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Lamprell plc (LAM)

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Friday 22 September, 2017

Lamprell plc

2017 Interim Results

RNS Number : 5013R
Lamprell plc
22 September 2017
 

 

 

 

 

 

 

22 September 2017

 

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

 

INTERIM FINANCIAL RESULTS

FOR SIX MONTHS TO 30 JUNE 2017

 

Robust balance sheet and discipline in a challenging market

 

Transformational joint venture in Saudi Arabia progressing as planned

 

 

Financial highlights

·    Revenue of USD 159.2 million, broadly in line with our expectations

·    Net profit of USD 1.1 million

·    Strong balance sheet maintained; robust net cash position of USD 305.9 million strengthened due to rig deliveries in 1H; moderate net cash reduction expected in 2H due to initial investment in the Maritime Yard in Saudi Arabia and increased working capital requirements

·    Gross margin of 13.0% achieved in 1H 2017 due to successful close-out of three remaining jackup rig projects and HMC Kaombo project; two major projects ongoing with delivery in 2018

 

Operational highlights

·    Total recordable incident rate (TRIR) for the period of 0.41 (31 December 2016: 0.29), safety and quality remain management priorities

·    Three remaining jackup rigs delivered successfully, two to National Drilling Company (NDC) and one to Shelf Drilling, on schedule and on budget

·    Buoyancy tanks for HMC Kaombo and final modules for UZ750 project all delivered and both projects now completed

·    Construction phase commenced on the East Anglia One offshore windfarm project, consisting of 60 foundations

·    Master Marine major upgrade project in respect of the mobile operating unit "Haven" for use offshore Norway progressing to schedule

·    New contract award for two land rigs for Schlumberger

·    As at 30 June 2017, backlog of USD 300 million (31 December 2016: USD 393 million)

 

Strategic and corporate highlights

·    John Malcolm appointed as new Non-Executive Chairman with effect from 20 September 2017

·    Transformational joint venture agreement signed with Saudi Aramco, Bahri and Hyundai Heavy Industries (HHI) for major maritime yard development in Saudi Arabia and approved by shareholders on 26 June 2017; formation activities for the joint venture company well under way

·    Pre-qualification process for Long Term Agreement (LTA) with Saudi Aramco ongoing

·    Growing profile in renewables sector following award of East Anglia One windfarm project, resulting in new bidding opportunities

 

Current trading and outlook

·    Maintain strong balance sheet and disciplined approach in a challenging market

·    Strategic business review continues with a focus on bid optimisation, further operational efficiencies and geographical and sector diversification

·    Revenue for FY2017 expected to be in the range of USD 370-390 million, marginally below previous guidance due primarily to the continuing low levels of walk-in work reflecting market conditions

·    FY2018 outlook remains challenging with revenue currently expected to be around 10% lower than FY2017 levels, contingent on the timing of potential contract awards

·    Continued margin pressure anticipated at these revenue levels as we look to retain our core competitive strengths and upskill our workforce to implement our strategic initiatives. Focus on disciplined cost control unchanged.

·    Bid pipeline increased to USD 3.1 billion (31 December 2016: USD 2.5 billion), underpinned by opportunities in core markets as well as new strategic initiatives in the renewables and EPC sectors; while the increased levels of bidding activity are encouraging, we do not expect to see revenue growth from potential contract awards until 2019.

 

 

1H 2017 FINANCIAL RESULTS

 

1H 2017

1H 2016

(USD million, unless stated)



Revenue

159.2

451.3

Gross margin

13.0%

6.1%

Underlying gross margin

13.0%

13.1%

EBITDA

13.5

10.0

Profit/(Loss)  from continuing operations after income tax and after exceptional items

1.1

(4.4)

Reported diluted earnings/(loss) per share (US cents)

0.30

(1.27)

Net cash as at 30 June

305.9

151.5




 

Christopher McDonald, Chief Executive Officer said:

"The business continues to deliver solid results broadly in line with our expectations despite the challenging market environment. Our balance sheet remains robust due to the combination of the efficiency measures we have taken over the past two years and our tight cost control measures.   This places us in a good position to be cost competitive and maintain our discipline in bidding for new work. Lamprell continues to be well positioned with a strong balance sheet, and our strategy is designed to support near-term resilience and secure long-term sustainable growth.

 

In particular, I am delighted that we secured an unprecedented opportunity to partner with Saudi Aramco, Bahri and Hyundai Heavy Industries to create a major new maritime yard in Saudi Arabia, establishing a significant long-term foothold in the largest and one of the most dynamic oil and gas markets. The project will further strengthen our position in the region and will provide exposure to significant new opportunities in a key market for the energy industry."

 

 

The management team will hold a presentation on 22 September at 9.30am at Holborn Bars (138-142 Holborn, London EC1 2NQ).  The live webcast will be accessible on Lamprell's website or on the following link: http://webcasting.brrmedia.co.uk/broadcast/59a942e1d1178550cf77404b or through conference call dial in: +44 (0)330 336 9411 (UK local), with confirmation code: 4224850.

 

- Ends -

 

Enquiries:

 

Lamprell plc

 

Christopher McDonald, Chief Executive Officer

+971 (0) 4 803 9308

Tony Wright, Chief Financial Officer

+971 (0) 4 803 9308

Maria Babkina, Investor Relations

+44 (0) 7852 618 046


 


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 5,000 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 828,000 m2 with 1.9 km of quayside.

 

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

 

 

Chief Executive Officer's Review

 

As expected, 2017 is proving to be challenging as the Company experiences a prolonged period of lower activity levels across the industry. As a result, Group  revenues in the first half of 2017 were significantly lower than during the comparative period in the prior year. However, we are encouraged by increased levels of bidding activity resulting from implementation of our strategic initiatives although due to the timing of potential contract awards, we do not expect to see revenue growth from them until 2019. Lamprell is now focused on harnessing the combined results from its recent cost control measures, internal restructuring and strong cash management efforts to be competitive in targeting new business opportunities in Saudi Arabia as well as in the renewables and EPC sectors. 

 

Operational performance in 1H

 

The Group delivered three jackup drilling rigs in the first half of the year. We completed our largest ever project comprising nine jackup rigs built over the course of eight years with the delivery of the "Al Hudairiyat" and  the "Al Lulu" jackup rigs to NDC in February and April respectively. We delivered the third rig of the year in Q2 2017 to Shelf Drilling, which has been deployed alongside its previously-constructed sister rig operating offshore Thailand.  Our operational team showed great determination and resilience to deliver all three rigs on schedule and on budget, overcoming the technical issues experienced in 2016.  In addition, the modules fabrication project for Petrofac also completed in April 2017, having delivered a total of 45 modules for use on the Upper Zakum project in Abu Dhabi.

 

Project completions and the slow pace of new contract awards have brought yard activities to a relatively low level, but fabrication work has commenced on our flagship renewables contract for ScottishPower Renewables in relation to the East Anglia One project. The major upgrade of the 'Haven' mobile operating unit for Master Marine is progressing well and is on track for completion of construction works in our Hamriyah facility later in 2017, with installation in Norway scheduled in 1H 2018.      

 

As announced in August 2017, we reached an amicable settlement with Cameron, a subsidiary of Schlumberger, in respect of the issues associated with their jacking equipment in 2016, which impacted both our financial and operational performance in 2016.  We are pleased to have successfully resolved the issues. Lamprell has preserved a strong relationship with  Schlumberger, which has commissioned Lamprell to fabricate two land rigs according to the client's 'rig of the future' design. This opportunity further strengthens Lamprell's credentials in the land rig sector. 

 

In the first six months of 2017, our rolling TRIR increased to 0.41, driven by unsatisfactory safety processes at an external site which contracted the services of some of our workers. We have taken the necessary measures to protect our workforce and terminated the contractual relationship with the site.  Our focus on safety remains unchanged and, with the appointment of a new VP of HSESQ (Health, Safety, Environment, Security and Quality), we are continuing our internal efforts to ensure that the health and wellbeing of our employees remains a top priority and that our safety track record returns to our historic strong performance levels.

 

Saudi Maritime Joint Venture

 

On 31 May 2017, the Group signed a joint venture agreement with Saudi Aramco, Bahri and HHI to establish and operate a maritime yard in the Kingdom of Saudi Arabia through a joint venture company ("JVCo").  The joint venture was approved by our shareholders on 26 June 2017 and we anticipate satisfaction of all conditions precedent by the end of year including the formation of the JVCo.

 

Once commissioned, the maritime yard will become one of the largest yards in the Arabian Gulf with 4.1km of quayside and 640,000 m2 of workshops. Lamprell will be the technical partner in two zones focusing on construction of jackup drilling rigs as well as maintenance, repair and overhaul ("MRO") services for jackup drilling rigs and commercial vessels, with HHI taking responsibility for the two zones focusing on the construction and MRO services for offshore support vessels and the construction of commercial vessels.  The yard is expected to be partially operational by 2019 with full functionality reached by 2021.

 

As part of the project documents for the joint venture, Saudi Aramco and JVCo will sign an offtake agreement for construction of 20 offshore jackup drilling rigs over a 10-year period as well as provision of MRO services for jackup drilling rigs. The offtake agreement allows Saudi Aramco to nominate its newly-formed Saudi drilling joint venture between Saudi Aramco and Rowan as the offtaker.  Until the maritime yard is operational, JVCo is expected to subcontract some of this work, with significant component parts of the first two jackup drilling rigs expected to be subcontracted to Lamprell's yards in the UAE in 2018. 

 

Work on the project is progressing well with the first contract for dredging works at the yard awarded during the summer and further construction contracts expected to be placed by year-end.  We will update the market on major milestones as the development progresses.

 

Board changes

 

On 11 September, we announced the appointment of John Malcolm as Lamprell's new Non-Executive Chairman to take effect following John Kennedy's retirement on 20 September 2017. John Malcolm has been an independent Non-Executive Director of the Company since 27 May 2013 and the Board determined that his strong industry experience and deep knowledge of the Company presented an excellent candidate for the Chairman role from existing Board members. On behalf of everyone at Lamprell, I would like to thank John Kennedy for his contribution to the Group's development and transformation over the last five years.

 

Market overview and bid pipeline

 

We recognised the key marketing needs: to expand the Company's business development ("BD") function, to maintain a competitive and attractive offering, and to broaden Lamprell's addressable markets.  With this in mind, in 1H 2017 we recruited a new VP of BD and our risk-based, structured approach to bidding ensures that we only pursue opportunities that fit well with our skillset, experience and growth ambition whilst generating satisfactory margins.  This approach is designed to ensure that reward is aligned with the risk profile for any given project. Despite the widely reported market downturn in 2017, there are early indications of a potential market recovery.  We are seeing improved bidding levels, both in our core markets and especially in the renewables sector, and our bid pipeline has grown to USD 3.1 billion from USD 2.5 billion at the end of 2016.  The 2016 contract award in the renewables sector for the East Anglia One project has positioned Lamprell as an important participant in that market.  As we move through project execution, we are on a learning curve with start-up costs and inefficiencies which we are working through.  Although this will impact our margins on this first project, it has reinforced our view of the significant potential that the renewables market presents to the growth of the Group.   Furthermore, and given our experience in constructing complex jackup windfarm installation vessels, we are seeing an increase in bid requests for both foundations and installation vessels.

 

One of the key Group priorities is the strategic partnership with Saudi Aramco, one of the few oil and gas majors still committed to rig commissioning in the current market. The joint development of a major maritime facility in the Middle East region will provide new revenue streams for Lamprell and the Group is also in the process of pre-qualifying to bid for a long-term agreement with Saudi Aramco.  The outcome of this highly competitive process is expected to be announced in the coming six months. If successful, Lamprell would have access to a significant project pipeline of non-rig work - awards under the long-term agreements with existing contractors amounted to USD 4 billion in 2016 alone.

 

We are also determined to build on our credentials in EPC projects within the energy industry and we are reviewing partnering options to help access this market. We are currently progressing discussions with a small number of established and reputable partners to bid for much larger scale projects in new geographies. Converting the pipeline into contract awards requires significant ongoing effort, but we are investing in our capabilities for this market, both by developing our infrastructure and attracting specialist talent to support our core competenices and expertise. Consequently, we are hiring various specialists with extensive expertise in EPC projects to support and complement our existing competencies and are currently installing a state-of-the-art pipeshop near our Hamriyah facility.

 

Outlook

We continue to expect 2017 to be a difficult year.  Top-line performance will remain subdued as a result of the slow pace of the new major contract awards that we have seen over the past 24 months. We do not expect to see the potential improvement in market conditions impacting our business in 2018 due to the lag between improved market conditions and project awards in our business streams.  In the meantime, we remain focused on the immediate challenges facing the business and on implementing our growth strategy for the medium term. The slow pace of contract awards (for walk-in work in particular) has resulted in our adjusting the revenue guidance for the full year to USD 370-390 million, with revenue weighted towards 2H 2017 as the major projects enter their high activity phases of construction. Our revenue expectations for 2018 are around 10% lower than 2017 and are conditional upon the timing of potential contract awards.  We are encouraged by increased levels of bidding activity but do not expect to see revenue growth until 2019 on the basis of such awards in late 2018.  Our investment in a skilled workforce will help to ensure delivery of our projects and, in combination with our bidding strategies, to convert a robust pipeline of profitable projects in existing business streams and in the renewables and EPC sectors.  While this may result in near-term margin pressure, we consider that this is an important investment for our future as we implement our strategy.

Christopher McDonald

Chief Executive Officer

Lamprell plc

 

 

 

Financial Review

 

The Group's financial performance was broadly in line with our expectations. Reduced levels of new contract awards in prior years have affected revenue levels as compared to 1H 2016, but successful closure of various major projects drove strong margins for the reporting period.  In addition, the balance sheet remains robust with healthy cash reserves.

 

Results from operations

 

The Group's total revenue for the six-month period ended 30 June 2017 was USD 159.2 million, significantly lower than the USD 451.3 million reported for the same period last year. The reduction reflects the adverse market conditions, particularly in the new build jackup rig sector and low levels of contract awards in 2016 and 2017 to date.

 

Revenue breakdown reflects current industry activity with new build jackup rigs representing just over 31% of total Group revenue for the period or USD 49.4 million, significantly down on the previous year.

 

Revenues from oil and gas contracting services and offshore platforms have improved, contributing USD 42.3 million and USD 40.2 million respectively as Master Marine and the Scottish Power project activity intensifies.

 

Our services businesses, particularly the manpower segment, have performed well contributing revenues of USD 24.3 million.

 

Modules revenues decreased to USD 3.0 million from USD 22.6 million during the comparative period in the prior year as we completed the Petrofac UZ750 project.

 

Margin performance 

 

Gross profit decreased to USD 20.6 million compared to USD 27.5 million during the comparative period.

 

Gross margin was 13.0%, an increase on the figure of 6.1% reported for the same period last year, and in line with the 13.1% underlying margin before the impact of the Ensco settlement in 2016. The gross margin in 1H 2017 was driven by the succeesful completion of the three new build jack up rigs and the HMC Kaombo project.  These project completions offset the impact that the low revenue levels had on recovery of the Group's fixed cost base.

 

Further cost reduction measures, announced in March 2017, have led to a reduction in overheads as we continue to align the business with the market outlook. Our overheads in 1H have reduced accordingly by USD 14.5 million in line with our expectations.

 

EBITDA, from continuing operations and including exceptional items for the period, was USD 13.5 million (1H 2016: USD 10.0 million). The Group's EBITDA margin was 8.5% reflecting the stable gross margin and reduction in overhead.

 

Finance costs and financing activities

 

Net finance costs in the first half of 2017 decreased further to USD 3.1 million (1H 2016: USD 5.5 million) due to the lower levels of debt, facility commitment fees and bonding commissions.

 

Net profit/loss after exceptional items and earnings per share

 

The Group generated a net profit of USD 1.1 million (1H 2016: net loss of USD 4.4 million). The diluted earnings per share for the six-month period ended 30 June 2017 was USD 0.30 cents (1H 2016: diluted loss per share of USD 1.27 cents).

 

Capital expenditure

 

The Group's capital expenditure on tangible assets during the six-month period ended 30 June 2017 was USD 13.7 million, largely similar with 1H 2016, as we continue to improve yard efficiencies and invest in the pipe shop. We expect capital expenditure on our existing yards to be broadly flat over the the rest of the year.

 

The Group will also make the initial investment in the Saudi Maritime Yard of USD 20 million in the second half of the year.  This represents the first instalment of our capital injection into the joint venture and JVCo will use the monies to fund the joint venture formation. Further instalments are expected to be required from the joint venture partners by the Saudi Maritime Yard on an annual basis over the coming years.  We expect to fund this project from our balance sheet.

 

Lamprell retains significant flexibility in capital expenditure on its existing operations and our current commitments reflect the strength of the balance sheet and our net cash position.

 

Cash flow and liquidity

 

The Group's net cash flow from operating activities for 1H 2017 reflected a net inflow of USD 56.7 million (1H 2016: net outflow of USD 38.2 million), which was driven primarily by decreased working capital requirements as milestone payments on completed projects were collected. Prior to working capital movements and the payment of employees' end of service benefits, the Group's net cash inflow was USD 20.0 million (1H 2016: inflow of USD 17.1 million).

 

Cash and bank balances increased by USD 20.6 million to USD 355.2 million during the first half of the year resulting from net cash inflow from operations, repayment of debt and a net cash outflow from investing activities. Net cash is expected to trend downwards moderately by the end of the year as we invest in the continuing efficiency improvements in our yard facilities, make the initial investment in the Saudi Maritime yard joint venture and complete the acquisition of two S116E kits which we initiated the purchase of in 2015 from Cameron LeTourneau to secure our supply chain.

 

Balance sheet

 

The Group's net cash increased further to USD 305.9 million in line with our expectations as milestone payments on delivery of the three new build jack up rigs were collected (31 December 2016: USD 275.2 million).

 

The Group's total current assets at the period-end were USD 588.5 million (31 December 2016: USD 616.8 million). Trade and other receivables decreased to USD 196.5 million (31 December 2016: USD 275.3 million).

 

Shareholders' equity remained relatively unchanged at USD 559.3 million (31 December 2016: USD 555.4 million).

 

Borrowings

 

Borrowings at the end of the first half of 2017 were USD 49.3 million (31 December 2016: USD 59.5 million).

 

At 30 June 2017, the Group's facilities comprised (a) a USD 100 million term loan amortised over five years, of which USD 50 million had been repaid by the end of the reporting period; (b) USD 50 million for general working capital purposes which remained unutilised; and (c) USD 100 million of working capital for project financing (reduced from USD 200 million), also undrawn. During 1H, the USD 150 million committed bonding facility (which had been reduced from USD 250 million in 2016) to be used in connection with new contract awards funded by the above working capital facility, was reduced by a further USD 100 million as it was replaced by lower cost bilateral bonding facilities. The Group's debt to equity ratio at the 30 June 2017 was low at 8.8%.

 

Amendments to debt facility covenants

 

The Group's balance sheet remains strong with USD 305.9 million in net cash.  The Board believes that maintaining significant liquidity is beneficial to the Group.  As a result, during 1H the Group obtained debt facility amendments from its lenders in relation to certain of the financial covenants, to provide financial flexibility.  These include a waiver of the ratio of EBITDA to Debt Service covenant up to the period ended 31 December 2018 and the ratio of Borrowings to EBITDA covenant for the periods ended 31 December 2017 and 30 June 2018.  Securing these waivers further demonstrates the strong, continuing support that the Group receives from its lender group.

 

Going concern

 

After reviewing its cash flow forecasts for a period of not less than 12 months from the date of signing these half-yearly 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 Group therefore continues to adopt the going concern basis in preparing its financial statements.

 

Dividends

 

In the context of ongoing market challenges, the low revenue levels in 2017 and the investment for future growth in the Saudi Maritime Yard, the Directors do not recommend the payment of an interim dividend for the period in relation to current financial year ending 31 December 2017.  The Directors will continue to review this position in light of market conditions at the relevant time.

 

Principal risks and uncertainties

 

Principal risks are a risk or combination of risks that, given the Group's current position, could seriously affect the performance, future prospects or reputation of the Group. They include those risks that could materially threaten the Company's business model, performance, solvency or liquidity, or prevent it from meeting its strategic objectives.

 

In terms of identifying and managing the principal risks and uncertainties, the Group has an established risk management framework which requires all risk owners to identify, evaluate and monitor risks and take steps to reduce, manage or eliminate the risk. The Board has oversight of enterprise risk management.  Responsibility for monitoring and reviewing the integrity and effectiveness of the Group's overall systems of risk management and internal controls is delegated to the Audit & Risk Committee.

 

For details of the principal risks and uncertainties faced by the Group, please refer to the Notes to Financial Statements in the Company's 2016 Annual Report as well as the Risk Report on pages 14 to 17 in the same document. The Audit & Risk Committee and the Board as a whole have continued to review the Group's risks throughout the first half of 2017 and the directors consider that, in addition to the principal risks and uncertainties included in the Annual Report for the year ended 31 December 2016, there is an additional risk arising from project execution in light of the Group's movement into the renewables and EPC sectors, consistent with its strategy.  One example is the East Anglia One project in the renewables sector, discussed above in the Chief Executive Officer's Review. 

 

Tony Wright

Chief Financial Officer

Lamprell plc

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lamprell plc   

 

Condensed consolidated interim income statement



Six months ended 30 June 2017

Six months ended 30 June 2016


Note

Pre-exceptional items

Exceptional

items

Total

Pre-exceptional items

Exceptional

Items

Total

 


USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

 


(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

 








Revenue

4

159,169

-

159,169

451,334

-

451,334

Cost of sales


(138,525)

-

(138,525)

(423,799)

-

(423,799)



--------------------

--------------------

--------------------

--------------------

--------------------

--------------------

Gross profit


20,644

-

20,644

27,535

-

27,535

Selling and distribution expenses


(262)

-

(262)

(326)

-

(326)

General and administrative expenses

5

(18,529)

-

(18,529)

(25,896)

(680)

(26,576)

Other gains - net


394

-

394

126

-

126



--------------------

--------------------

--------------------

--------------------

--------------------

--------------------

Operating profit


2,247

-

2,247

1,439

(680)

759

 








Finance costs


(4,919)

-

(4,919)

(7,024)

-

(7,024)

Finance income


1,841

-

1,841

1,554

-

1,554

 


--------------------

--------------------

--------------------

--------------------

--------------------

--------------------

Finance costs - net


(3,078)

-

(3,078)

(5,470)

-

(5,470)

Share of profit of investment accounted for using the equity method

10

1,991

-

1,991

506

-

506

 


--------------------

--------------------

--------------------

--------------------

--------------------

--------------------

Profit /(loss) before income tax


1,160

-

1,160

(3,525)

(680)

(4,205)

Income tax expense


(93)

-

(93)

(162)

-

(162)

 


--------------------

--------------------

--------------------

--------------------

--------------------

--------------------

Profit /(loss) for the period


1,067

-

1,067

(3,687)

(680)

(4,367)

 


========

=========

========

========

========

========

Profit /(loss) for the period attributable to the equity holders of the Company


1,067

-

1,067

(3,687)

(680)

(4,367)



=========

=========

=========

========

========

========

Earnings/(loss) per share attributable to the equity holders of the Company during the period
















7



0.31c



(1.27)c

 




========



========

7



0.30c



(1.27)c





========



========

 

 

 

 

 

 

Condensed consolidated interim statement of comprehensive income

 



Six months ended 30 June


Note

2017

2016

 


USD'000

USD'000

 


(Unaudited)

(Unaudited)

 

 

 

 

Profit /(loss) for the period


1,067

(4,367)



 


Other comprehensive income:


 


Items that may be reclassified subsequently to profit or loss:


 

 

Currency translation differences

16

14

(39)

Net gain on cash flow hedges

16

1,913

28



--------------

--------------

Other comprehensive income/(loss) for the period


1,927

(11)

 


--------------

--------------

Total comprehensive income/(loss) for the period 

 

2,994

(4,378)

 


=======

=======

Total comprehensive income/(loss) for the period attributable to the equity holders of the Company

 

2,994

(4,378)

 

 

=======

=======

 

 

 

 

 

Condensed consolidated interim balance sheet

 



At 30 June

At 31 December


Note

2017

2016



USD'000

USD'000



(Unaudited)

(Audited)

ASSETS




Non-current assets




Property, plant and equipment

8

174,840

172,328

Intangible assets

9

32,755

24,951

Investment accounted for using the equity method

10

9,220

7,229

Trade and other receivables

11

1,690

10,905

Term and margin deposits

12

13,297

6,777

Derivative financial instruments

20

110

115



------------------------

------------------------

Total non-current assets


231,912

222,305

 


------------------------

------------------------

Current assets




Inventories

13

51,001

24,415

Trade and other receivables

11

194,811

264,417

Derivative financial instruments

20

726

58

Cash and bank balances

12

341,928

327,893



------------------------

------------------------

Total current assets


588,466

616,783



------------------------

------------------------

Total assets


820,378

839,088



------------------------

------------------------

LIABILITIES




Current liabilities




Borrowings

21

(20,003)

(20,321)

Trade and other payables

18

(170,710)

(180,021)

Derivative financial instruments

20

-

(465)

Provision for warranty costs and other liabilities

19

(8,454)

(7,958)

Current tax liability


(223)

(223)



------------------------

------------------------





Total current liabilities


(199,390)

(208,988)



------------------------

------------------------

 

Net current assets


389,076

407,795



------------------------

------------------------

Non-current liabilities




Borrowings

21

(29,323)

(39,163)

Derivative financial instruments

20

-

(794)

Provision for employees' end of service benefits

17

(32,288)

(34,745)



------------------------

------------------------

Total non-current liabilities


(61,611)

(74,702)



------------------------

------------------------

Total liabilities


(261,001)

(283,690)



------------------------

------------------------

Net assets


559,377

555,398



==========

==========

EQUITY




Share capital

15

30,346

30,346

Share premium

15

315,995

315,995

Other reserves

16

(18,766)

(20,693)

Retained earnings


231,802

229,750



-----------------------

-----------------------

Total equity attributable to the equity holders of the Company


559,377

555,398



=========

=========

 

 

Condensed consolidated interim statement of changes in equity

 

 

 

 

Note

Share

capital

Share

premium

Other

reserves

Retained

   earnings

 

Total



USD'000

USD'000

USD'000

USD'000

USD'000








At 1 January 2016


30,346

315,995

(19,144)

410,360

737,557



--------------

-----------------

--------------

----------------

-----------------

Loss for the period


-

-

-

(4,367)

(4,367)

Other comprehensive income:







Currency translation differences

16

-

-

(39)

-

(39)

Net gain on cash flow hedges


-

-

-

28

28



--------------

-----------------

--------------

----------------

-----------------

Total comprehensive loss for the period ended 30 June 2016


-

-

(39)

(4,339)

(4,378)



--------------

-----------------

--------------

----------------

-----------------

Transactions with owners:







Share based payments:







- value of services provided


-

-

-

1,666

1,666

Treasury shares purchased


-

-

-

(504)

(504)



--------------

-----------------

--------------

----------------

-----------------

Total transactions with owners


-

-

-

1,162

1,162



--------------

-----------------

--------------

----------------

-----------------

At 30 June 2016 (unaudited)


30,346

315,995

(19,183)

407,183

734,341



--------------

-----------------

--------------

----------------

-----------------

Loss for the period  


-

-

-

(179,948)

(179,948)

Other comprehensive income:







Re-measurement of post-employment benefit obligations

17

-

-

-

1,523

1,523

Currency translation differences

16

-

-

(251)

-

(251)

Net loss on cash flow hedges

16

-

-

(1,287)

-

(1,287)

Reclassification of loss on cash flow hedges

16

-

-

28

(28)

-



--------------

-----------------

--------------

----------------

-----------------

Total comprehensive loss for the period ended 31 December 2016


-

-

(1,510)

(178,453)

(179,963)



--------------

-----------------

--------------

----------------

-----------------

Transactions with owners:







Share based payments:







- value of services provided


-

-

-

1,059

1,059

Treasury shares purchased


-

-

-

(39)

(39)



--------------

-----------------

--------------

----------------

-----------------

Total transactions with owners


-

-

-

1,020

1,020



--------------

-----------------

--------------

----------------

-----------------

At 31 December 2016 (audited)


30,346

315,995

(20,693)

229,750

555,398



=======

========

=======

========

========








 

At 1 January 2017


30,346

315,995

(20,693)

229,750

555,398

 



--------------

--------------

--------------

--------------

--------------

 

Profit for the period


-

-

-

1,067

1,067

 

Other comprehensive income:







 

Currency translation differences

16

-

-

14

-

14

 

Net gain on cash flow hedges

16

-

-

1,913

-

1,913

 



--------------

--------------

--------------

--------------

--------------

 

Total comprehensive income for the period ended 30 June 2017


-

-

1,927

1,067

2,994

 



--------------

--------------

--------------

--------------

--------------

 

Transactions with owners:







 

 Share based payments:







 

- value of services provided


-

-

-

985

985

 



--------------

---------------

--------------

---------------

-----------------

 

Total transactions with owners


-

-

-

985

985

 



--------------

---------------

--------------

----------------

-----------------

 

At 30 June 2017 (unaudited)


30,346

315,995

(18,766)

231,802

559,377

 



=======

=======

=======

=======

========

 

 

Condensed consolidated interim statement of cash flows

 


Note

Six months ended 30 June

 



2017

2016



USD'000

USD'000



(Unaudited)

(Unaudited)

Operating activities




Cash generated from/(used in) operating activities

26

56,826

(38,087)

Tax paid


(93)

(67)

 


----------------

----------------

Net cash generated from/(used in) operating activities


56,733

(38,154)

 


----------------

----------------

Investing activities




Additions to property, plant and equipment

8

(13,669)

(13,404)

Proceeds from sale of property, plant and equipment


109

825

Additions to intangible assets

9

(9,396)

(2,024)

Finance income


1,841

1,554

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


(5,105)

2,124

Movement in margin deposits/short term deposits under lien


2,101

(2,751)



----------------

----------------

Net cash used in investing activities


(24,119)

(13,676)



----------------

----------------

Financing activities




Treasury shares purchased

15

-

(504)

Repayment of borrowings

21

(10,000)

(10,000)

Finance costs


(5,077)

(7,082)



----------------

----------------

Net cash used in financing activities


(15,077)

(17,586)



----------------

----------------

Net increase/(decrease) in cash and cash equivalents


17,537

(69,416)





Cash and cash equivalents, beginning of the period

12

245,514

224,164

Exchange rate translation


14

    (39)



------------------

------------------

Cash and cash equivalents at end of the period

12

263,065

154,709



=========

=========

 

Notes to the condensed consolidated interim financial information

 

1      Legal status and activities

 

There has been no change in the legal status or principal activities of the Company during the current period.

 

During the period, Lamprell Saudi Arabia Company ("LSAC"), a fully owned subsidiary, was incorporated but is not yet operational. Other than this, there are no changes to the Company and its subsidiaries (together referred to as "the Group") since the publication of our most recent annual financial statements.

 

This condensed consolidated interim financial information has been reviewed, not audited. The information for the year ended 31 December 2016 do not constitute statutory accounts as defined in the Isle of Man Companies Act. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.  The auditor's report on those accounts was not qualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report.

 

2      Summary of significant accounting policies

 

2.1     Basis of preparation

 

The condensed consolidated interim financial information for the six months ended 30 June 2017 have been prepared in accordance with the Disclosure and Transparency Rules ("DTR") of the United Kingdom's Financial Conduct Authority ("FCA") and with International Accounting Standard ("IAS") 34, "Interim Financial Reporting" as adopted by the European Union ("EU"). The consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2016, which have been prepared in accordance with IFRSs as adopted by the EU.

 

2.2     Accounting policies

 

The accounting policies applied in the preparation of the condensed consolidated interim financial information are consistent with those of the annual financial statements for the year ended 31 December 2016 except for the adoption of new standards and interpretations effective as of 1 January 2017. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. The annual financial statements for the year ended 31 December 2016 are available on the Company's website (www.lamprell.com).

 

(a)  New and amended standards adopted by the Group

 

·    IAS 12 (amendments), 'Income Taxes' - Recognition of Deferred Tax Assets for Unrealised Losses.

·    IFRS 12 (amendments) 'Disclosure of Interests in Other Entities' - Annual Improvements to IFRSs 2014-2016 Cycle.

 

These amendments have had no impact on the Group as they clarify existing standards.

 

3      Critical accounting judgements and key sources of estimation uncertainty

 

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

 

3.1       Critical judgements in applying the Group's accounting policies

 

During the period there were no critical judgements made applying the Group's accounting policies.

 

3.2       Key sources of estimation uncertainty

 

The significant judgements made by management in applying the Group's key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2016, except as stated otherwise below.

 

Revenue recognition

The Group uses the percentage-of-completion method for accounting 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 Group's 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 period end would result in an increase in assets by USD 2.6 million (H1 2016: USD 18.2 million) if the total costs to completion are decreased by 10% and a decrease liabilities by USD 2.1 million (H1 2016: USD 17.2 million) if the total costs to completion are increased by 10%.

 

4        Segment information 

 

The Group is organised into business units, which are the Group's operating segments and are reported to the Board of Directors, the chief operating decision maker. These operating segments are aggregated into two reportable segments - 'Fabrication & Engineering' and 'Services' based on similar nature of the products and services, type of customer and economic characteristics.

 

The Fabrication & Engineering segment contains business from New Build Jack up Rigs ("NBJR"), Modules, ("MOD"), Offshore Platform ("OP") and Oil and Gas Contracting Services

 

("OGCS") excluding that from the Operations & Maintenance manpower business. The Services segment contains business from Operations & Maintenance and safety services.

 

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. Operations & maintenance derives its revenue from manpower supply and safety services.


Fabrication & Engineering

Services

Total


USD'000

USD'000

USD'000





Six months ended 30 June 2017




Revenue from external customers

134,873

24,296

159,169


 =========

 =========

 =========

Gross operating profit

38,917

8,599

47,516


 =========

 =========

 =========

 

Segment comparatives are restated to reflect the organisational changes that have occurred since the prior interim reporting period to present a like-for-like view.

 

Six months ended 30 June 2016 (restated)



Revenue from external customers

432,356

18,978

451,334


 =========

 =========

 =========

Gross operating profit

41,498

9,014

50,512


 =========

 =========

 =========

 

Segment comparatives as previously stated are as below.

 


Segment A

All other segments

Total

Six months ended 30 June 2016




Revenue from external customers

449,150

2,184

451,334


 =========

 =========

 =========

Gross operating profit

49,596

916

50,512


 =========

 =========

 =========

 

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

 

The Board of Directors assesses the performance of the operating segments based on a measure of gross operating profit. The staff, equipment and certain subcontract costs are measured based on standard cost. The measurement basis of gross profit excludes the effect of the common expenses for yard rent, repairs and maintenance and other miscellaneous expenses.

 

The reconciliation of the gross operating profit is provided as follows:

 

Note

Six months ended 30 June


2017

2016


USD'000

USD'000

Gross operating profit for the Fabrication & Engineering

  segment as reported to the Board of Directors

38,917

41,498

Gross operating profit for the Services segments as

  reported to the Board of Directors

8,599

9,014

Unallocated:

 

 

  Employee and equipment costs

(13,783)

(11,011)

  Repairs and maintenance

(2,531)

(4,860)

  Yard rent and depreciation

(6,401)

(6,814)

  Others

(4,157)

(292)


--------------

--------------

Gross profit

20,644

27,535


--------------

--------------

Selling and distribution expenses                                           

(262)

(326)

General and administrative expenses                                 5

(18,529)

(26,576)

Other gains - net                                                               

394

                 126

Finance costs

(4,919)

(7,024)

Finance income

1,841

              1,554

Share of profit of investment accounted for using the

    equity method                                                               10

1,991

506


---------------

---------------

Profit/(loss) for the period before tax

1,160

            (4,205)


=======

=======

 

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

The breakdown of revenue from all services is as follows:

 


                Six months ended 30 June

 


2017

2016


USD'000

USD'000

Fabrication & Engineering



New build jackup rigs

49,398

375,508

Oil and gas contracting services

42,294

22,946

Offshore platforms

40,221

11,253

Modules

2,960

22,649

Services



Operations & Maintenance manpower supply and safety services

24,296

18,978


---------------------

---------------------


159,169

451,334


 ==========

 ==========

 

 

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


2017

2016


USD'000

USD'000




External customer A

34,131

204,821

External customer B

30,330

105,987

External customer C

20,357

64,737


________

_________


84,818

375,545


 =========

 ==========

The revenue from these customers is attributable to Fabrication & Engineering. The above customers in 2017 are not necessarily the same customers in 2016.

5        General and administrative expenses

 


Six months ended 30 June


2017

2016

 

 

USD'000

 

USD'000

Staff costs

9,885

16,740

Legal, professional and consultancy fees

1,783

1,585

Depreciation

1,463

1,475

Amortisation of intangible assets (Note 9)

1,592

1,563

Office rent and maintenance

817

728

Non-executive director fees

763

856

Utilities and communication

679

1,457

Release of impairment of trade receivables - net

(22)

(917)

Bank charges

62

101

Potential partnership expenses (Note 6)

-

1,489

Others

1,507

1,499


----------------

----------------


18,529

26,576


========

========

 

6      Investment in Maritime Yard

 

The Group's proposed investment in the Maritime Yard within the King Salman International Complex for Maritime Industries & Services ('Maritime Yard') was approved by the Shareholders at an extraordinary general meeting held on 26 June 2017. The circular ('Proposed Joint Venture') detailing the investment is available on the Company's website (www.lamprell.com).

 

As at 30 June 2017, other than certain costs incurred in connection with the preparatory steps no direct investment had been made by the Group pending formation of the Company that will operate the Maritime Yard. It is intended that a new limited liability company will be established under the laws of the Kingdom by the partners to operate, maintain and manage the Maritime Yard.

 

The Group's investment commitments for the Maritime Yard are disclosed in Note 23.

 

7        Earnings/(loss) per share 

 

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

 

 

Six months ended 30 June

 


2017

2016


USD'000

USD'000

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


 

 

Profit/(loss) for the period

1,067

(4,367)


-------------------------

-------------------------

Weighted average number of shares for basic earnings/(loss) per share

341,710,302

341,710,302

Adjustments for:



- Assumed vesting of performance share plan

3,811,566

-

- Assumed vesting of retention share plan

1,000,806

-


-------------------------

-------------------

Weighted average number of shares for diluted earnings/(loss) per share

346,522,674

341,710,302


-------------------------

-------------------

Earnings/(loss) per share:



  Basic

0.31c

(1.27)c


===========

===========

  Diluted

0.30c

(1.27)c


===========

===========

 

During the prior period, assumed vesting of performance and retention share plans amounting to 1,672,494 shares and 67,548 shares respectively were anti-dilutive and therefore excluded.

 

8        Property, plant and equipment

 

 

  USD'000

 

Net book amount at 1 January 2016

175,286

Additions

13,404

Net book amount of disposals

(422)

Depreciation

(11,888)

 

--------------

Net book amount at 30 June 2016

176,380

Additions

9,467

Net book amount of disposals

(306)

Depreciation

(13,213)

 

---------------

Net book amount at 31 December 2016

172,328

Additions

13,669

Net book amount of disposals

(4)

Depreciation

(11,153)

 

--------------

Net book amount at 30 June 2017

174,840

 

=======

A depreciation expense of USD 9.7 million has been charged to cost of sales and USD 1.5 million to general and administrative expenses.

 

9       Intangible assets

 

During the period, Sharjah Electricity and Water Authority completed the construction and installation of an electric mainline to the Group's Hamriyah facility. The Group has right of use and the cost incurred by the Group of USD 8.6 million has been capitalised as an intangible asset and will be amortised over the remaining period of the leasehold rights of the facility (17 years). Other than these and amortisation of USD 1.6 million there has been no change in the composition of intangible assets reported at the year ended 31 December 2016.

 

10      Investment accounted for using the equity method

 

The Group's share of profit for the period amounting to USD 2.0 million arises from its interests in Maritime Industrial Services Arabia Co. Ltd. ("MISA"). There were no changes in investments held during the six months ended 30 June 2017.

 

11      Trade and other receivables

 

 

At 30 June

At 31 December

 

2017

2016

 

USD'000

USD'000



 

Trade receivables

92,893

89,431

Other receivables and prepayments

37,723

38,244

Advances to suppliers

1,344

17,556

Receivable from a related party

166

109

 

---------------

 

132,126

145,340

Less: Provision for impairment of trade receivables

(5,466)

(5,488)

 

---------------

---------------

 

126,660

139,852

Amounts due from customers on contracts

30,224

127,809

Contract work in progress

39,617

7,661

 

---------------

---------------

 

196,501

275,322

Non-current portion:

 

 

Prepayments

1,690

10,905

 

---------------

---------------

Current portion

194,811

264,417

 

=======

=======

 

12      Cash and bank balances

 

 At 30 June

 At 31 December

 

2017

  2016

 

USD'000

USD'000




Cash at bank and on hand

117,841

88,491

Term and margin deposits

224,087

239,402

 

---------------

---------------

Cash and bank balances - current

341,928

327,893

Term and margin deposits - non-current

13,297

6,777

Less: Margin/short term deposits under lien

(8,882)

(10,983)

Less: Deposits with an original maturity of more than three months

(83,278)

 

(78,173)

 

--------------

----------------

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

263,065

245,514

 

=======

========

 

13      Inventories

 

 

At 30 June

2017

USD'000

 

At 31 December

2016

USD'000

Raw Materials, Consumables and Finished Goods

27,793

27,989

Work in Progress

26,253

-

Less: Provision for slow moving and obsolete inventories

(3,045)

(3,574)

 

-------------

-------------

 

51,001

24,415

 

======

======

 

14    Related party balances and transactions

 

The Group entered into the following transactions during the period with related parties at prices and on terms agreed between the related parties.

 

 

Six months ended 30 June

 

2017

2016

 

USD'000

USD'000




Key management compensation

2,077

4,599

 

======

======

Legal and professional services

64

-

 

======

======

Sales to a joint venture

166

-

 

======

======

Purchases from a joint venture

64

77

 

======

======

Sponsorship fees and commissions paid to legal shareholders of subsidiaries

159

186


======

======

 

15      Share capital      

 

There is no movement in issued and fully paid ordinary shares and share premium for the period ending 30 June 2017 and year ended 31 December 2016.

 

During 2017, Employee Benefit Trust ('EBT') acquired nil shares (2016: 321,691 shares) of the Company. The total amount paid to acquire the shares was USD nil (2016: USD 504,000) and has been deducted from the consolidated retained earnings. During 2017, nil shares (2016: 321,691 shares) were issued to employees on vesting of the performance shares and 16,268 shares (31 December 2016: 16,268 shares) were held as treasury shares at 30 June 2017.

 

16      Other reserves

 

 

 

 

Legal

reserve

Merger

Reserve

Hedge reserve

Translation

reserve

 

Total

 

USD'000

USD'000

USD'000

USD'000

USD'000

 

 

 

 

 

 

At 1 January 2016

98

(18,572)

-

(670)

(19,144)

Currency translation differences

-

-

-

(39)

(39)

 

-------------

----------------

-------------

-------------

----------------

At 30 June 2016 (Unaudited)

98

(18,572)

-

(709)

(19,183)

Currency translation differences

-

-

-

(251)

(251)

Loss on cash flow hedges

-

-

(1,287)

-

(1,287)

Reclassification of loss on cash flow hedges

-

-

28

-

28

 

-------------

----------------

-------------

-------------

----------------

At 31 December 2016 (Audited)

98

(18,572)

(1,259)

(960)

(20,693)

Currency translation differences

-

-

-

14

14

Gain on cash flow hedges

-

-

1,913

-

1,913

 

-------------

----------------

-------------

-------------

----------------

At 30 June 2017 (Unaudited)

98

(18,572)

654

(946)

(18,766)


========

===========

========

========

==========

 

17      Provision for employees' end of service benefits

 

The end of service benefits obligation as at 30 June 2017 is calculated on a year to date basis, using the latest actuarial valuation as at 31 December 2016. There have not been any significant fluctuations or onetime events since that time that would require adjustments to the actuarial assumptions as at 31 December 2016.

 

18      Trade and other payables     

 

At 30 June

At 31 December

 

2017

2016

 

USD'000

USD'000

Trade payables

61,194

31,662

Accruals

87,048

111,022

Payables to a related party

292

228

Amounts due to customers on contracts

22,176

37,109


----------------------------------------------------

------------------------------------------------------

 

170,710

180,021

 

=======

=======

 

 

19      Provision for warranty costs and other liabilities

 

During the period, the Group has incurred a charge of USD 1.0 million for estimated warranty costs on completed projects. This is partly offset by release of previous provisions amounting to USD 0.5 million.

 

20      Derivative financial instruments

 

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

 

a.       Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

b.       Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2); and

c.       Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

 

The following table presents the Group's assets that are measured at fair value at:

 


Level 1

Level 2

Level 3

Total


USD'000

USD'000

USD'000

USD'000

At 30 June 2017

Derivative financial instruments

 

 -

==========

 

836

==========

 

-

==========

 

836

==========

 

At 31 December 2016
Derivative financial instruments

 

 

 -

==========

 

 

173

==========

 

 

 -

==========

 

 

173

==========

 

There are no liabilities at 30 June 2017 measured at fair value.

 

The following table presents the Group's liabilities that are measured at fair value at:

 


Level 1

Level 2

Level 3

Total


USD'000

USD'000

USD'000

USD'000

 

At 31 December 2016
Derivative financial instruments

 

 

 -

==========

 

 

1,259

==========

 

 

 -

==========

 

 

1,259

==========

 

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.

 

There were no transfers between Level 1, 2 and 3 during the period.

 

There were no changes in valuation techniques during the period.

 

21      Borrowings

 

Repayments of borrowings amounting to USD 10.0 million were made during the period. As at 30 June 2017, the Group's borrowings amount to USD 49.3 million.

 

At 30 June 2017, the Group has banking facilities of USD 1,049 million (31 December 2016: USD 1,362 million) with commercial banks. The facilities include bank overdrafts, letters of guarantees, letters of credit and short-term loans and there has been no significant change in the nature of security pledged against these facilities as at 30 June 2017.

 

During the six months end 30 June 2017, the Group obtained debt facility amendments from its lenders in relation to certain of the financial covenants, to provide financial flexibility.  These include a waiver of the ratio of EBITDA to Debt Service covenant up to the period ended 31 December 2018 and the ratio of Borrowings to EBITDA covenant for the periods ended 31 December 2017 and 30 June 2018. 

22      Dividends

 

There were no dividends declared or paid during the six months period ended 30 June 2017.

 

23      Commitments

 

(a)     Operating lease commitments

 

The Group leases land and staff accommodation under various operating lease agreements. The future minimum lease payments payable under operating leases are as follows:

 


At 30 June

At 31 December


2017

2016


USD'000

USD'000


 

 

Not later than one year

8,658

6,528

Later than one year but not later than five years

24,229

23,997

Later than five years

80,892

76,264


-------------

-------------


113,779

106,789


======

======

 

(b)     Maritime yard commitments

 

As stated in Note 6, the Group has entered into commitments associated with the establishment of a Maritime yard, at Ras Al Khair, in eastern Saudi Arabia. Under the Shareholders' Agreement, the Group will invest up to a maximum of USD 140.0 million in relation to its commitment over the course of construction of the Maritime Yard between 2017 and 2022. The forecast contributions are as follows:

 


At 30 June

At 31 December


2017

2016


USD'000

USD'000

 

Not later than one year

20,000

-

Later than one year but not later than four years

120,000

-


-------------

-------------


140,000

-


======

======

 

(c)     Other commitments


At 30 June

At 31 December


2017

2016


USD'000

USD'000

 

Capital commitments for purchase of operating

 equipment and computer software

958

345


======

======

Capital commitments for construction of facilities

13,221

10,347


======

======

Purchase commitments

41,199

51,659


======

======

24      Bank guarantees

 


 At 30 June

At 31 December


2017

2016


USD'000

USD'000

 

 

 

Performance/bid bonds

124,730

163,812

Advance payment, labour visa and payment guarantees

47,613

240,383

 

---------------

-----------------------

 

172,343

404,195

 

=======

========

 

The various bank guarantees, as above, were issued by the Group's bankers in the ordinary course of business. Certain guarantees are secured by cash margins, assignments of receivables from some customers and in respect of guarantees provided by banks to the Group companies, some 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.

 

25    Events after the balance sheet date

 

On 14 August 2017 the Group reached an amicable settlement with Cameron International Corporation ("Cameron"), a subsidiary of Schlumberger Limited ("Schlumberger") in respect of the issues associated with the jacking equipment supplied by Cameron in 2016.

 

The settlement results in the Group receiving a proportion of the remedial costs incurred in rectifying the issues associated with the jacking equipment.  After taking account of the outstanding payment to Cameron in respect of the jacking equipment and the settlement, the Group anticipates its current net cash position will be largely unchanged.

 

26      Cash flow from operating activities

 


Note

Six months ended 30 June


 

2017

2016


 

USD'000

USD'000

 


(Unaudited)

(Unaudited)

Operating activities




Profit/(loss) for the period before income tax

 

1,160

(4,205)

Adjustments for:

 



  Depreciation 

8

11,153

11,888

  Amortisation of intangible assets

9

1,592

1,563

  Share of profit from investment in a joint venture

10

(1,991)

(506)

  Share based payments value of services provided

 

985

1,666

  Release of excess tax provision

 

-

(260)

Profit on disposal of property, plant and equipment


(105)

(403)

Provisions/(release) for warranty costs(net)

19

496

(370)

Provision for slow moving and obsolete     inventories


 

(529)

 

(187)

   Release of impairment of trade receivables, net


(22)

(917)

Provision for employees' end of service benefits

17

2,271

3,325

Finance costs

 

4,919

7,024

Finance income

 

(1,841)

(1,554)

Net gain on cash flow hedges

16

1,913

28



-------------

-------------

Operating cash flows before payment of employees'

end of service benefits and changes in working capital


 

 

20,001

 

 

17,092

Payment of employees' end of service benefits

17

(4,728)

(5,513)

Changes in working capital:




Inventories before movement in provision


(26,057)

(2,855)

Derivative financial instruments


(1,922)

640

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


 

78,843

 

5,954

Trade and other payables


(9,311)

(53,405)



-------------

-------------

Net cash generated from/(used in) operating   activities


 

56,826

 

(38,087)



---------------

---------------

 

Alternative performance measures

 

As set out in our most recent annual report, we use a range of financial and non-financial measures to assess our performance. The tables below set out the definitions of such measures, reconciliations to amounts presented in the interim financial statements and the reason for their inclusion in the report. The metrics presented are consistent with those presented in our previous annual report and there has been no changes to the bases of calculation.

 

EBITDA

In addition to measuring financial performance of the group based on operating profit, we also measure performance based on EBITDA and underlying EBITDA (also referred to as adjusted EBITDA). EBITDA is defined as the profit/(loss) for the period from continuing operation before depreciation, amortisation, interest on bank borrowings, finance income and taxation. Underlying EBITDA is defined as EBITDA before non-recurring items or certain accounting adjustments that do not reflect changes in performance.

 

We consider EBITDA and underlying EBITDA to be useful measures of our operating performance because they approximate the operating cash flow of the Group by eliminating depreciation and amortisation. EBITDA and underlying EBITDA are not direct measures of our liquidity, which is shown by our cash flow statement, and need to be considered in the context of our financial commitments.

 

 

A reconciliation from profit/(loss) for the period from continuing operation, the most directly comparable IFRS measure, to reported and underlying EBITDA, is set out below:

 

Six month ended 30 June:


2017

2016

2015


USD'000

USD'000

USD'000

Profit/(loss) for the period from continuing

    operations

 

1,067

 

(4,367)

 

20,339

Exceptional items

-

680

-

Depreciation (Note 8)

11,153

11,888

8,973

Amortisation (Note 9)

1,592

1,563

1,251

Interest on bank borrowings

1,418

1,637

2,383

Finance income

(1,841)

(1,554)

(1,202)

Tax

93

162

102

EBITDA

13,482

10,009

31,846

Settlement agreement with Ensco

-

35,000

-

Underlying EBITDA

13,482

45,009

31,846

Underlying EBITDA margin*

8.5%

9.4%

9.1%

 

*Underlying EBITDA margins are calculated as underlying EBITDA shown above as a percentage of the Group's revenue.

 

Net cash

This performance measure indicates financial health after deduction of liabilities such as borrowings. A reconciliation from the cash and cash equivalents per the consolidated cash flow statement, the most directly comparable IFRS measure, to reported net cash, is set out below:

 


 30 June 2017

31 December 2016

31 December 2015


USD'000

USD'000

USD'000

Cash and cash equivalents (Note 12)

263,065

245,514

224,164

Margin/short-term deposits under lien (Note 12)

8,882

10,983

11,787

Deposits with original maturity of more than 3

    months (Note 12)

 

83,278

 

78,173

 

53,667

Borrowings (Note 21)

(49,326)

(59,484)

(79,299)

Net cash

305,899

275,186

210,319

 

Underlying gross profit

Underlying gross profit is defined as gross profit before non-recurring items or certain accounting adjustments that can mask underlying changes in performance. A reconciliation from gross profit, the most directly comparable IFRS measure, to reported and underlying gross profit, is set out below:

 

Six month ended 30 June:


2017

2016

2015


USD'000

USD'000

USD'000

Gross profit

20,644

27,535

40,786

Settlement agreement with Ensco*

-

35,000

-

Underlying gross profit

20,644

62,535

40,786

Normalised underlying margins**

13.0%

13.1%

11.6%

 

*Refer to prior year interim financial statements Note 4 for an explanation of the agreement.

**Normalised underlying margins are calculated as underlying gross profit shown above as a percentage of the Group's revenue.

 

Underlying profitability

Underlying profitability is defined as profit for the period from continuing operation before non-recurring items or certain accounting adjustments that do not reflect changes in performance. A reconciliation from profit/(loss) for the period from continuing operations, the most directly comparable IFRS measure, to reported and underlying profitability, is set out below:

 

Six month ended 30 June:


2017

2016

2015


USD'000

USD'000

USD'000

Profit/(loss) for the period from continuing operations

1,067

(4,367)

20,339

Exceptional items

-

680

-

Settlement agreement with Ensco*

-

35,000

-

Underlying profitability

1,067

31,313

20,339

 

*Refer to prior year interim financial statements Note 4 for an explanation of the agreement.

 

Statement of Directors' responsibilities

 

The directors confirm that, to the best of their knowledge, this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the EU. The interim management report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.7R and 4.2.8R, namely:

 

·        an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed consolidated interim financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

 

·        material related party transactions in the first six months of the financial year and any material changes in the related party transactions described in the last annual report.

 

The Directors of Lamprell plc are listed in the Lamprell plc Annual Report for 31 December 2016. A list of current directors is maintained on the Lamprell plc website www.lamprell.com.

 


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