Cosalt plc Annual report & financial statements 2008

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Business review Cosalt Offshore Cosalt Offshore We provide testing, inspection and lifting equipment services for the Oil & Gas industries. Aberdeen Cosalt Offshore locations. Stavanger Lowestoft Revenue 2008 £41.8m Headline EBIT 2008 £8.3m Rotterdam 18 Cosalt plc Annual report & financial statements 2008 Cosalt Offshore, which comprises the newly acquired GTC Group, Myhre-Maritime and two existing Cosalt operations, reported turnover of £41.8 million and operating profit before special items of £8.3 million during the period. The Division has been built around legislation-backed regulation and the requirement for third party verification for key lifting and inspection equipment, with a targeted client base predominantly operating in the downstream Oil & Gas sector. With the integration of GTC, which was acquired in October 2007, and Myhre-Maritime in August 2008, we now offer a genuine pan-North Sea geographical spread covering the UK, Norwegian and Dutch oil and gas sectors, specialising in the provision of services in the following areas: • Supply, repair, maintenance and management of lifting equipment • Powered hand tools • Marine safety equipment, liferafts, lifeboats, hydraulics • Working at height equipment • Gas detection and breathing apparatus • The provision of technical and legislative support Right Carrying out inspections offshore
Business review Cosalt Offshore predominantly operates in the subsea, engineering and management sectors as well as the offshore platform operators. Our current client base includes Exxon Mobil, Shell, Talisman Oil, Wood Group Engineering, Amec, Petrofac, PSN, Subsea 7, Technip, Acergy and Halliburton. Since its inception in the summer of 2008, the division has, with notable success, worked hard to expand the product and service offering across our geographical footprint. We plan to build on the strong relationships with our existing clients and, through a pan-North Sea approach, expand the scope of those contracts in providing clients with services across their entire North Sea asset base. Significant contract wins in 2008 include Perenco, Aker Solutions, Taqa Britani, Wood Group, Exxon Mobil and Prosafe. Future tenders are due in 2009 and Cosalt Offshore believes strongly that with our strong current geographic footprint and service offering we are uniquely placed to further increase our market share. In 2009 we expect to see a continued focus on expanding our product and service offering with the addition of complimentary products and services that fit the criterion of safety critical and operationally critical third party verification which, in all cases, will be driven by regulation. We have already seen evidence from existing clients that the industry is moving towards a market characterised by fewer contracted partners providing an ever expanding range of complementary products and services, across an expanded geographic footprint together with providing a commonality of safety, quality and service. With this trend in mind, we see significant growth potential in expanding our current contracts beyond their current locations, and we have already widened our scope for Exxon Mobil, Energy Cranes, Subsea 7, PSN and Vallourec & Mannesman to cover more than one geographical area. In a sector where product safety and service quality is paramount, Cosalt Offshore has invested heavily, thereby adding to our resources and reforming our technical support business into a department called Cosalt Compliance. Cosalt Compliance was created from existing expanding technical support functions and developing new elements of service provision to satisfy the need for both internal and external legislative and technical expertise. The department provides the Cosalt Organisation with quality assurance, health, safety and environmental management, competence assurance and technical support in the form of procedures and work instructions. Cosalt Offshore Calum Melville Managing Director Cosalt Offshore External functions include the provision of integrity management services directly to clients, including compliance auditing, document development and review, examination/ inspection/maintenance strategy development. In essence, Cosalt Compliance offers comprehensive lifting operations integrity management as standard. The growth in our product and service offering in 2009 will come from a combination of organic growth and selective acquisitions. Cosalt Offshore believes that 2009 will provide some attractive opportunities at realistic multiples across all the geographic areas we currently and intend to operate within. We believe that a sustained low crude oil price will lead to a restructuring of the industry as our clients and the industry in general continue to look at reducing their supplier base and enter into longer-term contracts with partners who cover a wider geographic footprint providing a wide range of complementary services. The division also plans to expand its geographic foot print beyond Europe into the Gulf of Mexico to take advantage of an increasing market supported by a number of our significant clients that already have significant operations in the region. In summary, although we expect market conditions to be tougher in 2009, Cosalt Offshore firmly believes that the strategy set out and implemented in 2008 will continue to provide significant opportunity for revenue and margin improvement. Far left Testing an offshore cargo unit Left Servicing of portable lifting equipment in Cosalt’s Aberdeen facility Cosalt plc Annual report & financial statements 2008 19
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