TIDMLAM
RNS Number : 2180V
Lamprell plc
08 August 2022
8 August 2022
LAMPRELL PLC
("Lamprell" and with its subsidiaries the "Group")
2021 FINANCIAL RESULTS
Lamprell today announces its audited financial results for the
year ended 31 December 2021.
Chairman's introduction
Dear Shareholders,
I would like to thank you for your continued support as Lamprell
delivers on its strategic priorities against the continuing
COVID-19 disruptions. The Group has transformed noticeably over the
past five years and, having announced a strategic reorganisation in
early 2021, is now on course, subject to resolving its acute
liquidity and funding requirements, for an even closer alignment
with the energy transition. The transformation has not been
straightforward and we, like everyone in the energy landscape, have
fought the COVID-19 pandemic headwinds and their impacts on our
productivity, new awards and financial performance. Multiple
lockdowns, severe travel restrictions, self-isolation requirements
and, more noticeably, the loss of productivity in our supply chain
were the main drivers of our USD 19.9 million adjusted EBITDA loss.
The Group net loss was USD 60.0 million.
I would like to commend everyone at Lamprell for another year of
excellent safety performance. In a period of strict COVID-19
restrictions and a multitude of impacts on daily operations, the
uncompromising effort to deliver our projects safely really stands
out. I am also pleased with the progress made by our Sustainability
Committee in setting out our priorities for responsible
operations.
We started the year by announcing that we would drive the Group
towards three distinct business units - Renewables, Oil & Gas
and Digital - as a means to implement our strategic goals. Our
roots as a Middle Eastern regional rig builder are valued by our
long-standing customers and recognised by new and prospective
clients. Today Lamprell firmly stands as a global energy partner
with a clear growth strategy and a foothold in markets with
significant barriers to entry. Our capacity and track record in
serial renewables fabrication have earned us solid credentials in
an industry with double-digit annual growth rates. Our investment
in Saudi Arabia and our four-decade history in serving our clients
in the Middle East have enabled us to become one of the select few
partners on Saudi Aramco's LTA programme. With the development of
our digital business, Lamprell is aiming to ensure it remains a
quality partner to its clients, one that is able to address their
growing need for new technology and unlock its significant
value.
Our renewables business has seen steady growth in its bid
pipeline since we took on our first offshore wind project in 2016.
In 2021, as net zero carbon targets and the energy transition
dominated the headlines, our pipeline of renewables projects grew
from USD 2.5 billion to USD 4.6 billion, exceeding the value of
prospective oil & gas projects for the first time in our
history. This is the beginning of a significant increase in
opportunity as offshore wind is set to ramp up commissioned
capacity through the coming decade. There are currently around a
dozen yards globally that can provide adequate facilities and
demonstrate proven experience for the complex serial work that
Lamprell specialises in. With nearly 10,000 foundations required
over the next ten years, global fabrication capacity will be put
under significant pressure. Lamprell, with its track record in
jacket fabrication for the UK's leading offshore wind farms, is
well positioned to benefit from this growth.
The oil & gas industry has experienced some of the most
dramatic shockwaves over the last eight years, only to see a steep
recovery in oil prices recently as the energy crisis unravelled to
expose significant underinvestment and the global supply squeeze
was amplified by the war in Ukraine. Hydrocarbons will continue to
play a critical role in supplying the world with energy for many
years and will therefore remain a core pillar of Lamprell's
operations in the near term. Our Board too has evolved to better
match our strategic ambition. We welcomed Motassim Al Maashouq as
an independent Non-Executive Director. Motassim brings nearly four
decades of experience at Saudi Aramco, and his insight has been
extremely helpful in progressing the strategy for our Oil & Gas
business unit. We were also pleased to broaden our Board
credentials with the appointment of Jean Marc Lechene a former
renewables executive. James Dewar has decided to step down from his
role as a Non-Executive Director after more than four years on the
Board and as Chair of our Audit and Risk Committee. We had
commenced a process to find a replacement but this process has been
put on hold pending outcome of the offer process detailed below. In
the meantime, Debra Valentine has agreed to step into the role on
an interim basis.
In 2021 our primary focus was to ensure our business development
goals were matched by a funding strategy. In Q4, we were pleased to
receive in the support of our shareholders and lenders during the
first phase of this strategy when we raised USD 30.1 million of
equity and a USD 45 million working capital facility, which helped
alleviate the immediate pressure on our ongoing working capital
requirements.
Management then continued to pursue a number of financing and
strategic options with a view to finalising these in Q2 2022. In
the absence of adequate debt finance solutions, the Group
management and Board consulted extensively with the major
shareholders to gauge their support for an equity raise as a means
to meet its USD 120-150 million balance sheet and growth funding
target. In light of the challenging equity markets and the acute
liquidity pressure, this option did not receive sufficient support
from our shareholders.
The Group then received a combined all cash offer to acquire the
entire issued and to be issued share capital of Lamprell PLC from
Blofeld Investment Management, a 25% shareholder, and AlGihaz
Holding Closed Joint-Stock Company, a 19.7% shareholder. The offer
includes a Bridge Loan Facility to assist with immediate working
capital and capital expenditure requirements. Without an agreement
on an equity-based financing solution, and mindful of the acute
liquidity needs of the Group, the Board views this offer as a
viable pathway to resolve the immediate funding obligations and
severe liquidity concerns. In the absence of any alternatives, the
Group will not be in the position to trade solvently should this
offer not proceed to completion. On 21 July 2022, Thunderball
Investments Limited (a newly formed company owned by Blofeld
Investment Management Limited and AlGihaz Holding Closed
Joint-Stock Company) (collectively referred to as "Thunderball")
and Lamprell's Board of Directors announced the terms of a
recommended cash offer to be made by Thunderball to acquire the
issued and to be issued share capital of Lamprell PLC. Further
details are set out on the Company website and its impact on going
concern, including the related material uncertainty, are set out in
the going concern section of the Financial Review.
Energy market fundamentals have demonstrated significant growth
both in renewables and oil & gas in recent months and the Board
is confident in the increasing opportunity set that lies ahead for
Lamprell. The Group's credentials and experience coupled with a
timely funding strategy will enable it to deliver returns on this
opportunity in the near to medium term.
John Malcolm
Chairman
Chief Executive Officer's review
As we complete our second year of working with COVID-19, I am
pleased to report solid operational results, year-on-year revenue
and bid pipeline growth and, more importantly, a number of
significant milestones as we deliver our growth strategy. 2021
marked a significant reorganisation for Lamprell that put us on a
firm course towards the energy transition. Lamprell is a
transformed business, not only as a result of a significant shift
in its addressable markets, but also as a result of continuing
investment in people, our yard and the intense commercial focus. In
2021 alone, our bid pipeline grew by over 30% to USD 7.9 billion,
with the renewables component growing by a remarkable 85% to
provide USD 4.6 billion of opportunities. Only five years ago, we
would not have been in the position to bid on over 90% of the
projects in our current pipeline. In that timeframe, we built a
solid track record in complex serial renewables fabrication that
can be matched by few yards globally. We also invested in and
secured partnerships in Saudi Arabia, where Lamprell had no direct
involvement previously. And we recognised the significant potential
of digital solutions for the energy industry, again establishing
strategic partnerships to develop this high-potential business
unit.
COVID-19 and safety
I would like to thank our operational team for another year of
excellent safety performance and delivering a Total Recordable
Injury Rate (TRIR) of 0.10, another historic result. This
performance is particularly noteworthy in the context of the
ongoing COVID-19 pandemic, which once again affected our
productivity and financial results. Our yards operated throughout
the year without any outages to deliver for our clients, but it
came at a cost and the Group made an adjusted EBITDA loss of USD
19.9 million and a net loss of USD 60.0 million.
Renewables
I am highly encouraged by the bidding dynamics and the
continuous upward adjustments for the outlook in the renewables
industry. Presently there is circa 35 GW of installed offshore wind
capacity across the globe. This is expected to reach 200 GW by the
end of the decade. For context, 1 GW represents approximately 100
jacket foundations, or over 1 year of Lamprell's current capacity.
We recognise the significant fabrication capacity crunch the
industry is likely to face in the near and medium term. In recent
months we have seen a clear preference for reservation agreements,
contracts reserving yard capacity ahead of full award, as our
prospective clients try to address the limited global fabrication
capacity in offshore wind. That is why Lamprell has continuously
adapted its operational set-up to improve efficiencies to ensure we
are capable of executing larger projects within shorter timeframes.
With these factors in mind, we approved, subject to securing the
necessary funding, the construction of a renewables production line
as a capex priority for 2022. This critical change to our yard will
significantly increase our revenue-generating capacity by allowing
us to access monopile projects and, in future, compete for larger
scale components for floating foundations.
Oil & Gas
Our oil & gas legacy business, and specifically our
proximity to the low-cost producers, has provided us with
exceptional operational expertise and crucial strategic
partnerships. We are currently working on three major projects
worth over USD 500 million, all directly or indirectly commissioned
by Saudi Aramco, our partner in the IMI joint venture. In 2021 we
were successful in securing our first two awards from Aramco's
selective LTA programme. We continue to bid on circa USD 3 billion
of opportunities within this programme and are starting to notice a
ramp-up in bidding activity due to the favourable oil price
environment. Around the turn of the year, we saw circa USD 10
billion contracts awarded by major oil producers in the MENA region
to develop some of the largest projects. We were not bidding on
these projects but crucially these awards will take up much of the
available yard capacity and so we are confident of our competitive
standing on future awards.
Our IMI joint venture is progressing despite a period of
disruptions during the pandemic, and we anticipate the
commissioning of certain zones to commence in 2022. Lamprell
invested USD 85 million out of its USD 140 million commitment in
the joint venture to date. Our shareholding in IMI has opened up a
number of opportunities for Lamprell: it has enabled us to join the
exclusive Saudi Aramco LTA programme, it has been an effective
conduit of dialogue with major influencers in the Kingdom to
develop a relocation strategy for Lamprell Oil & Gas, and it
has provided us with revenue opportunities at a time when much of
the oil & gas industry was recovering from a crisis.
Digital
Since 2019, Lamprell has been actively developing commercial
digital solutions to improve efficiencies in our business and for
its clients across the energy industry. We were pleased to have
secured strategic financial and technical partnerships with
Injazat/G42 and Akselos to complement our fabrication and
engineering know-how. The Digital business unit, through its joint
venture partners and independently, is currently focusing on four
core areas of dynamic digital twin technology, asset integrity, the
connected worker, and robotic welding. Over the next few years, we
plan to invest in the development of specific digital solutions and
anticipate seeing positive contribution to Group financial
performance from 2024.
Funding our future
Our business requires funding and we have been severely
cash-constrained for several years; we have pursued several options
to alleviate these acute liquidity pressures and deliver a funding
strategy with a view to raise USD 120-150 million to strengthen our
balance sheet, assist with major legacy projects working capital
requirements and invest in our yard to deliver significant growth.
As we look ahead at the significant growth in our opportunity set
and the increasing scopes, complexity and value within our bid
pipeline and also our near-term working capital requirements, we
realise the need for a much stronger balance sheet. In late 2021,
we successfully completed the first stage of our funding strategy
by securing a circa USD 45 million working capital facility and
raising USD 30 million through an oversubscribed placing of
shares.
Since then, the Group has explored a number of alternative
financing and strategic options, including asset monetisation, debt
financing and/or additional equity to deliver its funding strategy.
Working capital needs and the working capital facility repayment
schedule required us to deliver these options by the end of July
2022. Bearing in mind the uncompromising time pressure to improve
our liquidity position and in the absence of viable funding
options, the Board of Directors unanimously recommended to accept a
takeover offer from two of its major shareholders, Blofeld and
AlGihaz which included a USD 145 million bridge financing loan. The
new ownership structure can assist in delivering Lamprell's
capital-intensive growth strategy, whilst securing a future for its
employees, delivering some cash value for its shareholders and
honouring its many other stakeholder obligations.
Christopher McDonald
Chief Executive Officer
Financial review
COVID-19 and low margin projects affected our financial
performance and put significant pressure on our liquidity.
Liquidity update
2021 presented major challenges across our supply chain and,
although Lamprell continued to deliver operationally, additional
costs associated with COVID-19 disruptions significantly affected
our financial performance. In 2021, the Group was successful in
securing a USD 45 million working capital facility for the delivery
of the two IMI rig contracts and raising USD 30.1 million before
expenses through a placing of shares. This assisted with some of
the working capital requirements on our legacy low margin projects
but in order to continue to meet its obligations to customers and
creditors, and deliver its strategic capital expenditure programme,
the Group total funding requirement was previously estimated to be
in the range USD of 120-150 million. Of that amount, the Group was
required to meet funding obligations of USD 95 million by the end
of July 2022.
Over the past 18 months, the Group has been focused on a number
of financing options in order to meet this funding requirement,
including asset monetisation, project-specific financing, hybrid
facilities and additional equity. However, none of the funding
alternatives set out above were capable of delivering a solution to
the urgent and severe liquidity constraints within the time
required. As a result and in order to avoid implementing
alternatives which seek to protect the interests of financial
creditors, commercial counterparties and employees at the cost of
no value being attributed to the existing equity, on 21 July 2022
the Board recommended an offer for Lamprell's entire issued and to
be issued share capital, from Thunderball. The offer included a
Bridge Loan Facility allowing Lamprell to resolve the immediate
liquidity pressure and continue to deliver its transformational
yard capex programme. See going concern section below for further
details of the Offer and Bridge Loan Facility.
Revenues
In 2021 the Group generated USD 388.8 million in revenues,
delivering a 15% increase compared to the previous year and a third
year of continuous revenue growth (2020: USD 338.6 million).
Throughout the year we experienced a number of significant impacts
on productivity and cost as we worked around lockdowns and
continuous COVID-19 restrictions. Much of our labour is deployed
from India, where the emergence of the Delta variant affected
workforce availability early in the year. Ongoing self-isolation
requirements further impacted our ability to deploy staff
effectively in the UAE and caused significant disruptions to our
supply chain. Lamprell continued to manage these disruptions
effectively; however, reduced productivity and rephasing of work
have impacted revenue recognition and profitability in 2021.
Revenues from the Renewables business unit, which focused on the
Seagreen project, amounted to USD 141.3 million. The Oil & Gas
business unit, with contribution from the two IMI newbuild jackup
rigs, two Saudi Aramco LTA projects, as well as our operations and
maintenance business and rig refurbishment, generated USD 247.5
million in revenues. Total new contract awards during the year
amounted to USD 135 million and we closed the period with a backlog
of USD 342.9 million.
Margin performance
The Group remains focused on cost discipline following the
significant overhead reduction programme in 2020. Overheads for the
year amount to USD 69.0 million of which USD 35.5 million pertains
to general and administrative expenses and the balance attributable
to direct overheads included in cost of sales. In 2021, much of the
temporary COVID-19 cost cutting measures, including remuneration
reductions introduced in 2020, also remained in place. Nonetheless,
our margin performance was affected by loss of productivity and
additional costs associated with COVID-19 measures, as well as low
margin contribution from ongoing major projects in the Oil &
Gas business unit. We report a gross loss of USD 0.8 million for
the year (2020: gross profit of USD 14.6 million), with a negative
adjusted EBITDA from continuing operations of USD 19.9 million.
Finance cost
In Q4 2021, the Group secured a USD 45 million working capital
facility for the delivery of the two IMI rigs and subsequently
raised USD 30.1 million through a placing of shares. Net finance
cost (excluding interest expense on leases) for the full year 2021
amounted to USD 2.1 million (2020: USD 1.4 million).
Net loss
Net loss for the year ended 31 December 2021 was USD 60.0
million (2020: loss of USD 53.4 million). The loss is driven by the
low revenue levels which did not generate sufficient margin
contribution to cover the Group's overhead of USD 69.0 million and
our share of loss of investments accounted for using the equity
method of USD 17.0 million. The diluted loss per share for the year
was 16.98 US cents (2020: diluted loss per share 15.63 US
cents).
Capital expenditure
We continued to make incremental investment in our yard with a
particular focus on improving throughput and efficiencies in serial
renewables fabrication. Capital expenditure in 2021 was USD 13.3
million (2020: USD 14.2 million) and is largely attributable to the
construction of a proprietary lifting frame and the additional yard
taken in Hamriyah. Investments in digital amounted to USD 1.8
million.
The Group did not make any equity contributions to the IMI joint
venture in 2021. To date, Lamprell has invested USD 85 million of
the USD 140 million committed.
Cash flow and liquidity
The Group's net cash flow from operating activities for the year
ended 31 December 2021 reflected a net outflow of USD 56.1 million
which was driven by the substantial working capital draw, as well
as delays in certification of variations and resolution of claims,
on ongoing projects. Prior to working capital movements and the
payment of employees' end-of-service benefits, the Group's net cash
outflow was USD 11.9 million. Cash, together with bank, term and
margin deposits, decreased by USD 40.5 million to USD 72.8 million,
of which USD 47 million is cash restricted in project bonds and
guarantees.
Balance sheet
Net cash at 31 December 2021 was USD 53 million, of which USD 6
million is unrestricted. The Group's total current assets at 31
December 2021 were USD 244.4 million (31 December 2020: USD 286.4
million). Trade and other receivables decreased to USD 59.4 million
(31 December 2020: USD 73.9 million). Contract assets increased to
USD 99.4 million (31 December 2020: USD 85.4 million) and this is
attributable to contract work in progress on ongoing projects.
Trade and other payables increased by USD 100.9 million to USD
171.8 million as the Group continued deferral of creditor payments
in view of the liquidity challenges summarised in the going concern
Note 2.1. Shareholders' equity reduced to USD 128.8 million (31
December 2020: USD 160.4 million).
Going concern
The Group's consolidated financial statements have been prepared
on a going concern basis as further discussed in Note 2.1. In
performing their assessment of going concern, the Directors have
considered the forecast cashflows for the Group for the 15 months
to 31 October 2023 which include the key assumptions detailed
below.
Balance sheet recapitalisation
In 2021, the Group launched a balance sheet recapitalisation
programme to fulfil its near-term working capital needs and to meet
medium term strategic objectives with the intention of completing a
new funding arrangement of USD 120 -150 million by the end of Q3
2021.
In order to temporarily address the most immediate capital
requirements, the Group entered a USD 45 million Export Credit
Agency ("ECA") backed revolving trade loan facility ("ECI
Facility") with two regional banks in October 2021 and raised gross
proceeds of approximately USD 30.1 million through a placing of new
Lamprell shares.
The Group intended to secure further capital in the form of a
second working capital facility of USD 45 million by the end of Q1
2022, with additional funding to be put in place by the end of H1
2022.
Accordingly, during 1H 2022 the Directors continued to explore a
number of potential financing and strategic options, including
equity financing, debt financing, the potential sale of the Group's
oil and gas business, asset monetisation and project-specific
financing with a view to delivering the required funding by Q2 2022
in line with the Group's working capital requirements.
Despite significant efforts by the Group to secure this
additional finance, these discussions did not result in new
financing for the Group. As a result, the Group faces urgent and
severe liquidity constraints and in the absence of reaching an
immediate alternative funding solution, the Group will not be able
to meet its funding obligations.
Recommended Cash Offer for Lamprell plc ("the Offer")
On 21 July 2022, the Board of Directors of Lamprell plc 'the
Company" and the Board of Directors of Thunderball announced a
recommended all-cash offer of 9p per share to be made by
Thunderball for the Company's issued and to be issued share
capital. It is intended that the Offer will be implemented by way
of a takeover offer. The Offer includes provision of a secured USD
145 million Bridge Loan Facility on the terms and conditions
summarised below.
Bridge Loan Facility
On 21 July 2022, the Group entered into the bridge loan facility
agreement (the "Bridge Loan Facility Agreement") with Maverick
Investment Holding Ltd ("Maverick"), a company under the control of
a member of the AlSayed family, and AlGihaz Holding Closed
Joint-Stock Company ("AlGihaz"). Pursuant to this Maverick and
AlGihaz each agreed to make available a total loan facility of up
to USD145 million to the Group. The Bridge Loan Facility is
available for drawdown in tranches, of which USD 85 million has
already been drawn down and a further USD 10 million has been
requested and is expected to be paid on or around 8 August 2022.
Further amounts of USD 35 million and USD 15 million are forecast
to be drawn down at the end of August and September 2022
respectively. The Bridge Loan Facility is secured on the majority
of the Group's assets.
The Bridge Loan Facility is being made available (i) to repay
the ECI Facility described above in full, which occurred on 4
August 2022; and (ii) to fund expenditures projected to fall due
after 21 July 2022, in accordance with a schedule of expenditures
agreed between the parties. The Bridge Loan Facility is repayable
on the earlier of (i) the date falling three months after the date
on which the Offer becomes wholly unconditional; or (ii) the date
falling three months after the date on which the Offer lapses or is
withdrawn. Interest will accrue at the rate of 12 per cent per
annum.
The Directors believe the Offer and Bridge Loan Facility are the
only viable funding solutions available to the Group and as a
result this forms the basis of the forecast cash flows used in
performing their assessment of going concern. The Directors have
considered the forecast cashflows for the Group for the 15 months
to October 2023 which include key assumptions detailed below:
-- The Offer proceeds to completion: The Offer is subject to
more than 50 per cent of shareholders approving the Offer. Based on
the current shareholdings of Thunderball, which in aggregate
represent approximately 45.18% of the Company's issued share
capital, and irrevocable undertakings by certain other shareholders
to vote in favour of the Offer representing an additional 4.82% of
issued share capital, the Directors have forecast that the Offer
will be accepted by the Shareholders. The Offer is subject to
certain additional conditions precedent which are considered usual
and customary for this type of transaction.
-- Sufficiency of the Bridge Loan Facility: The Directors have
assumed that the Bridge Loan Facility will be timely paid following
draw-down requests and sufficient to cover the funding requirements
for the time required to conclude the Offer. After repayment of the
ECI facility, USD 101 million of the Bridge Loan Facility remains
to pay the Group's other creditors, which amounted to USD 176
million as of 30 June 2022, and to partially meet the ongoing
funding requirements of the Group. A significant proportion of the
Group's creditors at 30 June 2022 were many months overdue and,
whilst it is anticipated that the Bridge Loan Facility will enable
a number of these to be settled in the period prior to the
completion of the Offer, the Directors expect payment to certain
overdue key suppliers on the IMI Rigs projects (who were owed USD
51 million at 30 June 2022) will need to be extended in line with
the expected timing of milestone receipts on these projects in late
2022 and early 2023. The Directors have assumed that the Group will
be able to achieve this based on its track record of doing so, but
its ability to do this is critical and dependent on the reaction of
the key suppliers as the payables are unsecured and contractual
credit terms are exceeded, which is outside the Group's control.
The level of creditor deferral in the period prior to completion of
the Offer is also dependent on the outcome of contract claims and
the extent of new contract awards as discussed below.
-- Post completion funding: The Directors do not have visibility
of Thunderball's plans for the business after the Offer is
completed, including the extent and terms of any funding that will
be provided post completion. The intentions statement in the 21
July announcement indicates that Thunderball is aware that Lamprell
must be recapitalised and that this would be most effectively
undertaken after the Company's shares are de-listed such that
Lamprell can execute its strategy, with appropriate support,
capital and assistance from Thunderball. The Directors have
therefore assumed that upon conclusion of the Offer, Thunderball
continues to support the business, and in particular:
o That Thunderball will extend or waive the repayment of the
Bridge Loan Facility as the Group will be unable to repay the loan
when it falls due (which is forecast to be in December 2022).
o That significant additional funding will be provided by
Thunderball during the 15 months to October 2023 in order that the
business may continue to trade. The level and timing of funding
required will depend on a number of factors, including the outcome
of Thunderball's review of the business, successful execution of
the Group's ongoing contracts, the speed with which they are
required to settle overdue creditors, and (as discussed below) the
outcome of contract claims and extent of new contract awards, but
may be up to approximately USD 100 million.
-- Contract claims: The Directors assume that settlement of
contract claims on certain major contracts will result in
significant cash inflows in the forecast period. These are not yet
agreed and the amount and timing of such settlements is not wholly
within the control of the Directors.
-- New awards: The Directors assume conversion of a portion of
the bid pipeline in line with the expected timing of awards,
including achieving similar historical levels of revenue for the
contracting services and rig refurbishment businesses. These
contract awards are not committed and there is therefore some
uncertainty as to their commencement.
In preparing the forecasts, the Directors have further
considered broader economic factors including the ongoing pandemic,
conflict in Ukraine and the effects of climate change.
Technological improvements or innovations that support the
transition to a lower carbon economy, and customer preferences or
regulatory incentives that alter fuel or power choices, could
impact demand for oil and gas. Depending on the nature and speed of
any such changes and our response, these changes could increase
costs, reduce our profitability, reduce demand for certain
products, limit our access to new opportunities, require us to
write down certain assets or curtail or cease certain operations,
and affect investor sentiment, our access to capital markets, our
competitiveness and financial performance. On the contrary, these
risks provide a significant opportunity to our Renewables segment
which would benefit from the increased demand and accelerated award
of projects to meet the net zero emission targets.
If the Offer does not proceed and the Bridge Loan Facility falls
due for repayment within its current terms, there can be no
guarantee that the Group will be able to implement any alternative
funding in the available timeframe. In such an event, the Directors
believe that the Group will be unable to meet its financial
commitments as they fall due and consequently will be unable to
continue to operate as a going concern resulting in the appointment
of receivers, liquidators or administrators. Accordingly, the
Directors consider that the Offer represents the only executable
funding solution available to the Group given that Thunderball has
procured the Bridge Loan Facility and there is no present viable
alternative.
The Directors believe that : (1) the risk that the Offer does
not complete; (2) the requirement for significant levels of ongoing
creditor deferral during the period prior to the completion of the
Offer; and (3) the lack of visibility of Thunderball's plans for
the business after the Offer is completed, all of which depend on
factors outside management's control, constitute in aggregate a
material uncertainty that may cast significant doubt upon the
Group's and Company's ability to continue as a going concern. The
financial statements do not include the adjustments that would
result if the Group and Company were unable to continue as a going
concern.
Dividend
The Group made progress in delivering its strategy in 2021,
however, due to the current financing requirements coupled with
prevailing COVID-19 uncertainties, the Directors do not recommend
the payment of a dividend for the period in relation to financial
year ending 31 December 2021. The Directors will continue to review
this position in light of market conditions and Group performance
at the relevant time.
Tony Wright
Chief Financial Officer
Consolidated income statement
Year ended 31 December
2021 2020
Notes USD'000 USD'000
Revenue 6 388,808 338,623
Cost of sales 7 (389,561) (324,073)
-------------------- --------------------
Gross (loss)/profit (753) 14,550
Selling and distribution expenses 8 (239) (298)
General and administrative expenses* 10 (35,531) (47,215)
Other gains - net 13 687 1,009
-------------------- --------------------
Operating loss (35,836) (31,954)
Finance costs 12 (7,122) (5,980)
Finance income 12 51 370
-------------------- --------------------
Finance costs - net (7,071) (5,610)
Share of loss of investments accounted
for using the equity method - net 20 (17,013) (15,697)
-------------------- --------------------
Loss before income tax (59,920) (53,261)
Income tax expense 34 (128) (125)
-------------------- --------------------
Loss for the year (60,048) (53,386)
========= =========
Loss per share attributable to the
equity holders of the Company during
the period 14
Basic (16.98)c (15.63)c
========== ==========
Diluted (16.98)c (15.63)c
========== ==========
*General and administrative expenses include a net reversal of
impairment losses of USD 0.5 million (31 December 2020: impairment
charge USD 4.6 million) recognised in respect of property, plant
and equipment as a result of year end assessments - refer Note
39.
Consolidated statement of comprehensive income
Year ended 31 December
2021 2020
Notes USD'000 USD'000
Loss for the year (60,048) (53,386)
Other comprehensive income:
Items that will not be
reclassified
subsequently to profit or
loss:
Remeasurement of
post-employment
benefit obligations 28 305 (1,676)
Share of other comprehensive
loss
of equity accounted
investments 20 - ( 352 )
Items that may be
reclassified subsequently
to profit or loss:
Currency translation
differences 27 (12) 43
-------------------------- -------------------------
Other comprehensive income
/(loss) (1, 985
for the year 293 )
-------------------------- --------------------------
Total comprehensive loss for
the
year (59,755) (55,371)
========= =========
Consolidated balance sheet
As at 31 December
2021 2020
Notes USD'000 USD'000
ASSETS
Non-current assets
Property, plant and equipment 17 158,835 162,024
Intangible assets 73 82
Investments accounted for
using the equity method 20 40,950 55,888
Term and margin deposits 24 530 447
------------------------ ------------------------
Total non-current assets 200,388 218,441
------------------------ ------------------------
Current assets
Inventories 21 13,228 14,252
Trade and other receivables 22 59,427 73,890
Contract assets 23 99,392 85,426
Cash and cash equivalents 24 25,860 57,625
Term and margin deposits 24 46,443 55,193
------------------------ ------------------------
Total current assets 244,350 286,386
------------------------ ------------------------
Total assets 444,738 504,827
------------------------ ------------------------
LIABILITIES
Current liabilities
Borrowings 33 (19,942) (880)
Trade and other payables 30 (171,817) (70,866)
Contract liabilities 31 (15,149) (159,991)
Lease liabilities 18 (2,297) (2,136)
Current tax liabilities 40 (336) (253)
Provision for warranty costs 32 (4,489) (3,555)
------------------------ ------------------------
Total current liabilities (214,030) (237,681)
------------------------ ------------------------
Net current assets 30,320 48,705
------------------------ ------------------------
Non-current liabilities
Lease liabilities 18 (63,411) (68,849)
Post-employment benefits liabilities 28 (38,455) (37,848)
------------------------ ------------------------
Total non-current liabilities (101,866) (106,697)
------------------------ ------------------------
Total liabilities (315,896) (344,378)
------------------------ ------------------------
Net assets 128,842 160,449
========== ==========
EQUITY
Share capital 26 34,904 30,346
Share premium 26 338,094 315,995
Other reserves 27 (19,304) (19,292)
Retained losses (224,852) (166,600)
------------------------ ------------------------
Total equity attributable
to the equity holders of the
Company 128,842 160,449
========== ==========
Consolidated statement of changes in equity
Other
Reserves Retained
Share Share (Note earnings
capital premium 27) / (losses) Total
Notes USD'000 USD'000 USD'000 USD'000 USD'000
At 1 January
2020 30,346 315,995 (19,335) (115,626) 211,380
------------------ ------------------ ------------------ ------------------ ------------------
Loss for the
year - - - (53,386) (53,386)
Other
comprehensive
income:
Remeasurement of
post-employment
benefit
obligations 28 - - - (1,676) (1,676)
Share of other
comprehensive
loss accounted
for using
the equity
method 20 - - - (352) (352)
Currency
translation
differences 27 - - 43 - 43
------------------ ------------------ ------------------ ------------------ ------------------
Total
comprehensive
loss
for the year - - 43 (55,414) (55,371)
------------------ ------------------ ------------------ ------------------ ------------------
Transactions
with owners:
Share-based
payments:
- value of
services
provided 9 - - - 4,440 4,440
------------------ ------------------ ------------------ ------------------ ------------------
Total
transactions
with
owners - - - 4,440 4,440
------------------ ------------------ ------------------ ------------------ ------------------
At 31 December
2020 30,346 315,995 (19,292) (166,600) 160,449
------------------ ------------------ ------------------ ------------------ ------------------
Loss for the
year - - - (60,048) (60,048)
Other
comprehensive
income:
Remeasurement of
post-employment
benefit
obligations 28 - - - 305 305
Share of other
comprehensive
loss accounted
for using
the equity
method 20 - - - - -
Currency
translation
differences 27 - - (12) - (12)
------------------ ------------------ ------------------ ------------------ ------------------
Total
comprehensive
loss
for the year - - (12) (59,743) (59,755)
------------------ ------------------ ------------------ ------------------ ------------------
Transactions
with owners:
Issue of share
capital 26 4,558 22,099 - - 26,657
Share-based
payments:
- value of
services
provided 9 - - - 2,410 2,410
- treasury
shares
purchased - - - (919) (919)
----------------- ------------------ ------------------ ------------------ ------------------
Total equity
transactions 4,558 22,099 - 1,491 28,148
----------------- ------------------ ------------------ ------------------ ------------------
At 31 December
2021 34,904 338,094 (19,304) (224,852) 128,842
======== ======== ======== ======== ========
Consolidated cash flow statement
Year ended 31 December
2021 2020
Notes USD'000 USD'000
Operating activities
Cash (used in) /generated from
operations 38 ( 5 6,088) 113,303
Tax paid 40 (45) (49)
------------------------ ------------------------
Net cash (used in) /generated from (5 6,133
operations ) 113,254
------------------------ ------------------------
Investing activities
Purchases of property, plant and
equipment 17 (11,771) (13,906)
Proceeds from sale of property,
plant and equipment 58 381
Additions to intangible assets - (288)
Investment in associates 20 (1,750) (25,814)
Finance income 12 51 370
Inflows from margin deposits under
lien (with original maturity more
than three months) 19,447 5,285
Outflows from margin deposits under
lien (with original maturity more
than three months) (6,976) (24,074)
Inflows from margin deposits under
lien (with original maturity less
than three months) 432 -
Outflows from margin deposits under
lien (with original maturity less
than three months) (4, 236 ) (497)
------------------------ ------------------------
Net cash used in investing activities (4, 745 ) (58,543)
------------------------ ------------------------
Financing activities
Proceeds on issue of shares - net
of transaction costs 26 26,657 -
Purchase of treasury shares (919) -
Proceeds from borrowings 33 19,924 880
Repayments of borrowings 33 (880) (20,000)
Cost of raising debt finance (3,274) -
Finance costs (2,157) (1,411)
Repayment of interest expense on
leases 18 (7,434) (2,142)
Repayment of lease liabilities 18 (2,792) ( 618 )
------------------------ ------------------------
Net cash generated/(used) in financing (23, 291
activities 29,125 )
------------------------ ------------------------
Net (decrease)/increase in cash
and cash equivalents (31,753) 31,420
Cash and cash equivalents, beginning
of the year 57,625 26,162
Exchange rate translation (12) 43
------------------------ ------------------------
Cash and cash equivalents, end
of the year 24 25,860 57,625
========== ==========
Notes to the consolidated financial statements for the year
ended 31 December 2021
1 Legal status and activities
The principal activities of the Company and its subsidiaries
(together referred to as "the Group") are: assembly and new build
construction for the onshore/offshore oil and gas and renewable
sectors; fabricating packaged, pre-assembled and modularised units;
constructing accommodation and complex process modules for onshore
downstream projects; construction of complex living quarters,
wellhead decks, topsides, jackets and other offshore fixed
facilities; rig refurbishment; land rig services; engineering and
construction, operations and maintenance and proprietary
technologies for industrial application - refer to Note 5.
2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated.
2.1 Basis of preparation
The Group is required to present its annual consolidated
financial statements for the year ended 31 December 2021 in
accordance with United Kingdom adopted international accounting
standards, International Financial Reporting Standards (" IFRS ")
as issued by the IASB and the Isle of Man Companies Acts 1931 to
2004 .
This financial information set out in this preliminary
announcement does not constitute the Group's statutory accounts for
the year ended 31 December 2021 or 31 December 2020, but is derived
from those accounts. A copy of the statutory accounts required to
be annexed to the Company's annual return to the Companies
Registration Office in respect of the year ended 31 December 2020
has been annexed to the Company's annual return for 2020. The
consolidated financial statements for the year ended 31 December
2021 approved by the Board of Directors on 7 August 2022 and a copy
will be annexed to the Company's annual return for 2021. The
auditors have reported on these accounts; their reports were not
modified and did not contain a statement under section 15(4) or
15(6) of the Isle of Man Companies Act 1982, but did draw attention
to the material uncertainty with respect to going concern (see
below).
The financial information comprises the Group balance sheets as
of 31 December 2021 and 31 December 2020 and related Group income
statement, statement of comprehensive income, cash flows, statement
of changes in equity and related notes for the twelve months then
ended, of Lamprell plc. This financial information has been
prepared under the historical cost convention except for the
measurement at fair value of share options, financial assets at
fair value through profit or loss and derivative financial
instruments.
The preliminary results for the year ended 31 December 2021 have
been prepared in accordance with the Listing Rules of the London
Stock Exchange.
Going concern
These financial statements have been prepared on a going concern
basis which assumes that the Group will continue to have adequate
resources to continue in operational existence for at least the
next twelve months from the date of approval of these consolidated
financial statements notwithstanding the material uncertainty
discussed below.
The Group incurred a loss before tax of USD 59.9 million during
the year ended 31 December 2021 (31 December 2020: USD 53.4
million) and was in a Net Cash position of USD 52.9 million on 31
December 2021 (2020: Net Cash position of USD 112.4 million). Of
the Net Cash position on 31 December 2021, USD 47.1 million was
restricted. The level of net unrestricted cash on 31 December 2021
was therefore USD 5.8 million (2020: USD 56.8 million). At 30 June
2022 the level of net unrestricted cash was USD 6.5 million and the
Group faces acute liquidity challenges as outlined further
below.
Balance sheet recapitalisation
In 2021, the Group launched a balance sheet recapitalisation
programme to fulfil its near-term working capital needs and to meet
medium term strategic objectives with the intention of completing a
new funding arrangement of USD 120 -150 million by the end of Q3
2021.
In order to temporarily address the most immediate capital
requirements, the Group entered a USD 45 million Export Credit
Agency ("ECA") backed revolving trade loan facility ("ECI
Facility") with two regional banks in October 2021 and raised gross
proceeds of approximately USD 30.1 million through a placing of new
Lamprell shares.
The Group intended to secure further capital in the form of a
second working capital facility of USD 45 million by the end of Q1
2022, with additional funding to be put in place by the end of H1
2022.
Accordingly, during H1 2022 the Directors continued to explore a
number of potential financing and strategic options, including
equity financing, debt financing, the potential sale of the Group's
oil and gas business, asset monetisation and project-specific
financing with a view to delivering the required funding by the end
of H1 2022 in line with the Group's working capital
requirements.
Despite significant efforts by the Group to secure this
additional finance, prior to the developments outlined below these
discussions had not resulted in new financing for the Group. As a
result, the Group now faces urgent and severe liquidity constraints
and in the absence of reaching an immediate alternative funding
solution, the Group will not be able to meet its funding
obligations.
Recommended Cash Offer for Lamprell plc ("the Offer")
On 21 July 2022, the Board of Directors of the Company and the
Board of Directors of Thunderball Investments Limited (a newly
formed company owned by Blofeld Investment Management Limited and
AlGihaz Holding Closed Joint-Stock Company) (collectively referred
to as "Thunderball") announced a recommended all-cash offer of 9p
per share to be made by Thunderball for the Company's issued share
capital. The Offer includes provision of a secured USD 145 million
Bridge Loan Facility on the terms and conditions summarised
below.
Bridge Loan Facility
On 21 July 2022, the Group entered into the bridge loan facility
agreement (the "Bridge Loan Facility Agreement") with Maverick
Investment Holding Ltd ("Maverick"), a company under the control of
a member of the AlSayed family, and AlGihaz Holding Closed
Joint-Stock Company ("AlGihaz"). Pursuant to this Maverick and
AlGihaz each agreed to make available a total loan facility of up
to USD145 million to the Group. The Bridge Loan Facility is
available for drawdown in tranches, of which USD 85 million has
already been drawn down and a further USD 10 million has been
requested and is expected to be paid on or around 8 August 2022.
Further amounts of USD 35 million and USD 15 million are forecast
to be drawn down at the end of August and September 2022
respectively. The Bridge Loan Facility is secured on the majority
of the Group's assets.
The Bridge Loan Facility is being made available (i) to repay
the ECI Facility described above in full, which occurred on 5
August 2022; and (ii) to fund expenditures projected to fall due
after 21 July 2022, in accordance with a schedule of expenditures
agreed between the parties. The Bridge Loan Facility is repayable
on the earlier of (i) the date falling three months after the date
on which the Offer becomes wholly unconditional; or (ii) the date
falling three months after the date on which the Offer lapses or is
withdrawn. Interest will accrue at the rate of 12 per cent per
annum.
The Directors believe the Offer and Bridge Loan Facility are the
only viable funding solutions available to the Group and as a
result this forms the basis of the forecast cash flows used in
performing their assessment of going concern. The Directors have
considered the forecast cashflows for the Group for the 15 months
to October 2023 which include key assumptions detailed below:
- The Offer proceeds to completion: The Offer is subject to more
than 50 per cent of shareholders approving the Offer. Based on the
current shareholdings of Thunderball, which in aggregate represent
approximately 45.18% of the Company's issued share capital, and
irrevocable undertakings by certain other shareholders to vote in
favour of the Offer representing an additional 4.82% of issued
share capital, the Directors have forecast that the Offer will be
accepted by the Shareholders. The Offer is subject to certain
additional conditions precedent which are considered usual and
customary for this type of transaction.
- Sufficiency of the Bridge Loan Facility: The Directors have
assumed that the Bridge Loan Facility will be timely paid following
draw-down requests and sufficient to cover the funding requirements
for the time required to conclude the Offer. After repayment of the
ECI facility, USD 101 million of the Bridge Loan Facility remains
to pay the Group's other creditors, which amounted to USD 176
million as of 30 June 2022, and to partially meet the ongoing
funding requirements of the Group. A significant proportion of the
Group's creditors at 30 June 2022 were many months overdue and,
whilst it is anticipated that the Bridge Loan Facility will enable
a number of these to be settled in the period prior to the
completion of the Offer, the Directors expect payment to certain
overdue key suppliers on the IMI Rigs projects (who were owed USD
51 million at 30 June 2022) will need to be extended in line with
the expected timing of milestone receipts on these projects in late
2022 and early 2023. The Directors have assumed that the Group will
be able to achieve this based on its track record of doing so, but
its ability to do this is critical and dependent on the reaction of
the key suppliers as the payables are unsecured and contractual
credit terms are exceeded, which is outside the Group's control.
The level of creditor deferral in the period prior to completion of
the Offer is also dependent on the outcome of contract claims and
the extent of new contract awards as discussed below.
- Post completion funding: The Directors do not have visibility
of Thunderball's plans for the business after the Offer is
completed, including the extent and terms of any funding that will
be provided post completion. The intentions statement in the 21
July announcement indicates that Thunderball is aware that Lamprell
must be recapitalised and that this would be most effectively
undertaken after the Company's shares are de-listed such that
Lamprell can execute its strategy, with appropriate support,
capital and assistance from Thunderball. The Directors have
therefore assumed that upon conclusion of the Offer, Thunderball
continues to support the business, and in particular:
o That Thunderball will extend or waive the repayment of the
Bridge Loan Facility as the Group will be unable to repay the loan
when it falls due (which is forecast to be in December 2022).
o That significant additional funding will be provided by
Thunderball during the 15 months to October 2023 in order that the
business may continue to trade. The level and timing of funding
required will depend on a number of factors, including the outcome
of Thunderball's review of the business, successful execution of
the Group's ongoing contracts, the speed with which they are
required to settle overdue creditors, and (as discussed below) the
outcome of contract claims and extent of new contract awards, but
may be up to approximately USD 100 million.
- Contract claims: The Directors assume that settlement of
contract claims on certain major contracts will result in
significant cash inflows in the forecast period. These are not yet
agreed and the amount and timing of such settlements is not wholly
within the control of the Directors.
- New contract awards: The Directors assume conversion of a
portion of the bid pipeline in line with the expected timing of
awards, including achieving similar historical levels of revenue
for the contracting services and rig refurbishment businesses.
These contract awards are not committed and there is therefore some
uncertainty as to their commencement.
In preparing the forecasts, the Directors have further
considered broader economic factors including the ongoing pandemic,
conflict in Ukraine and the effects of climate change.
Technological improvements or innovations that support the
transition to a lower carbon economy, and customer preferences or
regulatory incentives that alter fuel or power choices, could
impact demand for oil and gas. Depending on the nature and speed of
any such changes and our response, these changes could increase
costs, reduce our profitability, reduce demand for certain
products, limit our access to new opportunities, require us to
write down certain assets or curtail or cease certain operations,
and affect investor sentiment, our access to capital markets, our
competitiveness and financial performance. On the contrary, these
risks provide a significant opportunity to our Renewables segment
which would benefit from the increased demand and accelerated award
of projects to meet the net zero emission targets.
If the Offer does not proceed and the Bridge Loan Facility falls
due for repayment within its current terms, there can be no
guarantee that the Group will be able to implement any alternative
funding in the available timeframe. In such an event, the Directors
believe that the Group will be unable to meet its financial
commitments as they fall due and consequently will be unable to
continue to operate as a going concern resulting in the appointment
of receivers, liquidators or administrators. Accordingly, the
Directors consider that the Offer represents the only executable
funding solution available to the Group given that Thunderball has
procured the Bridge Loan Facility and there is no present viable
alternative.
The Directors believe that : (1) the risk that the Offer does
not complete; (2) the requirement for significant levels of ongoing
creditor deferral during the period prior to the completion of the
Offer; and (3) the lack of visibility of Thunderball's plans for
the business after the Offer is completed, all of which depend on
factors outside management's control, constitute in aggregate a
material uncertainty that may cast significant doubt upon the
Group's and Company's ability to continue as a going concern. The
financial statements do not include the adjustments that would
result if the Group and Company were unable to continue as a going
concern.
Impact of climate change on going concern
Technological improvements or innovations that support the
transition to a lower carbon economy, and customer preferences or
regulatory incentives that alter fuel or power choices, could
impact demand for oil and gas. Depending on the nature and speed of
any such changes and our response, these changes could increase
costs, reduce our profitability, reduce demand for certain
products, limit our access to new opportunities, require us to
write down certain assets or curtail or cease certain operations,
and affect investor sentiment, our access to capital markets, our
competitiveness and financial performance. On the contrary, these
risks provide a significant opportunity to our Renewables segment
which would benefit from the increased demand and accelerated award
of projects to meet the net zero emission targets.
3 Basis of accounting
The accounting policies used are consistent with those set out
in the audited financial statements for the year ended 31 December
2020 except for the adoption of new standards and interpretations
effective 1 January 2021 as stated in the reviewed interim
financial information for the period ended 30 June 2021. These
financial statements are available on the Company's website,
www.lamprell.com.
4 Critical accounting judgements and key sources of estimation uncertainty
The Group makes certain critical judgements, estimates and
assumptions concerning the future. These 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 resulting accounting estimates will,
by definition, seldom equal the related actual results. The
judgements, 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 year are as follows:
4.1 Critical judgements in applying accounting policies
Apart from those involving estimation (see Note 4.2), the Group
has made following critical judgements in applying accounting
policies in the process of preparing these consolidated financial
statements.
4.1.1 Contract claims
A claim is an amount that the Group seeks to collect from the
customer or another party as reimbursements for costs not included
in the contract price. A claim may arise from, for example,
customer caused delays, prolongation cost, cost of acceleration of
project, program errors in specifications or design, and disputed
variations in contract work. The measurement of the amounts of
revenue arising from claims is subject to a high level of
uncertainty and often depends on the outcome of negotiations.
Therefore, claims are only included in contract revenue when the
amount has been accepted by the customer or the customer's
representative, there is a clear contractual entitlement, and / or
negotiations have reached a stage that it is highly probable that a
significant reversal of revenue will not occur.
As at 31 December 2021, the balance due from customers on
construction contracts includes an amount of USD 22.1 million
(2020: USD 5.0 million) unapproved contract claims as negotiations
continue with our clients on the Seagreen and IMI projects.
4.1.2 Liquidated damages (LDs)
The Group recognises liquidated damages where there have been
significant delays against defined contractual delivery dates or
unfulfilled contractual obligations and it is considered probable
that the customer will successfully pursue these penalties. This
requires management to make a judgement where the amount of
liquidated damages payable under the contract will be incurred
based on a combination of an assessment of the contractual terms,
the reasons for any delays and evidence of cause of the delays to
assess who is liable under the contract for the delays and
consequently whether the Group is liable for the liquidated damages
or not.
While certain contracts have been subject to delays and/or
unfulfilled contractual obligations in 2021, based on a review of
the status of and risk on ongoing projects, the current status of
discussions with customers and information at hand, no provision
for LDs have been made in the financial statements as at 31
December 2021 (2020: nil).
4.2 Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and
other key sources of estimation uncertainty at the end of the
reporting period that may have a significant risk of causing
material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
4.2.1 Revenue and margin recognition
The Group uses the input method in accounting for its contract
revenue. Use of the input method requires the Group to estimate the
stage of completion of the contract to date based on costs incurred
as a proportion of the total contract costs that will be incurred
over the life of the contract. As a result, the Group is required
to estimate the total cost to completion of all outstanding
projects at each period end. These cost estimates will often
include a contingency relating to identified risks which are
adjusted throughout the life of a project to reflect the remaining
risk profile.
The Group uses a 5% sensitivity to assess the effect a change in
estimate of this magnitude would have on the revenue and margin
recognised. A 3% cost increase is considered to be the minimum
figure that could turn a project onerous where margins are low.
If the estimated total costs to completion of all outstanding
projects were to decrease by 5% this would either result in
contract assets increasing by USD 6.8 million (2020: USD 5.4
million) or contract liabilities decreasing by USD 6.8 million
(2020: USD 5.4 million).
If the estimated total costs to completion of all outstanding
projects were to increase by 5%, contract assets would either
decrease by USD 7.8 million (2020: USD 5.8 million) or contract
liabilities would increase by USD 7.8 million (2020: USD 5.8
million). Based on this scenario, contract liabilities would
include an onerous contract provision of USD 4.2 million on the
Group's two newbuild projects where the margin is lower than
average, as they were bid at competitive levels to monetise
existing inventory.
5 Segment information
In January 2021, as part of the Lamprell reimagined strategy the
Group was re-organised into three strategic markets it seeks to
address i.e., 'Oil and Gas', 'Renewables' and 'Digital'.
Accordingly, this has changed how the business is reported and
viewed by the Executive Directors, the chief operating
decision-maker, and therefore the make up of the reportable
segments.
The segments are based on strategic objectives, similar nature
of the products and services, type of customer and economic
characteristics.
During 2020, the segments were reported as Rigs, EPC(I) and
Contracting services and as a result, comparatives have been
restated.
The Oil and Gas segment contains business from New Build Jack Up
rigs, land rigs, refurbishment and engineering and construction
(excluding site works) used by customers operating in the Oil and
Gas business. The Renewables segment contains business from
foundations and offshore platforms mainly used by customers
operating offshore wind power projects. The Digital segment
comprises business from use of proprietary technologies for
industrial application.
Oil and Renewables Digital Total
Gas
USD'000 USD'000 USD'000 USD'000
Year ended 31 December 2021
Revenue from external customers 247,467 141,341 - 388,808
========= ========= ========= =========
Gross operating profit before
absorptions 27,447 6,244 - 33,691
========= ========= ========= =========
Year ended 31 December 2020
(restated)
Revenue from external customers 188,311 150,312 - 338,623
========= ========= ========= =========
Gross operating profit before
absorptions 25,330 21,262 - 46,592
========= ========= ========= =========
The Executive Directors assesses the performance of the
operating segments based on a measure of gross profit. The labour,
project management and equipment costs in this gross profit measure
are measured based on standard cost. Standard cost is based on an
estimated or predetermined cost rates for performing an operation
under normal circumstances. Standard costs are developed from
historical data analysis adjusted with expected changes in the
future circumstances. The difference between total cost charged to
the projects at standard rate and the actual cost incurred are
reported as under or over absorption. The measurement basis
excludes the effect of the common expenses for yard rent, repairs
and maintenance and other miscellaneous expenses.
The reconciliation of the gross operating profit is provided as
follows:
2021 2020
USD'000 USD'000
Gross operating profit for Oil and
Gas segment as reported to the Executive
Directors 27,447 25,330
Gross operating profit for the Renewables
segments as
reported to the Executive Directors 6,244 21,262
Gross operating profit for the Digital
segments as reported to the Executive - -
Directors
----------------- -----------------
Gross operating profit before absorptions 33,691 46,592
----------------- -----------------
Under absorbed employee and equipment
costs (5,544) (2,893)
Provision for slow moving and obsolete
inventories (21) (294)
Reversal of impairment losses shown
as part of operating profit (Note 10) 148 97
Project related bank guarantee charges
shown as part of operating profit (1,500) (1,237)
----------------- -----------------
Gross operating profit 26,774 42,265
----------------- -----------------
Unallocated:
Unallocated operational overheads (6,497) (10,743)
Repairs and maintenance (5,006) (3,464)
Yard rent and depreciation (6,969) (7,323)
Others (10,408) (7,325)
Add back:
Reversal of impairment losses shown
as part of general and administrative
expenses (Note 10) (148) (97)
Project related bank guarantee charges
shown as part of finance costs 1,500 1,237
----------------- -----------------
Gross (loss)/profit (753) 14,550
----------------- -----------------
Selling and distribution expenses (Note
8) (239) (298)
General and administrative expenses-
excluding impairment and restructuring
costs (Note 10) (34,282) (37,070)
Other gains - net (Note 13) 687 1,009
Finance costs (Note 12) (7,122) (5,980)
Finance income (Note 12) 51 370
Share of loss of investment accounted
for using the equity method (Note 20) (17,013) (15,697)
Reversal/(charge) of impairment losses
- net (Note 39) 471 (4,548)
Restructuring costs (Note 29) (1,720) (5,597)
------------------- -------------------
Loss before income tax (59,920) (53,261)
======== =======
The breakdown of revenue from all services is as disclosed in
Note 6.
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.
Information about segment assets and liabilities is not reported
to or used by the Executive Directors and, accordingly, no measures
of segment assets and liabilities are reported.
The Group's principal place of business is in the UAE. The
revenue recognised in the UAE with respect to external customers is
USD 386.3 million (2020: USD 336.5 million), and the revenue
recognised from other countries is USD 2.5 million (2020: USD 2.1
million).
Certain customers individually accounted for greater than 10% of
the Group's revenue and are shown in the table below:
2021 2020
USD'000 USD'000
External customer A 148,542 99,156
External customer B 140,491 87,193
External customer C 28,069 51,152
--------------- ---------------
317,102 237,501
======== ========
In 2021, revenue from customers A and C is attributable to the
Oil and Gas segment, and revenue from customer B to the Renewables
segment, whereas in 2020, revenue from customers A and C relates to
Renewable segment and customer B to the Oil and Gas segment.
Customers A, B and C are not the same in the two years
presented.
6 Disaggregation of revenue
Major value streams
Year ended 31 December Year ended 31 December
2021 2020 (restated)
Oil and Renewables Total Oil and Renewables Total
Gas Gas
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
New build jackups,
refurbishment and
land rigs 186,221 - 186,221 128,727 - 128,727
Platforms 7,448 - 7,448 - - -
Foundations - 141,341 141,341 - 150,312 150,312
Operations and
maintenance, site
work and safety
services 53,798 - 53,798 59,584 - 59,584
--------- ------------ --------
247,467 141,341 388,808 188,311 150,312 338,623
========= =========== ======== ============ ============ ========
Timing of revenue recognition
Year ended 31 December Year ended 31 December
2021 2020 (restated)
Oil and Oil and
Gas Renewables Total Gas Renewables Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Recognised over
time 247,467 141,341 388,808 188,311 150,312 338,623
======== =========== ======== ======== =========== ========
There was no revenue recognised at a point in time during the
years ended 31 December 2021 and 31 December 2020.
The transaction prices allocated to the remaining performance
obligations (unsatisfied or partially unsatisfied), to be
recognised over time, as at 31 December are, as follows:
Performance Obligations (unsatisfied)
Year ended December Year ended December 2020
2021 (restated)
Oil and Oil and
Gas Renewables Total Gas Renewables Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Within one year 326,978 14,317 341,295 314,332 142,872 457,204
More than one
year 1,596 - 1,596 64,760 - 64,760
======== =========== ======== ============ ============= ========
328,574 14,317 342,891 379,092 142,872 521,964
======== =========== ======== ============ ============= ========
7 Cost of Sales
2021 2020
USD'000 USD'000
Materials and related costs 147,324 131,921
Staff costs (Note 11) 124,708 107,692
Subcontract labour 38,295 16,376
Subcontract costs - including warranty
provisions 33,958 30,803
Depreciation (Note 17) 14,858 17,986
Equipment hire 14,071 9,620
Write-down of inventory to net realisable
value (Note 21) - 6,934
Utilities 6,122 3,439
Repairs and maintenance 5,006 3,464
Warranty provision released (257) (9,039)
Recruitment costs 499 555
Others 4,977 4,322
------------------- -------------------
389,561 324,073
======== ========
8 Selling and distribution expenses
2021 2020
USD'000 USD'000
Advertising and marketing 162 72
Travel 48 214
Entertainment 21 11
Others 8 1
--------------- ---------------
239 298
====== ======
9 Share-based payments
2021 2020
USD'000 USD'000
Amount of share-based charge (Note 11):
- relating to retention share plan 896 1,230
- relating to performance share plan 1,514 3,210
--------------- ---------------
2,410 4,440
====== ======
10 General and administrative expenses
2021 2020
USD'000 USD'000
Staff costs (Note 11) 18,959 25,574
Legal, professional and consultancy fees 4,504 2,126
Depreciation (Note 17) 1,950 2,045
Auditor's remuneration (Note 15) 1,944 1,326
IT support and maintenance 1,857 1,543
Restructuring costs (Note 29) 1,720 5,597
Insurance 1,422 916
Utilities and communication 1,279 1,135
Non-executive director fees 452 439
Office maintenance 450 513
Bank charges 101 105
Amortisation of intangible assets 9 9
Digital initiatives - 550
Reversal of impairment losses, net
of amounts recovered (148) (97)
(Reversal)/charge of impairment losses
of non-financial assets - net (Note 39) (471) 4,548
Others 1,503 886
_ ----------------------- _ -----------------------
35,531 47,215
========= =========
11 Staff costs
2021 2020
USD'000 USD'000
Wages and salaries 112,404 100,209
Employees' end of service benefits (Note
28) 4,618 5,251
Share-based payments - value of services
provided (Note 9) 2,410 4,440
Other benefits 24,235 23,366
------------------- -------------------
143,667 133,266
======== ========
Staff costs are included in:
Cost of sales (Note 7) 124,708 107,692
General and administrative expenses (Note
10) 18,959 25,574
-------------------- --------------------
143,667 133,266
========= ========
Number of employees at 31 December 5,688 5,346
========= ========
Sub-contracted employees at 31 December 1,060 1,275
========= ========
Total number of employees (staff and subcontracted)
at 31 December 6,748 6,621
========= ========
Staff costs for the year ending 31 December 2021 is net of the
COVID-19 savings realised from payroll deductions implemented at
the onset of the pandemic amounting to USD 8.7 million (31 December
2020: 7.7 million). This contributes USD 6.2 million (31 December
2020: USD 5.4 million) to cost of sales and USD 2.5 million (31
December 2020: USD 2.3 million) to general and administrative
expenses.
The other benefits primarily consist of non-cash benefits for
employees such as insurance, air fare, VISA costs and rental of
villas and apartments.
During the year, the average head count for administrative
employees was 5,780 (2020: 5,552) while the average head count for
subcontracted employees was 1,875 (2020: 717).
12 Finance costs and income
2021 2020
USD'000 USD'000
Finance costs
Interest expense on leases (Note 18) 4,949 4,627
Bank guarantee charges 1,526 1,147
Interest on bank borrowings 34 129
Commitment fees - 42
Others 613 35
_ ----------------- _ -----------------
7,122 5,980
======= =======
Finance income
Finance income comprises interest income of USD 0.1 million
(2020: USD 0.4 million) from bank deposits.
13 Other gains - net
2021 2020
USD'000 USD'000
Exchange loss - net (140) (454)
(Loss)/profit on disposal of assets (73) 267
Discounts received - 892
Insurance claim received against previous 723 -
year expenses
Others 177 304
_ --------------- _ --------------
687 1,009
====== ======
14 Loss per share
(a) Basic
Loss per share is calculated by dividing the loss attributable
to the equity holders of the Company by the weighted average number
of ordinary shares in issue during the year excluding ordinary
shares purchased by the Company and held as treasury shares (Note
26).
(b) Diluted
Diluted loss 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 retention and
performance share plans, 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 share awards.
2021 2020
USD'000 USD'000
The calculations of loss per share are
based on the following loss and numbers
of shares:
Loss for the year (60,048) (53,386)
------------------------- -------------------------
Weighted average number of shares for
basic loss per share 353,506,890 341,710,302
Adjustments for:
- -
* Assumed vesting of performance share plan
- -
* Assumed vesting of retention share plan
------------------------- -------------------------
Weighted average number of shares for
diluted loss per share 353,506,890 341,710,302
------------------------- -------------------------
Assumed vesting of performance and retention share plans
amounting to 3,813,324 (2020: 3,199,269) shares and 1,817,370
(2020: 2,880,301) shares respectively have been excluded in the
current period as these are anti-dilutive.
Loss per share:
Basic (16.98)c (15.63)c
=========== ===========
Diluted (16.98)c (15.63)c
=========== ===========
15 Operating loss
(a) Operating loss
Operating loss is stated after charging/recognising:
2021 2020
USD'000 USD'000
Depreciation (Note 17) 16,808 20,031
======== ========
(Reversal)/charge of impairment losses -
net (Note 39) (471) 4,548
======== ========
Write-down of inventory to net realisable
value (Note 21) - 6,934
======== ========
(b) Auditor's remuneration
Services provided by the Group's auditor and its associates
comprised:
2021 2020
USD'000 USD'000
Audit of parent company and consolidated
financial statements 1,306 966
Audit of Group companies pursuant to legislation 71 71
------------- -------------
Total audit fee 1,377 1,037
======= =======
Interim review of parent company and consolidated
financial statements 554 289
Corporate finance services 494 -
------------- -------------
Total non-audit fee 1,048 289
======= =======
The above fees exclude non-recoverable UK VAT amounting to USD
0.3 million.
16 Financial instruments by category
Assets as per balance sheet
2021 2020
Classification USD'000 USD'000
Trade receivables - net
of provision (Note 22) Amortised cost 27,010 51,903
Other receivables (Note
22) Amortised cost 12,609 10,871
Due from related parties
(Note 25) Amortised cost 13,470 8,602
Cash and bank balances
(Note 24) Amortised cost 72,833 113,265
-------------- --------------
125,922 184,641
======= =======
Liabilities as per balance sheet
2021 2020
Classification USD'000 USD'000
Liabilities at amortised
Trade payables (Note 30) cost 112,943 26,586
Liabilities at amortised
Other payables (Note 30) cost 9,090 1,353
Liabilities at amortised
Accruals (Note 30) cost 49,549 42,810
Due to a related party Liabilities at amortised
(Note 25) cost 235 117
Liabilities at amortised
Borrowings (Note 33) cost 19,942 880
--------------- ---------------
191,759 71,746
======= =======
17 Property , plant and equipment
Fixtures Capital
Buildings Right
& Operating and office Motor of work-in-
use
infrastructure Equipment Equipment Vehicles assets Progress Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Cost
At 1 January
2020 172,764 173,551 19,417 3,230 56,758 5,104 430,824
Additions 337 5,705 173 - 13,569 7,691 27,475
Disposals (95) (6,367) (1) (347) - - (6,810)
Remeasurements - - - - (1,824) - (1,824)
Transfers - 4,825 102 - - (4,927) -
Retirements* (27,166) (6,428) (10,279) (39) - - (43,912)
------------------- --------------------- ------------------- ------------------- ------------------- ------------------- -------------------
At 31 December
2020 145,840 171,286 9,412 2,844 68,503 7,868 405,753
Additions 2,321 7,567 905 - - 2,486 13,279
Disposals (122) (862) (3) (25) - - (1,012)
Remeasurements - - - - -
Transfers 4,925 2,693 128 - - (7,746) -
------------------- ---------------------- ------------------- ------------------- ------------------- ------------------- -------------------
At 31 December
2021 152,964 180,684 10,442 2,819 68,503 2,608 418,020
------------------- ---------------------- ------------------- ------------------- ------------------- ------------------- -------------------
Depreciation
At 1 January
2020 (122,596) (122,809) (18,019) (2,937) (4,386) - (270,747)
Charge for the
year (4,264) (10,648) (872) (149) (4,098) - (20,031)
Impairment
(Note
39) (311) (3,172) (76) - - - (3,559)
Disposals 68 6,281 - 347 - - 6,696
Retirements* 27,166 6,428 10,279 39 - - 43,912
------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
At 31 December
2020 (99,937) (123,920) (8,688) (2,700) (8,484) - (243,729)
Charge for the
year (3,746) (8,004) (782) (63) (4,213) - (16,808)
Impairment
reversal
/(charge) -
net
(Note 39) (2,225) 2,708 (12) - - - 471
Disposals 122 732 2 25 - - 881
------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
At 31 December
2021 (105,786) (128,484) (9,480) (2,738) (12,697) - (259,185)
------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
Net book value
At 31 December
2021 47,178 52,200 962 81 55,806 2,608 158,835
======== ======== ======== ======= ======= ======== ========
At 31 December
2020 45,903 47,366 724 144 60,019 7,868 162,024
======== ======== ======== ======= ======= ======== ========
* relates to the retirement of assets associated with the
Sharjah yard, which was vacated during 2020 as part of the Group's
restructuring plan.
Buildings have been constructed on land, leased on a renewable
basis from various Government Authorities. The remaining lives of
the leases range between two to twenty-one years.
Property, plant and equipment with a carrying amount of USD 39.3
million (2020: USD 58.4 million) are under lien against the bank
facilities (Note 33).
A depreciation expense of USD 14.9 million (2020: USD 18.0
million) has been charged to cost of sales; USD 1.9 million (2020:
USD 2.0 million) to general and administrative expenses (Notes 7
and 10). This includes depreciation charge on right-of-use assets
of USD 4.2 million (2020: USD 4.1 million). A net reversal of an
impairment loss of USD 0.5 million (2020: impairment charge USD 3.6
million) has been recorded based on the impairment tests performed
at year end. Refer to Note 39 for details of the impairment
assessments performed at year end and key assumptions.
Capital work-in-progress represents the cost incurred towards
construction and upgrade of infrastructure and operating
equipment.
18 Lease liabilities
The following is the movement in lease liabilities during the
year ended 31 December 2021:
2021 2020
USD'000 USD'000
At 1 January 70,985 57,373
Additions during the year - 13,569
Interest expense on leases 4,949 4,627
Repayment of lease liability (2,792) (618)
Repayment of interest expense on leases (7,434) (2,142)
Remeasurements - (1,824)
_ -------------- _ --------------
At 31 December 65,708 70,985
======= =======
Non-current 63,411 68,849
Current 2,297 2,136
_ -------------- _ --------------
65,708 70,985
======= =======
19 Events after balance sheet date
Recommended Cash Offer for Lamprell plc ("the Offer")
On 21 July 2022, the Board of Directors of Lamprell plc and the
Board of Directors of Thunderball Investments Limited (a newly
formed company owned by Blofeld Investment Management Limited and
AlGihaz Holding Closed Joint-Stock Company) (collectively referred
to as "Thunderball") announced a recommended all-cash offer of 9p
per share to be made by Thunderball for the Company's issued and to
be issued share capital. It is intended that the Offer will be
implemented by way of a takeover offer - refer Note 2.1.
Bridge Loan Facility
On 21 July 2022, the Group entered into the bridge loan facility
agreement (the "Bridge Loan Facility Agreement") with Maverick
Investment Holding Ltd ("Maverick"), a company under the control of
a member of the AlSayed family, and AlGihaz Holding Closed
Joint-Stock Company ("AlGihaz"). Pursuant to this Maverick and
AlGihaz each agreed to make available a total loan facility of up
to USD145 million to the Group - refer Note 2.1.
Repayment of ECI facility
On 4 August 2022 , the Group repaid the full amount outstanding
on the ECI facility amounting to USD 44 million as of that
date.
Capacity reservation agreement for major renewables contract
On 22 March 2022, the Group signed a capacity reservation
agreement for the Moray West Offshore Wind Farm for a very large
contract. The reservation agreement secures capacity in Hamriyah
yard for the work as the project moves towards financial close and
full contract award. The base scope of work is for the supply of 62
transition pieces, which includes 60 wind turbine generator
transition pieces and two transition pieces for the two offshore
substations, as well as for the shipping of the 62 transition
pieces to a marshalling harbour in the UK.
Limited Notice to Proceed pending new contract award
("LNTP")
On 18 February 2022, the Group received a limited notice to
proceed from the Saudi-based contractor, Bas Global Marine Services
(BGMS), in anticipation of the full award in H2 2022. The full
scope of work on this contract relates to the delivery and
construction of multiple jack-up lift barges to BGMS. The scope of
work under the LNTP is for early works, including the procurement
of materials and mobilisation of the Group's project management
team. All project activities will be undertaken in the Group's
Hamriyah facilities and work will start immediately, with project
completion planned for 2H 2023.
20 Investment accounted for using the equity method
2021 2020
USD'000 USD'000
At 1 January 55,888 44,420
Investment in associate and joint venture 1,750 25,814
Share of loss of investments accounted
for using the
equity method - net (17,013) (15,697)
Impairment (Note 39) - (792)
Excess loss reclassified to other liabilities
(MISA) - 2,123
Excess loss reclassified to other liabilities
(LSAL) 325 372
Share of other comprehensive loss accounted
for using the equity method - (352)
_ ------------- _ -------------
At 31 December 40,950 55,888
======== ========
21 Inventories
2021 2020
USD'000 USD'000
Raw materials, consumables and finished
goods 15,710 16,995
Work in progress - -
Less: Provision for slow moving and obsolete
inventories (2,482) (2,743)
------------------- -------------------
13,228 14,252
======== =========
The cost of inventories recognised as an expense amount to USD
18.7 million (2020: USD 19.6 million) and this includes nil (2020:
6.9 million) in respect of write-down of inventory to net
realisable value. The net realisable value for finished goods was
determined by an independent valuer based on a fair valuation of
the components making up the finished goods.
22 Trade and other receivables
2021 2020
USD'000 USD'000
Trade receivables 30,233 55,275
Other receivables 12,609 10,871
Prepayments 6,062 2,320
Advance to suppliers 277 194
Receivables from a related party (Note
25) 13,470 8,602
------------------- -------------------
62,651 77,262
Less: Provision for impairment losses (3,224) (3,372)
_ ------------------- _ -------------------
59,427 73,890
========= =========
An analysis of trade receivables is as follows:
2021 2020
USD'000 USD'000
Fully performing 21,126 43,760
Past due 5,884 8,143
Impaired 3,223 3,372
------------------ ------------------
30,233 55,275
======== =========
23 Contract Assets
2021 2020
USD'000 USD'000
Amounts due from customers on contracts 26,211 30,859
Contract work in progress 73,181 54,567
--------------- ---------------
99,392 85,426
======= =======
24 Cash and bank balances
(a) Cash and cash equivalents
2021 2020
USD'000 USD'000
Cash at bank and on hand 25,860 57,625
========= =========
(b) Term and margin deposits
2021 2020
USD'000 USD'000
Margin deposits - under lien (with original
maturity less than three months) 6,844 3,040
Margin deposits - under lien (with original
maturity more than three months) 40,129 52,600
------------------ ------------------
Term and margin deposits (restricted
cash) (Note 33) 46,973 55,640
========= =========
Non-Current 530 447
Current 46,443 55,193
------------------ ------------------
46,973 55,640
========= =========
At 31 December 2021, the cash at bank and short-term deposits
were held with ten banks (2020: eleven banks). The effective
interest rate on short-term deposits was 0.10% (2020: 0.77%) per
annum. Margin and short-term deposits of USD 6.8 million (2020: USD
3.0 million) and deposits with an original maturity of more than
three months amounting to USD 40.1 million (2020: USD 52.6 million)
are held under lien against bank guarantees (Note 37).
Cash and cash equivalents are assessed to have low credit risk
as further detailed in Note 3.1c. Therefore, management does not
estimate the loss allowance on cash and cash equivalents at the end
of reporting period as material.
25 Related party balances and transactions
Related parties comprise of substantial shareholders who own 10%
or more of the issued share capital and voting rights of the
Company, certain legal shareholders of the Group companies,
Directors and key management personnel of the Group and entities
controlled by Directors and key management personnel. Key
management includes the Directors and members of the executive
committee. Related parties, for the purpose of the parent company
financial statements, also include subsidiaries owned directly or
indirectly and joint ventures. Other than those disclosed elsewhere
in the financial statements, the Group entered the following
significant transactions during the year with related parties at
arm's length prices. The Group's other related party transactions
were the remuneration of Non-Executive Directors.
2021 2020
USD'000 USD'000
Key management compensation 5,419 8,441
======= =======
Sales to associates* 146,904 90,351
======= =======
Purchases from associates 118 117
======= =======
Re-chargeable expenses to associates 1,638 2,369
======= =======
Sponsorship fees and commissions paid to
legal
shareholders of subsidiaries (Note 1) 337 329
======= =======
*Sales to associates includes contract revenue earned from the
IMI rigs USD 141.9 million (2020: USD 88.2 million). Contract
liabilities on the balance sheet includes an amount of USD 8.2
million (2020: USD 97.3 million) related to these rigs in line with
IFRS 15 accounting.
Key management compensation comprises:
2021 2020
USD'000 USD'000
Salaries and other short-term benefits 3,380 3,912
Bonus and share-based payments - value of
services provided 1,374 3,874
Post-employment benefits 217 216
Non-Executive Directors fee (Note 11) 448 439
------------- ------------
5,419 8,441
=========== ==========
The terms of the employment contracts of the key management
include reciprocal notice periods of between three to twelve
months.
Due from related parties
2021 2020
USD'000 USD'000
MISA (in respect of sales to associate) 1,006 698
IMI (In respect of expenses on behalf of associate) 4,411 6,852
LSAL (In respect of expenses on behalf of joint
venture) 8,050 1,049
Mada Al Sharq Company LLC (in respect of joint
venture expenses) 3 3
_______ _______
13,470 8,602
========= =========
Due to a related party
2021 2020
USD'000 USD'000
MISA (in respect of purchases) (associate)
(Note 30) 235 117
========== ==========
26 Share capital and share premium
Issued and fully paid ordinary shares
Share Share
Equity capital premium
Number USD'000 USD'000
At 1 January 2021 341,726,570 30,346 315,995
Shares issued during the year 68,345,313 4,558 24,608
Share issue costs - - (2,509)
---------------------------- ----------------- -------------------
At 31 December 2021 410,071,883 34,904 338,094
============= ======== =========
The total authorised number of ordinary shares is 500 million
shares (2020: 500 million shares) with a par value of 5 pence per
share (2020: 5 pence per share).
During the year, the Company successfully carried out a
non-pre-emptive placing through an accelerated bookbuild and the
direct subscription with the Company by certain Directors
(together, the "Capital Raising"). The capital raising represented
19.99% of the Company's issued share capital at the time equal to
68,345,313 ordinary shares at an issue price of 32 pence per share.
An aggregate of 67,900,313 shares were placed with institutional
investors, while the remaining 445,000 shares were directly
subscribed by the directors. The gross proceeds from the capital
raising amounted to USD 29.2 million.
27 Other reserves
Legal Merger Translation
reserve reserve reserve Total
USD'000 USD'000 USD'000 USD'000
At 1 January 2020 98 (18,572) (861) (19,335)
Currency translation
differences - - 43 43
------------------ ------------------ ------------------ -----------------
At 31 December 2020 98 (18,572) (818) (19,292)
Currency translation
differences - - (12) (12)
------------------ ------------------ ------------------ -----------------
At 31 December 2021 98 (18,572) (830) (19,304)
======== ======== ======== ========
28 Post-employment benefits liabilities
In accordance with the provisions of IAS 19, management has
carried out an exercise to assess the present value of its
obligations at 31 December 2021 and 2020, 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:
2021 2020
USD'000 USD'000
At 1 January 37,848 36,863
Current service cost 4,046 4,308
Interest cost 572 943
Remeasurements (305) 1,676
Benefits paid (3,706) (5,942)
------------------- -------------------
At 31 December 38,455 37,848
========= =========
Remeasurements consist of actuarial gain from a change in
financial assumptions USD 1.2 million (2020: loss of USD 2.2
million) and an actuarial loss from a change in other experiences
USD 0.9 million (2020: gain of USD 0.5 million).
29 Restructuring costs
As part of the reorganisation mentioned in Note 5, the Group
restructured some of its functional departments and has outsourced
IT services to an external party. A one-off charge of USD 1.7
million (2020: USD 5.6 million) relating to process transitions and
staff redundancies has been recorded because of these changes and
are included in General and Administrative expenses. Previous year
expenses were related to staff redundancies and costs of closing
down Sharjah yard.
30 Trade and other payables
2021 2020
USD'000 USD'000
Trade payables 112,943 26,586
Other payables 9,090 1,353
Accruals 49,549 42,810
Payables to a related party (Note 25) 235 117
------------------- -----------------
171,817 70,866
========= =========
The Group considers that the carrying amount of trade and other
payables approximates to their fair value. The increase in trade
payables is due to deferral of creditors payments - see Note 2.1.
As at 31 December 2021, trade payables amounting to USD 97.1
million (2020: USD 15.1 million) were not within current aging.
31 Contract Liabilities
2021 2020
USD'000 USD'000
Amounts due to customers on contracts 15,149 159,991
======= =======
Amounts due to customers on contracts comprise:
Progress billings 271,287 343,734
Less: Cost incurred to date (248,111) (168,790)
Less: Recognised profit (8,027) (14,953)
------------------- -------------------
15,149 159,991
========= =========
32 Provision for warranty costs and other liabilities
USD'000
At 1 January 2020 11,440
Charge during the year 1,154
Released/utilised during the year (9,039)
-------------------
At 31 December 2020 3,555
Charge during the year 1,191
Released/utilised during the year (Note 7) (257)
------------------
At 31 December 2021 4,489
========
Warranty costs charged during the year relates to management's
assessment of potential claims under contractual warranty
provisions. The charge during the year is included in subcontract
cost in Note 7. During the year ended 31 December 2021, an amount
of USD 0.2 million (2020: USD 0.6 million) was utilised and USD 0.1
million (2020: USD 8.4 million) released against the provision for
warranty costs. These provisions are expected to be utilised if
claims are received within the warranty periods which can range
between one to five years. If not utilised, these are released at
the end of the warranty periods.
33 Borrowings
2021 2020
USD'000 USD'000
Trade credit facility - 880
Revolving trade loan facility 19,942 -
========= =========
The borrowings are payable within one year (2020: within one
year).
At 31 December 2021, the Group has separate bilateral unfunded
facilities of USD 38.8 million (2020: USD 321.3 million) with
commercial banks. The facilities include letters of guarantees and
letters of credit and there has been no change in the nature of
security pledged against these facilities as at 31 December 2021.
These are summarised below:
Facility Amount utilised Amount available to
be used
USD'000 USD'000 USD'000
Funded facilities
Trade loan facility 45,006 19,942 25,064
Unfunded facilities
Bank guarantees (Note
37) 124,627 85,787 38,840
--------------- ---------------- ------------------
Total 169,633 105,729 63,904
======== ======== ========
During the year, the Group secured a USD 45 million UAE Export
Credit Agency backed revolving trade loan facility from First Abu
Dhabi Bank and Emirates Development Bank (the "Initial Facility").
The Initial Facility will assist with the working capital
requirements on the IMI rigs which are currently under construction
at the Group's Hamriyah yard. As part of the terms of the Initial
Facility, there is an option of an additional accordion facility of
USD 45 million subject to the provision of additional security to
the banks similar to that for the Initial Facility.
The facility is repayable in stages linked to the timing of
milestone receipts under the IMI rigs contracts and will terminate
two business days after the milestone three payment is received, or
on 31 December 2022, whichever comes first. The facility has been
fully repaid subsequent to the balance sheet date - refer Note
19.
The Group's debt facility is subject to covenant clause, whereby
the Group must ensure that its net worth, calculated as net
tangible assets, does not fall below USD 100 million at any
time.
The revolving trade loan facility carries interest at EIBOR plus
margins, which must be paid on maturity/rollover dates. The
borrowings include accrued interest of USD 0.1 million (2020:
Nil).
Bank facilities are secured by liens over term deposits of USD
47.0 million (2020: USD 55.6 million) (Note 24), 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 movable assets
and certain contract related receivables.
The carrying amounts of borrowings in the year approximated to
their fair value and were denominated in USD or UAE Dirhams, which
are pegged to the USD.
Reconciliation of liabilities arising from financing
activities
The table below details changes in the Group's liabilities
arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those
for which cash flows were, or future cash flows will be, classified
in the Group's consolidated cash flows as cash flows from financing
activities.
Year ended 31 December 2021
Draw-down Repayment Additions Remeasurements
during during to lease / Finance
the year the year liabilities cost
1 January (cash) (cash) (non-cash) (non-cash) 31 December
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Trade credit
facility 880 - (894) - 14 -
Trade loan
facility - 19,924 - - 18 19,942
Lease liabilities 70,985 - (10,226) - 4,949 65,708
------------- ------------- ------------- ------------- ------------- -------------
71,865 19,924 (11,120) - 4,981 85,650
======== ======== ======== ======== ======== ========
Year ended 31 December 2020
Trade credit
facility - 880 - - - 880
Term loans 20,058 - (20,058) - - -
Lease liabilities 57,373 - (2,760) 13,569 2,803 70,985
------------- ------------- ------------- ------------- ------------- -------------
77,431 880 (22,818) 13,569 2,803 71,865
======== ======== ======== ======== ======== ========
34 Income tax expense
2021 2020
USD'000 USD'000
Current tax expense:
Current year charge 128 125
Adjustments in respect of prior years - -
--------------- ---------------
Income tax expense as reported in consolidated
income statement 128 125
======== ========
Corporate income tax is not applicable in the UAE where the
Group's principal place of business is located. The Group accounts
for corporate tax for its operations in Qatar and Kurdistan.
35 Dividends
T here were no dividends declared or paid during the year ended
31 December 2021 or 31 December 2020.
36 Commitments
(a) International Maritime Industries Commitments
In 2017, the Group entered commitments associated with the
investment in International Maritime Industries. Under the
Shareholders' Agreement, the Group, via its subsidiary Maritime
Offshore Limited, will invest up to a maximum of USD 140.0 million
in relation to its commitment over the course of construction of
the Maritime Yard between 2017 and 2023 with USD 84.8 million
already paid to date. The forecast contributions are as
follows:
2021 2020
USD'000 USD'000
Within one year 37,000 17,000
Later than one year but not later than
four years 18,200 38,200
55,200 55,200
====== ======
As part of this investment, the Company provided a guarantee, of
the obligations, commitments, undertakings, representations,
warranties, indemnities and covenants of Maritime Offshore Limited
under the Shareholders' Agreement (capped at its aggregate maximum
commitment of USD 140 million). Should the Group not be in the
position to honour its outstanding investment commitments, it is
likely that this would result in the Group's stake in the IMI joint
venture being diluted below 20 percent.
(b) Other commitments
2021 2020
USD'000 USD'000
Capital commitments for restructuring
programme 60 1,304
========= =========
Capital commitments for construction of
facilities 85 883
========= =========
Capital commitments for purchase of operating
equipment
and computer software 258 2,433
========= =========
37 Bank guarantees
2021 2020
USD'000 USD'000
Performance/bid bonds 81,935 84,673
Advance payment, labour visa and payment
guarantees 3,818 8,754
-------------------- -------------------
85,753 93,427
========= =========
The various bank guarantees, as above, were issued by the
Group's bankers in the ordinary course of business. Certain
guarantees are secured by cash margins, assignments of receivables
from some customers and in respect of guarantees provided by banks
to the Group companies, they have been secured by parent company
guarantees (Note 33). In the opinion of the management, the above
bank guarantees are unlikely to result in any liability to the
Group.
38 Cash (used in)/generated from operations
Year ended 31 December
2021 2020
Notes USD'000 USD'000
Operating activities
Loss before income tax (59,920) (53,261)
Adjustments for:
Share-based payments - value of
services provided 9 2,410 4,440
Depreciation 17 16,808 20,031
Amortisation of intangible assets 9 9
(Reversal)/charge of impairment
losses of non-financial assets -
net 39 (471) 4,548
Share of loss of investments accounted
for using the equity method - net 20 17,013 15,697
Provision/(release) for warranty
costs and other liabilities - net 32 934 (7,885)
Loss/(profit) on disposal of property,
plant and equipment 73 (267)
(Release)/provision for slow moving
and obsolete inventories 21 (261) 155
Release for impairment of trade
receivables, net of amounts recovered (148) (97)
Charge for employees' end of service
benefits 28 4,618 5,251
Finance costs 12 7,122 5, 980
Finance income 12 (51) (370)
--------------- ---------------
Operating cash flows before payment
of employees' end of service benefits
and changes in working capital (11,864) (5,769)
Payment of employees' end of service
benefits (3,706) (5,942)
Changes in working capital:
Inventories before movement in provision 21 1,285 75,351
Trade and other receivables before
movement in Provision for impairment
losses 22 17,885 (36,362)
Contract assets 23 (13,966) (45,042)
Trade and other payables 30 99,120 (25,098)
Contract liabilities 31 (144,842) 156,165
--------------- ---------------
Cash (used in)/generated from operations (56,088) 113,303
======= =======
39 Impairment of non-financial assets
2021 2020
Impairment comprise of the following: USD'000 USD'000
Impairment of property, plant and equipment
(Note 17) 3,163 3,559
Impairment of intangible assets - 197
Impairment of an investment accounted for using
equity
method (Note 20) - 792
Reversal of an impairment loss (Note 17) (3,634) -
--------------- ---------------
(471) 4,548
======== ========
40 Statutory Accounts
This financial information is not the statutory accounts of the
Company and the Group, a copy of which is required to be annexed to
the Company's annual return to the Companies Registration Office in
Isle of Man. A copy of the statutory accounts in respect of the
year ended 31 December 2021 will be annexed to the Company's annual
return for 2021. Consistent with prior years, the full financial
statements for the year ended 31 December 2021 and the audit report
thereon will be circulated to shareholders at least 20 working days
before the AGM. A copy of the statutory accounts required to be
annexed to the Company's annual return to the Companies
Registration Office in respect of the year ended 31 December 2020
has been annexed to the Company's annual return for 2020.
41 Directors' responsibilities statement
We confirm that to the best of our knowledge
The financial statements, have been prepared in accordance with
the applicable set of accounting standards, give a true and fair
view of the assets, liabilities and financial position and profit
or loss of the company and the undertakings included in the
consolidation taken as a whole; and, This announcement includes a
fair review of the development and performance of the business and
the position of the company and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
Further information is available on the Company's website,
www.lamprell.com.
Alternative performance measures
We use a range of financial and non-financial measures to assess
our performance. The tables below set out the definitions of such
measures, reconciliations to amounts presented in the financial
statements and the reason for their inclusion in the report. The
metrics presented are consistent with those presented in our
previous annual report and there has been no change to the bases of
calculation.
Adjusted EBITDA
In addition to measuring financial performance of the Group
based on operating profit, we also measure performance based on
adjusted EBITDA. Adjusted EBITDA is defined as the Group
profit/(loss) for the year from continuing operation before
depreciation, amortisation, impairment, net finance expense,
taxation, one off items and share of loss of investments accounted
for using the equity method.
We consider adjusted EBITDA to be a useful measure of our
operating performance because it provides an indication of our
ability to generate cash from profit by excluding non-cash items
and one-off items that are non-recurring in nature, such as
restructuring costs (Note 29). Adjusted EBITDA is not a direct
measure of our liquidity, which is shown by our cash flow
statement, and needs to be considered in the context of our
financial commitments. Adjusted EBITDA margin is calculated as a
percentage of revenue.
Reconciliation from Group loss for the year, the most directly
comparable IFRS measure, to adjusted EBITDA is set out below:
Year ended 31 December
2021 2020
USD'000 USD'000
--------- ---------
Loss for the year (60,048) (53,386)
--------- ---------
Depreciation (Note 17) 16,808 20,031
--------- ---------
Amortisation 9 9
--------- ---------
Interest on bank borrowings and
leases (Note 12) 4,983 4,756
--------- ---------
Finance income (Note 12) (51) (370)
--------- ---------
Income tax expense 128 125
--------- ---------
(Reversal)/charge of impairment
losses - net (Note 39) (471) 4,548
--------- ---------
Inventory write down (Note 21) - 6,934
--------- ---------
Restructuring costs (Note 29) 1,720 5,597
--------- ---------
Share of loss of investments accounted
for using the equity method - net
(Note 20) 17,013 15,697
--------- ---------
Adjusted EBITDA (19,909) 3,941
--------- ---------
Adjusted EBITDA margin (5.1%) 1.2%
--------- ---------
Net cash
Net cash measures financial health after deduction of
liabilities such as borrowings. A reconciliation from the cash and
cash equivalents per the consolidated cash flow statement, the most
directly comparable IFRS measure, to reported net cash, is set out
below:
2021 2020
USD'000 USD'000
--------------------------------------------
Cash and cash equivalents (Note 24) 25,860 57,625
--------------------------------------------
Margin deposits - under lien (with
original maturity less than three months)
(Note 24) 6,844 3,040
--------------------------------------------
Margin deposits - under lien (with
original maturity more than three months)
(Note 24) 40,129 52,600
--------------------------------------------
Borrowings (Note 33) (19,942) (880)
--------- ---------
Net cash 52,891 112,385
========= =========
Of net cash at 31 December 2021, USD 47 million is restricted
(31 December 2020: USD 55.6 million) - see Note 24.
Overheads
Overheads are costs required to run our business, but which
cannot be directly attributed to any specific project or service. A
reconciliation from unallocated expenses per the segment note in
the consolidated financial statements to reported overheads, is set
out below:
2021 2020
USD'000 USD'000
-----------------------------------------------
General and administrative expenses (Note 10) 35,531 47,215
-----------------------------------------------
Selling and distribution expenses (Note 8) 239 298
-----------------------------------------------
Direct overheads included in cost of sales:
-----------------------------------------------
Unallocated operational overheads (Note 5) 6,497 10,743
-----------------------------------------------
Yard rent and depreciation (Note 5) 6,969 7,323
Repairs and maintenance (Note 5) 5,006 3,464
Interest expense on leases (Note 12) 4,949 4,627
Other 9,842 6,783
Overheads 69,033 80,453
-----------------------------------------------
Restructuring costs (Note 10) (1,720) (5,597)
-----------------------------------------------
Reversal/(charge) of impairment losses - net
(Note 39) 471 (4,548)
-----------------------------------------------
Covid-19 related salary reductions 8,684 7,736
-------- --------
Underlying overheads 76,468 78,044
======== ========
An analysis of overheads nature is as follows:
2021 2020
Overhead nature: USD'000 USD'000
---------------------
Fixed 27,741 27,169
----------------------
Semi variable 9,848 6,167
----------------------
Variable 38,879 44,708
----------------------
Underlying overhead 76,468 78,044
======== ========
An analysis of overheads types is as follows:
2021 2020
Overhead type: USD'000 USD'000
---------------------
Cash 58,312 53,214
----------------------
Non-cash 18,156 24,830
----------------------
Underlying overhead 76,468 78,044
======== ========
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END
FR FIFEVTRITIIF
(END) Dow Jones Newswires
August 08, 2022 02:00 ET (06:00 GMT)
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