long service is a feature of the
Group’s employees and recognition is
given through service award programmes
across the Group. Forty years’ service is
not an uncommon attribute.

The location of our employees reflects
the global nature of the oil and gas
industry and the geographic diversity
of the Group’s activities.

At 31 December 2012, the Group has
3,866 employees (2011 – 3,453) with
the geographical split shown in the
chart above.

The Group seeks to adhere to all
relevant local and jurisdictional laws
about employment equality and
minimum wage legislation.

As a responsible employer, full and fair
consideration is given to applications for
positions from disabled persons and to
their training and career advancement.
Every effort is made to retain in
employment those who become
disabled while employed by the Group.

Hunting believes that employing the right
people is only the start of the relationship
between an employee and employer.
The Group is committed to mutually
developing an environment of honesty,
integrity and respect for its staff and for
those people and companies we work
with daily. The Group is also committed
to abiding by all international and local
laws and regulations on employment and
has a no child labour policy.

The Group encourages and promotes an
awareness of the financial and economic
factors affecting the performance of the
Group and shares information on current
activities through regular communication
and consultation.

Hunting PLC Annual Report 201231

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

The Group has published its combined
policy on health, safety and
environmental matters, which can
be found on the Group’s website.

Hunting’s Director of Health, Safety and
Environment reports directly to the Chief
Executive and a report is considered by
the Board of Directors at each meeting.

The Group’s target is to achieve zero
recordable incidents. Each local business
is required to develop tailored policies
to reflect its daily business. These
incorporate the Group’s approach to
putting safety first and, at a minimum,
to comply with local regulatory
requirements. Training is given to every
employee, whether they are on the
shop floor or working from a desk.

During the year, there were no fatalities
across the Group’s operations with
82 recordable incidents.

In 2012, the Group continued its
programme to introduce Lean
Manufacturing processes into global
operations. This resulted in efficiency
gains in a number of key business units.

Environment
The Group is committed to the
protection of the environment and
developing manufacturing processes
and procedures, which ensure that any
adverse effects on the environment are
kept to a practicable minimum. We take
the view that sustainable development is
in the interests of all our stakeholders
and include environmental issues in
our planning and decision-making.

The Group’s environmental policy
is to look for opportunities and adopt
practices that create a safer and cleaner
environment. It is particularly sensitive to
the challenges for the industry in which
it operates. The Group has programmes
in place to monitor the environmental
impact from its operational activities
and remains focused on ensuring
environmental consideration is at the
forefront of its business practices.

Through the Group’s Code of Conduct,
published on the Company’s website, the
Group sets out its equal opportunities
policies and zero tolerance approach to
harassment within the workplace. The
Group’s gender diversity policy, which
also seeks to promote fair and equal
opportunities, is also published on the
Company’s website.

The Group believes that providing
additional benefits to staff encourages
the best performance from our people.
Therefore, most employees are offered
participation in schemes which provide
healthcare and post-retirement benefits
and, in certain instances, participation in
bonus arrangements when
outperformance in terms of operational
excellence has been achieved. Hunting
has share award schemes in place as
a longer term incentive whereby staff
can participate in the ownership of
the Company.

The Board has an established “whistle-
blowing” procedure in place for any
employee wishing to raise, in confidence,
any concerns they may have about
possible financial improprieties, or other
matters, with the Senior Independent
Director. Details of the procedure are
regularly communicated to all
employees.

Health and Safety
The Group is committed to achieving
and maintaining the highest standards
of safety for its employees, customers,
suppliers and the public. Hunting has
a proven culture of aiming for best
practice and employs rigorous health
and safety practices.

Health and Safety policies include:
• Regular audit and maintenance
reviews of facilities, equipment,
practices and procedures to ensure
compliance with prevailing standards
and legislation and a safe environment
for all those who work within and
around our facilities.

• Seeking accreditation and aligning

long standing company programmes
and procedures to internationally
recognised Quality Assurance
standards.

• Monitoring, which is a management
task, is documented and reported at
each Board meeting.

• Appropriate training and education

of all staff.

Staff and management volunteers have teamed up to
raise funds for two local orphanages in Indonesia.

Hunting PLC Annual Report 2012

Corporate Social Responsibility Report continued

Natural Gas Usage (kwh)

17.8m

16.3m

15.1m

Electricity Usage (kwh)

55.9m

41.5m

30.5m

Mains Water Usage (’000m3)

169.0

124.4

98.9

The winner of the $50,000 Hunting Art Prize,
Michael Bise.

Key aspects of our environmental
policies include:
• Keeping any adverse effects on
the environment to a practicable
minimum.

• Encouraging the reduction of waste

and emissions and promoting
awareness of recycled materials and
use of renewable resources.

• Each operating unit developing and
implementing their own procedures
while conducting regular reviews to
ensure that they are maintained and
refined.

• Encouraging employees to pay special
regard to environmental issues and
requirements in the communities in
which the Group operates.
• Incorporating health, safety and

environment considerations into the
design of new facilities.

With the aim of maintaining standards a
number of the Group’s operating facilities
are ISO or API registered or subject to
other similar registrations or industry
qualifications. In 2012, 7 facilities (2011
– 6) within the Group were ISO 14001
compliant indicating a recognised
environmental management system being
in place and 2 facilities being ISO 18001
compliant (2011 – 1), indicating that health
and safety systems have been reviewed
and formally certified. More facilities
across the Group are working towards
these accreditations, continuing the
Group’s commitment to monitoring and
reducing the environmental impact of its
operations and increasing HSE standards.

The Group continues to monitor and
collect data relating to its carbon
emissions from across its operations.
For 2012, each business unit across the
Group has reported scope 1 and 2
emissions to provide a consolidated total
of each source of greenhouse gas
emissions. Total emissions are then
converted to a carbon dioxide equivalent
figure, using conversion factors published
by DEFRA at www.defra.gov.uk. The
following table details Hunting’s scope 1
and 2 emissions, excluding vehicle
mileage and fuel consumption.

CO2 equivalent emissions (tonnes)

2012

2011

%
change

Scope 1
Scope 2

3,064
3,644
36,149 22,636

12
60

Total gross
controlled
emissions

39,793 25,700

The increase in carbon dioxide emissions
between 2011 and 2012 is primarily
attributed to the acquisitions completed in
2011, where the operational scale of the
Group materially increased. Including
vehicle mileage and fuel consumption
data, Hunting’s 2012 scope 1 emissions
would be 9,061 tonnes of carbon dioxide,
leading to a scope 1 and 2 total of 45,210
tonnes of carbon dioxide emissions.

Natural gas, electricity and mains water
usage across the Group’s facilities are
shown in the chart above.

A number of Group facilities in the US
are supplied by on-site wells – water
sourced from these wells is not included
in the data presented.

Operational Excellence and Research
The Group continues to develop its
relationships with academic institutions
and during 2012 Hunting collaborated
with the University of Plymouth in the
UK to research ways of improving safety
and reliability during oil and gas extraction.

The Group continuously strives to gain
leadership in areas of technology relevant
to the Group’s products and at the
year-end had 350 active patents
(2011 – 316).

In order to promote its engagement
within its industry sector, Group
companies hold membership of the
following organisations:
• American Petroleum Institute
• Society of Petroleum Engineers
• The Intervention and Coiled

Tubing Association

• Leading Oil and Gas Industry

Competitiveness
• Investors in People

Hunting PLC Annual Report 2012“ The Group continuously strives
to gain leadership in areas of
technology relevant to the
Group’s products.”

Through the Group’s Code of Conduct
and compliance with the UK Bribery
Act, the Group has policies and controls
in place detailing procedures on how
the Group interacts with customers,
suppliers and governments around
the world.

Customers and Suppliers
The Group’s Code of Conduct has been
circulated to all of the Group’s employees,
key customers and suppliers and agents.
The principles in the Code of Conduct
lay out our responsibilities to all external
associates and also incorporates
anti-bribery and corruption policies
addressed by the UK Bribery Act.

Dennis Proctor
Chief Executive
7 March 2013

In the US, employees led a food drive in support of
the Wyoming Food Bank of the Rockies.

Community and Charitable Donations
Hunting’s commitment to the
communities in which it operates extends
on many fronts. The Group participates
in a number of initiatives and in events
which raise money for charities around
the world. In 2012, Hunting employees
participated in local charitable events,
including corporate support through
sponsorship of a number of events.

The Group’s major charitable event,
the Hunting Art Prize is an annual event
which supports and recognises the
local community in Houston, Texas.
In 2012, the Art Prize supported the
charity New Danville, a self-sustaining,
master-planned community dedicated
to providing adults with intellectual
and developmental disabilities an
opportunity to live, work, and grow with
their non-disabled peers. In Aberdeen,
employees from Hunting Energy
Services participated in the Caledonian
Challenge, raising funds for the Scottish
Community Foundation, an organisation
which distributes funds to small charities
and community projects in Scotland.

The Group also makes donations to
charities through the Chairman’s
charitable trust committee, which
comprises the Chairman and former
Hunting employees. In 2012, assistance
was granted to 32 charities.

During 2012, the Group donated
£182,000 (2011 – £162,000) to charities.
In accordance with Group policy, no
political donations were made in
the year (2011 – £nil).

Business Ethics
The Group’s Directors and employees
promote high standards of honesty and
integrity in the way it goes about its
business, recognising that the Group’s
reputation is of critical importance in
the industry in which we operate.

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Board of Directors

L-R John Nicholas, Peter Rose, Dennis Proctor, Richard Hunting, John Hofmeister and Andrew Szescila.

Board Subcommittee Membership

Executive Directors

Dennis Proctor

Peter Rose

Non-executive Directors

Richard Hunting

John Hofmeister

John Nicholas

Andrew Szescila

Audit

Committee

Nomination
Committee

Remuneration
Committee

–

✔

–

✔

–

✔

Hunting PLC Annual Report 2012Richard Hunting C.B.E.
Non-executive Chairman
Was elected an executive Director and
Deputy Chairman on the formation
of Hunting PLC in 1989 and has been
Chairman of the Board since 1991.
In 2011, Mr Hunting moved from an
executive to a non-executive role.
Chairman of the Nomination Committee.
He is a non-executive director of the
Royal Brompton & Harefield NHS
Foundation Trust.

Dennis Proctor
Chief Executive
Was appointed a Director in 2000 and
Chief Executive in 2001. He was chief
executive of Hunting Energy Services
from March 2000 after joining the Group
in 1993. He is a US citizen based in
Houston, Texas and has held senior
positions in the oil services industry in
Europe, Middle East and North America.

Peter Rose
Finance Director
Was appointed to the Board as
Finance Director in 2008. A Chartered
Accountant, he joined Hunting PLC
in 1997 prior to which he held senior
financial positions with Babcock
International.

John Hofmeister
Non-executive Director
Was appointed a non-executive
Director in 2009 and appointed the
senior independent director of the
Company in 2010. A US citizen resident
in Houston, Texas. He is the founder
and chief executive officer of the
Washington D.C. registered not-for-profit
Citizens for Affordable Energy Inc, and a
non-executive director of US quoted
Lufkin Industries Inc and Camac Energy
Inc. He is the former President of Shell
Oil Company and a former Group
Director of Royal Dutch Shell PLC in
The Hague, Netherlands.

John Nicholas
Non-executive Director
Was appointed a non-executive Director
in 2009 and is chairman of the Audit
Committee. He is a Fellow of the
Association of Chartered Certified
Accountants and is a member of the UK
Financial Reporting Review Panel. He is
currently a non-executive director of
Rotork PLC and Mondi plc. He was
formerly the Group Finance Director of
Tate & Lyle plc and prior to that Group
Finance Director of Kidde plc.

Andrew Szescila
Non-executive Director
Was appointed a non-executive Director
in 2011 and is chairman of the
Remuneration Committee. A US citizen
resident in Destin, Florida. He is currently
a non-executive director of UK quoted
Frontera Resources Corporation. He was
formerly the Chief Operating Officer of
Baker Hughes Inc.

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Report of the Directors

The Directors present their report, together with the audited
financial statements for the year ended 31 December 2012.

Principal Activities and Business Review
Hunting PLC is a holding company whose subsidiaries are
primarily involved in the manufacture and distribution of
products that enable the extraction of oil and gas for the
world’s leading energy companies.

The Company is UK domiciled and incorporated in England
and Wales. Details of the Company’s principal subsidiaries
and associated undertakings are set out in note 44.

The Business Review, encompassing the Chief Executive’s
Review, Operating Review, the Financial Review and Review
of Principal Risks and Uncertainties on pages 10 to 33,
together with the Chairman’s Statement on pages 6 and 7,
reports on the principal activities of the Group and its
performance during the year ended 31 December 2012,
along with likely future developments in its operations. This
information, together with a description of financial capital
management (page 25), details of the Group’s policies on
employment, health, safety and the environment, which are
contained within the Corporate Social Responsibility Report
on pages 29 to 33, and the Corporate Governance Report on
pages 40 to 43, are incorporated into this report by reference.

Results and Dividends
The results of the Group are set out in the Consolidated
Income Statement on page 55.

The Directors, subject to approval by shareholders at the
Annual General Meeting of the Company to be held on 17
April 2013, recommend a final dividend of 14.0p per share
(2011 – 11.0p), which together with the interim dividend of
4.5p (2011 – 4.0p), takes the total dividend for the year to
18.5p per share (2011 – 15.0p), an increase of 23%. The final
dividend will be paid on 1 July 2013 to shareholders on the
register at the close of business on 14 June 2013.

Changes in the Group and its Interests During the
Financial Year
On 27 April 2012, the Group disposed of Hunting Canadian
Airport Holdings Ltd. and its subsidiaries, including Field
Aviation Company Inc. Further details can be found in note 43.

Post Balance Sheet Events
There have been no disclosable post balance sheet events.

Directors
The biographies of the Directors of the Company as at
31 December 2012 are set out on page 35 of this report.
As recommended by the UK Corporate Governance Code,
all Directors will submit themselves for re-election at the
Company’s Annual General Meeting.

On 29 August 2012, both John Hofmeister and John Nicholas
were reappointed as non-executive Directors for a second
three year term. Mr Hofmeister will continue as the Senior
Independent Director of the Company and Mr Nicholas will
continue as Chairman of the Audit Committee.

No Director during the year had a material interest in any
contract of significance to which either the Company or any
of its subsidiaries were a party. Directors’ interests in the
shares of the Company are shown on page 49. As at 31
December 2012, no Director of the Company had any
beneficial interest in the shares of subsidiary companies.

Directors’ and Officers’ Liability Insurance
The Company maintains insurance against certain liabilities,
which could arise from a negligent act or a breach of duty by
its Directors and officers in the discharge of their duties. This
is a qualifying third party indemnity provision, which was in
force throughout the financial year.

Annual General Meeting
The Annual General Meeting of the Company will take place
on Wednesday 17 April 2013 at The Royal Automobile Club,
89 Pall Mall, London, SW1Y 5HS, commencing at 10.30am.
At the meeting, as well as routine matters, members will be
asked to receive the Report of the Directors and Accounts, to
approve the 2012 Remuneration Committee Report and to
give authority to the Directors to reappoint the Group’s
external auditors and determine their remuneration.

Further details of the resolutions are set out in the letter
concerning the Annual General Meeting, which
accompanies the Notice of the Annual General Meeting.

Powers of the Directors
Subject to the Company’s Articles of Association, UK
legislation and any directions prescribed by resolution of the
Company in general meeting, the business of the Company is
managed by the Board. The Directors have been authorised
to allot and issue Ordinary shares and to make market
purchases of the Company’s Ordinary shares. These powers
are exercised under authority of resolutions of the Company
passed at its Annual General Meeting.

During the financial year ended 31 December 2012
733,055 Ordinary shares were issued pursuant to the
Company’s various share plans.

Share Capital
The Company’s issued share capital comprises a single class,
which is divided into Ordinary shares of 25p each, details of
which are set out in note 33 of the financial statements. As at
31 December 2012, there were 147,049,241 Ordinary shares
in issue. The rights and obligations attached to these shares
are summarised on page 37 and are detailed in the Articles of
Association of the Company, copies of which can be
obtained from Companies House in the UK, or by writing to
the Company Secretary at the registered office of the
Company. Subject to applicable statutes, shares may be
issued with such rights and restrictions as the Company may,
by ordinary resolution, decide, or (if there is no such
resolution or so far as it does not make specific provision) as
the Board may decide. The movements in share capital
during the year are detailed in note 33 of this report.

The Directors have the authority to allot shares and to disapply
statutory pre-emption rights. This authority is renewed
annually at the Annual General Meeting. The Company has

Hunting PLC Annual Report 201237

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

authority, renewed annually, to purchase up to 14.99% of the
issued share capital, equating to 22,042,681 shares at 31
December 2012. Any shares purchased will either be
cancelled, and the number of Ordinary shares in issue reduced
accordingly, or held in Treasury. The Directors will be seeking
a new authority for the Company to purchase its Ordinary
shares at the Annual General Meeting.

The Company holds 986,731 shares in Treasury (2011 –
1,072,186), used to satisfy a proportion of the shares under
award to employees who participate in the share-based
incentive schemes currently run by the Company. This number
of shares is deducted from the Company’s equity. The Company
has a policy to purchase shares in the market or issue new
shares to meet future requirements of these incentive schemes.
During the year, the Company, through the Employee Share
Trust, purchased 85,558 Treasury shares with an aggregate
nominal value of £21,390. The total consideration was £797,016.
Details of the employee share schemes can be found in the
Remuneration Committee Report on pages 45 and 46 and in
note 38.

The rights to such shares are restricted in accordance with the
Companies Act 2006 and, in particular, the voting and
dividend rights attaching to these shares are automatically
suspended.

Voting Rights and Restrictions on Transfer of Shares
On a show of hands at a general meeting of the Company,
every holder of Ordinary shares present in person or by proxy,
and entitled to vote, has one vote, and, on a poll, every member
present in person or by proxy and entitled to vote has one vote
for every Ordinary share held. Further details regarding voting
at the Annual General Meeting can be found in the notes to
the Notice of the Annual General Meeting. None of the
Ordinary shares carry any special rights with regard to control
of the Company. Proxy appointments and voting instructions
must be received by the Company’s Registrars not later than
48 hours before a general meeting.

Shareholders may submit votes electronically at
www.sharevote.co.uk. A Voting ID, Task ID and Shareholder
Reference Number will be required to complete this method
of voting; these details are included on shareholders’ voting
proxy cards. To be valid, an electronic proxy must be received
by no later than 48 hours before a general meeting. Any
shareholder having difficulty submitting their voting
instructions electronically should contact the Company’s
Registrars immediately.

A shareholder can lose his entitlement to vote at a general
meeting where that shareholder has been served with a
disclosure notice and has failed to provide the Company with
information concerning interests in those shares. Shareholders
rights to transfer shares are subject to the Company’s Articles
of Association.

Transfers of uncertificated shares must be carried out using
CREST and the Directors can refuse to register a transfer of an
uncertificated share in accordance with the regulations
governing the operation of CREST.

The Directors may decide to suspend the registration of
transfers, for up to 30 days a year, by closing the register of
shareholders. The Directors cannot suspend the registration
of transfers of any uncertificated shares without obtaining
consent from CREST.

There are no restrictions on the transfer of Ordinary shares in
the Company other than:
• certain restrictions may from time to time be imposed by
laws and regulations, for example insider trading laws;
• pursuant to the Company’s share dealing code whereby
the Directors and certain employees of the Company
require approval to deal in the Company’s shares; and
• where a shareholder with at least a 0.25% interest in the
Company’s certificated shares has been served with a
disclosure notice and has failed to provide the Company
with information concerning interests in those shares.

The Company is not aware of any agreements between
shareholders that may result in restrictions on the transfer
of Ordinary shares or on voting rights.

Research and Development
Group subsidiaries undertake, where appropriate, research
and development to meet particular market and product
needs. The amount incurred and written off by the Group
during the year was £1.7m (2011 – £0.6m).

Charitable and Political Contributions
During the year, the Group donated £57,000 (2011 –
£48,000) to UK charitable organisations and £125,000 (2011
– £114,000) to overseas charities. It is the Group’s policy not
to make political donations, accordingly there were no
political donations made during the year (2011 – £nil).

Property, Plant and Equipment
Details of movements in property, plant and equipment are
shown in note 15 to the financial statements. The Directors
are of the opinion that the net book value of Hunting’s
properties at 31 December 2012 exceeded their market value
by approximately £5.3m. No impairment has been recorded
as the Directors are of the opinion that the expected future
profits and cash flows generated from the properties support
the net book values as at 31 December 2012.

Registrar
The address and contact details of Equiniti Limited, the
Company’s Registrar, are listed on the inside back cover
of this report. Equiniti is the Company’s single alternative
inspection location, whereby individuals can inspect the
register of members. Individual shareholders may view
their personal shareholder information online, through
the www.shareview.co.uk website.

Articles of Association
The Company’s Articles of Association may only be amended
by special resolution at a general meeting of shareholders.
Where class rights are varied, such amendments must be
approved by the members of each class of share separately.

Hunting PLC Annual Report 2012

Report of the Directors continued

Significant Agreements
The Company is a party to a revolving credit facility in which
the counterparties can determine whether or not to cancel
the agreement where there has been a change of control of
the Company.

all reasonable steps necessary in order to make himself aware
of any relevant audit information and to establish that the
Group’s auditors are aware of that information. This
confirmation is given and should be interpreted in accordance
with the provisions of Section 418 of the Companies Act 2006.

The service agreements of the executive Directors include
provisions for compensation for loss of office or employment
as a result of a change of control. Further details of the
Directors’ service contracts can be found in the
Remuneration Committee Report on pages 47 and 48.

Policy on the Payment of Creditors
The Company’s and Group’s policy is to pay all creditors in
accordance with agreed terms of business. The Company
itself has no substantial trade payables. The total amount of
Group trade payables falling due within one year at 31
December 2012 represents 41 days’ worth (2011 – 45 days),
as a proportion of the total amount invoiced by suppliers
during the year ended on that date.

Statement of Disclosure of Information to Auditors
In accordance with the Companies Act 2006, all Directors in
office as at the date of this report have confirmed, so far as
they are aware, there is no relevant audit information of which
the Group’s auditors are unaware and each Director has taken

Going Concern
The Group’s business activities, together with the factors
likely to affect its future development, performance and
position are set out in the Chief Executive’s Review and the
Operating Review on pages 10 to 21. The financial position
of the Group, its cash flows, liquidity position, borrowing
facilities and financial capital management are described on
pages 24 to 26 and the principal risks and uncertainties facing
the business are described on pages 27 and 28. The notes
to the financial statements include the Group’s objectives,
policies and processes for managing its capital (note 36), its
financial risk management objectives (note 30), details of its
financial instruments (note 29), hedging activities (note 28)
and sensitivity analysis (note 31) and its exposures to credit
risk and liquidity risk (note 30).

The Group has access to considerable financial resources
including a £375m committed bank facility. The main
financial covenants (note 36) attached to this facility are (1)
EBITDA should not be less than four times net finance

Substantial Interests
As at 31 December 2012, pursuant to the Disclosure and Transparency Directive, issued by the Financial Services Authority,
the major shareholders of the Company are as follows:

AXA group of companies
Hunting Investments Limited
Threadneedle Asset Management
M&G Investment Management
Mirabaud Investment Management
BlackRock group of companies
Slaley Investments Limited
F Godson – as trustee
Legal & General Investment Management
Standard Life Investments
JA Trafford – as trustee
Norges Bank Investment Managers
Cooperative Insurance Society
Royal London Asset Management
David RL Hunting
– as trustee
– other beneficial

Number of
Ordinary
shares

Notes

(v) 15,002,781
(i)/(iv) 10,884,743
8,985,167
(vi) 8,944,131
8,123,430
(vii) 6,745,747
6,411,679
(ii)/(viii) 5,861,575
4,852,848
3,877,605
(ii)/(viii) 3,680,686
3,457,059
3,319,647
3,071,984
199,910
(ii) 2,549,117
(iii) 2,484,583

Percentage
of issued
Ordinary
shares

10.2
7.4
6.1
6.1
5.5
4.6
4.4
4.0
3.3
2.6
2.5
2.4
2.3
2.1
0.1
1.7
1.7

Notes
i.

Included in this holding are 9,437,743 Ordinary shares held by Huntridge Limited, a wholly-owned subsidiary of Hunting Investments Limited. Neither of these
companies is owned by Hunting PLC either directly or indirectly.

ii. After elimination of duplicate holdings, the total Hunting family trustee interests shown above amount to 6,165,269 Ordinary shares.
iii. Arise because David RL Hunting and his children are or could become beneficiaries under the relevant family trusts of which David RL Hunting is a trustee.
iv. Richard H Hunting and David RL Hunting are both directors of Hunting Investments Limited.
v. On 21 February 2013, AXA group of companies notified the Company that it had increased its shareholding to 17,016,457 Ordinary shares, representing 11.6% of the

issued share capital.

vi. On 7 February 2013, M&G Investment Management disclosed to the Company that its total shareholding had decreased to 8,388,201 Ordinary shares representing
5.7% of the issued share capital. On 21 February 2013, M&G Investment Management informed the Company that their holding had reduced to below 5% of the
issued share capital.

vii. On 22 February 2013, BlackRock group of companies disclosed to the Company that its total shareholding had increased to 7,875,629, representing 5.4% of the

issued share capital.

viii. On 5 March 2013, the Company was informed that, in their roles as trustees, Messrs Godson’s and Trafford’s interest in the Company’s Ordinary shares had reduced

by 18,900 shares.

Hunting PLC Annual Report 2012charges, and (2) net debt should be no more than three-and-
a-half times adjusted EBITDA. In accordance with the terms
of the facility agreement, the net debt covenant ratio changes
to three times EBITDA in 2013. EBITDA, for covenant test
purposes, is based on the previous rolling twelve month
period, measured twice yearly at 30 June and 31 December.

The Group has a broad range of products and services and a
diverse, global customer and supplier base and meets its
day-to-day working capital requirements through its cash and
debt facilities.

The Group continues to have limited exposure to the Euro
zone or other regions that are perceived as high risk or
exposed to the direct impact of austerity measures. The Group
also retains limited exposure to credit risk as it has strong,
well-developed relationships with its major customers and
maintains insurance cover for 95% of its trade receivables.

The Group’s results are exposed to currency risk, as a major
portion of earnings is generated in several currencies, in
particular the US dollar, prior to translation into sterling at the
period’s average exchange rate. Movements in these rates do
affect the Group’s results and in response to this the currency
impact on forecast results is monitored closely and certain
derivatives are purchased to mitigate this risk.

The Group’s forecasts and projections, taking account of
reasonably possible changes in trading performance, show that
the Group is well placed to manage its business successfully
in the current economic climate. Accordingly, the Directors,
having made appropriate enquiries, are satisfied that the Group
has adequate resources to meet the Group’s operational
requirements for the foreseeable future and consequently
continue to adopt the going concern basis of accounting in
preparing these consolidated financial statements.

Auditors
PricewaterhouseCoopers LLP has indicated its willingness to
continue in office as auditors. A resolution to reappoint them
as auditors to the Group will be proposed at the Annual
General Meeting to be held on 17 April 2013.

By Order of the Board

Peter Rose
Company Secretary
7 March 2013

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Corporate Governance Report

“ It is with great pleasure that I introduce
to you our Corporate Governance
Report for 2012. During the year
the Board appointed external
facilitators to undertake its annual
performance evaluation and in the
final quarter of the year completed
the exercise, with the feedback
being considered by the Board
at its December meeting.

“ Hunting continues to comply with the
UK Corporate Governance Code and
wherever possible seeks to enhance its
governance practices and disclosures.
As part of this ongoing development,
I am pleased to highlight a report
from the Audit Committee as
recommended by the new Code.”

Richard Hunting C.B.E., Chairman

UK Corporate Governance Code
This statement, which has been approved by the Board,
reports on the Company’s compliance with the UK
Corporate Governance Code (“the Code”) as issued by the
Financial Reporting Council (“FRC”) in 2010 and how the
principles of the Code have been applied during the year.

The Company was fully compliant with the Code’s provisions
throughout the year.

Compliance with the principles relating to Directors’
remuneration is reported within the Remuneration
Committee Report on pages 44 to 51 and the activities of the
Audit Committee are reported on pages 52 and 53.

Board Composition and Committee Membership
The Board of Directors currently comprises the non-
executive Chairman, Chief Executive, Finance Director and
three independent non-executive Directors. All independent
non-executive Directors are appointed to the Company’s
Nomination, Audit and Remuneration Committees.

This composition, with a separate Chairman and Chief
Executive, ensures a balance of responsibilities and
authorities. Non-executive Directors’ letters of appointment
include details of their duties and expected time
commitments required. The Directors, together with brief
biographical details, are identified on pages 34 and 35.

Excluding the Chairman, 60% of the Board is currently
comprised of independent non-executive Directors.

Mr Hunting, the Company’s non-executive Chairman, is not
regarded as independent, given his former executive position
since joining the Company in 1989.

The Company has procedures in place to deal with potential
conflicts of interest whereby actual and potential conflicts of
interest are reviewed, and appropriate authorisation sought,
prior to the appointment of any new Director or if a new
conflict arises. In accordance with the Articles of Association,
only non-conflicted Directors are involved in the
authorisation process. The Board is of the view that these
procedures operated effectively throughout the year. The
Group operates a decentralised management structure to
allow for rapid responses to business matters. A framework of
controls with discretionary limits and powers for local
management is contained within a group manual.

Appointment and Replacement of Directors
Rules for the appointment and replacement of Directors are set
out in the Company’s Articles of Association. Directors are
appointed by the Company by ordinary resolution at a general
meeting of Ordinary shareholders or by the Board on the
recommendation of the Nomination Committee. The Company
may also remove a Director. Additional details of the workings
of the Nomination Committee are set out on pages 42 and 43.

Following the Code’s guidance on the election of Directors, all
members of the Board submit themselves for re-election at
each Annual General Meeting of the Company.

Hunting PLC Annual Report 201241

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

The non-executive Directors are initially appointed for a three
year term with subsequent reappointment conditional upon an
appraisal and review process. Letters of appointment for each
of the independent non-executive Directors are available from
the Company upon request and their terms of appointment are
summarised on pages 47 and 48. Details of the executive
Directors’ service contracts are set out on page 47.

Prior to the appointment of a non-executive Director, the
Nomination Committee undertakes an evaluation of the
Board’s requirements to ensure the balance of skill and
experience is maintained to fulfil the Group’s strategy. In the
case of a non-executive Director being reappointed, the Code
recommends a particularly rigorous evaluation with particular
consideration being given to the need to regularly refresh the
Board and to continued independence. On 29 August 2012
John Hofmeister and John Nicholas were both reappointed as
non-executive Directors of the Company for a second three
year term of office, following an evaluation exercise and
recommendation by the Nomination Committee. Neither Mr
Hofmeister or Mr Nicholas participated in the evaluation or
decision to propose their respective appointments to the
Board. Both Mr Hofmeister and Mr Nicholas continue to
remain independent in judgement and free from any conflicts
of interest. Mr Hofmeister also continues his role as the
Company’s Senior Independent Director and Mr Nicholas
continues as Chairman of the Audit Committee.

On appointment to the Board, each Director receives
comprehensive induction tailored to their experience and
needs. All Directors have access to the Company Secretary
and to independent professional advice, at the Company’s
expense, in the furtherance of their duties. Directors are
encouraged to maintain their skills and knowledge to best
practice standards and, where appropriate, attend update
training courses on relevant topics. During the year, the
Chairman held meetings with the non-executive Directors
without the executive Directors being present and also met
each individual Director to discuss training and development
requirements. The Company Secretary, through the Chairman,
is responsible for keeping the Board informed of Corporate
Governance developments and maintaining corporate
awareness of legislative and regulatory changes. The
appointment and removal of the Company Secretary is a
matter reserved for the Board.

Number of meetings held in 2012

Number of meetings attended:
Richard Hunting
Dennis Proctor
Peter Rose
John Hofmeister
John Nicholas
Andrew Szescila

Annual Performance Evaluation
During 2012, the Board appointed IDDAS (www.iddas.com), a
specialist advisory practice as external facilitators to complete a
performance evaluation exercise as recommended by the UK
Corporate Governance Code. As part of the evaluation process,
each individual Director completed a detailed governance and
evaluation questionnaire and were interviewed by IDDAS,
covering Board and subcommittee procedures.

IDDAS briefed the Chairman on the results of the evaluation
who in turn provided feedback to the Board and to the
individual Directors. IDDAS also submitted a final report on
the process which was presented to the Board at the Meeting
of Directors on 5 March 2013.

IDDAS has no connection with the Company other than being
engaged to undertake this exercise.

This externally facilitated evaluation will be undertaken every
three years with the exercise being conducted internally for the
intervening years.

Separately to the above process, the performance of the
Chairman was evaluated by the non-executive Directors in
March 2013 as recommended by the UK Corporate
Governance Code.

Board and Committee Meetings
The Board normally holds six formal meetings each year, of
which one is held in North America. Meeting dates are set a
year in advance. Attendance by each of the Directors at
Board or committee meetings is detailed below.

The duties and responsibilities of the Board and its
subcommittees are formally agreed by the Board in writing.
In addition, the division of responsibilities between the
Chairman and Chief Executive is set out in writing and
agreed by the Board. Matters specifically reserved for the
Board include, but are not limited to, the following:
• compliance with UK Company Law and the UKLA’s

Listing Rules;

• review of the Group’s system of risk management, internal

control and assess its effectiveness;

• approve all Stock Exchange announcements;
• approve the full and half year financial statements,

including the declaration of dividends;

Board

Audit
Committee

Nomination
Committee

Remuneration
Committee

6
6
6
6
6
6

–
–
–
4
4
4

1
1
–
1
1
1

–
–
–
4
4
4

Board papers are always circulated in advance of meetings. These include detailed financial reports on the Group’s activities,
reports on each operating division, health and safety, risk management and investor relations reports. In addition, the meetings
held in March and August focus on the full and half year results respectively and the meeting in December focuses on the
budget for the following financial year.

Hunting PLC Annual Report 2012

Corporate Governance Report continued

• consider the Group’s commercial strategy and approval of

the annual budget;

• consider recommendations of the Board subcommittees
including Board remuneration, appointments and their
terms of reference.

Institutional Shareholders
The Company uses a number of processes for communicating
with shareholders, including stock exchange announcements,
the annual and half year reports, interim management
statements issued twice a year, and the Annual General
Meeting to which all shareholders are invited. In addition, the
Chief Executive and Finance Director meet on a one-to-one
basis with all principal shareholders at least twice a year,
following the Group’s half and full year results, or when
requested to update them on Group performance and strategy.
The Board is in turn briefed by the Chief Executive, when
appropriate, on matters raised by shareholders.

During the year, the Chairman and Senior Independent
Director met with a number of shareholders to discuss strategy,
governance and other matters. Their comments were passed
on to the Board by the Chairman. The non-executive Directors
are also available to meet shareholders.

The Company’s major shareholders are listed, together with the
information required under the Disclosure and Transparency
Rules 7.2.6, within the Report of the Directors on page 38.

Internal Control
The Board acknowledges its responsibility for monitoring the
Group’s system of internal control, for reviewing its
effectiveness and for compliance with the Turnbull guidance.
The internal control system, which has been in place
throughout 2012 and up to the date of approval of these
accounts, is an on-going evolutionary process designed to
identify, evaluate and manage the significant risks to which
the Group is exposed. These systems of internal control are
designed to manage rather than eliminate risks, therefore they
only provide reasonable, but not absolute assurance against
material misstatement or loss in the financial statements and
of meeting internal control objectives.

The Directors have reviewed the effectiveness of the Group’s
system of internal control for the period covered by these
financial statements, the key features of which are as follows:

Management Structure – within operational parameters set
by the Board, management is delegated to the executive
Directors. Subsidiaries operate within clearly defined policies
and authorities contained within a group manual under a
decentralised management structure. All senior management
changes require the prior approval of the Chief Executive.

Reporting and Consolidation – all subsidiaries submit
detailed financial information in accordance with a pre-set
reporting timetable. This includes weekly, bi-monthly and
quarterly treasury reports, monthly management accounts,
annual budgets and two-year plans, together with half year
and annual statutory reporting. The Group’s consolidation
process is maintained and updated with regular communication,
including distribution of a group manual to all reporting units.

The Group monitors and reviews new UK Listing Rules,
Disclosure and Transparency Rules, accounting standards,
interpretations and amendments and legislation and other
statutory requirements. Subsidiary reporting entities are
supported by instruction from Group and structured training.
All data is subject to review and assessment by management
through the monitoring of key performance ratios and
comparison to targets and budgets. The content and format of
reporting is kept under review and periodically amended to
ensure appropriate information is available.

Strategic Planning and Budgeting – strategic plans and
annual budgets containing comprehensive financial projections
are formally presented to the Board for adoption and approval
and form the basis for monitoring performance. Clearly
defined procedures exist for capital expenditure proposals
and authorisation.

Quality Assurance – most of the business sectors within
which the Group operates are highly regulated and subsidiaries
are invariably required to be accredited, by the customer or an
industry regulator, to national or international quality
organisations. These organisations undertake regular audits
and checks on subsidiary procedures and practices ensuring
compliance with regulatory requirements.

Board Committees
The Board has three main committees to which it delegates
responsibility and authority:

Nomination Committee
Members of the committee are Richard Hunting (committee
chairman), Dennis Proctor and the independent non-executive
Directors. The committee convened once during the year and
has written terms of reference approved by the Board, which
are published on the Group’s website. The role of the committee
includes leading the process for Board appointments and
determining the terms of new appointments. The committee
also considers succession planning which takes into account
the experience and skills required of Board members.

On 28 August 2012 the committee met to consider the
reappointment of John Hofmeister and John Nicholas and to
approve new committee terms of reference. Following an
evaluation exercise, both Mr Hofmeister and Mr Nicholas
were each reappointed from 29 August 2012 for a second
three year term of office.

The Board has considered the recommendations of the Davies
Report (Women on Boards) and in 2012 issued its gender
diversity policy for Board appointments. Given the current size
and balance of experience of Hunting’s Board and the recent
refreshing of the Board’s independent non-executive Directors
it is unlikely that Hunting will be compliant with the
recommendations of the Davies Report in the short term.
However, in line with the Davies Report’s recommendations,
Hunting’s diversity policy commits the Group to:
• An embedded culture of equal opportunities for all

employees, regardless of gender;

• Require external recruitment consultants to submit their
diversity policies to the Group prior to appointment;

Hunting PLC Annual Report 2012The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain the
Group’s and Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the
Group and the Company and to enable them to ensure that
the financial statements and the Remuneration Committee
Report comply with the Companies Act 2006 and, as regards
the Group financial statements, Article 4 of the IAS
Regulation. The Directors are also responsible for
safeguarding the assets of the Group and the Company and
for taking reasonable steps for the prevention and detection
of fraud and other irregularities.

The Directors are also responsible for the maintenance and
integrity of the Group’s website, www.huntingplc.com.
Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.

Pursuant to the Financial Service Authority’s Listing Rules,
Disclosure and Transparency Rules and the UK Corporate
Governance Code, each of the Directors, whose names and
responsibilities are listed on pages 34 and 35, confirm that, to
the best of their knowledge and belief:

• the financial statements, prepared in accordance with IFRSs
as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit of the Group and of
the Company;

• the Business Review on pages 10 to 33 includes a fair

review of the development and performance of the Group’s
operations and the position of the Group and the Company,
together with a description of the principal risks and
uncertainties they face.

By Order of the Board

Peter Rose
Company Secretary
7 March 2013

• Ensure that external consultants appointed by Hunting

submit candidate shortlists comprising of an appropriate
gender balance for consideration by the Nomination
Committee;

• A target of at least one female Director of the Company

when practicable;

• An annual review by the Nomination Committee of its

progress complying with the Davies Report’s
recommendations.

Remuneration Committee
The Remuneration Committee (“the Committee”) comprises
solely the independent non-executive Directors of the
Company and is chaired by Andrew Szescila. Details of the
Remuneration Committee’s activities are contained within its
report on pages 44 to 51.

The Committee convened four times during the year and has
written terms of reference approved by the Board which are
published on the Group’s website. During the year, the
Committee reviewed its effectiveness and the Chairman
reported these findings to the Board.

Audit Committee
The Audit Committee comprises exclusively of the
independent non-executive Directors of the Company and is
chaired by John Nicholas. Details of the Audit Committee’s
activities are contained within its report on pages 52 and 53.

Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report,
the Remuneration Committee Report and the financial
statements in accordance with applicable laws and regulations.

Company Law requires the Directors to prepare financial
statements for each financial year. Under that law, the
Directors have prepared the Group and parent Company
financial statements in accordance with International
Financial Reporting Standards (“IFRSs”) as adopted by the
European Union (“EU”). Under Company Law, the Directors
must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Group and the Company and of the profit or
loss of the Group for that period.

In preparing these financial statements, the Directors are
required to:
• select suitable accounting policies and apply them

consistently;

• make judgements and accounting estimates that are

reasonable and prudent;

• state whether applicable IFRSs as adopted by the EU have

been followed, subject to any material departures
disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern
basis, unless it is inappropriate to presume that the
Company will continue in business.

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Remuneration Committee Report

“ The work of the Remuneration
Committee during 2012
included reviewing the
remuneration structures within
the Group; approving base
salaries, cash bonuses and
long-term incentive awards
for the executive Directors;
and determining awards
to executives under the
Performance Share Plan.”

Andrew Szescila, Remuneration
Committee Chairman

Introduction
Hunting operates in the international energy arena, supplying
to global companies. Recruiting, retaining and appropriately
incentivising our senior management remains a clear focus
for the work of the Remuneration Committee. The following
report summarises the Committee’s work and outlines
forward policies for remuneration.

Compliance
This report has been prepared in accordance with Schedule 8 of
the Large and Medium-sized Companies and Group (Accounts
and Reports) 2008 and the relevant provisions of the Companies
Act 2006. The report also satisfies the relevant requirements of
the UKLA’s Listing Rules and describes how the Board has
applied the principles relating to Directors’ remuneration in the
UK Corporate Governance Code. It has been approved by the
Board and will be presented to shareholders for approval at the
Annual General Meeting on 17 April 2013.

Remuneration Committee
Role and Composition
The Remuneration Committee (the “Committee”) is responsible
for determining the remuneration of the non-executive
Chairman and the executive Directors, including the setting of
competitive salaries, annual performance targets and participation
in the Company’s executive share-based incentive plans. The
Committee also takes account of remuneration policy for the
Group’s senior executives generally.

The constitution and operation of the Committee during the
year has complied with the UK Corporate Governance Code’s
guidance on Directors’ remuneration. The terms of reference
of the Committee are published on the Group’s website and
are available from the Company on request.

The Committee comprises the independent non-executive
Directors of the Company Andrew Szescila (Committee
Chairman), John Hofmeister and John Nicholas.

The Committee met four times in 2012 with all members
attending all meetings.

Work During the Year
The Committee’s principal activities during 2012 included:
• review of the remuneration structure vis-à-vis business needs;
• consideration and approval of executive Directors’ salaries,
bonuses and awards under the Performance Share Plan
(“PSP”);

• measurement of the performance conditions and

determination of vesting levels in respect of awards under
the Long-Term Incentive Plan (“LTIP”) and the PSP;

• approval of grants under the PSP; and
• approval of the Remuneration Committee Report.

Advice
During the year, New Bridge Street (a trading name of AON
Hewitt Limited), Pearl Meyer & Partners and Towers Watson
provided advice and assistance on remuneration for Hunting’s
Directors, executive incentive plans and share scheme matters.
None of these advisers provided any other service to the
Group during 2012.

Hunting PLC Annual Report 201245

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

The Committee also consulted with and received information
from the executive Directors during the year but not in
respect of their own remuneration.

The Committee is also mindful of pay and conditions for the
wider employee population when determining executive
remuneration.

Remuneration Policy
The Group aims to ensure that remuneration, generally, and
incentives in particular, provide a clear link between individual
performance and shareholder interests. The policy is to
provide competitive remuneration packages enabling the
Group to attract, motivate and retain executives of high ability,
experience and commitment.

The Committee’s on-going approach is to set base salaries
within competitive market ranges, combined with realistic
reward potential for performance that is outstanding. Executive
Directors’ remuneration packages consist of an annual salary,
health cover, car and fuel benefits, life and disability insurance,
an annual performance-linked cash bonus plan, pension
contributions, participation in performance linked share plans
and a long-term incentive plan. Performance-related elements
should form a significant proportion of total remuneration
packages and performance targets are established to achieve
consistency with the interests of shareholders, with an
appropriate balance between long and short-term goals.

In setting the remuneration of individual Directors, the
Committee takes account of their role, responsibilities, skills,
performance and references credible and established market
pay studies. The Committee reviews such studies with caution
in view of the risk of an upward ratchet in remuneration levels.
The Committee also has the discretion to take account of
social and corporate governance issues when setting the
remuneration of the executive Directors.

Consistent with policy on service contracts, executive
Directors’ service contracts are subject to termination on one
year’s notice by the Company or the executive.

The Committee believes an appropriate balance should be
maintained between fixed and variable performance-related
remuneration, with the current balance approximately 26%
deriving from salary and benefits and 74% from variable
incentives.

Set out below are the key elements of the policy, which will
apply in 2013 and subsequent financial years. Whilst no major
changes to policy are being implemented, the Committee
considers that an effective policy needs to be kept under
review in order to reflect future changes to business needs and
the environment in which the Company operates and,
therefore, the policy may be amended in future.

Base Salaries
Base salaries are reviewed annually. In considering appropriate
salary levels, the Committee takes into account the remuneration
paid by comparable companies in terms of asset size, revenues,
profits, the number of employees, market capitalisation and the
complexity and international spread of the Group’s operations,
as well as applicable rates of inflation. The Company’s practice
is to target base salaries at the mid-market level in the
appropriate market for an executive position. In determining
executive salaries, consideration is given to their experience
and general personal performance.

Annual Bonus
An annual performance-linked cash bonus plan is in
place for the executive Directors. The plan, which is not
pensionable, is designed to provide an incentive reward for
performance and reflects the competitive markets in which
the Group conducts its business.

Dennis Proctor and Peter Rose are eligible for a bonus under
the scheme when 80% of the Group’s underlying budgeted
profit before tax and budgeted return on capital employed is
achieved. Below this level no bonus is payable. Further, the
bonus is weighted with 70% to achieving the budgeted profit
before tax and 30% to the budgeted return on capital
employed.

The amount payable under the scheme, when these budgeted
targets are achieved, is 100% of base salary for Dennis Proctor
and 75% of base salary for Peter Rose. When actual results
achieve 120% of these performance targets Dennis Proctor and
Peter Rose are entitled to a maximum cash bonus of 200% and
150% of base salary respectively. The amount of bonus payable
accrues on a straight-line basis when actual results achieved are
between 80% and 120% of performance targets.

Bonus schemes are in place for the majority of the Group’s
employees with the choice of performance metrics dependent
on the individual roles.

Long-Term Performance Related Incentives
The Group operates three long-term plans all of which target
to align the incentive package of executives with that of the
long-term interests of shareholders.

1. Performance Share Plan (“PSP”)
Awards under the PSP are granted annually and only vest if
demanding performance conditions based on returns to
shareholders are met. Awards granted under the PSP, which
are subject to a three year vesting period, are based on the
Group’s total shareholder return performance relative to the
constituent members of the Dow Jones US Oil Equipment and
Services and the DJ STOXX TM Oil Equipment and Services
sector indices and if the Committee determines the Group’s
financial performance to be satisfactory. These indices are
considered by the Committee to be appropriate as they
compare the Group’s performance against other companies
in the oil and gas services sector.

Awards vest subject to the schedule outlined below:

Group’s Total Shareholder Return (“TSR”) against the TSR
of the members of the Comparator Group

Upper quartile
Between upper quartile

and median

Median
Below median

% of the award that vests

100%
On a straight-line basis
between 40% and 100%
40%
0%

Hunting PLC Annual Report 2012

Remuneration Committee Report continued

The plan allows for a maximum of share-based awards with
a face value at grant equal to 200% of annual salary. In 2012,
awards to the value of 100% and 80% of base salary were
granted to Dennis Proctor and Peter Rose respectively.

The pool available for distribution was £5.7m at 31
December 2012 compared to £1.4m at 31 December 2011.
The aggregate amount of the pool distributable to
participants for 2012 was £3.8m (2011 – £1.3m).

The PSP awards granted in 2009 were measured by Towers
Watson against the performance target up to 28 April 2012.
The results were a below median performance and
accordingly none of the 2009 awards vested.

The PSP awards granted in 2010, were measured by New
Bridge Street on 25 February 2013 and resulted in a partial
vesting of 65.9% of the 2010 share awards granted.

2. Long-Term Incentive Plan (“LTIP”)
The LTIP is intended to link key executives’ remuneration to
the long-term success and performance of the Group.

The LTIP is a performance-linked plan with an incentive pool,
which is calculated using the sum of the Group’s after tax
operating income after deducting a charge for the after tax cost
of capital, which for 2012 is a rate of 7% on average
shareholders’ funds. Determination of the incentive pool
incorporates two components, the first being 2% of the
absolute value added, and the second being 5% of the
incremental value added. These performance conditions align
the interests of the executives with those of the Group and its
shareholders and will only produce value to the participants if
value is created for the Group.

Awards are determined for each participant at the beginning of
a three year performance cycle and are settled at the end of
each cycle either in shares or in cash. The award for each
participant is calculated as a percentage of the incentive pool
resulting from the performance of the business over the
performance cycle, as determined by the Committee.

Following vesting, the amount payable under any single award
may not exceed a certain multiple of the base annual salary of
each participant. The maximum award levels under the LTIP
rules as a multiple of base salaries are 3.5 times annual salary
for Dennis Proctor and 1.75 times annual salary for Peter Rose.

3. Executive Share Option Plan
The Group operated an Executive Share Option Plan
(“ESOP”) between 2001 and 2008 to provide long-term
incentives for executive Directors and executives of the
Group. From 2009, executive Directors are granted share-
based awards under the PSP in place of grants under the
ESOP. No further grants will be made under the ESOP.

Directors’ Shareholding Requirements
In order to align the interests of the executive Directors with
that of shareholders, each executive Director is required to
build up and maintain a holding in the Company’s shares
with a market value equivalent to not less than one times
their annual salary.

Performance Graph
The graph below compares the total shareholder return for
an investment in Hunting PLC Ordinary shares, with the
return for the same investment in the Dow Jones US Oil
Equipment and Services and DJ Stoxx TM Oil Equipment,
Services and Distribution indices commencing on
31 December 2007.

Total shareholder return performance of Hunting PLC vs. DJGL US Oil Equipment & Services and Stoxx TM Oil
Equipment, Services & Distribution Indices
(TSR rebased to 100 at December 2007 and measured on a 3-month average basis in Local Currency)

140

2007

2008

2009

2010

2011

2012

Hunting PLC

DJGL US Oil Equipment & Services

Stoxx TM Oil Equipment, Services & Distribution

Source: Datastream

In the opinion of the Directors, the Dow Jones US Oil Equipment and Services and DJ Stoxx TM Oil Equipment, Services and
Distribution indices are the most appropriate indices against which the shareholder return of the Company’s shares should be
compared because they comprise other companies in the oil and gas services sector, in addition to being the comparator
group for the Group’s Performance Share Plan.

Hunting PLC Annual Report 2012Director Service Contracts
Executive Directors
The Company’s policy on executive Directors’ contracts is to comply with guidance contained in the UK Corporate
Governance Code.

All Directors’ Service Contracts are rolling one year agreements and contain standard provisions allowing the Company to
terminate summarily for cause, such as gross misconduct.

Dennis Proctor entered into an Employment Agreement with Hunting Energy Services Inc., a wholly-owned subsidiary of the
Group, on 7 February 2001. This Agreement is governed by the laws of the US State of Delaware. Under the terms of the
Agreement both Hunting Energy Services Inc. and Dennis Proctor are required to give one year’s notice of termination.

The Agreement contains a pay in lieu of notice clause, which provides for payment of base salary, performance bonus and
vacation pay based on an annual entitlement of four weeks. There are special provisions on a change of control. These
provide for payment of one year’s base salary together with an amount equal to the average performance bonus paid of the
previous two years. In addition, Dennis Proctor would be entitled to continue to participate in the Group insurance
programmes for one year following the change of control and, unless otherwise provided in the relevant option agreement, all
share-based awards granted to him will vest at the date of the change of control.

Peter Rose entered into a Service Agreement with the Company on 23 April 2008. Under the terms of the Service Agreement
both the Company and the Director are required to give one year’s notice of termination. The Company reserves the right to
pay Peter Rose in lieu of notice (whether given by the Company or by him) which comprises his salary and bonus. The
Company also has the option to put Peter Rose on paid leave of absence following payment of a sum equivalent to salary and
bonus (based on the previous twelve month period), subject to him complying with the terms of his Service Agreement. These
conditions also apply on termination following a change of control. In addition, Peter Rose would be entitled to an acceleration
of all share-based awards which would immediately vest at the date of the change of control.

The Company has authorised the executive Directors to undertake non-executive directorships outside of the Group provided
these do not interfere with their primary duties. During the year neither Dennis Proctor nor Peter Rose held any external positions.

Non-executive Directors
Non-executive Directors are initially appointed for a fixed term of three years and thereafter, subject to approval of the Board,
for a further three year term. On 29 August 2012 John Hofmeister and John Nicholas were both reappointed for a second
three year term, following a recommendation from the Nomination Committee.

In the event of early termination by the Company, the independent non-executive Directors are not entitled to receive
compensation for loss of office. Their letters of appointment are available for inspection by shareholders during normal
business hours at the Company’s registered office or at the Annual General Meeting.

Non-executive Director

John Hofmeister
John Nicholas
Andrew Szescila

Date of first appointment or
subsequent reappointment

29 August 2012
29 August 2012
16 September 2011

Term of appointment

Three years
Three years
Three years

Unexpired term from
7 March 2013

30 months
30 months
18 months

Non-executive Director fees are determined by the Board as a whole on recommendation of the executive Directors following
receipt of external salary information and an assessment of the time commitment and responsibilities involved. Fees are
reviewed annually in December each year. The non-executive Directors do not participate in the Group’s share plans or
receive any other benefits.

The table below shows fees payable to non-executive Directors for the year to 31 December 2012 as well as fees applying from
1 January 2013.

Annual fee
Additional fees per annum
Senior Independent Director
Committee Chairman (Audit and Remuneration)

2012

2013

£60,000

£10,000
£10,000

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Remuneration Committee Report continued

In 2011, Richard Hunting, the Company’s Chairman, moved from an executive to a non-executive Director role. Mr Hunting was
appointed for a fixed term of three years and his letter of appointment contains details of his remuneration and expected time
commitments. As at 7 March 2013, Mr Hunting’s unexpired term was 17 months. The appointment can be terminated by the
Company or Mr Hunting with either party giving three months’ notice. Mr Hunting’s remuneration was reviewed by the Board in
December 2012 and, following advice from New Bridge Street, his annual fee from 1 January 2013 was unchanged at £193,500.
The advice received included benchmarked data on fees and benefits comparing companies of a similar size and profile to
Hunting PLC.

Emoluments (audited)
Emoluments received by each Director during the year were as follows:

Non-executive Chairman
Richard Hunting*

Executives
Dennis Proctor
Peter Rose

Non-executives
David Barr (to 8 April 2011)
George Helland (to 30 September 2011)
John Hofmeister
John Nicholas
Andrew Szescila (from 16 September 2011)

Salary and
Fees
£000

194

468
233

–
–
70
70
70

Annual
Bonus
£000

–

702
300

–
–
–
–
–

Benefits
£000

–

37
21

–
–
–
–
–

2012
Total
£000

194

2011
Total
£000

224

1,207
554

1,355
511

–
–
70
70
70

14
42
53
56
16

Total remuneration

1,105

1,002

2,165

2,271

* Richard Hunting’s 2011 emoluments included salary of £112,895 and benefits of £29,642 relating to the period 1 January 2011 to 31 July 2011 as executive Chairman

and fees of £80,625 from 1 August 2011 to 31 December 2011 as non-executive Chairman.

Analysed as:

Executive Directors
Non-executive Directors

Total remuneration

Dennis Proctor’s remuneration is paid in US dollars as follows:

Analysed as:

2012
2011

Salary and
fees
£000

701
404

1,105

Annual
bonus
£000

1,002
–

1,002

Salary
US$000

742
710

Benefits
£000

58
–

Annual
bonus
US$000

1,113
1,420

2012
Total
£000

1,761
404

2,165

2011
Total
£000

2,009
262

2,271

Benefits
US$000

57
42

Total
US$000

1,912
2,172

Benefits include the provision of a company car and fuel benefits, subscriptions, health cover, life and disability insurance.

The emoluments for George Helland shown in the table above are to the date of his retirement from the Board. In the case of
David Barr, his emoluments are from the date of his appointment on 1 January 2011 up to the date of his resignation from the
Board on 8 April 2011.

Hunting PLC Annual Report 2012Directors’ Share Interests (audited)
The interests of the Directors in the issued Ordinary shares in the Company are as follows:

Non-executive Chairman
Richard Hunting
as trustee
as director of Hunting Investments Limited

Executives
Dennis Proctor
Peter Rose

Non-executives
George Helland (as at 30 September 2011)
John Hofmeister
John Nicholas
Andrew Szescila

At 31 December 2012
(or cessation date)

At 31 December 2011
(or cessation date)

678,306
1,105,339
10,884,743

1,220,472
43,196

–
5,000
5,000
5,000

743,306
1,105,339
10,884,743

1,075,144
38,196

18,750
5,000
5,000
–

On 5 March 2013, the Company was notified that Richard Hunting’s interest as trustee had reduced to 1,086,439 Ordinary
shares. The market price of the Ordinary shares at 31 December 2012 was 790.5p. The highest and lowest mid-market prices
during the year were 968.0p and 688.0p respectively.

Directors’ Options and Awards over Ordinary Shares (audited)
The interests of executive Directors over Ordinary shares of the Company under the Executive Share Option Plan (“ESOP”)
and the Performance Share Plan (“PSP”) are set out below:

The vesting of options and awards are subject to performance conditions set out within the remuneration policy statement on
pages 45 and 46.

Interests at
1 January
2012

181,622
309,705
171,742
104,178
64,688
55,449

38,863
70,751
57,295
–

29,454
18,277
15,000
21,670

15,000
29,129
23,241
–

Dennis Proctor

Peter Rose

+ Vested and currently exercisable.
^ Not yet vested/exercisable.

Options/
awards
granted in
year

Options/
awards
exercised in
year

Options/
awards
lapsed
in year

Interests
at 31
December
2012

–
–
–
–
–
–

(181,622)
–
–
–
–
–

–
–
– 309,705+
– 171,742+
– 104,178+
64,688+
–
55,449+
–

Exercise
price p

167.4
116.9
220.7
383.0
640.0
784.5

Date from
which
exercisable/
vesting

Expiry date

Scheme

15.04.05 14.04.12
31.03.07 30.03.14
09.03.08 08.03.15
07.03.16
08.03.09
06.03.10 05.03.17
04.03.11 03.03.18

–
–
–
52,103

–
–
–
–

–
–
–
20,953

–
–
–
–

(38,863)
–
–
–

–
–
–
–

(15,000)
–
–
–

–
70,751^
57,295^
52,103^

29,454+
18,277+
15,000+
21,670+

–
29,129^
23,241^
20,953^

nil
nil
nil
nil

28.04.12
26.02.13
25.02.14
17.04.15

–
–
–
–

220.7
383.0
640.0
784.5

09.03.08 08.03.15
08.03.09
07.03.16
06.03.10 05.03.17
04.03.11 03.03.18

nil
nil
nil
nil

–
28.04.12
26.02.13
–
25.02.14 24.02.21
17.04.15 16.04.22

ESOP
ESOP
ESOP
ESOP
ESOP
ESOP

PSP
PSP
PSP
PSP

ESOP
ESOP
ESOP
ESOP

PSP
PSP
PSP
PSP

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Remuneration Committee Report continued

Under the PSP scheme rules, awards may be granted as share awards or share options. In 2012, Dennis Proctor was granted
52,103 nil cost share awards and Peter Rose was granted 20,953 nil cost options.

Dennis Proctor exercised 181,622 options on 8 March 2012. The share price on the date of exercise was 856p, representing a
notional gain of £1,250,649.

In 2012 the awards under the PSP made to the executive Directors in 2009 failed to pass the plans’ performance conditions.
Accordingly none of the 2009 PSP awards vested.

The measurement of the performance conditions for the PSP awards granted in 2010 resulted in a 65.9% partial vesting. On 7
March 2013, 46,625 shares vested to Dennis Proctor and 19,196 shares vested to Peter Rose from the awards granted in 2010.

Directors’ Awards Under the Long-Term Incentive Plan (audited)

Interest in three year
performance cycle awarded
February 2010 and vesting
31 December 2012
(at 1 January 2012)

Interest in three year
performance cycle awarded
February 2011 and vesting
31 December 2013
(at 1 January 2012)

Interest in three year
performance cycle awarded
March 2012 and vesting
31 December 2014
(at 1 January 2012)

Value of award in respect of three
year performance cycle vested
31 December 2012

Dennis Proctor
Peter Rose

35%
15%

£1,638,272
£407,925

Executive Directors and some senior executives are invited to participate in the Company’s LTIP, with all awards subject to the
performance conditions outlined on page 46. Awards are settled at the end of each performance cycle in cash or shares. The
determination of whether to deliver benefits under the LTIP in cash or shares is not made until after the awards vest. This applied
to the performance cycle that vested on 31 December 2011 with Dennis Proctor receiving 63,706 shares and Peter Rose
receiving 27,302 shares.

The mid-market price of an Ordinary share on 25 February 2010, the date of the award, for the cycle vested 31 December 2012
was 579.5p and the price on the date of vesting, 31 December 2012, was 790.5p.

The mid-market price of an Ordinary share on the date of the most recent LTIP award, 8 March 2012, was 856.0p.

Pensions (audited)
Peter Rose and Richard Hunting are members of the Hunting Pension Scheme (the “Scheme”), which is a defined benefit pension
scheme. The retirement age for the Directors under the Scheme is 60 and they are entitled to, subject to certain limits, a pension
of up to two thirds of final salary. Pensionable salary is the annual salary less an amount equal to the State Lower Earnings Limit.

Richard Hunting contributed 8.5% of his pensionable salary up until his Scheme retirement date of 31 July 2006. Peter Rose
contributes a similar proportion of his salary to the Scheme. The Scheme provides all members a lump sum death in service
benefit of four times base salary and a spouse’s pension of two thirds of the member’s pension on the member’s death. Bonuses
and benefits do not qualify as pensionable salary.

Dennis Proctor is a member of a deferred compensation scheme in the US, which is a defined benefit pension scheme. In 2012,
the Company contributed £110,866 (2011 – £91,622). He also participates in a US 401K Tax Deferred Savings Plan and in 2012
the Company contributed £9,463 (2011 – £9,162).

Directors’ Pension Benefits (audited)
Set out below are details of the pension benefits to which each of the Directors is entitled.

Pensionable
service at
31 December
2012

35 years
19.9 years

Normal
retirement age

60
60

Accrual rate

1/50th
1/50th

Total accrued
pension at
31 December
2011
£000 pa

Increase
in accrued
pension during
2012 including
inflation
£000 pa

Increase
in accrued
pension during
2012 excluding
inflation
£000 pa

Transfer value
of increase
less Directors’
contributions
£000

Total accrued
pension at
31 December
2012
£000 pa

132
81

nil
nil

nil
4

nil
214

127
85

Name of Director

Richard Hunting
Peter Rose

Hunting PLC Annual Report 2012
Name of Director

Richard Hunting
Peter Rose

Transfer value at
31 December 2012
£000

Transfer value at
31 December 2011
£000

Difference in transfer values
less Directors’ contributions
£000

3,618
2,566

3,746
2,628

(128)
(82)

Notes
i. The total accrued pension shown is that which would be paid annually on retirement for life based on service to 31 December 2012. Peter Rose’s accrued pension at

31 December 2012 includes a temporary pension of just over £5,000 per annum.

ii. The transfer values at 31 December 2012 have been based on estimated insurance company pricing terms, reflecting the fact that most of the benefits are covered by

insurance policies.

iii. Richard Hunting’s normal retirement date was 31 July 2006. No further benefits have accrued to him since that date. The pension figure at 31 December 2012 shown
above is his pension in payment. The year-end transfer value reflects only the value of the pension shown above and does not include the value of any benefits he
received during the year.

The information starting on page 44 and ending on page 48 of this report is not audited and the information starting on page
48 and ending on page 51 is audited.

By Order of the Board

Andrew Szescila
Chairman of the Remuneration Committee
7 March 2013

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Audit Committee Report

“ The work of Hunting’s Audit
Committee follows best
practice guidelines issued by
the Financial Reporting
Council and adopts an annual
programme of work covering
the recommended aspects
of monitoring and review.
During the year, the
committee met four times,
received and reviewed reports
from management, met with
the Company’s external and
internal auditors, reviewing
detailed reports on their
respective activities and
monitored the internal controls
active across the Group.”

John Nicholas, Audit Committee
Chairman

Composition and Frequency of Meetings
The committee comprises the independent non-executive
Directors of the Company: John Nicholas (committee
chairman), John Hofmeister and Andrew Szescila. Mr Nicholas
has recent and relevant financial experience, details of which
can be found in his biographical summary set out on page 35.

The committee met four times during the year and operates
under written terms of reference approved by the Board,
which are published on the Company’s website. The
committee normally meets in March, April (to coincide with
the Annual General Meeting of the Company), August and
December and the attendance of committee members
during the year is noted on page 41. The Chairman, Chief
Executive, Finance Director, internal and the external auditors
are normally invited to attend meetings. During the year, the
committee reviewed its effectiveness and the committee
Chairman reported these findings to the Board.

Responsibilities
The responsibilities of the Audit Committee include to:
• monitor and review reports from the executive Directors,
including the Group’s financial statements and Stock
Exchange announcements;

• monitor and review the Group’s systems of internal control;
• review reports from the Group’s external auditors;
• review reports from the Group’s internal auditors including

details of the internal audit programme and its scope;

• monitor any corporate governance and accounting

developments;

• monitor the Group’s bribery act compliance procedures;
• consider and recommend to the Board the reappointment

of the external auditor;

• agree the scope and fees of the external audit;
• monitor and approve engagements of the external auditor

to provide non-audit services to the Group;

• review of the external auditor’s independence and

effectiveness of the audit process and assess the level
and quality of service in relation to fees paid.

Training
During the year, the committee received presentations on
accounting and governance developments pertinent to the
Company’s listed status.

External Audit
The external auditors present reports at the March, April,
August and December meetings for consideration by the
committee. In March, a full year report is considered ahead
of the publication of the Company’s annual results; in April an
internal control report is presented following the year end
audit; and in August an interim report is presented which
includes the proposed full year audit scope and fee. The Audit
Committee considers the reappointment of the auditors annually
in August and makes a recommendation to the Board. The
committee normally meets with the auditors without executive
Directors present at the end of each formal meeting.

Hunting PLC Annual Report 2012The external auditors’ full year report includes a statement on
their independence, their ability to remain objective and to
undertake an effective audit. The committee considers and
assesses this independence statement on behalf of the Board
taking into account the level of fees paid particularly for
non-audit services. The committee considers the effectiveness
of the audit by reviewing and taking account of Financial
Reporting Council reports on the auditors; input from
executive management; consideration of responses to
questions from the audit committee and the audit findings
reported to the committee.

PricewaterhouseCoopers LLP and its predecessor firms
have been the Group’s auditors for many years. The Audit
Committee is satisfied with their effectiveness and their
independence and has not considered it necessary to
require an independent tender process.

During the year, the Company engaged the services of Deloitte,
KPMG and Ernst and Young to undertake non-audit assignments
in order to reduce reliance on PricewaterhouseCoopers LLP for
the provision of non-audit services.

The committee closely monitors fees paid to the auditors in
respect of non-audit services, which are analysed within note
8 on page 70. In 2012, fees for non-audit services totalled
£1.1m and included taxation services amounting to £0.9m
and other services £0.2m. The scope and extent of non-audit
work undertaken by the external auditor is monitored by,
and, above certain thresholds, requires prior approval from
the committee to ensure that the provision of such services
does not impair their independence or objectivity.

The Board received copies of all reports submitted to the
Audit Committee.

Internal Audit
The Audit Committee receives reports from the Internal
Audit department and reviews the internal audit process and
effectiveness, as part of the Group’s internal audit and risk
assessment programme. An annual programme of internal
audit assignments is reviewed by the Audit Committee, in
addition to progress on improving the control environment
across the Group.

Internal Controls
The Group has established an internal control environment
which was in operation throughout the year. The Audit
Committee monitors these arrangements on behalf of the
Board, which includes a report submitted three times a year on
the principal risks facing the Group and the mitigating controls
against those identified key risks. The Group level report is
based on submissions from all subsidiaries of the Company.

All subsidiaries undertake formal self-assessment risk reviews
a minimum of three times a year on their internal control
environment. These reviews are available to the Audit Committee
and encompass the identification of the key business, financial,
compliance and operational risks facing each unit, together
with an assessment of the controls in place for managing and
mitigating these risks. Additionally, risks are evaluated for their
potential impact on the business.

Bribery Act Compliance
In compliance with the UK Bribery Act, Hunting has procedures
in place including the publication of Bribery and Corruption
policies and detailed guidelines on interacting with customers,
suppliers and agents, including specific policies for gifts,
entertainment and hospitality. Senior managers across the
Group are required to report their compliance activities
including an evaluation of risk areas. The Group has completed
a screening exercise to determine relevant employees who
face a heightened risk of bribery with all relevant personnel
completing a formal training and compliance course, in line
with the Group’s procedures. The Audit Committee reviews
the compliance procedures related to the Bribery Act at its
April and December meetings, which incorporate a risk
assessment completed by each business unit and gifts and
entertainment disclosures made during the reporting period.
The Group’s internal audit function reviews local compliance
to the Bribery Act and provides recommendations to the Audit
Committee where appropriate.

Code of Conduct
The Group’s Code of Conduct contains policies and
procedures covering how the Group conducts business and
maintains its relationships with business partners. The Code
of Conduct is available on the Group’s website.

Whistleblowing
The Senior Independent Director, John Hofmeister, is the
primary point of contact for staff of the Company to raise,
in confidence, concerns they may have over possible
improprieties, financial or otherwise. All employees have
been notified of this arrangement through the corporate
magazine, Group notice boards and the Group’s website.

John Nicholas
Chairman of the Audit Committee
7 March 2013

C
o
m
p
a
n
y
O
v
e
r
v
i
e
w

B
u
s
i
n
e
s
s
R
e
v
i
e
w

G
o
v
e
r
n
a
n
c
e

F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s

O
t
h
e
r

I
n
f
o
r
m
a
t
i
o
n

Hunting PLC Annual Report 2012

Report of the Auditors

Independent Auditors’ Report to the Members of Hunting PLC
We have audited the financial statements of Hunting PLC for
the year ended 31 December 2012 which comprise the
Consolidated Income Statement, Consolidated Statement of
Comprehensive Income, Consolidated Balance Sheet,
Company Balance Sheet, Consolidated Statement of Changes
in Equity, Company Statement of Changes in Equity,
Consolidated and Company Statement of Cash Flows and the
related notes. The financial reporting framework that has been
applied in their preparation is applicable law and International
Financial Reporting Standards (“IFRSs”), as adopted by the
European Union and, as regards the parent company financial
statements, as applied in accordance with the provisions of the
Companies Act 2006.

Respective Responsibilities of Directors and Auditors
As explained more fully in the Statement of Directors’
Responsibilities set out on page 43, the Directors are
responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and
only for the Company’s members as a body in accordance
with Chapter 3 of Part 16 of the Companies Act 2006 and for
no other purpose. We do not, in giving these opinions, 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.

Scope of the Audit of the Financial Statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting
policies are appropriate to the Group’s and the parent
Company’s circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant
accounting estimates made by the Directors; and the overall
presentation of the financial statements. In addition, we read
all the financial and non-financial information in the Annual
Report to identify material inconsistencies with the audited
financial statements. If we become aware of any apparent
material misstatements or inconsistencies we consider the
implications for our report.

Opinion on Financial Statements
In our opinion:
• the financial statements give a true and fair view of the state
of the Group’s and of the parent Company’s affairs as at
31 December 2012 and of the Group’s profit and Group’s
and parent Company’s cash flows for the year then ended;

• the Group financial statements have been properly

prepared in accordance with IFRSs as adopted by the
European Union;

• the parent Company financial statements have been

properly prepared in accordance with IFRSs, as adopted by
the European Union and as applied in accordance with the
provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS
Regulation.

Opinion on Other Matters Prescribed by the Companies
Act 2006
In our opinion:
• the part of the Remuneration Committee Report to be

audited has been properly prepared in accordance with the
Companies Act 2006; and

• the information given in the Report of the Directors for the

financial year for which the financial statements are
prepared is consistent with the financial statements.

Matters on Which we are Required to Report by Exception
We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to
you if, in our opinion:
• adequate accounting records have not been kept by the

parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or

• the parent Company financial statements and the part of

the Remuneration Committee Report to be audited are not
in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by

law are not made; or

• we have not received all the information and explanations

we require for our audit.

Under the Listing Rules we are required to review:
• the Directors’ statement, set out on pages 38 and 39, in

relation to going concern;

• the parts of the Corporate Governance Report relating to

the Company’s compliance with the nine provisions of the
UK Corporate Governance Code specified for our review;
and

• certain elements of the report to shareholders by the Board

on Directors’ remuneration.

Charles van den Arend
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
7 March 2013

Hunting PLC Annual Report 2012
Consolidated Income Statement
For the Year ended 31 December 2012

Revenue
Cost of sales

Gross profit
Other operating income
Operating expenses

Profit from continuing operations
Finance income
Finance expense
Share of associates’ post-tax profits

Profit before tax from continuing operations
Taxation

Profit for the year from continuing operations
Profit for the year from discontinued operations

Profit for the year

Profit attributable to:
Owners of the parent
Non-controlling interests

Earnings per share

Basic

– from continuing operations
– from discontinued operations

Group total

Diluted – from continuing operations

– from discontinued operations

Group total

Notes

5
6

8
11
11

14
14

Before
amortisation
and
exceptional
items
£m

2011

Amortisation
and
exceptional
items
(note 7)
£m

2012

Before
amortisation
and
exceptional
items
£m

Amortisation
and
exceptional
items
(note 7)
£m

825.8
(562.2)

263.6
4.0
(138.8)

128.8
1.7
(7.9)
1.0

123.6
(34.6)

89.0
–

89.0

–
(14.8)

(14.8)
1.1
(29.2)

(42.9)
–
–
–

(42.9)
16.7

(26.2)
69.2

43.0

Total
£m

825.8
(577.0)

248.8
5.1
(168.0)

85.9
1.7
(7.9)
1.0

80.7
(17.9)

62.8
69.2

132.0

608.8
(428.2)

180.6
3.3
(102.9)

81.0
3.5
(5.7)
1.0

79.8
(22.5)

57.3
0.7

58.0

–
(13.9)

(13.9)
–
(26.1)

(40.0)
–
(1.0)
–

(41.0)
15.2

(25.8)
50.0

24.2

24.2
–

24.2

85.9
3.1

89.0

43.0
–

43.0

128.9
3.1

132.0

54.9
3.1

58.0

58.9p
–

58.9p

57.5p
–

57.5p

40.9p
47.5p

88.4p

40.0p
46.3p

86.3p

39.6p
0.5p

40.1p

38.7p
0.5p

39.2p

Total
£m

608.8
(442.1)

166.7
3.3
(129.0)

41.0
3.5
(6.7)
1.0

38.8
(7.3)

31.5
50.7

82.2

79.1
3.1

82.2

20.7p
37.0p

57.7p

20.3p
36.2p

56.5p

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information

Consolidated Statement of Comprehensive Income
For the Year ended 31 December 2012

Comprehensive income:
Profit for the year

Components of other comprehensive income after tax:
Items that may be reclassified subsequently to profit or loss:
Exchange adjustments
Fair value gains and losses:
– gain on available for sale financial investment arising during the year
– gains transferred to income statement on redemption of available for sale financial investment
– gains originating on cash flow hedges arising during the year
– losses transferred to income statement on disposal of cash flow hedges
– gains transferred to goodwill on disposal of cash flow hedges

Items that have been reclassified to profit or loss:
Release of foreign exchange adjustments on disposal of subsidiary
Items that will not be reclassified to profit or loss:
Actuarial losses on defined benefit pension schemes

Other comprehensive expense after tax

Total comprehensive income for the year

Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests

Notes

2012
£m

2011
£m

132.0

82.2

34
34
34

(27.4)

6.6

–
–
0.4
–
–

(27.0)

(2.3)

(1.0)

(30.3)

101.7

98.7
3.0

101.7

35.3
(53.2)
4.0
0.8
(5.5)

(12.0)

–

(1.3)

(13.3)

68.9

65.1
3.8

68.9

Hunting PLC Annual Report 2012
Consolidated Balance Sheet
At 31 December 2012

ASSETS
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Investments in associates
Investments
Retirement benefit assets
Trade and other receivables
Deferred tax assets

Current assets
Inventories
Trade and other receivables
Current tax assets
Investments
Cash and cash equivalents
Assets classified as held for sale

LIABILITIES
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings
Provisions
Liabilities classified as held for sale

Net current assets

Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Other payables

Net assets

Equity attributable to owners of the parent
Share capital
Share premium
Other components of equity
Retained earnings

Non-controlling interests

Total equity

2012
£m

Restated
2011
£m

Notes

15
16
17

18
32
20
21

22
20

18
23

25
27

25
21
27
24

33
33
34
35

248.5
304.5
185.2
6.8
4.0
6.0
3.7
7.2

765.9

240.6
171.0
6.5
3.2
101.7
–

523.0

132.7
10.8
81.3
12.5
–

237.3

285.7

187.4
25.7
17.1
7.6

237.8

813.8

36.8
88.5
12.7
657.5

795.5
18.3

813.8

231.2
317.9
220.8
5.9
0.2
4.8
2.2
4.9

787.9

231.0
174.2
6.4
2.4
68.8
13.6

496.4

146.8
25.3
43.2
42.3
8.5

266.1

230.3

248.3
19.7
18.2
–

286.2

732.0

36.6
87.1
41.1
550.4

715.2
16.8

732.0

The notes on pages 62 to 115 are an integral part of these consolidated financial statements. The financial statements on pages 55
to 115 were approved by the Board of Directors on 7 March 2013 and were signed on its behalf by:

Dennis Proctor
Director

Peter Rose
Director

Registered number: 974568

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information58

Company Balance Sheet
At 31 December 2012

ASSETS
Non-current assets
Investments in subsidiaries
Other investments
Other receivables

Current assets
Other receivables
Current tax asset
Cash and cash equivalents

LIABILITIES
Current liabilities
Other payables
Borrowings
Provisions

Net current assets

Non-current liabilities
Other payables
Borrowings
Deferred tax liabilities
Provisions

Net assets

Equity attributable to owners of the parent
Share capital
Share premium
Other components of equity
Retained earnings

Total equity

Notes

2012
£m

2011
£m

19
18
20

24
25

24
25
21

33
33
34
35

307.9
0.2
11.9

320.0

312.4
–
26.6

339.0

19.7
5.0
1.4

26.1

7.4
3.0
0.2

10.6

15.5

4.1
53.7
0.1
0.4

58.3

8.7
7.3
0.7

16.7

9.3
0.1
–

9.4

7.3

–
71.5
1.1
–

72.6

277.2

273.7

36.8
88.5
7.8
144.1

277.2

36.6
87.1
7.0
143.0

273.7

Dennis Proctor
Director

Peter Rose
Director

Registered number: 974568

Hunting PLC Annual Report 2012
59

Consolidated Statement of Changes in Equity

At 1 January

Profit for the year
Other comprehensive expense

Total comprehensive (expense) income

Transactions with owners
Dividends
Shares issued
– share option schemes and awards
Treasury shares
– purchase of treasury shares
Share options and awards
– value of employee services
– discharge
– taxation

Total transactions with owners

Year ended 31 December 2012

Notes

Share
capital
£m

36.6

Share
premium
£m

Other
components
of equity
£m

Retained
earnings
£m

Non-
controlling
interests
£m

Total
£m

Total
equity
£m

87.1

41.1

550.4

715.2

16.8

732.0

–
–

–

–
–

–

0.2

1.4

–

–
–
–

–

–
–
–

0.2

1.4

–
(29.2)

(29.2)

128.9
(1.0)

127.9

128.9
(30.2)

98.7

3.1
(0.1)

3.0

132.0
(30.3)

101.7

–

2.5
(1.7)
–

0.8

(22.6)

(1.5)

(24.1)

–

(0.8)

–
2.8
(0.2)

1.6

(0.8)

2.5
1.1
(0.2)

–

–
–
–

1.6

(0.8)

2.5
1.1
(0.2)

(20.8)

(18.4)

(1.5)

(19.9)

At 31 December

36.8

88.5

12.7

657.5

795.5

18.3

813.8

Year ended 31 December 2011

Notes

Share
capital
£m

33.1

Share
premium
£m

85.8

Other
components
of equity
£m

52.2

At 1 January

Profit for the year
Other comprehensive income (expense)

Total comprehensive (expense) income

Transactions with owners
Dividends
Shares issued
– share option schemes and awards
– share placing
– share placing costs
Treasury shares
– purchase of treasury shares
– disposal of treasury shares
Share options and awards
– value of employee services
– discharge
– taxation
Transfer between reserves

Total transactions with owners

–
–

–

0.2
3.3
–

–
–

–
–
–
–

–
–

–

1.3
–
–

–
–

–
–
–
–

3.5

1.3

35
35

Retained
earnings
£m

409.3

79.1
(1.3)

77.8

Non-
controlling
interests
£m

Total
£m

Total
equity
£m

580.4

14.2

594.6

79.1
(14.0)

65.1

3.1
0.7

3.8

82.2
(13.3)

68.9

–
(12.7)

(12.7)

–

(16.8)

(1.2)

(18.0)

–
82.1
(1.9)

–
–

2.2
(0.6)
–
(80.2)

1.6

–
–
–

(1.1)
0.2

–
0.6
0.2
80.2

63.3

1.5
85.4
(1.9)

(1.1)
0.2

2.2
–
0.2
–

–
–
–

–
–

–
–
–
–

1.5
85.4
(1.9)

(1.1)
0.2

2.2
–
0.2
–

69.7

(1.2)

68.5

At 31 December

36.6

87.1

41.1

550.4

715.2

16.8

732.0

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information60

Company Statement of Changes in Equity

At 1 January

Profit for the year

Total transactions with owners

At 31 December

At 1 January

Loss for the year

Total transactions with owners

Notes

35
35

Year ended 31 December 2012

Share
capital
£m

36.6

Share
premium
£m

87.1

Other
components
of equity
£m

Retained
earnings
£m

Total
£m

7.0

143.0

273.7

–

0.2

1.4

–

–
–

–

–
–

0.2

1.4

–

21.7

(22.6)

–

1.6

(0.8)

2.5
(1.7)

0.8

–
2.8

2.5
1.1

(20.6)

(18.2)

36.8

88.5

7.8

144.1

277.2

Year ended 31 December 2011

Share
capital
£m

33.1

Share
premium
£m

85.8

Other
components
of equity
£m

Retained
earnings
£m

Total
£m

5.6

84.0

208.5

–

0.2
3.3
–

–
–

–
–
–
–

–

1.3
–
–

–
–

–
–
–
–

3.5

1.3

–

–
82.1
(1.9)

–
–

2.2
(0.6)
(0.2)
(80.2)

1.4

(4.1)

(16.8)

–
–
–

(1.1)
0.2

–
0.6
–
80.2

63.1

1.5
85.4
(1.9)

(1.1)
0.2

2.2
–
(0.2)
–

69.3

At 31 December

36.6

87.1

7.0

143.0

273.7

Hunting PLC Annual Report 2012
61

Consolidated and Company Statement of Cash Flows
For the Year ended 31 December 2012

Group

2012
£m

Company

2011
£m

2012
£m

2011
£m

Notes

Operating activities
Continuing operations:
Profit (loss) from operations
Depreciation, amortisation and impairment
Profit on disposal of subsidiaries
Loss on disposal of property, plant and equipment
Proceeds from disposal of property, plant and equipment held for rental
Purchase of property, plant and equipment held for rental

Increase in inventories

Decrease (increase) in receivables
(Decrease) increase in payables
Increase (decrease) in provisions

Taxation paid
Other non-cash flow items
Discontinued operations

Net cash inflow (outflow) from operating activities

Investing activities
Continuing operations:
Interest received

Dividends received from subsidiaries
Dividends received from associates
Purchase of subsidiaries
Net cash acquired with subsidiaries
Proceeds from disposal of subsidiaries

Indemnity receipts in respect of disposed subsidiaries

Net movement on loans to and from associates
Proceeds from disposal of property, plant and equipment
Purchase of property, plant and equipment
Purchase of intangibles

(Purchase) receipt of bank deposit investments

Discontinued operations

Net cash (outflow) inflow from investing activities

Financing activities
Continuing operations:

Interest and bank fees paid

Equity dividends paid
Non-controlling interest dividend paid
Share capital issued
Costs of share issue
Purchase of treasury shares
Loan issued
Loan issued repaid
Proceeds from new borrowings
Repayment of borrowings

41
42

43
13
41

Net cash (outflow) inflow from financing activities

Net cash (outflow) inflow in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rates
Classified as held for sale

Cash and cash equivalents at the end of the year

Cash and cash equivalents and bank overdrafts at the end of the year comprise:
23
Cash and cash equivalents
25
Bank overdrafts included in borrowings

85.9
58.8
–
3.0
3.1
(17.0)
(17.4)
7.6
(1.2)
(2.2)
(15.1)
(0.7)
–

104.8

1.3
–
0.1
(2.2)
–
3.1
17.2
(0.7)
0.2
(44.6)
(1.5)
(0.8)
–

(27.9)

(6.5)
(22.6)
(1.5)
1.6
–
(0.8)
–
–
4.5
(56.9)

(82.2)

(5.3)
35.1
(0.8)
–

29.0

101.7
(72.7)

29.0

41.0
36.2
–
1.4
3.1
(20.2)
(14.1)
(38.0)
33.4
(0.1)
(15.5)
1.1
2.0

30.3

2.3
–
2.3
(593.6)
26.9
87.5
–
(1.1)
1.7
(37.8)
(0.3)
0.1
0.2

(511.8)

(9.9)
(16.8)
(1.2)
86.8
(1.9)
(1.1)
–
–
266.7
(16.3)

306.3

(175.2)
212.0
0.2
(1.9)

35.1

68.8
(33.7)

35.1

7.1
3.8
(3.5)
–
–
–
–
(11.3)
2.7
0.6
(0.3)
2.8
–

1.9

0.6
16.7
–
–
–
3.1
–
–
–
–
–
–
–

20.4

(1.2)
(22.6)
–
1.6

(0.8)
–
16.4
–
(16.4)

(23.0)

(0.7)
0.6
–
–

(0.1)

1.4
(1.5)

(0.1)

(5.1)
–
–
–
–
–
–
(6.2)
7.5
–
(3.3)
2.7
–

(4.4)

0.8
0.4
–
–
–
–
–
–
–
–
–
–
–

1.2

(1.9)
(16.8)
–
86.8
(1.9)
(1.1)
(16.4)
–
16.4
(28.4)

36.7

33.5
(32.9)
–
–

0.6

0.7
(0.1)

0.6

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information

Notes to the Financial Statements

1. Basis of Preparation
The financial statements have been prepared in accordance with the Companies Act 2006 and those International Financial
Reporting Standards (“IFRS”) as adopted by the European Union and IFRIC Interpretations. The financial statements have been
prepared on a going concern basis under the historical cost convention as modified by the revaluation of available for sale
financial assets and those financial assets and financial liabilities held at fair value through profit or loss.

As permitted under IFRS 3, the balance sheet at 31 December 2011 has been restated to recognise additional goodwill of £1.4m
and a reduction in inventories of £1.4m on the acquisition of Hunting Titan on 16 September 2011. The balance sheet at
1 January 2011 has not been presented, as there was no impact on the previous year’s numbers from this adjustment.

The 2011 Consolidated Balance Sheet deferred tax assets and deferred tax liabilities have been restated to offset balances where
there is a legally enforceable right to offset. The balance sheet at 1 January 2011 has not been presented as the figures previously
reported for deferred tax assets and deferred tax liabilities do not require adjustment.

In addition, the current tax assets and current tax liabilities have been restated in the 2011 Consolidated Balance Sheet to reflect
the underlying position within each tax jurisdiction. The balance sheet at 1 January 2011 has not been presented, as the figures
previously reported for the current tax assets and current tax liabilities do not require adjustment.

Where a change in the presentational format between the prior year and current year financial statements has been made during
the period, comparative figures have been restated accordingly.

The principal accounting policies applied in the preparation of these financial statements are set out in note 45. These policies
have been consistently applied to all the years presented.

Adoption of New Standards, Amendments and Interpretations
There are no new IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning 1 January 2012
that have a material impact on the Group’s financial performance or position.

The Group has early adopted the amendment to IAS 1 – Presentation of items of Other Comprehensive Income, issued June
2011. The presentation of items in the consolidated statement of comprehensive income has been altered to show items which
will or might potentially be reclassified from other comprehensive income into profit or loss separately from those for which
reclassification is not permitted.

Standards, Amendments and Interpretations Effective Subsequent to the Year End
• IFRS 9 Financial Instruments*
• IFRS 10 Consolidated Financial Statements
• IFRS 11 Joint Arrangements
• IFRS 12 Disclosure of Interests in Other Entities
• IFRS 13 Fair Value Measurement
• IAS 27 (revised) Separate Financial Statements
• IAS 28 (revised) Investments in Associates and Joint Ventures
• Amendment to IFRS 7 Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities
• Amendment to IAS 32 – Offsetting Financial Assets and Financial Liabilities
• Amendments to IAS 19 Employee Benefits
• Improvements to IFRSs 2009-2011 (May 2012)*

* Not yet endorsed by the European Union.

New requirements contained within International Reporting Standards, referred to above, are not expected to significantly impact
the Group’s results or financial position.

Hunting PLC Annual Report 2012
63

2. Critical Accounting Estimates and Judgements
The preparation of financial statements requires management to make judgements and assumptions about the future, resulting in
the use of accounting estimates. These will, by definition, seldom equal the related actual results and adjustments will
consequently be necessary. Estimates are continually evaluated, based on experience, consultation with experts and reasonable
expectations of future events.

Accounting estimates are applied in determining the carrying amounts of the following significant assets and liabilities:

Asset/liability

Nature of Estimates

Goodwill

• The Group has capitalised goodwill of £304.5m at 31 December 2012 (2011 – £317.9m), as

shown in note 16.

• The Group uses the present value of future cash flows to determine value in use. In calculating
the value in use, significant management judgement is required in forecasting relevant cash
flows considering factors such as long-term growth rates, future margins, timing and quantum
of future replacement capital expenditure, future tax rates and the selection of discount rates to
reflect the risks involved.

• Management believes that no reasonably possible change in any of the key assumptions would

cause the carrying value of any CGU to materially exceed its recoverable amount.

Other intangible assets

• Other intangible assets include the Group’s aggregate amounts spent on the acquisition of

customer relationships, patented and unpatented technology, trademarks and other intangibles.
At 31 December 2012, intangible assets amounted to £185.2m (2011 – £220.8m), as shown in
note 17, and represented 23% (2011 – 30%) of the Group’s net assets.

• These assets have principally arisen from the Group’s acquisitions.
• The relative size of the Group’s other intangible assets makes the judgements regarding the

initial recognition, useful economic lives and potential impairments significant to the Group’s
financial position and performance. The fair value of these assets is determined by discounting
estimated future net cash flows generated by the asset. The use of different assumptions for the
expectations of future cash flows and the discount rate could change the valuation of the
intangible assets.

• Management also utilises judgement in estimating the lives of these assets and in considering

whether any indicators of impairment have arisen.

Provisions

• The main components of the provisions relate to warranties, tax indemnities and onerous

contracts, as shown in note 27.

• On the sale of Gibson Energy in 2008, accounting estimates and judgements were applied in

determining the amount of provisions held for tax indemnities. Following the favourable
settlement of a legacy tax dispute by the relevant judicial and tax authorities in Canada, these
provisions have significantly reduced during the year. The timing and amounts payable in
respect of retained provisions remains uncertain.

• The Group has commitments in respect of leasehold properties, some of which are not used

for Group trading purposes and are vacant or sub-let to third parties. The provision for onerous
contracts reflects the uncertainty of future conditions in the sub-letting market.

• The Group uses the present value of future cash flows to determine the carrying value of

provisions. Judgement is used in forecasting relevant cash flows.

Deferred tax

• Deferred tax balances are derived from assumptions, which include the future utilisation of

trading losses and provisions at assumed tax rates.

Share-based payments

• A number of assumptions are made in determining the fair value of awards at the grant date

and at each subsequent reporting date for LTIPs, as shown in note 38.

• In making these estimates and assumptions, management considers advice provided by

external advisers.

Post-employment
benefits

• The Group’s accounting policy for defined benefit pension schemes requires management to

make judgements as to the nature of benefits provided by each scheme and thereby determine
the classification of each scheme. For defined benefit schemes, management is required to
make annual estimates and assumptions about future returns on classes of scheme assets,
future remuneration changes, administration costs, changes in benefits, inflation rates,
exchange rates, life expectancy and expected remaining periods of service of employees. The
assumptions are shown in note 32. In making these estimates and assumptions, management
considers advice provided by external advisers, such as actuaries. Where actual experience
differs to these estimates, actuarial gains and losses are recognised directly in equity.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information64

Notes to the Financial Statements continued

3. Segmental Reporting
Group
The Group reports on seven operating segments, two of which are discontinued operations, in its internal management reports,
which are used to make strategic decisions. The Group’s segments are strategic business units that offer different products and
services to international oil and gas companies and the shipping sector.

The discontinued operations comprise Field Aviation, which was sold on 27 April 2012 and Gibson Energy, which was sold in
2008. Gibson Energy continues to generate accounting entries due to sale related transactions and is required for reconciliation
purposes.

The Well Construction segment provides products and services used by customers for the drilling phase of oil and gas wells,
along with associated equipment used by the underground construction industry for telecommunication infrastructure build-out
and precision machining services for the energy, aviation and power generation sectors.

The Well Completion segment provides products and services used by customers for the completion phase of oil and gas wells.

The Well Intervention segment provides products and services used by customers for the production, maintenance and
restoration of existing oil and gas wells.

The Exploration and Production segment includes the Group’s oil and gas exploration and production activities in the Southern
US and offshore Gulf of Mexico. The Board of Hunting has reviewed the strategic rationale of the Exploration and Production
division and from 2013 will not be making any new capital investment, beyond where the division has contractual commitments.
The division will in future focus on producing out its remaining reserves, with a view to winding down the operation. As a result,
Exploration and Production is now presented within other operating divisions.

Gibson Shipbrokers is a global energy shipping broker headquartered in London. Crude oil, fuel oil and bio fuels are shipped
along with dry bulk such as coal, iron ore and grain. Gibson Shipbrokers is also involved in the shipping of liquefied petroleum
gas (“LPG”), petrochemicals and liquefied natural gas (“LNG”).

The following tables present the results of the operating segments on the same basis as that used for internal reporting purposes
to the Chief Operating Decision Maker.

The Group measures the performance of its operating segments based on revenue and profit from operations, before exceptional
items and the amortisation of intangible assets. Accounting policies used for segment reporting reflect those used for the Group.
Inter-segment sales are priced on an arm’s length basis. Costs and overheads incurred centrally are apportioned to the continuing
operating segments on the basis of time attributed to those operations by senior executives.

Hunting PLC Annual Report 2012
3. Segmental Reporting continued
Results from Operations

Continuing operations:
Hunting Energy Services
Well Construction
Well Completion
Well Intervention

Other Activities
Exploration and Production
Gibson Shipbrokers

Year ended 31 December 2012

Total gross
revenue
£m

Inter-
segmental
revenue
£m

Total
revenue
£m

Profit from
operations
before
amortisation
and
exceptional
items
£m

Amortisation
and
exceptional
items
£m

284.1
468.6
56.7

809.4

4.9
27.5

(4.8)
(11.2)
–

(16.0)

–
–

279.3
457.4
56.7

793.4

4.9
27.5

45.7
74.1
6.9

126.7

0.5
1.6

(5.1)
(30.0)
(0.6)

(35.7)

(7.2)
–

Total from continuing operations

841.8

(16.0)

825.8

128.8

(42.9)

Net finance expense
Share of associates’ post-tax profits

Profit before tax from continuing operations

Discontinued operations:
Gibson Energy
Field Aviation

Total from discontinued operations

Taxation
Profit from discontinued operations

–
10.1

10.1

–
–

–

–
10.1

10.1

(6.2)
1.0

–
–

123.6

(42.9)

–
–

–

56.9
1.2

58.1

11.1

69.2

Total
£m

40.6
44.1
6.3

91.0

(6.7)
1.6

85.9

(6.2)
1.0

80.7

56.9
1.2

58.1

11.1

69.2

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information66

Notes to the Financial Statements continued

3. Segmental Reporting continued

Year ended 31 December 2011

Continuing operations:
Hunting Energy Services
Well Construction
Well Completion
Well Intervention

Other Activities
Exploration and Production
Gibson Shipbrokers

Total gross
revenue
£m

Inter-
segmental
revenue
£m

Total
revenue
£m

200.8
340.9
52.9

594.6

8.2
26.0

(6.3)
(13.7)
–

(20.0)

–
–

194.5
327.2
52.9

574.6

8.2
26.0

Total from continuing operations

628.8

(20.0)

608.8

Exceptional items not apportioned to business segments*

Profit from continuing operations

Net finance expense
Share of associates’ post-tax profits

Profit before tax from continuing operations

Discontinued operations:
Gibson Energy
Hunting Energy France
Field Aviation

Total from discontinued operations

Net finance income
Taxation

Profit from discontinued operations

–
–
25.9

25.9

–
–
–

–

–
–
25.9

25.9

Exceptional items not apportioned to business segments include acquisition costs and head office property provisions.

Profit from
operations
before
amortisation
and
exceptional
items
£m

Amortisation
and
exceptional
items
£m

28.5
41.2
7.9

77.6

1.7
1.7

81.0

–

81.0

(2.2)
1.0

79.8

–
–
0.8

0.8

0.2
(0.3)

0.7

(7.8)
(19.8)
(0.6)

(28.2)

(1.0)
–

(29.2)

(10.8)

(40.0)

(1.0)
–

(41.0)

55.0
0.1
–

55.1

–
(5.1)

50.0

Total
£m

20.7
21.4
7.3

49.4

0.7
1.7

51.8

(10.8)

41.0

(3.2)
1.0

38.8

55.0
0.1
0.8

55.9

0.2
(5.4)

50.7

Hunting PLC Annual Report 2012
67

3. Segmental Reporting continued
Other Segment Items

Continuing operations:
Hunting Energy Services
Well Construction
Well Completion
Well Intervention

Other Activities
Exploration and Production
Gibson Shipbrokers

Continuing operations

Discontinued operations:
Field Aviation

2012

Amortisation
of intangible
assets
£m

Depreciation
£m

Impairment
£m

Depreciation
£m

2011

Amortisation
of intangible
assets
£m

Impairment
£m

10.9
9.8
3.1

23.8

1.5
0.2

25.5

5.4
22.1
0.6

28.1

–
–

28.1

–
–
–

–

5.2
–

5.2

7.7
7.8
2.7

18.2

3.1
0.2

21.5

5.2
6.4
0.6

12.2

–
–

12.2

–
1.5
–

1.5

1.0
–

2.5

–

0.2

–

Geographical Information
The Group mainly operates in five geographical areas. The UK is the domicile of Hunting PLC. The table below shows revenues
from external customers, which are attributed to individual countries on the basis of the location in which the sale originated.
Information on the location of non-current assets is also presented below. Non-current assets exclude defined benefit assets and
deferred tax assets.

External revenue

Non-current assets

2012
£m

2011
£m

2012
£m

Continuing operations:
UK
USA
Canada
Rest of Europe
Singapore
Other

Discontinued operations:
Canada

Unallocated assets:
Deferred tax assets
Retirement benefit assets

Total non-current assets

141.8
500.2
61.0
17.8
81.6
23.4

825.8

10.1

835.9

134.2
314.8
53.1
15.2
82.4
9.1

608.8

25.9

634.7

Restated
2011
£m

52.5
675.6
21.8
2.7
6.0
19.6

778.2

52.4
641.8
24.9
2.8
9.2
21.6

752.7

–

752.7

778.2

7.2
6.0

4.9
4.8

765.9

787.9

Non-current assets in 2011 have been restated for the additional goodwill of £1.4m recognised on the acquisition of Hunting Titan on 16 September 2011. The additional goodwill has
been included within US non-current assets. The deferred tax asset in 2011 has been restated to take into account the offsetting of balances where there is a legally enforceable right
to offset.

Major Customer Information
The Group had no customers (2011 – nil) who accounted for more than 10% of the Group’s external revenue during the year.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information68

Notes to the Financial Statements continued

4. Revenue
Group

Sale of goods
Revenue from rental equipment
Revenue from services

Continuing operations

2012
£m

724.7
66.4
34.7

825.8

2011*
£m

526.5
49.9
32.4

608.8

Revenue from rental equipment has now been shown as a separate category. Prior year comparatives have been reclassified as
appropriate*. Sale of goods includes revenue derived from the Group’s manufacturing processes. Revenue from services includes
revenue from shipbroking activities of £27.5m (2011 – £26.0m).

5. Other Operating Income
Group

Royalty income
Operating lease rental income
Gain on disposal of property, plant and equipment
Foreign exchange gains
Other income

Other operating income before exceptional items
Exceptional items included in other income (note 7)

Continuing operations

6. Operating Expenses
Group

Administration expenses before amortisation and exceptional items
Distribution costs

Operating expenses before amortisation and exceptional items
Amortisation and exceptional items (note 7)

Continuing operations

Administrative expenses include:
Fair value loss on non-hedging derivatives
Foreign exchange losses

2012
£m

1.9
0.8
0.4
0.5
0.4

4.0
1.1

5.1

2012
£m

126.0
12.8

138.8
29.2

168.0

2012
£m

0.2
1.3

2011
£m

1.2
0.7
0.7
0.5
0.2

3.3
–

3.3

2011
£m

97.1
5.8

102.9
26.1

129.0

2011
£m

–
–

Hunting PLC Annual Report 2012
7. Amortisation and Exceptional Items
Group

Fair value uplift to inventories charge
Impairment of property, plant and equipment
Dry hole costs

Charged to cost of sales

Amortisation of intangible assets (note 17)
Acquisition costs
Retention bonuses for key employees of acquired businesses
Impairment of goodwill (note 16)
Property provisions (note 27)

Charged to operating expenses

Release of contingent consideration liability – credited to operating income

Amortisation and exceptional items
Unamortised loan facility fees written off – charged to finance expense
Taxation on amortisation and exceptional items (note 12)

Continuing operations

2012
£m

2011
£m

7.6
5.2
2.0

14.8

28.1
–
1.1
–
–

29.2

(1.1)

42.9
–
(16.7)

26.2

12.9
1.0
–

13.9

12.2
8.6
1.6
1.5
2.2

26.1

–

40.0
1.0
(15.2)

25.8

Under IFRS, at acquisition, inventory values are adjusted from their carrying values (generally at cost of production) to a fair
value, which includes profit attributable to the degree of completion of the inventory. This uplift is charged to the income
statement as the inventory is sold, thereby reducing reported operating profits. In 2012, the charge was £7.6m relating to the four
acquisitions completed in the second half of 2011.

The impairment charge of £5.2m (2011 – £1.0m) relates to the write down of oil and gas development expenditure, largely due to
sustained low natural gas commodity prices during the year and forecast for the foreseeable future. The recoverable amount of oil
and gas development expenditure is based on value in use. These calculations use discounted pre-tax cash flow projections based
on estimated oil and gas reserves, future production and income attributable to such reserves. Cash flows are based on reserve
production lives varying from one to fifteen years. Cash flows are discounted using a pre-tax rate of 10% (2011 – 10%). The prices of
oil and natural gas are derived from published futures prices, with the long-term average oil price assumed to be US$98.13 bbl.
(2011 – US$96.10 bbl.) and the long-term average gas price at US$4.35 mcf (2011 – US$4.07 mcf). Natural declines in well
production rates, combined with low forecast product prices, materially decreased the present value of future cash flows and
rendered development and production of certain older offshore wells uneconomical, resulting in the impairment charge of £5.2m.

Dry hole costs of £2.0m have been incurred during the year from our Exploration and Production activities.

A £1.1m charge for bonuses for key employee retention, relating to the 2011 acquisitions, has been recognised. All relevant
employees have been paid their bonuses in the period and the liability has been discharged.

A credit of £1.1m has been recognised in the income statement for the Doffing contingent consideration arrangement, as the
future payments are not likely to be required.

8. Profit from Continuing Operations
Group
The following items have been charged in arriving at profit from continuing operations:

Staff costs (note 10)
Depreciation of property, plant and equipment
Amortisation of other intangible assets (included in operating expenses)
Impairment of goodwill (included in operating expenses)
Impairment of property, plant and equipment (included in cost of sales)
Impairment of trade and other receivables (note 20)
Cost of inventories recognised as expense (included in cost of sales)*
Write down in inventories
Net loss on disposal of property, plant and equipment
Operating lease payments
Research and development expenditure

2012
£m

2011
£m

175.9
25.5
28.1
–
5.2
0.8
445.9
2.3
3.0
6.9
1.7

134.9
21.5
12.2
1.5
1.0
0.9
346.8
0.7
1.4
6.0
0.6

* The cost of inventories recognised as an expense includes the release of the fair value uplift to inventories of £7.6m (2011 – £12.9m) included in exceptional items (note 7).

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information70

Notes to the Financial Statements continued

8. Profit from Continuing Operations continued
Services provided by the Group’s auditor PricewaterhouseCoopers LLP and its associates comprised:

Fees payable to the Company’s auditor and its associates:
Audit of the parent company and consolidated financial statements
Audit of the Company’s subsidiaries

Total audit

Audit-related assurance services

Tax compliance services
Tax advisory services

Total services relating to taxation

Services relating to corporate finance transactions entered into by the Group
Other services

Total other non-audit services

Total fees

9. EBITDA
Group

Total profit from continuing operations (page 55)
Add: Amortisation and exceptional items (note 7)
Add: Depreciation (note 15)

EBITDA

Group

2012
£m

2011
£m

Company

2012
£m

2011
£m

1.3
0.1

1.4

0.1

0.6
0.3

0.9

0.1
0.1

0.2

2.6

1.3
0.1

1.4

0.1

0.7
0.3

1.0

1.5
0.2

1.7

4.2

0.4
–

0.4

–

0.1
0.1

0.2

–
0.1

0.1

0.7

0.3
–

0.3

–

0.3
–

0.3

0.8
–

0.8

1.4

2012
£m

85.9
42.9
25.5

2011
£m

41.0
40.0
21.5

154.3

102.5

EBITDA is a non-GAAP measure and is defined as pre-exceptional profit from continuing operations before interest, tax,
depreciation, amortisation and impairment to property, plant and equipment. EBITDA is used by the Board as a measure of
performance of the Group.

EBITDA includes a £0.8m charge in respect of acquisition related costs incurred during the year.

10. Employees
Group

Staff costs during the year comprised:
Wages and salaries
Social security costs
Share-based payments (note 38)
Pension costs
– defined contribution schemes (note 32)
– defined benefit scheme (note 32)

2012

2011

Continuing
operations
£m

Discontinued
operations
£m

Total
£m

Continuing
operations
£m

Discontinued
operations
£m

151.1
11.4
7.0

4.2
2.2

175.9

3.7
0.5
–

0.2
–

4.4

154.8
11.9
7.0

4.4
2.2

112.3
10.0
6.9

3.7
2.0

8.5
1.0
–

0.5
–

180.3

134.9

10.0

144.9

Total
£m

120.8
11.0
6.9

4.2
2.0

Hunting PLC Annual Report 2012

10. Employees continued

The average monthly number of employees (including executive

Directors) comprised:

UK
Rest of Europe
Canada
USA
Asia Pacific
Other

The average monthly number of employees (including executive

Directors) comprised:

Well Construction
Well Completion
Well Intervention
Exploration and Production
Field Aviation
Gibson Shipbrokers
Central

2012

2011

Continuing
operations

Discontinued
operations

Total

Continuing
operations

Discontinued
operations

Total

552
65
232
2,224
653
23

3,749

–
–
73
1
–
–

552
65
305
2,225
653
23

3,823

499
54
202
1,487
480
–

2,722

–
–
183
5
–
–

188

499
54
385
1,492
480
–

2,910

2012

2011

Continuing
operations

Discontinued
operations

Total

Continuing
operations

Discontinued
operations

Total

1,219
1,954
359
4
–
155
58

3,749

–
–
–
–
74
–
–

1,219
1,954
359
4
74
155
58

3,823

814
1,394
314
4
–
149
47

2,722

–
–
–
–
188
–
–

188

2012

2011

Continuing
operations

Discontinued
operations

Total

Continuing
operations

Discontinued
operations

814
1,394
314
4
188
149
47

2,910

Total

2,951
705

3,656

2011
£m

2.3
0.2
0.3
1.0

3.8

Actual number of employees at year end:
Male
Female

3,138
728

3,866

–
–

–

3,138
728

3,866

2,785
668

3,453

Key management comprises the executive and non-executive Directors only. Their compensation is:

Salaries and short-term employee benefits
Social security costs
Post-employment benefits
Share-based payments

166
37

203

2012
£m

2.2
0.2
0.3
2.4

5.1

Salaries and short-term benefits are included within Emoluments on page 48 of the Remuneration Committee’s Report. Post-
employment benefits comprise employer pension contributions. Share options exercised are disclosed on page 49 within
Directors’ Options and Awards over Ordinary shares in the Remuneration Committee’s Report.

Company
The Company has no employees.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information72

Notes to the Financial Statements continued

11. Net Finance Costs
Group

Finance income:
Bank balances and deposits
Foreign exchange gains
Other finance income

Finance expense:
Bank overdrafts
Bank borrowings
Bank fees and commissions
Other finance expense

Finance expense before exceptional items
Unamortised loan facility fees written off – exceptional item (note 7)

2012
£m

1.0
–
0.7

1.7

(0.9)
(4.2)
(2.1)
(0.7)

(7.9)
–

(7.9)

2011
£m

2.1
1.0
0.4

3.5

(1.2)
(1.6)
(1.8)
(1.1)

(5.7)
(1.0)

(6.7)

Net finance expense – continuing operations

(6.2)

(3.2)

12. Taxation
Group

Current tax
– current year expense
– adjustment in respect of prior years

Deferred tax
– origination and reversal of temporary differences
– change in tax rate
– adjustment in respect of prior years

2012

Before
amortisation
and
exceptional
items
£m

Amortisation
and
exceptional
items
£m

33.5
(5.9)

27.6

6.8
0.3
(0.1)

7.0

(15.8)
–

(15.8)

(0.9)
–
–

(0.9)

Before
amortisation
and
exceptional
items
£m

2011

Amortisation
and
exceptional
items
£m

26.9
(3.3)

23.6

(1.0)
(0.1)
–

(1.1)

(13.0)
–

(13.0)

(2.2)
–
–

(2.2)

Total
£m

17.7
(5.9)

11.8

5.9
0.3
(0.1)

6.1

Total
£m

13.9
(3.3)

10.6

(3.2)
(0.1)
–

(3.3)

Total tax charged to the income statement –

continuing operations

34.6

(16.7)

17.9

22.5

(15.2)

7.3

The weighted average applicable tax rate for continuing operations before amortisation and exceptional items is 28%
(2011 – 28%).

The tax credit in the income statement for amortisation and exceptional items principally comprises £10.8m (2011 – £3.8m) for
amortisation, £1.9m (2011 – £0.3m) for the impairment of oil and gas development expenditure, £0.7m (2011 – £nil) for dry hole
costs, £nil (2011 – £2.5m) for acquisition costs, £nil (2011 – £0.5m) for property provisions, £0.4m (2011 – £0.6m) for retention
bonuses, £nil (2011 – £0.3m) for unamortised loan facility fees and £2.9m (2011 – £4.9m) for the fair value uplift to inventories
charge.

Hunting PLC Annual Report 2012
73

12. Taxation continued
The total tax charge for the year is lower (2011 – lower) than the standard rate of UK corporation tax of 24.5% (2011 – 26.5%) for
the following reasons:

Profit before tax from continuing operations

Tax at 24.5% (2011 – 26.5%)
Permanent differences
Recognition of previously unrecognised deferred taxes
Non-tax deductible (untaxed) exceptional items
Higher rate of tax on overseas profits
Change in tax rates
Adjustments in respect of prior years

Tax charge for the year – continuing operations

Tax effects relating to each component of other comprehensive income:

2012

Tax
(charged)
credited
£m

1.9
(0.2)

–

–
(0.1)

–
–
0.3

1.9

Before
tax
£m

(29.3)
(2.1)

–

–
0.5

–
–
(1.3)

(32.2)

Exchange adjustments
Release of foreign exchange adjustments on disposal of subsidiary
Fair value gains and losses:
– gain on available for sale financial investment arising during

the year

– gains transferred to income statement on redemption of

available for sale financial investment

– gains originating on cash flow hedges arising during the year
– (gains) losses transferred to income statement on disposal of

cash flow hedges

– gains transferred to goodwill on disposal of cash flow hedges
Actuarial losses on defined benefit pension schemes

Tax credited directly in equity:

Share options and awards

2012
£m

80.7

19.8
1.8
(0.7)
(0.2)
2.9
0.3
(6.0)

17.9

2011

Tax
(charged)
credited
£m

(2.5)
–

(5.1)

5.1
(1.4)

1.6
–
0.6

2011
£m

38.8

10.3
1.6
(2.0)
0.5
0.3
(0.1)
(3.3)

7.3

After
tax
£m

6.6
–

35.3

(53.2)
4.0

0.8
(5.5)
(1.3)

After
tax
£m

(27.4)
(2.3)

–

–
0.4

–
–
(1.0)

Before
tax
£m

9.1
–

40.4

(58.3)
5.4

(0.8)
(5.5)
(1.9)

(30.3)

(11.6)

(1.7)

(13.3)

2012
£m

(0.2)

2011
£m

0.2

A number of changes to the UK corporation tax system were announced in the March 2012 Budget Statement, whereby from
1 April 2012 the main rate of corporation tax was reduced to 24%. The impact of this change has been recognised in calculating
the effective rate of tax for the year ended 31 December 2012. Legislation to reduce the main rate of corporation tax from 24% to
23% is included in the Finance Act 2012, which received Royal Assent on 17 July 2012. Further reductions to the main rate are
proposed to reduce the rate by 2% per annum to 21% by 1 April 2014. The changes are not expected to have a material impact
on the Group’s deferred tax balances.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information74

Notes to the Financial Statements continued

13. Discontinued Operations
Group
The results from discontinued operations comprise the following:

Trading results:
Revenue
Cost of sales

Gross profit
Other operating income
Operating expenses

Profit from operations
Finance income

Profit before tax
Taxation

Profit for the year

Gain on disposal:
Gain on sale before tax
Taxation

Gain on sale after tax

Total profit from discontinued operations

2012

Gibson
Energy
£m

–
–

–
–
–

–
–

–

Total
£m

10.1
(9.6)

0.5
0.8
(1.3)

–
–

–

Field
Aviation
£m

25.9
(23.9)

2.0
2.4
(3.6)

0.8
0.2

1.0
(0.3)

0.7

56.9
10.9

67.8

58.1
11.1

69.2

–
–

–

67.8

69.2

0.7

Field
Aviation
£m

10.1
(9.6)

0.5
0.8
(1.3)

–
–

–

1.2
0.2

1.4

2011

Hunting
Energy
France
£m

Gibson
Energy
£m

Total
£m

25.9
(23.9)

2.0
2.4
(3.6)

0.8
0.2

1.0
(0.3)

0.7

55.1
(5.1)

50.0

–
–

–
–
–

–
–

–

55.0
(5.1)

49.9

50.7

–
–

–
–
–

–
–

–

0.1
–

0.1

Gibson Energy
The sale of Gibson Energy Inc., Hunting’s midstream services operation, was completed on 12 December 2008.

Following the sale of Gibson Energy, Hunting established provisions for tax indemnities given in respect of two tax disputes with
the Canadian Tax Authorities (“CRA”). The CRA have now ended their enquiry into the larger of the two tax disputes and have
dropped their challenge resulting in a gain to the income statement of £56.9m, comprising of a release of £30.7m provisions held
in respect of the dispute, a refund of approximately £25.9m in cash, for payments which were made in response to corporation
tax reassessments issued by the CRA in respect of this tax dispute and other movements on Gibson Energy related provisions in
the year giving rise to a net credit of £0.3m.

The refund of cash involves the Federal and Provincial tax authorities in Canada. Receipt of the Federal portion, amounting to
£17.2m was received in December 2012 and receipt of the Provincial portion, approximately £8.7m, was received on 28
February 2013.

On the sale of Gibson Energy in 2008, part of the consideration was deferred and held as a warrant until its receipt in full in
2011. Upon receipt, the proceeds were treated as a taxable revenue item and taxed accordingly. In 2012, the UK tax authorities
agreed that the underlying nature of the transaction is capital. The company has utilised capital tax losses to offset the capital
gain arising on the warrant, resulting in a £nil tax charge on the warrant. The tax charge previously recognised, together with
provisions, has been released.

Field Aviation
On 27 April 2012, the Group sold its aviation engineering services business, Hunting Canadian Airport Holdings Ltd and its
subsidiaries, including Field Aviation Company Inc. (together referred to as “Field Aviation”). Field Aviation is considered to be a
major operation of Hunting and as such the results have been presented as a discontinued operation.

Hunting Energy France
On 22 December 2009, the Group sold Hunting Energy France SA, its French-based business.

Hunting PLC Annual Report 2012
75

14. Earnings per Share
Basic earnings per share (“EPS”) is calculated by dividing the earnings attributable to Ordinary shareholders by the weighted
average number of Ordinary shares outstanding during the year.

For diluted earnings per share, the weighted average number of outstanding Ordinary shares is adjusted to assume conversion of
all dilutive potential Ordinary shares. The dilution in respect of share options applies where the exercise price is less than the
average market price of the Company’s Ordinary shares during the year and the possible issue of shares under the Group’s
long-term incentive plans.

Reconciliations of the earnings and weighted average number of Ordinary shares used in the calculations are set out below:

Basic and diluted earnings attributable to Ordinary shareholders:
From continuing operations
From discontinued operations

Total

Basic and diluted earnings attributable to Ordinary shareholders before amortisation and

exceptional items:

From continuing operations
Add: amortisation and exceptional items after taxation (note 7)

Total for continuing operations

From discontinued operations
Add: exceptional items after tax

Total for discontinued operations

Basic weighted average number of Ordinary shares
Dilutive outstanding share options
Long-term incentive plans

Adjusted weighted average number of Ordinary shares

Basic EPS
From continuing operations
From discontinued operations

Diluted EPS
From continuing operations
From discontinued operations

Earnings per share before amortisation and exceptional items:
Basic EPS
From continuing operations
From discontinued operations

Diluted EPS
From continuing operations
From discontinued operations

2012
£m

2011
£m

59.7
69.2

128.9

28.4
50.7

79.1

59.7
26.2

85.9

69.2
(69.2)

–

millions

145.9
1.2
2.4

149.5

28.4
25.8

54.2

50.7
(50.0)

0.7

millions

137.1
1.4
1.6

140.1

pence

40.9
47.5

88.4

40.0
46.3

86.3

58.9
–

58.9

57.5
–

57.5

20.7
37.0

57.7

20.3
36.2

56.5

39.6
0.5

40.1

38.7
0.5

39.2

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information76

Notes to the Financial Statements continued

15. Property, Plant and Equipment
Group

Cost:
At 1 January
Exchange adjustments
Additions
Disposals
Reclassification

At 31 December

Accumulated depreciation and impairment:
At 1 January
Exchange adjustments
Charge for the year
Impairment of assets (note 7)
Disposals
Reclassification

At 31 December

Net book amount

Year ended 31 December 2012

Land and buildings

Freehold
£m

Short
leasehold
£m

Oil and gas
exploration
and
development
£m

Plant,
machinery
and motor
vehicles
£m

89.6
(2.6)
15.4
–
0.1

102.5

6.7
0.1
1.8
–
–
–

8.6

1.4
(0.1)
0.2
(0.1)
2.3

3.7

0.8
(0.1)
0.4
–
(0.1)
1.6

2.6

98.2
(4.5)
6.1
–
–

99.8

81.5
(3.8)
1.5
5.2
–
–

84.4

208.8
(6.4)
41.7
(11.2)
(2.4)

230.5

77.8
(1.2)
21.8
–
(4.4)
(1.6)

92.4

Total
£m

398.0
(13.6)
63.4
(11.3)
–

436.5

166.8
(5.0)
25.5
5.2
(4.5)
–

188.0

93.9

1.1

15.4

138.1

248.5

Oil and gas exploration and development includes expenditure on the exploration for and evaluation of mineral resources, which
is recognised at cost and is not depreciated until production commences, or is impaired if the exploration of the mineral
resources is not commercially viable. The amount recognised in cost at 31 December 2012 is £0.2m (2011 – £0.1m), including
additions during the year of £0.2m (2011 – £0.1m) and an impairment loss of £nil (2011 – £nil).

Included in the net book amount is expenditure relating to assets in the course of construction of £0.3m (2011 – £6.4m) for
freehold land and buildings, £2.1m (2011 – £2.6m) for oil and gas exploration and development and £6.3m (2011 – £4.2m) for
plant and machinery.

Group capital expenditure committed, for the purchase of property, plant and equipment, but not provided for in these financial
statements amounted to £7.9m (2011 – £10.9m).

Hunting PLC Annual Report 2012
77

Total
£m

311.6
4.5
59.6
45.4
(11.6)
(11.5)
–

Year ended 31 December 2011

Land and buildings

Freehold
£m

Short
leasehold
£m

Oil and gas
exploration
and
development
£m

Plant,
machinery
and motor
vehicles
£m

55.9
0.9
18.0
18.7
(2.1)
–
(1.8)

89.6

6.0
–
1.5
–
(0.8)
–
–

6.7

6.6
0.1
–
–
–
(5.4)
0.1

1.4

4.8
–
0.2
–
–
(4.6)
0.4

0.8

93.7
1.1
3.4
–
–
–
–

98.2

76.5
0.9
3.1
1.0
–
–
–

81.5

155.4
2.4
38.2
26.7
(9.5)
(6.1)
1.7

208.8

398.0

70.2
0.3
16.9
–
(4.4)
(4.8)
(0.4)

77.8

157.5
1.2
21.7
1.0
(5.2)
(9.4)
–

166.8

82.9

0.6

16.7

131.0

231.2

15. Property, Plant and Equipment continued

Cost:
At 1 January
Exchange adjustments
Additions
Acquisitions
Disposals
Classified as held for sale
Reclassification

At 31 December

Accumulated depreciation and impairment:
At 1 January
Exchange adjustments
Charge for the year*
Impairment of assets
Disposals
Classified as held for sale
Reclassification

At 31 December

Net book amount

Included in the charge for the year is £0.2m for discontinued operations.

The net book amount of property, plant and equipment at 1 January 2011 was £154.1m.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information78

Notes to the Financial Statements continued

16. Goodwill
Group

Cost:
At 1 January
Exchange adjustments
Additions

At 31 December

Accumulated impairment:
At 1 January
Exchange adjustments
Charge for the year

At 31 December

Net book amount

2012
£m

339.3
(13.6)
–

325.7

21.4
(0.2)
–

21.2

Restated
2011
£m

120.3
5.1
213.9

339.3

19.7
0.2
1.5

21.4

304.5

317.9

As permitted under IFRS 3, goodwill for 2011 has been restated to recognise additional goodwill of £1.4m on the acquisition of
Hunting Titan on 16 September 2011.

The net book amount at 1 January 2011 was £100.6m.

Impairment tests for goodwill
Goodwill is allocated to the Group’s cash-generating units (“CGUs”), the individual business operations, as follows:

Innova
Dearborn
Titan
Welltonic
Hunting Stafford (formerly National Coupling Company)
Other cash generating units

At 31 December

2012
£m

42.3
15.7
176.6
11.6
20.1
38.2

304.5

Restated
2011
£m

44.2
16.4
185.0
11.6
21.0
39.7

317.9

The recoverable amount of a CGU is determined based on value in use calculations. The key assumptions for the value in use
calculations are long-term growth rates and pre-tax discount rates. The calculations use discounted pre-tax cash flow projections
based on the most recent financial budgets approved by management covering a two year period and are based on past
experience and order books. Cash flows beyond the two year period are extrapolated using estimated nominal long-term growth
rates of 6.8% and 8.0% and terminal growth rates of 2.7% and 3.0% for 2012 and 2011 respectively. The growth rate reflects the
products, industries and countries in which the relevant CGU operates and will incorporate, where relevant, projected rig counts
and the expected profile of drilling.

Cash flows are discounted using nominal pre-tax rates between 10% and 15% (2011 – 11% and 15%). The cash flows for the
Titan CGU have been discounted using a nominal pre-tax rate of 11% (2011 – 11%). The discount rate best reflects current market
assessments of the time value of money, the risks associated with the cash flows and the likely external rate of borrowing of the
CGU. Consideration has also been given to other factors such as currency risk, operational risk and country risk.

The operations of Well Intervention have been combined with the operations of Welltonic and so goodwill relating to Well
Intervention, which was previously disclosed separately, has been reallocated to the Welltonic CGU.

Sensitivities
Having performed a sensitivity analysis on the value in use calculations, management believes that no reasonably possible
change in any of the key assumptions would cause the carrying value of any CGU to materially exceed its recoverable amount.

Hunting PLC Annual Report 2012
79

17. Other Intangible Assets
Group

Cost:
At 1 January
Exchange adjustments
Additions

At 31 December

Accumulated amortisation:
At 1 January
Exchange adjustments
Charge for the year

At 31 December

Customer
relationships
£m

Unpatented
technology
£m

Patents
£m

Trademarks
£m

Other
£m

Total
£m

2012

159.3
(6.9)
–

152.4

8.9
(0.7)
16.5

24.7

34.4
(1.5)
–

32.9

1.0
(0.1)
3.4

4.3

13.0
(0.6)
0.1

12.5

1.1
(0.1)
1.3

2.3

19.4
(0.9)
–

18.5

2.3
(0.2)
4.0

6.1

11.3
(0.5)
1.4

12.2

3.3
(0.3)
2.9

5.9

237.4
(10.4)
1.5

228.5

16.6
(1.4)
28.1

43.3

Net book amount

127.7

28.6

10.2

12.4

6.3

185.2

Cost:
At 1 January
Exchange adjustments
Additions
Acquisitions

At 31 December

Accumulated amortisation:
At 1 January
Exchange adjustments
Charge for the year

At 31 December

Customer
relationships
£m

Unpatented
technology
£m

Patents
£m

Trademarks
£m

Other
£m

Total
£m

2011

19.6
2.9
–
136.8

159.3

2.2
0.1
6.6

8.9

–
0.6
–
33.8

34.4

–
–
1.0

1.0

3.1
0.1
–
9.8

13.0

0.5
–
0.6

1.1

0.9
0.5
–
18.0

19.4

0.5
0.1
1.7

2.3

3.0
0.2
0.3
7.8

11.3

0.8
0.2
2.3

3.3

26.6
4.3
0.3
206.2

237.4

4.0
0.4
12.2

16.6

Net book amount

150.4

33.4

11.9

17.1

8.0

220.8

The net book amount of total other intangible assets at 1 January 2011 was £22.6m.

None of the Group’s intangible assets have been internally generated.

All amortisation charges relating to intangible assets have been charged to operating expenses.

All intangible assets are regarded as having a finite life and are amortised accordingly.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information80

Notes to the Financial Statements continued

17. Other Intangible Assets continued
Individual Material Intangible Assets
Included in the table above are the following individual material intangible assets:

Cost:
At 1 January
Exchange adjustments

At 31 December

Accumulated amortisation:
At 1 January
Exchange adjustments
Charge for the year

At 31 December

Net book amount

Remaining amortisation period at 31 December – years

18. Investments

Non-current:
At 1 January
Exchange adjustments
Additions
Fair value gain transferred to equity
Redemption of warrant

The financial assets comprise:

Unlisted equity investments
Listed equity investments and mutual funds
Environmental escrow

Current:
Bank deposits maturing after more than three months

2012

Customer
relationships
– Innova
£m

Customer
relationships
– Titan
£m

17.4
(0.8)

16.6

122.3
(5.4)

116.9

2.9
(0.2)
2.1

4.8

3.6
(0.5)
12.0

15.1

11.8

101.8

5.7

8.8

Group

Company

2012
£m

0.2
(0.1)
3.9
–
–

4.0

2011
£m

45.1
–
–
40.4
(85.3)

0.2

2012
£m

–
–
0.2
–
–

0.2

Group

Company

2012
£m

0.3
3.5
0.2

4.0

Group

2012
£m

3.2

2011
£m

0.2
–
–

0.2

2011
£m

2.4

2012
£m

–
–
0.2

0.2

Company

2012
£m

–

2011
£m

–
–
–
–
–

–

2011
£m

–
–
–

–

2011
£m

–

The maximum exposure to credit risk at 31 December 2012 is the fair value of the financial assets of £7.2m (2011 – £2.6m),
see note 29.

Hunting PLC Annual Report 2012
19. Investments in Subsidiaries
Company

Cost:
At 1 January
Disposals

At 31 December

Impairment:
At 1 January
Charge for the year

At 31 December

Net book amount

2012
£m

2011
£m

314.4
(0.7)

313.7

314.4
–

314.4

2.0
3.8

5.8

1.4
0.6

2.0

307.9

312.4

The principal subsidiaries are detailed in note 44.

The impairment charge of £3.8m (2011 – £0.6m) relates to a non-trading subsidiary that has incurred losses and which the
directors do not expect to be recovered in the foreseeable future. The investment has therefore been written down to the
subsidiary’s net asset value, being the directors’ estimate of the recoverable amount.

Investments in subsidiaries are recorded at cost, which is the fair value of the consideration paid, less impairment. The Directors
believe that the carrying value of the investments is supported by their underlying net assets.

20. Trade and Other Receivables

Non-current:
Receivables from subsidiaries
Other receivables
Prepayments

Current:
Trade receivables
Less: provision for impairment of receivables

Net trade receivables
Receivables from subsidiaries
Receivable due from Canadian tax authority
Prepayments
Accrued revenue
Other receivables

Group

Company

2012
£m

–
1.6
2.1

3.7

2011
£m

–
–
2.2

2.2

146.0
(2.3)

154.8
(2.2)

143.7
–
8.7
6.6
3.7
8.3

171.0

152.6
–
–
5.0
4.0
12.6

174.2

2012
£m

2011
£m

10.3
1.6
–

11.9

–
–

–
19.2
–
0.2
–
0.3

19.7

26.6
–
–

26.6

–
–

–
8.5
–
0.1
–
0.1

8.7

The amount receivable from the Canadian tax authorities was received on 28 February 2013.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information82

Notes to the Financial Statements continued

20. Trade and Other Receivables continued
Group
Trade receivables that are not overdue and not impaired are expected to be fully recovered as there is no recent history of default
or any indications that the customers will not meet their payment obligations. At the year-end there are no trade receivables
(2011 – none) whose terms have been renegotiated and would otherwise be past due or impaired.

At 31 December 2012, trade receivables of £61.6m (2011 – £52.0m) were overdue but not impaired. The ageing of these
receivables at the year-end is as follows:

Number of days overdue:

1–30 days
31–60 days
61–90 days
91–120 days
more than 120 days

Receivables overdue not impaired
Receivables not overdue and not impaired
Receivables not overdue and impaired
Receivables overdue and impaired
Impairment

Net trade receivables

2012
£m

33.9
15.6
6.3
4.6
1.2

61.6
82.1
1.1
1.2
(2.3)

143.7

2011
£m

29.0
12.5
7.0
2.5
1.0

52.0
100.6
1.0
1.2
(2.2)

152.6

Receivables that are overdue but not impaired relate to customers for whom there is no recent history of default.

Impaired receivables mainly relate to debtors in financial difficulty where defaults in payments have occurred or concerns have
been raised about the customer’s liquidity. Trade receivables are impaired when there is evidence that the Group will not be able
to collect all amounts due according to the original terms of sale.

During the year, a provision of £1.4m (2011 – £1.3m) for the impairment of receivables was recognised, £0.6m (2011 – £0.3m)
receivables were written off and £0.6m (2011 – £0.4m) unused provisions were released. After recognising foreign exchange
gains of £0.1m (2011 – £0.1m gains), the provision for the impairment of trade receivables at the year end was £2.3m (2011 –
£2.2m).

The other classes of financial assets within trade and other receivables do not contain impaired assets.

Concentrations of credit risk with respect to trade receivables are limited due to the Group’s wide and unrelated customer base.

The maximum exposure to credit risk is the fair value of each class of receivable, as shown in note 29.

The Group does not hold any collateral as security and no assets have been acquired through the exercise of any collateral
previously held.

Company
None (2011 – none) of the Company’s trade and other receivables were past due at the year end and the Company does not
consider it necessary to provide for any impairments. The Company’s maximum exposure to credit risk is the fair value of each
class of receivable, as shown in note 29. The Company does not hold any collateral as security and no assets have been acquired
through the exercise of any collateral previously held.

Non-current receivables due from subsidiaries have no fixed term for repayment and are unsecured. Interest charged is 1% above
UK Base Rate on sterling loans. Current receivables due from subsidiaries are unsecured, interest free and payable on demand.

Hunting PLC Annual Report 2012
83

21. Deferred Tax
Deferred income tax assets and liabilities are only offset when there is a legally enforceable right to offset and when the deferred
income taxes relate to the same fiscal authority and there is an intention to settle the balance net. The offset amounts are as
follows:

Deferred tax assets
Deferred tax liabilities

Group

Company

2012
£m

7.2
(25.7)

(18.5)

Restated
2011
£m

4.9
(19.7)

(14.8)

2012
£m

–
(0.1)

(0.1)

2011
£m

–
(1.1)

(1.1)

The 2011 balance sheet deferred tax assets and liabilities have been restated to offset balances where there is a legally
enforceable right to offset.

The movement in the net deferred tax liability is as follows:

At 1 January
Exchange adjustments
(Charge) credit to income statement*
Taken direct to equity
Transfers to current tax
Classified as held for sale
Change in tax rate**

At 31 December

Group

Company

2012
£m

(14.8)
0.7
(4.0)
–
–
–
(0.4)

Restated
2011
£m

(17.0)
(0.1)
1.4
1.0
(0.3)
0.1
0.1

2012
£m

(1.1)
–
0.9
–
–
–
0.1

(18.5)

(14.8)

(0.1)

2011
£m

(1.1)
–
–
–
–
–
–

(1.1)

*
**

Included in the credit to the income statement is a £1.8m credit (2011 – £1.8m charge) relating to discontinued operations.
Included in the change in tax rate is a £0.1m charge (2011 – £nil) relating to discontinued operations.

Deferred tax assets of £0.3m (2011 – £0.6m) have not been recognised as realisation of the tax benefit is not probable. The tax
losses do not have an expiry date.

Deferred tax assets of £2.0m (2011 – £2.0m) have been recognised as the Group has assessed that the realisation of the benefit is
probable. Deferred tax assets of £7.2m (2011 – £4.9m) are expected to be recovered after more than twelve months. Deferred tax
liabilities of £25.7m (2011 – £19.7m) are expected to be released after more than twelve months.

The movements in deferred tax assets and liabilities, without taking into consideration the offsetting of balances within the same
tax jurisdictions, are shown below:

Group

Tax losses
Inventory
Goodwill and Intangibles
Post retirement benefits
Asset decommissioning provision
Accummulated tax depreciation
Share-based payments
Unremitted earnings
Other

At
1 January
2012
£m

Exchange
adjustments
£m

(Charge)
credit to
income
statement
£m

Taken direct
to equity
£m

Change in
tax rates
£m

At
31 December
2012
£m

Net
deferred
tax assets
£m

Net
deferred tax
liabilities
£m

3.9
4.5
(6.6)
(0.6)
1.0
(20.5)
5.3
(1.1)
(0.7)

(14.8)

(0.2)
(0.2)
0.3
–
(0.1)
0.9
–
–
–

0.7

(2.3)
(1.4)
(1.1)
0.1
0.2
(3.0)
1.4
0.9
1.2

(4.0)

–
–
–
0.3
–
–
(0.2)
–
(0.1)

–

(0.1)
0.1
–
–
–
(0.5)
–
0.1
–

(0.4)

1.3
3.0
(7.4)
(0.2)
1.1
(23.1)
6.5
(0.1)
0.4

(18.5)

1.3
–
–
(1.4)
–
0.8
6.5
–
–

7.2

–
3.0
(7.4)
1.2
1.1
(23.9)
–
(0.1)
0.4

(25.7)

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information84

Notes to the Financial Statements continued

–
–

–

(1.2)

–

0.7

5.3
–
0.1

4.9

3.9
4.5

(6.6)

0.6

1.0

(21.2)

–
(1.1)
(0.8)

(19.7)

Group

2012
£m

0.3
(0.1)
–
(0.2)

–

2011
£m

0.6
(1.4)
1.6
0.2

1.0

Taken direct
to equity
£m

Transfer to
current tax
£m

Change in
tax rates
£m

Classified
as held
for sale
£m

At
31 December
2011
£m

Net
deferred tax
assets
£m

Net
deferred tax
liabilities
£m

21. Deferred Tax continued

Tax losses
Inventory
Goodwill and
Intangibles
Post retirement

benefits

Asset

decommissioning
provision

Accummulated tax

depreciation
Share-based
payments

Unremitted earnings
Other

At
1 January
2011
£m

Exchange
adjustments
£m

1.8
1.6

(7.4)

(1.5)

0.1
0.1

–

(Charge)
credit to
income
statement
£m

2.0
2.8

1.1

0.3

–

0.1

0.9

(11.8)

(0.4)

(8.4)

3.1
(1.2)
(1.6)

–
–
–

(17.0)

(0.1)

2.0
–
0.7

1.4

–
–

–

0.6

–

0.2
–
0.2

1.0

–
–

(0.3)

–

–
–
–

(0.3)

–
–

–

–
0.1
–

0.1

–
–

–

3.9
4.5

(6.6)

(0.6)

1.0

0.1

(20.5)

–
–
–

5.3
(1.1)
(0.7)

0.1

(14.8)

Deferred income tax credited (charged) to equity during the year comprised:

Actuarial losses on defined benefit pension schemes
Losses originating on cash flow hedges arising during the year
Gains transferred to income statement on disposal of cash flow hedges
Share options and awards

Company
The Company had £0.1m (2011 – £1.1m) of deferred tax liabilities relating to unremitted earnings at the year end.

22. Inventories
Group

Raw materials
Work in progress
Finished goods
Less: provisions for impairment

2012
£m

67.3
42.9
137.2
(6.8)

240.6

Restated
2011
£m

71.3
43.4
122.3
(6.0)

231.0

As permitted under IFRS 3, inventories for 2011 have been restated to reflect a reduction of £1.4m on the acquisition of Hunting Titan on 16 September 2011.

Inventories are stated at the lower of cost and fair value less selling costs. The carrying amount of inventories stated at fair value
less selling costs is £4.5m (2011 – £6.0m).

The Group reversed £1.3m (2011 – £2.2m) of a previous inventory impairment as the goods were sold during the year for an
amount greater than their carrying value. The amount reversed has been included in cost of sales in the income statement.

23. Cash and Cash Equivalents

Cash at bank and in hand

Group

Company

2012
£m

101.7

2011
£m

68.8

2012
£m

1.4

2011
£m

0.7

Hunting PLC Annual Report 2012
85

Group

Company

2011
£m

2012
£m

2011
£m

2012
£m

4.1
3.5

7.6

66.2
–
5.1
51.1
10.3

–
–

–

57.5
–
3.5
70.6
15.2

4.1
–

4.1

–
0.6
–
6.4
0.4

7.4

–
–

–

–
3.2
–
5.7
0.4

9.3

24. Trade and Other Payables

Non-current:
Accruals
Other payables

Current:
Trade payables
Payables to subsidiaries
Social security and other taxes
Accruals
Other payables

Company
Current payables due to subsidiaries are unsecured, interest free and payable on demand.

132.7

146.8

25. Borrowings

Non-current:
Secured bank loans
Unsecured bank loans
Other unsecured loans
Amounts due to subsidiaries

Current:
Bank overdrafts
Secured bank loans
Unsecured bank loans
Other unsecured loans
Amounts due to subsidiaries

Group

2012
£m

Company

2011
£m

2012
£m

2011
£m

–
183.7
3.7
–

187.4

72.7
0.2
7.2
1.2
–

81.3

0.2
243.0
5.1
–

248.3

33.7
0.2
8.0
1.3
–

43.2

–
–
–
53.7

53.7

1.5
–
–
–
1.5

3.0

–
–
–
71.5

71.5

0.1
–
–
–
–

0.1

Total borrowings

268.7

291.5

56.7

71.6

Analysis of Borrowings by Currency
Group
The carrying amounts of the Group’s borrowings are denominated in the following currencies:

Secured bank loans
Unsecured bank loans
Other unsecured loans
Bank overdrafts

At 31 December 2012

Sterling
£m

US dollars
£m

–
–
–
65.9

65.9

0.2
190.9
4.9
6.5

202.5

Euro
£m

–
–
–
0.3

0.3

Total
£m

0.2
190.9
4.9
72.7

268.7

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information86

Notes to the Financial Statements continued

25. Borrowings continued

Secured bank loans
Unsecured bank loans
Other unsecured loans
Bank overdrafts

At 31 December 2011

Sterling
£m

US dollars
£m

–
–
–
29.5

29.5

0.4
247.4
6.4
4.2

258.4

Chinese
RMB
£m

–
3.6
–
–

3.6

Total
£m

0.4
251.0
6.4
33.7

291.5

Company
The Company has borrowings of £56.7m (2011 – £71.6m) at the year end, of which £56.7m (2011 – £55.3m) are denominated in
sterling and £nil (2011 – £16.3m) are denominated in Canadian dollars.

Non-current borrowings due to subsidiaries have no fixed term for repayment and are unsecured. Interest charged is 1% above
UK Base Rate on sterling loans.

26. Changes in Net Debt
Group
The analysis below is provided in order to reconcile the movement in borrowings (note 25) and cash and cash equivalents (note
23) during the year.

Cash and cash equivalents
Bank overdrafts

Current investments
Non-current borrowings
Current borrowings
Classified as held for sale

Total net debt

27. Provisions
Group

At 1 January 2012
Exchange adjustments
Charged to income statement
Charged to property, plant and equipment
Provisions utilised
Unutilised amounts reversed
Unwinding of discount
Change in discount rate
Reclassification from accruals

At 31 December 2012

At
1 January
2012
£m

68.8
(33.7)

35.1
2.4
(248.3)
(9.5)
1.9

(218.4)

Cash flow
£m

Exchange
movements
£m

Disposal of
subsidiaries
£m

Amortisation
of loan
facility fees
£m

At
31 December
2012
£m

33.8
(39.1)

(5.3)
0.8
51.9
0.5
(0.7)

47.2

(0.9)
0.1

(0.8)
–
9.8
0.4
–

9.4

–
–

–
–
–
–
(1.2)

(1.2)

–
–

–
–
(0.8)
–
–

101.7
(72.7)

29.0
3.2
(187.4)
(8.6)
–

(0.8)

(163.8)

Asset
decom-
missioning
and
remediation
obligations
£m

Warranties
and tax
indemnities
£m

2.9
(0.2)
–
0.7
–
–
0.1
–
–

3.5

39.8
(0.8)
2.7
–
–
(32.9)
–
–
–

8.8

Onerous
contracts
£m

17.8
–
2.0
–
(2.4)
(2.4)
0.1
0.2
–

15.3

Other
£m

–
–
0.8
–
–
(0.4)
–
–
1.6

2.0

Total
£m

60.5
(1.0)
5.5
0.7
(2.4)
(35.7)
0.2
0.2
1.6

29.6

Hunting PLC Annual Report 2012
27. Provisions continued
Provisions are due as follows:

Current
Non-current

2012
£m

12.5
17.1

29.6

2011
£m

42.3
18.2

60.5

The Group has commitments in respect of leasehold properties, some of which are not used for Group trading purposes and are
vacant or sub-let to third parties. The provision for onerous contracts reflects the uncertainty of future conditions in the sub-
letting market. It is expected that £2.1m of the provision will be utilised in 2013, £1.9m in 2014 and the remaining balance of
£11.3m utilised from 2015 to 2023. Provision is made on a discounted basis, at a risk-free rate of between 0.25% and 1.8% pa, for
the net rental deficit on these properties to the end of the lease term.

Asset decommissioning and remediation obligations relate to the Group’s obligation to dismantle, remove and restore items
of property, plant and equipment. The provision reflects uncertainty in the timing and amounts of the costs expected to arise
in meeting this obligation. Provision is made on a discounted basis and is expected to be utilised over a period of one to
eighteen years.

Following the sale of Gibson Energy in 2008, Hunting established provisions for tax indemnities given in respect of two tax
disputes with the Canadian Tax Authorities (“CRA”). The CRA have now ended their enquiry into the larger of the two tax
disputes and have dropped their challenge resulting in the release of £30.7m provisions held in respect of the dispute. Other tax
warranty provisions of £2.2m have also been released. This has been shown as part of discontinued operations (note 13).
Provisions of £7.7m continue to be retained in respect of the smaller tax dispute and are expected to be utilised in 2013.

28. Derivatives and Hedging
Group
(a) Currency Derivatives
The Group has used spot and forward foreign exchange contracts and average rate options to hedge its exposure to exchange
rate movements during the year.

At 31 December 2012, the total notional amount of the Group’s outstanding forward foreign exchange contracts is £3.7m
(2011 – £15.9m).

Gains and losses on contracts that are not designated in a hedge relationship are taken directly to the income statement. Changes
in the fair value of currency derivatives not designated in a hedge relationship amounting to a £0.2m loss (2011 – £0.1m) have
been recognised in the income statement during the year for continuing operations.

Certain highly probable forecast transactions have been designated in a cash flow hedge relationship and hedged using forward
foreign exchange contracts. These forecast transactions are expected to occur at various dates during the next six months. Gains
and losses recognised in the hedging reserve on forward foreign exchange contracts at 31 December 2012 will be recognised in
the income statement in the period or periods during which the hedged forecast transaction affects the income statement.

Losses of £0.5m (2011 – £5.4m gain) were recognised in the hedging reserve (note 34) during the year. No gains or losses (2011
– £6.3m gains) were removed from equity during the year, with no gains or losses (2011 – £0.8m gains included in revenue)
included in the income statement. Ineffectiveness of £nil (2011 – £nil) arose on the cash flow hedges during the year.

Fair values of derivative financial instruments

Forward foreign exchange – in cash flow hedges
Forward foreign exchange – not in a hedge

2012

2011

Total
assets
£m

0.1
–

0.1

Total
liabilities
£m

–
(0.1)

(0.1)

(0.4)
–

(0.4)

(b) Hedge of Net Investments in Foreign Operations
The Group has US dollar denominated borrowings, which it has designated as a hedge of the net investment in its US
subsidiaries. At 31 December 2012, the carrying amount of net US dollar borrowings was £215.7m (2011 – £244.1m).

At 31 December 2012, foreign exchange gains of £10.1m (2011 – £4.7m losses) on translation of the borrowings into sterling has
been recognised in the cumulative translation reserve.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information88

Notes to the Financial Statements continued

29. Financial Instruments: Fair Values
The carrying amounts of each measurement category of the Group’s financial assets and financial liabilities are stated below,
together with a comparison of fair value and carrying amount for each class of financial asset and financial liability.

Group

Year ended 31 December 2012

Carrying amount

Financial
asset at
fair value
through
profit
or loss
£m

Financial
liabilities
measured at
amortised
cost
£m

Derivatives
at fair value
through
equity
(cash flow
hedges)
£m

Financial
liabilities
held for
trading
£m

Loans and
receivables
£m

Available
for sale
financial
assets
£m

Non-current assets
Unlisted equity investments (note 18)
Listed equity investments and mutual

funds (note 18)

Environmental escrow (note 18)
Other receivables (note 20)

Current assets
Net trade receivables (note 20)
Receivable due from Canadian tax

authority (note 20)

Accrued revenue (note 20)
Other receivables
Deposits maturing after more than three

months (note 18)

Cash and cash equivalents (note 23)

Current liabilities
Trade payables (note 24)
Accruals (note 24)
Other payables
Provisions

Current borrowings (note 25)
Bank overdrafts
Secured bank loans
Unsecured bank loans
Other unsecured loans

Non-current borrowings (note 25)
Unsecured bank loans
Other unsecured loans

Non-current liabilities
Accruals (note 24)
Other payables (note 24)
Provisions

–

–
–
1.6

143.7

8.7
3.7
3.0

3.2
101.7

–
–
–
–

–
–

–
–
–

0.3

–
0.2
–

–

3.5
–
–

–

–
–
–

–
–

–
–
–
–

–
–

–
–
–

–

–
–
–

–
–

–
–
–
–

–
–

–
–
–

–

–
–
–

–

–
–
–

–
–

(66.2)
(50.6)
(6.3)
(12.5)

(72.7)
(0.2)
(7.2)
(1.2)

(183.7)
(3.7)

(4.1)
(3.5)
(13.6)

–

–
–
–

–

–
–
–

–
–

–
–
(0.1)
–

–
–
–
–

–
–

–
–
–

–

–
–
–

–

–
–
0.1

–
–

–
–
–
–

–
–

–
–
–

Total
£m

0.3

3.5
0.2
1.6

Fair value
total
£m

0.3

3.5
0.2
1.6

143.7

8.7
3.7
3.1

3.2
101.7

(66.2)
(50.6)
(6.4)
(12.5)

(72.7)
(0.2)
(7.2)
(1.2)

(66.2)
(50.6)
(6.4)
(12.5)

(72.7)
(0.2)
(7.2)
(1.2)

(183.7)
(3.7)

(4.1)
(3.5)
(13.6)

265.6

0.5

3.5

(425.5)

(0.1)

0.1

(155.9)

The fair value of forward foreign exchange contracts is determined by the deviation in future expected cash flows calculated by
reference to the movement in market quoted exchange rates. The carrying values of available for sale unlisted investments are
based on the Directors’ best estimate of fair value as there is no active market in which these are traded. The fair value of listed
equities and mutual funds is based on their current bid prices in an active market. The fair values of the environmental escrow
and the promissory note are determined by discounting the expected future cash flows. The fair values of non-sterling
denominated financial instruments are translated into sterling using the year end exchange rate.

Hunting PLC Annual Report 2012
89

29. Financial Instruments: Fair Values continued

Non-current assets
Unlisted equity investments (note 18)

Current assets
Net trade receivables (note 20)
Accrued revenue (note 20)
Other receivables
Investments (note 18)
Cash and cash equivalents (note 23)
Assets classified as held for sale

Current liabilities
Trade payables (note 24)
Accruals (note 24)
Other payables
Provisions
Liabilities classified as held for sale

Current borrowings (note 25)
Bank overdrafts
Secured bank loans
Unsecured bank loans
Other unsecured loans

Non-current borrowings (note 25)
Secured bank loans
Unsecured bank loans
Other unsecured loans

Non-current liabilities
Provisions

Year ended 31 December 2011

Carrying amount

Financial
liabilities
measured at
amortised
cost
£m

Derivatives at
fair value
through
equity (cash
flow hedges)
£m

–

–
–
–
–
–
–

(57.5)
(70.6)
(10.4)
(42.3)
(5.3)

(33.7)
(0.2)
(8.0)
(1.3)

(0.2)
(243.0)
(5.1)

(15.3)

–

–
–
–
–
–
–

–
–
(0.4)
–
–

–
–
–
–

–
–
–

–

Total
£m

0.2

Fair value
total
£m

0.2

152.6
4.0
10.2
2.4
68.8
7.9

(57.5)
(70.6)
(10.8)
(42.3)
(5.3)

(33.7)
(0.2)
(8.0)
(1.3)

152.6
4.0
10.2
2.4
68.8
7.9

(57.5)
(70.6)
(10.8)
(42.3)
(5.3)

(33.7)
(0.2)
(8.0)
(1.3)

(0.2)
(243.0)
(5.1)

(15.3)

Loans and
receivables
£m

Available for
sale financial
assets
£m

–

0.2

152.6
4.0
10.2
2.4
68.8
7.9

–
–
–
–
–

–
–
–
–

–
–
–

–

–
–
–
–
–
–

–
–
–
–
–

–
–
–
–

–
–
–

–

245.9

0.2

(492.9)

(0.4)

(247.2)

The inputs used to determine the fair value of unlisted equity investments and the environmental escrow are not based on
observable market data and therefore their fair value measurements can be categorised in Level 3 of the fair value hierarchy. The
inputs used to determine the fair value of derivative financial instruments are inputs other than quoted prices that are observable
and so the fair value measurement can be categorised in Level 2 of the fair value hierarchy. The fair value of listed equity
investments and mutual funds is based on quoted market prices and so the fair value measurement can be categorised in Level 1
of the fair value hierarchy.

The table below shows a reconciliation of the fair value measurements in Level 3 of the fair value hierarchy.

At 1 January 2012
Additions

At 31 December 2012

Additions of £0.2m relate to the environmental escrow account recognised on disposal of Field Aviation (note 43).

Available
for sale
financial
assets
£m

0.2
0.3

0.5

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information90

Notes to the Financial Statements continued

29. Financial Instruments: Fair Values continued
Company

Non-current assets
Environmental escrow (note 18)
Receivables from subsidiaries (note 20)
Other receivables (note 20)

Current assets
Receivables from subsidiaries (note 20)
Other receivables
Cash and cash equivalents (note 23)

Current liabilities (note 24)
Payables to subsidiaries
Accruals
Other payables
Provisions

Current borrowings (note 25)
Bank overdrafts
Amounts due to subsidiaries

Non-current borrowings (note 25)
Amounts due to subsidiaries

Non-current liabilities
Accruals (note 24)
Provisions

Year ended 31 December 2012

Carrying amount

Available
for sale
financial
assets
£m

Financial
liabilities
measured at
amortised
cost
£m

Total
£m

Fair value
total
£m

0.2
–
–

–
–
–

–
–
–
–

–
–

–

–
–

–
–
–

(0.6)
(6.4)
(0.4)
(0.2)

(1.5)
(1.5)

0.2
10.3
1.6

19.2
0.2
1.4

(0.6)
(6.4)
(0.4)
(0.2)

(1.5)
(1.5)

0.2
10.3
1.6

19.2
0.2
1.4

(0.6)
(6.4)
(0.4)
(0.2)

(1.5)
(1.5)

(53.7)

(4.1)
(0.4)

Loans and
receivables
£m

–
10.3
1.6

19.2
0.2
1.4

–
–
–
–

–
–

–

–
–

32.7

0.2

(68.8)

(35.9)

The fair values of the environmental escrow and the promissory note are determined by discounting the expected future cash
flows. The inputs used to determine the fair value of the environmental escrow are not based on observable data and therefore
the fair value measurement can be categorised in Level 3 of the fair value hierarchy.

Hunting PLC Annual Report 2012
91

29. Financial Instruments: Fair Values continued

Year ended 31 December 2011

Carrying amount

Non-current assets
Receivables from subsidiaries (note 20)

Current assets
Receivables from subsidiaries (note 20)
Other receivables (note 20)
Cash and cash equivalents (note 23)

Current liabilities (note 24)
Payables to subsidiaries
Accruals
Other payables

Current borrowings (note 25)
Bank overdrafts

Non-current borrowings (note 25)
Amounts due to subsidiaries

26.6

8.5
0.1
0.7

–
–
–

–

35.9

Financial
liabilities
measured at
amortised
cost
£m

Loans and
receivables
£m

Total
£m

Fair value
total
£m

26.6

8.5
0.1
0.7

(3.2)
(5.7)
(0.4)

8.5
0.1
0.7

(3.2)
(5.7)
(0.4)

–

–
–
–

(3.2)
(5.7)
(0.4)

(0.1)

(71.5)

(80.9)

(71.5)

(45.0)

(71.5)

(45.0)

30. Financial Risk Management
The Group’s activities expose it to certain financial risks, namely market risk (including currency risk, fair value interest risk and
cash flow interest risk), credit risk and liquidity risk. The Group’s risk management strategy seeks to mitigate potential adverse
effects on its financial performance. As part of its strategy, both primary and derivative financial instruments are used to hedge
certain risk exposures.

There are clearly defined objectives and principles for managing financial risk established by the Board of Directors, with
policies, parameters and procedures covering the specific areas of funding, banking relationships, foreign currency and interest
rate exposures and cash management.

The Group’s treasury function is responsible for implementing the policies and providing a centralised service to the Group for
funding, foreign exchange, interest rate management and counterparty risk management. It is also responsible for identifying,
evaluating and hedging financial risks in close co-operation with the Group’s operating companies.

(a) Foreign Exchange Risk
The Group’s international base is exposed to foreign exchange risk from its investing, financing and operating activities,
particularly in respect of US dollars. Foreign exchange risks arise from future transactions and cash flows and from recognised
monetary assets and liabilities that are not denominated in the functional currency of the Group’s local operations.

The Group’s material foreign exchange rates are:

Average exchange rate to sterling
Year-end exchange rate to sterling

US dollar

Canadian dollar

2012

1.59
1.63

2011

1.60
1.55

2012

1.58
1.62

2011

1.59
1.58

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information92

Notes to the Financial Statements continued

30. Financial Risk Management continued
(i) Transactional Risk
The exposure to exchange rate movements in significant future transactions and cash flows is hedged by using forward foreign
exchange contracts and currency options. Certain forward foreign exchange contracts have been designated as hedging
instruments of highly probable forecast transactions. Operating companies prepare quarterly rolling twelve month cash flow
forecasts to enable working capital currency exposures to be identified. Currency exposures arise where the cash flows are not in
the functional currency of the entity. Exposures arising from committed long-term projects beyond a twelve month period are
also identified. The currency flows to be hedged are committed foreign currency transactions greater than £250,000 equivalent
per month and/or currency flows that in aggregate exceed £500,000 equivalent per annum.

No speculative positions are entered into by the Group.

The table below shows the carrying values of the Group’s financial instruments at 31 December, including derivative financial
instruments, on which exchange differences would potentially be recognised in the income statement in the following year. The
table excludes available for sale financial assets, derivatives designated in a cash flow hedge, borrowings designated in a hedge of
the net investment in its US subsidiaries and loans to subsidiaries that are considered to be part of the net investment in a foreign
operation, as exchange differences arising on these are recognised in other comprehensive income.

At 31 December 2012

Functional currency of Group’s entities:
Sterling
US dollars
Canadian dollars
Singapore dollars
Euro
Chinese RMB
Other currencies

Sterling
£m

US dollars
£m

Currency of denomination

Canadian
dollars
£m

Singapore
dollars
£m

Euro
£m

Other
currencies
£m

–
(0.3)
–
(0.1)
(0.5)
–
–

(0.9)

31.9
–
2.1
1.5
(0.2)
(7.4)
0.3

28.2

3.6
–
–
–
–
–
–

3.6

(0.2)
(0.5)
–
–
–
–
–

(0.7)

0.5
–
–
–
–
–
–

0.5

(0.3)
–
–
–
–
–
0.1

(0.2)

Total
£m

35.5
(0.8)
2.1
1.4
(0.7)
(7.4)
0.4

30.5

The US dollar denominated financial instruments consist mainly of cash balances, trade receivables and inter-group loans. The
Canadian dollar denominated financial instruments consist mainly of inter-group loans, warranty provisions, the refund due from
the Canadian tax authority and the Field Aviation promissary note and environmental escrow.

At 31 December 2011

Functional currency of Group’s entities:
Sterling
US dollars
Canadian dollars
Singapore dollars
Euro
Chinese RMB
Other currencies

Sterling
£m

US dollars
£m

Currency of denomination

Canadian
dollars
£m

Singapore
dollars
£m

Euro
£m

Other
currencies
£m

–
–
–
–
(2.1)
–
–

(2.1)

11.1
–
4.5
3.2
2.1
(11.5)
0.3

9.7

(54.0)
2.1
–
–
–
–
–

(51.9)

(0.2)
(0.7)
–
–
–
–
–

(0.9)

0.8
–
–
–
–
–
–

0.8

(0.7)
0.2
0.3
–
–
–
–

(0.2)

Total
£m

(43.0)
1.6
4.8
3.2
–
(11.5)
0.3

(44.6)

The US dollar denominated financial instruments consist mainly of cash and cash equivalents and receivables and the Canadian
dollar denominated financial instruments consists mainly of warranty provisions and inter-group loans.

Hunting PLC Annual Report 2012
93

30. Financial Risk Management continued
(ii) Translational Risk
Foreign exchange risk also arises from the Group’s investments in foreign operations. Average rate options are used to reduce
translation risk on the Group’s consolidated profit before tax by hedging the translation of approximately 50% of budgeted US
dollar earnings into sterling. These derivatives are not designated as a hedge.

The foreign exposure to net investments in foreign operations is managed using borrowings denominated in the same functional
currency as that of the hedged assets. The borrowings are designated as a hedge of the net investment in foreign operations. The
foreign exchange exposure primarily arises from US dollar denominated net investments.

(b) Interest Rate Risk
Variable interest rates on cash at bank, deposits, overdrafts and borrowings expose the Group to cash flow interest risk and fixed
interest rates on loans and deposits expose the Group to fair value interest rate risk. The treasury function manages the Group’s
exposure to interest rate risk and has used interest rate swaps and caps, when considered appropriate.

(c) Credit Risk
The Group’s credit risk arises from its available for sale financial assets, pension assets, cash and cash equivalents, investments,
derivative financial instruments and outstanding receivables.

At the year end, the Group had credit risk exposures to a wide range of counterparties. Credit risk exposure is continually
monitored and no individual exposure is considered to be significant in the context of the ordinary course of the Group’s
activities.

Exposure limits are set for each approved counterparty, as well as the types of transactions that may be entered into. Approved
institutions that the treasury function can invest surplus cash with all must have a minimum of an A1, P1 or F1 short-term rating
from Standard and Poor’s, Moody’s or Fitch rating agencies and AAA rating for Money Market Funds.

The majority of cash and cash equivalents, which total £101.7m (2011 – £68.8m) at the year end, and investments of £3.2m
(2011 – £2.4m) have been deposited with banks with Fitch short-term ratings of F1 to F1+. All cash and cash equivalents and
investments are expected to be fully recovered.

The credit risk of foreign exchange contracts is calculated before the contract is acquired and compared to the credit risk limit set
for each counterparty. Credit risk is calculated as a fixed percentage of the nominal value of the instrument.

Trade and other receivables are continuously monitored. Credit account limits are primarily based on the credit quality of the
customer and past experience through trading relationships. To reduce credit risk exposure from outstanding receivables, the
Group has taken out credit insurance with an external insurer, subject to certain conditions.

The Company operates a pension scheme in the UK, which includes a funded defined benefit section with pension plan net
assets of £6.0m (2011 – £4.8m). The majority of the Scheme’s defined benefits are now covered by insurance company annuity
policies, meaning the pensions-related risks have largely been eliminated. The pension buy-in has been effected by using three
insurers, so as to spread its credit risk. The credit rating of these insurers is monitored.

The Company also operates a defined benefit pension scheme in the US, which is unfunded. Contributions are paid into a
separate investment vehicle and invested in a wide portfolio of US mutual funds that are recognised by the Company as non-
current investments. Investments at the year end amounted to £3.5m (2011 – £2.9m) and are expected to be fully recovered.

(d) Liquidity Risk
The Group needs to ensure that it has sufficient liquid funds available to support its working capital and capital expenditure
requirements. All subsidiaries submit weekly and bi-monthly treasury reports to the treasury function to enable them to monitor
the Group’s requirements.

The Group has sufficient credit facilities to meet both its long and short-term requirements.

The Group’s credit facilities are provided by a variety of funding sources and total £416.2m (2011 – £423.6m) at the year end. The
facilities comprise £375.0m (2011 – £375.0m) of committed facilities and £41.2m (2011 – £48.6m) of uncommitted facilities. Of
the uncommitted facilities, £0.2m (2011 – £0.4m) is secured on the machinery that the loan was used to purchase and £41.0m
(2011 – £48.2m) is unsecured. The £375.0m committed facility is unsecured.

The committed facilities comprise the £375.0m multi-currency loan facility from a syndicate of ten banks. This facility expires on
5 August 2016. A commitment fee is payable on the undrawn amount.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information94

Notes to the Financial Statements continued

30. Financial Risk Management continued
The Group’s treasury function maintains flexibility in funding by maintaining availability under committed credit facilities. The
Group has the following undrawn committed borrowing facilities available at the year-end:

Floating rate:
Expiring between two and five years

2012
£m

2011
£m

187.2

128.5

Surplus funds are placed in short-term deposits with approved banks and with AAA rated Money Market Funds.

The Group also has a letter of credit facility for £1.3m, which is secured by funds held on deposit of £0.8m.

The tables below analyse the Group’s and Company’s non-derivative financial liabilities into relevant maturity groupings based
on the remaining period at the balance sheet date to the contractual maturity date of the financial liabilities. The amounts are the
contractual, undiscounted cash flows. The carrying amounts in the balance sheet are the discounted amounts. Balances due
within one year have been included in the maturity analysis at their carrying amounts, as the impact of discounting is not
significant.

Group

Non-derivative financial liabilities:
Trade payables
Accruals
Other payables
Provisions
Secured bank loans
Unsecured bank loans
Other unsecured loans
Bank overdrafts

Non-derivative financial liabilities:
Trade payables
Accruals
Other payables
Provisions
Secured bank loans
Unsecured bank loans
Other unsecured loans
Bank overdrafts
Liabilities held for sale

The Group had no net-settled financial liabilities at the year end (2011 – none).

2012

On demand
or within
one year
£m

Between
two and
five years
£m

After five
years
£m

66.2
50.6
6.3
12.5
0.2
10.9
1.2
72.7

–
4.1
3.5
12.4
–
197.3
3.7
–

220.6

221.0

–
–
–
6.1
–
–
–
–

6.1

2011

On demand
or within
one year
£m

Between
two and
five years
£m

After five
years
£m

57.5
70.6
10.4
42.3
0.2
13.8
1.3
33.7
5.3

235.1

–
–
–
9.2
0.2
268.4
2.6
–
–

280.4

–
–
–
6.8
–
–
2.5
–
–

9.3

Total
£m

66.2
54.7
9.8
31.0
0.2
208.2
4.9
72.7

447.7

Total
£m

57.5
70.6
10.4
58.3
0.4
282.2
6.4
33.7
5.3

524.8

Hunting PLC Annual Report 2012
95

30. Financial Risk Management continued
The table below analyses the Group’s derivative financial instruments, which will be settled on a gross basis, into maturity
groupings based on the period remaining from the balance sheet date to the contractual maturity date. The amounts disclosed in
the table are the contractual, undiscounted cash flows.

Currency derivatives – held for trading
– inflows
– outflows

Company

Non-derivative financial liabilities:
Payables to subsidiaries
Accruals
Other payables
Provisions
Bank overdrafts

Non-derivative financial liabilities:
Payables to subsidiaries
Accruals
Other payables
Bank overdrafts

On demand or within one year

2012
£m

2011
£m

30.2
(30.1)

37.3
(37.5)

On demand
or within
one year
£m

2012

Between
two and
five years
£m

2.1
6.4
0.4
0.2
1.5

10.6

On demand
or within
one year
£m

3.2
5.7
0.4
0.1

9.4

53.7
4.1
–
0.4
–

58.2

2011

Between
two and
five years
£m

71.5
–
–
–

71.5

Total
£m

55.8
10.5
0.4
0.6
1.5

68.8

Total
£m

74.7
5.7
0.4
0.1

80.9

The Company did not have any derivative financial liabilities.

31. Financial Instruments: Sensitivity Analysis
The following sensitivity analysis is intended to illustrate the sensitivity to changes in market variables on the Group’s and
Company’s financial instruments and show the impact on profit or loss and shareholders’ equity. Financial instruments affected
by market risk include cash and cash equivalents, borrowings, deposits and derivative financial instruments. The sensitivity
analysis relates to the position as at 31 December 2012.

The sensitivity analysis has been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of
the cash and derivatives and the proportion of financial instruments in foreign currencies remain unchanged from the hedge
designations in place at 31 December 2012.

The analysis excludes the impact of movements in market variables on the carrying value of pension and other post-retirement
obligations, provisions and on the non-financial assets and liabilities of foreign operations.

The following assumptions have been made in calculating the sensitivity analysis:
• Foreign exchange rate and interest rate sensitivities have an asymmetric impact on the Group’s results, that is, an increase in

rates does not result in the same amount of movement as a decrease in rates.

• For floating rate assets and liabilities, the amount of asset or liability outstanding at the balance sheet date is assumed to be

outstanding for the whole year.

• Fixed rate financial instruments that are carried at amortised cost are not subject to interest rate risk for the purpose of this

analysis.

• The carrying values of financial assets and liabilities carried at amortised cost do not change as interest rates change.

Positive figures represent an increase in profit or equity.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information96

Notes to the Financial Statements continued

31. Financial Instruments: Sensitivity Analysis continued
(i) Interest Rate Sensitivity
The sensitivity rate of 0.25% (2011 – 0.5%) for US interest rates represents managements’ assessment of a reasonably possible
change, based on historical volatility and a review of analysts’ research and banks’ expectations of future interest rates.

Group
The table below shows the post-tax impact for the year on the Group’s profit for an increase and decrease in interest rates, with
all other variables unchanged, at 31 December.

US interest rates +0.25% (2011: +0.5%)
US interest rates –0.25% (2011: –0.5%)

2012
Income
statement
£m

(0.3)
0.3

2011
Income
statement
£m

(0.9)
0.9

The movements in the income statement are mainly attributable to US dollar denominated borrowings. There is no impact on
equity for a change in interest rates.

Company
The post-tax impact on the income statement, with all other variables held constant, at 31 December, for an increase of 0.25%
(2011 – 0.25%) in the UK interest rate, is to reduce profits by £0.1m (2011 – £0.1m). If the UK interest rate were to decrease by
0.25% (2011 – 0.25%), then the post-tax impact would be to increase profits by £0.1m (2011 – £0.1m). The movements arise on
sterling loans from subsidiaries.

There is no impact on equity for a change in interest rates.

(ii) Foreign Exchange Rate Sensitivity
The sensitivity rate of 10% (2011 – 10%) for US dollar and Canadian dollar exchange rates represents managements’ assessment
of a reasonably possible change, based on historical volatility and a review of analysts’ research and banks’ expectations of future
foreign exchange rates.

Group
The table below shows the post-tax impact for the year of a reasonable change in foreign exchange rates, with all other variables
held constant, at 31 December.

US dollar exchange rates +10% (2011: +10%)
US dollar exchange rates –10% (2011: –10%)
Canadian dollar exchange rates +10% (2011: +10%)
Canadian dollar exchange rates –10% (2011: –10%)

2012

2011

Income
statement
£m

(3.4)
4.0
(0.2)
0.3

Equity
£m

(11.0)
13.7
(1.2)
1.4

Income
statement
£m

(1.2)
1.5
2.6
(3.3)

Equity
£m

(8.4)
10.3
(1.2)
1.5

The movements in the income statement arise from cash, borrowings, receivables and payables where the functional currency of
the entity is different to the currency that the monetary items are denominated in.

The movements in equity arise from net US dollar borrowings designated in a hedge of net investments in US subsidiaries and
Canadian and US dollar denominated loans that have been recognised as part of the Group’s net investment in foreign
subsidiaries.

Hunting PLC Annual Report 2012
97

31. Financial Instruments: Sensitivity Analysis continued
Company
The table below shows the post-tax impact for the year of a reasonably possible change in the US dollar exchange rate, with all
other variables held constant, at 31 December.

US dollar exchange rates +10% (2011: +10%)
US dollar exchange rates -10% (2011: –10%)
Canadian dollar exchange rates +10% (2011: +10%)
Canadian dollar exchange rates –10% (2011: –10%)

2012
Income
statement
£m

2011
Income
statement
£m

(1.0)
1.2
(0.1)
0.1

(0.4)
0.4
–
–

The movement arises from US dollar denominated receivables and borrowings and Canadian dollar denominated receivables.

There is no impact on equity from a change in the US dollar exchange rate.

32. Post-Employment Benefits
Pensions
Within the UK, the Group operates a funded pension scheme, which includes a defined benefit section with benefits linked to
final salary and a defined contribution section with benefits dependent on future investment returns. With effect from
31 December 2002, the defined benefit section was closed to new UK employees who are offered membership of the defined
contribution section. The majority of UK employees are members of one of these arrangements.

The majority of the Scheme’s defined benefits are covered by insurance policies, meaning that pensions-related risks have largely
been eliminated. This is demonstrated by the stability of the pension asset from year to year. However, the obligation ultimately
rests with the Group. During the year, the Trustees paid additional funds into the existing insurance policies to secure further
benefits for members.

A valuation of the defined benefit section of the Scheme was produced and updated to 31 December 2012 by independent
qualified actuaries.

The main assumptions used for IAS 19 purposes at 31 December were:

Annual rates
Rate of increase in salaries
Rate of increase in pensions
Discount rate
Inflation (RPI)

2012

2011

5.1%
3.1%
4.3%
3.1%

5.2%
3.2%
4.7%
3.2%

The post-employment mortality assumptions allow for future improvements in mortality. The mortality table implies that a 65
year old male currently has an expected future lifetime of 24.5 years (2011 – 24.3 years) and an expected future lifetime of 27.6
years (2011 – 27.4 years) for a male reaching 65 in 20 years’ time. The mortality table implies that a 65 year old female currently
has an expected future lifetime of 25.9 years (2011 – 25.8 years) and an expected future lifetime of 27.8 years (2011 – 27.7 years)
for a female reaching 65 in 20 years’ time. Based upon past experience, pension increases have been assumed to be in line with
RPI inflation.

The expected rate of return on assets for the year ending 31 December 2012 was 4.6% pa based on financial conditions as at
31 December 2011. The expected rate of return on pension plan assets is generally determined as management’s best estimate of
the long-term return on the major asset classes weighted by the actual allocation of assets at the measurement date. The
expected rate of return on the insurance policies has been set equal to the discount rate.

Other Information
The defined contribution section of the Scheme held assets, equal to its liabilities, of £9.1m as at 31 December 2012
(2011 – £6.6m).

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information98

Notes to the Financial Statements continued

32. Post-Employment Benefits continued
Scheme Assets
The proportions of the total assets in the defined benefit section of the Scheme for each asset class and the contributions
made were:

Insurance annuity policies
Cash

2012

100%
–

100%

2011

98%
2%

100%

Employer contributions made during the year to the defined benefit section of the Scheme (£m)

4.0

3.2

In accordance with IAS19, the insurance annuity policies held to match the obligations in respect of pensioners and deferred
pensioners of the Scheme have been valued by placing a value on them equal to the related obligations. In accordance with
IAS19 and IFRS13, the insurance policy held to meet the obligations in respect of active members of the Scheme has been valued
by discounting the expected future payments from the policy using assumptions that are consistent with the assumptions used to
value the obligations for active members.

During the year to 31 December 2012, contributions by the Group of £1.3m (2011 – £1.1m) were also made to the UK defined
contribution section of the Scheme. For 2013, the Group will pay estimated contributions of £3.8m to the defined benefit section
of the Scheme. Contributions to the defined contribution section of the Scheme are in addition.

Surplus in the Plan
The following amounts were measured in accordance with IAS 19:

Total fair value of plan assets
Present value of obligations

Asset recognised in the balance sheet

Movements in the Present Value of the Defined Benefit Obligation

Change in present value of obligation:
Present value of obligation at the start of the year
Current service cost (employer)
Interest cost
Contributions by plan participants
Actuarial losses
Benefits paid

Present value of obligation at the end of the year

Movements in the Fair Value of Plan Assets

Change in plan assets:
Fair value of plan assets at the start of the year
Expected return on plan assets
Actuarial gain on plan assets
Contributions by plan participants
Contributions by employer
Benefits paid

Fair value of plan assets at the end of the year

2012
£m

254.8
(248.8)

6.0

2011
£m

238.0
(233.2)

4.8

2012
£m

2011
£m

233.2
2.0
10.8
0.4
13.2
(10.8)

248.8

218.4
2.1
11.6
0.4
11.2
(10.5)

233.2

2012
£m

2011
£m

238.0
10.8
12.4
0.4
4.0
(10.8)

254.8

223.9
11.7
9.3
0.4
3.2
(10.5)

238.0

For 2012, the actual return on the plan assets amounted to a gain of £23.2m (2011 – £21.0m). The gain arising as a result of the
increase in the value placed on the insurance annuity policies is offset by a corresponding increase in the value placed on the
corresponding liabilities. This effect is seen in the actuarial losses on the defined benefit obligations stated above.

Hunting PLC Annual Report 2012
32. Post-Employment Benefits continued
Total Expense Recognised in the Income Statement

Interest cost
Expected return on assets

Net (income) recognised in net finance costs
Current service cost (employer) – recognised within operating expenses

Total expense included within staff costs (note 10)

2012
£m

10.8
(10.8)

–
2.0

2.0

2011
£m

11.6
(11.7)

(0.1)
2.1

2.0

In addition, employer contributions of £4.4m (2011 – £4.2m) for various Group defined contribution arrangements (including the
UK defined contribution arrangement referred to on page 97) are recognised in the income statement.

Total Expense Recognised in the Statement of Comprehensive Income

Actuarial losses before tax

2012
£m

0.8

2011
£m

1.9

The cumulative actuarial gains and losses recognised in the Statement of Comprehensive Income at 31 December 2012 is a loss
of £37.7m (2011 – £36.9m).

Amounts to be Shown for the Current and Previous Periods

Difference between the expected and actual return on plan assets:
Amount (£m)
As a percentage of plan assets

Experience (losses) and gains on obligations:
Amount (£m)
As a percentage of the present value of the obligations

Present value of defined benefit obligation
Fair value of plan assets

Surplus in the plan

2012

2011

2010

2009

2008

12.4
5%

(0.1)
0%

9.3
4%

(1.1)
0%

(2.3)
1%

7.0
3%

38.6
17%

(35.3)
(19)%

(0.2)
0%

£m

(248.8)
254.8

6.0

(233.2)
238.0

4.8

(218.4)
223.9

5.5

(214.5)
222.5

8.0

(175.0)
182.6

7.6

Unfunded Defined Benefit Pension Scheme
The Group also operates a cash balance arrangement in the US for certain executives. Members build up benefits in this
arrangement by way of notional contributions and notional investment returns. Actual contributions are paid into an entirely
separate investment vehicle held by the Company, which is used to pay benefits due from the cash balance arrangement when
the member retires.

Under IAS 19 the cash balance arrangement is accounted for as an unfunded defined benefit scheme. At 31 December 2012,
total obligations arising from the scheme were £3.5m (2011 – £2.9m) and movements during the year comprised a service cost
(equal to the notional contributions) of £0.1m (2011 – £0.1m), an interest cost of £0.1m (2011– £0.1m), an actuarial loss
(representing the excess of notional investment returns over the interest cost) of £0.5m (2011 – £0.2m gain), benefits paid of £nil
(2011 – £0.1m) and a foreign exchange gain of £0.1m (2011 – £0.1m loss).

Company
The Company has no employees and therefore does not participate in any of the above schemes, although it does guarantee the
contributions due by the participating employers.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information 100

Notes to the Financial Statements continued

33. Share Capital and Share Premium
Group and Company

At 1 January
Shares issued – share option schemes and awards

At 31 December

At 1 January
Shares issued – share placing (note 34)
Shares issued – share option schemes

At 31 December

Number of
Ordinary
shares of
25p each
Number

146,316,186
733,055

147,049,241

Number of
Ordinary
shares of
25p each
Number

132,519,924
13,175,838
620,424

146,316,186

2012

Ordinary
shares of
25p each
£m

36.6
0.2

36.8

2011

Ordinary
shares of
25p each
£m

33.1
3.3
0.2

36.6

Share
premium
£m

87.1
1.4

88.5

Share
premium
£m

85.8
–
1.3

87.1

There are no restrictions attached to any of the Ordinary shares in issue and all Ordinary shares carry equal voting rights, except
those shares which are held by the Company as Treasury shares. The rights attached to the Company’s Ordinary shares are
summarised on page 37. All of the Ordinary shares in issue are fully paid.

At 31 December 2012, the Group held 986,731 (2011 – 1,072,186) Treasury shares. Details of the carrying amount are set out in
note 35.

34. Other Components of Equity
Year ended 31 December 2012

At 1 January
Exchange adjustments net of tax
Release of foreign exchange adjustments on disposal of subsidiary

net of tax

Fair value gains and losses:
– gains originating on cash flow hedges arising during the year net of tax
Share options
– value of employee services
– discharge

At 31 December

7.0
–

–

2.5
(1.7)

7.8

Group

Other
reserves
£m

Cash flow
hedge
reserve
£m

Foreign
currency
translation
reserve
£m

(0.3)
–

34.4
(27.3)

Total
£m

41.1
(27.3)

–

0.4

–
–

0.1

(2.3)

–

–
–

4.8

0.4

2.5
(1.7)

12.7

Company

Other
reserves
total
£m

7.0
–

–

2.5
(1.7)

7.8

Hunting PLC Annual Report 2012101

34. Other Components of Equity continued
Year ended 31 December 2011

At 1 January
Exchange adjustments net of tax
Fair value gains and losses:
– gain on available for sale financial investment arising during

the year net of tax

– gains transferred to income statement on redemption of

available for sale financial investment net of tax

– gains originating on cash flow hedges arising during the year

net of tax

– gains transferred to income statement on disposal of cash flow

hedges net of tax

– gains transferred to goodwill on disposal of cash flow hedges

net of tax
Shares issued
– share premium on share placing
– share placing costs
Share options
– value of employee services
– discharge
Transfer between reserves
Other

At 31 December

Group

Cash flow
hedge
reserve
£m

0.4
–

Foreign
currency
translation
reserve
£m

28.5
5.9

–

4.0

(0.6)

(4.1)

–
–

–
–
–
–

–

–
–

–
–
–
–

Merger
reserve
£m

–
–

–

82.1
(1.9)

–
–
(80.2)
–

–

(0.3)

34.4

Company

Other
reserves
total
£m

5.6
–

–

82.1
(1.9)

2.2
(0.6)
(80.2)
(0.2)

7.0

Total
£m

52.2
5.9

35.3

(53.2)

4.0

(0.6)

(4.1)

82.1
(1.9)

2.2
(0.6)
(80.2)

41.1

Other
reserves
£m

23.3
–

35.3

(53.2)

–

–
–

2.2
(0.6)
–
–

7.0

On 5 August 2011, a placing of 13,175,838 new Ordinary shares at a price of 648.0p took place, representing approximately
9.9% of Hunting’s existing issued Ordinary share capital. In accordance with Section 612 of the Companies Act 2006, the
premium from the placing of £82.1m, along with costs of £1.9m, were recognised in the merger reserve. The net proceeds of
£83.5m were used to fund, in part, the acquisition of Titan. The merger reserve has been transferred to retained earnings as it has
become distributable.

Other reserves include share option reserves, capital redemption reserves and available for sale financial assets reserves.

Company
The Company’s other reserves comprise the merger and share option reserves.

35. Retained Earnings

At 1 January
Profit (loss) for the year
Actuarial loss on defined benefit pension schemes net of tax
Dividends paid
Treasury shares
– purchase of treasury shares
– disposal of treasury shares
Share options and awards
– discharge
– taxation
Transfer between reserves

Group

Company

2012
£m

550.4
128.9
(1.0)
(22.6)

(0.8)
–

2.8
(0.2)
–

2011
£m

409.3
79.1
(1.3)
(16.8)

(1.1)
0.2

0.6
0.2
80.2

2012
£m

143.0
21.7
–
(22.6)

(0.8)
–

2.8
–
–

2011
£m

84.0
(4.1)
–
(16.8)

(1.1)
0.2

0.6
–
80.2

At 31 December

657.5

550.4

144.1

143.0

In respect of the tax on the actuarial loss on defined benefit pension schemes, £0.2m (2011 – £0.5m) arises on the current year’s
movement and £0.1m (2011 – £0.1m) is due to a change in tax rates.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information 102

Notes to the Financial Statements continued

35. Retained Earnings continued
Retained earnings include the following amounts in respect of the carrying amount of Treasury shares:

Cost:
At 1 January
Purchase of Treasury shares
Disposal of Treasury shares

At 31 December

Group

2012
£m

(6.4)
(0.8)
1.0

(6.2)

2011
£m

(5.5)
(1.1)
0.2

(6.4)

Company

2012
£m

(6.4)
(0.8)
1.0

(6.2)

2011
£m

(5.5)
(1.1)
0.2

(6.4)

The loss on disposal of Treasury shares during the year, which is recognised in retained earnings, was:

Loss on disposal

Group

Company

2012
£m

(1.0)

2011
£m

–

2012
£m

(1.0)

2011
£m

–

Company
In accordance with the exemption allowed by Section 408 of the Companies Act 2006, the Company has not presented its own
income statement and statement of comprehensive income. A profit of £21.7m (2011 – £4.1m loss) has been accounted for in the
financial statements of the Company.

36. Capital Risk Management
The Group’s capital consists of equity and net debt.

Total equity
Net debt

Capital employed

Gearing

2012
£m

813.8
163.8

977.6

20%

2011
£m

732.0
218.4

950.4

30%

Capital employed is managed with the aim of maintaining an appropriate level of financing available for the Group’s activities.
The balance of debt and equity, as reflected in the gearing ratio, which is net debt expressed as a percentage of total equity, is
managed having due regard to the respective cost of funds and their availability.

The Group’s net debt is monitored on a daily basis and is managed by the control of working capital, dividend and capital
expenditure payments and the purchase and disposal of assets and businesses. The level of net debt and related gearing ratio of
20% at 31 December 2012 is considered comfortable, with adequate headroom remaining, giving management ongoing
flexibility.

For debt funding, the Group ensures that banking and other borrowing covenants are complied with, and that appropriate
forecast headroom exists, to ensure that borrowing facilities remain in place. The main financial covenants attached to the £375m
committed bank facility require EBITDA to cover net finance charges by a minimum of 4 times and net debt to be no more than
3.5 times adjusted EBITDA. The maximum net debt to EBITDA permitted will reduce to 3 times in June 2013 and will remain at
that level until the facility expires in 2016. For bank covenant testing purposes, the Group’s EBITDA is adjusted to include the
share of associates’ post-tax results and exclude the fair value charge for share awards. EBITDA, for covenant test purposes, is
based on the previous rolling twelve month period, measured twice yearly at 30 June and 31 December. The covenants are
monitored on a monthly basis and all external covenant requirements were met during the year. Both key bank covenant metrics
at year end were well covered.

Return on average capital employed is a KPI management uses to assess business unit performance. The Group return on capital
employed has fallen from 15% during 2011 to 14% in 2012 primarily due to the higher level of capital employed following the
acquisition programme.

Changes in equity arise from the retention of earnings and, from time to time, issues of share capital. The Board considers each
ordinary dividend proposed based on the merits of the information available to it at the time. Consideration is given to the
financial projections of business performance and capital investment needs, together with feedback from shareholder discussions.

Hunting PLC Annual Report 2012103

36. Capital Risk Management continued
The Group operates a centralised treasury function with policies and procedures approved by the Board. These cover funding,
banking relationships, foreign currency, interest rate exposures, cash management and the investment of surplus cash. Further
detail on financial risks is provided within note 30.

The Group has significant foreign operations and hence results originate in a number of currencies, particularly in US dollars. As
a result, the Group’s financial statements, which are reported in sterling, are subject to the effects of foreign exchange rate
fluctuations with respect to currency conversions. Currency options are used to reduce currency risk movements on the Group’s
results, by hedging approximately 50% of each year’s budgeted US dollar earnings into sterling. Currency exposure on the
balance sheet is, where practical, reduced by financing assets with borrowings in the same currency. Spot and forward foreign
exchange contracts are used to cover the net exposure of purchases and sales in non-domestic currencies.

37. Dividends Paid
Group and Company

Ordinary dividends:
2012 interim paid
2011 final paid
2011 interim paid
2010 final paid

2012

2011

Pence
per share

£m

Pence
per share

4.5
11.0
–
–

15.5

6.6
16.0
–
–

22.6

–
–
4.0
8.3

12.3

£m

–
–
5.8
11.0

16.8

A final dividend of 14.0p per share has been proposed by the Board, amounting to an estimated distribution of £20.4m. The
proposed final dividend is subject to approval by the shareholders at the Annual General Meeting to be held on 17 April 2013
and has not been provided for in these financial statements.

38. Share-based Payments
Group and Company
(a) Executive Share Options
The Company used to operate an executive share option scheme, which granted options to eligible employees. Under this
scheme, the final granting of options occurred on 4 March 2008 and the subsequent final vesting of options ocurred on 4 March
2011. Vesting of options was subject to the achievement of performance targets over a three year period. Thereafter the
employee, subject to continued employment, has seven years in which to exercise the option.

Options were valued using an option pricing model based on the binomial model, but adjusted for the particular features of the
options. The assumptions used in calculating the charge to the income statement, which only related to options granted after
November 2002 as permitted by IFRS 2, were as follows:

Date of grant

Exercise price (p)
Share price at grant (p)
Expected volatility (% pa)
Dividend yield (% pa)
Risk-free interest rate (% pa)
Turnover rates (% pa)
Fair value at grant (p)

04.03.2008

784.5
784.5
32
1.1
4.3
5
294.9

The expected volatility was calculated as the historic volatility of the Hunting PLC share return over the five years prior to each
grant date.

The charge to the income statement attributable to Executive Share Options is £nil (2011 – £0.2m, recognised as part of
operating expenses).

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information 104

Notes to the Financial Statements continued

38. Share-based Payments continued
Share Option Movements During the Year

Outstanding at beginning of the year
Exercised during the year
Lapsed during the year

Outstanding and exercisable at the year end

2012

2011

Number
of options

2,539,424
(524,918)
(8,263)

2,006,243

Weighted
average
exercise
price (p)

338
294
785

348

Number
of options

3,205,151
(626,145)
(39,582)

2,539,424

Weighted
average
exercise
price (p)

322
233
703

338

Options were granted with an exercise price equal to the average closing mid-market price of the Company’s share price for the
three trading days prior to the date of grant.

The weighted average share price at the date of exercise was 904.0p (2011 – 755.0p).

Share Options Outstanding at the Year End

Executive Share Options 2002 – vested
Executive Share Options 2003 – vested
Executive Share Options 2004 – vested
Executive Share Options 2005 – vested
Executive Share Options 2006 – vested
Executive Share Options 2007 – vested
Executive Share Options 2008 – vested

2012
Number
of options

–
58,850
562,964
493,820
350,168
273,602
266,839

2011
Number
of options

Exercise
price range
(p)

Exercise period

189,389
78,592
637,728
564,511
420,142
334,228
314,834

15.04.05–14.04.12
167.4
14.03.06–13.03.13
79.0
116.9
31.03.07–30.03.14
220.7 09.03.08–08.03.15
08.03.09–07.03.16
383.0
06.03.10–05.03.17
640.0
04.03.11–03.03.18
784.5

2,006,243

2,539,424

(b) Performance Share Plan (“PSP”)
The Company continues to operate and grant share awards and options under its performance share plan. Under the PSP, annual
conditional awards of shares and options may be made to executive Directors and senior employees. Awards and options are
subject to performance conditions and continued employment during the vesting period. The PSP is a share award scheme and
as such there is no exercise price.

The PSP awards made in the year will vest subject to total shareholder return (“TSR”) performance over a three year period from
the date of grant, relative to comparator companies from the Dow Jones US Oil Equipment and Services sector index and the DJ
STOXX TM Oil Equipment and Services sector index.

Details of the PSP awards and options movements during the year are set out below:

Outstanding at beginning of the year
Granted during the year
Lapsed during the year

Outstanding at the end of the year

Details of PSP awards and options outstanding at 31 December 2012 are as follows:

Date of grant:
29 April 2009
26 February 2010
25 February 2011
17 April 2012

Outstanding at the end of the year

2012
Number
of awards

2011
Number
of awards

635,571
309,924
(233,439)

450,112
249,323
(63,864)

712,056

635,571

Number
of shares
2012

Number
of shares
2011

Normal
vesting date

–
248,453
202,214
261,389

155,541 28.04.12
264,717 26.02.13
215,313 25.02.14
– 17.04.15

712,056

635,571

Hunting PLC Annual Report 2012105

38. Share-based Payments continued
The fair value of the PSP awards and options granted in 2012 was calculated using the Stochastic pricing model (also known as
the “Monte Carlo” model), which incorporates the effect of the TSR performance condition.

The assumptions used in the model were as follows:

Weighted average share price at grant
Expected volatility – Hunting PLC
Expected volatility – Comparator group (average)
Risk free rate
Expected life
Fair value

2012

2011

906.0p
774.5p
35.3% 50.7%
71.4%
44.2%
1.9%
0.5%
3 years
3 years
604.97p 525.89p

The expected volatility was calculated using historic weekly volatility over three years prior to grant, equal in length to the
performance period at the date of grant. The expected volatilities of each constituent of the comparator group are calculated on
the same basis and input into the model individually and the average of these figures is shown in the table above.

The expected life of the award has been calculated as three years, commensurate with the vesting period. The risk free rate is
based on the UK gilt rate commensurate with the vesting period prevailing at the date of grant.

Participants are entitled to a dividend equivalent over the number of shares that make up their award. It is accumulated over the
vesting period and released subject to the achievement of the performance condition. This is factored into the fair value
calculation and as a result the dividend yield assumption is set to zero.

The initial accounting charge of the PSP incorporates an estimate of the number of shares that are expected to lapse for those
participants who cease employment during the vesting period. The estimate of the expected forfeiture rate is 2.5% per annum.
The subsequent accounting charge for 2012 includes an adjustment to the initial accounting charge to allow for actual lapses
rather than estimated lapses.

The charge to the income statement attributable to the PSP is £1.0m (2011 – £0.8m), which is recognised in operating expenses.

(c) Restricted Share Plan (“RSP”)
The Company continues to operate and grant share awards and options under its restricted share plan. Under the RSP, annual
conditional awards of shares and options may be made to employees subject to continued employment during the vesting
period. There are no performance conditions attached to these awards and options. The RSP is a share award scheme and as
such there is no exercise price.

Details of the RSP awards and options movements during the year are set out below:

Outstanding at beginning of the year
Granted during the year
Vested during the year
Lapsed during the year

Outstanding at the end of the year

2012
Number
of awards

2011
Number
of awards

432,419
618,570
272,023 220,296
(5,876)
(208,137)
(28,269)
(78,755)

603,701

618,570

The weighted average share price at the date of vesting, for awards vesting during the year, was 951.0p (2011 – 700.3p).

Details of RSP awards and options outstanding at 31 December 2012 are as follows:

Date of grant:
29 April 2009
26 February 2010
25 February 2011
17 April 2012

Outstanding at the end of the year

Number
of shares
2012

Number
of shares
2011

Normal
vesting date

– 209,810 28.04.12
171,470 195,405 26.02.13
213,355 25.02.14
179,787
– 17.04.15
252,444

603,701

618,570

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information 106

Notes to the Financial Statements continued

38. Share-based Payments continued
The fair value of the RSP award granted in 2012 was calculated using the Black-Scholes pricing model. The assumptions used in
the model were as follows:

Weighted average share price at grant
Expected volatility
Risk free rate
Expected life
Fair value

2012

2011

774.5p
906.0p
35.3% 50.7%
1.9%
0.5%
3 years
3 years
774.5p
906.0p

The expected volatility was calculated using historic weekly volatility over three years to grant, equal in length to the remaining
portion of the performance period at the date of grant.

Participants are entitled to a dividend equivalent over the number of shares which make up their award. It is accumulated over
the vesting period and released subject to the employee remaining in employment. This is factored into the fair value calculation
and as a result the dividend yield assumption is set to zero.

The initial accounting charge of the RSP incorporates an estimate of the number of shares that are expected to lapse for those
participants who cease employment during the vesting period. The estimate of the expected forfeiture rate is 2.5% per annum.
The subsequent accounting charge for 2012 includes an adjustment to the initial accounting charge to allow for actual lapses
rather than estimated lapses.

The charge to the income statement attributable to the RSP is £1.5m (2011 – £1.2m), which is recognised in operating expenses.

(d) Long-Term Incentive Plan
The Group operates a Long-Term Incentive Plan (“LTIP”) for key executives. LTIP awards may be settled in shares or cash. Details
of awards made under this plan are contained within the Remuneration Committee Report on page 46.

The fair value charge to the income statement attributable to the LTIP is £4.5m (2011 – £4.7m) and the liability in relation to the
LTIP at the year-end is £8.1m (2011 – £4.9m).

39. Operating Leases
The Group as Lessee
Operating lease payments mainly represent rentals payable by the Group for properties:

Operating lease payments recognised in income statement:
Lease and rental payments*

Included in the charge for the year is £0.6m (2011 – £1.5m) for discontinued operations.

Property
£m

2012

Others
£m

Total
£m

Property
£m

2011

Others
£m

6.8

0.7

7.5

6.9

0.6

Total future aggregate minimum lease payments under non-cancellable operating leases expiring:

Within one year
Between two and five years
After five years

Total lease payments

Property
£m

8.1
20.3
7.2

35.6

2012

Others
£m

0.6
0.9
–

1.5

Total
£m

8.7
21.2
7.2

37.1

Property
£m

8.4
24.7
14.1

47.2

2011

Others
£m

0.5
1.1
–

1.6

Total
£m

7.5

Total
£m

8.9
25.8
14.1

48.8

Included in the total future payments above, as at 31 December 2011, is £9.9m committed to by Field Aviation, which was sold
on 27 April 2012. The Hunting Group’s obligation in relation to these leases ceased at this date.

Hunting PLC Annual Report 2012107

39. Operating Leases continued
The Group as Lessor
Property rental earned during the year was £1.7m (2011 – £2.8m), of which £0.9m (2011 – £2.1m) relates to discontinued
operations. A number of the Group’s leasehold properties are sublet under existing lease agreements.

Total future minimum sublease income receivable under non-cancellable operating leases expiring:

Within one year
Between two and five years

Total lease income receivable

2012
Property
£m

2011
Property
£m

0.7
0.4

1.1

0.6
0.8

1.4

40. Exploration and Evaluation Activities
The assets, liabilities, income, expense and cash flows arising on the Group’s exploration for and evaluation of oil and gas
resources are as follows:

The Group had £0.9m assets (2011 – £nil) and £2.2m liabilities (2011 – £3.2m) relating to the exploration for and evaluation of oil
and gas reserves.

During the year income earned on exploration and evaluation activities was £nil (2011 – £nil) and expenses incurred for the year
were £2.0m (2011 – £nil), with tax relief of £0.7m (2011 – £nil). Expenses comprise £2.0m (2011 – £nil) for dry hole costs.

Cash outflows from operating activities were £2.0m (2011 – £nil) and outflows from investing activities were £nil (2011 – £0.1m).

The Group is committed to £1.9m (2011 – £0.3m) for expected drilling costs, but these have not been provided for in the
financial statements.

41. Related Party Transactions
Group
The following related party transactions took place between wholly-owned subsidiaries of the Group and associates during
the year:

Transactions:
Sales of goods and services
Purchase of goods and services
Royalties receivable
Dividends received from associates
Movement on loans to and from associates:
Loans from associates repaid
Loans from associates
Loans to associates
Loans to associates repaid
Year end balances:
Interest bearing loans owed to associates
Receivables from associates
Payables from associates

2012
£m

2.5
(0.1)
0.6
0.1

(0.9)
–
(0.1)
0.3

–
0.6
(0.1)

2011
£m

2.4
(0.3)
0.5
2.3

(0.6)
0.1
(0.6)
–

(0.9)
0.8
(0.1)

The outstanding balances at the year-end are unsecured and have no fixed date for repayment. No expense has been recognised
in the period for bad or doubtful debts in respect of amounts owed by associates.

All interests in associates are in the equity shares of those companies.

The key management of the Company comprises the executive and non-executive Directors only. The details of the Directors’
compensation are disclosed in note 10. The Directors of the Company had no material transactions other than as a result of their
service agreements.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information 108

Notes to the Financial Statements continued

41. Related Party Transactions continued
Company
The following related party transactions took place between the Company and wholly-owned subsidiaries of the Group during
the year:

Transactions:
Royalties receivable
Management fees payable
Recharges:
Share options and awards
LTIP recharges
Administrative expenses
Loans received from subsidiaries
Loan from subsidiary repaid
Loan to subsidiary
Loan to subsidiary repaid
Interest payable on inter-company loans
Interest receivable on inter-company loans
Dividends received from subsidiaries
Year end balances:
Amounts owed to subsidiaries
Amounts owed by subsidiaries

2012
£m

11.1
(0.6)

2.5
6.1
1.3
–
(16.4)
–
16.4
(0.9)
0.2
16.7

(54.3)
29.5

2011
£m

1.6
(3.3)

1.7
4.7
2.3
22.0
(28.4)
(16.4)
–
(1.3)
0.4
0.4

(74.7)
35.1

All balances between the Company and its subsidiaries have no fixed term for repayment and are unsecured.

The Company also serves as the Group’s intermediary for the provision of UK group tax relief, VAT and certain group insurances.
At the year end, the outstanding balance receivable for these services was £6.8m (2011 – £6.1m).

42. Acquisitions
Titan
Titan was acquired on 16 September 2011. On 9 January 2012, £2.0m was paid for adjustments specified in the sale and
purchase agreement.

Doffing
W. L. Doffing L.P. was acquired on 2 September 2011. On 30 January 2012, £0.2m was paid for working capital adjustments.

A credit of £1.1m has been recognised in the income statement for the contingent consideration arrangement, as the future
payments are not likely to be required (note 7).

Acquisition costs
During the year, acquisition related costs of £0.8m were incurred. These have been charged to operating expenses and have not
been presented as exceptional.

Hunting PLC Annual Report 2012109

43. Business Disposals
On 27 April 2012, the Group sold Hunting Canadian Airport Holdings Ltd. and its subsidiaries, including Field Aviation Company
Inc. (together referred to as “Field Aviation”) to Amavco Inc., through its subsidiary 1650614 Alberta Ltd., a group of companies
owned by a consortium of North American investors assembled by the current management team of Field Aviation. The agreed
selling price was £7.5m (Can$12.0m), with £2.5m (Can$4.0m) placed into an environmental escrow account, £1.9m (Can$3.0m)
deferred in the form of an interest-bearing promissory note and the remainder paid in cash. Following fair value adjustments,
principally relating to amounts held in the environmental escrow, the fair value of the consideration was £5.0m.

Details of the net assets disposed and consideration at fair value are set out below:

Property, plant and equipment
Deferred tax assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current tax assets
Trade and other payables
Provisions
Deferred tax liabilities

Net assets disposed
Release of foreign exchange adjustments
Costs of disposal
Profit on disposal

Fair value of consideration

The fair value of the consideration comprised the following:

Net cash proceeds
Promissory note
Environmental escrow

Fair value of consideration

£m

2.1
0.2
3.9
5.6
1.2
0.2
(7.7)
(0.3)
(0.1)

5.1
(2.1)
0.6
1.4

5.0

3.1
1.7
0.2

5.0

Promissory note
As part of the consideration, the Group subscribed to a promissory note, which is carried as a receivable at amortised cost. The
note is repayable by 31 December 2018, is unsecured and is subordinate to bank debt put in place by the purchaser. Interest is
charged at an effective rate of 10.8% per annum on the note.

Environmental escrow
Under the terms of the sale of Field Aviation, Hunting and the purchaser have agreed to establish an environmental escrow
account to pay for any potential environmental matters which may arise relating to Field Aviation’s hangar facilities in Calgary.
The escrow account will remain in place until the property lease expires in 2027 or until a time when such environmental
matters have been satisfactorily resolved. The environmental escrow account was recognised at its fair value of £0.2m as an
available for sale financial asset. No changes to the fair value have occurred since its initial recognition.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information 110

Notes to the Financial Statements continued

44. Principal Subsidiaries and Associates

Subsidiaries and associates

Oil and gas activities
Hunting Energy Services Inc.

Country of incorporation and operations

Business

USA

Oilfield and trenchless drilling

Hunting Energy Services (Drilling Tools), Inc.
Hunting Energy Services (International) Limited
Hunting Energy Services (UK) Limited (60%)
Hunting Energy Services Limited
Hunting Energy Services (Well Intervention) Limited
Hunting Energy Services (Canada) Ltd.
Hunting Energy Services (Drilling Tools) Ltd.
Hunting Energy Services (International) Pte Ltd
Hunting Energy Services Pte Ltd
Hunting Energy Services (Wuxi) Co. Ltd (70%)
Hunting Welltonic Limited
National Coupling Company Inc.
Hunting Innova, Inc.

USA
England and Scotland
Scotland and Netherlands
Scotland
Scotland, USA and Singapore
Canada
Canada
Singapore
Singapore
China
Scotland
USA
USA

products and services

Drilling equipment
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Drilling equipment
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services electronic
component manufacturer

Hunting Titan, Ltd

Hunting Dearborn, Inc.

Hunting Specialty Supply, L.P.

Other activities
E.A. Gibson Shipbrokers Limited

Tenkay Resources, Inc.

Corporate activities
Hunting Energy Corporation
Hunting Energy Holdings Limited*
Huntaven Properties Limited
Hunting Knightsbridge Holdings Limited*
Hunting U.S. Holdings, Inc.
Hunting America Corporation

USA and Canada

Oil and gas industry perforating

USA

systems

Oilfield services – precision

engineering
Oilfield services

England, Hong Kong, Singapore

Shipbroking, LPG broking

and Norway

USA

USA
England
England
England
USA
USA

Oil and natural gas exploration

Holding company
Holding company
Group properties
Finance
Holding company
Finance

Notes
1 Certain subsidiaries and associates have been excluded from the above where in the opinion of the Directors they do not have a material bearing on the profits or assets of the

Group.

2 Except where otherwise stated companies are wholly-owned being incorporated and operating in the countries indicated.
3
4 All interests in subsidiaries and associates are in the equity shares of those companies.

Interests in companies marked * are held directly by Hunting PLC.

Hunting PLC Annual Report 2012111

45. Principal Accounting Policies
The Group’s principal accounting policies are described below.

(1) Consolidation
• The Group accounts include the results of the Company and its subsidiaries, together with its share of associates.
• Uniform accounting policies have been adopted across the Group.

(2) Subsidiaries
• Subsidiaries are entities over which the Group has the power to govern the financial and operating policies irrespective of the

percentage of voting rights owned.

• Subsidiaries are consolidated from the date on which control is transferred to the Group and are de-consolidated from the date

control ceases.

• The Group uses the acquisition method of accounting for business combinations. Consequently the consideration is determined as
the fair value of the net assets transferred to the vendor and includes an estimate of any contingent consideration. The net assets
acquired are also measured at their respective fair values for initial recognition purposes on the acquisition date.

• Acquisition-related costs are expensed to the income statement as incurred.

(3) Discontinued Operations
• A discontinued operation is a component of the Group that has either been disposed of or that is classified as held-for-sale,

which represents a separate major line of business or geographical area of operations and is part of a single coordinated plan
to dispose of a separate major line of business or geographical area of operations.

• Discontinued operations are presented separately in the income statement and are shown net of tax.

(4) Revenue
• Revenue is measured as the fair value of the consideration received or receivable for the provision of goods or services in the

ordinary course of business, taking into account trade discounts and volume rebates, and is stated net of sales taxes.

• Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have been transferred to the

customer, which is normally on delivery of the products.

• Revenue from the sale of services is recognised when the services are rendered.
• Revenue from the rental of plant and equipment is recognised as the income is earned.

(5) Exceptional Items
• Exceptional items are regarded as items of income and expense, which should be separately disclosed by virtue of their

significant size, incidence or nature to enable a full understanding of the Group’s financial performance. Exceptional items
principally comprise profits or losses on the disposal of subsidiaries, the impairment of assets, dry hole costs, movements on
provisions for warranties on the disposal of subsidiaries, refund from Canadian tax authorities, retention bonuses for
management of acquired businesses, acquisition costs, unamortised loan facility fees written off on early termination of the
facility, the charge to the income statement for the value uplift to inventories, provisions for onerous leases and the release of
contingent consideration liabilities recognised on acquisition of subsidiaries.

(6) Interest
• Interest income and expense is recognised in the income statement using the effective interest method.

(7) Foreign Currencies
(a) Individual Subsidiaries’ and Associates’ Accounts
• The financial statements for each of the Group’s subsidiaries and associates are prepared using their functional currency.
• The functional currency is the currency of the primary economic environment in which the entity operates.
• Transactions denoted in currencies other than the functional currency are translated into the functional currency at the

exchange rate ruling at the date of the transaction.

• Monetary assets and liabilities, except borrowings designated as a hedging instrument in a net investment hedge, denoted in
non-functional currencies are retranslated at the exchange rate ruling at the balance sheet date and exchange differences are
taken to the income statement.

• Borrowings designated as a hedging instrument in a net investment hedge are retranslated at the exchange rate ruling at the

balance sheet date and exchange differences are taken direct to equity.

(b) Group Consolidated Accounts
• The presentation currency of the Group is sterling.
• The net assets of non-sterling denominated subsidiaries and associates are translated into sterling at the exchange rates ruling at

the balance sheet date.

• The income statements of subsidiaries and associates are translated into sterling at the average rates of exchange for the year.
• Exchange differences are recognised directly in equity in the foreign currency translation reserve, together with exchange

differences arising on foreign currency loans used to finance foreign currency net investments.

• The foreign currency translation reserve commenced on 1 January 2004. Amounts arising prior to that date were re-set to zero.
• On the disposal of a business, the cumulative exchange differences previously recognised in the foreign currency translation

reserve relating to that business are transferred to the income statement as part of the gain or loss on disposal.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information 112

Notes to the Financial Statements continued

45. Principal Accounting Policies continued
(8) Taxation
• The taxation charge in the income statement comprises current tax and deferred tax arising on the current year’s profit before

tax and adjustments to tax arising on prior years’ profits.

• Current tax is the expected tax payable arising in the current year on the current year’s profit before tax, using tax rates

enacted or substantively enacted at the balance sheet date, plus adjustments to tax payable in respect of prior years’ profits.
• Deferred tax is the expected tax payable on the current year’s profit before tax arising in a future year, using tax rates enacted
or substantively enacted at the balance sheet date that are expected to apply when the related deferred tax asset is realised or
the deferred tax liability is settled.

• Full provision is made for deferred taxation, using the liability method, on all taxable temporary differences. Deferred tax

assets and liabilities are recognised separately on the balance sheet and are reported as non-current assets in line with IAS 1.

• Deferred tax assets are recognised only to the extent that they are expected to be recoverable. Deferred taxation on

unremitted overseas earnings is provided for to the extent a tax charge is foreseeable.

• If items of income and expense are recognised in other comprehensive income, then the current and deferred tax relating to

those items is also recognised in other comprehensive income.

(9) Segmental Reporting
• Financial information on operating segments that corresponds with information regularly reviewed by the Chief Operating

Decision Maker is disclosed in the accounts.

• Operating segments are components of the Group that are engaged in providing related products.
• Geographical information is based on the location of where the sale originated and where the non-current assets are located.

(10) Property, Plant and Equipment and Depreciation
(a) General
• Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value. Cost includes

expenditure that is directly attributable to the acquisition and installation of the asset.

• Depreciation is charged so as to write off the cost of assets to their residual value, over their estimated useful lives.
• Land, pre-production oil and gas exploration costs and assets under construction are not depreciated.
• With the exception of oil and gas exploration and production equipment (see 10(b) below), assets are depreciated using the

straight-line method at the following rates:
– Freehold buildings – 2% to 10%
– Leasehold buildings – life of lease
– Plant, machinery and motor vehicles – 6% to 331⁄3%

• The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
• Assets in the course of construction are carried at cost, less any impairment in value and are included in the relevant asset

category. Depreciation of these assets commences when they are ready for their intended use. In the case of a new
manufacturing facility, it is when the facility has been commissioned. For larger facilities, this may occur in phases.

• Computer software integral to an item of machinery is capitalised as part of the hardware.

(b) Exploration Expenditure
• Oil and gas exploration and appraisal costs are initially capitalised pending determination of the existence of commercial

reserves and are included in the asset category oil and gas exploration and development.

• Upon determination that commercially viable quantities of hydrocarbons are not found, the costs are charged immediately to

the income statement.

• Depreciation of oil and gas expenditure commences when production commences. The costs are depreciated using the unit

of production method.

(11) Goodwill
• Goodwill arises when the fair value of the consideration paid for a business exceeds the fair value of the Group’s share of the

net assets acquired.

• Goodwill is recognised as an asset and is carried at cost less accumulated impairment losses.
• Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to the cash-

generating units or groups of cash-generating units that are expected to benefit from the business combination in which the
goodwill arose.

• On the disposal of a business, goodwill relating to that business that remains on the balance sheet at the date of disposal is

included in the determination of the profit or loss on disposal.

Hunting PLC Annual Report 2012113

45. Principal Accounting Policies continued
(12) Other Intangible Assets
• Other intangible assets are stated at cost less accumulated amortisation and impairment losses where applicable.
• These assets have a finite life and are amortised in accordance with the pattern of expected future economic benefits,

or when this cannot be reliably estimated, by using the straight-line method.

• Intangible assets are amortised over the following periods:

– Customer relationships – eight to ten years
– Patents – ten to twelve years
– Unpatented technology – ten years
– Trademarks and domain names – one to five years

(13) Impairments
• The Group performs goodwill impairment reviews at least annually.
• The Group also assesses at least annually whether there have been any events or changes in circumstances that indicate that
property, plant and equipment and intangible assets other than goodwill may be impaired. An impairment review is carried
out whenever the assessment indicates that the carrying amount may not be fully recoverable.

• For the purposes of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash

flows.

• Where impairment exists, the asset is written down to the higher of (a) its fair value minus costs to sell; and (b) its value in use.

Impairments are recognised immediately in the income statement.

• An impairment to goodwill is never reversed. When applicable, an impairment of any other asset is reversed, but only to the
extent that the consequent carrying value does not exceed what would have been the carrying value had the impairment not
originally been made.

(14) Inventories
• Inventories are stated at the lower of cost and net realisable value.
• Cost is determined using the first-in-first-out method and net realisable value is the estimated selling price less costs of disposal

in the ordinary course of business. The cost of inventories includes direct costs plus production overheads.

(15) Cash and Cash Equivalents
• Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with a maturity of

less than three months from the date of deposit that are readily convertible to a known amount of cash.

• Accrued interest is disclosed as part of the year-end balance.
• For cash flow statement purposes, cash and cash equivalents include bank overdrafts and short-term deposits with a maturity
of less than three months from the date of deposit. In the balance sheet, bank overdrafts are shown within borrowings in
current liabilities.

(16) Financial Assets
• The Group classifies its financial assets principally into the following categories: financial assets at fair value through profit or
loss and loans and receivables. Management determines the classification of its investments at initial recognition and re-
evaluates this designation at every reporting date.

• Financial assets are initially recognised at fair value at the trade date which is normally the consideration paid, plus, in the case

of financial assets that are not measured at fair value through profit or loss, transaction costs.

• The Group assesses at each balance sheet date whether a financial asset is impaired and if necessary the carrying amount is

reduced to the appropriate value. The loss is recognised immediately in the income statement.

• Financial assets cease to be recognised when the right to receive cash flows has expired or the Group has transferred

substantially all the risks and rewards of ownership.

(17) Loans and Receivables
• The Group’s financial assets are principally loans and receivables, which comprise trade and other receivables and cash and

cash equivalents.

• Loans and receivables are carried at amortised cost using the effective interest method. If collection is expected in one year or

less they are classified as current assets, otherwise they are presented as non-current assets.

• By virtue of the nature of the effective interest method, interest arising on loans carried at amortised cost is regarded as an
integral part of the loan balance and is therefore included within the carrying amount of the loan. Consequently, interest
receivable within twelve months on loans due after more than one year is recognised within non-current assets.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information 114

Notes to the Financial Statements continued

45. Principal Accounting Policies continued
(18) Financial Liabilities
• Financial liabilities are initially recognised at fair value at the trade date which is normally the consideration received less, in

the case of financial liabilities that are not measured at fair value through profit or loss, transaction costs. The Group
subsequently re-measures all of its non-derivative financial liabilities, including trade payables, at amortised cost.

• Payables are classified as current liabilities if payment is due within one year, otherwise they are presented as non-current

liabilities.

• By virtue of the nature of the effective interest method, interest arising on loans that are measured at amortised cost using the
effective interest method is regarded as an integral part of the loan balance and is therefore included within the carrying
amount of the loan. Consequently, interest payable within twelve months on loans due after more than one year is recognised
in non-current borrowings.

(19) Debt Issue Costs
• When it is probable that some or all of a loan facility will be drawn down, transaction costs are capitalised and presented as a

reduction to the borrowed amount and subsequently amortised through interest expense using an appropriate effective
interest method.

• When it is not probable that some or all of the loan facility will be drawn down, the facility fee is capitalised as a prepayment

for services and amortised over the period of the relevant facility on a straight-line basis.

• The amortisation charge is recognised in the income statement as an interest expense.

(20) Leases
• An operating lease is defined as a lease that is not a finance lease. A finance lease is a lease that transfers substantially all the

risks and rewards of ownership of an asset to the lessee.

• The rental costs incurred on operating leases are charged to the income statement as incurred over the life of the lease on a

straight-line basis.

• Operating lease income is recognised in the income statement within other income as it is earned.

(21) Provisions
• Provisions are liabilities for which the amount or timing of future expenditure is uncertain.
• Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that an

outflow of resources will be required to settle the obligation.

• Whenever the time value of money is material, provisions are discounted to their present value.

(22) Post-employment Benefits
(a) Defined Contribution Retirement Schemes
• Payments to defined contribution retirement schemes are charged to the income statement when they fall due.

(b) Defined Benefit Retirement Schemes
• Payments to defined benefit retirement schemes are recognised as increments to the assets of the schemes.
• The amount charged to the income statement with respect to these schemes, within profit from operations, is the increase in
the retirement benefit obligation resulting from the additional service provided by the participating employees during the
current year, which is measured using the Projected Unit method.

• Interest arising on the obligations and the expected return from the assets are also recognised in the income statement, net,

within net finance costs.

• Actuarial gains and losses are recognised fully and immediately in the statement of comprehensive income.

(23) Share-based Payments
• The Group issues share-based payments (LTIP awards), which can be settled in either cash or equity, to certain employees as
consideration for services received from the employees. A liability is recognised equal to the current fair value of the services
received, determined at each balance sheet date. The fair value of the liability is remeasured at each subsequent reporting date
and at the date of settlement, with any changes in fair value recognised in the income statement.

• The fair value is measured as the present value of the expected future cash flows.
• The Group also issues equity-settled share-based payments (PSP and RSP awards) to certain employees as consideration for
services received from the employees. The fair value of the employees’ services is recognised as an expense in the income
statement on a straight-line basis over the vesting period based on the Group’s estimate of awards that will ultimately vest.
• The fair value of employees’ services is determined by an external valuer, using the Monte Carlo model for PSP awards and
the Black-Scholes model for the RSP awards, with reference to the grant date fair value of the options granted. The fair value
includes market performance conditions in respect of the performance based awards and excludes the impact of any service
and non-market performance vesting conditions.

• The estimate of the number of awards likely to vest is reviewed at each balance sheet date and at the vesting date, where the

estimate is adjusted to reflect current expectations. The adjustment is included as part of the underlying expense recognised in
the income statement. No adjustment is made to the fair value after the vesting date.

Hunting PLC Annual Report 2012115

45. Principal Accounting Policies continued
(24) Share Capital
• The Company’s share capital comprises a single class of Ordinary shares, which are classified as equity.
• Incremental costs directly attributable to the issue of new shares are charged to equity as a deduction from the proceeds, net

of tax.

(25) Treasury Shares
• Treasury shares are stated at cost and presented as a deduction from the equity attributable to owners of the parent.

Consideration received for the sale of these shares is also recognised directly in equity, with any difference between the
proceeds from the sale and the original cost being taken directly to retained earnings.

(26) Dividend Distributions
• Dividend distributions to the Company’s shareholders are recognised as liabilities in the Group’s financial statements in the

period in which the dividends are approved by the Company’s shareholders and are dealt with in the Statement of Changes in
Equity.

• Interim dividends are recognised when paid.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceFinancial StatementsOther Information 116

Financial Record*
(Unaudited)

Revenue

EBITDA
Depreciation and non-exceptional impairment

Profit from continuing operations
Finance (charges) income
Share of associates’ post-tax profits

Profit before taxation from continuing operations
Taxation

Profit for the year from continuing operations
Profit for the year from discontinued operations

Profit for the year

Basic earnings per share:
Continuing operations
Continuing and discontinued operations

Diluted earnings per share:
Continuing operations
Continuing and discontinued operations

Dividend per share#

Total assets
Non-current assets
Net current assets

Financed by:
Shareholders’ funds (including non-controlling interests)
Non-current liabilities

2012
£m

825.8

154.3
(25.5)

128.8
(6.2)
1.0

123.6
(34.6)

89.0
–

89.0

Restated^
2011
£m

608.8

102.5
(21.5)

81.0
(2.2)
1.0

79.8
(22.5)

57.3
0.7

58.0

2010
£m

2009
£m

2008
£m

423.3

309.9

371.1

62.6
(17.6)

45.0
1.0
1.0

47.0
(14.0)

33.0
5.8

38.8

42.8
(13.7)

29.1
1.7
0.9

31.7
(9.8)

21.9
5.9

27.8

73.8
(16.1)

57.7
(4.0)
1.2

54.9
(18.2)

36.7
42.3

79.0

58.9p
58.9p

39.6p
40.1p

23.1p
27.6p

14.3p
18.8p

25.5p
57.8p

57.5p
57.5p

38.7p
39.2p

22.7p
27.1p

14.1p
18.5p

25.5p
57.8p

18.5p

15.0p

12.0p

10.5p

9.90p

765.9
285.7

787.9
230.3

1,051.6

1,018.2

813.8
237.8

732.0
286.2

1,051.6

1,018.2

353.1
285.7

638.8

594.6
44.2

638.8

238.3
362.0

600.3

561.8
38.5

600.3

204.5
386.0

590.5

557.3
33.2

590.5

Net assets per share

553.6p

500.3p

448.8p

425.0p

422.2p

Information is stated before exceptional items and amortisation of intangible assets.

*
# Dividend per share is stated on a declared basis.
^ Non-current assets and net current assets have been restated for the additional goodwill of £1.4m and a reduction in inventories of £1.4m recognised on the acquisition of Hunting
Titan on 16 September 2011. Non-current assets and liabilities have been restated by £15.8m following the offset of deferred tax balances where there is a legally enforceable right
to offset.

Hunting PLC Annual Report 2012117

Shareholder Information
(Unaudited)

Financial Calendar 2013

17 April

1 July

August

November

Annual General Meeting

Final Ordinary Dividend Payment

Announcement of Interim Results

Interim Ordinary Dividend Payment

In common with many public companies in the UK, the Company no longer publishes a printed version of its half year report.
The half year report is only available online from the Company’s website at www.huntingplc.com.

Analysis of Ordinary Shareholders
At 31 December 2012, the Company had 2,105 Ordinary shareholders (2011 – 2,137) who held 147.0 million (2011 – 146.3
million) Ordinary shares analysed as follows:

Size of holdings
1–4,000
4,001–20,000
20,001–40,000
40,001–200,000
200,001–500,000
500,001 and over

2012

2011

% of total
shareholders

% of total
shares

% of total
shareholders

% of total
shares

72.5
13.0
3.1
6.1
2.4
2.9

1.0
1.7
1.3
8.2
10.9
76.9

74.1
12.3
2.8
6.2
2.3
2.3

1.1
1.6
1.1
9.0
11.1
76.1

Share Information
The Ordinary shares of the Company are quoted on the London Stock Exchange.

The Company’s registrars, Equiniti, offer a range of shareholder information and dealing services on www.shareview.co.uk.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceOther InformationFinancial Statements 118

Glossary

AGM

AMG

API

Annual General Meeting.

Advanced Manufacturing Group – combines the precision engineering and manufacturing
capabilities in the Well Construction segment for the Hunting Innova, Hunting Dearborn and
Hunting Doffing product lines. Hunting is aiming to become a leading single source of
MWD/LWD tools.

American Petroleum Institute.

Average gross capital employed The monthly average of the aggregate of capital employed.

Basic EPS

bbl

boe

Board

Basic earnings per share is calculated by dividing the earnings from continuing operations
attributable to Ordinary shareholders by the weighted average number of Ordinary shares in
issue during the year.

Barrel of oil – one barrel of oil equals 159ℓ or 42 US gallons.

Barrels of oil equivalent.

The Board of Directors of the Company.

Capital employed

The amount of capital available to the Group to invest in its business and comprises the total
equity plus net debt.

Capital expenditure -”Capex”

Cash spend on tangible non-current assets.

Can

C$ or Can$

CGU

CO2
e
CO2
CODM

Company

CPI

DPS

Diluted EPS

Dividend cover

Downhole

DTR

EBITDA

EPS

ESOP

Free cash flow

FSA

FTSE

GAAP

Gearing

Canada.

Canadian dollar.

Cash-generating unit.

Carbon dioxide.

Carbon dioxide equivalent.

Chief operating decision maker.

Hunting PLC.

Consumer Price Index.

Dividend per share – the amount in pence returned to Ordinary shareholders. Figures shown
are calculated on an accruals basis.

Diluted earnings per share – earnings from continuing operations before amortisation and
exceptional items, attributable to Ordinary shareholders, divided by the weighted average
number of Ordinary shares in issue during the year, as adjusted for all potentially dilutive
Ordinary shares.

An indication of the Company’s ability to maintain the level of its dividend and is calculated
as earnings from continuing operations attributable to Ordinary shareholders divided by the
cash dividend to be returned to Ordinary shareholders, on an accruals basis.

Downhole refers to something that is located within the wellbore.

Disclosure and Transparency Rules.

Pre-exceptional earnings before share of associates’ post-tax profits, interest, tax,
depreciation, impairment and amortisation.

Earnings per share.

Executive Share Option Plan.

European Union.

Profit from continuing operations adjusted for working capital, tax, replacement capital
expenditure and interest.

Financial Services Authority.

Financial Times Stock Exchange.

The twelve months ending 31 December of a given year.

Generally Accepted Accounting Practice.

Net debt as a percentage of total equity.

Hunting PLC Annual Report 2012119

GHG

GoM

Group

Greenhouse gas.

Gulf of Mexico.

The Company and its subsidiaries.

Growth capital expenditure

Capital expenditure to grow the business from current operating levels and enhance
operating activity.

HEMS

HS&E

Hunting

IAS

IFRIC

IFRS

The six months ended 30 June of a given financial year.

The six months ended 31 December of a given financial year.

Hunting Equipment Management Services – provide downhole tool rental equipment in the
Well Construction segment.

Health, safety and environment.

The Company and its subsidiaries.

International Accounting Standards.

International Financial Reporting Interpretations Committee interpretation.

International Financial Reporting Standards.

Inventory and WIP days

Inventory and WIP at the year end divided by revenue per day, adjusted for the impact of
acquisitions.

ISO

KPI

LEAN or Lean

LHS

LIBOR

LLP

LNG

LPG

LTIP

mcf

MENA

MWD/LWD

MWh

NEB

Net debt

OCI

OCTG

PLC

PSP

R&D

RCF

International Standards Organisation.

Key performance indicator.

A production practice that eliminates wasteful processes, thereby reducing production time
and costs, and improving efficiency.

Left hand side.

London Inter-bank Offered Rate.

Limited Liability Partnership.

Liquefied Natural Gas.

Liquefied Petroleum Gas.

Long-Term Incentive Plan.

million.

Cubic metre.

1,000 cubic feet.

Middle East and North Africa region.

Measurement-while-drilling/Logging-while-drilling.

Megawatt hours.

Net equivalent barrels of oil.

Bank overdrafts, current and non-current borrowings and finance leases less cash and cash
equivalents and investments.

Other comprehensive income.

Oil Country Tubular Goods – pipe and tubular goods and products used in the oil and gas
industry, such as drill pipe, pipe casings and production pipes.

UK pence.

Public Limited Company.

Performance Share Plan.

Research and Development.

Revolving Credit Facility.

Replacement capital expenditure Capital expenditure necessary to maintain existing levels of operating activity.

Hunting PLC Annual Report 2012Company OverviewBusiness ReviewGovernanceOther InformationFinancial Statements 120

Glossary continued

Reported

RHS

ROCE

RPI

RSP

Scope 1

Scope 2

Trade payable days

Trade receivable days

TSR

TSR %

TWh

UAE

Underlying

US or USA

US$ or $

VAT

Wellbore

Well completion

Well construction

Well intervention

WIP

Working capital

Results for the year as reported under IFRS.

Right hand side.

Return on average capital employed – measures profit before interest and tax before
amortisation and exceptional items, as a percentage of average gross capital employed.

Retail Price Index.

Restricted Share Plan.

Scope 1 emissions are direct GHG emissions from sources that are owned or controlled by
the entity. Scope 1 emissions include fossil fuels burned on site, emissions from vehicles and
other direct sources.

Scope 2 emissions are indirect GHG emissions resulting from the generation of electricity,
heating and cooling or steam generated off site but purchased by the entity.

Sterling.

The average number of days’ credit taken by the Group, calculated as trade payables at the
year end divided by cost of sales per day, adjusted for the impact of acquisitions.

The average number of days’ credit given to the Group’s customers, calculated as trade
receivables at the year end divided by revenue per day, adjusted for the impact of
acquisitions.

Total Shareholder Return – the net share price change plus the dividends paid during that
period.

Total Shareholder Return % = Share price end of period – Share price start of period +
Dividends paid ÷ Share price start of period.

Terawatt hours.

The Federation of the United Arab Emirates.

Results for the year, as reported under IFRS, adjusted for amortisation and exceptional items,
which is the basis used by the Directors in assessing performance.

United States of America.

United States dollar.

United Kingdom.

Value Added Tax.

The wellbore refers to the drilled hole.

Well completion refers to the processes of preparing a well for production. This involves the
assembly of downhole tubulars and equipment required to enable safe and efficient
production from an oil or gas well.

Well construction refers to the initial drilling and processes of constructing the wellbore in an
oil and gas well. These processes typically include drilling and logging the hole; running,
cementing and logging the casing; hydraulic fracturing or stimulating the well and monitoring
well performance and integrity.

Well intervention refers to any operation carried out on an oil or gas well that maintains or
enhances the production of the well or provides well diagnostics.

Work in progress.

Trade and other receivables, excluding receivables from associates, derivative financial assets,
environmental escrow and promissory notes, plus inventories less trade and other payables,
excluding payables due to associates, derivative financial liabilities, dividend liabilities and
retirement plan obligations.

WTI

West Texas Intermediate – the price per barrel of Texas light sweet crude oil.

Hunting PLC Annual Report 2012Welcome to Hunting

Professional Advisers

Solicitors
CMS Cameron McKenna LLP

Auditors
PricewaterhouseCoopers LLP

Joint Corporate Brokers
Deutsche Bank and Barclays Bank

Financial Advisers
DC Advisory Partners Limited

Insurance Brokers
Willis Limited

Pension Advisers & Actuary
Lane Clark & Peacock LLP

Financial Public Relations
Buchanan Communications Limited

Registrars & Transfer Office
Equiniti Limited
Aspect House
Spencer Road, Lancing
West Sussex BN99 6DA
Telephone: 0871 384 2173

Registered Office: 3 Cockspur Street, London SW1Y 5BQ
Registered Number: 974568 (Registered in England and Wales)
Telephone: 020 7321 0123
Facsimile: 020 7839 2072
www.huntingplc.com

Printed by Park Communications on paper
manufactured from Elemental Chlorine Free (ECF)
pulp sourced from sustainable forests

Park Communications is certified to ISO 14001:2004
Environmental Management System and is a
CarbonNeutral® company

Hunting PLC
3 Cockspur Street
London SW1Y 5BQ
Tel: 020 7321 0123
Fax: 020 7839 2072

www.huntingplc.com

Hunting PLC Annual Report 2012

H
u
n
t
i
n
g
P
L
C
A
n
n
u
a
l

R
e
p
o
r
t
2
0
1
2