Hunting for a bargain

The disparity between Hunting's underlying and reported figures reflects a sharp rise in goodwill impairments. Net earnings fell by a third to $71.8m (£46.9m), but rose 7 per cent on an adjusted basis. The goodwill impairments - $49.6m in total - were charged against Hunting's Drilling Tools business, which was hit by weather-related problems, and Hunting Electronics, which reported a fall in sales due to customer destocking and increased competition from Asian suppliers.

However, if you disregard these one-off items, 2014 was a highly successful year for Hunting. Underlying profits were up 13 per cent at the key well completion division, largely on the back of strong demand for Hunting Titan's perforating wellhead systems, which are used in both conventional and unconventional sites. But the outstanding performance came from Hunting's smaller well intervention business, which reported a 52 per cent uplift in profits. Despite the oil price falls, there were encouraging levels of demand from the Middle East and South-east Asia, while subsea work continues to generate sales growth.

Non-cash charges may have hit the bottom line, but Hunting generated a quarter more free cash last year, at $182m, than in 2013. This enabled the group to reduce net debt by 36 per cent to $131m. Strong cash flow, coupled with manageable capital commitments and a diversified product offering, should enable the group to weather even a prolonged downturn in energy markets.

Broker Numis Securities expects EPS of 39.9p this year, against 100p in 2014.