TIDMLAM
RNS Number : 5021K
Lamprell plc
22 September 2016
22 September 2016
LAMPRELL PLC
("Lamprell" and with its subsidiaries the "Group")
INTERIM FINANCIAL RESULTS
FOR SIX MONTHS TO 30 JUNE 2016
Resilient underlying performance in a challenging market
Strong balance sheet, cost focus and competitive position
1H 2016 FINANCIAL RESULTS
1H 2016 1H 2015
(USD million, unless stated)
Revenue 451.3 351.4
Gross margin 6.1% 11.6%
EBITDA 10.0 31.8
(Loss)/Profit from continuing operations
after income tax and after exceptional items (4.4) 20.3
Reported diluted (loss)/earnings per share
(US cents) (1.27) 5.90
Net cash as at 30 June 151.5 316.3
Results excluding settlement with Ensco
EBITDA 45.0 31.8
Profit from continuing operations after
income tax and after exceptional items 30.6 20.3
Gross margin 13.1% 11.6%
Financial highlights
-- Ensco settlement reduced revenue by USD 25 million and net profit by USD 35 million
-- Underlying performance, excluding the settlement with Ensco,
is broadly in line with expectations
-- Revenues of USD 451.3 million substantially higher than the
comparative period last year owing to phasing of construction
activity
-- Net cash position in line with guidance owing to working
capital movements ahead of multiple upcoming rig deliveries; cash
position expected to strengthen in the coming months
-- Gross margins 6.1% in 1H 2016, impacted by the settlement
with Ensco; underlying gross margin margins 13.1% (1H 2015:
11.6%)
-- Overhead staff reduced by 10%, as announced in April 2016,
resulting in annualised savings of more than USD 5 million
Operational highlights
-- Operational performance dominated by technical issues with
Cameron jacking equipment on Ensco 140 rig
-- Despite these, Ensco 140 rig successfully delivered on 26 August 2016
-- 33 modules delivered on UZ750 project to date, with 12 more to be delivered by year-end
-- As at 30 June 2016, backlog of USD 297.1 million (31 December
2015: USD 739.7 million) with bid pipeline at approximately USD 3.9
billion (31 December 2015: USD 5.4 billion)
-- World class safety record maintained with a current total
recordable incident rate of 0.29 (31 December 2015: 0.31)
Strategic and corporate highlights
-- Following a Memorandum of Understanding announced in January
2016, a Joint Development Agreement (JDA) was signed with Saudi
Aramco, Bahri and Hyundai Heavy Industries for the development of a
new major maritime yard in Saudi Arabia
-- Christopher McDonald appointed as new CEO from 1 October 2016
-- Group is using the flexibility in its cost base to further
downsize the organisation in light of the current environment
Current trading and outlook
-- Technical solutions to the Cameron jacking equipment issues
being implemented; we expect to deliver all remaining rigs over the
next eight months
-- The Board remains committed to recovering all remedial costs
arising from the technical defects from Cameron as well as seeking
full compensation
-- Ongoing focus on business development with a number of
sizeable bids submitted recently, including competitive pricing
achieved through cost-cutting whilst maintaining acceptable
margins
-- Revenue for FY2016 expected to be slightly below current market expectations
-- Challenging environment impacting the industry through
project delays and cancellations expected to continue through 2017,
impacting the Group's order book and next year's top-line
performance
-- Revenue for FY2017 expected to be in the range of USD 400-500
million depending on the outcome of a number of submitted bids
awaiting award
-- Further cost-reduction activities being implemented to reflect the reduced revenues
John Kennedy, Executive Chairman for Lamprell, said:
"Lamprell's substantial order intake two years ago meant that
the business saw high activity levels and a solid underlying
financial performance during the first half of the year although
the results were impacted by the delay in delivery of the Ensco 140
rig. In addition, the industry downturn has continued to affect the
sector and Lamprell's ability to win new contract awards during the
period. However, the Board has full confidence that Christopher
McDonald, the incoming Chief Executive, will lead the business
through the short and medium term difficulties ahead by maintaining
Lamprell's competitive position, converting our bid pipeline and
developing strategic partnerships."
James Moffat, Chief Executive Officer for Lamprell, said:
"In this tough market environment, Lamprell is in a solid
position, both financially and operationally, as a result of our
counter-cyclical investment which created a robust base for the
Group to not only ride out the storm, but also to enable long-term
growth. In this context, the impact from the Cameron equipment
issue has been particularly disappointing, as it has overshadowed
our otherwise positive underlying results. As my tenure as Chief
Executive comes to an end, I'm confident that Lamprell's new CEO
will be able to capitalise and build on the resilience and strong
franchise of the business."
The management team will hold a presentation for research
analysts at 9.30am 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/57ceea91a911746f59ec8dd7.
- 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 7,000 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 Review
In 1H 2016, Lamprell's financial performance was significantly
impacted by the delay in delivery of the Ensco 140 rig. This was
due to the failure of the Cameron jacking equipment and we are
pursuing Cameron for all costs and damages. Apart from this, our
underlying financial and operational performance was in line with
expectations. The first half of the year has also seen Lamprell's
core markets impacted by the ongoing industry downturn. Whilst work
secured over the past three years allowed the Group to maintain the
high activity levels in the yards during 1H 2016, winning major new
awards in the current environment has proved to be challenging. The
team's focus therefore remains on protecting Lamprell's competitive
position by further reducing costs and converting our bid
pipeline.
Market downturn continuing
Lamprell had a sustained successful period for new awards before
the industry downturn, with a large number of wins filling the
Group's order book for the ensuing years. This allowed Lamprell to
maintain high activity and performance levels throughout the first
two years of the market downturn. During recent months, the extent
and effect of the market downturn have been felt and our management
continues to pursue all reasonable avenues. In this context, the
Group remains focussed on converting its robust bid pipeline into
awards. Throughout the first half of the year, Lamprell has
improved the competitiveness of its offering by reducing its cost
base. The Board believes that by focussing on factors within its
control, the Group will be able to secure awards, maintain margins
and remain effective.
In the near-term, Lamprell is well situated with its positive
cash position and strong balance sheet. Our commitment to
delivering high business performance will continue under the
Group's new leadership following the appointment of Christopher
McDonald as Lamprell's new CEO starting from 1 October. The Group
will benefit from Christopher's proven track record in business
development and sales.
The Group signed the JDA with Saudi Aramco, Bahri and Hyundai
Heavy Industries towards the end of 1H 2016 for a new major
maritime yard in the Kingdom of Saudi Arabia. Under the JDA the
partners will assess the project in detail with a view to making a
Final Investment Decision in the coming months. This is a major
project and it has the potential to have a transformational impact
on Lamprell's future.
The Lamprell Board and management team will continue to take all
necessary steps to protect the business and maintain its
competitiveness in order to ride out the market storm and secure
Lamprell's long-term future.
John Kennedy
Executive Chairman
Lamprell plc
Chief Executive Officer's Review
The first half of this year has seen the activity levels in the
industry drop significantly as a result of the prolonged downturn.
This market weakness has had a dramatic impact on the pace of
awards of large projects, affecting Lamprell along with its
peers.
Operational performance
Lamprell's operating performance in the period was dominated by
the technical issues with the Cameron-provided jacking equipment on
the Ensco 140 jackup rig. During commissioning and testing, a
technical issue was identified and, despite finding a resolution,
there was a substantial delay before successful delivery to Ensco.
This resulted in Lamprell reaching a settlement with Ensco for the
late delivery including a revenue reduction of USD 25 million.
Lamprell is committed to delivering all projects on time and the
management is extremely disappointed by the impact of the Cameron
equipment's failure on our excellent track record. The Board is
determined to recover all remedial costs arising from the technical
defects from Cameron as well as seeking full compensation.
Lamprell has worked with Cameron to identify the issues and
appropriate technical solutions to these issues are being
implemented on the other rigs, taking on board the lessons which
have been learned on the Ensco 140 project. The team is now focused
on delivering the next two jackup rigs, namely the Shelf 122 and
Ensco 141, and all six remaining rigs will be delivered over the
course of the coming eight months.
Despite these issues, the Group's Hamriyah yard operations
reached record activity levels during 1H with seven rigs being
built concurrently for the first time. This was made possible
through the recent yard optimisation and process improvements,
which allowed Lamprell to accelerate build schedules.
Lamprell's continued focus on costs has allowed the Group to be
more competitive in its bidding.
The Jebel Ali yard was close to its full capacity by the
construction of modules for Petrofac, with a total of 33 modules
delivered successfully to the client for installation offshore Abu
Dhabi. The 12 remaining modules are due to be delivered by the end
of the year.
Our minor business streams have had good operational performance
in the year to date but have also been impacted by the market
slowdown in terms of a reduced number of contract awards. The Group
continued to assist its past, current and potential clients with
cold and warm stacking of jackup rigs in its facilities, with 10
rigs currently being stored. Given clients' keen interest in this
stacking service, Lamprell has now set up a separate offshore
stacking facility able to accommodate 10 rigs without reducing
valuable quayside capacity elsewhere in our facilities.
The Group's high standards of safety continued on its positive
trajectory, with our total recordable incident rate maintained at
0.29 in 1H 2016.
With all major projects in our backlog scheduled for delivery by
Q2 2017 and low visibility on our future workload, the management
team cut headcount by 10% in Q2 2016, resulting in overall
annualised savings on overhead costs of more than USD 5 million.
Lamprell is using flexibility in its costs base to further downsize
the organisation in light of the current environment and in order
to reflect the lower revenues.
Market overview, order book and bid pipeline
The market environment has continued to be challenging with
further capital expenditure reductions across the board in the
industry resulting in project delays and even cancellations. This
is expected to extend well into 2017. Lamprell's strong period for
new awards prior to the downturn and its construction business
phasing mean that the business performed well through the past two
years of the downturn and is only now starting to suffer from the
impact of the downturn.
The Group's bid pipeline of medium-term projects remains
reasonably strong but, as a consequence of the large number of
project cancellations and projects being deferred, the pipeline has
reduced to USD 3.9 billion. The pipeline is diversified across
various regions and types of projects, however it is marked in
particular by a current slowdown in the jackup rig market. In this
context, the Group is targeting further modular work and is also
bidding for projects in the renewables sector. Lamprell continues
to believe that Middle East will remain its main source of revenue
in the near-term future, with high levels of activity and
investment maintained despite a clear slow-down in some areas and
notable pricing pressure. The pipeline however also includes
projects in the North Sea amongst live bids.
The Group has maintained high levels of bidding throughout the
first half of the year, refining its approach to marketing to
maximise the efficiency of its business development efforts. The
focus has been on targeting only those projects Lamprell believes
it has a good chance to win and those that are the most likely to
go ahead.
Lamprell's focus on strong relationships as future sources of
business has also delivered two potentially important partnerships.
The Group agreed to explore joint FPSO opportunities with Dubai
Drydocks in March 2016. The second alliance relates to the signing
of the JDA with Saudi Aramco, Bahri and Hyundai Heavy Industries
for the new major maritime yard in the eastern region of Saudi
Arabia. Under the JDA the partners will assess the project in
detail with a view to making a Final Investment Decision in the
coming months. This is a major project and it has the potential to
have a transformational impact on Lamprell's future.
Outlook
The Board's guidance for 2016 remained unchanged until the
settlement agreed with Ensco, with over 90% of revenue covered at
the time of our preliminary results. As a result of the settlement
announced on 26 August relating to the late delivery of Ensco 140,
the Group's revenue will be reduced by USD 25 million from previous
guidance, with a reduction of around USD 35 million at the bottom
line. Total revenue for FY2016 is now expected to be slightly below
current market expectations.
Our focus remains firmly on converting the pipeline of potential
new contracts, and the Group has recently submitted a number of
bids for sizeable projects, mainly in offshore construction.
Revenue for 2017 is expected to be in the range of USD 400-500
million depending on the outcome from these bidding activities.
Whilst the near-term challenges are substantial, Lamprell's
robust balance sheet and improving competitiveness put it in good
stead to recover from the downturn and deliver growth in the
future.
James Moffat
Chief Executive Officer
Lamprell plc
Financial Review
The Group's underlying performance was affected by the one-off
charge from the settlement with Ensco for all claims arising from
the equipment issues. Until the settlement, the Group was
performing in line with expectations and underlying performance,
excluding the impact of the Ensco settlement, was robust. Whilst
this negative impact on revenue and profit is disappointing,
Lamprell will look to recover all remedial costs and seek full
compensation from Cameron. Despite this impact, the Group retains a
robust balance sheet with sufficient cash reserves which will
strengthen further as the remaining six rigs are delivered.
Results from operations
The Group's total revenue for the six-month period ended 30 June
2016 was USD 451.3 million, after the USD 25 million impact of the
settlement with Ensco, with the underlying revenue in line with
expectations (1H 2015: USD 351.4 million). The new build jackup
rigs revenue was the single biggest contributor and oil & gas
contracting services was responsible for around 9% of revenue.
Gross profit decreased to USD 27.5 million from the USD 40.8
million reported in the corresponding period in 2015 due to the
settlement with Ensco. Our gross margin percentage has declined to
6.1% in 1H 2016 from 11.6% in 1H 2015. The decrease is a result of
the impact of the settlement with Ensco, whilst our underlying
margin before impact from Ensco would have remained at a strong
level of 13.1%. The continuing industry challenges also had a
negative impact on margins through the revenue mix, whereby we saw
lower activity levels in rig refurbishment and offshore/onshore
construction. Our cost saving initiatives, including the admin
staff reduction announced earlier this year helped offset this
effect partly, with an overall cost reduction of more than USD 5
million in annualised savings. We also continue to see a
contribution from Project Evolution.
EBITDA, excluding discontinued operations and exceptional items
for the period, was USD 10.0 million (1H 2015: USD 31.8 million),
or USD 45.0 million adjusted for the impact of the settlement with
Ensco. The Group's EBITDA margin decreased from 9.1% in 2015 to
2.2% in 2016 as a result of the Ensco settlement.
Finance costs and financing activities
Net finance costs in the period decreased to USD 5.5 million (1H
2015: USD 7.1 million). Gross finance costs were USD 1.6 million
lower due to lower debt levels and reduced costs of our bank
guarantees. Finance income has increased by USD 0.4 million.
Net profit/loss after exceptional items and earnings per
share
The Group generated an underlying profit, pre-Ensco charge, of
USD 30.6 million, however the settlement resulted in a net loss of
USD 4.4 million for the six-month period ended 30 June 2016
attributable to the equity holders (1H 2015: net profit of USD 20.3
million). The diluted loss per share for the six-month period ended
30 June 2016 was 1.27 cents (1H 2015: diluted earnings per share of
5.90 cents).
Capital expenditure
The Group's capital expenditure during the six-month period
ended 30 June 2016 decreased significantly to USD 15.4 million (1H
2015: USD 44.9 million) as last year was a period of heavy
investment during the first phase of Project Evolution. Lamprell
continues to retain significant flexibility in its capital
expenditure items with further room for reductions.
Cash flow and liquidity
The Group's net cash flow from operating activities for the
period ended 30 June 2016 reflected a net outflow of USD 38.1
million (1H 2015: inflow of USD 88.2 million) primarily driven by
increased working capital requirements due to project phasing with
a number of the jackup rig projects reaching their final
stages.
Cash and bank balances decreased by USD 68.8 million to USD
220.8 million during the first half of the year resulting from net
cash outflow from operations, repayment of debt and a net cash
outflow from investing activities. Net cash is expected to trend
slightly upwards by the end of the year before it recovers fully
with the final payment milestones being received as the final
remaining rigs are delivered next year.
Balance sheet
The Group's total non-current assets at 30 June 2016 were USD
413.0 million (31 December 2015: USD 408.1 million). This increase
is mainly attributable to the purchase of Property, Plant and
Equipment during the period of USD 13.4 million (31 December 2015:
USD 55.5 million) partially offset by depreciation amounting to USD
11.9 million (31 December 2015: USD 19.4 million).
The Group's total current assets at the period-end were USD
651.7 million (31 December 2015: USD 725.3 million). Trade and
other receivables decreased slightly to USD 423.3 million (31
December 2015: USD 428.3 million). As at 30 June 2016 the Group had
a net cash position of USD 151.5 million (31 December 2015: USD
210.3 million) in line with expectations as a result of a number of
rigs entering final stages of completion.
Shareholders' equity remained relatively stable at USD 734.3
million (31 December 2015: USD 737.6 million).
Goodwill
Significant value continues to be attributed to goodwill as a
result of the MIS transaction as part of the Group's assets. At 30
June 2016, the goodwill headroom above the carrying value reduced
from USD 311.6 million at 31 December 2015 to USD 130.4 million as
a result of the weak trading environment and our current activity
outlook. The critical assumptions that impact management's
assessment of the carrying value of goodwill include the
challenging market conditions, the importance of securing new
contract awards in 2H 2016 and 2017 and the current low backlog.
Management continues to monitor the value of goodwill very closely
in light of new awards.
Borrowings
Our borrowings were USD 69.2 million at 30 June 2016 (31
December 2015: USD 79.3 million). The term loan is repaid in equal
tranches over a period of five years since the refinancing in 2014,
while the additional USD 50 million working capital facility
remains in place. The USD 200 million financing facility also
remains unused.
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 Group therefore continues to adopt the
going concern basis in preparing its financial statements.
Dividends
Given the continuation of market challenges and the impact of
the settlement with Ensco, the Directors do not recommend the
payment of an interim dividend for the current financial year
ending 31 December 2016. The Directors will continue to review this
position in light of market conditions at the relevant time.
Principal risks and uncertainties
The directors do not consider that the principal risks and
uncertainties have changed since the publication of the Annual
Report for the year ended 31 December 2015. For details of the
principal risks and uncertainties faced by the Group, please refer
to the Notes to Financial Statements in the Company's 2015 Annual
Report as well as the Risk Report in the same document.
Tony Wright
Chief Financial Officer
Lamprell plc
Independent review report to Lamprell plc
We have been engaged by the company to review the condensed set
of consolidated financial statements in the half-yearly financial
report for the six months ended 30 June 2016 which comprises the
condensed consolidated interim income statement, the condensed
consolidated interim statement of comprehensive income, the
condensed consolidated interim balance sheet, the condensed
consolidated interim statement of changes in equity, the condensed
consolidated interim statement of cash flows and related notes 1 to
29. We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of consolidated financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2.1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of consolidated financial
statements included in this half-yearly financial report has been
prepared in accordance with International Accounting Standard 34
"Interim Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of consolidated financial statements in the
half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the half-yearly financial report for the
six months ended 30 June 2016 is not prepared, in all material
respects, in accordance with International Accounting Standard 34
as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
21 September 2016
Lamprell plc
Condensed consolidated interim income statement
Six months ended 30 June 2016 Six months ended 30 June 2015
Note Pre-exceptional Exceptional Total Pre-exceptional Exceptional Total
items items items items
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Continuing
operations
Revenue 5 451,334 - 451,334 351,416 - 351,416
Cost of sales (423,799) - (423,799) (310,630) - (310,630)
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Gross profit 27,535 - 27,535 40,786 - 40,786
Selling and
distribution
expenses (326) - (326) (642) - (642)
General and
administrative
expenses 6 (25,896) (680) (26,576) (15,465) - (15,465)
Other gains -
net 7 126 - 126 2,197 - 2,197
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Operating profit 1,439 (680) 759 26,876 - 26,876
Finance costs (7,024) - (7,024) (8,298) - (8,298)
Finance income 1,554 - 1,554 1,202 - 1,202
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Finance costs -
net (5,470) - (5,470) (7,096) - (7,096)
Share of profit
of investments
accounted for
using the
equity method 12 506 - 506 661 - 661
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
(Loss)/profit
before income
tax (3,525) (680) (4,205) 20,441 - 20,441
Income tax
expense (162) - (162) (102) - (102)
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
(Loss)/profit
for the period
from continuing
operations (3,687) (680) (4,367) 20,339 - 20,339
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Discontinued
operations
Loss from
discontinued
operations for
the period - - - (223) - (223)
Gain on disposal
of a subsidiary - - - 66 - 66
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Loss for the
period from
discontinued
operations - - - (157) - (157)
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
(Loss)/profit
for the period (3,687) (680) (4,367) 20,182 - 20,182
======== ========= ======== ======== ======== ========
(Loss)/profit
for the period
attributable to
the equity
holders of the
Company (3,687) (680) (4,367) 20,182 - 20,182
======== ========= ======== ======== ======== ========
(Loss)/earnings
per share
attributable to
the equity
holders of the
Company during
the period
Basic 8 (1.27)c 5.91c
======== ========
Diluted 8 (1.27)c 5.90c
======== ========
Lamprell plc
Condensed consolidated interim statement of comprehensive
income
Six months ended 30 June
Note 2016 2015
USD'000 USD'000
(Unaudited) (Unaudited)
(Loss)/profit for the period (4,367) 20,182
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Currency translation differences 18 (39) 212
Net gain on cash flow hedges 20 28 -
-------------- --------------
Other comprehensive income for the period (11) 212
-------------- --------------
Total comprehensive (loss)/income for the period (4,378) 20,394
======= =======
Total comprehensive (loss)/income for the period attributable to the equity
holders of the
Company arises from:
Continuing operations (4,378) 20,551
======= =======
Discontinued operations - (157)
======= =======
Lamprell plc
Condensed consolidated interim balance sheet
At 30 June At 31 December
Note 2016 2015
USD'000 USD'000
(Unaudited) (Audited)
ASSETS
Non-current assets
Property, plant and equipment 10 176,380 175,286
Intangible assets 11 206,345 205,884
Investment accounted for using
the equity method 12 5,791 5,285
Trade and other receivables 13 11,226 12,712
Term and margin deposits 14 13,272 8,950
------------------------ ------------------------
Total non-current assets 413,014 408,117
------------------------ ------------------------
Current assets
Inventories 15 32,108 29,066
Trade and other receivables 13 412,063 415,614
Cash and bank balances 14 207,518 280,668
------------------------ ------------------------
Total current assets 651,689 725,348
------------------------ ------------------------
Total assets 1,064,703 1,133,465
------------------------ ------------------------
LIABILITIES
Current liabilities
Borrowings 23 (20,078) (20,136)
Trade and other payables 21 (211,538) (264,943)
Derivative financial instruments 20 (188) (4)
Provision for warranty costs
and other liabilities 22 (7,964) (8,334)
Current tax liability (286) (451)
------------------------ ------------------------
Total current liabilities (240,054) (293,868)
------------------------ ------------------------
Net current assets 411,635 431,480
------------------------ ------------------------
Non-current liabilities
Borrowings 23 (49,163) (59,163)
Derivative financial instruments 20 (470) (14)
Provision for employees' end
of service benefits 19 (40,675) (42,863)
------------------------ ------------------------
Total non-current liabilities (90,308) (102,040)
------------------------ ------------------------
Total liabilities (330,362) (395,908)
------------------------ ------------------------
Net assets 734,341 737,557
========== ==========
EQUITY
Share capital 17 30,346 30,346
Share premium 17 315,995 315,995
Other reserves 18 (19,183) (19,144)
Retained earnings 407,183 410,360
----------------------- -----------------------
Total equity attributable to
the equity holders of the Company 734,341 737,557
========= =========
Lamprell plc
Condensed consolidated interim statement of changes in
equity
Share Share Other Retained
Note capital premium reserves earnings Total
USD'000 USD'000 USD'000 USD'000 USD'000
At 1 January 2015 30,346 315,995 (18,655) 344,474 672,160
-------------- ---------------- -------------- ---------------- ----------------
Profit for the period - - - 20,182 20,182
Other comprehensive income:
Currency translation
differences 18 - - 212 - 212
-------------- ---------------- -------------- ---------------- ----------------
Total comprehensive income
for the period ended
30 June 2015 - - 212 20,182 20,394
-------------- ---------------- -------------- ---------------- ----------------
Transactions with owners:
Share based payments:
- value of services provided - - - 1,391 1,391
-------------- ---------------- -------------- ---------------- ----------------
Total transactions with
owners - - - 1,391 1,391
-------------- ---------------- -------------- ---------------- ----------------
At 30 June 2015 (unaudited) 30,346 315,995 (18,443) 366,047 693,945
-------------- ---------------- -------------- ---------------- ----------------
Profit for the period - - - 44,518 44,518
Other comprehensive income:
Re-measurement of post-employment
benefit obligations 19 - - - (1,988) (1,988)
Currency translation
differences 18 - - (701) - (701)
-------------- ---------------- -------------- ---------------- ----------------
Total comprehensive income
for the period ended
31 December 2015 - - (701) 42,530 41,829
-------------- ---------------- -------------- ---------------- ----------------
Transactions with owners:
Share based payments:
- value of services provided - - - 1,783 1,783
-------------- ---------------- -------------- ---------------- ----------------
Total transactions with
owners - - - 1,783 1,783
-------------- ---------------- -------------- ---------------- ----------------
At 31 December 2015 (audited) 30,346 315,995 (19,144) 410,360 737,557
======= ======== ======= ======== ========
Loss for the period - - - (4,367) (4,367)
Other comprehensive
income:
Currency translation
differences 18 - - (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 17 - - - (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
======= ======== ======= ======== ========
Lamprell plc
Condensed consolidated interim statement of cash flows
Six months ended 30
Note June
2016 2015
USD'000 USD'000
(Unaudited) (Unaudited)
Operating activities
Cash (used in)/generated from operating
activities 29 (38,087) 88,238
Tax paid (67) (209)
---------------- ----------------
Net cash (used in)/generated from operating
activities (38,154) 88,029
---------------- ----------------
Investing activities
Additions to property, plant and equipment 10 (13,404) (43,451)
Proceeds from sale of property, plant
and equipment 825 293
Additions to intangible assets 11 (2,024) (1,474)
Dividend received from a joint venture - (579)
Finance income 1,554 1,202
Proceeds from disposal of a subsidiary
- net - 2,034
Movement in deposits with an original
maturity of more than three months 2,124 (4,735)
Movement in margin deposits/short term
deposits under lien (2,751) (453)
---------------- ----------------
Net cash used in investing activities (13,676) (47,163)
---------------- ----------------
Financing activities
Treasury shares purchased 17 (504) -
Repayment of borrowings (10,000) (10,000)
Finance costs (7,082) (8,173)
---------------- ----------------
Net cash used in financing activities (17,586) (18,173)
---------------- ----------------
Net (decrease)/increase in cash and
cash equivalents (69,416) 22,693
Cash and cash equivalents, beginning
of the period from continued operations 14 224,164 312,352
Cash and cash equivalents, beginning
of the period from discontinued operations - 5,652
Exchange rate translation (39) 212
---------------- ----------------
Cash and cash equivalents at end of
the period 154,709 340,909
======== ========
Cash and cash equivalents from continued
operations 14 154,709 340,909
======== ========
Lamprell plc
Notes to the condensed consolidated interim financial
information
1 Legal status and activities
Lamprell plc ("the Company"/"the parent company") was
incorporated and registered on 4 July 2006 in the Isle of Man as a
public company limited by shares under the Isle of Man Companies
Acts with the registered number 117101C; and is listed on the
London Stock Exchange ("LSE") main market for listed securities.
The address of the registered office of the Company is Fort Anne,
Douglas, Isle of Man and the Company is managed from the United
Arab Emirates ("UAE"). The address of the principal place of the
business is PO Box 33455, Dubai, UAE.
The principal activities of the Company and its subsidiaries
(together referred to as "the Group") are: 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.
This condensed consolidated interim financial information has
been reviewed, not audited.
2 Summary of significant accounting policies
2.1 Basis of preparation
The condensed consolidated interim financial information for the
six months ended 30 June 2016 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 2015, 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 2015 except for the adoption of new standards and
interpretations effective as of 1 January 2016. 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 2015 are available on the
Company's website (www.lamprell.com).
The preparation of consolidated interim financial information
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 are disclosed in Note
4.
(a) New and amended standards adopted by the Group
-- Amendments to IFRS 7, 'Financial Instruments: Disclosures';
-- Amendments to IAS 1, 'Presentation of Financial Statements'- Disclosure Initiative;
-- Amendments to IAS 16, 'Property, Plant and Equipment' and IAS 38, 'Intangible Assets';
-- Amendments to IAS 19, 'Employee Benefits'; and
-- Amendments to IAS 34, 'Interim Financial Reporting'.
(b) The following new standards, amendments to standards and
interpretations are mandatory for the first time for the financial
year beginning 1 January 2016, but do not have a material impact to
the Group or are not currently relevant for the Group.
-- Amendments to IFRS 5, 'Non-current Assets Held for Sale and Discontinued Operations';
-- Amendments to IFRS 10, 'Consolidated Financial Statements',
IFRS 12, 'Disclosure of Interests in Other Entities' and IAS 28,
'Investments in Associates and Joint Ventures';
-- New standard IFRS 14, 'Regulatory Deferral Accounts';
-- Amendments to IFRS 11, 'Joint Arrangements';
-- Amendments to IAS 16, 'Property, Plant and Equipment' and IAS 41, 'Agriculture'; and
-- Amendments to IAS 27, 'Separate Financial Statements'.
Exceptional items
Exceptional items are disclosed separately in the financial
statements where it is necessary to do so to provide further
understanding of the financial performance of the Group. They are
material items of income or expense that have been shown separately
due to the significance of their nature or amount.
3 Financial risk management
3.1 Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (including foreign exchange and cash flow
interest rate risk), credit risk and liquidity risk. These risks
are evaluated by management on an ongoing basis to assess and
manage critical exposures.
The condensed consolidated interim financial information does
not include all financial risk management information and
disclosures required in the annual financial statements; they
should be read in conjunction with the Group's annual financial
statements as at 31 December 2015. There have been no changes in
any risk management policies since the year ended 31 December
2015.
3.2 Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and to maintain an optimal capital
structure to reduce the cost of capital. There have been no changes
in capital risk management policies since the year ended 31
December 2015.
3.3 Fair value estimation
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).
There are no assets at 30 June 2016 and 31 December 2015
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
30 June 2016
Derivative financial instruments - 658 - 658
(Note 20) ========== ========== ========== ==========
31 December 2015
Derivative financial instruments - 18 - 18
(Note 20) ========== ========== ========== ==========
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
periods.
4 Critical accounting estimates and judgements
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.
In preparing these interim financial statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the
same as those that applied to the consolidated financial statements
for the year ended 31 December 2015, except as stated otherwise
below.
Settlement of contractual claims
As stated in Note 5 and Note 28, the Group signed a contract
settlement agreement for the Ensco 140 rig, which reduced the
contract revenue by USD 25 million and increased estimated contract
costs by USD 10 million. The additional estimated contract costs
have been based on the historical experience for similar
modifications and activities based on current working practice.
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 revenue
and a decrease in loss by USD 18.2 million (H1 2015: increase in
revenue and profit by USD 16.0 million) if the total costs to
completion are decreased by 10% and a decrease in revenue and an
increase in loss by USD 17.2 million (H1 2015: decrease in revenue
and profit by USD 13.5 million) if the total costs to completion
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. Testing for impairment was performed on 31
December 2015 and is detailed in the annual financial statements
for the year ended 31 December 2015.
The Group considers the relationship between its market
capitalisation and its book value, among other factors, when
reviewing for indicators of impairment. As at 30 June 2016, the
market capitalisation of the Group was below the book value of its
equity, indicating a potential impairment of goodwill. In addition,
the overall decline in oil and gas and related activities due to
ongoing market uncertainty, have led to decreased demand in the
industry as a whole. As a result, management performed an
impairment test as at 30 June 2016 for 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" ("CGU(1)
").
The Group used the cash-generating unit's value-in-use to
determine the recoverable amount, which exceeded the carrying
amount. The projected cash flows were updated to reflect the
decreased demand for new build rigs and services and a pre-tax
discount rate of 11.10% (31 December 2015: 10.42%) was applied.
Cash flows beyond the five-year period have been extrapolated using
a 3.25% terminal growth rate (31 December 2015: 3.25%). All other
assumptions remained consistent with those disclosed in the annual
financial statements for the year ended 31 December 2015. The
headroom as at 30 June 2016 is USD 130.4 million.
The directors believe that any reasonable possible change in the
key assumptions on which the recoverable amount is based would not
cause the carrying amount to exceed its recoverable amount. As a
result of this analysis, management did not identify an impairment
for this cash generating unit to which goodwill of USD 180.5
million is allocated.
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
in such bonds, the market yields on government bonds should be
used. In the UAE there is no deep market either for corporate or
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% (2015: 3.5%). If
the discount rate used were to differ by 0.5 points from
management's estimates, the carrying amount of the employees' end
of service benefits provision at the balance sheet date would be an
estimated USD 1.0 million (H1 2015: USD 1.5 million) lower or USD
1.4 million (H1 2015: USD 1.6 million) higher.
Recoverability of inventory balances
Management has estimated the recoverability of inventory
balances and considered the allowance required for any potential
write-down to net realisable value based on current economic
environment. Estimating the amount of any potential write-down
requires significant judgment and the use of estimates which
management determines based on past historical experience and third
party evidence of net realisable value.
5 Segment information
The business units are viewed by the chief operating
decision-maker 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.
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.
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.
There has been no change in the basis of segmentation or basis
of measurement of segment profit or loss in the period.
All other
Segment A segments Total
USD'000 USD'000 USD'000
Six months ended 30 June
2016
Revenue from external
customers* 449,150 2,184 451,334
========= ========= =========
Gross operating profit 49,596 916 50,512
========= ========= =========
*As a result of late delivery of Ensco 140 rig which were caused
by failures in the jacking equipment supplied by the original
equipment manufacturer, Cameron LeTourneau ("Cameron") the Group
entered into a settlement agreement as referred to in Note 28.
The impact of the settlement agreement was that the Group
incurred a write-down of revenue amounting to USD 25 million, which
was a deduction from the final 'Ensco 140' rig milestone payment
and is likely to incur additional estimated contract costs
amounting to USD 10 million as a result of an increase in the
contract scope which the Group committed to provide for the 'Ensco
140 and 141' rigs.
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
2015 (restated)
Revenue from external
customers 348,627 2,789 351,416
========= ========= =========
Gross operating profit 72,339 1,123 73,462
========= ========= =========
Segment comparatives as previously stated are as below.
Six months ended 30 June
2015
Revenue from external customers 319,211 32,205 351,416
========= ========= =========
Gross operating profit 60,206 13,256 73,462
========= ========= =========
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 operating 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 operating profit is provided as
follows:
Note Six months ended 30 June
2016 2015
USD'000 USD'000
Gross operating profit for the reportable
segments as
reported to the Executive Directors 49,596 72,339
Gross operating profit for other segments
as reported
to the Executive Directors 916 1,123
Unallocated:
Employee and equipment costs (11,011) (18,705)
Repairs and maintenance (4,860) (8,436)
Yard rent and depreciation (6,814) (6,355)
Others (292) 820
-------------- --------------
Gross profit 27,535 40,786
-------------- --------------
Selling and distribution expenses (326) (642)
General and administrative expenses 6 (26,576) (15,465)
Other gains - net 7 126 2,197
Finance costs (7,024) (8,298)
Finance income 1,554 1,202
Others 506 661
--------------- ---------------
(Loss)/profit for the period before tax
from continuing operations (4,205) 20,441
======= =======
Loss for the period from discontinued operations - (157)
======= =======
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 services is as follows:
Six months ended 30 June
2016 2015
USD'000 USD'000
New build jackup rigs 375,508 244,883
Oil and gas contracting services 41,924 85,633
Modules 22,649 17,596
Offshore platforms 11,253 3,304
--------------------- ---------------------
451,334 351,416
========== ==========
Certain customers individually accounted for greater than 10% of
the Group's revenue and are shown in the table below:
2016 2015
USD'000 USD'000
External customer A 204,821 125,587
External customer B 105,987 65,757
External customer C 64,737 30,624
________ _________
375,545 221,968
========= ==========
The revenue from these customers is attributable to Segment A.
The above customers in 2016 are not necessarily the same customers
in 2015.
6 General and administrative expenses
Six months ended 30 June
2016 2015
USD'000 USD'000
Staff costs 16,740 14,706
Legal, professional and consultancy fees 1,585 1,496
Depreciation 1,475 1,168
Amortisation of intangible assets (Note
11) 1,563 1,251
Utilities and communication 1,457 1,037
Release of impairment of trade receivables
- net (917) (7,361)
Bank charges 101 151
Potential partnership expenses* 1,489 -
Others 3,083 3,017
---------------- ----------------
26,576 15,465
======== ========
*Potential partnership expenses pertain to costs incurred on
establishing a Maritime Yard, at Ras Al Khair, in eastern Saudi
Arabia.
7 Other gains - net
Six months ended 30 June
2016 2015
USD'000 USD'000
Net (losses)/gains on derivatives (640) 10
Profit on disposal of property, plant and
equipment 403 203
Exchange gains/(losses) - net 393 (200)
Others (30) 2,184
---------------- ----------------
126 2,197
======== ========
8 (Loss)/earnings per share
(a) Basic
Basic (loss)/earnings per share is calculated by dividing the
(loss)/ profit attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the
period excluding ordinary shares purchased by Lamprell plc employee
benefit trust ("EBT") and held as treasury shares (Note 17).
(b) Diluted
Diluted (loss)/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.
Six months ended 30 June
2016 2015
USD'000 USD'000
The calculations of (loss)/earnings per
share are based on the following (loss)/profit
and numbers of shares:
(Loss)/profit for the period (4,367) 20,182
------------------------- -------------------------
Loss for the period from discontinued
operations - (157)
------------------------- -------------------------
Weighted average number of shares for
basic (loss)/earnings per share 341,710,302 341,710,353
Adjustments for:
* Assumed vesting of performance share plan - 385,939
* Assumed vesting of free share plan - 74,463
------------------------- -------------------------
Weighted average number of shares for
diluted (loss)/earnings per share 341,710,302 342,170,755
------------------------- -------------------------
Assumed vesting of performance and free share plans amounting
to 1,672,494 shares and 67,548 shares respectively have been
excluded as these are anti-dilutive in the current period.
(Loss)/earnings per share:
Basic (1.27)c 5.91c
=========== ===========
Diluted (1.27)c 5.90c
=========== ===========
(Loss)/earnings per share from continuing
operations:
Basic (1.27)c 5.95c
=========== ===========
Diluted (1.27)c 5.94c
=========== ===========
Loss per share from discontinued operations:
Basic - (0.04)c
=========== ===========
Diluted - (0.04)c
=========== ===========
9 Operating profit
Operating profit (from continuing operations) is stated after
charging:
Six months ended 30 June
2016 2015
USD'000 USD'000
Depreciation (Note 10) 11,888 8,973
====== ======
Operating lease rentals - land and buildings 9,560 8,813
====== ======
10 Property, plant and equipment
USD'000
Net book amount at 1 January 2015 139,343
Additions 43,451
Net book amount of disposals (90)
Depreciation (8,973)
--------------
Net book amount at 30 June 2015 173,731
Additions 12,098
Net book amount of disposals (138)
Depreciation (10,405)
---------------
Net book amount at 31 December 2015 175,286
Additions 13,404
Net book amount of disposals (422)
Depreciation (11,888)
--------------
Net book amount at 30 June 2016 176,380
=======
The additions of USD 13.4 million during the current period
comprise USD 8.8 million of additions to capital work-in-progress,
USD 1.8 million of additions to operating equipment, USD 2.4
million of additions to buildings and infrastructure and USD 0.4
million of additions to other fixed assets.
11 Intangible assets
Goodwill Others Total
USD'000 USD'000 USD'000
Net book amount at 1 January
2015 180,539 24,187 204,726
Additions - 1,474 1,474
Amortisation - (1,251) (1,251)
----------------- ------------------ --------------------
Net book amount at 30 June 2015 180,539 24,410 204,949
Additions - 2,308 2,308
Amortisation - (1,373) (1,373)
----------------- ------------------ --------------------
Net book amount at 31 December
2015 180,539 25,345 205,884
Additions - 2,024 2,024
Amortisation - (1,563) (1,563)
----------------- ------------------ --------------------
Net book amount at 30 June 2016 180,539 25,806 206,345
======= ======== =========
12 Investment accounted for using the equity method
Investment in a joint venture
At 30 June At 31 December
2016 2015
USD'000 USD'000
Opening balance at the beginning of the
year 5,285 5,118
Dividend received during the period/year - (1,151)
Share of profit for the period/year 506 1,318
------------------ ------------------
Closing balance 5,791 5,285
======== ========
Details of the Group's joint venture during the period and at
the balance sheet date is as follows:
Place of incorporation Proportion
Name of the joint venture and operation of ownership Status
Maritime Industrial Operational
Services Arabia Co. Jubail, Kingdom
Ltd. ('MISA')* of Saudi Arabia 30%
* Production, manufacturing and erection of heat exchangers,
pressure vessels, tanks, structural steel, piping and other related
activities.
Summarised financial information in respect of the Group's joint
venture is set out below:
MISA
At 30 June At 31 December
2016 2015
USD'000 USD'000
Total non-current assets 6,679 6,902
Total current assets 23,705 21,452
Total non-current liabilities (2,807) (2,600)
Total current liabilities (excluding
income tax payable) (7,793) (6,977)
------------------ ------------------
Net assets (excluding income tax payable) 19,784 18,777
Income tax payable (282) (628)
------------------ ------------------
Net assets 19,502 18,149
======== ========
Group's share of joint venture's net
assets (excluding income tax payable)
- 30% 5,935 5,633
Group's share of joint venture's income
tax payable (144) (348)
------------------ ------------------
Group's share of joint venture's net
assets (net of Group's share of income
tax) 5,791 5,285
======== ========
Six months ended Year ended
30 June 31 December
2016 2015
USD'000 USD'000
Revenue 22,069 30,809
Expenses (19,902) (25,077)
------------------ ------------------
Profit before tax 2,167 5,732
======== ========
Group's share of joint venture's net
profit - net of Group's share of income
tax 506 1,318
======== ========
MISA is a private company and there is no quoted market price
available for its shares.
The Group has the following contingencies and commitments
relating to Group's interest in the joint venture.
At 30 June At 31 December
2016 2015
USD'000 USD'000
Letters of guarantee 2,307 2,532
======== ========
Operating lease commitments 284 119
======== ========
13 Trade and other receivables
At 30 June At 31 December
2016 2015
USD'000 USD'000
Trade receivables 94,336 94,146
Other receivables and prepayments 31,869 30,206
Advances to suppliers 22,113 19,435
Receivable from a related party (Note 16) - 13
--------------- ---------------
148,318 143,800
Less: Provision for impairment of trade
receivables (4,303) (5,220)
--------------- ---------------
144,015 138,580
Amounts due from customers on contracts 211,435 133,487
Contract work in progress 67,839 156,259
--------------- ---------------
423,289 428,326
======= =======
Non-current portion:
Prepayments 11,226 12,712
--------------- ---------------
Current portion 412,063 415,614
======= =======
During 2015, the Group paid an amount of USD 8.5 million to the
Sharjah Electricity & 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.
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.
Amounts due from customers on contracts comprise:
At 30 June At 31 December
2016 2015
USD'000 USD'000
Costs incurred to date 1,537,190 1,098,234
Attributable profits 254,727 204,586
--------------------- ---------------------
1,791,917 1,302,820
Less: Progress billings (1,580,482) (1,169,333)
--------------------- ---------------------
211,435 133,487
========== ==========
14 Cash and bank balances
At 30 June At 31 December
2016 2015
USD'000 USD'000
Cash at bank and on hand 29,131 92,301
Term and margin deposits 178,387 188,367
--------------- ---------------
Cash and bank balances - current 207,518 280,668
Term and margin deposits-non-current 13,272 8,950
Less: Margin/short term deposits under
lien (14,538) (11,787)
Less: Deposits with an original maturity
of more than three months (51,543) (53,667)
-------------- ----------------
Cash and cash equivalents (for purpose
of the cash flow statement) 154,709 224,164
======= ========
At 30 June 2016, the cash at bank and term deposits were held
with thirteen banks (31 December 2015: thirteen banks). The
effective interest rate earned on term deposits was 0.56% (31
December 2015: 0.62%) per annum. Margin and short term deposits of
USD 14.5 million (31 December 2015: USD 11.8 million) and deposits
with an original maturity of more than 3 months amounting to USD
41.7 million (31 December 2015: USD 43.9 million) are held under
lien against guarantees issued by the banks (Note 26).
15 Inventories
At 30 June At 31 December
2016 2015
USD'000 USD'000
Raw Materials, Consumables and Finished
Goods 34,376 21,917
Work in Progress - 9,604
Less: Provision for slow moving and obsolete
inventories (2,268) (2,455)
------------- -------------
32,108 29,066
====== ======
16 Related party balances and transactions
Related parties comprise Lamprell Holdings Limited ("LHL")
(which owns 33% of the issued share capital of the Company),
certain legal shareholders of Group companies, Directors and key
management personnel of the Group and entities controlled by
Directors and key management personnel. Key management includes
directors (executive and non-executive) and members of the
executive committee. Other than disclosed elsewhere in the
condensed consolidated interim financial information, the Group
entered into the following significant transactions during the
period with related parties at prices and on terms agreed between
the related parties.
Six months ended 30 June
2016 2015
USD'000 USD'000
Key management compensation 4,599 3,289
====== ======
Legal and professional services - 174
====== ======
Sales to a joint venture - 81
====== ======
Purchases from a joint venture 77 208
====== ======
Sponsorship fees and commissions paid to
legal shareholders of subsidiaries 186 257
====== ======
Key management compensation comprises:
Six months ended 30 June
2016 2015
USD'000 USD'000
Salaries and other short term benefits 3,518 2,433
Share based payments - value of services
provided 982 757
Post-employment benefits 99 99
------------- -------------
4,599 3,289
====== ======
The terms of the employment contracts of the key management
include reciprocal notice periods of between three to twelve
months.
At 30 June At 31December
2016 2015
USD'000 USD'000
Due from a related party:
MISA (in respect of sales) (Joint venture)
(Note 13) - 13
===== =====
Due to a related party:
MISA (in respect of purchases) (Joint venture)
(Note 21) 62 122
===== =====
17 Share capital
Issued and fully paid ordinary shares
Equity share capital Share premium
Number USD'000 USD'000
At 30 June 2016 341,726,570 30,346 315,995
=========== ======= =======
There is no movement in issued and fully paid ordinary shares
and share premium for the period ending 30 June 2016 and year ended
31 December 2015. The total authorised number of ordinary shares is
400 million shares (2015: 400 million shares) with a par value of 5
pence per share (2015: 5 pence per share).
During 2016, EBT acquired 321,691 shares (2015: 51 shares) of
the Company. The total amount paid to acquire the shares was USD
504,000 (2015: nil) and has been deducted from the consolidated
retained earnings. During 2016, 321,691 shares (2015: nil shares)
were issued to employees on vesting of the free shares and 16,268
shares (31 December 2015: 16,268 shares) were held as treasury
shares at 30 June 2016. The Company has the right to reissue these
shares at a later date. These shares will be issued on vesting of
free shares/performance shares/share options granted to certain
employees of the Group.
18 Other reserves
Legal Merger Translation
reserve Reserve reserve Total
USD'000 USD'000 USD'000 USD'000
At 1 January 2015 98 (18,572) (181) (18,655)
Currency translation differences - - 212 212
------------- ----------------- ------------- ----------------
At 30 June 2015 (Unaudited) 98 (18,572) 31 (18,443)
Currency translation differences - - (701) (701)
------------- ----------------- ------------- ----------------
At 31 December 2015 (Audited) 98 (18,572) (670) (19,144)
Currency translation differences - - (39) (39)
------------- ----------------- ------------- ----------------
At 30 June 2016 (Unaudited) 98 (18,572) (709) (19,183)
======== =========== ======== ==========
19 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, 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:
USD'000
At 1 January 2015 38,752
Current service cost 2,562
Interest cost 587
Payments during the period (2,286)
--------------
At 30 June 2015 39,615
Current service cost 2,309
Interest cost 855
Remeasurements 1,988
Payments during the period (1,904)
------------
At 31 December 2015 42,863
Current service cost 2,621
Interest cost 704
Payments during the period (5,513)
------------
At 30 June 2016 40,675
======
The amounts recognised in the consolidated income statement are
as follows:
USD'000
Current service cost 2,562
Interest cost 587
------------
Six months ended 30 June 2015 3,149
------------
Current service cost 2,309
Interest cost 855
------------
Six months ended 31 December 2015 3,164
------------
Current service cost 2,621
Interest cost 704
------------
Six months ended 30 June 2016 3,325
======
The charge for the six months period ended 30 June 2016 is based
on the estimates provided in the actuarial report as at 31 December
2015. There has been no change in principal actuarial assumptions
from those used as at 31 December 2015.
20 Derivative financial instruments
2016 2015
-------------------------------- --------------------------------------------------------------
Notional amount Assets Liabilities Notional amount Assets Liabilities
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Interest rate
swaps 70,000 - 658 80,000 - 18
======== ====== ====== ======== ====== ======
Non-current
portion 50,000 - 470 60,000 - 14
---------------- ------------ ------------ ---------------- ------------ ------------
Current portion 20,000 - 188 20,000 - 4
---------------- ------------ ------------ ---------------- ------------ ------------
The Group has an interest rate swap to switch floating interest
rate to fixed interest rate 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 30 June
2016 of this derivative was USD 0.7 million (2015: USD 0.02
million).
During the period, the Group designated foreign currency forward
contracts as hedges of highly probable purchases of fixed assets in
Euros (EUR). The forecast purchases are expected to occur during
2016 and 2017. The terms of the Euro currency forward contracts
have been negotiated to match the terms of the forecast
transactions. Consequently, the hedges were assessed to be highly
effective. As at 30 June 2016, an unrealised gain of USD 0.03
million relating to the Euro forward contract is included in other
comprehensive income.
21 Trade and other payables
At 30 June At 31 December
2016 2015
USD'000 USD'000
Trade
payables 58,792 44,065
Accruals 142,013 127,155
Payables
to a
related
party
(Note 16) 62 122
Amounts
due to
customers
on
contracts 10,671 93,601
---------------------------------------------------- ------------------------------------------------------
211,538 264,943
======= =======
Amounts due
to
customers
on
contracts
comprise:
Progress
billings 231,627 357,154
Less: Costs
incurred
to date (184,494) (226,975)
Less:
Recognised
profits (36,462) (36,578)
---------------------------------------------------- --------------------------------------------------------
10,671 93,601
======= =======
22 Provision for warranty costs and other liabilities
Warranty Minimum purchase
costs obligations Total
USD'000 USD'000 USD'000
At 1 January 2015 12,389 3,423 15,812
-------------- --------------- ---------------
At 30 June 2015 12,389 3,423 15,812
Charge during the period 1,200 - 1,200
Released/utilised during the
period (5,489) (3,189) (8,678)
-------------- --------------- ---------------
At 31 December 2015 8,100 234 8,334
Charge during the period 2,000 - 2,000
Released/utilised during the
period (2,370) - (2,370)
------------------- ------------------- -------------------
At 30 June 2016 7,730 234 7,964
======= ======= =======
23 Borrowings
At 30 June At 31 December
2016 2015
USD'000 USD'000
Bank term loans 69,241 79,299
======= =======
The bank borrowings are repayable as follows:
Current (less than 1 year) 20,078 20,136
Non-current (2 to 5 years) 49,163 59,163
--------------- ---------------
69,241 79,299
======= =======
At 30 June 2016, the Group has banking facilities of USD 1,457
million (31 December 2015: USD 1,381 million) with commercial
banks. The facilities include bank overdrafts, letters of
guarantees, letters of credit and short-term loans.
Bank facilities are secured by liens over term deposits in the
amount of USD 56.3 million (31 December 2015: USD 55.7 million),
the Group's counter indemnities for guarantees issued on their
behalf, the Group's corporate guarantees, letter of undertakings,
letter of credit payment guarantees, cash margin held against
letters of guarantees, shares of certain subsidiaries, certain
property, plant and equipment, movable assets, leasehold rights for
land and certain contract receivables.
The borrowings include accrued interest of USD 0.4 million (31
December 2015: USD 0.5 million). At 30 June 2016, borrowings were
presented net of the unamortised arrangement fees and other
transaction costs of USD 0.8 million (31 December 2015: USD ---1.2
million).
The bank facilities relating to overdrafts, term loans and
revolving facilities carry interest at LIBOR + 3.5%. However, the
Group has entered into an interest rate swap against the variable
interest rate on its term loan facility to convert the LIBOR
component into a fixed interest rate of 1.2375% (2015:
1.2375%).
The carrying amounts of borrowings in the year approximated to
their fair value and were denominated in US Dollars or UAE Dirhams,
which is pegged to the US Dollar.
24 Dividends
There were no dividends declared or paid during the six months
period ended 30 June 2016 and during the year ended 31 December
2015.
25 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 and twenty five years and
are renewable at mutually agreed terms. The future minimum lease
payments payable under operating leases are as follows:
At 30 June At 31 December
2016 2015
USD'000 USD'000
Not later than one year 6,312 6,988
Later than one year but not later than
five years 12,968 9,992
Later than five years 53,796 36,530
------------- -------------
73,076 53,510
====== ======
(b) Other commitments
Capital commitments for purchase of
operating
equipment and computer software 1,539 4,791
====== ======
Capital commitments for construction
of facilities 14,861 196
====== ======
26 Bank guarantees
At 30 June At 31 December
2016 2015
USD'000 USD'000
Performance/bid bonds 126,708 126,375
Advance payment, labour visa and payment
guarantees 284,485 315,200
--------------- -----------------------
411,193 441,575
======= ========
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.
27 Exceptional items
Exceptional items comprises of:
Six months ended 30
June
2016 2015
USD'000 USD'000
(Unaudited) (Unaudited)
Staff redundancy expenses 680 -
====== ======
28 Events after the balance sheet date
On 26 August 2016 the Group signed an agreement with its client,
Ensco, to settle all claims arising from the late delivery of the
Ensco 140 Jack up rig which was caused by failures in the jacking
equipment supplied by the original equipment manufacturer, Cameron
LeTourneau ("Cameron").
The settlement agreement comprises a deduction of USD 25 million
from the final milestone payment in respect of late delivery. As
part of the settlement, the Group will also provide additional
contract scope for the 'Ensco 140 and 141' rigs and estimated costs
of USD 10 million have been included in the loss for the six months
ended 30 June 2016.
29 Cash flow from operating activities
Note Six months ended 30
June
2016 2015
USD'000 USD'000
(Unaudited) (Unaudited)
Operating activities
(Loss)/profit for the period before
income tax (4,205) 20,284
Adjustments for:
Share based payments value of services
provided 1,666 1,391
Release of excess tax provision (260) -
Depreciation 10 11,888 8,973
Amortisation of intangible assets 11 1,563 1,251
Share of profit from investment in
a joint venture 12 (506) (661)
Profit on disposal of property, plant
and equipment 7 (403) (203)
Release/utilisation of provisions
for warranty costs 22 (370) -
Provision for slow moving and obsolete
inventories (187) 1,029
Release of impairment of trade receivables,
net (917) (7,376)
Provision for employees' end of service
benefits 19 3,325 3,149
Gain on disposal of a subsidiary - (66)
Finance costs 7,024 8,298
Finance income (1,554) (1,202)
Net gain on cash flow hedges 28 -
------------- -------------
Operating cash flows before payment
of employees'
end of service benefits and changes
in working capital 17,092 34,867
Payment of employees' end of service
benefits 19 (5,513) (2,286)
Changes in working capital:
Inventories before movement in provision (2,855) (2,019)
Derivative financial instruments 7 640 (10)
Trade and other receivables before
movement in provision for impairment
of trade receivables 5,954 76,622
Trade and other payables (53,405) (18,936)
------------- -------------
Net cash (used in)/generated from
operating activities (38,087) 88,238
--------------- ---------------
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 2015. A list of current directors is
maintained on the Lamprell plc website www.lamprell.com.
On behalf of the Board
James Moffat
Chief Executive Officer
Antony Wright
Chief Financial Officer
21 September 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR AKDDKFBKDDCB
(END) Dow Jones Newswires
September 22, 2016 02:01 ET (06:01 GMT)
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