Lamprell plc Annual Report and Accounts 2015
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1
5 BUILDING
IMPROVING
EVOLVING
PLAYING A KEY ROLE IN THE GLOBAL ENERGY INDUSTRY
Operational highlights
Strong operational performance leading to repeat business
High levels of activity in the yards with a record seven
concurrent new build rigs under construction
Efficiency and productivity improvements delivered on
time and on budget
World-class safety levels maintained with important
milestones achieved
First proprietary design land rig built and marketing under way
Revenue
(USD million)
871.1
2014: USD 1,084.9m
2013: USD 1,072.8m
KPI
EBITDA
(USD million)
KPI
90.0
2014: USD 137.0m
2013: USD 76.0m
Net profit before income
tax and exceptional items
(USD million)
KPI
Net profit
(USD million)
65.2
2014: USD 118.5m
2013: USD 45.9m
Earnings per share – diluted
(cents)
18.84c
2014: 37.38c
2013: 12.67c
64.7
2014: USD 118.0m
2013: USD 36.4m
Net cash
(USD million)
210.3
2014: USD 272.6m
2013: USD 183.8m
Throughout this report we use this symbol KPI to indicate which
measures are main Group KPIs.
Who we are
Lamprell, based in the
United Arab Emirates
(“UAE”) and with over
40 years’ experience,
is a leading provider of
fabrication, engineering
and contracting services
to the offshore and onshore
oil & gas and renewable
energy industries.
What we do
We have an international
reputation for building
complex offshore and
onshore process modules
as well as fixed platforms
and topsides, and hold
leading market positions
in the fabrication of shallow-
water drilling jackup rigs,
multi-purpose liftboats,
land rigs, and rig
refurbishment projects.
Lamprell is listed on the London Stock
Exchange (symbol “LAM”).
Online shareholder information
In order to keep shareholders fully up to
date, we have comprehensive financial
and company information on our website.
Our shareholders can access all the
information they require, 24 hours a day.
www.lamprell.com
Cover images, from left to right:
1 NDC rig “Butinah” delivered in May 2015
2 Petrofac UZ750 module load out
3 Rigs under construction in Hamriyah
4 Project Evolution panel line
Strategic report: Highlights 2015
1
Strategic report
How the Company sets out to create value
and how we performed during the year.
2 Lamprell at a glance
4 Executive Chairman’s statement
6 Chief Executive’s review
8 Markets, trends pipeline and opportunities
10 Business model
12 Project Evolution
14 Strategy
16 Principal risks and uncertainties
20 Financial review
23 Performance measures (KPIs)
24 Operational review
30 Sustainability report
We are building a solid
platform for growth
Corporate governance
Including information on our Board,
Committees, leadership team and
remuneration.
Our business
continues to improve
As we implement our
strategy, our business
is evolving
36 Board of Directors
38 Directors’ Report
48 Nomination & Governance
Committee Report
50 Audit & Risk Committee Report
54 Directors’ Remuneration Report
55 Directors’ Remuneration Policy Report
61 Directors’ Annual Report on Remuneration
68 Statutory information and Directors’
Statements
Financial statements
Our primary financial statements and
supporting notes.
70 Independent auditor’s report to the
members of Lamprell plc
71 Consolidated income statement
72 Consolidated statement of
comprehensive income
73 Consolidated balance sheet
74 Company balance sheet
75 Consolidated statement
of changes in equity
76 Company statement of changes in equity
77 Consolidated cash flow statement
78 Company cash flow statement
79 Notes to the financial statements
118 Glossary
For further reading on specific topics,
please follow the
throughout the document.
2
Strategic report: Lamprell at a glance
WHAT THE BUSINESS
LOOKS LIKE TODAY
Lamprell is firmly established as one
of the world’s major fabricators playing
a key role in the energy industry to
a global customer base.
Our core services
New build jackup rigs
Offshore platforms
Modules
Oil & gas contracting services
Lamprell has some of the
world’s leading facilities for
the construction of new build
jackup drilling rigs. With a
sophisticated engineering
capability and state-of-the-
art construction and load out
facilities, Lamprell has rapidly
gained a reputation as a
leading and reliable builder of
drilling rigs for the international
market. In May 2015 the
Group successfully delivered
its 27th jackup rig since its
listing in 2006, comprising of
14 LeTourneau Super 116E’s,
seven Friede & Goldman Super
M2’s and six multi-purpose
GustoMSC vessels.
Lamprell has successfully
undertaken a variety of
offshore new build construction
projects for the oil & gas
industry. We construct complex
living quarters, wellhead
decks, topsides, jackets and
various other offshore fixed
facilities including modules
and topsides for FPSO/FPU
projects. In 2014 Lamprell
was recognised by Guinness
World Records for moving
the heaviest load on trailers
from its Jebel Ali facility.
This was for the load out
of the production, utilities
and quarters deck destined
for the Golden Eagle Area
Development in the North Sea.
Lamprell fabricates
packaged, pre-assembled
and modularised units and
has expertise constructing
accommodation and complex
process modules for onshore
downstream projects. We are
also looking to expand into
modularised LNG. Lamprell’s
modular fabrication activities
offer a number of advantages
over conventional construction.
Fabrication and assembly are
performed at our modernised
facilities allowing us to ensure
that all work is executed
productively in accordance
with our industry-leading safety
and quality standards.
Oil & gas contracting services
consists of our four smaller
business streams including
Rig Refurbishment, Land
Rig Services, Engineering
and Construction (E&C), and
Operations and Maintenance
(O&M). We completed our
first land rig built to Lamprell’s
proprietary design; our
E&C and Rig Refurbishment
businesses enjoy a reputation
of delivering quality products
safely, within budget and
on schedule; and our O&M
division has an excellent
reputation for bringing our
strong safety and quality
culture into every yard in
which it operates.
Glossary
page 118
3
new build jackup rigs
delivered to various
clients
page 25
10
modules delivered to
Petrofac for the UZ750
project
page 26
11
rig refurbishment projects
successfully delivered
13
land rig projects
completed and delivered
page 27
page 27
Jubail
Hamriyah
Sharjah
Dubai
Jebel Ali
Lamprell plc Annual Report and Accounts 2015
Strategic report: Lamprell at a glance
3
Employees
Order book
Significance of location
With its primary fabrication yards located
in Hamriyah, Sharjah and Jebel Ali, all
of which are in the UAE, and facilities
in Saudi Arabia through a joint venture
agreement, Lamprell is advantageously
located allowing us to serve an
international clientele. The Group has
excellent facilities including fabrication
space and deep water quayside berths
which allow us to efficiently load out
our projects and service our clients
across the globe. Combined, the Group’s
facilities cover over 1,000,000m2 with 2km
of quayside. We also have access to a
highly skilled low cost workforce, which
allows us to offer a competitive cost
structure to our clients.
Total quayside (m)
2,000
Total land (m2)
1,000,000+
Lamprell employs approximately 9,000
people across multiple facilities, has project-
focused and experienced execution teams
with over 300 multi-disciplinary engineers
and a specialist commissioning department.
We have a highly skilled workforce which
benefits from our assessment and training
centre and is led by a strong leadership
team. Embedded within our organisation
is a clear focus on safety and teamwork,
two of our core values.
The order book at the end of 2015 totalled
USD 739.7 million and is mainly composed
of new build jackup rigs including three
for NDC, two for Shelf, two for Ensco and
a number of modular fabrication projects.
Our order book 2015 (USD million)
as at 31 December 2015
KPI
2.1%
5.8%
5.7%
86.4%
739.7
New build jackup rigs
Modules
Offshore platforms
Oil & gas contracting services
Total employees
as at 31 December 2015
9,312
2014: 8,367 employees
Employee nationalities
as at 31 December 2015
46
2014: 50 nationalities
Employee gender split
Management 2015
92%
8%
2014: male 90% female 10%
Jubail
Hamriyah
Sharjah
Dubai
Jebel Ali
4
Strategic report: Executive Chairman’s statement
All 2015
Board
priorities
achieved
FUTURE
GROWTH
THROUGH
RESILIENCE
2015 was an undeniably
challenging year for our
industry. We are proud
that Lamprell was able to
show resilience in a tough
market environment and
lay the groundwork for
long-term growth.
Challenging market backdrop
Contrary to the predictions of many
market participants, oil prices continued
to slide throughout 2015. Oil & gas
companies around the world reacted by
gradual, and in some cases drastic, cuts
to their capital expenditure.
Lamprell is not immune to the oil sector
headwinds but we are pleased to report
on our demonstrated ability to withstand
these challenges. Along with other energy
industry contractors, we have seen delays
in contract awards but we have taken steps
to adapt by changing our approach to new
business development.
Maintaining a competitive position
In difficult times, companies often make
the mistake of losing focus on their long-
term goals. Lamprell’s strong position
allowed us to withstand the storm without
compromising our future growth plans.
We managed to remain competitive and
continue to implement our strategy.
page 8 was affected
Similar to most of our peers, our pipeline
conversion
by project delays and cancellations.
Nevertheless our bid-to-win ratio remained
healthy by industry standards and this is
an important factor indicating Lamprell’s
strong competitive position. It gives comfort
about our ability to recover from the difficult
contracting environment.
We also judge our strength by our
ability to compete without undermining
Lamprell’s financial performance or
commercial position
page 20. In the
context of increased pricing pressure,
where numerous market players saw
gradual margin erosion, we have been
able to remain profitable. The gains
delivered through Project Evolution
page 12 allowed us to protect our
normalised margins whilst enabling
us to offer attractive propositions in
a tough market.
This business flexibility and our strong
client relationships have helped us maintain
leadership in the jackup market, with a
win of the ninth rig from National Drilling
Company (“NDC”), one of only three
jackup rig orders placed worldwide
in 2015
page 25.
Focus on the future
Whilst we are taking steps to ensure we
successfully weather the current storm
in the sector, we anticipate a recovery in
the energy markets, as do most industry
experts, and so we are also continuing
to focus on our future. We have reviewed
our strategy
redirecting our marketing efforts from
slower international regions around the
world to the Middle East where we can
leverage our position of strength.
page 14 for robustness,
Lamprell plc Annual Report and Accounts 2015
Strategic report: Executive Chairman’s statement
5
Appoint at least
one additional
independent
Non-Executive
Director
New gender
policy: minimum
of one new
female director
by end of 2016
Board to hold at
least one Board
meeting at a
group site/facility
per annum
Continue to
pursue long-term
succession plan
for management
during 2015,
and commence
implementation
Total shareholder return
KPI
(17.8)%
As a Board, we have also spent
considerable time assessing our
medium-term positioning in the market
and potential sources of growth for
Lamprell. With this in mind, we have
identified strategic partnerships as a
potential route to a step-change in the
scale of projects to target. In line with
this plan, in January 2016 we announced
a Memorandum of Understanding with
Saudi Aramco, Bahri and Hyundai Heavy
Industries regarding a potential partnership
for collaboration on the Maritime Complex
in Saudi Arabia. The discussions are still
at an early stage, but this could become
a sizeable business opportunity for
Lamprell. I took on the responsibility
of Executive Chairman to identify
opportunities for strategic initiatives and
other means to grow the business in an
outward facing role. Our work on potential
alliances continues, and we will update our
shareholders on progress as appropriate.
Strong Board
In this endeavour, I have benefited from
the support of a strong Board
page 36.
Following the departure of Michael Press
and the passing of Peter Whitbread
during 2015, Lamprell has enhanced the
Board’s independence and composition
with the addition of two Directors with
impressive experience and with Ellis
Armstrong’s appointment as Senior
Independent Director. Debra Valentine
brings significant industry knowledge
coupled with expertise in corporate
transactions. Mel Fitzgerald is
a seasoned executive with 30 years
of industry experience. It was also
pleasing to promote from within, with
the appointment of Tony Wright to the
Board in the role of Chief Financial
Officer
page 20.
Lamprell’s Board will be completed with
the recruitment of a new CEO following
Jim Moffat’s announced retirement from the
full-time CEO position in 2016. Lamprell will
continue to benefit from Jim’s expertise for
a year following his retirement but I would
like to take this opportunity to thank him
and the wider senior management team
for their dedication and drive to secure
a strong future for the Group.
I would also like to thank our shareholders
for their support through these challenging
times. The Board will continue to work
tirelessly to deliver the strategy
firm in our belief in Lamprell’s future.
page 14,
John Kennedy
Executive Chairman
6
Strategic report: Chief Executive’s review
BUILDING
ON OUR
STRONG
FOUNDATIONS
After a year of exceptional
financial results in 2014,
Lamprell has maintained
a steady operational
performance and built
on the strong business
position towards long-term
growth. The focus is now on
executing our strategy.
Lamprell plc Annual Report and Accounts 2015
Lamprell plc Annual Report and Accounts 2015
Q How would you describe 2015
for Lamprell?
2015 will certainly be remembered as
a difficult year for the industry, but for
Lamprell it was an important turning point.
After a year of recovery in 2013 and the
exceptional performance in 2014, this
year has shown the underlying robustness
of Lamprell’s business with its ability to
be flexible and adapt to the changing
environment. In 2015 we demonstrated
that Lamprell is resilient enough to return
to normalised performance, even in the
context of a challenging market.
Q What is your assessment of
Lamprell’s performance in 2015?
Overall, our performance across the key
metrics was strong. We focussed on the
elements under our control, which allowed
us to manage the impact of the external
environment. Operationally, we have
done well, delivering three major projects
on time, on budget and to high safety
and quality standards. We have seen an
extension in scope of the project we are
fabricating for Petrofac, a testament to
our performance. Our yards remained full
throughout the second half of the year.
The strength of our client relationships is
a key driver of our performance, and we
continued to develop these through our
collaborative approach. Having awarded
Lamprell the ninth jackup rig
pages 24
and 25, NDC subsequently extended its
options with Lamprell. We also offered
the service of stacking client rigs in our
facilities
and future cooperation.
page 27 in the spirit of current
Our safety record throughout the year
was steady with a TRIR of around 0.3.
The Jebel Ali and Dubai facilities achieved
a major milestone having now operated
for three years without a day away from
work case (DAFWC). We have set new
improvement goals and are looking at
new ways to strengthen the safety culture
further within the workforce and prevent all
avoidable incidents
page 30.
We have also significantly improved our
efficiency and productivity in the yards.
The implementation of Project Evolution
page 12 was almost entirely completed
by the end of the year, with a new panel
line
page 24 fully operational and with
significant improvements in automation.
Strategic report: Chief Executive’s review
77
How we are
adapting to a
challenging
market
Total awards (USD million)
407.1
Completed initiatives
Strengthen and
realign our organisation
Productivity and
efficiency improvements
Enhanced focus on
broadening customer
base and strengthening
our brand
new bids more likely to be awarded in the
near future. In practice, this was driven by
a conscious shift away from the quieter
international markets to more buoyant
regional markets such as the Middle East
which maintains higher activity levels
in the current environment.
This approach allowed us to mitigate
page 16 of adverse impact
the risk
in areas where we have control, but of
course Lamprell cannot resist the market
dynamics. While bidding activity levels are
high, we continue to be affected by the
industry-wide trend of projects drifting
to the right.
Q What are your predictions for 2016?
The strong foundations laid over the last
18 months have created a structure for us
to be competitive and deliver operational
excellence consistently. With our ongoing
bidding efforts, we expect to be able to
persevere through the downturn and then
emerge from it in a position for growth to
deliver our strategy
page 14.
In our drive to expand our offering, we
also built our first land rig of Lamprell’s
page 27, which we
proprietary design
started marketing towards the end of the
year. We believe it will be an attractive
product for Middle East clients, having
been specifically designed for the region.
We believe our ability to win large projects
could be enhanced by forming strategic
alliances. In early 2016 we signed a
Memorandum of Understanding regarding
Lamprell’s potential participation in the
Maritime Complex in eastern Saudi Arabia.
We will continue to scrutinise the market
for other value-added alliances.
There is a lot of uncertainty in the current
markets but Lamprell’s focus for 2016
is on demonstrating resilience and its
ability to progress towards future growth
despite the industry challenges. We are
confident in our ability to deliver on our
strategy
page 14.
James Moffat
Chief Executive Officer
Q When are you expecting to see the
benefits of Project Evolution?
We started to see the benefits in terms
of productivity almost immediately upon
completion of each component of the
project. As you would expect with the
introduction of new equipment and training
requirements, some of the initiatives took
time to ramp up to their full rate but we
have benefited from the improvements
throughout the year.
page 26,
For example, welding
which constitutes a major component
in fabrication with approximately 30%
of manhours, has seen a dramatic
improvement as we modernised our
processes. The beam cutting robots cut
beams to exact size multiple times faster
and more accurately than a human can.
We have optimised painting, crane and
scaffolding services, as well as our use
of yard space and assets
page 34.
As a result, we have been able to
accommodate the construction of seven
page 25 in our
concurrent jackup rigs
Hamriyah yard, a record for the Group.
Q What are the financial benefits of
these improvements?
When we announced Project Evolution,
we explained that we expect full payback
within three to four years. While this remains
appropriate guidance, we delivered better
savings than first anticipated in 2015. The
savings and efficiencies generated by
Project Evolution
to protect our margins whilst at the same
time remaining competitive in a market with
increased pricing pressure. With the recent
appointment of Niall O’Connell as COO,
a strong focus will be on driving these
operational improvements even further.
page 12 allowed us
Q What were the main challenges you
encountered and how did you adapt
to face them?
As drilling programmes started to be
scaled back in response to weak oil prices,
the pace of the contract awards slowed
down the whole supply chain. Along with
our peers, we suffered from this which is
reflected in the lack of major awards during
the second half of the year.
In response, we have continued to improve
our approach to business development
and, specifically, we dynamically adapted
the composition of our bid pipeline
page 8 throughout the year to address
the changing circumstances. When our
target projects moved to the right, we
regularly reassessed their likelihood of
sanction or proactively replaced them with
8
Strategic report: Markets, trends, pipeline and opportunities
WE ARE A KEY PLAYER
IN THE GLOBAL ENERGY MARKET
Shares of primary energy1
*Includes biofuels
50%
40%
30%
20%
10%
0%
1965
Renewables*
Hydro
Nuclear
Coal
Gas
Oil
2000
2035
Following Lamprell’s
record performance in
2014, this year presented
new challenges. However,
challenges that test some
organisations will create
opportunities for others.
Despite falling oil prices
and slowing demand, our
2015 bid pipeline remained
strong. We aim to weather
the downturn and are
currently in a strong position
for the anticipated recovery
as the world’s energy
demand is expected to
continue its rise of around
0.8% each year over the
next 20 years1.
References
1. BP Energy Outlook 2035.
2. Global capex outlook December 2015
3.
– Nomura & Citi Research.
Infield systems “Offshore Oil and Gas Macro”
November 2015.
4. Douglas Westwood Production and Drilling Outlook
2015-2021 (Q4 2015 edition).
5. Wood Mackenzie October 2015.
6. Douglas Westwood Land Drilling Rig market report
7.
2015-2019.
IHS world rig forecast short-term trend –
December 2015, rigbase.
8. Barclay’s E&P Spending Outlook, January 2016.
Lamprell plc Annual Report and Accounts 2015
Macroeconomic factors and strategy
Our business opportunities
Amid the continued oil price depression,
there continues to be a strong discipline
around any E&P spend and new
high profile developments are closely
scrutinised. This has had an impact on
project awards in 2015. However, the
impact for Lamprell is mitigated to some
extent by our expertise and focus which
primarily lie in the conventional and shallow
water activities.
While long-term industry fundamentals
remain strong with capex forecast to
recover by 2020, the shorter-term capex
for the upstream oil & gas industry is set to
drop by a further 20% from 2015 capex2
levels. Major oil companies also continue
to delay final investment decisions due to
cash flow affordability and less favourable
project economics caused by current low
energy prices.
Offsetting this, the conventional shallow
water in the Middle East region where
most production costs are viable at levels
below USD 30/bbl3 remains attractive
with continued investment forecast over
the next five years. Led by Saudi Arabia
and Iran (post sanctions), the Middle East
is pressing ahead with major oil & gas
development projects. By leveraging
our strong reputation and regional
presence, Lamprell expects to win our
share of these opportunities although
we recognise that competition for such
projects has intensified.
We continue to diversify our bid pipeline
portfolio across our market sectors
and via a broader geographic footprint.
This has strengthened our bid pipeline,
which as at 31 December 2015 totalled
USD 5.4 billion. With a win rate slightly
over 30% in 2015, we continue to focus on
converting the pipeline to contract awards.
However, numerous projects have been
cancelled or deferred. Consistent with our
page 14
2015 refined corporate strategy
we are proactively sourcing opportunities
through diversification across markets.
The emphasis will be to target sizeable
opportunities through strategic alliances
and partnerships. We recently announced
a Memorandum of Understanding regarding
Lamprell’s potential participation in the
Maritime Complex in Saudi Arabia. We have
also agreed to work with Dubai Drydocks
to identify opportunities for cooperation on
FPSO projects in the context of Dubai’s
aspiration to become a strategic location
for FPSU/FPSO.
Strong pipeline and high
bidding activity
Bid pipeline was USD 5.4 billion at the end
of 2015 (2014: USD 5.2 billion)
New awards value at USD 407.1 million
in 2015 (2014: USD 1.4 billion)
Successfully diversified bid pipeline
client base
Increased the volume of modular work,
a key strategic target
In discussions with potential alliance
partners to target major projects
Started marketing first land rig based on
proprietary design
Strategic report: Markets, trends, pipeline and opportunities
9
Bid pipeline 2015 (USD millions)
as at 31 December 2015
KPI
New build jackup rigs
Modules
Offshore platforms
Oil & gas contracting services
1,960
660
1,960
5,400
820
Long-term
market
fundamentals
remain strong
Market sectors and our opportunities
67.4%
jackup utilisation7
444
15%
6%
USD billion forecast
E&P spend in 20168
of Lamprell’s total 2015
bid pipeline
increase in Middle East
E&P spend for 20168
New build jackup rigs
Offshore platforms
Modules
While the global jackup drilling
fleet has seen a significant
increase over the past seven
years through aggressive build
programmes by major drilling
operators and speculators,
worldwide jackup utilisation
decreased to 67.4% at
December 2015 versus
83.5% at December 2014.
Despite the current oversupply
of jackup rigs, the market
specifically in the Middle East
is still promising as NOCs
invest billions of dollars into
redeveloping maturing fields.
A forecast 4% CAGR rise in
shallow water drilling over the
next six years in the Middle
East should compensate for
some of this decline4, with
the slowdown in new orders
expected to continue until
the oversupply of rigs is re-
balanced. Meanwhile, Lamprell
has a proven capability of
bidding competitively against
international bidders. Of
the three rig orders in 2015,
Lamprell received one new
order from an established
drilling contractor.
Fixed offshore platform
demand in the medium term is
anticipated to remain resilient
due to the lower sanction
point generally required for
shallow water as opposed
to deep water floating
developments. The Middle East
region, notably Saudi Arabia,
Abu Dhabi, Qatar and Iran,
remains highly attractive in
this environment. The long-
term fundamentals remain in
place despite the near-term
uncertainty in this sector.
With the projected growth of
deep water developments
in the longer time frame,
FPSOs are expected to be the
preferred solution among the
floating production concepts,
as fixed platforms become
technically challenging and
cost prohibitive. With Lamprell’s
geographical location, cost
competitiveness and proven
track record of world-class
project delivery, we are well
positioned to re-enter this
potential growth market
as the industry recovers.
Despite the expected softening
in spend due to recent over-
supply in refining capacity
in the downstream market,
significant investment is
continuing in the Middle East
and hence this remains a key
region for Lamprell where the
Group is strategically located.
Investment is divided with circa
50% on upgrades to existing
refineries and the remainder
split between maintaining
existing facilities and greenfield
projects5. We increased our
volumes of modular work
in 2015, demonstrating our
capabilities in this area, and
continue to actively pursue
opportunities in all onshore
module markets. The long-term
outlook for the LNG industry
remains positive as vast
reserves of natural gas are
being discovered in developing
regions such as East Africa.
Investment in LNG facilities
has increased in recent years
as global demand is trending
towards natural gas, a fuel
considered to be cheaper and
more environmental friendly
as highlighted at the COP21
climate conference in 2015.
Oil & gas contracting services
Although drilling activity is
subdued by current oil price
forecasts, we expect there to
be continued activity in the
Middle East market for jackup
rig refurbishment services as
the aging rig population often
requires regular maintenance
or upgrades. This business
stream also includes site
works, pressure vessels,
static equipment and general
fabrication works, all of
which are required to operate
regional facilities, and are core
competencies of Lamprell.
There is a relatively modest
outlook forecast for the global
land rig market until 2019,
however the global rig count will
need to expand in order to meet
projected drilling demand6.
10
Strategic report: Business model
OUR BUSINESS MODEL
ADAPTS TO CHANGING CIRCUMSTANCES
We are
continually
improving
page 20 in the face of a
successfully deliver profitable 2015
results
weak market climate. Our aspiration is
to serve a broader market, leveraging
our successful project delivery track
record, superior safety performance
page 30, and reputation for quality
workmanship to be a leading global
fabrication and EPC service provider
delivering complex fabrication projects
to world-class standards in multiple
markets. We will also use strategic
partnerships to achieve our goal,
allowing us to expand our geographical
market focus and deliver new product
offerings, such as FPSO integrated
solutions and LNG/Petrochemical
page 14.
modules
Our competitive advantage
Lamprell safely delivers projects on
time, competitively and at best value
for money, to clients’ specifications and
industry-leading quality standards in a
culture of teamwork and accountability.
These attributes, which have been
developed, reinforced and proven over
time, are what differentiates us from
our competitors, along with our central
geographical location, state-of-the-art
facilities and core team of highly skilled
and motivated workers who understand
and are committed to the Lamprell way
of project execution. All of this ensures
execution excellence and lower risk
for our clients and their business critical
projects. At Lamprell, we are people
of integrity.
Even in today’s difficult
market, Lamprell aspires
to deliver predictable,
sustainable and profitable
growth through leading
operational performance,
strong management and a
robust strategy that builds
on our key strengths.
page 16 of
Our business model is structured around
a risk-based assessment
opportunities to meet the demand for
fabrication, engineering and contracting
services in the offshore and onshore oil
& gas and renewable energy industries.
Difficult times call for fresh thinking, and
that is what we have done. In 2014 we
looked at our key strengths, our prospects,
the markets in which we operate and our
competitive advantages and we asked
ourselves: what will it take to win in today’s
business climate? Following a detailed
review performed in 2015, our refined
page 14 addresses a more
strategy
diversified market in terms of both product
offerings and geography by recognising
the current downturn but targeting medium
to long-term growth.
Creating long-term value
We are focussing on creating long-term
shareholder value by reinforcing our
position in the Middle East as a leading
fabricator. This has enabled Lamprell to
Lamprell plc Annual Report and Accounts 2015
S >
S
E
Strategic
location
S I N
U
K IN T O B
BUSINESS DEVELOPM
Provide a competitive
cost structure leveraging
our key strengths
O U R VALUES
E
N
T IN
S
I
G
Focus on
countries with
H
T
S
growth markets
and expand
geographical
reach
C
A
T B
N
E
M
T
S
E
V
N
I
Client
satisfaction
Reliable
on time
solutions
D
B
I
A
F
F
S
E
E
R
D
E
O
N
N
T
I
K
A
E
T
E
Y
Strong
P
S
management and
R
T
R
O
highly skilled, low
E
D
N
U
G
C
T
H
T
S
cost workforce
World-class safety
and quality
Greater
NOC/IOC
focus and
management
of strategic
client
accounts
and
relationships
Engagement
with EPC(I)
companies
based on
target
markets and
prospects
Focus on broader
brand awareness/
recognition
BUSINESS DEVELOPM
E
N
T IN
S
I
G
Focus on
countries with
H
T
S
growth markets
and expand
geographical
reach
Provide a competitive
cost structure leveraging
our key strengths
O U R VALUES
S >
S
E
Strategic
location
S I N
U
K IN T O B
C
A
T B
N
E
M
T
S
E
V
N
I
Client
satisfaction
Reliable
on time
solutions
D
I
B
A
F
F
S
E
E
R
D
E
O
N
N
T
I
K
A
At Lamprell,
everything we do is built
on the strong foundations
created by our core values.
Just as our beliefs guide us in our
day-to-day operations, they also provide
the framework to guide our growth.
Safety
We deliver world-class safety standards and leave
nothing to chance, so everyone goes home safely.
Fiscal responsibility
Because every employee influences our costs, we
are all accountable to ensure that we achieve the
most cost-effective solutions.
Integrity
We conduct our business honestly, with professional
integrity, fairly and transparently, and we are open
and ethical in our day-to-day dealings with all
stakeholders.
Accountability
We deliver what we say we will.
Teamwork
We strive to work together with our
stakeholders and believe great teams
can achieve incredible things.
Greater
NOC/IOC
focus and
management
of strategic
client
accounts
and
relationships
Engagement
with EPC(I)
companies
based on
target
markets and
prospects
E
T
E
Y
Strong
P
S
management and
R
T
R
O
E
D
N
U
highly skilled, low
cost workforce
G
C
T
T
H
S
World-class safety
and quality
Focus on broader
brand awareness/
recognition
Strategic report: Business model 11
How our strengths
add value
First class safety and quality
Lamprell has a strong commitment to
continuously improving the safety and
quality performance of our employees and
contractors. These are a prerequisite with
any potential top tier client.
Reliability
Lamprell has a proven reputation for quality
standards and the delivery of competitive
products. We have a strong track record in
our core markets for completing projects on
time, to specification and on budget. This
has enabled us to diversify our pipeline.
Client satisfaction
Lamprell is committed to customer service
and close client relationships throughout
the project life cycle. This has resulted in
strong support from our major clients and
a strong record of repeat business.
Skilled workforce
Lamprell has a strong leadership team
focused on delivering the Company’s
refined strategy. We value our highly skilled,
dedicated and flexible workforce and invest
in their continued development to ensure
excellent project performance. Our access
to a highly skilled, low cost workforce from
Asia supports a competitive cost structure.
Strategic location
Lamprell is advantageously located and
has excellent facilities including over
1,000,000m2 of fabrication space and
2km of deep water quayside access.
We are
committed to
safety, quality
and reliability
12
Strategic report: Project Evolution
F-TH E-A R
E-O
T
A
T
S
C
O
N
N
E
C
T
E
D
C I L I T I E S
A
T F
PROJECT EVOLUTION IS
PRODUCING RESULTS
A
C I L I T I E S
IM
IM
P
O
Achievements
P
R
O
V
E
E F F I C I E NT PEO
BEST IN
CLASS
PRODUCT
O
P
TI
MISED RE S O U
O
R
C
E
S
P
E
D
S
E
E
L
V
P
T F
T
A
T
S
F-TH E-A R
R
Project Evolution kicked
off in mid-2014 with the
intention of reviewing
E-O
the Group’s processes,
fabrication techniques
and facilities in order to
identify and implement cost
efficiencies and productivity
improvements that would
make Lamprell more
competitive and bring
E
TI
down daily running costs.
R
U
T
C
C ES
C
O
S
N
N
P
C
O
E
E
T
R
D
T
E
A S TRU
H
C
R
F
T I N
R O B U S
N
O
LOGY
E F F I C I E NT PEO
O
R
C
D
P
P
We established a dedicated team which
was tasked with investigating our current
systems, execution and production
processes and material handling
techniques, to identify improvement
opportunities that would reduce the
costs of our operations and enhance
product delivery. Ultimately the aim of this
project was to make us safer and more
competitive which, in turn, would help us
diversify and convert our bid pipeline.
L
S
E
S
E
S
E
BEST IN
CLASS
PRODUCT
MISED RE S O U
R
C ES
Initially 24 opportunities for improvement
were identified over the duration of the
project. Part of the capital raised in the
E
rights issue in 2014 was dedicated to
R
Project Evolution. The Group expended
U
T
part of this investment on upgrading
C
and modernising equipment and work
areas, warehouses, and adding major
construction systems such as a new
panel line in the Hamriyah facility. The new
fabrication building housing the panel line
page 24 and supporting machinery were
safely installed on a fast track basis within
ten months, an impressive achievement
for the Group. The panel line was officially
launched in 2015 and by the end of the
year was operating at full run-rate. We have
seen returns on this investment as benefits
are being achieved on all major projects.
A S TRU
R O B U S
T I N
F
R
T
E
C
H
N
O
LOGY
IM
P
R
O
V
E
D
P
R
O
C
E
S
S
E
S
E
R
U
T
C
A S TRU
P
L
E
C ES
R
R
F
T I N
R O B U S
E F F I C I E NT PEO
BEST IN
CLASS
PRODUCT
MISED RE S O U
C I L I T I E S
T F
E-O
F-TH E-A R
A
An integral part of the measures
implemented was the investment in
automation around parts of our facilities,
and we have installed a variety of new
equipment. Upgraded and new working
areas, new cranes, robotic cutting
machines and an automatic beam
T
A
fabrication system have all been installed
T
in order to increase the level of automation
S
and reduce construction times. In addition,
strategic procurement processes and
systems have been implemented in order
to deliver synergies and economies of
scale on major projects, which has also
resulted in significant savings for the Group.
C
O
How this helps our business
N
O
P
TI
N
D
T
E
E
C
T
E
C
H
N
O
While Lamprell is not immune to the
ongoing headwinds in the energy sector,
we were pleased to see that our early
implementation of the efficiency measures
under Project Evolution positioned the
Group to be more competitive which
will consequently be key to our future
success. Using an optimised blend of
automation and low cost labour, Lamprell
will continue to deliver a safe and high
quality product at the best value to its
clients following completion of the Project
Evolution measures. Our yards have been
modernised, our systems and processes
are more efficient, our workforce is well
trained and operates to high standards,
all of which in turn helps us to win
new projects.
LOGY
P RO
C
IL I T I ES
E
S
S
E
S
C
A
F
T
E
C
H
N
I
O
LOG Y
N
FRA S T
IL I T I ES
P RO
E
C
R
U
T
C
R U
E
S
C
A
F
S
E
S
SOU R C
E
R
E S
Our business model
lays the foundations
for efficiency and
productivity
E
P E OPL
T
E
C
H
N
I
O
LOG Y
N
FRA S T
E
R
U
T
C
R U
R
E
SOU R C
E S
P E OPL
E
P RO
C
E
S
S
E
S
IL I T I ES
C
A
F
T
E
C
H
N
O
LOG Y
E
R
U
T
C
R U
I
N
FRA S T
R
E
SOU R C
E S
P E OPL
E
Time management
Time management and span
Air and gas lines
We completed an upgrade for
Welding improvements
Lamprell switched from stick
and control
page 28 ratios
underground air and gas lines
welding to the more efficient
were improved across all
facilities, by setting KPI’s for
page 26
yard staff
which removed the reliance
on inefficient fuel driven air
compressors and thousands
flux cored arc welding
page 26 which has
reduced welding manhours
of cylinders that needed
changing on a daily basis
by approximately 20%
Lamprell plc Annual Report and Accounts 2015
Strategic report: Project Evolution 13
C I L I T I E S
A
T F
IM
P
R
O
V
E
F-TH E-A R
E-O
T
A
T
S
C
O
N
N
E
C
T
E
D
C I L I T I E S
C I L I T I E S
A
T F
V
O
R
P
T F
IM
A
CONTINUOUS
IMPROVEMENT
CULTURE
E-O
F-TH E-A R
P
L
E
D
P
S
E
C
R
O
E F F I C I E NT PEO
E
T
A
T
S
IM
P
R
D
O
V
E
F-TH E-A R
P
R
O
S
E
S
F-TH E-A R
E-O
T
A
T
S
O
P
TI
E
R
U
T
C
LOGY
A S TRU
H
N
E
C
R
C
O
F
O
N
N
E
C
C
O
C ES
N
N
E
C
T
E
D
T
T I N
R O B U S
C I L I T I E S
E F F I C I E NT PEO
A
T F
P
L
E
E-O
T
A
T
S
BEST IN
CLASS
PRODUCT
MISED RE S O U
N
C
O
E F F I C I E NT PEO
C ES
BEST IN
CLASS
PRODUCT
R
N
E
T
C
E
E
T
D
R
P
L
E
O
P
E
TI
R
U
T
C
A S TRU
C ES
LOGY
O
N
C
H
F
T I N
O
P
TI
R O B U S
MISED RE S O U
R
C
IM
E
P
S
R
S
E
E F F I C I E NT PEO
O
V
E
P
L
S
D
P
R
E
C ES
R
O
BEST IN
CLASS
PRODUCT
S
E
C
S
E
S
MISED RE S O U
D
P
R
O
C
E
S
S
E
S
E
R
U
T
C
A S TRU
R
F
T I N
BEST IN
CLASS
PRODUCT
O
P
TI
MISED RE S O U
R
T
E
C
H
N
O
LOGY
T
E
D
T
E
C
H
N
O
LOGY
R
F
T I N
R O B U S
R O B U S
E
R
U
T
C
A S TRU
P RO
C
IL I T I ES
E
S
S
E
S
C
A
F
T
E
C
H
N
I
O
LOG Y
N
FRA S T
U
T
C
R U
P RO
C
E
E
R
S
S
E
S
IL I T I ES
C
A
F
E
P E OPL
T
E
C
H
R
E
SOU R C
E S
N
I
O
LOG Y
N
FRA S T
P RO
E
C
E
S
S
E
S
R
R
U
T
C
R U
IL I T I ES
C
A
F
E S
E
SOU R C
E
P E OPL
T
E
C
H
N
I
O
LOG Y
N
FRA S T
E
R
P E OPL
E
Robotic equipment
We invested more than
USD 16 million on automated
NDT and quality control
improvements
We have upgraded our
Satellite stores
Satellite stores have been
installed, taking tools and
equipment including a panel
non-destructive and
line, an automatic fabrication
radiographic testing facilities
line as well as two 3D robotic
making use of more modern,
consumables to workers
instead of staff having to
walk distances for collection,
beam cutting facilities
low radiation technology and
P RO
improved processing
IL I T I ES
C
E
saving time and cost
page 28
E
P E OPL
E
S
S
E
S
C
A
F
T
E
C
H
N
I
O
LOG Y
N
FRA S T
R
U
T
C
R U
R
E
SOU R C
E S
U
T
C
R U
E S
R
E
SOU R C
Being more
competitive
enables us to
implement our
strategy
14
Strategic report: Strategy
OUR REFINED STRATEGY
PROVIDES SUSTAINABLE GROWTH
Our strategy is based on
our fabrication capabilities
where our Middle Eastern
geographical location,
low cost labour and state-
of-the-art facilities are
fundamental differentiators,
and is structured around
product lines with the
highest potential to grow the
business going forward.
We aim to
deliver what
clients want
Lamprell plc Annual Report and Accounts 2015
During 2015 we reviewed the global
market outlook, analysed our product line
and weighed our strengths. We evaluated
the immediate and future needs of our
customers around the globe, exploring
potential opportunities in new business
segments and geographies and assessed
the alignment between our capabilities
and differentiators against those needs.
The strategy was initially developed as
part of the 2014 rights issue but had to
be reviewed in light of the current market
conditions. We asked ourselves: where
are our best opportunities for delivering
profitable growth in the long term?
Corporate strategy statement
By 2020 Lamprell aims to be a leading
global fabrication and EPC service
provider of jackup rigs, offshore platforms,
onshore modular solutions and FPSO
structures consistently delivering safe,
high quality, competitive, on time solutions
to our customers while providing steady
growth and predictable returns for our
shareholders. This will be achieved by
building on the strong foundations created
by our values of Safety, Fiscal Responsibility,
Integrity, Personal Accountability and
Teamwork
page 47, working in
WHAT WE ARE GOOD AT
WHERE WE ARE GOING
Safety
Integrity
Quality
WHAT THE
CLIENT WANTS
Fiscal responsibility
Systems and procedures
Safety
Competitive
delivery model
Delivery certainty
Delivery excellence
Local content
Risk transfer
Teamwork
On time delivery
State-of-the-art facilities
Client relationship
Cost efficiencies
Continuous improvement
Productivity
Balance sheet
Risk management
1
2
3
4
5
6
Maintain a regional market leading
jackup rig builder position servicing
niche market clients.
Maintain our market leading position in jackup rig
refurbishment based on differentiated competitive
‘one stop shop’ service solutions.
Broaden our offshore platform
fabrication offering.
Broaden our onshore module fabrication
service offering and target large scale
LNG and downstream projects.
Develop a competitive ‘one stop shop’
Middle East Centre of Excellence
for the FPSO market.
Continue to offer differentiated service
offerings to the regional land rig, our
E&C and O&M markets and maintain
market share position.
HOW WE DO IT
We aim to deliver our
long-term sustainable
growth through competitive
fabrication and delivery
excellence. This includes:
Investment in a new
pipe shop
Investment in improving
and upgrading our facilities
for additional production
Reinforce business
development, targeting
growth countries and
strengthening relationships
with clients and EPC
contractors
Target strategic alliances
in our core markets
Strategic report: Strategy 15
combination with a strong balance sheet,
our strategic geographical location,
state-of-the-art facilities and execution
excellence in our projects. We will be
differentiated by delivering all of
the above at the best value for money.
Focus on enhanced performance
We have achieved execution excellence
on all of our recent and ongoing projects.
Our facilities are modern and automated
page 12, and we have invested in
labour training programmes to support
our desired growth. Although the global
spend has sharply declined in 2015 and
is forecast to contract further in 2016, we
believe that our strategy has positioned us
to emerge from this downturn a stronger,
more focussed company. We will continue
page 11, while
to play to our strengths
expanding into markets where our key
competencies will enable us to compete
effectively. Our bid pipeline is structured
to deliver our strategic objectives through
broader addressable markets, whether by
expansion into complementary business
segments or new geographical markets,
and through targeting of a diversified client
base. We have also taken steps to explore
strategic partnerships where appropriate to
further strengthen and expand our offering.
WHAT THE
CLIENT WANTS
Fiscal responsibility
Systems and procedures
Safety
Competitive
delivery model
Delivery certainty
Delivery excellence
Local content
Risk transfer
WHAT WE ARE GOOD AT
WHERE WE ARE GOING
Safety
Integrity
Quality
Teamwork
On time delivery
State-of-the-art facilities
Client relationship
Cost efficiencies
Continuous improvement
Productivity
Balance sheet
Risk management
1
2
3
4
5
6
Maintain a regional market leading
jackup rig builder position servicing
niche market clients.
Maintain our market leading position in jackup rig
refurbishment based on differentiated competitive
‘one stop shop’ service solutions.
Broaden our offshore platform
fabrication offering.
Broaden our onshore module fabrication
service offering and target large scale
LNG and downstream projects.
Develop a competitive ‘one stop shop’
Middle East Centre of Excellence
for the FPSO market.
Continue to offer differentiated service
offerings to the regional land rig, our
E&C and O&M markets and maintain
market share position.
HOW WE DO IT
We aim to deliver our
long-term sustainable
growth through competitive
fabrication and delivery
excellence. This includes:
Investment in a new
pipe shop
Investment in improving
and upgrading our facilities
for additional production
Reinforce business
development, targeting
growth countries and
strengthening relationships
with clients and EPC
contractors
Target strategic alliances
in our core markets
16
Strategic report: Principal risks and uncertainties
AN ENHANCED
APPROACH
TO RISK
MANAGEMENT
Lamprell is enhancing
its approach to risk
management through the
consistent application and
development of our risk
management framework.
A robust, embedded
risk awareness culture is
essential to ensure that
business decisions are
aligned with the Group’s
strategic objectives.
Lamprell plc Annual Report and Accounts 2015
Analysis of risk – strategic and financial
43%
40%
57%
60%
Strategic
Financial
High risk
Medium risk
Low risk
Continuing an active risk management
approach
50%
50%
We believe that early identification and
appropriate management of risk is vital to
the success of the Group. With this ethos in
mind, we continue to regularly and actively
identify and manage risk profiles across
each business area in the organisation,
both at the project and enterprise level.
Our current risk management framework,
which was developed in 2014, remains
highly effective and fit for purpose. All
risks are ranked taking into account both
impact assessment and probability, and
on a gross (pre-mitigation) and net (post-
mitigation) basis. Following such ranking,
appropriate risk management plans are
developed, with defined mitigation plans
and allocated risk owners. We have a
Risk Review Panel, comprising of senior
management, which meets regularly to
review and challenge risk management
plans. Through the Panel, increased
focus is now being placed on risk owners
tasked with monitoring the effectiveness
of mitigations being implemented.
Operational
67%
A focus on Enterprise Risk Management
(“ERM”)
Our plan to identify and manage Enterprise
Risks is structured in a similar way to the
way in which we address project risks.
Management has worked with the Audit &
Risk Committee on behalf of the Board to
implement an ERM system which identifies,
documents and reports on progress to
manage Enterprise Risks.
Our database is used to:
» Ensure risk management processes are
effective and key risks are evaluated on
a fully-unmitigated basis, and risk action
plans are put in place.
»
Improve focus and perspective on risk
providing a basis for discussion and
benchmarking through regular meetings.
33%
» Provide Internal Audit with risk
information on a quarterly basis in order
to audit, monitor and generate Internal
Audit’s annual cycle.
» Provide the basis of the bi-annual
review of our key risks by our Audit &
Risk Committee, which reports back
to the Board.
High risk
Medium risk
Principal risks and uncertainties
for Lamprell
Compliance and legal
Low risk
Lamprell faces a variety of risks in
connection with its business and these may
change from year to year depending on
both external and internal circumstances.
By way of example, our Board proactively
decided to escalate the risk ranking for
geopolitical security as a result of the
heightened threat from terrorism and the
fact that, in recent years, some of the
Company’s Board meetings have been
held in Paris.
The Board considers that the principal
risks and uncertainties faced by the Group
within this reporting period are as follows:
43%
40%
57%
60%
Strategic
Financial
High risk
Medium risk
Low risk
Strategic report: Principal risks and uncertainties 17
Analysis of risk – operational, compliance and legal
50%
50%
67%
33%
While the operational category has the
highest number of key risks for this
reporting period, our ‘high’ key risks are
mostly strategic in nature. We consider
this to be a fair reflection of the negative
environment faced by the energy industry.
Lamprell uses mitigation plans to reduce
the potential impact of each risk.
Operational
Compliance and legal
High risk
Medium risk
Low risk
Strategic risks
Risk description
Business implication
Mitigation
Macroeconomic
conditions
Risk to strategy
high
Risk change
increased
Single product line
Risk to strategy
high
Risk change
increased
With the continuing energy
market downturn, demand for the
Group’s products and services
may be adversely impacted by
a fall in the levels of expenditure
by oil & gas and renewable
energy companies.
From 2012 to 2015, the proportion
of Lamprell’s revenues deriving
from new build LeTourneau-
designed jackup rigs increased
year-on-year and that trend is
expected to continue in 2016.
This places heavy reliance on
continuing demand for that
single product line which may
be exacerbated in 2016 if
the proposed acquisition of
the LeTourneau rig design is
completed by a competitor of
the Company.
» Regular market reports identify projects which are expected to be
sanctioned within Lamprell’s addressable markets.
» Strategy refined to focus on broadening our addressable markets
and our client base to target sectors and geographical markets
which offer most potential for growth.
» Activities to implement strategic objectives under way.
» Bid pipeline
page 8 continues to be strong with a year-end value
of USD 5.4 billion.
» Use of a Client Relationship Management system to provide real
time information on opportunities and key contacts.
» Strategy focussed on diversification of business streams away
from new build LeTourneau-designed jackup rigs.
» Bid pipeline has a heavy weighting towards Offshore Platforms
and Modules
page 9.
» Target strategic alliances to enable access to additional sectors.
» Lamprell offers construction of alternative rig designs and is
considering designing a state-of-the-art shallow water jackup rig
having taken into account client feedback.
» Anticipated slowdown in the jackup rig market demands a keener
focus on non-rig sectors.
18
Strategic report: Principal risks and uncertainties
Strategic risks
Risk description
Business implication
Mitigation
Winning new work
Risk to strategy
high
Risk change
none
Geopolitical
Risk to strategy
medium
Risk change
increased
Financial risks
Financial
disclosure
Risk to strategy
medium
Risk change
unchanged
Counterparty
credit risk
Risk to strategy
medium
Risk change
unchanged
The Group is dependent on
a relatively small number of
contracts at any given time,
some of which are for the same
customers, and strong client
relationships are critical for a
sustainable business. The industry
is highly competitive and Lamprell
is dependent on its ability to
provide on time, high quality
products and services at low cost.
» Focus on delivering high quality products and services provides
robust platform for repeat business.
» Each business stream within our strategy has clear objectives and
business development goals set by reference to target projects.
» Client account management structure ensures that good, effective
client relationships are maintained.
» Productivity improvements and cost efficiencies have been fully
implemented to enhance Lamprell’s ability to compete.
» Other activities such as a new pipe shop will target additional areas
to drive down cost.
Given the increased global threat
from war, civil unrest and in
particular terrorism, the Group’s
operations and business could be
materially disrupted in the case
of such an event directly affecting
one of our operations or any of
our key business activities such
as Board meetings.
» Limited remote location operations with the vast proportion of the
Group’s operations taking place in the United Arab Emirates, which
is stable politically and financially.
» Group security policies and procedures updated with closer
monitoring of travel.
» Board meetings held primarily in the UAE.
» Contracts include force majeure provisions as standard.
» No material impact of EU referendum outcome on the business.
The Group’s visible order book
may fluctuate significantly because
the majority of the contracts are
structured as fixed-duration, lump
sum projects or else as short-
term rig refurbishment projects.
In addition, varying project cycles
mean that revenues can be ‘lumpy’
making it more difficult to predict
with certainty the future long-term
financial condition of the Group.
» Proven, reliable project execution led by experienced management
team creates predictable financial outcomes.
» New ERP system completed
timely financial reporting.
page 22, ensuring predictable and
» Lamprell has a range of contract types from lump sum projects,
framework/call-off contracts through to unit rate reimbursable
projects.
» Strategy refined to focus on broadening addressable markets and
client base.
» Regular project review meetings feed into monthly Board reports.
Lamprell sells its products and
services to, and also procures
goods and services from, a variety
of contractual counterparties
and could therefore be subject to
counterparty credit risk, either with
clients, subcontractors or business
partners. Failure by any of these
entities to make payment may
result in Lamprell suffering losses
or reduced revenues.
» Credit checks are conducted internally and through expert
third party providers for new counterparties or in support
of major contracts.
» Bonds/guarantees backed by reputable financial institutions may
be requested prior to contractual relationships being formalised.
» Payment terms under contract are carefully managed.
» Protection against non-payment is built into contractual
documentation to ensure that the Group has a right of remedy
in the event of delayed/non-payment.
» Project debt facility only available for use by top tier clients,
per lender requirements.
Lamprell plc Annual Report and Accounts 2015
Strategic report: Principal risks and uncertainties 19
Compliance and legal risks
Risk description
Business implication
Mitigation
Contractual
commitments
Risk to strategy
medium
Risk change
unchanged
Operational risks
Information
management
systems and
cyber risks
Risk to strategy
medium
Risk change
decreased
Productivity
and efficiency
Risk to strategy
medium
Risk change
decreased
Lamprell may be subject to
onerous contractual terms
for product defects, faulty
workmanship or errors in design
which could impact revenue or
earnings as a result of breach or
non-performance. With the Group’s
increased involvement in joint
ventures, a failure to determine
appropriately the liabilities
between the parties could expose
the Group to additional risks.
» Potential contract risks assessed at the outset following a full risk
review, with mitigation plans created.
» Robust training and inspection programmes implemented across
all facilities and projects.
» Lessons learned on earlier projects used to design work scopes,
thus ensuring continual improvement in project execution.
» Appropriate contract terms ensure that the Group’s risk exposure
is acceptable and risks may be passed to subcontracting parties
or covered by contingency, as appropriate.
» External advisory experts are engaged, as required.
The Group relies heavily on
information technology systems,
including crucial business
management software and our
enterprise resources planning
systems, which may fail to
operate effectively or be subject
to disruption or cyber attacks. In
such event, the activities of the
Group may be severely disrupted
and, subsequently, operations may
be adversely affected.
The Group has incurred significant
expenditure as part of its yard
investment programme under
page 12.
Project Evolution
Although thorough analysis of the
requirement for such investment
has been undertaken, such
investments may not yield the
targeted savings and efficiency
improvements in practice, either
because of the changing market
environment or due to other
unforeseen events.
» Employee cyber security training and awareness campaigns are
undertaken regularly.
» We have adopted the ISO 27001 Information Security Management
System (ISMS) standard across our business.
» Disaster recovery plans and procedures are in place and have
been tested in a simulated environment to ensure adequacy.
» Third party experts undertake penetration exercises to test
adequacy of IT security.
» Embedded culture of continuous improvement and transparency
demonstrated on all projects and on investment programme.
» All Project Evolution measures completed on time and on budget,
with many operating at full run rate already.
» Flexibility in our staff cost base.
» Management regularly assesses the status of and outputs from
the investment programme.
» Key performance indicators for productivity improvements and
cost efficiencies including the annual incentive metrics.
Viability statement
In accordance with provision C.2.2 of the
2014 revision of the Code and taking into
account the Group’s principal risks, the
Directors have assessed the prospect of
the Company over a longer period than the
12 months required by the ‘Going Concern’
provision. The Board conducted this
review for a period of three years, which
was selected for the following reasons:
(i) the Group’s strategic review covers a
period with visibility on projects extending
out for at least two years; (ii) most major
projects undertaken by the Group last for
a period of approximately two years; and
(iii) the Company has a reasonable ability
to project its likely backlog for a period of
between two and three years.
The three year strategic review considers
the Group’s cash flows, dividend cover,
available debt and other key financial ratios
over the period. These metrics are subject
to sensitivity analysis which involves
varying a number of the main assumptions
underlying the forecast both individually
and in unison. Where appropriate, this
analysis is carried out to evaluate the
potential impact of the Group’s principal
risks actually occurring. The three year
review also makes certain assumptions
about the normal level of capital recycling
likely to occur and considers whether
additional financing facilities will be
required. Based on the results of this
analysis, the Directors have a reasonable
expectation that the Company will be
able to continue in operation and meet its
liabilities as they fall due over the three year
period of their assessment.
20
Strategic report: Financial review
OUR
FINANCIAL
PERFORMANCE
REMAINS
STRONG AND
STEADY
In 2015, Lamprell delivered
solid financial results, driven
by consistent operational
performance. After a year
of exceptional results in
2014, the Group returned
to normalised margins
and retained its strong
balance sheet, a notable
achievement in the context
of a challenging market
environment.
Results from operations
Margin performance
We are pleased to deliver healthy and
steady financial performance in 2015
following a year of exceptional financial
results in 2014. The combination of
strong operational execution and savings
achieved as a result of Project Evolution
page 12 allowed us to deliver good
margins despite global headwinds
in the sector.
The Group’s total revenue for the year
was USD 871.1 million, slightly below
our earlier guidance due to the impact
of the market downturn on our walk-in
business. Our other businesses performed
in line with expectations. The new build
page 25 remained
jackup segment
the main source of revenue for Lamprell,
with a record number of seven concurrent
rigs under construction in the yard. Our
revenues for 2015 were heavily weighted
to the second half of the year due to the
phasing of construction, as several of
our projects were at the early stages in
their build schedules in the six months
to 30 June 2015.
The additional awards by Petrofac have
provided a significant contribution to our
module business.
Whilst we are seeing repeat business
from our clients, the general weakness
across the sector has driven a reduction
in revenues from our rig refurbishment
page 27. We delivered 11
business
refurbishment projects in 2015. We also
took on high quality projects, with a number
of wins for important clients albeit of fairly
modest value, in our E&C business unit.
The Group completed the major part
of the investment under Project Evolution
page 12, with the realised savings partly
utilised to protect Lamprell’s margins whilst
retaining our competitive position in an
environment of increased pricing pressure.
This investment programme allowed the
Group to maintain its normalised margins
despite the industry difficulties which
impacted the financial performance of
its sector.
The Group’s gross margin decreased
to USD 123.5 million from USD 182.1
million in the previous year primarily due
to lower revenues, project phasing and
a return to normalised performance.
The drop in rig refurbishment revenue
in the current environment had a minor
negative impact on margins, whilst our
new build jackup business managed to
maintain stable margins at normalised
levels. The main reason for this was the
savings and productivity gains delivered
by the Project Evolution initiatives.
EBITDA excluding discontinued operations
and exceptional items for the period
was USD 90.0 million (2014: USD 137.0
million). The Group’s EBITDA margin
decreased from 12.6% in 2014 to 10.3%
in 2015, reflecting the absence of the
2014 exceptional items, partially offset
by certain one off events in 2015 such
as bad debt recoveries.
Lamprell plc Annual Report and Accounts 2015
Strategic report: Financial review 21
Illustrative example: financial cycle of a typical jackup project
PHASE 1:
START UP
PHASE 2:
EXECUTION
PHASE 3:
COMPLETION
Revenue recognised
Working capital position
Months 1-8
Low revenue recognition
period/no profit until 20%
progress achieved
Months 9-20
High revenue recognition period with a gradual
release of contingencies
Months 21-24
Contribution to profit
from final
contingencies
release
E
V
I
T
I
S
O
P
0
E
V
I
T
A
G
E
N
Finance costs and financing activities
Cash flow and liquidity
Net finance costs in the period decreased
to USD 12.0 million (2014: USD 18.4 million).
Gross finance costs were USD 5.9 million
lower due to reduced interest margins and
lower bonding costs, partially offset by
increased commitment fees on our facilities
following the refinancing in 2014. Finance
income has increased by USD 0.5 million
as a result of higher cash deposits.
Net profit after exceptional items
and earnings per share
The Group recorded a profit for 2015
attributable to the equity holders of
USD 64.7 million (2014: USD 118.1 million).
The fully diluted earnings per share for the
year was 18.84 cents (2014: 37.38 cents),
based on strong underlying performance
in the absence of the exceptional items
reported in 2014.
Capital expenditure
The Group’s capital expenditure in 2015
increased to USD 59.5 million (2014: USD
22.5 million). The main area of investment
was yard improvement under Project
Evolution
page 12, which comprised of
the purchase of new equipment including
the new panel line
cutting robots and some yard infrastructure
enhancements
page 34. The major part
of the investment under Project Evolution
is now complete, with the second phase
of Project Compass
the Group since 1 October 2015.
page 22 live across
page 24, beam
The Group’s net cash flow from operating
activities for 2015 reflected a net outflow
of USD 0.8 million (2014: net outflow of
USD 39.8 million) arising predominantly
from the Group’s EBITDA and offset by
increased working capital requirements
due to the natural cycle on major projects.
Cash and bank balances decreased
by USD 82.0 million, resulting from
a net cash outflow from investing activities
attributable to the major capital investment
programme and an outflow from financing
activities. The Group’s net cash position
remains strong at USD 210.3 million (2014:
USD 272.6 million), a decrease in line
with expectations due to capital spend
on Project Evolution and the phasing
of the construction cycle on our projects.
Balance sheet
The Group maintained a strong balance
sheet, providing flexibility and security in a
challenging environment for the industry.
The Group’s total current assets at the
period-end were USD 725.3 million
(2014: USD 780.7 million). Trade and
other receivables increased to USD
428.3 million (2014: USD 403.6 million)
due to unfavourable timing on milestone
payments as well as advance payments
to suppliers to secure favourable
terms for equipment procured.
Shareholders’ equity increased from
USD 672.2 million to USD 737.6 million at
31 December 2015. The movement mainly
reflects increased retained earnings of
USD 410.4 million (2014: USD 344.5 million).
Gross margin
14.2%
2014: 16.8%
EBITDA1
(USD million)
90.0
2014: USD 137.0m
Net cash
(USD million)
210.3
2014: USD 272.6m
1. EBITDA excludes discontinued operations and
exceptional items.
22
Strategic report: Financial review
Project Compass
Robust platform
to streamline
technology
processes
Approximate reduction in payroll
department overhead
45%
Project Compass was launched
to implement a new Oracle-based
ERP system at Lamprell. Along with
streamlining processes and connecting
our business functions to a single
system, it is now also helping us to
reduce our overall operational costs by
providing greater visibility, control and
increased employee productivity. The
implementation of Project Compass
provided Lamprell with a more robust
and flexible platform to support future
growth. Lamprell is better equipped to
deliver higher levels of business process
efficiency by leveraging the latest
technologies in ways that directly impact
the bottom line and create further value
for our shareholders.
Performance
Improvement driven by outstanding
performance in project gross profit and
cost efficiencies (USD millions)
100
93.2
19.1
90
80
70
60
50
40
30
20
10
0
31.8
6.7
66.5
4.5
13.0
2014 net profit
Impact of EDC 2 in 2014
Impact of competitive environment
Movement of bad debts
Overhead reductions
Others
2015 net profit
Lamprell plc Annual Report and Accounts 2015
The Group’s debt/equity ratio of 10.8%
at 31 December 2015 (2014: 14.7%)
emphasises our low levels of leverage
and balance sheet strength.
Borrowings and debt
In 2015, following the major debt
refinancing the previous year, the Group’s
facilities comprised (a) a USD 100 million
term loan amortised over five years, of
which USD 20 million was repaid over
the course of the year; (b) USD 50 million
for general working capital purposes
which remained undrawn; and (c)
USD 200 million of working capital for
project financing, which has not been
taken up by our clients to date. Lamprell
continued to market this facility as part
of a number of bids and the aim remains
to leverage it in future projects.
In addition, the related USD 250 million
committed bonding facility, which
is available for use in connection with
new contract awards funded by the
working capital facility detailed in
(c) above, remained undrawn in 2015
and the Group has been able to leverage
its bilateral bonding facilities for better
commission rates.
The outstanding borrowings were
USD 79.3 million as at 31 December 2015
(2014: USD 99.0 million).
Change of auditors
Following a formal tender process in line
with market best practice, the Audit & Risk
Committee made a recommendation for the
appointment of Deloitte LLP as the external
page 52. Deloitte LLP has
auditor for the Company, which the Board
approved
expressed its willingness to act as external
auditor and a resolution to appoint Deloitte
LLP will be proposed at the forthcoming
AGM for their services in respect of the
2016 financial year.
Going concern
After reviewing its cash flow forecasts
for a period of not less than 12 months
from the date of signing these financial
statements, the Directors have a
reasonable expectation that the Group will
have adequate resources to continue in
operational existence for the foreseeable
future. The Directors have concluded
therefore that it is appropriate for the Group
to continue to adopt the going concern
basis in preparing its financial statements.
Dividends
Given the challenging market environment
and the Group’s strategy to retain a strong
net cash position and balance sheet, the
Directors do not recommend the payment
of a dividend for the current financial year
ending 31 December 2015. In the future
the Directors will continue to review this
position in light of market conditions at the
relevant time.
Antony Wright
Chief Financial Officer
Strategic report: Performance measures 23
Our operational
year in more detail
and Project
Evolution
PERFORMANCE
MEASURES
Safety TRIR
(rate per 200,000 manhours)
KPI
Revenue
(USD million)
KPI
Net profit
(USD million)
KPI
0.31
0.28
2015
2014
2013
0.67
2015
2014
2013
871
1,085
1,092
2015
2014
2013
66.5
93.2
39.1
Description
Key lagging indicators showing the Group’s
safety performance.
Description
Measures level of operating activity and size
of business.
Description
Measures net profitability of the business
before exceptional items.
New awards
(USD million)
2015
407
2014
2013
1,400
756
KPI
EPS (diluted)
(US cents)
2015
2014
2013
18.84
12.67
37.38
Description
Indicates total awards/new work won during
the year.
Description
Indicates net profitability on a per share
basis, taking into account changes in the
capital structure.
24
Strategic report: Operational review
OUR BUSINESS IS
BUILDING MOMENTUM
Lamprell continues to build
on its solid foundation of
operational excellence
after getting back on track.
We are delivering what
we promised and have
installed new processes
and equipment to make our
operations leaner, stronger
and more competitive.
Business overview
The Company had to adjust its outlook
in early 2015 in light of the challenging
climate following the sharp oil price
decline. Recognising the importance
of being competitive in this market, we
pressed on with implementing our various
business improvement measures. This
included the productivity improvements
and cost efficiencies under Project
Evolution
page 12, refinement of our
strategic objectives to align with market
page 14 and our focus on
demands
maintaining our competitive position by
page 11.
leveraging our key strengths
In the early months of 2015, we delivered
three major projects safely, on time,
within budget and to high standards of
quality. During the second half of 2015,
the Group saw a significant ramp-up in
manpower across all three yards as all
ongoing projects reached critical, high
intensity phases and, during this period,
the Group increased its project workforce
by approximately 1,500 people. We
achieved another record for the Group as
we constructed seven concurrent jackup
rigs in the Hamriyah yard, which was made
possible because of Project Evolution
page 12.
Notably, given the limited number of
awards during 2015, Lamprell was pleased
to receive a new rig contract award in April
2015 by our largest client, NDC, one of
only three global rig awards throughout the
year. The Group also agreed with NDC to
extend the outstanding two options
and to include a third option on its next
jackup rigs. The Group has seen further
awards from Petrofac on the Abu Dhabi
project under construction in our yards.
As a result the original contract award of
26 pre-assembled racks has now grown
to a total of 45 pre-assembled racks, units
and modules.
2015 saw each of the Jebel Ali and
Dubai yards reach the same milestone of
having operated for more than three years
without a single DAFWC. In addition, the
Sharjah facility completed over five million
manhours without a DAFWC, with its last
recordable incident in June 2014. Overall,
we are proud of the Group’s proven safety
page 30. However, with the TRIR
record
plateauing during 2015, management will
make this a top priority for 2016 – we want
an underlying safety culture which prevents
incidents and allows our workforce to go
home free from injury.
The Board made changes to the senior
management team designed to create
functions which are accountable either
for winning new work (under the CCO),
executing work (under the COO) or
managing payments (under the CFO). Tony
Wright was appointed as CFO
and Board Director in August 2015, and
Niall O’Connell was promoted to the role of
COO in October. This simplified structure
is considered to be the most efficient and
cost-effective way of running a business of
Lamprell’s size and complexity.
page 20
P RO
C
E
S
S
E
S
IL I T I ES
C
A
F
T
E
C
H
N
O
LOG Y
Project Evolution
Panel line delivering
savings and
efficiencies
E
R
N
I
E
R
FRA S T
In July 2015 the new state-of-the-art
panel line was officially opened in our
U
Hamriyah facility and provided Lamprell
T
C
with a USD 13.6 million automated and
E S
R U
more efficient solution to our panel
SOU R C
fabrication process. The Evolution team
delivered the new technology safely with
over 300,000 manhours worked with no
recordable incidents, in ten months, on
time and within budget. The savings and
efficiency benefits resulting from this
investment programme have contributed
to all seven ongoing new build jackup rig
projects, and to maintaining the Group’s
competitive position by offsetting some
of the pressure on margins experienced
in the currently challenging environment
worldwide in the oil & gas services sector.
P E OPL
E
In late 2015 the panel line was operating
at full run-rate of six panels a day
6-a-day
Strategic report: Operational review 25
The Group completed the disposal of one
of its smaller non-core service businesses,
Litwin PEL LLC, in April, and in July the
Group launched phase two of its ERP
system
successfully and went live in October.
page 22 which was completed
New build jackup rigs
Highlights
Three EPC projects successfully delivered
during 2015
All projects completed on time and
within budget
New contract awarded by National
Drilling Company
Trading review
The Group delivered three new build
jackup rigs in 2015, namely the “Jindal
Pioneer” to the Jindal group in February,
the rig “Greatdrill Chaaru” to Greatship
in March and finally the rig “Butinah” to
NDC in May. All projects were delivered
within budget and on or ahead of schedule
and all were designed according to
the Cameron LeTourneau Super 116E
(Enhanced) Class design.
The contract for the “Jindal Pioneer” rig
was signed in January 2013 and this
was the second of its kind which
Lamprell delivered to this client.
The rig was deployed to compete for work
offshore India.
Construction of the “Greatdrill Chaaru” rig
was undertaken on a fast-track basis and
completion was achieved in only 18 months
after initial steel cutting. The rig joined its
sister vessel, the “Greatdrill Chaaya” which
Lamprell delivered in H1 2013. Both rigs
were contracted to work for India’s Oil and
Gas Corporation in the offshore Indian
territorial waters.
The “Butinah” rig, which achieved an
exceptional safety record, departed
Lamprell’s Hamriyah facility in 1H 2015,
for operations in its drilling location in the
Zakum Field off Abu Dhabi. This was the
sixth in a series of nine rigs being built
and delivered by Lamprell to NDC. All of
the NDC rigs are on charter to the ADNOC
group of companies.
A further seven jackup rigs are under
construction for three key clients for the
Group and all are at different stages of
completion. There are three rigs being
fabricated for NDC and they are in relatively
early phases of construction. With regard
to the two rigs for our customer Ensco,
they are nearing completion with deliveries
expected to be in Q2 and Q3 of 2016.
We are also constructing two rigs for first
time client Shelf Drilling and they are
both on schedule, with one of the rigs
scheduled for delivery in Q3 2016. All
seven rig EPC projects are proceeding
as planned and have benefited from
the yard optimisation measures under
Project Evolution
page 12.
Three rigs delivered and a further
seven under construction in Lamprell’s
Hamriyah yard
Having seven new build jackup rigs under
construction concurrently is a record for
Lamprell and was made possible due to
the yard optimisation initiative as part of
Project Evolution
page 12.
To date Lamprell have delivered a total of
27 new build jackup units, including both
drilling units and multipurpose liftboats, to
various clients during the last ten years.
The Group is planning to deliver four further
LeTourneau Super 116e jackup drilling rigs
in 2016.
26
Strategic report: Operational review
Offshore platforms
Trading review
The global energy markets have
experienced a significant shift since mid-
2014 and this has impacted all contractors
operating in the sector including Lamprell,
with limited numbers of overall contract
awards. This has impacted the Group’s
ability to convert its pipeline into backlog,
notably in the Offshore Platform business
stream. Although Lamprell has not been
successful with new awards in this major
business stream in 2015, we anticipate
growth in the long term and we have
been able to strengthen and diversify our
bid pipeline with a substantially higher
proportion made up from projects in this
sector. Lamprell’s yards are strategically
located in the Middle East which is proving
to be more resilient to the current market
challenges and we are therefore targeting
projects in this region which are expected
to proceed.
P RO
C
IL I T I ES
E
S
S
E
S
C
A
F
T
E
C
H
N
I
O
LOG Y
N
FRA S T
E
R
U
T
C
R U
R
E
SOU R C
E S
P E OPL
E
Project Evolution
Efficient welding
through FCAW
Lamprell plc Annual Report and Accounts 2015
Modules
Highlights
First 10 Petrofac modules loaded out
successfully in 2015
Excellent safety record with zero DAFWCs
Awards of further modules in 2015 taking
the total to 45
Trading review
In 2H 2015, one year after the start of
construction, Lamprell successfully
completed the load out of the first pipe
racks for Petrofac in connection with the
UZ750 project. By the close of 2015, 10
pre-assembled pipe racks had sailed away
to the North Zakum Island in Abu Dhabi to
undergo installation and commissioning.
In early 2016 another seven modules were
loaded out and the remaining modules
and pipe racks will be delivered to the
client over the course of 2016. In addition,
Lamprell achieved a major milestone by
reaching two million manhours without
a DAFWC on this project which is an
impressive achievement and shows our
deep commitment to safety, one of our core
values. Some of the modules have been
fabricated in our Sharjah facility, which by
the close of 2015 had celebrated achieving
over 600,000 manhours without a DAFWC
on the project, in addition to no lost time
The quality of Lamprell welding has
consistently been high, however we found
that there were some inconsistencies
in certain processes and techniques
being applied, offering an opportunity for
improvements. In 2013, 65% of welding at
Lamprell was done using shielded metal
arc welding, also known as stick welding.
An alternative welding process called
flux cored arc welding (“FCAW”) has
been introduced to a far greater extent.
FCAW is more efficient, significantly
reducing the number of manhours spent
on this activity. In addition, welders
have been given defined KPIs which
has increased productivity and reduced
consumable wastage. These welding
improvements have made Lamprell more
productive, reduced welding manhours
by approximately 20%, improved our
environmental footprint and made us
more competitive.
Petrofac UZ750 modules
Petrofac made further awards to Lamprell
on the UZ750 project in 2015.
incidents to date in our Jebel Ali facility
on this project. Lamprell has developed
a close and effective working relationship
with Petrofac based around our high
quality and reliable project execution, and
this follows our strong performance for this
client on the Laggan Tormore project in the
North Sea, during 2013.
Both Petrofac and Zakum Development
Company, the end user client for this
project and operator of the Abu Dhabi
field, have recognised Lamprell’s excellent
performance when it comes to safety,
quality and progress. In recognition of
Lamprell’s high standards on the project,
Approximate reduction in
welding manhours
20%
Strategic report: Operational review 27
Engineering and construction
Lamprell’s E&C business unit performed
well in 2015 with the most significant
contract being our involvement in the
prestigious Kaombo project offshore
Angola. E&C also renewed a key
maintenance service contract with client
Sharjah National Oil Corporation, which
completes more than 15 years of service
to this group. Much of the work under
E&C is for clients with whom we have
well-developed relationships, as they trust
Lamprell to deliver as promised.
Operations and maintenance
Our O&M team continues to perform
well and successfully retained the
maintenance service contracts for the
supply of manpower with key clients, some
of whom they have worked for since the
1980s. In spite of its small size, O&M have
been regular winners of safety awards
from these clients, demonstrating that
Lamprell’s safety culture is well-established
throughout the business.
the Group was rewarded with additional
work, including an award by Petrofac for
an additional five pipe racks and a further
three modules. This brings the total amount
of modular structures awarded by Petrofac
to date to 45, including 39 pre-assembled
pipe racks, three pre-assembled units and
three pre-assembled modules.
We focussed on our strong project
execution and delivery throughout 2015,
whilst ensuring that efficiency measures
result in a competitive advantage in an
increasingly challenging market.
Oil & gas contracting services
Highlights
New land rig constructed according to
Lamprell’s proprietary design
11 rig refurbishment projects successfully
delivered in 2015
E&C business unit wins work on prestigious
Kaombo project
Trading review
As part of its strategy refinement
Lamprell has grouped its four smaller
business streams under the name
“Oil & Gas Contracting Services”.
Notwithstanding the low oil price
environment, each business stream
delivered a solid performance in 2015
and Lamprell views each as capable
of generating long-term growth for
the business.
Land rig services
Land Rig Services completed 13 projects
in 2015, covering the refurbishment and
upgrade of land rigs or component parts
as well as support for onshore drilling
activities, and has worked on three projects
for a new Kuwaiti client. Lamprell has
started the process of marketing its first
land rig based on its own proprietary
design. There has been considerable
interest in the rig and the Group has been
giving demonstrations of its capabilities to
clients in early 2016.
Rig refurbishment
After a positive start in 2015, the rig
refurbishment business saw a slowdown in
later months. In 2015 we delivered a total
of 11 rig refurbishment projects and won
a total of nine new contracts, all repeat
business from established customers.
Some clients have stacked their jackup
rigs with Lamprell until market conditions
improve, with a total of eight rigs located
across our yards in 2015. This is an
important service for clients while the
market recovers and allows for a rapid
response to refurbish or upgrade a rig
when it is redeployed.
28
Strategic report: Operational review
P RO
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S
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C
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E
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LOG Y
N
FRA S T
Project Evolution
Span & control and
time management
improvements
E
R
E
E
R
SOU R C
U
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C
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Key opportunities for improved efficiency
P E OPL
were in the Group’s time management
and span and control ratios, meaning
the number of supervisors compared to
E S
workers being placed under their control.
In terms of supervisor to staff ratios,
changes have been made to ensure that
they are not only in line with industry
standards, but also optimal by reference
to the work being performed, and the
potential safety hazards arising from that
work. The Evolution team also took steps
in measuring the time management culture
of our people in every facility.
Following a series of audits, a number
of improvement opportunities leading
to greater efficiency were identified and
safely implemented. The most significant
was a targeted reduction in the non-
productive time associated with each
workman. We saw opportunities for
enhanced work productivity and made
various adjustments through a focused
measurement campaign which was
supported by yard management and key
supervision, ensuring our workers are
more productive during each shift. We also
observed that there were lengthy queuing
times associated with our tradesmen
getting their equipment and consumables
from our stores, and in order to improve
this we have provided the majority of our
tradesmen with personal tool kits and set
up satellite stores in different areas of our
yards, taking consumables and tools to
the work area locations instead of our staff
having to walk distances to warehouses for
collection. We have implemented a work
package system, in line with industry best
practice, and now use dedicated systems
to package construction and related works
into activities which ensures all inputs
are verified as “ready” prior to production
commencing. Manhour bookings, all
consumables and tooling are now traced
via work pack codes, capturing full costs
for work activities.
Total manhours worked in 2015
24,922,987
30
Strategic report: Sustainability report
WE ARE BUILDING A
SUSTAINABLE BUSINESS
Essential to our long-
term growth is a robust
sustainability framework
which enables us to deliver
value for all stakeholders.
We operate safely, to the
highest standards, whilst at
the same time managing our
impact on the environment.
Sustainability at Lamprell
Health and safety
The successful implementation of new
sustainability initiatives throughout the
organisation during 2015 was a significant
achievement for the Group. These
initiatives contributed to the Company’s
financial performance for the period
while maintaining a safe and efficient
operating environment for our workforce.
The promotion of accountability and
transparency are of paramount importance
to the Group, which is in part achieved
through the maintenance of a healthy
and well trained workforce. We believe
that our operations can have a positive
effect upon our clients, employees,
subcontractors, the environment and
communities in which we operate.
Highlights
Successful heat stress management
campaign which resulted in zero
recordable heat stress incidents
Three years without a DAFWC for both
the Jebel Ali and Dubai facilities
6.1 million manhours and 551 days
without DAFWC for the Sharjah facility
The best-in-class organisational health and
safety management system which Lamprell
deployed throughout 2015 continued
to deliver positive health and safety
performance results. These were achieved
through a number of complementary
mechanisms including:
» Company-wide occupational health
and safety campaigns focused around
fatal risk management;
» Dropped object safety awareness
campaign to highlight and reduce the
dangers associated with falling tools
and materials on fabrication yards;
Our sustainability pillars
Resource
conservation
Financial
performance
Worker
welfare
Environmental
protection
Stakeholder
engagement
Decrease in
CO2e emissions below
2015 emissions figures
Our goals
Investigate water saving
initiatives
Continue efforts to
encourage waste
minimisation and diversion
Data capture systems to
include capability to
measure indirect
economic benefits
Increase in the
performance of the
organisation in customer
satisfaction surveys
Increase in the diversity
of the workforce
Continue to design and
implement organisational
health campaigns
Enhance and refine
Training Centre
capabilities
Enhance environmental
regulatory compliance
Increase community
programmes per operation
Continue to decrease
environmental
incident rate
Increase number of
ecological initiatives
undertaken annually
Improved stakeholder
engagement programmes
with a focus on employee
welfare
Lamprell plc Annual Report and Accounts 2015
Strategic report: Sustainability report 31
»
‘Take 5’ hazard evaluation initiative
which requires all operational personnel
to assess their work areas for potential
hazards and rectify them prior to any
work being undertaken; and
» The provision of external Institute
of Occupational Safety and Health
training courses for supervisors and
Construction Industry Training Board
certification for Company supervisors
and scaffolders.
Lamprell is committed to achieving an
incident and injury free culture for all
stakeholders. To help achieve this goal,
hazard identification workshops as well as
client and Lamprell safety review meetings
are now standard for each project, which
subcontractors are required to attend.
This process enables clear communication
of health and safety expectations and
standards, and allows all parties to share
their industry experience on how to achieve
a safer work environment.
The Company is proud of its TRIR achieved
throughout 2015, however it acknowledges
that this rate has plateaued and is now
reviewing options to drive the TRIR down
by implementing more extensive training
programmes for Lamprell’s supervision.
All Lamprell employees continually strive
to ensure that operations are performed
in a safe working manner. However, in
November 2015, there was a tragic
non-operational incident in which a guard
received burn injuries as a result of a
fire that broke out in a security office at
Lamprell’s facility in Erbil, Iraq. One week
later he sadly passed away. As a result
of this incident, a number of corrective
actions were implemented including all
gas appliances being connected via hard
pipe and being fitted with a gas detection
system initiating automatic emergency
shutdown. In addition, a HSE audit was
undertaken at all remote facilities to ensure
that general safety standards are being
maintained. The lessons from this incident
were shared and further actions taken
where appropriate.
Quality
Highlights
Successful third party recertification for
ISO 9001 and ISO TS 29001
In 2015 Lamprell’s Quality department
successfully achieved recertification
by Bureau Veritas and the American
Petroleum Institute, demonstrating that we
have maintained and complied with these
internationally recognised standards. The
Group also successfully completed the ISO
27001 information security management
system certification audit. This certification
confirms that we have robust, secure and
reliable IT systems in place, ensuring
greater stakeholder confidence.
Lamprell successfully completed a number
of audit assessments for prospective
clients as part of our ongoing business
development efforts. These audits enable
the Group’s participation in bidding
activities for potential clients. In addition
Lamprell’s Quality department designed
and initiated a programme to train and
further develop the skills of its Quality
Control and Production department
personnel. The programme is aimed at
creating greater efficiency and continuous
improvement across the department.
Another major accomplishment for the
organisation in 2015 was the completion of
a new Lamprell shipyard quality standard
for new build rig projects which ensures
that we are complying with the international
code and class requirements.
Our sustainability pillars
Resource
conservation
Financial
performance
Worker
welfare
Environmental
protection
Stakeholder
engagement
Decrease in
Data capture systems to
Increase in the diversity
Our goals
Investigate water saving
CO2e emissions below
2015 emissions figures
initiatives
Continue efforts to
encourage waste
minimisation and diversion
include capability to
measure indirect
economic benefits
Increase in the
performance of the
organisation in customer
satisfaction surveys
of the workforce
Continue to design and
implement organisational
health campaigns
Enhance and refine
Training Centre
capabilities
Enhance environmental
regulatory compliance
Continue to decrease
environmental
incident rate
Increase number of
ecological initiatives
undertaken annually
Increase community
programmes per operation
Improved stakeholder
engagement programmes
with a focus on employee
welfare
32
Strategic report: Sustainability report
Environment
Highlights
Establishment of organisational carbon
footprint analysis framework
Full regulatory compliance with all
applicable environmental legislation
Majority of operational waste diverted from
landfill to be recycled
Effective and compliant environmental
management remains a cornerstone
of Lamprell’s operations. To drive this,
we are using a standardised reporting
regime, which enables timely and accurate
measurement of all major environmental
impacts from Group activities. A number of
environmental management improvements
were made possible through Project
Evolution
realignment of compressors to maximise
efficiency and the replacement of some
diesel powered cranes. A total of nine
overhead electric gantry cranes have been
installed at our Sharjah and Hamriyah
facilities to replace some of the diesel
powered crawler cranes.
page 12 initiatives such as the
In 2015 Lamprell once again participated
in the international Carbon Disclosure
Project (“CDP”) in which organisations
submit operational data that has an impact
upon the environment. The Disclosure
Score for the CDP report submitted for
2015 reflected a significant improvement
from previous years.
Disclosure
Score (/100)
Lamprell Group waste diversion from landfill
operational waste diversion rate
Year
Programme
2015
2014
2013
Climate Change 2015
Climate Change 2014
Climate Change
(Investor CDP)
87
38
25
The CO2e emissions from 2015 Lamprell
Group operations are provided below:
Lamprell Group CO2e emissions
52,410 tonnes Scope 1 – Emissions from
Lamprell owned or operated entities
4,280 tonnes Scope 2 – Emissions from
electricity and water purchased from
government utilities
3,280 tonnes Scope 3 – Emissions from
other third party activities purchased by
Lamprell
Throughout 2015 the Group diverted the
majority of operational waste away from
landfill sites and into recycling plants. This
was achieved through a best practice
waste segregation source management
approach and linking the organisation’s
waste recycling systems with a leading
UAE recycling enterprise. While the
overall Group waste diversion percentage
dropped from the previous year, this
was due to a short-term increase in un-
recyclable waste products at one facility.
Going forward, Lamprell will continue to
investigate and implement ways to extend
our waste management processes into
other sectors and improve the overall
percentage diverted from landfill.
2014
2015
85%
75%
page 12, the
As part of Project Evolution
yard layout optimisation measures instigated
at our Sharjah and Hamriyah facilities
were undertaken to maximise efficiency
and reduce operational costs. Part of this
project incorporated the replacement of
older diesel compressors with new electric
models. This capital investment by the
Company resulted in an annual diesel
saving of 1,572,060 litres and the reduction
of 2,330 tonnes of CO2e emissions which
were not emitted through the switch to the
cleaner (electric) energy source.
Corporate social responsibility (“CSR”)
Highlights
Management has implemented a robust
CSR framework to help achieve the
strategic objectives of the Group
Development of organisational
sustainability pillars
Formulation of corporate social
responsibility key performance indicators
The Group understands that the
sustainability of business operations
is achieved in part through the
implementation of a robust Corporate
Social Responsibility (“CSR”) framework
and that such a CSR framework is vital
to the long-term value proposition of
the Company. In 2015, the Company
continued to support the Don Bosco
Snehalaya shelter in Baroda, India through
an apprenticeship programme that takes
Rolling monthly total recordable injury rate (TRIR)
December 2014 to December 2015
KPI
2014 TRIR target 0.55
TRIFR actual
TRIR target
0.6
0.5
0.4
0.3
0.28
0.2
0.1
0.0
0.29 0.33 0.32 0.32 0.31
0.27 0.28 0.28 0.31 0.29
0.33 0.31
2015 TRIR target 0.22
TRIR = Total number of
recordable incidents X
200,000 number of hours
worked by all employees
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Lamprell plc Annual Report and Accounts 2015
Strategic report: Sustainability report
33
Daman Corporate Health Awards
Lamprell retained its Daman Corporate
Health Award for Employee Health and
Wellness for a second successive year.
underprivileged children and provides
craft training. Three graduates of this
programme will start work with Lamprell in
early 2016. Lamprell is in the process of
developing KPIs around an organisational
CSR framework. Completion and
integration of the CSR framework
is a work in progress for 2016.
Employee welfare
Highlights
Lamprell wins major employee health and
wellness award for second year running
Almost 2,000 employees completed basic
health screening
90 courses now available at Lamprell
Assessment and Training Centre
page 47 include
Our core values
integrity and teamwork and 2015 was
another landmark year for employee
welfare which continues to be centred
on these values. In November 2015
Lamprell received a major regional award
for the second year in succession, for the
“Most Improved Corporate Health and
Wellness Performance” at the Daman
Corporate Health Awards in Dubai. The
Group was recognised for executing
new initiatives such as health awareness
campaigns on diabetes, breast cancer,
heat stress, cholesterol management and
dental and oral hygiene. In addition, almost
2,000 employees underwent basic health
screening and were provided with their
personal follow up health report.
In March 2015, the Company conducted
an Employee Engagement Survey which
provided valuable feedback from over
1,000 office-based employees, of whom
99% expressed their pride in working
for Lamprell. We are implementing other
lessons learned from this feedback.
We also recognise the importance of
a good work-life balance and encourage
employees to participate in a variety
of internal sports tournaments and
leisure activities which we organised
during 2015. They included basketball,
cricket, football, badminton and bowling
tournaments as well as our employee
talent show – “Lamprell’s Got Talent”.
With the high employee participation
in our extracurricular activities, the
Group is continuing with similar activities
during 2016.
In terms of staff training and development,
the Company had a strong year
supporting both professional and trade
development. The Lamprell Assessment
and Training Centre currently has over
90 individual courses available covering
topics as diverse as leadership, English
language, welding, fabrication, electrical
and mechanical. Some of the courses
have mandatory third party involvement
including offshore survival, rigging and
crane operations. Over 400,000 manhours
of training and assessment were provided
by Lamprell’s dedicated training centre
in the UAE compared to approximately
250,000 in 2014.
The Board and executive management
continue to recognise that strong employee
engagement stems from a focus on
employee health, wellness and work-life
balance and this commitment will continue
in 2016.
Voluntary attrition admin
and professional
Target KPI – 10% max
4.66%
Target in 2014: 8%
Actual in 2014: 13%
KPI
Total manhours 2015
24,922,987
Manhours in 2014: 26,741,858
34
Strategic report: Sustainability report
P RO
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E
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LOG Y
E
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SOU R C
FRA S T
Project Evolution
Yard optimisation
and improvements
made throughout
our facilities
P E OPL
E
We have invested further in our yards with
the purchase of several new fixed and
telescopic cranes for operations in each of
our three main facilities servicing multiple
new concrete fabrication pads. In order to
reduce costs and speed up the fabrication
time associated with cutting and preparing
thousands of beams and profiles needed
in our various business lines, we installed
high technology, 3D robotic beam cutting
facilities in each of our Jebel Ali and
Hamriyah yards.
We also established an in-house
scaffolding department in Jebel Ali in
order to reduce subcontractor costs as
most of our projects have a high demand
for scaffolding. In Sharjah, an additional
blast and priming wheel abbrator unit
with dedicated overhead cranage and
an adjacent material laydown is now in
operation. We also installed new pipe
shops, paint sheds, cranes, a warehouse
and have upgraded our blasting facilities
with dedicated dust collection systems.
In our Hamriyah facility, we have installed
new paint and leg blasting sheds with
recovery, recycling and dust collection
systems. Centralised gas systems are up
and running and our new airline supply
is being fed by integrated compressor
stations servicing the yard economically
which has removed the costly supply
previously provided by handling of
thousands of cylinders. Thanks to our new
Oracle ERP system
also have digitised, real time field access
to commissioning and quality control
systems, as well as new material handling
equipment which have helped reduce our
fabrication costs. A new yard transporter
page 22, we now
Lamprell plc Annual Report and Accounts 2015 Strategic report: Sustainability report 35
was delivered in July and is providing
more efficient movement for heavy parts
and prefabricated sections. The power
supply to our Hamriyah facility will be
finalised in 2016 and will replace the
generator power used previously.
We also completed an underground
utilities upgrade at both our Hamriyah
and Sharjah facilities, which has ensured
savings on utility charges and increased
productivity, as well as improved safety
standards in the yards. Our efforts to
modernise and optimise the layout of
our yards are benefiting all of our current
major projects and will provide a strong
foundation on which to bid competitively
for future projects.
USD million invested in multi-yard utilities upgrade project
20+ million
36 Corporate governance: Board of Directors
OUR EXPERIENCED BOARD IS
WELL BALANCED
Nom
Rem
Member of the Remuneration
Committee
Nom
Member of the Nomination
& Governance Committee
John Kennedy
Executive Chairman
Aged 66
James Moffat
Chief Executive Officer
Aged 62
Tony Wright
Chief Financial Officer
Aged 44
Appointed: June 2012
Appointed: March 2013
Appointed: August 2015
Aud
Member of the Audit & Risk
Committee
Strengths: public company
boards, international oil & gas
Indicates
Committee Chairman
Experience: John Kennedy
trained originally as an
engineer who subsequently
spent much of his career in
senior management roles.
He started his career at
Schlumberger and then moved
to Halliburton where he held
the role of Executive Vice
President. He was Executive
Chairman of Wellstream
Holdings PLC from 2003 until
its acquisition by GE. He is
an adviser to several oilfield
service companies. In 1993,
Mr Kennedy received the Sloan
Fellowship from the London
Business School. He is a
Chartered Engineer and
Fellow of the Institution of
Electrical Engineers.
External appointments:
Non-Executive Chairman
of Maxwell Drummond
International Limited.
Strengths: fabrication yard
operations, international
oil & gas
Strengths: financial &
accounting, Middle East
operations
Experience: James Moffat
has over 40 years’ experience
in the offshore engineering,
construction and project
management sectors. From
1996 and until joining the
Lamprell Group, Mr Moffat
was employed with the KBR
group of companies, working
in various roles including
heading up the Kellogg Joint
Venture on the Gorgon Project,
Australia. Mr Moffat worked
for the McDermott group from
1977 to 1996 where he latterly
managed the Batam facility in
Indonesia. He is a Chartered
Engineer, has a BSc (Hons)
in Civil Engineering from
Edinburgh University and
is a member of the Institution
of Civil Engineers.
External appointments: None
Experience: Tony Wright joined
Lamprell in January 2013 as
Vice-President, Finance and
in November 2014 he stepped
into the role of Deputy CFO,
followed by a promotion to
Chief Financial Officer in
August 2015. Tony is a qualified
Chartered Certified Accountant
with over 15 years’ experience
working in the oil & gas
and construction industries.
From 2010 Tony worked with
Leighton Holdings Group
in Malaysia and the UAE,
thereafter with the Habtoor
Leighton Group. Prior to joining
Leighton, he spent five years
as Group CFO with Dubai
based oilfield EPC firm Global
Process Systems. When in the
UK, Tony held senior finance
positions with Input/Output Inc
and the Expro Group.
External appointments: None
Lamprell plc Annual Report and Accounts 2015
Lamprell plc Annual Report and Accounts 2015 Corporate governance: Board of Directors
37
Aud
Nom
Nom
Rem
Aud
Nom
Aud
Nom
Rem
Ellis Armstrong
Senior Independent Director
Aged 58
John Malcolm
Non-Executive Director
Aged 65
Mel Fitzgerald
Non-Executive Director
Aged 65
Debra Valentine
Non-Executive Director
Aged 62
Appointed: May 2013
Appointed: May 2013
Appointed: August 2015
Appointed: August 2015
Strengths: financial &
accounting, international oil
& gas, risk management
Experience: Ellis Armstrong
is a senior executive within
the energy industry with
broad international experience.
Mr Armstrong worked for more
than 30 years with BP, where
he held a range of operational
and leadership roles including
line operating roles in the
North Sea and Alaska, VP for
Latin America and Caribbean,
Head of Technology and, most
recently, CFO (Exploration &
Production). Mr Armstrong is
a Chartered Engineer with a
BSc and a PhD, both in Civil
Engineering, from Imperial
College, and a Master’s in
Business Administration
from Stanford.
External appointments:
Non-Executive Director of
Lloyds Register Group,
Non-Executive Director
of InterOil.
Strengths: international oil &
gas, Middle East operations
Experience: After 25 years
with Shell, John Malcolm
retired in 2010 to become an
independent consultant to
the energy industry. During
his tenure at Shell, he held
senior positions including
as Managing Director for
Petroleum Development Oman.
He was recently appointed as
Managing Director of Oman
Oil Company Exploration &
Production LLC. Mr Malcolm
is a Chartered Engineer with
the UK Engineering Council
and has a PhD in Process
Control Systems from Heriot
Watt University, which he
obtained in 1975.
External appointments:
Non-Executive Director of
Partex Oil & Gas (Holdings)
Corp., Executive Director
of Aquamarine Power Ltd.,
Managing Director of Oman Oil
Co. Exploration & Production
LLC, Director of Bellwood
Enterprises Ltd.
Strengths: fabrication yard
operations, international
oil & gas
Experience: Mel Fitzgerald
has over 30 years’ experience
in the energy industry and
currently acts as a Director
to a number of companies,
notably in the role of Chairman
for Suretank Group Limited.
Mr Fitzgerald served as
CEO and Board Director at
Subsea 7 for eight years until
2012 and has a Bachelor of
Engineering from the University
of Ireland and a Master’s of
Business Administration from
the University of Kingston. He
is also a chartered engineer.
In July 2015 Mr Fitzgerald was
awarded the Honorary Doctor
of Business Administration
(HonDBA) by Robert Gordon
University in Aberdeen in
recognition for his contribution
to the UK oil & gas industry.
External appointments:
Chairman for Suretank
Group Limited
Strengths: risk management,
legal
Experience: Debra
Valentine has experience
in heavy industries, having
led government relations,
governance, risk and legal
functions across global
jurisdictions. Her current role
is Group executive, Legal
& Regulatory Affairs for Rio
Tinto, where she is on the
Executive Committee. She has
expertise in competition and
anti-trust issues. Ms Valentine
worked at United Technologies
Corporation and as a partner
with the law firm O’Melveny
& Myers, as well as serving
as general counsel at the US
Federal Trade Commission from
1997 until 2001. Ms Valentine
has an AB magna cum laude
from Princeton University and
a JD from Yale University, and
is a member of the District of
Columbia Bar.
External appointments: None
38
Corporate governance: Directors’ Report
LEADING WITH
GOOD GOVERNANCE
We set a number of key
priorities to enhance the
Company’s governance
structures and leadership
by the Board, and we have
made excellent progress on
them during the year.
Dear Shareholders,
Given the importance of high standards
of corporate governance for the effective
leadership of any company and in
particular a publicly listed company, I am
pleased to report on the excellent progress
made in delivering on the priorities set
for 2015. These priorities were chosen as
a result of the feedback from the 2014
evaluation process and, in this way, the
Board has been able to demonstrate
accountability for its own performance and
effective leadership of the Company.
Board changes
In line with its stated goals, the Board
strengthened its independence and
composition with the appointment of
Mel Fitzgerald and Debra Valentine as
independent Non-Executive Directors.
This was doubly important with the
unplanned departures from the Board of
Peter Whitbread and Michael Press, for
personal reasons. Peter and Michael were
major contributors in navigating the Group
through challenging times but Mel and
Debra are highly experienced individuals
who will enhance Board performance.
Leadership succession
We also focussed on development of our
leadership succession plan for the Board
and management team and there was
progress in that regard. In August, James
Moffat, our CEO, announced that he was
planning to retire in June 2016 and so
we started the search process to find a
replacement CEO, which is now well under
way. In addition, I agreed to take on the
role of Executive Chairman until the 2016
AGM in order to help the transition process
between James and the new CEO and to
take on an outward-facing role looking at
potential partnerships for the Group as it
looks to implement its refined strategy
page 14.
In addition, following extensive search and
evaluation processes, we were pleased to
be able to promote two internal candidates
to leading management positions. Tony
The Board committed to hold at least one
Board meeting at a Group facility and, in
2015, the February meetings were held
at the Hamriyah facility in the Northern
Emirates. This site visit was planned to
capture both presentations on key subject
matters but also to allow the Directors
to interact with other personnel aside
from senior managers. This included
presentations at the facility offices made
during the course of the meetings. Then,
having changed into full safety coveralls
and after the necessary safety training
course, the Directors took the opportunity
to walk around the yard, meet some of
the operations personnel and also to
board the “Greatdrill Chaaru” rig which
was ready for delivery at that time.
This represented a prime opportunity
to demonstrate greater visibility by the
Directors with the wider workforce.
Site visit
Board meeting
at the Hamriyah
facility
Lamprell plc Annual Report and Accounts 2015
Corporate governance: Directors’ Report 39
Wright moved from Deputy CFO to CFO
and Executive Director in August and
Niall O’Connell was promoted to COO in
October. Tony and Niall have both been
working in the Group for several years prior
to their appointments, and so understand
the business well.
Getting close to the business
An area for improvement identified
in the 2014 evaluation process was
communication between the Board and
wider management. With that in mind,
the Directors – both existing and new
– participated in site tours around our
Hamriyah facility where the Board held
its February meeting. During the June
Board meetings, members of the wider
management team had one on one
meetings with the Directors with a view
to encouraging closer communication
with Board members.
Strategy
Lamprell had set out a clear strategy
page 14 during its rights issue in
mid-2014 and has been successful in
implementing the first phase over the
page 12. Given the
last 18 months
industry economic downturn, the Board
wished to verify that the current strategy
was still appropriate for future growth in
the business. As such, the management
team undertook a detailed review of the
strategy which was completed in August
2015, which the Board subsequently
approved. The outcome of that review
process is set out on
the Board believes, continue to deliver
page 14 and will,
sustainable growth over the longer term to
its shareholders.
Governance
The Company is incorporated in the Isle
of Man and has a Premium Listing on the
Official List of the London Stock Exchange.
The Board makes considerable efforts
to ensure that during the relevant period
the Company applies and complies
with the UK Corporate Governance Code
2014 as the pre-eminent set of global
standards for corporate governance
(the “Code”, available at www.frc.org.uk).
Where the Company does not comply,
this is explained in this Annual Report and
Accounts or in this Corporate Governance
Report specifically.
In light of our achievements in 2015,
Lamprell benefits from an improved
governance structure that is appropriate
for the size and complexity of our
business, and we continue to move in
the right direction. Nevertheless, we look
for new ways to improve governance
and so, following our Board’s self-
evaluation process for 2015 using an
external facilitator, we have agreed our
priorities for 2016 and the outcome
of that process is on
page 44.
John Kennedy
Chairman of the Board
The Directors present their report on the
affairs of the Company and the Group
together with the financial statements and
the auditor’s report for the year ended
31 December 2015.
Results and dividends
The financial statements of the Group
for the year ended 31 December 2015 are
pages 70 to 117. The Group’s
set out on
profit from continuing and discontinued
operations after income tax and exceptional
items for the year amounted to USD 64.7
million (2014: USD 118.1 million). The
Directors do not recommend the payment
of any dividend for the financial year ended
31 December 2015.
Other information
The following sections of the Annual Report
contain all other information relating to and
forming part of the Directors’ Report:
Further reading
Pages
Principal risks and uncertainties
Board of Directors
Corporate Governance Report
Directors’ Remuneration Report
Directors’ Remuneration Policy
Report
Directors’ Annual Report
on Remuneration
Statutory Information and
Directors’ Statements
16
36
38
54
55
61
68
40
EFFECTIVE LEADERSHIP
ACROSS THE GROUP
As a result of the changes
among the Directors
during 2015, the Board
composition, succession
and integration have been
key focus areas. The Board
is collectively responsible
for the long-term success
of the Company and aims
to achieve that through
effective risk management
and greater transparency.
Board composition
Board composition
2015
2015
57%
43%
Executive
Non-Executive
14%
86%
Female
Male
Board composition
The Board is comprised of an Executive
Chairman, CEO, CFO and four independent
Non-Executive Directors (“NEDs”). Of
the current Directors, Messrs Kennedy,
Moffat, Malcolm and Armstrong served
as Directors throughout 2015, with Mel
Fitzgerald and Tony Wright joining the
Board on 13 August and Debra Valentine
being appointed as a Director with effect
from 1 September 2015. The Executive
Chairman, CEO and CFO are the Executive
Directors on the Board.
pages 36 and 37
There is a strong combination of industry,
regional and operational experience
among the Directors
enhanced by the diverse professional
competences of each Board member.
However, with the announcement by
James Moffat of his planned retirement
in 2016, the Board prioritised the process
to identify a suitable replacement as
CEO. That search has been under way
for some months and, while a number
of candidates have been identified and
interviewed, the Board is continuing with
the search as it aims to find a replacement
with a broad array of skills, both in
managing a business but also capable
of delivering the longer-term aspects
of the Company’s strategy. This search
process will continue to be the top priority
for the Board in 2016. In the meantime,
John Kennedy has agreed to take on the
role of Executive Chairman in order to
help with the transition to the new CEO.
The Board will aim to refresh its
membership on a regular and phased
basis in order to bring relevant experience
and independence to the Board while
at the same time ensuring continuity
and stability.
Board composition
Name
Position
Nationality
Tenure on the Board
John Kennedy
James Moffat
Tony Wright
Executive Chairman
Director and CEO
Director and CFO
Ellis Armstrong
Senior Independent Director
John Malcolm
Mel Fitzgerald
Independent NED
Independent NED
Debra Valentine
Independent NED
Tony Wright
Debra Valentine
Mel Fitzgerald
Ellis Armstrong
John Malcolm
James Moffat
John Kennedy
0.5 years
2.5 years
3 years
3.5 years
Lamprell plc Annual Report and Accounts 2015Corporate governance: Directors’ Report Board and committee functions
The Board
The board has ownership of the global policies
,
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James
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Tony
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Ellis
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John
Malcolm
Mel
Fitzgerald
Debra
Valentine
Executive
Non-executive
Board committees
Support the board in its work with specific review and oversight
Nomination &
Governance Committee
Takes primary responsibility
for succession planning,
Board/Director selection and
Board composition
Audit & Risk Committee
Monitors the integrity of the
Company’s financial
statements and reviews
financial and regulatory
compliance and controls
Remuneration Committee
Agrees remuneration policy
and sets individual
compensation levels for
members of senior
management
Ad hoc Board committees
Set up for defined,
time-specific tasks
Group leadership team
Responsible for implementation of the global policies
Chief Executive
Primarily responsible for running the business with
the objective of creating shareholder value
Management level committees
Responsible for the communication and implementation of decisions, administrative matters
and matters for recommendation to the Board and its Committees
Executive
Committee
Bid Approval
Committee
Risk Review
Panel
HSES Management
Review
Monthly
Management Meeting
Chief Financial
Officer
Business managers
Responsible for leading and
delivering business streams
Function managers
Departmental head for
enterprise-wide support services
Business teams
Structured around
project execution
Function teams
Departmental policy and
procedures
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41
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Corporate governance: Directors’ Report
42
Roles and responsibilities
The roles and duties of the Chairman
and the CEO have been segregated, in line
with the best practices set out in the Code,
as agreed by the Board. This will ensure
that effective governance is maintained
throughout the temporary period until
the new CEO has been transitioned into
the Group.
The Executive Chairman is responsible
for providing effective leadership of the
Board and the Group as a whole including
strategy and direction and chairs all Board
meetings within an effective corporate
governance framework. In addition, for
the period until the Chairman reverts to
a non-executive capacity, he has also
taken on an outward-facing role looking
at strategic initiatives for the Group
as it looks to implement its refined
strategy. The CEO is responsible for
the day-to-day running of the Group’s
business, including execution of the
Group’s business plans and objectives
and communicating its decisions from/
recommendations to the Board.
The CFO is responsible for the financial
stewardship, navigation and control
activities of the Group as well as the
investor relations activities. The role of
the four independent NEDs is critical
to ensure an effective counter-balance
on the Board. The NEDs are primarily
responsible for challenging constructively
all recommendations presented to the
Board, based on their broad experience
and individual expertise.
The Senior Independent Director acts as
a sounding board and confidante to the
Chairman and is available to shareholders
to answer questions which cannot be
addressed by the Chairman or the CEO.
With the departure of Michael Press on
13 August 2015, Ellis Armstrong was
appointed as Senior Independent Director.
The biographical information of each
Director as well as the memberships for
each Board Committee are detailed on
pages 36 and 37.
Board meetings and attendance
The Directors met in person on seven
occasions (five times in Dubai and two in
Paris) during the course of 2015. However,
where required and in order to receive an
interim update on ongoing matters, the
Directors may convene ad hoc meetings
at short notice by way of conference call,
where required. Meetings in person will
generally take place over the course of two
days and will include meetings of both the
Board and the Committees.
The Company Secretary is responsible
to the Board and provides the Board and
each of the individual Directors with advice
and assistance on governance matters.
He ensures that all Board materials and
other information are delivered in a timely
fashion, at least five days before scheduled
Board meetings through a secure, online
software system.
As well as the Directors and the Company
Secretary, it is common for members of
the executive committee to attend parts
of the Board meetings and to deliver
Table for Board attendance
Committee member
No. of
meetings
attended
No. of
meetings
eligible
No. of
Strategy
meetings
attended
No. of
Strategy
meetings
eligible Notes
John Kennedy
James Moffat
Tony Wright
Ellis Armstrong
John Malcolm
Mel Fitzgerald
Debra Valentine
Michael Press
Peter Whitbread
d
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Mel Fitzgerald joined the Board on 13 August 2015
Debra Valentine joined the Board on 1 September 2015
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Michael Press left the Board on 13 August 2015
Peter Whitbread left the Board on 12 May 2015
Lamprell plc Annual Report and Accounts 2015Corporate governance: Directors’ Report Table for Board agenda items
Standing
Periodic
Review of actions from previous meetings
Full-year/interim financial statements
Safety update on enterprise-wide statistics
Group budget, strategy and progress updates
Reports from the CEO and the CFO, including investor feedback
Corporate transactions
Reports from each of the principal Board Committees
Risk management
Report on legal and corporate governance matters
Funding proposals
Business development and prospects
43
Frequency
Every 6 months
Every 3 months
Ad hoc
Every 6 months
Every 12 months
Every 2 to 3
months
presentations on operational or business
topics in greater detail. In this way, the
Board gains an in-depth understanding
of business-critical functions and the
presenting managers are able to interact
with the Directors and gain experience for
their own personal development.
Board topics
There is a formal schedule of matters
reserved for the Board and the Board
retains discretion to approve decisions on
key subject matters such as the Group’s
strategy, annual budget and financial
statements. The Board also reviews other
relevant matters including standing agenda
items (see above) and key topics for
discussion at that relevant time of year or as
a result of current business requirements.
In all cases, the agenda focuses on topics
in pursuit of the Company’s strategic
objectives underpinned by our core values
page 47, rather than administrative
matters. The Chairman sets the agenda
for each meeting in consultation with
the CEO and the Company Secretary.
At the meeting, the Executive Directors
give an update on business, operational
and financial matters, thereby enabling
the Board to understand progress within
the business but also anticipate likely
forthcoming risks
page 16.
During 2015, there were detailed
presentations from key managers
including the COO, CCO and VP of HR
on matters such as strategy, enterprise
risk management, business development,
security and leadership succession
planning. In addition, from time to time,
the Board invites external presenters
to speak to the Directors. This included
a detailed discussion on the oil & gas
industry from an economics expert from
a major UAE bank as well as information
from the Company’s brokers (JPMorgan
Cazenove – “JPMC”) and lawyers. The
Board has been particularly keen to
keep abreast of issues in the market
in light of the prolonged downturn.
Between Board meetings, management
distributes a monthly report to the Board
providing a summary of the financial
performance of the Group, highlighting
page 16.
developments and key risks
Principal Board Committees
There are three principal Board
Committees – the Audit & Risk Committee,
the Nomination & Governance Committee
and the Remuneration Committee – and
much of the Board oversight of the
executive management team is conducted
by delegation through these Committees.
Given the time and resources invested
in the appointment of the Directors, it is
important for the Directors to operate in an
environment of trust and responsibilities to
be effective.
An open and forthright environment
is also encouraged in meetings of the
three Board Committees.
Meetings structure
The Board is primarily responsible for the
leadership of the Company and wider
Group; however it is ably supported
both by the Board Committees and the
management team which makes use of a
number of management level committees
page 41 for details. It is a core
see
principle for all that there is an effective
working relationship between the Directors,
between the Board and management
and at the management level. Structurally
and from a governance perspective, this
provides a robust framework for achieving
the Company’s strategic objectives.
Board independence
Date
Board composition on relevant date
Reason for change in %
independence
% independence
(including C’man)
% independence
(excluding C’man)
01/01/15
Non-Executive Chairman, CEO, NED and 3 independent NEDs
Start of year
12/05/15
Non-Executive Chairman, CEO and 3 independent NEDs
Retirement of P Whitbread
13/08/15
Executive Chairman, CEO, CFO and 3 independent NEDs
Appointments of
T Wright & M Fitzgerald;
departure of M Press
01/09/15
Executive Chairman, CEO, CFO and 4 independent NEDs
Appointment of D Valentine
31/12/15
Executive Chairman, CEO, CFO and 4 independent NEDs
Year-end
50%
60%
50%
57%
57%
60%
75%
60%
66%
66%
Corporate governance: Directors’ Report 44
Accordingly, there are regular discussions
outside of scheduled Board meetings,
particularly between the Chairman and
the other Directors, with a view to reaching
a mutual understanding of views prior to
wider discussions at meetings. At physical
Board meetings, the NEDs, without the
CEO or CFO present, share insights on
matters of governance and sensitivity
for management. The Chairman typically
attends such meetings, notwithstanding his
change of role to Executive Chairman.
Independence and conflicts
In accordance with the Code, at least half
of the Board (excluding the Chairman)
is comprised of independent NEDs
who are free from any business or other
relationships that could materially interfere
in the exercise of their independent
judgement. At the date of publication, John
Malcolm, Ellis Armstrong, Debra Valentine
and Mel Fitzgerald are all considered by
the Board to be independent NEDs as
defined by the Code.
At the beginning of each year, the
Company asks each of the independent
NEDs to re-confirm their independence.
The Chairman of the Board was
considered to be independent on his
original appointment in June 2012.
Integrity is a core value for the Group.
Each Director recognises the importance
of transparency in trying to avoid any
actual or potential conflict of interest
and will promptly declare such conflict,
if one arises. This enables the Board to
assess the possible impact of any conflict
and take appropriate and timely action.
The following procedures are in place for
dealing with conflicts:
» Any new Director is required to provide
information on any conflicts of interest
by means of a questionnaire prior to
appointment;
» Conflicts are declared and addressed
during Board meetings and noted in the
minutes; and
» For conflicts arising between Board
meetings, these are submitted to the
Chairman for consideration, prior
to deliberation at the next meeting.
No new, additional conflicts of interest
were noted from the Directors in 2015,
save as disclosed previously. John
Kennedy remains as the Non-Executive
Chairman of Maxwell Drummond (which
is one of the companies who provide
recruitment services to the Company)
but the Board has determined that this
potential conflict has been effectively
managed as Mr Kennedy is not involved
in any decision involving the appointment
of Maxwell Drummond. All conflict
management procedures were adhered
to and operated effectively.
Appointments to the Board
There is a formal, rigorous and
transparent process for the appointment
of new Directors to the Board and this
is led by the Nomination & Governance
Committee which then makes any such
recommendations to the full Board for
approval. Prior to embarking on a search,
the Committee on the advice of the VP
of HR will prepare a list of key criteria for
any candidates, taking into account the
Board composition, and will ordinarily
appoint external search consultants to
prepare candidate lists and assist with the
recruitment/evaluation process.
A key Board priority for 2015 included
the appointment of at least one additional
independent NED, which was achieved
by the appointment of Mel Fitzgerald and
Debra Valentine. They joined the Board
following an extended recruitment process
which also included interviews with
the existing Directors and a number
of senior managers.
Once appointed, the two new Directors
were given full induction into the business
including visits to the three main facilities in
the UAE, presentations from key managers
on business-related topics and a meeting
with the Chairman and the Company
Secretary, to discuss governance matters
including the Listing Rule obligations
for the Company, Directors’ duties and
responsibilities, share dealing restrictions
in accordance with the Disclosure and
Transparency Rules and the Model Code,
and Board procedural matters.
All Directors are encouraged to attend
relevant external seminars and, on an
ongoing basis, there is training for the
Directors as a whole by way of the
presentations to the Board from guest
presenters. The individual Directors
also make efforts to remain current with
the latest regulatory obligations for UK
listed companies with the assistance
of our brokers and lawyers. Similarly, any
Director is entitled to take independent
professional or legal advice on Company
matters, as and when needed. No Director
sought independent advice during the
financial year.
The Audit & Risk Committee also
benefits from regular briefings from the
external auditors on any new accounting
requirements as well as developments in
the area of corporate governance.
Board performance evaluation
In last year’s Annual Report, the
Board committed to making use of an
external facilitator to assist with the
2015 performance evaluation process.
This process was conducted under
the stewardship of the Nomination &
Governance Committee, which met in
mid-2015 to plan the evaluation process.
The Committee considered the Code
and, although the Company was not a
constituent of the FTSE 350, decided
What were the results from the Board evaluation?
Matter(s) considered
Observation(s)
Board priority(ies)
Strategy and risk management
Recognition that the current market
downturn will be longer than originally
expected
Increased oversight of Group’s KPIs and
risk management, and in particular cash
management by Audit & Risk Committee
Ongoing training and
development of Directors
Roles and responsibilities
Training can sometimes be reviewed
as subsidiary to other, more pressing
Board agenda items
Risk of overlap between the
responsibilities for the Chairman
and CEO
Draw up and commit to a formal
induction, training and development
programme for incoming and existing
Directors
Update the memorandum outlining
the respective responsibilities of the
Chairman and CEO
Lamprell plc Annual Report and Accounts 2015Corporate governance: Directors’ Report 45
that appointment of an external facilitator
was in the best interests of the Company.
Accordingly, the Company appointed Value
Alpha (www.valuealpha.com) to advise
on and facilitate an externally-managed
Board evaluation. Value Alpha has no other
connection with the Group.
The process focussed on review of
the Board performance and made use
of both an online questionnaire (with
questions asking for quantitative ranking
and for qualitative feedback to the Board,
Committees and the Directors) and review
meetings with each Director. The facilitator,
on behalf of the Board, also sought
feedback from specific key executives
that have regular interaction with either
the Board or the Board Committees. The
externally-compiled report summarised
the results of the evaluation on an
aggregated and confidential basis and was
subsequently provided to the Board which
then discussed the results in open session.
As a result of this external process, the
Board has been able to structure its
priorities for 2016 around the results
page 44. The NEDs, led by the Senior
Independent Director, evaluated the
Chairman’s performance and confirmed
that he is performing effectively. While
the Company was not required to use
external facilitators, the Board consider
that this has strengthened and enhanced
the performance and transparency of
discussions and decision-making at the
Board level.
Annual general meetings
In May 2015, the Company held its AGM in
Dubai, United Arab Emirates and all then-
current Directors were present although
it should be noted that Peter Whitbread
decided not to stand for re-election for
personal reasons. We encourage our
shareholders to attend the AGM as an
opportunity to engage in a constructive
dialogue with the Board members. As has
been the norm, all resolutions were passed
on a show of hands; however as a matter
of good governance and in accordance
with the changes to the Code, voting on
resolutions 7, 9 and 11 (which related
to the re-election of the independent
Non-Executive Directors) was conducted
by independent shareholders only (i.e.
excluding the “controlling shareholders”)
page 46.
The Company plans to hold its 2016
AGM on 15 May 2016 in Dubai and
full details are set out in the Notice of
Meeting which accompanies this report
and is also available on our website. All
Directors are planning to attend and will
be available to answer questions from
shareholders. Each item will be presented
as a separate resolution. Any shareholder
unable to attend in person but wishing to
submit a question for consideration by the
Directors, is invited to submit questions to
investorrelations@lamprell.com.
Pursuant to the Company’s Articles of
Association, the Directors are required
to submit themselves for re-election by
shareholders at least every three years but,
in line with the Code and best practice,
the Board has decided that all Directors
will retire and stand for re-election at the
2016 AGM.
As also required, the Company makes
the terms and conditions of Directors’
engagement available for inspection at the
registered office of the Company during
normal business hours and also at the
Company’s AGM 15 minutes prior to the
meeting and during the meeting.
Communications with shareholders
As in previous years, Lamprell has
focussed on effective and open
communications with its shareholders,
not least because of the impact of the
declining oil price on the Company’s
share price. Whilst the Chairman assumes
overall responsibility for communication of
shareholder views to the Board, investor
relations activities are primarily handled
by the CEO and CFO with the support
of a dedicated investor relations team.
During 2015, nearly 100 investor and
analyst meetings were held by the investor
relations team, of which the CEO or CFO
attended approximately 65%.
As in previous years, Company
representatives met with major institutional
shareholders and market analysts following
the announcement for our financial results
and at other key times. In addition, the
management arranged for an analyst
site visit in November 2015 pursuant to
which eight analysts and investors visited
the Group’s facilities in the UAE, listened
to presentations from key members of
Consistent communication with our shareholders
Consistent communication with our shareholders
Jan
Feb
Mar
Apr May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Trading
update
Preliminary
results
Annual
Report
published
AGM
attended by
all Directors
Trading
update
Sell-side and
buy-side
roadshow
Sell-side
and
buy-side
roadshow
Interim
results
published
Q&A on
Board
changes
Major
shareholder
meeting
Trading
update
Regular press releases regarding Company’s business
Regular, ongoing dialogue and phone calls with major shareholders and analysts
Corporate presentations, market announcements including trading updates and contract wins,
and other Company information on our website at www.lamprell.com
Corporate governance: Directors’ Report
46
management and had an opportunity to
question the Lamprell team on all aspects
of the business (within the boundaries
of the listing rules requirements). Based
on feedback, it was well-received and
provided greater visibility on the Group’s
operations, which is of added value given
the remote nature of the business from
its listing in London. In light of this, the
Company will aim to make such visits an
annual occurrence.
The Chairman and Senior Independent
Director are available to speak with
shareholders and did communicate from
time to time with shareholders on specific
issues during 2015.
The Company has made use of the services
of JPMC as its corporate broker since its
listing in 2006 and JPMC has supported
and advised the Board through a number
of challenging corporate transactions
since 2012. However, the Board decided
to appoint a second broker with a view to
accessing a wider shareholder base. Under
the direction of the Board, a sub-committee
comprising the CFO, Company Secretary
and Investor Relations Officer managed a
formal tender process for the appointment
of the second broker and, following the
process, the Company appointed Investec
Bank plc as its joint corporate broker to act
alongside JPMC.
The Company also views the AGM as
an important process for liaising with
page 45. In previous
shareholders
years, there had been significant minorities
voting against certain resolutions at the
relevant AGM. Following these meetings,
the Company had engaged with investor
advisory groups to understand the
concerns and the Board was pleased to
note that, at the 2015 AGM, all resolutions
were passed with at least 97% of the votes
cast in favour.
Significant shareholders
As at 17 March 2016, being the latest
practicable date prior to the publication of
this Annual Report, the significant interests
in the voting rights of the Company’s
issued ordinary shares based on the last
request for confirmation as to the beneficial
ownership of voting rights in the Company
(at or above 5% beneficial ownership) were
as follows:
Voting rights
attaching to issued
ordinary shares
% of total
voting
rights
113,182,291
33.12
Lamprell
Holdings Limited
Schroder plc
50,526,439
M&G Investment
Management Ltd.
43,419,605
14.79
12.71
MFS Investment
Management
21,249,185
6.22
By virtue of the size of its shareholding in
the Company, Lamprell Holdings Limited
and its ultimate owner, Steven Lamprell,
are “controlling shareholders” for the
purposes of the UK’s Listing Rules.
Accordingly, they were required to enter
into an agreement with the Company to
ensure compliance with the independence
provisions set out in the Listing Rules
(“Controlling Shareholder Agreement”).
The Controlling Shareholder Agreement
regulates the ongoing relationship between
the Company and these controlling
shareholders. The Company has complied
with the independence and all other
provisions in the Controlling Shareholder
Agreement. So far as the Company is
aware, the controlling shareholder has
also complied with the independence
and all other provisions in the Controlling
Shareholder Agreement. The Controlling
Shareholder Agreement represents a key
component of the Company’s corporate
governance structure.
Communications with other
key stakeholders
Lamprell’s core lending group is another
key stakeholder group for the business
and the debt facility terms represent
a fundamental part of the Group’s
governance structure as it includes certain
banking covenants and restrictions.
The management team provides regular
updates on key aspects of the business
to the lending group and the CFO
communicates frequently with each of
the lending banks to address any queries.
Finally, the Board places considerable
importance on positive and effective
interaction with the Group’s workforce
and Lamprell’s internal Corporate
Communications team coordinates
campaigns for the management team
to cascade key messages throughout
the organisation. In 2015, there were
campaigns relating to safety and IT
security matters as well as the launch
of the online training for the Company’s
Business Code of Conduct. In January
and July 2015, the CEO presented a series
of “town hall meetings” at each of the
three main facilities in the UAE, which were
focussed on the Company’s performance
and on developments within the business.
The CEO also presented awards for
long service and safety achievements
to employees.
Directors’ remuneration
The Remuneration Committee is primarily
responsible for determining the Company’s
remuneration policy, taking into account the
best practices as well as the advice from
external consultants on peer companies.
Details of the Company’s policy on
remuneration, the Directors’ remuneration
for the year ended 31 December 2015
and their interests in the ordinary shares
of the Company can be found in the
Directors’ Annual Report on Remuneration
page 61.
Directors’ and Officers’ insurance cover
Each year, the Board reviews and approves
the level of the Directors’ and Officers’
liability insurance cover to ensure that it is
appropriate in light of the circumstances,
size and risks within the business. This is
subject to the usual exclusions such as
fraud or dishonesty by a Director.
Lamprell plc Annual Report and Accounts 2015Corporate governance: Directors’ Report GUIDED BY
OUR VALUES
The Board recognises
that Lamprell is an
organisation which
comprises stakeholders
from a diverse array of
cultural backgrounds and
nationalities and so makes
use of core values as a
means to align the corporate
culture. This ensures a
common message around
the key drivers for the
business and ensures that
all stakeholders are working
towards the same goals.
47
1
Safety
We deliver world-class safety
performance and leave nothing to
chance so everyone goes home
safely.
2
Fiscal responsibility
Because every employee
influences our costs, we are all
accountable to ensure that we
achieve the most cost effective
solutions.
3
Integrity
We conduct our business honestly,
with professional integrity, fairness
and transparency and we are open
and ethical in our day-to-day dealings
with all stakeholders.
4
Accountability
We deliver what we say we will.
5
Teamwork
We will strive to work together with
our stakeholders and believe great
teams will achieve incredible things.
Corporate governance: Directors’ Report 48 Corporate governance: Nomination & Governance Committee Report
NOMINATION & GOVERNANCE
COMMITTEE REPORT
It has been a busy year
for the Committee with
the appointment of three
new Directors following
the departure of Peter
Whitbread and Michael
Press. However the key 2016
priority for the Committee will
be the executive search for
the new CEO.
John Malcolm, Committee Chairman
Committee attendance
The Committee is comprised of five
members, four of whom are considered to
be wholly independent, plus the Executive
Chairman of the Board. Aside from the
members, the Company Secretary and the
Group’s VP of HR are typically invited to
attend meetings.
Remit of the Committee
The Committee has primary responsibility
for the structure, balance, diversity and
experience on the Board and Committees,
and for leading the evaluation of the
Board’s performance and effectiveness.
It also assesses the succession planning
needs at the senior level. In addition, the
Committee considers the implications of
changes in the regulatory framework and
advises the Board on the same. With the
increased global concerns around security,
the Board also delegated responsibility for
overseeing the Group’s security activities
to the Committee, which resulted in a major
review of the Group’s security policy.
The Committee’s written terms of reference
are reviewed annually and are available
on the Company’s website.
Activities during 2015
The Committee devoted most time and
resources to two Board priorities, namely
the appointment of at least one additional
independent NED and the need to finalise
the Group’s long-term succession plan
for the Board and management, with
positive results.
Committee members
John Malcolm (Committee Chairman and
Non-Executive Director)
John Kennedy (Executive Chairman)
Ellis Armstrong
(Senior Independent Director)
Mel Fitzgerald (Non-Executive Director)
Debra Valentine (Non-Executive Director)
Meeting attendance
Committee member
John Malcolm
(Chairman)
John Kennedy
Ellis Armstrong
Mel Fitzgerald
Debra Valentine
No. of
meetings
attended
No. of
meetings
eligible
d
n
e
t
t
A
d
n
e
t
t
A
d
n
e
t
t
A
d
n
e
t
t
A
d
n
e
t
t
A
7
6
7
2
2
7
7
7
2
2
y
r
a
D
i
y
r
a
D
i
y
r
a
D
i
y
r
a
D
i
y
r
a
D
i
Independence on the Board was greatly
strengthened with the arrival of Mel
Fitzgerald and Debra Valentine, both of
whom became independent NEDs. Both
individuals are highly experienced in their
own fields and bring complementary skill
sets to the Board which were welcomed
following the departures of Peter
Whitbread and Michael Press.
With these changes, the Committee
reviewed the composition of the Board
Committees as a result of the increased
number of independent NEDs. In October
2015, the Board (on the recommendation
of the Committee) reconstituted each
Committee with at least three members,
which reduces the risk of a lack of quorum.
Following a review of benchmark external
candidates, the Committee was able to
recommend the promotion of Tony Wright
to the role of CFO and Executive Director
and of Niall O’Connell to the position of
Chief Operating Officer, which the Board
approved. This is the first chief officer
position for each of these individuals
but they are experienced senior
managers and have had the benefit
of working several years within the
Group. The Committee anticipates that
Mr Wright and Mr O’Connell have the
potential to hold these roles for the
long term, helping to ensure stability
at the executive management level.
Lamprell plc Annual Report and Accounts 2015 Corporate governance: Nomination & Governance Committee Report
49
With regard to the search for a new CEO,
the Committee has made use of Korn Ferry
and Maxwell Drummond, two executive
recruitment specialist firms, because of
their strong profiles in the industry, proven
assessment processes and broad contact
networks from which to source candidates.
Save as disclosed, these companies had
no other connection with the Company.
The Committee, and the Board as a whole,
recognise the significance of ensuring that
the candidate has the necessary skill set
and experience to lead the Group through
the current tough market environment and
grow the business in the coming years.
For this reason, the CEO recruitment
process was the highest priority for the
Committee during 2H 2015 and followed
a defined path including the identification
of candidates on long- and short-lists
followed by interviews with a number of
leading candidates for the role. As at the
time of publication, the replacement CEO
with the required credentials has not yet
been identified and so the search process
is continuing. The Company will make
further announcements once the candidate
is identified.
Leadership succession planning
The Board considers succession planning
and internal talent management to be
significant for delivery of the strategy.
As part of the development process, the
Board implemented formal, documented
assessment and development programmes
for Tony Wright and Niall O’Connell as part
of their promotion processes. This helped
the Board to assess their capabilities and
competencies prior to their appointments
and also ensures that they will be properly
developed in the coming years to fulfil
their more senior roles within the Group.
The Committee received regular feedback
from the VP of HR who administers the
programme on behalf of the Board.
Looking at the broader management
team, the Committee continued with the
succession planning exercise initiated in
2014 to evaluate the leadership team’s
critical competencies and retention risks.
The Committee continued to oversee that
process and received regular feedback
from management on talent development
and training needs for the wider team.
The Committee considers that the Company
has made considerable progress during
2015 in strengthening effectiveness and
depth of the senior management team and
governance structures at Lamprell.
Diversity policy
Noting the benefits of diversity, the Board
implemented a diversity policy which
included the recruitment of a minimum
of one female Director by the end of 2016.
During the search process for independent
NEDs, the Committee identified a number
of highly qualified candidates which
included Debra Valentine who joined
the Board as a NED with effect from
1 September 2015. This satisfied the goal
well in advance of the proposed deadline
but, more significantly, provides a broader
range of competencies on the Board
with Ms Valentine’s experience working
as general counsel for a leading global
enterprise in the extractive industries
page 37.
Within the wider management level,
there is broader diversity of ethnicity and
backgrounds.
Service agreements and letters
of appointment
Executive Directors are employed
under Directors’ Service Contracts with
termination notice periods of not more than
12 months.
Non-Executive Directors are engaged
pursuant to letters of appointment which
do not have fixed terms but they are
subject to re-election by the Company’s
shareholders at intervals of not more
than three years. All existing Directors
have been elected or re-elected by the
shareholders within the last year and new
Directors will be proposed for election by
the shareholders at the 2016 AGM.
Board expertise
Oil & gas markets
70%
Financial
28%
Middle East
28%
Fabrication
operations
28%
Public company
boards
14%
Risk
management
28%
Legal
14%
Employee gender split
Management 2015
Employee gender split
Management 2015
Management 2014
Management 2014
8%
10%
92%
90%
Female
Male
50 Corporate governance: Audit & Risk Committee Report
AUDIT & RISK
COMMITTEE REPORT
The Committee has been
working closely with
management to provide
the necessary oversight on
significant judgements and
on enterprise risks, to ensure
that the financial statements
are fair, balanced and
understandable.
Ellis Armstrong, Committee Chairman
Committee attendance
Throughout 2015, membership of the
Committee was comprised solely of
independent NEDs. As a “smaller company”
under the Code, the Committee needs
to only have two members but the Board
determined that it was in the best interests
for the Committee to have three members
and so the Committee was pleased to
welcome Mel Fitzgerald in October 2015.
Ellis Armstrong has relevant financial
experience for the purposes of the Code.
In combination, these points ensured
the appropriate balance of financial and
industry experience to assess the matters
presented to the Committee.
Aside from the members, the Company
Secretary and the Group’s CFO are typically
invited to attend the meetings. In addition,
the external and internal auditors are invited
to meetings at key times during the year.
On occasion, other Board members and
managers attend by invitation.
Remit of the Committee
The Committee has primary responsibility
for overseeing the integrity of all of the
Company’s announcements relating to its
financial performance, including its financial
results
matters relating to the terms of appointment
for, performance and independence of
the Company’s external auditors. The
Committee advises the Board on whether
page 20, and for considering all
the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable.
The Committee also oversees the
Company’s risk management system
page 16 as well as its internal control
systems, and monitors the effectiveness
of such systems particularly against
potential ethical or fraudulent activities.
This includes assessment of the
whistleblowing hotline activities.
Committee members
Ellis Armstrong
(Committee Chairman and Senior
Independent Director)
John Malcolm (Non-Executive Director)
Mel Fitzgerald (Non-Executive Director)
The Committee’s written terms of reference
are available on the Company’s website.
Meeting attendance
Committee member
Ellis Armstrong
(Chairman)
John Malcolm
Mel Fitzgerald
Michael Press
No. of
meetings
attended
No. of
meetings
eligible
d
n
e
t
t
A
d
n
e
t
t
A
d
n
e
t
t
A
d
n
e
t
t
A
6
3
2
3
6
3
2
3
y
r
a
D
i
y
r
a
D
i
y
r
a
D
i
y
r
a
D
i
1st line of defence
Executive
Committee
Internal controls
and annual
self-assessments
Internal policies
and training
2nd line of defence
Financial control
Health and safety Technology
Risk
management
Environment
Legal
3rd line of defence
Audit & Risk Committee
Monitors the integrity of the Company’s
financial statements and reviews financial and
regulatory compliance and controls
Lamprell plc Annual Report and Accounts 2015 Corporate governance: Audit & Risk Committee Report
51
Activities during 2015
Significant judgements in 2015
The Committee’s main activities during 2015
were as follows:
»
reviewing the year-end/interim financial
statements for the Company including
ongoing risks and opportunities
The Committee considered the significant
judgements below during 2015. The
Committee was satisfied that the
judgements made by management were
reasonable and that appropriate disclosures
have been included in the accounts.
» considering the financial aspects of
page 14
the Company’s strategy
including the impact of the market
downturn
» evaluating the external auditor’s
independence, objectivity and
their effectiveness
» overseeing the audit tender process
page 52
» assessing the Group’s enterprise risk
management systems and how risks are
identified and mitigated
page 16
»
reviewing the internal audit reports and
the 2016 audit plan
» ongoing assessment of the control
environment and systems
» analysis by PricewaterhouseCoopers
(“PwC”) of the Group’s IT systems
and controls
»
reporting on the whistleblowing
statistics and reported cases
External auditor – activities
and performance
PwC have been the Company’s auditors
since listing in 2006. During 2015, PwC
presented to the Committee on various
matters (including their audit report on the
2014 financial results) on three occasions.
PwC also provided the Committee with
updates on changes to accounting,
regulatory and corporate governance laws
and regulations that impact the Company.
The Company’s Policy on Auditor
Independence, which is available on the
Group’s website, is designed to safeguard
the objectivity of our external auditors and
to ensure the independence of the audit is
not compromised. This Policy was reviewed
in detail by the Committee in 2015 and then
re-issued after Board approval.
Under the policy, all audit-related services
or non-audit services must receive specific
pre-approval of the Audit & Risk Committee
if the total annual fee for all such services
exceeds 50% of the sum of the annual fees
for audit services. Any and all audit-related
services or non-audit services in excess
of this amount must be expressly pre-
approved by the Audit & Risk Committee.
Further, in respect of all such other
services, a tender process is required
for any project or scope of work which is
anticipated to generate fees in excess of
USD 250,000. Accordingly, the auditor may,
under certain conditions, be engaged to
undertake non-audit services provided
that it does not compromise the integrity of
their audit work. However, it also sets out
services that the auditor is prohibited from
undertaking under any circumstances and
there was no breach of the policy.
In 2015, PwC provided non-audit services
with a total value of USD 101,014 (2014:
USD 872,000) against an annual audit
fee including Group audit fees with a
total value of USD 568,061 (2014: USD
663,000). This represents a significant
improvement in the balance between audit
and non-audit services over previous
years and has occurred as a result of the
drive by the Committee and management
to reduce the non-audit services being
performed by PwC.
The majority of the non-audit services
performed by PwC related to use of PwC
for in-country tax compliance services.
Significant judgements in 2015
Significant judgements considered by the Committee
Views/actions of the Committee with respect to significant judgements
Impact of the disposal of the non-core service businesses on the financial
statements
Review of provisions
Revenue recognition and estimated cost to complete on major projects
Segmental reporting
The Group completed the disposal of one non-core service business in
1H 2015. The Committee received summaries of the accounting areas such
as the valuation of intangible assets, any gains or losses on disposal and
any subsequent fair value adjustments made.
At each meeting, the Committee evaluated management’s report on
material provisions taken in respect of matters including doubtful debts,
contract accruals, project risks and warranty issues. The adequacy
and appropriateness of these provisions and disclosures required were
discussed and challenged.
The Committee reviewed the reasonableness of judgements made
regarding the cost to complete estimate, recognition of variation orders
and adequacy of contingency provisions to mitigate contract specific
risks. This was discussed with management and audited by internal audit
to ensure the operating effectiveness of internal controls. The Committee
satisfied itself that the Company’s financial statements had been prepared
on the basis of the accounting policy and noted that the external auditors
had audited the methodology on that basis.
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker at the reporting
date, namely the Executive Directors. With effect from 1 January 2015 the
business was reorganised into business units on the basis of services
rendered. Segment comparatives are restated to reflect the organisational
changes on the basis of the geographic location from where the services
are rendered. The Committee reviewed the appropriateness of this segment
reporting and were satisfied that this is consistent with the reporting
structure for the Group.
52 Corporate governance: Audit & Risk Committee Report
External audit tender process for 2016
External audit tender process
1. Audit & Risk Committee (ARC)
directs management to prepare
RFQ for external audit tender to five
audit firms
2. Initial review of
written submissions
by management
and ARC
3. Shortlist of four
audit firms
presented to ARC
4. ARC makes
recommendation
to Board
5. Board decides
on appointment of
Deloitte LLP as
external auditors
Performance and effectiveness of the
external auditor
Under the Committee’s terms of reference,
it assesses the auditor’s independence,
performance and effectiveness at least on
an annual basis, placing reliance on self-
assessment by PwC of its performance,
on feedback from certain senior managers
that work closely alongside the auditors
including the CFO and the Company
Secretary, and on its own evaluation of
PwC’s services based on the results of its
audit work and the challenges presented to
the views of the management team.
Given these incremental benefits of
PwC’s involvement and the oversight
by the Board, the Committee considers
that the objectivity and independence of
the external auditor were safeguarded
throughout the financial year. The
Committee also determined that PwC
was effective in providing its services
to the Group.
Auditor tender process for 2015
The Code provides that a listed company
should put its external audit contract out
to public tender at least every ten years.
As noted in the Company’s 2014 Annual
Report, the Committee decided that it was
appropriate and timely to re-tender for the
external audit services during 2015.
The Committee led the audit tender
process with the assistance of the CFO
and the Company Secretary. Five audit
firms – PwC as incumbent, Ernst & Young,
Grant Thornton, Deloitte and KPMG –
were invited to submit written proposals
to act as the Company’s external auditor,
followed by an initial assessment of the
quality and detail of these proposals.
A shortlist of four audit firms was then
asked to make a detailed presentation to
the Committee and to answer questions
about their proposals. The Committee then
assessed the presentations and credentials
for the shortlisted firms and made a
recommendation for the appointment of
Deloitte LLP as the external auditor for the
Company, which the Board approved.
Deloitte LLP has expressed its willingness
to be appointed and act as external auditor
and a resolution to appoint Deloitte LLP will
be proposed at the forthcoming 2016 AGM
for their services in respect of the 2016
financial year.
Interaction with internal auditors
The Company has a well-established and
embedded internal audit (IA) function and
the Head of IA presents to the Committee
at least on a bi-annual basis, providing
updates and analysis for the internal audits,
and submitting a proposal for the internal
audits for the subsequent year.
Aside from leading the annual control
self-assessment exercises that have
been completed during the year, the
IA function conducted the following audits
during 2015:
» Analysis of implementation of
Project Evolution
» Payroll Management
» Accounts Receivable Management
» Surprise Cash Count
» Service level agreement with key
service providers
» Procurement and Supply Chain
Management
» Equipment Hire Process
» Project Management – New Builds
» Project Management –
Offshore/Onshore
There has been close interaction between
the IA and Group risk functions in order to
formulate the 2016 planned internal audits
and necessary amendments to the IA plan
may be made during the year, subject to
the Committee’s approval, in instances
where the level of risk increases, or
decreases significantly, or circumstances
within the Group change.
As a matter of best practice the Committee
meets with the internal auditor without
executives present to discuss any sensitive
matters or concerns. Equally and much in
the same way as with the external auditors,
the Committee reviews the performance
and effectiveness of the IA function and
remains satisfied of the effectiveness of
the IA function.
Enterprise risk management
Each of the Directors acknowledges
and accepts that the Board as a whole
take responsibility for risk management
page 16, in line with the Code
requirements. The Board has delegated
the administration and monitoring of the
effectiveness of the Group’s internal
control and risk management systems
to the Committee. However, the day-to-
day responsibility for developing and
implementing the internal control and risk
management procedures resides with
the executive management team which
then reports on risk to the Committee.
In 2015, management presented twice
to the Committee, once in May and then
again in December. The purpose of such
presentations was to ensure that the
Committee, and therefore the Board, has
appropriate oversight of enterprise risks
and their potential impact on the business,
with a particular focus on the risks that are
specific to the Group. A key emerging risk
that received particular attention from the
Committee was the heightened security
threats from terrorism.
This two way disclosure and monitoring
system for enterprise risks facing the
Group provides the Directors with
reasonable (but not absolute) assurance
against material misstatements and losses.
The structure of the risk management
Lamprell plc Annual Report and Accounts 2015 Corporate governance: Audit & Risk Committee Report
53
Managing risk appropriately during 2015
At the Board level:
At the executive management level:
At the project/operational level:
Audit & Risk Committee conducts an annual
review of the effectiveness of the systems of
financial, operational and compliance controls
and risk management systems
The Board regularly receives comprehensive
written reports from the CEO and the CFO on the
strategic and financial risks within the business
respectively
Presentation by management to the Audit &
Risk Committee on the status of the Group’s risk
management systems
Meetings of the Risk Review Panel every other
month – forum for management oversight of
project and department risks
Project managers are directly responsible
for identification and ensuring that risks are
captured in the risk database
Business unit/department heads are responsible
for the identification, evaluation and mitigation of
risks within their businesses/departments
As project risk owners, project managers
implement the risk mitigation plans within their
respective projects
The Group Risk Manager supports management
on all risk management activities
Project managers report on project risks a
monthly basis to the Group Risk Manager
Bi-annual report identifying the major, current
risks and opportunities within the business is
submitted by senior management to the Audit
& Risk Committee
Creation of an online, interactive risk database
which is used to capture all project and
department risks and provide reports on risk
trends and severity/likelihood of risk
Internal Audit ensures application and
consistency of Group’s risk policies and
procedures by undertaking internal audits
mechanisms as well as the results of this
system can be seen in the information
relating to the principal risks and
uncertainties faced by the Group, together
pages 16 to 19.
with the mitigating factors
Risk management is being embedded
into the daily working life of Lamprell
employees and how they complete
projects, aside from the enterprise risk
management being overseen by the
Committee. This is being done with a
view to identifying potential hazards and
risks on a project at an early stage and
taking mitigating actions accordingly.
Risk is assessed formally at the business
unit level through risk workshops and
via the maintenance of project and
department risk registers. In addition,
a more comprehensive and rigorous
bid authorisation model is being used
by management bidding committees to
evaluate proposals and cost breakdowns
when bidding for new work.
Internal controls framework
The Company has a system of internal
controls based around the following key
features:
» a strategy defined and overseen by
the Board
» financial planning including annual
budgets, quarterly reviews and three
year forecasting
» oversight and approval of projects
and/or contract awards either through
executive management or the Board
»
implementation and use of an
integrated ERP system, linking the
various business functions
» policies and procedures which
define the Group’s standards of
business including a schedule of
matters reserved for the Board,
a clear organisation structure and
a delegation of authority matrix
»
the Company’s Business Code of
Conduct framed according to the
Group’s core values
There are also various policies and
procedures which embed regulatory
requirements into the daily operations of
the Group such as the anti-bribery and
corruption policy, the share dealing code,
the insider dealing and market abuse
policy and the whistleblowing policy.
There is a multi-lingual, secure
whistleblowing hotline which was set up
to allow staff members to report ethical
breaches, irregularities or simply concerns
on a confidential basis without any fear of
recrimination. They are all key elements
of an internal control system which is
designed to assist in the achievement
of the Group’s business objectives. The
Group also launched an e-learning module
on the Company’s Business Code of
Conduct in 2015 which was compulsory
for administration staff and to date over
97% of such employees have completed
the training. This is available in five
languages, namely English, Arabic, Hindi,
Malayalam and Tagalog, to help ensure
greater completion. This training module
is expected to be rolled out to the yard
workforce, which does not typically have
access to computers, in due course.
The Committee undertakes an annual
review of the effectiveness of the systems
of internal control including financial,
operational and compliance controls
and risk management systems. This is
performed in collaboration with both
the internal and external auditors and,
where weaknesses have been identified,
the management team was tasked with
implementing further safeguards which
will then be re-tested by the audit teams.
The Committee reports on its monitoring
and observations to the Board at least
annually. The Directors are satisfied that, as
a result of the systems and the oversight
functions, the internal control environment
is operating effectively.
54 Corporate governance: Directors’ Remuneration Report
DIRECTORS’
REMUNERATION REPORT
The Committee has had
to respond to challenging
market conditions as well as
changes within Lamprell and
has successfully achieved a
number of key milestones,
notably in its succession
planning at the senior
management level.
Dear Shareholders,
On behalf of the Board, I am pleased
to introduce the Directors’ Remuneration
Report for the year ended 31 December
2015.
Performance and reward in 2015
Despite difficult market conditions
throughout 2015, the Company successfully
delivered net profit in line with the
performance target but fell short of the
threshold target on new business awards.
Along with performance against personal
page 65
goals (which are detailed on
of this report) and the impact of the non-
operational fatality in the Group’s Kurdistan
operations
key factors driving the Company’s bonus
payment of 44.6% of annual base salary
to the CEO.
page 31, these were the
The Company announced on 14 August
2015 that Mr Moffat would retire from his
role as CEO effective 30 June 2016. The
search for a new CEO is ongoing. Also on
14 August 2015, the Company announced
that John Kennedy had agreed to take up
the role of Executive Chairman until the
next AGM and Tony Wright had been
promoted to the position of Chief Financial
Officer whereupon he also became an
Executive Director of the Board. Details
of Mr Kennedy’s and Mr Wright’s
remuneration are detailed later in this
report. Mr Kennedy’s appointment and
remuneration as Executive Chairman
are very much focused around enabling
the Company to drive shareholder value
primarily through key strategic initiatives.
to secure a replacement CEO of the
calibre required to move the Company
to the next level of its development
and, in turn, drive shareholder value.
Long-term incentive awards were granted
in April 2015, in accordance with the rules
of the performance share plan, details of
which are given on
no long-term incentive awards vesting
in 2015.
page 57. There were
The Committee is satisfied that the revised
Remuneration Policy will ensure that we
can continue to recruit and retain the right
calibre of senior management to maximise
shareholder value and deliver sustainable
growth over the longer term.
Remuneration policy for 2016
pages 55 to 60. We believe that
The proposed Remuneration Policy
to take effect from the 2016 AGM is set
out on
our Remuneration Policy must adapt
to the challenging market conditions
and continue to attract and reward
executive management for delivering
strong performance. As such, the policy
contains two proposed revisions that
will be submitted for approval at the
2016 AGM, specifically in relation to the
long-term incentive plans. These are
highlighted in the introduction to the
page 56. As a result, the
policy on
Board is recommending two resolutions
to be submitted for approval by the
shareholders at the AGM on 15 May 2016,
one to approve the revised Remuneration
Policy and the second to approve the
changes to the long-term incentive
policy. The Committee considers that the
revisions to the policy may be necessary
We shall be seeking your support for
each part of this report at the forthcoming
AGM on 15 May 2016. On behalf of the
Committee, I recommend this Remuneration
Report to you and I hope that you will find it
clear, concise and understandable.
John Malcolm
Chairman of the Remuneration
Committee
22 March 2016
Committee members
John Malcolm (Committee Chairman and
Non-Executive Director)
Ellis Armstrong
(Senior Independent Director)
Debra Valentine (Non-Executive Director)
Lamprell plc Annual Report and Accounts 2015 Remuneration Policy
This part of the report sets out the
remuneration policy for the Company and
has been prepared in accordance with
the Large and Medium-sized Companies
and Groups (Accounts and Reports)
(Amendment) Regulations 2013. The
Remuneration Policy for the Company has
been developed taking into account the
principles of the Code and the views of
our major shareholders and describes
the policy to be applied from 2016
onwards. The Policy Report will be put
to a binding shareholder vote at the 2016
AGM and the policy will take formal effect
from 15 May 2016.
Policy overview
The Committee is responsible, on behalf
of the Board, for establishing appropriate
remuneration arrangements for the
Executive Directors and other senior
management in the Group.
Our remuneration policy aims to drive
continuous improvements in business
performance and maximise shareholder
value by offering remuneration packages
that are appropriately balanced and are
designed to enable the recruitment, retention
and motivation of talented Executive
Directors and senior management.
In setting the remuneration policy, the
Committee considers the remuneration
policy and levels of remuneration for the
wider employee population, compensation
policies and practices in the UAE and also
in the wider market. The Committee will
ensure that the arrangements are in the
best interests of both the Group and its
shareholders, by taking into account the
following general principles:
Corporate governance: Directors’ Remuneration Report
55
» To attract, retain and motivate the
Consideration of shareholder views
The Company is committed to maintaining
good communications with investors
and in particular around compensation
matters. The Committee also considers
the AGM to be an opportunity to meet and
communicate with investors and consider
shareholder feedback received as a result
of the AGM each year and guidance from
shareholder representative bodies more
generally. This feedback, together with any
additional feedback received from time
to time, is then considered as part of the
Company’s annual review of remuneration
policy. The Committee will also seek to
engage directly with major shareholders
and their representative bodies should any
material changes be made to the Directors’
Remuneration Policy. Details of the votes
cast for and against the resolution to
approve last year’s Directors’ Remuneration
Report are set out in the Annual Report on
Remuneration.
best talent without paying more than
is necessary.
» To ensure total remuneration packages
are simple and fair in design and valued
by participants.
» To ensure that the fixed element of
remuneration is determined broadly
in line with market rates, taking
account of individual performance,
responsibilities and experience; and
that a significant proportion of the
total remuneration package is linked to
performance-related incentives.
» To balance performance pay
between the achievement of
financial performance objectives and
delivering sustainable stock market
outperformance; creating a clear line of
sight between performance and reward
and providing a focus on sustained
improvements in profitability and returns.
» To calibrate carefully all performance
metrics and associated sliding scale
ranges to ensure that performance
is incrementally rewarded through
stretching targets and that executives
are not inadvertently incentivised to take
inappropriate business risks.
» To maintain the highest possible health
and safety standards where any fatality
that takes place in a facility operated by
the Company or any of its subsidiaries
may result in discretionary withdrawal or
reduction of incentive eligibility.
» To provide a significant proportion
of performance linked pay in shares
allowing senior management to build
significant shareholding in the business
and therefore aligning management
with shareholders’ interests and the
Group’s performance.
» To maintain appropriate governance and
risk management through the application
of holding periods and clawback
provisions on incentive plan awards.
56 Corporate governance: Directors’ Remuneration Report
Summary of the Directors’ remuneration policy
For ease of reference, set out below are the proposed changes to the policy for 2016 onwards. These relate only to the Long-Term Incentive
Plan component.
Component
Previous policy
Proposed policy from 2016 onwards
Normal maximum
opportunity
100% of base salary for all
Executive Directors
120% for CEO
100% for other Executive Directors
Exceptional
maximum
opportunity
100% of base salary
150% only in exceptional circumstances
The following table sets out the key aspects of the Directors’ remuneration policy1.
Element of pay
Purpose and link to strategy Operation
Maximum opportunity
Performance framework
Base salary
To attract, retain and
motivate talented
individuals who are critical
to the Group’s success
Reviewed annually by
the Committee or, if
appropriate, in the event of
a change in an individual’s
position or responsibilities
Annual bonus
To reward the achievement
of the Group’s annual
financial and non-financial
objectives linked to the
delivery of the Group’s
strategic plan
Base salary levels set by
reference to competitive
market rates, taking
into account level of
responsibility, individual
performance, skills
and experience, Group
performance and the
pay and conditions in
the workforce
Normally payable in cash
Performance targets are
approved annually by the
Committee
The Committee has
discretion to override
the formulaic outturn of the
bonus and determine the
appropriate level of bonus
payable if it believes
exceptional circumstances
warrant it or, if it is
deemed necessary based
on safety, environmental,
social and governance
issues
Clawback provisions apply
for overpayments due to
misstatement or error and
other circumstances
There is no prescribed
minimum or maximum
annual increase. The
Committee is guided by
market position and the
average increase for the
workforce generally but on
occasions may recognise
an increase in certain
circumstances, such
as assumed additional
responsibility, or an
increase in the scale or
scope of the role
Maximum opportunity of
100% for all Executive
Directors
Company performance
appraisal process
At least two thirds of
the annual bonus will
be based on Group
financial performance
or other key business
metrics with the remainder
dependent on the
achievement of individual
performance objectives
to provide a rounded
assessment of the Group
and management’s
performance
The financial metrics
incorporate an appropriate
sliding scale around a
challenging target
1. A description of how the Company intends to implement the above policy is set out in the Annual Report on Remuneration
page 61.
Lamprell plc Annual Report and Accounts 2015 Corporate governance: Directors’ Remuneration Report
57
Element of pay
Purpose and link to strategy Operation
Maximum opportunity
Performance framework
Long-Term
Incentive Plan
(LTIP)
To balance performance
pay between the
achievement of strong
financial performance
and delivering sustainable
stock market out-
performance
To encourage share
ownership and alignment
with shareholder interests
End of service
gratuity
To offer executives a
retirement benefit as
required under UAE
Labour Law
Benefits and
allowances
To offer a market-
competitive level of
benefits to ensure the
Executive Directors’
well-being and provide
additional allowances
in line with local market
practice
Normal maximum
opportunity of 120%
of base salary for the
CEO and 100% of base
salary for other Executive
Directors
Exceptional maximum
opportunity of 150% of
base salary
Performance is assessed
against challenging
independent financial
metrics that may include
relative or absolute
total shareholder return
(“TSR”), cumulative
EBITDA, end of period
backlog and other equally
challenging metrics
On each element,
between 0 and 20%
of an award will vest
for achieving threshold
performance, increasing
and vesting pro rata at
a further target with full
vesting for achievement
of maximum stretch
performance targets
Company contributions
are limited to two years’
base salary by UAE
Labour Law
None
Actual value of benefits
provided
None
Annual awards of
conditional shares or nil
(or nominal cost) options
(or possibly cash) with
vesting dependent on
the achievement of
performance conditions
over a three-year period
An additional mandatory
holding period of two
years will apply to all
vested awards granted
from 2016 onwards (net
of tax)
Performance targets and
metrics are approved
annually by the Committee
The Committee has
discretion to scale back
(potentially to zero) the
vesting of any awards if it
believes the results are not
an accurate reflection of
the Company’s underlying
performance
Clawback provisions apply
for overpayments due to
misstatement or error and
other circumstances
Dividends that accrue
during the vesting period
may be paid in cash or
shares at the time of
vesting, to the extent that
shares vest
The Company has no
Group-wide pension
scheme
A lump sum cash payment
is awarded following end
of service, based on the
length of service and final
base salary in accordance
with UAE Labour Law
Current benefits include
a housing allowance,
private medical/life
insurance, use of a
company car and driver,
fuel card, annual leave air
fares, club membership
and utility expenses
58 Corporate governance: Directors’ Remuneration Report
Element of pay
Purpose and link to strategy Operation
Maximum opportunity
Performance framework
Share ownership
guidelines
To further strengthen
the long-term alignment
between executives and
shareholders
Non-Executive
Directors’ (“NEDs”)
fees
Set to attract, retain
and motivate talented
individuals through the
provision of market
competitive fees
Executive Directors are
required to retain the net
proceeds of vested share
awards which vest under
the Group’s discretionary
share plans
Reviewed periodically by
the Executive Directors
and Chairman (except
for his own fee) or, if
appropriate, in the
event of a change in an
individual’s position or
responsibilities
Fee levels set by
reference to market rates,
taking into account the
individual’s experience,
responsibility, time and
travel commitments
None
Expected to achieve 150%
of base salary for the CEO
and 125% of base salary
for the other Executive
Directors within five years
Board Evaluation Process
As for the Executive
Directors there is no
prescribed minimum or
maximum annual increase.
The Executive Directors
and Chairman are guided
by market position but on
occasions may recognise
an increase in certain
circumstances such
as assumed additional
responsibility or an
increase in the scale or
scope of the role
Performance metric selection
The annual bonus is predominantly based
on key financial performance indicators,
to reflect how successful the Group has
been in managing its operations. The
balance is determined on performance
against individually determined strategic
objectives and annual operational targets,
including HSE.
The LTIP performance measures reward
significant long-term returns to shareholders
and long-term financial growth. Targets
take account of internal strategic planning
and external market expectations for the
Company and are set appropriate to the
economic outlook and risk factors prevailing
at the time, ensuring that such targets
remain challenging in the circumstances,
whilst remaining realistic enough to
motivate and incentivise management.
Only modest rewards are available for
achieving threshold performance with
maximum rewards requiring substantial
outperformance of challenging strategic
plans approved at the start of each year.
Discretion
The Committee will operate the incentive
plans in accordance with their respective
rules, the UK Listing Rules and the HMRC
rules where relevant. The Committee,
consistent with market practice, retains
discretion over a number of areas relating to
the operation and administration of certain
plan rules. These include (but are not limited
to) the following:
» Who participates;
» The timing of the grant of award and/or
payment;
For the avoidance of doubt, in approving
this Directors’ Remuneration Policy, authority
is given to the Company to honour any
commitments entered into with current or
former directors (such as, the vesting or
exercise of past share awards).
» The size of an award (up to plan/policy
limits) and/or a payment;
Relative to pay and employment
conditions in the Group
» The result indicated by the relative
TSR performance condition may be
scaled back (potentially to zero) in the
event that the Committee considers
that financial performance has been
unsatisfactory and/or the outcome has
been distorted due to the TSR for the
Company or any comparator company
being considered abnormal;
» Discretion relating to the measurement
of performance in the event of a change
of control or reconstruction;
» Determination of a good leaver (in
addition to any specified categories)
for incentive plan purposes and the
treatment of leavers;
» Adjustments required in certain
circumstances (e.g. rights issues,
corporate restructuring and special
dividends); and
» The ability to adjust existing performance
conditions for exceptional events so that
they can still fulfil their original purpose.
The Committee takes account of
remuneration levels offered to the senior
management team in the Group as well as
the awards affecting the wider employee
population. When considering the Executive
Directors’ remuneration structure and levels,
the Committee reviews base salary and
incentive arrangements for the management
team, to ensure that there is a coherent
approach across the Group. Employees
may be eligible to participate in an annual
bonus arrangement and receive awards
under the LTIP, Executive Share Option Plan
(“ESOP”), Retention Share Plan (“RSP”) or
Free Share Plan (“FSP”). Opportunities and
performance metrics may vary by workforce
level with specific business metrics
incorporated where possible.
While the Company sees communication
among its employees as a key priority it
does not formally consult with employees
in respect of the design of the executive
remuneration policy, although the
Committee will keep this under review.
Lamprell plc Annual Report and Accounts 2015 Corporate governance: Directors’ Remuneration Report
59
Remuneration scenarios for the
Executive Directors
The charts below show an estimate of the
potential range of remuneration payable for
the Executive Directors in 2016 at different
levels of performance. The charts highlight
that the performance-related elements
of the package comprise a significant
portion of the Executive Directors’ total
remuneration at maximum performance.
Executive Chairman1
Total remuneration USD’000
Maximum
50%
50%
USD 1,440
On-target
55%
45%
USD 1,318
Minimum
100%
USD 720
0
500
1,000
1,500
2,000
2,500
Chief Executive Officer
Total remuneration USD’000
Maximum
40%
30%
30%
USD 2,475
On-target
52%
32%
16%
USD 1,872
Minimum
100%
USD 969
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Chief Financial Officer
Total remuneration USD’000
Maximum
50%
25%
25%
USD 1,390
On-target
62% 25%
13%
USD 1,111
Minimum
100%
USD 694
0
500
1,000
1,500
2,000
Total fixed pay
Annual bonus
Long-Term Incentive Plan
Assumptions:
1. The Executive Chairman’s remuneration is expressed
on an annualised basis for ease of presentation and
will be pro-rated according to his contract.
2. Base salary levels applying on 1 January 2016.
3. Benefits are estimated, based on the annualised
value for the year ended 31 December 2015.
4. For the purpose of the above charts, the end of
service gratuity accrual is excluded.
5. Minimum performance assumes no award is earned
under the annual bonus plan and no vesting is
achieved under the LTIP; at on-target, typically 80%
of the maximum is earned under annual bonus plan
and typically 40% vesting is achieved under the LTIP;
and at maximum full vesting under both plans.
6. As per the legislation, share price movement
and dividend accrual have been excluded from the
above analysis.
Directors’ recruitment and promotions
The Committee takes into account the need
to attract, retain and motivate Executive
Directors and senior managers of the
highest calibre, while at the same time
ensuring a close alignment between the
interests of shareholders and management.
If a new Executive Director was to be
appointed, the Committee would seek
to align the remuneration package with
the remuneration policy approved by
shareholders, including discretion to award
an annual bonus up to 100% of base salary
and an LTIP award up to 120% for the CEO
and 100% for other Executive Directors, with
discretion, in exceptional circumstances,
to grant an award of up to 150% of base
salary. Flexibility would be retained to
set base salaries at the level necessary
to facilitate the hiring of candidates of
appropriate calibre in external markets and
to make awards or payments in respect of
deferred remuneration forfeited on leaving a
previous employer. In terms of remuneration
to compensate forfeited awards, the
Committee would look to replicate the
arrangements being forfeited as closely
as possible and, in doing so, would take
account of relevant factors including the
nature of the remuneration, performance
conditions and the time over which they
would have vested or been paid.
In exceptional circumstances and only
on recruitment (e.g. to buyout the value
of awards forfeited) the Committee may
also award share options of up to 150%
of base salary under the ESOP. Options
will vest dependent on the achievement
of agreed performance and/or retention
conditions over a three-year period and will
be exercisable up to the 10th anniversary
of the date of grant. Dividends that accrue
during the vesting period may be paid in
cash or shares at the time of vesting, to the
extent that the options become exercisable.
For an internal appointment, any incentive
amount awarded in respect of a prior role
may be allowed to vest on its original terms,
or adjusted as relevant to take into account
the appointment. Any other ongoing
remuneration obligations existing prior to
appointment may continue.
The Committee may also agree that the
Company will meet certain relocation and
incidental expenses as appropriate.
For the appointment of a new Non-Executive
Chairman or NED, the fee arrangement
would be set in accordance with the
approved remuneration policy at that time.
Directors’ service agreements and
payments for loss of office
The Committee reviews the contractual
terms of the service agreements to ensure
these reflect best practice.
The Group’s policy is that Executive
Directors should be employed on a rolling
term, with a notice period not exceeding 12
months and in the event of early termination,
the Company will not make any payments
beyond its contractual obligations.
The Executive Directors’ service
agreements are terminable on up to
12 months’ notice. In circumstances of
termination on notice, the Committee will
determine an equitable compensation
package, having regard to the particular
circumstances of the case. The Committee
has discretion to require notice to be
worked or to make payment in lieu of notice
or to place the Director on garden leave for
the notice period. In case of payment in lieu
or garden leave, base salary, benefits and
end of service gratuity will be paid for the
period of notice served on garden leave
or paid in lieu. If the Committee believes
it would be in shareholders’ interests, the
Company may elect to make payments in
three separate tranches; 50% within seven
working days of the termination date; 25%
three months after the termination date; and
25% six months after the termination date.
The annual bonus may be payable in
respect of the period of the bonus plan year
worked by the Director; there is no provision
for an amount in lieu of bonus to be payable
for any part of the notice period not worked.
The bonus will be scaled back pro-rata for
the period of the incentive year worked by
the Director and will still be payable at the
normal payment date.
Long-term incentives granted under the
LTIP will be determined by the plan rules
which contain discretionary good leaver
provisions for designated reasons (e.g.
participants who leave early on account
of injury, disability or ill health, a sale of
their employer or business in which they
were employed, or any other reason at
the discretion of the Committee). In these
circumstances a participant’s awards will
not be forfeited on cessation of employment
and instead will vest on the normal vesting
date. In exceptional circumstances, the
Committee may decide that the participant’s
award will vest early on the termination
date. In either case, the extent to which the
awards will vest depends on the extent to
which the performance conditions have
been satisfied and a pro-rata reduction of
the awards will be applied by reference
to the time of cessation (although the
Committee has discretion to disapply
60 Corporate governance: Directors’ Remuneration Report
The table below sets out the details of the
Executive Directors’ service contracts:
The following table shows the effective date
of appointment for each NED:
Director
Date of contract
John William
Kennedy
13 August 2015
James Moffat
25 November 2012
Non-Executive
Director
Date of appointment
John Malcolm1
27 May 2013
Ellis Armstrong1
27 May 2013
13 August 2015
Mel Fitzgerald1
13 August 2015
Antony Robert
William Wright
Debra Valentine1
1 September 2015
1. John Malcolm, Ellis Armstrong, Mel Fitzgerald and
Debra Valentine are considered to be independent
NEDs of the Company.
The service contracts are available for
inspection during normal business hours
at the Company’s registered office, and
available for inspection before and at
the AGM.
Remuneration payments under all Service
Agreements are enforceable only insofar
as they fall within a shareholder-approved
Remuneration Policy.
Non-Executive Directors’ (NEDs) terms
of engagement
The NEDs do not have service contracts
and instead are appointed by letters of
appointment, which are terminable by three
months’ notice on either side. All Directors
are subject to re-election at the AGM of the
Company on a regular basis.
Upon termination or resignation, NEDs are
not entitled to compensation and no fee is
payable in respect of the unexpired portion
of the term of appointment.
Currently, four NEDs are considered to be
independent of the Company.
performance conditions and time pro-rating
if the circumstances warrant it). In the case
of death of the participant, the award will
vest at that time, irrespective of whether or
not any performance conditions have been
satisfied, and the award will not be time
pro-rated.
In respect of legacy options outstanding
under the ESOP, the options will be
determined by the plan rules which contain
discretionary good leaver provisions for
designated reasons (i.e. participants who
leave early on account of injury, disability
or ill health, a sale of their employer or
business in which they were employed
or any other reason at the discretion of
the Board). In these circumstances a
participant’s options will not be forfeited
on cessation of employment but will vest
on the termination date instead. The extent
to which the options become exercisable
depends, unless the Board determines
otherwise, on the extent to which the
performance conditions have been satisfied
up until the termination date or such longer
period as the Board may decide within six
weeks of the grant date. The performance
period will end on the termination date
unless the Board determines otherwise.
In the case of death of a participant, the
option will become exercisable at that
time, irrespective of whether or not any
performance conditions have been satisfied,
and the option will not be time pro-rated.
In the event of a change of control all
unvested awards under the long-term
incentive arrangements would vest, to the
extent that any performance conditions
attached to the relevant awards have been
achieved. The awards will, other than in
exceptional circumstances, be scaled
back pro-rata for the period of the incentive
year worked by the Director (although
the Committee has discretion to disapply
performance conditions and time pro-rating
if the circumstances warrant it).
Lamprell plc Annual Report and Accounts 2015 Corporate governance: Directors’ Remuneration Report
61
DIRECTORS’ ANNUAL REPORT
ON REMUNERATION
This report has been
prepared in accordance
with Part 4 of the Large and
Medium-sized Companies
and Groups (Accounts and
Reports) (Amendment)
Regulations 2013 and
9.8.6R of the UK’s Listing
Rules. The Annual Report
on Remuneration will be put
to an advisory shareholder
vote at the 2016 AGM. The
information on pages 64 to
67 has been audited.
Responsibilities of the Committee
The Committee is responsible for
determining and agreeing with the
Board the policy on Executive Directors’
remuneration, including setting the
over-arching principles, parameters and
governance framework and determining
the initial remuneration package of
each Executive Director. In addition, the
Committee monitors the structure and level
of remuneration for the senior management
team and is aware of pay and conditions
in the workforce generally. The Committee
also ensures full compliance with the UK
Corporate Governance Code in relation to
remuneration. The Committee’s terms of
reference are available for review on the
Company’s website.
Members and activities of the Committee
The members of the Committee throughout
the relevant period were Michael Press
(Chair) (until 13 August 2015), John
Malcolm (member throughout the year
and as Committee Chair with effect from
5 October 2015), Ellis Armstrong (member
as from 5 October 2015) and Debra
Valentine (member as from 5 October
2015). Membership is comprised solely
of independent NEDs. None of the current
Committee members have day-to-day
involvement with the business nor do
they have any personal financial interest
in the matters to be recommended. The
Company Secretary acts as Secretary to the
Committee and the Vice-President, Human
Resources and Administration attends
meetings on a regular basis to present and
provide related support. The number of
formal meetings held and the attendance
by each member is shown in the table
below. The Committee also held informal
discussions as required.
External advice received
During the year, the Committee received
independent advice on remuneration
matters from New Bridge Street (“NBS”),
a trading name of Aon plc. NBS did not
provide other services to the Group during
the year under review and there is no other
connection between NBS and the Company
or the Directors. The Committee also
consulted with the CEO and Chairman but
not in relation to their own remuneration.
NBS is a signatory to the Remuneration
Consultants’ Code of Conduct and adheres
to the Voluntary Code of Conduct in relation
to executive remuneration consulting in
the UK. The Committee has reviewed the
operating processes in place at NBS and
is satisfied that the advice it receives is
objective and independent.
The fees paid to NBS during the year
were £13,300.
Shareholder voting at AGM
At last year’s AGM held on 12 May 2015,
the Directors’ Remuneration Report
received the following votes from
shareholders (see table below).
Implementation of the Remuneration
Policy for 2016
Base salary
In accordance with an agreement made
with shareholders in 2014, the base
salaries of Executive Directors were
frozen until 1 January 2016. In setting the
base salaries for 2016, the Committee
considered external market data, as well as
any increase in base salary for the senior
management team and the workforce
generally, where the average increases
across the Group will be 3% for the general
workforce and 0% for management levels.
In view of the market data and the general
market conditions, the CEO’s base salary
for 2016 will remain the same as 2015.
Upon his appointment as Executive
Chairman effective 13 August 2015, John
Kennedy’s base salary was set relative to
external market data and to the nature and
duration of the appointment.
Upon his promotion to the position of
Chief Financial Officer effective from
13 August 2015, Tony Wright’s base salary
was set relative to external market data, his
experience and on the basis that it would
be subject to review, without commitment,
on 1 October 2016.
Accordingly, base salaries for 2016 are as
follows:
Base salary
from 1 January
2016
2015
%
increase
£
480,000
n/a
n/a
USD 753,000
753,000
0%
USD 410,000
341,281
20%
John
Kennedy
James
Moffat
Tony
Wright1
1. Tony Wright was promoted from Deputy Chief
Financial Officer to Chief Financial Officer effective
13 August 2015.
Meeting attendance
Resolutions held
Committee member
John Malcolm (Chairman)
Ellis Armstrong
Debra Valentine
Michael Press
No. of
meetings
attended
No. of
meetings
eligible
d
n
e
t
t
A
d
n
e
t
t
A
d
n
e
t
t
A
d
n
e
t
t
A
5
2
2
3
5
2
2
3
y
r
a
D
i
y
r
a
D
i
y
r
a
D
i
y
r
a
D
i
Resolution
For
Against
Total votes cast (for and against)
Votes withheld¹
Total votes cast (including withheld votes)
Total number
of votes
% number
of votes
244,470,733
6,546,738
251,017,471
401
251,017,878
97.4
2.6
100
–
–
1. A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes cast ‘For’
and ‘Against’ a resolution.
62 Corporate governance: Directors’ Remuneration Report
awards are expected to be made in
respect of his current appointment.
Relative TSR, cumulative EBITDA and end
of period backlog are considered to be
the most appropriate measures of long-
term performance for the Group, in that
they ensure the Executive Directors are
incentivised and rewarded for the financial
performance of the Group as well as
returning value to shareholders.
Annual bonus for 2016
For 2016 the annual bonus opportunity
will be 100% of base salary for the CEO
and 85% of base salary for the CFO,
payable in cash. 40% of the bonus will be
based on sales, 20% will be based on net
cash, 15% will be based on net profit set
in relation to the Group’s budget and the
remaining 25% will be based on strategic
and/or personal targets, including safety
performance. This structure is intended
to provide a rounded assessment of the
Group and management’s performance
against defined targets which are aligned
with the Group’s strategic objectives.
The sales targets will be within a range
from USD 800m to USD 1.4bn with
associated pay-outs within the range of
20 to 100% of target. The Committee
considers any disclosure of future net
LTIP 2016
profits and cash to be commercially
sensitive, however, full retrospective
disclosure of targets and performance
against them will be disclosed in next
year’s Annual Report on Remuneration.
Clawback provisions will apply to all
bonus pay-outs.
Long-term incentives
Subject to compliance with the Listing
Rules, awards will be made in 2016 and
the maximum LTIP potential will be 120%
of base salary for the CEO and 100% for
the CFO. 50% of the award will be based
on relative TSR (relative to the FTSE World
Oil Equipment & Services Index), 25%
on cumulative EBITDA and 25% on end
of period backlog. In view of the short-
term duration of the Executive Chairman’s
appointment, no long-term incentive
Threshold
Maximum
Performance condition
% vesting
Performance
% vesting
Performance
End measurement point
TSR vs. FTSE World
Oil Equipment &
Services Index
20
Median
Cumulative EBITDA
20
End of period backlog 20
USD 300m
USD 1.2bn
100
100
100
Upper quintile
31 December 2018
USD 360m
USD 1.6bn
31 December 2018
31 December 2018
The awards will be subject to clawback provisions and a mandatory holding restriction of two years beyond vesting will apply to the 2016
awards.
For the sake of completeness, the Company discloses the performance conditions which are attached to the awards of LTIPs in 2014 and
2015, as follows:
LTIP 2014 (following shareholder consultation in mid-2014 as a result of which certain targets were increased)
Performance condition
% vesting
Performance
% vesting
Performance
End measurement point
Threshold
Maximum
TSR vs. FTSE World
Oil Equipment &
Services Index
Cumulative EBITDA
0
0
End of period backlog 20
LTIP 2015
Median
USD 300m
USD 1.0bn
100
100
100
Upper quintile
31 December 2016
USD 400m
USD 1.4bn
31 December 2016
31 December 2016
Threshold
Maximum
Performance condition
% vesting
Performance
% vesting
Performance
End measurement point
TSR vs. FTSE World
Oil Equipment &
Services Index
20
Median
Cumulative EBITDA
20
End of period backlog 20
USD 320m
USD 1.0bn1
100
100
100
Upper quintile
31 December 2017
USD 420m
USD 1.4bn1
31 December 2017
31 December 2017
1. At least 33% of backlog must be derived from non-rig business otherwise vesting will be 50% of the above percentages.
Lamprell plc Annual Report and Accounts 2015 Corporate governance: Directors’ Remuneration Report
63
End of Service Gratuity
As required under UAE Labour Law, the Company contributes to the End of Service Gratuity Fund on behalf of the Executive Directors,
whereby the gratuity shall be 21 days’ base salary for each year of the first five years of employment and 30 days’ base salary for
each additional year of employment thereafter, on the condition that the total gratuity does not exceed two years’ base salary, payable
upon termination of employment. In view of the short-term nature of the appointment, end of service gratuity does not apply to the
Executive Chairman.
Directors’ contracts
Following changes in directors’ appointments during 2015, the following information regarding the service contracts of Executive Directors
should be noted.
Service contract for Executive Chairman
Mr Kennedy was appointed to the position of Executive Chairman on 13 August 2015 and his Service Agreement dated 13 August 2015
is terminable by either party on three months’ notice. Mr Kennedy’s annual base salary is £480,000 and he is eligible to participate in a
bonus arrangement with a maximum opportunity of 100% of base salary earned in the period which will be assessed over the period of his
contract and paid wholly in shares. Mr Kennedy’s award of 292,570 shares is expected to vest upon the earlier of (i) three months after the
end of the executive appointment, and (ii) the Remuneration Committee determining satisfaction of the relevant performance conditions.
Service contract for CFO
As announced on 13 August 2015, aligned with the Company’s stated intention of internal development and succession, Tony Wright
was promoted to the position of Chief Financial Officer from his former role as Deputy CFO with the Group. Mr Wright was appointed
on a Service Agreement dated 13 August 2015 which is terminable by either party giving nine months’ notice until the first anniversary of
Mr Wright’s appointment at which point the agreement will be terminable on six months’ notice. Mr Wright’s annual base salary equates to
USD 410,000 and his participation in the Company’s benefit programmes and incentive plans reflects the Company’s remuneration policy
as set out elsewhere in this report.
Outside appointments
The Board allows Executive Directors to accept appropriate external, commercial Non-Executive Director appointments provided the
aggregate commitment is compatible with their duties and does not cause a conflict of interest with the role of an Executive Director. Such
Executive Directors may retain fees paid for these services, which will be subject to approval by the Board. During the year John Kennedy
served as a Non-Executive Chairman of Maxwell Drummond International Limited.
Fees for the Chairman and Non-Executive Directors
The Non-Executive Chairman’s remuneration is determined by the Committee and the Non-Executive Directors’ remuneration is
determined by the Executive Directors and the Chairman, all of which is based on the responsibility and time committed to the Group’s
affairs and appropriate market comparisons. Individual Non-Executive Directors do not take part in discussions regarding their own fees.
The Non-Executive Chairman and Non-Executive Directors receive no other benefits. For the duration of 2016, the Non-Executive Directors’
fees will be held at 2015 rates. A summary of the current fees are as follows:
Non-Executive Chairman
Deputy Chairman
Senior Independent Director
Base fee
Committee Chair fee
Fee at 1 January 2016
£000
Fee at 1 January 2015
£000
% increase
£180
£88
£80
£65
£8
£180
£88
£80
£65
£8
0%
0%
0%
0%
0%
64 Corporate governance: Directors’ Remuneration Report
Directors’ remuneration earned in 2015
The table below summarises Directors’ remuneration received in respect of 2015 with comparisons, where appropriate, to 20141.
Base salary
and fees
USD’000
Benefits and
allowances2
USD’000
End of
service
gratuity3
USD’000
Annual bonus4
USD’000
Long-term
incentives
USD’000
Other
USD’000
Total
remuneration
USD’000
Executive Directors
James Moffat
John Kennedy5
Tony Wright6
Non-Executive Directors
John Kennedy5
Michael Press7
John Malcolm
Ellis Armstrong8
Peter Whitbread9
Mel Fitzgerald10
Debra Valentine11
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
753
753
294
–
325
n/a
174
307
87
146
115
125
125
121
40
96
40
–
34
–
216
205
–
–
284
–
44
76
–
–
19
–
336
682
–
–
121
–
–
–
–
–
–
–
–
–
–
–
–
–
1,349
1,716
294
–
749
–
174
307
87
146
115
125
125
121
40
96
40
–
34
–
1. All Directors’ pay is reported above in USD. James Moffat’s remuneration is determined and paid in USD. Tony Wright is remunerated in AED; Michael Press, Ellis Armstrong and
Debra Valentine’s remuneration is/was determined in GBP and paid in USD and the remuneration of John Kennedy, Peter Whitbread, John Malcolm and Mel Fitzgerald is/was
determined and paid in GBP.
2. Benefits and allowances include housing, private medical insurance, life insurance, club membership, the use of a company car and driver, private fuel card, airfare tickets and
utility expenses.
3. End of service gratuity is the provision accrued during the year. In accordance with the provisions of IAS 19, the present value of Directors’ end of service gratuity obligations under
UAE Labour Law have been valued using the projected unit credit method, as at 31 December 2015 and 2014. Under this method an assessment has been made of a Director’s
expected service with the Group and the expected base salary on the date of termination. As part of the valuation we have assumed an average base salary increment of 3% p.a.
(2014: 3%). The expected liability on the date of termination has been discounted to its net present value using a discount rate of 3.5% p.a. (2014: 3.5% p.a.).
4. The annual bonus for 2015 was based on performance against financial and non-financial performance targets. Performance against these targets is set out in the tables opposite.
5. John Kennedy transitioned from Non-Executive to Executive Director on 13 August 2015.
6. Tony Wright became a Director on 13 August 2015. The remuneration detailed above reflects the full year 2015.
7. Michael Press stood down as a Director on 13 August 2015.
8. Ellis Armstrong became Senior Independent Director on 13 August 2015.
9. Peter Whitbread stood down as a Director on 12 May 2015.
10. Mel Fitzgerald was appointed as a Director on 13 August 2015.
11. Debra Valentine was appointed as a Director with effect from 1 September 2015.
Lamprell plc Annual Report and Accounts 2015 Corporate governance: Directors’ Remuneration Report
65
Annual Bonus 2015: Performance against targets
CEO
Metric
Net profit1
Safety
Sales2
Overhead cost reduction
Operating efficiencies
Total
Weighting as % of
maximum annual opportunity
Actual
performance
Pay-out outcome as % of
maximum annual opportunity
50%
3.8%
32%
7.1%
7.1%
100%
83%
0%
0%
100%
100%
41.5%
0%
0%
7.1%
7.1%
55.7%3
1. Net profit targets were in the range of USD 55m (threshold) to USD 65m (target) and USD 75m (stretch). Target was exceeded.
2. Sales targets were in the range of USD 900m (threshold) to USD 1.1bn (target) and USD 1.4bn (stretch). Threshold was not achieved.
3. The CEO’s final payment was reduced by 20% to 44.6% due to the non-operational fatality in the Group’s Kurdistan facility.
CFO
Metric
Net profit1
Safety
Sales2
Employee retention
ERP Implementation and
process improvements
Other financial performance
Total
Weighting as % of
maximum annual opportunity
Actual
performance
Pay-out outcome as % of
maximum annual opportunity
50%
5.5%
25%
2.75%
8.25%
8.5%
100%
83%
50%
0%
27%
66%
92%
41.5%
2.7%
0%
0.8%
5.6%
7.8%
58.4%3
1. Net profit targets were in the range of USD 55m (threshold) to USD 65m (target) and USD 75m (stretch). Target was exceeded.
2. Sales targets were in the range of USD 900m (threshold) to USD 1.1bn (target) and USD 1.4bn (stretch). Threshold was not achieved.
3. The CFO’s final payment was reduced by 15% to 49.6% due to the non-operational fatality in the Group’s Kurdistan facility.
Long-term incentive awards granted during the year
An award of 416,569 performance shares was made to James Moffat on 9 April 2015 in accordance with the Performance Share Plan
rules and associated performance conditions. The 2015 LTIP award vests in full on 9 April 2018, subject to achieving the performance
conditions relating to relative TSR, three-year cumulative EBITDA and end of period backlog. The award is subject to a holding period
of 18 months following the date of vesting.
Directors’ interests in share plan awards
The Directors hold interests in long-term incentive awards under the Company’s incentive plans as at 31 December 2015 as set out below.
Share option awards
The following table sets out the interests of the Executive Directors in relation to ESOP awards:
Executive
Director
At 1 January
2015
Granted in year
Exercise price
at grant
Date of vesting
James Moffat
340,855
0
£1.4125
18.11.2017
Vested
N/A
Exercised
in 2015
At 31 December
2015
Nil
340,855
LTIP awards
The following table sets out the interests of the Executive Directors in relation to LTIP award(s):
Executive Director
James Moffat
James Moffat
James Moffat
Tony Wright
At 1 January
2015
Awarded in
2015
Date of vesting
Vested
in 2015
321,691
321,691
–
53,172
–
–
416,569
141,601
20161
18.11.2017
09.04.2018
09.04.2018
Nil
Nil
Nil
Nil
Lapsed
in 2015
At 31 December
2015
(cumulative)
Nil
Nil
Nil
Nil
321,691
643,382
1,059,951
194,773
1. The 2013 LTIP award is expected to be vest following announcement by the Company of the results for the financial period ending 31 December 2015.
In the ordinary course, awards will normally vest on the third anniversary of the date of grant of the award, subject to any applicable
performance conditions having been satisfied. Further details are set out above.
66 Corporate governance: Directors’ Remuneration Report
RSP awards
The following table sets out the interests of the Chairman in relation to RSP award(s):
Director
At 1 January
2015
Granted in year
Exercise price
at grant
Date of vesting
John Kennedy
122,499
0
Nil
18.11.2017
Vested
Nil
Exercised
in 2015
At 31 December
2014
Nil
122,499
Directors’ interests in ordinary shares
The Committee has adopted a formal policy requiring the Executive Directors to build and maintain, through the award of shares by the
Company, a shareholding in the Company equivalent to 150% of base salary for the CEO and 125% of base salary for the CFO, when
appointed. Until such time as this threshold is achieved there is a requirement for executives to retain the net proceeds of all vested share
awards. Mr Kennedy, Mr Moffat and Mr Wright have not currently achieved these guidelines.
In accordance with the Listing Rules, the Company discloses the beneficial interests of the Directors in the share capital of the
Company as at 31 December 2015 as set out below. There were no changes to the interests of the Directors in the ordinary shares
of the Company in the period from 1 January 2016 to 17 March 2016, being the last practicable date that the Company is able to
report on Directors’ interests.
Executive Directors
James Moffat
John Kennedy2
Tony Wright
Non-Executive Directors
Michael Press
John Malcolm
Peter Whitbread
Ellis Armstrong
Mel Fitzgerald
Debra Valentine
Beneficially
owned at
31 Dec 2015
Beneficially
owned at
31 Dec 2014
Outstanding share
awards
Shareholding as a
% of base salary
Shareholding
requirement met?
1,059,9511
1,894,509
234,773
–
–
643,382
122,499
0
–
–
N/A3
2,188,294
–
–
–
–
–
–
1,400,806
415,069
194,773
–
–
–
–
–
–
Nil
Nil
Nil
–
–
–
–
–
–
No
No
No
–
–
–
–
–
–
1. This comprises two LTIPs awarded in 2014 and one LTIP awarded in 2015 both of which are subject to vesting and performance conditions.
2. Between 1 January 2015 and 18 March 2015, John Kennedy or his connected persons had acquired an additional 1,601,939 interests in the share capital of the Company, pursuant
to a trading plan which was entered into on 15 January 2015 in accordance with the requirements of the Listing Rules and the Model Code. Further purchases may have been made
under such trading plan after the date of this Annual Report on Remuneration.
3. Peter Whitbread passed away on 18 July 2015.
Note: Full details of the Directors’ shareholdings and share allocations are given in the Company’s Register of Directors’ Interests, which is open to inspection at the Company’s
registered office during business hours.
Payments to former directors
There were no payments to former directors during the year.
Payments for loss of office
There were no payments for loss of office during the year.
Percentage change in remuneration levels
The table below shows the movement in base salary, benefits and annual bonus for the CEO between the 2015 and 2014 financial years,
compared to that for the average employee of the Group:
% change
% change
Chief Executive Officer
All employees
Base salary
Benefits
Bonus
0%
0%
Base salary
Benefits
-50%
Bonus
+1.5%
+1.5%
-28%
Lamprell plc Annual Report and Accounts 2015 Corporate governance: Directors’ Remuneration Report
67
Relative importance of the spend on pay
The table below shows the spend on staff costs in the financial year, compared to dividends:
Staff costs
Dividends
Performance graph and CEO pay
2015
£000
120,611
–
2014
£000
116,490
–
% change
3.5%
0.00%
The first graph below shows the growth in value of a notional £100 invested in the Company over the last five financial years compared to
the FTSE 250 Index. The graph covers the time period from 31 December 2010 to 31 December 2015. The second graph below shows the
growth in value of a notional £100 invested in the Company compared to the FTSE World Oil Equipment and Services Index, which is used
as the basis for one of the Company’s LTIP metrics. The graph covers the time period from 1 January 2013 to 31 December 2015.
Share price performance
(rebased to 100)
Share price performance by reference to FTSE World Oil
Equipment & Services Index since 1 January 2013
(rebased to 100)
200
150
100
50
0
Lamprell
FTSE 250
250
200
150
100
50
0
Lamprell
FTSE World
Oil Equipment
and Services
Dec 10
Dec 11
Dec 12
Dec 13
Dec 14
Dec 15
Dec 12
Dec 13
Dec 14
Dec 15
The total remuneration figures for the CEO during the last seven financial years are shown in the table below. Consistent with the
calculation methodology for the single figure for total remuneration, the total remuneration figure includes the total annual bonus award
based on that year’s performance and the long-term incentive award based on the three-year performance period ending in the relevant
year. The annual bonus pay-out and long-term incentive award vesting level as a percentage of the maximum opportunity are also shown
for each year.
Year ending 31 December (USD’000)
CEO
Total remuneration
Annual bonus %
LTIP vesting %
2015
Moffat
1,349
45%
0%
2014
2013
2013
2012
2012
2011
2010
2009
2009
Moffat
Moffat1 Whitbread Whitbread2
McCue3
McCue
McCue
McCue4 Whitbread5
1,716
1,652
1,504
352
2,739
2,094
91%
0%
99%
0%
0%
0%
0%
0%
0%
100%
72.3%
100%
1,824
100%
0%
514
0%
0%
1,211
0%
0%
1. James Moffat was appointed CEO on 1 March 2013.
2. Peter Whitbread was appointed interim CEO on 4 October 2012 and his employment ceased on 30 June 2013.
3. Nigel McCue’s employment ceased on 3 October 2012.
4. Nigel McCue was appointed to the position of the CEO on 27 March 2009 with effect from 1 May 2009.
5. Peter Whitbread resigned as the CEO on 27 March 2009 and was appointed to the position of the Director of International Development with effect from 1 May 2009.
Approval of the Directors’ Remuneration Report
The Directors’ Remuneration Report, including both the Directors’ Remuneration Policy and the Annual Report on Remuneration, was
approved by the Board on 22 March 2016.
John Malcolm
Chair of the Remuneration Committee
22 March 2016
68 Corporate governance: Statutory Information and Directors’ Statements
STATUTORY INFORMATION
AND DIRECTORS’ STATEMENTS
The Board of Directors
has taken into account the
latest change in the UK
Corporate Governance
Code 2014 by including
an appropriate viability
statement, in addition to
ensuring that this Annual
Report is fair, balanced and
understandable.
Memorandum and Articles
of Association
The Company’s Memorandum of
Association sets out the objectives and
powers of the Company. The Articles of
Association detail the rights attached to
each share class, the method by which the
Company’s shares can be purchased or
re-issued and the provisions which apply
to the holding of and voting at general
meetings. The Articles also set out the
rules relating to Directors (including by way
of example, their appointment, election,
retirement, duties and powers).
Capital structure and corporate
authorities
Details of the authorised and issued
share capital together with details of
movements in share capital during the
year are included in Note 8 to the financial
statements. The Company has one class of
share in issue, ordinary shares of 5 pence
each, all of which are fully paid. Each
ordinary share in issue carries equal rights
including one vote per share on a poll at
general meetings of the Company, subject
to the terms of the Articles and applicable
laws. There are no restrictions on the
transfer of shares.
Details of the Company’s employee share
schemes are disclosed in the Directors’
page 54 and in
Remuneration Report
Note 8 to the financial statements.
Lamprell plc Free Share Award Plan
Granted
2015
Nil
2014
Nil
Outstanding
2015 2014 & prior
Nil
Nil
Lamprell plc Retention Share Plan
495,000
632,499
450,000
546,252
Lamprell plc Executive Share Option Plan
Nil
340,855
Nil
340,855
Lamprell plc Long-Term Incentive Plan
2,246,878 1,723,524 2,138,878
1,626,478
The awards under the Lamprell plc Free
Share Award Plan, Retention Share Plan
and Long-Term Incentive Plan are granted
at nil price.
Pursuant to the Company’s share schemes,
the Employee Benefit Trust as at the year-
end, held a total of 16,268 (2014: 16,217)
ordinary shares of 5p, representing less
than 0.01% (2014: 0.01%) of the issued
share capital. The voting rights attaching to
these shares cannot be exercised directly
by the employees, but can be exercised
by the trustees. However, in line with good
practice, the trustees do not exercise
these voting rights. In the event of another
company taking control of the Company,
the employee share schemes operated
by the Company have set change of
control provisions. In short, awards may,
in certain circumstances and approved
proportions, be allowed to vest early or to
be exchanged for awards of equivalent
value in the acquiring company.
The Company was given authority at the
2015 AGM to make market purchases of
up to 33,000,000 ordinary shares of 5p,
which represented approximately 10% of
the Company’s then issued ordinary share
capital. This authority will expire at the 2016
AGM, where approval from shareholders
will be sought to renew the authority for
approximately 10% of the Company’s
current issued ordinary share capital.
Approval from shareholders will be sought
to authorise the Directors to allot the
unissued shares up to a maximum nominal
amount of £4,900,000, representing
approximately 30% of the Company’s
current issued ordinary share capital
(excluding treasury shares) to existing
shareholders and to issue equity securities
of the Company for cash to persons other
than existing shareholders, other than
in connection with existing exemptions
contained in the Articles or with a rights,
scrip dividend, or other similar issue, up to
an aggregate nominal value of £825,000
representing approximately 5% of the
current issued ordinary share capital of
the Company. Authorities were given by
the shareholders at the 2015 AGM to issue
a similar percentage of the Company’s
then issued ordinary share capital. The
authorities now sought, if granted, will
expire on the earlier of the conclusion of
the AGM of the Company next year and the
date which is 15 months after the granting
of the authorities.
Lamprell plc Annual Report and Accounts 2015 Corporate governance: Statutory Information and Directors’ Statements
69
After reviewing its cash flow forecasts
for a period of not less than 12 months
from the date of signing these financial
statements, the Directors have a
reasonable expectation that the Group
will have adequate resources to continue
in operational existence for the foreseeable
future. The Directors have concluded
therefore that it is appropriate for the Group
to continue to adopt the going concern
basis in preparing its financial statements.
The financial information has been
prepared under the historical cost
convention, except as disclosed in the
accounting policies below.
Alex Ridout
Company Secretary
By order of the Board
22 March 2016
Contracts of significance
Except for the debt facility agreements
which were concluded in 2014 and the
Controlling Shareholder Agreement
page 46, the Company or Group does
not have contractual or other arrangements
which are significant to its business with
any person.
Directors’ responsibility statement
The Directors are responsible for
preparing the Annual Report and the
financial statements in accordance with
applicable law and regulations. Company
law requires the Directors to prepare
financial statements for each financial
year. Under that law the Directors have
elected to prepare the financial statements
in accordance with International Financial
Reporting Standards (“IFRS”) as adopted
by the European Union. The financial
statements are required by law to give a
true and fair view of the state of affairs of
the Group and the Company and of the
profit or loss of the Group for that period.
In preparing these financial statements, the
Directors are required to:
» select suitable accounting policies and
then apply them consistently;
» make judgements and accounting
estimates that are reasonable and
prudent;
» state that the financial statements
comply with IFRSs as adopted by the
European Union, subject to any material
departures disclosed and explained in
the financial statements; and
» prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Group and the Company will continue
in business.
The Directors confirm that they have
complied with the above requirements in
preparing the financial statements.
The Directors are responsible for keeping
adequate accounting records that
are sufficient to show and explain the
Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Company and the
Group and enable them to ensure that the
financial statements comply with the Isle of
Man Companies Acts 1931 to 2004. They
are also responsible for safeguarding the
assets of the Company and the Group
and hence for taking reasonable steps for
the prevention and detection of fraud and
other irregularities.
The Directors are responsible for
the maintenance and integrity of the
Company’s website, www.lamprell.com.
Legislation in the Isle of Man governing the
preparation and dissemination of financial
statements may differ from legislation in
other jurisdictions.
In accordance with the principles of
the Code, the Group has arrangements
in place to ensure that the information
presented in this Annual Report is fair,
balanced and understandable. The
Audit & Risk Committee oversees the
implementation of this approach. The
Directors consider, on the advice of the
Audit & Risk Committee, that the Annual
Report, taken as a whole, is fair, balanced
and understandable and provides the
information necessary for shareholders
to assess the Company’s performance,
business model and strategy.
Each of the Directors, whose names
and functions are listed
confirm that, to the best of their knowledge:
pages 36 to 37
»
»
the Group financial statements, which
have been prepared in accordance with
IFRSs as adopted by the EU, give a true
and fair view of the assets, liabilities,
financial position and profit or loss of
the Group; and
the Directors’ Report includes a
fair review of the development and
performance of the business and the
position of the Group, together with a
description of the principal risks and
uncertainties that it faces.
As far as each Director is aware, there
is no relevant audit information of which
the Company’s auditors are unaware. In
addition, each Director has taken all the
steps that he or she ought to have taken
as a Director in order to make him/herself
aware of any relevant audit information and
to establish that the Company’s auditors
are aware of that information.
Going concern
The Company’s business activities,
together with the factors likely to affect
its future development, performance and
position are set out in the Strategic Report
pages 4 to 35. The financial position
of the Company, its cash flows, liquidity
position and borrowing facilities are
described in the Financial Review
pages 20 to 23. The Company’s
consolidated financial statements have
been prepared on a going concern basis.
70
INDEPENDENT
AUDITOR’S REPORT
TO THE MEMBERS OF LAMPRELL PLC
Report on the financial statements
We have audited the accompanying consolidated and parent company financial statements (“the financial statements”) of Lamprell
plc and its subsidiaries (the “Group”) which comprise the consolidated and company balance sheets as at 31 December 2015 and the
consolidated income statement, consolidated statement of comprehensive income, consolidated and company statements of changes
in equity and consolidated and company cash flow statements for the year then ended and a summary of significant accounting policies
and other explanatory notes.
Directors’ responsibility for the financial statements
The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with applicable Isle of
Man law and International Financial Reporting Standards as adopted by the European Union, and for such internal control as the Directors
determine is necessary to enable the preparation of consolidated and parent company financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. This report, including the opinion, has been
prepared for and only for the Company’s members as a body in accordance with Section 15 of the Isle of Man Companies Act 1982 and
for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion:
»
»
»
the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2015, and
of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards
as adopted by the European Union;
the parent company financial statements give a true and fair view of the financial position of the parent company as at 31 December
2015, and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the
European Union as applied in accordance with the provisions of the Isle of Man Companies Act 1982; and
the financial statements have been properly prepared in accordance with the Isle of Man Companies Acts 1931 to 2004.
Matters on which we are required to report by exception
We have nothing to report on the following:
The Isle of Man Companies Acts 1931 to 2004 require us to report to you if, in our opinion:
»
»
»
»
proper books of accounts have not been kept by the parent company or, proper returns adequate for our audit have not been
received from branches not visited by us; or
the parent company’s balance sheet is not in agreement with the books of account and returns; or
we have not received all the information and explanations necessary for the purposes of our audit; and
certain disclosures of Directors’ loans and remuneration specified by law have not been complied with.
Under the Listing Rules we are required to review:
»
»
the Directors’ statements in relation to going concern and longer term viability; and
the parts of the Corporate Governance Statement relating to the Company’s compliance with the eleven provisions of the UK
Corporate Governance Code specified for our review.
Nicholas Mark Halsall, Responsible Individual
for and on behalf of PricewaterhouseCoopers LLC
Chartered Accountants
Douglas, Isle of Man
22 March 2016
Lamprell plc Annual Report and Accounts 2015Financial statements CONSOLIDATED
INCOME STATEMENT
Continuing operations
Revenue
Cost of sales
Gross profit
Selling and distribution expenses
General and administrative expenses
Other gains/(losses) – net
Operating profit
Finance costs
Finance income
Finance costs – net
Share of profit of an investment accounted for using the equity method
Profit before income tax
Income tax expense
Profit for the year from continuing operations
Discontinued operations
Loss for the year from discontinued operations
Gain on disposal of subsidiary
Profit for the year attributable to the equity holders of the Company
Earnings per share for profit from continuing operations
attributable to the equity holders of the Company
Basic
Diluted
Earnings per share attributable to the equity holders of the Company
Basic
Diluted
The notes on pages 79 to 117 form an integral part of these financial statements.
Financial statements
71
Year ended 31 December
2015
USD’000
2014
USD’000
Note
5
6
7
9
12
11
11
19
23
13
13
871,058
(747,538)
123,520
(1,771)
(44,318)
260
77,691
(14,647)
2,679
(11,968)
1,318
67,041
(541)
66,500
(1,866)
66
64,700
19.46c
19.36c
18.93c
18.84c
1,084,890
(902,810)
182,080
(1,773)
(72,700)
1,456
109,063
(20,516)
2,166
(18,350)
2,991
93,704
(484)
93,220
(6,433)
31,270
118,057
29.54c
29.52c
37.41c
37.38c
72
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
Profit for the year
Other comprehensive loss
Items that may be reclassified to profit or loss:
Currency translation differences
Items that will not be reclassified to profit or loss:
Re-measurement of post-employment benefit obligations
Other comprehensive loss for the year
Total comprehensive income for the year
Total comprehensive income/(loss) for the year attributable
to equity holders of the Company arises from:
Continuing operations
Discontinued operations
The notes on pages 79 to 117 form an integral part of these financial statements.
Year ended 31 December
2015
USD’000
64,700
2014
USD’000
118,057
(489)
(372)
(1,988)
(2,477)
62,223
(3,742)
(4,114)
113,943
64,023
(1,800)
89,106
24,837
Note
26
27
23
Lamprell plc Annual Report and Accounts 2015Financial statements CONSOLIDATED
BALANCE SHEET
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investment accounted for using the equity method
Trade and other receivables
Derivative financial instruments
Cash and bank balances
Total non-current assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and bank balances
Assets of disposal group classified as held for sale
Total current assets
Total assets
LIABILITIES
Current liabilities
Borrowings
Trade and other payables
Derivative financial instruments
Provision for warranty costs and other liabilities
Current tax liability
Liabilities of disposal group classified as held for sale
Total current liabilities
Net current assets
Non-current liabilities
Borrowings
Derivative financial instruments
Provision for employees’ end of service benefits
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Other reserves
Retained earnings
Total equity attributable to the equity holders of the Company
73
As at 31 December
2015
USD’000
2014
USD’000
Note
16
17
19
21
28
22
20
21
28
22
23
31
29
28
30
23
31
28
27
25
25
26
175,286
205,884
5,285
12,712
–
8,950
408,117
29,066
415,614
–
280,668
725,348
–
725,348
1,133,465
(20,136)
(264,943)
(4)
(8,334)
(451)
(293,868)
–
(293,868)
431,480
(59,163)
(14)
(42,863)
(102,040)
(395,908)
737,557
30,346
315,995
(19,144)
410,360
737,557
139,343
204,726
5,118
11,876
55
12,517
373,635
14,560
391,743
14
359,108
765,425
15,228
780,653
1,154,288
(20,136)
(317,603)
(269)
(15,812)
(167)
(353,987)
(10,546)
(364,533)
416,120
(78,843)
–
(38,752)
(117,595)
(482,128)
672,160
30,346
315,995
(18,655)
344,474
672,160
The financial statements on pages 71 to 117 were approved and authorised for issue by the Board of Directors on 22 March 2016 and
signed on its behalf by:
James Moffat
Chief Executive Officer and Director
Antony Wright
Chief Financial Officer and Director
The notes on pages 79 to 117 form an integral part of these financial statements.
Financial statements 74
COMPANY
BALANCE SHEET
ASSETS
Non-current assets
Investment in subsidiaries
Current assets
Other receivables
Due from related parties
Cash at bank
Total current assets
Total assets
LIABILITIES
Current liabilities
Accruals
Total current liabilities
Net current assets
Non-current liabilities
Provision for employees’ end of service benefits
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Other reserves
Retained earnings
Total equity attributable to the equity holders of the Company
As at 31 December
2015
USD’000
2014
USD’000
Note
18
692,569
593,747
24
22
27
25
25
26
634
12,510
218
13,362
705,931
(17)
(17)
13,345
(121)
(138)
705,793
30,346
315,995
329,153
30,299
705,793
507
110,191
286
110,984
704,731
(2,487)
(2,487)
108,497
(75)
(2,562)
702,169
30,346
315,995
329,153
26,675
702,169
The financial statements on pages 71 to 117 were approved and authorised for issue by the Board of Directors on 22 March 2016 and
signed on its behalf by:
James Moffat
Chief Executive Officer and Director
Antony Wright
Chief Financial Officer and Director
The notes on pages 79 to 117 form an integral part of these financial statements.
Lamprell plc Annual Report and Accounts 2015Financial statements 75
Other
reserves
USD’000
(22,133)
–
–
(372)
(372)
3,850
Retained
earnings
USD’000
229,561
118,057
(3,742)
–
114,315
–
Total
USD’000
442,756
118,057
(3,742)
(372)
113,943
3,850
Note
Share
capital
USD’000
23,552
–
Share
premium
USD’000
211,776
–
–
–
–
–
–
–
–
–
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
At 1 January 2014
Profit for the year
Other comprehensive income:
Re-measurement of post-employment benefit obligations
Currency translation differences
Total comprehensive income for the year
Disposal of subsidiary
Transactions with owners:
Proceeds from shares issued (net)
Share based payments:
– value of services provided
Treasury shares purchased
Total transactions with owners
At 31 December 2014
Profit for the year
Other comprehensive income:
Re-measurement of post-employment benefit obligations
Currency translation differences
Total comprehensive income for the year
Transactions with owners:
Share based payments:
– value of services provided
Total transactions with owners
At 31 December 2015
27
26
26
25
8
25
27
26
8
The notes on pages 79 to 117 form an integral part of these financial statements.
6,794
104,219
–
–
111,013
–
–
6,794
30,346
–
–
–
–
–
–
104,219
315,995
–
–
–
–
–
–
–
(18,655)
–
–
(489)
(489)
1,084
(486)
598
344,474
64,700
(1,988)
–
62,712
1,084
(486)
111,611
672,160
64,700
(1,988)
(489)
62,223
–
–
30,346
–
–
315,995
–
–
(19,144)
3,174
3,174
410,360
3,174
3,174
737,557
Financial statements 76
COMPANY STATEMENT
OF CHANGES IN EQUITY
At 1 January 2014
Profit for the year
Other comprehensive income:
Re-measurement of post-employment benefit obligations
Total comprehensive income for the year
Transactions with owners:
Share based payments:
– value of services provided
– investments in subsidiaries
Treasury shares issued
Proceeds from shares issued (net)
Total transactions with owners
At 31 December 2014
Profit for the year
Other comprehensive income:
Re-measurement of post-employment benefit obligations
Total comprehensive income for the year
Transactions with owners:
Share based payments:
– value of services provided
– investment in subsidiaries
Total transactions with owners
Note
Share
capital
USD’000
23,552
–
Share
premium
USD’000
211,776
–
Other
reserves
USD’000
329,153
–
Retained
earnings
USD’000
23,965
2,079
Total
USD’000
588,446
2,079
27
8
18
25
25
27
8
18
–
–
–
–
–
–
45
2,124
45
2,124
–
–
–
6,794
6,794
30,346
–
–
–
–
104,219
104,219
315,995
–
–
–
–
–
–
329,153
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
118
966
(498)
–
586
26,675
443
7
450
1,125
2,049
3,174
118
966
(498)
111,013
111,599
702,169
443
7
450
1,125
2,049
3,174
At 31 December 2015
30,346
315,995
329,153
30,299
705,793
The notes on pages 79 to 117 form an integral part of these financial statements.
Lamprell plc Annual Report and Accounts 2015Financial statements CONSOLIDATED
CASH FLOW STATEMENT
Operating activities
Cash used in operating activities
Tax paid
Net cash used in operating activities
Investing activities
Additions to property, plant and equipment
Proceeds from sale of property, plant and equipment
Additions to intangible assets
Finance income
Dividend received from a joint venture
Proceeds from disposal of a subsidiary – net
Movement in deposit with an original maturity of more than three months
Movement in margin/short-term deposits under lien
Net cash (used in)/generated from investing activities
Financing activities
Proceeds from shares issued (net of expenses)
Treasury shares purchased
Proceeds from borrowings
Repayments of borrowings
Finance costs
Dividends paid
Net cash (used in)/generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents, beginning of the year from continued operations
Cash and cash equivalents, beginning of the year from discontinued operations
Exchange rate translation
Cash and cash equivalents, end of the year
Cash and cash equivalents from continuing operations
Cash and cash equivalents from discontinued operations
Total
The notes on pages 79 to 117 form an integral part of these financial statements.
77
Note
36
17
11
19
23
22
25
25
22
Year ended 31 December
2015
USD’000
2014
USD’000
(522)
(257)
(779)
(55,681)
543
(3,782)
2,679
1,151
2,091
(6,706)
1,519
(58,186)
–
–
–
(20,000)
(14,386)
–
(34,386)
(93,351)
312,352
5,652
(489)
224,164
224,164
–
224,164
(39,433)
(374)
(39,807)
(18,947)
317
(3,595)
2,166
3,488
59,312
5,633
3,249
51,623
111,013
(486)
100,000
(160,000)
(21,014)
(18)
29,495
41,311
275,479
1,586
(372)
318,004
312,352
5,652
318,004
Financial statements 78
COMPANY
CASH FLOW STATEMENT
Operating activities
Profit for the year
Adjustments for:
Share based payments – value of services provided
Provision for employees’ end of service benefits
Operating cash flows before payment of employees’ end of service benefits
and changes in working capital
Payment of employees’ end of service benefits
Other receivables
Accruals
Due from related parties
Due to related parties
Net cash used in operating activities
Financing activities
Proceeds from shares issued (net of expenses)
Treasury shares purchased
Net cash generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of the year
The notes on pages 79 to 117 form an integral part of these financial statements.
Non-cash transaction
The non-cash transaction during the year is as follows:
Year ended 31 December
2015
USD’000
2014
USD’000
Note
32
8
27
27
24
24
25
25
443
2,079
1,125
53
1,621
–
(127)
(2,470)
908
–
(68)
–
–
–
(68)
286
218
118
68
2,265
(23)
(138)
2,458
(102,560)
(12,334)
(110,332)
111,013
(498)
110,515
183
103
286
»
Management has decided to convert a loan receivable from LEL into an equity contribution. Accordingly, an amount of USD 96.8 million
has been treated as further investment in the subsidiary.
Lamprell plc Annual Report and Accounts 2015Financial statements 79
NOTES TO THE
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
Legal status and activities
1
Lamprell plc (“the Company”/“the parent company”) was incorporated and registered on 4 July 2006 in the Isle of Man as a public
company limited by shares under the Isle of Man Companies Acts with the registered number 117101C. The Company acquired 100%
of the legal and beneficial ownership in Lamprell Energy Limited (“LEL”) from Lamprell Holdings Limited (“LHL”), under a share for share
exchange agreement dated 25 September 2006 and this transaction was accounted for in the consolidated financial statements using
the uniting of interest method (Note 26). The Company was admitted to the Alternative Investment Market (“AIM”) of the London Stock
Exchange with effect from 16 October 2006. From 6 November 2008, the Company moved from AIM and was admitted to trading on the
London Stock Exchange (“LSE”) plc’s main market for listed securities. The address of the registered office of the Company is Fort Anne,
Douglas, Isle of Man and the Company is managed from the United Arab Emirates (“UAE”). The address of the principal place of the
business is PO Box 33455, Dubai, UAE.
The principal activities of the Company and its subsidiaries (together referred to as “the Group”) are: assembly and new build construction for
the 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 and operations and maintenance.
The Company has either directly or indirectly the following subsidiaries:
Name of the subsidiary
Lamprell Energy Limited
Lamprell Investment Holdings Limited (“LIH”)
Lamprell Dubai LLC (“LD”)
Lamprell Sharjah WLL (“LS”)
Maritime Offshore Limited (“MOL”)
Maritime Offshore Construction Limited (“MOCL”)
Cleopatra Barges Limited (“CBL”)
Lamprell plc employee benefit trust (“EBT”)
Jebel Ali Investments Limited (“JIL”)
Lamprell Energy FZCO (“LE FZCO”)
Maritime Industrial Services Co. Ltd Inc (“MIS”)
Maurlis International Ltd. Inc (“MIL”)
Rig Metals LLC (“RIM”)
Litwin PEL Co. LLC (“LIT”)
Maritime Industrial Services Co. Ltd. & Partners (“MISCLP”)
Global Investment Co. Ltd. Inc (“GIC”)
Sunbelt Safety Services Co. Ltd. Inc. (“SSS”)
MIS Qatar LLC (“MISQWLL”)
Lamprell Industrial Services Holdings Limited (“LISH”)
Lamprell Kazakhstan LLP (“LAK”)
Percentage
of legal
ownership
%
Percentage
of beneficial
ownership
%
100
100
491
491
100
100
100
100
100
903
100
100
491
5
491
100
1004
491
100
100
100
100
100
100
100
100
100
2
100
100
100
100
100
5
100
100
100
100
100
100
Place of incorporation
Isle of Man
British Virgin Islands
UAE
UAE
Isle of Man
Isle of Man
British Virgin Islands
Unincorporated
British Virgin Islands
UAE
Republic of Panama
Republic of Panama
UAE
UAE
Sultanate of Oman
Republic of Panama
Republic of Panama
Qatar
British Virgin Islands
Kazakhstan
1. The remaining balance of 51% in each case is registered in the name of a Gulf Cooperation Council (“GCC”) National/Entities owned by a GCC National, but has assigned all the
economic benefits attached to their shareholdings to the Group entity. The Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity via management agreements and, accordingly, these entities are consolidated as wholly owned subsidiaries in these
consolidated financial statements. These shareholders receive sponsorship fees from the Group (Note 24).
2. The beneficiaries of the EBT are the employees of the Group.
3. A UAE free zone company (“FZCO”) is required to have a minimum of two shareholders and, consequently, the balance of 10% is held by an employee of LEL in trust for the
beneficial interest of the Group. A resolution to liquidate this entity was passed on 30 December 2013.
4. Sunbelt Safety Services Co. Ltd. Inc. was earlier known as Maritime International Agency Services Ltd (“MIAS”). It was renamed on 5 January 2014.
5. During 2014, the Group decided to dispose of Litwin. This transaction was completed on 21 April 2015.
Financial statements 80
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
Summary of significant accounting policies
2
The principal accounting policies applied in the preparation of these consolidated and parent company 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 consolidated financial statements of the Group and the financial statements of the parent company have been prepared in
accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”) and the Isle of Man Companies
Acts 1931 to 2004. In accordance with the provisions of the Isle of Man Companies Act 1982, the Company has not presented its own
statement of comprehensive income.
After reviewing its cash flow forecasts for a period of not less than 12 months from the date of signing of these financial statements,
the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the
foreseeable future. Therefore, the Group continues to adopt the going concern basis in preparing its financial statements.
The financial statements have been prepared under the historical cost convention, except as disclosed in the accounting polices below.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree
of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated and parent company financial
statements, are disclosed in Note 4.
(a) New and amended standards adopted by the Group
IFRS 2 (amendments), ‘Share based payment’ clarifies various issues relating to the definitions of performance and service conditions
which are vesting conditions. The clarifications are consistent with how the Group has identified any performance and service conditions
which are vesting conditions in previous periods. The Group has adopted this amendment and it has no impact on the Group.
IFRS 8 (amendments), ‘Operating segments’ requires disclosure of the judgements made by management in aggregating operating
segments and clarifies that a reconciliation of segment assets must only be disclosed if segment assets are reported. The Group has
adopted this amendment and it has no impact on the Group.
IFRS 13 (amendments), ‘Fair value measurement’ confirms that short-term receivables and payables can continue to be measured at
invoice amounts if the impact of discounting is immaterial. It also clarifies that the portfolio exception in IFRS 13 (measuring the fair value
of a group of financial assets and financial liabilities on a net basis) applies to all contracts within the scope of IAS 39 or IFRS 9. The
Group has adopted this amendment and it has no impact on the Group.
IAS 19 (amendments), ‘Employee benefits’ regarding employee or third party contributions to defined benefit plans. The amendments
clarify the accounting for defined benefit plans that require employees or third parties to contribute towards the cost of the benefits.
The Group has adopted this amendment and it has no impact on the Group.
(b)
New and amended standards and interpretations mandatory for the first time for this financial year beginning 1 January 2015
but not currently relevant to the Group
IFRS 3 (amendments), ‘Business combinations’ clarifies that all contingent consideration arrangements classified as liabilities (or assets)
arising from a business combination should be subsequently measured at fair value through profit or loss whether or not they fall within the
scope of IAS 39. It also clarifies that IFRS 3 does not apply to the accounting for the formation of any joint arrangement. This amendment
is currently not applicable to the Group, as the Group has no contingent consideration arrangements arising from a business combination.
IAS 16 (amendments), ‘Property, plant and equipment’ and IAS 38, ‘Intangible assets’ clarifies how the gross carrying amount and
accumulated depreciation are treated where an entity measures its assets at revalued amounts. This amendment is currently not
applicable to the Group, as the Group does not measure its assets at revalued amounts.
IAS 24 (amendments), ‘Related party disclosures’ clarifies that a management entity is a related party subject to the related party
disclosures and is required to disclose the expenses incurred for management services. This amendment is currently not applicable
to the Group, as the Group does not receive any management services from other entities.
IAS 40 (amendments), ‘Investment property’ clarifies that IAS 40 and IFRS 3 are not mutually exclusive when distinguishing between
investment property and owner-occupied property and determining whether the acquisition of an investment property is a business
combination. This amendment is currently not applicable to the Group, as the Group has no investment property.
(c)
New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2015
and not early adopted
IFRS 5 (amendments), ‘Non-current assets held for sale and discontinued operations’ regarding assets (or disposal groups) disposed
of either through sale or distribution to owners. The amendment clarifies that changing from one of these disposal methods to the other
would not be considered a new plan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruption of
the application of the requirements in IFRS 5. This amendment must be applied prospectively. The Group intends to adopt these
amendments no later than the accounting period beginning on or after 1 January 2016.
IFRS 7 (amendments), ‘Financial instruments: disclosures’ regarding servicing contracts. The amendment clarifies that a servicing
contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and
the arrangement against the guidance for continuing involvement in IFRS 7 in order to assess whether the disclosures are required.
The amendment also clarifies that the additional disclosures relating to the offsetting of financial assets and financial liabilities only
need to be included in interim reports if required by IAS 34. The Group intends to adopt these amendments no later than the
accounting period beginning on or after 1 January 2016.
Lamprell plc Annual Report and Accounts 2015Financial statements 81
Summary of significant accounting policies continued
2
2.1 Basis of preparation continued
(c)
New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2015
and not early adopted continued
IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities.
The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and
measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary
measurement categories for financial assets: amortised cost, fair value through other comprehensive income (“OCI”) and fair value
through P&L. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the
financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option
at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the
incurred loss impairment model used in IAS 39. For financial liabilities, there were no changes to classification and measurement except
for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss.
IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic
relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually
uses for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under
IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The Group
is yet to assess IFRS 9’s full impact.
Amendments to IFRS 10 and IAS 28 regarding the sale or contribution of assets between an investor and its associate or joint venture,
addresses an inconsistency between IFRS 10 and IAS 28 in the sale or contribution of assets between an investor and its associate
or joint venture. A full gain or loss is recognised when a transaction involves a business. A partial gain or loss is recognised when a
transaction involves assets that do not constitute a business, even if those assets are in a subsidiary. The Group intends to adopt these
amendments no later than the accounting period beginning on or after 1 January 2016. These amendments are not anticipated to have
any impact on the Group.
IFRS 11 (amendments), ‘Joint arrangements’ regarding acquisition of an interest in a joint operation, provides new guidance on how
to account for the acquisition of an interest in a joint venture operation that constitutes a business. The amendments require an investor
to apply the principles of business combination accounting when it acquires an interest in a joint operation that constitutes a ‘business’.
The Group intends to adopt these amendments no later than the accounting period beginning on or after 1 January 2016. These
amendments are not anticipated to have any impact on the Group.
IFRS 15, ‘Revenue from contracts with customers’, deals with revenue recognition and establishes principles for reporting useful
information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from
an entity’s contract with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability
to direct the use and obtain the benefits from the goods or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction
contracts’ and related interpretations. The Group intends to adopt these amendments no later than the accounting period beginning
on or after 1 January 2018. The Group is assessing the impact of IFRS 15.
IFRS 16, ‘Leases’, replaces IAS 17 ‘Leases’. Under the new requirements, lessees would be required to recognise assets and liabilities
arising from both operating and finance leases on the balance sheet. The effective date is 1 January 2019. The standard has not yet been
endorsed by the EU. The Group is assessing the impact of IFRS 16.
IAS 1 (amendments), ‘Presentation of Financial Statements’ Disclosure Initiative clarify, rather than significantly change, existing IAS 1
requirements. The amendments clarify: the materiality requirements in IAS 1; that specific line items in the statement(s) of profit or loss
and OCI and the statement of financial position may be disaggregated; that entities have flexibility as to the order in which they present
the notes to financial statements; and that the share of OCI of associates and joint ventures accounted for using the equity method must
be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to
profit or loss. Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement
of financial position and the statement(s) of profit or loss and OCI. These amendments are effective for annual periods beginning on or
after 1 January 2016 with early adoption permitted. The Group intends to adopt these amendments no later than the accounting period
beginning on or after 1 January 2016.
Amendments to IAS 16, ‘Property, plant and equipment’ and IAS 38, ‘Intangible assets’ regarding depreciation and amortisation, clarifies
that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an
activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the
asset. The Group intends to adopt these amendments no later than the accounting period beginning on or after 1 January 2016.
IAS 27 (amendments), ‘Separate financial statements’ regarding the equity method, allows entities to use the equity method to account
for investments in subsidiaries, joint ventures and associates in their separate financial statements. The Group intends to adopt these
amendments no later than the accounting period beginning on or after 1 January 2016.
IAS 19 (amendments), ‘Employee Benefits’ regarding the additional disclosures relating to the offsetting of financial assets and
financial liabilities clarifies that these only need to be included in interim reports if required by IAS 34. The Group intends to adopt these
amendments no later than the accounting period beginning on or after 1 January 2016.
IAS 34 (amendments), ‘Interim Financial Reporting’ clarifies that the required interim disclosures must either be in the interim financial
statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the interim
financial report. The Group intends to adopt these amendments no later than the accounting period beginning on or after 1 January 2016.
Financial statements 82
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
Summary of significant accounting policies continued
2
2.2 Revenue recognition
(a) Contract revenue
Contract revenue is recognised under the percentage-of-completion method. When the outcome of the contract can be reliably estimated,
revenue is recognised by reference to the proportion that accumulated costs up to the year-end bear to the estimated total costs of the
contract. When the contract is at an early stage and its outcome cannot be reliably estimated, revenue is recognised to the extent of costs
incurred up to the year-end which are considered recoverable.
With respect to new build fixed price construction contracts with an expected contract duration of 18 months or greater, profit on such
contracts will only be recognised when the contract has progressed to 20% based on the total estimated cost of the contract and the
ultimate outcome can be reliably estimated.
Revenue related to variation orders is recognised when it is probable that the customer will approve the variation and the amount of
revenue arising from the variation can be reliably measured.
A claim is recognised as contract revenue when settled or when negotiations have reached an advanced stage such that it is probable
that the customer will accept the claim and the amount can be measured reliably.
Losses on contracts are assessed on an individual contract basis and provision is made for the full amount of the anticipated losses,
including any losses relating to future work on a contract, in the period in which the loss is first foreseen.
The aggregate of the costs incurred and the profit/loss recognised on each contract is compared against progress billings at the year end.
Where the sum of the costs incurred and recognised profit or recognised loss exceeds the progress billings, the balance is shown under
trade and other receivables as amounts recoverable on contracts. Where the progress billings exceed the sum of costs incurred and
recognised profit or recognised loss, the balance is shown under trade and other payables as amounts due to customers on contracts.
In determining contract costs incurred up to the year end, any amounts incurred, including advances paid to suppliers and advance
billings received from subcontractors relating to future activity on a contract, are excluded and are presented as contract work-in-progress.
(b) Products and services
Revenue from sale of products and services is recognised in the accounting period in which the risks and rewards are transferred or the
service is rendered.
Interest income
(c)
Interest income is recognised on a time proportion basis using the effective interest rate method.
2.3 Consolidation
(a) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group
is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owner of the acquiree and
the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from
a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises
any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the recognised
amount of acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.
The excess of the consideration transferred over the amount of any non-controlling interest in the acquiree and the acquisition-date fair
value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is
recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase,
the difference is recognised directly in the consolidated statement of comprehensive income.
Business combinations involving entities under common control do not fall within the scope of IFRS 3. Consequently, the Directors have
a responsibility to determine a suitable accounting policy. The Directors have decided to follow the uniting of interests’ method to account
for business combinations involving entities under common control.
Under the uniting of interest method, there is no requirement to fair value the assets and liabilities of the acquired entities and hence no
goodwill is recorded as balances remain at book value. Consolidated financial statements include the profit or loss and cash flows for the
entire year (pre- and post-merger) as if the subsidiary had always been part of the Group. The aim is to show the combination as if it had
always been combined.
Inter company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses
are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been
changed or adjustments have been made to the financial statements of subsidiaries, where necessary, to ensure consistency with the
policies adopted by the Group.
Lamprell plc Annual Report and Accounts 2015Financial statements 83
Summary of significant accounting policies continued
2
2.3 Consolidation continued
(b) Disposal of subsidiaries
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost,
with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purpose of subsequently
accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other
comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of related asset or liabilities. This
may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
(c) Joint arrangements
The Group has applied IFRS 11 to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint
operations or joint ventures depending on the contractual rights and obligations of each investor. The Company has assessed the nature
of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method. Under the
equity method of accounting, interest in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s
share of the post-acquisition profits or losses and movements in the consolidated income statement. When the Group’s share of losses in
a joint venture equals or exceeds its interest in the joint ventures (which includes any long-term interest that, in substance, forms part of
the Group’s net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the joint ventures.
(d) Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under
the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the
investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s investment in associates includes goodwill
identified on acquisition.
The Group’s share of post-acquisition profit or loss is recognised in the consolidated income statement, and its share of post-acquisition
movements in other comprehensive income is recognised in the consolidated statement of comprehensive income with a corresponding
adjustment to the carrying amount of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on
behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired.
If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate
and its carrying value and recognises the amount adjacent to ‘share of profit/(loss) of an associate’ in the consolidated income statement.
Investment in subsidiaries
2.4
In the Company’s separate financial statements, the investment in subsidiaries is stated at cost less provision for impairment. Cost is the
amount of cash paid or the fair value of the consideration given to acquire the investment. Income from such investments is recognised
as dividend in the statement of comprehensive income.
2.5 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (“the functional currency”). The Group’s activities are primarily carried out from the UAE, whose
currency, the UAE Dirham, is pegged to the United States Dollar (“USD”) and is the functional currency of all the entities in the Group
(except MISCLP whose functional currency is the Omani Riyal, MISQWLL whose functional currency is the Qatari Riyal, LAK whose
functional currency is the Kazakh Tenge and EBT whose functional currency is the Great Britain Pound). The consolidated and parent
company financial statements are presented in US Dollars.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated income statement,
except when deferred into other comprehensive income as qualifying cash flow hedges.
Foreign exchange gains and losses that relate to cash and cash equivalents are presented in the consolidated income statement
within ‘finance income or costs’. All other foreign exchange gains and losses are presented in the consolidated income statement within
‘other gains/(losses) – net’.
Financial statements 84
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
Summary of significant accounting policies continued
2
2.5 Foreign currency translation continued
(c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are translated into the presentation currency as follows:
»
»
»
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
income and expenses for each income statement are translated at average exchange rates for the year; and
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations, are taken to other
comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are
recognised in the consolidated statement of comprehensive income as part of the gain or loss on sale.
2.6 Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation. The cost of property, plant and equipment is the purchase
cost, together with any incidental expenses of acquisition. Depreciation is calculated on a straight line basis over the expected useful
economic lives of the assets as follows:
Operating equipment
Buildings and infrastructure
Fixtures and office equipment
Motor vehicles
Years
3 – 15
3 – 25
3 – 5
5
The assets’ residual values, if significant, and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All repairs
and maintenance are charged to the consolidated income statement during the financial period in which they are incurred.
Capital work-in-progress is stated at cost. When commissioned, capital work-in-progress is transferred to property, plant and equipment
and depreciated in accordance with Group policies.
Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable
amount (Note 2.22).
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within
‘other gains/(losses) – net’ in the consolidated income statement.
Intangible assets
2.7
(a) Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over Lamprell plc’s interest
in the net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the value of the non-controlling
interest in the acquiree.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units
(“CGUs”) or groups of CGUs that is expected to benefit from the synergies of the combination. Each unit or group of units to which the
goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.
Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential
impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value
less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.
(b) Trade name
A trade name acquired as part of a business combination is capitalised, separately from goodwill, at fair value at the date of acquisition
if the asset is separable or arises from contractual or legal rights and its fair value can be measured reliably. Amortisation is calculated
on a straight line method to allocate the fair value at acquisition over their estimated useful life. The useful life of a trade name is reviewed
on an annual basis.
Lamprell plc Annual Report and Accounts 2015Financial statements 85
Summary of significant accounting policies continued
Intangible assets continued
2
2.7
(c) Customer relationships
Customer relationships acquired as part of a business combination are capitalised, separately from goodwill, at fair value at the date
of acquisition if the asset is separable or arises from contractual or legal rights and its fair value can be measured reliably. Amortisation
is calculated on a straight line method to allocate the fair value at acquisition over their estimated useful life. The useful life of customer
relationships is reviewed on an annual basis.
(d) Operating lease rights
Intangible assets representing operating leasehold rights are carried at cost (being the fair value on the date of acquisition where
intangibles are acquired in a business combination) less accumulated amortisation and impairment, if any. Amortisation is calculated
using the straight line method to allocate the cost of the leasehold right over its estimated useful life.
(e) Computer software
Directly attributable costs that are capitalised as part of the software product include the software development employee costs. Other
development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously
recognised as an expense are not recognised as an asset in a subsequent period. Computer software development costs recognised
as assets are amortised over their estimated useful lives.
(f) Work-in-progress
Work-in-progress is stated at cost. When commissioned, work-in-progress is transferred to intangible assets in accordance with
Group policies.
Inventories
2.8
Inventories comprise raw materials, work-in-progress and consumables which are stated at the lower of cost and estimated net realisable
value. Cost is determined on the weighted average basis and comprises direct purchase, direct labour and other costs incurred in
bringing the inventories to their present location and condition.
2.9 Trade receivables
Trade receivables are amounts receivable from customers for billing in the ordinary course of business. If collection is expected in one
year or less, they are classified as current assets. If not, they are presented as non-current assets.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method,
less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the
Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the
debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered
indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted at the effective interest rate.
The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the
consolidated income statement within ‘general and administrative expenses’. When a trade receivable is uncollectable, it is written off
against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against
‘general and administrative expenses’ in the consolidated income statement.
2.10 Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented
as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
2.11 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that
an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate of the amount
of the obligation can be made.
Financial statements 86
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
Summary of significant accounting policies continued
2
2.12 Employee benefits
(a) Provision for staff benefits
A provision is made for the estimated liability for performance related bonus and employees’ entitlements to annual leave and air fare
as a result of services rendered by the employees up to the balance sheet date. This provision is disclosed as a current liability and
included in trade and other payables.
Labour laws in the countries in which the Group operates require the Group to provide for other long-term employment benefits.
Provision is made, using actuarial techniques, for the end of service benefits due to employees, for their periods of service up to the
balance sheet date. The provision relating to end of service benefits is disclosed as a non-current liability. Actuarial gains and losses
arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive
income in the period in which they arise. The current service cost and interest cost is recognised in the income statement in ‘Employees’
end of service benefits’.
(b) Share based payments
The Group operates a number of equity-settled, share based compensation plans. The fair value of the employee services received
in exchange for the grant of the shares/options is recognised as an expense. The total amount to be expensed over the vesting period
is determined by reference to the fair value of the shares/options granted, excluding the impact of any non-market vesting conditions
(for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of
shares/options that are expected to vest. At each balance sheet date, the entity revises its estimates of the number of shares/options
that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the consolidated income statement,
with a corresponding adjustment to retained earnings.
The Company has granted rights to its equity instruments to the employees of subsidiary companies conditional upon the completion of
continuing service with the Group for a specified period. The total amount of the grant over the vesting period is determined by reference
to the fair value of the equity instruments granted and is recognised in each period as an increase in the investment in the subsidiary with
a corresponding credit to retained earnings.
In the separate financial statements of the subsidiary, the fair value of the employee services received in exchange for the grant of the
equity instruments of the Company is recognised as an expense with a corresponding credit to equity.
2.13 Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.
Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated income statement
on a straight line basis over the period of the lease.
2.14 Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, current accounts with banks less margin deposits, other short-term highly liquid
investments with original maturity of three months or less and bank overdrafts. Bank overdrafts are shown within borrowings in current
liabilities on the balance sheet.
2.15 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost;
any difference between the proceeds (net of transaction costs) and the repayment value is recognised in the consolidated statement of
income over the period of the borrowings using the effective interest method. The Group capitalises general and specific borrowing costs
directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. All other borrowing
costs are recognised in consolidated income statement in the period in which they are incurred.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan. The fee is capitalised and amortised over
the period of the facility to which it relates.
2.16 Dividend distribution
Dividend distributions are recognised as a liability in the Group’s consolidated and parent company financial statements in the period
in which the dividends are approved by the shareholders.
2.17 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and accessing performance of the operating segments,
has been identified as the Executive Directors that make strategic decisions.
Lamprell plc Annual Report and Accounts 2015Financial statements 87
Summary of significant accounting policies continued
2
2.18 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent
that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date
in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which the applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they
arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability
in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date
and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which
the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except for deferred income tax liability
where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will
not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either
the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
2.19 Financial assets
The Group classifies its financial assets in the following categories: at fair value through profit or loss and loans and receivables. Currently,
the Group does not have any available-for-sale and held-to-maturity financial assets. The classification depends on the purpose for which
the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
(a) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category
if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are
designated as hedges. Assets in this category are classified as current assets.
Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in
the consolidated income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have
expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.
Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented
in the consolidated income statement within ‘other gains/(losses) – net’ in the period in which they arise.
(b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified
as non-current assets.
The Group’s loans and receivables comprise trade receivables (Note 2.9), other receivables (excluding prepayments), receivables
from a related party and cash and cash equivalents (Note 2.14) in the consolidated balance sheet and amounts due from related parties
(Note 24), other receivables and cash at bank (Note 22) in the Company balance sheet.
Loans and receivables are initially measured at fair value plus transaction costs and subsequently carried at amortised cost less provision
for impairment. The amortised cost is computed using the effective interest method.
Loans and receivables are derecognised when the rights to receive cash flows from the counterparty have expired or have been
transferred and the Group has transferred substantially all risks and rewards of the ownership.
Impairment of financial assets
(c)
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial
assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective
evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that
loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be
reliably estimated.
Financial statements 88
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
Summary of significant accounting policies continued
2
2.20 Derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their
fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument
and, if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of a particular risk associated with a
recognised asset or liability, or a highly probable forecast transaction (cash flow hedge).
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its
risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting
changes in fair values or cash flows of hedged items.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain
or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the
consolidated income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported
in equity is immediately transferred to the consolidated income statement within ‘other gains/(losses) – net’.
The fair values of various derivative instruments used for hedging purposes are disclosed in Note 28. The full fair value of a hedging
derivative is classified as a non-current asset or liability when the remaining hedged item is more than 12 months and as a current asset
or liability when the remaining maturity of the hedged item is less than 12 months.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other
comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the consolidated income statement
within ‘other gains/(losses) – net’.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the item affects profit or loss (for example, when
the forecast sale that is hedged takes place). The gain or loss relating to the ineffective portion is recognised in the consolidated
income statement within ‘other gains/(losses) – net’. However, when the forecast transaction that is hedged results in the recognition
of a non-financial asset (for example, contracts work-in-progress or fixed assets), the gains and losses previously deferred in equity
are transferred from equity and included in the initial measurement of the cost of the asset. The deferred amounts are ultimately
recognised in cost of goods sold in the case of contracts work in progress or in depreciation in the case of fixed assets.
2.21 Assets (or disposal groups) held for sale
Assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale
transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.
2.22 Impairment of non-financial assets
Assets that have an indefinite useful life – for example, goodwill or intangible assets not ready to use – are not subject to amortisation and
are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the
asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost to sell and
its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows (cash generating units). Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment
at each reporting date. Any material impairment loss is recognised in the consolidated income statement and separately disclosed.
2.23 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as
a deduction, net of tax, from the proceeds. The excess of proceeds received net of any directly attributable transaction costs over the par
value of the shares is credited to the share premium.
Where any Group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly
attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders until the shares
are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable
incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.
3. Financial risk management
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange and cash flow interest rate risk),
credit risk and liquidity risk. These risks are evaluated by management on an ongoing basis to assess and manage critical exposures.
The Group’s liquidity and market risks are managed as part of the Group’s treasury activities. Treasury operations are conducted within
a framework of established policies and procedures.
(a) Market risk – foreign exchange risk
The Group has foreign exchange risk primarily with respect to balances in Euro and Saudi Riyal with certain suppliers. During the year
ended 31 December 2015, if foreign exchange rates on foreign balances had been 10% higher/lower, the exchange difference would
have been higher/lower by USD 139,602 (2014: USD 122,918).
Lamprell plc Annual Report and Accounts 2015Financial statements 89
Financial risk management continued
3
3.1 Financial risk factors continued
(b) Market risk – cash flow interest rate risk
The Group holds its surplus funds in short-term bank deposits. During the year ended 31 December 2015, if interest rates on deposits had
been 0.5% higher/lower, the interest income would have been higher/lower by USD 1,395,304 (2014: USD 1,358,744).
The Group’s interest rate risk arises from long-term borrowings. Borrowings at variable rates expose the Group to cash flow interest rate
risk which is covered by the Group by taking fixed interest rate swaps against the variable rates. Under these swaps, the Group agrees with
other parties to exchange, at specified intervals (mainly quarterly), the difference between fixed contract rates and floating rate interest
amounts calculated by reference to the agreed notional principal amounts. During the year ended 31 December 2015, if interest rates
on borrowings had been 0.5% higher/lower, the interest expense would have been higher/lower by USD 462,028 (2014: USD 543,411).
(c) Credit risk
The Group’s exposure to credit risk is detailed in Notes 15, 21, 22 and 28. The Group has a policy for dealing with customers with an
appropriate credit history. The Group has policies that limit the amount of credit exposure to any financial institution.
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, deposits with banks, financial assets carried
at fair value through profit or loss, trade and other receivables and derivative financial instruments. The Group has a formal procedure of
monitoring and follow up of customers for outstanding receivables. For banks and financial institutions, only independently rated parties
with a minimum rating of ‘B’ are accepted. The Group assesses internally the credit quality of each customer, taking into account its
financial position, past experience and other factors.
At 31 December 2015, the Group had a significant concentration of credit risk with nine of its largest customer balances accounting
for 88% (2014: 57%) of trade receivables outstanding at that date. Management believes that this concentration of credit risk is
mitigated as the Group conducts credit checks internally and through expert third party providers for new counterparties or in support
of major contracts, payment terms under contract are carefully managed and protection against non-payment is built into contractual
documentation to ensure the Group has a right to remedy in the event of delayed/non-payment.
The following table shows the rating and balance of the 13 major counterparties at the balance sheet date:
Counterparty
Bank A
Bank B
Bank C
Bank D
1. Based on Fitch’s long-term ratings.
Customer 1
Customer 2
Customer 3
Customer 4
Customer 5
Customer 6
Customer 7
Customer 8
Customer 9
2015
External
rating1
A+
A+
AA-
AA-
USD’000
171,549
51,922
34,268
11,614
269,353
2014
External
rating1
AA-
A+
AA-
AA-
2015
2014
Internal
rating2
Group B
Group C
Group B
Group B
Group A
Group B
Group B
Group A
Group B
Internal
rating2
Group A
Group C
Group B
Group B
Group A
Group C
Group B
Group A
Group C
USD’000
38,798
23,665
12,548
5,332
2,159
1,156
1,096
773
649
86,176
USD’000
195,700
115,362
35,654
11,511
358,227
USD’000
4,888
3,928
3,892
3,359
3,091
2,753
2,081
1,935
1,851
27,778
2. Refer to Note 15 for the description of internal ratings.
The above represents 94% (2014: 57%) of trade receivables of USD 94.1 million (2014: USD 48.6 million) (Note 21).
The counterparties in 2015 are not necessarily the same counterparties in 2014.
Management does not expect any losses from non-performance by these counterparties.
Financial statements 90
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
Financial risk management continued
3
3.1 Financial risk factors continued
(d) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of
committed credit facilities. The Group is currently financed from shareholders’ equity and borrowings.
The Group’s liquidity risk on derivative financial instruments is disclosed in Note 28.
The following table analyses the Group’s other financial liabilities into relevant maturity groupings based on the remaining period at the
balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
31 December 2015
Trade and other payables (excluding due to customers
on contracts) (Note 29)
Derivative financial instruments (Note 28)
Borrowings (Note 31)
31 December 2014
Trade and other payables (excluding due to customers
on contracts) (Note 29)
Derivative financial instruments (Note 28)
Borrowings (Note 31)
Carrying
amount
USD’000
Contractual
cash flows
USD’000
Less than
1 year
USD’000
Between
2 to 5 years
USD’000
171,342
18
79,299
250,659
168,923
269
98,979
268,171
–
–
80,456
80,456
–
–
100,456
100,456
–
4
20,456
20,460
–
269
20,456
20,725
–
14
60,000
60,014
–
–
80,000
80,000
3.2 Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide
returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, or issue new
shares to reduce debt.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is
calculated as total borrowings (including current and non-current borrowings as shown in the balance sheet) less cash and bank
balances. Total capital is calculated as “equity” as shown in the balance sheet plus net debt.
At the balance sheet date, the Group has no net debt and was therefore un-geared.
3.3 Fair value estimation
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
(a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
(b)
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices) (Level 2); and
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).
(c)
There are no assets at 31 December 2015 measured at fair value. The following table presents the Group’s assets that are measured
at fair value at 31 December 2014:
Derivative financial instruments (Note 28)
Level 1
USD’000
–
Level 2
USD’000
69
Level 3
USD’000
–
Total
USD’000
69
Lamprell plc Annual Report and Accounts 2015Financial statements
91
Financial risk management continued
3
3.3 Fair value estimation continued
The following table presents the Group’s liabilities that are measured at fair value:
31 December 2015
Derivative financial instruments (Note 28)
31 December 2014
Derivative financial instrument (Note 28)
Level 1
USD’000
Level 2
USD’000
Level 3
USD’000
Total
USD’000
–
–
18
269
–
–
18
269
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation
techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all
significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant
inputs is not based on observable market data, the instrument is included in Level 3.
Specific valuation techniques used to value financial instruments include:
(a) Quoted market prices or dealer quotes for similar instruments; and
(b) Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.
4 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are
as follows:
Revenue recognition
The Group uses the percentage-of-completion method in accounting for its contract revenue. Use of the percentage-of-completion method
requires the Group to estimate the stage of completion of the contract to date as a proportion of the total contract work to be performed
in accordance with the accounting policy set out in Note 2.2. As a result, the Group is required to estimate the total cost to completion of
all outstanding projects at each period end. The application of a 10% sensitivity to management estimates of the total costs to completion
of all outstanding projects at the year-end would result in the revenue and profit increasing by USD 30.5 million (2014: USD 4.4 million)
if the total costs to complete are decreased by 10% and the revenue and profit decreasing by USD 28.5 million (2014: USD 4.4 million)
if the total costs to complete are increased by 10%.
Estimated impairment of goodwill
The Group tests goodwill (Note 17) for impairment annually or more frequently if events or changes in circumstances indicate a potential
impairment. Goodwill is monitored by management at the “cash generating unit relating to upgrade and refurbishment of offshore jackup
rigs, fabrication, assembly and new build construction for the offshore oil and gas and renewables sectors, including FPSO and other
offshore and onshore structures, oilfield engineering services, including the upgrade and refurbishment of land rigs” (“CGU1”). This CGU
also represents the operating segment UAE for the Group (Note 5).
The recoverable amount of CGU1 is determined based on value-in-use calculations. These calculations require the use of estimates
(Note 17).
The amount of headroom is USD 311.6 million (2014: USD 290.6 million).
If the revenue growth rate used was to differ by 0.5% from management’s estimates, in isolation, there would be a reduction of
USD 3.9 million (2014: USD 5.7 million) in the headroom if the revenue growth rate was lower or the headroom would be higher
by USD 3.9 million (2014: USD 5.7 million) if the revenue growth rate was higher.
If the discount rate used was to differ by 0.5% from management’s estimates, in isolation, there would be a reduction in the headroom
of USD 48.0 million (2014: USD 55.2 million) if the discount rate was to increase or an increase in the headroom by USD 54.2 million
(2014: USD 63.5 million) if the discount rate was to decrease.
If the net profit as a percentage of revenue used was to differ by 0.5% from management’s estimates, in isolation, there would be an
increase of USD 66.4 million (2014: USD 62.1 million) in the headroom if the net profit was to increase or there would be an reduction
in the headroom of USD 66.4 million (2014: USD 62.1 million) in the headroom if the net profit was to decrease.
If the terminal value growth rate used was to differ by 0.5% from management’s estimates, in isolation, there would be a reduction
in the headroom of USD 35.5 million (2014: USD 43.4 million) if the terminal value growth rate was lower or an increase in the headroom
of USD 40.8 million (2014: USD 49.8 million) if the terminal value growth rate was higher.
Financial statements 92
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
4 Critical accounting estimates and judgements continued
Estimated impairment of investment in subsidiaries
The Company tests investment in subsidiaries (Note 18) for impairment annually or more frequently if events or changes in circumstances
indicate a potential impairment. The recoverable amount of the investment in subsidiaries is determined based on value-in-use calculations.
These calculations require the use of estimates. These calculations use pre-tax cash flow projections based on financial budgets approved
by management covering a three-year period.
Cash flows beyond the three-year period are extrapolated using the estimated revenue growth rate of 5% (2014: 5%). A discount rate of
10.39% (2014: 10.46%) is used to discount the pre-tax cash flows projections to the present value. In determining the appropriate discount
rate, the Group considers the weighted average cost of capital employed, which takes into consideration the risk free rate of US treasury
bonds with the long-term maturity period, UAE inflation rate, equity risk premium on the entities operating from UAE, Group’s beta and cost
of Group’s debt.
The amount of headroom is USD 354.7 million (2014: USD 381.7 million).
If the revenue growth rate used was to differ by 0.5% from management’s estimates, in isolation, the headroom would be lower by
USD 3.9 million (2014: USD 5.8 million) if the revenue growth rate was decreased or the headroom would be higher by USD 3.9 million
(2014: USD 5.8 million) if the revenue growth rate was increased.
If the discount rate used was to differ by 0.5% from management’s estimates, in isolation, the headroom would be lower by USD 48.2 million
(2014: USD 56.7 million) if the discount rate was increased or the headroom would be higher by USD 55.1 million (2014: USD 65.4 million)
if the discount rate was decreased.
If the net profit as a percentage of revenue was to differ by 0.5% from management’s estimates, in isolation, the headroom would be lower
by USD 67.0 million (2014: USD 63.2 million) if the net profit as a percentage of revenue was lower or the headroom would be higher by
USD 67.0 million (2014: USD 63.2 million) if the net profit as a percentage of revenue was higher.
If the terminal value growth rate was to differ by 0.5% from management’s estimates, in isolation, the headroom would be lower by
USD 35.9 million (2014: USD 44.7 million) if the terminal value growth rate was lower or the headroom would be higher by USD 41.3 million
(2014: USD 51.4 million) if the terminal value growth rate was increased.
Employees’ end of service benefits
The rate used for discounting the employees’ post-employment defined benefit obligation should be based on market yields on high quality
corporate bonds. In countries where there is no deep market for such bonds, the market yields on government bonds should be used.
In the UAE, there is no deep market for corporate bonds and no market for government bonds and, therefore, the discount rate has been
estimated using the US AA-rated corporate bond market as a proxy. On this basis, the discount rate applied was 3.5% (2014: 3.5%). If the
discount rate used was to differ by 0.5 points from management’s estimates, the carrying amount of the employees’ end of the service
benefits provision at the balance sheet date would be an estimated USD 1.0 million (2014: USD 1.5 million) lower or USD 1.4 million (2014:
USD 1.6 million) higher. If the salary growth rate used was to differ by 0.5 points from management’s estimates, the carrying amount of the
employees’ end of the service benefits provision at the balance sheet date would be an estimated USD 1.4 million (2014: USD 1.5 million)
higher or USD 1.0 million (2014: USD 1.6 million) lower.
Segment information
5
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker at
the reporting date. The chief operating decision-maker has been identified as the Executive Directors who make strategic decisions.
The Executive Directors review the Group’s internal reporting in order to assess performance and allocate resources. Management has
determined the operating segments based on these reports.
In prior periods, the business reported on the basis of the facility from where the services were rendered. With effect from 1 January 2015,
the business was reorganised into business units on the basis of services rendered. Segment comparatives are restated to reflect the
organisational changes that have occurred since the prior reporting period to present a like-for-like view.
The Executive Directors manage the business on the basis of the business units from which the services are rendered. Management
considers the performance of the business from New Build Jackup Rigs (“NBJR”), Modules, (“MOD”), Offshore Platforms (“OP”) and
Oil and Gas Contracting Services (“OGCS”).
NBJR derives its revenue from assembly and new build construction for the offshore oil and gas and renewables sectors; MOD derives
its revenue from fabricating packaged, pre-assembled and modularised units and constructing accommodation and complex process
modules for onshore downstream projects; OP derives its revenue from construction of complex living quarters, wellhead decks, topsides,
jackets and other offshore fixed facilities; and OGCS derives its revenue from rig refurbishment, land rig services, engineering and
construction and operations and maintenance.
These business units are viewed by the management as three operating segments – United Arab Emirates “UAE”, Qatar “QTR” and
Kazakhstan “KZK” – based on common pool of resources and ability to execute the projects on an interchangeable basis.
Lamprell plc Annual Report and Accounts 2015Financial statements 93
Segment information continued
5
UAE is reported as a single segment (Segment A). Services provided from QTR and KZK do not meet the quantitative thresholds required
by IFRS 8 and the results of these operating segments are included in the “all other segments” column.
Year ended 31 December 2015
Revenue from external customers
Gross operating profit
Year ended 31 December 2014
Revenue from external customers
Gross operating profit
Segment A
USD’000
865,802
173,179
1,077,921
233,292
All other
segments
USD’000
5,256
1,696
6,969
2,511
Total
USD’000
871,058
174,875
1,084,890
235,803
Sales between segments are carried out on agreed terms. The revenue from external parties reported to the Executive Directors is
measured in a manner consistent with that in the consolidated income statement.
The Executive Directors assess the performance of the operating segments based on a measure of gross profit. The staff, equipment and
certain subcontract costs are measured based on standard cost. The measurement basis excludes the effect of the common expenses
for yard rent, repairs and maintenance and other miscellaneous expenses.
The reconciliation of the gross profit is provided as follows:
Gross operating profit for the reportable segments as reported to the Executive Directors
Gross operating profit for other segments as reported to the Executive Directors
Unallocated:
Employee and equipment costs
Repairs and maintenance
Yard rent and depreciation
Others
Gross profit
Selling and distribution expenses (Note 7)
General and administrative expenses (Note 9)
Other gains/(losses) – net (Note 12)
Finance costs (Note 11)
Finance income (Note 11)
Others
Profit for the year from continuing operations
2015
USD’000
173,179
1,696
(14,523)
(18,636)
(12,667)
(5,529)
123,520
(1,771)
(44,318)
260
(14,647)
2,679
777
66,500
2014
USD’000
233,292
2,511
(11,841)
(21,776)
(15,249)
(4,857)
182,080
(1,773)
(72,700)
1,456
(20,516)
2,166
2,507
93,220
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.
Financial statements
94
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
Segment information continued
5
The breakdown of revenue from all business units is as follows:
New build jackup rigs
Oil & gas contracting services
Modules
Offshore platforms
2015
USD’000
675,821
136,216
47,121
11,900
871,058
2014
USD’000
748,391
253,870
4,636
77,993
1,084,890
The Group’s principal place of business is in the UAE. The revenue recognised in the UAE with respect to services performed to
external customers is USD 865.8 million (2014: USD 1,077.9 million), and the revenue recognised from the operations in other countries
is USD 5.3 million (2014: USD 7.0 million).
Certain customers individually accounted for greater than 10% of the Group’s revenue and are shown in the table below:
External customer A
External customer B
External customer C
2015
USD’000
275,296
196,462
147,251
619,009
2014
USD’000
275,026
155,768
144,952
575,746
The revenue from these customers is attributable to Segment A. The above customers in 2015 are not necessarily the same customers
in 2014.
6 Cost of sales
Materials and related costs
Subcontract costs
Staff costs (Note 10)
Subcontract labour
Equipment hire
Depreciation (Note 16)
Repairs and maintenance
Yard rent
Warranty costs and other liabilities – net
Others
7
Selling and distribution expenses
Travel
Advertising and marketing
Entertainment
Others
2015
USD’000
445,461
77,561
150,979
20,968
5,136
16,818
18,636
6,754
(4,000)
9,225
747,538
2014
USD’000
420,939
187,357
163,614
38,394
19,252
23,979
21,776
6,707
6,989
13,803
902,810
2015
USD’000
2014
USD’000
628
359
143
641
1,771
1,055
480
144
94
1,773
Lamprell plc Annual Report and Accounts 2015Financial statements Share based payments
8
Group
Amount of share based charge (Note 10):
– relating to free share plan
– relating to executive share option plan
– relating to performance share plan
Company
Amount of share based charge:
– relating to free share plan
– relating to executive share option plan
– relating to performance share plan
95
2015
USD’000
2014
USD’000
126
130
2,918
3,174
143
15
926
1,084
2015
USD’000
2014
USD’000
90
130
905
1,125
11
15
92
118
Free share plan
The Company awarded shares to selected Directors, key management personnel and employees under the free share plan that provides
an entitlement to receive these shares at no cost. These free shares are conditional on the Directors/key management personnel/employee
completing a specified period of service (the vesting period). The award does not have any performance conditions and does not entitle
participants to dividend equivalents during the vesting period. The fair value of the share awards made under this plan is based on the
share price at the date of the grant, less the value of the dividends foregone during the vesting period.
The details of the shares granted under this scheme are as follows:
Grant date
2014
30 June 2014
18 November 2014
Number of
shares
Vesting
period
Fair value
per share
Expected
withdrawal
rate
40,000
122,499
162,499
36 months
36 months
£ 1.55
£ 1.41
–
–
A charge of USD 125,661 (2014: USD 143,000) is recognised in the consolidated income statement for the year with a corresponding
credit to the consolidated retained earnings. This includes a charge recognised in the income statement of the Company with a
corresponding credit to retained earnings of USD 90,356 (2014: USD 11,000).
The Group has no legal or constructive obligation to settle the free share awards in cash.
An analysis of the number of shares granted, vested during the year and expected to vest in future periods is provided below:
Shares expected to vest in future periods at 1 January 2014
Shares granted under the free share awards
Shares vested under the free share awards
Shares expected to vest in future periods at 31 December 2014 and 31 December 2015
Number
of shares
127,500
162,499
(127,500)
162,499
Financial statements 96
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
Share based payments continued
8
Executive share option plan
Share options are granted by the Company to certain employees under the executive share option plan. This option plan does not entitle
the employees to dividends. These options are conditional on the employee completing three years of service (the vesting period) and
hence the options are exercisable starting three years from the grant date and have a contracted option term of 10 years. The Group has
no legal or constructive obligation to repurchase or settle the options in cash.
The movement in the number of share options outstanding and their related weighted average exercise price is as follows:
At 1 January 2009
Granted in 2009
Forfeited in 2009
At 31 December 2009 and 2010
Vested and exercised
Vested but not exercised
At 31 December 2011
Adjustment for the rights issue
Vested and exercised
At 31 December 2012 and 2013
Granted in 2014
At 31 December 2014 and 2015
Exercise
price in
£ per share
3.22
0.57
3.22
0.93
3.22
3.22
0.57
0.57
0.57
1.41
Options
105,369
550,000
(19,585)
635,784
(35,253)
(50,531)
550,000
55,048
(605,048)
340,855
340,855
Vesting date
16 May 2010
31 March 2012
Expiry date
16 May 2017
31 March 2019
17 November 2017
27 November 2027
The outstanding options as at 31 December 2015 have a fair value per option of £0.73.
5,876 options under this plan were vested on the due date but not exercised or lapsed at 31 December 2015 (2014: 5,876).
A charge of USD 130,470 (2014: USD 15,000) is recognised in the consolidated income statement for the year with a corresponding credit
to the consolidated retained earnings. This includes a charge recognised in the income statement of the Company with a corresponding
credit to retained earnings of USD 130,470 (2014: USD 15,000).
Performance share plan
The Company granted share awards to Directors, key management personnel and selected employees that give them an entitlement to
receive a certain number of shares subject to the satisfaction of a performance target and continued employment. The performance target
related to the growth in the Group’s earnings per share. The fair value of the share awards made under this plan is based on the share
price at the date of the grant less the value of the dividends foregone during the vesting period.
The details of the shares granted under this scheme are as follows:
Grant date
2010
15 April 2010
2011
2 September 2011
8 December 2011
2012
16 April 2012
2014
30 June 2014
30 June 2014
18 November 2014
18 November 2014
2015
9 April 2015
9 April 2015
9 April 2015
21 September 2015
Number
of shares
Vesting
period
Fair value
per share
Dividend
entitlement
502,572
36 months
£ 2.57
339,448
38,512
377,960
36 months
36 months
£ 2.97
£ 2.81
507,216
36 months
£ 3.19
1,080,142
470,000
321,691
321,691
2,193,524
416,569
1,671,505
495,000
292,570
2,875,644
36 months
36 months
24 months
36 months
36 months
36 months
36 months
14 months
£ 1.35
£ 1.55
£ 1.41
£ 1.23
£ 1.05
£ 1.05
£ 1.20
£ 0.67
No
Yes
Yes
No
No
No
No
No
No
No
No
No
Expected
withdrawal
rate
5%
–
–
–
–
–
–
–
–
–
–
–
Lamprell plc Annual Report and Accounts 2015Financial statements
97
Share based payments continued
8
Performance share plan continued
Accordingly, a charge of USD 2,918,062 (2014: USD 926,000) is recognised in the consolidated income statement for the year with
a corresponding credit to the consolidated retained earnings. During 2015, this includes a charge recognised in the income statement
of the Company with a corresponding credit to retained earnings of USD 905,000 (2014: USD 92,000).
The Group has no legal or constructive obligation to settle the free share awards in cash.
An analysis of the number of shares gifted/granted, vested during the year and expected to vest in future periods is provided below:
Shares expected to vest in future periods at 1 January 2014
Shares granted under performance share plan
Shares vested under performance share plan
Shares lapsed due to non-satisfaction of vesting conditions
Shares expected to vest in future periods at 31 December 2014
Shares granted under performance share plan
Shares lapsed due to non-satisfaction of vesting conditions
Shares expected to vest in future periods at 31 December 2015
9 General and administrative expenses
Staff costs (Note 10)
Legal, professional and consultancy fees
Depreciation (Note 16)
Amortisation of intangible assets (Note 17)
Utilities and communication
(Release)/provision for impairment of trade receivables – net
Bank charges
Others
10 Staff costs
Wages and salaries
Employees’ end of service benefits (Note 27)
Share based payments – value of services provided (Note 8)
Other benefits
Staff costs are included in:
Cost of sales (Note 6)
General and administrative expenses (Note 9)
Number of employees at 31 December
Number of
shares
157,471
2,193,524
(60,080)
(34,333)
2,256,582
2,875,644
(336,293)
4,795,933
2014
USD’000
38,519
5,067
3,627
11,895
718
6,871
286
5,717
72,700
2014
USD’000
116,490
6,229
1,084
78,330
202,133
163,614
38,519
202,133
6,912
2015
USD’000
34,054
3,346
2,560
2,624
932
(6,100)
184
6,718
44,318
2015
USD’000
120,611
6,313
3,174
54,935
185,033
150,979
34,054
185,033
7,736
Staff costs capitalised during the year and not included above amount to USD 7.5 million (2014: USD 0.5 million).
Financial statements
98
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
10 Staff costs continued
Directors’ remuneration comprises:
Salary
2015
USD’000
Fees
2015
USD’000
Allowances
& benefits
2015
USD’000
Share based
payments
2015
USD’000
Post-
employment
benefits
2015
USD’000
Total
2015
USD’000
Total
2014
USD’000
–
753
157
–
–
–
–
–
–
–
–
910
294
–
–
–
174
40
87
115
125
40
34
909
–
551
150
–
–
–
–
–
–
–
–
701
105
1,034
44
–
55
–
–
–
–
–
–
1,238
–
44
7
–
–
–
–
–
–
–
–
51
399
2,382
358
–
229
40
87
115
125
40
34
3,809
–
1,823
–
2,170
318
96
146
125
121
–
–
4,799
Executive Directors
John Kennedy1
Jim Moffat
Antony Wright2
Joanne Curin3
Non-Executive Directors
John Kennedy1
Peter Whitbread4
Michael Press5
John Malcolm
Ellis Armstrong
Mel Fitzgerald6
Debra Valentine7
Total
The emoluments of the highest paid Director were USD 2.4 million (2014: USD 2.2 million) and these principally comprised salary, bonus
and benefits.
1. Appointed Executive Chairman with effect from 13 August 2015.
2. Appointed as Chief Financial Officer and Director on 13 August 2015.
3. Appointed as Chief Financial Officer and Director on 1 October 2013 and resigned with effect from 17 November 2014.
4. Retired as Non-Executive Director with effect from 12 May 2015.
5. Retired as Non-Executive Director with effect from 13 August 2015.
6. Appointed as Non-Executive Director on 13 August 2015.
7. Appointed as Non-Executive Director on 1 September 2015.
11 Finance costs – net
Finance costs:
Bank guarantee charges
Interest on bank borrowings
Commitment fees
Others
2015
USD’000
2014
USD’000
5,300
3,588
3,829
1,930
14,647
11,232
6,006
1,728
1,550
20,516
Finance income
Finance income comprises interest income of USD 2.7 million (2014: USD 2.2 million) from bank deposits.
Lamprell plc Annual Report and Accounts 2015Financial statements
12 Other gains/(losses) – net
Exchange (loss)/gain – net
Profit on disposal of assets
Net loss on derivatives
Others
99
2015
USD’000
2014
USD’000
(16)
315
(780)
741
260
1,164
162
(156)
286
1,456
13 Earnings per share
(a) Basic
Basic earnings per share is calculated by dividing the profit 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 25).
(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion
of all dilutive potential ordinary shares. For the free share awards, options under executive share option plan and performance share plan,
a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average
annual market share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share
awards/options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming
the exercise of the share awards/options.
The calculations of earnings per share are based on the following profit and numbers of shares:
Profit for the year (USD’000)
Weighted average number of shares for basic earnings per share
Adjustments for:
– Assumed exercise of the free share awards
– Assumed vesting of performance share plan
Weighted average number of shares for diluted earnings per share
Earnings per share:
Basic
Diluted
Earnings per share from continued operations:
Basic
Diluted
(Loss)/earnings per share from discontinued operations:
Basic
Diluted
2015
2014
64,700
341,710,302
118,057
315,591,024
51,331
1,683,467
343,445,100
3,640
242,361
315,837,025
18.93c
18.84c
19.46c
19.36c
(0.53c)
(0.52c)
37.41c
37.38c
29.54c
29.52c
7.87c
7.86c
The 340,855 options (2014: 340,855 options) granted on 18 November 2014 are not included in the calculation of diluted earnings
per share because they are antidilutive for the year ended 31 December 2014 and 2015. These options could potentially dilute basic
earnings per share in future.
Financial statements 100
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
14 Operating profit
(a) Operating profit
Operating profit (from continuing operations) is stated after charging/recognising:
Depreciation
Operating lease rentals – land and buildings
(Release)/provision for impairment of trade receivables (Note 21)
(b) Auditor’s remuneration
Services provided by the Group’s auditors and its associates comprised:
Auditor’s remuneration – audit and related services
Auditor’s remuneration – taxation and other services
Auditor’s remuneration – other services1
1. Comparative numbers mainly relate to capital markets support for the rights issue.
15 Financial instruments by category
The accounting policies for financial instruments have been applied to the line items below:
Group
Assets as per balance sheet
Derivative financial instruments (Note 28)
Trade receivables net of provision (Note 21)
Other receivables excluding prepayments
Due from related parties (Note 24)
Cash and bank balances (Note 22)
Liabilities as per balance sheet
Classification
Fair value through profit or loss
Loans and receivables
Loans and receivables
Loans and receivables
Loans and receivables
Classification
Derivative financial instruments (Note 28)
Trade payables (Note 29)
Due to a related party (Note 24)
Accruals (Note 29)
Provision for warranty costs and other liabilities (Note 30)
Borrowings (Note 31)
Fair value through profit or loss
Liabilities at amortised cost
Liabilities at amortised cost
Liabilities at amortised cost
Liabilities at amortised cost
Liabilities at amortised cost
2015
USD’000
19,378
12,437
(6,100)
2014
USD’000
27,654
16,609
7,798
2015
USD’000
2014
USD’000
568
101
–
663
229
643
2015
USD’000
–
88,926
6,404
13
289,618
384,961
2015
USD’000
18
44,065
122
127,155
8,334
79,299
258,993
2014
USD’000
69
37,000
8,315
68
371,625
417,077
2014
USD’000
269
30,390
364
138,169
15,812
98,979
283,983
Lamprell plc Annual Report and Accounts 2015Financial statements
15 Financial instruments by category continued
Company
Assets as per balance sheet
Cash at bank
Due from related parties (Note 24)
Other receivables
Liabilities as per balance sheet
Accruals
Classification
Loans and receivables
Loans and receivables
Loans and receivables
Classification
Liabilities at amortised cost
101
2015
USD’000
218
12,510
635
13,363
2014
USD’000
286
110,191
507
110,984
2015
USD’000
17
2014
USD’000
2,487
Credit quality of financial assets
Group
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to historical information about
counterparty default rates:
Trade receivables
Group A
Group B
Group C
Group A – Last six months average debtor days is less than 45.
Group B – Last six months average debtor days is between 46 and 90.
Group C – Last six months average debtor days is above 90.
Derivative financial instruments
Fitch’s ratings
A+
AA-
None of the financial assets that are fully performing have been renegotiated in the last year.
2015
USD’000
2014
USD’000
4,473
12,502
21,668
38,643
17,127
976
2,088
20,191
2015
USD’000
2014
USD’000
–
–
–
23
46
69
Financial statements
102
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
15 Financial instruments by category continued
Credit quality of financial assets continued
Group continued
Cash at bank and short-term bank deposits
Fitch’s ratings
AA-
A+
A
A-
B
BBB+
BBB–
Not rated
Cash in hand (unrated)
Cash at bank and in hand (Note 22)
Company
Due from related parties (Note 24)
Due from related parties is neither past due nor impaired.
Cash at bank
Fitch’s ratings
AA–
2015
USD’000
2014
USD’000
46,463
230,471
10,547
–
963
395
–
202
289,041
577
289,618
242,865
124,745
1,564
395
917
–
104
202
370,792
833
371,625
2015
USD’000
12,510
2014
USD’000
110,191
2015
USD’000
2014
USD’000
218
286
Lamprell plc Annual Report and Accounts 2015Financial statements
103
Total
USD’000
262,503
18,868
–
(915)
(1,566)
278,890
55,549
(5,543)
–
328,896
(114,180)
(27,654)
876
1,411
(139,547)
(19,378)
5,315
(153,610)
16 Property, plant and equipment
Cost
At 1 January 2014
Additions
Transfers
Assets of disposal group classified
as held for sale (Note 23)
Other disposals
At 31 December 2014
Additions
Other disposals
Transfers
At 31 December 2015
Depreciation
At 1 January 2014
Charge for the year
Accumulated depreciation of disposal group
classified as held for sale (Note 23)
Other disposals
At 31 December 2014
Charge for the year
Other disposals
At 31 December 2015
Net book amount
At 31 December 2015
At 31 December 2014
Operating
equipment
USD’000
Buildings &
infrastructure
USD’000
Fixtures
and office
equipment
USD’000
Motor
vehicles
USD’000
Capital
work-in-
progress
USD’000
116,853
8,842
1,332
–
(643)
126,384
25,104
(1,760)
3,597
153,325
(70,814)
(14,052)
–
588
(84,278)
(10,906)
1,723
(93,461)
123,232
1,991
1,445
–
(48)
126,620
10,793
(370)
1,088
138,131
(27,272)
(9,042)
–
41
(36,273)
(7,209)
331
(43,151)
16,207
1,978
154
(820)
(109)
17,410
2,121
(3,118)
129
16,542
(13,970)
(3,485)
781
88
(16,586)
(803)
3,001
(14,388)
59,864
42,106
94,980
90,347
2,154
824
2,522
1,113
315
(95)
(766)
3,089
1,372
(295)
83
4,249
(2,124)
(1,075)
95
694
(2,410)
(460)
260
(2,610)
1,639
679
3,689
4,944
(3,246)
–
–
5,387
16,159
–
(4,897)
16,649
–
–
–
–
–
–
–
–
16,649
5,387
175,286
139,343
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 seventeen years. The Group has renewed these land leases upon expiry in the past and its present intention
is to continue to use the land and renew these leases for the foreseeable future.
Property, plant and equipment with a carrying amount of USD 115.2 million (2014: USD 124.8 million) are under lien against the bank
facilities (Note 31).
A depreciation expense of USD 16.8 million (2014: USD 24 million) has been charged to cost of sales; USD 2.6 million (2014:
USD 3.6 million) to general and administrative expenses (Notes 6 and 9) and USD 0.04 million (2014: USD 0.1 million) is presented
within profit for the year from discontinued operations (Note 23).
Capital work-in-progress represents the cost incurred towards construction and upgrade of infrastructure and operating equipment.
Financial statements 104
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
17
Intangible assets
Cost
At 1 January 2014
Additions
Transfers
At 31 December 2014
Additions
Transfers
At 31 December 2015
Amortisation
At 1 January 2014
Charge for the year (Note 9)
At 31 December 2014
Charge for the year (Note 9)
At 31 December 2015
Net book amount
At 31 December 2015
At 31 December 2014
Goodwill
USD’000
Trade name
USD’000
Customer
relationships
USD’000
Leasehold
rights
USD’000
Software
USD’000
Work-in-
progress
USD’000
180,539
–
–
180,539
–
–
180,539
–
–
–
–
–
180,539
180,539
22,335
–
–
22,335
–
–
22,335
6,770
3,765
10,535
1,804
12,339
9,996
11,800
19,323
–
–
19,323
–
–
19,323
11,876
7,447
19,323
–
19,323
–
–
8,338
–
–
8,338
–
–
8,338
1,478
488
1,966
488
2,454
5,884
6,372
1,536
56
2,777
4,369
6
7,153
11,528
1,536
195
1,731
332
2,063
9,465
2,638
Total
USD’000
234,686
3,595
–
238,281
3,782
–
242,063
21,660
11,895
33,555
2,624
36,179
2,615
3,539
(2,777)
3,377
3,776
(7,153)
–
–
–
–
–
–
–
3,377
205,884
204,726
Trade name represents the expected future economic benefit to be derived from the continued use of the MIS trade name acquired
through the acquisition of MIS.
Leasehold rights represent a favourable operating right acquired upon the acquisition of MIS and existing leasehold rights in the books
of MIS on acquisition of Rig Metals LLC in 2008. The value of the intangible assets has been determined by calculating the present value
of the expected future economic benefits to arise from the favourable lease terms of eleven to seventeen years.
During 2014 and 2015, work-in-progress represents the cost incurred towards the implementation of a new Enterprise Resource Planning
software (“ERP software”).
The Group amortises intangible assets with a limited useful life using the straight line method over the following periods:
Trade name
Leasehold rights
Software
Years
10
17
15
Goodwill is monitored by the management at the operating segment level. Goodwill of USD 180.5 million arising due to the acquisition
of MIS has been allocated to the CGU1.
The recoverable amount of CGU1 has been determined based on value-in-use calculations. These calculations require the use of
estimates. These calculations use pre-tax cash flow projections based on Group budget covering a three-year period. Cash flows beyond
the three-year period are extrapolated using the estimated growth rate stated below. The growth rate does not exceed the long-term
average growth rate for the business in which the CGU operates. The discount rate used is pre-tax and reflect specific risks to the relevant
cash generating unit.
Lamprell plc Annual Report and Accounts 2015Financial statements 105
Intangible assets continued
17
The key assumptions, revenue growth rate, discount rate, net profit rate and terminal value growth rate used in the value-in-use calculations
are as follows:
Revenue growth rate1
Discount rate2
Net profit rate3
Terminal value growth rate4
2015
USD’000
5%
10.42%
3%
3.25%
2014
USD’000
5%
10.55%
5%
3.25%
1. Revenue growth rate for the first three-year period is based on the Group budget. Beyond this period, the growth rate is determined based upon past performance and management
2.
expectations of future market development.
In determining the appropriate discount rate, the Group considers the weighted average cost of capital employed, which takes into consideration the risk free rate of US treasury
bonds with a long-term maturity period, the UAE inflation rate, an Equity risk premium on the entities operating from the UAE, the Group’s beta and the cost of the Group’s debt.
3. Net profit rate for the first three-year period is based on the Group budget. Beyond this period, the net profit rate is determined based upon management expectations of future
market development.
4. Terminal value growth rate is based upon management expectations of future market development.
18
Investment in subsidiaries
At 1 January
Additions – conversion of loan
Share based payments to employees of subsidiaries in accordance with IFRS 2
At 31 December
2015
USD’000
593,747
96,773
2,049
692,569
2014
USD’000
592,781
–
966
593,747
The Company granted free and performance shares to employees of its subsidiaries under various plans (Note 8). These shares have
a vesting period of thirty six months. Accordingly, the proportionate share based charge for the year of USD 2.0 million
(2014: USD 1.0 million) has been recorded as an increase in investment in subsidiaries with a corresponding credit to retained earnings.
During the year, management has decided to convert a loan receivable from LEL into an equity contribution. Accordingly, an amount
of USD 96.8 million has been treated as a further investment in the subsidiary.
Investment accounted for using the equity method
19
Investment in a joint venture
At 1 January
Dividends received during the year
Share of profit for the year
At 31 December
2015
USD’000
5,118
(1,151)
1,318
5,285
2014
USD’000
5,615
(3,488)
2,991
5,118
Details of the Group’s joint ventures during the year and at the balance sheet date is as follows:
Name of the joint venture
Place of incorporation and operation
Proportion of ownership
Status
Maritime Industrial Services Arabia Co. Ltd. (“MISA”)1
Jubail, Kingdom of Saudi Arabia
30%
Operational
1. Production, manufacturing and erection of heat exchangers, pressure vessels, tanks, structural steel, piping and other related activities.
Financial statements
106
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
Investment accounted for using the equity method continued
19
Investment in a joint venture continued
Summarised financial information in respect of the Group’s joint ventures is set out below:
MISA
Total non-current assets
Total current assets
Total non-current liabilities
Total current liabilities (excluding income tax payable)
Net assets (excluding income tax payable)
Income tax payable
Net assets
Group’s share of joint venture’s net assets (excluding income tax payable) – 30%
Group’s share of joint venture’s income tax payable
Group’s share of joint venture’s net assets – net of Group’s share of income tax
Revenue
Expenses
Profit before tax
Group’s share of joint venture’s net profit – net of Group’s share of income tax
MISA is a private company and there is no quoted market price available for its shares.
This Group has the following contingencies and commitments relating to the Group’s interest in the joint venture.
Letters of guarantee
Operating lease commitments
20
Inventories
Raw materials and consumables
Work in progress
Less: Provision for slow moving and obsolete inventories
2015
USD’000
6,902
21,452
(2,600)
(6,977)
18,777
(628)
18,149
5,633
(348)
5,285
30,809
(25,077)
5,732
1,318
2014
USD’000
5,450
24,684
(2,152)
(8,117)
19,865
(1,232)
18,633
5,960
(842)
5,118
39,824
(27,037)
12,787
2,991
2015
USD’000
2,532
119
2014
USD’000
1,695
187
2015
USD’000
21,917
9,604
(2,455)
29,066
2014
USD’000
16,301
–
(1,741)
14,560
Lamprell plc Annual Report and Accounts 2015Financial statements
21 Trade and other receivables
Trade receivables
Other receivables and prepayments
Advance to suppliers
Receivables from a related party (Note 24)
Less: Provision for impairment of trade receivables
Amounts due from customers on contracts
Contract work in progress (Note 2.2)
Non-current portion:
Advance to suppliers
Prepayments
Current portion
107
2015
USD’000
94,146
30,206
19,435
13
143,800
(5,220)
138,580
133,487
156,259
428,326
2014
USD’000
48,622
21,620
6,533
68
76,843
(11,622)
65,221
185,476
152,922
403,619
–
12,712
415,614
4,932
6,944
391,743
During 2015, the Group paid an amount of USD 8.5 million to the Sharjah Electricity & Water Authority for construction, installation and
maintenance of an electric mainline at its Hamriyah facility. The Group has decided to amortise this amount over the remaining period
of the leasehold rights for the facility.
Amounts due from customers on contracts comprise:
Costs incurred to date
Attributable profits
Less: Progress billings
2015
USD’000
1,098,234
204,586
1,302,820
(1,169,333)
133,487
2014
USD’000
1,042,589
190,090
1,232,679
(1,047,203)
185,476
As required under our current contracts with Ensco, we note that all related materials and equipment and the vessel itself being
constructed under these contracts are the exclusive property of Ensco.
An analysis of trade receivables is as follows:
Fully performing
Past due but not impaired
Impaired
2015
USD’000
38,643
50,283
5,220
94,146
2014
USD’000
20,191
16,809
11,622
48,622
At 31 December 2015, trade receivables of USD 50.3 million (2014: USD 16.8 million) were past due but not impaired. These relate to a
number of independent customers for whom there is no recent history of default.
The ageing analysis of these trade receivables is as follows:
Up to three months
Three to six months
Over six months
2015
USD’000
48,446
785
1,052
50,283
2014
USD’000
11,524
3,173
2,112
16,809
Financial statements 108
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
21 Trade and other receivables continued
At 31 December 2015, trade receivables of USD 5.2 million (2014: USD 11.6 million) were impaired and provided for. The individually
impaired receivables mainly relate to customers who are in a difficult economic situation. The ageing analysis of these trade receivables is
as follows:
Not yet overdue
Up to three months
Over six months
2015
USD’000
–
569
4,651
5,220
2014
USD’000
3,090
–
8,532
11,622
The carrying amounts of the Group’s trade and other receivables are primarily denominated in US Dollars or UAE Dirhams, which are
pegged to the US Dollar.
Movements in the provision for impairment of trade receivables are as follows:
At 1 January
Provision for receivables impairment
Receivables written off during the year as uncollectable
Amounts recovered during the year
Reclassified as asset held for sale
At 31 December
2015
USD’000
11,622
1,309
(302)
(7,409)
–
5,220
2014
USD’000
7,715
8,328
(2,774)
(1,116)
(531)
11,622
The creation and release of the provision for impaired receivables have been included in general and administrative expenses in the
consolidated income statement (Note 9). Amounts charged to the allowance account are generally written off when there is no expectation
of recovering additional cash.
The other classes within trade and other receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above.
The carrying value of trade receivables approximates to their fair value.
22 Cash and bank balances
Group
Cash at bank and on hand
Term deposits and margin deposits – current
Cash and bank balances
Term deposits and margin deposits – non-current
Less: Margin/short-term deposits under lien
Less: Deposit with original maturity of more than three months
Cash and cash equivalents (for the purpose of cash flow statement)
2015
USD’000
92,301
188,367
280,668
8,950
(11,787)
(53,667)
224,164
2014
USD’000
82,945
276,163
359,108
12,517
(12,312)
(46,961)
312,352
At 31 December 2015, the cash at bank and short-term deposits were held with thirteen banks (2014: fifteen banks). The effective
interest rate on short-term deposits was 0.96% (2014: 0.51%) per annum. Margin and short-term deposits of USD 11.8 million (2014:
USD 12.3 million) and deposits with an original maturity of more than three months amounting to USD 43.9 million (2014: USD 37.3 million)
are held under lien against guarantees issued by the banks (Note 35).
Company
Cash at bank comprises of cash held with one bank.
Lamprell plc Annual Report and Accounts 2015Financial statements
109
23 Assets held for sale and discontinued operations
Discontinued operations
Profit/(loss) from discontinued operations comprises:
Revenue
Cost of sales
General and administrative expenses
Other gains/losses – net
Finance costs – net
Profit/(loss) from discontinued operations
Re-measurement of post-employment
benefit obligations
Total comprehensive income arising
from discontinued operations
The main elements of the cash flows are as follows:
Operating cash flows
Investing cash flows
Financing cash flows
Total cash flows
Inspec
USD’000
–
–
–
–
–
–
–
–
2015
Litwin
USD’000
1,640
(1,763)
(1,849)
165
(59)
(1,866)
Total
USD’000
Inspec
USD’000
1,640
(1,763)
(1,849)
165
(59)
(1,866)
3,008
(2,080)
(193)
2
–
737
2014
Litwin
USD’000
16,385
(21,082)
(2,550)
280
(203)
(7,170)
Total
USD’000
19,393
(23,162)
(2,743)
282
(203)
(6,433)
–
–
–
13
13
(1,866)
(1,866)
737
(7,157)
(6,420)
Inspec
USD’000
–
–
–
–
2015
Litwin
USD’000
702
(123)
(59)
520
Total
USD’000
Inspec
USD’000
702
(123)
(59)
520
2,954
(74)
–
2,880
2014
Litwin
USD’000
5,315
30
(203)
5,142
Total
USD’000
8,269
(44)
(203)
8,022
Inspec
During 2013, the Group decided to dispose of Inspec. This transaction was completed on 3 March 2014.
Litwin
During 2014, the Group decided to dispose of Litwin. This transaction was completed on 21 April 2015.
Disposal group
At 31 December 2014, the major classes of assets and liabilities of a disposal group (Litwin) were as follows:
Assets classified as held for sale
Property, plant and equipment (Note 16)
Trade and other receivables (net of provision for impairment of trade receivables)
Cash and bank balances
Liabilities classified as held for sale
Provision for employees’ end of service benefits (Note 27)
Trade and other payables
The commitments of disposal group were as follows:
Bank guarantees
2014
USD’000
39
8,543
6,646
15,228
333
10,213
10,546
9,395
Financial statements 110
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
23 Assets held for sale and discontinued operations continued
Disposal group continued
Litwin
Net cash inflow on the subsidiary disposed during the year is as follows:
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Provision for employees’ end of service benefits
Trade and other payables
Net assets
Accruals
Net assets retained
Expenses on disposal
Gain on disposal
Cash consideration on disposal
Less: Expenses on disposal
Less: Cash and cash equivalents transferred as a part of disposal
Net cash inflow for the purpose of consolidated cash flow statement
2015
USD’000
163
7,315
749
(298)
(3,906)
4,023
1,362
(2,611)
500
66
3,340
(500)
(749)
2,091
24 Related party balances and transactions
Related parties comprise LHL (which owns 33% of the issued share capital 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 (Executive and Non-Executive) 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 into the following significant transactions during the year with
related parties at prices and on terms agreed between the related parties:
Group
Key management compensation
Legal and professional services
Sales to joint ventures
Purchases from joint ventures
Sponsorship fees and commissions paid to legal shareholders of subsidiaries
Company
Key management compensation
Revenue (Management fees charged to subsidiaries)
2015
USD’000
2014
USD’000
7,099
–
315
342
294
2015
USD’000
3,139
6,119
8,746
730
267
350
866
2014
USD’000
3,993
10,129
Lamprell plc Annual Report and Accounts 2015Financial statements
24 Related party balances and transactions continued
Key management compensation comprises:
Group
Salaries and other short-term benefits
Share based payments – value of services provided
Post-employment benefits
Company
Salaries and other short-term benefits
Share based payments – value of services provided
Post-employment benefits
111
2015
USD’000
2014
USD’000
5,075
1,832
192
7,099
6,537
435
1,774
8,746
2015
USD’000
2014
USD’000
1,905
1,183
51
3,139
2,200
107
1,686
3,993
The terms of the employment contracts of the key management include reciprocal notice periods of between three to twelve months.
Due from/due to related parties
Due from related parties
Group
MISA (current) (Note 21)
Company
MIS1
EBT2
LEL3
2015
USD’000
2014
USD’000
13
68
11,236
13
1,261
12,510
10,972
43
99,176
110,191
1. Primarily comprises a receivable in respect of management fees charged by the Company.
2. Primarily comprises of payments made for treasury shares acquired by EBT on behalf of the Group.
3. Primarily comprises of a receivable in respect of management fees charged by the Company (2014: the balance primarily comprises a receivable in respect of amount advanced to
LEL from the proceeds of the rights issue).
Further, the Company has provided performance guarantees on behalf of its subsidiary. These guarantees, issued in the normal course
of business, are outstanding at the year end and no outflow of resources embodying economic benefits in relation to these guarantees is
expected by the Company.
Due to a related party
Group
MISA (current) (Note 29)
2015
USD’000
2014
USD’000
122
364
Financial statements
112
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
25 Share capital
Issued and fully paid ordinary shares
At 1 January 2014
Add: New shares issued during the year
Less: Transaction costs relating to the rights issue
At 31 December 2014
At 31 December 2015
Equity
number
260,363,101
81,363,469
–
341,726,570
341,726,570
Share
capital
USD’000
23,552
6,794
–
30,346
30,346
Share
premium
USD’000
211,776
112,785
(8,566)
315,995
315,995
The total authorised number of ordinary shares is 400 million shares (2014: 400 million shares) with a par value of 5 pence per share
(2014: 5 pence per share).
During 2014, the Company successfully carried out a fully underwritten rights issue. The rights issue offered five new ordinary shares
for every 16 ordinary shares held by each shareholder at an issue price of 88 pence per new ordinary share. The rights issue was fully
subscribed and paid up as at 30 June 2014. The Company issued 81,363,469 new ordinary shares through the rights issue and received
proceeds amounting to USD 119.6 million.
The paid-in capital from the rights issue is split between the par value of the shares issued (USD 6.8 million) and the share premium
at the date of issue (USD 112.8 million) less any directly attributable transaction costs (USD 8.6 million). These new ordinary shares rank
pari passu in all respects with the existing ordinary shares, including the right to all future dividends and other distributions declared,
made or paid.
During 2015, Lamprell plc employee benefit trust (“EBT”) acquired 51 shares (2014: 189,111 shares) of the Company. The total amount
paid to acquire the shares was USD Nil (2014: USD 0.5 million) and has been deducted from the consolidated retained earnings. During
2015, no shares (2014: 187,580 shares amounting to USD 0.5 million) were issued to employees and 16,268 shares (31 December 2014:
16,217 shares) were held as treasury shares at 31 December 2015. The Company has the right to reissue these shares at a later date.
These shares will be issued on vesting of the free shares/performance shares/share options granted to certain employees of the Group.
26 Other reserves
Group
At 1 January 2014
Currency translation differences
Disposal of a subsidiary
At 31 December 2014
Currency translation differences
At 31 December 2015
Legal
reserve
USD’000
98
–
–
98
–
98
Merger
reserve
USD’000
(22,422)
–
3,850
(18,572)
–
(18,572)
Translation
reserve
USD’000
191
(372)
–
(181)
(489)
(670)
Total
USD’000
(22,133)
(372)
3,850
(18,655)
(489)
(19,144)
Legal reserve
The Legal reserve relates to subsidiaries (other than the subsidiaries incorporated in free zones) in the UAE and the State of Qatar. In
accordance with the laws of the respective countries, the Group has established a statutory reserve by appropriating 10% of the profit for
the year of such companies. Such transfers are required to be made until the reserve is equal to, at least, 50% (UAE) and 33.3% (State of
Qatar) of the issued share capital of such companies. The legal reserve is not available for distribution.
Merger reserve
On 11 September 2006, the Group acquired 100% of the legal and beneficial ownership of Inspec from LHL for a consideration of
USD 4 million. This acquisition was accounted for using the uniting of interest method.
On 25 September 2006, the Company entered into a share for share exchange agreement with LEL and LHL under which it acquired
100% of the 49,003 shares of LEL from LHL in consideration for the issue to LHL of 200,000,000 shares of the Company. This acquisition
has been accounted for using the uniting of interest method.
Lamprell plc Annual Report and Accounts 2015Financial statements
26 Other reserves continued
Company
Other reserve
At 1 January and 31 December
113
2015
USD’000
329,153
2014
USD’000
329,153
The other reserve arose on acquisition of LEL and is not available for distribution.
27 Provision for employees’ end of service benefits
In accordance with the provisions of IAS 19, management has carried out an exercise to assess the present value of its obligations at
31 December 2015 and 2014, 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:
Group
At 1 January
Current service cost
Interest cost
Remeasurements
Benefits paid
Liabilities of disposal group classified as held for sale (Note 23)
At 31 December
2015
USD’000
38,752
4,871
1,442
1,988
(4,190)
–
42,863
2014
USD’000
36,046
4,739
1,701
3,742
(7,143)
(333)
38,752
Remeasurements consist of actuarial losses from a change in demographic assumptions USD 1.0 million (2014: USD Nil), a change in
financial assumptions USD 0.6 million (2014: USD 2.2 million) and other experiences 0.4 million (2014: USD 1.0 million).
Company
At 1 January
Current service cost
Interest cost
Remeasurements
Benefits paid
At 31 December
2015
USD’000
2014
USD’000
75
40
13
(7)
–
121
75
64
4
(45)
(23)
75
Remeasurements consist of actuarial gains from change in demographic assumptions of USD 0.03 million and other experiences
USD 0.04 million.
Group
The amounts recognised in the consolidated income statement are as follows:
Current service cost
Interest cost
Total (included in staff costs) (Note 10)
2015
USD’000
4,871
1,442
6,313
2014
USD’000
4,626
1,603
6,229
Of the total charge, USD 4.9 million (2014: USD 5.1 million) and USD 1.4 million (2014: USD 1.1 million) are included in cost of sales
and general and administrative expenses (Note 6 and 9 respectively).
Financial statements 114
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
27 Provision for employees’ end of service benefits continued
Company
Current service cost
Interest cost
Total (included in staff costs)
The above charge of USD 0.1 million (2014: USD 0.1 million) is included in general and administrative expenses.
The principal actuarial assumptions used were as follows:
Discount rate
Future salary increase:
Management and administrative employees
Yard employees
2015
USD’000
2014
USD’000
40
13
53
2015
3.50%
3.00%
3.00%
64
4
68
2014
3.50%
3.00%
2.50%
The rate used for discounting the employees’ post-employment defined benefit obligation should be based on market yields on high
quality corporate bonds. In countries where there is no deep market for such bonds, the market yields on government bonds should be
used. In the UAE there is no deep market for corporate bonds and no market for government bonds and, therefore, the discount rate has
been estimated using the US AA-rated corporate bond market as a proxy. On this basis, the discount rate applied was 3.5% (2014: 3.5%).
The rates used for future salary increase are long-term assumptions which take into account inflation, relevant factors in the employment
market and the Group’s own expectations. Based on these factors, the future salary increase rate for Yard employees has increased from
2.5% to 3%.
Due to the nature of the benefit, which is a lump-sum payable on exit for any cause, a combined single decrement rate has been used
as follows:
Yard employees:
20 – 29 years
30 – 44 years
45 – 59 years
60 years and above
Management and administrative employees:
20 – 29 years
30 – 44 years
45 – 54 years
55 – 59 years
60 years and above
Executive Directors:
35 – 39 years
40 – 64 years
65 years and above
Percentage of employees at each
age exiting the plan per year
2015
2014
16%
10%
6%
100%
8%
6%
4%
1%
100%
10%
7%
100%
16%
10%
6%
100%
8%
6%
4%
1%
100%
10%
7%
100%
Lamprell plc Annual Report and Accounts 2015Financial statements 115
28 Derivative financial instruments
Derivatives held at fair value through profit or loss
Interest rate swaps
Total
Non-current portion
Current portion
2015
2014
Notional
contract
amount
USD’000
–
80,000
80,000
60,000
20,000
Assets
USD’000
Liabilities
USD’000
–
–
–
–
–
–
18
18
14
4
Notional
contract
amount
USD’000
2,889
100,000
102,889
80,000
22,889
Assets
USD’000
Liabilities
USD’000
–
69
69
55
14
269
–
269
–
269
During 2014, the Group entered into an interest rate swap to switch floating interest rates to fixed interest rates on the Group’s borrowings.
This derivative did not qualify for hedge accounting and is carried at fair value through profit or loss. The notional principal amount at the
date of inception of these contracts was USD 100 million. This contract matures in various instalments within fifty seven months from the
date of inception. The fair value liability at the 31 December 2015 of this derivative was USD 0.2 million (2014: USD 0.7 million).
29 Trade and other payables
Trade payables
Accruals
Payables to a related party (Note 24)
Amounts due to customers on contracts
Amounts due to customers on contracts comprise:
Progress billings
Less: Cost incurred to date
Less: Recognised profits
30 Provision for warranty costs and other liabilities
At 1 January 2014
Charged during the year
Released/utilised during the year
At 31 December 2014
Charge during the year
Released/utilised during the year
At 31 December 2015
2015
USD’000
44,065
127,155
122
93,601
264,943
357,154
(226,975)
(36,578)
93,601
Minimum
purchase
obligations
USD’000
–
3,423
–
3,423
–
(3,189)
234
2014
USD’000
30,390
138,169
364
148,680
317,603
477,583
(299,010)
(29,893)
148,680
Total
USD’000
5,400
12,423
(2,011)
15,812
1,200
(8,678)
8,334
Warranty
costs
USD’000
5,400
9,000
(2,011)
12,389
1,200
(5,489)
8,100
Warranty costs charged during the year relates to management’s assessment of potential claims under contractual warranty provisions.
Financial statements 116
NOTES TO THE
FINANCIAL STATEMENTS
CONTINUED
31 Borrowings
Bank term loans
The bank borrowings are repayable as follows:
Current (less than 1 year)
Non-current (2 to 5 years)
2015
USD’000
79,299
20,136
59,163
79,299
2014
USD’000
98,979
20,136
78,843
98,979
At 31 December 2015, the Group has banking facilities of USD 1,381 million (2014: USD 1,189 million) with commercial banks.
The facilities include bank overdrafts, letters of guarantees, letters of credit and short-term loans.
Bank facilities are secured by liens over term deposits of USD 55.7 million (2014: USD 49.6 million) (Note 22), the Group’s counter
indemnities for guarantees issued on their behalf, the Group’s corporate guarantees, letter of undertakings, letter of credit payment
guarantees, cash margin held against letters of guarantees, shares of certain subsidiaries, certain property, plant and equipment,
movable assets, leasehold rights for land and certain contract related receivables.
The borrowings are stated net of the unamortised arrangement fees and other transaction costs of USD 1.2 million (2014: USD 1.5 million)
and accrued interest of USD 0.5 million (2014: USD 0.5 million).
The banking facilities relating to overdrafts and revolving facilities carry interest at LIBOR + 3.5%. However, the Group has entered into
interest rate swaps against the variable interest rate at a fixed interest rate of 1.2375% (2014: 1.2375%).
The carrying amounts of borrowings in the year approximated to their fair value and were denominated in US Dollars or UAE Dirhams,
which are pegged to the US Dollar.
32 Profit of the Company
The profit of USD 0.4 million (2014: USD 2.1 million) in respect of the Company is included in these consolidated financial statements.
33 Dividends
There were no dividends declared or paid during the year ended 31 December 2015 or 31 December 2014.
34 Commitments
(a) Operating lease commitments
The Group leases land and staff accommodation under various operating lease agreements. The remaining lease terms of the majority
of the leases are between four to seventeen years and are renewable at mutually agreed terms.
The future minimum lease payments payable under operating leases are as follows:
Not later than one year
Later than one year but not later than five years
Later than five years
(b) Other commitments
Capital commitments for construction of facilities
Capital commitments for purchase of operating equipment and computer software
2015
USD’000
6,988
9,992
36,530
53,510
2015
USD’000
196
4,791
2014
USD’000
7,570
10,912
39,236
57,718
2014
USD’000
4,219
14,966
Lamprell plc Annual Report and Accounts 2015Financial statements
35 Bank guarantees
Performance/bid bonds
Advance payment, labour visa and payment guarantees
117
2015
USD’000
126,375
315,200
441,575
2014
USD’000
90,063
276,757
366,820
The various bank guarantees, as above, were issued by the Group’s bankers in the ordinary course of business. Certain guarantees are
secured by 100% cash margins, assignments of receivables from some customers and in respect of guarantees provided by banks
to the Group companies, they have been secured by parent company guarantees. In the opinion of the management, the above bank
guarantees are unlikely to result in any liability to the Group.
36 Cash generated from operating activities
Operating activities
Profit before income tax including discontinued operations
Adjustments for:
Share based payments – value of services provided
Depreciation
Amortisation of intangible assets
Share of profit from investment in joint venture
Profit on disposal of property, plant and equipment
(Release)/provisions for warranty costs and other liabilities
Provision for slow moving and obsolete inventories
(Release)/provision for impairment of trade receivables – net
Provision for employees’ end of service benefits
Gain on disposal of a subsidiary
Loss on derivative financial instruments
Finance costs
Finance income
Operating cash flows before payment of employees’ end of service benefits and
changes in working capital
Payment of employees’ end of service benefits
Changes in working capital:
Inventories before movement in provision
Derivative financial instruments
Trade and other receivables before movement in provision for impairment of trade
receivables
Trade and other payables, excluding movement in dividend payable
Cash used in operating activities
Year ended 31 December
Note
2015
USD’000
2014
USD’000
65,241
118,541
8
17
19
30
20
21
27
23
12
11
28
3,174
19,386
2,624
(1,318)
(315)
(7,478)
714
(6,100)
6,313
(66)
780
14,706
(2,679)
94,982
(4,225)
(15,220)
(962)
(14,768)
(60,329)
(522)
1,084
27,935
11,895
(2,991)
(162)
5,989
24
5,278
6,560
(31,270)
156
20,719
(2,166)
161,592
(7,182)
(2,898)
205
(94,857)
(96,293)
(39,433)
37 Events after the balance sheet date
On 26 January 2016, the Group has signed a Memorandum of Understanding (“MOU”) with Saudi Aramco (the National Oil Company
of the Kingdom of Saudi Arabia), the National Shipping Company of Saudi Arabia (“Bahri”) and Hyundai Heavy Industries in connection
with a potential partnership collaboration on establishing a Maritime Complex in Saudi Arabia. The intended Maritime Complex will provide
engineering, manufacturing and repair services for offshore rigs, commercial vessels and offshore service vessels. The MOU covers joint
participation and due diligence on all activities and work streams required to make a final investment decision by all participating parties.
The outcome of the agreement to engage in the potential joint venture partnership will be determined upon finalisation of all activities
and required due diligence.
Financial statements
118
GLOSSARY
“AED”
United Arab Emirates Dirham
“FPSO”
Floating, Production, Storage and Offloading
“ADNOC”
Abu Dhabi National Oil Company
“AGM”
“AIM”
“API”
“ASME”
“bn”
“Board” or
“Directors”
Annual General Meeting
Alternative Investment Market – a market
operated by the London Stock Exchange plc
American Petroleum Institute
American Society of Mechanical Engineers
Billion
the Board of Directors of the Company
“CAGR”
Compound Annual Growth Rate
“CBL”
“CDP”
“CEO”
“CFO”
“CGU”
“Code”
Cleopatra Barges Limited
Carbon Disclosure Project
Chief Executive Officer
Chief Financial Officer
Cash Generating Unit
UK Corporate Governance Code 2014
“Company”
Lamprell plc
“COO”
Chief Operating Officer
“COP 21”
Conference of Parties 21
“CSR”
Corporate Social Responsibility
“DAFWC”
Day away from work case
“E&C”
“E&P”
“EBITDA”
“EBT”
“EPC”
“EPCI”
“EPS”
“ERM”
“ERP”
“ESOP”
“EU”
“FCAW”
Engineering & Construction
Exploration and Production
Earnings before Interest, Taxes, Depreciation
and Amortisation
Engineering, Procurement and Construction
Engineering, Procurement, Construction
and Installation
Earnings Per Share
Enterprise Resource Management
Enterprise Resource Planning
Lamprell plc Executive Share Option Plan
European Union
Flux Cored Arc Welding
“FPU”
“FSP”
“FTSE”
“FZCO”
“GBP”
“GE”
“GIC”
“Group”
“HMRC”
“HR”
“HSE”
Floating Production Units
Free Share Plan
Financial Times Stock Exchange index
Free Zone Company
Great Britain Pound
General Electric
Global Investment Co. Ltd. Inc
The Company and its subsidiaries
HM Revenue & Customs
Human Resources
Health, Safety and Environment
“HSESQ”
Health, Safety, Environment, Security and Quality
“lAS”
“IFRS”
“IHS”
International Accounting Standards
International Financial Reporting Standards
Information Handling Services
“INSPEC”
International Inspection Services Limited
“IOC”
“ISO”
“IA”
“IT”
“JIL”
“JPMC”
“KBR”
“KPI”
International Oil Company
International Organization for Standardization
Internal Audit
Information Technology
Jebel All Investments Limited
JP Morgan Cazenove
Kellogg Brown & Root
Key Performance Indicators
UAE Labour Law (Federal Law No.8 of 1980
(as amended))
“Lamprell”
the Company and its subsidiary undertakings
“LD”
Lamprell Dubai LLC
“LE FZCO”
Lamprell Energy FZCO
“LEL”
“LHL”
“LIH”
“LIT”
“LNG”
Lamprell Energy Limited
Lamprell Holdings Limited
Lamprell Investment Holdings Limited
Litwin PEL Co. LLC
Liquid Natural Gas
Lamprell plc Employee Benefit Trust
“Labour Law”
Lamprell plc Annual Report and Accounts 2015Glossary 119
“LS”
“LSE”
“LTIP”
“m”
“MIAS”
“MIL”
“MIS”
“MISA”
Lamprell Sharjah WLL
London Stock Exchange Limited
Long-Term Incentive Plan
Million
Maritime International Agency Services Ltd
Maurlis International Ltd. Inc
Maritime Industrial Services Co. Ltd. Inc.
Maritime Industrial Services Arabia Co. Ltd.
“MISCLP”
Maritime Industrial Services Co. Ltd. & Partners
“MISQWLL”
MIS Qatar LLC
“MOCL”
“MOD”
“MOL”
“NBJR”
“NBS”
“NDC”
“NED”
“NOC”
“NY”
“O&M”
Maritime Offshore Construction Limited
Modules
Maritime Offshore Limited
New Build Jackup Rigs
New Bridge Street
National Drilling Company
Non-Executive Director
National Oil Company
New York
Operations & Maintenance
“OGCS”
Oil and Gas Contracting Services
“OP”
“PwC”
“RIM”
“RSP”
“TRIR”
“TSR”
“UAE”
“UK”
“United States”
or “US”
Offshore Platforms
PricewaterhouseCoopers
Rig Metals LLC
Retention Share Plan
Total Recordable Injury Rate
Total Shareholder Return
the Federation of the United Arab Emirates
United Kingdom
the United States of America
“USD”
“VP”
US Dollar
Vice-President
Glossary Designed and produced by www.farraday.com
This document is printed on GalerieArt Matt which
has been independently certified according to the rules
of the Forest Stewardship Council® (FSC). The virgin
fibre is Elemental Chlorine Free (ECF) bleached.
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Lamprell plc
Registered office
Fort Anne
Douglas
Isle of Man
IM1 5PD
Operations
PO Box 33455
Dubai
United Arab Emirates
Tel +971 6 528 2323
Fax +971 6 528 4325
Email lamprell@lamprell.com
www.lamprell.com
Certifications
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Certifications:
Bureau Veritas
ASME
National Board
ISO 9001:2008
ISO/TS 29001:2010
OHSAS 18001:2007
ISO 14001:2004
Monogram Licenses
U,S,PP,U2
NB, R
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2C-0113
4F-0094
4F-0227
4F-0281
7K-0303
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16C-0202
16C-0278
16D-0075
Bureau Veritas
ASME
National Board
Monogram Licenses
API QMS
API QMS
API - Q1
API - Q1
ISO 9001:2008
ISO/TS 29001:2010
OHSAS 18001:2007
ISO 14001:2004
ISO 27001:2013
U,S,PP,U2
NB, R
2B-0133
2C-0113
4F-0094
4F-0227
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7K-0303
8C-0182
16C-0202
16C-0278
16D-0075
2427, 0881
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