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Lamprell plc (LAM)

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Wednesday 23 March, 2016

Lamprell plc

2015 Financial Results

RNS Number : 9657S
Lamprell plc
23 March 2016
 

 

 

23 March 2016

 

LAMPRELL PLC
("Lamprell" and with its subsidiaries the "Group")

 

2015 FINANCIAL RESULTS

 

Financial performance in line with expectations 

 

Margins maintained despite challenging environment

 

2015 FINANCIAL RESULTS

 

2015

2014

(USD million, unless stated)

 

 

Revenue

871.1

1,084.9

EBITDA

90.0

137.0

EBITDA margin

10.3%

12.6%

Profit from continuing operations after income tax

66.5

93.2

Reported diluted earnings/per share (US cents)

18.9

37.4

Net cash as at 31 December

210.3

272.6

Dividend per share (US Cents)

Nil

Nil

 

Financial highlights

·     Profit of USD 66.5 million ahead of market expectations on the back of strong operational performance and contribution from efficiency and productivity measures

·     Revenues of USD 871.1 million, slightly below earlier guidance due to the impact of the market downturn

·     EBITDA margin down from the exceptional level of 12.6% in 2014 to a more normalised level of 10.3%, with pricing pressure partly offset by positive impact of higher productivity and cost efficiencies

·     Robust cash position of USD 210.3 million maintained despite spending on Project Evolution and the working capital cycle

 

Operational highlights

·     High levels of activity with our yards close to full capacity in 2H and into 2016

·     Strong operational performance with three major projects delivered safely, on time, on budget and to high quality standards

·     Option with NDC for a new jackup converted in April; further awards from Petrofac for additional modules, now totalling 45 units for the landmark Upper Zakum project, Abu Dhabi

·     Backlog of USD 740 million (31 December 2014: USD 1.2 billion) of which 90% is attributable to 2016, with bid pipeline slightly higher at approximately USD 5.4 billion (31 December 2014: USD 5.2 billion)

·     Safety remains a high priority, with an outturn total recordable incident rate of 0.31

·     Phase 2 of Project Evolution, our programme of productivity improvements and cost efficiencies, commenced

 

Strategy in place

·     Strategy reviewed and refined during the year in light of the prolonged market downturn

·     Prospects pipeline assessed and composition refocused to maximise overall likelihood of  awards

·     Near-term business development efforts shifted towards more resilient markets such as the Middle East where we have a competitive position

·     Strategic alliances targeted to enable involvement in large projects

·     Memorandum of Understanding relating to potential participation in a Maritime Yard in Saudi Arabia signed in January 2016

 

Current trading and outlook

·     Four major deliveries expected during the course of 2016, with all projects progressing well

·     Bid pipeline of USD 5.4 billion remains extensive, however delays in awards continue to affect conversion rate; 90% of backlog attributable to 2016

·     Challenging market environment expected to affect the industry throughout 2016

·     Revenues for FY2016 currently expected to be around 5% below 2015 levels

·     Maintaining business flexibility with overhead cost reductions and further cost and productivity improvements from additional opportunities identified through Project Evolution

·     Continuing efforts to leverage Lamprell's regional expertise and competitive advantage

 

 

John Kennedy, Executive Chairman for Lamprell, said:

"2015 was a challenging year for the global energy industry and Lamprell began the year in a position of relative strength, with a high level of backlog and a strengthened balance sheet, which allowed the Group to deliver a robust performance.  Although we have been affected by the slow-down in new awards worldwide as companies have delayed project sanctions, Lamprell has shown resilience and has been quick to react and adapt. We have refined our strategy and structured our operations so as to remain competitive and to be well-prepared for another challenging year in 2016. At the same time, we have not lost sight of our strategic objectives by building a foundation for longer-term growth. We continue to diversify our bid pipeline, pursue strategic alliances and have recently announced early stage discussions regarding our potential participation in the Maritime Yard in Saudi Arabia.  In the meantime, our cost advantages and strong balance sheet will help us to compete in a very challenging market as the downturn is expected to continue through 2016."

 

James Moffat, Chief Executive Officer for Lamprell, said:

"Lamprell's operational performance has been consistently strong over the past few years and I am pleased to see that continuing throughout 2015, resulting in financial performance in line with expectations in the face of market headwinds. Having successfully implemented Project Evolution, the benefits from this programme of cost efficiencies and productivity improvements have proven to be key to both our operational and our financial results in 2015 and that will continue in 2016. We have been able to maintain our competitiveness in a market with significant downward pressure on pricing. As a result, not only have we maintained healthy margins, but this also helped us win one of only three rigs awarded globally in 2015. It seems unlikely that the markets will return to full recovery in 2016 and so we currently expect our full year revenues for 2016 to be around 5% below 2015 levels. Our business retains a high degree of flexibility leaving us sufficient room to undertake further measures to adapt to the market environment and preserve our long term future."

 

The management team will hold a presentation for research analysts at 9.00am at Holborn Bars (138-142 Holborn, London EC1 2NQ).  The live webcast will be accessible on Lamprell's website and on the following link:

http://webcasting.brrmedia.co.uk/broadcast/56e1a8234f1d147d54d0fc36.

 

 

The Company will hold its 2016 annual general meeting on 15 May 2016 in Dubai, United Arab Emirates.

 

- Ends -

 

 

Enquiries:

 

Lamprell plc

John Kennedy, Executive Chairman

+971 (0) 4 803 9308

James Moffat, Chief Executive Officer

+971 (0) 4 803 9308

Tony Wright, Chief Financial Officer

+971 (0) 4 803 9308

Natalia Erikssen, Investor Relations

+44 (0) 7885 522 989

 

 

 

Tulchan Communications, London

+44 (0) 207 353 4200

Martin Robinson

 

Martin Pengelley

 

 

 

 

 

 

Notes to editors

Lamprell, based in the United Arab Emirates ("UAE") and with over 40 years' experience, is a leading provider of fabrication, engineering and contracting services to the offshore and onshore oil & gas and renewable energy industries.  The Group has established leading market positions in the fabrication of shallow-water drilling jackup rigs, liftboats, land rigs, and rig refurbishment projects, and it also has an international reputation for building complex offshore and onshore process modules and fixed platforms.

 

Lamprell employs more than 9,000 people across multiple facilities, with its primary facilities located in Hamriyah, Sharjah and Jebel Ali, all of which are in the UAE. In addition, the Group has facilities in Saudi Arabia (through a joint venture agreement). Combined, the Group's facilities cover approximately 1,000,000 m2 with 2 km of quayside.

 

Lamprell is listed on the London Stock Exchange (symbol "LAM").

 

 

 

 

Chairman's statement

 

Challenging market backdrop

 

Contrary to the predictions of many market participants, oil prices continued to slide throughout 2015. Oil and gas companies around the world reacted by gradual, and in some cases drastic, cuts to their capital expenditure.

 

Lamprell is not immune to the oil sector headwinds but we are pleased to report on our demonstrated ability to withstand these challenges. Along with other energy industry contractors, we have seen delays in contract awards but we have taken steps to adapt by changing our approach to new business development.

 

Maintaining a competitive position

 

In difficult times, companies often make the mistake of losing focus on their long -term goals. Lamprell's strong position allowed us to withstand the storm without compromising our future growth plans. We managed to remain competitive and continue to implement our strategy.

 

Similar to most of our peers, our pipeline conversion was affected by project delays and cancellations. Nevertheless our bid-to-win ratio remained healthy by industry standards and this is an important factor indicating Lamprell's strong competitive position. It gives comfort about our ability to recover from the difficult contracting environment.

 

We also judge our strength by our ability to compete without undermining Lamprell's financial performance or commercial position. In the context of increased pricing pressure, where numerous market players saw gradual margin erosion, we have been able to remain profitable. The gains delivered through Project Evolution allowed us to protect our normalised margins whilst enabling us to offer attractive propositions in a tough market.  This business flexibility and our strong client relationships have helped us maintain leadership in the jackup market, with a win of the ninth rig from National Drilling Company ("NDC"), one of only three jackup rig orders placed worldwide in 2015.

 

 

Focus on the future

 

Whilst we are taking steps to ensure we successfully weather the current storm in the sector, we anticipate a recovery in the energy markets, as do most industry experts, and so we are also continuing to focus on our future. We have reviewed our strategy for robustness, redirecting our marketing efforts from slower international regions around the world to the Middle East where we can leverage our position of strength.

 

As a Board, we have also spent considerable time assessing our medium-term positioning in the market and potential sources of growth for Lamprell. With this in mind, we have identified strategic partnerships as a potential route to a step-change in the scale of projects to target. In line with this plan, in January 2016 we announced a Memorandum of Understanding with Saudi Aramco, Bahri and Hyundai Heavy Industries regarding a potential partnership for collaboration on the Maritime Complex in Saudi Arabia. The discussions are still at an early stage, but this could become a sizeable business opportunity for Lamprell. I took on the responsibility of Executive Chairman to identify opportunities for strategic initiatives and other means to grow the business in an outward facing role. Our work on potential alliances continues, and we will update our shareholders on progress as appropriate.

 

Strong Board

 

In this endeavour, I have benefited from the support of a strong Board. Following the departure of Michael Press and the passing of Peter Whitbread during 2015, Lamprell has enhanced the Board's independence and composition with the addition of two Directors with impressive experience and Ellis Armstrong's appointment as Senior Independent Director. Debra Valentine brings significant industry knowledge coupled with expertise in corporate transactions. Mel Fitzgerald is a seasoned executive with 30 years of industry experience. It was also pleasing to promote from within, with the appointment of Tony Wright to the Board in the role of Chief Financial Officer.

 

Lamprell's Board will be completed with the recruitment of a new CEO following Jim Moffat's announced retirement from the full-time CEO position in 2016. Lamprell will continue to benefit from Jim's expertise for a year following his retirement but I would like to take this opportunity to thank him and the wider senior management team for their dedication and drive to secure a strong future for the Group.

 

I would also like to thank our shareholders for their support through these challenging times. The Board will continue to work tirelessly to deliver the strategy firm in our belief in Lamprell's future.

 

John Kennedy

Executive Chairman

 

 

 

 

Chief Executive Officer's Review

 

After a year of exceptional financial results in 2014, Lamprell has maintained a strong operational performance and built on the strong business position towards long-term growth. The focus is now on executing our strategy.

 

2015 will certainly be remembered as a difficult year for the industry, but for Lamprell it was an important turning point. After a year of recovery in 2013 and the exceptional performance in 2014, this year has shown the underlying robustness of Lamprell's business, with its ability to be flexible and adapt to the changing environment. In 2015, we demonstrated that Lamprell is resilient enough to return to normalised performance, even in the context of a challenging market.

 

Maintaining high activity levels

 

Overall, our performance across the key metrics was strong. We focused on the elements under our control, which allowed us to manage the impact of the external environment.  Operationally, we have done well, delivering three major projects on time, on budget and to high safety and quality standards. We have seen an extension in scope of the project we are fabricating for Petrofac, a testament to our performance. Our yards remained full throughout the second half of the year.

 

The strength of our client relationships is a key driver of our performance, and we continued to develop these through our collaborative approach. Having awarded Lamprell a contract for the ninth in a series of jackup rigs, NDC subsequently extended its options with Lamprell to a current total of three options. We also offered the service of stacking client rigs in our facilities in the spirit of current and future cooperation.

 

New build jackup rigs were the largest contributor to our revenue this year, with offshore/onshore construction suffering from a slow-down in the market downturn. The challenging environment has also significantly impacted the contribution from our walk-in business, with rig refurbishment revenue reduced by more than half compared to 2014, which is the reason behind our total revenue being slightly below our earlier guidance. Our land rigs business unit performed broadly in line with our expectations, albeit reflecting the slow-down in the industry, and completed 13 projects in total during 2015.

 

Maximising operational performance through improvements

 

During the course of the year we improved significantly our efficiency and productivity in the yards. The implementation of Project Evolution was almost entirely completed by the end of the year, with a new panel line fully operational and significant improvements in automation.

 

We started to see the benefits in terms of productivity almost immediately upon completion of each component of the project. As you would expect with the introduction of new equipment and training requirements, some of the initiatives took time to ramp up to their full run-rate but we have benefited from the improvements throughout the year. For example welding, which constitutes a major component in fabrication with approximately 30% of total manhours, has seen a dramatic step up as we modernised our processes. The beam-cutting robots cut beams to exact size many times faster and more accurately than a human can.

 

We have also optimised painting, crane and scaffolding services, as well as our use of yard space and assets. As a result, we have been able to accommodate the construction of seven concurrent jackup rigs in our Hamriyah yard, a record for the Group.

 

At the time of the start of Project Evolution, we expected full payback within three to four years. While this remains appropriate guidance, we delivered better savings than first anticipated during 2015, whilst also implementing the Project within budget and the timeframe specified originally. The savings and efficiencies generated by Project Evolution allowed us to protect our margins whilst at the same time remaining competitive in a market with increased pricing pressure. With the recent appointment of Niall O'Connell as COO a strong focus will be on driving these operational improvements even further. Phase 2 of Project Evolution has commenced with the approval of a new pipeshop.

 

Our safety record throughout the year was stable with a total recordable incident rate around 0.3. The Jebel Ali and Dubai facilities also achieved a major milestone, having now operated for three years without a day away from work case, a significant achievement given the nature of our business. We have set new improvement goals and are looking at new ways to strengthen the safety culture further within the workforce and prevent all avoidable incidents.

 

Focus on remaining competitive in a challenging market environment

 

As drilling programmes started to be scaled back in response to weak oil prices, the pace of the contract awards has slowed down across the whole supply chain. Along with our peers, we suffered from this and this is reflected in the lack of major awards during the second half of the year. The slow-down in order intake has however had an impact on our backlog, which stood at USD 740 million at period end and provides reasonable revenue coverage for the current year with approximately 90% attributable to 2016.

 

In the first half of the year, we were successful in converting one of the jackup rig options with NDC and we saw an award of additional modules on the Abu Dhabi project for our client, Petrofac, with the total now standing at 45 preassembled racks, units and modules. We have also seen a number of smaller contract awards across our businesses, including a contract award for suction caps and buoyancy tanks from a new client. In our drive to expand our offering, we also built our first land rig of Lamprell's proprietary design, which we started marketing towards the end of the year. The initial feedback from potential customers has been positive and we believe it will be an attractive product for Middle East clients, having been specifically designed for the region.

 

Despite a healthy bid-to-win rate being maintained, the conversion rate of our pipeline suffered from a slow-down in awards across the global markets. Whilst bidding activity levels are high and our bidding pipeline is extensive, we continue to be affected by the industry-wide trend of projects drifting to the right. In response to this slow-down we have continued to improve our approach to business development and, specifically, we dynamically adapted the composition of our bid pipeline throughout the year to address the changing circumstances. We regularly reassess the likelihood of sanction or proactively replace the delayed projects with new bids more likely to be awarded in the near future. Our bid pipeline currently stands at USD 5.4 billion, which is at comparable level to last year's, whilst its composition has changed. In practice, this was driven by a conscious shift away from the quieter international markets to more buoyant regional markets such as the Middle East, which maintains higher activity levels in the current environment. The Company, due to its geographic location, believes it is relatively well placed to capitalise on this comparative market strength.

 

In our effort to minimise the impact of the downturn on our near and medium term performance, we have streamlined the organisational structure with efficiencies and overhead reductions and we expect to generate further efficiencies this year. The high activity levels to date have meant that despite maintaining flexibility, Lamprell did not have to adjust its operations to a quieter market, unlike many other companies in our sector, however we continuously review our ability to react to a significant drop in activity should action be required. We value this additional room for flexibility, particularly this far into the market downturn, as an important competitive advantage for Lamprell.

 

Outlook

 

The strong foundations laid over the last 18 months have created a structure for us to be competitive and deliver a strong operational performance consistently. With our ongoing bidding efforts, we expect to be able to persevere through the downturn and then emerge from it in a strong position for growth to deliver our strategy. With this in mind, we believe our ability to win large projects could be enhanced by forming strategic alliances. In early 2016 we signed a Memorandum of Understanding regarding Lamprell's potential participation in the Maritime Complex in eastern Saudi Arabia.  We have also agreed to work with Dubai Drydocks to identify opportunities for cooperation on FPSO/FPU projects in the context of Dubai's aspiration to become a strategic location for such projects.  We will continue to scrutinise the market for other value-added alliances.

 

There is a lot of uncertainty in the current markets but Lamprell's focus for 2016 is on demonstrating resilience and its ability to progress towards future growth despite the industry challenges. We remain confident in our ability to deliver on our strategy, which we believe is the right path to long term success. Despite our confidence in the long term future, this does not leave us immune from the market downturn and we expect the challenges to continue impacting our performance in 2016.

 

The Board currently expects the revenues for 2016 to be around 5% below Lamprell's performance in 2015 as the overall market downturn continues to have an impact on the Company.  In the meantime, the management team will continue its focus on protecting margins benefiting from cost efficiencies and productivity improvements. The Group remains firmly focused on influencing the factors under its control by improving performance, streamlining the business and shifting its focus to the Middle East region.

 

James Moffat

Chief Executive Officer

Lamprell plc

 

 

 

Financial Review

 

Results from operations

 

We are pleased to deliver healthy and steady financial performance in 2015 following a year of exceptional financial results in 2014. The combination of strong operational execution and savings achieved as a result of Project Evolution allowed us to deliver good margins despite global headwinds in the sector.

 

The Group's total revenue for the year was USD 871.1 million, slightly below our earlier guidance due to the impact of the market downturn on our walk-in business. Our other businesses performed in line with expectations. The new build jackup segment remained the main source of revenue for Lamprell, with a record number of seven concurrent rigs under construction in the yard. Our revenues for 2015 were heavily weighted to the second half of the year due to the phasing of construction, as several of our projects were at the early stages in their build schedules in the six months to 30 June 2015.

 

The additional awards by Petrofac have provided a significant contribution to our module business.

 

Whilst we are seeing repeat business from our clients, the general weakness across the sector has driven a reduction in revenues from our rig refurbishment business. We delivered 11 refurbishment projects in 2015. We also took on high quality projects, with a number of wins for important clients albeit of fairly modest value, in our E&C business unit.

 

Margin performance

 

The Group completed the major part of the investment under Project Evolution, with the realised savings partly utilised to protect Lamprell's margins whilst retaining our competitive position in an environment of increased pricing pressure. This investment programme allowed the Group to maintain its normalised margins despite the industry difficulties which impacted the financial performance of its sector.

 

The Group's gross margin decreased to USD 123.5 million from USD 182.1 million in the previous year primarily due to lower revenues, project phasing and a return to normalised performance. The drop in rig refurbishment revenue in the current environment had a minor negative impact on margins, whilst our new build jackup business managed to maintain stable margins at normalised levels. The main reason for this was the savings and productivity gains delivered by the Project Evolution initiatives.

 

EBITDA excluding discontinued operations and exceptional items for the period was USD 90.0 million (2014: USD 137.0 million). The Group's EBITDA margin decreased from 12.6% in 2014 to 10.3% in 2015, reflecting the absence of the 2014 exceptional items, partially offset by certain one off events in 2015 such as bad debt recoveries.

 

Finance costs and financing activities

 

Net finance costs in the period decreased to USD 12.0 million (2014: USD 18.4 million). Gross finance costs were USD 5.9 million lower due to reduced interest margins and lower bonding costs, partially offset by increased commitment fees on our facilities following the refinancing in 2014. Finance income has increased by USD 0.5 million as a result of higher cash deposits.

 

Net profit after exceptional items and earnings per share

 

The Group recorded a profit for 2015 attributable to the equity holders of USD 64.7 million (2014: USD 118.1 million). The fully diluted earnings per share for the year was 18.84 cents (2014: 37.38 cents), based on strong underlying performance in the absence of the exceptional items reported in 2014.

 

Capital expenditure

 

The Group's capital expenditure in 2015 increased to USD 59.5 million (2014: USD 22.5 million). The main area of investment was yard improvement under Project Evolution, which included the purchase of new equipment including the new panel line       , beam cutting robots and some yard infrastructure enhancements.  The major part of the investment under Project Evolution is now complete, with the second phase of Project Compass live across the Group since 1 October 2015.

 

Cash flow and liquidity

 

The Group's net cash flow from operating activities for 2015 reflected a net outflow of USD 0.8 million (2014: net outflow of USD 39.8 million) arising predominantly from the Group's EBITDA and offset by increased working capital requirements due to the natural cycle on major projects.

 

Cash and bank balances decreased by USD 82.0 million, resulting from a net cash outflow from investing activities attributable to the major capital investment programme and an outflow from financing activities. The Group's net cash position remains strong at USD 210.3 million (2014: USD 272.6 million), a decrease in line with expectations due to capital spend on Project Evolution and the phasing of the construction cycle on our projects.

 

Balance sheet

 

The Group maintained a strong balance sheet, providing flexibility and security in a challenging environment for the industry.

 

The Group's total current assets at the period-end were USD 725.3 million (2014: USD 780.7 million). Trade and other receivables increased to USD 428.3 million (2014: USD 403.6 million) due to unfavourable timing on milestone payments as well as advance payments to suppliers to secure favourable terms for equipment procured.

 

Shareholders' equity increased from USD 672.2 million to USD 737.6 million at 31 December 2015. The movement mainly reflects increased retained earnings of USD 410.4 million (2014: USD 344.5 million).

 

The Group's debt/equity ratio of 10.8% at 31 December 2015 (2014: 14.7%) emphasises our low levels of leverage and balance sheet strength.

 

Borrowings and debt

 

In 2015, following the major debt refinancing the previous year, the Group's facilities comprised (a) a USD 100 million term loan amortised over five years, of which USD 20 million was repaid over the course of the year; (b) USD 50 million for general working capital purposes which remained undrawn; and (c) USD 200 million of working capital for project financing, which has not been taken up by our clients to date. Lamprell continued to market this facility as part of a number of bids and the aim remains to leverage it in future projects.

 

In addition, the related USD 250 million committed bonding facility, which is available for use in connection with new contract awards funded by the working capital facility detailed in (c) above, remained undrawn in 2015 and the Group has been able to leverage its bilateral bonding facilities for better commission rates.

 

The outstanding borrowings were USD 79.3 million as at 31 December 2015 (2014: USD 99.0 million).

 

Change of auditors

 

Following a formal tender process in line with market best practice, the Audit & Risk Committee made a recommendation for the appointment of Deloitte LLP as the external auditor for the Company, which the Board approved. Deloitte LLP has expressed its willingness to act as external auditor and a resolution to appoint Deloitte LLP will be proposed at the forthcoming AGM for their services in respect of the 2016 financial year.

 

Going concern

 

After reviewing its cash flow forecasts for a period of not less than 12 months from the date of signing these financial statements, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future. The Directors have concluded therefore that it is appropriate for the Group to continue to adopt the going concern basis in preparing its financial statements.

 

Dividends

 

Given the challenging market environment and the Group's strategy to retain a strong net cash position and balance sheet, the Directors do not recommend the payment of a dividend for the current financial year ending 31 December 2015.  In the future the Directors will continue to review this position in light of market conditions at the relevant time.

 

Antony Wright

Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lamprell plc

Consolidated income statement

 

 

 

Year ended 31 December

 

Note

2015

USD'000

2014

USD'000

Continuing operations

 

 

 

Revenue

5

              871,058

             1,084,890

Cost of sales

6

       (747,538)

       (902,810)

Gross profit

 

              123,520

                182,080

Selling and distribution expenses

7

                (1,771)

                  (1,773)

General and administrative expenses

8

              (44,318)

                (72,700)

Other gains/(losses) - net

11

                   260

                  1,456

Operating profit

 

                77,691

                109,063

Finance costs

10

              (14,647)

                (20,516)

Finance income

10

                2,679

                  2,166

Finance costs - net

 

              (11,968)

                (18,350)

Share of profit of an investment accounted for using the equity method

 

                1,318

                  2,991

Profit before income tax

 

                67,041

                  93,704

Income tax expense

 

                   (541)

                  (484)

Profit for the year from continuing operations

 

              66,500

                93,220

Discontinued operations

 

 

 

Loss for the year from discontinued operations

18

                (1,866)

                  (6,433)

Gain on disposal of subsidiary

 

                     66

                31,270

Profit for the year attributable to the equity holders of the Company

 

              64,700

              118,057

 

 

 

 

Earnings per share for profit from continuing operations attributable to the equity holders of the Company

12

 

 

Basic

 

19.46c

29.54c

Diluted

 

19.36c

29.52c

 

 

 

 

Earnings per share attributable to the equity holders of the Company

12

 

 

Basic

 

18.93c

37.41c

Diluted

 

18.84c

37.38c

 

 

 

 

Lamprell plc

Consolidated statement of comprehensive income

 

 

Note

2015

USD'000

2014

USD'000

Profit for the year

 

                    64,700

              118,057

Other comprehensive loss

 

 

 

Items that may be reclassified to profit or loss:

 

 

 

Currency translation differences

21

                       (489)

                   (372)

Items that will not be reclassified to profit or loss:

 

 

 

Re-measurement of post-employment benefit obligations

22

                 (1,988)

             (3,742)

Other comprehensive loss for the year

 

                 (2,477)

             (4,114)

Total comprehensive income for the year

 

                  62,223

           113,943

Total comprehensive income/(loss) for the year attributable to equity holders of the Company arises from:

 

 

 

Continuing operations

 

                  64,023

             89,106

Discontinued operations

 

                 (1,800)

             24,837

 

 

 

 

Lamprell plc

Consolidated balance sheet

 

 

Note

2015

USD'000

2014

USD'000

ASSETS

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

13

            175,286

            139,343

Intangible assets

14

            205,884

            204,726

Investment accounted for using the equity method

 

                5,285

                5,118

Trade and other receivables

16

              12,712

              11,876

Derivative financial instruments

23

                       -

                     55

Cash and bank balances

17

              8,950

             12,517

Total non-current assets

 

          408,117

           373,635

Current assets

 

 

 

Inventories

15

              29,066

              14,560

Trade and other receivables

16

            415,614

            391,743

Derivative financial instruments

23

                       -

                     14

Cash and bank balances

17

          280,668

           359,108

 

 

            725,348

            765,425

Assets of disposal group classified as held for sale

18

                     -

             15,228

Total current assets

 

          725,348

           780,653

Total assets

 

       1,133,465

        1,154,288

LIABILITIES

 

 

 

Current liabilities

 

 

 

Borrowings

26

           (20,136)

           (20,136)

Trade and other payables

24

         (264,943)

         (317,603)

Derivative financial instruments

23

                    (4)

                (269)

Provision for warranty costs and other liabilities

25

             (8,334)

           (15,812)

Current tax liability

 

              (451)

               (167)

 

 

         (293,868)

         (353,987)

Liabilities of disposal group classified as held for sale

18

                     -

          (10,546)

Total current liabilities

 

       (293,868)

        (364,533)

Net current assets

 

          431,480

           416,120

Non-current liabilities

 

 

 

Borrowings

26

           (59,163)

           (78,843)

Derivative financial instruments

23

                  (14)

                        -

Provision for employees' end of service benefits

22

         (42,863)

          (38,752)

Total non-current liabilities

 

       (102,040)

        (117,595)

Total liabilities

 

       (395,908)

        (482,128)

Net assets

 

          737,557

           672,160

EQUITY

 

 

 

Share capital

20

              30,346

              30,346

Share premium

20

            315,995

            315,995

Other reserves

21

           (19,144)

           (18,655)

Retained earnings

 

          410,360

           344,474

Total equity attributable to the equity holders of the Company

 

          737,557

           672,160

 

 

 

 

 

Lamprell plc

Consolidated statement changes of equity

 

 

 

 

 

 

Note

Share capital

USD'000

Share premium

USD'000

Other reserves

USD'000

Retained earnings

USD'000

Total

USD'000

At 1 January 2014

 

         23,552

         211,776

          (22,133)

          229,561

          442,756

Profit for the year

 

                    -

                       -

                       -

           118,057

          118,057

Other comprehensive income:

 

 

 

 

 

 

Re-measurement of post-employment benefit obligations

 

22

                    -

                       -

                       -

             (3,742)

            (3,742)

Currency translation differences

21

                  -

                     -

               (372)

                     -

               (372)

Total comprehensive income for the year

 

                  -

                     -

               (372)

          114,315

          113,943

Disposal of subsidiary

21

                  -

                     -

               3,850

                     -

              3,850

Transactions with owners:

 

 

 

 

 

 

Proceeds from shares issued (net)

20

            6,794

           104,219

                       -

                       -

          111,013

Share based payments:

 

 

 

 

 

 

- value of services provided

 

                    -

                       -

                       -

               1,084

              1,084

Treasury shares purchased

20

                  -

                     -

                      -

              (486)

               (486)

Total transactions with owners

 

           6,794

         104,219

                      -

                 598

          111,611

At 31 December 2014

 

         30,346

         315,995

          (18,655)

          344,474

          672,160

Profit for the year

 

                    -

                       -

                       -

             64,700

            64,700

Other comprehensive income:

 

 

 

 

 

 

Re-measurement of post-employment benefit obligations

 

22

                    -

                       -

                       -

             (1,988)

            (1,988)

Currency translation differences

21

                  -

                     -

               (489)

                     -

               (489)

Total comprehensive income for the year

 

                  -

                     -

               (489)

            62,712

            62,223

Transactions with owners:

 

 

 

 

 

 

Share based payments:

 

 

 

 

 

 

- value of services provided

 

                  -

                     -

                      -

              3,174

              3,174

Total transactions with owners

 

                  -

                     -

                      -

              3,174

              3,174

At 31 December 2015

 

        30,346

         315,995

           (19,144)

          410,360

          737,557

               

 

 

Lamprell plc

Consolidated cash flow statement

 

Year ended 31 December

 

 

 

 

Note

 

2015

USD'000

2014

USD'000

Operating activities

 

 

 

 

Cash used in operating activities

29

 

                 (522)

             (39,433)

Tax paid

 

 

               (257)

                (374)

Net cash used in operating activities

 

 

               (779)

           (39,807)

Investing activities

 

 

 

Additions to property, plant and equipment

 

            (55,681)

             (18,947)

Proceeds from sale of property, plant and equipment

 

                    543

                     317

Additions to intangible assets

14

              (3,782)

               (3,595)

Finance income

10

                 2,679

                  2,166

Dividend received from a joint venture

 

                 1,151

                  3,488

Proceeds from disposal of a subsidiary - net

18

                 2,091

                59,312

Movement in deposit with an original maturity of more than three months

17

              (6,706)

                  5,633

Movement in margin/short-term deposits under lien

 

               1,519

                3,249

Net cash (used in)/generated from investing activities

 

           (58,186)

              51,623

Financing activities

 

 

 

Proceeds from shares issued (net of expenses)

20

                         -

              111,013

Treasury shares purchased

20

                         -

                  (486)

Proceeds from borrowings

 

                         -

              100,000

Repayments of borrowings

 

            (20,000)

           (160,000)

Finance costs

 

            (14,386)

             (21,014)

Dividends paid

 

                       -

                  (18)

Net cash (used in)/generated from financing activities

 

           (34,386)

              29,495

Net (decrease)/ increase in cash and cash equivalents

 

            (93,351)

                41,311

Cash and cash equivalents, beginning of the year from continued operations

 

             312,352

              275,479 

Cash and cash equivalents, beginning of year from discontinued operations

 

                 5,652

                  1,586

Exchange rate translation

 

                (489)

                (372)

Cash and cash equivalents, end of the year

 

           224,164

            318,004

Cash and cash equivalents from continuing operations

17

             224,164

              312,352

Cash and cash equivalents from discontinued operations

 

                       -

                5,652

Total

 

           224,164

            318,004

           

 

 

 

 

Lamprell plc

Notes to the financial statements

1         Legal status and activities

Lamprell plc ("the Company") and its subsidiaries (together referred to as "the Group") are engaged in the assembly and new build construction for the offshore oil and gas and renewable sectors; fabricating packaged, pre-assembled and modularised units; constructing accommodation and complex process modules for onshore downstream projects; construction of complex living quarters, wellhead decks, topsides, jackets and other offshore fixed facilities; rig refurbishment; land rig services; engineering and construction and operations and maintenance.

2     Basis of preparation

The Group is required to present its annual consolidated financial statements for the year ended 31 December 2015 in accordance with EU adopted International Financial Reporting Standards ("IFRS"), International Financial Reporting Interpretations Committee ("IFRIC") interpretations and those parts of the Isle of Man Companies Acts 1931-2004 applicable to companies reporting under IFRS.

 

This financial information set out in this preliminary announcement does not constitute the Group's statutory accounts for the year ended 31 December 2015.  The financial information has been extracted from the consolidated financial statements for the year ended 31 December 2015 approved by the Board of Directors on 22 March 2016 upon which the auditors' opinion is not modified and did not contain a statement under section 15(4) or 15(6) of the Isle of Man Companies Act 1982.

 

The financial information comprises the Group balance sheets as of 31 December 2015 and 31 December 2014 and related Group income statement, statement of comprehensive income, cash flows, statement of changes in equity and related notes for the twelve months then ended, of Lamprell plc. This financial information has been prepared under the historical cost convention except for the measurement at fair value of share options, financial assets at fair value through profit or loss and derivative financial instruments.

 

The preliminary results for the year ended 31 December 2015 have been prepared in accordance with the Listing Rules of the London Stock Exchange.

 

After reviewing its cash flow forecasts for a period of not less than 12 months from the date of signing of these financial statements, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future. Therefore, the Group continues to adopt the going concern basis in preparing its financial statements.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated and parent company financial statements, are disclosed in Note 4.

3    Accounting policies

The accounting policies used are consistent with those set out in the audited financial statements for the year ended 31 December 2014 and reviewed interim financial information for the period ended 30 June 2015, which are available on the Company's website, www.lamprell.com.

 

4     Critical accounting estimates and judgements

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 under the circumstances. The Group makes estimates and assumptions concerning the future. 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 recognition

The Group uses the percentage-of-completion method in accounting for its contract revenue. Use of the percentage-of-completion method requires the Group to estimate the stage of completion of the contract to date as a proportion of the total contract work to be performed in accordance with the accounting policy. As a result, the Group is required to estimate the total cost to completion of all outstanding projects at each period end. The application of a 10% sensitivity to management estimates of the total costs to completion of all outstanding projects at the year-end would result in the revenue and profit increasing by USD 30.5 million (2014: USD 4.4 million) if the total costs to complete are decreased by 10% and the revenue and profit decreasing by USD 28.5 million (2014: USD 4.4 million) if the total costs to complete are increased by 10%.

       Estimated impairment of goodwill

The Group tests goodwill for impairment annually or more frequently if events or changes in circumstances indicate a potential impairment. Goodwill is monitored by management at the "cash generating unit relating to upgrade and refurbishment of offshore jackup rigs, fabrication, assembly and new build construction for the offshore oil and gas and renewables sectors, including FPSO and other offshore and onshore structures, oilfield engineering services, including the upgrade and refurbishment of land rigs" ("CGU1"). This CGU also represents the operating segment UAE for the Group (Note 5).

The recoverable amount of CGU1 is determined based on value-in-use calculations. These calculations require the use of estimates.

The amount of headroom is USD 311.6 million (2014: USD 290.6 million).

If the revenue growth rate used was to differ by 0.5% from management's estimates, in isolation, there would be a reduction of USD 3.9 million (2014: USD 5.7 million) in the headroom if the revenue growth rate was lower or the headroom would be higher by USD 3.9 million (2014: USD 5.7 million) if the revenue growth rate was higher.

If the discount rate used was to differ by 0.5% from management's estimates, in isolation, there would be a reduction in the headroom of USD 48.0 million (2014: USD 55.2 million) if the discount rate was to increase or an increase in the headroom by USD 54.2 million (2014: USD 63.5 million) if the discount rate was to decrease.

If the net profit as a percentage of revenue used was to differ by 0.5% from management's estimates, in isolation, there would be an increase of USD 66.4 million (2014: USD 62.1 million) in the headroom if the net profit was to increase or there would be an reduction in the headroom of USD 66.4 million (2014: USD 62.1 million) in the headroom if the net profit was to decrease.

If the terminal value growth rate used was to differ by 0.5% from management's estimates, in isolation, there would be a reduction in the headroom of USD 35.5 million (2014: USD 43.4 million) if the terminal value growth rate was lower or an increase in the headroom of USD 40.8 million (2014: USD 49.8 million) if the terminal value growth rate was higher.

       Employees' end of service benefits

The rate used for discounting the employees' post-employment defined benefit obligation should be based on market yields on high quality corporate bonds. In countries where there is no deep market for such bonds, the market yields on government bonds should be used. In the UAE, there is no deep market for corporate bonds and no market for government bonds and therefore, the discount rate has been estimated using the US AA-rated corporate bond market as a proxy. On this basis, the discount rate applied was 3.5% (2014: 3.5%). If the discount rate used was to differ by 0.5 points from management's estimates, the carrying amount of the employees' end of the service benefits provision at the balance sheet date would be an estimated USD 1.0 million (2014: USD 1.5 million) lower or USD 1.4 million (2014: USD 1.6 million) higher. If the salary growth rate used was to differ by 0.5 points from management's estimates, the carrying amount of the employees' end of the service benefits provision at the balance sheet date would be an estimated USD 1.4 million (2014: USD 1.5 million) higher or USD 1.0 million (2014: USD 1.6 million) lower. 

5     Segment information

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker at the reporting date. The chief operating decision-maker has been identified as the Executive Directors who make strategic decisions. The Executive Directors review the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

 

In prior periods, the business reported on the basis of the facility from where the services were rendered. With effect from 1 January 2015, the business was reorganised into business units on the basis of services rendered. Segment comparatives are restated to reflect the organisational changes that have occurred since the prior reporting period to present a like-for-like view.

 

The Executive Directors manage the business on the basis of the business units from which the services are rendered. Management considers the performance of the business from New Build Jack up Rigs ("NBJR"), Modules, ("MOD"), Offshore Platforms ("OP") and Oil and Gas Contracting Services ("OGCS").

 

NBJR derives its revenue from assembly and new build construction for the offshore oil and gas and renewables sectors; MOD derives its revenue from fabricating packaged, pre-assembled and modularised units and constructing accommodation and complex process modules for onshore downstream projects; OP derives its revenue from construction of complex living quarters, wellhead decks, topsides, jackets and other offshore fixed facilities; and OGCS derives its revenue from rig refurbishment, land rig services, engineering and construction and operations and maintenance.

 

These business units are viewed by the management as three operating segments - United Arab Emirates "UAE", Qatar "QTR" and Kazakhstan "KZK" based on common pool of resources and ability to execute the projects on an interchangeable basis.

 

UAE is reported as a single segment (Segment A). Services provided from QTR and KZK do not meet the quantitative thresholds required by IFRS 8 and the results of these operating segments are included in the "all other segments" column.

 

Year ended 31 December 2015

Segment A  USD'000

All other segments USD'000

Total    USD'000

Revenue from external customers

           865,802

               5,256

           871,058

Gross operating profit

           173,179

               1,696

           174,875

 

 

 

 

Year ended 31 December 2014

Segment A USD'000

All other segments USD'000

Total   USD'000

Revenue from external customers

        1,077,921

               6,969

        1,084,890

Gross operating profit

           233,292

               2,511

           235,803

 

Sales between segments are carried out on agreed terms. The revenue from external parties reported to the Executive Directors is measured in a manner consistent with that in the consolidated income statement.

The Executive Directors assess the performance of the operating segments based on a measure of gross profit. The staff, equipment and certain subcontract costs are measured based on standard cost. The measurement basis excludes the effect of the common expenses for yard rent, repairs and maintenance and other miscellaneous expenses. The reconciliation of the gross profit is provided as follows:

 

 

2015

USD'000

2014

USD'000

Gross operating profit for the reportable segments as reported to the Executive Directors

           173,179

           233,292

Gross operating profit for other segments as reported to the Executive Directors

               1,696

               2,511

Unallocated:

 

 

Employee and equipment costs

           (14,523)

           (11,841)

Repairs and maintenance

           (18,636)

           (21,776)

Yard rent and depreciation

           (12,667)

           (15,249)

Others

            (5,529)

            (4,857)

Gross profit

           123,520

           182,080

 

Selling and distribution expenses (Note 7)

             (1,771)

             (1,773)

General and administrative expenses (Note 8)

           (44,318)

           (72,700)

Other gains/(losses) - net (Note 11)

                  260

               1,456

Finance costs (Note 10)

           (14,647)

           (20,516)

Finance income (Note 10)

               2,679

               2,166

Others

                  777

               2,507

Profit for the year from continuing operations

             66,500

             93,220

Information about segment assets and liabilities is not reported to or used by the Executive Directors and accordingly no measures of segment assets and liabilities are reported.

The breakdown of revenue from all business units is as follows:

 

2015

USD'000

2014

USD'000

New build jackup rigs

           675,821

           748,391

Oil and Gas contracting services

           136,216

           253,870

Modules

             47,121

               4,636

Offshore platforms

             11,900

             77,993

 

           871,058

        1,084,890

 

The Group's principal place of business is in the UAE. The revenue recognised in the UAE with respect to services performed to external customers is USD 865.8 million (2014: USD 1,077.9 million), and the revenue recognised from the operations in other countries is USD 5.3 million (2014: USD 7.0 million). 

Certain customers individually accounted for greater than 10% of the Group's revenue and are shown in the table below:

 

 

2015

USD'000

2014

USD'000

External customer A

           275,296

           275,026

External customer B

           196,462

           155,768

External customer C

           147,251

           144,952

 

           619,009

           575,746

 

The revenue from these customers is attributable to Segment A. The above customers in 2015 are not necessarily the same customers in 2014.

6  Cost of sales

 

 

2015

USD'000

2014

USD'000

Materials and related costs

          445,461

         420,939

Subcontract costs

            77,561

         187,357

Staff costs (Note 9)

          150,979

         163,614

Subcontract labour

            20,968

           38,394

Equipment hire

              5,136

           19,252

Depreciation (Note 13)

            16,818

           23,979

Repairs and maintenance

            18,636

           21,776

Yard rent

              6,754

             6,707

Warranty costs and other liabilities - net

            (4,000)

             6,989

Others

              9,225

           13,803

 

          747,538

         902,810

7  Selling and distribution expenses

 

 

 

 

2015

USD'000

 

2014

USD'000

 

Travel

 

                 628

              1,055

Advertising and marketing

 

                 359

                 480

Entertainment

 

                 143

                 144

Others

 

                 641

                   94

 

 

              1,771

             1,773

8  General and administrative expenses

 

 

 

 

2015

USD'000

 

2014

USD'000

 

Staff costs (Note 9)

 

            34,054 

                38,519

Legal, professional and consultancy fees

 

              3,346 

                  5,067

Depreciation (Note 13)

 

              2,560 

                  3,627

Amortisation of intangible assets (Note 14)

 

              2,624 

                11,895

Utilities and communication

 

                 932 

                     718

(Release)/provision for impairment of trade receivables - net

 

            (6,100) 

                  6,871

Bank charges

 

                 184 

                     286

Others

 

             6,718 

                  5,717

 

 

           44,318 

                72,700

9  Staff costs

 

 

 

 

 

 

2015

USD'000

 

2014

USD'000

 

 

Wages and salaries

 

              120,611

              116,490

 

Employees' end of service benefits (Note 22)

 

                  6,313

                  6,229

 

Share based payments - value of services provided

 

                  3,174

                  1,084

 

Other benefits

 

                54,935

                78,330

 

 

 

              185,033

              202,133

 

Staff costs are included in:

 

 

 

 

Cost of sales (Note 6)

 

              150,979

              163,614

 

General and administrative expenses (Note8)

 

                34,054

                38,519

 

 

 

              185,033

              202,133

 

Number of employees at 31 December

 

                  7,736

                  6,912

 

                     

 

Staff costs capitalised during the year and not included above amount to USD 7.5 million (2014: USD 0.5 million).

10  Finance costs - net

 

 

2015

USD'000

2014

USD'000

 

Finance costs:

 

 

 

 

Bank guarantee charges

 

                5,300

            11,232

 

Interest on bank borrowings

 

                3,588

              6,006

 

Commitment fees

 

                3,829

              1,728

 

Others

 

                1,930

             1,550

 

 

 

              14,647

            20,516

 

 

Finance income

Finance income comprises interest income of USD 2.7 million (2014: USD 2.2 million) from bank deposits.

 

11  Other gains/(losses) - net

 

2015

USD'000

2014

USD'000

 

Exchange (loss)/gain - net

             (16)

          1,164

 

Profit on disposal of assets

             315

             162

 

Net loss on derivatives

           (780)

           (156)

 

Others

             741

             286

 

 

             260

          1,456

 

12  Earnings per share

(a)   Basic

Basic earnings per share is calculated by dividing the profit attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the year excluding ordinary shares purchased by the Company and held as treasury shares (Note 20).

(b)   Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. For the free share awards, options under executive share option plan and performance share plan, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share awards/options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share awards/options.  

The calculations of earnings per share are based on the following profit and numbers of shares:

 

 

2015

USD'000

2014

USD'000

Profit for the year

                     64,700

                118,057

Weighted average number of shares for basic earnings per share

            341,710,302

         315,591,024

Adjustments for:

 

 

- Assumed exercise of the free share awards

                     51,331

                    3,640

- Assumed vesting of performance share plan

                1,683,467

                242,361

   Weighted average number of shares for diluted earnings per share

            343,445,100

         315,837,025

 

 

 

Earnings per share:

 

 

Basic

18.93c

37.41c

Diluted

18.84c

37.38 c

Earnings per share from continued operations:

 

 

Basic

19.46c

29.54 c

Diluted

19.36c

29.52 c

(Loss)/earnings per share from discontinued operations:

 

 

Basic

(0.53c)

7.87 c

Diluted

(0.52c)

7.86 c

             

The 340,855 options (2014: 340,855 options) granted on 18 November 2014 are not included in the calculation of diluted earnings per share because they are antidilutive for the year ended 31 December 2014 and 2015. These options could potentially dilute basic earnings per share in future.

 

 

13  Property, plant and equipment

 

 

 

 

 

 

Operating equipment

USD'000

Buildings & infrastructure

USD'000

Fixtures and office equipment

USD'000

Motor vehicles

USD'000

Capital work-in-

progress

USD'000

Total

USD'000

 

 

Cost

 

 

 

 

 

 

 

 

 

At 1 January 2014

 

         116,853

              123,232

            16,207

               2,522

               3,689

            262,503

 

 

Additions

 

             8,842

                  1,991

              1,978

               1,113

               4,944

              18,868

 

 

Transfers

 

             1,332

                  1,445

                 154

                  315

            (3,246)

                        -

 

 

Assets of disposal group classified as held for sale (Note 18)

 

                    -

                         -

              (820)

                 (95)

                       -

                 (915)

 

 

Other disposals

 

             (643)

                    (48)

              (109)

               (766)

                       -

            (1,566)

 

 

At 31 December 2014

 

         126,384

              126,620

            17,410

               3,089

               5,387

            278,890

 

 

Additions

 

           25,104

                10,793

              2,121

               1,372

             16,159

              55,549

 

 

Other disposals

 

          (1,760)

                  (370)

           (3,118))

               (295)

                       -

              (5,543)

 

 

Transfers

 

             3,597

                  1,088

                 129

                    83

            (4,897)

                       -

 

 

At 31 December 2015

 

         153,325

              138,131

            16,542

               4,249

            16, 649

           328,896

 

 

Depreciation

 

 

 

 

 

 

 

 

 

At 1 January 2014

 

        (70,814)

             (27,272)

         (13,970)

            (2,124)

                       -

          (114,180)

 

 

Charge for the year

 

        (14,052)

               (9,042))

           (3,485)

            (1,075)

                       -

            (27,654)

 

 

Accumulated depreciation of disposal group classified as held for sale (Note 18)

 

                    -

                         -

                 781

                    95

                       -

                   876

 

 

Other disposals

 

                588

                       41

                   88

                  694

                       -

               1,411

 

 

At 31 December 2014

 

        (84,278)

             (36,273)

         (16,586)

            (2,410)

                       -

          (139,547)

 

 

Charge for the year

 

        (10,906)

               (7,209)

              (803)

               (460)

                       -

            (19,378)

 

 

Other disposals

 

             1,723

                     331

              3,001

                  260

                       -

               5,315

 

 

At 31 December 2015

 

        (93,461)

             (43,151)

         (14,388)

            (2,610)

                       -

        (153,610)

 

 

Net book amount

 

 

 

 

 

 

 

 

 

At 31 December 2015

 

           59,864

                94,980

              2,154

               1,639

             16,649

           175,286

 

 

At 31 December 2014

 

           42,106

                90,347

                 824

                  679

               5,387

           139,343

 

 

14  Intangible assets

 

 

 

Goodwill

USD'000

Trade name

 USD'000

Customer relationships

USD'000

Leasehold rights

 USD'000

Software

USD'000

 Work-in- progress

USD'000

Total

USD'000

 

 

Cost

 

 

 

 

 

 

 

 

 

At 1 January 2014

           180,539

         22,335

           19,323

          8,338

          1,536

           2,615

        234,686

 

 

Additions

                      -

                  -

                     -

                  -

               56

           3,539

            3,595

 

 

Transfers

                   -

                -

                   -

                  -

        2,777

       (2,777)

                  -

 

 

At 31 December 2014

           180,539

         22,335

           19,323

          8,338

          4,369

           3,377

        238,281

 

 

Additions

                      -

                  -

                     -

                  - 

                 6

           3,776

            3,782

 

 

Transfers

                   -

                -

                   -

                  -

        7,153

       (7,153)

                  -

 

 

At 31 December 2015

       180,539

      22,335

         19,323

          8,338

      11,528

                 -

      242,063

 

 

Amortisation

 

 

 

 

 

 

 

 

 

At 1 January 2014

                      -

           6,770

           11,876

          1,478

          1,536

                   -

          21,660

 

 

Charge for the year (Note 8)

                   -

        3,765

           7,447

             488

           195

                 -

        11,895

 

 

At 31 December 2014

                      -

         10,535

           19,323

          1,966

          1,731

                   -

          33,555

 

 

Charge for the year (Note 8)

                   -

        1,804

                   -

             488

           332

                 -

          2,624

 

 

At 31 December 2015

                   -

      12,339

         19,323

          2,454

        2,063

                 -

        36,179

 

 

Net book amount

 

 

 

 

 

 

 

 

 

At 31 December 2015

       180,539

        9,996

                   -

          5,884

       9,465

                 -

      205,884

 

 

At 31 December 2014

       180,539

      11,800

                  - 

          6,372

        2,638

          3,377

      204,726

 

 

15  Inventories

 

 

 

 

2015

USD'000

2014

USD'000

 

 

Raw materials and consumables

 

                21,917

                16,301

 

 

Work in progress

 

                  9,604

                          -

 

 

Less: Provision for slow moving and obsolete inventories

 

              (2,455)

               (1,741)

 

 

 

 

              29,066

                14,560

 

 

16  Trade and other receivables

 

 

2015

USD'000

2014

USD'000

 

Trade receivables

               94,146

               48,622

 

Other receivables and prepayments

               30,206

               21,620

 

Advance to suppliers

               19,435

                 6,533

 

Receivables from a related party (Note 19)

                     13

                    68

 

 

             143,800

               76,843

 

Less: Provision for impairment of trade receivables

              (5,220)

           (11,622)

 

 

             138,580

               65,221

 

Amounts due from customers on contracts

             133,487

             185,476

 

Contract work in progress

           156,259

            152,922

 

 

            428,326

            403,619

 

Non-current portion:

 

 

 

Advance to suppliers

                         -

                 4,932

 

Prepayments

              12,712

                6,944

 

Current portion

           415,614

            391,743

 

                                               

During 2015, the Group paid an amount of USD 8.5 million to Sharjah Electricity and Water Authority for construction, installation and maintenance of an electric mainline at its Hamriyah facility. The Group has decided to amortise this amount over the remaining period of the leasehold rights for the facility.

Amounts due from customers on contracts comprise:

 

2015

USD'000

2014

USD'000

Costs incurred to date

          1,098,234

          1,042,589

Attributable profits

             204,586

             190,090

 

          1,302,820

          1,232,679

Less: Progress billings

        (1,169,333)

        (1,047,203)

 

             133,487

             185,476

As required under our current contracts with Ensco, we note that all related materials and equipment and the vessel itself being constructed under these contracts are the exclusive property of Ensco.

17  Cash and bank balances

 

 

2015

USD'000

2014

USD'000

Cash at bank and on hand

    92,301

      82,945

Term deposits and margin deposits - current

  188,367

    276,163

Cash and bank balances

  280,668

    359,108

Term deposits and margin deposits - non-current

      8,950

      12,517

Less: Margin/short-term deposits under lien

  (11,787)

    (12,312)

Less: Deposit with original maturity of more than three months

  (53,667)

    (46,961)

Cash and cash equivalents (for the purpose of cash flow statement)

  224,164

    312,352

18  Assets held for sale and discontinued operations

 

Discontinued operations

 

       

Profit/(loss) from discontinued operations comprises:

 

Inspec USD'000

2015

Litwin   USD'000

Total USD'000

Inspec USD'000

2014             

Litwin  USD'000

Total USD'000

Revenue

                        -

                     1,640

              1,640

               3,008

                 16,385

            19,393

Cost of sales

                        -

                  (1,763)

            (1,763)

            (2,080)

              (21,082)

         (23,162)

General and administrative expenses

                        -

                  (1,849)

            (1,849)

               (193)

                (2,550)

           (2,743)

Other gains/losses - net

                        -

                        165

                 165

                      2

                      280

                 282

Finance costs - net

                      -

                    (59)

               (59)

                     -

                 (203)

            (203)

Profit/(loss) from discontinued operations

                        -

                  (1,866)

            (1,866)

                  737

                (7,170)

           (6,433) 

Re-measurement of post-employment benefit obligations

                      -

                          -

                    -

                     -

                      13

                 13

Total comprehensive income arising from discontinued operations

                     -

               (1,866)

          (1,866)

                737

              (7,157)

         (6,420)

The main elements of the cash flows are as follows:

 

Inspec USD'000

2015

Litwin   USD'000

Total USD'000

Inspec USD'000

2014            

Litwin  USD'000

Total USD'000

Operating cash flows

                        - 

                        702

                 702

               2,954

                   5,315

              8,269

Investing cash flows

                        -

                     (123)

               (123)

                 (74)

                        30

                (44)

Financing cash flows

                      -

                    (59)

               (59)

                     -

                 (203)

            (203)

Total cash flows

                      -

                     520

               520

             2,880

                 5,142

            8,022

Inspec

During 2013, the Group decided to dispose of Inspec. This transaction was completed on 3 March 2014.

Litwin

During 2014, the Group decided to dispose of Litwin. This transaction was completed on 21 April 2015.

Disposal group

At 31 December 2014, the major classes of assets and liabilities of a disposal group (Litwin) were as follows:

 

2014

 USD'000

Assets classified as held for sale

 

Property, plant and equipment

                  39

Trade and other receivables (net of provision for impairment of trade receivables)

             8,543

Cash and bank balances

             6,646

 

           15,228

Liabilities classified as held for sale

 

Provision for employees' end of service benefits

                333

Trade and other payables

           10,213

 

           10,546

The commitments of disposal group were as follows:

 

 

 

Bank guarantees

            9,395

       

Litwin

Net cash inflow on the subsidiary disposed during the year is as follows:

 

    2015

 

USD'000

Property, plant and equipment

                163

Trade and other receivables

             7,315

Cash and cash equivalents

                749

Provision for employees' end of service benefits

             (298)

Trade and other payables

          (3,906)

Net assets

             4,023

Accruals

             1,362

Net assets retained

          (2,611)

Expenses on disposal

                500

Gain on disposal

                  66

Cash consideration on disposal

             3,340

Less: Expenses on disposal

             (500)

Less: Cash and cash equivalents transferred as a part of disposal

             (749)

Net cash inflow for the purpose of consolidated cash flow statement

            2,091

19  Related party balances and transactions

Related parties comprise LHL (which owns 33% of the issued share capital of the Company), certain legal shareholders of the Group companies, Directors and key management personnel of the Group and entities controlled by Directors and key management personnel. Key management includes the Directors (Executive and Non-Executive) and members of the executive committee.  Related parties, for the purpose of the parent company financial statements, also include subsidiaries owned directly or indirectly and joint ventures. Other than those disclosed elsewhere in the financial statements, the Group entered into the following significant transactions during the year with related parties at prices and on terms agreed between the related parties:

 

 

2015

USD'000

2014

USD'000

Key management compensation

                  7,099

                  8,746

Legal and professional services

                         -

                     730

Sales to joint ventures

                     315

                     267

Purchases from joint ventures

                     342

                     350

Sponsorship fees and commissions paid to legal shareholders of subsidiaries

                     294

                     866

 

Key management compensation comprises:

 

2015

USD'000

2014

USD'000

Salaries and other short-term benefits

                  5,075

                  6,537

Share based payments - value of services provided

                  1,832

                     435

Post-employment benefits

                     192

                  1,774

 

                  7,099

                  8,746

 

The terms of the employment contracts of the key management include reciprocal notice periods of between three to twelve months.

Due from/due to related parties

                             

Due from related parties

 

 

 2015

USD'000

2014

USD'000

 

 

 

Maritime Industrial Services Arabia Co. Ltd. (current)

                       13

                       68

       

 

Due to a related party

 

 

2015

USD'000

2014

USD'000

 

 

 

Maritime Industrial Services Arabia Co. Ltd. (current)

                     122

                     364

20  Share capital

 

Issued and fully paid ordinary shares

 

       

 

 

Equity

Number

Share capital

USD'000

Share premium

USD'000

At 1 January 2014

    260,363,101

           23,552

             211,776

Add: New shares issued during the year

      81,363,469

             6,794

             112,785

Less: Transaction costs relating to the rights issue

                      -

                    -

              (8,566)

At 31 December 2014

    341,726,570

           30,346

             315,995

At 31 December 2015

    341,726,570

           30,346

             315,995

 

The total authorised number of ordinary shares is 400 million shares (2014: 400 million shares) with a par value of 5 pence per share (2014: 5 pence per share).

During 2014, the Company successfully carried out a fully underwritten rights issue. The rights issue offered five new ordinary shares for every 16 ordinary shares held by each shareholder at an issue price of 88 pence per new ordinary share. The rights issue was fully subscribed and paid up as at 30 June 2014. The Company issued 81,363,469 new ordinary shares through the rights issue and received proceeds amounting to USD 119.6 million.

The paid-in capital from the rights issue is split between the par value of the shares issued (USD 6.8 million) and the share premium at the date of issue (USD 112.8 million) less any directly attributable transaction costs (USD 8.6 million). These new ordinary shares rank pari passu in all respects with the existing ordinary shares, including the right to all future dividends and other distributions declared, made or paid.

During 2015, Lamprell plc employee benefit trust ("EBT") acquired 51 shares (2014: 189,111 shares) of the Company. The total amount paid to acquire the shares was USD Nil (2014: USD 0.5 million) and has been deducted from the consolidated retained earnings. During 2015, no shares (2014: 187,580 shares amounting to USD 0.5 million) were issued to employees and 16,268 shares (31 December 2014: 16,217 shares) were held as treasury shares at 31 December 2015. The Company has the right to reissue these shares at a later date. These shares will be issued on vesting of the free shares/performance shares/share options granted to certain employees of the Group.

21  Other reserves

 

 

Legal reserve

Merger reserve

Translation reserve

Total

 

USD'000

 

USD'000

 

USD'000

 

USD'000

 

At 1 January 2014

                 98

        (22,422)

               191

          (22,133)

Currency translation differences

                   -

                    -

            (372)

               (372)

Disposal of a subsidiary

                   -

            3,850

                   -

              3,850

At 31 December 2014

                 98

        (18,572)

            (181)

          (18,655)

           

 

Currency translation differences

                   -

                     

            (489)

              (489)

At 31 December 2015

                 98

        (18,572)

            (670)

         (19,144)

 

Legal reserve

The Legal reserve relates to subsidiaries (other than the subsidiaries incorporated in free zones) in the UAE and the State of Qatar. In accordance with the laws of the respective countries, the Group has established a statutory reserve by appropriating 10% of the profit for the year of such companies. Such transfers are required to be made until the reserve is equal to, at least, 50% (UAE) and 33.3% (State of Qatar) of the issued share capital of such companies. The legal reserve is not available for distribution.

Merger reserve

On 11 September 2006, the Group acquired 100% of the legal and beneficial ownership of Inspec from LHL for a consideration of USD 4 million. This acquisition was accounted for using the uniting of interest method.

On 25 September 2006, the Company entered into a share for share exchange agreement with LEL and LHL under which it acquired 100% of the 49,003 shares of LEL from LHL in consideration for the issue to LHL of 200,000,000 shares of the Company. This acquisition has been accounted for using the uniting of interest method.

22  Provision for employees' end of service benefits

In accordance with the provisions of IAS 19, management has carried out an exercise to assess the present value of its obligations at 31 December 2015 and 2014, using the projected unit credit method, in respect of employees' end of service benefits payable under the Labour Laws of the countries in which the Group operates. Under this method, an assessment has been made of an employee's expected service life with the Group and the expected basic salary at the date of leaving the service. The obligation for end of service benefit is not funded.

 

The movement in the employees' end of service benefit liability over the periods is as follows:

 

 

2015

USD'000

 

2014

USD'000

 

 

At 1 January

 

                38,752

                36,046

 

Current service cost

 

                  4,871

                  4,739

 

Interest cost

 

                  1,442

                  1,701

 

Remeasurements

 

                  1,988

                  3,742

 

Benefits paid

 

               (4,190)

                (7,143)

 

Liabilities of disposal group classified as held for sale (Note 18)

 

                         -

                   (333)

 

At 31 December

 

                42,863

                38,752

 

23  Derivative financial instruments

 

 

Notional contract amount USD'000

2015

 

  Assets USD'000

Liabilities
USD'000

Notional contract amount USD'000

2014

 

Assets USD'000

 

Liabilities
USD'000

Derivatives held at fair value through profit or loss

                   -

              -

                -

           2,889

              -

           269

Interest rate swaps

        80,000

              -

             18

       100,000

           69

               -

Total

        80,000

              -

             18

       102,889

           69

           269

 

 

 

 

 

 

 

Non-current portion

       60,000

              -

             14

         80,000

           55

               -

Current portion

        20,000

             - 

               4

         22,889

           14

           269

                       

During 2014, the Group entered into an interest rate swap to switch floating interest rates to fixed interest rates on the Group's borrowings. This derivative did not qualify for hedge accounting and is carried at fair value through profit or loss. The notional principal amount at the date of inception of these contracts was USD 100 million. This contract matures in various instalments within fifty seven months from the date of inception. The fair value liability at the 31 December 2015 of this derivative was USD 0.2 million (2014: USD 0.7 million)

24  Trade and other payables

 

 

2015

USD'000

2014

USD'000

Trade payables

                    44,065

                30,390

Accruals

                  127,155

              138,169

Payables to a related party (Note 19)

                         122

                     364

Amounts due to customers on contracts

                    93,601

              148,680

 

                  264,943

              317,603

       

Amounts due to customers on contracts comprise:

 

 

 

 

 

Progress billings

                  357,154

              477,583

 

Less: Cost incurred to date

               (226,975)

           (299,010)

 

Less: Recognised profits

                 (36,578)

            (29,893)

 

 

                    93,601

           148,680

 

25  Provision for warranty costs and other liabilities

 

 

Warranty costs

USD'000

Minimum purchase obligations

USD'000

Total   USD'000

At 1 January 2014

                  5,400

                         -

               5,400

Charged during the year

                  9,000

                  3,423

             12,423

Released/utilised during the year

               (2,011)

                         -

            (2,011)

At 31 December 2014

                12,389

                  3,423

             15,812

Charge during the year

                  1,200

                         -

               1,200

Released/utilised during the year

               (5,489)

               (3,189)

            (8,678)

At 31 December 2015

                  8,100

                     234

               8,334

                   

Warranty costs charged during the year relates to management's assessment of potential claims under contractual warranty provisions.

26  Borrowings

 

 

2015

USD'000

2014

USD'000

Bank term loans

              79,299

              98,979

The bank borrowings are repayable as follows:

 

 

 

 

Current (less than 1 year)

              20,136

              20,136

Non-current (2 to 5 years)

              59,163

              78,843

 

              79,299

              98,979

27  Commitments

 

(a)   Operating lease commitments

 

             

The Group leases land and staff accommodation under various operating lease agreements. The remaining lease terms of the majority of the leases are between four to seventeen years and are renewable at mutually agreed terms.

The future minimum lease payments payable under operating leases are as follows:

 

 

 

 

 

2015

USD'000

 

2014

USD'000

 

 

Not later than one year

 

                  6,988

                  7,570

 

Later than one year but not later than five years

 

                  9,992

                10,912

 

Later than five years

 

               36,530

                39,236

 

 

 

               53,510

                57,718

 

(b)   Other commitments

 

 

2015

USD'000

2014

USD'000

 

Capital commitments for construction of facilities

 

                    196

                  4,219

 

Capital commitments for purchase of operating equipment and computer software

 

                 4,791

                14,966

 

             

 

28  Bank guarantees

 

 

2015

USD'000

2014

USD'000

Performance/bid bonds

               126,375

                 90,063

Advance payment, labour visa and payment guarantees

               315,200

               276,757

 

               441,575

               366,820

       

 

The various bank guarantees, as above, were issued by the Group's bankers in the ordinary course of business. Certain guarantees are secured by 100% cash margins, assignments of receivables from some customers and in respect of guarantees provided by banks to the Group companies, they have been secured by parent company guarantees. In the opinion of the management, the above bank guarantees are unlikely to result in any liability to the Group.

 

29  Cash generated from operating activities

                                                                              Year ended 31 December

 

Note

2015

USD'000

2014

USD'000

Operating activities

 

 

 

Profit before income tax including discontinued operations

 

                65,241

             118,541

Adjustments for:

 

 

 

Share based payments - value of services provided

8

                  3,174

                 1,084

Depreciation

 

                19,386

               27,935

Amortisation of intangible assets

17

                  2,624

               11,895

Share of profit from investment in joint venture

19

               (1,318)

              (2,991)

Profit on disposal of property, plant and equipment

 

                  (315)

                 (162)

(Release)/provisions for warranty costs and other liabilities

30

               (7,478)

                 5,989

Provision for slow moving and obsolete inventories

20

                     714

                      24

(Release)/provision for impairment of trade receivables - net

21

               (6,100)

                 5,278

Provision for employees' end of service benefits

27

                  6,313

                 6,560

Gain on disposal of a subsidiary

23

                    (66)

            (31,270)

Loss on derivative financial instruments

12

                     780

                    156

Finance costs

 

                14,706

               20,719

Finance income

11

               (2,679)

              (2,166)

Operating cash flows before payment of employees'
end of service benefits and changes in working capital

 

                94,982

             161,592

Payment of employees' end of service benefits

 

               (4,225)

              (7,182)

Changes in working capital:

 

 

 

Inventories before movement in provision

 

             (15,220)

              (2,898)

Derivative financial instruments

28

                  (962)

                    205

Trade and other receivables before movement in provision for impairment of trade receivables

 

             (14,768)

            (94,857)

Trade and other payables, excluding movement in dividend payable

 

             (60,329)

            (96,293)

Cash used in operating activities

 

                  (522)

            (39,433)

 

30  Events after the balance sheet date

On 26 January 2016, the Group has signed a Memorandum of Understanding ("MOU") with Saudi Aramco (the National Oil Company of the Kingdom of Saudi Arabia), the National Shipping Company of Saudi Arabia ("Bahri") and Hyundai Heavy Industries in connection with a potential partnership collaboration on establishing a Maritime Complex in Saudi Arabia. The intended Maritime Complex will provide engineering, manufacturing and repair services for offshore rigs, commercial vessels and offshore service vessels. The MOU covers joint participation and due diligence on all activities and work streams required to make a final investment decision by all participating parties. The outcome of the agreement to engage in the potential joint venture partnership will be determined upon finalisation of all activities and required due diligence.

31  Statutory Accounts

This financial information is not the statutory accounts of the Company and the Group, a copy of which is required to be annexed to the Company's annual return to the Companies Registration Office in Isle of Man. A copy of the statutory accounts in respect of the year ended 31 December 2015 will be annexed to the Company's annual return for 2015. Consistent with prior years, the full financial statements for the year ended 31 December 2015 and the audit report thereon will be circulated to shareholders at least 20 working days before the AGM. A copy of the statutory accounts required to be annexed to the Company's annual return to the Companies Registration Office in respect of the year ended 31 December 2014 has been annexed to the Company's annual return for 2014.

32  Directors' responsibilities statement

 

We confirm that to the best of our knowledge

 

The financial statements, have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities and financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and, This announcement includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.


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