28 august 2014 lamprell plc 2014 interim financial …/media/files/l/lamprell-v3/media/...drive to...

28 August 2014

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

2014 INTERIM FINANCIAL RESULTS

FOR SIX MONTHS TO 30 JUNE 2014

Excellent operational performance delivers strong financial results for H1 2014

H1 2014 FINANCIAL RESULTS

H1 2014 H1 20131

(US$ million, unless stated)

Revenue 632.3 506.6

Operating profit 53.4 19.2

Profit from continuing operations before income tax and before

exceptional items

46.5 14.7

Profit from continuing operations after income tax and after

exceptional items

46.1 11.8

Net profit from continuing operations and discontinued operations

before exceptional items

77.7 9.6

Net profit from continuing operations and discontinued operations

after exceptional items

77.7 7.3

Reported diluted earnings/per share (US cents) 26.9 2.5

Net cash as at 30 June 280.6 151.1

1 Note that H1 2013 has been re-presented with Inspec and Litwin businesses included as discontinued operations in accordance

with IFRS.

Financial highlights

Results for the first half of 2014 ahead of expectations due to strong operational performance and

early results from savings initiatives, generating improved margins

Revenues are up by US$ 125.7 million against H1 2013 as a result of the high H1 activity levels

and phasing of construction activity during the period

Successful rights issue and refinancing provides a strong financial platform and enables delivery

of long-term growth strategy

Operational highlights

Strong operational performance in all core markets enhances Lamprell’s track record for project

execution

Successful delivery of two jackup rigs to National Drilling Company, the 13,200 tonne

production utilities and quarters deck to Nexen for use in North Sea sector and a new self-

propelled jackup vessel to Seajacks

Largest and one of the most complex rig conversion and refurbishment projects in Lamprell’s

history delivered to the client after the period end

Over US$ 900 million of new awards since January 2014 including multi-rig awards from each

of Ensco and Shelf Drilling, as well as an award from Petrofac for modules to be deployed in

Abu Dhabi

As at 30 June 2014, backlog of US$ 1.2 billion (31 December 2013: US$ 0.9 billion) with bid

pipeline increasing to approximately US$ 4.9 billion (31 December 2013: US$ 4.7 billion)

World class safety record continues on various projects including ten million manhours without a

lost-time incident on Nexen project

Project Evolution, a programme to deliver material productivity improvements and cost

efficiencies, is progressing well and generating some early returns

Current trading and outlook

Five new build jackup drilling rigs to be delivered between November 2014 and March 2015

Order book rebuilt and now extending out to Q2 2017

Continued strong demand for our core markets as demonstrated by increased bid pipeline

All ongoing major projects progressing well

Revenue expectations for FY 2014 unchanged; lower revenue levels expected in H2 2014

compared to H1 2014 due to timing of build cycles and reduced activity in onshore and offshore

construction market

Full year outturn anticipated to be ahead of expectations predominantly due to projected

continuing strong operational performance and initial savings from procurement activities

As previously announced, revenue for FY2015 expected to be broadly flat on FY2014 with

significantly fewer major project completions in FY2015

Drive to target further reductions in overheads

John Kennedy, Non-executive Chairman for Lamprell, said:

“Lamprell has achieved a great deal in the first half of 2014. We have delivered a strong operational and

financial performance, made good progress in converting our pipeline and successfully completed a

rights issue and a major debt refinancing. The business is now well-positioned to deliver on its refreshed

growth strategy and to create long-term value for all stakeholders.”

James Moffat, Chief Executive Officer for Lamprell, said: “Our continued focus on operational excellence has resulted in a strong first half performance that has

exceeded our expectations. At the same time our safety track record has been world class. In 2014, we

are delighted to have rebuilt our order book, winning significant awards from both new and existing

customers. We are making good progress implementing our refreshed growth strategy based on our core

markets and are already beginning to see the benefits of a stronger balance sheet. While we anticipate

lower revenues in the second half of the year, we expect the outturn for the full year to be ahead of our

expectations.”

A conference call for analysts and investors will be held at 7.30am. Dial-in 02031394830, passcode

87954567#.

Presentation slides can be accessed at the following website:

http://www.anywhereconference.com?UserAudioMode=DATA&Name=&Conference=131649986&PIN

=87954567

http://www.anywhereconference.com/?UserAudioMode=DATA&Name=&Conference=131649986&PIN=87954567

http://www.anywhereconference.com/?UserAudioMode=DATA&Name=&Conference=131649986&PIN=87954567

- Ends -

Enquiries:

Lamprell plc

James Moffat, Chief Executive Officer +971 (0) 4 803 9308

Jo Curin, Chief Financial Officer +971 (0) 4 803 9308

Natalia Erikssen, Investor Relations +44 (0) 7885 522 989

Tulchan Communications, London +44 (0) 207 353 4200

Christian Cowley

Martin Robinson

Notes to editors Lamprell, based in the United Arab Emirates (“UAE”), and with operations throughout the region, has

played a prominent role in the development of the offshore industry in the Arabian Gulf for over 30 years

and is the regional market leader in the rig market. Lamprell is a leading provider of diversified

engineering and contracting services to the onshore and offshore oil & gas and renewable energy

industries.

Lamprell currently employs approximately 9,000 people, including contract labour, across six 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 JV agreements) and Kuwait. Combined, the

Group’s facilities provide a total area of over 900,000 m² with 2.2 km of quayside.

Chief Executive Officer’s Review

During the first half of 2014, Lamprell has continued to recover strongly, building on our 2013

performance. This operational outperformance has resulted in financial results for the period being ahead

of expectations. The successful completion of both a US$ 120 million rights issue and a US$ 350 million

refinancing package (along with a US$ 250 million bonding facility) has enabled us to implement our

refreshed growth strategy and we are already starting to see positive initial results, both operationally and

financially. We are also pleased to see the support shown by our clients, who have placed their

confidence in Lamprell with a number of major contract awards. Collectively, these developments have

established a solid foundation for the Group to grow sustainably in the coming years.

Operational outperformance continues

Lamprell has a proven track record for reliable project execution in its core markets and this has been

enhanced further with four major deliveries during the first six months of 2014. In February, Lamprell

completed the “Qarnin” jackup rig, a LeTourneau Super 116E (Enhanced), to our largest client, National

Drilling Company (“NDC”). This was followed by delivery of its sister rig of identical design, the

“Marrawah” jackup rig, in May 2014. This latest rig represents the 16th new build jackup drilling rig that

Lamprell has successfully constructed since 2006 and is the fourth in a series of six rigs that Lamprell has

been commissioned to build for NDC.

In April 2014, the Group delivered the 13,000 plus tonne production, utilities and quarters (“PUQ”) deck

to Nexen as part of the Golden Eagle Area Development in the North Sea. Our safety record on the

combined Nexen project (namely the wellhead platform handed over in June 2013 and the PUQ deck)

has been world class reaching the milestone of ten million man-hours without a lost time incident. In

completing this project, Lamprell also achieved a world record for the heaviest load moved by self-

propelled modular trailers.

The fourth major delivery during H1 2014 was for the self-propelled jackup vessel “Hydra” to another

key client, Seajacks. The “Hydra” is the fourth vessel that Lamprell has built for Seajacks and these

vessels have been specifically designed to work in the harsh environment of the North Sea. They are

flexible and multipurpose, capable of operating in both the offshore wind and the oil and gas sectors.

We have experienced a busy period in the rig refurbishment market, buoyed predominantly by the recent

completion of the conversion of the jackup drilling rig, “MOS Frontier”, into an accommodation support

vessel. This was handed over to our client, Millennium Offshore Services, in July. This has been the

largest rig conversion and refurbishment project in Lamprell’s history and we have seen significant

operational achievements on this highly complex and technically challenging project including an

excellent safety record of 3.8 million man hours without a day away from work case. With the departure

of the “MOS Frontier”, we anticipate lower levels of activity in rig conversions and refurbishments in H2

2014 based on current projections.

During the H1 period, the Group experienced a high number of major projects either in late stages of

construction and/or being completed. As already noted, the Group’s operations also outperformed in the

project execution and delivery of four of these projects, meaning not only that they were delivered on

time but also ahead of budget. Consequently, the project contingencies have not been used and so these

projects have been delivered ahead of budgeted margins. This has also been supported by some early

savings from productivity enhancements and costs efficiencies (‘Project Evolution’) being implemented

across the Group and by our efforts to reduce overheads, as well as improved performance in both our

land rigs and other minor fabrication businesses. The Group intends to deliver a similar, strong

operational performance during the second half of the year.

Our next major delivery period commences in November with the planned handover of the second

Caspian Sea rig, which is now in the commissioning phase. This project had been identified as a key

project with significant potential risk around completion, due to the losses suffered on and lessons

learned from delivery of the first Caspian Sea rig in 2013. While we have been making good progress on

the project, we continue to take a conservative view on completion because of previous experience on the

first Caspian Sea rig and weather extremes in the region. We are understandably working hard towards

the scheduled delivery date and, if delivered successfully as planned, this could have a material positive

impact on the financial results of the Company for 2014.

During the five-month period after completion of the second Caspian Sea rig, Lamprell is scheduled to

hand over four further new build jackup drilling rigs. This will be a critical time for Lamprell with

delivery of so many major projects in such a short space of time; however all these projects are

progressing well.

Corporate activities

We have also been busy during H1 2014 with completion of several important corporate achievements.

Early in the year and in line with the Group’s strategy to focus on its core markets, we entered into an

agreement to sell the non-core “Inspec” service business for US$ 66.2 million. This resulted in the early

repayment of a substantial part of the high cost portion of our existing debt facility.

In June, the Company successfully completed a rights issue which raised gross proceeds of

approximately US$ 120 million. The rights issue was well supported by shareholders and puts the Group

on a stronger footing to deliver its growth strategy. Project Evolution is a key component of our strategy

as it will produce significant productivity improvements across major projects and also entails a

significant capital investment programme to automate some of our facilities. Under Project Evolution,

the Group has rolled out new welding equipment and associated training, as well as updating its welding

techniques, across the facilities. This has reduced the welding manhours on one of the ongoing jackup

rig projects by 2% and it is expected to result in further reductions on other projects once the techniques

have been fully embedded. We have also recently entered a contract with a value of more than US$ 5

million for upgrading the panel line in our Hamriyah facility. This facility enhancement will be installed

by mid-2015.

As a result of the rights issue, the outstanding portion of existing debt Facility B was repaid and this

immediately reduced the Group’s bonding costs which will be further reduced going forward under the

improved terms of the new debt facility announced on 12 August 2014. This new debt facility replaces

the entire existing debt facility and comprises a funded US$ 350 million debt facility as well as a

committed US$ 250 million bonding arrangement to be used for new project awards. The rights issue, in

conjunction with the new debt arrangements, has strengthened the Group's balance sheet by providing it

with a more cost effective and sustainable capital structure which enhances the Group's working capital

flexibility and enables the Company to broaden its addressable markets.

Market overview, order book and bid pipeline

Over the last twelve months, the highest priority for the management team has been to convert a

substantial proportion of its strong bid pipeline into backlog and I am pleased with our achievement in

winning new projects with a total value of more than US$ 900 million since the beginning of the year.

We announced previously that we have seen strong demand for our products and services in our core

markets and we have maintained a buoyant pipeline, notwithstanding the broader negative sentiment

across the sector. We are attracting a variety of clients, both new and existing, and will continue to focus

on converting more awards, led by two new, senior business development appointments.

The Group has secured two, multiple-rig orders in H1 2014. Firstly in April, Ensco awarded a US$ 390

million contract for two Super 116E high specification jackup rigs with two options. Later, in May, we

were awarded a contract by Shelf Drilling, with an estimated value of more than US$ 370 million for two

more Super 116E jackup rigs. More recently, the Company announced that it had received a new

contract award from Petrofac for the fabrication and delivery of 29 piperack modules to be deployed to a

project in Abu Dhabi.

A fundamental element of our updated strategy is to leverage our key strengths, namely our high build

quality, strong safety record, commitment to reliability, our reputation for working collaboratively with

our clients for success, our skilled workforce and our strategically-located facilities. Broader market

conditions around our core markets remain competitive but these new contract awards demonstrate our

clients’ confidence in our project execution, the value we offer and our renewed financial strength.

As at 30 June 2014, the Group’s order book was valued at US$ 1.2 billion (31 December 2013: US$ 0.9

billion), of which a substantial proportion relates to the construction of the four new build jackup rigs for

Ensco and Shelf Drilling. With the increased focus on business development, the bid pipeline has grown

to approximately US$ 4.9 billion (31 December 2013: US$ 4.7 billion).

As announced previously, the Board believes that the jackup rig market will continue to provide the

Group’s primary revenue stream in the medium term and we have already been successful in starting to

diversify our client base with the contract award from Shelf Drilling. However in the longer term, our

goal is to broaden our addressable markets into related fields, based around our proven expertise in

project execution, and to attract new major clients with our improved offering and renewed financial

strength. With this in mind, our pipeline includes a more balanced representation from our core markets,

in particular from new build onshore and offshore construction projects and new build jackup rigs. The

Board expects that 2015 revenue will remain heavily weighted towards new build jackup rigs in line with

these recent contract awards. We continue discussions with prospective clients about upcoming projects.

Refurbishment projects typically have a short bid to award profile and therefore limited order book or

pipeline values. This has typically been one of the Group’s traditional areas of strength but,

notwithstanding the successes with the recent MOS project, we are seeing increasing competition for all

such projects and clients are increasingly driven by cost as the primary factor. While we expect rig

refurbishment and conversion projects to remain a core market for the Group, we will only take on such

projects which include a balanced and reasonable level of risk and reward.

Outlook

The Company has performed very well in the year to date and we aim to repeat the high levels of

operational performance during H2 2014 through our focus on project execution and embedding the

Project Evolution initiatives into the business. However, with the delivery of the five major projects

already this year and the new projects at a very early stage of construction, the business will experience

lower revenue levels in H2 2014. This is being driven by the timing of build cycles for the major

projects, in particular where cycles for the new build jackup rigs coincide, and the lower revenues from

the onshore and offshore construction market. Nevertheless the Board expects that the outturn for the

full year will be ahead of expectations (with a heavy weighting towards the first half of the year). This is

predominantly as a result of the projected continuing operational outperformance and margin

improvements on our new build projects and savings in procurement activities. As announced previously,

revenue for 2015 is expected to be broadly flat on the current year, with significantly fewer major project

completions scheduled during 2015. Alongside our continuing focus on conversion of the strong bid

pipeline, our drive to target further reductions in overhead is a high priority for the management team.

James Moffat

Chief Executive Officer

Lamprell plc

Financial Review

Results from operations

The first half of the year marked the continued financial recovery of the Group, with significantly

improved profitability and a strengthened balance sheet. The Group’s strong operational performance

was the main reason for the delivery of H1 2014 financial results being ahead of expectations, with a

contribution from some procurement gains and early results from the programme of productivity

improvements and cost efficiencies.

The Group’s total revenue of US$ 632.3 million showed significant improvement on last year’s

performance (H1 2013: US$ 506.6 million), driven mainly by the new build segment with a contribution

from rig refurbishment, partially offset by weaker revenues in the onshore and offshore construction

market. Although we were building a similar number of jack-up rigs in both H1 2014 and H1 2013, due

to the phasing of construction and the low percentage of completion on four rigs in H1 2013, the six

months to 30 June 2014 delivered materially higher revenues than the same period the previous year. An

accelerated build schedule on two rigs in H1 2014 added further to the volume growth. The

refurbishment business also contributed to the stronger revenues, driven by a strong performance on the

large-scale rig conversion project for MOS which was largely completed in the period.

Gross margin increased to 13.6% from the 9.1% reported in the corresponding period in 2013. Lower

onshore/offshore construction revenues had a negative mix impact on margins but this was more than

offset by a strong improvement in margins in our new build jackup rig business. This was partially driven

by a more favourable phasing of the construction cycle described above but in the main resulted from the

Group’s continuing improvement in project execution, which allowed a release of technical

contingencies as we successfully delivered five projects on time and ahead of budget. We also benefited

from procurement savings and some early productivity gains as we delivered higher revenues with a

slightly lower overhead base. A strong performance from land rigs and our E&C minor fabrication

business added further to the margin improvement.

Savings to ongoing corporate overhead costs have been more than offset in H1 2014 by a bad debt

provision of US$ 4.0 million and other costs, resulting in a slight increase for the period. However,

ongoing costs reduced by more than 20% on H1 2013.

EBITDA excluding discontinued operations and exceptional items for the period was US$ 66.2 million

(H1 2013: US$ 30.4 million). The Group’s EBITDA margin increased from 6% in 2013 to 10.5% in

2014, reflecting the improved operating performance of the business.

Gross profit for the six-month period was US$ 85.8 million (H1 2013: US$ 46.2 million). The reduction

in revenues arising from the sale of Inspec had a net impact of a US$ 1.7 million reduction in profit.

Finance costs and financing activities

Net finance costs in the period increased to US$ 8.6 million (H1 2013: US$ 5.8 million). Interest costs

were US$ 1.3 million higher due to the higher cost of debt following the refinancing in July 2013. The

amortised cost of bank fees was US$ 1.2 million higher in H1 2014.

Net profit after exceptional items and earnings per share

The Group recorded a profit for the six-month period ended 30 June 2014 attributable to the equity

holders of US$ 77.7 million (H1 2013: US$ 7.3 million), including a US$ 31.3 million gain from the

disposal of Inspec. The fully diluted earnings per share for the six-month period ended 30 June 2014

were 26.86 cents (H1 2013: 2.52 cents).

Capital expenditure

The Group’s capital expenditure during the six-month period ended 30 June 2014 increased to US$ 9.6

million (H1 2013: US$ 7.1 million). The main area of investment consisted of additions to operating

equipment with the major items being new cranes and to a lesser extent to buildings and infrastructure.

The major capital investment programme enabled by the rights issue will reduce costs as it is

implemented with the major part of it being committed over the course of the next eighteen months.

Cash flow and liquidity

The Group’s net cash flow from operating activities for the six-month period ended 30 June 2014

reflected a net outflow of US$ 51.9 million (H1 2013: net inflow of US$ 62.9 million) primarily driven

by increased working capital due to the natural cycle on major projects and also advance procurement on

key pieces of equipment for the new build jackup rigs. Prior to working capital movements, the Group’s

net cash inflow was US$ 81.6 million (H1 2013: inflow of US$ 33.5 million).

Cash and bank balances increased by US$ 16.9 million in the six-month period. The net cash outflow

from operations was offset by the US$ 111.0 million net proceeds from the rights issue, less a repayment

of US$ 80 million of senior debt.

Balance sheet

The Group’s total non-current assets at 30 June 2014 were US$ 380.9 million (31 December 2013: US$

367.0 million). This increase is mainly attributable to US$ 14.0 million (31 December 2013: US$ Nil) in

secured trade receivables.

The Group’s total current assets at the period-end were US$ 738.8 million (31 December 2013: US$

707.9 million). Trade and other receivables increased to US$ 352.3 million (31 December 2013: US$

327.3 million) due to unfavourable timing on milestone payments as well as payments to suppliers for

equipment procured for inventory. At 30 June 2014 the Group had a net cash position of US$ 280.6

million (31 December 2013: US$ 183.8 million) reflecting among other things the proceeds from the

rights issue received in June.

Shareholders’ equity increased from US$ 442.8 million at 31 December 2013 to US$ 635.0 million at 30

June 2014. The movement mainly reflects increased retained earnings of US$ 307.2 million (31

December 2013: US$ 229.6 million) and the proceeds from the rights issue received in June.

Borrowing and debt refinancing

Last year, the Group concluded a refinancing through a syndicate of banks for an aggregate amount of

US$ 181.0 million, consisting of: (a) a term facility A of US$ 100.0 million with a final maturity on 30

June 2016, which was subject to an amortisation schedule commencing on 30 June 2014; (b) a term loan

facility B of US$ 60.0 million with an original final maturity on 30 June 2016; and (c) a revolving facility

of US$ 21.0 million maturing on 30 June 2016.

In May 2014, the Group agreed with a range of banks a new set of funded facilities amounting to US$

350 million. The new arrangement replaces the Group's funded facilities described above. It comprises

(a) a US$ 100 million term loan (‘Facility A’); (b) US$ 50 million for general working capital purposes;

and (c) US$ 200 million of working capital for project financing. In addition, the lending banks

committed a US$ 250 million bonding facility which may be used by the Group for project bonding

requirements in connection with new contract awards funded by the working capital facility. The

refinancing was completed post period-end, on 11 August 2014. Along with greater financial flexibility,

the new facilities are expected to result in material savings from reduced interest margins and from lower

bonding costs.

The period-end outstanding borrowing was US$ 80.9 million in the form of term loans (31 December

2013: US$ 160.8 million). The balance was fully repaid on 14 August by drawing down from Facility A

on the same date.

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

Whilst the proposed repayment of the balance of term loan facility B under the 2013 debt facility

agreement removes the restriction on the payment of dividends, the Directors do not currently anticipate

that the Company will pay a final dividend in the current financial year ending 31 December 2014.

However, the Directors recognise the importance of dividends and remain optimistic about the future of

the Group and will seek to review and restore the payment of a dividend at the most appropriate 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 2013 Annual Report as well as the Risk Report in the same

document.

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 2014,

which comprises the consolidated income statement, the consolidated statement of

comprehensive income, the consolidated balance sheet, the consolidated statement of changes in

equity, the 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 2014 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 LLC

Chartered Accountants

Douglas, Isle of Man

27 August 2014

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.

Consolidated income statement

Consolidated statement of comprehensive income

Six months ended 30 June

Note 2014 2013

Six months ended 30 June 2014 Six months ended 30 June 2013

Note

Pre-

exceptio

nal items

Exceptio

nal

items Total

Pre-

exceptional

items

Exceptiona

l

items Total

USD’00

0 USD’000 USD’000 USD’000 USD’000 USD’000

(Unaudite

d)

(Unaudite

d) (Unaudited) (Unaudited) (Unaudited) (Unaudited)

Continuing operations

Revenue 5 632,334 - 632,334 506,551 - 506,551

Cost of sales (546,558) - (546,558) (460,328) - (460,328)

-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- Gross profit 85,776 - 85,776 46,223 - 46,223

Selling and distribution expenses (879) - (879) (558) - (558)

General and administrative expenses (32,306) - (32,306) (28,259) - (28,259)

Other gains/(losses) – net 6 804 - 804 1,770 - 1,770

-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- Operating profit 53,395 - 53,395 19,176 - 19,176

Finance costs (8,590) - (8,590) (5,757) (2,346) (8,103)

Finance income 718 - 718 537 - 537

-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- Finance costs – net (7,872) - (7,872) (5,220) (2,346) (7,566)

Share of profit of investments

accounted for using the equity

method 1,012 - 1,012 728 - 728

-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- Profit before income tax 46,535 - 46,535 14,684 (2,346) 12,338

Income tax expense (423) - (423) (521) - (521)

-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- Profit for the period from

continuing operations 46,112 - 46,112 14,163 (2,346) 11,817

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

Discontinued operations

Profit/(loss) from discontinued

operations 14 291 - 291 (4,566) - (4,566)

Gain on disposal of a subsidiary 14 31,270 - 31,270 - - -

-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- Profit/(loss) for the period from

discontinued operations 31,561 - 31,561 (4,566) - (4,566)

-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- Profit for the period attributable to

the equity holders of the

Company 77,673 - 77,673 9,597 (2,346) 7,251

======== ========= ======== ======== ========= ========

Earnings/ per share attributable to

the equity holders of the

Company Basic 7 26.87c 2.52c

======== ======== Diluted 7 26.86c 2.52c

======== ========

USD’000 USD’000

(Unaudited) (Unaudited)

Profit for the period 77,673 7,251

Other comprehensive income

Items that may be reclassified subsequently to profit

or loss:

Currency translation differences (196) (15)

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

Other comprehensive loss for the period (196) (15)

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

Total comprehensive income for the period 77,477 7,236

======= =======

Total comprehensive income for the period

attributable to the equity holders of the Company

arises from:

Continuing operations 45,916 11,802

======= =======


31,561 (4,566)

======= =======

Consolidated balance sheet

At 30 June At 31 December

Note 2014 2013

USD’000 USD’000

(Unaudited) (Audited)

ASSETS

Non-current assets

Property, plant and equipment 9 147,313 148,323

Intangible assets 10 208,631 213,026

Investment accounted for using the equity method 11 6,627 5,615

Trade receivables 12 14,363 -

Cash and bank balances 13 3,921 - ------------------------ ------------------------ Total non-current assets 380,855 366,964 ------------------------ ------------------------ Current assets

Inventories 13,699 11,685

Trade and other receivables 12 352,319 327,318

Derivative financial instruments - 161

Cash and bank balances 13 357,581 344,573 ------------------------ ------------------------ 723,599 683,737

Assets of disposal group classified as held for sale 14 15,162 23,843 ------------------------ ------------------------ Total current assets 738,761 707,850 ------------------------ ------------------------ Total assets 1,119,616 1,074,544 ------------------------ ------------------------ LIABILITIES

Current liabilities

Borrowings 21 (80,858) (56,493)

Trade and other payables 19 (345,563) (424,702)

Provision for warranty costs and other liabilities 20 (16,323) (5,400)

Consolidated statement of changes in equity

Note

Share capital

Share premium

Other reserves

Retained earnings

Total

USD’000 USD’000 USD’000 USD’000 USD’000

At 1 January 2013 23,552 211,776 (22,069) 192,808 406,067

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

Profit for the period - - - 7,251 7,251

Other comprehensive income:

Currency translation differences - - (15) - (15)

-------------- ----------------- -------------- ---------------- ----------------- Total comprehensive profit for the period ended 30 June 2013 - - (15) 7,251 7,236

-------------- ----------------- -------------- ---------------- ----------------- Transactions with owners: Share based payments:

– value of services provided - - - 525 525

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

Total transactions with owners - - - 525 525

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

At 30 June 2013 (unaudited) 23,552 211,776 (22,084) 200,584 413,828

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


Other comprehensive income: Re-measurement of post-employment benefit obligations 18 - - - (737) (737)


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

Total comprehensive profit for the - - (51) 28,455 28,404

Current tax liability (148) (57) ------------------------ ------------------------ (442,892) (486,652)

Liabilities of disposal group classified as held for sale 14 (5,526) (4,832) ------------------------ ------------------------ Total current liabilities (448,418) (491,484) ------------------------ ------------------------ Net current assets 290,343 216,366 ------------------------ ------------------------ Non-current liabilities

Borrowings 21 - (104,258)

Provision for employees’ end of service benefits 18 (36,186) (36,046) ------------------------ ------------------------ Total non-current liabilities (36,186) (140,304) ------------------------ ------------------------

Total liabilities (484,604) (631,788)

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

Net assets 635,012 442,756

========== ==========

EQUITY

Share capital 16 30,346 23,552

Share premium 16 315,995 211,776

Other reserves 17 (18,479) (22,133)

Retained earnings 307,150 229,561

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

Total equity attributable to the equity holders of the Company 635,012 442,756

========== ==========

period ended 31 December 2013

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

Transactions with owners:

Share based payments:


Transfer to legal reserve - - 2 (2) -

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

Total transactions with owners - - 2 522 524

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

At 31 December 2013 (audited) 23,552 211,776 (22,133) 229,561 442,756

======= ======== ======= ======== ========

Consolidated statement of changes in equity

Note Share

capital

Share

premium

Other

reserves

Retained

earnings

Total

USD’000 USD’000 USD’000 USD’000 USD’000

At 1 January 2014 23,552 211,776 (22,133) 229,561 442,756 -------------- -------------- -------------- -------------- --------------


Other comprehensive income:


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

Total comprehensive income for

the period ended 30 June 2014 - - (196) 77,673 77,477

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

Transactions with owners:

Share based payments:


Treasury shares purchased 16 - - - (327) (327)

Proceeds from shares issued (net) 6,794 104,219 - - 111,013

Disposal of a subsidiary 14 - - 3,850 - 3,850

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

Total transactions with owners 6,794 104,219 3,850 (84) 114,779

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

At 30 June 2014 (unaudited) 30,346 315,995 (18,479) 307,150 635,012

======= ======== ======= ======== ========

Consolidated statement of cash flows Note Six months ended 30 June 2014 2013 USD’000 USD’000 (Unaudited) (Unaudited) Operating activities Cash (used in)/generated from operating activities 25 (51,946) 62,877 Tax paid (332) (520) ---------------- ---------------- Net cash (used in)/generated from operating activities (52,278) 62,357 ---------------- ---------------- Investing activities Additions to property, plant and equipment (9,697) (7,056) Proceeds from sale of property, plant and equipment 42 130

Additions to intangible assets 10 (1,216) (898) Dividends from joint ventures - 173 Finance income 718 537 Proceeds from disposal of a subsidiary - net 14 59,312 - Movement in deposits with an original maturity of more than

three months 13 3,364 (6,245) Movement in margin deposits/short term deposits under lien (1,500) 44,833 ---------------- ---------------- Net cash provided by investing activities 51,023 31,474 ---------------- ---------------- Financing activities Proceeds from shares issued (net of expenses) 16 111,013 - Treasury shares purchased 16 (327) - Repayment of borrowings (81,130) (30,261) Finance costs (7,484) (8,234) ---------------- ---------------- Net cash generated from/(used in) financing activities 22,072 (38,495) ---------------- ---------------- Net increase in cash and cash equivalents 20,817 55,336 Cash and cash equivalents, beginning of the period from

continued operations 13 275,479 126,372 Cash and cash equivalents, beginning of the period from

discontinued operations 1,586 - Exchange rate translation (196) - ---------------- ---------------- Cash and cash equivalents, end of the period 297,686 181,708 ======== ======== Cash and cash equivalents from continued operations 13 294,217 181,708 Cash and cash equivalents from discontinued operations 14 3,469 - ---------------- ---------------- Total 297,686 181,708 ======== ========

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.

2 Summary of significant accounting policies

2.1 Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 June

2014 has 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 condensed consolidated interim financial information should be read in conjunction with the

annual financial statements for the year ended 31 December 2013, which have been prepared in

accordance with IFRSs as adopted by the EU.

After reviewing its cash flow forecasts for a period of not less than 12 months, from the date of

signing of this interim financial information, 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 interim

financial information.

The interim financial information has been prepared under the historical cost convention, except

as disclosed in the accounting policies below.

2.2 Accounting policies

The accounting policies applied are consistent with those of the annual financial statements for

the year ended 31 December 2013. The annual financial statements for the year ended 31

December 2013 are available on the Company’s website (www.lamprell.com).

The preparation of condensed consolidated interim financial information requires the use of

certain critical accounting estimates. It also requires management to exercise its judgement in

the process of applying the Group’s accounting policies. The areas involving a higher degree of

judgement or complexity, or areas where assumptions and estimates are significant, are

disclosed in Note 4.

(a) The following new standards, amendments to standards and interpretations are mandatory

for the first time for the financial year beginning 1 January 2014, but do not have a material

impact to the Group or are not currently relevant for the Group.

IAS 32, ‘Financial Instruments: Presentation’, amendments relating to offsetting financial

assets and financial liabilities (effective 1 January 2014);

IAS 39, ‘Financial Instruments: Recognition and Measurement’, amendments relating to

novation of derivatives and hedge accounting (effective 1 January 2014);

IFRIC 21, ‘Levies’ (effective 1 January 2014); and

IFRS 10, IFRS 12 and IAS 27, amendments relating to Investment entities (effective 1

January 2014);

(b) The following new standards, amendments to standards and interpretations have been

issued, but are not effective for the financial year beginning 1 January 2014 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;

IAS 16, ‘Property, Plant and Equipment, amendments relating to method of depreciation

(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 2012 and 2013. It includes changes to, IFRS 1, ‘First-time

Adoption of International Financial Reporting Standards’; IFRS 2, ‘Share based

payments’; IFRS 3, ‘Business Combinations’; IFRS 8, ‘Operating segments’; IFRS 13,

‘Fair Value Measurement’; ‘ IAS 16, ‘Property plant and equipment’; IAS 38, ‘Intangible

Assets’; IAS 24, ‘Related Party Disclosures’, and; IAS 40, ‘Investment Property’,

effective from 1 July 2014.

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 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 2013. There have

been no changes in any risk management policies since the year ended 31 December 2013.

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 2013.

4 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and

other factors, including expectations of future events that are believed to be reasonable under the

circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting

estimates will, by definition, seldom equal the related actual results. The estimates and

assumptions that have a significant risk of causing a material adjustment to the carrying amounts

of assets and liabilities within the next financial period are as follows:

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 23 million (H1 2013: increase in

revenue and profit by USD 28 million) if the total costs to completion are decreased by 10% and

a decrease in revenue and profit by USD 22 million (H1 2013: decrease in revenue and profit by

USD 39 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 2013 and is detailed in the annual financial statements for the year ended 31

December 2013.

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 4.25% (2013: 3%). 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 1.2 million (2013: USD

1.2 million) lower or USD 1.3 million (2013: USD 1.3 million) higher.

Warranty provisions The Company has provided for amounts that are expected to be potential future warranty claims. These provisions are mainly on new-build contracts. These amounts are based on management’s best estimates based on the complexity of the projects still under warranty, remaining period of warranty and history of past warranty claims. Due to the inherent uncertainty associated with these estimates, the actual amount of future claims could be different than the amount provided. Management believes that the amounts provided are reasonable.

5 Segment information

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. 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.

The Executive Directors consider the business mainly on the basis of the facilities from where the services are rendered. Management considers the performance of the business from Sharjah (SHJ), Hamriyah (HAM) and Jebel Ali (JBA) in addition to the performance of Land Rig Services (LRS), Sunbelt, Engineering and Construction (E&C) and Operations and Management (O&M).

SHJ, HAM, JBA and LRS meet all the aggregation criteria required by IFRS 8 and are reported as a single segment (Segment A). 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.

The reportable operating segments derive their revenue from the upgrade and refurbishment of offshore jackup rigs, fabrication, assembly and new build construction for the offshore oil and gas and renewables sectors, including FPSO and other offshore and onshore structures, oilfield engineering services, including the upgrade and refurbishment of land rigs.

Sunbelt derives its revenue from safety and training services; E&C derives its revenues from the site works, compression and chemicals and; O&M derives its revenue from the labour supply and other operations and maintenance services. Segment A All other segments Total

USD’000 USD’000 USD’000

Six months ended 30 June 2014

Total segment revenue 593,157 44,504 637,661

Inter-segment revenue - (5,327) (5,327)

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

Revenue from external customers 593,157 39,177 632,334

======== ====== ========

Gross profit 90,576 21,749 112,325

======== ====== ========

Six months ended 30 June 2013

Total segment revenue 477,736 32,271 510,007

Inter-segment revenue - (3,456) (3,456)

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

Revenue from external customers 477,736 28,815 506,551

======== ======= ========

Gross profit 56,819 14,493 71,312

======== ======= ========

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 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 profit is provided as follows:


2014 2013

USD’000 USD’000

Gross operating profit for the reportable segments as

reported to the Executive Directors 90,576 56,819

Gross operating profit for other segments as reported to the

Executive Directors 21,749 14,493

Unallocated:

Under-absorbed employee and equipment costs (14,064) (12,518)

Repairs and maintenance (9,407) (7,240)

Yard rent and depreciation (4,112) (4,981)

Others 1,034 (350)

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

Gross profit 85,776 46,223

======= ========

The reconciliation of the gross profit:


2014 2013

USD’000 USD’000

Gross profit 85,776 46,223

Selling and distribution expenses (879) (558)

Bad debt provision (3,702) (1,351)

Other General and administrative expenses (28,604) (26,908)

Other gains/(losses) – net 804 1,770

Finance costs (8,590) (8,103)

Finance income 718 537

Others 589 207

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

Profit for the period from continuing operations 46,112 11,817

====== =======

Profit/(loss) for the period from discontinued operations 31,561 (4,566)

====== =======

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.

6 Other gains/(losses) - net


2014 2013

USD’000 USD’000

Exchange gain/(loss) – net 308 551

Profit/(loss) on disposal of property, plant and equipment 38 (121)

Recovery of doubtful debts - 816

Others 458 524

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

804 1,770

======== ========

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.


2014 2013

USD’000 USD’000

The calculations of earnings per share are based on the

following profit and numbers of shares:

Profit for the period 77,673 7,251

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

Weighted average number of shares for basic

earnings per share 289,037,555

287,546,196

Adjustments for:

- Assumed vesting of performance share plan 104,738 18,947

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

Weighted average number of shares for diluted earnings

per share 289,142,293

287,565,143

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

Weighted average number of shares for basic earnings

per share (previously stated) 260,348,415

Impact of bonus element of the rights issue 27,197,781

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

Weighted average number of shares for basic earnings

per share (revised) 287,546,196

===========

Earnings per share:

Basic 26.87c 2.52c

=========== ===========

Diluted 26.86c 2.52c

=========== ===========

Earnings per share from continuing operations:

Basic 15.95c 4.11c

Diluted 15.95c 4.11c

=========== ===========

Earnings/(loss) per share from discontinued operations:

Basic 10.92c (1.59)c

Diluted 10.91c (1.59)c

=========== ===========

On 26 June 2014, the Company announced a rights issue of five shares for every sixteen shares

held at a discounted price of 88 pence per share resulting in the issue of 81,363,469 new

ordinary shares (Note 16). The calculation of the weighted average number of ordinary shares

for the current period was affected by the issue of the new ordinary shares. The Group has

treated the discount element of the rights issue as if it were a bonus issue, using the theoretical

ex-rights price of 132 pence per share. The effect of this is to increase the weighted average

number of shares reported in the prior period, with a resulting reduction in the reported basic and

diluted earnings per share for the previous period. The adjustment factor, to effect the increase in

the weighted average number of shares, has been calculated by dividing the share price

immediately before the shares were quoted ex-rights (146p) with the theoretical ex-rights price

(132p), giving an adjustment factor of 1.104. These adjustments to the comparative EPS

calculations do not impact the consolidated income statement and consolidated balance sheet

previously reported.

8 Operating profit

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


2014 2013

USD’000 USD’000

Depreciation 10,567 11,079

====== ======

Operating lease rentals – land and buildings 8,906 8,691

====== ======

9 Property, plant and equipment

USD’000

Net book amount at 1 January 2013 165,849

Additions 7,056

Exchange differences (15)

Net book amount of disposals (242)

Depreciation (12,044)

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

Net book amount at 30 June 2013 160,604

Additions 4,951

Exchange differences 15

Net assets of disposal group classified as held for sale (Note 14) (4,820)



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

Net book amount at 31 December 2013 148,323

Additions 9,620

Net assets of disposal group classified as held for sale (Note 14) (59)



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

Net book amount at 30 June 2014 147,313

=======

The additions of USD 9.6 million during the current period comprise USD 0.4 million of

additions to capital work-in-progress, USD 1.2 million of additions to buildings and

infrastructure, USD 7.6 million of additions to operating equipment and USD 0.4 million of

additions to other fixed assets.

10 Intangible assets

Goodwill Others Total

USD’000 USD’000 USD’000

Net book amount at 1 January 2013 180,539 39,288 219,827

Additions - 898 898

Amortisation - (4,750) (4,750)

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

Net book amount at 30 June 2013 180,539 35,436 215,975

Additions - 1,717 1,717


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

Net book amount at 31 December 2013 180,539 32,487 213,026

Additions - 1,216 1,216


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

Net book amount at 30 June 2014 180,539 28,092 208,631

======= ====== =======

11 Investments accounted for using the equity method Investment in joint ventures At 30 June

2014

At 31 December

2013 USD’000 USD’000

Balance as at 1 January 5,615 4,679

Dividend received during the period - (174) Group’s share of joint venture’s net profit - net of Group’s share of income tax 1,012 1,110

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

Closing balance 6,627 5,615

======== ========

During 2012, the Group entered into a joint venture agreement through its subsidiary Lamprell

Sharjah WLL with the Saudi Arabia based Shoaibi Group, Al Yusr Townsend and Bottum

L.L.C., to form Lamprell Arabia Ltd (“LAR”). The JV did not form in the stipulated time and

this agreement was allowed to lapse on 6 Feb 2014. There has been no outflow from the Group

in the form of investment. The Group is still actively engaged in the setup of these operations

outside the JV structure.

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

Name of the joint venture

Place of incorporation

and operation

Proportion of

ownership

Status

MIS Arabia Co. Ltd.*

Jubail, Kingdom of

Saudi Arabia 30%

Operational

* 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: MIS Arabia Co. Ltd.


2014 2013 USD’000 USD’000 Total current assets 26,117 25,172 Total non-current assets 5,937 6,701 Total current liabilities (8,196) (10,336) Total non-current liabilities (2,013) (1,836) ------------------ ------------------ Net assets 21,845 19,701 ======== ======== Group’s share of joint venture’s net assets - net of Group’s

share of income tax 6,627 5,615

======== ========

Six months ended

30 June

Year ended

31 December

2014 2013

USD’000 USD’000

Revenue 16,015 40,328

Expenses (12,643) (35,537)

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

Profit before tax 3,372 4,791

======== ========

Group’s share of joint venture’s net profit - net of

Group’s share of income tax 1,012 1,110

======== ========

MIS Arabia Co. Ltd. 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.


2014 2013

USD’000 USD’000

Letters of Credit 77 52

======== ========

Letters of guarantee 2,228 2,296

======== ========

Operating lease commitments 35 210

======== ========

12 Trade and other receivables


2014 2013

USD’000 USD’000

Non-current

Trade receivables (secured) 14,363 -

======= =======

Current

Trade receivables 134,106 158,161

Other receivables and prepayments 19,903 16,068

Advances to suppliers 20,340 811

Receivable from a related party (Note 15) 69 197

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

174,418 175,237

Less: Provision for impairment of trade receivables (13,351) (7,715)

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

161,067 167,522

Amounts due from customers on contracts 82,451 57,557

Contract work in progress 108,801 102,239

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

352,319 327,318

======= =======

Amounts due from customers on contracts comprise:


2014 2013

USD’000 USD’000

Costs incurred to date 1,187,156 618,302

Attributable profits 180,190 113,562

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

1,367,346 731,864

Less: Progress billings (1,284,895) (674,307)

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

82,451 57,557

========== ==========

As required under our current contracts with Ensco we note that all related materials and equipment and the vessel itself being constructed under these contracts are the exclusive property of Ensco.

13 Cash and bank balances


2014 2013

USD’000 USD’000

Cash at bank and on hand 115,377 48,738

Term deposits and margin deposits-Current 242,204 295,835

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

Cash and bank balances 357,581 344,573

Term deposits and margin deposits-Non-current 3,921 -

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

361,502 344,573

Less: Margin/short term deposits under lien (18,055) (16,500)

Less: Deposits with an original maturity of more than

3 months (49,230)

(52,594)

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

Cash and cash equivalents (for purpose of the

consolidated statement of cash flows) 294,217 275,479

======= =======

At 30 June 2014, the cash at bank and term deposits were held with fifteen banks (31 December

2013: fifteen banks). The effective average interest rate earned on term deposits was 0.28% (31

December 2013: 0.54%) per annum. Margin and short term deposits of USD 18.0 million (31

December 2013: USD 16.5 million) and deposits with an original maturity of more than 3

months amounting to USD 39.5 million (31 December 2013: USD 50.6 million) are held under

lien against guarantees issued by the banks (Note 24).

14 Non-current assets held for sale and discontinued operations


Profit/(loss) from discontinued operations comprises:


2014 2013

USD’000 USD’000

Inspec 737 3,808

Litwin (446) (8,374)

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

291 (4,566)

====== ====== Inspec

During 2013, the Group decided to dispose one of its subsidiaries (Inspec). This transaction was completed on 3 March 2014. Financial information relating to Inspec operations for the period to the date of disposal and prior year comparatives are set out below.

The main elements of the cash flow of the Inspec are as follows:


2014 2013

USD’000 USD’000

Operating cash flows 2,954 799

Investing cash flows (74) (430)

Financing cash flows - (420)

------------- ------------ Total cash flows 2,880 (51) ====== ======

Analysis of the result of discontinued operations related to Inspec is as follows:


2014 2013

USD’000 USD’000

Revenue 3,008 11,793

Cost of sales (2,080) (7,279)

General and administrative expenses (193) (720) Other gains/losses – net 2 14 --------------- ---------------

Profit and total comprehensive income arising from discontinued operations

737

3,808

======= =======

Litwin

During the period, the Group decided to dispose one of its subsidiaries (Litwin). The completion date for this transaction is expected to be before December 2014 and consequently meets the criteria for assets held for sale and discontinued operations as per IFRS 5. Financial information relating to the operations for the period and prior period comparatives are set out below.

The main elements of the cash flow of the Litwin are as follows:


2014 2013

USD’000 USD’000

Operating cash flows 2,067 1,528

Investing cash flows - (39)

Financing cash flows (131) (808) ------------- ------------ Total cash flows 1,936 681 ====== ====== Analysis of the result of discontinued operations related to Litwin is as follows:


2014 2013

USD’000 USD’000

Revenue 13,025 2,659

Cost of sales (12,307) (10,442)

General and administrative expenses (1,305) (465) Other gains/losses – net 237 5 Finance costs – net (96) (131) --------------- --------------- Loss and total comprehensive loss arising from discontinued

operations (446) (8,374)

======= =======

Disposal Group

Inspec Cash flow on disposal of Inspec is as follows: USD’000

Property, plant and equipment 4,618

Inventories 459

Trade and other receivables 18,246

Cash and cash equivalents 4,522

Provision for employees’ end of service benefits (1,568)

Trade and other payables (3,920)

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

Net assets 22,357

Merger reserve (Note 17) 3,850

Provision for minimum purchase obligations (Note 20) 3,423

Expenses on disposal 2,411

Provision for impairment of trade receivables 1,934

Provision for warranty 1,000

Gain on disposal 31,270

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

Cash consideration on disposal 66,245

=======

Less: Expenses on disposal (2,411)

Less: Cash and cash equivalents transferred as a part of disposal (4,522)

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

Net cash inflow for the purpose of consolidated cash flow statement 59,312

=======

At 31 December 2013, the major classes of assets and liabilities of Inspec disposal group were as follows:

At 31 December

2013

USD’000

Assets classified as held for sale

Property, plant and equipment (Note 9) 4,820

Inventories 460

Trade and other receivables (net of provision for impairment of trade receivables)

16,922

Cash and bank balances 1,641 --------------- 23,843 =======

Liabilities classified as held for sale

Provision for employees’ end of service benefits (Note 18) 1,487

Trade and other payables 3,345

--------------- 4,832 ======= The commitments related to Inspec are as follows:

At 31 December

2013

USD’000

Operating lease commitments 107

=======

Capital commitments for purchase of operating equipment 127 ======= Bank guarantees 23 ======= Litwin The major classes of assets and liabilities of Litwin disposal group are as follows:

At 30 June

2014

USD’000

Assets classified as held for sale

Property, plant and equipment 59

Trade and other receivables (net of provision for impairment of trade

and receivables) 11,634

Cash and bank balances 3,469

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

15,162

======

Liabilities classified as held for sale

Provision for employees’ end of service benefits 540

Trade and other payables 4,986

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

5,526

======

The commitments related to Litwin discontinued operations are as follows:

At 30 June

2014

USD’000

Operating lease commitments 172

=======

Bank guarantees 9,768 =======

15 Related party balances and transactions

Related parties comprise Lamprell Holdings Limited (“LHL”) (which owns 33% of the issued share capital of the Company), certain legal shareholders of Group companies, Directors and key management personnel of the Group and entities controlled by Directors and key management personnel. Key management includes directors (executive and non-executive) and members of the executive committee. Other than disclosed elsewhere in the financial statements, the Group entered into the following significant transactions during the year with related parties at prices and on terms agreed between the related parties.


2014 2013

USD’000 USD’000

Key management compensation 3,342 4,327

====== ======

Legal and professional services 248 385

====== ======

Sales to joint ventures 221 212

====== ======

Purchases from joint ventures - 116

====== ======

Sponsorship fees and commissions paid to legal

shareholders of subsidiaries 462 158

====== ======

Key management compensation comprises:


2014 2013

USD’000 USD’000

Salaries and other short term benefits 2,914 4,142

Share based payments - value of services provided 336 73

Post-employment benefits 92 112

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

3,342 4,327

====== ======

The terms of the employment contracts of the key management include reciprocal notice periods

of between six to twelve months.

Due from a related party

At 30 June At 31 December 2014 2013 USD’000 USD’000 Current MIS Arabia Co. Ltd (Note 12) 69 197

===== =====

16 Share capital

Issued and fully paid ordinary shares

Equity share capital

Share

premium

Number USD’000 USD’000

At 1 January 2013 and 31 December 2013 260,363,101 23,552 211,776

Add: new shares issued during the period 81,363,469 6,794 112,785

Less: transaction costs relating to the rights

issue

- - (8,566)

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

At 30 June 2014 341,726,570 30,346 315,995

=========== ======= =======

The total authorised number of ordinary shares is 400 million shares (2013: 400 million shares)

with a par value of 5 pence per share (2013: 5 pence per share).

During the period, the Company successfully carried out a fully underwritten rights issue. The

rights issue offered five new ordinary shares for every sixteen ordinary shares held by each

shareholder at an issue price of 88 pence per new ordinary share. The rights issue was fully

subscribed and paid up as at 30 June 2014. The Company issued 81,363,469 new ordinary

shares through the rights issue and received proceeds amounting to USD 119.6 million.

The paid-in capital from the rights issue is split between the par value of the shares issued (USD

6.8 million) and the share premium at the date of issue (USD 112.8 million) less any directly

attributable transaction costs (USD 8.6 million). These new ordinary shares will rank pari passu

in all respects with the existing ordinary shares, including the right to all future dividends and

other distributions declared, made or paid.

During 2014, Lamprell plc employee benefit trust (‘EBT’) acquired 127,500 shares (2013: Nil)

of the Company. The total amount paid to acquire the shares was USD 0.3 million (2013: Nil)

and has been deducted from the consolidated retained earnings. During 2014, 127,500 shares

(2013: Nil) amounting to USD 0.3 million (2013: Nil) were issued to employees on vesting of

the free shares and 14,686 shares (31 December 2013: 14,686 shares) were held as treasury

shares at 30 June 2014. The Company has the right to reissue these shares at a later date. These

shares will be issued on the vesting of the free shares/performance shares/share options granted

to certain employees of the Group.

17 Other reserves

Legal reserve

Merger reserve

Translation reserve

Total

USD’000 USD’000 USD’000 USD’000

At 1 January 2013 96 (22,422) 257 (22,069)

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

Currency translation differences - - (15) (15)

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

At 30 June 2013 (Unaudited) 96 (22,422) 242 (22,084)


Transfer from retained earnings 2 - - 2

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

At 31 December 2013 (Audited) 98 (22,422) 191 (22,133)


Disposal of a subsidiary (Note 14) - 3,850 - 3,850

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

At 30 June 2014 (Unaudited) 98 (18,572) (5) (18,479) ======== ======== ======== ========

Merger reserve

On 11 September 2006, the Group acquired 100% of the legal and beneficial ownership of Inspec from LHL for a consideration of USD 4 million. This acquisition was accounted for using the uniting of interests method and the difference between the purchase consideration (USD 4 million) and the share capital of Inspec (USD 0.2 million) was recorded in the Merger reserve. On the disposal of Inspec during the period, this reserve has been recycled to the consolidated income statement and presented as part of the gain on disposal of a subsidiary (Note 14).

18 Provision for employees’ end of service benefits In accordance with the provisions of IAS 19, management has carried out an exercise to assess

the present value of its obligations, using the projected unit credit method, in respect of

employees’ end of service benefits payable under the Labour Laws of the countries in which the

Group operates. Under this method, an assessment has been made of an employee’s expected

service life with the Group and the expected basic salary at the date of leaving the service. The

obligation for end of service benefit is not funded.

The movement in the employees’ end of service benefit liability over the periods is as follows:

USD’000 At 1 January 2013 38,095

Current service cost 2,621

Interest cost 599 Payments during the period (3,592) -------------- At 30 June 2013 37,723 Current service cost 2,666 Interest cost 599 Actuarial losses 737

Liabilities of disposal group classified as held for sale (1,487) Payments during the period (4,192) ------------ At 31 December 2013 36,046 Current service cost 2,694 Interest cost 564 Liabilities of disposal group classified as held for sale (540) Payments during the period (2,578) ------------ At 30 June 2014 36,186 ======

The amounts recognised in the consolidated income statement are as follows:

USD’000


Interest cost 599 ------------ At 30 June 2013 3,220

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


Interest cost 599 ------------ At 31 December 2013 3,265

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


Interest cost 564 ------------ At 30 June 2014 3,258 ====== The charge for the six months period ended 30 June 2014 is based on the estimates provided in the actuarial report as at 31 December 2013. There has been no change in principal actuarial assumptions used as at 31 December 2013.

19 Trade and other payables

At 30 June At 31 December 2014 2013 USD’000 USD’000 Trade payables 49,368 31,247 Accruals 197,126 203,497 Amounts due to customers on contracts 99,051 189,940 Dividend payable (Note 22) 18 18 --------------------------------------------------- -------------------------------------------------

345,563 424,702 ======= ======= Amounts due to customers on contracts comprise: Progress billings 547,454 1,116,466 Less: Costs incurred to date (387,897) (883,808)

Less: Recognised profits (60,506) (42,718) --------------- --------------- 99,051 189,940 ======= =======

20 Provision for warranty costs and other liabilities

Warranty

costs

Minimum purchase

obligations Total USD’000 USD’000 USD’000

At 1 January 2013 and 30 June

2013 - - -

Charge during the period 5,400 - 5,400

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

At 31 December 2013 5,400 - 5,400

Charge during the period 7,500 3,423 10,923

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

At 30 June 2014 12,900 3,423 16,323

======= ======= ======= Warranty costs charged during the year relates to management’s assessment of potential claims

under contractual warranty provisions.

21 Borrowings

At 30 June At 31 December 2014 2013 USD’000 USD’000 Bank term loans 80,858 160,751

======= ======= The bank borrowings are repayable as follows: Current (less than 1 year) 80,858 56,493 Non-current (2 to 3 years) - 104,258 --------------- --------------- 80,858 160,751 ======= ======= At 30 June 2014, the Group has banking facilities of USD 687 million (2013: USD 781 million) with commercial banks. The facilities include bank overdrafts, letters of guarantees, letters of credit and short-term loans.

Bank facilities are secured by lien over term deposits in the amount of USD 57.5 million (2013: USD 67.1 million), the Group’s counter indemnities for guarantees issued on their behalf, the Group’s corporate guarantees, letter of undertakings, letter of credit payment guarantees, cash margin held against letters of guarantees, shares of certain subsidiaries, certain property, plant and equipment, movable assets, leasehold rights for land and certain contract receivables.

The borrowings include accrued interest of USD 0.9 million (2013: USD 1.9 million). At 31 December 2013, borrowings were net of the unamortised arrangement fees and other transaction costs of USD 1.2 million.

The bank facilities relating to overdrafts and revolving facilities carry interest at LIBOR + 6.0% to 8.0% (2013: LIBOR + 6% to 8%). The carrying amounts of borrowings in the year approximated to their fair value and were denominated in US Dollars or UAE Dirhams, which is pegged to the US Dollar. Subsequent to the Balance Sheet date, on 11 August 2014, the Group signed an agreement with

the lenders for a syndicated facility. This new facility will replace the Group’s existing funded

facility with a USD 350 million facility, comprising a USD 100 million term loan, USD 50

million for general working capital purposes and USD 200 million of working capital for project

financing. In addition, the lending banks have agreed to arrange a committed USD 250 million

bonding facility which may be used by the Group for project bonding requirements in

connection with new contract awards. This new agreement will provide the Group with greater

flexibility within its financial covenants than is currently available under its existing facilities

and material savings from reduced interest margins and from lower bonding costs to our

projects.

22 Dividends

There were no dividends declared or paid during the six months period ended 30 June 2014 and

during the year ended 31 December 2013. At 30 June 2014 and 31 December 2013, unpaid

dividends amounted to USD 18,000 (Note 19) and were in relation to the shares held by EBT.

23 Commitments

(a) Operating lease commitments

The Group leases land and staff accommodation under various operating lease agreements. The

remaining lease terms of the majority of the leases are between three to twenty one years and are

renewable at mutually agreed terms. The future minimum lease payments payable under

operating leases are as follows:

At 30 June At 31 December 2014 2013 USD’000 USD’000 Not later than one year 5,699 7,528 Later than one year but not later than five years 11,268 11,625 Later than five years 40,590 42,002 ------------- ------------- 57,557 61,155 ====== ======

(b) Other commitments

Letters of credit for purchase of materials and operating equipment - 1,062 ====== ====== Capital commitments for purchase of operating 4,003 1,954

equipment ====== ====== Capital commitments for construction of facilities 2,240 2,241 ====== ======

24 Bank guarantees


2014 2013

USD’000 USD’000

Performance/bid bonds 98,997 115,140 Advance payment, labour visa and payment guarantees 336,080 321,052 --------------- -----------------------

435,077 436,192 ======= ===========

The various bank guarantees, as above, were issued by the Group’s bankers in the ordinary

course of business. Certain guarantees are secured by 100% cash margins, assignments of

receivables from some customers and in respect of guarantees provided by banks to the Group

companies, they have been secured by parent company guarantees. In the opinion of the

management, the above bank guarantees are unlikely to result in any liability to the Group.

25 Cash flow from operating activities Note Six months ended 30 June 2014 2013 USD’000 USD’000

(Unaudited) (Unaudited) Operating activities Profit for the period before income tax 78,096 7,772

Adjustments for: Share based payments - value of services provided 243 525 Depreciation 10,848 12,044 Amortisation of intangible assets 10 5,611 4,750 Share of profit from investments accounted using

the equity method 11 (1,012) (728) (Profit)/loss on disposal of property, plant and

equipment (38) 112 Provisions for warranty costs and other liabilities 6,500 - Provision for slow moving and obsolete

inventories 246 213 Provision for impairment of trade receivables, net

of amounts recovered 3,622 535 Provision for employees’ end of service benefits 3,378 3,220 Gain on disposal of a subsidiary 14 (31,270) - Gain on derivative financial instruments - 901 Finance costs 8,721 8,234 Finance income (718) (537) ------------- -------------

Operating cash flows before payment of employees’ end of service benefits and changes in working 84,227 37,041

capital

Payment of employees’ end of service benefits (2,617) (3,592)

Changes in working capital: Inventories before movement in provision (2,259) 1,038 Derivative financial instruments 161 - Trade and other receivables before movement in

provision for impairment of trade receivables (57,879) (10,032) Trade and other payables, excluding movement in

dividend payable (73,579) 38,422 ------------- ---------------

Net cash (used in)/generated from operating activities (51,946) 62,877

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

Statement of Directors’ responsibilities

The directors confirm that, to the best of their knowledge, this consolidated interim financial

information has been prepared in accordance with IAS 34 as adopted by the EU. The interim

management report includes a fair review of the information required by Disclosure and

Transparency Rules 4.2.7R and 4.2.8R, namely:

an indication of important events that have occurred during the first six months of the

financial year and their impact on the consolidated interim financial information, and a

description of the principal risks and uncertainties for the remaining six months of the

financial year; and

material related party transactions in the first six months of the financial year and any

material changes in the related party transactions described in the last annual report.

The Directors of Lamprell plc are listed in the Lamprell plc Annual Report for 31 December

2013. A list of current directors is maintained on the Lamprell plc website www.lamprell.com.

On behalf of the Board

James Moffat

Chief Executive Officer

Joanne Curin

Chief Financial Officer

27 August 2014

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