(HMS.L) Hallin Marine Subsea International PLC Buy/Sell

Tony Ebel, Chairman of Hallin Marine, said: "We are pleased to report that, despite the challenging economic climate, the Group has achieved first half revenues in line with the corresponding period last year, when the market was especially buoyant. Overall, we remain confident in the outlook for the business and the current climate contains as many opportunities as challenges."

Chairman's and Chief Executive's Report

We are pleased to report that, despite the challenging economic climate, the Group has achieved first half revenues in line with the corresponding period last year, when the market was especially buoyant. The Group's first half revenues were US$60.27 million, versus US$59.58 million in 2008. As previously announced, margins have come under pressure, but we expect them to be sustainable at the current levels. The Group achieved a gross margin of 29.1% in the period, down from 31.8% in the first half of 2008. Together with a higher level of overhead expenditure, primarily relating to the acquisition of Prospect Flow Solutions Limited in August 2008, this has resulted in a lower EBITDA of US$14.24 million (23.63%) against US$16.66 million (27.96%) in the first half of 2008. Earnings per share expressed in our reporting currency were 20.2 cents compared to 28.0 cents in the same period last year.

The highly volatile oil price of late 2008 and early 2009 has created considerable uncertainty in the industry. Whilst bidding activity remained high at the beginning of 2009, we witnessed a diminished level of actual contract awards, leading to increased competition and higher price sensitivity. In recent months confidence appears to be slowly returning to the oil and gas services market, following a period of more stable prices. It should be noted, however, that a number of factors remain which have the potential to prolong the uncertainty in the market. Oil prices, whilst currently at US$70 per barrel and slowly rising, remain well below the level that generated the hyperactive market of last year. Maintaining confidence depends on price stability, which creates revenue certainty for operators, and any significant short-term oil price fluctuation in either direction has the ability to erode confidence again after the experience of the last twelve months. Overall, the industry is dependent on the sustained availability of investment and project finance. The longer-term picture of worldwide demand outpacing supply is clear and a significant number of projects are in the pipeline to help address this. However, the continuity of projects and the predictability of start dates are dependent on the reliability and availability of lines of finance. It is this, together with the drive from oil majors for cost savings, which is having a significant impact on our industry at the present time.

Contracting Divisions

The subsea contracting picture is at its most complex for several years with marked geographical variations. Our East Division, trading in the Asia Pacific region, generated revenues of US$36.4 million in the first half of 2009, representing 60% of Group revenues. However, it did so in the face of increased regional competition that impacted margins. West Division, trading mainly in the European and Mediterranean region, reported revenues of US$18.5 million or 31% of Group revenue. The margin pressures have been less on the West Division but demand has been lower, resulting in lower utilisation of their Remote Operating Vehicle equipment, particularly the smaller inspection vehicles. The results of our West Division have also been particularly affected by the adverse movement of over 30% in dollar / sterling exchange rates. Overall, however, returning confidence in the market is generating a more robust pattern of demand which is reflected in our rising forward order book which now stands at US$55.3 million, an increase over US$53 million, the last figure disclosed by the Company in March this year at the time of the 2008 annual results announcement.

Prospect

Our Engineering Division, Prospect, experienced a significantly lower level of business in the first half but, encouragingly, is now seeing signs of a recovery. A new subsidiary, Prospect Asia, was formed in February, co-located with Hallin in Singapore. This entity has already won interesting new work in both oil and gas and renewable energy fields and further new opportunities have been identified. A decision was made to close the loss making Prospect office in Norway. The engineering focus is now on the profitable sectors of Prospect's operations, particularly those in Asia and the more established Prospect markets in the UK and Houston. The closure of the Norway office involves a non-recurring write-off of US$448,000, which has been provided for in full in the first half 2009.

Marine Division

The Ullswater, Hallin's first Subsea Operations Vessel, has performed well since delivery in February 2009, achieving utilisation of 88% to the end of June. The sale and leaseback of this vessel was successfully completed in February, contributing over US$3 million to earnings and enabling the repayment of the loan drawn to finance the construction of the vessel. As announced on 11 September 2009, the vessel has been immediately contracted from late September for inspection, repair and maintenance work in Indonesia, with a contract value of US$20 million, and which will utilise the Ullswater through to January 2010, with further contracted work to be carried out in mid 2010.

The build of our second Subsea Operations Vessel, the Windermere, is progressing well at the Drydocks World shipyard in Singapore, and delivery is scheduled for the second quarter of 2010. Based on enquiries currently being received, we remain confident about the ongoing demand for our specialist vessels and also for the long-term charter vessel, the Sanko Angel, which achieved 83% utilisation in the first half of the year.

Manufacturing Division

The Company is continuing with the development of new operating assets and, in addition to the Ullswater, the first half has seen delivery of a new portable saturation diving system, three work class Remote Operating Vehicles (two built by our Manufacturing Division) and two inspection class Remote Operating Vehicles. The value of operational equipment on the balance sheet has risen to US$51.85 million from US$31.89 million at the beginning of the year. The value of equipment under construction has fallen to US$28.09 million after the US$45 million disposal of the Ullswater and US$14.70 million additions to the Windermere under build. Prudently, the Group has hedged a substantial proportion of the foreign currency exposure related to the Windermere construction contract.

Financial

The cash position of the Group remains strong, with cash balances reported of US$18.6 million at 30 June 2009 (US$23.0 million at 31 December 2008). Borrowings, the majority of which are long term loans to purchase operating assets, fell to US$38.2 million at 30 June 2009 from US$42.6 million at 31 December 2008, resulting in a gearing ratio of 26.1%, down from 30.8% at December 2008. We will continue to draw on facilities already in place to complete the construction of the Windermere.

Summary and Outlook

The more competitive market place created by the economic conditions this year has validated the Group's long-term strategy for developing state of the art, cost effective and fit for purpose equipment to enable us to bid competitively for work whilst still achieving healthy profit levels. Our core Subsea Operations Vessels, Diving and Remote Operating Vehicle assets have performed well and continue to experience high utilisation. However, an older vessel that Hallin had taken on charter at 2007 rates to meet the demand levels of 2008 proved hard to place with clients in the 2009 market. Consequently, the vessel was significantly under utilised in the early part of the year and the Board took the decision to negotiate early release of this vessel, which involved a termination payment of US$720,000, the cost of which is included in these results.

We continue to expand the fleet of operating assets and currently have under construction two further work class Remote Operating Vehicles and a modular Saturation Diving System. We are also in an advanced stage of negotiation to enter into a long-term charter for a new-build specialist Remote Operating Vehicle support vessel to supplement our West Division's contracting activities. If this project proceeds as expected, this vessel would be available in the second half of 2011. We continue to look for other opportunities to further expand our range of assets.

Whilst a high level of economic uncertainty remains, there are recent indications of potential improvements. Our industry has reverted to a more normal pattern of order lead time compared to 2008 and the financial performance of the Company for the year will, in part, depend on the success we achieve in winning business during the traditionally quieter final quarter of the year as well as completing the sale of one of our older Saturation Diving Systems before the year end.

Overall, we remain confident in the outlook for the business and the current climate contains as many opportunities as challenges. Our management team has focused on tight control of our key operations so as to ensure that we are in an excellent position to take maximum advantage of the recovery when it comes. We continue actively to develop the Company and its revenue generating assets, seeking to deliver the best possible performance and growth in a difficult environment.

Tony Ebel - Chairman

John Giddens - Chief Executive

Enquiries:

Hallin Marine +44 (0)845 5191156
John Quinn john@scorchedcorporatepr.co.uk
Blomfield Corporate Finance Ltd +44 (0)207 489 4500
Alan MacKenzie/Ben Jeynes ben.jeynes@blomfieldcf.com
Evolution Securities Limited +44 (0)20 7071 4300

Tim Redfern

Robert Collins

www.hallinmarine.com

UNAUDITED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2009

6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December

Note (Unaudited) (Unaudited) (Audited)

USD'000 USD'000 USD'000

REVENUE 60,266 59,581 139,898

Cost of sales (42,722) (40,615) (92,159)

GROSS PROFIT 17,544 18,966 47,739

Other gains and losses 3 3,308 2,940 7,148
Administrative expenses (9,847) (7,461) (17,993)
Finance costs (871) (638) (1,496)

Profit before taxation 10,134 13,807 35,398

Taxation (1,777) (2,568) (3,922)

Net profit for period 8,357 11,239 31,476

Other comprehensive income

translating foreign operations
Total comprehensive income for 12,489 11,291 27,418

the period, net of tax
EBITDA 14,241 16,659 41,202

Earnings per share (cents) 4

AS AT 30 JUNE 2009

30 June 30 June 31 December

Note (Unaudited) (Unaudited) (Audited)

USD'000 USD'000 USD'000

Plant and equipment 5 82,909 79,531 97,585
Goodwill 7,583 - 7,583
Investments 1,299 - 361

Contract work-in-progress (1,857) 2,446 (2,166)
Trade and other receivables 30,851 33,869 32,235
Related parties 12 13 12
Cash and cash equivalents 18,635 12,357 23,012
47,641 48,685 53,093
TOTAL ASSETS 139,432 128,216 158,622

Share capital 698 678 696
Share premium 20,663 17,675 20,540
Reserves 53,679 26,274 42,419

TOTAL EQUITY 75,040 44,627 63,655

Long term loans 31,546 34,621 21,939
Deferred taxation 37 45 38

31,583 34,666 21,977

Trade and other payables 24,432 31,900 40,654
Payment received on account - 9,800 9,800
Short term loans 6,698 4,306 20,684
Related parties - - -
Current tax payable 1,679 2,917 1,852

32,809 48,923 72,990

TOTAL LIABILITIES 64,392 83,589 94,967

TOTAL EQUITY AND LIABILITIES 139,432 128,216 158,622

UNAUDITED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 JUNE 2009

6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December

(Unaudited) (Unaudited) (Audited)

USD'000 USD'000 USD'000

Opening shareholders' equity 63,655 33,702 33,702
Profit for the period / year 8,357 11,239 31,476
New shares issued 2 6 24
Premium on new share capital 123 361 3,226

subscribed
Currency translation differences 4,132 52 (4,058)
Value of employee services 112 63 81
Dividend payments (1,341) (796) (796)

Closing shareholders' equity 75,040 44,627 63,655

UNAUDITED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2009

6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December

(Unaudited) (Unaudited) (Audited)

USD'000 USD'000 USD'000

Profit before taxation 10,134 13,807 35,398

Adjustments for:-
Exchange alignment 383 794 2,161
Interest expense 871 638 1,496
Provision - - (160)
Interest received - - (218)
Value of employee services 112 63 81

received
for issue of share options
Depreciation 3,236 2,214 4,158
Gain on sale of plant and (2,996) (3,068) (7,768)

equipment
Operating profit before working capital 11,740 14,448 35,148

changes Changes in working capital :-
Trade and other receivables 1,330 (13,508) (8,885)
Contract work-in-progress (309) (2,446) 2,607
Amounts owing by related - (6) (5)

parties
Trade and other payables (16,500) 9,536 12,800

Cash from operations (3,739) 8,024 41,665

Income taxes paid (1,951) (438) (3,120)

Cash flows from operating (5,690) 7,586 38,545

operations Investing activities
Purchase of plant and (26,484) (17,717) (44,873)

equipment
Proceeds from sales of plant 35,200 5,172 11,822

and equipment
Net cash from acquisition of - - (2,699)

subsidiaries
Investment in associated (938) - (361)

companies
Interest income - - 218

Cash flows used in investing 7,778 (12,545) (35,893)

activities Financing activities
Interest paid (871) (638) (1,496)
Repayment of finance leases (61) (59) (223)
Issue of shares 125 366 489
Dividends paid (1,341) (796) (796)
Proceeds from borrowings 17,142 12,109 17,304
Repayment of borrowings (21,459) (1,619) (2,871)

Cash flows from financing (6,465) 9,363 12,407

activities
Net (decrease)/increase in (4,377) 4,404 15,059

cash and cash equivalents Cash and cash equivalents
At beginning of financial 23,012 7,953 7,953

period
At end of financial period 6 18,635 12,357 23,012

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL INFORMATION

1 PRINCIPAL ACTIVITY

Hallin Marine Subsea International plc is a company incorporated and domiciled in the Isle of Man with its registered office at International House, Castle Hill, Victoria Road, Douglas, Isle of Man, IM2 4RB. The principal activity of the Group is in offshore subsea intervention primarily for the oil, gas and telecommunication industries either contracting directly with energy majors or through multi-national contractors. The work involves the use of marine vessels, diving systems of various types, remotely controlled intervention systems and survey positioning systems to conduct underwater inspection, construction and maintenance operations.

2 BASIS OF PREPARATION

The accounting policies applied in the interim consolidated financial information are consistent with those of the annual financial statements for the year ended 31 December 2008 as described in those financial statement except for the impact of the Standard applicable for the current financial period described below:

IAS 1 (revised 2007) Presentation of Financial Statements - effective for annual periods beginning on or after 1 January 2009. IAS 1 (revised 2007) presents transactions with owners in detail and non-owner changes in equity as a single line in the statement of changes in equity. The standard introduces a Consolidated Statement of Comprehensive Income which presents all items of unrecognised income and expense and is limited to the Consolidated Income Statement of Financial Position and the Consolidated cash Flow Statement has been renamed Consolidated Statement of Cash Flows.

IAS 1 (revised 2007) is a disclosure standard and has no impact on the financial position and results of the Group.

3 OTHER GAINS AND LOSSES

6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December

(Unaudited) (Unaudited) (Audited)

USD'000 USD'000 USD'000

Gain on disposal of plant and 3,002 3,085 7,768

equipment
Net foreign exchange 718 (306) (1,403)
Provision for closure of Prospect (448) - -

Norway AS
Others 36 161 783
3,308 2,940 7,148

4 EARNINGS PER SHARE

The basic earnings per share has been calculated on the profit for the period (USD 8,357,000; 2008: USD 11,239,000) and the weighted average number of ordinary shares in issue during the period (41,320,596 shares; 2008 40,111,044 shares).

The fully diluted earnings per share has been calculated on the profit for the period (USD 8,357,000; 2008: USD11,239,000) and the weighted average number of ordinary shares issued and potential ordinary shares issuable under share options granted, assuming full conversion (44,564,096 shares; 2008: 42,474,044 shares).

5 PLANT & EQUIPMENT
Equipment
Operational under Other
equipment construction assets
Total
Group USD '000 USD '000 USD '000 USD '000

Cost
At 1 January 2009 36,066 63,648 3,347 103,061
Additions 10,367 14,703 1,414 26,484
Transfers 50,259 (50,259) - -
Disposals (41,720) - (22) (41,742)
Exchange alignment 4,126 - 87 4,213
At 30 June 2009 59,098 28,092 4,826 92,016

Accumulated depreciation
At 1 January 2009 4,172 - 1,304 5,476
Depreciation charge for the 2,683 - 553 3,236

period
Disposals - - (16) (16)
Exchange alignment 395 - 16 411
At 30 June 2009 7,250 - 1,857 9,107

Carrying amount
At 1 January 2009 31,894 63,648 2,043 97,585

At 30 June 2009 51,848 28,092 2,969 82,909

During the six months ended 30 June 2009, the Group acquired plant and equipment with an aggregate cost of USD26,484,000 (June 2008: USD17,717,000), of which USD Nil (June 2008: Nil) was acquired by means of finance leases and USD26,484,000 (June 2008: USD17,717,000) by borrowings and advances.

During the year ended 31 December 2008, the Group acquired plant and equipment with an aggregate cost of USD45,999,000, of which USD 437,000 was acquired by means of finance leases and USD 45,562,000 by borrowings and advances.

6 CASH FLOW

For the purposes of the consolidated statements of cash flow, the consolidated cash and cash equivalents comprised the following:

6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December

(Unaudited) (Unaudited) (Audited)

USD'000 USD'000 USD'000

Cash and bank balances 18,635 12,357 23,012
Less: bank overdrafts - - -

Cash and cash equivalents as per
Consolidated statements of cash 18,635 12,357 23,012

flow

7 HEDGING

The Group incurs foreign currency risk on sales and purchases that are denominated in currencies other then United States dollars. At present, the Group does not have any formal policy for hedging against exchange exposure, The Group may, when necessary, enter into foreign currency forward contracts to hedge against exposure from foreign currencies fluctuations. The forward contracts that the Group has entered into to date are as follows:-

Buying Currency & Amount Value Date Rate USD Equivalent
SGD 7,535,000 18 Sep 2009 1.5070 5,000,000
SGD 7,533,000 30 Sep 2009 1.5066 5,000,000
SGD 7,751,000 17 Sep 2009 1.5502 5,000,000
SGD 7,750,000 29 Sep 2009 1.5500 5,000,000

8 NATURE OF FINANCIAL INFORMATION

The interim information set out above is neither audited nor reviewed and does not represent the statutory financial statements for Hallin Marine Subsea International plc or for any of the entities comprising the Hallin Marine Group for the period ended 30 June 2009. The figures for the year ended 31 December 2008 were extracted from the consolidated financial statements which have been presented to shareholders. The auditors' report on those financial statements was unqualified.

The Board approved the interim financial information for the period ended 30 June 2009 on 9 September 2009.

These interim results are available on the Company's website at www.hallinmarine.com.

This information is provided by RNS The company news service from the London Stock Exchange

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