26th Mar 2008 07:01
Lamprell plc26 March 2008 LAMPRELL PLC ("Lamprell" or the "Company") 2007 PRELIMINARY RESULTS Lamprell (ticker: LAM), a leading provider of specialist engineering services tothe international oil & gas industry based in the UAE, is pleased to announceits Preliminary Results for the year ended 31 December 2007. HIGHLIGHTS • Revenue: US$ 467.3 million up 41.8% (2006: US$ 329.6 million) • Adjusted operating profit: US$ 82.0 million up 46.1%* (2006: US$ 56.1 million)* • Adjusted net profit: US$ 86.2 million up 51.4%* (2006: US$ 56.9 million)* • Adjusted EPS (fully diluted): 43.04 cents up 51.2%* (2006: 28.47 cents)* • Proposed final dividend: 12.25 cents (6.17 pence) per ordinary share (2006: 3.8 cents) • Cash and bank balances as at 31 December 2007 of US$ 159.1 million (2006: US$ 19.8 million) with no debt • Projects successfully completed in 2007 included: • major refurbishments of jackup drilling rigs for Global Santa Fe and Nabors Drilling Company • the completion of the Vitoria Floating Production, Storage and Offloading ("FPSO") project for Saipem • the Single Buoy Moorings, Inc. Kashagan project • Projects successfully completed in 2007 included: • the Tapti topside process decks for British Gas Exploration and Production India Ltd. • The commencement of the two new build liftboats for Seajacks International Ltd. and one Super 116E jackup rig for Scorpion Rigs Ltd., with a contract secured for a second jackup rig * For the current year stated before reflecting exceptional charges for sharebased payments of US$ 14.7 million (2006: US$ 15.6 million) granted to certaindirectors and selected management personnel pre IPO, and for the prior year US$7.5 million (2007: US$ nil) incurred mainly towards various legal andprofessional charges in connection with the admission of Lamprell plc to AIM. CURRENT TRADING AND OUTLOOK 2008 has started well with further contract wins and project progress acrossseveral fronts: o Contract with National Drilling Company ("NDC") to refurbish the Al Ghallan jackup drilling rig with a contract value amounting to US$ 50.9 million. This project, which is part of the NDC strategic Rig Integrity Assurance Program, is a significant win for Lamprell and follows the successful completion of the NDC Junana upgrade project in 2007 o The upgrade and refurbishment of the Nabors 660 jackup rig will be completed in quarter 1, 2008 and the rig will be handed over to Nabors Drilling, ready to commence its long term contract with Saudi Aramco later in the year o The construction phases of the new build jackup rig projects for Scorpion will be significantly advanced during 2008 and the first rig, the Offshore Freedom, will be launched later in the year awaiting final completion and commissioning o The construction phases of the new build liftboat projects for Seajacks will be significantly advanced during 2008 and Unit 1 will be launched later in the year awaiting final completion and commissioning o A number of FPSO related projects and rig refurbishment projects are currently nearing the end of the proposals cycle and, if secured, will provide significant revenue visibility for the balance of 2008 and 2009 Commenting on the results Peter Whitbread, Chief Executive Officer, Lamprellsaid: "This has been another outstanding year for Lamprell. We have seen significantrevenue and earnings growth, exceeding all targets set at the beginning of theyear which is testament to robust growth across all our operating activities.This is coupled with an ever improving forward visibility of revenue oncontracted work with an order book of new and repeat business that continues toflourish. Our financial position is strong and we continue to maintain a balance sheetwith no borrowings. Our debt free position, combined with strong cashgeneration, supports our investment plans for the new facilities which in turnwill enable us to realise our expansion plans for the business. Going forward we see these dynamics for growth, development and success helpingto underpin our business model and the strong client retention that we havemaintained. It is the commitment of a loyal and dedicated workforce and management team thathas created and continues to maintain this success and it will be these samequalities that are the essential elements enabling us to continue thedevelopment, growth and success of the business in 2008 and beyond." Enquiries: Lamprell plc +44 (0) 207 153 1547Peter Whitbread, Chief Executive OfficerDavid Moran, Chief Operating Officer JPMorgan Cazenove, London +44 (0) 207 588 2828Malcolm MoirNick GarrettLaurence Hollingworth M:Communications, LondonPatrick d'Ancona +44 (0) 207 153 1547Charlotte Kirkham +44 (0) 207 153 1531Georgina Briscoe +44 (0) 207 153 1548 Chief Executive Officer's Statement I am pleased to be able to announce that we have had another outstanding year in2007, having seen significant growth in revenues of 42% compared to 2006, and anet profit (adjusted for exceptional charges) for the year of US$ 86.2 million(and US$ 71.5 million after exceptional charges) which once again exceeded ourinitial projections for the year. We are currently in a period of high oil prices and unprecedented demands on allaspects of the services provided by Lamprell. We continue to focus on our corebusiness activities of drilling rig refurbishment, new build rigs and thefabrication of Floating Production, Storage and Offloading ("FPSO") topsideprocess modules. This focus, coupled with our ongoing commitment to quality,schedule, safety and customer service, has ensured that the Company hascontinued to benefit from the strong support that we receive from our clientsand encouraging levels of repeat business. We see the current high level of oil and gas related activity, both onshore andoffshore, coupled with a sustained high oil price, continuing for many years tocome. In this underlying economic climate we see real opportunity for continuedprogressive growth and expansion of our Company interests both in the region andinternationally. We also see continued commitment from our long-term clientssupporting our declared intentions to expand and develop the Company over thecoming years. During 2007, we have seen a significant increase in new clients, some of whomhave already become repeat clients. We have additionally commenced a range ofmajor new build projects, with the two Scorpion LeTourneau Super 116 jackupdrilling rigs and the two Seajacks liftboats being the primary projects thatwere started during the year. At the turn of the year we also successfullycompleted the largest single jackup rig rehabilitation and upgrade project everundertaken by the Company, the Nabors Drilling 660 project, worth approximatelyUS$ 77 million in revenue. We have also started the construction of our new facility at Hamriyah which ison schedule to come on stream at the beginning of 2009. At the beginning of 2008 we entered the year with an unprecedented forwardvisibility of contracted work in excess of US$ 580 million and a cash and bankbalance of US$ 159 million. We continue to run our business without debt and ourorganic expansion and development is supported from our own free cash flow. Wehave a strong balance sheet and we maintain a business model without claims orcases of litigation either against us or against our clients, subcontractors orsuppliers. Against this background we enter the new financial year in anexcellent position to capitalise on the opportunities that exist in this buoyantbusiness climate. All the initiatives we undertook in 2007 were consistent with our declaredstrategy laid out at the time of our IPO in October 2006. Our successful fullyear results are testament that we are pursuing the right strategy and we remainconfident in our ability to maintain our growth and to continue to delivershareholder value and customer satisfaction. The Board During 2007, and into 2008, there have been a number of actual and proposedchanges to the Board of Directors of Lamprell plc. In early February 2008 Istepped down as Chairman of the Board handing over to Peter Birch, whopreviously held the position of Deputy Chairman. Peter brings a wealth of longterm corporate experience to the position of Chairman of the Board and is awell-known and much respected figure within the City. This change is in preparation for our intended move to have a primary listing onthe Main Market of the London Stock Exchange plc, subject to regulatoryapprovals, in the fourth quarter of 2008 and accords with the recommendations ofthe Combined Code. It also ensures that the continuing role as Chief ExecutiveOfficer can be carried out with a singular focus on the ongoing expansion anddevelopment of the Company. As previously announced, David Moran will step down as Chief Operating Officerin May 2008, but will continue on the Board in the capacity of Director ofCorporate Communications. This is an undertaking that demonstrates to theinvestment community the high level of importance that we place on the interfacewith our clients, investors and market analysts, and carries with it aparticular remit to broaden our investor base. Nigel McCue, currently a Non-Executive Director, will take over the role ofChief Operating Officer in May 2008, bringing with him a wealth of experience inthe oil and gas industry. I am confident that Nigel will continue to build uponthe significant contribution he has already made to the management team in hisNon-Executive role. In August 2007 Jonathan Silver joined the Board of Lamprell plc as aNon-Executive Director. Jonathan has for many years been a principal legaladvisor to the Company and has lived and worked in the United Arab Emirates forover thirty years and brings to the Board a huge amount of industrial, legal andlocal knowledge. I would also like to particularly thank Steven Lamprell (President of theCompany) for his ongoing support and enthusiasm in assisting in the growth anddevelopment of the Company; also to Peter Birch who, in his capacity as Chairmanof the Board, is providing invaluable support to myself and the Board as weprepare to move to the Main Market of the London Stock Exchange. Market Overview Throughout 2007 we have seen a sustained high level of business activity in allsectors of the oil and gas services industry. In the Middle East we continue tosee high levels of drilling activity, both onshore and offshore. We believe thismarket strength will continue for some years to come and expect to see asignificant increase in the regional rig count over the next few years. Thereare no indications that any of the operators in the region are consideringrelocating any of their rig fleet away from the region. The majority of this rig count increase will most likely come from our existingclient base, and we therefore anticipate that we will see many of these rigscome through the Lamprell facilities. There continues to be a high demand world wide for deep water FPSO fielddevelopments and Lamprell is well placed to take advantage of these projectswith its already well proven track record of quality and timely delivery of FPSOtopside process modules. The continued high oil price together with worldwide demand placing pressure onlimited oil and gas service resources provides us with a high level ofconfidence that the current market conditions will prevail for some considerableperiod of time. We have already seen our long term visibility for contractedwork significantly increase through 2007 and we believe that this visibilitywill continue to improve through 2008 and beyond. Future Developments The construction phase of the new Hamriyah deep water facility in the HamriyahFree Zone, in the United Arab Emirates ("UAE"), is currently well underway andon schedule, having commenced construction works in the early part of 2008. Thefacility will be ready to commence fabrication activities in early 2009, andprogress is in line with expectations. When completed, the new facility will have a developed area of 250,000m2 with adeepwater berthing quay wall 1,250m in length and 9m deep. This will enable usto work on up to 10 rigs simultaneously and construct up to three new buildjackups. The new facility will also enable us to move into the refurbishment ofdrill ships and semi submersible drilling units which, up to this time, we havebeen unable to service in any significant capacity because of space and waterdepth constraints. Our existing client base is looking very positively at the potential that thisnew facility will offer to them to provide further services to meet their everincreasing regional needs. We are additionally developing and expanding our facilities at the Jebel Alifacility with further workshops, client offices, corporate offices andwarehousing to support the planned increase in liftboat, tender barge and FPSOprocess module building which we foresee arising this year and beyond. Dividend As previously stated, it has been our intention to reward shareholders with adividend subject to the performance of the business and the cash flowrequirements of our expansion plans. Given the strength of 2007 for the companyand our continued growth, the Board of Directors is recommending a finaldividend payment of 12.25 cents per ordinary share, with a Sterling equivalentof 6.17 pence per ordinary share. This will be payable, when approved, on 18June 2008 to eligible shareholders on the register at 16 May 2008. Outlook This has once again been an outstanding year for Lamprell. We have seensignificant revenue and earnings growth, exceeding all targets set at thebeginning of the year, alongside growth across all our operating businesses.This is coupled with an ever improving forward visibility of revenue oncontracted work. We continue to maintain a strong balance sheet with no debt. This is combinedwith strong cash generation that will support our investment plans for the newfacilities which in turn will enable us to realise our expansion plans for thebusiness. Going forward we see these dynamics for growth, development and success helpingto underpin the business model that we have and the strong client retention thatwe have maintained. It is the commitment of a loyal and dedicated workforce and management team thathas created and maintained this success and it will be these same qualities thatwill continue to be the essential elements that that will enable us to continuethe development, growth and success of the business. On behalf of the Board of Directors and from myself personally, I would like tothank everyone in the Lamprell team for the tremendous efforts that have beenmade throughout the past year. I am confident that we can continue to deliverthe highest standards of service to our customers, win new work and reward ourshareholders for their support. After a successful 2007, I firmly believe thatwe can look forward with confidence to an equally successful 2008 and beyond. Peter WhitbreadChief Executive OfficerLamprell plc26 March 2008 Operating Review Lamprell had a very successful year in 2007, with all operating facilitiessuccessfully working on a wide range of different projects. During the yearLamprell has not only maintained and indeed strengthened its relationships withits existing customers, but also added a number of new key customers to ourexpanding client base. The market environment has remained buoyant throughoutthe year and this has enabled us to achieve our highest volumes of work to dateand to exceed the operational targets we established at the beginning of theyear. The current financial year has started well and we continue to receive ahigh level of enquiries for our services. This healthy new business pipeline,combined with the buoyant trading environment, gives us confidence that we willbuild on the success achieved in 2007. Lamprell endeavors to provide a differentiated quality service that is foundedon a flexible and proactive approach to the management and execution ofprojects. Within this operational framework and by using established and provencontracting models and strategies, Lamprell focuses on ensuring that projectsare executed safely, whilst maintaining high levels of quality and adhering toagreed schedules. By following this operational philosophy which is central toour proposition, we continue to win repeat business as our customers valueworking alongside Lamprell. A function of the buoyant business environment in the oil and gas sector andensuing high levels of drilling activity is that resources are becomingincreasingly scarce. During 2007 we therefore initiated a process of enhancingour methods of procurement as part of an integrated approach to supply chainmanagement and we are confident that we can build on this initiative in thefuture to the mutual benefit of both our customers and ourselves. Whilst focusing on our core business during the year, Lamprell has now expandedits scope of projects to include Engineering, Procurement and Construction ("EPC") new build projects, such as the construction of jackup drilling rigs andliftboats. These projects are a natural extension of our refurbishmentactivities and they provide greater revenue visibility which allows us to take alonger term approach to the development of our facilities and the management ofour internal resources. The principal markets in which Lamprell operates, and the principal services weprovide are: • upgrade and refurbishment of offshore jackup rigs; • new build construction for the offshore oil and gas sector; • oilfield engineering services, including the upgrade and refurbishment of land rigs; • EPC new build construction of jackup drilling rigs and liftboats. The operational aspects of these businesses are reviewed as follows: Upgrade and refurbishment of offshore jackup rigs During 2007 Lamprell executed refurbishment and upgrade works on a total oftwenty four jackup rigs and one semi submersible drilling rig. The rigs, ownedby a wide range of international drilling contractors including Nabors Drilling,Global Santa Fe, Noble Drilling, Transocean, Rowan, National Drilling Companyand Japan Drilling Company, were all berthed at our Sharjah and existingHamriyah facilities. Refurbishment and upgrade projects such as these vary greatly in scope fromproject to project and depend on the existing condition of each rig and theowner's upgrade requirements. A minor project can have a work schedule lasting afew days, whereas a major upgrade project with a significant engineeringrequirement can last for twelve months or more. Typical upgrade andrefurbishment projects include some of the following work scopes: • leg extensions and/or strengthening; • conversion of slot rigs to cantilever mode; • living quarters extension, upgrade and refurbishment; • engine replacement and re-power works; • mud process system upgrade and/or refurbishment; • helideck replacement, upgrade and/or refurbishment; • condition-driven refurbishment, including structural steel and piping replacement and painting. The jackup rig upgrade and refurbishment projects carried out in 2007 included: Nabors Drilling 660 The rig, which was relocated from the Gulf of Mexico after it was severelydamaged by hurricane "Katrina", arrived at our Hamriyah facility in late 2006and has been the largest project of its type undertaken to date by Lamprell. Thework scopes on this project included the construction and installation ofreplacement leg sections and spud cans, the complete renewal of the rig'selectrical system including the installation of five new Caterpillar 3516engines and extensive steel renewals and painting work. The project has beencompleted in the first quarter of 2008, and the rig will now undertake a longterm drilling programme in the Arabian Gulf. Global Santa Fe ("GSF") High Island 2 & 4 and Main Pass 1 & 4 These four rigs were mobilised to the Middle East to work for Saudi Aramco andprior to commencing their contracts they required extensive refurbishment works.The work scopes on the rigs included steel and piping replacement, electricalworks and accommodation refurbishment. These projects are particularlynoteworthy as the lead time allotted to undertake the project was very short.Despite the aggressive schedule, Lamprell completed all of the work to thesatisfaction of GSF and recorded three million man hours of work on the projectswithout a single lost time incident ("LTI"). Grup Servicii Petroliere ("GSP") Jupiter In addition to the works executed at our facilities in the UAE, Lamprellundertook an extensive refurbishment and upgrade work scope on GSP's rig Jupiterat a shipyard in Croatia. The project commenced in 2006 with the prefabricationof a large range of steel and piping components at our Sharjah facilityincluding a cantilever and drill floor. These components were then shipped toCroatia where they were installed on the rig. In addition to the installation ofthese prefabricated items, the existing rig accommodation was refurbished andextensions were added to increase its capacity, the existing rig cranes werereplaced and the rig was completely repainted. This was a major project for theCompany and illustrates our core competencies are transferable geographically.The experience gained on this project will be invaluable if we perform futuremajor refurbishment projects outside the UAE. Offsite and other services In addition to major refurbishment projects we also undertook a wide range ofminor projects including the supply of engineering services, procurementactivities and various smaller rig refurbishment projects carried out on boardrigs whilst they remain in operation. These projects do not account for a largeproportion of revenue but they provide a critical service to our customers andreflect Lamprell's flexible approach to servicing our clients needs. New build construction for the offshore oil and gas sector Throughout 2007 our Jebel Ali facility has been working on a variety of majorprojects for clients including Single Buoy Moorings ("SBM"), Saipem, British GasExploration and Production India Limited ("BG India") and Aker FP. Theseprojects all require the utilisation of our state of the art facility as well ashigh levels of project management control to ensure that safety and qualitystandards are maintained whilst keeping a strong focus on delivering onschedule. The Jebel Ali facility undertakes a range of different new build constructionprojects which in 2007 included: Offshore fixed structures: Topside platforms BG India Limited Tapti Topside Decks The contract, awarded in 2006, included the fabrication, mechanical completionand load out of the TCPP (East and West) and MTA decks including all necessaryengineering and the procurement of materials and equipment. The schedule forthis project was very ambitious, but Lamprell delivered the decks ahead ofschedule and as a result BG India were able to secure first oil earlier thanplanned. Process barges SBM Kashagan Flash Gas Compression Barges In 2006 Lamprell commenced the construction of three process barges for SBM.These barges form part of the ongoing development of the Kashagan project, theworld's largest oil and gas project, and each weighs in excess of 3,000 tonnes,including 1,800 tonnes of topside process components. In July 2007, the firsttwo barges were successfully loaded out from our Jebel Ali facility onto theLamprell owned semi-submersible barge, the "Hamriyah Pride". The third bargeremained at our facility until the first quarter of 2008 when it was alsodelivered to SBM. Apart from the operational and technological successesachieved on a project of this magnitude, the project was also constructed withinour rigorous safety guidelines with more than 3.6 million hours being expendedwithout an LTI. FPSO process modules Aker FP SMART FPSO process modules At the end of 2007, Lamprell completed the fabrication of process modules forAker Kvaerner Production Systems. These modules were designed and constructed aspart of a generic and modular design concept to suit typical production ofaround 60,000 barrels of oil per day (bopd). The design was developed by Akerthroughout the fabrication phase of the project and this approach required thatboth the Aker and Lamprell project teams had to work very closely to minimisethe impact that design changes could have on the construction sequence anddelivery date. This team approach to managing the project worked extremely welland the modules were delivered in December 2007. SBM Frade FPSO process modules In the first quarter of 2007 Lamprell was awarded the contract to build sevenprocess modules and turret manifold deck by SBM for their Frade FPSO. The workscope includes structural, piping, E&I and pressure vessel works and oncompletion, the modules will be delivered to SBM ready for integration onto theconverted tanker currently located at Dubai Drydocks. Oilfield Engineering services Lamprell's Oilfield Engineering operation is located within our main Jebel Alifacility and it was busy throughout 2007, executing contracts for a variety ofclients including Nabors Drilling, KCA Deutag and Ensign. Projects executedduring 2007 included the upgrade and refurbishment of nine land rigs, as well asthe construction of land camps and the inspection and overhaul of mechanical androtary equipment. In addition to these projects, we also executed a number ofminor offsite projects to assist our clients by providing our services onlocation at drilling sites. During the year Lamprell also signed a memorandum of understanding withLeTourneau Technologies to build a new build 2000 horse power land rig. This rigis being fabricated to LeTourneau's "Lightening Rig" design and will be readyfor delivery in mid 2008. Engineering, Procurement and Construction ("EPC") As part of Lamprell's strategic growth plan, in 2007 we expanded our range ofprojects to include major EPC new build projects. These projects can be executedat either our Jebel Ali or current Hamriyah facilities and they underpin theexpansion of our business activities to larger, more prestigious projects. Seajacks liftboats In February 2007 we secured the award of contracts from Seajacks InternationalLimited for two harsh environment special purpose self-propelled four leggedjackup "liftboats". These turnkey contracts cover all aspects of projectdevelopment from design to delivery. The first unit will be delivered in early2009 with the second unit being delivered four months later. These projects arebeing built at our Jebel Ali facility and are progressing well and on schedule. Scorpion S116E jackup drilling rigs In July 2007 we successfully negotiated a contract with Scorpion Rigs Ltd. forthe construction and delivery of a completely outfitted and equipped, LeTourneaudesigned, Super 116E jackup drilling unit. This contract was followed later inthe year by the award of another contract by Scorpion to build a second rig.These contracts will allow Lamprell to utilise our significant experience gainedin the refurbishment sector and the construction of both units is progressing onschedule and on budget. The first rig will be delivered in mid 2009 and thesecond at the end of 2009. Human resources Attracting and retaining talented staff is one of the key issues we face in theoil and gas sector. At Lamprell we consider our employees to be our greatestasset and in support of this core principle of our business the Human ResourcesDepartment has undergone a transformation with the addition of a dedicatedRecruitment Specialist and more recently the introduction of a senior HRprofessional to oversee the HR and Administration support functions. Managing such a culturally diverse workforce presents both challenges andopportunities for Lamprell in the coming years. To prepare us for thesechallenges we will be reorganising the Human Resources department to respondwith innovative, professional and efficient solutions and support. Providingintegrated HR systems with consistent practices will provide stability to boththe employee and the Company. The adoption of these HR and Administrativeguidelines will impart a clear statement of employee expectations, reduceduplication, increase efficiency and ensure stability across functions andemployees. New and promoted employees with relevant skills and new ideas will enhance theCompany's progress as it evolves with clearly defined roles andresponsibilities. The continued development of our performance review processthat captures a continuous improvement and development philosophy will ensure astable and dependable delivery of services through a trained and sustainedworkforce. We aim to provide a safe and supportive work environment to our employees fromdiverse cultural backgrounds and in an environment that provides a competitivecompensation programme that is affordable to the Company. We believe thiscontinues to be our market differentiator and will strengthen our position us asan "employer of choice". These will continue to be our goals in 2008 and beyond. Don Bosco Maritime Academy To continue to increase the number of qualified workshop personnel, both now andin the future, an Indian training programme was established in early 2007. Incollaboration with our Indian based training provider, Don Bosco MaritimeAcademy (in Mumbai, India), an advanced fabrication and welding trainingfacility has now been established and, whilst it is still early days, theresults have been extremely encouraging. This facility provides our traineeswith hands-on, heavy-engineering experience, thus substantially improving theircapabilities prior to joining Lamprell. To date, some 173 personnel havesuccessfully undertaken this course and have been relocated for permanentemployment at our facilities in the UAE. An additional 47 people will completethe training course in March 2008. Furthermore, we are working with and supporting the local community through acorporate social responsibility programme which has been established with theDon Bosco Salesian Society in Mumbai Province. This will provide annually up to150 personnel from poor and underprivileged families with training in basicfirst year trades skills. For those trainees capable of undertaking furtherstudies, a learning pathway has been created so that they can further improvetheir skills to a level acceptable to Lamprell, with the potential of eventualemployment within the Company. Alongside these practical training programmes, we are providing financialsupport to a shelter for homeless street children. This shelter is located inVadodara and serves as a half-way house with the aim of returning these childrensafely to their families. General Recruitment The recruitment drive continues with 4,331 permanent staff in the Company at theend of 2007, a 30% increase in headcount during the year. Our search for new andtalented staff is a continual process as a result of the competitive market inwhich the Company operates. As a result of the growth that Lamprell hasexperienced, we aim to recruit staff with the requisite skills and professionalexperience to add value to the Company and the service which we offer to ourclients. This is particularly so in the areas of engineering and projectmanagement, where we clearly differentiate ourselves from our competitors. Operating facilities A key part of our strategy is to facilitate organic growth. To this end, we havemaintained a high level of capital investment throughout 2007. The aim of thisinvestment is to increase our capacity, increase our existing levels ofproductivity and improve the working environment for both yard andadministrative personnel. In Jebel Ali we commissioned the construction of an extension to our existingproduction facility. This building has three levels and it will provideincreased storage capacity on the ground floor and additional office space forproduction personnel on the first and second floors. In addition we have startedthe design of a new welfare and office building, as well as a corporate office.The construction of both these buildings will commence in 2008. In 2007 we also completed the concept plan for our new 250,000m2 facility in theHamriyah free zone and subsequently awarded the detailed design and constructioncontracts for various elements of our facility. In parallel to these internalactivities, the marine work contract, including the dredging of the accesschannel and quay wall construction work, has been awarded by the Hamriyah FreeZone Authority and the selected contractor has subsequently commenced work. Ourfacility, when completed, will include 1.25km of quayside dredged to 9m indepth, offices, workshops and construction areas. The development is on scheduleand we will be operational in early 2009. During the year our investment continued in operating equipment includingforklift trucks, generators and automated welding equipment; buildings as wedevelop the infrastructure across all facilities; and cranes which includesinitial payments on larger units with increased delivery lead times. Financial Review Trading performance 2007 (US$m) 2006 (US$m) ChangeRevenue 467.3 329.6 41.8%Gross profit 107.8 73.2 47.2%Adjusted EBITDA * 89.5 61.2 46.3%Adjusted EBITDA margin * 19.1% 18.6% Adjusted operating profit * 82.0 56.1 46.1%Adjusted operating margin * 17.5% 17.0%Adjusted net profit * 86.2 56.9 51.4%Adjusted net margin * 18.4% 17.3%Adjusted earnings per share * 43.04c 28.47c 51.2% * For the current year stated before reflecting exceptional charges for sharebased payments of US$ 14.7 million (2006: US$ 15.6 million) granted to certaindirectors and selected management personnel pre IPO, and for the prior year US$7.5 million (2007: US$ nil) incurred mainly towards various legal andprofessional charges in connection with the admission of Lamprell plc to AIM. Group revenue increased by 41.8% to US$ 467.3 million (2006: US$ 329.6 million)reflecting strong growth over the prior year. This was largely driven bysignificant increases in both of Lamprell's key business activities of rigrefurbishment, based in Sharjah, and offshore new build activity at the JebelAli facility. The key drivers for the increase in revenue generated from rigrefurbishment were a number of high value projects including the Global Santa Fefour rig fleet and the refurbishment of the Nabors 660 rig. This revenue alsoreflected revenue from the first Scorpion Offshore Super 116E jackup rig whichcommenced construction in the second half of the year. The increase in revenue generated from offshore construction projects largelyreflects the completion of a number of projects with extensions in scope in thefirst half of the year and progress on a number of FPSO projects in the latterhalf of the year. In addition, the second half reflects the recognition ofrevenues on the new build liftboat projects for Seajacks International Limited.Revenue from Oilfield Engineering services, related to the refurbishment of landrigs and land camps, reflected a strong performance for the year. The Grouprevenue includes the results of International Inspection Services Limited("Inspec"), with revenue growth resulting from a significant increase in thedemand for the inspection and non-destructive testing services the subsidiaryprovides. The cost of sales for the year was US$ 359.5 million (2006: US$ 256.3 million)with the increase driven predominantly by the growth in revenue during the year.As a percentage of revenue, cost of sales has decreased from 77.8% in 2006 to76.9% in 2007, reflecting the improved sales pricing of projects together withincreased operational efficiencies. Material costs have increased as apercentage of total contract costs as the level of procurement undertaken onprojects increased. Also the level of staff cost has increased as a percentageof total contract costs as we seek to increase our permanent headcount to meethigher levels of activity. As a consequence, the level of sub-contracted labourcosts incurred in the year has decreased. Gross profit increased by 47.2% to US$ 107.8 million (2006: US$ 73.2 million)resulting in a gross margin of 23.1% (2006: 22.2%). This improvement isattributable to improved average margins across most areas of activity butparticularly in new build activities in the Jebel Ali facility where a number ofmajor projects were completed during the year. These projects included the Taptiprocess topsides for British Gas in India, the Kashagan flash gas compressionbarges built for Single Buoy Moorings and the Vitoria FPSO process modules builtfor Saipem, and in all projects positive variations were seen. Rig refurbishmentactivities carried out in the Sharjah and Hamriyah facilities continue toprovide very positive margins along with a significant amount of increased workscopes through variation orders, which further supported margin growth. Operating profit (before exceptional charges) in 2007 was US$ 82.0 million(2006: US$ 56.1 million) reflecting an increase of 46.1%. This excludesexceptional costs in the current year for share based payments of US$ 14.7million (2006: US$ 15.6 million) related to shares gifted in connection with theadmission of Lamprell plc to AIM. Exceptional charges in 2006 also included US$7.5 million incurred towards various legal and professional charges inconnection with the admission of the Company to AIM which were charged togeneral and administrative expenses. The increase in operating profit over theprevious year reflects the strong growth in revenue and increased gross marginachieved in 2007. The operating profit margin (before exceptional charges) as a result, increasedfrom 17.0% in 2006 to 17.5% in 2007. The net profit (before exceptional charges) attributable to the shareholders ofLamprell plc, increased by 51.4% to US$ 86.2 million (2006: US$ 56.9 million).The net margin increased to 18.4% (2006: 17.3%) in line with the increase in theGroup's operating margin and an increase in net interest income to US$ 4.2million (2006: US$ 0.9 million) largely reflecting higher average cash balancesheld by the Group during the year. EBITDA (before exceptional charges) increased to US$ 89.5 million (2006: US$61.2 million) reflecting an increase of 46.3% over the prior year. EBITDA marginfor the year increased to 19.1% (2006: 18.6%). The increase in EBITDA is largelyin line with the increase in operating profit as there is no taxation onearnings and the increase in depreciation and amortisation charged to generaland administration expense was not significant. Interest income Interest income of US$ 4.2 million (2006: US$ 0.9 million) relates mainly tobank interest earned on surplus funds deposited on a short term basis with theCompany's bankers. The increase reflects a higher level of funds on depositduring the year and a marginal increase in the average deposit rates. Taxation The Company, which is incorporated in the Isle of Man, has no income taxliability for the year ended 31 December 2007 as it is taxable at 0% in linewith local Isle of Man tax legislation. Prior to 6 April 2007 the Company wasregistered as a tax exempt entity, however, from that date the tax exemptcompany status ceased to exist in Isle of Man legislation. The Group is notcurrently subject to income tax in respect of its operations carried out in theUnited Arab Emirates, and does not anticipate any liability to income taxarising in the foreseeable future. Earnings per share Fully diluted earnings per share (before exceptional charges) for 2007 increasedto 43.04 cents (2006: 28.47 cents) reflecting primarily the improved profit ofthe Group for the year. Operating cash flow and liquidity The Group's net cash flow from operating activities for the year was US$ 176.8million (2006: US$ 16.6 million) largely reflecting a significant increase inadvance payments received from customers, primarily from the new build liftboatand jackup projects. The amounts due to customers on contracts was US$ 120.1million (2006: US$ 11.9 million) which includes cash advances due to customersof US$ 111.5 million (2006: US$ 3.4 million). Other working capital movementsreflect short term timing differences in collections from debtors and a decreasein amounts due from customers on contracts of US$ 24.9 million (2006: US$ 36.9million) reflecting a lower level of accrued income at the year end. Contractwork-in-progress amounting to US$ 54.0 million (2006: US$ nil) largely reflectsadvances made to subcontractors on key projects and results in reducing the cashflow from operating activities. Investing activities for the year absorbed US$ 21.4 million (2006: US$ 23.0million) as a result of a significant investment in property, plant andequipment amounting to US$ 15.0 million (2006: US$ 24.0 million) largelycomprising the purchase of operating equipment and investment in new buildings.The outstanding purchase consideration due to the previous Holding Company forthe purchase of Inspec, amounting to US$ 3.0 million, was also settled in theyear. This investment activity was offset by significant interest income of US$4.2 million received from surplus funds. Net cash used in financing activities was US$ 22.6 million (2006: US$ 7.8million). This represents dividend payments of US$ 22.5 million (2006: US$ 26.3million) including the settlement of amounts due to the previous Holding Companycomprising pre IPO dividends of US$ 5.0 million. Capital expenditure Capital expenditure on property, plant and equipment during the year amounted toUS$ 15.0 million (2006: US$ 24.0 million). The main area of expenditure was theinvestment in operating equipment amounting to US$ 6.4 million to support thegrowth in activities experienced during the year and to replace hired equipmentwhere this was deemed cost effective. Expenditure on cranes reflects aninvestment of US$ 2.4 million. Further expenditure on buildings and relatedinfrastructure at Group facilities amounted to US$ 3.3 million with additionalcommitted expenditure amounting to US$ 14.0 million reflecting the ongoingdevelopment of the infrastructure of the Company at all facilities, includinginitial expenditure at the new Hamriyah facility. Shareholders' equity Shareholders' equity increased from US$ 89.9 million at 31 December 2006 to US$158.8 million at 31 December 2007. The movement mainly reflects the retainedprofits for the year of US$ 71.5 million net of dividends declared of US$ 17.6million. The movement also reflects a credit for the accounting of share basedpayments of US$ 14.9 million made to certain Directors and employees of theGroup and charged to general and administrative expenses. Shareholders' equity includes a Merger reserve amounting to US$ 22.4 millionthat was created in the year ended 31 December 2006 as a result of Lamprell plc,on 25 September 2006, entering into a share for share exchange agreement withLEL and LHL under which it acquired 100% of the 49,003 shares of LEL from LHL inconsideration for the issue and transfer to LHL of 200,000,000 shares of theCompany. This acquisition was accounted for using the uniting of interestsmethod and the difference between the nominal value of shares issued by theCompany (US$ 18.7 million) and the nominal value of LEL shares acquired (US$0.082 million) was taken to the Merger reserve. In addition, during 2006 LELacquired 100% of the legal and beneficial ownership of Inspec from LHL for aconsideration of US$ 4 million on 11 September 2006. This acquisition wasaccounted for using the uniting of interests method and the difference betweenthe purchase consideration (US$ 4 million) and share capital of Inspec (US$ 0.15million) was taken to the Merger reserve. Consolidated income statement Year ended 31 December ------------------------ Note 2007 2006 USD'000 USD'000 Revenue 467,332 329,587Cost of sales 2 (359,532) (256,341) ------------ -----------Gross profit 107,800 73,246 Selling and distribution expenses 3 (1,395) (988) General and administrativeexpenses: ------------ ----------- - share based payments 4 (14,942) (15,584) - others 5 (25,517) (24,478) ------------ ----------- (40,459) (40,062) Other gains/(losses) - net 1,355 767 ------------ -----------Operating profit 67,301 32,963 Interest income 4,249 852 ------------ -----------Profit for the year attributable 71,550 33,815to equity holders of the Company ======= ======= Earnings per share attributable to 7equity holders of the CompanyBasic 35.78c 16.91c ======= =======Diluted 35.72c 16.91c ======= ======= Consolidated balance sheet As at 31 December ------------------- Note 2007 2006 USD'000 USD'000 ASSETSNon-current assetsProperty, plant and equipment 47,766 40,595Intangible asset 1,490 - --------------- --------------- 49,256 40,595 --------------- ---------------Current assetsInventories 6,705 4,531Trade and other receivables 8 149,950 113,508Derivative financial instruments 964 -Cash and bank balances 9 159,088 19,777 ---------------- ----------------- 316,707 137,816 ----------------- -----------------Total assets 365,963 178,411 ======== ========EQUITY AND LIABILITIESCapital and reservesShare capital 18,654 18,654Legal reserve 24 22Merger reserve (22,422) (22,422)Retained earnings 162,506 93,616 ----------------- -----------------Total equity 158,762 89,870 ----------------- -----------------Non-current liabilitiesProvision for employees' end ofservice benefits 9,740 8,039 --------------- ---------------Current liabilitiesTrade and other payables 10 197,461 72,404Due to a related party - 8,098 ----------------- ----------------- 197,461 80,502 ----------------- -----------------Total liabilities 207,201 88,541 ----------------- -----------------Total equity and liabilities 365,963 178,411 ======== ======= Consolidated statement of changes in equity Note Share Legal Merger Retained capital Reserve reserve earnings Total USD'000 USD'000 USD'000 USD'000 USD'000 At 1 January 2006 18,654 18 (18,422) 75,472 75,722Profit for the year - - - 33,815 33,815 Share basedpayments -value ofservicesprovided 4 - - - 15,584 15,584Transfer to Legalreserve - 4 - (4) -Dividends - - - (31,251) (31,251)Acquisitionof Inspec - - (4,000) - (4,000) ------------ ---------- ------------ -------------- --------------At 31 December2006 18,654 22 (22,422) 93,616 89,870 Profit for the year - - - 71,550 71,550Share basedpayments -value ofservicesprovided 4 - - - 14,942 14,942Transfer to Legal reserve - 2 - (2) -Dividends - - - (17,600) (17,600) ----------- ---------- ------------ -------------- ----------------At 31 December 2007 18,654 24 (22,422) 162,506 158,762 ====== ====== ====== ====== ====== Consolidated cash flow statement Year ended 31 December ------------------------ Note 2007 2006 USD'000 USD'000Operating activitiesProfit for the year 71,550 33,815Adjustments for:Share based payments - value ofservices provided 4 14,942 15,584Fair value gain on derivativefinancial instruments (964) -Depreciation 7,485 5,082Amortisation of intangible asset 44 -(Profit)/loss on disposal ofproperty, plant and equipment (4) 6Profit on disposal of asset held for sale - (773)(Release)/provision for slow movingand obsolete inventories (657) 396Provision for impairment of tradereceivables, net 17 65Provision for employees' end ofservice benefits 2,215 3,221Interest income (4,249) (852) ------------- -------------Operating cash flows before paymentof employees' end of service benefits and changes in working capital 90,379 56,544 Payment of employees' end of servicebenefits (514) (1,050) Changes in working capital:Inventories before movement in provision (1,517) (1,495)Trade and other receivables beforemovement in provision for impairmentof trade receivables (36,459) (53,321)Trade and other payables excludingunpaid 124,914 15,958dividend ---------------- -------------Net cash generated from operatingactivities 176,803 16,636 ---------------- -------------Investing activitiesPayments for property, plant andequipment (14,978) (24,037)Acquisition of a subsidiary net ofcash acquired (1,586) -Proceeds from sale of property, plantand equipment 378 27Proceeds from disposal of asset heldfor sale - 2,705Interest income 4,249 852Payments for acquisition of Inspec (3,000) (1,000)Movement in margin deposits 9 (6,457) (1,523) ------------- -------------Net cash used in investing activities (21,394) (22,976) -------------- --------------Financing activitiesDue (to)/from a related party net ofunpaid dividend and purchaseconsideration payable for acquisitionof Inspec (98) 18,501Dividends paid (22,457) (26,251) --------------- --------------Net cash used in financing activities (22,555) (7,750) --------------- -------------Net increase/(decrease) in cash andcash equivalents 132,854 (14,090) Cash and cash equivalents, beginningof the year 16,410 30,500 --------------- -------------Cash and cash equivalents, end of theyear 9 149,264 16,410 ======== ======= Notes to the financial information for the year ended 31 December 2007 1. General information and basis of preparation Lamprell plc ("the Company") and its subsidiaries ("the Group") are engaged inthe upgrade and refurbishment of offshore jackup rigs, fabrication, assembly andnew build construction for the offshore oil and gas sector, including jackuprigs, FPSO's and other offshore and onshore structures, oilfield engineeringservices, including the upgrade and refurbishment of land rigs. The address ofthe principal place of business is PO Box 5427, Dubai, UAE. The audit report on the annual consolidated financial statements of Lamprell Plcfor the year ended 31 December 2007 was signed on 25 March 2008. This financialinformation has been extracted without adjustment from those audited financialstatements. Copies of the annual report and financial statements will becirculated to shareholders at least 20 days in advance of the AGM." 2 Cost of sales 2007 2006 USD'000 USD'000 Materials and related costs 146,019 84,647Sub-contract 82,860 70,713Staff costs (Note 6) 67,095 45,378Sub-contract labour 27,586 27,175Equipment hire 8,392 8,867Repairs and maintenance 4,968 3,222Depreciation 4,978 3,089Yard rent 2,511 2,153Others 15,123 11,097 --------------- --------------- 359,532 256,341 ========= ========= 3 Selling and distribution expenses Advertisement and marketing 436 441Entertainment 187 123Travel 324 275Other expenses 448 149 ------------ ------------ 1,395 988 ====== ====== 4 General and administrative expenses - share based payments 2007 2006 USD'000 USD'000 Fair value of shares vested in October 2006 - 11,882Proportionate amount of share based charge forthe year: - relating to shares gifted/granted in 2006 13,276 3,414 - relating to deferred share award in 2006 1,382 288 - relating to Free Share Plan 228 - - relating to Executive Share Option Plan 56 - -------------- -------------- 14,942 15,584 ======= ======= 5 General and administrative expenses - others Staff costs (Note 6) 15,450 10,626Utilities and communication 1,548 1,370Depreciation 2,507 1,993Other expenses 6,012 10,489 ----------- --------- 25,517 24,478 ======= ====== Other expenses for the year 2006 include USD 7.5 million incurred mainly towardsvarious legal and professional charges in connection with the admission ofLamprell plc to AIM. 6 Staff costs 2007 2006 USD'000 USD'000 Wages and salaries 53,283 36,239Employees' end of service benefits 2,215 3,221Share based payments - value of servicesprovided (Note 4) 14,942 15,584Other benefits 27,047 16,544 -------------- -------------- 97,487 71,588 ======= =======Staff costs are included in:Cost of sales (Note 2) 67,095 45,378General and administrative expenses - sharebased payments (Note 4) 14,942 15,584General and administrative expenses - 15,450 10,626Others (Note 5) ------------- ------------- 97,487 71,588 ======= ======= Number of employees at 31 December 4,331 3,331 ======= ======= 7 Earnings per share 2007 2006 USD'000 USD'000 The calculations of earnings per share are basedon the following profit and numbers of shares: Profit for the year 71,550 33,815 --------------- --------------- Weighted average number ofshares for basic earningsper share 200,000,000 200,000,000 Adjustments for: - Assumed vesting of deferred share awards+ 249,275 - - Assumed exercise of free share awards 52,766 - -------- --------Weighted average number ofshares for dilutedearnings per share 200,302,041 200,000,000 --------------- ---------------Earnings per share: Basic 35.78c 16.91c =========== =========== Diluted 35.72c 16.91c =========== =========== + In the prior year there was no dilution impact of the assumed conversion ofdeferred share awards as the performance condition relating to this award hadnot been met at 31 December 2006 8 Trade and other receivables 2007 2006 USD'000 USD'000 Trade receivables 58,565 52,335Other receivables and prepayments 12,571 5,653Advances to suppliers - 18,760 -------------- --------------- 71,136 76,748Less: Provision for impairment of tradereceivables (87) (97) -------------- --------------- 71,049 76,651Amounts due from customers on contracts 24,868 36,857Contract work in progress 54,033 - -------------- --------------- 149,950 113,508 ======= ======= Amounts due from customers on contracts comprise:Costs incurred to date 216,007 133,697Attributable profits 73,683 34,119 --------------- --------------- - - 289,690 167,816Less: Progress billings (264,822) (130,959) --------------- --------------- - - 24,868 36,857 ======== ======== 9 Cash and bank balances 2007 2006 USD'000 USD'000 Cash at bank and on hand 11,828 8,705Short term and margin deposits 147,260 11,072 --------------- -------------- -Cash and bank balances 159,088 19,777Less: Margin deposits (9,824) (3,367) --------------- -------------- -Cash and cash equivalents 149,264 16,410 ======== ======= At 31 December 2007, the cash at bank and short term deposits were held with six(2006: three) banks. The effective interest rate on short term deposits was4.75% (2006: 4.68%) per annum. These deposits have an average maturity of sevendays to one month. The margin deposits with the bank are held under lien againstguarantees issued. 10 Trade and other payables 2007 2006 USD'000 USD'000 Trade payables 24,329 26,388Other payables and accruals 52,902 34,125Amounts due to customers on contracts 120,087 11,891Dividend payable 143 - --------------- --------------- - 197,461 72,404 ======== =======Amounts due to customers on contracts comprise:Progress billings 327,710 93,859Less : Cost incurred to date (165,495) (63,175)Less : Attributable profits (42,128) (18,793) --------------- --------------- - - 120,087 11,891 ======== ======= This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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