/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE
UNITED STATES/
TORONTO and MARSEILLES, Aug. 14 /CNW/ - Foraco International SA
(TSX: FAR) (the "Company" or "Foraco") today announced its financial results
for the three and six-month periods ended June 30, 2007. All figures are
reported in Euros, unless otherwise indicated.
Subsequent to the end of its fiscal 2007 second quarter, Foraco
successfully completed its Initial Public Offering ("IPO") of 14,040,870
common shares at a price of $2.40 per share for gross proceeds of $33,698,088.
In conjunction with the completion of the IPO, certain selling shareholders of
the Company sold, pursuant to a secondary offering, an aggregate of 520,000
common shares of the Company at a price of $2.40 per share. The Company's
common shares have commenced trading on the Toronto Stock Exchange under the
stock symbol "FAR". There are currently 14,560,870 publicly-traded Foraco
common shares issued and outstanding.Q2 2007 Highlights
- Revenue increased 113% to euro 20.3 million compared to
euro 9.6 million in Q2 2006
- Gross profit increased 127% to euro 6.1 million compared to
euro 2.7 million in Q2 2006
- Net earnings before share based compensation granted as part of the
IPO increased 168% to euro 2.7 million, compared to euro 1.0 million
in Q2 2006
- Net earnings increased 91% to euro 1.9 million, or euro 0.04 per
share (basic and diluted) compared to euro 1.0 million or
euro 0.02 per share (basic and diluted) in Q2 2006"We are pleased to report strong financial results for the second quarter
and first half of 2007. Our growth was driven by exceptional results from our
African, Asia Pacific and European operations, and our recent expansion in
North America," said Daniel Simoncini, Chairman and Chief Executive Officer of
Foraco. "Looking ahead, we remain committed to further strengthening our
relationships with existing customers and expanding our market presence
through both organic growth and acquisitions."
"Our operations in the Mining & Energy business segment benefited from
robust market conditions that allowed us to take advantage of our strong
presence in historical markets in Africa, Europe and Asia, as well as our
recent expansion into North America. Growth of our operations in the Water,
Infrastructure & Environmental business segment was organic and includes a new
geotechnical project in New Caledonia," said Jean-Pierre Charmensat, Vice-CEO
and Chief Financial Officer. "With the recent completion of our IPO, we have
entered the second half of 2007 with a strong balance sheet and the financial
flexibility to pursue our growth opportunities."
Financial Results
Revenue for the three-month period ended June 30, 2007 increased 113% to
euro 20.3 million, compared to euro 9.6 million in the same period of 2006.
Increased revenue in the quarter was primarily attributable to the strong
performance of the Company's operations in Africa, Europe and Asia Pacific;
euro 3.3 million in net new revenue from the acquisition of Connors Drilling;
and euro 2.8 million from growth of Foraco in Canada and the U.S.-------------------------------------------------------------------------
(In thousands Euros) Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
-------------------------------------------------------------------------
Revenue 20,313 9,558 34,569 16,601
-------------------------------------------------------------------------
Gross Profit 6,082 2,680 9,319 3,979
-------------------------------------------------------------------------
Net Earnings before share
based compensation granted
as part of the IPO 2,703 1,007 3,715 1,012
-------------------------------------------------------------------------
Net Earnings 1,922 1,007 2,934 1,012
-------------------------------------------------------------------------Gross profit for the three-month period ended June 30, 2007 increased
127% to euro 6.1 million or 29.3% of revenue, compared to gross profit of
euro 2.7 million or 28.0% of revenue for the same period in 2006. The increase
in gross profit for the quarter reflects higher revenues and improved
operational performance.
Selling and marketing expenses, and general and administrative expenses
("operating expenses"), for the second quarter of 2007 totaled
euro 2.1 million or 10.1% of revenue, compared to operating expenses of
euro 1.2 million or 12.9% of revenue in the second quarter of 2006. Increased
operating expenses in the second quarter of 2007 reflect the Company's
expansion in North America including the acquisition of Connors Drilling,
increased business activity and corporate costs related to the Company's IPO.
For the second quarter of 2007, net earnings before share based
compensation granted as part of the IPO increased 170% to euro 2.7 million,
compared to net earnings of euro 1.0 million in the second quarter of 2006.
These increases can be attributed to higher revenues and pricing, strong
operational performance and improved absorption of operational and general
expenses.
For the second quarter of 2007, net earnings increased 91% to
euro 1.9 million, or euro 0.04 per share (basic and diluted), compared to net
earnings of euro 1.0 million or euro 0.02 per share (basic and diluted), in
the second quarter of 2006.
For the six-month period ended June 30, 2007, revenue increased 108% to
euro 34.6 million compared to revenue of euro 16.6 million in the same period
a year ago. Gross profit increased 134% to euro 9.3 million or 27.0% of
revenue, compared to gross profit of euro 4.0 million or 24.0% of revenue, in
the first six months of 2006. Selling and marketing expenses, and general and
administrative expenses ("operating expenses"), for the first six months of
2007 totaled euro 3.7 million or 10.7% of revenue, compared to operating
expenses of euro 2.4 million or 14.6% of revenue in the first six months of
2006.
Net earnings before share based compensation granted as part of the IPO
increased to euro 3.7 million in the first six months of 2007 compared to net
earnings of euro 1.0 million in the corresponding period of 2006. For the
first six months of 2007, net earnings (after deducting share-based
compensation granted as part of the IPO) increased to euro 2.9 million or
euro 0.07 per share (basic and diluted) compared to net earnings of
euro 1.0 million or euro 0.02 per share (basic and diluted) in the
corresponding period of 2006.
Cash flow from operations for the six months ended June 30, 2007 was
euro 8.1 million before changes in working capital, compared to
euro 2.6 million for the same period in 2006.
As at June 30, 2007 Foraco had cash and cash equivalents of
euro 5.0 million compared to euro 3.3 million as at December 31, 2006.Segment performance
(In thousands Euros) Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
Reporting segment
-----------------
Mining & energy ............... 14,012 3,764 22,584 5,446
Water, environmental &
infrastructure ............... 6,301 5,794 11,985 11,155
-------- -------- -------- --------
Total revenue ................. 20,313 9,558 34,569 16,601
-------- -------- -------- --------
-------- -------- -------- --------
Geographical region
-------------------
Africa ........................ 10,925 7,449 18,820 12,801
Europe ........................ 1,381 519 2,371 1,182
Asia Pacific .................. 1,939 1,590 3,432 2,618
Americas ...................... 6,068 - 9,946 -
-------- -------- -------- --------
Total revenue ................. 20,313 9,558 34,569 16,601
-------- -------- -------- --------
-------- -------- -------- --------Mining & Energy
The Mining & Energy segment benefited from strong market conditions in
the second quarter of 2007, as revenue increased to euro 14.0 million from
euro 3.8 million in the second quarter of 2006. Operating profit before share
based compensation granted as part of the IPO for the segment increased to
euro 2.8 million from euro 0.7 million for the three-month period ended
June 30, 2006. The company was able to take advantage of the favourable market
conditions due to its strong presence in traditional markets, its strategy of
acquisition and organic growth in the U.S. and Canada, and a significant
capital expenditure program for new production equipment.
Water, Environment & Infrastructure
Foraco's Water, Environmental & Infrastructure segment also achieved
strong results in the second quarter of 2007, as revenue increased 8.8% to
euro 6.3 million compared to euro 5.8 million in the second quarter of 2006.
Operating profit before share based compensation granted as part of the IPO
for the segment increased 70.9% to euro 1.2 million from euro 0.7 million in
the second quarter of 2006.
About Foraco
Foraco is a worldwide drilling service provider headquartered in
Marseille, France. The Company provides a diverse range of drilling services
to the minerals, energy, water, environmental and infrastructure sectors. The
Company currently operates 100 drilling rigs, with a presence in 16 countries
across five continents. For more information about Foraco, visit
www.foraco.com.
Caution concerning forward-looking statements
This press release may contain "forward-looking statements" and
"forward-looking information" within the meaning of applicable securities
laws. These statements and information include estimates, forecasts,
information and statements as to management's expectations with respect to,
among other things the future financial or operating performance of the
Company and capital and operating expenditures. Often, but not always,
forward-looking statements and information can be identified by the use of
words such as "may", "will", "should", "plans", "expects", "intends",
"anticipates", "believes", "budget", and "scheduled" or the negative thereof
or variations thereon or similar terminology. Forward-looking statements and
information are necessarily based upon a number of estimates and assumptions
that, while considered reasonable by management, are inherently subject to
significant business, economic and competitive uncertainties and
contingencies. Readers are cautioned that any such forward-looking statements
and information are not guarantees and there can be no assurance that such
statements and information will prove to be accurate and actual results and
future events could differ materially from those anticipated in such
statements. Important factors that could cause actual results to differ
materially from the Company's expectations are disclosed under the heading
"Risk Factors" in the Company's final prospectus dated July 23, 2007, which is
filed with Canadian regulators on SEDAR (www.sedar.com). The Company expressly
disclaims any intention or obligation to update or revise any forward-looking
statements and information whether as a result of new information, future
events or otherwise. All written and oral forward-looking statements and
information attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the foregoing cautionary statements.Unaudited condensed consolidated interim balance sheet - Assets
June 30, December 31,
Note 2007 2006
-------------------------------------------------------------------------
ASSETS
Non-current assets
Property, plant and equipment (5) 13,711 11,411
Goodwill (6) 4,279 1,914
Other intangible asset (6) 385 -
Investments in associates 169 75
Deferred income tax assets 474 645
Other non-current assets 315 413
-------------------------------------------------------------------------
19,333 14,458
Current assets
Inventories, net (7) 11,399 11,081
Trade receivables, net 17,859 13,024
Other current assets 4,715 4,376
Cash and cash equivalents 5,025 3,313
-------------------------------------------------------------------------
38,998 31,794
Assets classified as held for sale (10) 746 -
-------------------------------------------------------------------------
Total assets 59,077 46,252
Unaudited condensed consolidated interim balance sheet -
Equity & Liabilities
June 30, December 31,
Note 2007 2006
-------------------------------------------------------------------------
EQUITY
Capital and reserves attributable
to the Company's equity holders
Share capital (15) 665 657
Retained earnings 17,370 15,064
Other reserves 53 (1,210)
-------------------------------------------------------------------------
18,088 14,511
Minority interest in equity 138 112
-------------------------------------------------------------------------
Total equity 18,226 14,623
LIABILITIES
Non-current liabilities
Borrowings (8) 10,443 3,868
Deferred income tax liabilities 664 893
Provisions for other liabilities
and charges (9) 2,602 2,632
-------------------------------------------------------------------------
Current liabilities
Trade and other payables 15,330 14,932
Current income tax liabilities 1,203 121
Borrowings (8) 10,102 8,820
Provisions for other liabilities
and charges (9) 363 363
-------------------------------------------------------------------------
Total liabilities 40,707 31,629
Liabilities directly associated
with non-current assets classified
as held for sale (10) 144 -
-------------------------------------------------------------------------
Total equity and liabilities 59,077 46,252
Unaudited condensed consolidated interim income statement
Three Six Three Six
month month month month
period period period period
ended ended ended ended
------------------ -------------------
Note June 30, 2007 June 30, 2006
---------------------------------- ------------------ -------------------
Revenue (4) 20,313 34,569 9,558 16,601
Cost of sales (12) (14,231) (25,250) (6,878) (12,622)
Gross profit 6,082 9,319 2,680 3,979
Selling and marketing
expenses (12) (678) (1,151) (320) (680)
General and administrative
expenses (12) (1,378) (2,542) (917) (1,742)
Other operating income/
(expense), net (12) - - (16) (16)
Share of profit/(loss)
from associates (12) 44 94 - -
Share based compensation
granted as part of the
Initial Public Offering (11)/(12) (781) (781) - -
Operating profit 3,289 4,939 1,427 1,541
Finance costs (329) (582) (173) (265)
Profit before income tax 2,960 4,357 1,254 1,276
Income tax expense (1,037) (1,422) (247) (264)
---------------------------------- ------------------ -------------------
Profit for the period 1,922 2,934 1,007 1,012
Attributable to:
Equity holders of the Company 1,908 2,908 1,007 1,012
Minority interest 14 26 - -
Earnings per share for
profit attributable to
the equity holders of the
Company during the period
(expressed in euro
per share)
- basic (15) 0.04 0.07 0.02 0.02
- diluted (15) 0.04 0.07 0.02 0.02
Unaudited condensed consolidated interim statement of changes in equity
Attributable to equity Minority Total
holders of the Company Interest equity
Share Retained Other Total
Capital Earnings Reserves
Balance at
January 1, 2006 657 13,414 (749) 13,322 210 13,532
Currency translation
differences - - (77) (77) - (77)
-------------------------------------------------------------------------
Net income/(loss)
recognized directly
in equity 657 13,414 (826) 13,245 210 13,455
Profit for the six
month period - 1,012 - 1,012 - 1,012
-------------------------------------------------------------------------
Total recognized income
and expense for the
six month period 657 14,426 (826) 14,257 210 14,467
Dividend paid
relating to 2005 - (602) - (602) - (602)
-------------------------------------------------------------------------
Balance at June 30,
2006 657 13,824 (826) 13,655 210 13,865
Balance at
January 1, 2007 657 15,064 (1,210) 14,511 112 14,623
Currency translation
differences - - 404 404 - 404
Change in fair value
of financial assets
available for sale,
net of tax - - 86 86 - 86
Employee share based
compensation
(see Note 11) - - 809 809 - 809
Actuarial gains/
(losses), net of
tax (see Note 9) - - (36) (36) - (36)
-------------------------------------------------------------------------
Net income/(loss)
recognized directly
in equity 657 15,064 53 15,774 112 15,886
Profit for the six
month period - 2,908 - 2,908 26 2,934
-------------------------------------------------------------------------
Total recognized
income and expense
for the six month
period 657 17,972 53 18,682 138 18,820
Share capital
increase 8 - - 8 - 8
Dividend declared
relating to 2006 - (602) - (602) - (602)
-------------------------------------------------------------------------
Balance at
June 30, 2007 665 17,370 53 18,088 138 18,226
Unaudited condensed consolidated interim cash flow statement
Six months period
ended June 30,
----------------------
Note 2007 2006
-------------------------------------------------------------------------
Cash flows from operating activities
Profit for the period 2,934 1,012
Adjustments for:
- Depreciation, amortization and
impairment (including euro 1,357
and euro 524 for the three month
period ended June 30, 2007 and
2006, respectively) (5) 2,484 1,114
- Changes in non-current portion of
provisions and other liabilities (9) (153) (104)
- Income taxes expense 1,422 264
- (Gain)/loss on sale and
disposal of assets - 6
- Share of (profit)/loss from associates (94) -
- Changes in items recognized
directly in equity with an impact
on (i) the profit for the period
or (ii) cash and cash equivalents:
Financial assets available
for sale, net of tax 86 -
Share based compensation expenses (11) 809 -
- Finance costs, net 582 265
Cash generated from operations
before changes in operating
assets and liabilities 8,070 2,557
Changes in operating assets
and liabilities:
- Inventories 1,048 (943)
- Trade accounts receivable and
related current liabilities (3,182) (625)
- Trade accounts payable and
related current assets (1,623) 347
Cash generated from operations 4,313 1,336
- Interest paid (518) (225)
- Income tax paid (393) (111)
Net cash flow from operating activities 3,402 1,000
Cash flows from investing activities
Purchase of property, plant
and equipment (5)/(*) (2,319) (1,803)
Acquisition of the net assets of
Connors Drilling Ltd (6,566) -
Deposit on escrow account relating
to Connors' acquisition (735) -
Proceeds from sale of PPE - 66
Changes in other current and
non-current assets (excluding
operating assets) (42) 18
Net cash used in investing activities (9,662) (1,719)
Cash flows from financing activities
Repayments of borrowings (956) (930)
Proceeds from issuance of borrowings,
net of issuance cots 8,731 446
Net increase/(decrease) in bank
overdrafts and short-term loans 227 (119)
Dividends paid to Company's shareholders - -
Dividends paid to minority interests (15) -
Net cash used in financing activities 7,987 (603)
Exchange differences on cash
and cash equivalents (15) -
Net increase/(decrease) in cash
and cash equivalents 1,712 (1,322)
Cash and cash equivalents at
beginning of the year 3,313 3,382
-------------------------------------------------------------------------
Cash and cash equivalents at
end of the year 5,025 2,060
(*) Excluding acquisition financed
through capital leases - -
Selected notes to the unaudited condensed
consolidated interim financial statements
1. Basis of preparation
These unaudited condensed interim financial statements have been prepared
in accordance with IAS 34, Interim Financial Reporting. All material
intercompany balances have been eliminated. Because all of the
disclosures required by IFRS are not included, these interim statements
should be read in conjunction with the audited financial statements in
the Company's annual report for the year ended December 31, 2006. The
statements of income for the periods presented are not necessarily
indicative of results to be expected for any future period, nor for the
entire year.
Except otherwise stated, all amounts are presented in thousands of euros,
which is the functional currency of the Group.
2. Accounting policies and new accounting pronouncements
The accounting policies have been consistently applied with those of the
annual financial statements for the year ended December 31, 2006, as
described in the annual financial statements for the year ended
December 31, 2006.
Certain new standards and interpretations to existing standards have been
published that are mandatory for the Company's accounting periods
beginning after July 1, 2007 or later periods.
New standard which the Company has not early adopted:
- IFRS 8, Operating segments (effective for annual periods beginning on
or after January 1, 2009): IFRS 8 replaces IAS 14, Segment Reporting
and requires an entity to report financial and descriptive
information about its reportable segments. IFRS 8 differs in certain
areas from IAS 14 such as the identification of operating segments
based on internal reports that are regularly reviewed by the entity's
management in order to allocate resources to the segment and assess
its performance, the amount of each operating segment item reported
to be the measure reported to the management for the purposes of
allocating resources to the segment and assessing its performance and
the reportable segment disclosures.
New interpretations which are not applicable to the operations of the
Company:
- IFRIC 11, Group and Treasury Share Transactions (effective for annual
periods beginning on or after March 1, 2007)
- IFRIC 12, Service Concession Arrangements (effective for annual
periods beginning on or after January 1, 2008)
- IFRIC 13 Customer Loyalty Programmes (effective for annual periods
beginning on or after July 1, 2008)
- IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction (effective for annual
periods beginning on or after January 1, 2008)
New interpretation and standard which are applicable to the operations of
the Company but which have no material effect on the condensed
consolidated interim financial statements as of June 30, 2007:
- IFRS 7, Financial Instruments: Disclosures, and a complementary
Amendment to IAS 1, Presentation of Financial Statements - Capital
Disclosures (effective from January 1, 2007). This standard will be
applied for disclosures provided in annual financial statements as of
December 31, 2007
- IFRIC 10, Interim Financial Reporting and Impairment (effective for
annual periods beginning on or after 1 November 2006): IFRIC 10
addresses the recognition and reversal in subsequent annual period of
impairment losses on goodwill and certain financial assets recognized
the context of interim financial statement prepared under IAS 34,
Interim Financial Reporting. The Group has not recognized any
impairment loss as of June 30, 2007
2.1. Intangible assets
Following the acquisition of the net assets of Connors Drilling Ltd, the
Company recognized certain intangible assets as part of the purchase
price allocation (see Note 6).
(a) Trademarks
Acquired trademarks are shown at acquisition cost. Trademarks have a
finite useful life and are carried at cost less accumulated amortization.
In the context of the acquisition of the Canadian operations of Connors
Drilling Ltd, the right to use the trademark 'Connors' has been granted
to the Company for a 20 month period. Amortization of the Connors
trademark is calculated using the straight-line method over its estimated
useful life (20 months). Trademarks are presented within "Other
intangible assets".
(b) Customer relationships
Customer relationships correspond to order backlog and customer contracts
recognized in the context of business combination at the date of
acquisition. For each component of customer contractual relationships,
(i) a signed drilling contract, (ii) an expected revenue and (iii) an
expected margin are identified. Following the date of acquisition when
the corresponding drilling contract starts, the customer contractual
relationship identified at the date of acquisition and recognized as an
intangible asset is credited to cost of sales so as to amortize the
intangible asset based on the revenue earned. When applicable, an
impairment test is performed if the drilling contract is no longer likely
to occur, or if the expected profitability of a given future transaction
is lower than anticipated. No impairment loss has been recognized to
date. Customer relationships are presented within "Other intangible
assets".
2.3. Share-based compensation
During the period, the Company entered into certain share-based
compensation plans (see Note 11 and 15). The fair value of the employee
services received in exchange for the grant of the shares is recognised
as an expense, with a corresponding adjustment to equity. The total
amount to be expensed over the vesting period is determined by reference
to the fair value of the equity instrument granted. The plans operated by
the Company do not include any market vesting conditions. At each balance
sheet date, the Company will revise its estimates of the number of shares
that are expected to vest. The Company will recognise the impact of the
revision of original estimates, if any, in the income statement.
2.4. Income tax
The income tax expense is recognised based on management's best estimate
of the average annual income tax rate expected for the full financial
year on a tax jurisdiction by tax jurisdiction basis.
2.5. Seasonal fluctuations
The Company experiences seasonality in the activity depending upon
drilling conditions of each project and country where the Company
operates, with peak activity in second quarter of the year. As a result
of these seasonal fluctuations, the Company's cash flows from operations
and revenue are not evenly distributed between quarters throughout the
year.
3. Financial Risk management
The Company is exposed to a variety of financial risks through its
activity: currency risk, cash transfer restriction, interest
rate/re-investment risk, financial counter-party risk and credit risk.
Following the Group expansion in Canada, a portion of the cash flows is
now denominated in Canadian dollars. Canadian operations are not exposed
to currency fluctuations as all revenues and costs are generated in
Canadian dollars.
4. Segment information
The two segments "Mining & energy" and "Water, environmental &
infrastructure" identified in the tables below correspond to the new
business segments in which the Company reports its financial information.
Management believes that this new identification of segments provides a
better understanding of current performance and trends in the context of
the expansion of Company's operations. Prior period segment information
presented for comparative purposes has been restated to reflect this new
identification of segments. Geographical segment information remains
unchanged.
The business segment information for the three month period ended
June 30, 2007 and 2006 is as follows:
Water,
environmental & Mining &
infrastructure energy Group
-------------------------------------------------------------------------
Three months June 30, June 30, June 30,
period ended 2007 2006 2007 2006 2007 2006
-------------------------------------------------------------------------
Net Sales 6,301 5,794 14,012 3,764 20,313 9,558
Operating profit 980 715 2,309 712 3,289 1,427
Finance costs n/a n/a n/a n/a (329) (173)
-------------------------------------------------------------------------
Profit before income
tax n/a n/a n/a n/a 2,960 1,254
Income tax expense n/a n/a n/a n/a (1,037) (247)
-------------------------------------------------------------------------
Profit for the period n/a n/a n/a n/a 1,922 1,007
The business segment information for the six month period ended
June 30, 2007 and 2006 is as follows:
Water,
environmental & Mining &
infrastructure energy Group
-------------------------------------------------------------------------
Six months June 30, June 30, June 30,
period ended 2007 2006 2007 2006 2007 2006
-------------------------------------------------------------------------
Net Sales 11,985 11,155 22,584 5,446 34,569 16,601
Operating profit 2,013 770 2,926 771 4,939 1,541
Finance costs n/a n/a n/a n/a (582) (265)
-------------------------------------------------------------------------
Profit before income
tax n/a n/a n/a n/a 4,357 1,276
Income tax expense n/a n/a n/a n/a (1,422) (264)
-------------------------------------------------------------------------
Profit for the period n/a n/a n/a n/a 2,934 1,012
Corporate costs and overheads are allocated to each business segment
based on their revenue. This approach is considered by management to be a
reasonable basis for determining the attributable costs of the respective
segment.
The following is a summary of sales to external customers by geographic
area for the three month period ended June 30, 2007 and 2006:
Three months period ended 30 June 2007 30 June 2006
-------------------------------------------------------------------------
Africa 10,925 7,449
Europe 1,381 519
Asia, Pacific 1,939 1,590
America 6,068 -
-------------------------------------------------------------------------
Net sales 20,313 9,558
The following is a summary of sales to external customers by geographic
area for the six month period ended June 30, 2007 and 2006:
Six months period ended 30 June 2007 30 June 2006
-------------------------------------------------------------------------
Africa 18,820 12,801
Europe 2,371 1,182
Asia, Pacific 3,432 2,618
America 9,946 -
-------------------------------------------------------------------------
Net sales 34,569 16,601
5. Property, plant and equipment
Property, plant and equipment (PPE) consists of the following:
Office
Drilling Auto- furniture
Land & equipment motive & other
Buildings & tools equipment equipment Total
As of December 31, 2006
Opening net book amount 1,179 5,547 1,055 142 7,923
Additions 273 4,718 1,167 68 6,226
Disposals or retirements - (35) (57) (2) (94)
Depreciation charge (79) (1,771) (731) (64) (2,644)
-------------------------------------------------------------------------
Closing net book value 1,373 8,459 1,434 144 11,411
As of December 31, 2006
Cost 1,889 18,872 3,995 923 25,680
Accumulated depreciation (516) (10,413) (2,561) (779) (14,269)
-------------------------------------------------------------------------
Net book value 1,373 8,459 1,434 144 11,411
Including:
PPE under finance lease
contracts, gross 893 3,657 1,133 - 5,683
PPE under finance lease
contracts, accumulated
depreciation (610) (908) (571) - (2,089)
-------------------------------------------------------------------------
Net book value of PPE under
finance lease as of
December 31, 2006 283 2,749 562 - 3,594
As of June 30, 2007
Opening net book amount 1,373 8,459 1,434 144 11,411
Additions 6 1,874 415 24 2,319
Exchange differences 75 153 5 7 239
Disposals or retirements - (6) - - (6)
Transfer to Assets
classified as held for
sale (746) - - - (746)
Acquisition of subsidiary
(Note 6) 913 1,577 74 12 2,576
Depreciation charge (85) (1,614) (343) (41) (2,083)
-------------------------------------------------------------------------
Closing net book value 1,536 10,443 1,585 146 13,711
As of June 30, 2007
Cost 2,039 27,647 7,702 711 39,665
Accumulated depreciation (502) (17,204) (6,117) (565) (25,208)
-------------------------------------------------------------------------
Net book value 1,537 10,443 1,585 146 13,711
Including:
PPE under finance lease
contracts, gross 72 3,813 778 - 4,663
PPE under finance lease
contracts, accumulated
depreciation (72) (1,218) (391) - (1,681)
-------------------------------------------------------------------------
Net book value of PPE
under finance lease as
of June 30, 2007 - 2,595 387 - 2,982
The depreciation expense of PP&E and the amortization expense of
intangible assets have been charged to the income statement as follows:
Three month period ended June 30, 2007 June 30, 2006
-------------------------------------------------------------------------
Cost of sales 1,341 508
General & administrative expenses 16 16
-------------------------------------------------------------------------
Total depreciation and amortization 1,357 524
Six month period ended June 30, 2007 June 30, 2006
-------------------------------------------------------------------------
Cost of sales 2,452 1,082
General & administrative expenses 32 32
-------------------------------------------------------------------------
Total depreciation and amortization 2,484 1,114
6. Goodwill
Goodwill can be analyzed as follows:
June 30, December 31,
Period ended 2007 2006
-------------------------------------------------------------------------
Goodwill at period beginning 1,914 1,914
Additions 2,206 -
Purchase price adjustments - -
Impairment loss - -
Exchange differences 159 -
-------------------------------------------------------------------------
Goodwill at period ending 4,279 1,914
Business Combination
The Company acquired through an asset deal substantially all the Canadian
assets of Connors Drilling Ltd, a surface and underground diamond
drilling company, on February 1, 2007. The net purchase consideration
paid in relation to this acquisition and the related goodwill amounted to
euro 6,566 thousand and euro 2,206 thousand, respectively.
The additional depreciation and amortization expenses recognized in the
income statement resulting from the purchase price allocation for the
three month and the six month period ended June 30, 2007 amounted to
euro 220 and euro 450, respectively.
7. Inventories
Inventories consist of the following:
June 30, December 31,
Period ended 2007 2006
-------------------------------------------------------------------------
Spare parts and consumables, gross 11,847 11,529
Less inventory allowance (448) (448)
-------------------------------------------------------------------------
Inventories, net 11,399 11,081
8. Borrowings
Financial debt consists of the following:
June 30, December 31,
Period ended 2007 2006
-------------------------------------------------------------------------
Non-current
Other bank financings 1,745 1,352
Capital lease obligations 1,480 1,978
Bank loan financing the acquisition of Boniface - 16
Other debt linked to the acquisition of Boniface 80 80
Bank loan financing the acquisition of Geomechanik 442 442
Bank loan financing the acquisition of Connors 6,696 -
-------------------------------------------------------------------------
10,443 3,868
Current
Bank overdrafts 6,799 6,572
Other bank liabilities 827 661
Capital lease obligations 809 974
Bank loan financing the acquisition of Boniface 73 170
Bank loan financing the acquisition of Geomechanik 443 443
Bank loan financing the acquisition of Connors 1,151 -
-------------------------------------------------------------------------
10,102 8,820
As of June 30, 2007, maturity of financial debt can be analyzed as
follows:
Less than One to five Over
Maturity one year years five years Total
-------------------------------------------------------------------------
Bank overdraft 6,799 - - 6,799
Bank financing 799 1,738 - 2,537
Capital lease obligations 809 1,480 - 2,289
Bank loans and debts relating to
acquisitions 1,695 4,939 2,286 8,920
-------------------------------------------------------------------------
Total financial debt 10,102 8,157 2,286 20,545
Unused credit facilities amount to euro 7,611 thousand as of
June 30, 2007.
9. Provisions
Provisions comprise the following elements:
Pension &
retirement
indemnities Other
provision provisions Total
-------------------------------------------------------------------------
At January 1, 2007 2,995 - 2,995
Charged to consolidated income
statement -
- Addition to provisions 72 - 72
- Unused amounts reversed - - -
Used during period (152) - (152)
Actuarial gains and losses
recognized directly in Equity 50 - 50
-------------------------------------------------------------------------
At June 30, 2007 2,965 - 2,965
The provision relating to French retirement indemnities amounts to
euro 199 thousand as of June 30, 2007. The pension obligations relating
to the company Geomechanik are not funded nor covered by pension plan
assets and consist of the following for the German entity:
June 30, December 31,
Period ended 2007 2006
-------------------------------------------------------------------------
Projected benefit obligation at the beginning
of the period 2,726 2,212
Pension benefits paid over the period (152) (275)
Interests accrued on pension obligations 64 106
Actuarial gains and losses recognized in Equity 50 683
-------------------------------------------------------------------------
Projected benefit obligation at the end of the
period 2,688 2,726
10. Reorganization and non-current assets held for sale
During the second quarter, the Company launched a reorganization process
whereby its real property and premises located in Lunel (France) and
Woringen (Germany), and obligations under a defined benefit pension plan
relating the Geomechanik (see Note 9) will be transferred to a
non-consolidated entity owned and co-managed by two of the directors and
current shareholders of Foraco.
The carrying amount of real property and premises that will be
transferred have been classified as of June 30, 2007 as "Non-current
assets classified as held for sale". Obligations under capital relating
to the premises in Lunel have been classified as of June 30, 2007 as
"Liabilities directly associated with non-current classified as held for
sale".
These transactions are expected to result in a net loss of
euro 0.3 million to the Company, which will impact third quarter of
2007. Following the close of these transactions the premises in Woringen
and Lunel will be leased back to the Company at market rates (these
leases will be entered into following the close of the transactions). The
lease in respect of the premises in Woringen, Germany is for a term of
two years, with an annual rent of euro 20 thousand. The lease in
respect of the premises in Lunel will be for a term of nine years, with
an annual rent of euro 181 thousand. The Company will benefit from an
option to terminate the lease for the premises in Lunel at the end of the
sixth and ninth year of the tenancy. These leases will be renewable.
The effect of these transactions on the financial statements will be
reported as part of Company's ongoing disclosure on transactions with
related parties.
11. Share based compensation
In 2007, 520 common shares (before the effect of share split) have been
issued to the benefit of certain directors (see Note 15). This issuance
is treated as share based compensations as these shares have been issued
at a price that is less than the fair value. The Company recognized an
expense amounting to euro 781 thousand corresponding to the difference
between the issue price of these shares and their fair value (deemed to
be the share price at Initial Public Offering date). These non cash, non
recurring share based compensations have be disclosed in a separate line
item of the income statement "Share based compensation granted as part of
the Initial Public Offering".
Share based compensation expenses recognized in the income statement are
as follows:
Three month Six month
period ended period ended
-----------------------------
June 30, 2007
-------------------------------------------------------------------------
Employee benefit scheme granted in 2006
that will be replaced by the free share
plan authorized in 2007 (see Note 15) 14 28
Common shares to the benefit of certain
directors issued in 2007 781 781
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total share based compensation expense 795 809
12. Expenses by nature
Operating expenses/(income), net by nature are as follows:
Three Six Three Six
month month month month
period period period period
ended ended ended ended
------------------- -------------------
June 30, 2007 June 30, 2006
-------------------------------------------------------------------------
Depreciation, amortization and
impairment charges (1,357) (2,484) (524) (1,114)
Accruals increases/(reversals) 23 50 - 37
Raw materials, consumables
used and external charges (9,702) (17,141) (5,845) (9,831)
Employee benefit expense (4,950) (8,852) (1,629) (3,732)
Other tax expense (301) (503) (127) (398)
Share of profit/(loss)
from associates 44 94
Other operating expenses, net - (13) (6) (22)
Share based compensations
granted as part of the initial
public offering (781) (781) - -
-------------------------------------------------------------------------
Total operating expenses (17,024) (29,630) (8,131) (15,060)
13. Commitments and contingencies
The guarantees given are the following:
June 30, December 31,
Period ended 2007 2006
-------------------------------------------------------------------------
Bid bonds 1,018 698
Advance payment guarantees and performance
guarantees 8,738 10,261
Retention guarantees 2,856 2,109
Financial guarantees 1,385 1,385
-------------------------------------------------------------------------
Total 13,997 14,453
Since 2004, the Company launched an arbitration process against a former
customer Codelco, a Chilian state owned company. This dispute arose
following the breach of the provisions of a drilling contract in
relation to the period 2002 and 2003. In late 2006, the arbitrator issued
a first conciliation proposal whereby Codelco is required to indemnify
the Company for an amount approximating US$ 2.5 million. This proposal
has not been accepted by the parties and the arbitration process is still
ongoing. At this stage, the management can not make any reliable estimate
of the future outcome of this arbitration.
In the context of the acquisition of the Company Boniface which took
place in 2000, the Company was granted with a guarantee on assets
acquired and liabilities assumed. The guarantee related to potential new
liabilities does not apply anymore. Management considers that the risk
that such a liability arises is remote. Under certain specified
circumstances, the Company may be required to repay to the vendors
amounts received in excess of the acquired assets resulting in no impact
on net income for the Company.
Generally, the Company is subject to legal proceedings, claims and legal
actions arising in the ordinary course of business. The Company's
management does not expect that the ultimate costs to resolve these
matters will have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows.
14. Related-party transactions
The Company entered into certain reorganization process (see Note 10) and
issued additional common shares (see Note 15) which involve related
parties.
Banque de Vizille, one of the shareholders of the Company, is a
subsidiary of group CM-CIC. A subsidiary of group CM-CIC, CIC Bonnasse
Lyonnaise de Banque, is also one of the bank with whom the Company holds
a current account. Bank fees paid to Bonnasse Lyonnaise de Banque
amounted to euro 26 thousand for the first half-year of 2007, including
euro 13 thousand for the second three month period ended June 30, 2007.
The Company made lease payments to the same bank for an amount of
euro 99 thousand for the first half-year of 2007, including
euro 49 thousand for or the second three month period ended
June 30, 2007.
Key Management compensations for the six month period as of June 30, 2007
amount to euro 232 thousand.
15. Operations related to share capital
In a general meeting of shareholders held on June 7, 2007, the Company
issued 596 common shares (including 520 to the benefit of certain
directors) at par value of euro 15.25 per share. These common shares
have been issued to existing shareholders on a pro-rata basis, so that
the capital has been increased to euro 665 thousand. This general
meeting also approved a distribution of a euro 14.00 dividend per
share. In an extraordinary meeting of shareholders held on June 29, 2007,
a share split was approved whereby each shareholder received 999
additional common shares for each one common share held in the capital of
the Company. Following these transactions, the outstanding and issued
shares in the capital of the Company became 43,596,000. The calculation
of the basic and diluted earnings per share has been adjusted
retrospectively to reflect the share split.
16. Events after the balance sheet date
16.1. Free share plans
According to the authorization given by the ordinary and extraordinary
general meeting of shareholders held on June 29, 2007, the board of
directors of the Company approved at a meeting held on July 18, 2007, two
free stock award plans. The common shares to be transferred under the
plans will be shares purchased by the Company and will be transferred to
beneficiaries for no consideration. The total number of shares to be
transferred under these plans is limited to 3% of the issued and
outstanding share capital of the Company on the date grants are made.
These plans were approved subject to the closing the Initial Public
Offering, which occurred on August 2, 2007. These common shares grants
are expected to occur on the third quarter 2007.
These free stock award plans with employees are within the scope of
IFRS 2, Share-based payment as they are at a price that is less than the
fair value of those equity instruments. From grant date, the Company will
measure and recognized the impact of such share-based compensations at
the fair value of the common shares granted. For clarity, these non cash,
non recurring share based payment expenses will be disclosed in a
separate line item of the income statement for the period ended of
September 30, 2007.
16.2. Initial Public Offering
Description of the offering
On July 23, 2007, the Company filed a final prospectus with the
securities regulatory authorities in each of the provinces of Canada in
connection with the Company's IPO of common shares and a secondary
offering by certain shareholders of the Company.
On August 2, 2007 the Company completed its Initial Public Offering (IPO)
of 14,040,870 common shares at a price of CAD$2.40 per share. In
conjunction with the completion of the IPO, certain selling shareholders
of the Company have sold an aggregate of 520,000 common shares of the
Company at a price of CAD$2.40 per share for gross proceeds to the
selling shareholders of CAD$1,248,000. Immediately after the offering,
the share capital amounted euro 877 thousand and the outstanding and
issued common shares became 57,636,870.
The reconciliation of the gross proceeds to the net proceeds to the
Company summarized as follows:
In thousands
of CAD$(1)
Gross proceeds from the treasury offering,
14,040,870 at CAD$2.40 33,698
Agents fees corresponding to 7% of the gross
proceeds of the offering (2,359)
Estimated expenses of the offering (1,350)
-------------------------------------------------------------------------
Net proceeds to the Company 29,989
(1) Conversion rate from the euro to the Canadian dollar at the date of
the closing of the offering is 1.4413.
The net proceeds arising from the IPO will be used by the Company to
retire existing indebtedness of the Company, to expand the business by
way of strategic acquisitions or through organic growth and for general
corporate purposes. On August 10, 2007 the Company repaid the outstanding
balance of the borrowing relating to the acquisition of Connors and
Boniface for approximately euro 7.9 million.
The Company has also granted the agents responsible for the offering:
- an over-allotment option exercisable within 60 days following closing
of the IPO to purchase up to an additional 15% (up to 2,106,130
common shares) of the number of common shares sold under the Initial
Public Offering at CAD$2.40 per common share, and
- a compensation option entitling the agents to acquire up to that
number of common shares equal to 5% of the common shares sold in the
offering at an exercise price equal to the lowest price paid by any
purchaser acquiring common shares, exercisable for a period of
18 months from the closing.
The Company's common shares have commenced trading on the Toronto Stock
Exchange, Canada, under the symbol "FAR".
Accounting considerations
Incremental costs that are directly attributable to the issuance of
shares and that would not have been incurred if the Company had not
issued such shares, will be reported as a reduction of the amounts
paid-in. Incremental costs generally include agents fees and other
external costs directly attributable, but exclude internal costs and
marketing costs, including those related to the road show, which will be
recorded within net profit. As of June 30, 2007 costs relating to the
offering have been deferred within prepaid expenses and will be
recognized on the closing date of the offering in accordance with the
principles described above.
In addition, none of the IPO expenses estimated to be CAD$1,350,000 will
be borne by the selling shareholders. Transaction costs related to the
selling shareholders estimated to be euro 33 thousand will be recorded
as an expense within profit for the period in the third quarter. Such non
recurring external costs related to the transaction as a whole will be
disclosed in a separate line item of the income statement for the period
ended September 30, 2007.%SEDAR: 00025480E
For further information: Bruce Wigle, Investor Relations, The Equicom
Group, T: (416) 815-0700 X 228, F: (416) 815-0080, E: bwigle@equicomgroup.com
