Full year results 2019 13 May 2020 lamprell.com Disclaimer This - - PowerPoint PPT Presentation

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Full year results 2019 13 May 2020 lamprell.com Disclaimer This - - PowerPoint PPT Presentation

Full year results 2019 13 May 2020 lamprell.com Disclaimer This presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/ or the industry in which it operates.


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lamprell.com

Full year results 2019

13 May 2020

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Disclaimer

2 This presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/ or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words “believes”, “expects, “predicts”, ”intends”, “projects”, “plans” “estimates”, “aims”, “foresees”, anticipates”, “targets” and similar expressions. The forward-looking statements, contained in this document, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are uncertain and subject to

  • risks. A multitude of factors can cause actual events to differ significantly from any

anticipated development. Neither the Company nor any of its officers or employees guarantees that the assumptions underlying such forward-looking statements are free from errors nor does any of the foregoing accept any responsibility for the future accuracy of the

  • pinions expressed in this document or the actual occurrence of the forecasted

developments. No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, neither the Company nor any of its subsidiary undertakings nor any such person’s officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this document.

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Core priorities 2019 Highlights Operational review Financial review Strategy update Appendices

1 2 3 4 5 6

Agenda

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Core priorities

Christopher McDonald CEO

l a m p r e l l . c o m

Moray East transition piece lifting

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▪ Operations adapted to crisis, able to avoid major delays ▪ Additional short term cost cutting measures implemented

Positioning for recovery

5

▪Focused the business on diversified growth in the evolving energy industry

Oil and Gas ▪ Established presence and high local content scores in the region with lowest cost reserves ▪ Offshore capex in Saudi Arabia and UAE will continue ▪ Strategic partnerships and long standing relationships in both markets Renewables ▪ Developing expertise in an industry with rapid global growth ▪ Requirement for 3000 foundations in the next 5 years ▪ Few yards with the right capacity, set-up and solid delivery track record

▪Protecting net cash and improving our liquidity

▪ Significant cost reduction from a major operational restructuring in 2020 ▪ EA1 settlement and release of restricted cash ▪ Deferring equity contribution into IMI until 2021 ▪ Capex reduction ▪ Actively pursuing various funding options ▪ Track record in renewables improves access to funding

▪Working through COVID-19 to deliver for our clients

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2020 Achievements

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▪ Contract secured for two new build jackup rigs from IMI with initial milestone payment of $88m received ▪ Debt free from 11 March 2020 ▪ East Anglia One contract closed out ▪ Moray East deliveries progressing ▪ Overhead reduction programme implemented – 21% saving in 2020 equating to $22m ▪ COVID-19 25% payroll cut saving $10m (overhead element $4m) in 2020 in addition to self help

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Operational restructuring

▪ Operations to be consolidated within one

yard (Hamriyah) with potential increase in yard space if required:

▪ Reduces cost base ▪ Delivers operational efficiencies ▪ Flexible

capacity to deliver the pipeline

▪ Jebel Ali facility mothballed, exit Sharjah

facility upon completion of Moray East project

▪ Significant

headcount reductions took place in Q1

▪ Spending

and allowance thresholds reduced/ work week extended

▪ Retained capacity and skillset to deliver

strategic initiatives

▪ Total overhead reduction of $22m for FY

2020

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COVID-19

Impact on operations

▪ Increased health screening ▪ UAE industrial work continues, close

collaboration with government authorities

▪ Work in the yards continues with moderate

impact on productivity and cost

▪ Current projects progressing in line with

schedule Impact on supply chain

▪ Working closely with suppliers and

potential clients to mitigate impact on

  • ngoing and future work

Temporary cost reduction

▪ Salary reductions of 25% for 6 months ▪ Reduced working hours where possible ▪ Redundancies ▪ Anticipated saving of $10m for FY 2020

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2019 Highlights

Christopher McDonald CEO

l a m p r e l l . c o m

Hamriyah

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2019 Overview

1 0

$6.2bn

Bid Pipeline*

$470.1m

Backlog*

$42.5m

Net Cash*

$260.4m

Revenue

$(183.5)m

Net loss

***Total recordable injury rate * As at 31 December 2019

$(64.6)m

EBITDA

0.19

TRIR***

One-off impacts ▪Share of EA1 loss: $28.8m ▪Non-cash impairment: $79.3m ▪31 March 2020: $77m** ▪Balance sheet supports backlog ▪Modest YoY growth ▪ Several awards deferred into 2020 ▪Commendable performance in line with industry best practice ▪ High-quality pipeline with opportunities in both end markets

** Including $35m restricted cash

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Operational review

Christopher McDonald CEO

l a m p r e l l . c o m

Moray East preparation for load out

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1 2

Moray East

▪ Project progressing as planned ▪ Significant improvement in efficiencies as a result of incremental

yard infrastructure investment

▪ Up-ending and load out campaign underway ▪ Final deliveries in early Q3 2020 ▪ Project provides strong platform for future wins

Rig refurbishment

▪ 13 completed in 2019 ▪ 8 stacked ▪ 1 larger scope project arrived at the yard ▪ Active major upgrade interest from the region

Operational review

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IMI: New contract award

Project scope

▪ Two new build jack up rigs for ARO Drilling ▪ To be built mainly in Lamprell’s facilities, with

final commissioning in Saudi Arabia

▪ Lamprell’s share of the project amounting to

circa $350m

▪ Received initial milestone payment of $88m

in January 2020

▪ Project will utilize jacking kits from existing

inventory, which will convert approximately $70m of inventory into cash over the project’s execution IMI Maritime Yard progress

▪ Dredging, reclamation and marine structures

nearly completed, commenced yard facilities construction

▪ Lamprell’s investment to date - $59m (of

$140 total committed).

▪ Discussions to defer 2020 investment of

$26m commenced IMI DELIVERABLES TO DATE

▪ Investment in yard provides significant boost

to IKTVA score – a key requirement for contracts

▪ IKTVA score was a key decision maker in

LTA inclusion

▪ First two IMI jackup rigs are the only global

awards in 5 years

*IKTVA – In-Kingdom Total Value Added

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Saudi Aramco LTA

Saudi Aramco LTA programme

▪ Bidding continues, do not anticipate current LTA

projects to be affected by the announced Capex cut

▪ 10 CRPOs submitted since joining LTA in

November 2018 (3 awarded, none to new entrants)

▪ 3 active bids ongoing ▪ Looking

at ways to further increase local content commitment

*LTA - Long-Term Agreement CRPO – Contract Release and Purchase Order

Jacket Topside Replacement deck module

CRPO SCOPE EXAMPLE

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Renewables

▪ Bidding levels remain robust with significant

growth anticipated over the decade

▪ COVID-19 affected timing of decision on several

projects Oil and gas

▪ Discussions with regional clients continue, with

encouraging interest in new build and major rig upgrades

▪ Saudi Aramco’s LTA programme to be extended to

major packages on a major project

Bid pipeline $6.2bn* (FY 2018: $6.4bn)

*Including LTA; as per 31 December 2019

$1.4bn $4.8bn

Renewables Oil and gas

Bid pipeline

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Financial review

Tony Wright CFO

l a m p r e l l . c o m

Moray East project construction in Hamriyah Facility

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▪ YoY revenue increase driven by ramp-up on Moray East project ▪ Non-cash impairment charges of $79.3m a significant contributor to losses in the year ▪ Revenue below break even point and EA1 settlement also contribute to losses ▪ 2019 overhead increase in line with guidance, targeting 20% reduction in 2020 as a

result of self help measures

▪ Retained net cash position, debt free as of 11 March 2020, refinancing options in

progress, EA1 settlement improves liquidity

Key Financials

Income statement ($m, unless stated otherwise) FY 2019 FY 2018 Revenue 260.4 234.1 EBITDA (64.6) (35.1) EBITDA margin (24.8)% (15.0)% Loss from continuing operations after income tax (183.5) (70.7) Loss from continuing operations after income tax and excluding impairments (104.2) Balance sheet ($m) Net cash as at 31 December 42.5 80.0 Tangible net assets 211.4 363.0

Revenue by segment FY2019$m FY2018$m Rigs 24.8 76.0 EPC(I) 167.2 99.8 Contracting services 68.4 58.3

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EBITDA

Amounts in US$m

(35.1) (64.6) 18.4 28.8 7.7 10.0 1.4

(70) (60) (50) (40) (30) (20) (10)

  • 2018 EBITDA

Impact of Moray Firth contribution in 2019 Impact of EA1 in 2019 Impact of reduced revenues and margin in other value streams Increase in Overheads Other 2019 EBITDA

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Cost structure

*Non cash: Depreciation, amortization, finance lease costs

Delivered overhead savings in Q1 2020

▪ Target overheads of $82m in 2020 ▪ Cash overheads to be reduced by 28% ▪ Major

reductions in corporate

  • verheads,

mainly driven by reduction in headcount

▪ Yard

consolidation drives

  • perational
  • verhead reductions

▪ One off restructuring costs of $8m excluded

Impact of COVID-19 savings on overhead

Cash overheads reduced by a minimum of a further 8%

Critical to preserving liquidity

  • 10

20 30 40

Yard Overhead Operational Support Overhead Business Unit Overhead Corporate Overhead Asset Management Overhead

Cash overheads

2019 2020

70.6 33.3

Cost Structure 2019 $m

Cash Non Cash*

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Net cash

Amounts in US$m

80.0 40.7 45.6 20.9 11.7 42.5

  • 10.0

20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 110.0 120.0 130.0 Net Cash as at 31st December 2018 Movement in working capital Operating cash flows Asset additions Other Net Cash as at 31st December 2019

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Capex & Spending Overview

Operational capital expenditure

▪ Capital expenditure in 2019 amounted to

$21m

▪ Modest

2020 capital expenditure anticipated Strategic investments

▪ No investment was called for by IMI in

2019

▪ IMI investment of $26m under discussion

for deferral to 2021

20 40 26 35 19 140 2017 2018 2019 2020 2021 2022 2023 Total

ANNUAL IMI EQUITY INVESTMENTS ($ m)

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Financial summary

Focus on overhead reduction and future project funding

▪ Balance sheet continues to support current projects ▪ Strong asset base to support future growth ▪ Tight control of strategic spend in 2020 ▪ Debt free as of 11 March 2020 but regional credit market, the global health crisis and the oil price volatility makes conventional term debt challenging ▪ Alternative sources of funding under consideration ▪ Overhead reductions to preserve our cash position

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Strategy update

Christopher McDonald CEO

l a m p r e l l . c o m

Stacked rigs - Hamriyah

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Strategic Focus

Adapting to the evolving energy industry

Solidify position in core markets Maintain continuity of renewables work and secure new build and refurbishment work for our offshore and

  • nshore rig divisions

Move up the value chain in EPC(I) Enter new geographies and markets Leverage our position in renewables and on Saudi Aramco’s LTA programme to move further into EPC(I) execution Build on entry into Saudi Arabian market by securing new contract awards; pursue prospects in the renewables market, either with new clients or in new geographies Improve our business through innovation and digital technologies Leverage Lamprell’s core fabrication and project execution skill set into digital product offerings

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50 100 150 200 250 300 350 2018 2025E 2030E 2040 E GW EU China US RoW

▪ Annual offshore wind capacity is set to double over

the next five years and increase almost 15x by 2040

▪ Europe leading the way but strong international

growth, supported by government policies

▪ Over 3000 foundations anticipated to be installed

  • ver

5 years (Lamprell’s fabrication focus

  • n

foundations - ca 20% of capex)

▪ Assessing market for transition piece packages for

monopiles

Offshore Wind

OFFSHORE WIND TO GROW ~15x BY 2040

Note: Estimate based on IEA Stated Policies Scenario, further upside based on IEA Sustainable Development Scenario Sources: Fearnley Securities, IEA Offshore Wind Outlook 2019

~ 15x ~ 3.5x ~ 8x

FIXED FOUNDATIONS

Gravity- based Monopile Tripile Tripod Jacket

Lamprell focus

Transition piece

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Oil & Gas

▪ Saudi

Aramco announced substantial

  • ffshore investments related to the LTA

programme

▪ ADNOC

announced a major rig fleet expansion in support of its 2030 smart growth plan – dozens of land and offshore rigs to be ordered by 2025

▪ Potential for major offshore rig upgrade

work as ADNOC seeks to utilize available rigs

▪ Lamprell maintains one of the highest

local content scores in both markets

▪ Traditional fuels will remain part of the

energy mix for the foreseeable future presenting an opportunity for disciplined and highly skilled contractors

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Digital Transformation

▪ Use innovation to improve our operations

and develop new revenue streams:

▪ Increased use of digital solutions on site (health performance metrics, face recognition, etc) to improve labour efficiencies ▪ Development of robotic solutions ▪ Asset integrity, digital twins and remote

  • perations controls

▪ Two partnerships established to advance

digital strategy:

▪ JV with Injazat (Mubadala), regional digital

leader

▪ MOU with Akselos, a specialist in digital

twin solutions

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Outlook

Focused on protecting the business

Guiding principles

▪ Health & Safety of our employees ▪ Protocols in place in line with WHO and UAE govt ▪ Protect net cash and improve liquidity ▪ Self

help measures implemented to lower EBITDA breakeven level

▪ Settled EA1 ▪ Discussions underway to defer IMI equity injection until

2021

▪ Net cash position ▪ Debt free with over $200m in unencumbered assets ▪ Alternative sources of funding under consideration ▪ Strategy remains unchanged ▪ 2020 secured revenue of $275m

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Appendix

l a m p r e l l . c o m

Moray East project sail away

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Financial summary

Amounts in $m FY 2019, $m Reported FY 2018 $m Reported Revenue 260.4 234.1 Cost of sales (288.0) (243.2) Gross loss (27.6) (9.1) Gross margin % (10.6%) (3.9%) G&A : (140.3) (45.2)

  • Impairment of PPE and intangibles

(79.3)

  • Other G&A expenses

(61.0) (45.2) Operating loss (169.1) (55.4) Finance costs - net* (7.3) (3.5) Share of loss in investments accounted using the equity method (7.9) (10.6) Loss before income tax (184.4) (69.5) Income tax expense 0.9 (1.2) Loss for the period (183.5) (70.7) Total loss attributable to equity holders (183.5) (70.7)

* Represents the net balance of finance costs and finance income

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Financial Cycle

Phase 1: Start Up Phase 2: Execution Phase 3: Completion

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 21-30: Contribution to profit from final contingencies release Negative Positive Cumulative CF of a renewable project Revenue recognized Cumulative CF of an LTA project CF of a jackup project