TIDMLAM
RNS Number : 7724A
Lamprell plc
01 October 2020
1 October 2020
LAMPRELL PLC
("Lamprell" and with its subsidiaries the "Group")
INTERIM FINANCIAL RESULTS
FOR SIX MONTHS TO 30 JUNE 2020
Improved financial performance with positive EBITDA
Operations continue with COVID-19 impact being well managed
Significant progress with strategic objectives
Financial highlights
-- 34% revenue growth to USD 142.5 million (1H 2019: USD 106.4 million)
-- EBITDA positive at USD 0.3 million despite headwinds of
COVID-19 and low oil prices (1H 2019: negative EBITDA of USD 29.6
million)
-- Net loss of USD 27.1 million (1H 2019: net losses of USD 51.9
million); net losses of USD 19.6 million excluding exceptional
non-cash impairments and restructuring costs
-- Debt-free as of 30 June 2020; pursuing future project funding arrangements
-- Net cash increased to USD 71.4 million from USD 42.5 million
at 31 December 2019, with restricted cash of USD 36.1 million as at
30 June 2020; net cash as at 30 September USD 125 million, with
restricted cash of USD 47 million
-- Backlog increased to USD 580 million at period end (31 December 2019: USD 470 million)
Operational highlights
-- Swift and decisive action taken to respond to the COVID-19
pandemic, operations continue with moderate impact on business
being effectively managed
-- Exemplary safety performance: 12-month rolling total recordable incident rate (TRIR) of 0.16
-- Moray East project operationally complete in September and fully handed over to client
-- IMI rigs progressing through fabrication phase in line with expectations
-- Two new project awards since the beginning of the year:
o Seagreen windfarm in the UK North Sea
o Mahani gas field in Sharjah
-- Steady stream of new awards from rig refurbishment segment continues
Strategic update
-- Addressable market in the renewables industry continues to
grow, with new geographies (Asia and US) gaining traction
-- Saudi Aramco's Long Term Agreement (LTA) bidding continues
-- Progressing digital strategy with successful employment of
digital twin technologies and robotic welding
-- Discussions to defer 2020 IMI equity contribution are continuing
Current trading and outlook
-- 2H 2020 secured backlog of USD 182.5 million, resulting in
full year 2020 secured revenue of USD 325 million; 2021 and 2022
secured backlog of around USD 400 million
-- High quality bid pipeline of USD 5.5 billion with
renewables-driven growth anticipated from 2021, currently
renewables pipeline of USD 1.3 billion
-- Actively engaged in multiple bidding processes in our
addressable markets, although predictability of timing of awards
impacted by COVID-19
-- 2020 overheads estimated to be circa USD 80 million (2019:
US$104 million), with 2021 overheads expected to be maintained at a
similar level
1H 2020 FINANCIAL RESULTS 1H 2020 1H 2019
(USD million, unless otherwise stated)
Revenue 142.5 106.4
Gross margin 4.0% (12.2%)
EBITDA 0.3 (29.6)
(Loss) from continuing operations after
income tax (27.1) (51.9)
Reported diluted (loss) per share (US
cents) (7.93) (15.20)
Net cash as at 30 June 71.4 50.2
For the definitions of EBITDA, overheads and net cash, please
refer to the 'Alternative performance measures' in the notes to
interim financial information.
Christopher McDonald, Chief Executive Officer said:
"2020 has been a challenging year for the global energy industry
and in this context it is pleasing to have returned to positive
EBITDA for the period. Like never before, we were able to
demonstrate our operational flexibility as we were forced to adapt
to new working arrangements without compromising on safety, quality
and timely delivery for our clients. Our strong operational
delivery and focused approach to overhead reduction has enabled us
to deliver a much improved financial performance whilst
demonstrating further progress in delivering our strategy. The
strategy we set out for the business three years ago has enabled us
to grow our backlog and revenue in challenging environment and we
continue to evolve with developments in the energy industry. Over
this three year period, Lamprell has become established as one of
the leading suppliers of foundations for offshore wind and we
expect to build on our strong position in renewables. The Group is
focused on reinforcing our position and capitalising on growth
fundamentals in our addressable markets and rapidly advancing
digital initiatives for our client base."
The management team will hold a presentation on 1 October 2020
at 9.00 am (UK time). Due to the ongoing global health crisis and
the wide-spread travel restrictions and prevention measures in
place, we will be holding the presentation in Dubai and it can be
accessed via a live webcast on our Company's website, at
www.lamprell.com or on the following link:
Webcast link:
https://webcasting.brrmedia.co.uk/broadcast/5f64c07483507b593b46bc85
Tollfree/freephone 0800 358 6377, UK Local +44 (0)330 336 9125 -
Confirmation code 1058068
- Ends -
Enquiries:
Lamprell plc
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
renewable energy and oil & gas industries. As well as its
exposure to the renewable energy industry, the Group has
established leading market positions in the fabrication of
shallow-water drilling jackup rigs, liftboats, land rigs, and rig
refurbishment projects. It also has an international reputation for
building complex offshore and onshore process modules and fixed
platforms.
Lamprell employs more than 4,000 people across multiple
facilities, with its primary facilities located in Hamriyah, in the
UAE. Combined, the Group's facilities cover approximately 800,000m2
with over 1.5 km of quayside. In addition, the Group has facilities
in Saudi Arabia (through a joint venture agreement).
Lamprell is listed on the London Stock Exchange (symbol
"LAM").
Chief Executive Officer's Review
We started this year with a formal contract award for two new
build jackup rigs subcontracted through our IMI joint venture in
Saudi Arabia and, despite the devastating effects of COVID-19 on
public health and global industries over the past eight months, we
are pleased to report an encouraging set of results for the first
half of 2020. We took swift action to restructure and reduce our
overheads early in the year and to address the operational
challenges we anticipated from the pandemic: in both cases we
significantly cut costs to ensure the Group continues to deliver on
its strategic objectives. As a result, we improved our financial
position, progressed our projects without major disruption or undue
risk to the health and wellbeing of our employees and were
successful in securing our third major contract award in the
renewables industry. We remain focused on improving the Company's
financial position and our commitment to lowering our cost base on
a permanent basis is central to this objective.
Operational performance in 1H
I am pleased to report that, despite the significant challenges
faced by most industries globally as a result of the COVID-19
pandemic, we made strong progress with our major projects and our
wider business. We started the year with a restructuring programme
aimed at streamlining our operations and achieving significant
overhead reductions. This resulted in us mothballing the Jebel Ali
yard and we are now also exiting the Sharjah yard as the final
works on the Moray East project have drawn to a close. The
restructuring will result in an overhead reduction of USD 24
million for the full year 2020 and will give us an opportunity to
develop a more efficient yard set-up.
Midway through 1H 2020, we looked to address the effects of
COVID-19 early on during the pandemic, introducing a temporary 25%
reduction in fees and salaries for the Directors, senior management
and all professional staff. As with all of our peers, the lockdown
and self-distancing measures affected the efficiency of our
operations but nonetheless we were able to progress existing
projects safely, to schedule, and successfully commence works on
those projects contracted since the beginning of the year. Further
as a result of COVID-19 and as reported previously, the Board
decided to delay the award of long-term incentives awards until
such time as the market had stabilised. The Board continues to
actively monitor the state of the market and the appropriate time
for making such awards.
The Moray East project is now operationally complete with the
final loadout of jackets having left our quayside last month. I
would like to thank the team for their exceptional efforts in
delivering this critical project, further demonstrating our ability
to deliver large scale renewables fabrication projects as planned
despite the tumultuous last six months and enhancing our reputation
and market-leading position in this fast-growing sector.
While completing final fabrication works on Moray East, we were
also contracted to fabricate 30 jackets for the Seagreen wind farm,
our third project in the offshore windfarm sector. As we had
undertaken some pre-engineering works on the project prior to
contract signing, this allowed us to promptly progress with steel
orders and we have now cut first steel on the project. Over the
last few years we have fabricated over 100 foundations for UK's
leading offshore wind farms, which has enabled us to improve our
execution and gain a strong foothold in the market for delivery of
jackets for offshore windfarms.
The two new build jackup rigs subcontracted to Lamprell through
the IMI joint venture in Saudi Arabia are also progressing as
planned. Since the period end, we have cut steel for both rigs and
commenced cantilever fabrication on rig one and started laying out
the hull.
We were also pleased to be selected as an engineering,
procurement, installation and commissioning (EPIC) partner for the
strategically significant Mahani gas and condensate field in
Sharjah, United Arab Emirates. The project includes hook-up and
installation at the well, existing systems upgrade, associated
tie-ins and a new 25 km export pipeline and is scheduled for
completion in early 2021.
The refurbishment segment continues to deliver good results, and
we have seen a steady flow of new work from our clients, although
rig deployment has slowed down with completed projects going
through additional scopes while they await commissioning.
Encouragingly, we received awards for several rig refurbishment
projects from ADNOC, continuing our long-standing relationship with
a major regional client.
Our focus on digital initiatives has proven to be timely as the
world has promptly embraced remote working arrangements during
these last 6 months, highlighting the need for rapid development in
the field. During the reporting period we signed an exclusive deal
with Akselos, a leading developer of simulation technologies, to
market digital twins, which we have been successfully employing to
support our clients. The deal will enable us to offer our clients
engineering simulations for the optimised design, delivery and
maintenance of wind farm foundations, jackup rigs, FPSO modules and
a number of other offshore assets. Our digital strategy has become
a larger part of our planning and we are excited about the major
opportunities open to us.
To this end, we are progressing innovative digital solutions in
our yards that drive improvements across our business. These
include successful deployment of adaptive robotic welding,
installation of facial recognition technology within our yards,
digitising our proprietary QA/QC quality management system and
implementing smart non-destructive testing techniques.
We intend to monetise our unique experience and know-how to
develop new revenue streams. To this end, we partnered with
Injazat, the region's leading digital developer backed by Mubadala
Investment Company, to progress a portfolio of digital ventures
including asset integrity and various initiatives to enhance
fabrication efficiencies in our core markets, with limited
investment at this stage. We are piloting these initiatives already
in our yards and have already started to discuss them with a number
of clients.
Strategic Initiatives
The global pandemic crisis has reinforced our commitment to the
strategy we set out three years ago. Since the beginning of the
year and amidst a global economic crisis, we have secured contracts
with a total value of circa USD 575 million. These include new
build jackup rigs destined for operation in Saudi Arabia, the
above-mentioned EPIC project with the Sharjah National Oil Company
and the major renewables contract for the Seagreen offshore wind
farm in Scotland. All three projects are well-aligned with our
strategic objectives.
Our focus and investment in the Middle East, a region with the
lowest hydrocarbon lifting costs across the oil industry, continues
to deliver robust revenue-generating opportunities. For three
years, we have seen a steady flow of offshore wind farm fabrication
projects through our yards, each adding to our expertise and
building on our reputation in this market with rapid global growth.
Our timely focus on digital solutions will also ensure we are
capable of not only addressing our clients' emerging requirements
and delivering cost effective innovative solutions for the global
energy industry, but also open up new revenue streams to the Group.
Our strategy fits the evolving energy landscape and we are well
positioned both geographically and through our skillset and
expertise to benefit from continued growth in global renewables and
regional oil and gas opportunities.
Market Overview and Bid Pipeline
The bid pipeline at 30 June 2020 reduced to USD 5.5 billion from
USD 6.2 billion at 31 December 2019. Although the COVID-19 pandemic
has slowed down new project commissioning globally, our pipeline of
prospective projects remains strong and we continue to apply
stringent selection criteria to our bid/no bid decisions.
Approximately USD 3.7 billion of the pipeline originates from oil
and gas projects in the Middle East, with the LTA component
remaining strong.
Our renewables bid pipeline at 30 June 2020 was USD 1.3 billion.
It has almost doubled over the last three years and includes a
number of active bids in Europe and Asia. This year, we are also
beginning to see strong interest from the US and expect these
projects to progress to a bidding stage in early 2021. The scale of
the US offshore renewables projects is significantly larger than
our current and previous experience in Europe and our track record,
location, cost and flexibility give a similar advantage as seen
with previous bids. We therefore expect our renewables pipeline to
grow in the medium term.
Outlook
Over the past few months, we have seen gradual easing of
operating and social distancing restrictions although uncertainty
and caution prevail across our own business and our supply chain.
Monitoring the health and safety of our employees and managing
costs and liquidity will remain our top priority. We have a strong
pipeline of potential projects with a number of active discussions
in both oil & gas and renewables end markets, but we expect
major project awards to push out until 2021. Our backlog at the end
of June 2020 increased to USD 580 million from USD 470 million at
31 December 2019, with secured revenue for 2H 2020 of USD 182.5
million. Approximately USD 400 million is scheduled to be delivered
in 2021 and 2022, providing the Group with a strong base for
growth.
Christopher McDonald
Chief Executive Officer
Financial Review
In 1H 2020 Lamprell demonstrated exceptional fiscal control and
discipline, continuing to navigate successfully the challenges of
the COVID-19 pandemic. With year-on-year growth in revenue and
significant overhead reductions, our EBITDA for the period was
positive. The Group is debt-free with net cash of USD 71.4 million
at the period-end, of which USD 36.1 million was restricted.
Results from operations
Total revenue for the six-month period ended 30 June 2020 was
USD 142.5 million (1H 2019: USD 106.4 million), of which 60% was
generated by the Moray East project, 22% by newbuild and
refurbishment works in the oil and gas business stream and 17% by
the services segment. With the Seagreen project commencing in 2H
2020 and the IMI rigs moving into fabrication phase, we expect full
year revenue to be weighted towards the second half.
Margin performance
Notwithstanding the significant challenges created by COVID-19,
gross profit for the reporting period was USD 5.7 million (1H 2019:
gross loss of USD 13.0 million), with the improvement over the
previous period being primarily driven by Moray East as the project
moved to final stages of fabrication and client handover. Gross
margin was also positive at 4.0%, a significant improvement on the
previous year.
As a result of the operational restructuring and significant
overhead reduction put in place at the beginning of the year as
well as COVID-19 specific temporary cost-cutting measures, total
overheads (excluding exceptional restructuring costs of USD 3.2
million and non-cash impairments of USD 4.2 million) have reduced
by USD 16 million (1H 2019: USD 51.1 million). General and
administrative expenses (excluding the exceptional items referred
to above) have reduced to USD 15.3 million (1H 2019: USD 29.3
million) with total overheads for the year on track to reducing to
USD 80.0 million, as per our previous guidance.
During 1H 2020, the Company achieved a positive EBITDA from
continuing operations (excluding exceptional items) of USD 0.3
million (1H 2019: USD (29.6 million)) as a result of successful
long and short term overhead reduction initiatives and solid
financial performance from our projects.
Finance costs and financing activities
The Group repaid its outstanding debt on 11 March 2020 and
therefore had no debt by the end of 1H 2020. Net finance cost
(excluding interest expense on leases) therefore reduced to a
neutral position (1H 2019: USD 1.7 million). We are assessing a
number of options for future project funding as a key priority for
the Company and its wider business.
Net loss and loss per share
The Group generated a net loss of USD 27.1 million (1H 2019: net
loss of USD 51.9 million) which equates to a loss per share of
(7.93) US cents (1H 2019: loss per share of (15.20) US cents). The
losses are driven by the continuing low revenue levels, a non-cash
asset impairment of USD 4.2 million based on an interim review of
the business's property, plant and equipment and investments in
associates (see Note 25) and USD 3.2 million of one-off expenses
related to the overhead restructuring programme (see Note 26). Net
loss before impairment and restructuring costs during the reporting
period was USD 19.6 million.
Capital expenditure
As the Group intensified efforts to preserve liquidity, all but
essential capital expenditure has been put on hold. Capital
expenditure in 1H 2020 amounted to USD 3.2 million (1H 2019: USD
9.6 million). We anticipate capital expenditure to be low for the
remainder of the year with incremental only investments in our
yards aimed at improving our efficiency with renewables
projects.
IMI equity contributions
There was no equity contribution to the IMI joint venture during
the reporting period. To date, total contribution to the IMI joint
venture amounts to approximately USD 59.0 million, out of a USD
140.0 million total maximum commitment. The Company's next equity
contribution of USD 25.8 million remains under discussion with the
IMI partners, with ongoing construction activities funded through
the prior equity contributions and IMI debt facility with the SIDF.
The Company's share of the losses for the IMI joint venture in 1H
2020 was USD 6.7 million.
Cash flow and liquidity
The Group's net cash flow from operating activities for the six
months period ending 30 June 2020 reflected a net inflow of USD
33.0 million which was driven by savings from the reduction in cash
overheads, the final settlement payment from the East Anglia One
contract as well as milestone receipts on major projects. Prior to
working capital movements and the payment of employees'
end-of-service benefits, the Group's net cash inflow was USD 0.9
million. Cash, together with bank, term and margin deposits,
increased by USD 8.9 million to USD 71.4 million.
Balance sheet
The Group's net cash increased to USD 71.4 million from USD 42.5
million as at 31 December 2019 aided by stringent cost management,
the final settlement payment from the East Anglia One contract as
well as milestone receipts on major projects. The element of cash
restricted through project guarantees and bonds was USD 36.1
million as at 30 June 2020. Subject to the timing of project
receipts, we anticipate the net cash position at the end of 2020 to
be at similar levels as at 30 June 2020.
The Group's total assets at the period-end were USD 501.0
million (31 December 2019: USD 434.6 million). Inventories on the
balance sheet have reduced to USD 22.0 million following
monetisation of the two Super 116E rig kits on award of the IMI
rigs and we continue to market our proprietary LAM2K land rig which
is held in inventory.
Shareholders' equity at the period-end was USD 186.8 million (31
December 2019: USD 211.4 million).
Borrowings
Following the repayment of the USD 30 million debt facility on
11 March 2020, the Company currently holds no debt.
New debt
The balance sheet retains sufficient headroom to support ongoing
projects and we remain focused on achieving a level of financial
performance that will support an efficient and prudent capital
structure. To this end, we have made progress in securing
additional project-specific funding options to improve working
capital liquidity over the medium term with a small project
facility for the Seagreen project secured. Furthermore, discussions
around alternative financing options are ongoing with various
potential sources of finance notwithstanding the impact of
COVID-19.
Going concern
Consistent with 31 December 2019, the Group's interim financial
statements have been prepared on a going concern basis,
notwithstanding the material uncertainty as further discussed in
Note 2.1. While the Group has made progress against the assumptions
included in the year-end annual report, in reaching the going
concern conclusion for the interim financial information the
Directors have made certain assumptions including securing new
financing for the business in the first quarter of 2021 and new
contract wins in the going concern period. Should these assumptions
not crystallise, plans are in place to implement mitigating
measures to maintain liquidity. Detail on the assumptions and
mitigating measures are provided in further detail in Note 2.1 of
the interim financial statements.
Following consideration of these measures, the Directors are
satisfied that they have appropriate available mitigating actions
in place to maintain the Group's liquidity in the short term, but
highlight that current market circumstances, together with
assumptions in management's forecasts that are outside their
control, represent material uncertainties that may cast significant
doubt on the Group's ability to continue as a going concern.
Dividends
In the context of the current macroeconomic environment and
uncertainty, the Directors do not recommend the payment of an
interim dividend for the period in relation to current financial
year ending 31 December 2020. 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 could
materially threaten the Company's business model, performance,
solvency or liquidity, or prevent it from meeting its strategic
objectives. 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. This
framework is overseen by the Audit & Risk Committee and the
Board as a whole, but is implemented and actioned by the executive
team.
For details of the Group's principal risks and uncertainties,
please refer to the Notes to Financial Statements and the Risk
Report in the Company's 2019 Annual Report (which is available on
our website at www.lamprell.com). Early in 2020, the Audit &
Risk Committee undertook a number of deep dives into key risks to
the Company with the risk owners and subsequently reported back to
the Board on these risks and the Group's risk mitigation
activities, confirming that no significant changes or new risks had
been identified. The Audit & Risk Committee and the Board will
continue to review and monitor the impact of COVID-19 on these
principal risks.
Antony Wright
Chief Financial Officer
Condensed consolidated interim income statement
Notes Six months ended 30 June
2020 2019
USD'000 USD'000
(Unaudited) (Unaudited)
Revenue 5 142,455 106,412
Cost of sales (136,776) (119,399)
-------------------- --------------------
Gross profit / (loss) 5,679 (12,987)
General and administrative expenses* 6 (22,767) (29,798)
Other gains - net 130 1,075
-------------------- --------------------
Operating loss (16,958) (41,710)
Finance costs 24 (2,286) (4,729)
Finance income 295 664
-------------------- --------------------
Finance costs - net (1,991) (4,065)
Share of loss of investments accounted for using the equity
method - net 9 (8,111) (6,104)
-------------------- --------------------
Loss before income tax (27,060) (51,879)
Income tax expense (32) (65)
-------------------- --------------------
Loss for the period (27,092) (51,944)
========= =========
Loss for the period attributable to the equity holders of the
Company (27,092) (51,944)
========= =========
Loss per share attributable to the equity holders of the
Company during the period
Basic 7 (7.93)c (15.20)c
========= =========
Diluted 7 (7.93)c (15.20)c
========= =========
*General and administrative expenses include an impairment
charge of USD 4.2 million (30 June 2019: nil) (Note 25) recognised
in respect of property, plant and equipment, intangible assets and
an investment accounted using equity method and a restructuring
cost of USD 3.2 million (30 June 2019: nil) (Note 26) relating to
staff redundancies and costs of closing down Sharjah.
Condensed consolidated interim statement of other comprehensive
income
Six months ended 30 June
Notes 2020 2019
USD'000 USD'000
(Unaudited) (Unaudited)
Loss for the period (27,092) (51,944)
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Currency translation differences 16 2 (17)
-------------- --------------
Other comprehensive income / (loss) for the period 2 (17)
-------------- --------------
Total comprehensive loss for the period (27,090) (51,961)
======= =======
Total comprehensive loss for the period attributable to the equity holders
of the Company (27,090) (51,961)
======= =======
Condensed consolidated interim balance sheet
At 30 June At 31 December
Notes 2020 2019
USD'000 USD'000
(Unaudited) (Audited)
ASSETS
Non-current assets
Property, plant and equipment 8 148,058 160,077
Investment accounted for using
the equity method 9 35,706 44,420
Term and margin deposits 12 445 432
------------------------ ------------------------
Total non-current assets 184,209 204,929
------------------------ ------------------------
Current assets
Inventories 13 22,011 89,758
Trade and other receivables 10 89,454 37,431
Contract assets 11 134,085 40,384
Cash and cash equivalents 12 35,278 26,162
Term and margin deposits 12 35,689 35,922
------------------------ ------------------------
Total current assets 316,517 229,657
------------------------ ------------------------
Total assets 500,726 434,586
------------------------ ------------------------
LIABILITIES
Current liabilities
Borrowings 20 - (20,058)
Trade and other payables 17 (81,719) (93,469)
Contract liabilities 18 (128,115) (3,826)
Lease liabilities (2,177) (1,985)
Current tax liability (158) (177)
Provision for warranty costs 19 (10,300) (11,440)
------------------------ ------------------------
Total current liabilities (222,469) (130,955)
------------------------ ------------------------
Net current assets 94,048 98,702
------------------------ ------------------------
Non-current liabilities
Lease liabilities (54,288) (55,388)
Provision for employees' end-of-service
benefits (37,212) ( 36,863)
------------------------ ------------------------
Total non-current liabilities (91,500) (92,251)
------------------------ ------------------------
Total liabilities (313,969) (223,206)
------------------------ ------------------------
Net assets 186,757 211,380
========== ==========
EQUITY
Share capital 15 30,346 30,346
Share premium 15 315,995 315,995
Other reserves 16 (19,333) (19,335)
Retained losses (140,251) (115,626)
----------------------- -----------------------
Total equity attributable to
the equity holders of the Company 186,757 211,380
========= =========
Condensed consolidated interim statement of changes in
equity
Retained
Share Share Other earnings
Note capital premium reserves / (losses) Total
USD'000 USD'000 USD'000 USD'000 USD'000
At 1 January 2019 30,346 315,995 (19,643) 66,255 392,953
-------------- -------------- -------------- -------------- --------------
Loss for the period - - - (51,944) (51,944)
Other comprehensive income:
Currency translation
differences 16 - - (17) - (17)
-------------- -------------- -------------- -------------- --------------
Total comprehensive loss
for the period ended
30 June 2019 - - (17) (51,944) (51,961)
-------------- -------------- -------------- -------------- --------------
Transactions with owners:
Share-based payments:
- value of services provided - - - 2,440 2,440
( 45
- treasury shares purchased - - - ) ( 45 )
-------------- ----------------- -------------- --------------- -----------------
- - - 2,395 2,395
Total transactions with
owners -------------- ----------------- -------------- ---------------- -----------------
At 30 June 2019 (unaudited) 30,346 315,995 (19,660) 16,706 343,387
-------------- ----------------- -------------- ---------------- -----------------
Loss for the period - - - (131,570) (131,570)
Other comprehensive income:
Re-measurement of post-employment
benefit obligations - - - (3,074) (3,074)
Share of other comprehensive
loss accounted for using ( 215
the equity method ) (215)
Currency translation
differences 16 - - 325 - 325
-------------- ----------------- -------------- ---------------- -----------------
Total comprehensive income
/ (loss) for the period
ended 31 December 2019 - - 325 (134,859) (134,534)
-------------- ----------------- -------------- ---------------- -----------------
Transactions with owners:
Share-based payments:
- value of services provided - - - 2,553 2,553
- treasury shares purchased - - - (26) ( 26 )
-------------- ----------------- -------------- ---------------- -----------------
Total transactions with
owners - - - 2,527 2,527
-------------- ----------------- -------------- ---------------- -----------------
At 31 December 2019
(audited) 30,346 315,995 (19,335) (115,626) 211,380
-------------- -------------- -------------- -------------- --------------
Loss for the period - - - (27,092) (27,092)
Other comprehensive
income:
Currency translation
differences 16 - - 2 - 2
-------------- -------------- -------------- -------------- --------------
Total comprehensive
income / (loss) for
the period ended 30
June 2020 - - 2 (27,092) (27,090)
-------------- -------------- -------------- -------------- --------------
Transactions with owners:
Share-based payments:
* value of services provided - - - 2,467 2,467
-------------- ----------------- -------------- --------------- -----------------
Total transactions with
owners - - - 2,467 2,467
-------------- ----------------- -------------- ---------------- -----------------
(140,
At 30 June 2020 (unaudited) 30,346 315,995 (19,333) 251 ) 186,757
======= ======== ======= ======== ========
Condensed consolidated interim statement of cash flows
Six months ended 30
Notes June
2020 2019
USD'000 USD'000
(Unaudited) (Unaudited)
Operating activities
Cash generated from / (used in) operating
activities 27 32,986 (16,165)
Tax paid (51) (101)
---------------- ----------------
Net cash generated from /(used in) operating
activities 32,935 (16,266)
---------------- ----------------
Investing activities
Purchases of property, plant and equipment 8 (2,962) (8,920)
Proceeds from sale of property, plant
and equipment 260 44
Additions to intangible assets (206) (632)
Dividend received from an associate 9 - 906
Finance income 295 664
Inflows from deposits with original
maturity of more than three months - 10,333
Outflows from deposit with original
maturity of more than three months - (486)
Inflows from margin deposits under lien
(with original maturity more than three
months) 3,715 14,732
Outflows from margin deposits under
lien (with original maturity more than
three months) (4,078) (2,520)
Inflows from margin deposits under lien
(with original maturity less than three
months) 810 1,261
Outflows from margin deposits under
lien (with original maturity less than
three months) (227) (73)
---------------- ----------------
Net cash (used in) / generated from
investing activities (2,393) 15,309
---------------- ----------------
Financing activities
Proceeds from borrowings - 40,000
Repayment of borrowings 20 (20,000) (20,000)
Finance costs (1,078) (4,209)
Repayment of lease liabilities (350) (810)
Treasury shares purchased - (45)
---------------- ----------------
Net cash (used in) / generated from
financing activities (21,428) 14,936
---------------- ----------------
Increase in cash and cash equivalents 9,114 13,979
Cash and cash equivalents at beginning
of the period 12 26,162 38,684
Exchange rate translation 2 (17)
------------------ ------------------
Cash and cash equivalents at end of
the period 12 35,278 52,646
========= =========
1 Legal status and activities
There has been no change in the legal status or to the Company
and its subsidiaries (together referred to as "the Group") or
principal activities of the Company 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 2019 included in these condensed consolidated interim
financial information does not constitute statutory accounts as
defined in the Isle of Man Companies Acts 1931-2004. 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
unqualified but referred to the Company's disclosures in respect of
a material uncertainty relating to going concern.
2 Summary of significant accounting policies
2.1 Basis of preparation
The condensed consolidated interim financial information for the
six months ended 30 June 2020 have been prepared in accordance with
the Disclosure Guidance 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 2019, which have been prepared in accordance with IFRSs
as adopted by the EU.
Going concern
The Group incurred a loss of USD 27.1 million during the six
months ended 30 June 2020 (30 June 2019: USD 51.9 million) and was
in a net cash position of USD 71.4 million at 30 June 2020 (31
December 2019: USD 42.5 million) - see Alternative Performance
Measures (APMs) on page 28. The increase in cash resources is
largely attributable to net cash inflows generated from operating
activities of USD 32.9 million.
Of the net cash position at 30 June 2020, USD 36.1 million of
the balance was restricted. The level of net unrestricted cash at
30 June 2020 was therefore USD 35.3 million (31 December 2019: USD
6.1 million).
The consolidated financial statements for the year ended 31
December 2019 contained a material uncertainty statement relating
to going concern. In performing their assessment at 30 June 2020,
the Directors have considered the forecast cashflows for the 15
months to December 2021 and reviewed the progress against the key
assumptions for which an update is provided below:
- Completion and signing of a new financing agreement in the
fourth quarter of the year: we have secured a small project
facility for the Seagreen project and are making progress in
securing additional project-specific funding options to improve
working capital liquidity over the medium term. Due to the extended
effects of the pandemic, the Directors now assume the new financing
will be completed in the first quarter of 2021.
- Conversion of a portion of the bid pipeline to contract awards
in line with our strategy: This includes opportunities from oil and
gas and renewables markets. We have thus far made progress on our
strategy as noted by the award of Seagreen in June 2020 and we
continue to bid on selective quality projects in these markets
which match our capabilities.
- Subsequent receipt of a portion of restricted cash relating to
the EA1 project: workstreams are ongoing in accordance with the
settlement agreement and we expect this to be released during
second half of the year.
- Execution of existing major projects in accordance with the
milestones in the contract and payment receipts in accordance with
the contract: despite the wide-ranging effects of COVID-19, all our
on-going projects remain on track and no delays in meeting
milestones or payment receipts have been encountered and/or are
expected at the time of approving the condensed consolidated
interim financial information.
- No further cash investment in IMI in the period: negotiations
are ongoing with the other IMI shareholders to defer our investment
that was due in Q2 2020 to Q3 2021.
- Capex, staff and overhead reduction: we remain on track to
deliver a USD 24 million reduction in overheads as a result of our
operational restructuring announced earlier this year, with
approximately a USD 20 million reduction in cash overheads.
- Ongoing revenues from contracting services and rig
refurbishment in line with those achieved in recent period: these
business units continue to deliver good results, and we have seen a
steady flow of work from our clients. The business unit has also
benefited from the slow rig deployment with completed projects
going through additional scopes as they await commissioning.
Notwithstanding the measures implemented by the Group to prevent
and/or detect the virus, the conditions and material uncertainty
due to COVID-19 and the lower oil and gas prices noted in Note 2.1
of the consolidated financial statements for the year ended 31
December 2019 remain present. At the date of approval of the
condensed consolidated interim financial information, our yards
continue to operate though these have been moderately affected by
lockdowns implemented during the period and social distancing
measures in the UAE.
The Directors believe that the timing and realisation of these
assumptions remain reasonable as noted with the progress achieved
to date and reflect their assessment of the most likely outcome.
However, the timing and realisation of these matters are not wholly
within management's control and so the Directors have also
considered downside sensitivities to the key assumptions which
include no new significant contract wins in the going concern
period and the inability of the Group to secure new financing. The
Directors have concluded that, in aggregate, such matters beyond
management's control represent a material uncertainty that may cast
significant doubt on the entity's ability to continue as a going
concern.
Significant disruption to the timing or realisation of the
anticipated cash flows could result in the business being unable to
realise its assets and discharge its liabilities in the normal
course of business.
In view of this, the Directors have considered the realistic
availability and likely effectiveness of mitigating actions that
they could take to avoid or reduce the impact or likelihood of a
significant deterioration in the cash flows. These include:
-- potential alternative financing options with various possible sources of funding;
-- pre-emptive stock issue in accordance with the special
resolution passed at the annual general meeting of
shareholders;
-- self-help measures including extended 25% reductions in fees,
salaries and allowances for the Board, senior management and
professional staff, use of a deferred salary savings scheme and
where operationally feasible, placing staff on reduced working
hours or unpaid leave;
-- reduced levels of capital expenditure; and
-- sale of non-core businesses or assets.
Following consideration of these actions, the Directors are
satisfied they have appropriate available mitigating actions in
place to maintain the Group's liquidity in the short term. However,
the Directors highlight that current market circumstances
influenced by the COVID-19 pandemic and the global oil price crash,
together with assumptions in management's forecasts which are
outside their control, represent material uncertainties that may
cast significant doubt on the entity's ability to continue as a
going concern.
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 2019 except for the adoption of new standards and
interpretations effective as of 1 January 2020. 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 2019 are available on the
Company's website ( www.lamprell.com ).
(a) New and amended standards adopted by the Group
-- IAS 1 and IAS 8 (Amendments) Definition of Material .
-- IFRS 3 (Amendments) Definition of a Business .
-- IFRS 7, IFRS 9 and IAS 39 (Amendments) Interest Rate Benchmark Reform .
-- Amendments to References to the Conceptual Framework in IFRS Standards.
The adoption of these amendments have not had any impact on the
Group.
3 Critical accounting judgements and key sources of estimation uncertainty
The preparation of condensed consolidated interim financial
information 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 accounting policies
Contract claims
A claim is an amount that the Group seeks to collect from the
customer or another party as reimbursements for costs not included
in the contract price. A claim may arise from, for example,
customer caused delays, prolongation cost, cost of acceleration of
project, program errors in specifications or design, and disputed
variations in contract work. The measurement of the amounts of
revenue arising from claims is subject to a high level of
uncertainty and often depends on the outcome of negotiations.
Therefore, claims are only included in contract revenue when the
amount has been accepted by the customer or the customer's
representative, there is a clear contractual entitlement, and / or
negotiations have reached a stage that it is highly probable that a
significant reversal of revenue will not occur.
As at 30 June 2020, the balance of due from customers on
construction contracts includes an amount of unapproved contract
claims.
3.2 Key sources of estimation uncertainty
Revenue and margin recognition
The Group uses the cost to cost (input method) to account for
its contract revenue. Use of the input 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 0.3 million (H1 2019: USD
7.8 million) if the total costs to completion are decreased by 10%
and a decrease in liabilities by USD 1.7 million (H1 2019: USD 1.4
million) if the total costs to completion are increased by 10%.
Impairment of non-financial assets
At the end of the reporting period, where indicators exist,
management performs an impairment test which requires to estimate
the recoverable amount of its assets which is initially based on
its value in use. When necessary, fair value less costs of disposal
("FVLCD") is estimated. Management performs the review at the cash
generating unit ("CGU") relating to an operating segment's assets
located in a particular geography - refer Note 25. At 30 June 2020
impairment indicators existed that predominantly arose from the
ongoing COVID-19 pandemic and sharp fall in oil prices.
Based on this review, an impairment loss of USD 3.4 million
(2019: nil) attributable to operating equipment and intangible
assets and USD 0.8 million relating to an investment accounted
using the equity method has been recorded during the period (Note
25) .
The recoverable amount has been determined based on FVLCD. In
determining FVLCD, management has used an independent valuer
sighting that their report contained a general industry-wide
material valuation uncertainty due to the effects of COVID-19. As
confirmed by the valuer, this is a general clause in line with
market practice, not specific to the Group and is required until
such a time that the pandemic is contained.
If the FVLCD were to increase by 5% there would be a decrease in
the impairment by USD 1.4 million and if the fair values were to
decrease by 5% there would be an increase in the impairment by USD
1.4 million.
4 Segment information
The Group is organised into business units, which are the
Group's operating segments and are reported to the Executive
Directors, the chief operating decision maker. These operating
segments are aggregated into three reportable segments - 'Rigs' and
'Engineering, Procurement, Construction & Installation
[EPC(I)]' and 'Contracting Services' based on strategic objectives,
similar nature of the products and services, type of customer and
economic characteristics.
The Rigs segment contains business from New Build Jack Up rigs,
land rigs and refurbishment. The EPCI segment contains business
from foundations, process modules, offshore platforms, pressure
vessels and engineering and construction (excluding site works).
The Contracting Services segment comprises Site works, Operations
and Maintenance, manpower supply and safety services.
Rigs EPC(I) Contracting Total
Services
USD'000 USD'000 USD'000 USD'000
Six months ended 30 June
2020
Revenue from external
customers 31,918 85,765 24,772 142,455
========= ========= ========= =========
Gross operating profit 5,331 9,342 8,707 23,380
========= ========= ========= =========
Six months ended 30 June
2019
Revenue from external
customers 13,171 61,919 31,322 106,412
========= ========= ========= =========
Gross operating profit/(loss) 1,697 (3,959) 15,463 13,201
========= ========= ========= =========
Sales between segments are carried out on agreed terms. The
revenue from external parties reported to the Executive Directors
is measured in a manner consistent with that in the consolidated
income statement.
The Executive Directors assesses the performance of the
operating segments based on a measure of gross profit. The labour,
project management and equipment 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 Group uses standard costing method for recording labor,
project management and equipment cost on project. Standard cost is
based on an estimated or predetermined cost rates for performing an
operation under normal circumstances. Standard costs are developed
from historical data analysis adjusted with expected changes in the
future circumstances. The difference between total cost charged to
the projects at standard rate and the actual cost incurred are
reported as under or over absorption.
The reconciliation of the gross operating profit is provided as
follows:
Six months ended 30
June
2020 2019
USD'000 USD'000
Gross operating profit for Rigs segment
as reported
to the Executive Directors 5,331 1,697
Gross operating profit/(loss) for the EPC(I)
segments as
reported to the Executive Directors 9,342 (3,959)
Gross operating profit for the Contracting
services segments as reported to the Executive
Directors 8,707 15,463
-------------- --------------
Gross operating profit before absorptions 23,380 13,201
-------------- --------------
Over / (under) absorbed employee and equipment
costs 210 (6,646)
Provision for slow moving and obsolete inventories (198) (550)
Project related bank guarantee charges shown
as part of operating profit (367) (421)
-------------- --------------
Gross operating profit 23,025 5,584
------------------ -------------------
Unallocated:
Operational overheads (8,888) (9,849)
Repairs and maintenance (1,845) (1,465)
Yard rent and depreciation (3,619) (5,420)
Others (3,361) (2,258)
Add back:
Project related bank guarantee charges shown
as part of finance costs 367 421
----------------- -----------------
Gross profit/(loss) 5,679 (12,987)
----------------- -----------------
General and administrative expenses - excluding
impairment of non-financial assets and restructuring
costs (Note 6) (15,304) (29,798)
Other gains - net 130 1,075
Finance costs (2,286) (4,729)
Finance income 295 664
Share of loss of investment accounted for
using the equity method (Note 9) (8,111) (6,104)
Impairment of non-financial assets (Note
25) (4,239) -
Restructuring costs (Note 26) (3,224) -
------------------- -------------------
Loss before income tax (27,060) (51,879)
========== ==========
The breakdown of revenue from all services is as disclosed in
note 5.
Certain customers individually accounted for greater than 10% of
the Group's revenue and are shown in the table below:
Six months ended 30 June
2020 2019
USD'000 USD'000
External customer A 84,725 35,190
External customer B 15,140 21,699
External customer C 14,539 17,433
________ ________
114,404 74,322
========= ==========
The revenue from these customers is attributable to the EPC(I),
contracting services and Rigs segment.
The above customers in 2020 are not necessarily the same
customers as in 2019.
5 Disaggregation of revenue
Six months ended 30 June
Six months ended 30 June 2020 2019
Contracting Contracting
Rigs EPC(I) Services Total Rigs EPC(I) Services Total
Strategic
markets USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
- Renewables - 85,765 - 85,765 - 56,889 - 56,889
- Oil and
gas 31,918 - 24,772 56,690 13,171 5,030 31,322 49,523
31,918 85,765 24,772 142,455 13,171 61,919 31,322 106,412
============ ============ =================== ======== ============ ============ =================== =========
Major value streams
Contracting Contracting
Rigs EPC(I) Services Total Rigs EPC(I) Services Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
New build
jackups,
refurbishment
and land
rigs 31,918 - - 31,918 13,171 - - 13,171
Platforms - - - - 5,030 - 5,030
Foundations - 85,765 - 85,765 - 56,889 - 56,889
Operations
and
maintenance,
site work
and safety
services - - 24,772 24,772 - - 31,322 31,322
31,918 85,765 24,772 142,455 13,171 61,919 31,322 106,412
============ ============ =================== ======== ============ ============ =================== =========
Timing of revenue recognition
Contracting Contracting
Rigs EPC(I) Services Total Rigs EPC(I) Services Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Recognised
over time 31,918 85,765 24,772 142,455 13,171 61,919 31,322 106,412
========= ======== ============ ======== ======== ======== ============ =========
There was no revenue recognised at a point in time during the
six months period ended 30 June 2020 and 30 June 2019.
Performance Obligations (unsatisfied)
The transaction prices allocated to the remaining performance
obligations (unsatisfied or partially unsatisfied), to be
recognised over time, as at 30 June 2020 are, as follows:
Contracting Contracting
Rigs EPC(I) Services Total Rigs EPC(I) Services Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Within 175,
one year 223,062 174,002 25,218 422,282 34,897 593 41,595 252,085
More than
one year 123,138 32,080 - 155,218 173,927 14,996 - 188,923
======== ======== ============ ======== ======== ======== ============ ========
346,200 206,082 25,218 577,500 208,824 190,589 41,595 441,008
======== ======== ============ ======== ======== ======== ============ ========
6 General and administrative expenses
Six months ended 30 June
2020 2019
USD'000 USD'000
Staff costs 9,806 19,866
Impairment of non-financial assets (Note 4,239 -
25)
Restructuring costs (Note 26) 3,224 -
Legal, professional and consultancy fees 1,555 2,443
Depreciation 1,030 1,190
IT support and maintenance 811 722
Utilities and communication 556 704
Office rent and maintenance 363 969
Non-executive director fees 283 388
Selling and distribution expenses 255 531
Bank charges 55 54
Amortisation of intangible assets 9 1,937
Provision for impairment of trade receivables 4 -
- net
Others 577 994
---------------- ----------------
22,767 29,798
======== ========
General and administrative expenses excluding the impairment of
non-financial assets and restructuring costs amount to USD 15.3
million. (30 June 2019: USD 29.8 million).
7 Earnings per share
The calculation of the basic and diluted loss per share is based
on the following data:
Six months ended 30 June
2020 2019
USD'000 USD'000
The calculations of loss per share are
based on the following loss and numbers
of shares:
Loss for the period (27,092) (51,944)
------------------------- -------------------------
Weighted average number of shares for
basic loss per share 341,710,302 341,710,302
Adjustments for:
* Assumed vesting of performance share plan - -
* Assumed vesting of retention share plan - -
------------------------- -------------------------
Weighted average number of shares for
diluted loss per share 341,710,302 341,710,302
------------------------- -------------------------
Loss per share:
Basic (7.93)c (15.20)c
=========== ===========
Diluted (7.93)c ( 15.20 )c
=========== ===========
8 Property, plant and equipment
USD'000
Net book amount at 1 January
2019 159,462
Adjustment on transition to
IFRS 16 57,477
Additions 9,322
Depreciation (11,839)
-------------------------------------------------------
Net book amount at 30 June
2019 214,422
Additions 10,896
Remeasurements (1,120)
Impairment (52,234)
Depreciation (11,887)
-------------------------------------------------------------------------------------
Net book amount at 31
December 2019 160,077
Additions 2,962
Remeasurements (1,824)
Disposal (81)
Depreciation (9,826)
Impairment (Note 25) (3,250)
-------------------------------------------------------
Net book amount at 30 June
2020 148,058
===========
Depreciation expense of USD 8.8 million (30 June 2019: USD 10.6
million) has been charged to cost of sales and USD 1.0 million (30
June 2019: USD 1.2 million) to general and administrative expenses.
Depreciation charge on right-of-use assets for period ended 30 June
2020 is USD 1.9 million (30 June 2019: USD 2.4 million).
9 Investments accounted for using the equity method
At 30 June At 31 December
2020 2019
USD'000 USD'000
At 1 January 44,420 53,321
Share of loss of investments accounted
for using the
equity method - net (8,111) (7,934)
Impairment (Note 25) (792) -
Excess loss reclassified to other liabilities
(LSAL) 189 154
Share of loss of other comprehensive loss
accounted for using the equity method -
net - (215)
Dividend received during the period - (906)
_ ------------- _ -------------
35,706 44,420
========= ========
Breakdown of the investment carrying amount
is as follows:
International Maritime Industries ('IMI') 35,706 42,407
Maritime Industrial Services Arabia Co.
Ltd. ('MISA')** - 2,013
Lamprell Saudi Arabia LLC ('LSA')* - -
_ ---------------- _ ----------------
35,706 44,420
========= =========
* Investment has been accounted to nil as share of losses exceed
investment value.
** Investment has been impaired to nil as a result of impairment
review at reporting date- refer Note 25.
10 Trade and other receivables
At 30 June At 31 December
2020 2019
USD'000 USD'000
Trade receivables 72,438 22,528
Other receivables and prepayments 14,796 14,268
Advances to suppliers 672 131
Receivable from related parties 5,021 3,973
--------------- ---------------
92,927 40,900
Less: Provision for impairment losses (3,473) (3,469)
--------------- ---------------
89,454 37,431
=========
The Group considers that the carrying amount of trade
receivables approximates to their fair value.
11 Contract Assets
At 30 June At 31 December
2020 2019
USD'000 USD'000
Contract work in progress 77,879 14,066
Amounts due from customers on contracts 56,206 26,318
--------------- ---------------
134,085 40,384
======= =======
The increase in contract assets is mainly due to the transfer of
the elevating kits from inventory into contract work in progress on
award of the IMI rigs (see Note 13).
12 Cash and bank balances
At 30 June At 31 December
2020 2019
USD'000 USD'000
(a) Cash and cash equivalents
Cash at bank and on hand 35,278 26,162
======= ========
(b) Term and margin deposits
Margin/short-term deposits under lien (with
original maturity less than three months) 1,960 2,543
Margin deposits - under lien (with original
maturity more than three months) 34,174 33,811
---------------- ----------------
Term and margin deposits 36,134 36,354
======= ========
Split as follows:
Non-current 445 432
Current 35,689 35,922
---------------- ----------------
Term and margin deposits 36,134 36,354
======= =======
13 Inventories
At 30 June At 31 December
2020 2019
USD'000 USD'000
Raw materials, consumables and finished
goods 24,722 22,741
Inventory relating to elevating kits - 69,605
Less: Provision for slow moving and obsolete
inventories (2,711) (2,588)
----------------- ----------------
22,011 89,758
======= ========
Inventories have reduced to USD 22.0 million following
monetisation of the elevating kits USD 69.6 million on award of the
IMI rigs. The cost of inventories recognised as an expense amounts
to USD 7.8 million (30 June 2019: USD 4.1 million) and this
includes nil (30 June 2019: USD 2.5 million) in respect of
write-down of inventory to net realisable value.
14 Related party 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
2020 2019
USD'000 USD'000
Key management compensation 3,948 4,090
====== ======
Revenue from associates 10,534 784
====== ======
Purchases from associates - 225
====== ======
Re-chargeable expenses to a joint venture 1,018 10,974
====== ======
Sponsorship fees and commissions paid to
legal shareholders of subsidiaries 163 184
====== ======
15 Share capital
There is no movement in issued and fully paid ordinary shares
and share premium for the period ended 30 June 2020 and year ended
31 December 2019.
During 2020, Employee Benefit Trust ('EBT') acquired no shares
(31 December 2019: 101,783 shares) of the Company. The total amount
paid to acquire the shares was nil (31 December 2019: USD 71,023)
and has been deducted from the consolidated retained earnings.
During 2020, no shares (31 December 2019: 101,783 shares) were
issued to employees on vesting of the performance shares and 16,268
shares (31 December 2019: 16,268 shares) were held as treasury
shares at 30 June 2020.
16 Other reserves
Legal Merger Translation
reserve reserve reserve Total
USD'000 USD'000 USD'000 USD'000
At 1 January 2019 98 (18,572) (1,169) (19,643)
Currency translation differences - - (17) (17)
------------- ----------------- ------------- ----------------
At 30 June 2019 98 (18,572) (1,186) (19,660)
Currency translation differences - - 325 325
------------- ----------------- ------------- ----------------
At 31 December 2019 98 (18,572) (861) (19,335)
Currency translation differences - - 2 2
------------- ----------------- ------------- ----------------
At 30 June 2020 98 (18,572) (859) (19,333)
======== =========== ======== ==========
17 Trade and other payables
At 30 June At 31 December
2020 2019
USD'000 USD'000
Trade
payables 47,031 40,127
Accruals
and
other
payables 34,688 52,693
Payables
to a
related
party - 649
---------------------------------------------------- ----------------------------------------------------
81,719 93,469
======= =======
The Group considers that the carrying amount of trade payables
approximates to their fair value.
18 Contract liabilities
At 30 June At 31 December
2020 2019
USD'000 USD'000
Amounts due to customers on contracts 128,115 3,826
======= =======
The increase in amounts due to customers on contracts is mainly
due to receipt of milestone payments on the major projects awarded
in 2020 relating to the Rigs and EPC(I) segment.
19 Provision for warranty costs
USD'000
At 1 January 2019 4,166
Charge during the period 2,391
Released/utilised during the period (872)
------------------
At 30 June 2019 5,685
Charge during the period 6,408
Released/utilised during the period (653)
------------------
At 31 December 2019 11,440
Released/utilised during the period (1,140)
------------------
At 30 June 2020 10,300
=========
20 Borrowings
As at 30 June 2020, the Group has no debt following repayment of
borrowings during the period.
The Group has separate bilateral unfunded facilities of USD
275.9 million (31 December 2019: USD 305.9 million) with commercial
banks. The facilities include letters of guarantees and letters of
credit (see Note 23) and there has been no change in the nature of
security pledged against these facilities as at 30 June 2020.
21 Dividends
There were no dividends declared or paid during the six months
period ended 30 June 2020 or year ended 31 December 2019.
22 Commitments
(a) International Maritime Industries' commitments
In 2017, the Group entered into commitments associated with the
investment in International Maritime Industries. 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 with USD
59.0 million already paid to date. The forecast contributions are
as follows:
At 30 June At 31 December
2020 2019
USD'000 USD'000
Later than one year but not later than
four years 80,966 80,966
====== ======
Negotiations are ongoing with the other IMI shareholders to
defer the Group's investment that was due in Q2 2020 to Q3 2021.
This commitment has been profiled under later than one year based
on the progress of these negotiations.
(b) Other commitments
At 30 June At 31 December
2020 2019
USD'000 USD'000
Capital commitments for restructuring
programme 6,153 -
====== ======
Capital commitments for purchase of
operating
equipment and computer software 91 7,919
====== ======
Capital commitments for construction
of facilities 48 110
====== ======
23 Bank guarantees
At 30 June At 31 December
2020 2019
USD'000 USD'000
Performance/bid bonds 65,473 88,284
Advance payment, labour visa and payment
guarantees 10,669 13,599
--------------- ---------------
76,142 101,883
======= ========
The various bank guarantees, as above, were issued by the
Group's bankers in the ordinary course of business. Certain
guarantees are secured by margins deposits, 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.
24 Finance costs
At 30 June At 30 June
2020 2019
USD'000 USD'000
Interest expense on leases 2,080 2,341
Interest on bank borrowings 129 698
Commitment fees 42 422
Bank guarantee charges 35 472
Others - 796
_ ----------------- _ -----------------
2,286 4,729
======= =======
25 Impairment of non-financial assets
At 30 June At 30 June
2020 2019
Impairment comprise of the following: USD'000 USD'000
Impairment of property, plant and equipment 3,250 -
(Note 8)
Impairment of intangible assets 197 -
Impairment of an investment accounted for 792 -
using equity method (Note 9)
----------------- -----------------
4,239 -
======== ========
The Group determines at the end of the reporting period whether
there are indicators of impairment in the carrying amount of its
property, plant and equipment, intangible assets and other
non-financial assets. Where indicators exist, an impairment test is
undertaken which requires management to estimate the recoverable
amount of its assets which is initially based on its value in use.
When necessary, fair value less costs of disposal - ("FVLCD") is
estimated and the higher of value in use and FVLCD is used as the
recoverable amount.
At 30 June 2020, impairment indicators existed, that
predominantly arose from the ongoing COVID-19 pandemic and low oil
prices which continue to impact NOC budgets and spending. This has
had an impact on our backlog and utilisation of our assets
attributable to the United Arab Emirates cash generating unit
("CGU").
Based on this review, an impairment loss of USD 3.4 million (30
June 2019: nil) has been recorded during the period largely as a
result of operating equipment valuation reductions. The recoverable
amount is based on fair value less costs of disposal except for
intangible assets where value in use has been used given the nature
of the assets.
FVLCD represents the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date net of costs of
disposal e.g. dismantling costs, brokerage and legal fees. The fair
value of the Group's property, plant and equipment at 30 June 2020
has been arrived at based on a valuation carried out at that date
by Cavendish Maxwell, independent valuers not connected with the
Group.
The valuation conforms to international valuation standards and
the key assumptions and techniques remain the same as those used at
year end - refer to Note 41 of the consolidated financial
statements for the year ended 31 December 2019.
In addition to that an impairment of USD 0.8 million has been
recorded towards an investment accounted using equity method based
on the decision to dispose of the investment for a nominal
value.
26 Restructuring costs
During January 2020, the Group undertook a major review of its
current operational footprint against medium term fabrication
requirements and decided to consolidate its operations within one
yard in order to streamline operations and achieve significant
overhead reductions. As such, the Jebel Ali facility has been
mothballed from January 2020 and we are in the process of exiting
the Sharjah Yard as final works on the Moray East project are
completed. These measures have also resulted in headcount
reductions most of which have already been implemented.
The Hamriyah yard, being the largest facility, will continue to
operate and gives us the opportunity to expand our yard capacity if
needed. These actions allow for the Group to gradually grow
fabrication volumes whilst significantly improving efficiency and
reducing its cost base.
The total estimated one-off charge/exceptional item is expected
to be USD 7.5 million of which USD 3.2 million has been incurred in
the six months period ended 30 June 2020. These expenses pertain to
staff redundancies and costs of closing down Sharjah. Capital
commitments related to the restructuring programme amounts to USD
6.2 million (Note 22).
27 Cash flow from operating activities
Notes Six months ended 30
June
2020 2019
USD'000 USD'000
(Unaudited) (Unaudited)
Operating activities
Loss for the period before income
tax (27,060) (51,879)
Adjustments for:
Depreciation 8 9,826 11,839
Amortisation of intangible assets 9 1,937
Impairment of non-financial assets 25 4,239 -
Share of loss from investment accounted
for using equity method 9 8,111 6,104
Share-based payments value of services
provided 2,467 2,440
Gain on disposal of property, plant
and equipment (179) (44)
(Release) / provision for warranty
costs and other liabilities 19 (1,140) 1,519
Provision for slow moving and obsolete
inventories 123 159
Provision / (release) for impairment
losses 4 (761)
Provision for employees' end of service
benefits 2,499 2,185
Finance costs 2,286 4,729
Finance income (295) (664)
------------- -------------
Operating cash flows before payment
of employees'
end of service benefits and changes
in working capital 890 (22,436)
Payment of employees' end of service
benefits (2,150) (1,419)
Changes in working capital:
Inventories before movement in provision* 67,624 1,843
Derivative financial instruments - 152
Trade and other receivables before
movement in provision for impairment
losses (52,027) 28,213
Contract assets (93,701) (8,680)
Trade and other payables (11,939) 2,671
Contract liabilities 124 , 289 (16,509)
------------- -------------
Cash generated from / (used in) operating
activities 32,986 (16,165)
--------------- ---------------
* Movement in inventories includes an amount of USD 69.6 million
for two rig kits.
28 Events after the balance sheet date
Subsequent to the balance sheet date, the Board of Directors
have approved the disposal of the Group's investment in Maritime
Industrial Services Arabia Co. Ltd. ("MISA") for a nominal
value.
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 have 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. EBITDA is defined as the Group profit / (loss) for the year
from continuing operation before depreciation, amortisation,
impairment, exceptional items, net finance expense, taxation, and
share of loss of investments accounted for using the equity
method.
We consider EBITDA to be a useful measure of our operating
performance because it approximates the operating cash flow by
eliminating depreciation and amortisation. EBITDA is not a direct
measure of our liquidity, which is shown by our cash flow
statement, and needs to be considered in the context of our
financial commitments.
Reconciliation from Group loss for the year, the most directly
comparable IFRS measure, to EBITDA is set out below:
Six month ended 30 June:
2020 2019
USD'000 USD'000
--------- ---------
Loss for the period from continuing
operations (27,092) (51,944)
--------- ---------
Depreciation (Note 8) 9,826 11,839
--------- ---------
Amortisation 9 1,937
--------- ---------
Interest on bank borrowings and leases
(Note 24) 2,209 3,039
--------- ---------
Finance income (295) (664)
--------- ---------
Tax 32 65
--------- ---------
Restructuring cost (Note 26) 3,224 -
--------- ---------
Impairment of non-financial assets 4,239 -
(Note 25)
--------- ---------
Share of loss of investment accounted
for using the equity method 8,111 6,104
--------- ---------
EBITDA 263 (29,624)
--------- ---------
EBITDA margin 0.2% (27.8%)
--------- ---------
Net cash
Net cash measures 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 31 December
2020 2019
USD'000 USD'000
------------------------------------
Cash and cash equivalents (Note
12) 35,278 26,162
-------------------------------------
Margin deposits - under lien (with
original maturity less than three
months) (Note 12) 1,960 2,543
-------------------------------------
Margin deposits - under lien (with
original maturity more than three
months) (Note 12) 34,174 33,811
-------------------------------------
Borrowings - (20,058)
--------- ------------
Net cash 71,412 42,458
--------- ------------
Overheads
Overheads are costs required to run our business but which
cannot be directly attributed to any specific project or service. A
reconciliation from unallocated expenses per the segment note in
the consolidated financial statements to reported overheads, is set
out below:
Six months ended 30 June
2020 2019
USD'000 USD'000
---------------------------------------------
General and administrative expenses -
excluding impairment of non-financial
assets and restructuring costs (Note 6) 15,304 29,798
----------------------------------------------
Direct overheads included in cost of sales:
---------------------------------------------
Unallocated operational overheads 8,888 9,849
----------------------------------------------
Yard rent and maintenance 3,619 5,420
Repairs and maintenance 1,845 1,465
Interest expense on leases 2,080 2.341
Other 3,359 2,258
Underlying overheads 35,095 51,131
Restructuring cost (Note 26) 3,224 -
Impairment of non-financial assets (Note 4,239 -
25)
--------- ---------
Overheads 42,558 51,131
--------- ---------
An analysis of overheads is as follows:
2020 2019
Overhead nature: USD'000 USD'000
----------------------
Fixed 13,321 17,293
-----------------------
Semi variable 3,211 2,044
-----------------------
Variable 18,563 31,794
-----------------------
Underlying overheads 35,095 51,131
-------- --------
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 2019. A list of current directors is
maintained on the Lamprell plc website www.lamprell.com
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END
IR KKDBNNBDKQKK
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October 01, 2020 02:00 ET (06:00 GMT)
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