Hamworthy offices Annual report 2011 · Annual report 2011 Hamworthy plc Annual report 2011...

Annual report 2011

Ham

worthy plc

Annual report 2011

Hamworthy offices

ChinaHamworthy Engineering and Equipment (China) Trading Company Ltd

Room 8BYi Dian PlazaNo. 746 ZhaoJiaBang RoadShanghai 20030

Room 2013No. 4 Xiu Zhu RoadDalian 116001

Room 910Fuying BuildingNo. 164 Changyang RoadHaizu DistrictGuangzhou 510250

Hamworthy (Suzhou) Ltd77 Hongxi RoadNew DistrictSuzhou 215151

DenmarkHamworthy Svanehøj A/S6 FabriksparkenPO Box 30DK-9230 Svenstrup J

GermanyHamworthy Serck Como GmbHPankower Str. 16–18 D-21502Geesthacht

IndiaHamworthy India Pvt Ltd35 Mittal ChambersNariman PointMumbai – 400 021

KoreaHamworthy Ltd 8th Floor Yoosung Plaza Building#655–6 Woo-dongHaeundae-GuBusan (612–020)

NetherlandsHamworthy BVAploniastraat 333084 CC Rotterdam

NorwayHamworthy Moss ASPO Box 1053NO–1510 Moss

Hamworthy Oil & Gas Systems ASPO Box 144NO–1371 Asker

PolandHamworthy Baltic Design Centreul. Łuzycka 6E81–537 Gdynia

SingaporeHamworthy Pte Ltd15 Benoi CrescentSingapore 629978

SpainHamworthy Pump Systems ASAvda Doctor TouronES–36600 Villagarcia de ArousaPontevedra

UAEHamworthy Middle East (FZC)PO Box 120691SAIF ZoneSharjah

UKHamworthy Water Systems LtdFleets CornerPooleDorset BH17 0JT

Hamworthy Pump SystemsFleets CornerPooleDorset BH17 0JT

Hamworthy Krystallon LtdChannel View RoadDover CT17 9TP

USAHamworthy Inc11111 Katy Freeway, Suite 910Houston Texas 77079

Hamworthy Inc8000 NW31 StreetUnit 13MiamiFlorida 33122

Hamworthy plcFleets CornerPooleDorsetBH17 0JTwww.hamworthy.com

This report has been printed on an FSC® Mixed Source Certified paper, which ensures that all virgin pulp is derived from well-managed forests. It is elemental chlorine-free bleached. This report was printed by Pureprint Group (a CarbonNeutral® company) using their environmental print technology which minimises the impact of printing on the environment. Vegetable-based inks have been used and 99% of dry waste associated with this production has been diverted from landfill. Both the printer and the paper mill are registered to ISO 14001.

Designed and produced by

www.lyonsbennett.com

Photography by Mick Ryan and Martin Haswell. Photo on page 13 courtesy of BW Offshore. Top left photo on page 15 courtesy of Ignazio Messina & C SpA.

Find out more online www.hamworthy.com

Who we are

Hamworthy is a market-leading global company providing specialist fluid handling systems and services to the marine and oil & gas industries. We provide a wide range of innovative solutions for our customers across a number of long-term growth markets. Our leading position in key sectors, track record of success and financial strength provide the solid foundations from which we will further develop and grow the business.

Cover imageHamworthy’s innovative LNG regasification technology fitted to Høegh LNG’s Shuttle and Regasification Vessel (SRV) GDF Suez Cape Ann. Built at Samsung Heavy Industries in Korea, this vessel can regasify LNG cargo whilst stationed offshore, delivering natural gas to shore via subsea pipeline.

1Hamworthy plc Annual report 2011

Com

pany overview

Company overview

AccountsG

overnanceB

usiness reviewP

arent company accounts

Additional information

Highlights

90 Notice of Annual General Meeting92 Financial calendar 201192 Glossary 92 Advisers

83 Independent auditors’ report84 Balance sheet84 Statement of total recognised

gains and losses85 Notes to the parent company

financial statements

45 Independent auditors’ report46 Consolidated income statement47 Consolidated statement of

comprehensive income48 Consolidated statement of changes in equity49 Consolidated balance sheet50 Consolidated cash flow statement51 Notes to the consolidated financial statements

34 Board of directors36 Executive management37 Directors’ remuneration report40 Corporate governance42 Directors’ report

6 Chief Executive’s review10 Our strategy in action16 Financial review20 Divisional review28 Principal risks and uncertainties29 Key performance indicators30 Corporate social responsibility

1 Highlights 2 Hamworthy at a glance 4 Chairman’s statement

Basicunderlyingearningspershare(p)1

24.1p2010: 32.6p

2007 2008 2009 2010 2011

19.5

40.4

28.532.6

24.1

Closingorderbook(£m)

£258.1m2010: £142.1m

2007 2008 2009 2010 2011

268.1 260.4

311.8

142.1

258.1

Revenue(£m)

£181.6m2010: £214.3m

2007 2008 2009 2010 2011

190.8

252.8231.8

214.3

181.6

Orderintake(£m)

£290.5m2010: £99.0m

2007 2008 2009 2010 2011

245.7

177.6

228.1

99.0

290.5

Underlyingoperatingprofit(£m)1

£13.8m2010: £19.7m

2007 2008 2009 2010 2011

11.1

23.2

16.4

19.7

13.8

1 Calculated in accordance with the table shown in the financial review on page 17.

Company overview

Hamworthy plc Annual report 20112

Hamworthy at a glance

23

4 56

7

89 10

11

1213

14 15

16

17

Poole UK

Asker, Moss, Bergen Norway

Aalborg Denmark

Rotterdam the Netherlands

Gdynia Poland

Geesthacht Germany

Villagarcia de Arousa Spain

Houston USA

Miami USA

Sharjah UAE

Mumbai India

Busan Korea

Dalian China

Suzhou China

Shanghai China

Guangzhou China

Singapore

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

Ourglobalnetwork

Ourdivisions

The Pump Systems business designs and manufactures a broad range of in-line and long-shaft centrifugal pumps, selling primarily to the marine and offshore oil & gas markets. Hamworthy has market-leading positions in a number of segments within these markets including cargo pumps for liquefied gas carriers and engine room pumps for the offshore market. The business has two principal facilities based in Denmark and Singapore.

Read more on page 20

Pump Systems

The Oil & Gas Systems division provides a range of technologies to the mid and upstream oil & gas markets. The business has a leading position in the larger LPG and LNG carrier segment for reliquefaction systems that are used to capture boil-off gas and return it to the cargo tanks during a vessel’s journey. The business also has a leading position in the growing market for floating regasification systems that allow operators to regasify LNG cargoes in a more cost-effective manner than traditional land-based receiving terminals. The business’ oil product range enables offshore production facilities to increase yields from diminishing oil fields, safely store and offload cargo as well as recover gas that is otherwise wasted. The business’ operations are based in Norway.


Oil & Gas Systems

Com

pany overview


Company overview Hamworthy at a glance

Ourperformance

Revenue Underlying operating profit1

Pump Systems

£58.0m2010: £76.9m

Oil & Gas Systems

£51.0m2010: £57.6m

Water Systems

£50.8m2010: £53.1m

Inert Gas Systems

£21.8m2010: £26.7m

Pump Systems2

£9.3m2010: £12.4m

Oil & Gas Systems2

£0.7m2010: £2.5m

Water Systems2

£5.9m2010: £6.5m

Inert Gas Systems2

£0.7m2010: £1.1m

£181.6m2010: £214.3m

£13.8m2010: £19.7m

Hamworthy is a market leader in providing inert gas systems for the marine and offshore markets. The systems are used to allow safe discharge of oil and gas cargoes from oil tankers, gas carriers and FPSOs in line with international safety legislation. Hamworthy has also established a leading position in the developing environmental market of marine exhaust gas sulphur removal. The business is located in Norway, China and the UK.


Inert Gas Systems

The Water Systems business is the market leader in wastewater treatment systems for the cruise ship and commercial marine markets and freshwater generation systems for the cruise ship market. The business also supplies steam condensers to the small-scale power station market and high pressure air compressors to the offshore drill rig and CNG markets. The business has operations in the UK, Germany and China.


Water Systems


2 Excludes unallocated corporate expenses of £2.7 million (2010: £2.8 million).

Company overview


Chairman’s statement

Key information

Basicunderlyingearningspershare1

24.1p2010: 32.6p

Totaldividend

10.09p2010: 9.17p

We are encouraged by the recovery in our end markets and the greater visibility of future revenue afforded by the increased order book. The Group has a range of substantial growth opportunities and the balance sheet strength to enable us to exploit them. GordonPageChairman

I am pleased to report a solid financial performance for Hamworthy, achieved against a backdrop of a lower order book at the start of the year. We have maintained our commitment to product development and once again remained strongly cash generative.

Higher levels of new project activity in our core markets coupled with success in increasing our penetration of key market sectors has delivered a significant increase in order intake during the year with the closing order book 82% ahead of prior year end.

Reflecting market conditions, underlying operating profit was 30% lower at £13.8 million (2010: £19.7 million) with underlying basic earnings per share 26% lower at 24.1p (2010: 32.6p). Statutory earnings per share decreased 31% to 23.2p per share (2010: 33.4p).

We have continued to invest in expanding our product portfolio with expenditure on research and development increasing by 23% to £4.8 million (2010: £3.9 million). This investment in developing new technologies, particularly in environmentally responsible products, is a core element of the Group’s strategy and will provide a platform for future growth.

Once again the Group has achieved strong net cash flows with positive operating cash flow of £19.7 million (2010: £27.0 million) leading to a closing net funds balance of £83.9 million (2010: £72.3 million). This provides substantial support for both organic development and strategic acquisitions.


Company overview Chairman’s statement

Com

pany overview


We remain committed to recruiting, retaining and developing the best people and our breadth of talented employees will play a critical role in the Group’s future success.

Order intake was nearly three times that of the prior year at £290.5 million (2010: £99.0 million) driven by a recovery in our core markets and success in growing the Group’s position in key target market sectors. In particular the Group significantly improved its position in the upstream oil & gas market and continues the successful development of its Aftersales service and support business. The closing order book for the year was £258.1 million (2010: £142.1 million).

The Group has maintained its focus on improving operational efficiency with gains made in both manufacturing and supply chain and this has provided some protection to operating margins, despite the reduced revenue whilst enabling the Group to increase its investment in research and development.

We are encouraged by the recovery in our end markets and the greater visibility of future revenue afforded by the increased order book. The Group has a range of substantial growth opportunities and the balance sheet strength to enable us to exploit these both organically and by added value acquisitions. We will continue to pursue operational excellence and expect this to deliver improvement in our net margin as the Group returns to growth.

These results and our improved outlook are reflected in the Board’s commitment to a progressive dividend policy and your directors are recommending a final dividend of 6.73p which, if approved, would represent a 10% increase in the total dividend declared in respect of the year to 10.09p per share (2010: 9.17p). Subject to shareholders’ approval the final dividend will be paid on 21 July 2011 to all shareholders on the register on 17 June 2011.

On behalf of the Board I thank all of our employees for their contributions to another year of significant achievement. We remain committed to recruiting, retaining and developing the best people and our breadth of talented employees will play a critical role in the Group’s future success.

We have made good progress during the year and the Group is now in a strong position to deliver growth as our core markets recover. As a result your Board expects a near-term improvement in the Group’s performance and looks to the future with significantly increased confidence.

GordonPageCBEDLChairman

Business review


• Breakthrough orders won for offshore pumps and cargo handling systems for small gas carriers

• Strong performance from Aftersales with record order intake, up 23% to £45 million

• Operation in Suzhou, China moved to a new, state-of-the-art 15,000m2 manufactuing facility

Key information

Operational highlights

The Group has made good progress through the year in maintaining a strong position in our core market sectors as they recover, and in growing market share in a number of the key markets targeted as part of our growth strategy.

A record order intake enabled the Group to rebuild the order book at year end to £258.1 million, 81.7% higher than at the previous year end. JoeOatleyChief Executive

Chief Executive’s review

As a result, order intake improved significantly to £290.5 million, up 193% on 2010 (2010: £99.0 million). Particularly strong order intake performances were achieved by our Oil & Gas Systems business with a near ten-fold increase on 2010 and our Pump Systems business that reported order intake up 172% on 2010. This strong order intake enabled the Group to rebuild the order book at year end to £258.1 million, 81.7% higher than at the previous year end (31 March 2010: £142.1 million).

Revenue was impacted by the market weakness in the prior year that led to a reduced order book as the Group entered the year. As a result, revenue decreased by 15.3% to £181.6 million (2010: £214.3 million) with all divisions seeing a reduction in activity compared to the prior year. The performance of the Group improved as we progressed through the year and as a result of the strong order intake, revenue in the second half of the year was 18.5% higher than in the first half.

Group underlying operating margin reduced to 7.6% (2010: 9.2%) with this reduction largely driven by the strategic decision to maintain our technical and operational capability in our Oil & Gas Systems business, despite very low levels of revenue in the first half of the year, coupled with a significant increase in research and development investment across the Group. Within the Oil & Gas Systems business, the second half underlying operating margin improved to 6.3% as revenue increased. The Pump Systems business continued to perform strongly with underlying operating margin close to the high level achieved in the previous year.

The performance of individual businesses is reviewed in the divisional review on pages 20 to 27. Aftersales activities across the Group continued to perform well with order intake increasing by 23.1% to £45.3 million (2010: £36.8 million) and revenue increasing by 9.9% to £41.0 million (2010: £37.3 million). The Aftersales business is run as a matrix organisation and the constituent parts of the Aftersales revenue are included in the divisional revenues.

Orderintake

£290.5m2010: £99.0m

Closingorderbook

£258.1m2010: £142.1m

Business review


The Group’s operations in Suzhou, China moved into a new 15,000m2 manufacturing facility in January 2011 to replace our existing smaller plant in the same region. This new facility currently carries out the assembly and test of the Group’s waste treatment and inert gas products and it is planned that it will also provide the capacity for the assembly of many of the Group’s new products. The facility supplies both to the local market in China and to the wider global market.

StrategyHamworthy continues to follow a robust and clear strategy with four key elements:

• expand the business into adjacent markets with long-term growth characteristics;

• invest in research and development to achieve and sustain leadership positions in key target markets;

• improve margins through operational excellence; and

• expand the technology base and market positions of the Group through strategic acquisitions.

We have made good progress during the year in growing the business in markets adjacent to the marine newbuild market that has been at the historical core of the Group. In particular the Group has significantly improved its position in the upstream oil & gas market, winning a breakthrough order for deepwell cargo pumps for a series of eight newbuild FPSOs to be deployed in Brazil and successfully commercialising the acquired VIEC oil/water upstream separation technology, winning orders for this product for oil production platforms in the North Sea, Brazil and the Middle East.

We continue to focus on developing our Aftersales business and have established Hamworthy Services as a global brand giving our customers consistently high levels of support wherever they are in the world. The Group has secured

a number of long-term support agreements with key customers and expanded its service offerings to include products such as control system upgrades and operator training in addition to our more traditional spares and service capabilities. The Aftersales business achieved record levels of orders and sales in 2011.

Whilst growing in adjacent markets, Hamworthy aims to maintain its strong market positions within the marine newbuild market and we target the expansion of our market share in marine newbuild sectors that have long-term growth prospects. The Group achieved particular success in establishing a strong position in the small gas carrier market: following two small initial contracts won in the prior year, the Oil & Gas Systems business was successful in winning two significant contracts to provide cargo handling systems for small gas carriers, one series of which will be constructed in China and the other series of vessels in Brazil. These two contracts were of an aggregate value in excess of £70 million and securing them establishes Hamworthy as a leading player in this sector.

Once again the Group has increased research and development investment both to improve the ongoing competitiveness of our existing products and also to ensure that we are well placed to exploit new market opportunities as they arise. Total Group internally-funded research and development grew by 23.0% to £4.8 million with the most significant investments being made in expanding our range of products for the upstream oil & gas market and developing solutions for the emerging environmentally-driven markets of exhaust gas cleaning and ballast water treatment. Both of these markets are expected to provide significant medium-term opportunities for the Group and some early success has already been achieved with the exhaust gas cleaning product, securing a four shipset commercial order and a contract for a system to be fitted to a container vessel as part of a trial supported by the US Environmental Protection Agency.

Business review Chief Executive’s review

A balanced business in long-term growth markets We aim to achieve a balance of earnings across specialist sectors within the oil & gas, marine and service markets, targeting investment in areas with long-term growth prospects.

Leadership through market-led innovation

We seek to be leaders in our chosen sectors and invest in new technology development

to both strengthen our existing market positions and develop solutions to

meet new opportunities.

Strategic acquisitionsWe are targeting strategic acquisitions

to extend both the technology base and market positions of our existing businesses.

Operational excellence and a flexible cost baseWe will achieve sustained margin improvement through a focus on operational efficiency and effectiveness. We outsource lower added-value parts of the manufacturing chain, maintaining a flexible cost base and minimising invested capital.

Strategy Hamworthy

continues to follow a robust and clear strategy with four

key elements

Business review


Flaregasrecovery

150bncubic metres of gas are wasted annually

Ballastwatertreatment

40,000ships affected by ballast water legislation

Offshorepumpingsystems

1.8bnbarrels of oil need to be discovered annually

Exhaustgascleaning

1.2mtonnes of untreated exhaust gas is emitted by ships every hour

A broad range of growth opportunities

Chief Executive’s review (continued)

Strategy(continued)We continue to focus on improving cost efficiency though our drive for operational excellence. Good progress was made in both reducing procurement costs and increasing manufacturing efficiency which mitigated the effect on Group underlying operating margin of the lower level of revenue and the increased investment in research and development. These cost efficiency improvements have also enabled the Group to offset the effects of increasing raw material costs and instances of our competitors pricing more aggressively as they attempt to rebuild their order books.

As part of the establishment of the new manufacturing facility in Suzhou, China, the Group has implemented a new management and operating methodology based on the latest techniques for lean manufacturing. This is now being used as the blueprint to be rolled out across the other main manufacturing sites across the Group. During the year we completed the transfer of the order processing and contract management for our marine inert gas systems products from Norway to our facility in China.

The Group’s acquisition strategy is based on targeting specific businesses that will complement our organic development by expanding our technology base and strengthening our market positions in key target markets. The focus during the last year has been on increasing the pipeline of acquisition opportunities we are pursuing and this increased portfolio of acquisition prospects gives the Group confidence that it will be able to successfully complete a number of strategic transactions in the near future.

Health,safetyandenvironmentalHamworthy continues to invest in its group-wide commitment to improving its safety culture. Both lost-time accidents and near-misses, where a potentially unsafe event occurred but no injury was sustained, are recorded and investigated. During the year a process was implemented that enabled and encouraged the sharing of lessons learned from both of these types of incident in order to prevent recurrences. Despite this focus it is disappointing to report an 11% increase in the number of lost-time accidents compared to the prior year, although the severity of accidents has reduced, with the total number of days lost during the year due to accidents falling by 18% to 70. These accidents have all been investigated in detail both in order to prevent recurrence and also to ensure that there was no common underlying cause. Hamworthy will continue in its efforts to eliminate injuries across the Group by continually seeking safer workplaces, processes and behaviour.

The Group is mindful of the environmental impact that its activities may have on the communities in which it operates and strives to minimise the effect of this. All of Hamworthy’s principal sites are accredited under the ISO 14001 environmental standard. Furthermore, many of its products have a direct environmental benefit and they are often designed to ensure that its customers can meet relevant environmental legislation.

EmployeesLast year was a difficult year for many of our employees within the Group given the reduced headcount across its operations. The workforce is now being increased in some parts of the Group in order to meet the recent growth in our order book commitments, in some cases re-employing those affected by previous layoffs. This is a testament to the professional and sensitive way the headcount reduction was handled.

The Group remains committed to the development of its people and we continue to invest in our group-wide Leadership Development Programme that provides a foundation for the development of our leaders and managers of the future.

Hamworthy’s core values (page 30) play an important role in the way our employees behave and in the way performance is measured. We measure our management not only on quantitative results but also on commitment to these core values. We believe that behaving in line with our core values is an important element of achieving long-term sustained performance.

Business review


The Group remains committed to the development of its people and has continued to invest in our group-wide Leadership Development Programme that provides a foundation for the development of our leaders and managers of the future.

Business review Chief Executive’s review

Markets2010 witnessed a recovery in several of the Group’s markets, although the pattern of demand was uneven, with some segments of the new shipbuilding market showing only slight improvement in the rate of new vessel contracting from the lows seen in 2009.

The offshore market has rebounded strongly, in particular for FPSOs, with 23 newbuild and conversion projects reported during 2010. Of these, eight newbuild FPSOs are destined for the development of Brazil’s pre-salt finds in the Campos basin. Deepwater offshore investment continues to be supported by high oil prices and the need to replace falling production from existing fields. This market remains a key area of focus for Hamworthy’s business development efforts.

Within the shipbuilding market, contracting activity for small gas carriers recovered strongly, with a more modest increase for larger gas carriers as ship owners took advantage of falling newbuild prices at major yards. The volume of new contracting of tankers, although substantially ahead of the lows seen in 2009, nevertheless remained relatively subdued, in particular for smaller product and chemical carriers. Demand for larger oil tankers is being supported by China where new vessels are being contracted primarily for domestic owners. Hamworthy is well positioned in this market with a strong reference list and a long-established sales and manufacturing presence.

Demand for the Group’s LNG regasification systems has increased substantially during the year, in particular from Asia where natural gas is increasingly being seen as an attractive fuel for power generation.

The field population of Hamworthy equipment continues to grow and we have seen strong demand for our Aftersales products and services, in particular from the offshore market.

OutlookOrder intake for original equipment has recovered strongly, strengthening the order book at the year end and providing improved visibility of future revenues. In addition, our Aftersales business continues to perform well. As a result the Board now believes its previous expectations for the financial year ending 31 March 2012 will be significantly exceeded.

The improvement in our end markets, in particular upstream oil & gas, and those related to LNG and LPG is encouraging. As our business returns to growth we will continue to tightly manage our cost base and this, combined with our drive for operational excellence, will help us achieve our medium-term goal of sustainable double digit group operating margin.

We see a broad range of medium and long-term organic growth opportunities for the Group, both within our existing markets, driven in particular by increasing investment in deepwater offshore oil production and continued growth in demand for LNG, and in emerging markets largely driven by tightening environmental regulations in the marine and oil & gas markets. We are investing in developing solutions to meet new environmental regulations, in particular those for ballast water treatment and reducing emissions from ships’ engines and boilers. In this latter market it is encouraging to have received early orders for Hamworthy’s exhaust gas cleaning system.

We have grown the portfolio of strategic acquisition prospects under consideration and the Group has substantial balance sheet strength to support both our organic and acquisition growth strategies.

As a result of the above the Board now looks forward with significantly increased confidence.

JoeOatleyChief Executive

Business review


Our strategy in action

Process improvement at world‑class facility

Business review

Business review


3

1 2

Excellence–theHamworthyway In order to improve quality and minimise our cost base we have

introduced a new approach in the management of our daily operations. Using our control panel assembly line as our model, we introduced the latest techniques in lean manufacturing, or as we call it ‘Excellence – the Hamworthy way”. The whole team embraced the challenge and we produced results of which we are all proud. We are now cascading our learning throughout the Group’s operations, continuously improving efficiency and effectiveness.

JuliaShiLean Champion, Hamworthy Suzhou, China

1: Hamworthy’s new 15,000m2 purpose-built assembly facility in Suzhou, China.

2: Hamworthy’s Suzhou new lean control panel assembly line.

3: Daily reviews around departmental communications boards have become a key success factor of the new management style.



Expanding our offshore oil & gas presence

Business review

Business review


3

1 2 1: Hamworthy’s fire pump packages are crucial for safety on board FPSOs and FSOs.

2: Hamworthy’s deepwell pumps being fitted to an FPSO.

3: Hamworthy continues to invest in new product development for the offshore oil & gas market.

Breakthrough in the oil & gas marketWe identified the offshore market as a key growth opportunity for our pumps business and our targeted investment in this market has delivered significant success. We are particularly proud of winning a breakthrough order for deepwell cargo pumps for a series of eight newbuild FPSOs in Brazil. At around £30m this is the largest pump contract Hamworthy has ever won and it firmly establishes our deepwell pump technology in the offshore market. We continue to invest in developing our technologies and solutions for offshore applications and look forward to future growth from this exciting market.

Lars FischerSales Director Offshore, Hamworthy Svanehøj, Denmark



Developing new environmental technologies

Business review

Business review


3

1 2 1: Massina Line’s four new RoRo vessels will be fitted with Hamworthy’s exhaust gas cleaning system.

2: Trials are underway on APL’s England which trades through the ports of Los Angeles and Long Beach.

3: Hamworthy’s exhaust gas cleaning system undertook thousands of hours of sea trials on P&O Ferries’ Pride of Kent.

MeetingenvironmentallegislationAs regulations limiting sulphur emissions in Emission Control Areas (ECAs) come into force the market is looking for economic solutions that enable vessels to meet their legislative obligations. Fitting our exhaust gas cleaning systems allows ship owners and operators to comply with the new rules and avoid using high-cost, low-sulphur fuel. We are leaders in this market with our systems having been proven during thousands of hours of operation at sea. We secured our first commercial exhaust gas cleaning orders this year and have also delivered a system onto a vessel as part of a trial supported by the US Environmental Protection Agency.

SigurdSJenssenManaging Director, Hamworthy Krystallon, Norway

Business review

Financial review


• Undelivered order book rose 87% to £258.1 million

• Operating cash flow at 142% of underlying operating profit

• Research and development expenditure up 23%

Key highlights

Actions taken to mitigate the effects of lower activity enabled the Group to report a solid financial performance, maintaining its commitment to product development and continuing to generate healthy cash flows. PaulCromptonFinance Director

BasisofreportingThe Group financial statements in this report have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted for use in the EU, together with the associated International Financial Reporting Interpretation Council (IFRIC) interpretations and those parts of the Companies Act 2006 applicable to entities reporting under IFRS.

AccountingpoliciesThe Group has reviewed its accounting policies in accordance with IAS 8 and determined that they are appropriate for the Group and have been consistently applied.

UnderlyingearningsUnderlying profit is used by the Board to measure and monitor the underlying performance of the Group. Set out at the top of page 17 is a reconciliation of profit calculated for statutory disclosure and the underlying measure. The measure used in the prior year has been amended to include intangible asset amortisation which is now considered sufficiently material in 2011 to require adjustment.

ResultsoverviewThe Group started the year with an historically low order book reflecting the fall in order intake in the prior year. Actions taken to mitigate the effects of lower activity enabled the Group to report a solid financial performance, maintaining its commitment to product development and continuing to generate healthy cash flows.

As anticipated, revenue fell 15.3% to £181.6 million (2010: £214.3 million). Underlying operating profit was 29.9% lower at £13.8 million (2010: £19.7 million), with net underlying operating margin decreasing to 7.6% (2010: 9.2%).

Key information

Revenue

£181.6m2010: £214.3m

Underlyingoperatingprofit

£13.8m2010: £19.7m

Business review Financial review

Business review


The Group generated 67% (2010: 75%) of its underlying operating profits before unallocated corporate expenses in reporting currencies other than sterling, the most significant being euro, Danish kroner, Norwegian kroner, Singapore dollar and Chinese renminbi. The weighted average rate for these currencies, impacted mostly by movement in the Singapore dollar, strengthened by 7.3% compared to the prior year which had the effect of increasing sterling consolidated revenue by £4.1 million and underlying operating profits by £0.9 million.

Expenditure on research and development rose 23.0% from £3.9 million in the prior year to £4.8 million with a particular focus on enhancing the technologies, and bringing to market systems for the ballast water and ships’ exhaust sulphur emissions markets. The Group received its first commercial order for this latter technology during the year.

The Group capitalises research and development expenditure where required to do so under IAS 38. One of the criteria for capitalisation set out in that accounting standard is the demonstration of the technical feasibility of completing the intangible asset. The directors consider that meeting the criteria can only be demonstrated when the developed product is fully tested and, where required, regulatory body approvals are received. It is likely therefore that research and development projects will have the majority of their budgeted costs expended by the time that criteria is met.

Underlying profit before taxation as calculated above fell 27.6% to £14.6 million (2010: £20.2 million). The prolonged low level of global interest rates resulted in continuing low net interest income of £0.7 million (2010: £0.4 million) despite a rise in net cash balances.

The Group’s undelivered order book rose from £142.1 million to £258.1 million.

AcquisitionsThe Group acquired the business and assets of Krystallon Limited on 29 September 2009 and the whole of the issued share capital of Greenship BV on 9 March 2009. During the year the directors have revised the amount of deferred consideration expected to be paid on these transactions and, in the case of Krystallon Limited, amended the fair value of intangible assets acquired and resulting goodwill. Details of the financial effects of these changes are set out in note 34 to the financial statements.

TaxationThe tax charge of £3.6 million (2010: £5.6 million) represents an effective rate of 25.2% (2010: 27.0%). The Group generates taxable profits in a number of jurisdictions where the rate of corporation tax is lower than the UK. The most notable differences are in China and Singapore. The net effect of these lower foreign tax rates is equivalent to 6.7% of the profit before taxation. Note 12 to the financial statements provides details of the tax charge.

EarningspershareBasic underlying earnings per share fell from 32.6p per share to 24.1p per share. On a statutory basis, basic earnings per share fell to 23.2p per share (2010: 33.4p). Note 14 to the financial statements provides details of these calculations and those of the measures of diluted earnings per share for the period.

DividendThe Board are recommending a final ordinary dividend of 6.73p per share. If approved by shareholders this would result in a total dividend declared in respect of the year of 10.09p per share when added to the interim dividend of 3.36p per share paid in December 2010.

Intangibleamortisation Reductionin arisingfrombusiness Intangibleasset considerationin Statutory combinations impairment excessofgoodwill Underlying2011 £’000 £’000 £’000 £’000 £’000

Operating profit 13,307 361 1,660 (1,510) 13,818

Net finance income 788 — — — 788

Profit before taxation 14,095 361 1,660 (1,510) 14,606

Taxation (3,553) (101) — — (3,654)

Profit for the year 10,542 260 1,660 (1,510) 10,952

Intangible amortisation Gain on fair arising from business value movements Statutory combinations in derivatives Underlying 2010 £’000 £’000 £’000 £’000

Operating profit 19,464 252 — 19,716

Net finance income 1,208 — (762) 446

Profit before taxation 20,672 252 (762) 20,162

Taxation (5,574) (71) 213 (5,432)

Profit for the year 15,098 181 (549) 14,730

Reconciliationofstatutoryandunderlyingearnings

Business review


Financial review (continued)

Financing,cashflowandtreasuryThe Group has maintained its focus on managing working capital and the generation of free cash flow. The Group’s strategy of maintaining a low fixed cost base reduces the need for investment in capital assets. Total investment in tangible fixed assets in the year to 31 March 2011 was higher than normal at £5.3 million (2010: £2.6 million) as the Group completed construction of its enlarged assembly facility in Suzhou, China. The conversion of Group profits to cash flow is a key financial performance indicator, as discussed within the KPI commentary on page 29. This is monitored over a rolling three year period to best accommodate the Group’s combination of regular cash flows in businesses with smaller equipment supply and greater volatility within those businesses with larger contracts.

A summary of cash flows and the change in net funds is set out above. Operating cash flow amounted to £19.7 million (2010: £27.0 million) which is a conversion rate of 142% of underlying operating profit. The conversion rate over a three year average is 104%. The net funds position at the year end was £83.9 million (2010: £72.3 million). Further detail relating to the cash flows and movements in net funds of the Group is given in the consolidated cash flow statement on page 50 and in notes 29 and 30 to the financial statements.

All businesses are responsible for the management of local cash and working capital requirements. The principal operating companies participate in a cash pooling arrangement under which surplus cash is transferred to a central treasury function which manages the most efficient use of funds across the Group. This central management balances the requirements of liquidity, return on investment and security. The Group has historically hedged part of the interest rate exposure on its term debt. At 31 March 2011 that exposure relates to a term loan held in the Group’s German subsidiary with an outstanding balance of £0.6 million and on which the interest rate exposure is fully hedged to a fixed rate of 3.35%.

The Group’s businesses are global and each can contract in several currencies. The Group’s policy is to hedge all currency transaction exposures at the time of entering into the contractual commitment back to the relevant contracting business’ local currency. The significant majority of this hedging is operated through the central treasury function with all principal businesses required to reconcile their currency exposures and related hedges and report them to the treasury function as part of their financial reporting routines.

2011 2010 £’000 £’000

Operating profit 13,307 19,464

Depreciation and other non-cash movements 2,764 3,117

Change in working capital and provisions 9,091 7,724

Net capital expenditure (5,460) (3,283)

Operating cash flow 19,702 27,022

Net interest received 799 446

Taxation paid (5,466) (3,856)

Free cash flow 15,035 23,612

Dividends paid (4,224) (4,018)

Outflow for acquisitions and net debt acquired (95) (5,032)

Exchange movements in funding 925 2,255

Increase in net funds 11,641 16,817

Summaryofcashflowsandchangeinnetfunds

Business review Financial review

Business review


The Group intends that its hedging procedures qualify for hedge reserve accounting as far as is practical to do so. This will result in any gain or loss volatility of hedge derivatives initially being recorded in a separate component of equity and not through the consolidated income statement. Where hedging products do not so qualify, the gains or losses relating to movements in fair values of the derivative product are recorded in the consolidated income statement. This occurred during the financial year ended 31 March 2010 and the effect was adjusted in arriving at underlying profit before tax and underlying earnings per share as shown in the statement of comprehensive income and detailed in note 14 to the financial statements.

The Group’s primary banking and finance facility is provided by Barclays Bank plc. This comprises a £60 million facility for bonds, guarantees and indemnities committed to 30 June 2012 and capable of being increased to £80 million subject to the bank’s approval. The facility’s principal financial covenants cover the level of borrowings to earnings and the ratio of earnings and cash flows to debt service and finance costs. No covenants have been breached during the year. Barclays Bank also provide the majority of the Group’s foreign exchange hedging through an uncommitted facility dated 25 March 2009. In addition the Group has further foreign exchange and treasury facilities held centrally with Royal Bank of Scotland plc and held by its subsidiaries with local banks. The Group has not breached any covenant within its banking facilities during the year.

GoingconcernThe Group has available to it considerable financial resources including its own net funds which were £83.9 million at 31 March 2011 and its committed banking facilities. The Group’s banking covenants have all been met comfortably during the past year and the expectation is that this will continue.

The order book at 31 March 2011 was significantly higher than the prior year end at £258.1 million (2010: £142.1 million) and represented 142% of revenue in the financial year. The Group’s businesses have relationships and costs bases in diverse geographic areas.

Whilst the recent volatility in financial markets has created general uncertainty in respect of the economic outlook, the longer-term nature of the Group’s business, taken together with its forward order book, provide a satisfactory level of confidence to the Board in trading during the year ahead.

The directors have a reasonable expectation that the Group has adequate resources and business demand drivers to continue in operational existence for the foreseeable future. No material uncertainties related to events or conditions that may cast significant doubt about the ability of the Company to continue as a going concern have been identified by the directors. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements.

RisksThe Group is exposed to a number of risks and uncertainties which could have a material impact on its long-term performance. The directors have identified those which they regard as being the principal risks. Those of a financial nature are set out below with strategic and operational risks being set out on page 28.

Exposure to multi‑currency marketsThe Group operates globally with contracts taken in various currencies and the majority of its earnings being generated outside the UK. Changes in global currency rates can result in changes to expected earnings, cash flows and movements in net asset values if unhedged and affect the competitive position of the operating businesses.

The Group’s policy is to fully hedge transactional currency exposure back to the reporting currency of the operating unit where practicable. Operating subsidiaries report these exposures as they arise and arrange hedging cover through the Group’s central treasury function. Competitively the Group has cost bases in various currencies which limits exposure to any one particular currency relative to competitors.

Counterparty failureThe Group contracts globally with both customers and suppliers whose performance and financial viability could have a material impact on the Group’s earnings. The failure of a key supplier or customer to meet its obligations to the Group could result in exposure to financial liabilities or impairment of the value of assets. The Group’s businesses regularly assess customer credit risk and payment terms are set accordingly including the use of bank instruments and credit insurance. Supplier performance is similarly monitored and, where possible, diversity of supply is integrated into product design.

PaulCromptonFinance Director

Business review

Divisional review – Pump Systems


The Pump Systems business designs and manufactures a broad range of in-line and long-shaft centrifugal pumps, selling primarily to the marine and offshore oil & gas markets. Hamworthy has market-leading positions in a number of segments within these markets including cargo pumps for liquefied gas carriers and engine room pumps for the offshore market. The business has two principal facilities based in Denmark and Singapore.

Highlights• Order intake 172% above 2010• Increased contracting in offshore market and a recovery in the small gas

carrier market• Tanker market remains subdued• Strong margins maintained• R&D investment continued to expand range of offshore products

Business review Divisional review – Pump Systems

Business review


Order intake was 172% above 2010 at £83.2 million (2010: £30.6 million) driven by a strong performance from the offshore oil & gas sector and a recovery in the gas carrier market.

The offshore market, in particular the FPSO segment, saw increased contracting activity through the year and the business was successful in securing several significant projects wins in this sector. Most noteworthy was the award of a contract to supply deepwell cargo pump systems for eight FPSOs to be built in Brazil by the shipyard Engevix Construcões Oceânicas. At approximately £30 million in value this is the largest pump contract ever secured by the Group and represents a significant breakthrough in this strategically important market.

The business was also successful in securing contracts for a number of other offshore vessels, securing and delivering an order for a complete firewater pump package for the FPSO market. The business delivered this system along with the cargo pump room system and seawater lift pumps to the Papa Terra FPSO which will be owned and operated by BW Offshore for Petrobras in Brazil. In line with the Group’s strategy to expand into adjacent markets, the business secured a contract to supply two fire water pump systems to the downstream oil & gas market for a BP refinery in Australia.

New contracting in the tanker market continued to be subdued, in particular for the smaller product and chemical carriers where there is excess capacity and freight rates have been low. Contracting of newbuild large crude oil carriers was also sporadic with the majority of activity being in China driven by demand from domestic owners. Despite this, the business has been successful in securing an order to provide cargo pump room systems for four VLCCs to be constructed at CSSC Guangzhou Long Xue Shipyard in China for the Chinese owner CSC Nanjing Tanker Co. Ltd.

Revenue fell by 24.6% to £58.0 million (2010: £76.9 million) as the effects of the low levels of new project contracting in 2009 across all key market segments fed through into revenue. Revenue for deepwell pumps and engine room pumps for the offshore market all declined significantly compared to the prior year due to reduced demand. The business was successful in gaining market share in the supply of pump room systems to the large tanker market and this mitigated somewhat the effect of the market weakness in this segment. Aftersales activity continued to be buoyant and remains an important element of the business.

Underlying operating margin remained strong at 16.0% (2010: 16.1%) as the business continued to benefit from generating an increasing proportion of its revenue from higher margin offshore and Aftersales segments and a continued focus on efficiency improvement and cost control. Raw material costs have shown considerable inflation throughout the year and in order to maintain margins, addressing this will be a key challenge for the business.

The expansion of the manufacturing plant in Singapore was completed on schedule and on budget in September 2010. This created an additional 2,500m2 of manufacturing space to accommodate the increased activity for the offshore sector and also to provide improved finished goods handling facilities.

The business has continued its investment in research and development with a strong focus on providing new products to widen the scope of the offshore product offering. Larger deep well pumps for sea water lift applications and a range of API-610 compliant deep well pumps for offshore cargo and process applications have been developed and released to production. The first of a new range of large in-line pumps has also been completed with lower manufactured cost, improved serviceability and a better suitability for firewater applications.


£69.3m2010: £39.7m

2007 2008 2009 2010 2011

71.7

79.685.6

39.7

69.3

Underlyingoperatingprofit(£m)

£9.3m2010: £12.4m

2007 2008 2009 2010 2011

5.5

12.5

7.3

12.4

9.3

Revenue(£m)

£58.0m2010: £76.9m

2007 2008 2009 2010 2011

55.1

84.4

66.6

76.9

58.0

Business review


Highlights• Strong rebound in order intake• Significant contract awards in small gas carrier sector in China and Brazil• Awarded two further LNG regasification contracts• Further contract awards for LNG fuel gas systems• Revenue down due to previous year’s low order intake

The Oil & Gas Systems division provides a range of technologies to the mid and upstream oil & gas markets. The business has a leading position in the larger LPG and LNG carrier segment for reliquefaction systems that are used to capture boil-off gas and return it to the cargo tanks during a vessel’s journey. The business also has a leading position in the growing market for floating regasification systems that allow operators to regasify LNG cargoes in a more cost-effective manner than traditional land-based receiving terminals. The business’ oil product range enables offshore production facilities to increase yields from diminishing oil fields, safely store and offload cargo as well as recover gas that is otherwise wasted. The business’ operations are based in Norway.

Divisional review – Oil & Gas Systems

Business review



£130.2m2010: £25.3m

2007 2008 2009 2010 2011

130.6

76.3

121.8

25.3

130.2


£0.7m2010: £2.5m

2007 2008 2009 2010 2011

4.7

3.7

5.5

2.5

0.7

Revenue(£m)

£51.0m2010: £57.6m

2007 2008 2009 2010 2011

89.683.7

98.9

57.651.0

Business review Divisional review – Oil & Gas Systems

Order intake rebounded strongly to £152.3 million (2010: £14.5 million) as new contracting activity recovered and the division increased its penetration in key market sectors.

Following its entry into the small gas carrier segment in 2010, when Hamworthy was successful in securing its first cargo handling system order for a small fully pressurised LPG carrier, the business significantly grew its market share of contracts awarded for cargo handling systems in this market. In July 2010 Hamworthy was awarded a contract worth approximately £50 million by Brazilian shipyard Estaleiro Promar S.A. to provide ship design and supply cargo handling systems to eight LPG carriers destined for operation by Transpetro, a subsidiary of Petrobras. This success in Brazil was followed by a significant advance in the Chinese market with the award of a contract to supply the cargo handling systems for six LEG carriers to be built by Sinopacific Offshore and Engineering Co. at their yard in Nantong.

The business saw an increase in bidding and new contracting activity in the market for LNG regasification systems, in particular in the south-east Asian region, and was successful in securing two significant contracts for these systems, one in Indonesia and one in Malaysia, both of which are scheduled for delivery in financial year 2012.

The business continues to be successful in winning contracts to provide LNG fuelling systems to the emerging market for LNG powered ships. Gas powered vessels enable ship owners and operators to meet tightening emissions regulations in environmentally sensitive waters such as the Baltic Sea as an alternative to using high-cost, low-sulphur marine diesel or fitting emissions abatement technology. Hamworthy won orders for five such systems during the year.

The oil separation part of the business, acquired in September 2009, made good commercial progress during the year. Approval of the VIEC enhanced separation technology was received from BP, ENI, Statoil, OSX in Brazil and in the Middle East where the business secured a first contract for a feasibility study from the Kuwait Oil Company to evaluate the effectiveness of the VIEC product in the heavy oil fields in North Kuwait.

Revenue fell 11.5% to £51.0 million (2010: £57.6 million) as the low order intake of the prior year flowed through to lower activity levels. Activity in the first half of the year was particularly low. Nevertheless, the business continued to invest in both its technology and market position through this period in order to maintain core capability in anticipation of a recovery in its key markets. Following the strong order intake during the year, the second half of the year saw a marked increase in activity levels with revenue more than double that of the first half of the year and a robust return to profitability.

The business successfully completed the project to provide a small-scale land based LNG liquefaction plant in Finland and handed this over to the customer in July 2010. Hamworthy’s LNG regasification technology has now been operating successfully for almost a year on board Golar LNG’s 138,000m3 FSRU Golar Winter in Guanabara Bay, Brazil and the business completed commissioning for the three other regasification systems during the year. The division also completed deliveries of cargo handling systems to a series of large and medium sized gas carriers at Hyundai Heavy Industries in Korea.

As a result of the loss made in the first half, the underlying operating margin for the full year decreased to 1.3% (2010: 4.3%). The margin in the second half of the year improved to 6.3%. The business continues to focus on improving its margins through product refinement, excellence in project execution and increased use of its engineering centre in Poland.

The business continued to invest in the development of products and systems for the wider LNG market and a development program for LNG fuel gas systems for LNG carriers as well as other merchant vessels was initiated. Product development of the low water VIEC separator was completed last year and a pilot plant has now been delivered to the Waimea field in Brazil, along with the complementary iPhase oil/water interface indicator. A new laboratory was established in the business’ main office in Norway facilitating funded research studies for oil field operators and testing of oil before VIEC deliveries.

Business review


The Water Systems business is the market leader in wastewater treatment systems for the cruise ship and commercial marine markets and freshwater generation systems for the cruise ship market. The business also supplies steam condensers to the small-scale power station market and high pressure air compressors to the offshore drill rig and CNG markets. The business has operations in the UK, Germany and China.

Divisional review – Water Systems

Highlights• New cruise shipbuilding showing signs of recovery and two new orders for

fresh and wastewater received• Delivered eight advanced water treatment plants to the cruise market• R&D effort has focused on developing new ballast water treatment

system prototypes

Business review



£27.6m2010: £44.5m

2007 2008 2009 2010 2011

38.7

64.864.4

44.5

27.6


£5.9m2010: £6.5m

2007 2008 2009 2010 2011

4.7

7.9

5.3

6.55.9

Revenue(£m)

£50.8m2010: £53.1m

2007 2008 2009 2010 2011

28.9

58.4

43.8

53.150.8

Business review Divisional review – Water Systems

Order intake was slightly lower than prior year at £35.2 million (2010: £36.8 million). Whilst the market for new cruise shipbuilding showed signs of recovery in the latter part of the previous financial year, ordering of new vessels remains below the peak levels seen in recent years.

Hamworthy was successful in winning wastewater treatment and fresh water generation systems for new vessels for AIDA Cruise Lines and Princess Cruise Lines. Whilst order intake for advanced wastewater treatment systems for the retrofit market has been subdued, enquiry levels remain high from this sector as ship owners consider future itineraries in more environmentally sensitive waters.

Order intake for conventional wastewater treatment plant was reduced compared to the levels seen in 2010 when demand had been boosted by the introduction of strict International Maritime Organization (IMO) wastewater discharge standards from 1 January 2010.

The high pressure compressor business witnessed strong demand for its range of products from the seismic survey market where they are used for offshore oil and gas exploration and other seabed survey work.

Revenue fell by 4.3% to £50.8 million (2010: £53.1 million), with lower demand for advanced wastewater treatment systems from the cruise market and for steam condensers from the small-scale power station market being partly offset by higher volumes of conventional wastewater treatment systems and a robust performance from the Aftersales component of the business.

During the year the business delivered eight advanced wastewater treatment plants to the cruise market including its largest ever plant to German shipyard Meyer Werft for a leading North American cruise ship operator. The business also delivered advanced wastewater treatment systems to the Royal Navy’s CVF aircraft carriers and an offshore accommodation vessel.

Underlying operating margin decreased slightly to 11.5% (2010: 12.2%) as the business significantly increased investment in research and development, primarily focused on developing solutions for the ballast water treatment market.

Following thorough testing of the ballast water treatment technology arising from the acquisition of Greenship BV, it was determined that the system would need a significant redesign in order to ensure its effectiveness across the full range of vessel operating conditions. Supported by the Dutch Administration and key customers, the business embarked upon a fast-track product development programme and successfully developed and built two new prototypes during the year, commencing land-based testing of those prototypes during March 2011. The test programme will continue through the first half of the financial year 2012 with the intent to release a product to the market towards the end of this year. In parallel with this land-based test activity, Hamworthy is providing prototype units to two vessels to undertake shipboard trials as part of the required IMO test protocol. The emerging market for ballast water treatment systems represents a very significant opportunity for the business as the regulations set by IMO, once ratified, will require commercial ship owners to fit such systems on both new and existing vessels. It is estimated that there are around 40,000 vessels in the global fleet that will be affected by the new legislation.

In addition to the ballast water treatment systems, the business has invested in the development of its advanced wastewater treatment both for the cruise market and for applications in other vessels such as ferries and offshore platforms. Working closely with Princess Cruises, the business has successfully developed a new configuration for the treatment of grey water that will allow the system to be future-proofed against the most stringent standards for Alaska and the Baltic Sea.

Business review


Divisional review – Inert Gas Systems

Hamworthy is a market leader in providing inert gas systems for the marine and offshore markets. The systems are used to allow safe discharge of oil and gas cargoes from oil tankers, gas carriers and FPSOs in line with international safety legislation.Hamworthy has also established a leading position in the developing environmental market of marine exhaust gas sulphur removal. The business is located in Norway, China and the UK.

Highlights• Order intake up 16% on 2010• Recovery in the offshore market• First orders for new exhaust gas cleaning products• Particularly strong order intake for Aftersales products and services

Business review



£31.0m2010: £32.5m

2007 2008 2009 2010 2011

27.1

39.740.0

32.5 31.0


£0.7m2010: £1.1m

2007 2008 2009 2010 2011

(1.2)

1.8

1.0 1.1

0.7

Revenue(£m)

£21.8m2010: £26.7m

2007 2008 2009 2010 2011

17.2

26.4

22.5

26.7

21.8

Business review Divisional review – Inert Gas Systems

Order intake was 15.9% above 2010 at £19.8 million (2010: £17.1 million) as a recovery in the offshore market and first orders for the new exhaust gas cleaning product offset a decline in demand for inert gas systems from the marine sector.

The offshore market remains a key focus for the business and the increased market activity witnessed at the end of 2009 continued into 2010 with the business securing the contract to supply the inert gas generator systems to the ENI Norge/Statoil owned Goliat FPSO to be located in the Barents Sea and letters of intent for systems on two other newbuild FPSOs.

Order intake was particularly strong for the division’s Aftersales products and services, continuing to build on the strong growth of the previous year. The business continues to expand its portfolio of Aftersales offerings including operator training, control system upgrades and long-term service agreements alongside the more traditional spares and service offerings.

Following the completion of the development of a commercial system for exhaust gas cleaning the business secured a breakthrough order for the supply of such systems for four newbuild roll-on roll-off ferries to be built at Daewoo Shipbuilding and Marine for the Italian based operator Ignazio Messina & Co. S.p.A.

Exhaust gas cleaning is a means of enabling ship owners and operators to meet new environmental legislation that limits the emissions of sulphur oxides from ships’ boilers and engines when the vessels are operating in environmentally sensitive waters. To date EU ports, the Baltic Sea, North Sea and the English Channel are all affected by legislation limiting emissions of sulphur oxide with North American coastal waters also affected from 2012. This emerging market represents a significant opportunity for the business as the legislation will require both newbuild and existing vessels sailing within controlled waters to comply.

In addition to the commercial order for four shipsets, the business was successful in securing a paid contract for a demonstration unit installed on a container vessel as a trial supported by the US Environmental Protection Agency.

Revenue was 18.1% below the prior year at £21.8 million (2010: £26.7 million) as the low order intake in 2010, in particular in the offshore sector, flowed through into lower activity levels.

The business achieved a number of successful deliveries into the marine tanker market during the period including the first of an eight shipset series for a new design of nitrogen generation system being fitted to a series of chemical carriers being built in Korea for the Middle Eastern owner UACC.

Underlying operating margin fell to 3.3% (2010: 4.3%) as the benefits of the transfer of contract management and order processing functions from Norway to China only partly offset the effects of lower revenue and the ongoing investment in research and development. Investment was predominantly focused on further development and refinement of the exhaust gas cleaning system to ensure that Hamworthy maximises its share of this market as it emerges.

Business review


The Group is exposed to a number of risks and uncertainties which could have a material impact on its long-term development and performance. The directors have identified the following as being the principal strategic and operational risks. In addition those risks of a financial nature are set out in the financial review on page 19.

Principal risks and uncertainties

ContractorproductfailureThe Group’s businesses contract for the supply of complex, highly technical and in many cases individually high value systems. Contracts may be long term in nature and involve multi-currency transactions. The delivered systems can be mission critical to the end user. Failure of a Group business in the delivery of its contractual commitments or subsequent failure of the product could expose the Group to unforeseen losses. The Group’s design, engineering and supply chain processes are designed to meet high quality and reliability standards. The businesses invest in the training of project personnel and conduct regular reviews of contract costs and progress.

CompetitionThe Group’s businesses compete with large well-established global companies, local companies and low-cost equipment and service providers. They do so on the basis of technical expertise, price, timeliness of delivery, previous experience and reputation for quality and reliability. To remain competitive the Group invests in its product development, manufacturing capabilities, sourcing and supply chain management and market access. The Group’s strategic objective is to hold leading market positions in its targeted market segments.

Markettrends53% of the Group’s revenue in the year to 31 March 2011 came from the new shipbuilding market (2010: 50%). In aggregate this market is highly cyclical and this can result in volatility in consolidated earnings and cash flows. The Group’s strategy is to target a balance of niche markets both within specialist ship types and outside the new shipbuilding cycle. Increasingly the Group is targeting the offshore, aftersales and retrofit markets. The share of the Group’s order intake from the new shipbuilding market was 45% during the year (2010: 34%).

UncertaintyontimingoforderplacementsSeveral of the Group’s businesses supply equipment and services into large bespoke projects, the exact timing of order placement for which can be difficult to accurately predict. This can result in volatility in cash flows and demand on resources. The Group aims to maintain a low fixed cost base flexible enough to accommodate this volatility. It has taken certain actions during the last financial year to reduce costs in businesses most exposed to demand volatility whilst maintaining core capabilities.

AcquisitionsHamworthy continues to seek acquisition opportunities as part of its growth strategy. There is a risk that such acquisitions do not realise their expected benefits. Acquisition targets are assessed against the business’ development objectives and are subject to due diligence processes. The Group’s senior management have developed a robust integration, planning and management process that is applied to all acquired businesses. The directors expect those businesses acquired recently to deliver the benefits originally projected for them.

EthicsShortcomings in the standard by which the Group conducts business could lead to reputational damage, breach of contract or laws and financial penalty. The Group is committed to the highest standards of business ethics and has developed a Code of Ethics and Business Conduct to ensure it carries out business fairly, honestly and transparently. Further details are provided in the corporate social responsibility report on pages 30 to 33.

ITsecurityThe Group’s businesses rely extensively on access to electronic data, communication in electronic form and IT systems to manage business processes. Corruption or loss of this data or system access could have a detrimental effect on operational effectiveness and a business’ ability to comply with its supply obligations. The Group has a global policy on the back up of all business critical data, system access and integrity and adherence is monitored via internal auditing.

Business review


The Group’s management teams use various performance measures to help run and assess the performance of their businesses. The following measures are those which the Board believe best indicate the performance of the Group as a whole.

Business review

Key performance indicators

Underlyingearningspershare(p)

2007 2008 2009 2010 2011

19.5

40.4

28.532.6

24.1

Profittocash(%)

2007 2008 2009 2010 2011

129

97

137

115 112

Orderbooktosales(ratio)

2007 2008 2009 2010 2011

1.4

1.0

1.4

0.7

1.4

R&Dexpenditure(£m)

2007 2008 2009 2010 2011

1.3

2.9

1.9

3.9

4.8

Underlyingoperatingmargin(%)

2007 2008 2009 2010 2011

5.8

9.2

7.1

9.2

7.6

Safetyperformance(accidentrate)

n/a 2008 2009 2010 2011

1,1281,295

550

946

The Group aims to deliver long-term growth in shareholder value through the aggregated effect of its core strategies and underlying earnings per share is a key indicator of this. It is also used as a key measure in determining vesting of awards under the Group’s long-term incentive plans. Underlying earnings per share is calculated as underlying earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year.

The Group aims to maintain a low fixed cost base, minimising the level of fixed and working capital required to support the business operations. The Group’s larger contracting businesses have volatile cash flows and this measure of the ratio of free cash per share to underlying earnings per share is therefore calculated over a rolling three year period.

Revenue visibility from the forward order book is both an indicator of future potential and allows the Group’s businesses to make better informed planning decisions. This ratio is calculated as total forward order book expressed as a multiple of the previous year’s revenue.

Developing innovative solutions to meet customer needs is critical to maintaining market leadership in the Group’s targeted market segments and achieving growth in emerging markets. The Group is therefore committed to ensuring that sufficient investment is made in research and development to achieve these aims.

One of the Group’s key strategic objectives is to increase business operating margins through improved operational efficiency. Operating margins are calculated as operating profits expressed as a percentage of revenue.

The Group is committed to continuous improvement of its safety performance and includes the accident rate as one of its key performance indicators. Accident rate is defined as the number of reportable accidents which result in an absence of greater than three days per 100,000 employees. The Group does not have the historic comparative data prior to 2008.

Business review


OurpeopleThe Group values communication with its employees, involving them in the wider Group and keeping them informed on matters affecting them as employees and on the various factors affecting the performance of the Group. Hamworthy has developed an intranet that regularly disseminates a significant amount of employee related information and is accessible at all our locations for those who do not have personal access.

Employee feedback is encouraged on a range of issues, developing a culture of openness and honesty. As a matter of principle Hamworthy seeks to provide an environment which allows individuals to develop to the best of their abilities.

EthicsandbusinessconductThe Board is committed to ensuring the highest standards of ethical practice and behaviour across the Group. In 2009 Hamworthy issued a new Code of Ethics and Business conduct with which all employees are required to comply.

The Group’s code can be viewed on our website at www.hamworthy.com in the About us section under Ethics.

The fundamental principles of the code are that all employees in the Group will carry out their business fairly, honestly and transparently, and ensure their actions do not result in the unreasonable or unfair enrichment of an individual or corporation, do not unfairly or unreasonably influence an individual or corporation and are open and transparent within the normal bounds of corporate confidentiality. This code reflects the requirements of the UK Bribery Act 2010. The Group has appointed a Bribery Act Compliance Officer and during 2011 will develop its control processes further in light of the Ministry of Justice Guidance to the Act.

CorevaluesThe Group places great importance on a set of values and beliefs which inform actions taken within the Group. These are publicised and promoted internally in all businesses.

ValuingpeopleTo ensure that all employees have a safe working environment. Employees will be given the opportunity to develop and grow within the Hamworthy Group and will be recognised and rewarded for their achievements. To always respect each other’s views and opinions.

OpennessandhonestyTo be open and honest in all dealings and communications, both internal and external.

OneteamTo work across geographical, cultural and business boundaries as one team to achieve the best result for our customers and shareholders.

ContinuousimprovementTo always seek to find ways to improve our products and services and to create better results for our customers, shareholders, employees and the environment. To learn from previous successes and failures and spread best practice across the Group.

WedeliverTo be committed to keeping our promises to deliver, both internally and externally.

Hamworthy is aware of its responsibilities to its employees, the communities and the environment in each of the diverse areas in which it operates.

Corporate social responsibility

Business review


WhistleblowingThe Company operates a whistleblowing policy which is publicised both internally and externally via its website. This provides the necessary access for, and protection of, employees wishing to bring matters they suspect as being malpractice or impropriety to the attention of the relevant person.

EqualityThe Group’s employment policies include a commitment to equal opportunities regardless of sex, age, race or ethnic origin.

DisabledpeopleIt is the policy of the Group to give full and fair consideration to applications made by disabled persons taking into consideration the respective aptitudes and abilities of the applicants concerned. In the event of a member of staff becoming disabled every effort is made to ensure their continued employment within the Group and to provide specialised training where appropriate.

TrainingThe Group is committed to employee training and retraining and this year has spent £0.4 million (2010: £0.5 million) in this respect. This is in addition to the cost of on-the-job training which, whilst substantial, is impractical to quantify. The Group has a leadership and talent development programme aimed at continually improving the strength in depth of the Group’s management capabilities.

HealthandsafetyThe health and safety of Hamworthy employees is of the highest priority. The Group’s safety programme is led by a member of the Group executive committee and the executive committee reviews the safety performance of each business every month. It has implemented a consistent reporting system both for accidents and for ‘near misses’ where a potentially unsafe situation arose but no accident occurred.

Safety performance is one of the Group’s key performance indicators as set out on page 29. All of the Group’s principal business sites have achieved accreditation under OHSAS 18001 health and safety standard.

Hamworthy encourages employees to maintain a healthy lifestyle and provides opportunities to pursue that. Several of the Group’s businesses support cycle-to-work initiatives, charity corporate sports events, sporting social clubs and occupational health programmes.

Maintainingahealthywork/lifebalance63 of Hamworthy’s employees in Singapore supported the seventh annual JP Morgan Corporate Challenge, along with nearly 12,000 others. As well as investing in a healthier lifestyle Hamworthy’s employees also helped to raise money for the nominated charities.

Business review Corporate social responsibility

Hamworthy communicates its safety news to all employees via the Group’s intranet.

Business review


OurstakeholdersSuppliersIt is the Group’s policy to agree terms with its suppliers that are appropriate for the markets in which they operate and to abide by such terms where suppliers have also met their obligations. Creditor days as at 31 March 2011 were 47 days (2010: 40 days). The Group seeks to engage with its major suppliers and attempts to understand and, if appropriate, encourage their approach to environmentally friendly and ethical sourcing of materials.

For new suppliers the Group undertakes a Supplier Audit Survey which ensures they can prove their standards are in line with the Group’s. Where non-conformance is discovered, Hamworthy works with suppliers to identify corrective actions.

The Group has made progress in its approach to strategic purchasing with the expansion of dedicated procurement personnel and adoption of group-wide standards of performance and monitoring.

ShareholdersThe Company meets with institutional shareholders and analysts as appropriate and uses its website to communicate with existing and prospective shareholders. Hamworthy plc welcomes feedback from investors about its published reports and website. Please address your feedback to our investor relations team by email to [email protected] or in writing to Hamworthy plc, Fleets Corner, Poole, Dorset BH17 0JT.

OurenvironmentalimpactHamworthy is very conscious of the environmental impact that its activities may have on the communities in which it operates and constantly strives to minimise the effect of this.

All the Group’s principal sites are accredited under the ISO 14001 environmental standard.

Many of our products have a direct environmental benefit and they are often designed to ensure that our customers can meet relevant environmental legislation. The Group has added to its portfolio of such products during the last year with the development of ballast water systems, helping to protect the world’s oceans, and ships’ exhaust emission cleaning, reducing the levels of sulphur emitted to the atmosphere from ships’ engines.

Hamworthy is a constituent of The FTSE Environmental Opportunities Index Series. The Index measures the performance of global companies that have significant involvement in environmental business activities, including renewable and alternative energy, energy efficiency, water-technology and waste and pollution control. Forming part of the overall FTSE Environmental Markets Index Series, The FTSE Environmental Opportunities Index Series recognises companies that derive at least 20% of their business from environmental markets and technologies.

Corporate social responsibility (continued)

HamworthyvolunteersforcommunityprojectsHamworthy Helping Hands was launched during the year to encourage employee support for local good causes. The inaugural project helped Bournemouth-based Hope Charity turn an unused outside space in to a safe and positive garden environment for the charity’s residents.

Business review


Business review Corporate social responsibility

OurcommunitiesThe Group seeks to contribute to the communities in which it operates both directly and through the encouragement of participation by employees. The single largest social impact is the wealth created within communities both economical and in development of skill sets and knowledge.

The Group contributes directly to charities with donations totalling £3,650 (2010: £5,150) during the year. In addition, employees give time to social causes which is often provided during Company working periods. Hamworthy formalised this process earlier in the year when it launched an employee volunteer scheme aimed at supporting local charities and good causes.

The scheme, Hamworthy Helping Hands, enables employees to get hands-on involvement in causes supported by the Group, proving a more rewarding and personal experience. Employee time contributed during the year is estimated at £20,300 (2010: £20,000) with employees participating in activities such as educational support, social benefit projects and charity management. The Group also donated redundant ITC equipment to HOPE. HOPE provides vulnerable individuals with the right tools to stay off the streets and into independent living, employment or further education. The equipment donated will be used by residents to search for jobs, write CVs and improve computer skills ready for their re-introduction into the workplace.

The Group made no political donations during the year.

The Group’s Charity Policy specifies the nature of those causes that the Group will support as being for the benefit of sick, disabled or underprivileged persons or for special educational causes particularly involving children and with links to the communities in which Hamworthy businesses operate.

HamworthysupportslocalhospiceLewisManningHamworthy continued its long standing support relationship with Lewis Manning, Poole’s local voluntary hospice providing palliative care for patients with cancer and other life threatening illnesses. Paul Crompton is a director and trustee of Lewis Manning Trust. Paul brings his financial and general management skill set to the organisation and is currently assisting them in a capital appeal to fund a new bedded unit at the hospice.

Governance


Board of directors

Gordon Page CBE DL

Non-executive Chairman

Mr Page, age 67, joined the Board in June 2004. He is chairman of AirTanker Holdings Limited and PH Warr plc. He is Pro-Chancellor of Cranfield University, Chairman of Governors of Canford School, Trustee of the Dorset Community Foundation and Chairman of the Wessex Multi-Area Partnership for Economic Development in Dorset. Mr Page previously held a number of senior commercial and marketing positions at Rolls-Royce plc and was chief executive (1991–2001) and chairman (2001–2008) of Cobham plc. He is a past president of the Royal Aeronautical Society, the Society of British Aerospace Companies and the Chartered Management Institute. He was awarded the CBE in 2000, an Honorary Doctorate of Science from Cranfield University in 2003 and an Honorary Doctorate of Business Administration from Bournemouth University in 2009. He was appointed as a Deputy Lieutenant of Dorset in 2006. He is chairman of the nominations committee.

Joe Oatley MA

Chief Executive

Mr Oatley, age 42, joined the Company in September 2007 as Chief Executive having previously spent three years as managing director of Weir Strachan & Henshaw. Prior to that, his experience was predominantly in the engineering sector in a variety of roles, including as managing director, in strategy development and acquisitions. Mr Oatley has a Masters Degree in Engineering from Cambridge University.

Paul Crompton BA FCA

Finance Director

Mr Crompton, age 50, joined the Company as Finance Director in 1994. A graduate in finance and business studies, he is a chartered accountant having spent five years at Ernst & Young. Prior to joining Hamworthy, Mr Crompton held senior board positions within the electronics and aerospace industries. He is a director of the Lewis Manning Trust.


Governance

Governance Boardofdirectors

Alan Frost BSc FIA

Non-executive director

Mr Frost, age 66, joined the Board in June 2004. He is the chairman of Dorset Opera, and a non-executive director of INVESCO Pensions Limited, Streetwise Limited and The Bournemouth University Foundation. He has been appointed a Deputy Lieutenant of Dorset and High Sheriff of Dorset for 2011–12. Mr Frost has over 40 years of experience in the financial services sector, including ten years as managing director of Abbey Life Assurance and chief executive of United Assurance Group plc. He is the senior independent director and chairman of the audit committee

James Wilding MA FCA

Non-executive director

Mr Wilding, age 51, joined the Board in 2004. He is a consultant to Hermes Private Equity. His past roles have included managing director at Alix Partners, the performance improvement and restructuring firm, and Principal at Nikko Principal Investments, the private equity house. He is a chartered accountant and a former partner at PricewaterhouseCoopers. He is chairman of the remuneration committee.

Governance


Executive management

Paul Fleetwood

Managing Director – Pump SystemsMr Fleetwood joined Hamworthy in 1998. He holds BEng and MSc degrees in engineering and management from Loughborough and Warwick Universities respectively, and is a chartered engineer through the IET. Having previously worked for the David Brown Group, he has 19 years of operations and management experience including overseas appointments in Hungary, China and Singapore.

Tore Lunde

Managing Director – Oil & Gas SystemsMr Lunde joined Hamworthy in 2000. He holds a degree in Naval Architecture and has 16 years’ management experience with Exxon Mobil and Total.

Dr Frank Hope

Managing Director – Water SystemsDr Hope joined Hamworthy in 2010. He holds a PhD in Physics from Exeter University and has over 25 years’ senior management experience. Prior to joining Hamworthy he was managing director of the Electrics business of Ultra Electronics Holdings.

Piet Daenen

Group Operations Director Mr Daenen joined Hamworthy in 2008 having previously worked for JCB, BMW and Ford. He has over 19 years’ management experience in operations including foreign assignments in China, Singapore, Malaysia and Brazil. He holds a BSc degree and MSc in Biochemical Engineering from UCL.

Dr Richard Wiefelspuett

Group Aftersales DirectorDr Wiefelspuett joined Hamworthy in February 2010. He holds MSc and PhD degrees in Mechanical Engineering and Offshore Technology from the RWTH in Aachen, Germany. Richard has worked in the international shipbuilding and ship repair sector since 1982 including assignments in Canada, Europe and Asia. Prior to joining Hamworthy he worked for Wärtsilä as managing director in China and Singapore.

Geir Hellum

Managing Director – Inert Gas SystemsMr Hellum joined Hamworthy in 2001. He holds an MSc degree in Mechanical Engineering from Trondheim University, Norway and an MSc degree in Management Studies from Durham University. Having previously worked for the Kværner Group, he has 25 years of operational and management experience.

In addition to the Board, the Company has an executive committee which consists of the Chief Executive, Finance Director and six senior members of the management team, details of whom are set out below:


Directors’ remuneration report

Governance

Governance

AIM companies are not required to prepare a formal remuneration report in accordance with Part 15 the Companies Act 2006 or the Listing Rules of the Financial Services Authority. However, in line with best practice the Company has prepared this report in order to enable a better understanding of directors’ remuneration. The information included in this report is unaudited unless otherwise stated.

Remuneration committeeThe remuneration committee consists exclusively of independent non-executive directors and its members are James Wilding (Chairman), Gordon Page and Alan Frost. The committee also consults with the Chief Executive. It meets at least twice each year and has delegated responsibility for making recommendations to the Board regarding the remuneration and other benefits of the executive directors and senior executives. The full terms of reference of the committee are available on the Company’s website or on request from the Company Secretary.

The committee has access to external remuneration data and professional advice. Following the full review of the Group’s executive remuneration structure in 2007, a further general review was undertaken in 2009, in both instances with assistance from Kepler Associates. Kepler Associates do not undertake any other work for the Group. During year ended 31 March 2010 the committee also reviewed the Group’s long-term incentive plans and concluded that it would continue to retain the existing structure.

Remuneration policy The Board’s policy is to recruit, motivate and retain senior executives of high calibre by rewarding them with competitive but responsible salary and benefit packages. A significant proportion of executive remuneration is performance related, both short term and long term. This includes participation in share incentive schemes which are closely aligned with the interests of shareholders.

The remuneration packages for executive directors comprise the following main elements:

• basic annual salary;

• annual bonus payments in respect of the performance of the individual and the Group calculated as a percentage of salary;

• share-based long-term incentives via participation in the Company’s Share Option Plan and Share Matching Plan;

• retirement benefits under the Company’s defined contribution pension scheme; and

• other benefits.

The Board’s intention is to combine appropriate levels of fixed pay with incentive schemes that provide executives with the ability to earn above median levels for true out-performance and which encourage executive co-investment in the Company’s shares.

Basic salaryBasic salaries are reviewed by the committee annually to take effect on 1 April. In setting basic salaries the committee assesses individual responsibilities, experience and performance and considers external market data.

As noted in last year’s annual report, the most recent review performed by the committee’s independent advisers, Kepler Associates, indicated that Mr Oatley’s salary was materially below those of CEOs of similar companies based on a review of pay at companies operating in the same business sectors as Hamworthy and of similar size to Hamworthy. Given the significant gap, the committee decided to increase Mr Oatley’s basic salary in stages over the two-year period commencing 1 April 2010. Mr Oatley elected to postpone the first stage of this increase, and therefore its effect is not reflected in the directors’ emoluments table on page 38.

Annual bonus paymentsExecutive directors participate in the annual cash bonus scheme under which bonuses of between 0% and 100% of basic salary are payable. Bonuses are awarded following consideration of the performance of the Group, achievement of profit and cash targets and the individual’s contribution to that performance. The principles of this scheme also apply to annual bonuses payable to the Group’s senior executives. Where an executive has specific responsibility for a division or subsidiary in the Group the performance of that business unit is considered along with the Group performance. Notwithstanding Mr Oatley’s election to postpone receipt of an increase in basic salary as noted above, Mr Oatley’s bonus in respect of the year to 31 March 2011 has been calculated using the basic salary established by the committee and which would otherwise have been paid for that year.

Long-term incentivesThe Company operates long-term incentives for executive directors and senior executive managers in the form of the Share Option Plan and a complementary co-investment Share Matching Plan. These Plans aim to encourage participants to contribute to the performance of the Company and to participate in the Company’s success along with other shareholders.

It is intention of the Board to grant share options to reward performance and align the interests of executives with those of shareholders. Share options are granted at the discretion of the committee.

Exercise of options is subject to the committee’s performance criteria set at the time of the original award. For awards made since 31 March 2007 vesting has been conditional on an equally weighted measure of earnings per share growth and total shareholder return (“TSR”). The minimum performance for any vesting is an earnings per share growth of CPI plus 5% and a TSR equal to the average of the UK Industrial Engineering and Oil & Gas indices over a three-year period. The percentage vesting rises from 25% to 100% in proportion to increases in these two performance measures up to earnings per share growth of CPI plus 20% and TSR of 115% of the above indices. Details of options held by the executive directors under the Plan given in the tables on page 39.

The Share Matching Plan is designed to encourage the acquisition and retention of the Company’s shares. Participation is by the invitation of the committee to executive directors and senior executive managers at the time of an award made under the Share Option Plan. Awards of matching shares are made to participants on the basis of one matching share for each share already owned or for every two vested but unexercised share options held. Vesting of awards are subject to retention of the participant’s initial qualifying holding over a three-year period and the meeting of performance criteria over that period. The percentage of awards vesting at the end of the three years is calculated by reference to the growth in earnings per share over a three-year period. The percentage rises proportionally from 25% for earnings per share growth of CPI plus 5% to 100% for earnings per share growth of CPI plus 20%.

Details of options and awards held by executive directors under the two Plans are given in the tables on page 39.

Governance


Directors’ remuneration report (continued)

Retirement and other benefitsThe executive directors are members of the Hamworthy Pension Scheme, a UK-defined contribution scheme. The Scheme provides for pension benefits payable on retirement and for a lump sum benefit payable to dependants in the event of death in service.

The executive directors receive private healthcare insurance and allowances in lieu of company cars and fuel.

Service contractsService agreements for executive directors are for no fixed term and are terminable on twelve months’ notice from the Company or six months’ notice from the director. There are no provisions for compensation in the event of early termination. Should such an occasion arise, the Company will have due regard to all relevant circumstances including the obligation of the departing director to mitigate any loss which may be suffered.

Non-executive directorsThe non-executive directors do not have service contracts, nor do they participate in any share option plan, long-term incentive plan or pension scheme. Gordon Page, Alan Frost and James Wilding have each been appointed under letters of engagement which commenced on 21 July 2004 and which can be terminated by either party giving three months’ notice. Fees payable under the terms of their appointments are shown in the table below.

External appointmentsIt is the Company’s policy to allow executive directors to hold external appointments and to receive payment therefrom provided such appointments are agreed by the Board in advance. During the year no executive director was a director of another public company.

Performance graph The following graph indicates the TSR of shares in Hamworthy plc since flotation in July 2004 compared to that of the average of the UK Industrial Engineering and Oil & Gas indices, the measure used as part of the performance criteria in share options.

Hamworthy TSR since IPO vs indices average

AuditedinformationDirectors’ emolumentsThe remuneration of the directors including the highest paid director and Chairman was as follows:

Salary Annual Other Total Total and fees cash bonus benefits 2011 2010 £ £ £ £ £

Executive

Paul Crompton 180,000 172,800 12,778 365,578 290,638

Joe Oatley 230,000 265,000 14,515 509,515 429,036

Non-executive

Gordon Page 73,500 — — 73,500 73,500

Alan Frost 41,000 — — 41,000 41,000

James Wilding 41,000 — — 41,000 41,000

Total 565,500 437,800 27,293 1,030,593 875,174

Other benefits include private healthcare insurance cover, allowances in lieu of motor cars and fuel and the benefit of life assurance cover provided under the Company’s pension arrangements.

2004

Hamworthy Index

Pric

e re

base

d to

100

p

0

100

200

300

400

500

600

2005 2006 2007 2008 2009 20112010


Governance

Governance Directors’remunerationreport

Directors’ pension benefitsThe executive directors participate in the Hamworthy Pension Scheme, a UK-defined contribution scheme.

Employer contributions to the Hamworthy Pension Scheme were as follows:

2011 2010 £ £

Paul Crompton 22,500 22,500

Joe Oatley 28,750 28,750

Total 51,250 51,250

The Company contributes to the scheme at the rate of 12.5% of basic salary for executive directors.

Directors’ interests in sharesThe interests of the directors in the ordinary shares of the Company were as follows:

31 March 31 March 2011 2010

Paul Crompton 76,195 67,233

Joe Oatley 20,960 20,960

Alan Frost 38,000 40,000

Gordon Page 50,000 50,000

James Wilding 65,660 65,660

All directors’ interests are beneficially held. There has been no change in the interests set out above between the balance sheet date and one month before the notice of the AGM.

The directors’ interests in options over the ordinary share capital of the Company and movements therein during the year are set out below. The options granted during the year are exercisable from June 2013. The exercise of options is subject to meeting the remuneration committee’s performance criteria.

Number of options

Date Exercise At 1 April At 31 March of grant price 2010 Granted Lapsed Exercised 2011

Paul Crompton 11.07.07 582.5p 27,468 — (16,069) — 11,399

23.06.08 548.0p 32,847 — — 32,847

07.07.09 233.0p 33,000 — — 33,000

17.06.10 296.0p 33,000 — 33,000

Joe Oatley 03.09.07 606.0p 33,000 — (19,305) — 13,695

23.06.08 548.0p 41,971 — — 41,971

07.07.09 233.0p 42,000 — — 42,000

17.06.10 296.0p 42,000 — — 42,000

In addition to the above share options the directors’ awards held under the Company’s Share Matching Plan are as follows:

Date of Share At 1 April At 31 March award price 2010 Vested Lapsed 2011

Paul Crompton 03.08.07 592.5p 22,504 (18,678) (3,826) —

23 06.08 548.0p 27,372 — 27,372

Joe Oatley 23 06.08 548.0p 7,933 — 7,933

The share price is the mid-market price agreed with the shares valuation division of HM Revenue and Customs.

The mid-market price of the Company’s ordinary shares at 31 March 2011 was 520p and the range during the year was 256.75p to 539p.

This report was approved by the Board of directors on 7 June 2011 and signed on its behalf by:

James WildingChairman of the remuneration committee

Governance


Corporate governance

The Company is listed on AIM. Although the rules of AIM do not require the Company to comply with the UK Corporate Governance Code (the “Code”) that was issued by the Financial Reporting Council in 2010, the Board has nevertheless resolved to do so having regard to the size and specific requirements of the Company. Accordingly it does not seek to comply with provisions E.1.1 and E.1.2 which deal with communication between major shareholders and non-executive directors including the Chairman.

The BoardThe Company has appointed non-executive directors to bring an independent view to the Board and to provide a balance to the executive directors. The Board of directors comprises two executive directors and three non-executive directors, one of whom is the Chairman, Gordon Page, and another is the senior independent director, Alan Frost.

The Board is actively pursuing a succession strategy which will result in the replacement of each of the existing non-executive directors as they retire progressively over the period to July 2014.

The Board considers that each of the non-executive directors is independent within the meaning of the Code.

The Chairman meets with the non-executive directors without the executive directors present at least once each year.

The Board meets every two months and in advance of each regular meeting, receives a board pack with the information necessary for it to discharge its duties. These packs include financial data, reporting on health and safety, controls and risk assessments and detailed individual reports from each executive director. The Board has responsibility for formulating, reviewing and approving the Group’s strategy, budgets, major items of expenditure, acquisitions and the directors’ report and annual and interim financial statements.

All directors have access to the advice and services of the Company Secretary and are able to take professional advice at the Company’s expense.

The Company maintains appropriate insurance cover in respect of legal actions against directors as well as against material loss or claims against the Group and reviews the adequacy of cover regularly. The Company has also entered an agreement with each of its directors whereby the director is indemnified against certain liabilities to third parties which might be incurred in the course of carrying out his duties as a director. These arrangements constitute a qualifying third-party indemnity provision for the purposes of the Companies Act 2006.

There is a formal schedule of matters, decisions on which are reserved to the Board. There is also a schedule of the division of responsibilities between the Chairman and the Chief Executive. Both schedules are reviewed by the Board at least annually.

Early in 2011, the Board undertook a further triennial formal external assessment of its performance and effectiveness using the services of an outside consultant (Edis-Bates Associates). Full results of this review will be made available after the date of this report.

Board committeesThe Board has established three committees: audit, remuneration and nominations. Each has written terms of delegated responsibilities and each is chaired by a different non-executive director. The Company Secretary is secretary to each committee. A copy of each committee’s terms of reference can be found at the Company’s website www.hamworthy.com.

Audit committeeThe audit committee consists of Gordon Page, Alan Frost and James Wilding and is chaired by Alan Frost. It meets at least three times a year with attendance from the external auditors and internal personnel as required. The committee is responsible for:

• ensuring that the appropriate financial reporting procedures are properly maintained and reported on;

• meeting the auditors and reviewing their reports relating to the Group’s accounts and internal control systems;

• reviewing and monitoring the independence of the external auditor and the objectives and effectiveness of the audit process;

• receiving and reviewing all internal operational review reports; and

• reviewing arrangements by which staff may in confidence raise concerns about possible improprieties in matters of financial reporting or otherwise and receiving and dealing with matters reported under the Group’s whistleblowing policy.

The Group’s internal audit function has written terms of reference, reports independently to the audit committee and has direct access to the Chief Executive. It has responsibility for a programme of reviews to cover all businesses in the Group on a rolling basis and with agreed scope of work. In addition, the head office finance team, led by the Group Finance Director, undertakes a programme of operational reviews at the Group’s businesses which includes internal control implementation. Both the internal audit and operational review programmes are integrated with the risk assessment process.

The external auditors have carried out non-audit services to the Group during the year. The committee has considered the effect of this work on the objectivity and independence of the external auditor. Having regard to the scale and nature of these services, the committee has concluded that the auditors’ objectivity and independence are not impaired.

The committee has considered the likelihood of a withdrawal of the auditors from the market and noted that there are no contractual obligations to restrict the choice of external auditors.

To assess the effectiveness of the external auditors, the committee reviewed:

• the arrangements for ensuring the external auditors’ independence and objectivity;

• the external auditors’ fulfilment of the agreed audit plan and any variation therefrom;

• the robustness and perceptiveness of the auditors in their handling of the key accounting and audit judgements; and

• the content of the external auditors’ reporting on internal control.

Following the above, the committee has recommended to the Board that Deloitte LLP be re-appointed as auditors.


Governance

Governance Corporategovernance

Remuneration committeeThe remuneration committee consists of Gordon Page, Alan Frost and James Wilding and is chaired by James Wilding. It meets at least twice a year and is responsible for reviewing the performance of the executive directors and other senior executives and for determining appropriate levels of remuneration. The Chief Executive is invited to participate in the committee’s deliberations on all matters except consideration of his own compensation. The committee’s report is set out on pages 37 to 39.

Nominations committeeThe nominations committee consists of Gordon Page, Alan Frost, James Wilding and Joe Oatley and is chaired by Gordon Page. The committee reviews the size, structure and composition of the Board and makes recommendations on changes, as appropriate. It also gives consideration to succession planning in the light of developments in the business.

The attendance of directors at Board and committee meetings throughout the year was as follows:

Audit Remuneration Nominations Board committee committee committee

Gordon Page 6 (6) 3(3) 4 (4) 2 (2)

Paul Crompton 6 (6)

Alan Frost 6 (6) 3(3) 4 (4) 2 (2)

Joe Oatley 6 (6) 2 (2)

James Wilding 6 (6) 3(3) 4 (4) 2 (2)

Figures in brackets show the number of meetings which could have been attended.

Shareholder relationsThe Company meets with institutional shareholders and analysts as appropriate and uses its website to encourage communication with private, existing and prospective shareholders. Hamworthy plc welcomes feedback from investors about its published reports and website. Please address your feedback to our investor relations team by email to [email protected] or in writing to Hamworthy plc, Fleets Corner, Poole, Dorset BH17 0JT.

Internal control and risk managementThe Group operates a system of internal control which is developed and reviewed in accordance with the guidance published by the Institute of Chartered Accountants in England and Wales. The internal control system is designed to manage rather than eliminate the risk of failure to achieve business objectives. The Board is responsible for the system of internal control and for reviewing its effectiveness. It can only provide reasonable, but not absolute, assurance against material misstatement or loss.

The Board operates a formal process of risk assessment and reporting. Each major business unit carries out formal risk assessments annually and regularly updates these during the year. The assessments are carried out using, where appropriate, a standard categorisation of risk. Reports on the assessments and mitigation actions of all significant risks are provided to the Board.

The Group operates an internal audit function, details of which are provided in the audit committee section of this report.

The Board recognises that an essential part of its responsibility is the effective safeguarding of assets, the proper recognition of liabilities and the accurate reporting of results. The Group has a comprehensive system for regular reporting to the Board. This includes an annual planning and budgeting system with budgets approved by the Board. The financial reporting system compares against budget and prior year and reconsiders its financial year forecast all on a monthly basis.

The Board has established a formal policy of authorisation setting out matters which require its express approval and certain authorities delegated to the executive directors.

The Group operates in a multi-currency environment and is exposed to a number of foreign currency risks. The Board has set a policy for the management and reporting of those risks and this is set out in more detail in the financial review on pages 18 and 19 and in note 31 to the financial statements.

The Company has established a policy and share dealing code relating to dealing in the Company’s shares by directors, employees and connected persons.

There is a group-wide Code of Ethics and Business Conduct to which all employees are required to adhere. Monitoring of compliance is included within the internal audit programme. This code reflects the requirements of the UK Bribery Act 2010. The Group has appointed a Bribery Act Compliance Officer and during 2011 will develop its control processes further in light of the Ministry of Justice Guidance to the Act.

The Company’s policy with regard to whistleblowing and health and safety is included in the corporate social responsibility report on pages 30 to 33. The Board of directors’ consideration of the adequacy of the Group’s resources to enable it to continue in operational existence for the foreseeable future is set out on page 19.

Governance


Directors’ report

The directors present their report and the audited financial statements for the year ended 31 March 2011.

Business reviewThis business review has been prepared to provide additional information to shareholders to assist in understanding the Group’s strategies and the potential for those strategies to succeed. The Chairman’s statement on pages 4 and 5, the Chief Executive’s review on pages 6 to 9, the financial review on pages 16 to 19 and the divisional reviews on pages 20 to 27 all contain further information related to this business review and are to be incorporated into this directors’ report by reference.

This business review contains forward-looking statements which have been made by the directors in good faith based on information available to them up to the time of their approval of this report and must be treated with caution due to the uncertainties including economic, business and other risk factors inherent in any such forward-looking information.

The Company acts as a holding company and the provider of Group management services. The principal activities of the Group are the design, manufacture and supply of products and systems for marine and oil & gas related industries.

Performance for the year ended 31 March 2011A summary of key financial results is set out in the table below:

Revenue Underlying operating profit

2011 2010 2011 2010 £’000 £’000 £’000 £’000

Pump Systems 57,996 76,973 9,302 12,425

Oil & Gas Systems 50,969 57,608 655 2,488

Water Systems 50,827 53,121 5,869 6,504

Inert Gas Systems 21,836 26,664 724 1,134

Central — — (2,732) (2,835)

181,628 214,330 13,818 19,716

2011 2010 £’000 £’000

Closing order book 258,133 142,100

Operating cash flow 19,666 27,022

The Group made further progress in developing its balanced portfolio of businesses and generating earnings through challenging market conditions. Details of the divisional performances are given on pages 20 to 27.

Acquisitions and disposalsThere were no significant acquisitions or disposals during the year.

RisksThere are a number of potential risks and uncertainties which could have a material impact on the Group’s long-term performance and which could cause actual results to differ from those expected. Those considered by the directors to be the principal risks facing the Group are set out on page 28. Further details of mitigating factors relating to financial risk are also described in detail on pages 19 and 28 and in note 31 to the financial statements.

The Group’s internal controls systems, including the system of assessment and management of risk, are described in the corporate governance report on pages 40 and 41.

DividendsThe directors propose the payment of a final dividend in respect of the year to 31 March 2011 of 6.73p per share (2010: 5.97p per share). If approved, the dividend will be paid on 21 July 2011 to shareholders on the register at the close of business on 17 June 2011.

The Company paid an interim dividend during the financial year of 3.36p per share (2010: 3.20p per share).

DirectorsThe names of the current directors, together with brief biographical details, are shown on pages 34 and 35. All directors served throughout the year and to the date of signing the financial statements.

The Board has determined that, regardless of when individual directors were last re-elected, henceforth all directors will resign and offer themselves for re-election at the AGM. Accordingly, each director resigns and, being eligible, offers himself for re-election. The Board recommends the re-election of each director.

None of the directors had a material interest in any contract of significance to which the Company, or its subsidiaries, was a party during the financial year. There were no contractual relationships between the non-executive directors and companies with which they are connected and the Hamworthy plc Group.

Other than the interests of directors disclosed in the directors’ remuneration report, the Company had been notified at 1 June 2011 of the following substantial interests in the Company’s issued ordinary share capital:


Governance

Governance Directors’report

Number of % of issued Registered holder ordinary shares share capital

Schroder Investment Management 4,534,342 9.90

BlackRock Inc 2,298,457 5.06

JO Hambro Capital Management 2,238,992 4.95

Jupiter Asset Management 2,122,039 4.67

Majedie Asset Management 2,092,923 4.61

Fidelity 1,644,100 3.62

Octopus Investments 1,454,138 3.20

Directors’ remunerationDetails of the remuneration of directors and their interests in the share capital of the Company are provided in the directors’ remuneration report on pages 37 to 39. The Company has made qualifying third-party indemnity provisions for the benefit of its directors which remain in force at the date of this report.

Financial instrumentsThe Group holds and utilises financial instruments in the management of its operations. It is the policy of the Group that no trading in financial instruments shall be undertaken. The main risks from the Group’s financial instruments relate to interest rates, liquidity risk and foreign exchange risk. The Board reviews and agrees policies for managing each of these risks and they are set out in note 31 to the financial statements.

Research and developmentDuring the year the Group expensed to the consolidated income statement, net of amounts capitalised to and amortised from intangible assets, £4,788,000 (2010: £3,894,000) in respect of research and development on marine and offshore products and systems.

Corporate responsibilityDetails of the Group’s policies on employment, environmental, health and safety, ethics, creditor payments, political donations and charitable payments are contained in the corporate responsibility report on pages 30 to 33.

Directors’ responsibilitiesThe directors are responsible for preparing the annual report, directors’ remuneration report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. The directors are required by the IAS Regulation to prepare the Group financial statements under IFRS as adopted by the European Union. The Group financial statements are also required by law to be properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation.

International Accounting Standard 1 requires that IFRS financial statements present fairly for each financial year the Company’s financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board’s “Framework for the preparation and presentation of financial statements”. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRS. However, directors are also required to:

• properly select and apply accounting policies;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and

• provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance.

The directors have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The parent company financial statements are required by law to give a true and fair view of the state of affairs of the company. In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards 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.

The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the parent company financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Governance


Directors’ report (continued)

Responsibility statement We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

• the management report, which is incorporated into the directors’ report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Disclosure of information to the auditorsIn the case of each of the persons who are directors of the Company at the date when this report is approved:

(a) so far as each director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and

(b) each of the directors has taken all steps that they ought to have taken as a director to make themselves aware of any relevant audit information (as defined) and to establish that the auditors are aware of that information.

This information is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.

Annual General MeetingThe Annual General Meeting (AGM) of the Company will take place at the Hytes Suite, Harbour Heights Hotel, Haven Road, Poole BH13 7LW on 14 July 2011 at 2.00pm. Full details of the resolutions to be put to the meeting are given in the notice of the AGM to be found on pages 90 and 91 of this annual report.

Capital structureDetails of the authorised and issued share capital, together with details of the movements in the Company’s issued share capital during the year are shown in note 26 to the financial statements. The Company has one class of ordinary shares which carry no right to fixed income. Each share carries the right to one vote at general meetings of the Company. There are no specific restrictions either on the size of a holding or on the transfer of shares, which are both governed by the general provisions of the Articles of Association and prevailing legislation.

Details of employee share schemes are also set out in note 26 to the financial statements. No person has any special rights of control over the Company’s share capital and all issued shares are fully paid.

With regard to the appointment and replacement of directors, the Company is governed by its Articles of Association, the Companies Acts and related legislation and observance of the UK Corporate Governance Code. The Articles of Association may be amended by special resolution of the shareholders.

An ordinary resolution will be put to the shareholders at the AGM to renew the directors’ authority to issue and allot ordinary shares. The nominal value of ordinary shares to which this authority will be limited is £729,482.

A special resolution will also be put to the shareholders at the AGM which renews the authority of the directors to allot ordinary shares without first offering them to existing shareholders in proportion to their existing holdings. This authority is limited to 5% of the issued share capital.

The Companies Act 2006 permits a company to purchase its own shares provided the purchase has been authorised by the members in general meeting. A special resolution will be put to shareholders at the AGM to authorise the Company to purchase up to 5% of the issued share capital at a maximum price 5% above the average middle market quotation according to the London Stock Exchange for the five days preceding any purchase.

In all cases the above resolutions will expire at the earlier of the next AGM in 2012 or 15 months after the date of the resolutions.

AuditorsDeloitte LLP have expressed their willingness to continue in office as auditors and a resolution to re-appoint them will be proposed at the forthcoming AGM.

By order of the Board

Peter DawesCompany Secretary

7 June 2011

Accounts


Independent auditors’ report totheshareholdersofHamworthyplc

Accounts

We have audited the Group financial statements of Hamworthy Plc for the year ended 31 March 2011which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cash flow statement and the related notes 1 to 35. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorsAs explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the Group 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 Group 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.

Scope of the audit of the financial statementsAn 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 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 statementsIn our opinion the Group financial statements:

• give a true and fair view of the state of the Group’s affairs as at 31 March 2011 and of its profit for the year then ended;

• have been properly prepared in accordance with IFRS as adopted by the European Union; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Separate opinion in relation to IFRS as issued by the IASBAs explained in note 1 to the Group financial statements, the Group in addition to complying with its legal obligation to apply IFRS as adopted by the European Union, has also applied IFRS as issued by the International Accounting Standards Board (IASB).

In our opinion the Group financial statements comply with IFRS as issued by the IASB.

Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the directors’ report for the financial year for which the Group financial statements are prepared is consistent with the Group financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• 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.

Other matterWe have reported separately on the parent company financial statements of Hamworthy plc for the year ended 31 March 2011.

Gregory Culshaw ACA (Senior Statutory Auditor)For and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditors Southampton, United Kingdom

7 June 2011

NotesThe maintenance and integrity of the Hamworthy plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Accounts


Consolidated income statementfortheyearended31March2011

2011 2010

Note £’000 £’000 £’000 £’000

Revenue 5 181,628 214,330

Cost of sales (121,350) (146,610)

Gross profit 60,278 67,720

Distribution expenses (3,010) (3,126)

Administrative expenses (43,961) (45,130)

(46,971) (48,256)

Operating profit 7 13,307 19,464

Finance income 10 934 1,392

Finance expense 11 (146) (184)

Profit before taxation 14,095 20,672

Underlying profit before taxation 14,606 20,162

Intangible asset write down 34 (1,660) —

Reduction in consideration in excess of goodwill 34 1,510 —

Intangible amortisation from business combinations 15 (361) (252)

Gain on fair value movements on derivatives — 762

Profit before taxation 14,095 20,672

Taxation 12 (3,553) (5,574)

Profit for the year 10,542 15,098

Attributable to:

Equity holders of the parent 10,514 15,113

Minority interest 28 (15)

10,542 15,098

Basic earnings per share 14 23.2p 33.4p

Underlying basic earnings per share 14 24.1p 32.6p

Diluted earnings per share 14 23.1p 33.3p

Underlying diluted basic earnings per share 14 24.0p 32.5p

All results relate to continuing activities.

Accounts


Consolidated statement of comprehensive incomefortheyearended31March2011

Accounts

2011 2010 £’000 £’000

Profit after taxation 10,542 15,098

Exchange differences on translating foreign operations 495 1,186

Cash flow hedges:

Transfers to profit or loss on cash flow hedges (946) (11,132)

Gains on cash flow hedges 9,729 22,599

Actuarial (loss)/gain in pension scheme (205) 2,700

Tax relating to components of other comprehensive income:

Deferred tax on cash flow hedges (2,407) (3,816)

Deferred tax on employee share option schemes — 71

Deferred tax on pension deficit 19 (556)

Total comprehensive income for the year 17,227 26,150

Attributable to:

Equity holders of the parent 17,199 26,165


17,227 26,150

Accounts


Consolidated statement of changes in equity fortheyearended31March2011

Share Share premium Hedging Own Minority Retained capital account reserve shares interest earnings £’000 £’000 £’000 £’000 £’000 £’000

At 1 April 2010 2,270 19,107 (1,150) (800) (27) 65,600

Profit for the year — — — — 28 10,514

Exchange differences on translation of foreign operations — — — — — 495

Increase in fair value of cash flow hedging derivatives — — 8,783 — — —

Tax effect of increase in fair value of cash flow hedging derivatives — — (2,407) — — —

Actuarial (loss) in pension schemes — — — — — (205)

Movement in deferred taxation on pension scheme deficit — — — — — 19

Own shares vesting to employees — — — 330 — (330)

Employee share option schemes — — — — — 447

Acquisition of minority interest — — — — 3 (3)

Dividends paid — — — — — (4,224)

At 31 March 2011 2,270 19,107 5,226 (470) 4 72,313

At 1 April 2009 2,270 19,107 (8,801) (800) (12) 50,820

Profit for the year — — — — (15) 15,113

Exchange differences on translation of foreign operations — — — — — 1,186

Increase in fair value of cash flow hedging derivatives — — 11,467 — — —

Tax effect of increase in fair value of cash flow hedging derivatives — — (3,816) — — —

Actuarial gain in pension schemes — — — — — 2,700

Movement in deferred taxation on pension scheme deficit — — — — — (556)

Employee share option schemes — — — — — 284

Deferred tax on employee share option schemes — — — — — 71

Dividends paid — — — — — (4,018)

At 31 March 2010 2,270 19,107 (1,150) (800) (27) 65,600

The hedging reserve represents the cumulative portion of gains and losses on hedging instruments deemed effective in cash flow hedges. The cumulative deferred gain or loss on the hedging instrument is recognised in profit or loss only when the hedged transaction impacts the profit or loss.

The own shares reserve represents the cost of shares in Hamworthy plc purchased in the market and held by the Hamworthy plc Employee Benefit Trust to satisfy the commitments under the co-investment share matching plan.

Accounts


Accounts

Consolidated balance sheetasat31March2011

2011 2010 Note £’000 £’000

Non-current assets

Intangible assets 15 20,765 29,034

Property, plant and equipment 17 15,419 12,427

Derivative financial instruments 31 3,951 532

Deferred tax assets 25 4,887 3,117

45,022 45,110

Current assets

Inventories 18 48,954 52,293

Trade and other receivables 20 29,883 33,426

Derivative financial instruments 31 7,962 3,307

Corporation tax 1,572 1,851

Cash and cash equivalents 21 84,536 73,447

172,907 164,324

Total assets 217,929 209,434

Current liabilities

Borrowings 23 (95) (539)

Trade and other payables 22 (77,610) (72,416)

Derivative financial instruments 31 (2,879) (4,328)

Provisions 24 (7,246) (7,052)

Corporation tax (8,206) (7,650)

(96,036) (91,985)

Non-current liabilities

Borrowings 23 (531) (639)

Trade and other payables 22 (4,192) (9,120)

Derivative financial instruments 31 (1,045) (545)

Deferred tax liabilities 25 (6,708) (5,319)

Provisions 24 (8,242) (13,130)

Retirement benefit obligations 28 (2,725) (3,696)

(23,443) (32,449)

Total liabilities (119,479) (124,434)

Net assets 98,450 85,000

Equity

Share capital 26 2,270 2,270

Share premium account 19,107 19,107

Hedging reserve 5,226 (1,150)

Own shares (470) (800)

Retained earnings 72,313 65,600

Equity attributable to equity holders of the parent 98,446 85,027


Total equity 98,450 85,000

The financial statements of Hamworthy plc, registered number 00713225, on pages 46 to 82 were approved by the Board of directors on 7 June 2011 and signed on its behalf by:

Joe Oatley Paul CromptonDirector Director

Accounts


Consolidated cash flow statementfortheyearended31March2011

2011 2010 Note £’000 £’000

Cash flows from operating activities

Cash generated from operations 29 25,162 30,305

Interest paid (146) (184)

Interest received 945 630

Corporate taxes paid (5,466) (3,856)

Net cash inflow from operating activities 20,495 26,895

Cash flows from investing activities

Purchase of property, plant and equipment 17 (5,292) (2,584)

Purchase of intangible fixed assets 15 (603) (536)

Proceeds from disposal of property, plant and equipment and intangibles 895 10

Capitalised development costs 15 (460) (173)

Acquisition of subsidiary net of cash acquired 34 — (5,032)

Acquisition of minority interest 16 (95) —

Net cash used in investing activities (5,555) (8,315)

Cash flows from financing activities

Dividends paid 13 (4,224) (4,018)

Repayment of borrowings (98) (339)

Net cash used in financing activities (4,322) (4,357)

Net increase in cash and cash equivalents 30 10,618 14,223

Cash and cash equivalents including overdrafts at beginning of year 21 72,997 56,538

Effect of foreign exchange rate changes 921 2,236

Cash and cash equivalents including overdrafts at end of year 21 84,536 72,997

Accounts


Notes to the consolidated financial statementsfortheyearended31March2011

Accounts

1. General informationThese financial statements are the consolidated financial statements of Hamworthy plc, a public limited company registered and domiciled in the United Kingdom and its subsidiaries (the “Group”). The address of the registered office is Fleets Corner, Poole, Dorset BH17 0JT. The nature of the Group’s operations and its principal activities are set out on page 57.

2. Adoption of new and revised StandardsIn the current year, the following new and revised Standards and Interpretations have been adopted.

Standards affecting the financial statementsIFRS 3 (revised 2008) Business Combinations (effective for periods beginning on or after 1 July 2009) – the main impact is the

requirement that all acquisition-related costs are to be expensed and will therefore no longer form part of the cost of the investment. In addition, changes to contingent consideration after initial recognition at fair value may potentially be recognised through the income statement rather than as an adjustment to goodwill

IAS 27 (revised 2008) Consolidated and Separate Financial Statements (effective for periods beginning on or after 1 July 2009)

Standards and interpretations not affecting the reported results nor the financial positionAmendment to IFRS 2 Share-based Payments – Group cash-settled share-based payments. The amendments clarify the accounting

for share-based payment transactions among group entities – effective for periods beginning on or after 1 January 2010

Amendments to IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items (effective for periods beginning on or after 1 July 2009). The amendments provide clarification on two aspects of hedge accounting: identifying inflation as a hedged risk or portion, and hedging with options

IFRIC 17 Distributions of Non-cash Assets to Owners – effective from 1 July 2009

The following amendments were made as part of Improvements to IFRS (2010).

Amendment to IFRS 7 Financial Instruments: Disclosures regarding reclassifications of financial assets

The following new and revised Standards and Interpretations would be effective for the current year but are not considered relevant to the Group’s operations:

Amendments to IAS 32 Financial Instruments: Presentation – Classification of rights issues

IFRIC 13 Customer Loyalty Programmes

Accounting standards not yet effectiveAt the date of authorisation of these financial statements, the following relevant Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not been adopted by the EU):

International Financial Reporting Standards (IFRS)IFRS 9 Financial Instruments: Classification and Measurement (effective for periods beginning on or after

1 January 2013) – replacement of IFRS 7 and IAS 39

Amendment to IAS 24 Related Party Disclosures

IFRIC 14 Prepayments of a Minimum Funding Requirement – effective from 1 January 2011

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments – effective from 1 July 2010

The adoption of IFRS 9 introduces new requirements for the classification, measurement and disclosure of Financial Instruments and is effective from 1 January 2013 with early adoption permitted.

With the exception of IFRS 9 the directors do not anticipate that the adoption of these Standards and Interpretations in future periods will have a material impact on the financial statements of the Group.

Accounts


Notes to the consolidated financial statements (continued)fortheyearended31March2011

3. Significant accounting policiesThe principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparationThese financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations adopted by the European Union (EU) and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation.

The financial statements have been prepared under the historical cost convention as modified by the revaluation of derivative contracts and retirement benefit obligations which are held at fair value. A summary of the more important Group accounting policies, which have been applied consistently across the Group, is set out below.

Basis of consolidationThe financial statements represent a consolidation of the Company and its subsidiary undertakings as at the balance sheet date and for the year then ended. Subsidiaries acquired or disposed of during the year are included in the consolidated financial statements from, or up to, the date upon which control passed, being the ability to govern the financial and operating policies of the investee entity so as to obtain benefits from its activities. This is considered to be the effective date of acquisition or disposal, as appropriate.

Minority interests represent the portion of profit or loss and net assets in subsidiaries that is not held by the Group and is presented within equity in the consolidated balance sheet, separately from the Company shareholders’ equity.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinationsThe acquisition of subsidiaries is accounted for using the purchase method. On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition.

Revenue recognitionRevenue is measured at the fair value of the consideration received and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales related taxes, and excluding inter-company sales

Sales of goods and services are recognised when goods are delivered or services rendered and title has passed. For bill and hold arrangements, revenue is recognised when the risks and rewards of ownership are transferred to the customer, typically on formal acceptance. Revenue from construction contracts is recognised in accordance with the Group’s accounting policy on construction contracts (see below).

Construction contractsWhere the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date. This is measured using a matrix of indicators applicable to the contract including costs incurred, man hours expended, deliveries made and engineering work completed. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred where it is probable they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Operating segmentsFor reporting purposes the results of the Group are allocated between four reporting product groups. These operate in specific product and market areas and are described in note 6. The Group accounting policies are applied consistently across the four divisions. Head office costs are shown separately.

Foreign currency translationThe functional and presentational currency of the parent company is UK pounds sterling. Group companies use their local currency as their functional currency. Transactions denominated in currencies other than the functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date, with any gains or losses being included in net profit or loss for the period.

On consolidation the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are dealt with through the Group’s reserves, until such time as the subsidiary is sold whereupon the cumulative exchange differences relating to the net investment in that foreign subsidiary are recognised as part of the profit or loss on disposal in the income statement. However, cumulative exchange differences arising prior to 1 April 2005 remain in equity as permitted by IFRS 1.

In order to hedge its exposure to certain foreign exchange risks the Group enters into forward contracts and options (see below for details of the Group’s accounting policies in respect of such derivative financial instruments).

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. The Group has elected to treat goodwill and fair value adjustments arising on acquisitions before the date of transition to IFRS as sterling-denominated assets and liabilities.

Accounts


Accounts Notestotheconsolidatedfinancialstatements

Derivative financial instrumentsThe use of derivative financial instruments is governed by the Group’s policies, approved by the Board of directors, which provide written principles on the use of financial derivatives.

All derivative financial instruments are recorded in the balance sheet at fair value. Where derivatives do not qualify for hedge accounting, any gains or losses on re-measurement are immediately recognised in the income statement. Where derivatives qualify for cash flow hedge accounting, recognition of any resultant gain or loss will initially be recorded in a separate component of equity (“Hedging Reserve”).

In order to qualify for hedge accounting, the Group is required to document from inception the relationship between the item being hedged and the hedging instrument. The Group is also required to document and demonstrate an assessment of the relationship between the hedged item and the hedging instrument, which shows that the hedge will be highly effective on an ongoing basis. This effectiveness testing is performed at each period end to ensure that the hedge remains highly effective.

Cash flow hedge accountingDerivative financial instruments are classified as cash flow hedges when they hedge the Group’s exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecasted transaction.

Changes in the fair value of derivative financial instruments that are designated as effective hedges of future cash flows are recognised directly in equity and the ineffective portion is recognised immediately in the income statement. The associated cumulative gain or loss is removed from equity and recognised in the income statement in the same period or periods during which the hedged transaction affects the income statement.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that time any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecast transaction occurs at which point it is recycled to the income statement. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the income statement.

Derivative instruments qualifying for cash flow hedging are principally forward foreign exchange transactions and interest rate swaps.

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value with unrealised gains or losses reported in the income statement.

The Group does not use derivative financial instruments for speculative purposes.

Trade receivablesTrade receivables do not carry any interest and are stated at their fair value as reduced by appropriate allowances for estimated irrecoverable amounts. Allowances for irrecoverable amounts are made when there is evidence that the Group may not be able to collect the amount due. The impairment recorded is the difference between the carrying value of the receivables and the estimated future cash flows. Any impairment required is recorded in the income statement in administrative expenses.

Trade payablesTrade payables do not carry any interest and are stated at their fair value.

LeasesRentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation in respect of a past event and it is probable that settlement will be required of an amount that can be reliably estimated.

Provisions for warranty costs are recognised at the date of sale of the relevant products, at the directors’ best estimate of the expenditure required to settle the Group’s liability. The estimate is discounted to present value where the effect is material.

Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the income statement in the period in which they are incurred.

Property, plant and equipmentTangible fixed assets are stated at cost, net of depreciation and provision for impairment. Cost includes expenditure that is directly attributable to the acquisition of the item including the costs of acquiring or constructing the asset and costs incurred subsequently to add to, or enhance, the asset. Depreciation is provided on all tangible fixed assets other than land and assets under construction, at rates calculated to write off the cost, less estimated residual value, of each asset on a straight-line basis over its expected useful economic life at the following annual rates:

Freehold land Nil Freehold buildings 2% – 5% Leasehold buildings 2% – 10% or over the life of the lease if different Plant, machinery and equipment 20% – 33% Assets under construction Nil

Estimated residual values and useful lives are reviewed annually and adjusted where necessary.

Accounts



3. Significant accounting policies (continued)GoodwillGoodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of subsidiary undertakings at the date of acquisition. Goodwill arising on acquisitions prior to 1 April 2005 has been retained at the previous UK GAAP amounts subject to being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has not been reinstated and is not included in determining any subsequent profit or loss on disposal.

Goodwill is recognised as an asset and reviewed for impairment annually or where there are indications that the carrying value may not be recoverable. Any impairment is recognised immediately in the income statement and is not subsequently reversed.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of the goodwill allocated to the unit and then to the other assets of the unit on a pro-rata basis.

Negative goodwill arising on acquisition before the date of transition to IFRS has been eliminated through reserves on transition.

Research and development expenditure – internally generatedExpenditure on research activities is recognised as an expense in the period in which it is incurred.

Development costs are written off as incurred unless it can be demonstrated that the following conditions for capitalisation, in accordance with IAS 38 (Intangible Assets), are met:

• the development costs are separately identifiable;

• the development costs can be measured reliably;

• management are satisfied as to the ultimate technical and commercial viability of the project; and

• it is probable that the asset will generate future economic benefits.

Any subsequent costs are capitalised as intangible assets until the intangible asset is readily available for production, and amortised on a straight-line basis over their useful lives.

Other intangible assetsIntangible assets acquired by the Group, other than goodwill, are stated at cost less accumulated amortisation and impairment losses. Intangible assets are amortised over the asset’s estimated useful life on a straight-line basis as follows:

Software three to five years Development costs three years Customer contracts one to three years Customer relationships life of the customer relationship – typically ten years Technology-based assets life of the product – typically ten years

Impairment of fixed tangible assets and intangible assets excluding goodwillAt each balance sheet date the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of any impairment loss. The recoverable amount is the higher of the asset’s value in use and its fair value less costs to sell. Value in use is calculated using cash flow projections for the asset (or group of assets where cash flows are not identifiable for specific assets) discounted at the Group’s cost of capital.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense in the income statement, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Operating profitOperating profit is stated before finance income or finance expense.

Retirement benefit costsThe Company provides pension arrangements to the majority of full time UK employees through a money purchase (defined contribution) scheme, and similar schemes exist across other countries in which the Group operates, except Norway and Germany. Contributions and pension costs are based on pensionable salary and are charged as an expense as they fall due. The Group has no further payment obligations once the contributions have been paid.

Employees in Norway and Germany participate in funded defined benefit pension plans. The cost of benefits accruing during the year in respect of current and past service is determined using the Projected Unit Credit Method and is charged against operating profit. The expected return on the scheme’s assets and the change in the present value of the scheme’s liabilities arising from the passage of time are included in other finance costs. Actuarial gains and losses are recognised in the consolidated statement of comprehensive income. The balance sheet includes the surplus/deficit in the scheme, taking assets at their year end market values and liabilities at their actuarially calculated values discounted at year end AA corporate bond interest rates.

Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group’s obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.

Accounts



InventoriesInventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the FIFO method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Provision is made for obsolete, slow-moving or defective items where appropriate.

Taxation including deferred taxThe tax expense represents the sum of current tax and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised in equity in which case it is recognised in equity.

The current tax is based on taxable profit for the year calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is provided using the balance sheet liability method on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. In principle deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets or liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.

Share-based paymentThe Group operates equity-settled share-based compensation plans through two share option schemes. The fair value of options awarded is calculated at the time of grant and is charged to the income statement on a straight-line basis over the vesting period based on an estimate of the number of options that will actually vest. The Group has adopted a Black-Scholes model to calculate the fair value of options. The Group has also introduced a complimentary co-investment share matching plan, details of which are given in note 26. The fair value of these matching shares are calculated at the date of award based upon the market value of the issued shares and are charged to the income statement on a straight-line basis over the vesting period based on an estimate of the number of options that will actually vest.

DividendsDividends are recognised as a liability in the same period in which they are fully authorised.

Cash and cash equivalentsCash and short-term deposits in the balance sheet comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less.

For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

4. Critical accounting judgements and key sources of estimation uncertaintyIn the process of applying the Group’s accounting policies, management has made a number of judgements, and the preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Revenue and margin recognition for long-term contractsThe Group derives revenue and margin from long-term contracts, most of which are normally fixed price and which may extend for a significant period of time. While long-term contracts are in progress, revenue is recognised based on their expected profitability and extent of completion. Profit is only taken once the outcome of the contract can be estimated reliably, however unforeseen future events may adversely impact the accuracy of those estimates. Where the outcome of a long-term contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Further details are given in note 19.

Retirement benefit schemesThe Group operates defined benefit pension schemes that provide benefits to a number of current and former employees. The value of the deficit is particularly sensitive to the market value of the scheme’s assets, and its liabilities are particularly sensitive to discount rates and actuarial assumptions related to mortality. Further details are given in note 28.

Accounts



4. Critical accounting judgements and key sources of estimation uncertainty (continued)Current and deferred taxationLegislation related to taxation is complex and its impact on the Group may be uncertain. In preparing the Group’s financial statements management estimates its taxation liability having taken appropriate professional advice. Determination of an agreed amount of taxation payable may take several years, and the final amounts paid may differ from the liabilities recorded in these financial statements.

The recognition of assets and liabilities related to deferred taxation also requires the exercise of management judgement, in particular the extent to which assets should be recognised.

Impairment of goodwillThe Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. Further details are given in note 16. The carrying amount of goodwill at 31 March 2011 was £12,955,000 (2010: £17,133,000).

Provisions for contract liabilitiesThe Group makes provision for liabilities related to contracts, including claims made against the Group by a contracting party, in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. At each balance sheet date the Group recognises such liabilities at the directors’ best estimate of the expenditure required to settle the liability.

Fair value of derivativesThe directors use their judgement in selecting appropriate valuation techniques for financial instruments. Valuation techniques commonly used by market practitioners are applied.

Financial risk managementFinancial risk factorsThe Group’s operations expose it to a number of financial risks including foreign currency risk, interest rate risk and liquidity risk. These risks are managed centrally by the Group’s treasury function in accordance with board-approved objectives, policies and authorities. There are internal review procedures to ensure local compliance.

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the business review on pages 6 to 33. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial review on pages 16 to 19. In addition these notes include the Group’s objectives, policies and processes for managing its capital and its financial risk management objectives. Details of its financial instruments and hedging activities and its exposures to credit risk and liquidity risk are set out in note 31.

The Group has considerable financial resources together with long-term contracts with a number of customers and suppliers across different geographic areas and industries. It has significant cash balances, little external debt and a significant order book. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

The directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

Foreign exchange riskThe Group operates internationally and is subject to foreign exchange risks on future commercial transactions. The principal exposures arise in respect of variations in the cross rates between sterling, euro, US dollar, Singapore dollar and Norwegian kroner. The Group seeks to hedge all its transactional currency exposures through the use of forward currency contracts. The Group does not hedge balance sheet or income and expenditure translation exposures arising on consolidation, or undertake trading in financial instruments.

Interest rate riskThe Group’s exposure to market risk for changes in interest rates relates primarily to its term loan borrowings which are detailed in note 31. Approximately 60% of borrowings at 31 March 2011 are subject to interest rate swap arrangements which have the effect of fixing interest rates at 3.35% p.a. for the term of the loan.

Liquidity riskThe Group’s cash flows and funds are managed in a central treasury function under a cash pooling structure. The Group maintains the most appropriate mix of short, medium and long-term borrowings from the Group’s lenders. Details of available facilities are set out in note 23.

Credit riskThe Group is not subject to significant concentration of credit risk with exposure spread across a number of companies across the world. Policies are maintained to ensure that the Group makes sales to customers with appropriate credit history. Letters of credit or other appropriate instruments are put in place to reduce credit risk where considered necessary.

The Group is also subject to credit risk on counterparties to its liquid funds and its derivative financial instruments which it controls by only dealing with highly-rated counterparties. The ratings are regularly monitored.

Accounts



Capital risk managementThe Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity structure. The capital structure of the Group consists of borrowings (disclosed in note 23), cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in note 26 and the consolidated statement of changes in equity. The Group balances its overall capital structure through the payment of dividends, new share issues and the use of debt facilities.

Details of the Group’s policy regarding employee share ownership and the Group’s share option programme can be found in the remuneration report on pages 37 to 39.

From time to time the Group purchases its own shares on the market through an employee benefit trust, and these own shares are intended to be used for issuing shares under the Group’s Share Co-investment Incentive Plan. The timing of these purchases is at the discretion of the trustees. The Group does not have a defined share buy-back plan.

There were no changes in the Group’s approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to any externally-imposed capital requirements.

5. RevenueThe analysis of the Group’s revenue is as follows:

2011 2010 £’000 £’000

Sale of goods and services 138,601 134,404

Revenue from construction contracts 43,027 79,926

181,628 214,330

Finance income 934 1,392

182,562 215,722

6. Business and geographical segmentsOperating segmentsFor management purposes, the Group is organised into four operating divisions – Pump Systems, Oil & Gas Systems, Water Systems and Inert Gas Systems. These divisions are the basis on which the Group reports its primary segment information.

The principal activities of each segment are as follows:

• the Pump Systems Division designs and manufactures a range of cargo and general duty pumps and pump systems;

• the Oil & Gas Systems Division’s principal activity is the design and supply of systems which handle the phase change of petroleum products and natural gas cargos between vapour and liquid;

• the Water Systems Division provides advanced, environmentally-friendly solutions for the onboard treatment of liquid waste products, the generation of fresh water through desalination plant and the treatment of ballast water; and

• the Inert Gas Systems Division provides products which supply oxygen-depleted air to the ship’s cargo tanks to prevent explosion during the transportation of oil and chemical cargos.

Segment information about these businesses is presented below. The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 3. Segment profit represents the profit earned by each segment after the allocation of specific central administration costs but before investment revenue, finance costs and income tax expense and is the measure reported to the Group’s Chief Executive and executive board for the purpose of resource allocation and assessment of segment performance.

Pump Oil & Gas Water Inert Gas Systems Systems Systems Systems Eliminations Total 2011 2011 2011 2011 2011 2011 2011 £’000 £’000 £’000 £’000 £’000 £’000

Revenue

External sales 57,996 50,969 50,827 21,836 — 181,628

Inter-segment sales 8,967 1,007 11,813 6,481 (28,268) —

Total revenue 66,963 51,976 62,640 28,317 (28,268) 181,628

Inter-segment sales are charged at prevailing market prices.

Accounts



6. Business and geographical segments (continued)Operating segments (continued)


Result

Segment result 9,302 458 5,564 715 — 16,039

Unallocated corporate expenses (2,732)

Group operating profit 13,307

Finance income 934

Finance expense (146)

Profit before taxation 14,095

Taxation (3,553)

Profit for the year 10,542

Pump Oil & Gas Water Inert Gas Systems Systems Systems Systems Unallocated Total 2011 2011 2011 2011 2011 2011 Other information £’000 £’000 £’000 £’000 £’000 £’000

Capital additions 1,946 366 2,625 1,356 62 6,355

Depreciation and amortisation 776 382 737 254 20 2,169

Impairment losses — — 1,660 — — 1,660

Balance sheet

Assets

Segment assets 52,158 90,226 40,400 22,506 — 205,290

Unallocated corporate assets 12,639

Consolidated total assets 217,929

Liabilities

Segment liabilities (24,251) (59,856) (18,090) (12,499) — (114,696)

Unallocated corporate liabilities (4,783)

Consolidated total liabilities (119,479)

Segment assets and liabilities are those assets and liabilities that are employed by a division in its operating activities. Segment assets include intangible assets, property, plant and equipment, inventories, trade and other receivables, cash and cash equivalents and derivative financial instruments. Segment liabilities include borrowings, trade and other payables, provisions, derivative financial instruments and retirement benefit obligations. Unallocated assets and liabilities include cash balances, derivative financial instruments, share-based payments and external borrowings.


Revenue

External sales 76,937 57,608 53,121 26,664 — 214,330

Inter-segment sales 11,054 2,835 16,156 8,256 (38,301) —

Total revenue 87,991 60,443 69,277 34,920 (38,301) 214,330

Inter-segment sales are charged at prevailing market prices.

Accounts




Result

Segment result 12,425 2,415 6,325 1,134 — 22,299

Unallocated corporate expenses (2,835)

Group operating profit 19,464

Finance income 1,392

Finance expense (184)

Profit before taxation 20,672

Taxation (5,574)

Profit for the year 15,098

Pump Oil & Gas Water Inert Gas Systems Systems Systems Systems Unallocated Total 2010 2010 2010 2010 2010 2010 Other information £’000 £’000 £’000 £’000 £’000 £’000

Capital additions 876 43 2,001 208 165 3,293

Depreciation and amortisation 766 1,112 713 137 104 2,832

Balance sheet

Assets

Segment assets 45,517 72,578 39,003 16,254 173,352

Unallocated corporate assets 36,082

Consolidated total assets 209,434

Liabilities

Segment liabilities (21,917) (53,158) (26,745) (11,563) — (113,383)

Unallocated corporate liabilities (11,051)

Consolidated total liabilities (124,434)

Geographical segmentsThe Group’s operations are located in the UK, Norway, Denmark, Singapore, Germany, China, the USA, Korea and the Netherlands.

The following table provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the goods/services:

2011 2010 £’000 £’000

Revenue by geographical destination:

UK 19,226 27,444

Rest of Europe 58,370 61,204

The Far East 82,290 100,704

Rest of the world 21,742 24,978

181,628 214,330

Accounts



6. Business and geographical segments (continued)Geographical segments (continued)The following is an analysis of the carrying amount of segment and corporate assets, and additions to property, plant and equipment and intangible assets, analysed by the geographical area in which the assets are located:

Carrying amount Additions to property, of segment net plant and equipment assets/(liabilities) and intangible assets

2011 2010 2011 2010 £’000 £’000 £’000 £’000

UK 20,136 10,485 157 217

Rest of Europe 48,946 44,988 1,231 1,198

The Far East 28,380 28,544 4,940 1,868

Rest of the world 988 983 27 10

98,450 85,000 6,355 3,293

Information about major customersRevenues arising in the Oil & Gas Systems division include £13.4 million (2010: £20.1 million) from sales to the Group’s largest customer.

7. Operating profitThe operating profit for the year is stated after charging/(crediting):

2011 2010 Note £’000 £’000

Net foreign exchange losses 458 111

Research and development costs 4,788 3,894

Depreciation of property, plant and equipment 1,465 1,782

Amortisation of internally-generated intangible assets included in other operating expenses 704 1,050

Impairment of technology-based assets 1,660 —

Reduction in consideration in excess of goodwill (1,510) —

Operating lease rentals – plant and machinery 225 301

Operating lease rentals – land and buildings 1,977 1,730

(Profit)/loss on disposal of property, plant and equipment (1) 1

Cost of inventories recognised as expense 95,174 143,405

Write downs of inventories recognised as an expense 788 1,432

Staff costs 9 49,582 53,254

The analysis of auditors’ remuneration is as follows:

2011 2010 £’000 £’000

Audit services – statutory audit 246 238

Other services:

Further assurance — 6

Taxation compliance 24 26

Taxation advisory 6 28

Internal control review 28 148

Other not covered above 58 46

Total non-audit fees 116 254

Amounts included above in respect of the parent company are Group statutory audit fee £50,000 (2010: £50,000) Taxation advisory £nil (2010: £2,000), internal controls review £23,000 (2010: £148,000) and other £47,000 (2010: £26,000).

8. Profit attributable to ordinary shareholdersIn accordance with the concession granted under Section 408 of the Companies Act 2006, the profit and loss account of Hamworthy plc has not been separately presented in these financial statements. The profit for the year attributable to shareholders dealt with in the financial statements of Hamworthy plc under UK GAAP is £9,920,000 (2010: £16,663,000).

Accounts



9. Employee and staff costsThe average number of employees during the year including executive directors by function was as follows:

2011 2010 Number Number

Production 583 632

Selling and marketing 82 96

Spares and service 132 133

Administration 164 165

961 1,026

Total employee costs comprised:

2011 2010 £’000 £’000

Wages and salaries 41,681 44,077

Social security costs 4,864 5,607

Other pension costs – defined benefit schemes 827 1,975

Other pension costs – defined contribution schemes 1,763 1,311

Share-based payments 447 284

49,582 53,254

Information on Directors’ remuneration is given in the section of the remuneration report described as having been audited and those elements required by the Companies Act 2006 and the Financial Services Authority form part of these accounts.

10. Finance income

2011 2010 £’000 £’000

Bank interest receivable 809 599

Gain on cash flow hedges — 762

Net return on pension scheme assets and liabilities 125 31

934 1,392

11. Finance expense

2011 2010 £’000 £’000

Interest payable on bank loans and overdrafts 91 184

Net return on pension scheme assets and liabilities 55 —

146 184

Unrealised gains or losses arise due to movements in fair value on derivative instruments used for foreign exchange hedging but deemed to be ineffective under IFRS hedge accounting rules. The gain in the prior year related to a specific option derivative whose structure did not qualify for hedge accounting but did nonetheless represent a commercially effective hedging instrument.

12. Taxation

2011 2010 £’000 £’000

The taxation charge comprises:

Overseas tax 5,525 6,812

UK tax 1,532 667

Adjustments in respect of prior years (756) 6

Total current tax 6,301 7,485

Deferred tax in respect of UK companies (412) 500

Deferred tax in respect of overseas companies (2,971) (2,411)

Adjustments in respect of prior years 635 —

Taxation 3,553 5,574

Income tax for the UK is calculated at the standard rate of UK Corporation tax of 28% (2010: 28%) on the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

Accounts



12. Taxation (continued)The total charge for the year can be reconciled to the accounting profit as follows:

2011 2010 £’000 £’000

Profit on ordinary activities before tax 14,095 20,672

Tax at 28% thereon 3,947 5,788

Effect of:

Expenses not deductible for tax purposes 163 204

Unrecognised accelerated capital allowances and other temporary differences (22) 285

Changes in respect of prior year’s charge (121) 1

Tax losses no longer recognised 531 —

Lower tax rate on overseas earnings (945) (704)

Total tax charge for the year 3,553 5,574

In addition to the taxation expense charged to the income statement, deferred tax charges of £2,482,000 (2010: £4,372,000) and deferred tax credits of £19,000 (2010: £71,000), related to changes in fair values of cash flow hedging derivatives and actuarial gains or losses on defined benefit pension schemes, have been recognised in equity in the year as shown in the consolidated statement of comprehensive income.

13. Dividends

2011 2010 £’000 £’000

Final paid in respect of year ended 31 March 2010 (5.97p per share) 2,701 —

Interim paid in respect of year ended 31 March 2011 (3.36p per share) 1,523 —

Final paid in respect of year ended 31 March 2009 (5.68p per share) — 2,579

Interim paid in respect of year ended 31 March 2010 (3.20p per share) — 1,439

4,224 4,018

The directors propose the payment of a final dividend of 6.73p per share, amounting to £3,049,647 in respect of the year to 31 March 2011 (2010: 5.97p per share amounting to £2,701,176). The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. If authorised it will be paid on 21 July 2011 to shareholders who are on the register of members as at 17 June 2011.

14. Earnings per shareBasic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.

For diluted earnings per share, the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential ordinary shares where, on options granted, exercise price is less than the average market price of the Company’s ordinary shares during the year.

The measures of underlying earnings per share are calculated using earnings attributable to ordinary shareholders adjusted to eliminate the mark-to-market of currency derivatives as adjusted throughout these financial statements for underlying earnings.

The calculation of the basic and diluted earnings per share is based on the following data:

Year ended 31 March 2011 Year ended 31 March 2010

Weighted Weighted average no. Per share average no. Per share Earnings of shares amount Earnings of shares amount £’000 ‘000 pence £’000 ‘000 pence

Basic EPS 10,514 45,314 23.2 15,098 45,246 33.4

Effect of dilutive securities — 258 — 47

Diluted EPS 10,514 45,572 23.1 15,098 45,293 33.3

Earnings 10,514 15,098

Intangible asset write down 1,660 —

Reduction in consideration in excess of goodwill (1,510) —

Intangible amortisation from business combinations 361 252

Taxation thereon (101) (71)

Mark-to-market gain on currency hedging — (762)

Taxation thereon — 213

Basic underlying EPS 10,924 45,314 24.1 14,730 45,246 32.6

Diluted underlying EPS 10,924 45,572 24.0 14,730 45,293 32.5

Accounts



15. Intangible assets

2011 2010 Note £’000 £’000

Goodwill 16 12,955 17,133

Other intangible fixed assets (as below) 7,810 11,901

20,765 29,034

The movements in goodwill and other intangible fixed assets are as follows:

Customer Technology contracts and Development based assets relationships Software costs Total Note £’000 £’000 £’000 £’000 £’000

Cost

1 April 2009 3,892 1,410 3,462 585 9,349

Additions — — 536 173 709

Disposals — — (679) — (679)

Adjustments to prior year acquisitions 122 — — — 122

Recognised on acquisition of subsidiary 5,981 156 — — 6,137

Exchange adjustments — — 131 — 131

1 April 2010 9,995 1,566 3,450 758 15,769

Additions — — 603 460 1,063

Disposals — — (58) — (58)

Adjustments to prior year acquisitions 34 (2,726) — — — (2,726)

Exchange adjustments (14) — 29 (7) 8

At 31 March 2011 7,255 1,566 4,024 1,211 14,056

Amortisation

1 April 2009 — 717 2,112 568 3,397

Charge for the year 73 179 780 18 1,050

Disposals — — (679) — (679)

Exchange adjustments — — 100 — 100

1 April 2010 73 896 2,313 586 3,868

Charge for the year 50 311 343 — 704

Impairment losses for the year 34 1,660 — — — 1,660

Disposals — — (43) — (43)

Exchange adjustments — — 62 (5) 57

At 31 March 2011 1,783 1,207 2,675 581 6,246

Net book value

31 March 2011 5,472 359 1,349 630 7,810

31 March 2010 9,922 670 1,137 172 11,901

Values ascribed to development costs represent the directly attributable costs of internally-generated development knowledge from the point at which an individual project meets the requirements for capitalisation until it is available for utilisation in the business. This is invariably a relatively short period of time resulting in minimal costs being incurred that qualify for capitalisation.

All of these assets are recognised at fair value to purchase or acquire and are amortised over their estimated useful lives. Fair values of acquired intangible fixed assets have been assessed by reference to the future estimated cash flows arising from the application of assets, discounted at an appropriate rate to present value, or by reference to the amount that would have been paid in an arm’s length transaction between knowledgeable and willing parties.

Accounts



16. Goodwill

2011 2010 Note £’000 £’000

Cost

At 1 April 17,133 13,458

Adjustments to prior year acquisitions 34 (4,320) 198

Arising on acquisition of subsidiaries — 3,403

Minority interests acquired (see note below) 95 —

Exchange adjustments 47 74

At 31 March 12,955 17,133

Net book value

31 March 12,955 17,133

Goodwill is allocated to the Group’s cash-generating units (“CGUs”) which principally comprise its individual business operations, as follows:

2011 2010 £’000 £’000

Hamworthy Norway and Singapore subsidiaries 1,737 1,737

Hamworthy Water Systems Ltd 5,210 5,210

Hamworthy Inc 136 136

Hamworthy Serck Como GmbH 2,915 2,915

Hamworthy Baltic Design Centre Ltd 685 590

Hamworthy Greenship BV — 3,066

Hamworthy Krystallon Ltd — 1,254

Hamworthy Technology & Products AS 2,272 2,225

12,955 17,133

For each CGU the Group has determined its recoverable amount. The recoverable amount is determined based on value in use calculations. No impairment charge was required in the year (2010: £nil) and the cumulative impairment charge recognised to date was £nil (2010: £nil). The key assumptions used in the calculations were:

• the forecast operating cash flows for the next two years based on approved budgets and plans. These budgets and plans are based on past performance and expectations for the market development of the CGU, taking into account the current economic climate and forecast assumptions around the relevant product markets;

• an estimate of the long-term effective tax rate for the CGU of 28%; and

• an estimate of the long-term growth rate for the CGU of 0%.

The resulting cash flows were discounted using a pre-tax discount rate of 15.3% (2010: 15.3%).

Sensitivity analysis has determined that no reasonably possible change in the key assumptions used will result in significant impairment and that there is sufficient headroom in all of the key assumptions before the carrying value becomes impaired. For instance, the discount rate would have to more than double to result in an impairment charge for any of the four largest CGUs that comprise nearly 75% of the goodwill carrying value.

On 24 November 2010 the Group acquired the remaining 21% interest in Hamworthy Baltic Design Centre Limited.

Accounts



17. Property, plant and equipment

Freehold Leasehold Assets in land and land and Plant and the course of buildings buildings equipment construction Total £’000 £’000 £’000 £’000 £’000

Cost

1 April 2009 7,685 2,633 12,244 — 22,562

Additions 3 9 845 1,727 2,584

Disposals — — (1,081) — (1,081)

Exchange adjustments (271) 98 (212) — (385)

1 April 2010 7,417 2,740 11,796 1,727 23,680

Additions 3,937 1,256 1,829 (1,730) 5,292

Disposals (1,031) — (615) — (1,646)

Reclassification of assets 778 (778) (268) — (268)

Exchange adjustments (61) 154 362 3 458

At 31 March 2011 11,040 3,372 13,104 — 27,516

Depreciation

1 April 2009 1,882 1,101 7,873 — 10,856

Charge for the year 354 143 1,285 — 1,782

Disposals — — (1,070) — (1,070)

Exchange adjustments (69) 77 (323) — (315)

1 April 2010 2,167 1,321 7,765 — 11,253

Charge for the year 310 128 1,027 — 1,465

Disposals (166) — (601) — (767)

Reclassification of assets 60 (179) (149) — (268)

Exchange adjustments (13) 119 308 — 414

At 31 March 2011 2,358 1,389 8,350 — 12,097

Net book value

31 March 2011 8,682 1,983 4,754 — 15,419

31 March 2010 5,250 1,419 4,031 1,727 12,427

Of the net book value of freehold land and buildings £1,322,000 relates to the value of land (2010: £766,000) and £1,567,000 is subject to a mortgage through Dresdner Bank AG as detailed in note 23 (2010: £1,665,000). The Group has commitments under contracts placed for future capital expenditure not provided for in the financial statements of £nil (2010: £2,619,000).

18. Inventories

2011 2010 £’000 £’000

Raw materials 7,233 8,477

Work in progress 37,781 38,647

Finished goods 3,940 5,169

48,954 52,293

There is no material difference between the book value and the replacement cost of the inventories shown.

Accounts



19. Construction contractsConstruction contracts in progress at the balance sheet date:

2011 2010 Note £’000 £’000

Amounts due from contract customers included in trade and other receivables 20 536 1,567

Amounts due to contract customers included in trade and other payables 22 (21,668) (15,620)

(21,132) (14,053)

Contract costs incurred plus recognised profits less recognised losses to date 15,956 94,001

Less: progress billings (37,088) (108,054)

(21,132) (14,053)

No retentions are held by customers for contract work, and advances received from customers for contract work amounted to £nil (2010: £nil). Progress billings reflect both payments on account and payments in advance of recognised contract revenues.

No amounts receivable from customers arising from construction contracts are due for settlement after more than twelve months.

20. Trade and other receivables

2011 2010 £’000 £’000

Trade receivables (net of impairment provision) 22,292 24,797

Amounts recoverable on contracts 536 1,567

Other receivables 4,059 5,708

Prepayments and accrued income 2,996 1,354

29,883 33,426

The Group is not subject to significant concentration of credit risk with exposure spread across a number of companies across the world. Policies are maintained to ensure that the Group enters into sales contracts with customers that are tailored to their respective credit rating. Advance payments, payments on delivery, letters of credit or other appropriate instruments are used to manage and reduce credit risk as appropriate. The credit quality of the Group’s trade receivables is considered by management to be very good as a high proportion of customers are large global companies with whom the Group trades on a long-term basis. This is further evidenced by the low rates of impairment provided and amounts written off.

The average credit period taken on sales of goods is 38 days. No interest is charged on the receivables balances. The Group does not hold any collateral or other credit enhancements over these balances nor has the legal right of offset with any amounts owed by the Group to the receivables counterparty.

The carrying amount of financial assets represents the maximum credit exposure. At the reporting date the principal financial assets were:

2011 2010 Note £’000 £’000

Loans and receivables

Trade receivables 22,292 24,797

Amounts recoverable on contracts 536 1,567

Cash and cash equivalents 21 84,536 73,447

Derivatives used for hedging

Forward foreign exchange contracts:

current assets 31 7,962 3,307

non-current assets 31 3,951 532

119,277 103,650

The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:

2011 2010 £’000 £’000

Geographic distribution of customers:

UK 2,096 6,988

Rest of Europe 4,985 5,847

Far East 11,301 9,408

Rest of the world 3,910 2,554

Trade receivables (net of impairment provision) 22,292 24,797

Accounts



The carrying amounts of trade and other receivables are denominated in the following currencies:

2011 2010 £’000 £’000

Sterling 5,805 9,073

US dollar 622 738

Euro 2,500 2,839

Norwegian kroner 15,162 13,630

Danish kroner 1,406 2,024

Singapore dollar 3,688 4,909

Other 700 213

Total trade and other receivables 29,883 33,426

The ageing of trade receivables at the reporting date was as follows:

Impairment Impairment Gross provision Net Gross provision Net 2011 2011 2011 2010 2010 2010 £’000 £’000 £’000 £’000 £’000 £’000

Not past due 12,130 175 11,955 12,871 230 12,641

Less than one month past due 2,610 95 2,515 4,324 — 4,324

Past due two to six months 7,204 612 6,592 4,888 215 4,673

Past due six to twelve months 2,810 1,580 1,230 1,983 423 1,560

More than one year — — — 2,837 1,238 1,599

24,754 2,462 22,292 26,903 2,106 24,797

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

2011 2010 £’000 £’000

Balance at 1 April 2,106 2,057

Provision for receivables impairment 1,340 750

Receivables written off (271) (498)

Unused amounts reversed (740) (202)

Foreign exchange movements 27 (1)

Balance at 31 March 2,462 2,106

This allowance has been determined by reference to the recoverability of specific overdue debts. No allowance for impairment is made against other receivables. The creation and reversal of provisions for impaired trade receivables are included in administrative expenses in the income statement.

The Group’s exposure to currency risks is set out in note 31. The directors consider that the carrying amount of trade and other receivables approximates their fair value.

21. Cash and cash equivalentsCash and cash equivalents include the following for the purposes of the cash flow statement:

2011 2010 Note £’000 £’000

Cash and cash equivalents 84,536 73,447

Bank overdrafts 23 — (450)

84,536 72,997

Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value.

Accounts



22. Trade and other payables

2011 2010 £’000 £’000

Current liabilities

Payments received on account 21,774 19,776

Trade payables 15,130 13,911

Amounts payable on contracts 19,239 6,500

Payroll and other taxes including social security 4,099 5,316

Accruals and deferred income 8,293 14,396

Other liabilities 9,075 12,517

77,610 72,416


Payments received on account 1,179 —

Amounts payable on contracts 2,429 9,120

Accruals and deferred income 460 —

Other liabilities 124 —

4,192 9,120

Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 47 days.

The directors consider that the carrying amount of trade payables approximates to their fair value.

23. Borrowings

2011 2010 £’000 £’000

Current

Bank overdrafts — 450

Bank loans 95 89

95 539


Bank loans 531 639

Total 626 1,178

The borrowings are repayable as follows:

2011 2010 £’000 £’000

On demand or within one year 95 539

Within one to two years 89 90

Within two to three years 177 282

Within three to four years 265 267

626 1,178

Less: amount due for settlement within twelve months (shown under current liabilities) (95) (539)

Amount due for settlement after twelve months 531 639

At 31 March 2011 the Group held committed revolving credit facilities of £60 million for documentary credits, guarantees and ancillaries (2010: £60 million) at Barclays Bank plc. This facility provides for the limit to rise to £80 million upon meeting certain reductions in the mark-to-market amounts of the Group’s extant foreign exchange hedging instruments. In addition the Group has uncommitted overdraft and ancillary facilities of £3.5 million (2010: £3.0 million) held with Den Danske Bank AS, a term loan of £0.63 million (2010: £0.71 million) with Dresdner Bank AG and overdraft and ancillary facilities totalling £10.6 million (2010: £10.7 million) with Dresdner Bank AG, HSH Nordbank AG and DBV-Winterthur.

All facilities with Barclays Bank plc are secured by a fixed charge over the Group’s assets under the terms of a debenture. The term loan held with Dresdner Bank AG is secured by a mortgage over freehold property owned by Hamworthy Serck Como GmbH. Interest is charged at LIBOR plus a margin but is then hedged to a fixed rate of 3.35%. The Dresdner Bank loan is being repaid by variable instalments until 2018.

Of the Group’s borrowings £0.6 million is denominated in euros (2010: £0.7 million euro; £0.5 million Danish kroner). All other borrowings are denominated in sterling.

Accounts



The weighted average interest rates paid were as follows:

2011 2010 % %

Bank overdrafts — 2.00

Bank loans 3.35 3.90

The directors estimate the fair value of the Group’s borrowings as follows:

2011 2010 £’000 £’000

Bank overdrafts — 450

Bank loans 626 728

The Group has the following undrawn borrowing facilities in various currencies, all at floating interest rates:

2011 2010 £’000 £’000

Expiring within one year 2,375 4,483

24. Provisions

Contingent Warranty Redundancy and consideration and contracts employment Total Note £’000 £’000 £’000 £’000

At 1 April 2009 — 10,906 992 11,898

Charged to the income statement — 6,012 752 6,764

Transferred from other creditors — 2,888 — 2,888

On acquisition of subsidiaries 3,000 — 497 3,497

Utilised in the year — (4,224) (1,214) (5,438)

Exchange difference — 550 23 573

At 1 April 2010 3,000 16,132 1,050 20,182

Charged to the income statement — 3,343 146 3,489

Transferred from other creditors — 137 — 137

Utilised in the year — (4,733) (893) (5,626)

Adjustment to prior year acquisitions 34 (3,000) — — (3,000)

Exchange difference — 324 (18) 306

At 31 March 2011 — 15,203 285 15,488

2011

Included in current liabilities — 7,033 213 7,246

Included in non-current liabilities — 8,170 72 8,242

— 15,203 285 15,488

2010

Included in current liabilities — 6,113 939 7,052

Included in non-current liabilities 3,000 10,019 111 13,130

3,000 16,132 1,050 20,182

Warranties are routinely given to customers in respect of certain products. Any costs in meeting claims, for which the warranty provision has been established, are expected to occur within three years of the balance sheet date. Contract provisions are made where, based upon management’s best estimate, the expected benefits from certain specific contracts are less than the cost of meeting those contract obligations. The periods over which these are expected to unwind varies by contract.

Redundancy provisions of £213,000 (2010: £939,000) relate to the estimated costs of restructuring certain of the Group’s activities. It is anticipated that these costs will be incurred in the year ended 31 March 2012. Employment provisions are local statutory employment provisions required in certain overseas jurisdictions payable when employees leave the Group.

Accounts



25. Deferred taxThe following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting period.

Provisions Accelerated and other capital Pension Share-based Financial temporary allowances liabilities payments instruments differences Total £’000 £’000 £’000 £’000 £’000 £’000

At 1 April 2009 (722) 1,395 73 4,086 (4,557) 275

(Credit)/charge to income statement 94 — 46 (213) 1,984 1,911

(Credit)/charge to reserves — (556) 71 (3,816) — (4,301)

Foreign exchange adjustments 15 98 — — (200) (87)

At 1 April 2010 (613) 937 190 57 (2,773) (2,202)

(Credit)/charge to income statement (151) (494) 125 — 3,268 2,748

(Credit)/charge to reserves — 19 — (2,407) — (2,388)

Foreign exchange adjustments (11) 16 — — 16 21

At 31 March 2011 (775) 478 315 (2,350) 511 (1,821)

Deferred tax liabilities (775) — — (3,335) (2,598) (6,708)

Deferred tax assets — 478 315 985 3,109 4,887

At 31 March 2011 (775) 478 315 (2,350) 511 (1,821)

Deferred tax liabilities (675) — — (1,246) (3,398) (5,319)

Deferred tax assets 62 937 190 1,303 625 3,117

At 31 March 2010 (613) 937 190 57 (2,773) (2,202)

Deferred tax balances for balance sheet purposes are analysed as follows:

2011 2010 £’000 £’000

Deferred tax liabilities are due as follows:

Deferred tax liability falling due within one year (2,936) (2,570)

Deferred tax liability falling due after one year (3,772) (2,749)

(6,708) (5,319)

Deferred tax assets are recoverable as follows:

Deferred tax asset to be recovered within one year 1,497 1,452

Deferred tax asset to be recovered after one year 3,390 1,665

4,887 3,117

At the balance sheet date there are no unrecognised deferred tax assets or liabilities.

At the balance sheet date the Group has unused tax losses of £6.9 million available for offset against future profits (2010: £6.4 million). No deferred tax asset has been recognised in respect of £6.9 million of these losses (2010: £6.4 million) due to the unpredictability of future profit streams against which these losses may be offset. These losses may be carried forward indefinitely.

Accounts



26. Share capital

2011 2010

Number Nominal value Number Nominal value ’000 £’000 ’000 £’000

Issued and fully paid:

At 1 April and 31 March 45,410 2,270 45,410 2,270

The Company has one class of ordinary shares which carries no right to fixed income.

The Company issued no ordinary shares pursuant to the exercise of options under the Hamworthy plc Unapproved Share Option Plan 2004 and the Hamworthy plc Company Share Option Plan 2004.

Share-based paymentsThe Company has two share option schemes: the Hamworthy plc Unapproved Share Option Plan 2004 and the Hamworthy plc Company Share Option Plan 2004. All options are granted at the market price at the date of grant.

The number of shares subject to options, the periods in which they were granted and the periods in which they may be exercised are given below.

Exercise Exercise 2011 2010Year of grant price period Number Number

Unapproved Share Option Plan 2004

2005–2006 210.5p 2007–2014 70,000 70,000

2005–2006 329.0p 2008–2015 26,346 26,346

2006–2007 335.0p 2009–2016 26,248 26,248

2007–2008 582.5p 2010–2017 87,511 213,868

2007–2008 606.0p 2010–2017 11,641 28,050

2007–2008 507.0p 2010–2017 2,905 7,000

2008–2009 548.0p 2011–2018 326,802 329,995

2009–2010 233.0p 2012–2020 380,000 383,000

2009–2010 300.0p 2012–2020 5,000 5,000

2010–2011 296.0p 2013–2021 388,500 —

Approved Share Option Plan 2004

2007–2008 582.5p 2010–2017 14,420 34,750

2007–2008 606.0p 2010–2017 2,054 4,950

2008–2009 548.0p 2011–2018 12,329 12,329

2009–2010 297.0p 2012–2020 6,000 6,000

2009–2010 300.0p 2012–2020 10,000 10,000

Details of the share options outstanding during the year are as follows:

2011 2010

Number Weighted Number Weighted of share average of share average options exercise price options exercise price

Outstanding at the beginning of the year 1,157,536 418.0p 753,536 515.1p

Granted during the year 388,500 296.0p 404,000 236.4p

Lapsed during the year (170,087) 583.4p — —

Forfeited during the year (6,193) 395.4p — —

Outstanding at the end of the year 1,369,756 363.0p 1,157,536 418.0p

Exercisable at the end of the year 241,125 420.3p 122,594 262.6p

The options outstanding at 31 March 2011 had a weighted average exercise price of 363.0p (2010: 418.0p) and a weighted average remaining contractual life of 7.6 years (2010: 8.1 years). During the year options were granted on 16 June 2010 with an estimated fair value of 81p per share and £267,274 in aggregate. In the prior year options were granted on 7 July 2009 with an estimated fair value of 64p per share and £335,125 in aggregate, on 11 September 2009 with an estimated fair value of 83p per share and £5,250 in aggregate and on 8 February 2010 with an estimated fair value of 83p per share and £13,125 in aggregate.

Accounts



26. Share capital (continued)Share-based payments (continued)The inputs into the Black-Scholes model are as follows:

2011 2010

Weighted average share price 363p 418p

Weighted average exercise price 363p 418p

Expected volatility 42% 38%

Expected life 3.5 years 3.5 years

Risk-free rate 3.28% 4.13%

Expected dividend yield 1.73% 1.74%

Expected volatility was determined by calculating the actual volatility of the Group’s share price since flotation in July 2004. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

The Group recognised total expenses of £447,000 and £284,000 related to equity-settled share-based payment transactions in 2011 and 2010 respectively.

Matching sharesHamworthy plc operates a complimentary co-investment share matching plan, designed to encourage the acquisition and retention of Hamworthy shares by relevant personnel. Participation is by invitation of the remuneration committee on grant award and is expected to be the executive managers of the Group. Participants are awarded matching ordinary shares in Hamworthy plc, up to a limit related to basic annual salary, in the ratio of:

• one for every one share already beneficially owned, and

• one for every two vested but unexercised share options held.

Further details are given in the directors’ remuneration report on page 37. The number of shares acquired by the trust during the year was £nil (2010: £nil). The number of shares held by the trust at 31 March 2011 was 96,125 (31 March 2010: 164,523) with total shares vesting in the period of 68,398 (2010: nil).

27. Operating lease commitmentsAt the balance sheet date the Group had outstanding commitments for minimum lease payments due under non-cancellable operating leases, which expire as follows:

Land and buildings Plant and machinery

2011 2010 2011 2010 £’000 £’000 £’000 £’000

Expiring within one year 1,790 1,166 205 120

Expiring between two and five years 4,866 5,595 137 213

Expiring after five years 331 — — —

6,987 6,761 342 333

Operating lease payments represent rentals payable by the Group for certain of its office properties and operating machinery. Leases are typically negotiated for an average period of three years in the case of plant and machinery, five years in the case of buildings and with a lease of land in Singapore for 30 years.

28. Retirement benefit schemesDefined benefit schemesThe Group operates two defined benefit pension schemes in Norway. The most recent valuations of plan assets and the present value of the defined benefit obligation were carried out as at 31 March 2011 by an independent qualified actuary. The present value of the defined benefit obligation, the related current service cost and past service cost were measured using the projected unit credit method.

The major assumptions used by the actuary were:

At 31 March At 31 March 2011 2010

Discount rate 4.00% 4.50%

Rate of increase in salaries 4.00% 4.50%

Rate of increase of pensions in payment 1.30% 1.40%

Expected return on scheme assets 5.40% 5.70%

Inflation assumption 2.00% 2.25%

Average life expectancy:

Male 84.7 yrs 84.7 yrs

Female 87.1 yrs 87.1 yrs

Accounts



The sensitivity of the principal assumption of the discount rate used to measure the scheme liabilities is as follows:

Discount rate – decrease by 0.5% to 3.5% scheme liabilities increase by £0.98 million (63.9%) Discount rate – increase by 0.5% to 4.5% scheme liabilities decrease by £0.18 million (12%)

The Group also operates a defined benefit pension scheme in Germany through Hamworthy Serck Como GmbH. A valuation of plan assets and the present value of the defined benefit obligation was carried out as at 31 March 2011 by an independent qualified actuary. The present value of the defined benefit obligation, the related current service cost and past service cost were measured using the projected unit credit method.

The major assumptions used by the actuary were:

At 31 March At 31 March 2011 2010

Discount rate 5.00% 4.80%

Rate of increase in salaries n/a n/a

Rate of increase of pensions in payment 2.00% 2.00%

Expected return on scheme assets 4.00% 4.00%

Inflation assumption 2.00% 2.00%

The mortality assumptions used were in accordance with the “Richttafeln 2005 G” reference tables published by Dr Klaus Heubeck.

The sensitivity of the principal assumption of the discount rate used to measure the scheme liabilities is as follows:

Discount rate – decrease by 0.5% to 4.5% scheme liabilities increase by £0.12 million (10%) Discount rate – increase by 0.5% to 5.5% scheme liabilities decrease by £0.12 million (10%)

The amounts recognised in the income statement in respect of these defined benefit schemes are as follows:

2011 2010 £’000 £’000

Current service cost including social security costs (1,510) (1,975)

Curtailment of benefits 683 —

Total operating charge (827) (1,975)

Expected return on scheme assets 625 599

Interest on liabilities (555) (568)

Net return charged to other finance costs 70 31

Of the charge for the year £827,000 (2010: £1,975,000) has been included in administrative expenses.

The actual return on scheme assets was a loss of £3,278,000 (2010: gain of £302,000).

Actuarial gains and losses have been reported in the consolidated statement of comprehensive income as follows:

2011 2010 £’000 £’000

Actual returns less expected return on scheme assets (3,905) (297)

Experience gains/(losses) in liabilities — (77)

Changes in the assumptions underlying the present value of liabilities 3,700 3,074

Actuarial (loss)/gain recognised in the consolidated statement of comprehensive income (205) 2,700

Cumulative actuarial gain/(loss) recognised in the consolidated statement of recognised income and expense 133 338

The assets of the Norwegian schemes are invested through an insurance company which was unable to provide an accurate breakdown of the assets into differing classes. The asset of the German scheme is a prepaid life assurance policy maturing on the retirement date of members.

Movements in the present value of defined benefit obligations were as follows:

2011 2010 £’000 £’000

At 1 April 14,466 13,321

Current service cost 1,510 1,922

Interest cost 555 568

Actuarial (gains)/losses (3,700) (2,997)

Exchange differences 20 1,054

Benefits paid (538) (361)

Curtailment of benefits (683) —

Transfers (318) —

Arising on acquisition of subsidiaries — 959

At 31 March 11,312 14,466

Accounts



28. Retirement benefit schemes (continued)Defined benefit schemes (continued)Movements in the fair value of scheme assets were as follows:

2011 2010 £’000 £’000

At 1 April 10,770 8,679

Expected return on plan assets 625 599

Actuarial losses (3,905) (297)

Exchange difference 40 467

Contributions from scheme participants 1,217 1,596

Benefits paid (160) (274)

At 31 March 8,587 10,770

The five-year history of experience adjustments is as follows:

2011 2010 2009 2008 2,007 £’000 £’000 £’000 £’000 £’000

Present value of defined benefit obligations (11,312) (14,466) (13,321) (9,414) (8,436)

Fair value of scheme assets 8,587 10,770 8,679 7,308 5,910

Deficit in the scheme (2,725) (3,696) (4,642) (2,106) (2,526)

Experience adjustments on scheme assets

Amount (4,050) (297) (527) 4 14

Percentage of scheme assets (%) (47.2) (2.8) (6.1) 0.1 1.2

Experience (losses)/gains on liabilities

Amount — (77) 836 — —

Percentage of scheme liabilities (%) — (0.5) 6.3 — —

The estimated amounts of contributions expected to be paid to the schemes during the 2011/12 financial year is £1,317,000.

Defined contribution schemesThe Group’s UK operations contribute to a company defined contribution scheme, the Hamworthy Pension Scheme. The Group makes employer contributions, pays administration costs of the scheme and pays premiums for insured life cover benefits. The Group also contributes to other defined contribution and state pension schemes.

Total amounts charged to defined contribution and state schemes in the year to 31 March were:

2011 2010 £’000 £’000

Hamworthy Pension Scheme 419 423

Other state schemes 1,344 730

1,763 1,153

Accounts



29. Cash flow from operating activitiesThe consolidated cash flow has been prepared using the temporal method by translating the cash flows of overseas subsidiaries at the rates applicable for the monthly reporting period in which they fall.

2011 2010 £’000 £’000


Adjustments for:

Taxation 3,553 5,574

Depreciation of property, plant and equipment 1,464 1,782

Amortisation of intangible fixed assets 704 1,050

Intangible asset write down 1,660 —

Excess of reduction in consideration over goodwill (1,510) —

(Profit)/loss on sale of fixed assets (1) 1

Finance income (934) (1,392)

Finance expense 146 184

Share-based payment expense 447 284

Operating cash flows before movements in working capital and provisions 16,071 22,581

Decrease in inventories 3,968 14,191

Decrease in trade and other receivables 3,521 26,807

Increase/(decrease) in trade and other payables 4,601 (33,705)

(Decrease)/increase in provisions (2,999) 431

Cash generated from operations 25,162 30,305

30. Reconciliation of net cash flow to movement in net funds

2011 2010 £’000 £’000

Net increase in cash and cash equivalents in the year 10,618 14,223

Non-cash movements in cash and cash equivalents 921 2,236

Movement in cash and cash equivalents in the year 11,539 16,459

Movement in borrowings 98 339

Non-cash movements in borrowings 4 19

Net funds at the beginning of the year 72,269 55,452

Net funds at the end of the year 83,910 72,269

Accounts



31. Financial instrumentsThe main risks from the Group’s financial instruments are interest rate risk, liquidity risk, foreign exchange risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below.

Interest risk and sensitivityThe Group finances its operations through a mixture of retained profits, term loans and overdraft facilities held by subsidiaries. The Group’s exposure to market risk for changes in interest rates relates primarily to its cash resources which are invested at variable rates. Its borrowings under a term loan facility are subject to an interest rate swap agreement which has the effect of fixing the interest payable at 3.35% per annum for the term of the loan. A 10% increase in interest rates throughout the year would have increased profit after tax by £0.1 million (2010: £0.1 million) with an equal but opposite effect for a fall in interest rates, all other variables remaining constant.

Liquidity riskThe Group has a strong cash flow and funds generated from operations are managed in a central treasury function under a cash pooling structure. The Group maintains the most appropriate mix of short, medium and long-term borrowings from the Group’s lenders.

The following are the contractual maturities of financial liabilities

Carrying Six months Six to twelve One to Two to Five or amount or less months two years four years more years 2011 £’000 £’000 £’000 £’000 £’000 £’000

Non-derivative financial liabilities

Bank loans (626) — (95) (89) (177) (265)

Trade and other payables (81,802) (75,088) (2,522) (1,807) (2,385) —

Derivative financial liabilities

Forward foreign exchange contracts used for hedging (3,924) (1,970) (909) (682) (363) —

(86,352) (77,058) (3,526) (2,578) (2,925) (265)

Foreign currency risk and sensitivityThe currencies most important to the Group’s financial position and results of operations were those which are typically linked by monetary policy at fixed exchange rates to the euro as well as US dollars, sterling, Norwegian kroner, Singapore dollars and Chinese renminbi. The Group seeks to hedge all its transactional currency exposures arising from sales and purchases by operating units in currencies other than the unit’s functional currency through the use of forward contracts. The notional value of forward exchange contracts in the Group’s main operating currencies at the balance sheet date were as follows:

Carrying Six months Six to twelve One to Two to Five or amount or less months two years four years more years 2010 £’000 £’000 £’000 £’000 £’000 £’000

Non-derivative financial liabilities

Bank loans (728) — (90) (89) (282) (267)

Trade and other payables (81,536) (58,723) (13,693) (6,571) (2,549) —

Bank overdraft (450) (450) — — — —

Derivative financial liabilities

Forward foreign exchange contracts used for hedging (4,873) (3,578) (750) (545) — —

(87,587) (62,751) (14,533) (7,205) (2,831) (267)

Accounts



USD EUR NOK SGD DKK 2011 ‘000 ‘000 ‘000 ‘000 ‘000

Buy – notional 25,905 28,735 1,156,616 28,594 32,226

Sell – notional (205,807) (14,355) (454,238) (13,329) —

Net (179,902) 14,380 702,378 15,265 32,226

Maturity

Maturing in less than one year (83,136) 636 319,361 12,129 9,697

Maturing in more than one year (96,766) 13,744 383,017 3,136 22,529

(179,902) 14,380 702,378 15,265 32,226

Net fair value (£’000) 9,182 (807) 7,377 333 (182)


Buy – notional 18,664 16,557 499,627 35,767 10,061

Sell – notional (92,305) (28,904) (202,462) (16,466) (50)

Net (73,641) (12,347) 297,165 19,301 10,011

Maturity

Maturing in less than one year (58,395) (11,329) 248,735 16,112 10,011

Maturing in more than one year (15,246) (1,018) 48,430 3,189 —

(73,641) (12,347) 297,165 19,301 10,011

Net fair value (£’000) (1,175) (857) 1,873 124 (117)

The Group does not hedge balance sheet translation exposures and therefore any foreign exchange differences on retranslation of these assets and liabilities on consolidation are taken to the Group reserves.

The Group’s operating units hold monetary assets and monetary liabilities that are denominated in currencies other than the operating currency of the operating unit involved. These balances are retranslated at the balance sheet date. The Group’s exposure to foreign currency risk for these balances for its most important currencies at the balance sheet date was as follows:


Cash and cash equivalents 6,401 11,585 367,706 27,270 18,042

Trade and other receivables 16,752 2,559 43,878 7,441 11,221

Trade and other payables (5,639) (3,878) (78,215) (16,367) (22,100)

Gross balance sheet exposure 17,514 10,266 333,369 18,344 7,163


Cash and cash equivalents 6,205 7,868 200,618 25,903 60,916

Trade and other receivables 11,004 7,127 47,496 701 662

Trade and other payables (3,056) (9,972) (26,293) (224) (3,332)

Gross balance sheet exposure 14,153 5,023 221,821 26,380 58,246

The most significant exchange rates applied during the year were:

Average rate Mid-spot rate

2011 2010 2011 2010

US dollar $1.5656 $1.6000 $1.6030 $1.5169

Euro €1.1692 €1.1380 €1.1296 €1.1211

Norwegian kroner kr9.1627 kr9.5321 kr8.8671 kr9.0038

Danish kroner kr8.8169 kr8.4304 kr8.4221 kr8.3459

Singapore dollar $2.0641 $2.2485 $2.0205 $2.1207

Chinese renminbi RMB10.4032 RMB10.9382 RMB10.4970 RMB10.3542

Accounts



31. Financial instruments (continued)Foreign currency risk and sensitivity (continued)Sensitivity analysisA 10% strengthening of sterling against these currencies at 31 March would have increased/(decreased) equity and profit by the amounts shown below, assuming all other variables remained constant:

Equity Profit after taxation

2011 2010 2011 2010 £’000 £’000 £’000 £’000

US dollar (88) (98) (3) (6)

Euro (284) (436) 15 (114)

Norwegian kroner (2,308) (1,892) 13 (61)

Danish kroner (672) (1,057) (164) (496)

Singapore dollar (1,584) (1,789) (451) (476)

Chinese renminbi (840) (860) (60) (116)

An equal but opposite effect would have been the impact of a 10% weakening of sterling.

Credit riskExposure to credit riskThe principal financial assets are cash and cash equivalents, trade and other receivables and derivative financial instruments. The Group’s exposure to credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings awarded by international credit rating agencies and these ratings are constantly monitored and are currently all rated at S&P A rating or above.

The Group’s exposure to credit risk on trade and other receivables is set out in note 20.

Derivatives and financial instrumentsThe Group’s financial instruments, other than derivatives, comprise borrowings, cash and liquid resources and various items such as trade debtors and trade creditors that arise from its operations. The main purpose of these financial instruments is to manage the Group’s operations. It is, and has been throughout the period under review, the policy of the Group that no trading in financial instruments shall be undertaken.

Interest rate swapThe Group’s borrowings under a term loan facility are subject to an interest rate swap agreement which has the effect of fixing the interest payable at 3.35% per annum for the term of the loan.

Currency derivativesCurrency derivatives are used to hedge future transactions and cash flows, and the Group’s resultant exposure to movements in foreign exchange rates. These are primarily in the form of foreign currency forward contracts and options, and are denominated in the currencies of the Group’s principal operating markets. At the balance sheet date, the total notional amount of outstanding forward foreign exchange contracts to which the Group is committed, based upon contractual undiscounted cash flows, is as follows:

2011 2010 £’000 £’000

Commodity swaps — 514

Forward foreign exchange contracts 212,641 143,494

All derivative financial instruments are recorded in the balance sheet at fair value. Changes in the fair value of derivative financial instruments that are designated as effective hedges of future cash flows are recognised directly in equity and the ineffective portion is recognised immediately in the income statement. The change in fair values of effective hedges amounted to a gain of £8,783,000 (2010: gain of £11,467,000). The Group recognised total gains of £nil (2010: £762,000) related to ineffective hedging transactions.

Accounts



The fair values of derivative financial instruments, based upon market prices of comparable instruments, as at the balance sheet date were as follows:

2011 2010

Assets Liabilities Assets Liabilities £’000 £’000 £’000 £’000

Current assets/liabilities

Commodity swaps – cash flow hedges — — 124 —

Forward foreign exchange contracts – cash flow hedges 7,962 (2,879) 3,183 (4,328)

7,962 (2,879) 3,307 (4,328)

Non-current assets/liabilities

Interest rate swaps – cash flow hedges — (15) — (30)

Forward foreign exchange contracts – cash flow hedges 3,951 (1,030) 532 (515)

3,951 (1,045) 532 (545)

11,913 (3,924) 3,839 (4,873)

The following table provides an analysis of financial instruments grouped into levels 1 to 3 based upon the degree to which the fair value is observable:

• level 1 – fair values are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

• level 2 – fair values are those derived from inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• level 3 – fair values are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

2011

Level 1 Level 2 Level 3 Total £’000 £’000 £’000 £’000


Interest rate swaps – cash flow hedges — — — —

Forward foreign exchange contracts – cash flow hedges — 5,083 — 5,083

— 5,083 — 5,083



Forward foreign exchange contracts – cash flow hedges — 2,921 — 2,921

— 2,906 — 2,906

— 7,989 — 7,989

2010

Level 1 Level 2 Level 3 Total £’000 £’000 £’000 £’000


Commodity swaps – cash flow hedges — 124 — 124

Forward foreign exchange contracts – cash flow hedges — (1,145) — (1,145)

— (1,021) — (1,021)



Forward foreign exchange contracts – cash flow hedges — 17 — 17

— (13) — (13)

— (1,034) — (1,034)

Accounts



31. Financial instruments (continued)Derivatives and financial instruments (continued)Currency derivatives (continued)The periods in which the cash flows associated with derivatives that are cash flow hedges are expected to occur, based upon contractual undiscounted cash flows, are as follows:

Carrying Notional Less than One to Two to amount cash flow one year two years five years 2011 £’000 £’000 £’000 £’000 £’000

Forward foreign exchange contracts

assets 11,913 269,686 156,052 76,398 37,236

liabilities (3,924) (57,045) (39,778) (15,486) (1,781)

7,989 212,641 116,274 60,912 35,455

Carrying Notional Less than One to Two to amount cash flow one year two years five years 2010 £’000 £’000 £’000 £’000 £’000

Forward foreign exchange contracts

assets 3,839 223,278 195,052 28,226 —

liabilities (4,873) (79,270) (70,716) (8,554) —

(1,034) 144,008 124,336 19,672 —

32. Ultimate parent companyThe ultimate parent company of the Group is Hamworthy plc. There were no shareholders with overall control of the Company as at 31 March 2011 or 31 March 2010.

33. Contingent liabilitiesAt 31 March 2011 contingent liabilities exist in respect of bank guarantees in relation to performance bonds totalling £22,928,000 (2010: £24,493,000) of which £3,170,000 (2010: £nil) mature more than two years from the balance sheet date. As the conditions of these guarantees are currently being met, no obligating event is foreseeable and therefore no contingent liability provision has been made at the year end.

The Group routinely enters into a range of contractual arrangements in the ordinary course of events which can give rise to claims or potential litigation against Group companies. It is the Group’s policy to make specific provisions at the balance sheet date for all liabilities including warranty costs and guarantees which, in the opinion of the directors, are expected to result in a significant loss. The directors have reviewed the open claims and pending litigation against the Group at the year end and concluded that no material unprovided loss is likely to accrue to the Group from any such unprovided claims.

Accounts



34. Acquisition of subsidiariesKrystallonOn 29 September 2009 the Group acquired the business and assets of Krystallon Limited. This business combination was included in the Group’s consolidated financial statements for the year ended 31 March 2010 at provisional fair values. Payment of the deferred consideration of £3,980,000 which had been provided in connection with the acquisition was contingent on, inter alia, the successful completion of a testing programme on the acquired technology. Those tests were not successfully completed in the year to 31 March 2011 and therefore no part of the deferred consideration will now be payable. Accordingly the directors have reviewed and amended the fair value of intangible assets acquired and the resulting goodwill.

Provisional Adjustments Fair values fair values to provisional 31 March 31 March 2010 fair values 2011 £’000 £’000 £’000

Net assets acquired:

Intangible assets 3,610 (2,726) 884

Goodwill 1,254 (1,254) —

Inventories and debtors 168 — 168

Total consideration 5,032 (3,980) 1,052

Satisfied by:

Cash 950 — 950

Deferred and contingent consideration 3,980 (3,980) —

Directly attributable costs 102 — 102

5,032 (3,980) 1,052

Under IFRS 3 (2004) these values have been restated as at the date of acquisition.

Greenship BVOn 9 March 2009 the Group acquired the whole of the issued share capital of Greenship BV. At 31 March 2010 the Group recognised deferred contingent consideration relating to this acquisition of £4,576,000, payable on the obtaining of IMO type approval for Greenship’s ballast water treatment system. As at 31 March 2010 it was expected that such approval would be achieved. Since 31 March 2010 the Group has undertaken a rigorous testing programme and concluded that the system in its acquired design does not perform to a standard sufficient for it to be type approved. Accordingly the directors do not consider the deferred consideration to be payable. The financial effect of no longer recognising the need to pay any deferred consideration is set out in the table below.

Intangible Income asset Goodwill statement £’000 £’000 £’000

At 31 March 2010 4,014 3,066 —

Reduction in goodwill to reflect reduction in deferred consideration payable — (3,066) —

Reduction in deferred consideration in excess of goodwill — — (1,510)

Intangible asset impairment (1,660) — 1,660

At 31 March 2011 2,354 — 150

Accounts



35. Related party transactionsTransactions between Group undertakings, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

Compensation of key management personnelThe remuneration of directors and other members of the Group’s executive committee (comprising the executive directors and the divisional managing directors) during the year was as follows:

2011 2010 £’000 £’000

Wages and salaries paid to key management personnel 2,025 1,462

Social security costs 173 128

Other pension costs – defined benefit schemes 55 95

Other pension costs – defined contribution schemes 120 83


2,466 1,840

The directors of the Group had no material transactions with the Company during the year, other than as a result of service agreements. The remuneration of directors and key executives is determined by the remuneration committee, having regard to the performance of individuals and market trends. Details of the directors’ remuneration are disclosed in the directors’ remuneration report on pages 37 to 39.

Parent com

pany accounts


Parentcompanyaccounts

Independent auditors’ report totheshareholdersofHamworthyplc

We have audited the parent company financial statements of Hamworthy plc for the year ended 31 March 2011 which comprise the parent company balance sheet, the parent company statement of total recognised gains and losses and the related notes 1 to 16. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorsAs explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the parent company 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 parent company 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.

Scope of the audit of the financial statementsAn 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 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 statementsIn our opinion the parent company financial statements:

• give a true and fair view of the state of the Company’s affairs as at 31 March 2011;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the directors’ report for the financial year for which the financial statements are prepared is consistent with the parent company financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us 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 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.

Other mattersWe have reported separately on the Group financial statements of Hamworthy plc for the year ended 31 March 2011.

Gregory Culshaw ACA (Senior Statutory Auditor)For and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditors Southampton, United Kingdom

7 June 2011

NotesThe maintenance and integrity of the Hamworthy plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.



Balance sheetasat31March2011

2011 2010 Note £’000 £’000

Fixed assets

Goodwill and intangible assets 4 3,035 7,130

Tangible fixed assets 5 162 176

Investments 6 28,891 28,611

32,088 35,917

Current assets

Debtors 7 12,695 13,028

Cash at bank and in hand 76,459 63,101

89,154 76,129

Creditors: amounts falling due within one year 8 (70,145) (63,762)

Net current assets 19,009 12,367

Total assets less current liabilities 51,097 48,284

Creditors: amounts falling due after more than one year 9 — (3,000)

Net assets 51,097 45,284

Capital and reserves

Share capital 10 2,270 2,270

Share premium account 11 20,587 20,587

Share option reserve 11 1,135 840

Profit and loss account 11 27,105 21,587

Total shareholders’ funds 12 51,097 45,284

The financial statements on pages 84 to 89 were approved by the Board of directors on 7 June 2011 and signed on its behalf by:

Joe Oatley Paul CromptonDirector Director

Statement of total recognised gains and lossesfortheyearended31March2011

2011 2010 Note £’000 £’000


Employee share option schemes 11 404 175

Deferred tax on employee share option schemes 43 19

Total recognised gains and losses for the year 10,367 16,857

The reconciliation of the movement in the Company’s equity shareholders’ funds can be found in note 12 to the financial statements.

Parent com

pany accounts


Notes to the parent company financial statementsfortheyearended31March2011


Accounting policiesStatement of accounting policiesA summary of the principal accounting policies, all of which have been applied consistently throughout the current and prior year.

Basis of accountingThe financial statements have been prepared under the historical cost convention and in accordance with applicable United Kingdom Accounting Standards.

Tangible fixed assets and depreciationTangible fixed assets are stated at cost, net of depreciation and provision for impairment. Depreciation is provided on all tangible fixed assets at rates calculated to write off the cost, less estimated residual value, of each asset on a straight-line basis over its expected useful life at the following annual rates:

Plant, machinery and equipment 20% – 33%

InvestmentsFixed asset investments are stated at cost less provision for any impairment in value.

TaxationCurrent UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date.

Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Company’s taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements.

A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.

LeasesRentals under operating leases are charged on a straight-line basis over the lease term, even if the payments are not made on such a basis.

Pension scheme arrangementsThe Company provides pension arrangements to the majority of full time UK employees through a money purchase scheme, operated by Barnett Waddingham LLP. Contributions and pension costs are based on pensionable salary and are recorded in the period in which they fall.

Foreign exchangeTransactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing at that date or at a contracted rate if applicable. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain/loss in the profit and loss account.

Financial instrumentsAmounts payable or receivable in respect of swap agreements are recognised in the interest payable/receivable charge/credit on an accruals basis. The interest differential amounts due to/from the counterparty on such agreements are accrued until the settlement date and are recognised as an adjustment to interest expense.

Share-based paymentThe Company operates equity-settled share-based compensation plans through two share option schemes. The fair value of options awarded is calculated at the time of grant and is charged to the income statement on a straight-line basis over the vesting period based on an estimate of the number of options that will actually vest. The Group has adopted a Black-Scholes model to calculate the fair value of options. The Company also participates in the Group’s complimentary co-investment share matching plan, details of which are given in note 26 to the Group financial statements. The fair value of these matching shares is calculated at the date of award based upon the market value of the issued shares and is charged to the income statement on a straight-line basis over the vesting period based on an estimate of the number of options that will actually vest.

Related party transactions and cash flow statementThe Company is the ultimate parent undertaking of the Hamworthy Group and is therefore included in the consolidated financial statements of that Group, which are publicly available. Consequently the Company has taken advantage of the exemptions from preparing a cash flow statement under the terms of Financial Reporting Standard 1 (Revised 1996) – Cash Flow Statements, and the exemptions under Financial Reporting Standard 8 – Related Party Disclosures relating to the disclosure of transactions with other Group companies.



Notes to the parent company financial statements (continued)fortheyearended31March2011

1. Profit for the yearAs permitted by Section 408 of the Companies Act 2006 the Company has elected not to present its own profit and loss account for the year. Hamworthy plc reported a profit for the financial year ended 31 March 2011 of £9,920,000 (2010: £16,663,000).

2. EmployeesInformation on directors’ remuneration is given in the section of the remuneration report described as having been audited on pages 38 and 39.

The average number of employees during the year, including directors by function, was as follows:

2011 2010 Number Number

Administration 14 13

Their aggregate remuneration comprised:

2011 2010 £’000 £’000

Wages and salaries paid to employees 1,878 1,638

Social security costs 181 151

Other pension costs 124 115


2,350 1,971

In addition an amount was paid to the employing company of a non-executive director for the services of that director of £nil (2010: £nil).

3. Dividends

2011 2010 £’000 £’000

Final paid in respect of year ended 31 March 2010 (5.97p per share) 2,701 —

Interim paid in respect of year ended 31 March 2011 (3.36p per share) 1,523 —

Final paid in respect of year ended 31 March 2009 (5.68p per share) — 2,579

Interim paid in respect of year ended 31 March 2010 (3.20p per share) — 1,439

4,224 4,018

The directors propose the payment of a final dividend of 6.73p per share, amounting to £3,049,647 in respect of the year to 31 March 2011 (2010: 5.97p per share amounting to £2,701,176). The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. If authorised it will be paid on 21 July 2011 to shareholders who are on the register of members as at 17 June 2011.

4. Goodwill and intangible fixed assets

Technology Goodwill based assets Total £’000 £’000 £’000

Cost

1 April 2010 1,150 5,980 7,130

Adjustments to prior period acquisitions (1,150) (2,824) (3,974)

At 31 March 2011 — 3,156 3,156

Amortisation

1 April 2010 — — —

Charge for the year — 121 121

At 31 March 2011 — 121 121

Net book value

31 March 2011 — 3,035 3,035

31 March 2010 1,150 5,980 7,130

As detailed in the Group financial statements, payment of the deferred consideration in respect of the business and assets of Krystallon Limited was contingent on the successful completion of a testing programme on the acquired technology. The tests were not successfully completed and therefore no part of the deferred consideration will now be payable. The directors have therefore reviewed and amended the fair value of goodwill and acquired intangible assets accordingly.

Parent com

pany accounts


Parentcompanyaccounts Notestotheparentcompanyfinancialstatements

5. Tangible fixed assets

Plant and machinery £’000

Cost

1 April 2010 387

Additions 55

At 31 March 2011 442

Depreciation

1 April 2010 211

Charge for the year 69

At 31 March 2011 280

Net book value

31 March 2011 162

31 March 2010 176

The Company has commitments under contracts placed for future capital expenditure not provided for in the financial statements of £nil (2010: £nil).

6. InvestmentsInvestments in subsidiary undertakings

£’000

Cost

1 April 2010 28,611

Options granted under FRS 20 280

At 31 March 2011 28,891

The following information relates to the principal subsidiary undertakings of the Company. Unless otherwise stated, all holdings are 100% and the principal activity of the undertaking is the design, manufacture and sale of equipment for marine and offshore applications.

Hamworthy Water Systems Limited incorporated and operating in England* Hamworthy Svanehøj AS incorporated and operating in Denmark Hamworthy Oil & Gas Systems AS incorporated and operating in Norway* Hamworthy Moss AS incorporated and operating in Norway* Hamworthy Pte Limited incorporated and operating in Singapore Hamworthy Korea Limited incorporated and operating in Korea Hamworthy BV incorporated and operating in the Netherlands* Hamworthy Inc incorporated and operating in USA* Hamworthy (Suzhou) Limited incorporated and operating in Peoples’ Republic of China Hamworthy International Limited incorporated and operating in England* Hamworthy Serck Como GmbH incorporated and operating in Germany Hamworthy Baltic Design Centre Limited incorporated and operating in Poland Hamworthy Greenship BV incorporated and operating in the Netherlands Hamworthy Krystallon Limited incorporated and operating in England

* denotes shareholdings held directly by the Company.



Notes to the parent company financial statements (continued)fortheyearended31March2011

7. Debtors

2011 2010 £’000 £’000

Amounts owed by Group undertakings 11,227 10,486

Trade debtors — 3

Other debtors 594 831

Prepayments and accrued income 182 107

Corporation tax 597 1,549

Deferred tax – share-based payments 95 52

12,695 13,028

Amounts owed by Group undertakings are inter-company loans in various currencies which form part of the central treasury and cash pooling arrangements, with interest being charged at prevailing market rates.

8. Creditors: amounts falling due within one year

2011 2010 £’000 £’000

Trade payables 123 77

Amounts owed to Group undertakings 69,094 61,870

Other creditors — 998

Taxation and social security 10 58

Accruals and deferred income 918 759

70,145 63,762

Amounts owed to Group undertakings are inter-company loans in various currencies which form part of the central treasury and cash pooling arrangements, with interest being charged at prevailing market rates.

9. Creditors: amounts falling due after more than one year

2011 2010 £’000 £’000

Other creditors — 3,000

Other creditors related to the deferred consideration payable as part of the acquisition of the business and assets of Krystallon Limited which is now no longer payable.

10. Called up share capital

2011 2010

Number Nominal value Number Nominal value ’000 £’000 ’000 £’000

Authorised:

Ordinary shares of £0.05p each 60,000 3,000 60,000 3,000

Issued and fully paid:

At 1 April and 31 March 45,410 2,270 45,410 2,270

The Company has one class of ordinary shares which carries no right to fixed income.

Details of ordinary shares issued pursuant to the exercise of options under the Hamworthy plc Unapproved Share Option Plan 2004 and the Hamworthy plc Company Share Option Plan 2004 during the current financial year, options granted and exercised during the year under these schemes and details of the Group’s co-investment share matching plan is given in note 26 to the Group financial statements.

The Company recognised total expenses of £166,926 (2010: £66,586) related to equity-settled share-based payment transactions. Subsidiary companies made cash contributions to the Company of £nil (2010: £nil) in the year in respect of share options exercised in the year.

Parent com

pany accounts


Parentcompanyaccounts Notestotheparentcompanyfinancialstatements

11. Reserves

Share premium Share option Profit and account reserve loss account £’000 £’000 £’000

1 April 2010 20,587 840 21,587

Retained profit for the year — — 9,920

Share-based payments — 295 152

Own shares vesting to employees — — (330)

Dividends paid in the year — — (4,224)

At 31 March 2011 20,587 1,135 27,105

The share option reserve relates to provisions made in accordance with FRS 20 for shares allocated under the Company share option and share matching schemes.

12. Reconciliation of movement in equity shareholders’ funds

2011 2010 £’000 £’000

Profit for the financial year 9,920 16,663

Equity dividends paid (4,224) (4,018)

Own shares vesting to employees (330) —


Movement in deferred taxation on share-based payments 43 19

Net change in equity shareholders’ funds 5,813 12,839

Opening equity shareholders’ funds at 1 April 45,284 32,445

Closing equity shareholders’ funds at 31 March 51,097 45,284

13. Operating lease commitmentsAnnual commitments under operating leases are as follows:

Land and buildings Plant and machinery

2011 2010 2011 2010 £’000 £’000 £’000 £’000

Expiring between two and five years 24 24 — —

14. Ultimate parent companyThere are no shareholders with overall control of the Company as at 31 March 2011 or 31 March 2010.

15. Contingent liabilitiesAt 31 March 2011 contingent liabilities exist in respect of bank guarantees in relation to performance bonds totalling £nil (2010: £nil).

16. Related party transactionsExemption has been taken under FRS 8 from disclosing related party transactions between the Company and its subsidiary undertakings.

The directors of Hamworthy plc had no material transactions with the Company during the year, other than as a result of service agreements. Details of the directors’ remuneration are disclosed in the directors’ remuneration report on pages 37 to 39.

Additionalinformation


Notice is hereby given that the 35th Annual General Meeting (“AGM”) of the Company will be held at the Hytes Suite, Harbour Heights Hotel, Haven Road, Poole BH13 7LW on Thursday 14 July 2011 at 2.00pm to transact the following business:

Ordinary business1. To receive the directors’ report and the audited financial statements for the year ended 31 March 2011.

2. To approve the directors’ remuneration report.

3. To declare a final dividend of 6.73p per ordinary share for the year ended 31 March 2011 to be paid on 21 July 2011 to members whose names appear on the register of members at the close of business on 17 June 2011.

4. To re-elect Gordon Page as a director of the Company.

5. To re-elect Alan Frost as a director of the Company.

6. To re-elect James Wilding as a director of the Company.

7. To re-elect Joe Oatley as a director of the Company.

8. To re-elect Paul Crompton as a director of the Company.

9. To re-appoint Deloitte LLP as the Company’s auditors and to authorise the directors to determine their remuneration.

Special business10. To consider and, if thought fit, to pass the following resolution which will be proposed as an Ordinary Resolution:

THAT, subject to and in accordance with Article 5 of the Company’s Articles of Association the directors of the Company be and they hereby are generally and unconditionally authorised, for the purposes of Section 551 of the Companies Act 2006 (the “Act”) to exercise all the powers of the Company to allot shares in the Company or to grant rights to subscribe for or convert any security into shares in the Company (“equity securities”) up to an aggregate amount of £729,482 for a period expiring (unless previously renewed, varied or revoked by the Company in general meeting) on the earlier of the conclusion of the AGM in 2012 or a date 15 months from the date of this Resolution except that the Company may before such expiry make an offer or agreement which would or might require equity securities of the Company to be allotted after such expiry and the directors may allot equity securities in pursuance of that offer or agreement as if the above authority conferred by this Resolution had not expired and provided further that the authority hereby conferred shall be in substitution for, and to the exclusion of, the existing authority conferred upon the directors on 15 July 2010 to the extent unused.

11. To consider and, if thought fit, to pass the following resolution which will be proposed as a Special Resolution:

THAT, subject to the passing of Resolution 10 above, the directors of the Company be and hereby are generally empowered pursuant to Sections 570 and 573 of the Companies Act 2006 (the “Act”) to allot equity securities (within the meaning of Section 560 of the Act) for cash and/or to sell or transfer shares held by the Company in treasury (as the directors shall deem appropriate) pursuant to the authority conferred on them under Section 551 of the Act by Resolution 10 above as if Section 561 of the Act did not apply to any such allotment provided that this power shall be limited:

(a) to the allotment of equity securities in connection with any rights issue or other pro-rata offer in favour of the holders of ordinary shares of 5p each in the Company where the equity securities respectively attributable to the interests of all such holders of shares are proportionate (as nearly as may be) to the respective numbers of shares held by them, provided that the directors of the Company may make such arrangements in respect of overseas holders of shares, and/or to deal with fractional entitlements, as they consider necessary or convenient; and

(b) to the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities and/or the sale or transfer of shares held by the Company in treasury (as the directors shall deem appropriate) up to an aggregate nominal amount of £113,525;

and such power shall expire at the earlier of the conclusion of the AGM in 2012 or a date 15 months from the date of this Resolution save that the Company may before such expiry make an offer or agreement which would or might require equity securities of the Company to be allotted after such expiry and the directors may allot equity securities in pursuance of such offer or agreement as if the authority conferred by this Resolution had not expired and provided further that the authority hereby conferred shall be in substitution for, and to the exclusion of, the existing authority conferred on the directors on 15 July 2010 to the extent unused.

Notice of Annual General Meeting

Additional information


Additionalinformation NoticeofAnnualGeneralMeeting

12. To consider and, if thought fit, to pass the following resolution which will be proposed as a Special Resolution:

THAT the Company be generally and unconditionally authorised pursuant to Article 14 of the Company’s Articles of Association and pursuant to Section 701 of the Companies Act 2006 (the “Act”) to make market purchases (as defined in Section 693(4) of the Act) of ordinary shares of 5p each in the capital of the Company (“Shares”) provided that

(a) the maximum number of Shares hereby authorised to be purchased is 2,270,517 being 5% of the current issued ordinary share capital of the Company;

(b) the minimum price which may be paid for such Shares is the nominal value thereof and the maximum price (excluding expenses) which may be paid for such Shares is an amount equal to 105% of the average of the middle market quotations for a Share taken from the listing of the Alternative Investment Market of the London Stock Exchange plc over the five business days immediately preceding the day on which the contract for purchase is made; and

(c) the authority shall expire on the earlier of the conclusion of the next AGM in 2012 or a date 15 months from the date of this Resolution, save that the Company may before such expiry make a contract to purchase Shares which would or might be executed in whole or part after such expiry and the Company may make a purchase of Shares in pursuance of such a contract as if the authority conferred by this Resolution had not expired.

By order of the Board

Peter Dawes Registered officeCompany Secretary Fleets Corner, Poole BH17 0JT

7 June 2011

Notes1. A form of proxy is enclosed for use by shareholders and, if appropriate, must be deposited with the Company’s registrars, Capita Registrars (PXS),

The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU not less than 48 hours before the time of the Annual General Meeting (“AGM”). Appointment of a proxy does not preclude a shareholder from attending the AGM and voting in person.

2. A member entitled to attend speak and vote at the AGM may appoint one or more proxies (who need not be a member of the Company) to attend and speak at the AGM and to vote on his or her behalf whether by show of hands or on a poll. A member can appoint more than one proxy in relation to the meeting, provided that each proxy is appointed by a separate form of proxy and to exercise the rights attaching to different shares held by him or her. In order to be valid an appointment of proxy (together with any authority under which it is executed or a copy of the authority certified notarially) must be returned by one of the following methods:

• in hard copy form by post, by courier or by hand to the Company’s registrars, Capita Registrars (PXS), The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU; or

• in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures set out below;

and in each case must be received by the Company not less than 48 hours before the time of the meeting.

CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the AGM and any adjournment thereof by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s) should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.

In order for a proxy appointment, or instruction, made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (“EUI”) specifications and must contain the information required for such instructions, as described in the CREST manual. The message regardless of whether it relates to the appointment of a proxy or to an amendment to the instruction given previously to the appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID RA10) by the latest time(s) for receipt of proxy appointments specified in the Notice of Meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner described by CREST. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5) of the Uncertificated Securities Regulations 2001. CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy instructions. It is therefore the responsibility of the CREST member concerned to take (or, if a CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s)), to procure that his or her CREST sponsor or voting service provider(s) take(s) such action as shall be necessary to ensure that the message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

3. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, in order to be able to attend and vote at the AGM or any adjourned meeting (and also for the purpose of calculating how many votes a person may cast), a person must have his/her name entered on the register of members of the Company by 6.00pm on 12 July 2011 (or 6.00pm on the date two days before any adjourned meeting). Changes to entries on the register of members after this time shall be disregarded in determining the rights of any person to attend or vote at the meeting.

4. Copies of the directors’ service contracts are available for inspection at the registered office of the Company during normal business hours on any weekday and will be available at the place of the AGM from at least 15 minutes prior to and until the conclusion of the meeting.

5. Any electronic communication received by the Company, including the lodgement of an electronic proxy form, that is found to contain any virus will not be accepted.

6. A map showing the location of the Harbour Heights Hotel can be found at the Company’s website, www.hamworthy.com/agmmap

Additionalinformation


Financial calendar 2011

Glossary Advisers

Registered officeHamworthy plcFleets Corner Poole BH17 0JT

Company registered number713225

AuditorsDeloitte LLPAbbots House Abbey St Reading RG1 3BD

Nominated adviserHawkpoint Partners Limited41 Lothbury London EC2R 7AE

BrokerNumis Securities LimitedThe London Stock Exchange Building 10 Paternoster Square London EC4M 7LT

Financial public relationsAbchurch Communications Limited125 Old Broad Street London EC2N 1AR

RegistrarsCapita RegistrarsNorthern House Woodsome Park Fenay Bridge Huddersfield HD8 0LA

TelephoneUK 0870 162 3131 Overseas +44 (0)20 8639 3131

CNG Compressed natural gas

FPSO Floating production, storage and offloading

FSO Floating, storage and offloading

FSRU Floating storage regasification unit

IMO International Maritime Organization

LEG Liquid ethylene gas

LNG Liquid natural gas

LPG Liquid petroleum gas

VIEC Vessel internal electrostatic coalescer

VLCC Very large crude carrier

15 June 2011 ex-dividend date in respect of the dividend on ordinary shares

17 June 2011 record date for receipt of the dividend on ordinary shares

14 July 2011 Annual General Meeting

21 July 2011 payment of final dividend for the year ended 31 March 2011

13 October 2011 pre-close trading update

22 November 2011 preliminary date for announcement of interim results for the six months ending 30 September 2011

This report has been printed on an FSC® Mixed Source Certified paper, which ensures that all virgin pulp is derived from well-managed forests. It is elemental chlorine-free bleached. This report was printed by Pureprint Group (a CarbonNeutral® company) using their environmental print technology which minimises the impact of printing on the environment. Vegetable-based inks have been used and 99% of dry waste associated with this production has been diverted from landfill. Both the printer and the paper mill are registered to ISO 14001.

Designed and produced by

www.lyonsbennett.com

Photography by Mick Ryan and Martin Haswell. Photo on page 13 courtesy of BW Offshore. Top left photo on page 15 courtesy of Ignazio Messina & C SpA.

Find out more online www.hamworthy.com

Who we are

Hamworthy is a market-leading global company providing specialist fluid handling systems and services to the marine and oil & gas industries. We provide a wide range of innovative solutions for our customers across a number of long-term growth markets. Our leading position in key sectors, track record of success and financial strength provide the solid foundations from which we will further develop and grow the business.

Cover imageHamworthy’s innovative LNG regasification technology fitted to Høegh LNG’s Shuttle and Regasification Vessel (SRV) GDF Suez Cape Ann. Built at Samsung Heavy Industries in Korea, this vessel can regasify LNG cargo whilst stationed offshore, delivering natural gas to shore via subsea pipeline.

Annual report 2011

Ham

worthy plc

Annual report 2011

Hamworthy offices

ChinaHamworthy Engineering and Equipment (China) Trading Company Ltd

Room 8BYi Dian PlazaNo. 746 ZhaoJiaBang RoadShanghai 20030

Room 2013No. 4 Xiu Zhu RoadDalian 116001

Room 910Fuying BuildingNo. 164 Changyang RoadHaizu DistrictGuangzhou 510250

Hamworthy (Suzhou) Ltd77 Hongxi RoadNew DistrictSuzhou 215151

DenmarkHamworthy Svanehøj A/S6 FabriksparkenPO Box 30DK-9230 Svenstrup J

GermanyHamworthy Serck Como GmbHPankower Str. 16–18 D-21502Geesthacht

IndiaHamworthy India Pvt Ltd35 Mittal ChambersNariman PointMumbai – 400 021

KoreaHamworthy Ltd 8th Floor Yoosung Plaza Building#655–6 Woo-dongHaeundae-GuBusan (612–020)

NetherlandsHamworthy BVAploniastraat 333084 CC Rotterdam

NorwayHamworthy Moss ASPO Box 1053NO–1510 Moss

Hamworthy Oil & Gas Systems ASPO Box 144NO–1371 Asker

PolandHamworthy Baltic Design Centreul. Łuzycka 6E81–537 Gdynia

SingaporeHamworthy Pte Ltd15 Benoi CrescentSingapore 629978

SpainHamworthy Pump Systems ASAvda Doctor TouronES–36600 Villagarcia de ArousaPontevedra

UAEHamworthy Middle East (FZC)PO Box 120691SAIF ZoneSharjah

UKHamworthy Water Systems LtdFleets CornerPooleDorset BH17 0JT

Hamworthy Pump SystemsFleets CornerPooleDorset BH17 0JT

Hamworthy Krystallon LtdChannel View RoadDover CT17 9TP

USAHamworthy Inc11111 Katy Freeway, Suite 910Houston Texas 77079

Hamworthy Inc8000 NW31 StreetUnit 13MiamiFlorida 33122

Hamworthy plcFleets CornerPooleDorsetBH17 0JTwww.hamworthy.com

Date post:	28-Apr-2018
Category:	Documents
Upload:	lammien
View:	231 times
Download:	1 times

Hamworthy offices Annual report 2011 · Annual report 2011 Hamworthy plc Annual report 2011...

Documents