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Kentz Corporation LtdAnnual Report and Accounts 2011

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KENTZ CORPORATION LTD ANNUAL REPORT AND ACCOUNTS 2011 WWW.KENTZ.COM

Kentz Group is a successful specialist solutions provider operating principally within the oil and gas services sectors, with over 14,000 staff worldwide.

We deliver our solutions through a wide range of engineering and construction services using our global network of offices. We are currently operating in 29 countries with a strong presence throughout oil and gas developing regions. At Kentz, we bring a global reach to our clients and partners worldwide, with consistent performance in safety, systems applications and fast-track project delivery.

Kentz is listed on the Main Market of the London Stock Exchange (LSE: KENZ).

Overview Governance

Business review

Our global operations IFCHighlights 1Our business units 2Standards 4Our year in review 6Chairman’s statement 8Clients 10Heritage and achievements 12People 14Strategy, KPIs and risks 16

Chief Executive’s review 18Partnerships 22Client project lifecycle 24Conduct 26Business Review 28Specialist EPC 32Construction 34Technical Support Services 36Principal risks and uncertainties 38Corporate responsibility 42Financial review 46

Financial statements

Independent auditors’ report 65Consolidated income statement 66Consolidated statement of comprehensive income 67Consolidated statement of financial position 68Consolidated statement of cash flows 69Consolidated statement of changes in equity 70Notes to the financial statements 71Shareholder information 104

Board of Directors 50 Directors’ report 52Corporate governance report 54Remuneration report 60

WWW.KENTZ.COMKENTZ CORPORATION LTD ANNUAL REPORT AND ACCOUNTS 2011

09 10 11

6.3% 6.4%5.8%

09 10 11

180.3

231.3 238.1

09 10 11

44.5

67.5

79.4

09 10 11

704.7

1,057.4

1,367.5

09 10 11

26.46

40.66

50.61

09 10 11

1,497.4 1,602.6

2,400.9

Corporate development and operational highlights

Financial highlights

Moved to a premium listing on the London Stock Exchange Main Market on 22 July 2011.

The award of a US$2.3 billion contract, in joint venture with CB&I, for the mechanical, electrical and instrumentation work on Chevron’s Gorgon Project on Barrow Island, Western Australia.

Signed an engineering, procurement and construction management (EPCM) framework agreement with Qatargas Operating Company Limited, in joint venture with Foster Wheeler, Qatar.

The award of the integrated commissioning services contract on the Queensland Curtis (QCLNG) project in Queensland, Australia.

Pipeline of opportunities with key clients and sectors, has grown 23% to in excess of US$10.5 billion at February 2012.

RevenueUS$m

Profit before taxUS$m

Profit before tax margins%

Gross cashUS$m

Earnings per share (basic)US¢

BacklogUS$m

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Americas

Revenue by region%

4.8% Far East, Russia and Europe

30.7% Middle East and Caspian

41.8% Africa5.4% Americas17.3% Australasia

Revenue by sector%

45.3% Oil and gas16.3% Petrochemical24.3% Mining and

metals6.8% Power7.3% Other

OverviewOur global operations

Kentz has over 14,000 employees and operations in 29 countries around the world, including the Americas, the Middle East, Africa, Australasia, the Far East, Russia and Europe. Kentz has been operating internationally on some of the largest oil and gas and minerals resourcing projects in the world for over 30 years, but it is our 90 year history that has laid the foundations for success.

People are the greatest resource at Kentz and we value the loyalty of our employees and are committed to the long-term internal development of our staff. On average the top 100 management each has over 17 years of service with the Group. Kentz has a strong partnering culture and has a number of agreements across our regions including Russia, the Caribbean, the Middle East and Australia.

Kentz continues to grow its addressable market through ongoing geographic expansion, new service offerings and an expanded client base.

World class offering

AmericasKentz has been operating in the United States since 1995 and is currently working on five projects for ExxonMobil in the region. In Canada, Kentz is involved in the significant Kearl Oil Sands resource and energy project. The backlog of work in the Americas has risen 50% during 2011 and Kentz sees substantial opportunities in this region.

AfricaSouthern Africa continues to be a large area of operation for the Group. Kentz has seen a significant increase in its metals and mining business in remote parts of Africa, which it expects to continue in the long-term. Revenues for the full year 2011 were up over 100% and the pipeline of prospects has grown by a similar percentage.


Africa Middle East and Caspian Australasia

Far East, Russia and Europe

• Construction• EPC• TSS

Middle East and CaspianThe Middle East remains a significant area of operation for Kentz. It is showing signs of significant future expansion with new projects being developed by both national and international oil companies, especially in Iraq, the United Arab Emirates and Saudi Arabia for oil and gas production, petrochemical and refining industries.

AustralasiaIn Australia, Kentz continues to see considerable ongoing investment in liquefied natural gas (LNG), liquefaction to take place in the Pacific Rim over the mid to longer term. Several LNG processing facilities are either under development or in implementation, all of which are significant in size and complexity. Kentz’s backlog in Australasia increased by approximately 250% during the year 2011.

Far East, Russia and EuropeKentz’s backlog of work in Russia is up 100% on 2010 and it sees substantial opportunities in this region. In Russia the recent opening up of reserves for the participation of international oil companies should benefit Kentz. It has a strong track record of working in Far East Russia, and has two joint venture partnerships with Russian companies that have been in place for a number of years now; DEM and SMNM (a Rosneft owned company). In the last number of years, Kentz has achieved significant growth in more remote and challenging locations. However, it still continues to service smaller projects from time to time in Europe.

WWW.KENTZ.COM2 KENTZ CORPORATION LTD ANNUAL REPORT AND ACCOUNTS 2011

ME &Cas Africa Aus

248

47 56FE, Rus & Eur

4

OverviewOur business units

Kentz is organised into three business units. We are dedicated to innovation and excellence in the provision of a full range of technical and project management skills – from design through procurement, construction, commissioning and start-up – to assist clients in developing new facilities, as well as effectively applying new technologies to upgrade and expand existing ones.

World class operations

Specialist EPC

Æ Page 32 for a full review

We have strong Engineering Centres of Excellence located in Canada, Qatar, Saudi Arabia, the United Arab Emirates, South Africa and Australia.

This worldwide network of engineering centres guarantees a high level of geographical proximity to our clients and suppliers, allowing Kentz to offer global solutions to local challenges.

Services include: – Onshore Modular Production Facilities – Non-process Infrastructure – Turnkey Utilities and Offsite Facilities – Turnkey Port Facilities – Small Capital Project Solutions – Controls and Automation Services – Telecommunications Systems – Power Projects and Services – Kentz Integrated Solutions – Engineering Services

Revenue 2011

US$355mRevenue by business unit%

26% Specialist EPC51% Construction23% Technical Support Services

Revenue by regionUS$m

WWW.KENTZ.COM 3KENTZ CORPORATION LTD ANNUAL REPORT AND ACCOUNTS 2011

Africa AusAmer

149

215

FE, Rus & Eur

53

ME &Cas

92

Africa Aus Amer

378

178

58 FE, Rus & Eur

8ME & Cas

80

Construction


Technical Support Services


Through our Technical Support Services business we offer a range of services for capital projects from front end and detailed engineering, project and construction management through to completions and commissioning.

We also offer asset enhancement services including brownfield engineering, maintenance, shutdowns and turnarounds and operations support.

Services include: – Pre-EPC Award (FEED) – Integrated Project Management – Arctic Construction Services – Completions and Commissioning – Maintenance and Turnaround – Operating Services

Image left: Shell Pearl GTL project, Qatar.

Image middle: Jordan Bromine Company plant, Jordan.

Image right: Natref Crude Refinery in Sasolburg, South Africa.

ME & Cas – Middle East and Caspian

Aus – Australasia

Amer – Americas

FE, Rus & Eur – Far East, Russia and Europe

Revenue 2011

US$702mRevenue 2011

US$311m

Kentz has in excess of 30 years of experience executing multi-discipline construction projects including: construction and site management; field engineering; multi-discipline services; site procurement, material control and logistics; QA/QC and HSE; commissioning, start-up and performance testing; and training.

Our construction management teams are highly experienced in the construction of new plant facilities, and the retrofit and expansion of existing plant facilities. Our worldwide construction group is supported by our in-house developed Construction and Completions Management System (CCMS).

Services include: – Structural, Mechanical and Piping Construction – Electrical and Instrumentation Construction

Revenue by region%

Revenue by region%

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World class

Standards


It is Kentz’s policy to provide and maintain a safe and healthy work environment at all times, with the goal of preventing occupational accidents, injuries and illnesses. Management place the health and safety of every employee above any other consideration of job operation or administration, with the goal at every level of the Group to ensure at all times, and in every phase of a job operation, the health and safety of Kentz’s employees and third parties at the locations in which Kentz operates.

KENTZ CORPORATION LTD ANNUAL REPORT AND ACCOUNTS 2011 WWW.KENTZ.COM 5

Health and Safety Achievements 2011 – man-hours achieved without a Lost Time Injury (LTI)

Qatar, E&I Utilities Pearl GTL over 13.4 million

Thailand, Gorgon Construction Village Fabrication over 8 million

Qatar, Sidra Hospital Project over 8 million

Madagascar, Ambatovy Project over 6 million

Mozambique, Moatize Project over 6 million

Qatar, ASU Pearl GTL over 4 million

Qatar, Receiving and Loading over 3.5 million

Saudi Arabia, Kayan Project over 3 million

Saudi Arabia, Kemya Sea Water Project over 2 million

Dominican Republic, PVDC Project over 1 million

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OverviewOur year in review

A year of significant progress

Awarded brownfield engineering services contract by ShellThe award of a Framework Agreement to provide services in executing Plant Change Requests by Qatar Shell GTL Limited. The duration of the contract is three years with a two-year extension option.

US$33.6 million contract award by Bariq Mining LimitedThe award of a procurement, construction and commissioning contract worth in the order of US$33.6 million by Bariq Mining Limited in Saudi Arabia.

Acquisition of South African engineering services company RNEAcquisition of RNE Engineering and Projects (Pty) Ltd, a leading supplier of engineering services, for a total cash consideration of South African Rand 73 million (approximately US$10 million) over a period of four years.

January February May


As we look ahead to 2012 and beyond, sector diversification and positive outlook for energy and resource capital expenditure underpins growth in Kentz’s overall pipeline to in excess of US$10.5 billion.

July listing and indexation to FTSE 250Following the move to a premium listing in July, Kentz achieved ranking in the FTSE 250 index of the London Stock Exchange.

CB&I Kentz Jv awarded US$2.3 billion construction contract on Gorgon LNGThe award of a US$2.3 billion contract, in joint venture with CB&I, for the mechanical, electrical and instrumentation work on the Gorgon Project on Barrow Island, Western Australia.

Senior Executive appointmentsThe appointments of Christian Brown as Group Chief Operating Officer and Eddie Lewis as Group Development Officer. They each bring a wealth of experience in the industry and will be invaluable additions to the Group. Christian Brown (pictured above) was subsequently appointed Chief Executive Officer on 1 February 2012.

SeptemberJuly August

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OverviewChairman’s statement

World class performance

Kentz delivered another impressive performance in 2011, with growth in order intake, sales and earnings finishing ahead of expectations.

Kentz delivered another impressive performance in 2011, with growth in order intake, sales and earnings finishing ahead of expectations. In many ways the year represented a significant turning point for the Company; not least with our graduation to the Main Market of the London Stock Exchange.

While Company values of Safety, Teamwork and Reputation remain at the foundation of our business, we are facing new challenges all the time through the rapidly shifting landscape of the industry, economic and regulatory environment.

The global energy and resources conditions for new project development during 2011 continued to be focused on more remote and emerging areas. The safety track record that Kentz has built over time is central to our operations worldwide and focus on this is more important than ever when entering new areas. The Board takes its responsibility for the safety and welfare of employees very seriously and undertakes regular reviews on processes and performance. The Company’s third annual Safety Conference in March 2011 provided an opportunity to bring together people from around the global operations, as well as partners and clients to review and refine procedures.

Strong and sustainable relationships with our clients hinge on our reputation for delivery and alignment with their values. Kentz continues to strengthen its relationships with key clients through the introduction of client account management plans. These now provide personalised focus for our key customers where a significant majority of recurring revenues occur. This has allowed us, going into 2012, to commit greater energy into new client development in the sectors we service and increase our addressable market.

Whilst energy associated stocks were hit during 2011 by a number of credit rating agency downgrades and ongoing European debt concerns, the longer-term outlook for the energy and resources services sectors remains robust. The management team believes the Company’s outlook is very positive and continues to see the benefits of a global approach to servicing clients across the sectors in which we operate. During the year we have strengthened our senior management and their teams, through recruitment and training and development, in order to meet the demands of future opportunities for Kentz.


In line with the significant achievements of the past year, the Board has stepped up to embrace new guidance on risk, Board leadership and effectiveness, executive remuneration and accountability. These have been set out within our Annual Report and Accounts through our Committee Reports. These Committees have provided direction and control over the growth of the Company’s business and ensured that we are complying with all relevant processes, customs, policies, laws, and institutions. I welcome an open and honest dialogue with all our shareholders and members of the Board have made themselves available to meet with shareholders on request.

Lastly, as you will be aware, following the year end it was announced that Christian Brown succeeded Hugh O’Donnell as Chief Executive of the Company. On behalf of the Board and everyone at Kentz, I would like to pay tribute to Hugh for his huge contribution to the Company throughout his 12-year tenure. I personally have enjoyed working with Hugh enormously and we have all benefited from his leadership, experience and wisdom. We are delighted that Hugh has committed to a further three years with Kentz through his exclusive advisory arrangements. It is fantastic for us that his time will be spent on key client relationships and securing new business.

We very much look forward to working with Christian and his management team in the coming months and years and feel confident that the outlook for the business and for our shareholders remains extremely positive.

Tan Sri Mohd Razali Abdul RahmanChairman

Our values

SafetyThe safety and health of all our employees is the most important value held by our company: “no one gets hurt and everyone goes home safe and well.”

TeamworkWe work together to achieve organisational goals.

ReputationOur current and future success stands on our reputation.

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World class


Clients

Woodside’s Pluto LNG Project, Western Australia Photograph courtesy of Woodside


Top 10 Clients by Revenue 2011

1 Sherritt 12.07%2 Chevron 10.39%3 Qatar Petroleum 8.46%4 Woodside 7.47%5 Sasol 6.80%6 GEA 5.96%7 Fluor 5.69%8 ExxonMobil 5.31%9 Vale 5.18%10 CB&I 2.65%

Kentz maintains a good balance and mix of clients with 46.2% of revenues in 2011 coming from end user international and national oil companies. A further 27.5% of revenues came from leading engineering and project management companies. The remaining 26.3% from other sources; primarily key clients in the metals and mining sector.

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OverviewHeritage and achievements

A track record for delivering value

1919 1977 1982 1983 1986 1987 1997 2003 2005 2006 2007 2008 2009 2010

The very first office opened on Parnell Street, Clonmel, Co.Tipperary, Ireland (formally known as M F Kent)

Kentz was given its first opportunity in Saudi Arabia with Fluor USA on the Shedgum and Uthimaniya commissioning of electrical and instrumentation work on gas oil separating plants (GOSP)

Kentz’s presence in the Southern hemisphere expanded to Australia

Kentz opened an office in Qatar, after being awarded the engineering, procurement and construction (EPC) contract for the NGL 1&2 analyser upgrades project for Qatar Petroleum in Mesaieed

The Company opened its first African office in Johannesburg, it was invited to tender for the Sasol II and Sasol III synthetic fuel plant projects in Secunda, South Africa

Kentz commences operations in Abu Dhabi

Kentz entered the Caribbean with the award of a contract with Kellog Pan America Corporation

First image: The first MF Kent office in Clonmel, Co. Tipperary, Ireland

Second image: Kentz staff pictured outside the old Randburg office, South Africa 1990

Third image: Aerial view of Sakhalin 1, Odoptu Site, Sakhalin Island, Russia


1919 1977 1982 1983 1986 1987 1997 2003 2005 2006 2007 2008 2009 2010

Kentz targeted the Caspian area and opened an office in Kazakhstan

Kentz opened its Canadian branch when it was invited by Imperial Oil Canada to participate in the Kearl Project Constructability Review process

Major EPC project awards on Gorgon LNG in Australia. This is one of the largest natural gas projects in the world, with AUS$43 billion investment from Chevron, Shell and ExxonMobil

First award on the Shell Pearl GTL, Qatar. Kentz worked on a number of Specialist EPC, Construction and Technical Support Services contracts worth in excess of US$360m

Kentz completed a very successful listing on the AIM market of the London Stock Exchange

Creation of Kentz Arctic division and the opening of an office on the oil-rich Sakhalin Island in Far East Russia. This serviced the needs of two major initiatives, namely the Sakhalin-1 and Sakhalin-2 developments fronted by ExxonMobil and Shell respectively

In 2011, Kentz progressed to a premium listing and achieved ranking in the FTSE 250 index of the London Stock Exchange. Award of the largest contract in the Company’s history, in joint venture with CB&I, with an estimated value of US$2.3 billion for the mechanical, electrical and instrumentation work on the Gorgon Project on Barrow Island, Western Australia.

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World class


People


Kentz is able to deliver consistently high quality services to its clients because of the strength and quality of its employees and its dedicated management team. The Company invests significant time and resource in to the development of its people through constant appraisal, coaching and training and by encouraging personal initiative.

Training and Development, 2011

More than 8,000 employees received on-site training and development

269 employees attended Skills Enhancement Courses

38 employees enrolled on the Supervisory Management Development Programme

174 trainees developed new skills to become welders, boilermakers and electricians at purpose-built training facilities in South Africa

16 candidates commenced the Kentz apprenticeship programme in Australia

7 employees are currently completing the Post Graduate Certificate and Diploma in Management and Leadership at Nottingham Trent University

17 external university and college bursaries were allocated in South Africa

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Backlog

Middle East Africa Arctic Region

ACE*

2005 2006 2007 2008 2009 2010

38% Middle East32% Africa22% Australia6% America2% Far East and Europe

1Current Prospects

2Strategic Prospects

626

1,40

3

232 31

3 370

372

1,32

5

1,81

3

767

3,07

8

1,85

7

1,17

5

BacklogRevenue

FY 2010 EPC RevenueFY 2010 Const. RevenueFY 2010 TSS Revenue

61% (53%) Oil & Gas30% (14%) Petrochemical12% (2%) Mining & Metals7% (7%) Power6% (8%) Other

(%) Prior year figures

544

545

596

643

1,00

4

705

1,49

7

880

1,60

0

235

140

75

44

180

48

65

145

8

137

*Australasia, Caribbean and Europe

Business reviewStrategy, KPIs and Risks

Strategy Longer visibility of our order book

Geographic spread

Æ Page 38 for a full risk breakdown

Risk This international presence exposes Kentz to a wide range of legal and regulatory systems, trade policies, the challenges associated with management and co-ordination across a wide geographical spread and a degree of political instability in a small number of locations.

Kentz derives the majority of its business on the basis of substantial contracts which are won through competitive tender processes and it therefore operates on a project-by-project basis, and its visible order book can fluctuate from time to time.

Achievements Presence in 29 countries worldwide. Entered into three new countries of operation in 2011 : Jordan, Singapore and South Korea.

Backlog at the end of February 2012 increased to US$2,439.2 million, with a total pipeline of prospects standing at US$10.5 billion.

Key Performance Indicators (KPIs)

Future Prospects

US$m

Revenue by region%

4.8% Far East, Russia and Europe

30.7% Middle East and Caspian

41.8% Africa5.4% Americas17.3% Australasia

Revenue by sector%

45.3% Oil and gas16.3% Petrochemical24.3% Mining and

metals6.8% Power7.3% Other

EPCConstructionTSS

1. Prospects that Kentz is currently bidding, expected award 6 to 12 months.

2. Prospects awaiting decision to bid or expected award 12 to 18 months.


2011

BacklogRevenue

1,36

8

2,40

1

2010

1,05

7

1,60

2

2009

705

1,49

7

2008

6431,

004

Long-term client relationships

Rapid growth Partnerships and developing successful joint ventures (JVs)

Kentz has a small number of clients that account for a significant proportion of its revenue. A failure to deliver consistently high standards of projects and Health and Safety performance could impact on the ability of the Group to secure ongoing business.

Kentz may be unable to attract and retain sufficient skilled personnel to meet its operational requirements. Kentz depends on the continued service of senior personnel, including its Directors and senior management.

The Group has a certain amount of reliance on its Joint Venture (JV) partners; the success of these partnerships depend on the financial capacity, continued goodwill and performance of all the JV partners.

Long-term working relationships with Fluor (32 years), Sasol (30 years) and Qatar Petroleum (10 years). Global Framework Agreement with ExxonMobil and Brownfield Engineering Services Contract with Shell.

30% average growth year-on-year for past five years.

Successful partnerships established in Australia, Far East Russia, Saudi Arabia, UAE, Qatar, Iraq and Trinidad and Tobago.

Top 10 Clients 1 Sherritt 2 Chevron 3 Qatar Petroleum 4 Woodside 5 Sasol 6 GEA 7 Fluor 8 ExxonMobil 9 Vale 10 CB&I

Joint venture Partners OJ’s Electrical and Instrumentation Services Ltd, Trinidad and TobagoDEM, RussiaSMNM, RussiaThiess, Decmil, AustraliaCB&I, Australia Global Process Systems, WorldwideVoltas Limited, QatarFoster Wheeler, QatarChiyoda Corporation, Saudi Arabia

Future ProspectsUS$m

Backlog

Middle East Africa Arctic Region

ACE*

2005 2006 2007 2008 2009 2010

38% Middle East32% Africa22% Australia6% America2% Far East and Europe

1Current Prospects

2Strategic Prospects

626

1,40

3

232 31

3 370

372

1,32

5

1,81

3

767

3,07

8

1,85

7

1,17

5

BacklogRevenue

FY 2010 EPC RevenueFY 2010 Const. RevenueFY 2010 TSS Revenue

61% (53%) Oil & Gas30% (14%) Petrochemical12% (2%) Mining & Metals7% (7%) Power6% (8%) Other

(%) Prior year figures

544

545

596

643

1,00

4

705

1,49

7

880

1,60

0

235

140

75

44

180

48

65

145

8

137

*Australasia, Caribbean and Europe

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Business reviewChief Executive’s review

2011 marked another period of transition for Kentz; as we graduated to the Main Market of the London Stock Exchange three years after our initial public offering on AIM.

Margin enhancing opportunities

2011 marked another period of transition for Kentz; as we graduated to the Main Market of the London Stock Exchange three years after our initial public offering on AIM. I believe there will be benefits to the move; greater interest in our story, a wider shareholder base and ranking among our peers. More importantly, having delivered another 30% growth in revenues and a 50% rise in our work on hand during the year, the move to the FTSE 250 is the right platform for the Company we believe Kentz can become. During 2011 we achieved a record backlog of US$2.4 billion that gives us greater visibility of earnings, and supports our investment in building out our capability and resources. This investment is key to our sustainable and profitable growth which we believe will continue in line with market expectations.

Our approach to achieving critical mass and growth across our three Global Business Units, underpinned by moving up the value chain to grow margin and earnings remains as the key element of Kentz strategy. We will continue to review acquisition opportunities in support of this strategy.

The last year proved yet again why our core historical Construction capabilities are central to the Kentz growth model. Kentz has been delivering multi-discipline construction services globally for over 30 years. Performance on tough and remote jobs is what has shaped our reputation and opened the door to provide other, higher-value, service offerings to our clients.

Æ Page 34 for further details on Construction

Delivering our own, direct-hire, construction labour means we are in control of our field execution activities and can better manage and control safety, execution and risk. This capability allows us to successfully deliver world class performance in such places as Far-East Russia, Papua New Guinea or Sub-Saharan Africa. Consistent delivery of such world class mega projects for major international clients was the key ingredient in our ability to win the Gorgon MEI US$2.3 billion reimbursable construction project which is being developed by three of the world’s largest oil companies.


• Increasing addressable markets

• Oil and Gas• Metals and Mining• Increase Asset

Enhancement presence• Increase Process EPC

capabilities• JVs

• EPS growth• Margin growth• Cash generation• Tender performance

ratios• Safety performance metrics• Backlog and pipeline growth

• Client account management plans

• New client development• GBU awareness

campaign• Early project participation• Segmental growth focus

• Safety leadership• Risk management• Ongoing development of

internal project controls tools

• Culture and organisational development

• Talent development• Communication

Innovation and Development

Customer Focus

Internal Processes

Performance Metrics

Oil, gas and petrochemical projects have consistently made up around 75% of our work, but 2011 saw a marked jump in mining and metals work that exemplifies the Kentz model of development. Over the years we have delivered a number of Construction scopes of work with major mineral resource clients in Southern Africa. Now as they seek out new projects and need more remote services Kentz is ideally placed to support them, with a complementary global footprint and services that sit across the lifecycle of their projects; from front-end engineering design, through provision of early infrastructure, construction services, completion and commissioning and into the operating phase.

Æ Page 24 for Client Project Lifecycle

2011 proved an uncertain year in terms of the global economy, but all the signs point to buoyant and sustained capital expenditure on the development of resources. I see huge potential still for Kentz; in the provision of more services to new and existing clients as well as in new geographies and sectors. The

diversification of Kentz business from a value chain, end market and geographical standpoint affords Kentz the opportunity to grow further by increasing our addressable market.

Kentz’s revenues were historically derived 90% from a client’s capital expenditure (in the development of new facilities) and only 10% from operational expenditure (delivering services on existing facilities). While we had all the requisite expertise in Asset Enhancement Services (AES) – maintenance and shutdown, brownfield engineering, and operations support – targeting specific opportunities with clients has reaped rewards in the past year with the award of five long-term brownfield engineering service contracts in the Middle East alone. Our strategy is to capitalise on the opportunities available in this business line through wider geographic expansion. During 2011 the capacity of our Development group has been increased to commit greater resources into new client development in the sectors we service to further expand our addressable market.

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Business reviewChief Executive’s review continued

Process EPC, or the delivery of onshore modular production facilities, is a further niche area where Kentz can differentiate its offering to our core clients as part of the continuing development of our business. Our target market is production facilities for the onshore oil and gas sector and in particular, upstream oil and gas process facilities including all the associated site infrastructure, process and non-process utilities, and off-sites. For international oil companies the modularisation of early and central production facilities is key to the economic viability of their field development plans; in achieving revenues sooner on modest production levels, conducting more in-depth field analysis via test-train facilities, and in many cases, maintaining the licence ownership for an area of operation that may not be first in line for full production development. The opportunity to provide oil and gas production facilities to clients is underpinned by Kentz’s proven success in the delivery of projects, often in logistically challenging locations, and it capitalises on reputable in-house engineering, procurement, modular fabrication and construction.

Part of our stated strategy for completing the public listing in 2008 was to raise new funds to complete an acquisition in the Process EPC space. At the time we took a twin track approach; both identifying

FY2011 6–12 months 12–18 months

Backlog Current prospects Strategic prospects

US$2.40bn

As of end Dec 2011

US$3.91bn

As of end Dec 2011

US$6.11bn

As of end Dec 2011

visibility of Future WorkDuring 2011, the total order intake converted to backlog was up almost 80% to US$2.26 billion, providing very good visibility of future work through to 2015.

potential acquisitions as well as forming a joint venture called Kentz Global to address opportunities in the market for the provision of oil and gas production facilities. Recently in following this strategy Kentz has been able to develop a significant pipeline of opportunities, with existing clients that will underpin future growth.

During 2011 we completed the acquisition of RNE, a South African supplier of engineering services, which has exceeded its revenue and profit targets for the year. Its addition reinforces the development and execution of several EPC projects underway in South Africa and in time should support the global operations of Kentz.

In a number of cases Kentz has been able to pursue growth and new opportunities with clients through the formation of strategic joint-ventures. During 2011 new joint-ventures in Australia, Qatar and Saudi Arabia were created with larger Engineering and Construction companies; confirming my belief that Kentz brings significant benefits through its global approach and local presence. These partnerships have supported Kentz to follow larger projects bringing an integrated service solution to existing and newer clients.


At the end of December 2011 we had grown our gross cash to just over US$238 million, an increase of approximately US$27 million from the position reported at June. We see three uses for this cash; further acquisitions, working capital finance for organic growth and reassurance; that we have the balance sheet strength to take on larger projects with our clients.

Our dividend policy remains as it has been; to pay between 20-25% of profits, and I am confident that the utilisation of shareholder cash, to grow the business organically and through acquisition, will provide the best return to our investors. The global energy and resources landscape for new project development during 2011 continued to focus on remote and emerging areas. In line with this Kentz’s addressable market; our pipeline of opportunities with our key clients and sectors, has grown 23% to in excess of US$10 billion. We are continuing to convert opportunities from this extended pipeline in line with previous tender success rates. During 2011, the total order intake to backlog was up almost 80% to US$2.26 billion, providing very good visibility of future work through to 2015.

Risk management is a constant focus of the Company. We have witnessed some fluctuations in the variables that make up our costs and retaining a disciplined approach to risk management throughout the bid, proposal and delivery phases is of paramount importance to our success. I believe that some amount of risk is mitigated by doing business with clients we know and who like working with Kentz. Once again repeat business with existing clients was a strong feature of Kentz in 2011.

Æ Page 38 for full risk breakdown

Execution excellence in health and safety is central to the successful operation of our business. It is a value that is reinforced from the very top level of the organisation to every individual working in our projects across the world; and defines our reputation in securing repeat work with core clients. During 2011 our workforce grew to an average of 14,000 employees worldwide and we delivered 52.5 million man-hours of work in 29 countries.

Given our strong pipeline of opportunities and sound financial base, the most pressing constraint to our growth is hiring and retaining the very best people in the industry. Kentz has a strong culture and well-established training and development programmes for people at all levels of the organisation. Nonetheless, our rapid growth has meant the need to supplement the existing team with a number of external hires and 2011 saw the culmination of this search at a senior level; including my recruitment in August 2011 and subsequent appointment in February 2012 as the Group’s Chief Executive Officer.

It was an easy choice to join a business with a great track record and with such potential for the future. I look forward to the next few months with great excitement and will seek in the coming year to define where we see the greatest opportunities to further strengthen geographic and end market diversification and to enhance earnings growth focusing on 2014 and beyond.

Christian BrownChief Executive Officer

Sasol Polymers PP2 Shutdown Team, South Africa

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World class


Partnerships


Kentz’s Joint venture Partners Worldwide

OJ’s Electrical and Instrumentation Services Ltd, Trinidad and TobagoDEM, RussiaSMNM, RussiaTheiss, Decmil, AustraliaCB&I, AustraliaGlobal Process Systems, Worldwide Voltas Limited, QatarFoster Wheeler, QatarChiyoda Corporation, Saudi Arabia

Vendors, agents, contractors, consultants and industry partners are crucial to Kentz’s success. It is vital that the Group deals with them fairly and treats them with integrity and respect. Kentz chooses all such partners only on the basis of appropriate business criteria including performance, price, qualifications, product quality and deliverability.

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Business reviewClient project lifecycle

Period one Period two Period three Period four

Construction


Specialist EPC

Shell Pearl GTL – The largest GTL project in the world

Pre Front End Engineering and Design

Front End Engineering and Design

Government Approvals

Final Investment Decision

Detailed Engineering Design and Procurement

Early Works Construction

Project profile

Pearl Gas to Liquids (GTL) Project in Ras Laffan Industrial City, Qatar is the largest GTL project in the world and jointly developed by Qatar Petroleum (QP) and Shell. It is the world’s largest source of GTL products, producing 140,000 barrels of GTL products each day and 120,000 barrels of oil equivalent per day of natural gas liquids and ethane.

Kentz has successfully completed a number of multi-million dollar contracts over the past five years on Pearl GTL. These contracts have encompassed all three of Kentz’s Global Business Units: Specialist Engineering, Procurement and Construction (EPC); Construction; and Technical Support Services.

Kentz won its first major contract on the project in 2006. The EPC business unit was awarded the EPC scope for the modular waste water treatment plant for the 35,000 man construction camp. This was followed by the diesel power generation scope and the temporary telecommunications for the plant’s turnkey temporary facilities.

Kentz’s share of the first phase of the project (common facilities and train 1) totalled in excess of US$320 million. The project entailed the development of upstream gas production facilities and an onshore GTL. The project also included the development of a block within Qatar’s vast North Field gas reserves which will produce 1.6 billion cubic feet per day of natural gas.

Later in the project lifecycle, during 2009 and 2010 Kentz’s focus turned to delivering the construction of utilities packages. The construction business unit was awarded the electrical and instrumentation scope for the utility and flare areas, materials management and commissioning support. This enabled the commencement of critically important process utilities commissioning: a precursor to plant- wide systems completion.

The Technical Support Services business unit became involved in the final stages of commissioning of the mega project. In early 2011, Kentz was awarded a Framework Agreement to provide services in executing Plant Change Requests by Qatar Shell GTL Limited. Under the Framework Agreement, Kentz provides engineering design, construction supervision and procurement services for plant changes and projects at Pearl GTL plant as well as to its offshore platforms, harbour tank farms, offloading jetties and connecting infrastructure. The duration of this contract is three years, with a two-year extension option. The services will be executed in the Kentz Doha office using existing multi-discipline engineering teams. Having been involved in this world-scale project from initial site works through to commissioning activities, Kentz is delighted to continue working with Shell in the operational and maintenance phase of the project with brownfield engineering services over the coming years.

In mid-2011, the Pearl GTL plant sold its first commercial shipment of GTL Gasoil, marking the start of production. The plant is expected to reach full production capacity by the middle of 2012.


Period five Period six Period seven Operating

Shell Pearl GTL – The largest GTL project in the world

Pre Commissioning & Commissioning

Start up

Brownfield Engineering

Operating Support

Maintenance & Turnaround

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World class


Conduct


Kentz has a Code of Business Conduct in place that formalises all of the important behaviours expected of Kentz employees and builds on its already well-established high standards of business conduct and ethics. All Kentz Directors, employees, and the people it works with, are required to fully comply with the Code and to use it in ensuring that they maintain the highest standards of ethics in their working lives, wherever they are located and whatever their responsibilities.

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Business reviewIntroduction

Strategically positioned

Kentz continues to grow its addressable market through ongoing geographic expansion, new service offerings and an expanded client base.

Specialist EPCConstructionTechnical Support Services

BacklogUS$m

626

1,403

372

OverviewKentz is a global supplier of specialist solutions to the oil and gas, petrochemical and mining and metals sectors. In the year ending December 2011, the Company generated revenues of US$1.37 billion and profit before tax of US$79.4 million.

Kentz employed an average of 14,000 people over the course of 2011 in 29 countries. It delivered 52.5 million man-hours with a total recordable incident ratio of 0.35, through its three main business lines: Specialist Engineering, Procurement and Construction (EPC) Services; Construction; and Technical Support Services.

Kentz’s business model is based on delivery of mechanical, electrical, controls and instrumentation engineering, and construction and management services in some of the most remote locations on earth. It generates a significant proportion of revenues through repeat business with its strong, blue-chip client base.

At the end of December 2011, the Group’s backlog of work stood at US$2.4 billion (2010: US$1.6 billion) and its pipeline of prospects was in excess of US$10.0 billion (2010: US$8.1 billion). Kentz continues to grow its addressable market through ongoing geographic expansion, new service offerings and an expanded client base.

Operating environmentWhile energy associated stocks were hit during 2011 by a number of credit rating agency downgrades and ongoing European debt concerns, the longer-term outlook for the energy and resource services sector remains robust.

Kentz is currently involved in a number of significant resource and energy projects in the world. Just a few are: Kearl Oil Sands in Canada, PNG LNG in the Southern Highlands of Papua New Guinea; the development of the Jubail II infrastructure in Saudi Arabia; ongoing development at Sakhalin I in Far East Russia; and the Gorgon LNG project in Western Australia.

The IMF’s baseline petroleum price projection for 2012 is broadly unchanged since September 2011 at US$99 a barrel, making the development of most global oil reserves financially viable. Oil and gas exploration and production is increasing in new and remote areas. Kentz’s ability to deliver in challenging locations, mainly for International Oil Companies (IOCs) and National Oil Companies (NOCs), has led to a significant demand for our services and we expect this to continue.

The International Energy Agency (IEA) has reported that global oil demand is forecast to climb to 89.9 million barrels per day (mbpd) in 2012, an increase of 0.8mbpd on the year. It is encouraging that 2012 capital expenditure for many of our IOC and NOC clients has again been increased for upstream exploration and production projects.


Moma Sands Shutdown Crew, Moma Sands Expansion Project, Mozambique, 2011

1,325

1,813

767

3,078

1,857

1,175

Operational overview The Middle East remains a significant area of operation for Kentz despite revenues in the region dropping marginally for the period. The civil unrest in early 2011 in certain parts of North Africa and the Middle East did not have any material impact on our business and we have continued to secure notable contracts in the countries in which we operate.

The award of a Framework Agreement with Qatar Shell GTL Limited at the Pearl Gas to Liquids (GTL) plant at Ras Laffan Industrial City, Qatar, was very encouraging. The Agreement covers services for plant change requests over the next three years, with a two-year extension option. This latest award follows Kentz’s successful completion of a number of multi-million dollar contracts over the past five years on the Pearl GTL Project in which all three of our Global Business Units have been involved.

Æ Page 24 for client project lifecycle

Very often, once Kentz teams are mobilised to a project and delivering for the client, we see significant growth in the scope and services that we are asked to perform. This featured strongly in our business again for 2011 with 30% of order intake coming from natural growth in existing contracts.

The brownfields services award with Qatar Shell GTL is also a good example of how involvement in the capital build phase of a facility positions us well to extend our service offering into the operating period. We have done this successfully with a number of core clients across our global operations.

In January 2011 Kentz was awarded a US$30 million contract by Abu Dhabi Gas Industries Ltd (GASCO) for the replacement of the existing emergency shutdown (ESD) system and associated field instrumentation at Habshan 0 and Habshan 1 plants. The works will be completed throughout two major shutdowns: one delivered in 2011 and the second due in 2012. It is a strategic initiative to pursue more asset enhancement services including brownfield engineering, maintenance and turnaround, and operations support.

Æ Page 36 for further details on Technical Support Services

Further awards secured in the period include a procurement, construction and commissioning contract worth in the order of US$33.6 million by Bariq Mining Limited and a US$32.7 million contract for the reduction area electrical and instrumentation on the Ma’aden Alcoa Aluminium Joint Venture, both in Saudi Arabia. Kentz’s first international project was in Saudi Arabia in 1977 and it is rewarding to be winning work in the early stages of the expansion of its mining and metals sector.

Projects in the mining and metals industry have been growing as a proportion of Kentz’s revenues. For the full year 2011 they accounted for 24% of revenues, up from 12% in the prior period. Southern Africa has historically been a leading centre for mining and metals and we have seen strong demand for the provision of our full complement of structural, mechanical, electrical, instrumentation and piping services in this market. Recent investments in base and precious metals projects, particularly in Africa and Australia, have been driven by buoyant global demand, despite perceptions about a weakening Chinese economy.



Current ProspectsUS$m

Strategic ProspectsUS$m

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Business reviewIntroduction continued

Kentz has been operating in South Africa since the early 1980s and its strong client relationships, business centres and workforce place it well to service the wider region. Southern Africa continues to be a large area of operation for the Group. Revenues for the full year 2011 were up over 100% and our pipeline of prospects has grown by a similar percentage.

Kentz has a number of ongoing capital and brownfield EPC projects with Sasol through our engineering contractor agreement and the acquisition of RNE early last year has unlocked further potential with this client and across the sectors we are currently serving.

Æ Page 32 for further details on Specialist EPC

During the year Kentz was awarded a US$35 million contract by the National Petroleum Refiners of South Africa (Natref) at the Natref Crude Refinery in Sasolburg, a joint venture between Sasol Mining (Pty) Ltd and Total South Africa (Pty) Ltd. Kentz has been working with Sasol for over 30 years. This latest contract is for the shutdown management and execution services at Natref, including planning, preparation and execution of all shutdowns and turnarounds over a five-year period. These longer-term contracts are typically reimbursable, supporting visibility of earnings.

Backlog at the year-end included 60% reimbursable service contracts, 10% unit rate reimbursable and 30% lump sum work. Kentz seeks to balance the margin opportunity with the risk profile of the projects we undertake and as we move into more and more remote locations, the current trend towards more reimbursable work with less risk is reassuring. Historically we have typically seen an average increase in scope of around 25% on most contracts from award to delivery and we see significant opportunity for continued natural growth during 2012.

Kentz was awarded a significantly large reimbursable contract in 2011, in joint venture with CB&I, for the mechanical, electrical and instrumentation work on the Gorgon Project on Barrow Island, Western Australia. It has an estimated value of US$2.3 billion to the CB&I Kentz JV, an integrated joint venture between CB&I (65%) and Kentz (35%), and will employ more than 1,650 jobs for construction personnel in Western Australia over a four-year period.

Æ Page 34 for further details on Construction

Australia continues to emerge as the world LNG liquefaction hub with planned expenditure of approximately US$200 billion set to boost the country’s production sixfold to 120 million tons per annum. Kentz’s backlog in Australasia increased around 250% during the year 2011 to US$1.26 billion from US$362 million at the end of 2010. This has been driven by IOC capital expenditures to service domestic, regional and Asian demands for gas.

Gorgon LNG Project, Western Australia where Kentz is currently involved in four contracts. The most recent contract was awarded to the CB&I Kentz joint venture by Chevron Australia and has an estimated value of US$2.3 billion.


In Papua New Guinea (PNG) Kentz is participating in a number of areas on PNG LNG, an integrated project that includes natural gas production and processing facilities, onshore and offshore pipelines and liquefaction facilities, that is being developed by a consortium of owners including ExxonMobil as operator. The most recent contract, awarded in November 2011, is for the Electrical and Instrumentation, Construction and Commissioning Completions for the Hides Gas Conditioning Plant. Kentz has substantial opportunities in PNG to really differentiate its offering and could be there for many more years to service existing and future projects in both the capital and operational expenditure phases.

Elsewhere, Kentz’s backlog of work in Russia is up 100% and in the Americas has risen 50% during the year. We see substantial opportunities in both these regions and cross utilisation of resources to address similar demands for services in challenging Arctic conditions. In Russia the recent opening up of reserves for the participation of IOCs should benefit Kentz. We have a strong track record of working in Far East Russia, and have two joint venture partnerships with Russian companies that have been in place for a number of years now: DEM and SMNM (a Rosneft-owned company).

Joint ventures have been a consistent feature of Kentz’s business. During 2011, we established a number of new, successful partnerships with larger engineering and construction companies: CB&I, Foster Wheeler, KBR and Chiyoda, that have allowed us to broaden our horizons and provide integrated solutions to our clients.

This included, at the end of the year, the signing of an engineering, procurement and construction management (EPCM) framework agreement with Qatargas Operating Company Limited (Qatargas), in joint venture with Foster Wheeler. The agreement will be for three years with an option to extend for a further two years. The booking values for the projects will be recorded as individual service orders are received, but we see fantastic potential to bid for specific packages of work, including pre-front end engineering design (pre-FEED), FEED and EPCM services to be carried out in our Qatar engineering centre.

Kentz now has six regional engineering centres of excellence supporting clients’ projects based in Canada, Qatar, Saudi Arabia, Abu Dhabi, South Africa and Australia. The geographic spread of these centres ensures proximity to our clients and suppliers, as well as delivering global solutions to local challenges for more remote projects. Kentz is well-positioned with a global workforce, engineering centres and partnerships that will support its continued growth and expand its addressable market into new geographies, sectors and clients.

30Over 30 years of developing strong client relationships in South Africa.

US$1.26bnKentz’s backlog in Australasia, up from US$362m.

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Business reviewReview of operations

Specialist EPC

James MooreChief Operating Officer, Specialist EPC

Process EPC still represents the biggest opportunity for growth in Kentz, in both existing and new emerging markets. Our clients want reliable suppliers who deliver consistent results in any market.

Q. Is Process EPC still an area of focus for growth in Kentz? Where are the biggest opportunities right now?

A. Process EPC still represents the biggest opportunity for growth in Kentz, in both existing and new emerging markets. Our clients want reliable suppliers who deliver consistent results in any market. Kentz combines a track record of execution in remote locations, strong local partnerships, in-house engineering, procurement, modular fabrication and construction, with commissioning, start-up and operation services. Challenging locations where projects require any number of these services are where Kentz is focused. We remain committed to execution excellence and opportunities are only considered under a continuous and rigorous approach to risk management and within our financial and technological reach. In the coming 18 months we see significant opportunities in Russia and Iraq.

Q. You completed the acquisition of RNE Engineering in 2011, how has it performed since acquisition? Are there further acquisitions on the horizon?

A. RNE has exceeded its revenue and profit targets for the year. Its addition reinforces the execution of several EPC projects underway in South Africa. We are currently developing new opportunities in the oil and gas, metals and mining, and infrastructure sectors in Sub-Saharan Africa and have a positive outlook for 2012. In time we may unlock further potential within RNE to support our global operations. Kentz has grown organically almost 30% annually on average for the past five years. While our pipeline of prospects and financial capacity remain robust, acquisitions would be the natural next step to supplement our own technical and human resources. We also see significant upside in strengthening our regional presence to align with proximity and services to international oil companies (IOCs). Any acquisitions would most likely be smaller, bolt-on capabilities that deliver higher-value services and are therefore earnings-per-share enhancing.


Specialist EPC Revenue by region%

70% Middle East and Caspian

13% Africa16% Australasia1% Far East,

Russia and Europe

Image left: Receiving and Loading Facility (RALF) Project, Qatar

Image right: Senior Managers and Lead Engineers, Engineering Consultancy Services Contract, Jubail Commission, Saudi Arabia

Q. Joint venture partnerships seem to play an important role in project awards for Kentz. What are the advantages and disadvantages of these partnerships?

A. Joint venture (JV) partnerships have a number of strategic advantages for Kentz. These include entry into new markets through local resource and experience, which can significantly de-risk projects where Kentz does not have a strong local office or where specific market or client conditions call for the use of significant local resources. A recent example is the three-way JV put in place for the Gorgon Construction Village contract on Barrow Island, Western Australia. By partnering with two local construction companies, Kentz was able to draw on additional domestic resources to supplement its own project management team. In other circumstances, a JV supports Kentz in bidding for larger projects to boost its own financial threshold and offer the best solution to the client. Especially for remote projects, clients are reassured by having two contractors partnered together to give certainty of delivery. As a result, the client sometimes recommends a joint strategy between companies which have a good track-record. One possible disadvantage of JVs is the shared responsibility, and risk that a partner might not perform. Kentz seeks to mitigate this to a large degree through selecting partners of a similar or larger size, who share like-minded values of client delivery and safety. In the past year, Kentz has established JV agreements for specific project opportunities with large engineering companies CB&I, Foster Wheeler and Chiyoda. We see longer-term possibilities through these JVs.

Q. How is global engineering capacity currently? Are you seeing stronger competition for recruiting quality engineers?

A. Global engineering firms are currently experiencing a growth phase and traditional capacity models are being stretched. The industry trend has been towards the development of low cost high value engineering centres. To date we have managed to successfully grow engineering capacity organically to meet demand. We now have six engineering centres; in long-established hubs throughout the Middle East, and in newer project areas such as Australia and Canada. Development of capacity reflects the way in which clients, both national and international have bought our services. In many cases in-country or project specific engineering, as opposed to back-office centres, have served us well. We envisage future demand being met from continued organic growth and investment in capacity.

Q. We saw in the interim management statement that a greater proportion of Kentz work is now reimbursable, does this bring down margin enhancement opportunities on EPC work?

A. The reimbursable element of EPC contracts tends to be the construction. The construction element of projects in logistically challenging and remote areas where there is little domestic construction activity is often contracted on a reimbursable basis. This allows higher visibility on cost and margin and facilitates a more reasonable approach to tendering. In these cases the margin on the construction element of the job may be slightly reduced, but in line with the reduced risk.

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Business reviewReview of operations continued

The outlook for metals and mining work remains very strong in our business. Over the past 10 years Kentz has worked on some significant metals and mining projects and built up a track record with a number of large resource companies.

Eoin HurleyChief Operating Officer, Construction

Construction

Q. Kentz grew its percentage of work in the mining and metals sector significantly in 2011. Do you anticipate further growth in this area in the future?

A. The outlook for metals and mining work remains very strong in our business. There are three areas in particular that represent opportunity in the immediate term: East Africa, where repeat business with existing clients and projects looks very promising; West Africa, which is a new market for Kentz but where some key clients are looking to develop projects; and in Australia, which represents an untapped market for Kentz. Over the past 10 years we have worked on some significant metals and mining projects and built up a track record with a number of large resource companies. There is a significant opportunity to leverage this and grow our market share. In the longer-term we hope this will include new geographies such as South America and we are currently assessing options to secure market entry and a local presence.

Q. The Middle East now represents a smaller percentage of the Kentz business. Is this due to intense competition in the region?

A. Construction revenues in the Middle East reduced in 2011. Construction in the region has become more competitive, but at the same time Kentz has seen significant opportunities elsewhere and has had the chance to move some of our very best construction project management teams to these new areas. The track-record we have built up over a 30-year period of delivering construction services internationally has been invaluable in securing recent construction contracts. Kentz delivered 17 million man-hours of construction, without a lost-time incident, at the Pearl GTL facility in Qatar, and this was no doubt a determining factor in our bid for the Gorgon MEI contract in Australia. The Construction business continues to be the biggest contributor to Group revenues and with the award of new exciting projects like Gorgon MEI, it is likely to be for a significant time yet. Through a dynamic and global approach to the business we have managed to maintain industry comparable margins.


Image left: Secunda 59 – 17th Stream Reformer Project, South Africa

Image right: Moatize Project Team, Mozambique, 2011

Q. The Gorgon MEI project was a significantly large award for Kentz, is there a high level of risk associated with this project?

A. Gorgon LNG is a significantly high profile project and we are delighted to be involved in three contracts on Barrow Island. The Gorgon MEI contract, secured in July 2011, was large in budget terms, but in fact is no bigger than previous scopes of work in terms of man-hours. The reality is that Australia is a higher-cost area and it will take an enormous amount of local human resources to deliver this project. For Kentz, the contract is de-risked to a large degree through a reimbursable commercial model. Aside from reputation risk this pricing structure gives Kentz complete certainty around payment terms. The project is driven through the client team, which retains control and flexibility that is reassuring to them. This contract was awarded to Kentz in JV with CB&I, a significantly large international engineering and construction company. We foresee further opportunities through this formidable joint venture as it is very complementary and both organisations have a major global footprint.

Q. Construction accounts for the largest proportion of the Kentz workforce, and some of its most remote projects. How do you overcome the challenges of health and safety?

A. Kentz’s workforce was in excess of 14,000 people on average during 2011, which presents a significant health and safety challenge. Our goal is to have zero accidents and zero incidents, and this can only be achieved through personal accountability and a strong safety leadership culture. The safety of our people and our record in this area is continuously monitored, right at the very top of the organisation. Each member of the Executive Management team undertake commitments to audit our project sites on a regular basis and are accountable to the Board of Directors. Health and safety is our number one priority on every site and it goes without saying that large construction jobs, where the workforce can run into thousands, present particular challenges. Strong project management teams can mitigate this to a large degree, as well as the

rigorous implementation of tried and tested Kentz processes and procedures. This is particularly important in newer areas of operation, where contracts can include the hiring and training of a large numbers of local, unskilled personnel. In these circumstances, it is imperative to have planning in place to ensure the requisite level of preparation and training. Our clients also place health and safety first, and in integrating with their on-site programmes we have seen tremendous benefits on projects where there may be a number of other contractors working in close proximity to our own teams.

Q. Operations in Australia and South Africa have grown significantly over the past couple of years. Is foreign exchange exposure becoming a greater consideration?

A. Kentz’s treatment of foreign exchange exposure is constantly monitored and we continue to have a careful and pragmatic approach in this regard. As far as possible, local costs are matched to local currencies. So for example significant material procurement would be done in country and by far the majority of employee contracts would be in the local currency; particularly for South African Rand and Australian Dollars. When required the Group also takes out foreign exchange cover with its banks to protect against foreign exchange risks.

Construction Revenue by region%


55% Africa 25% Australasia8% Americas1% Far East,

Russia and Europe

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Business reviewReview of operations continued

Q. Kentz signed a Global Framework Continuing Engineering Service Agreement with ExxonMobil in early 2010. Would you like to target similar agreements on a global basis with other clients?

A. The ExxonMobil agreement provides a framework for the provision of engineering, design and technical support services to its projects around the world. Its signing was the result of a strong relationship with ExxonMobil developed over many years; delivering on a broad range of capital expenditure projects in a number of geographies around the world. There is no guaranteed revenue generation through this agreement, but our relationship has continued to prove successful two years on. We do have similar service agreements in place: with Shell, Qatargas and Sasol, although not on a global basis. Where feasible it would be nice to establish similar agreements, but only where the client organisation reflects and utilises the flexibility and global reach that Kentz can provide.

Q. You have highlighted Asset Enhancement Services as an area of growth for your business. How is this progressing? Would you look at potential acquisitions in this space?

A. About two years ago we took several operational phase capabilities we had already: Maintenance and shutdown, Brownfield engineering, and Operations support, and pulled them together into an Asset Enhancement Business to reflect the way that clients bought these services from us. Targeting specific opportunities with clients, particularly where Kentz has been involved in delivering the infrastructure, has reaped rewards in the past year. In the Middle East alone we have been awarded five long-term brownfield engineering service contracts which keep our teams in place following the start-up of a number of client facilities. Our strategy is to capitalise on the opportunities available in this business line through wider geographic expansion. We were delighted to complete a very successful shutdown at the Chavyo facility in Sakhalin at the end of last year that was delivered ahead of schedule. It is possible that we would look to make an acquisition, but these would most likely be smaller, bolt-on deals that help to gain market entry or local capability.

About two years ago we took several operational phase capabilities we had already: Maintenance and shutdown, Brownfield engineering, and Operations support, and pulled them together into an Asset Enhancement Business to reflect the way that clients bought these services from us.

Mike MurphyChief Operating Officer, Technical Support Services



Technical Support Services Revenue by region%

Q. Your business relies on securing the best people in the industry to work on remote projects. Are you seeing any constraints in the recruitment market right now?

A. Kentz has grown very strongly over the last number of years and we have met this challenge quite successfully through the organic growth in our leadership teams. It helps that Kentz has a solid core of management, who have been with the Company an average of 17 years. By ensuring a core group of these personnel on any project, it is possible to supplement numbers from the local market or wider industry while keeping the Kentz style of execution and values of safety and teamwork. The progression of people through strong training and development is absolutely core to our business and as the Company has grown, the opportunities for up-and-coming management have been plentiful. As oil majors seek more and more remote reserves Kentz has been ideally placed to support their projects. Clients like the fact that they get the same team, the same delivery, wherever they take us. As projects have become more remote and challenging, it is natural that compensation terms and work rotations are attractive and this has allowed us to supplement our own teams with additional resource quite successfully. In reality, the downturn in certain Western economies has meant an increase in good people who are available and willing to travel where they might not have been before.

Q. There has been a lot of talk of Arctic development. Is Kentz targeting this as an area of future growth?

A. Recent geographical surveys have estimated that as much as 20% of the world’s undiscovered, but exploitable, gas and oil reserves sit north of the Arctic Circle. Its recovery presents some of the most unique technical and environmental challenges ever seen. It is still early days, but our TSS business is well-placed to support with early phase services. We have a tried and tested model of delivery we can replicate from other areas with Arctic conditions, such as Sakhalin Island in Russia. Our track record includes the formation of strong local partnerships, which have continued long past their initial conception to target new project opportunities. Local content and resources have proved invaluable, especially in such challenging conditions, to supplement Kentz’s own project management, processes and procedures. We see the biggest immediate opportunities with core clients that are involved in the development of Arctic resources in Russia, Canada and Alaska.

Q. The energy landscape in North America has shifted rapidly over the past few years. Where do you see it going and how will Kentz be involved?

A. The advent of cheap domestic gas in North America has been the catalyst to drive investment in projects for export or downstream beneficiation such as GTL and LNG. Several years ago the United States was building receiving terminals, so this has been a significant shift in political and economic policy. As long as the economic viability remains in place to develop new infrastructure, this should happen. Kentz sees the biggest opportunities with core clients, with entry through domestic engineering services in upstream oil and gas.


48% Africa5% Americas 17% Far East,

Russia and Europe

Image left: Ambatovy Nickel and Cobalt Mining Project, Madagascar

Image right: Natref Crude Refinery Project Team, South Africa

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Sustaining shareholder value

Business reviewPrincipal risks and uncertainties

David BeldottiChairman, Risk Review Committee

Regulatory risksRisk Description Mitigating factors

Reputation Kentz operates in some countries which are perceived to have relatively high corruption levels (as rated by Transparency International).

During 2011 Kentz established a Code of Business Conduct which set out its expectations of Directors, employees and others we work with in relation to ethical business dealings, health and safety, corporate social responsibility, human resources, information and government relations.

Economic and political conditions such as regime change

Kentz operates in 29 counties and is expanding to more locations. The Middle East and North Africa (MENA) Region has seen an increase in the levels of political instability, civil disturbances and labour unrest. From time to time other locations experience industrial unrest.

Kentz has no current activities in North Africa and save for Yemen its MENA countries of operation have been generally stable. Kentz monitors economic indicators and political sentiments and also seeks to negotiate appropriate remedies to be included in its contracts with clients which cater for unforeseen events.

Licences, registrations, accreditations and government regulations

Kentz has operations in certain areas which are subject to a number of licences, registrations and accreditations.

With support from corporate management, the management in each area follow defined procedures to keep abreast of renewals and ensure compliance with the requirements. During 2011 all material licences and accreditations were successfully renewed.

Environment, health and safety

Significant deterioration in Kentz’s Safety, Security, Health and Environment record or reputation may have an adverse impact on the ability of the Group to secure business.

Safety is the number one value in Kentz and is embedded into the culture of the organisation. Focus on Safety is driven from senior management right down to project personnel. Kentz also has a behaviour-based programme that demonstrates the level of safe work habits its employees are exhibiting around the globe. Kentz has leading and lagging indicators in place to monitor safety performance.

Effective management of risk and opportunity is essential to the protection of Kentz’s reputation and the achievement of sustainable shareholder value.


Regulatory risksRisk Description Mitigating factors

Legal and sovereign risk

Kentz contracts are subject to governing laws outside of Western Europe and the United States.

Kentz reviews this risk as part of the tender risk review process and endeavours to limit this exposure by measures such as requesting a neutral venue or institute of repute to be identified in the contracts in the event there is a need for independent dispute resolution.

Market risksRisk Description Mitigating factors

Demand for oil and gas The demand for Kentz’s range of services may be dependent on the wider economy and activity within the oil, gas and resource industries.

Kentz’s business is a balance between geographies, blue-chip clients and industries. In 2011 it continued to diversify its business to provide a better overall balance and thus reducing exposure to any one region or sector.

Acquisitions Acquisitions may not be successfully integrated into the business and the financial results of acquired companies may fall short of targets.

Kentz has a defined strategy and processes in relation to acquisitions. Internal and external resources are engaged to carry out due diligence on targets, deals are structured to ensure sellers remain actively involved and there are processes in place for post-acquisition activities. During 2011 the RNE acquisition performed ahead of expectations.

Competitors The markets in which Kentz operates are competitive.

Kentz works to develop and sustain long-term relationships. Measures are implemented to critically evaluate tender pricing to ensure competitive offers for clients. There are also high barriers to entry such as the need to satisfy clients’ regulatory, financial and health, safety and environmental criteria.

Operational risksRisk Description Mitigating factors

Counterparty credit Kentz is exposed to counterparty risk primarily though its contracts with clients.

Credit risk is considered as part of the tender review process and Kentz seeks to negotiate reasonable payment terms to mitigate such exposures. The majority of Kentz business is derived from large multinational energy and resource companies and to date Kentz has experienced a low level of bad debts.

Lump sum projects Kentz operates its Specialist EPC and Construction business on the basis of lump sum or work unit rate contracts which are won through competitive tender processes.

Kentz undertakes projects on a selective basis and tenders are subjected to a set of hierarchical reviews to identify risks and implement appropriate mitigation strategies. Controls are implemented during the execution phase so that management is alerted to any adverse trends prompting corrective actions. At 31 December 2011, 60% of Kentz’s backlog was derived from reimbursable contracts.

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Business reviewPrincipal risks and uncertainties continued

Operational risksRisk Description Mitigating factors

Reliance on joint venture/consortium partners

Kentz’s performance on projects may be affected by the actions of joint venture or consortium partners.

Kentz follows defined procedures in the selection of partners and seeks to agree cross guarantees and indemnities with partners in order to limit its liability for potential loss or damage.

Contract and cost performance

Failure to deliver projects in the stipulated time and within Kentz’s budgeted cost could affect Kentz’s financial performance and in certain circumstances could potentially lead to disputes with clients.

Controls are implemented during the execution phase and there is regular project reporting and management oversight. There are Board briefings to discuss progress of the major projects. The Risk Committee also provides oversight on the suitability of the risk identification and mitigation process adopted on selected projects. Kentz seeks to engage with clients to find mutually agreeable outcomes and formal dispute resolution procedures are extremely rare.

Skilled personnel Kentz may be unable to attract and retain sufficient skilled personnel to meet its current and future needs.

Kentz has successfully attracted sufficient personnel to date and through personal development measures such as skills enhancement training, further education and providing opportunities for career development Kentz has continued to meet the needs of the business.

Senior employees Kentz depends on the continued service of senior personnel, including its Directors and senior management.

Kentz monitors the marketplace to ensure remuneration levels remain attractive and also has succession planning measures in place, which are aimed at ensuring the development of its professional and management staff to provide successors, over time, for the Group's existing Directors and senior managers.

Warranties Kentz provides warranties on the projects it executes and in certain circumstances liabilities under these warranties may affect the financial performance of the Company.

Kentz has implemented procedures to track the completion of projects to the required standards and where possible seeks to ensure suppliers and sub-contractors provide similar warranties in support of the commitments made by Kentz.

Supplier risksRisk Description Mitigating factors

Equipment manufacturers and sub-contractors

Kentz relies on inputs from third-party equipment manufacturers and sub-contractors for the delivery of its projects. These parties may not conform to delivery standards or schedules.

Kentz evaluates the capability of potential suppliers and there are procedures in place to effectively manage outsourced manufacture of equipment along with the activities of sub-contractors at sites. Kentz also seeks to build supply chain relationships based on performance.

Supply chain risks Kentz’s supply chain may be affected by supplier insolvency, strikes, weather, port conditions and congestion, the actions of customs authorities and other unforeseen matters.

These risks are considered at tender stage and monitored throughout the lifecycle of the projects. Where possible, alternative routes or sources of supply are investigated.

Local content Certain locations where Kentz operates have requirements to promote involvement of local companies and resource pools where the projects take place.

Kentz has successfully dealt with such requirements for many years through engagement with local resource pools and training initiatives.


Other risksRisk Description Mitigating factors

Exchange rates Kentz invoices its customers in a variety of currencies and similarly, its costs are incurred in a number of currencies.

The majority of earnings and costs are in US Dollars or currencies marked against the US Dollar. Kentz seeks to include adequate protection in its contracts with customers and where possible, endeavours to match the revenues and cost currencies to reduce exposure. When required, the Group also takes out foreign exchange cover with its banks to protect against foreign exchange risks.

Integrity of financial controls

Kentz operates in 29 countries. Inaccurately reported information may impact on its performance and reputation.

There is a monthly reporting regime in place and an internal audit function. Results and forecasts are reviewed on a monthly basis against budgets and any significant variance is investigated and explained. Results are also reviewed by the Board and the Management Executive Committee. There is Board and Management Executive reporting on a quarterly basis. An external audit is performed on the Financial Statements annually.

The list above is not exhaustive and there may be more risks, which are not known to Kentz or which we currently deem to be immaterial, which could affect performance of the business. Kentz continues to raise awareness of Risk Management in the organisation and historically has successfully mitigated the risks encountered.

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BOARD OF DIRECTORS

CR Steering Committee

Employees HSE Relationships Communities

Management Executive Committee

Business reviewCorporate responsibility

Kentz aims to conduct its business in a socially responsible manner. We believe that the long-term future of the Company is best served by respecting the interests of all our stakeholders and the wider community. We actively seek opportunities to improve our performance and to contribute to the wellbeing of the communities in which we operate. This is undertaken in the framework of Kentz’s core values of Safety, Teamwork and Reputation.

During 2011, a project was undertaken to improve Kentz’s policies and reporting in Corporate Responsibility (CR) in order to direct Group resources to areas that are deemed most important to our employees.

A Corporate Responsibility Survey was issued to a selection of Kentz employees around the world, obtaining employees’ opinions on the environment, communities, our people and relationships. There was an excellent response to the survey and a Kentz Corporate Responsibility steering committee was established in September 2011 to oversee the development of CR going forward. Adrian Griffin, a member of our Management Executive Committee and Group Commercial Contracts and Risk Officer, was appointed to Chair the team, which comprises James Cassin, Group QHSE Manager, Elizabeth Rous, Group Head of Communications and Catríona Nugent, Communications Manager. It met once in

Building better futures

As a responsible employer, listed on the Main Market of the London Stock Exchange, we believe that the long-term future of the Company is best served by respecting the interests of all our stakeholders: employees, clients, partners, shareholders, suppliers and the wider community.

the last three months of 2011 and going forward will convene four times a year. It reports quarterly to the Management Executive Committee.

The CR steering committee identified four main areas of focus as follows:

EmployeesWe respect our employees and encourage their development and training. We will promote equality as differences in responsibilities permit and consider the interests of our employees including their welfare, health and safety. We aim to empower our employees and recognise and reward individual contributions as well as teamwork. Through effective communication and consultation with employees and trade representatives we ensure that their views, opinions, suggestions and recommendations are considered openly and constructively. Our ultimate aim is the happiness of our employees through their worthwhile and satisfying employment in a successful business.

During 2011, Kentz employed an average of 14,000 employees across the world including 64 different nationalities. Kentz has a policy of investing time and effort in the development of its people by supporting them through constant appraisal, coaching and training and by encouraging personal initiative.

+80%Over 80% of employees surveyed felt that one or more people had positively influenced their career at Kentz.

37%37% viewed the family culture as being the most positive aspect of working for the Company, with 25% citing career progression opportunities.


During 2011, over 8,000 employees received on-site training and development. In South Africa, our purpose-built training facilities at Chamdor in Johannesburg, the Medupi Power Station Project and our office in Vanderbijlpark saw 174 trainees develop new skills to become welders, boilermakers and electricians.

269 employees attended Skills Enhancement Courses (SECs) and 17 bursaries were allocated to students in South Africa to study disciplines of engineering, quantity surveying and accountancy at university or college. The average length of service in top 100 core management for 2011 was over 17 years.

Health, Safety and EnvironmentIt is the duty of all our employees to take all reasonable steps to manage our operations so as to minimise our environmental impact and to promote best health and safety practice.

We will set and follow high standards in operations, quality and safety and have Environmental Management Systems in place that meet the requirements of international standards (ISO 9001, ISO 14001 and OHSAS 18001). We will continue to promote responsible and sustainable operations in all of our global locations and review regularly our business practices and performance to identify how we can improve our energy efficiency, water usage and carbon emissions. We undertake to identify, assess and manage risks to the environment, communicate effectively and regularly with all stakeholders, and supply sufficient resources of time, personnel and finance to provide information, training and supervision to our workforce.

During 2011, Kentz completed over 52.5 million man-hours across the Group, an increase of 22.1% from 2010, with a Total Recordable Incident Ratio (TRIR) of 0.35. Kentz senior management completed over 94 safety leadership evaluations during 2011, 46% of which were completed by the Management Executive Committee of Kentz.

The Safety Observation Card System of Kentz (SOCKS) continued throughout 2011, which allows us to monitor and observe employees beliefs and attitudes and eliminate unsafe acts. The programme focuses on the behaviours our employees exhibit on a day-to-day basis, in areas such as key points of communication, risk assessment, personal protective equipment (PPE), working postures and proper use of tools and equipment. During 2011, over 1.6 million observations were made, with only 0.67% of them demonstrating unsafe acts.

Kentz has Environmental Management Systems in place that meet the requirements of ISO 14001. During 2011, the average electricity usage per person across our global offices was 247KW and the average paper consumption per person was 33kg, of which 7kg was recycled and 1kg was reused. We have set targets to reduce these consumption figures by 5% in 2012. There were over 85,000 environmental observations done on Kentz sites during 2011, resulting in zero occurrences of non-compliance.

Kentz is committed to improving our environmental performance in the coming years and has set a target to make all our offices carbon neutral by 2018 through a 5% reduction year on year on our 2012 carbon emissions.

RelationshipsWe will conduct our business relationships with integrity and courtesy, and honour our contract commitments. Our aim is to build long-term relationships with our clients, partners and suppliers and utilise local companies and resources where feasible. We are committed to trading fairly with all our employees, clients, partners and suppliers, and commit the requisite level of resource to ensure we adhere to the highest levels of health, safety and environmental practice.

90%However, 90% felt that environmental issues are becoming a greater area of focus in our industry and the same percentage agreed that a more visible environmental stance would improve Kentz’s reputation.

+80%Over 80% of those surveyed “agreed” or “strongly agreed” that Kentz is an environmentally friendly company.

Images right: WaterAid/Dieter Telemans

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Business reviewCorporate responsibility continued

During 2011, the Gorgon LNG Telecommunications Project in Western Australia achieved considerable success in engaging Australian national and local suppliers for the sourcing and integration of the majority of major system packages, that make up the overall telecommunication and electronic systems.

Given the highly technical nature of much of the equipment and the fact that some components had by necessity to be sourced overseas, Kentz placed great emphasis on utilising local agents and integrators where possible, in order to maximise local content and input.

As a consequence, 25 major packages were sourced through Australian manufacturers, integrators, agents or distributors. This benefited local vendors by exposing them to international oil and gas industry practices and standards for the first time, which can only serve to strengthen the technical capability of these companies.

+50%Over 50% of those surveyed want to know more about which charities we are already supporting and almost 20% are keen to get involved in our Group efforts in this area.

CommunitiesKentz strives to become an active member of the communities in which we operate and supports a number of charitable, social, recreational, wellbeing and cultural initiatives. Kentz operates in 29 countries and each community is unique. We will listen to community needs and expectations and obtain a wide range of views on our social and environmental policies and performance. We encourage our employees to consider the needs of others and involve themselves in public service in order to continually develop a sustainable community for all.

Working with WaterAidDuring 2011, Kentz formed a partnership with the global charity, WaterAid, whose vision is a world where everyone has access to safe water and sanitation.

WaterAid operates in over 27 countries including India, Madagascar, Papua New Guinea and Mozambique. Working in some of the world’s poorest communities, WaterAid transforms lives by improving access to safe water, hygiene and sanitation. WaterAid works with partner organisations to provide practical technology and sustainable solutions which are cost-effective and fit-for-purpose.


85%Almost 85% of people agreed that Kentz should set a goal to contribute a defined portion of attributable profits each year to charity.

Respondents viewed the following charitable causes in this order of importance: (1) Education (2) Disaster relief (3) Medical (4) Community (5) Culture and sports

WaterAid and its partners work with local communities to build water points and latrines, give simple engineering training and promote good hygiene practices. Working in schools can play a vital role in keeping children in education and disseminating hygiene messages to the wider community, thus reducing incidences of diarrhoea caused by dirty water and poor sanitation. After meeting with the WaterAid team and hearing about the fantastic work they do across the globe, Kentz decided to support WaterAid projects in Madagascar and India. Kentz is currently working on the Ambatovy Nickel and Cobalt Mining Project in Madagascar and hires a large proportion of its workforce from different regions of India.

Read more about how Kentz’s funding helped WaterAid make a difference in these countries during 2011 in the Kentz’s 2011 Corporate Responsibility report.

Kentz is proud to be aligned with WaterAid and its aspirations to make a sustainable difference to thousands of people’s lives every year by giving them access to basic services through simple engineering solutions. We look forward to developing our involvement further in the coming year. For more information go to: www.wateraid.org.

Images: WaterAid/Dieter Telemans

Image Left: Children of the Puthur Village, Kanya Kumari District, Tamil Nadu, India

Image Right: A school girl at her water source, Toamasina, Madagascar

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Business reviewFinancial review

Strength in numbers

RevenueSales revenues increased by 29.3% in 2011 to US$1,367.5 million (2010: US$1,057.4 million) as a result of an exceptionally strong performance in Africa, and strong growth in Australasia and the Americas.

The breakdown of revenue by business unit shows an increase in our core Construction business which accounted for 51% of Group revenue (2010: 45%) EPC 26% (2010: 32%) and Technical Support Services (TSS) 23% (2010: 23%). Overall Construction revenues increased by 48% during 2011 due to strong performance in the Africa and Australia regions. TSS revenues grew in line with overall Group revenues to maintain their 23% share of total revenues and Specialist EPC revenues grew by 5% which accounted for 26% of Group revenue. 48% of total revenues in the period were reimbursable while 31% were lump sum and 21% were unit rate reimbursable.

Backlog at 31 December 2011 included 60% of reimbursable service contracts which reduces the risk profile of the group. These contracts also carry good potential for future natural growth.

Sales to the oil and gas and petrochemicals markets in 2011 totalled US$841.8 million or 61.6% of Group revenues, up US$56.1 million or 7.1% from US$785.7 million in 2010. The largest growth sector has been in mining and metals with revenues of US$332.7 million or 24.3% of our business, up by US$203.8 million or 158.1% (2010: US$128.9 million or 12.2%). Our remaining revenues have come from the power sector (6.8%), and from other sectors (7.3%).

Gross profitGross profits of US$160.9 million or 11.8% of sales were recorded in 2011, an increase of US$27.4 million or 20.5% on the 2010 figure of US$133.5 million. The dip in the gross margin from prior year (11.8% compared to 12.6% in 2010) is mainly due to the following factors:• Higher proportion of Construction work in the

period (typically our lowest margin business), combined with the application of our conservative profit recognition policy which precludes us from taking profit on such projects in the early stages of execution.

For the year ended 31 December 2011 (US$m) 2010 (US$m) % Change

Sales Revenue 1,367.5 1,057.4 +29.3%EBITDA* 97.5 81.7 +19.3%% of sales* 7.1% 7.7% -0.6%ptsProfit before tax* 79.4 67.5 +17.6%% of sales* 5.8% 6.4% -0.6%ptsPBT % (excluding non-recurring costs) 6.2% 6.4% -0.2%ptsProfit for the year* 61.3 49.0 +25.1%Profit after tax attributable to shareholders* 58.9 47.3 +24.5%Cash generated from operations 52.7 79.4 -33.6%Net cash from operating activity 31.8 68.1 -53.3%Cash and equivalents at year end 237.7 226.1 +5.1%Basic earnings per share (US cents)* 50.61 40.66 +24.5%ROCE* 30.5% 30.6% -0.1%ptBacklog 2,400.9 1,602.6 +49.8%

* 2011 results include non-recurring listing and senior management engagement costs of approximately US$5.0 million which were expensed during the period.

Ed PowerChief Financial Officer


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44.5

67.5

79.4

09 10 11

704.7

1,057.4

1,367.5

RevenueUS$m

Profit before taxUS$m

• We have experienced timing differences in profit recognition on some EPC projects which have not progressed as quickly as expected, including our project in Yemen which is still on hold and we have also seen some increased competition in the Middle East region which has impacted our margins there.

• More sales achieved on the Medupi project in South Africa in 2011 than in 2010 with no margin taken to date. We have deployed additional management resources to support the project team to ensure successful completion and discussions are continuing with our client regarding recovery of certain additional costs incurred. In line with our prudent policy on such matters we made a provision for these costs in H1 2011 and we have maintained that provision in the full year results. We have completed a detailed review of the project and we are satisfied the current level of provisioning is sufficient.

• Increase in profits coming from joint venture activities in Australia which are equity accounted and as such are included under share of joint ventures’ profit below.

SG&A ExpensesSelling general and administration expenses increased by US$18.1 million in 2011 to US$96.1 million in absolute terms (2010: US$78.0 million). This increase reflects the growth of the business as well as the non-recurring costs associated with our move from AIM to the Main Market of the LSE and the investment made in additional management resources to manage that growth. In relative terms the 2011 figure comes in at 7.0% of sales, which is a reduction from 7.4% in 2010.

Operating profitOperating profit before finance costs for the year increased by US$9.8 million to US$66.1 million.

Geographically, the main increase occurred in the Southern African region where strong performances by all business units contributed to an increase in profits. This growth is primarily attributable to the strong performance of the mining and metals sector.

All the other regions reported a solid performance, particularly Australasia where we have seen a 27.8% growth in profits from our joint ventures.

Net finance expenseNet finance (expense)/income for the year was US$0.7 million negative, down US$0.9 million from the 2010 figure. This reduction is due to additional interest charged on borrowings and bank overdrafts in South Africa. The borrowings relate primarily to lease asset finance for the purchase of fixed assets. Deposit interest for the year amounted to US$1.8 million, an increase of US$0.3 million on 2010.

Profit before taxProfit before tax for 2011 was US$79.4 million, 5.8% of sales or 6.2% when non-recurring costs are excluded. This represents an increase of 17.6% on the 2010 figure of US$67.5 million or 6.4% of sales. The reduction in PBT margin is due to the same reasons as explained under gross margin above, in addition to the impact of the non-recurring costs of US$2.9 million associated with the move from AIM to the Main Market as well as non-recurring senior management engagement costs of US$2.1 million also incurred.

TaxationThe tax charge for the year is US$18.1 million, which is an effective tax rate of 22.8%. This compares with an effective rate of 27.4% for 2010. The lower percentage in 2011 is attributable to a combination of prudent tax planning coupled with benefits derived from the fact that more of our profits were earned in lower tax jurisdictions.

Net profit for the yearProfit for the year from continuing operations was US$61.3 million, up 25.1% on 2010. Net profit equates to 4.5% of revenue which is broadly in line with prior year and marginally ahead when allowance is made for non-recurring costs related to the move from AIM to the Main Market and senior management engagement costs.

Non-controlling interestThe non-controlling interest for the period was US$2.4 million or 0.2% of sales (2010: US$1.7 million or 0.2%). This relates to a 50% holding in Kentz E&C Pty Limited by Thiess Pty Ltd and a 25% interest by our Black Economic Empowerment partner in South Africa in Kentz Pty Ltd.

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09 10 11

6.0

10.012.3

09 10 11

26.35

39.91

48.98

Business reviewFinancial review continued

Earnings per shareWe have achieved strong growth in both basic and diluted earnings per share during the period.

Basic earnings per share for the year were 50.61 US$ cents (2010: 40.66 US$ cents). This calculation is based on a weighted average number of 116,312,519 shares in issue in 2011.

Diluted earnings per share for the year were 48.98 US$ cents (2010: 39.91 US$ cents). This calculation is based on a weighted average number of 120,199,721 shares in issue in 2011. DividendsThe Group reports its financial results in US dollars and accordingly declares its dividends in US dollars. Dividends are paid in Sterling using an exchange rate calculated at the record date and shareholders have the option of electing to have their dividend paid in another currency. The interim dividend payment amounting to 5.0 US$ cents per share was made in October 2011 and the Directors intend to propose a final dividend payment of 7.3 US$ cents per share which would make a total dividend payment of 12.3 US$ cents per share for the year ended 31 December 2011. This equates to a payout equivalent of 25% of diluted EPS which is at the top end of our stated dividend policy range. If approved, this will represent

Financial Position

As at 31 December2011

US$’0002010

US$’000

ASSETSNon-current assets 73,872 80,433Current assetsInventories 126,601 80,699Receivables 291,042 227,364Cash 238,127 231,334

Total assets 729,642 619,830

LIABILITIESNon-current liabilities 17,564 14,723Finance Leases 7,357 13,916Borrowings 59 31Current liabilitiesTrade and other payables 461,454 388,393Finance leases 5,059 5,259Borrowings 477 6,608

Total liabilities 491,970 428,930

Net assets 237,672 190,900

Diluted EPSUS¢

DividendUS¢

an increase of 23% on the total dividend of 10.0 US$ cents paid last year. The final dividend payment will be made in May 2012 to shareholders on the register at the close of business on 27 April 2012.

Working CapitalWorking capital at year end was US$188.8 million or 13.8% of sales, up 35.7% on 2010 year end (US$139.1 million or 13.2% of sales). This increase mainly reflects the growth in the business coupled with the milestone payment terms on the Medupi contract which preclude invoicing for progress achieved until all elements of a particular milestone have been completed. The growth in the level of reimbursable work, while welcome from a risk reduction perspective also means that these contracts do not attract mobilisation payments. This has also served to increase the working capital requirement in the period.

Current assets at year end were US$655.8 million, up US$116.4 million or 21.6% on 2010 (US$539.4 million). This growth is due to increased receivables of US$64.7 million, and work in progress of US$45.9 million. Current liabilities at year-end were US$467.0 million, up US$66.7 million or 16.7% on 2010 mainly due to increase of US$70.0 million in trade and other payables.


09 10 11

168.3205.5

225.2

09 10 11

142.9

190.9

237.7

EquityShareholders’ equity at year-end was US$226.3 million, up 24.6% on 2010 (US$181.6 million). This reflects the growth of 24.4% in profits attributable to shareholders during the year.

Total AssetsTotal Assets at the end of the year were US$729.6 million, up 17.7% or US$109.8 million on 2010, primarily as a result of the growth in working capital referred to above.

Cash flow from operationsCash generated from operations for the year was US$52.7 million, down 33.7% or US$26.7 million on 2010 levels. This is attributable to the requirement to invest significantly in working capital during 2011, as explained above.

Cash flow used in investing activitiesNet cash used in investing activities amounted to US$0.2 million mainly as a result of returns received from our joint venture operations in Australia of US$17.8 million (2010: US$10.3 million) and reduced levels of capital expenditure. The corresponding figure from 2010 was a net usage of US$22.8 million primarily related to the purchase of plant and equipment in the Southern African region.

Summary Cash Flow

2011 US$’000

2010 US$’000

Opening cash and equivalents 226,096 179,798

Cash generated from operations 52,662 79,374

Interest & tax paid (20,840) (11,285)Returns from joint ventures 17,758 10,288Capital expenditure (12,803) (35,020)(Payments of)/proceeds from borrowings and finance leases (6,327) 9,285Dividends paid (14,002) (8,252)Other (4,837) 1,908

Closing cash and equivalents 237,707 226,096

Net cashUS$m

Net assetsUS$m

Cash flow used in financing activitiesNet cash used in financing activities for the year was US$21.0 million, mainly attributable to dividend payments in 2011 amounting to US$14.0 million and payment of finance lease liabilities and borrowings of US$6.5 million. The 2010 equivalent was cash generated of US$1 million.

Cash and cash equivalentsCash and cash equivalents amounted to US$237.7 million at year end, up US$11.6 million or 5.1% on the 2010 figure of US$226.1 million. Kentz own cash, consisting of gross cash (US$238.1 million) less borrowings (US$12.9 million) and client advances (US$42.0 million) increased by 15.6% to US$183.1 million during the period.

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Business reviewBoard of Directors

Christian Ian BrownChief Executive Officer, aged 42Christian Brown, a British national, joined Kentz as Group Chief Operating Officer in July 2011 and subsequently went on to become Chief Executive Officer and was appointed to the Board of Directors on 1 February 2012. He has over 20 years’ experience in the LNG, oil and gas, refining, and petrochemicals industries. He had a 17 year career with Kellog Brown and Root working across the Americas, Europe, Africa and the Middle East before joining Foster Wheeler in 2009. Previously, Christian held positions including Managing Director of Global Sales, Strategy and Marketing for Foster Wheeler (FW), Senior Vice President Operations FW USA, President KBR Canada, Director and General Manager KBR Construction Middle East and Africa. Earlier in his career he was a Project Manager, Construction Manager and Project Engineer. Christian is a mechanical engineering graduate from the University of Hull and has an MBA from Henley Management College. He is a Professional Engineer, member of the Association for Project Management and a Fellow of the Institution of Plant Engineers.

Tan Sri Mohd Razali Abdul RahmanNon-Executive Chairman, aged 64A Malaysian, Tan Sri Razali was appointed to the Board with effect from 6 May 1994. He holds a Bachelor’s degree in Commerce from the University of Newcastle, Australia and a Master’s degree in Financial Management from the University of Queensland, Australia, and is a fellow of the Australian Society of Certified Public Accountants. Tan Sri Razali is currently the Executive Chairman of Peremba (Malaysia) Sdn Bhd. He is also the Chairman of Saujana Resort Sdn Bhd and Focal Aims Holdings Berhad; the latter is a company listed on the Bursa Malaysia.


Edward Anthony PowerChief Financial Officer, aged 57Ed Power, an Irish national, was appointed to the Board on 31 January 2008, having previously been appointed to the Board of Management as Group Finance Director in 2002. Prior to that, he served as Group Financial Controller of Kentz Group since 1995 and as Group Financial Accountant since 1990. Before joining Kentz in 1990, he worked with US-owned multinationals such as Measurex and Hasbro in Ireland, the US, Germany and Spain. Ed is a graduate of Waterford Institute of Technology and is an associate member of the Chartered Institute of Management Accountants.

Hassan AbasNon-Executive Director, aged 58A Malaysian, Hassan Abas was appointed to the Board with effect from 6 May 1994. He holds a Bachelor of Arts (Honours) from the University of Lancaster and is a member of the Institute of Chartered Accountants, England & Wales. He is also a member of the Malaysian Institute of Accountants. Hassan is currently the Deputy Chairman of Peremba (Malaysia) Sdn Bhd and a Director of Jardine Cycle & Carriage Ltd (Singapore). He also sits on the board of several private companies.

David Michael BeldottiIndependent Non-Executive Director, aged 70An American, David Beldotti was appointed to the Board with effect from 5 February 2003. David’s experience in the EPC process business spans over 40 years with direct involvement in over 100 projects ranging in size from small engineering studies to multi-billion US dollar projects. Over the years, David has worked in over 30 different countries in all continents except Antarctica. The senior positions he has held during his tenure in the industry include President of Badger Europe/Africa, CEO McConnell Dowell, and President of Lummus Americas/East Asia.

Brendan LyonsIndependent Non-Executive Director, aged 64Brendan Lyons, an Irish national, was appointed to the Board on 31 January 2008. He holds a Bachelor of Engineering (Chemical) from University College Dublin. Brendan also holds a Master’s degree in Public Administration from the same university. Brendan has had a long career with the Department of Foreign Affairs of Ireland and is well placed to advise the Company on numerous political and cultural matters. Senior posts held with the Department of Foreign Affairs include Ambassador of Ireland in Riyadh, Kuala Lumpur, Singapore and Hanoi. He is currently President of Penang Medical College in Malaysia.

Hans Joachim KrausIndependent Non-Executive Director, aged 74An American, Hans Kraus was appointed to the Board on 31 January 2008. He holds a Bachelor’s degree in Mechanical Engineering from the University of Wyoming. Hans has over 40 years experience with Chevron Corporation, and has worked in various management positions in engineering, construction, operations, management and consulting and executive management. Key executive positions during his tenure with Chevron included Vice President of Projects, Project Director and General Manager/Coordinator of downstream projects worldwide.

Left to right: David Michael Beldotti, Brendan Lyons, Edward Anthony Power, Christian Ian Brown, Tan Sri Mohd Razali Abdul Rahman, Hassan Abas, Hans Joachim Kraus

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GovernanceDirectors’ Report

Directors’ ReportThe Directors have pleasure in presenting the Annual Report and Accounts for the year ended 31 December 2011.

Principal activitiesThe principal activities of the Group consist of the provision of mechanical, electrical, controls and instrumentation, engineering construction and management services to the oil and gas, petrochemical, power, process, water and environmental, communications and commercial and infrastructure services.

Board of DirectorsThe Directors who served the Company during the year ended 31 December 2011 were:

Tan Sri Mohd Razali Abdul RahmanHugh O’DonnellHassan AbasDavid BeldottiEd PowerHans KrausBrendan Lyons

Hugh O’Donnell resigned from the Board on 31 January 2012. Christian Brown was appointed to the Board on 1 February 2012.

Results and dividendsThe Consolidated Income Statement and Consolidated Statement of Financial Position for the year ended 31 December 2011 are set out on pages 66 and 68. Profit before taxation for the year amounted to US$79.4 million, an increase of 17.6% on the previous year. After providing for tax and non-controlling interests, the net profit attributable to shareholders was US$58.9 million (2010: US$47.3 million). Basic earnings per share amounted to US$50.61 cents compared with US$40.66 cents in the previous year, an increase of 24.5%. Dividends proposed and paid during the year amounted to US$14.0 million.

Business review and future developmentsA review of the Group performance for the year is included in the Chief Executive’s review.

Admission to Premium ListingThe ordinary shares of the Company were admitted to trading on the London Stock Exchange plc’s Main Market for listed securities on 22 July 2011. Trading in the Company’s ordinary shares on AIM was cancelled simultaneously. The Company’s stock code continued to be LSE: KENZ, with ISIN of JE00B28ZGP75 and there were 116,371,470 ordinary shares in issue on Admission.

Significant shareholdersInterests in 3% or more of the issued share capital which have been notified to the Company in accordance with the Articles of Association of the Company were:

At 31 December 2010 At 31 December 2011

No. of shares % No. of shares %

Kerbet Limited 30,875,000 26.53 30,875,000 26.53

Legal and General Investment Management – – 11,127,681 9.56

Hugh O’Donnell 7,500,000 6.44 7,500,000 6.44

Standard Life Investments 9,521,807 8.18 7,340,744 6.31

Blackrock Investment Management (UK) Limited 10,775,437 9.26 6,438,477 5.53

Danache Holdings Limited 7,602,135 6.53 5,623,325 4.83

BAE Systems Pension Fund Investors 5,725,000 4.92 4,581,906 3.94

Noel Kelly 3,935,000 3.38 2,245,000 1.93

WWW.KENTZ.COM 53KENTZ CORPORATION LTD ANNUAL REPORT AND ACCOUNTS 2011 53

Going concernThe Directors confirm that it is appropriate to apply the going concern concept in preparing the Financial Statements of the Group. In forming this view, the Directors have reviewed the Group’s budgets and projections, and have satisfied themselves that the Group is in a sound financial position.

Statement of Directors’ ResponsibilitiesJersey company law requires the Directors to prepare the financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the Company and of the profit or loss of the Group for that year. In preparing those financial statements, the Directors are required to:• Select suitable accounting policies and then apply them on a

consistent basis.• Make judgements and estimates that are reasonable and

prudent.• State whether applicable accounting standards have been

followed, subject to any material differences disclosed and explained in the Financial Statements.

• Prepare the Financial Statements on the going concern basis unless it is not appropriate to presume that the Group will continue in business.

The Directors are responsible for keeping proper books of accounting records which disclose with reasonable accuracy at any time the financial position of the Group and the Company and to ensure that the Financial Statements comply with relevant legislation. They are also responsible for safeguarding the assets of the Group and for taking reasonable steps for the prevention and detection of fraud and other irregularities.

AuditorsThe auditors, BDO, Registered Auditors, have expressed their willingness to continue in office in accordance with Article 109(4) of Companies (Jersey) Law, 1991.

On behalf of the Board of Directors

Christian Brown Ed PowerDirector Director10 April 2012

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GovernanceCorporate Report

The holding company of the Kentz Group, Kentz Corporation Limited (the Company), has a Premium Listing on the Main Market of the London Stock Exchange (LSE: KENZ) and is a member of the FTSE 250 index. The Company is incorporated in Jersey. The Directors are responsible for the management and control of the Company and recognise the value of the principles of good governance whereby the Company follows the recommendations of the UK Corporate Governance Code (the Code).

The Board considers that applying best practice in corporate governance is an integral element in developing, maximising and maintaining the success of the Group and in achieving its long-term goals. It is therefore committed to the highest standards of corporate governance and to instilling in the Group the related principles with which it believes business should be undertaken. This process is reviewed on a quarterly basis at each Audit Committee meeting where the Group Compliance Officer and the Committee review relevant updates and best practices in relation to Corporate Governance requirements.

UK Corporate Governance Code complianceKentz completed its move to a Premium Listing on the London Stock Exchange on 22 July 2011. As part of the process the Directors undertook a review of the requirements of the Code. This report covers how the Directors applied the principles of the Code during the year ended 31 December 2011. The Company is substantially compliant with the Code and, except where indicated, the provisions have been met.

At the request of the Directors, an independent consultant specialising in internal audit and corporate governance, has undertaken an evaluation of the Company’s compliance with the Code, which has guided this review.

Board compositionThe Board comprises seven members including three independent Non-Executive Directors, each contributing individual experience from diverse backgrounds. In addition, there are two non-independent Non-Executive Directors who have served on the Board since 1994. They provide focus and alignment and have many years of experience on the boards of publicly-traded companies. Finally, the two Executive Directors are responsible for the implementation of all Board decisions and oversee the management of the Group on a day-to-day basis. None of the Directors hold positions on the boards of other LSE-listed companies.

The Chairman of the Board was, when appointed, not independent as he was then (and remains) a significant shareholder of the Company.

In accordance with provision A.4.1 of the Code, David Beldotti was appointed as Senior Independent Director in October 2011.

David Beldotti is Chairman of the Audit Committee and the Risk Review Committee and is also a member of the Nomination and Remuneration Committees. His role is to ensure, inter alia, that shareholders have a channel through which to communicate with the Board, and that enquiries relating to our Code of Business Conduct are appropriately addressed.

Current Board Member PositionYear

Appointed

Tan Sri Razali Non-Executive Chairman 1994Hassan Abas Non-Executive Director 1994David Beldotti Non-Executive Director

Senior Independent Director20032011

Christian Brown Chief Executive Officer 2012Ed Power Chief Financial Officer 2008Hans Kraus Non-Executive Director 2008Brendan Lyons Non-Executive Director 2008

Board changesOn 31 January 2012, Hugh O’Donnell resigned as Chief Executive Officer and as a Director of the Company. He was succeeded in these roles by Christian Brown who previously held the position of Group Chief Operating Officer.

In accordance with the terms of reference of the Nomination Committee, the committee members are currently considering the requirement to appoint an additional non-executive Director to the Board.

The terms and conditions of appointment of all Directors are included in the Remuneration Committee Report on pages 62 and 63 of the Annual Report.

Re-electionThe Company does not currently comply with the Code in respect of the annual re-election of all Directors. The Board believes that its existing arrangements on the re-election of Directors as set out in the Articles provide continuity of governance, while enabling proper accountability and underpinning board effectiveness.

IndependenceThe Board considers the independence of each of the Non-Executive Directors upon appointment and on an annual basis or at any other time when circumstances change. The Board is satisfied that its composition will ensure that no individual, or group of individuals, will dominate the decision-making process.

Following a review of the Board composition, the Company, in line with provisions B.1.2 of the Code, regards three of the current Non-Executive Directors to be independent within the meaning of “Independent” as defined in the Code. The Board considers that David Beldotti, Hans Kraus and Brendan Lyons are independent in character and judgement and free from relationships or circumstances that affect their judgement. In judging the independence of these individuals, the Board has taken account of the following:• Independent Directors are not and have never been employees

of the Group.• Independent Directors do not receive any remuneration from

the Group other than Director fees, nor do they participate in the Company’s share option scheme, long-term incentive plan or the Company’s pension scheme.

• Independent Directors do not have any close family ties with any of the Company’s advisers, Directors or senior employees.

• Independent Directors do not have any shareholdings in the Company.

• Independent Directors do not have any links with other Directors through involvement in other companies.


Both Hans Kraus and David Beldotti have in the past provided additional and separately remunerated advice or other support to the Company. Previously Hans Kraus advised Kentz’s management on aspects of safety, health and environment and David Beldotti provided support to the Risk Review Committee on aspects of its activities. In neither case do the other Directors consider that this involved significant time and remuneration of the relevant Director relative to his overall commitments and income. These matters now come within the respective roles of Hans Kraus and David Beldotti as Directors and are reflected in their time commitment and ordinary remuneration as Directors.

After a rigorous review the Board continues to consider David Beldotti as independent, notwithstanding the fact he has been a Director of the Company for nine years in April 2012, and considers his extensive experience and knowledge of the industry to be invaluable to the Group’s success.

The Board undertakes regular reviews to ensure that its composition is balanced and that its Directors have relevant industry and financial experience.

Functioning of the BoardThe Board is collectively responsible for providing leadership, setting the Group’s strategic objectives and key policies and ensuring that appropriate resources are in place to achieve business success. The Board has put in place a schedule of matters reserved for its attention and approval. These include: • The Group’s long-term objectives and strategy.• Matters relating to the structure and capital of the Group.• Financial reporting and controls including internal controls,

risk management and group accounting policies.• Approval of annual operating budgets.• Matters relating to major capital expenses: projects,

contracts and acquisitions.• Approval of the dividend policy and proposed dividend

payments.• Approval of the Annual Report and Accounts.• Board membership and senior appointments; approval of

contracts with Directors or related parties including the determination of the remuneration for the Directors and executive management.

• Approval of the Board Committees’ terms of reference.• Undertaking an annual review of the Board’s performance

and that of its Committees and individual Directors.

The Board of Directors review and challenge the strategy process adopted by the management of the Company and the strategic plan which is developed bi-annually. At the January 2012 Board meeting, a detailed presentation was delivered by management as to the future direction of the Group which included a budget for 2012 along with strategic initiatives, a review of business and investment opportunities. Following a detailed review by the Board members, the strategic plan was agreed to be appropriate for the Group and the plan was approved. A detailed strategic review is currently under way which, once completed will be presented to the Board for further approvals.

There is a clear and formally documented division of responsibility between the roles of the Chairman and the Chief Executive to ensure an appropriate balance of responsibility and accountability.

It is the Chairman’s responsibility to ensure the effective functioning of the Board, including the provision of accurate, timely and clear information in relation to the Group and its business. He chairs the Board meetings, ensures the agendas are appropriate and is responsible for facilitating that all Directors actively contribute to the determination of the Group’s strategy. The Chairman is also responsible for encouraging debate and constructive criticism, speaking and acting for the Board and representing the Board to shareholders. The Board is satisfied that he makes sufficient time available to serve the Group effectively.

The Chief Executive is responsible for the day-to-day management of the Group and implementation of Group strategy, developing proposals for Board approval, and ensuring that a regular dialogue with shareholders is maintained.

Advice All Directors have unrestricted access to the Corporate Company Secretary. The current Company Secretary is a corporate entity, which provides advice on the normal statutory compliance items that enables the Board to fulfil its role.

Directors also have unrestricted access to members of Group senior management and a right to obtain independent professional advice at the Group’s expense in relation to their duties where they consider it appropriate to do so.

DevelopmentDuring 2011, prior to the Company moving from AIM to the Main Market, the Board received extensive briefings from the Company’s legal advisers, Simmons and Simmons and from its financial advisers Evolution Securities and Morgan Stanley. The Board also engaged with the Primary Listing Team at the London Stock Exchange to fully understand the ongoing requirements of moving from AIM to the Main Market in relation to the role and responsibility of the Board.

Management of conflicts of interest The 2006 Companies Act (the Act) places a statutory duty on Directors to avoid a situation where they have, or could have, a direct or indirect interest that conflicts, or possibly may conflict with the Group’s interests.

At the Annual General Meeting held on 27 May 2011, shareholder approval was obtained for the Company to adopt new Articles of Association coinciding with its admission to the Main Market. These new Articles include provisions for dealing with Directors’ conflicts of interests under which Directors are required to notify the Company Secretary of such events as they arise so that they can be considered by the Board. A Director may not vote on or be counted in the quorum to vote on any contract, arrangement, transaction or proposal in which he is interested except those specifically permitted in article 61.3 of the Articles of Association.

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Non-Executive Directors are also required to avoid any engagements with or instructions from other persons that might result in the creation of a conflict of interest. In the event such a situation has arisen, or is about to arise, the Non-Executive Director is required to notify the Board. If the Board decides that a conflict of interest has arisen, or may arise, the Non-Executive Director must immediately cease such activity or resign from the Board.

Directors are required to disclose any conflicts of interests at all Board and Committee meetings that may exist or appear to exist.

The Company has a share dealing code that covers dealings in its own shares by Directors and employees. It complies with the provisions of the UK Listing Rules and restricts dealings in shares and other relevant securities by Directors and employees during the designated close periods and any time that they are in possession of unpublished price-sensitive information. A notification outlining the dates of close periods is issued to Directors and employees by the investor relations team prior to commencement of the close period.

Directors are also obliged to notify the Company of their shareholding in the Company on appointment and to seek Board approval for any acquisition or disposal of shares while acting as a Director.

The Company maintains a Register of Directors Interests at its registered office. Changes to Directors’ interests are reviewed at each scheduled Board Meeting.

2011 Board and Committee members’ attendance

BoardRisk Review Committee

Audit Committee

Remuneration Committee

Nomination Committee

Number of meetings 4 4 4 4 2

Tan Sri Razali 4 – – – 2Hassan Abas 4 – 4 – –David Beldotti 4 4 4 4 2Brendan Lyons 4 – 3 4 2Hans Kraus 4 4 4 4 –Hugh O’Donnell 4 4 – – –Ed Power 4 4 – – –

Board performance evaluationThe performance of the Board is critical to the success of the Company. The Board regularly reviews its own performance and to date this review has been conducted internally. The Board is satisfied that each Director continues to contribute effectively and to demonstrate commitment to his responsibilities. The Chairman reviews the performance of each Non-Executive Director and that of the Executive Directors serving on the Board. The Chairman regularly meets with the Non-Executive Directors, without the Executive Directors present, to discuss issues pertaining to performance and remuneration; independent of this, the Chief Executive’s performance is reviewed by the Board on an annual basis. The Non-Executive Directors led by the Senior Independent Director also meet annually to evaluate the performance of the Chairman after taking into account the views of the Executive Directors.

Risk Review Committee The Risk Review Committee comprises David Beldotti as Chairman, Christian Brown, Ed Power and Hans Kraus. The Committee meets at least four times a year and at the Chairman’s request, Adrian Griffin, the Group Commercial, Contracts and Risk Officer, also attends these meetings. The Committee is responsible for: • Maintaining and improving the internal systems for control

and risk management.• Continually reviewing the effectiveness of systems for internal

control, covering all material controls including financial, operational and compliance controls and risk management.

• Reviewing the process for identifying the principal business risks facing the Group, the methods of managing these risks, the controls that are in place to contain them and the procedures to monitor them.

• Making recommendations for consideration by the Board of any actions it deems necessary to better protect the interests of the Company.

Æ Page 38 for full risk factors breakdown

Audit Committee The Audit Committee comprises David Beldotti as the Chairman, Hans Kraus, Hassan Abas and Brendan Lyons. The Audit Committee meets at least four times a year at appropriate times in the reporting and audit cycle and otherwise as required. Other members of the Board may also be invited to attend meetings as and when appropriate. The Group’s external auditor, BDO, is invited to attend meetings of the Audit Committee on a regular basis. The Audit Committee’s responsibilities include:• Monitoring the integrity of the reported financial performance

of the Group, including its preliminary results announcement, Annual Report and interim report and to review the appropriateness of related accounting policies, material assumptions and significant judgements adopted in their preparation.

• Reviewing the effectiveness of the Group’s internal financial controls.

• Monitoring and reviewing the effectiveness of the Group’s internal audit function.

• Making recommendations to the Board on the appointment and removal of the external auditors.

• Monitoring the objectivity and independence of the external auditors.

• Developing and implementing policy on the engagement of the external auditors to supply non-audit services.

• Meeting at least annually with the external auditor and Group Internal Audit Manager in the absence of executive management.

The Directors consider that David Beldotti and Hassan Abas have competence in accounting and auditing matters and have relevant financial experience over an extended period of time in international businesses. David Beldotti holds a Masters of Business Administration with a major in Finance and has extensive experience of audit committee duties in the Company and in other companies. Hassan Abas is a member of the Institute of Chartered Accountants, England & Wales and the Malaysian Institute of Accountants. He also chairs the audit committee of Jardine Cycle and Carriage Ltd, a public company in Singapore.

GovernanceCorporate Report continued


The Audit Committee has put in place procedures relating to the provision of non-audit services by the Group’s external auditors. These procedures specify services that are permitted to be carried out by the external auditors and those that are not permitted. They also require that non-audit work with fees above a specific value to be approved in advance by the Audit Committee and the process of how that work should be tendered for.

During 2011, the Company engaged BDO as Reporting accountants to facilitate its move from AIM to the Main Market of the London Stock Exchange. BDO were paid fees of US$351,000 for their services. This appointment was approved by the Audit Committee. This work was non-advisory in nature and no management decisions were taken by BDO.

While the Group does not consider it necessary to have a formal requirement for rotation of external auditors, it has recently introduced a policy under which every three years the Audit Committee will consider the appropriateness of putting the external audit out to tender and will inform the shareholders as to their decision.

Nomination Committee The Nomination Committee comprises Tan Sri Mohd Razali Abdul Rahman as the Chairman, Brendan Lyons and David Beldotti. The Nomination Committee meets at least twice a year and at such other times required by the Chairman of the Committee. The duties of the Nomination Committee include:• Identifying and nominating, for the approval of the Board,

candidates to fill Board vacancies.• Review annually the overall effectiveness of the Board as

a whole and the individual Directors in discharging their stewardship function and responsibilities.

• Carry out succession planning for the Board where required.• Regularly review the structure, size and composition of

the Board.• Keep under review the leadership needs of the Group for

both executive and non-executive positions.

During 2011, the Committee met twice. Prior to the graduation of the Company to the Main Market the composition of the Board was reviewed. The terms of this review were disclosed in the prospectus. The Committee is satisfied that the current composition of the Board is adequate to provide guidance to the Group.

The Committee will continue to review the Board and leadership needs of the Group and to make appropriate policy recommendations in terms of skills, gender and qualifications, to ensure the ability of the organisation to compete effectively in the marketplace with uninterrupted leadership.

Remuneration CommitteeThe Remuneration Committee comprises Brendan Lyons as the Chairman, Hans Kraus and David Beldotti. The Remuneration Committee meets at least four times a year and is responsible for:• Monitoring the level and structure of remuneration for senior

management.• Determining the framework or broad policy for the remuneration

of the Group’s executive management.• Agreeing the remuneration for all Executive Directors and the

Chairman, including the terms of service and employment contracts and share-based schemes.

• Other employee incentive schemes adopted by the Group from time-to-time and pension arrangements.

The remuneration of Non-Executive Directors is a matter for the executive members of the Board to consider and evaluate annually. No Director is involved in any decisions as to their own remuneration.

Executive Directors and senior management compensation comprises of base salary and benefits, short-term cash incentives to drive annual financial performance, and long-term incentives comprising equity awards vesting after a three year period with the aim of driving long-term shareholder value.

Material inaccurate reporting or statements are regarded as a misconduct event and would result in all unvested long-term incentive awards lapsing immediately.

All long-term incentive equity awards, either options, performance or contingent stock have a minimum three year vesting period consistent with the Code.

Æ Page 60 for full Report of the Remuneration Committee

Internal AuditInternal Audit and compliance monitoring work is carried out by the Group Internal Audit Manager and Group Compliance Officer, supported by independent specialist consultants as required. The Group Internal Audit Manager reports to the Chairman of the Audit Committee and works closely with the Chief Financial Officer to ensure direct and transparent communication around all internal audit activity.

The Internal Auditor Manager’s role includes providing the Board with appropriate reports to assist them in their annual review of the Group’s internal control systems. He is responsible for reviewing specific areas of the Group’s operations in line with an annual plan, which is agreed with the Audit Committee annually.

Control framework and activities The Directors are responsible for establishing, maintaining and reviewing the effectiveness of the Group’s internal control systems. These systems are designed to manage, but not necessarily eliminate, the risks to the Group. They provide reasonable but not complete assurance against material loss or misstatement, including that from fraud.

The internal control systems are reviewed by the Board on a regular basis. Throughout the year, senior management provide the Board with related reports to assist them with this review.

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The main elements of the internal control framework are set out below.

The Group has a clear management structure with defined lines of responsibility and clear delegation of authority. A key element of the overall control is directed by the Management Executive Committee, comprising the key senior executives of the Company. The Committee meets six times annually and its main focus and responsibilities are:• Overseeing the Safety Leadership Charter.• Developing and implementing Group strategy.• Carrying out formalised risk reviews on selected projects

throughout the Group.• Reviewing Group financials, annual budgets and forecasts.• Ensuring appropriate guidance is given to analysts.• Planning news/project announcements.• Reviewing Group backlog position across the Group.

The Chief Executive Officer reports at each Board meeting on the Group operational environment and activities of the Management Executive Committee.

The Group’s policies and procedures are reviewed on a periodic basis and updated as necessary on an ongoing basis, for example those in relation to ethical business dealings as noted below. This process is designed to ensure that the Group’s policies and procedures are up-to-date, meet the Group’s requirements and are in line with best practice.

UK Bribery Act 2010The new UK Bribery Act came into force in July 2011. Guidance from the government suggests that companies should adopt a risk-based approach to the application of the UK Bribery Act and as such the Company is currently obtaining legal advice concerning how the legislation will impact the Group. The Board has charged the Chief Financial Officer with overseeing its application to the Company.

The Company relationships with shareholdersThe Board represents the shareholders and is accountable to them for creating and delivering value through the effective governance of the business. It aims to develop a mutual understanding with shareholders on the Group’s strategic objectives and remains fully committed to ensuring regular communication with shareholders and reviews the following activities:• The provision of regular dialogue with major institutional

shareholders.• Press releases regarding Company news which have been

issued throughout the year.• Kentz Group website, which contains all current news,

including corporate presentations and accounts.• The Annual Report is issued to all registered shareholders and

contains extensive information about the Company’s activities.

Shareholders are encouraged to attend the Annual General Meeting which is attended by all Directors, to deal with any matters raised by shareholders. Questions relating to the strategy, performance and progress of the Company are welcomed at this meeting.

The CEO, CFO and the investor relations team maintain regular dialogue with institutional shareholders. Formal meetings with investors, analysts and media take place throughout the year; at preliminary and interim results and at other times as requested by the investment community. Copies of these results presentations can be viewed on the Group’s website.

The Group’s investor relations team, based in London, acts as a point of contact for investors throughout the year. The Senior Independent Director is also available to shareholders on their request.

Insurance coverThe Company maintains Directors’ and Officers’ liability insurance cover, the level of which is reviewed annually.

Company SecretaryThe current Company Secretary is a corporate entity, which provides advice on statutory compliance that enables the Board to fulfil its role. Other duties that would normally be carried out by an internal Company Secretary, such as the provision of timely information to the Board, are fulfilled by either the CEO or CFO. In terms of Corporate Governance issues the Board is advised by the Group Internal Audit Manager and external advisers as appropriate. The appointment or removal of a Company Secretary is a matter for the Board as a whole. The Board is satisfied that the current arrangement is adequate but will continue to review its effectiveness.

Code of Business ConductThe Group continues to maintain and build on our already well-established high standards of business conduct and ethics. In September 2011, the Company formalised all of the important behaviours expected of Group employees into a single Code of Business Conduct, which was approved by the Board.

The Group is committed to ensuring the highest legal standards and moral ethics guide all its business activities. This applies to the behaviour of all Directors, staff, sub-contractors, agents, consultants, contract labour, suppliers and others representing or acting for, or on behalf of the Company, its subsidiaries or joint ventures. The Code of Business Conduct sets out to ensure that at every level of the organisation, at all times, all employees conduct through their own actions, their dealings internally and with third parties with the highest standards of honesty, integrity and fairness and foster an environment based on such standards, as well as complying with all related legislation in the countries in which they operate within.

GovernanceCorporate Report continued


The Group has its own internal procedures for monitoring compliance set out in its Code of Business Conduct, but also relies on its employees and external bodies “speaking up” where they become aware of actual or potential breaches of it. Speaking up relates to the disclosure of information by an employee or external body if they have a genuine concern about malpractice anywhere in the Group, such as instances of contravention of internal policies and legal and ethical standards, including activities or inactivities that put at risk the health and safety of Group employees or others, breaches of any environmental or regulatory requirements, bribery and corruption, false accounting, fraud and failure to comply with a legal obligation or a deliberate concealment of information relating to any of the above.

The Group is committed to ensuring any employee or external body’s concerns of malpractice are taken seriously and investigated and the ways to raise such concerns are set out in the Code of Business Conduct which can be found on the Kentz website www.kentz.com.

Share Dealing CodeThe Company has a share dealing code that covers dealings by Directors and employees. This code complies with the provisions set out in the Model Code contained in Annex 1 to Listing Rule 9 of the UK Listing Rules. This code restricts dealings in shares and other relevant securities by Directors and employees during the designated prohibited periods and any time that they are in possession of the unpublished price-sensitive information. A notification outlining the dates of close periods is issued to Directors and employees by the investor relations team a month prior to each period’s commencement.

Market DisclosureWe are committed to maintaining the highest standards of disclosure ensuring that all investors and potential investors have the same access to relevant information in an accessible and timely manner to assist them in making informed decisions. Copies of announcements to the market, investor presentations, the Annual Report and other relevant information are published on the Kentz website.

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KENTZ CORPORATION LTD ANNUAL REPORT AND ACCOUNTS 2011 WWW.KENTZ.COM60

Members of the Remuneration CommitteeBrendan Lyons, ChairmanHans KrausDavid Beldotti

Main Responsibilities• Recommending and monitoring the level and structure of remuneration for

senior management.• Determining the framework or broad policy for the remuneration of the

Group’s executive management. • Agreeing the remuneration for all Executive Directors and the Chairman,

including the terms of service and employment contracts and share-based schemes.

• Overseeing and monitoring other employee incentive schemes adopted by the Group from time-to-time including pension arrangements.

Unaudited Information

Remuneration Committee The Committee met four times during 2011 and the attendance record of individual Committee members is shown on page 56 of the Annual Report.

All three members of the Remuneration Committee, including the Chairman Brendan Lyons, were considered by the Board to be independent during 2011 according to the criteria of independence set out in the Code.

Following a review, the current terms of reference of the Remuneration Committee were adopted by the Board on 23 June 2011 immediately prior to the Company’s listing on the Main Market of the London Stock Exchange. These provide that it will determine and agree with the Board the framework or broad policy for the remuneration of the Group’s executive management and fix the remuneration for all Executive Directors, the Chairman and senior management of the Company. The remuneration of Non-Executive Directors is a matter for the executive members of the Board. No Director is involved in any decisions as to their own remuneration.

As recommended by the UK Corporate Governance Code, the Company has set the remuneration of Executive Directors at levels sufficient to attract, retain and motivate individuals of the quality required to run the Company successfully.

The Company has taken into account the level of compensation in its industry and in the geographical markets in which it operates; the Company’s need for executive talent to continue its growth; and the equitable rewarding of its employees.

Advice to the Remuneration CommitteeThe CEO and CFO provide internal support to the Remuneration Committee and attend meetings at the Committee’s invitation, except where matters associated with their own remuneration are being discussed.

The Remuneration Committee and its members are entitled to seek external advice as and when required. During the year the Company, using an outside consultant and its own resources, conducted a comprehensive exercise, benchmarking the compensation of its Executive Directors and senior management against comparable positions in similar companies.

Following the review, the Company modified its compensation scheme to reflect industry practices for short-term incentives (STI), (annual cash bonus), long-term incentive (LTI) equity-based awards and total compensation as set out on pages 61 and 62.

Executive Award Policy Kentz is a global engineering and construction company, operating in 29 countries, competing against international firms. The Remuneration Committee, with support from external consultants, has established executive compensation consistent with the external competitive environment. Executives are paid competitive base salaries and their overall remuneration is subject to achieving annual financial and long-term strategic goals.

Short-term and long-term incentivised components of executive remuneration are variable. Levels of payout, determined by the Remuneration Committee, reflect executive and overall Group performance.

GovernanceReport of the Remuneration Committee

Brendan LyonsRemuneration Committee Chairman

KENTZ CORPORATION LTD ANNUAL REPORT AND ACCOUNTS 2011 61WWW.KENTZ.COM

Balance between fixed and performance related pay

Chief Executive total compensation at threshold levels comprises a 50% bonus award based upon achieving the minimum financial threshold. The bonus award is a mix of 70% cash based short-term incentive and 30% equity based long-term incentive. The annual bonus award can be increased subject to the Chief Executive achieving financial, strategic and personal objectives, the maximum annual award amount shall not exceed 500% of basic salary.

Chief Financial Officer total compensation at threshold levels comprises a 40% bonus level based upon achieving the minimum financial threshold. The bonus award is a mix of 70% cash-based short-term incentive and 30% equity-based long-term incentive. The annual bonus award can be increased subject to the Chief Financial Officer achieving financial, strategic and personal objectives, the maximum annual award amount shall not exceed 200% of basic salary.

Base PackageBase packages reflect the Remuneration Committee’s assessment of the appropriate market fees for executive positions in the industry, as well as an individual’s level of responsibility, criticality and value to the business. Salaries are set at a level that allows the Company to attract and retain the very best talent.

Following a review undertaken during the year, the Remuneration Committee has decided that base salaries for Executive Directors should be increased for 2012. This decision was taken in view of the general environment for salary increases for employees across the Group and the industry, as well as the investor environment and a desire to align remuneration with performance-based incentives.

Name 2012 base package 2011 base package % Increase

Christian Brown* US$565,500 n/a n/aHugh O’Donnell* n/a US$493,325 n/aEd Power US$346,477 US$329,979 5%

* With effect from 31 January 2012, Hugh O’Donnell resigned as Chief Executive Officer of Kentz and ceased to be an Executive Director. Christian Brown succeeded him as Chief Executive Officer and Executive Director of Kentz.

Annual BonusThe Remuneration Committee recommends the level of annual bonuses paid to the Executive Directors. The cash element of the annual bonus is split into two parts: one at the year-end and the other following the approval of the full year results. There are no individual targets for Executive Directors, but for any bonus to be paid, a minimum level of Company performance must be achieved. The payments to individual Executive Directors are shown in the Directors’ Emoluments table on page 64.

During the year, overall compensation was restructured so that some element of the annual cash bonus will be replaced in part by Long-Term Incentive equity-based awards, thus structuring Executive Directors’ and senior management’s remuneration to link a significant element to the Company’s and the individual’s performance.

Chief Executive total compensation at threshold level%

Chief Executive total compensation at maximum level%

67% Salary23% STI10% LTI


Chief Financial Officer total compensation at threshold level%

Chief Financial Officer total compensation at maximum level%



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GovernanceReport of the Remuneration Committee continued

Long-Term IncentivesThe Long-Term Incentive award is a mixture of contingent stock awards (70% of award value) and performance stock awards (30% of the value) with a three-year vesting period. For the performance stock to vest in full, Kentz’s average basic earnings per share (EPS) growth must not be less than the average basic EPS growth for the same period for a peer group of designated industry competitors. If the Kentz actual basic EPS growth is more than 90% but less than 100% of the industry competitors’ performance, a pro-rated award value will be made. No vesting of performance stock will be made if Kentz’s basic EPS growth is less than 90% of the industry competitors’ average EPS growth.

Share Option Scheme The Company operates an equity-settled share-based remuneration scheme for key management. All key management are eligible to participate in the scheme, the only vesting condition being that the individual remains an employee of the Group over the savings period. In addition, the options will lapse if the individual leaves within 2 years of satisfying the criterion.

PensionsExecutive Directors receive pension contributions of an annual amount equal to 10% of their base salary, paid into the Company pension scheme.

Non-Executive Directors do not participate in the Company’s pension arrangements.

Other BenefitsThe Company’s policy is to provide Executive Directors with private medical insurance, life assurance and a company car allowance. In addition, Executive Directors are entitled to housing allowances dependent on their geographical location.

ShareholdingThe Executive Directors hold a substantial number of shares in the Company and have interests in shares under share incentive arrangements at 31 December 2011 as shown below.

Shares held Hugh O’Donnell* Ed Power Christian Brown*

Ordinary shares 7,500,000 1,018,936 –Share options 127,000 127,000 –

Ed Power’s shares are held indirectly through Danache Holdings Limited. Ed Power has a beneficial interest of approximately 18.1% of Danache Holdings Limited. The shares in Danache Holdings Limited are held by Essex Trust Limited in trust for certain managers of the Group, of which Ed Power is one.

Service AgreementsThe Executive Directors’ service agreements with the Company do not set a fixed term. In normal circumstances, the agreements may be terminated by the Company or by the Director giving no less than six months’ notice for the Chief Financial Officer and no less than 12 months’ notice for the Chief Executive Officer. The Board is of the view that these notice periods are appropriate to recruit and retain the Executive Directors. During 2011 the Remuneration Committee reviewed the employment contracts of Executive Directors as part of the preparation for the transfer to the Main Market of the London Stock Exchange.

Executive Director Date of Contract Unexpired term Notice period by Company Notice period by Director

Christian Brown* 18 January 2012 No fixed term 12 months 12 monthsHugh O’Donnell* 15 November 2010 n/a 12 months 12 monthsEd Power 15 November 2010 No fixed term 6 months 6 months

* With effect from 31 January 2012, Hugh O’Donnell resigned as Chief Executive Officer of the Company and ceased to be an Executive Director. Christian Brown succeeded him as Chief Executive Officer and Executive Director of the Company.

non-Executive DirectorsThe Non-Executive Directors do not have service contracts, but their terms of service are set out in a letter of appointment which provides, inter alia, that a Non-Executive Director may resign at any time; and that their service may be terminated by the Company giving three month’s notice, or by shareholders refusing to re-elect them. Appointment may be terminated by each party giving three months’ notice in writing.

The Board does not comply with Code Provision B.7.1, in respect of the annual re-election of all directors. The Board believes that its existing arrangements on the re-election of directors provide continuity of governance, while enabling proper accountability and underpinning Board effectiveness. Directors submit for re-election every three years with the exception of David Beldotti and Hans Kraus, who both being over 70 years of age will submit for re-election on an annual basis.

KENTZ CORPORATION LTD ANNUAL REPORT AND ACCOUNTS 2011 63WWW.KENTZ.COMWWW.KENTZ.COM 63

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Fee levels for 2011 and 2012 are set out below.

USD 2011 – Pre Listing 2011 – Post Listing Total 2011 2012 Changes in Membership of Committees Post-listing

Tan Sri Razali 64,640 61,211 125,851 149,842 n/aHassan Abas 43,428 43,467 86,895 102,524 n/aDavid Beldotti 55,216 80,540 135,756 197,161 Chair of Risk Review Committee as

of 23 June 2011Brendan Lyons 47,294 58,514 105,808 138,013 Member of Audit Committee as of

23 June 2011Hans Kraus 47,520 56,378 103,898 138,013 Member of Risk Review Committee

as of June 2011

Table of Non-Executive Directors’ Fees

Pre-listing on 22 July 2011 (£ Stg) From 22 July 2011 (£ Stg)

Directors’ Fees 30,000 50,000Chairman of the Board 25,000 30,000Chairman of the Audit Committee 20,000 30,000Chairman of the Risk Review Committee n/a 30,000Chairman of the Remuneration Committee 10,000 15,000Chairman of the Nomination Committee 10,000 15,000Member of the Audit Committee 12,000 15,000Member of the Risk Review Committee n/a 15,000Member of the Remuneration Committee 5,000 7,500Member of the Nomination Committee 5,000 7,500

Terms of appointment and reappointment are set out below:

Date of contract Notice period Last re-election

Tan Sri Razali 23 June 2011 3 months 2010 AGMHassan Abas 23 June 2011 3 months 2011 AGMDavid Beldotti 23 June 2011 3 months 2011 AGMBrendan Lyons 23 June 2011 3 months 2010 AGMHans Kraus 23 June 2011 3 months 2010 AGM

Performance GraphThe Company’s share price performance since listing on the Main Market against the FTSE 250 Index.

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Audited InformationDirectors’ Remuneration

Base package/fees

US$’000Benefits

US$’000Annual Bonus

US$’0002011 Total US$’000

2011 Pension US$’000

2010 Total US$’000

2010 Pension US$’000

Executive DirectorsHugh O’Donnell 493 88 1,800 2,381 65 2,319 123Ed Power 330 71 367 768 47 914 89non-Executive DirectorsTan Sri Razali 126 – – 126 – 100 –Hassan Abas 87 – – 87 – 67 –David Beldotti 136 – – 136 – 164 –Brendan Lyons 106 – – 106 – 73 –Hans Kraus 104 – – 104 – 89 –

Directors’ beneficial interests in ordinary shares

At 31 December 2010 At 31 December 2011

No. of shares % No. of shares %

Hugh O’Donnell 7,500,000 6.44 7,500,000 6.44Ed Power 1,018,936 0.87 1,018,936 0.87Tan Sri Razali 15,437,500 13.27 15,437,500 13.27Hassan Abas 15,437,500 13.27 15,437,500 13.27

(i) These shares are held indirectly by Hassan Abas and Tan Sri Mohd Razali Abdul Rahman respectively through Kerbet Limited. 20% of the shares in Kerbet Limited are beneficially held by Covili Investment Limited and the remaining 80% held by Gigondas Real Estate Inc. Each of Hassan Abas and Tan Sri Mohd Razali Abdul Rahman indirectly hold a beneficial interest of 50% of the shares in both of Covili Investment Limited and Gigondas Real Estate Inc.

(ii) These shares are held indirectly by Ed Power through Danache Holdings Limited. Ed Power has a beneficial interest of approximately 18.1% of Danache Holdings Limited. The shares in Danache Holdings Limited are held by Essex Trust Limited in trust for certain managers of the Group, of which Ed Power is one.

The Company operates a share option scheme for certain employees and in addition to the interests disclosed above certain Directors have options to acquire shares in the Company.

Number of shares at

1 Jan 2011

Shares granted in the

year

Shares exercised in

the year

Number of shares at

31 Dec 2011Exercise price

STG £ Exercise date Expiry date

Hugh O’Donnell 127,000 – – 127,000 1.545 1 July 2012 30 June 2019Ed Power 127,000 – – 127,000 1.545 1 July 2012 30 June 2019

No options lapsed during the year. The market price of the shares at 31 December 2011 was Stg£4.22 and the price during 2011 ranged from Stg£3.22 to Stg£5.08.

Awards of shares under the Long-Term Incentive PlanShares awarded to Executive Directors under the Long-Term Incentive Plan (LTIP) were:

2011 2010

No of shares US$ No of shares US$

Hugh O’Donnell 57,124 400,000 – –Ed Power 32,797 229,656 – –

The above share awards were made to the Executive Directors on 9 January 2012 pursuant to the Company’s LTIP scheme. These share awards form part of their 2011 annual bonus.

The share awards have been granted on a conditional basis and no shareholder rights will be conferred upon the grantee until the awards have vested. Such vesting is subject to, inter alia, the achievement of the performance criteria of the scheme over the three year measurement period to 31 December 2014 in relation to 30% of the award and the executive’s continued employment with the Group over the three year period in relation to the balance.

GovernanceReport of the Remuneration Committee continued


To the shareholders of Kentz Corporation LimitedWe have audited the Group Financial Statements of Kentz Corporation Limited (“the Company”) and its subsidiaries (together “the Group”) for the year ended 31 December 2011 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity and the related notes 1 to 34. These Group Financial Statements have been prepared under the accounting policies set out therein.

This report is made solely to the Company’s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991 and the terms of our letter of engagement. 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 AuditorsThe Directors are responsible for preparing the Annual Report and the Group Financial Statements in accordance with applicable Jersey law as set out in the Statement of Directors’ Responsibilities and International Financial Reporting Standards.

The Directors have complied with the requirements of rules 9.8.7 and 9.8.7A of the Listing Rules of the UK Financial Services Authority in preparing its Annual Report. Our responsibility is to audit the Group Financial Statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the Group Financial Statements give a true and fair view and whether the Group Financial Statements have been properly prepared in accordance with the Companies (Jersey) Law 1991. We also report to you whether, in our opinion, we have not received all the information and explanations we require for our audit.

We read other information contained in the Annual Report and consider whether it is consistent with the audited Group Financial Statements. The other information comprises the Chairman’s Statement, Chief Executive Officer’s Report, the Corporate Governance Report, Chief Financial Officer’s Report, Directors’ Report and the Report of the Remuneration Committee. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Group Financial Statements. Our responsibilities do not extend to any other information.

Basis of opinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Group Financial Statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the Group Financial Statements, and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Group Financial Statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the Group Financial Statements.

OpinionIn our opinion:• The Group Financial Statements give a true and fair view,

in accordance with the International Financial Reporting Standards, of the state of the Group’s affairs as at 31 December 2011 and of its profit for the year then ended.

• The Group Financial Statements have been properly prepared in accordance with the Companies (Jersey) Law 1991.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following;Under the Companies (Jersey) Law 1991 we are required to report to you if, in our opinion:• proper accounting records have not been kept, or proper

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

• the financial statements are not in agreement with the accounting records and returns; or

• we have not received all the information and explanations we require for our audit.

Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to the company’s compliance with the nine provisions of the UK Corporate Governance Code specified for our review.

Michael CostelloSenior statutory auditorFor and on behalf of BDODublin, IrelandRegistered AuditorsAI22387610 April 2012

Financial statementsIndependent auditors’ report

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Financial statementsConsolidated income statement

Year ended 31 December

In thousands of USD Note 2011 2010

Revenue 3 1,367,529 1,057,355Cost of sales (1,206,609) (923,864)

Gross Profit 160,920 133,491

Selling, general & administration expenses (96,136) (78,005)Other operating income 1,349 869

Operating profit before finance costs 3, 4 66,133 56,355

Finance income 6 1,798 1,509Finance costs 6 (2,473) (1,329)Share of joint ventures’ profit 13 13,981 10,943

Profit before tax 79,439 67,478

Tax expense 7 (18,127) (18,473)

Profit for the year 61,312 49,005

Attributable to: Equity holders of the parent 58,867 47,313 Non-controlling interests 19 2,445 1,692


Earnings per share (US$ cents) 9Basic 50.61 40.66Diluted 48.98 39.91

The attached notes 1 to 34 form part of these Consolidated Financial Statements.

On behalf of the Board

Christian Brown Ed PowerDirector Director

For the year ended 31 December 2011


Financial statementsConsolidated statement of comprehensive income



In thousands of USD Note 2011 2010

Profit for the year 61,312 49,005Other comprehensive incomeExchange translation differences– on employee benefits 331 908– on foreign currency net investments 543 (1,887)Actuarial (losses)/gains on defined benefit plans 25 (3,227) 1,877

Total other comprehensive (expense)/income (2,353) 898

Total comprehensive income 58,959 49,903

Total comprehensive income attributable to:Equity holders of the parent 56,514 48,211Non-controlling interests 19 2,445 1,692

Total recognised income and expenses for the year 58,959 49,903


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In thousands of USD Note


2011 2010

ASSETSnon-current assetsProperty, plant & equipment 10 60,188 68,962Goodwill 11 3,594 –Intangible assets 12 922 –Other investments 13 3,805 7,501Trade and other receivables 15 1,085 615Deferred tax asset 23 4,278 3,355

Total non-current assets 73,872 80,433

Current assetsInventories 14 126,601 80,699Trade and other receivables 15 287,156 222,462Amounts owed by related parties 30 3,886 4,902Cash and bank balances 16 238,127 231,334

Total current assets 655,770 539,397

Total assets 729,642 619,830

EQUITYShare capital 17 2,284 2,284Share premium 39,568 39,568Treasury shares/reserve (706) –Reserves 7,651 4,772Retained earnings 177,511 134,999

Total equity attributable to equity holder of the parent 226,308 181,623

Non-controlling interests 19 11,364 9,277

Total equity 237,672 190,900

LIABILITIESnon-current liabilitiesInterest bearing loans and borrowings 21 59 31Obligations under finance leases – due after 1 year 24 7,357 13,916Employee benefit obligations 25 9,013 8,638Amounts owed to related parties 30 92 92Trade and other payables 20 5,022 2,894Deferred tax liabilities 23 3,437 3,099

Total non-current liabilities 24,980 28,670

Current liabilitiesTrade and other payables 20 439,816 369,857Corporation tax payable 17,244 14,294Interest bearing loans and borrowings 21 477 6,608Obligations under finance leases – due within 1 year 24 5,059 5,259Amounts owed to related parties 30 4,394 4,242

Total current liabilities 466,990 400,260

Total liabilities 491,970 428,930

Total equity & liabilities 729,642 619,830


The Financial Statements were approved and authorised for issue by the Board on 10 April 2012.

Christian Brown Ed PowerDirector Director

Financial statementsConsolidated statement of financial position

As at 31 December 2011


In thousands of USD Note


2011 2010

Cash flows from operating activitiesProfit before tax 29 79,439 67,478Adjustments for: Depreciation 4,10 16,755 14,447 Net finance costs/(income) 6 675 (180) Loss/(gain) on sales of property, plant & equipment 4 661 (237) Impairment of property, plant & equipment 10 1,517 – Share of profit from joint ventures 13 (13,981) (10,943) Amortisation of intangible assets 12 659 – Current service cost 25 – 446 Share-based payment expense 26 2,879 1,567 Increase in trade and other receivables (62,530) (36,568) Increase in inventories (45,522) (55,549) Increase in trade and other payables 72,110 98,913

Cash generated from operations 52,662 79,374

Interest paid 6 (2,242) (951)Income taxes paid (18,598) (10,334)

net cash from operating activities 31,822 68,089

Cash flows from investing activitiesReturn from joint ventures 17,758 10,288Change in control of subsidiary – 6,363Acquisition of subsidiary, net of cash acquired 32 (4,957) –Purchase of property, plant and equipment 10 (12,803) (35,020)Proceeds from sale of equipment 742 306Interest received 6 1,798 1,509Pension contribution 25 (2,751) (6,282)

net cash used in investing activities (213) (22,836)

Cash flows from financing activitiesProceeds from finance lease liabilities – 11,980Payments of finance lease liabilities (4,988) (2,856)Proceeds from long-term borrowings 79 31Payments of long-term borrowings (45) –Proceeds from short-term borrowings 54 130Payments of short-term borrowings (1,427) –Treasury shares purchased 18 (706) –Dividends paid to equity holders of the Company 8 (14,002) (8,252)

net cash (used in)/generated from financing activities (21,035) 1,033

net increase in cash and cash equivalents during the year 10,574 46,286Cash and cash equivalents at beginning of year 16 226,096 179,798Exchange difference 1,037 12

Cash and cash equivalents at end of year 16 237,707 226,096


Financial statementsConsolidated statement of cash flows


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Attributable to shareholders of Kentz Corporation Limited Total attributable

to equity holders of

parent

Non-controlling

interestTotal

equityShare

capitalShare

premiumCapital reserve

Treasury Shares

Share option

reserveRetained earnings

Translation reserves

At 1 January 2010 2,284 39,568 2,388 – 817 92,040 3,000 140,097 2,827 142,924Expenses associated with

share-based payments – – – – 1,567 – – 1,567 – 1,567Dividends – – – – – (8,252) – (8,252) – (8,252)Non-controlling interest arising

on business combination – – – – – – – – 4,242 4,242Profit for the year – – – – – 47,313 – 47,313 1,692 49,005Other comprehensive income – – – – – 2,785 (1,887) 898 – 898Movement in

non-controlling interests – – – – – – – – 516 516

At 31 December 2010 2,284 39,568 2,388 – 2,384 133,886 1,113 181,623 9,277 190,900

At 1 January 2011 2,284 39,568 2,388 – 2,384 133,886 1,113 181,623 9,277 190,900Expenses associated with

share-based payments – – – – 2,879 – – 2,879 – 2,879Treasury shares purchased – – – (706) – – – (706) – (706)Dividends – – – – – (14,002) – (14,002) – (14,002)Profit for the year – – – – – 58,867 – 58,867 2,445 61,312Other comprehensive income – – – – – (2,896) 543 (2,353) – (2,353)Movement in

non-controlling interests – – – – – – – – (358) (358)

At 31 December 2011 2,284 39,568 2,388 (706) 5,263 175,855 1,656 226,308 11,364 237,672

Financial statementsConsolidated statement of changes in equity



Financial statementsnotes to the consolidated financial statements

1. Corporate informationKentz Corporation Limited (the Company) is a limited liability company registered in Jersey (registered number 58549) under the Companies (Jersey) law 1991 and is the holding company for the Kentz Group.

The Group’s principal activity is the provision of engineering and construction services, principally in the oil services sector.

The Consolidated Financial Statements of Kentz Corporation Limited for the year ended 31 December 2011 were authorised for issue in accordance with a resolution of the Directors on 10 April 2012.

2. Significant accounting policies(a) Statement of complianceThe Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations adopted by the International Accounting Standards Board (IASB).

(b) Basis of preparationThe Financial Statements are presented in US$, rounded to the nearest thousand which represents the functional currency of the Group, as it is the currency of the primary economic environment in which the Group operates. Foreign operations are consolidated in accordance with the policies set out in note e(iii) below.

The financial statements are prepared on the historical cost basis except that financial instruments held for trading are recorded at their fair value.

The preparation of Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of IFRS that have significant effect on the Financial Statements and estimates with a significant risk of material adjustment in the next year are discussed in note 33.

The accounting policies set out below have been applied consistently to all periods presented in these Consolidated Financial Statements and in preparing an opening IFRS Statement of Financial Position at 1 January 2004 for the purposes of the transition to IFRS.

The accounting policies have been applied consistently by Group entities.

(c) Basis of consolidation(i) SubsidiariesSubsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The Financial Statements of subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the date that control ceases. See note 31.

(ii) Acquisition accounting policyThe consolidated financial statements incorporate the results of business combinations using the purchase method. In the statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases.

(iii) Joint venturesA joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. Joint control is the contractually agreed sharing of control such that significant operating and financial decisions require the consent of more than one venturer. The Group has two types of joint ventures:– Jointly controlled entities and– Jointly controlled operations

A jointly controlled entity is an entity over whose activities the Group has joint control, established by contractual agreement. The results, assets and liabilities of a jointly controlled entity are incorporated in these Consolidated Financial Statements using the equity method of accounting.

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2. Significant accounting policies (continued)A jointly controlled operation involves the use of assets and other resources of the Group and other venturers rather than the establishment of a corporation, partnership or other entity. The Group’s proportionate interest in the assets, liabilities, revenue, expenses and cash flows of jointly controlled operations are incorporated into the Group’s Financial Statements under the appropriate headings.

(iv) Non-controlling interestNon-controlling interests in subsidiaries consolidated by the Group are disclosed separately from the Group’s Equity in the Consolidated Statement of Financial Position and in the Consolidated Income Statement.

(v) Transactions eliminated on consolidationIntra-Group balances and any unrealised gains and losses or income and expenses arising from the intra-Group transactions are eliminated in preparing the Consolidated Financial Statements. Unrealised gains arising from transactions with associates and jointly controlled entities are eliminated to the extent of the Group’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(d) International Financial Reporting Standards not yet effectiveSet out below are new accounting standards and interpretations which will be applicable going forward. None are expected to have a significant effect on the results of the operation.

Accounting Standard/Interpretation Type Effective date

IFRS 9 (Revised) Financial Instruments New Statement Financial year commencing on or after 1 January 2015IFRS 10 Consolidated Financial Statements New Statement Financial year commencing on or after 1 January 2013IFRS 11 Joint Arrangements New Statement Financial year commencing on or after 1 January 2013IFRS 12 Disclosures of Interests in Other Entities New Statement Financial year commencing on or after 1 January 2013IFRS 13 Fair Value Measurement New Statement Financial year commencing on or after 1 January 2013IAS 28 Investments in Associates and Joint Ventures Revised Statement Financial year commencing on or after 1 January 2013IAS 12 Income Taxes Amended Interpretation Financial year commencing on or after 1 January 2013IAS 1 Presentation of Financial Statements Amended Interpretation Financial year commencing on or after 1 July 2012IAS 19 Employee Benefits Amended Interpretation Financial year commencing on or after 1 January 2013IFRS 7 Financial Instruments: Disclosures Amended Interpretation Financial year commencing on or after 1 January 2013IAS 32 Financial Instruments: Presentation Amended Interpretation Financial year commencing on or after 1 January 2014IAS 12 Income Taxes Amended Interpretation Financial year commencing on or after 1 January 2012

All other new standards, interpretations and amendments, which are effective for periods beginning after 1 January 2011 and which have not been adopted early, are expected to have an immaterial effect on the Group’s future financial statements.

(e) Foreign currency(i) Functional presentation currencyItems included in the Financial Statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the respective entity operates (“the functional currency”). The Consolidated Financial Statements are presented in US Dollars, which is the Group’s presentation currency.

(ii) Foreign currency transactionsTransactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are re-translated to US$ at the foreign exchange rate ruling at the Statement of Financial Position date. Foreign exchange differences arising on translation are recognised in the Consolidated Income Statement. Non-monetary assets and liabilities that are measured in terms of historical costs in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to US$ at foreign exchange rates ruling at the dates the fair value was determined.

(iii) Financial statements of foreign operationsThe assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to US$ at foreign exchange rates ruling at the Statement of Financial Position date. The results and cash flows of foreign operations are translated to US$ at average exchange rates for the year. Foreign exchange differences arising on re-translation are recognised directly in a separate component of equity.

Financial statementsnotes to the consolidated financial statements continued


2. Significant accounting policies (continued)(iv) Net investment in foreign operationsAdjustments arising on translation of the results of foreign operations at average rate, and on re-statement of the opening net assets at closing rates, are dealt with in a separate translation reserve within equity. On disposal of a foreign operation, accumulated currency translation differences are recognised in the Consolidated Income Statement as part of the overall gain or loss on disposal; the cumulative currency translation differences arising prior to 1 January 2004 (the translation date to IFRS) have been set to zero for ascertaining the gain or loss on disposal of a foreign operation subsequent to that date. Translation differences arising after 1 January 2004 are presented as a separate component of equity in the foreign currency translation reserve in the Consolidated Statement of Financial Position.

(f) Property, plant and equipment(i) Owned assetsItems of property, plant and equipment are stated at cost, as deemed cost, less accumulated depreciation (see below) and impairment losses (see accounting policy m).

Certain items of property, plant and equipment which had been revalued to fair value on or prior to 1 January 2004, the date of transition to IFRS, are measured on the basis of deemed costs, being the revalued amount at the date of that revaluation.

(ii) Leased assetsLeases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. The Group has entered into various operating leases, the payments for which are recognised as an expense in the Consolidated Income Statement on a straight-line basis over the lease terms (see accounting policy t).

(iii) DepreciationDepreciation is charged to the Income Statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment at the following rates:Buildings 10%Plant and fixtures 10%–100%Motor vehicles 20%–100%

The residual value, if not insignificant, is re-assessed annually.

(g) Goodwill and intangible assets (i) GoodwillGoodwill represents the excess of the cost of an acquisition of a subsidiary or joint venture, over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities recognised at the date of acquisition.

Goodwill on the acquisition of subsidiaries and joint ventures is presented separately in the Consolidated Statement of Financial Position. Goodwill is tested annually for impairment, or more frequently when there is an indication that the goodwill may be impaired and carried at cost less accumulated impairment losses, if any. Impairment losses previously recognised cannot be reversed (see accounting policy m).

(ii) Other intangible assetsOther intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (see below) and impairment losses (see accounting policy m).

Expenditure on internally generated goodwill and brands is recognised in the Consolidated Income Statement as an expense as incurred.

(iii) AmortisationGoodwill and intangible assets with an indefinite useful life are not amortised. However, they are systematically tested for impairment at each Statement of Financial Position date.

(h) Trade and other receivablesTrade and other receivables are stated at their cost less impairment losses (see accounting policy m).

(i) Long-term contract work in progressAmounts recoverable on construction contracts, which are included in trade and other receivables, are stated at the net sales value of the work done less amounts received as progress payments on account. Cumulative costs incurred, net of amounts transferred to cost of sales, after deducting foreseeable losses and progress payments on account not matched with revenue, are included as construction contract balances within inventories. Where the progress billings exceed the sum of costs incurred and recognised profit or recognised loss, the balance is shown under trade and other payables.

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2. Significant accounting policies (continued)(j) Financial assetsAll financial assets are initially measured at fair value, including transaction costs, except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value, excluding transaction costs. Where the effect on fair value at initial recognition of any extended payment terms is not material, no adjustments were made.

The fair value of a financial instrument on initial recognition is normally the transaction price, unless the fair value is evident from observable market data.

Subsequent measurement for financial assets is set out below.

Loans and receivablesTrade and other receivables (excluding Value Added Taxation, pre-payments and operating lease receivables), loans and cash and cash equivalents that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.

Loans and receivables are subsequently measured at amortised cost, using the effective interest rate method less any impairment loss. Interest income is recognised in profit or loss by applying the effective interest rate, except for short-term trade receivables where the recognition of interest would be immaterial. Trade receivables are carried at original invoice amount less any impairment loss.

The accounting policy for bank and cash balances is dealt with under cash and cash equivalents set out below.

Trade receivables are carried at anticipated realisable value. An estimate is made for doubtful receivables based on a review of all outstanding amounts at the year end. Bad debts are written off during the year in which they are identified.

De-recognition of financial assetsThe Group de-recognises a financial asset only when the contractual rights to the cash flows from the asset expire or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

(k) Financial liabilitiesAll financial liabilities are initially measured at fair value, including transaction costs, except for those financial liabilities classified as at fair value through profit or loss, which are initially measured at fair value, excluding transaction costs.

Subsequent measurement for financial liabilities is set out below.

Other financial liabilities not measured at fair value through profit or lossOther financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis, except for short-term payables where the recognition of interest would be immaterial.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liabilities or, where appropriate, a shorter period.

De-recognition of financial liabilitiesThe Group de-recognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or expired. On de-recognition, the difference between the carrying amount of the financial liability, including related unamortised costs, and settlement amount paid are included in profit or loss.

(l) Cash and cash equivalentsCash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows. Bank overdrafts are included in interest bearing loans and borrowings in the Consolidated Statement of Financial Position.



2. Significant accounting policies (continued)(m) ImpairmentThe carrying amounts of the Group’s assets, other than inventories and deferred tax assets (see accounting policy u(ii)), are reviewed at each Statement of Financial Position date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each Statement of Financial Position date.

An impairment loss is recognised whenever the carrying amount of an asset of its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the Consolidated Income Statement.

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

Goodwill and indefinite-lived intangible assets were tested for impairment at 1 January 2004, the date of transition to IFRS, even though no indication of impairment existed.

When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in profit or loss even though the financial asset has not been de-recognised. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss.

(n) DividendsDividends are recognised as a liability in the Group’s Financial Statements in the period in which they are declared by the Company. In the case of final dividends, this is when approved by the shareholders at the AGM.

(o) Employee benefits(i) Defined contribution plansObligations for contributions to defined contribution pension plans are recognised as an expense in the Consolidated Income Statement as incurred.

(ii) Defined benefit plansThe Group’s net obligation in respect of the defined benefit pension plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The discount rate is the yield at the Statement of Financial Position date on high quality corporate bonds that have maturity dates approximating to the terms of the Group’s obligations. The calculation is performed by a qualified actuary using the projected unit credit method. The excess of scheme liabilities over scheme assets is included in the Statement of Financial Position under non-current liabilities. The increase in the present value of the liabilities of the scheme expected to arise from employee service (current service cost) in the period is charged to operating profit. The expected return on the scheme’s assets and the increase during the period of the scheme’s liabilities, arising from the passage of time, are included as other finance income/costs.

Actuarial gains and losses arising subsequent to the transition to IFRS are recognised in full in the Statement of Comprehensive Income.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the Consolidated Income Statement on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the Consolidated Income Statement.

Where the calculation results in a benefit to the Group, the recognised asset is limited to the net total of any unrecognised and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.

A full actuarial valuation is carried out every three years. The last actuarial valuation was performed on 1 May 2010.

(iii) Share-based paymentsWhere equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the Consolidated Statement of Comprehensive Income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.

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2. Significant accounting policies (continued)The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied. Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the Consolidated Statement of Comprehensive Income over the remaining vesting period.

(p) ProvisionsA provision is recognised in the Statement of Financial Position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(q) Trade and other payablesTrade and other payables are not interest-bearing and are stated at their settlement amount.

(r) BorrowingsBorrowings are recognised initially at proceeds received, net of transaction costs. Subsequent measurement is at amortised cost. Finance charges including any premiums payable on settlement are recognised in the Consolidated Income Statement over the period of the borrowings using the effective rate of interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the Statement of Financial Position date.

(s) Revenue recognitionContract revenue is recognised under the percentage of completion method. When the outcome of the contract can be reliably estimated, revenue is recognised by reference to the proportion that accumulated cost of sales up to the year end bear to the estimated total costs of the contract. When the contract is at an early stage and its outcome cannot be reliably estimated, revenue is recognised to the extent of costs incurred up to the year end which are considered recoverable.

Revenue related to variation orders is recognised when it is probable that the customer will approve the variation and the amount of revenue arising from the variation can be reliably measured.

A claim is recognised as contract revenue when settled or when negotiations have reached an advanced stage such that it is probable that the customer will accept the claim and the amount that it is probable will be accepted by the customer can be measured reliably.

Losses on contracts are assessed on an individual contract basis and provision is made for the full amount of the anticipated losses, including any losses relating to future work on a contract, in the period in which the loss is first foreseen.

(t) Expenses(i) Operating lease paymentsPayments made under operating leases are recognised in the Consolidated Income Statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the Consolidated Income Statement as an integral part of the total lease expense.

(ii) Finance lease paymentsMinimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

(iii) Net financing costsNet financing costs comprise interest payable on borrowings, calculated using the effective interest rate method, interest receivable on funds invested and dividend income.

Interest income is recognised in the Consolidated Income Statement as it accrues, using the effective interest method. Dividend income is recognised in the Income Statement on the date the entity’s right to receive payments is established which, in the case of quoted securities, is usually the ex-dividend date. The interest expense component of finance lease payments is recognised in the Consolidated Income Statement using the effective interest rate method.



2. Significant accounting policies (continued)(u) Income taxIncome tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the Consolidated Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

(i) Current taxCurrent tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the Statement of Financial Position date, and any adjustment to tax payable in respect of previous years.

(ii) Deferred taxDeferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and for the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, differences relating to investment in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the Statement of Financial Position date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.

(v) Share capitalFinancial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset.

The Group’s ordinary shares are classified as equity instruments.

(w) Treasury sharesConsideration paid for the purchase of treasury shares is recognised directly in equity. The cost of treasury shares held is presented as a separate reserve (the ‘treasury share reserve’).

3. Segmental reporting Segment information is presented in respect of the Group’s geographical and business segments. The primary format, geographical segments, is based on the Group’s management and internal reporting structure.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly income-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

(i) Geographical segments The Group manages its business on a worldwide basis by organising its activities into six distinct regions. The geographical areas are:• Middle East• Far East• Africa• Australasia• Americas• Europe

Europe includes all costs associated with the Group’s administrative function.

In presenting the information on the basis of geographical segments, segment revenue and segment assets are based on the geographical location of assets.

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3. Segmental reporting (continued) (ii) Business segmentsThe Group’s activity comprises the following main business segments:

• Specialist engineering, procurement, and construction (EPC)• Construction• Technical support services

Primary segment information by location of assetsGeographical segments


In thousands of USD 2011 2010

Revenue by location of assetsMiddle East 420,403 441,774Far East 52,424 114,852Africa 572,169 264,680Australasia 236,211 187,345Americas 73,692 28,439Europe 12,630 20,265

Total revenue 1,367,529 1,057,355

Operating profit/(loss) before net finance cost by location of assetMiddle East 18,502 35,431Far East 8,933 8,467Africa 50,509 9,072Australasia (2,263) 8,068Americas 2,861 (2)Europe (15,160) (10,518)

Unallocated Group income 2,751 5,837

Operating profit before finance costs 66,133 56,355

Net finance (cost)/income (675) 180

Share of joint ventures’ profit 13,981 10,943

Profit before tax 79,439 67,478

Income tax expense (18,127) (18,473)




3. Segmental reporting (continued)

At 31 December


Segment assets (including tax) by location of assetsMiddle East 241,687 289,893Far East 32,683 26,758Africa 242,414 185,890Australia 120,061 67,416Americas 29,208 10,711Europe 63,589 39,162

Total assets as reported in the Statement of Financial Position 729,642 619,830

Segment liabilities (including tax) by location of assetsMiddle East 194,776 197,357Far East 12,914 21,345Africa 153,538 108,381Australia 69,560 50,502Americas 21,170 12,185Europe 30,999 30,522

Total segmental liabilities 482,957 420,292

Reconciliation of total liabilities as reported in the Statement of Financial Position Employee benefits 9,013 8,638

Total liabilities as reported in Statement of Financial Position 491,970 428,930

Other segment information



Capital expenditureMiddle East 2,453 980Far East 1,098 973Africa 6,921 27,431Australasia 321 1,234Americas 1,965 471Europe 45 28

Group total 12,803 31,117

DepreciationMiddle East 2,953 3,516Far East 1,145 1,016Africa 10,594 8,778Australasia 1,100 574Americas 881 321Europe 82 242


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3. Segmental reporting (continued) Secondary segment information by Business segments



Revenue by businessSpecialist EPC 354,629 336,420Construction 702,249 474,986Technical support services 310,651 245,949

Total revenue 1,367,529 1,057,355

At 31 December


Segment assets by businessSpecialist EPC 124,546 103,342Construction 273,341 213,723Technical support services 57,159 49,067

455,046 366,132

Unallocated assets 274,596 253,698

Total assets 729,642 619,830



Capital expenditure by businessSpecialist EPC 613 762Construction 9,512 29,056Technical support services 1,953 1,178Unallocated 725 121




4. Operating profit before finance costs



This is arrived at after chargingDepreciation 16,755 14,447Amortisation 659 –Impairment 1,517 –Operating lease rentals– plant and machinery 3,524 10,451– other 22,571 7,215

Auditors’ remunerationFees for professional services in respect of the audit of the Financial Statements and for other services provided

to the Group:Group Auditor:Audit fees for audit services 229 210Non-audit services– Tax services 65 59– For acting as reporting accountants 351 –– All other services 150 526Other auditors of subsidiaries:Audit fees for audit services 775 474Non-audit services– Tax services 441 82– All other services – 32

Directors’ remuneration 3,820 3,937Loss/(profit) on sale of fixed assets 661 (237)Foreign exchange losses 5,425 2,631

5. Staff cost


In number 2011 2010

Continuing operationsContracts 13,262 11,082Administration 376 313Management 405 334


Staff costs for all employees, including Executive Directors, consist of:



Continuing operationsWages and salaries 567,281 448,376Share-based payment expense (note 26) 2,879 1,567Other pension costs 2,207 2,119

Group total 572,367 452,062

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6. net finance income/(cost)



Deposit interest receivable 1,798 1,509Interest payable on bank overdrafts, loans and finance leases (2,242) (952)Pension finance charge (231) (377)

(675) 180

7. Tax expense



Current tax:Tax on foreign operations 20,863 16,684

20,863 16,684

Deferred tax:Origination and reversal of temporary differences 1,436 1,619Other deferred tax (credit)/charge (4,172) 170

Deferred tax (credit)/charge for the year (2,736) 1,789

18,127 18,473

Factors affecting tax charge for the year:Profit on ordinary activities before tax 79,439 67,478At Jersey’s domestic tax rate of 0% (2010: 0%) – –Expected tax charge in higher tax jurisdictions 16,287 16,808Income not taxable (19) (217)Expenditure not allowable for tax purposes 1,389 1,459Effect of changes in the expected manner of recovery of assets – 900Effect of unutilised tax losses (159) 222Adjustment in respect of previous years 143 (39)Other 486 (660)

Total tax charge for the year 18,127 18,473

8. Dividends



Dividends approved 14,002 8,252

14,002 8,252

The interim dividend payment amounting to 5.0 US$ cents per share (2010: 3.0 US$ cents per share) was made in October 2011 and, the Directors have proposed a final dividend payment of 7.3 US$ cents per share (2010: 7.0 US$ cents per share) which would make a total dividend payment of 12.3 US$ cents per share (2010: 10.0 US$ cents per share) for the year ended 31 December 2011.



9. Earnings per shareThe calculations of earnings per ordinary share are based on the following profits attributable to ordinary shareholders and the weighted average number of shares in issue:



Profit attributable to ordinary shareholders 58,867 47,313

no. ‘000 No. ‘000

Weighted average number of shares of the Company used in basic EPS 116,313 116,371

Effects of:– Employee share options 3,887 2,175

Weighted average number of shares of the Company used in diluted EPS 120,200 118,546

Earnings per share (US$ cents)Basic 50.61 40.66

Diluted 48.98 39.91

10. Property, plant & equipment

In thousands of USDLand and buildings

Plant and fixtures

Motor vehicles Total

CostAs at 1 January 2011 8,245 82,970 16,842 108,057Additions 397 8,469 3,937 12,803Acquisitions during year (note 32) – 377 86 463Reclassification – (865) 865 –Disposals – (2,058) (1,117) (3,175)Exchange adjustment (1,249) (3,360) (658) (5,267)

As at 31 December 2011 7,393 85,533 19,955 112,881

DepreciationAs at 1 January 2011 343 30,697 8,055 39,095Charge for the year 271 12,795 3,689 16,755Impairment – 1,517 – 1,517Disposals (60) (1,229) (485) (1,774)Exchange adjustment – (2,612) (288) (2,900)

As at 31 December 2011 554 41,168 10,971 52,693

net carrying amountsAs at 31 December 2010 7,902 52,273 8,787 68,962

As at 31 December 2011 6,839 44,365 8,984 60,188

The net book value of property, plant and equipment for the Group includes the following amounts in respect of assets held under finance lease and hire purchase contracts.



Net book value of assets held under finance leases 19,959 28,475Depreciation on the assets held under finance lease 3,046 3,283

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11. Goodwill



Opening balance – –Acquisition during the year (note 32) 4,012 –Exchange adjustments (418) –

Closing balance 3,594 –

On 1 February 2011, the Group acquired 100% of the ordinary shares in RNE Engineering & Projects (Pty) Limited in South Africa.

The goodwill above comprises the fair value of expected future synergies and business opportunities arising from the integration of the business into the Group.

See note 32 – Acquisition during the year.

12. Intangible assets



Opening balance – –Additions 1,687 –Amortisation (659) –Exchange adjustments (106) –

Closing balance 922 –

The intangible assets recognised on acquisition comprise of customer orders and computer software which are being amortised over their useful economic lives. Customer orders have an expected useful life of 1 year, whereas customer relationships have an expected useful life of 35 months.

See note 32 – Acquisition during the year.



13. Other investments

In thousands of USDJoint

Venture Other Total

Balance at 1 January 2010 7,613 19 7,632Capital Return (6,697) – (6,697)Change in control of joint venture (4,545) – (4,545)Additional investment – 14 14Exchange adjustments 152 2 154Share of joint venture profits 10,943 – 10,943

As at 31 December 2010 7,466 35 7,501

Balance at 1 January 2011 7,466 35 7,501Capital Return (17,745) – (17,745)Disposals – (13) (13)Exchange adjustments 76 5 81Share of joint venture profits 13,981 – 13,981

As at 31 December 2011 3,778 27 3,805

In 2006, Kentz Pty Limited, a company incorporated in Australia, which is a subsidiary of the Company, acquired a 50% interest in an incorporated joint venture known as Thiess Kentz Pty Limited. On 17 December 2009, the name of the joint venture entity was changed to Kentz E&C Pty Limited.

During 2008, Kentz Russia LLC, a subsidiary of the Company, acquired a 50% interest in two Russian joint ventures known as Kentz-DEM LLC and Kentz-SMNM LLC.

In 2009, Kentz Pty Limited entered into a joint venture agreement in Australia with Thiess Pty Limited and Decmil Pty Limited. Kentz Pty Limited has a 33.33% interest in this unincorporated joint venture, known as Thiess Decmil Kentz joint venture.

In 2011, Kentz Pty Limited entered into a joint venture agreement in Australia with Chicago Bridge and Iron N.V. (CB&I). Kentz Pty Limited has a 35% interest in this unincorporated joint venture known as CB&I Kentz joint venture.

13.1 Joint ventures The Group’s share of assets, liabilities, revenues and expenses relating to joint ventures is as follows:

At 31 December


Non-current assets 1,038 555Current assets 19,359 28,659Current liabilities (16,619) (21,748)

net assets 3,778 7,466



Income 101,495 102,370Expenses (87,514) (91,427)

Profit before tax 13,981 10,943Tax expense (3,967) (3,312)

Share of post tax results from joint ventures 10,014 7,631

In 2011, the Consolidated Income Statement includes the Group’s share of pre-tax profits from its one-third interest in the Thiess Decmil Kentz unincorporated joint venture and its 35% share in the CB&I Kentz unincorporated joint venture.

In 2010, the Consolidated Income Statement includes the Group’s share of pre-tax profits from its one-third interest in the Thiess Decmil Kentz unincorporated joint venture.

The joint ventures have no significant contingent liabilities to which the Group is exposed, nor has the Group any significant contingent liabilities in relation to its interest in the joint ventures with the exception of corporate guarantees as security for banking facilities. The names and principal activities of the joint ventures are disclosed in note 31.

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14. Inventories



For construction contracts in progress at the Statement of Financial Position date:Contract costs incurred to date and recognised profits (less recognised losses) on these contracts 1,200,497 657,784Less progress billings 1,073,896 577,085

Total work in progress 126,601 80,699

Billings in excess of contract costs and recognised profits (less recognised losses) – included in Trade and other payables

Billings 804,175 702,683Less costs and recognised profits (less recognised losses) 719,325 632,104

Total billings in excess of contract costs and recognised profits (less recognised losses) 84,850 70,579

Total contract costs incurred to date and recognised profits (less recognised losses) on these contracts 1,919,822 1,289,888

15. Trade and other receivables



Contract trade receivables 229,690 170,848Retentions held by customers 21,062 23,073Prepayments and accrued income 5,539 4,831Other debtors 26,124 16,215VAT recoverable 2,069 5,508Corporation tax recoverable 2,672 1,987

Total trade and other receivables 287,156 222,462

Retentions due after one year 1,085 615

Contract trade receivables that are more than 90 days past due are not considered impaired. At 31 December 2011 the ageing of the contract trade receivables were as follows:

At 31 December


0 – 60 days 214,406 155,71960 – 90 days 9,470 6,739> 90 days 5,814 8,390

Total contract trade receivables 229,690 170,848

16. Cash and cash equivalents



Cash and cash equivalents – continuing operations 238,127 231,334Bank overdrafts – continuing operations (420) (5,238)

Cash and cash equivalents in the Statement of Cash Flows 237,707 226,096



Cash at bank and in hand 135,648 105,323Short-term deposits 102,479 126,011

238,127 231,334



17. Issued and fully paid share capitalThe share capital of the Company as at 31 December was as follows:

At 31 December

In thousands 2011 2010

Authorised share capital 186,333,300 ordinary shares of Stg£0.01 each 1,863 1,863

Called up share capital 116,371,470 ordinary shares of Stg£0.01 each 1,164 1,164

US Dollar equivalent 2,284 2,284

18. Treasury Shares

For the purpose of awarding shares under its long-term incentive plan, the Company acquires its own shares which are held by the Kentz Employee Benefit Trust. All these shares have been classified in the Statement of Financial Position as treasury shares under equity.

2011 2010

no. ’000s US$’000 No. ’000s US$’000

At 1 January – – – –Acquired during the year 101 706 – –Vested during the year – – – –

At 31 December 101 706 – –

19. non-controlling interests

At 31 December


Opening balance 9,277 2,827Share of profit 2,445 1,692Non-controlling interest arising on business combination – 4,242Exchange difference (358) 516

Closing balance 11,364 9,277

The non-controlling interest relates to:• The 25.002% non-controlling interest held by THEBE Investment in Kentz (Pty) Limited and its subsidiaries as part of the Black

Economic Empowerment initiative in South Africa.• 50% interest held by Thiess Pty Limited in Kentz E&C Pty Limited in Australia. From 1 January 2010, following an agreement with

Thiess Pty Limited, Kentz took management control of Kentz E&C Pty Limited (formally Thiess Kentz Pty Limited), although the respective shareholdings remain the same.

20. Trade and other payables



Trade creditors 105,738 88,136Other creditors 55,434 54,418Advances on contracts 42,025 41,867Accruals and deferred income 236,619 185,436

439,816 369,857

Other creditors due after 1 year 5,022 2,894

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21. Interest-bearing loans and borrowingsThis note provides information concerning the contractual terms of the Group’s interest-bearing loans and borrowings.

For additional disclosures relating to the Group’s exposure to interest rate risk and foreign currency risk, see note 22.

At 31 December


Current liabilitiesBank overdraft 420 5,238Current portion of secured loans 57 1,370

477 6,608

non-current liabilitiesSecured bank loans 59 31

59 31

In thousands of USD Currency

Interest rate basis at 31

December 2011 Term of loan

At 31 December

2011 2010

Short-term loan EUR n/a 30 months – 1,348Short-term loan CAD Various Various 57 23Bank Overdraft ZAR Prime+

marginOn demand 420 4,542

Bank Overdraft CAD n/a On demand – 38Bank Overdraft EUR n/a On demand – 657

477 6,608

Long-term loan CAD Various Various 59 31

536 6,639

22. Financial InstrumentsThe principal objective of the Group’s treasury policy is to ensure that there are sufficient resources to finance the business. The cash resources of the Group are retained in a combination of central and local bank accounts. These accounts comprise current, call and short-term deposits with banks approved by the Board. Financial instruments held by the Group principally comprise financing facilities, cash and other items including receivables and payables, all of which arise directly from its operations.

The risks arising from these financial instruments are liquidity risk, interest rate risk and foreign exchange rate risk. The Board reviews, agrees and monitors policies for managing each of these risks; these are summarised below. These policies have remained unchanged during the period under review.

(a) Liquidity riskGroup cash resources held at banks are monitored regularly by senior management (locally and at Group level). It is the Group’s policy to keep sufficient funds in current and call accounts to meet short-term needs. Surplus funds are retained on short-term interest-bearing deposits. At the Statement of Financial Position date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset. The Group also maintains overdraft facilities in certain entities.

(b) Interest rate riskThe financial assets of the Group comprise trade and other receivables and cash and cash equivalents. The trade and other receivables are non-interest-bearing. The cash and cash equivalents earn interest at floating rates based on individual bank market rates for the relevant currencies and durations.

The Group’s exposure to market risk for changes in interest rates relates primarily to bank loans and amounts payable under asset finance leases.



22. Financial Instruments (continued)Interest rate sensitivity analysisThe impact on the Group’s pre-tax profit due to a possible change in interest rates on loans and asset finance leases at the reporting date is demonstrated below:

2011US$’000

2010US$’000

+1% movement (270) (138)

(c) Foreign currency riskThe Financial Statements are prepared in US$, rounded to the nearest thousand which represents the functional currency of the Group as it is the currency of the primary economic environment in which the Group operates. The Group is exposed to foreign currency risk on sales, purchases, borrowings and net investments in subsidiaries that are denominated in a currency other than the US$. The principal currencies giving rise to this risk are Australian Dollar, South African Rand, United Arab Emirates Dirham, Saudi Riyal, Qatari Riyal, Kuwaiti Dinar, Euro, Russian Rouble, Canadian Dollar, Botswana Pula, Mozambique Metical and Madagascar Ariary.

Exchange rate risk is managed at the subsidiary levels by ensuring that, as far as possible, income and expenses are denominated in the appropriate functional currency. Certain subsidiaries enter into forward exchange contracts to hedge the exchange risk of trading and intercompany balances in line with Board-approved policy. Those contracts outstanding at the relevant period ends are not designated as cash flow, fair value or net investment hedges and are entered into for periods consistent with currency transaction exposures, which are short-term in nature with average duration of 14 months as at 31 December 2011.

The Group does not trade in any derivative financial instruments.

Exchange rate sensitivity analysisThe following table demonstrates the sensitivity of profit before tax to selected movements in subsidiary foreign exchange rates (with all other variables held constant). The impact on profit before tax is based on a reasonably possible change in US dollar exchange rates with respect to different floating exchange rate reporting currencies. The impact on total equity is calculated by changing the exchange rates used in measuring the closing balance sheet.

2011US$’000

2010US$’000

A 10% rate depreciation in these currencies versus US dollarImpact on profit before tax (832) (1,842)Impact on total equity (2,132) (2,671)

(d) Fair valuesForward exchange contracts open at the reporting period ends are marked to market to fair value the contracts.

At 31 December 2011, the Group had foreign exchange contracts outstanding with notional contract values of US$60.2 million and net unrealised gains of US$1.5 million.

The estimated fair values of the remaining financial instruments of the Group approximate to their book values as at the relevant period ends. The following criteria have been used to assess the fair values of the Group’s financial instruments.• Receivables, cash and cash equivalents and payables are based on their book values due to their short maturity period.• Loans are based on their book values which represents the Directors’ opinion of their fair values.

The fair value of the Group’s lease obligations approximates their carrying amounts.

As the Group’s financing facilities bear interest at floating rates, which represent prevailing market rate, the Directors consider the carrying amount of these borrowings approximates their fair value.

The Directors estimate the fair value of the amounts due to/from related companies approximates to the carrying value.

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23. Deferred tax asset/liabilitiesDeferred tax is calculated in full on temporary differences under the liability method using tax rates applicable in the various jurisdictions in which the Group operates. The movement on the deferred tax account is as shown below:



Opening balance (256) 225(Credit)/charge to the income statement (2,736) 1,789On acquisition of subsidiary (note 32) 552 –Foreign exchange adjustment (7) (387)Other 1,606 (1,883)

net deferred tax asset at the end of the year (841) (256)

Deferred taxation is reflected in the Statement of Financial Position as:Deferred tax asset (4,278) (3,355)Deferred tax liability 3,437 3,099

Net asset (841) (256)

Deferred tax assets not provided



Deferred tax assets have not been recognised in respect of the following items:Unutilised tax losses 14,931 16,139

Tax effect 1,866 2,017

Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be generated in the subsidiaries where they arise against which the Group can utilise the benefits thereafter.

24. Obligations under finance leasesAmounts payable under finance leases

Minimum lease paymentsPresent value of minimum

lease payments

In thousands of USD 2011 2010 2011 2010

Within one year 5,736 6,452 5,059 5,259In the second to fifth years inclusive 7,158 14,233 6,414 12,409After five years 1,057 1,758 943 1,507

13,951 22,443 12,416 19,175

Less: future finance charges (1,535) (3,268) – –

Present value of lease obligations 12,416 19,175 12,416 19,175

Less: Amount due for settlement within 12 months (5,059) (5,259)

Amounts due for settlement after 12 months 7,357 13,916

These non-cancellable leases have remaining non-cancellable lease terms of between one and ten years and, for certain plant, property and equipment leases, are subject to renegotiation at various intervals as specified in the lease agreements.



25. Employee benefitsThe following pension schemes operate in the Group.

(a) Irish administered defined benefit schemeThe Group operates a defined benefit pension plan for certain of its General and Professional Staff. On 31 December 2010, this defined benefit pension scheme was closed for future service accrual. Existing members have been invited to join a new company defined contribution scheme with effect from 1 January 2011.

The defined benefit pension plan is administered by independent trustees and is managed externally by independent investment managers.

The pension charge in the Consolidated Income Statement is calculated so as to spread the cost of pension provision over the employees’ expected working lives with the Group. The pension cost is determined in accordance with the advice of qualified actuaries, using the Attained Age method. An actuarial valuation was prepared for the General and Professional Staff Plan effective 1 May 2010.

The assumptions which most significantly affect the level of pension costs are those relating to the rate of return on the underlying investments of the plan and the rate of increase in salaries and pensions. The financial assumptions inherent in the actuarial basis underlying the plan assumes that the long-term investment return exceeds the rate of increase in pensionable earnings by 2% per annum.

At the date of the most recent actuarial valuation, the market value of the assets held in General and Professional Plan amounted to €17,822,000 equivalent to US$23,922,000. The actuarial value of the assets represented 56% of the liability for benefits under the valuation method, for service to the valuation date, based on the assumptions used in the actuarial review. The actuarial report is not available for public inspection.

The disclosures required under IAS 19 “Employee Benefits” are as follows:



Valuation method Projected unit method

Projected unit method

Inflation rate 2.00% 2.00%Salary increases 3.00% 3.00%Increase for pension in payments 3.00% 3.00%Discount rate 5.20% 5.50%Expected rate of return on plan assets 4.20% 6.10%

The major categories of scheme assets as a percentage of the total fair value of scheme assets are as follows:Equities 19.70% 55.00%Bonds 69.20% 42.30%Property 2.50% 2.70%Cash 8.60% 0.00%

100.00% 100.00%

Expense/(gain) recognised in the Consolidated Income Statement



Current service cost – 446Interest on obligation 2,138 1,997Expected return on plan assets (1,908) (1,620)Curtailment gain recognised – (1,993)

230 (1,170)

Analysis of the amount recognised in the Consolidated Statement of Comprehensive Income



Actual return less expected return on pension scheme assets (987) 1,123Experience (loss)/gains arising on the scheme liabilities (13) 119Change in the assumptions underlying the present value of the scheme liabilities (2,227) 635

Actuarial (losses)/gains recognised in the Statement of Comprehensive Income (3,227) 1,877

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25. Employee benefits (continued)The amount included in the Statement of Financial Position arising from the Group’s obligation in respect of its defined benefit scheme is as follows:



Present value of defined benefit obligations 39,481 37,609Fair value of plan assets 30,468 28,971

Recognised liability for defined benefit obligations 9,013 8,638

Movement in deficit during the period



Opening balance 8,638 13,128Current service cost – 446Contributions paid (2,751) (4,289)Other finance cost 231 377Curtailments – (1,993)Actuarial loss/(gain) 3,227 (1,877)Foreign exchange (gain)/loss (331) 2,846

Deficit at period end 9,013 8,638

Change in benefit obligation



Benefit obligation at beginning of the year 37,609 37,011Service cost – 446Interest cost 2,138 1,997Plan members’ contributions – 611Actuarial loss 2,240 3,000Benefits paid (1,048) (1,129)Curtailments – (1,993)Foreign exchange gain (1,458) (2,334)

Benefit obligation at end of the year 39,481 37,609

Change in plan assets



Fair value of plan assets at beginning of the year 28,971 23,883Expected return on plan assets 1,908 1,620Actuarial (loss)/gain (987) 1,123Employer contributions 2,751 4,289Member contributions – 611Benefits paid from plan (1,048) (1,129)Foreign exchange loss (1,127) (1,426)

Fair value of plan assets at end of the year 30,468 28,971



25. Employee benefits (continued)History of scheme assets, liabilities and actuarial gains and losses


In thousands of USD 2011 2010 2009 2008

Amounts recognised in the Statement of Financial PositionPresent value of funded obligations (39,481) (37,609) (37,011) (33,555)Fair value of plan assets 30,468 28,971 23,883 17,885

net deficit (9,013) (8,638) (13,128) (15,670)

Actual return less expected return on scheme assets (987) 1,123 2,289 (9,307)% of scheme assets (3.24%) 3.88% 9.60% (52.04%)

Experience (loss)/gain arising on scheme liabilities (13) 119 185 (1,544)% of scheme liabilities (0.03%) 0.32% 0.50% (4.60%)

As the defined benefit scheme has been closed to accruals for future service, member contributions to this scheme have ceased. The Company has made contributions of US$2.8 million to the scheme in 2011 and estimates that it will make contributions of US$2.9 million in 2012 as part of the agreed strategy to fund the actuarial deficit.

(b) Irish administered defined contribution schemeThe Group also operates a defined contribution pension scheme in Ireland.

The pension charge in the Consolidated Income Statement for the following periods is as follows.



Pension charge to the Consolidated Income Statement 569 195

(c) South African administered scheme A defined benefit pension plan also operated for the Group’s employees in South Africa. This scheme is in the process of being converted to a defined contribution scheme. An actuarial valuation was completed for the plan as at 1 August 2003. An actuarial review of the value of the fund was performed in July 2008.

The pension charge in the Consolidated Income Statement for the following periods and any shortfall identified in the fund included in trade and other payables are as follows.



Pension charge to the Consolidated Income Statement 1,015 776

(d) Construction Industry Federation (CIF) schemeCertain companies in the Group also participate in the Irish CIF defined benefit plan.

The pension charge in the Consolidated Income Statement for the following periods is as follows.



Pension charge to the Consolidated Income Statement 74 284

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26. Share-based paymentThe Company operates an equity-settled share-based remuneration scheme for key management. All key management are eligible to participate in the scheme, the only vesting condition being that the individual remains an employee of the Group over the savings period. In addition, the options will lapse if the individual leaves within two years of satisfying the criterion.

2011 2011 2010 2010

Weighted average exercise price (p) number

Weighted average exercise price (p) Number

Outstanding at beginning of the year 154.5 5,658,000 154.5 5,658,000Granted during the year 378.0 2,359,000 – –Forfeited during the year – (288,000) – –

7,729,000 5,658,000

Of the total number of options outstanding at the end of the year, the number that had vested and were exercisable at the end of the year was nil.

The following information is relevant in the determination of the fair value of options granted during the year under the equity-settled share-based remuneration scheme operated by the Group.



Equity-settledOption pricing model used Black-Scholes n/aWeighted average share price at grant date (in Stg£ pence) 378.0 n/aExercise price (in Stg£ pence) 378.0 n/aExpected life of share award (in years) 5 n/a

Dividend growth rate relative to comparator index

Equity-settledExpected volatility 41.67 n/aExpected dividend growth rate 1.70 n/aRisk-free interest rate 2.57 n/a

The volatility assumption, measured at the standard deviation of expected share price returns, is based on a statistical analysis of daily share prices of peer companies over the last three years.

The share-based remuneration expense (note 5) comprises:



Equity-settled schemes 2,879 1,567

The Group did not enter into any share-based payment transactions with parties other than employees during the current or previous period.



27. Contingent liabilities(a) Certain banking facilities of the Group and its subsidiaries are secured by various securities, including the assignment of contract

receivables, the cession of book debtors and corporate guarantees from the Company. The Company together with certain subsidiary companies have given corporate guarantees as security for the banking facilities of certain Group companies amounting to US$585.4 million.

(b) The Group’s bankers and certain insurance companies provide guarantees to customers of the Group as security against the possibility of the Group or certain companies related to the Group failing to satisfactorily complete contracts.

Guarantees issued with recourse against the Group amount to:



Guarantee bonds provided by banks 306,896 197,979Guarantee bonds provided by insurance companies 107,224 121,617

414,120 319,596

These guarantees are represented by the contractual amount. However, as management fully expects the guarantees to expire at the end of their respective terms without being called upon, no provision has been made in the financial statements in respect of these contingent liabilities and the Directors do not believe that the Group will incur any liability arising from the issuance of these guarantees.

(c) The Company and its subsidiary Kentz International Limited have also provided guarantees for certain Group companies in respect of performance of obligations under contract and tenders for contracts and a letter of financial support for Kentz Management Limited.

(d) The Group has received advances on certain contracts as follows:



Advances received on contracts 42,025 41,867

28. Capital commitmentsThe following are the annual commitments under non-cancellable operating leases:



Within 1 year 13,017 13,125Between 2 and 5 years 8,918 5,895Greater than 5 years 2,117 2,877

24,052 21,897

29. Profit before tax reported in the Statement of Cash Flows



Profit before tax as reported in the Consolidated Income Statement 79,439 67,478Profit before tax as reported in the Consolidated Statement of Cash Flows 79,439 67,478

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30. Related parties and related party transactionsIdentity of related partiesThe Group has a related party relationship with its subsidiaries (see note 31), joint ventures (see note 13.1) and with its Directors and Executive Officers.

Transactions with key management personnelIn addition to their salaries, the Group also provides non-cash benefits to Directors and Executive Officers, and contributes to a post-employment defined contribution plan on their behalf.

Prior to this, the Group operated a defined benefit scheme which was closed to future accruals on 31 December 2010. Pensionable service under this pension scheme will be determined by the number of continuous years service up to that date and final pensionable salary will be based on 1/60th of final pensionable salary for each year of service completed to 31 December 2010, as adjusted for an agreed inflation factor.

In accordance with the terms of the plan, Directors and Executive Officers retire at age 60.

The key management personnel compensations are as follows:



Short-term employee benefits 11,540 6,634Post-employment benefits 438 643Share-based payments 411 484

12,389 7,761

Total remuneration is included in the Consolidated Income Statement (see note 5):



Directors 3,820 3,937Executive Officers 12,389 7,761

16,209 11,698

Description of the other related partiesKerbet LimitedAt 31 December 2011, the Company was 26.5% owned by Kerbet Limited, a company registered in Jersey. Kerbet Limited is ultimately owned by Gigondas Real Estate Inc (80%) and Covili Investment Limited (20%). Both of these companies are registered in the British Virgin Islands and are beneficially owned by two of the Company’s Directors, Tan Sri Mohd Razali Abdul Rahman and Hassan Abas.

Saffa LimitedSaffa Limited, a company incorporated in the Republic of Ireland, is beneficially owned by three of the Company’s Directors. In 2005, a property owned by the Group was sold to Saffa Limited at open market value based on an independent valuation for an amount of US$3,155,941. The property was subsequently leased to the Group by Saffa Limited.

The Group pays rent to Saffa Limited. Amounts due to/from the Group to Saffa Limited are included in related parties.

Peremba Group companiesTan Sri Mohd Razali Abdul Rahman and Hassan Abas, who are Directors of the Company, are also shareholders in the Peremba Group companies incorporated in Malaysia.



30. Related parties and related party transactions (continued)Transactions with joint venturesSubsidiary companies incurred reimbursable costs on behalf of the joint ventures listed in note 31.

Amount due from related parties

At 31 December


Joint ventures 3,640 4,673Kerbet Limited 94 79Carmyle Limited 19 9Peremba Group companies 133 137Saffa Limited – 4

3,886 4,902

Amount due to related parties

At 31 December


Joint ventures 3,900 3,665Peremba Group companies 348 359Kerbet Limited 146 146Saffa Limited – 72

4,394 4,242

Non-current liabilities

At 31 December


Kerbet Limited (Shareholder’s advance) 92 92

Transaction values

In thousands of USD Type of transaction 2011 2010

Joint Ventures Technical support services 2,457 2,248Kerbet Limited Costs paid on behalf of related party

Costs paid on behalf of related partyCosts paid on behalf of related party

12 18Carmyle Limited 10 9Peremba Group companies – 82Saffa Limited Rental Charges 331 176

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31. SubsidiariesThe Company has dominant influence over the subsidiaries listed below. Accordingly, the Consolidated Financial Statements incorporate 100% of the assets, liabilities, income and expenses (except where otherwise stated) in accordance with the basis of consolidation accounting policy at 31 December 2011.

name Principal activity

AustraliaKentz Pty Limited Mechanical/electrical/instrumentationKentz (Australia) Pty Limited Mechanical/electrical/instrumentationKentz E&C Pty Limited1 (50%) Mechanical/electrical/instrumentation1 A subsidiary undertaking; Kentz Pty Limited is entitled to appoint the majority of directors of the board of Kentz E&C Pty Limited

BahrainKentz Middle East Holding Company W.L.L. Holding companyKentz Overseas Co. W.L.L. Mechanical/electrical/instrumentation

BotswanaKentz Engineers and Constructors Botswana (Pty) Limited Engineering and construction servicesKentz Botswana (Proprietary) Limited In liquidationKentz Africa Proprietary Limited Dormant

CanadaKentz Canada Holdings Limited Holding companyKentz Canada Limited Mechanical/electrical/instrumentationCallisto Construction Limited Mechanical/electrical/instrumentationBeralta Construction Limited Mechanical/electrical/instrumentation

CaribbeanKentz Caribbean LLC Mechanical/electrical/instrumentationKentz Caribbean (PR) Inc. Mechanical/electrical/instrumentation

Channel IslandsKentz International Limited Holding companyLeonora Limited Holding companyBratoga Limited Engineering servicesKentz (TSS) Global Limited Holding companyKentz Equatorial Guinea Limited Mechanical/electrical/instrumentationKentz Overseas Limited Engineering services

IrelandKentz Ireland Limited Mechanical/electrical/instrumentationChandler Enterprises Limited Holding companyKentz Engineering International Limited Engineering servicesKentz Management Limited Engineering, financial, human resourcesClonmak Limited Non-trading

Isle of ManKentz Africa Holdings Limited Holding companyKentz Caspian Limited Mechanical/electrical/instrumentation

KazakhstanKentz Kazakhstan LLP Mechanical/electrical/instrumentation

MadagascarKentz Madagascar SARL Engineering and construction services

MalaysiaKentz (MEPC) Malaysia SDN BHD Mechanical/electrical/instrumentation

MauritiusKentz Mauritius Limited Holding company and engineering and construction services

MozambiqueKentz Engineering and Constructors Limitada Engineering and construction services



name nature of business

netherlandsKentz Holdings (Europe) B.V. Holding company

QatarQatar Kentz W.L.L.1 (49%) Mechanical/electrical/instrumentation1 A subsidiary undertaking; Kentz Overseas Limited has dominant influence

RussiaKentz Russia LLC Mechanical/electrical/instrumentation

Saudi ArabiaSaudi Arabia Kentz Company Limited1 (49%) Mechanical/electrical/instrumentation1 A subsidiary undertaking; Kentz Middle East Holding Co. W.L.L. has dominant influence

SingaporeKentz MEPC (Singapore) PTE Limited Mechanical/electrical/instrumentation

South AfricaKentz South Africa (Proprietary) Limited Holding companyKentz Management Services (Proprietary) Limited DormantKentz (Proprietary) Limited (74.998%) Engineering and contractingKentz Property Holdings (Proprietary) Limited (74.998%) Property investment and management companyKentz Training Solutions Limited1 (58%) Training servicesKentz Automation and Drives Projects (Proprietary) Limited1 Mechanical/electrical/instrumentationRNE Engineering & Projects (Pty) Limited1 Engineering services1 The shares in these companies are held by the 74.998% indirectly held subsidiary Kentz (Proprietary) Limited

ThailandPeremba Kentz Thai Limited Engineering services

United Arab EmiratesUTS Kentz LLC1 (49%) Mechanical/electrical/instrumentation1 A subsidiary undertaking; Kentz Middle East Holding Co. W.L.L. has dominant influence

UgandaKentz E&C Uganda Limited Mechanical/electrical/instrumentation

USAKentz USA Inc Mechanical/electrical/instrumentation

The Company has the following joint ventures

name nature of business

AustraliaThiess Decmil Kentz JV Mechanical/electrical/instrumentationCB&I Kentz JV Mechanical/electrical/instrumentation

BahrainKentz Global Oil and Gas Process Systems W.L.L. Engineering services

CaribbeanKentz OJ’s JV Barbados Limited Mechanical/electrical/instrumentation

RussiaKentz-DEM LLC Mechanical/electrical/instrumentationKentz-SMNM LLC Mechanical/electrical/instrumentation

Trinidad and TobagoKentz OJ’s E&I Services JV Mechanical/electrical/instrumentation

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32. Acquisition during the year On 1 February 2011, Kentz Pty Limited acquired 100% of the share capital of RNE Engineering & Projects (Pty) Limited (RNE) in South Africa for a total cash consideration of South African Rand 73 million (approximately US$10 million).

RNE undertakes project management, engineering and design services including process, mechanical, piping, civil and structural engineering for oil, gas and petrochemical process plants. The acquisition will support the growth of activity in South Africa as well as the opportunity to jointly tender for select Engineering, Procurement and Construction (EPC) contracts.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:

In thousands of USD Fair value

Property, plant and equipment 463Intangible assets 1,687Inventories 380Receivables 934Cash and cash equivalents 723Payables (295)Deferred tax liability (552)

3,340

Fair value of consideration paid:

Cash paid 5,680Deferred consideration (at net present cost) 4,875Contingent consideration (3,203)

Total consideration 7,352

Goodwill 4,012

The acquisitions costs have been charged to administrative expenses in the consolidated income statement for the year ended 31 December 2011.

The contingent consideration is payable should RNE meet performance targets for the financial years ending 31 December 2011 to 31 December 2013. A portion of the purchase consideration will be forfeited if the selling shareholders were to leave RNE before 31 December 2013. The portion of the consideration relating to this is amortised over the three year period in accordance with IAS 19 Employee Benefits. The liability for the remaining deferred consideration recognised at the acquisition date is measured at the fair value of the obligation at that date. Differences on the remeasurement of this liability are recognised in profit or loss.

On an undiscounted basis, the total future payments for which the Group may be liable range from US$1.9 million to US$5.1 million.

The main factors leading to the recognition of goodwill are the value of expected synergies arising from the acquisition.

The goodwill recognised will not be deductible for tax purposes.

From the date of acquisition, RNE has contributed US$8.7 million to revenues and US$2.2 million to PBT of the Group.

If the acquisition had taken place on 1 January 2011, revenues would have been US$1,368.5 million and PBT for the Group would have been US$79.7 million.


KENTZ CORPORATION LTD ANNUAL REPORT AND ACCOUNTS 2011 101WWW.KENTZ.COM 101WWW.KENTZ.COM

33. Critical accounting estimates and judgementsManagement makes estimates and judgements, including assumptions concerning the future. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable in the circumstances.

The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows.

Revenue recognitionThe Group uses the percentage-of-completion method in accounting for its contract revenue. Use of the percentage-of-completion method requires management to estimate the stage of completion of a contract to date as a proportion of the total contract work to be performed in accordance with the accounting policy set out in note 2(s). As a result, Kentz Group management is required to estimate the total cost to completion of all outstanding jobs at each period end.

Income taxesThe Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

Pension benefitsThe present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations. In determining the appropriate discount rate, the Group considers the interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability. Other key assumptions for pension obligations are based in part on current market conditions. Additional information is disclosed in note 25.

34. Events after the reporting perioda) Final dividendThe Directors have proposed a final dividend of 7.3 US$ cents per share which would make a total dividend payment of 12.3 US$ cents per share for the year ended 31 December 2011. The final dividend payment will be made in May 2012 to shareholders on the register at the close of business on 27 April 2012.

b) Kerbet LimitedOn 4 April 2012, Kerbet Limited disposed of 15 million shares in the Company representing 12.89% of the issued share capital by way of a secondary placing.

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notes


notes

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Shareholder information

Secretary IFG Secretaries (C.I.) Limited

Registered office IFG House 15 Union Street St Helier JE1 1FG Jersey Channel Islands

Auditors BDO Registered Auditors Beaux Lane House Mercer Street Lower Dublin 2 Ireland

Solicitors Arthur Cox William Fry Earlsfort Centre Fitzwilton House Earlsfort Terrace Wilton Place Dublin 2 Dublin 2 Ireland Ireland

Simmons & Simmons Ogier 1 Ropemaker Street Whiteley Chambers London EC2Y 9SS Don Street United Kingdom St Helier JE4 9WG Jersey Channel Islands

Joint Sponsors Investec Banking 2 Gresham Street London EC2V 7QP United Kingdom

Morgan Stanley & Co Limited 20 Bank Street Canary Wharf London E14 4AD United Kingdom

Registrar Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU United Kingdom

KENTZ CORPORATION LTD ANNUAL REPORT AND ACCOUNTS 2011

Worldwide offices

Middle East and CaspianBahrainKentz Middle East Holding Co. (W.L.L.)Sheikh Abdullah Building3rd FloorBuilding # 198Road # 2803Al Seef DistrictKingdom of BahrainTel: +973 17560360Fax: +973 [email protected]

DubaiKentz Global Oil & Gas Process Systems1st Floor, Spectrum BuildingOud MethaP.O. Box 30593DubaiUnited Arab EmiratesTel: +971 4 3366136 Fax: +971 4 [email protected]

Saudi ArabiaSaudi Arabian Kentz Co. LtdPO Box 3462, Al-Khobar 31952Kingdom of Saudi ArabiaTel: +966 3 859 1829Fax: +966 3 859 [email protected]

Kentz Engineering International Co. LtdPO Box 31412, Al-Khobar 31952Kingdom of Saudi [email protected]

KuwaitKentz Overseas LimitedPlot Nos. 61-66East Ahmadi Industrial AreaKuwaitTel: +965 2398 3020Fax: +965 2398 [email protected]

UAEUTS Kent LLC PO Box 34826Mazyad Office Building No.3, Flr - 9Mohammed Bin Zayed CityAbu DhabiUnited Arab EmiratesTel: +971 2 4013200Fax: +971 2 [email protected]

QatarQatar Kentz (W.L.L.)PO Box 3865, DohaQatarTel: +974 44025222Fax: +974 [email protected]

KazakhstanKentz Kazakhstan LLP1st FloorKhakimova Street 4B060005 Atyrau, KazakhstanTel: +7 7122 761211Fax: +7 7122 [email protected]

AustralasiaMalaysiaKentz MEPC (Malaysia) Sdn BhdSuite J-05-13 Solaris Mont’ KiaraNo. 2 Jalan Solaris, Mont’ Kiara50480 Kuala LumpurMalaysiaTel: +603 6203 7300Fax: +603 6203 [email protected]

Papua New GuineaKentz MEPC (Malaysia) Sdn. BhdLevel 3, Port Tower Section 03 Allotment 21 Hunter StreetPort Moresby Papua New GuineaTel/Fax: + 675 320 [email protected]

AustraliaKentz Pty LtdLevel 4, 488 Queen Street Brisbane, Queensland 4000AustraliaTel: +61 7 3370 8100Fax: +61 7 3370 8166

Kentz Pty LtdLevel 13, 191 St Georges TerracePerth, WA 6000Western AustraliaTel: +61 8 9442 2500Fax: +61 8 9226 5435

Kentz Pty Ltd18/16 Charlton Court WoolnerNorthern Territory 0820Tel: +61 8 9442 2500Fax: +61 8 9226 [email protected]

RussiaRussiaKentz Russia LLC4th Floor, 24-B Kommunistichesky AvenueYuzhno-SakhalinskRussia693 000Tel: +7 4242 464 974/5Fax: +7 4242 464 [email protected]

AfricaMadagascar Kentz Madagascar SARLLot II Y 33 F, AntanimoraAntananarivo 101, MadagascarTel: +27 11 203 9600Fax: +27 11 203 [email protected]

MauritiusKentz Mauritius Limited6th Floor, Tower A, 1 Cyber CityEbene, MauritiusTel: +230 4036000Fax: +230 [email protected]

MozambiqueKentz Engineering and Constructors, LimitadaRue Da Se Nr 114,Rovuma Pestana Hotel1 Andar, Maputo, MozambiqueTel: +258 21302712Fax: +258 [email protected]

South Africa Kentz (Pty) LtdSuite 4B Corner of Torsvale and Armstrong Avenue 2 Torsvale Crescent La Lucia 4051 South AfricaTel: +27 31 536 6300 Fax: + 27 31 536 [email protected]

Kentz (Pty) Ltd89 14th Road, Erand MidrandSouth AfricaTel: +27 11 203 9600Fax: +27 11 203 [email protected]

Kentz Integrated Solutions, a division of Kentz (Pty) LtdCnr of Frikkie Meyer Blvd & Kelvin BlvdVanderbijlpark 1900South AfricaTel: +27 16 910 9300Fax: +27 16 933 [email protected]

Europe Ireland Kentz Engineers & ConstructorsGurtnafleurClonmelCounty TipperaryIrelandTel: +353 52 6122811Fax: +353 52 [email protected]

United Kingdom Kentz Engineers and ConstructorsCentral Court25 Southampton BuildingsLondon WC2A 1ALTel: +44 (0)20 3159 [email protected]

The AmericasUSAKentz USA Inc.1800 W Loop SouthSuite 1800Houston, TX 77027USATel: +1 713 862 4066Fax: +1 713 862 [email protected]

CanadaKentz Canada LimitedSuite 610, Bow Valley Square 2205 5 Avenue SWCalgaryAlberta T2P 2V7CanadaTel: +1 403 532 1119Fax: +1 403 873 7293

Suite 1700555 - 4th Avenue SWCalgary, AlbertaT2P 3E7CanadaTel: +1 403 984 5400Fax: +1 403 984 [email protected]

Bahamas Kentz OJ’s JV BahamasChambersPoinciana HouseWest Mall and Poinciana DriveFreeportBahamasTel: +1 868 223 1075/6/7Fax: +1 868 679 [email protected]

BarbadosKentz-OJ’s JV (Barbados) LimitedPO Box 261BridgetownSt. MichaelBarbadosTel: +1 868 223 1075/6/7Fax: +1 868 679 [email protected]

Dominican Republic Kentz Caribbean LLC DRAvenue Independencia No. 201Esq. Dr. DelgadoApto. 203, GazcueSanto DomingoDistrito NacionalRepublica DominicanaTel: +1 868 223 1075/6/7Fax: +1 888 348 [email protected]

Puerto Rico Kentz Caribbean PR Inc.PO Box 51432, Toa BajaPuerto Rico 00950-1432Tel: +1 868 684 8649 / +1 868 387 [email protected]

Trinidad Kentz-OJ’s E&I Services J.V.65 New SettlementDow VillageCaliforniaTrinidadWest IndiesTel: +1 868 223 1075/6/7Fax: +1 868 679 6917

Kentz Caribbean LLC5300 Memorial Drive, Suite 1060Houston, TX 77007, USATel: +1 713 862 4066Fax: +1 888 348 [email protected]

For more information about Kentz, please refer to our websitewww.kentz.com Kentz Investor Relations TeamElizabeth Rous+44 (0) 20 3159 4000 Ronan Tyrrell+353 (0)52 6139869

Kentz Corporation Ltd www.kentz.com

Kentz C

orporation Ltd Annual R

eport and Accounts 2011

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