2015 Interim Results

27 August 2015

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

INTERIM FINANCIAL RESULTS

FOR SIX MONTHS TO 30 JUNE 2015

Half year results in-line with expectations

Lower year-on-year due to construction phasing and exceptional performance in 2014

1H 2015 FINANCIAL RESULTS

Financial highlights

· First half results in line with expectations due to continued strong project execution coupled with contribution from efficiency and productivity measures

· Revenues of USD 351.4 million, lower than comparative period in 2014 which was an exceptional result due to phasing of construction activity

· Gross margins of 11.6% in 1H 2015, down from an exceptional 13.6% in 2014 to a more normalized level, with market pressure offset by benefits of cost savings

· Robust cash position maintained, enabling continued investment in business improvement

Operational highlights

· Strong operational performance in core markets: three major projects delivered safely, on time, on budget and with high quality

· New rig contract awarded in April by largest client NDC; further awards from Petrofac for additional modules to be deployed in Abu Dhabi

· As at 30 June 2015, backlog of USD 1.2 billion (31 December 2014: USD 1.2 billion) with bid pipeline maintained at approximately USD 5.2 billion (31 December 2014: USD 5.2 billion)

· Continued world class safety record with a total recordable incident rate of 0.27

· Project Evolution, a programme to deliver material productivity improvements and cost efficiencies, is progressing well with cutting machines, dedicated utilities pipelines and a panel line already installed and operational

Post-period board changes

· Jim Moffat retiring as CEO in June 2016; recruitment process underway

· John Kennedy will be Executive Chairman until 2016 AGM to facilitate the handover process

· Tony Wright appointed as CFO and Board director

· Mel Fitzgerald and Debra Valentine appointed to the Board as Non-executive Directors

· Ellis Armstrong appointed as Senior Independent Director following resignation of Michael Press for personal reasons

Current trading and outlook

· All ongoing projects progressing well; seven new build jackup rigs under construction

· Order book maintained at steady level and now extends out to Q2 2017

· Options outstanding with NDC and Ensco for two jackups each

· Significant revenue coverage, with over 90% covered for 2015 and over 60% covered for 2016; slightly higher than the comparative coverage levels at same time in 2014

· Continued focus on competitiveness to win further projects in our core markets

· As previously announced, revenue for FY2015 expected to be in line with previous guidance with significantly fewer major project completions during the year and a heavy weighting towards 2H 2015 reflecting the phasing of construction cycles

· Full year outturn anticipated to be in line with expectations, with solid performance and savings providing relative protection of margins despite heightened pricing pressure in the sector

· Revenue for FY2016 expected to be broadly flat on FY2015 with more major projects in late stages of construction compared to FY2015

· Drive to achieve further reductions in overheads progressing as planned

· Ongoing process to refine the Group's strategy and ensure it remains appropriate in challenging industry environment

John Kennedy, Executive Chairman for Lamprell, said:

"The global energy markets have experienced a significant shift during the last nine months and this has impacted all contractors operating in the sector. These challenging market conditions are now expected to last longer than originally envisaged by the industry. With a strong balance sheet and cash position and a market-leading operational performance, the Group is well positioned to weather this difficult climate. In addition, the Board is undertaking a thorough review of our strategy to ensure it is robust in the face of industry challenges. We remain confident that Lamprell has a clear path for targeting those clients and markets where we see the best opportunities during the downturn and for developing the business in the longer term."

James Moffat, Chief Executive Officer for Lamprell, said:

"Operationally we have had a steady start to the year following the record performance in 2014 and we have continued to deliver according to plan in a difficult environment. Lamprell has a competitive offering and this was reflected with the further rig order from our largest client, NDC, which demonstrates our client's faith in our ability to deliver a high quality, good value product. We will continue to focus on our strong project execution and delivery, whilst ensuring that efficiency measures result in a competitive advantage in an increasingly challenging market. We remain focused on converting our extensive bid pipeline into backlog."

The management team will hold a presentation for research analysts at 12.30pm 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/140136.

- Ends -

Enquiries:

Notes to editors

Lamprell, based in the United Arab Emirates ("UAE") and with over 35 years' experience, is a leading provider of fabrication, engineering and contracting services to the offshore and onshore oil & gas and renewable energy industries. The Group has established leading market positions in the fabrication of shallow-water drilling jackup rigs, liftboats, land rigs, and rig refurbishment projects, and it also has an international reputation for building complex offshore and onshore process modules and fixed platforms.

Lamprell employs more than 9,000 people across multiple facilities, with its primary facilities located in Hamriyah, Sharjah and Jebel Ali, all of which are in the UAE. In addition, the Group has facilities in Saudi Arabia (through a joint venture agreement). Combined, the Group's facilities cover approximately 899,000 m2 with 2.1 km of quayside.

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

Chief Executive Officer's Review

After Lamprell's impressive operational performance generated exceptional financial results in 2014, the Company was forced to adjust its outlook in early 2015 in light of the challenging market environment due to the sharp oil price decline in the second half of 2014. We have pressed on with implementation of our business improvement measures and focused on maintaining our competitive position by leveraging our client relationships and maintaining the Group's proven track record for safety, quality and delivery. At the halfway point in 2015, we have made good progress towards achieving those goals with continuing reliable project execution and a further rig contract award in the year to date.

Operational strength benefiting from improvements

The Group is in the process of implementing our programme of productivity improvements and costs efficiencies known as Project Evolution. Project Evolution was a key component of the Company's 2014 rights issue and forms a cornerstone of our drive to reduce our costs and hence improve our competitiveness, particularly in the current climate. An integral part of the measures is the investment in automation for parts of our facilities and we have made significant progress in installing the necessary equipment. New fabrication areas, cutting machines and a beam fabrication system have all been installed over the past few months, in order to increase the level of automation and reduce construction times. The new panel line was officially launched in our Hamriyah facility in early July and there are also ongoing works to connect the facility to the ring main, thereby putting an end to our reliance on generating our own electricity and reducing the cost of power to the yard. This project is scheduled to be completed early in 2016.

We delivered three jackup drilling rigs during the first half of the year, all on budget and on time; currently there are seven jackup rigs being built in the Hamriyah facility, almost all of which have been in relatively early stages of construction in 1H 2015. This included steel cutting on the three jackup rigs which are under construction for National Drilling Company (NDC). This provides good visibility on 2H performance but contributes significantly to the imbalance between the 1H and 2H results as the Group ramps up its operations to accommodate this number of rig projects running in tandem. All the projects will benefit, to varying extent, from the Project Evolution measures being implemented in the Hamriyah yard.

The construction of piperack modules for Petrofac, for a landmark project in Abu Dhabi, is progressing well in our Jebel Ali facility. It is a testament to our high quality and reliable project execution that the client has awarded further modules to us this year for this project, which follows our strong performance on the Laggan Tormore project in the North Sea where we were also engaged by Petrofac. Initial modules will be delivered later this year and will then be delivered in shipments over the coming months, with the final shipment expected to be handed over in Q3 2016.

We have also seen steady progress in other core markets during the first half of 2015. The land rig services business unit has completed 10 projects (either for the refurbishment of land rigs, fabrication of component parts of land rigs or the provision of services in support of onshore drilling activities), in the year to date and has worked on three projects for a new client based in Kuwait.

After a strong start this year with the Group working on 10 concurrent projects earlier this year, the rig refurbishment business has seen a slow-down in recent months. We are seeing some clients stacking jackup rigs until market conditions improve and we are assisting various clients with this stacking activity. We currently have six rigs stacked in our facilities in Sharjah and Hamriyah.

The Group is successfully maintaining its world-class safety performance, which has been top priority for the management team over the last two years. Notably, the Abu Dhabi modules project has surpassed 1.5 million man-hours without a day away from work case (DAFWC) and the Jebel Ali facility has now gone for over 2.5 years since its last DAFWC. The safety record on the two new build jackup rigs for Ensco, a key client, has been solid to date, with the Group passing a combined milestone of over 3 million manhours without a DAWFC on these projects.

Corporate activities

Following the announcement on 2 December 2014, the Group completed the disposal of one of its smaller non-core service businesses, Litwin PEL LLC, in April.

In July, the Group launched phase two of its enterprise resources planning system with completion scheduled to take place by the end of September. We have been particularly pleased with the implementation process, which has been progressing as planned and on budget. This achievement has only been possible with the significant input and participation of many personnel throughout the Group.

Post-period Board changes

In August, the Company announced a number of changes to the Board composition. Following Jim Moffat's decision to retire as CEO in June 2016, the search to identify a suitable candidate has started. During the transition period, John Kennedy will be Executive Chairman until the 2016 annual general meeting. In order to facilitate a due handover process, Jim Moffat agreed to remain with Lamprell in a consultancy role for up to a year following his retirement.

Following 10 months in the role of Deputy CFO, Tony Wright was promoted to CFO and has joined the board as an Executive Director.

In line with the Company's commitment to maintain strong corporate governance and ensure a broad range of key skillsets on the Board, Lamprell has appointed Mr Mel Fitzgerald and Ms Debra Valentine as Non-executive Directors. Ellis Armstrong has been appointed Senior Independent Director following the resignation of Michael Press from the Board for personal reasons. The Board is revising the composition of the principal Board committees.

Market overview, order book and bid pipeline

As has been widely noted in the industry, the fall in commodity prices in late 2014 has created challenging market conditions for all contractors operating in the oil and gas industry. Many oil & gas companies have delayed project awards for capital expenditure in some instances; for sanctioned projects, there has been intense competition for a significantly reduced number of opportunities. Despite these challenges, our bidding pipeline remains strong at USD 5.2 billion of projects although it might be anticipated that volatile market conditions may result in delays. We now have a greater focus on regional activity where there continue to be prospects for new orders, particularly in the Middle East where the Group has a strong track record and a competitive advantage with its close proximity to the projects.

Overall intake levels have been relatively stable as compared to revenue levels during 1H 2015 in line with our expectations. As a result, our backlog has remained at USD 1.2 billion at period end and the Group now has a high level of coverage with over 90% of revenue covered for FY2015 and over 60% covered for 2016. In April, we were successful in converting one of the jackup rig options with NDC, the ninth in a series of such rigs, with the remaining two NDC options due to expire in Q3 2015. It was reassuring that our win rate over the last 18 months has been positive and our business model has enabled us to win further awards from NDC, particularly in the context of few new rig awards so far in 2015.

In our other core markets, there have been a number of smaller contract awards, notably the additional modules for Petrofac and a contract award for suction caps and buoyancy tanks from a new client. The land rig services business unit has been able to win contracts with both new and existing clients and is now in discussions with a number of clients for the sale of its first new build land rig which is being built according to the Group's in-house design specifically adapted for the Middle East. Construction is expected to be completed early in the fourth quarter.

Following a number of awards early in the year, there has been a recent slow-down in the rig refurbishment market and so we expect contribution from this business unit to 2015 revenue to be lower than usual. However, our client base in this market is diverse within the region and we are targeting the prospects where the Group can offer a differentiated service based around its reliable track record for delivery on time. Rig refurbishment and conversion projects will remain a core market for the Group although we anticipate that the Group will only take on projects which include a balanced and reasonable level of risk and reward.

The Board expects that 2015 and 2016 revenues will continue to depend heavily on new build jackup rigs in line with the contract awards over the last 18 months, whilst commercial efforts have been successful at diversifying the Group's pipeline into major projects for our offshore/onshore construction business unit. The management team remains focused on developing prospects from our bid pipeline into backlog. As part of Lamprell's efforts to broaden its addressable markets, the Company has recently submitted or is in the process of submitting bids for large offshore and onshore projects. The current pipeline reflects this commercial push into non-jackup areas, however project sanctions represent a risk in this current market environment. We continue discussions with prospective clients about upcoming projects.

In the context of the prolonged market weakness, the Board is undertaking an in-depth review of the earlier announced strategy to ensure that it is sufficiently robust to withstand the current industry challenges. The Board remains confident the Group is well positioned to leverage growth opportunities in the medium to long term, whilst maintaining a competitive position in the short term.

Outlook

The Company maintains its revenue guidance for 2015. As previously indicated, the Group's results for 2015 will be heavily weighted towards the second half of the year reflecting the phasing of construction cycles, with a number of new major projects ramping up during 2H 2015 and into 2016. In addition, the Group continues its programme of overhead costs reduction in its drive to realise savings across the business.

Looking ahead, the Board believes that 2016 revenues for the year will be broadly flat on 2015. The management team will continue its focus on protecting margins with the support of its productivity improvements and costs efficiencies which are expected to be operating at full run-rate from early 2016. Coverage for 2016 is slightly higher at the current time than it has been at the comparative times in previous years at over 60%. We remain focused on converting our extensive bid pipeline into backlog.

James Moffat

Chief Executive Officer

Lamprell plc

Financial Review

Results from operations

The first half of the year saw the Group maintain its strong balance sheet and achieve expected results despite the uncertainty in the market due to low oil prices. The Group executed well in the first half with a solid operational performance delivering 1H 2015 financial results in line with expectations, with contributions from cost savings delivered by the programme of productivity improvements and cost efficiencies and the collection of old debts.

The Group's total revenue for the six-month period ended 30 June 2015 was USD 351.4 million, in line with our expectations (1H 2014: USD 632.3 million). The revenue was mainly driven by the new build jackup rig segment with contributions from our other core markets, namely rig refurbishment, offshore/onshore construction (including our E&C business unit) and land rig services segments.

There was a similar number of jackup rigs under construction in both 1H 2015 and 1H 2014. However, due to the phasing of construction, we saw a higher percentage of completion on four rigs and accelerated build schedule on two rigs during 1H 2014, whereas the six months to 30 June 2015 delivered lower revenues than the same period the previous year because several of our projects were at early stages in their build schedules.

Gross margin decreased to USD 40.8 million from the USD 85.8 million reported in the corresponding period in 2014. Our gross margin percentage has declined to 11.6% in 1H 2015 from 13.6% in 1H 2014. The decrease is as a result of the lower revenue earned in the new build jackup rig segment during the period as a result of the favourable phasing of the construction cycle described above in 1H 2014. Declining oil prices and uncertainty in the market resulted in lower onshore/offshore construction activities, which had a negative impact on margins. This was, however, partially offset by the cost savings and some productivity gains from efficiencies derived from implementation of Project Evolution across the Group.

EBITDA, excluding discontinued operations and exceptional items for the period, was USD 31.8 million (1H 2014: USD 66.2 million). The Group's EBITDA margin decreased from 10.5% in 2014 to 9.1% in 2015 benefiting from the sustained operating performance of the business.

Finance costs and financing activities

Net finance costs in the period decreased to USD 7.1 million (1H 2014: USD 7.9 million). Gross finance costs were USD 0.3 million lower due to reduced costs of our bank guarantees. Finance income has increased by USD 0.5m as a result of higher cash on deposit.

Net profit after exceptional items and earnings per share

The Group recorded a profit for the six-month period ended 30 June 2015 attributable to the equity holders of USD 20.2 million (1H 2014: USD 77.7 million), including a USD 0.1 million gain from the disposal of Litwin. The fully diluted earnings per share for the six-month period ended 30 June 2015 were 5.90 cents (1H 2014: 26.86 cents).

Capital expenditure

The Group's capital expenditure during the six-month period ended 30 June 2015 increased to USD 44.9 million (1H 2014: USD 9.7 million). The main area of investment consisted of additions to capital work-in- progress, USD 29.1 million of which related to cost saving initiatives as part of Project Evolution and our new enterprise resource planning system, Oracle. The major capital investment programme enabled by the 2014 rights issue continued to reduce costs with the major part of the investment being committed over the remainder of 2015.

Cash flow and liquidity

The Group's net cash flow from operating activities for the period ended 30 June 2015 reflected a net inflow of USD 88.2 million (1H 2014: net outflow of USD 52.3 million) primarily driven by decreased working capital requirements due to inflows from customers on milestone payments and the natural cycle on major projects. Prior to working capital movements, the Group's net cash inflow was USD 33.7 million (1H 2014: inflow of USD 81.6 million), arising predominately from the Group's EBITBA in the period.

Cash and bank balances increased by USD 33.7 million to USD 405.4 million during the first half of the year resulting from net cash inflow from operations less repayment of debt and a net cash outflow from investing activities. Net cash is expected to trend slightly downwards by the end of the year but remain strong.

Balance sheet

The Group's total non-current assets at 30 June 2015 were USD 396.1 million (31 December 2014: USD 366.7 million). This increase is mainly attributable to the purchase of Property, Plant and Equipment during the period of USD 39.3 million (31 December 2014: USD 18.7 million) partially offset by depreciation amounting to USD 9.0 million (31 December 2014: USD 27.7 million).

The Group's total current assets at the period-end were USD 763.1 million (31 December 2014: USD 787.6 million). Trade and other receivables decreased to USD 357.7 million (31 December 2014: USD 398.7 million) due to improved collection over the period and on the collection of final milestone payments on completed projects. As at 30 June 2015 the Group had an improved net cash position of USD 316.3 million (31 December 2014: USD 280.6 million) as a result of management effort to recover payments from customers past due and a favourable collection period.

Shareholders' equity increased from USD 672.2 million at 31 December 2014 to USD 693.9 million at 30 June 2015. The movement mainly reflects increased retained earnings of USD 366.0 million (31 December 2014: USD 344.5 million).

Borrowing and debt refinancing

The refinancing that was completed in 2014 has generated savings during the six-month period ended 30 June 2015 from reduced interest margins and lower bonding costs on future projects. These savings have been offset by increased commitment fees on the unutilised facilities that are available to support project financing. Our borrowings were USD 89.0 million at 30 June 2015 (31 December 2014: USD 99.0 million).

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 on-going investment programme to improve productivity, as well as the uncertain market environment, the Directors do not recommend the payment of an interim dividend for the current financial year ending 31 December 2015. The Directors will continue to review this position in light of market conditions at the relevant time.

Principal risks and uncertainties

For details of the principal risks and uncertainties faced by the Group, please refer to the Notes to Financial Statements in the Company's 2014 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

Introduction

We have been engaged by Lamprell plc ('the Company') to review the condensed consolidated interim financial information in the interim financial report for the half year ended 30 June 2015, 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 statement of cash flows and related notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial information.

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim 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 consolidated interim financial information included in this interim 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 consolidated interim financial information in the interim financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the International Auditing and Assurance Standards Board. A review of interim financial information consists of making enquiries, 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 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 consolidated interim financial information in the interim financial report for the half year ended 30 June 2015 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.

PricewaterhouseCoopers LLCChartered Accountants

Douglas, Isle of Man

26 August 2015

a) The maintenance and integrity of Lamprell Plc's website is the responsibility of the directors; the work carried out by the auditor does not involve consideration of these matters and, accordingly, the auditor accepts no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

b) Legislation in the Isle of Man governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Lamprell plc

Condensed consolidated interim income statement

Six months ended 30 June

Condensed consolidated interim statement of comprehensive income

Condensed consolidated interim balance sheet

Condensed consolidated interim statement of changes in equity

Condensed consolidated statement of cash flows

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: the upgrade and refurbishment of offshore jackup rigs; fabrication; assembly and new build construction for the offshore oil and gas and renewable sector, including jackup rigs and liftboats; Floating Production, Storage and Offloading ("FPSO") and other offshore and onshore structures; and oilfield engineering services, including the upgrade and refurbishment of land rigs.

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 2015 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 2014, 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 2014 except for the adoption of new standards and interpretations effective as of 1 January 2015. 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 2014 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.

Other amendments to IFRS effective for the financial year ending 31 December 2015 are not expected to have a material impact on the Group. 

(a) The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2015, but do not have a material impact to the Group or are not currently relevant for the Group.

· IAS 19,'Employee benefits', amendments regarding defined benefit plans (effective from 1 February 2015);

· Annual improvements 2010 - 2012. It includes changes to, IFRS 2, 'Share based payments'; IFRS 3, 'Business Combinations'; IFRS 8, 'Operating segments'; 'IAS 16, 'Property plant and equipment' and; IAS 24, 'Related Party Disclosures'; and

· Annual improvements 2011 - 2013. It includes changes to, IFRS 3, 'Business Combinations'; IFRS 13, 'Fair Value Measurement' and; IAS 40, 'Investment Property', effective from January - February 2015.

(b) The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2015 and have not been early adopted:

· IFRS 9, 'Financial instruments', (effective 1 January 2018), subject to EU endorsement;

· IFRS 11, 'Joint arrangements', amendments relating to acquisition of an interest in a joint operation, (effective 1 January 2016), subject to EU endorsement;

· IFRS 14, 'Regulatory deferral accounts', (effective 1 January 2016), subject to EU endorsement;

· IFRS 15, 'Revenue from contracts with customers', (effective 1 January 2017), subject to EU endorsement;

· IFRS 10, 'Consolidated Financial Statements' and IAS 28 'Investments in Associates and Joint Ventures, amendments on investment entities applying the consolidation exception, (effective 1 January 2016), subject to EU endorsement;

· IAS 1, 'Presentation of financial statements', amendments on the disclosure initiative, (effective 1 January 2016), subject to EU endorsement;

· IAS 16, 'Property, Plant and Equipment, amendments relating to method of depreciation, (effective 1 January 2016), subject to EU endorsement;

· IAS 16, 'Property, Plant and Equipment', and IAS 41, 'Agriculture', amendments, regarding bearer plants (effective 1 January 2016), subject to EU endorsement;

· Amendments to IAS 27, 'Separate financial statements' on the equity method, (effective 1 January 2016), subject to EU endorsement;

· IAS 38, 'Intangible Assets', amendments relating to method of amortisation (effective 1 January 2016), subject to EU endorsement; and

· Annual improvements 2014 - 2015. It include changes to, IFRS 5, 'Non-current assets held for sale and discontinued operations' regarding methods of disposal; IFRS 7, 'Financial instruments: Disclosures', (with consequential amendments to IFRS 1) regarding servicing contracts; IAS 19, 'Employee benefits' regarding discount rates, and ; IAS 34, 'Interim financial reporting' regarding disclosure of information effective from 1 July 2016.

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 2014. There have been no changes in any risk management policies since the year ended 31 December 2014.

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 2014.

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 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 2015 measured at fair value. The following table presents the Group's assets that are measured at fair value at 31 December 2014:

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

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 2014.

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 profit by USD 16 million (H1 2014: increase in revenue and profit by USD 23 million) if the total costs to completion are decreased by 10% and a decrease in revenue and profit by USD 14 million (H1 2014: decrease in revenue and profit by USD 22 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 2014 and is detailed in the annual financial statements for the year ended 31 December 2014.

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% (2014: 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 1.5 million (2014: USD 1.2 million) lower or USD 1.6 million (2014: USD 1.3 million) higher.

5 Segment information 

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

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

The Executive Directors view the business categorised in business units on the basis of services rendered. Management considers the performance of the business from New Build Rigs ("NBR"), Rig refurbishment ("RR"), Offshore/Onshore Construction ("O&OC") and Land Rig Services ("LRS") in addition to the performance of Engineering and Construction ("E&C"), Operations and Management ("O&M") and Sunbelt. These business units qualify as the operating segments of the Group.

NBR derives its revenue from assembly and new build construction for the offshore oil and gas and renewables sectors; RR derives its revenue from the refurbishment, upgrade and conversion of jackup rigs; O&OC derives its revenue from FPSO and other offshore and onshore structures for oil and gas sector; LRS derives its revenue from assembly, construction, upgrade and refurbishment of land rigs.

Sunbelt derives its revenue from safety and training services; E&C derives its revenue from minor fabrication, site works, compression and chemicals; O&M derives its revenue from the labour supply and other operations and maintenance services.

NBR, RR, O&OC and LRS are aggregated and reported as a single segment (Segment A) as all of these activities are carried out from common facilities located in the UAE with respect to oil and gas rigs for the same customer base of rig owners. Also these operating segments share the common pool of equipment, labour and working capital finances. Services provided from Sunbelt, E&C and O&M do not meet the quantitative thresholds required by IFRS 8, and the results of these operations are included in the "all other segments" column.

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

The Executive Directors assess the performance of the operating segments based on a measure of gross 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:

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:

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

6 Other gains/(losses) - net

7 Earnings per share 

(a) Basic

Basic earnings per share is calculated by dividing the 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 EBT and held as treasury shares (Note 16).

(b) Diluted

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

8 Operating profit

Operating profit (from continuing operations) is stated after charging:

9 Property, plant and equipment

The additions of USD 43.5 million during the current period comprise USD 38.3 million of additions to capital work-in-progress, USD 3.5 million of additions to operating equipment, USD 0.8 million of additions to buildings and infrastructure and USD 0.9 million of additions to other fixed assets.

10 Intangible assets

Management is in the process of reviewing the allocation of goodwill based on the change in operating segments.

11 Investment accounted for using the equity method

Investment in a joint venture

Details of the Group's joint ventures during the period and at the balance sheet date is as follows:

* 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 ventures is set out below:

MISA

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.

12 Trade and other receivables

Amounts due from customers on contracts comprise:

13 Cash and bank balances

At 30 June 2015, the cash at bank and term deposits were held with 15 banks (31 December 2014: 15 banks). The effective average interest rate earned on term deposits was 0.24% (31 December 2014: 0.51%) per annum. Margin and short term deposits of USD 12.8 million (31 December 2014: USD 12.3 million) and deposits with an original maturity of more than 3 months amounting to USD 42.0 million (31 December 2014: USD 37.3 million) are held under lien against guarantees issued by the banks (Note 25).

14 Discontinued operations and disposal groups

Discontinued operations

(Loss)/profit from discontinued operations comprises:

Six months ended Six months ended

The main elements of the cash flows are as follows:

  Six months ended Six months ended

Inspec

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

Litwin

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

Disposal group

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