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East Anglia One
Full Year Results 2017
22 March 2018
www.lamprell.com
Full Year Results 2017 22 March 2018 1 East Anglia One - - PowerPoint PPT Presentation
Full Year Results 2017 22 March 2018 1 East Anglia One www.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
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East Anglia One
www.lamprell.com
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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
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 opinions expressed in this document
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
document.
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East Anglia One Load out
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▪ $80m loss on East Anglia One project ▪ 5 large scale projects delivered, 2 ongoing ▪ Solid net cash position to support strategic growth ▪ Bid pipeline increasing, with focus on KSA, Renewables and EPC(I) ▪ Backlog at historical lows ▪ Strategy progress: solidifying position in core rig markets ▪ International Maritime Industries JV established, construction of maritime yard in Saudi Arabia commenced ▪ Organisational changes and strict compliance to newly updated bidding process as a result of East Anglia One shortcomings
Bid Pipeline
Safety
Net Cash
Revenue
* Total Recordable Injury Rate
Strategic progress despite temporary challenges
Net loss
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Master Marine Departure from Hamriyah
94.8 43.1
Renewables Oil and gas
▪ Significant improvement in safety performance in 2H ▪ Major projects delivered on time and on budget
▪ Uptick in rig refurbishment segment:
▪ Master Marine major upgrade for “Haven” progressing well and to schedule ▪ East Anglia One 73% complete as of today
2H dominated by East Anglia One
Backlog ($m) (FY 2017)
(YE 2016: $393m)
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Project status: ▪ All 182 piles delivered to the client ▪ 8 jackets delivered to European marshalling yard ▪ 12 pre-fabricated jackets delivered to Harland & Wolff in Belfast ▪ Delivering to client’s expectations but LD exposure remains if delays arise Root cause analysis: ▪ Poor understanding of scope and requirements at bidding stage ▪ Inexperienced project management team (did not set the right price and did not match specific sector requirements) ▪ Delays in addressing welding issues due to labour market challenges ▪ Transportation and logistics issues
East Anglia package 3 movement
Primary focus on delivering to client schedule and expectations
14% 86%
Rigs EPCI
Bidding approach matches strategic goals: ▪ Capture broader energy markets for long-term growth ▪ Address EPC(I) market for higher value projects ▪ Strategic partnerships to expand sector and geographical footprint Higher levels of bidding activity: ▪ Refocused sector targeting resulted in increased levels of bidding ▪ Major focus on KSA, Renewables and EPC(I) ▪ Timing of awards is Q4 2018 at the earliest
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Solidifying position in core expansion markets
Bid pipeline $3.6bn* (2016: $2.5bn) $1.8bn
80% 15% 5%
Rigs EPCI Contracting services
$1.8bn Renewables Oil and gas*
*Excluding LTA
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Schlumberger land rigs
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($m, unless stated otherwise) FY 2017 FY 2016 Reported results Revenue 370.4 705.0 EBITDA (70.5) 28.7 EBITDA margin (19.0)% 4.1% Loss from continuing operations after income tax and exceptional items (98.1) (182.2) Reported diluted earnings/(loss) per share (US cents) (28.7) (53.9) Net cash as at 31 December 2017 257.0 275.2 Revenue by segment $m FY2016 $m New build jackup rigs 49.4 567.6 O&G contracting services 131.3 47.6 Offshore platforms 140.6 12.8 Modules 3.0 40.8 Services 46.1 36.2
▪ East Anglia loss booked in 2017. Zero margin on $98m project revenue in 2018, net cash outflow estimated at $30m ▪ Revenues affected by market-driven backlog pressure ▪ Delivered overhead reduction for sixth consecutive year; $16m YoY reduction ▪ Robust cash position of $257m ▪ $20m strategic investment made into International Maritime Industries JV ▪ Amendments to loan agreement secured with bank syndicate
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▪ Reduction in New build jackup revenue severely impacts profitability ▪ Significant loss on East Anglia One ▪ Project completions and settlements delivered in 1H ▪ Focus on cost control to mitigate losses continues
Loss driven by drop in revenue from core business segment and EA1 costs
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Benefit from working capital conversion on 1H project completions
▪ Net cash in line with forecast despite operational issues ▪ $50m of East Anglia losses reflected in net cash, $30m cash funding in 2018 ▪ Well-positioned to fund ongoing business and investment in Saudi Arabia ▪ Investment in IMI reflected in increased tangible assets
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Balance sheet FY17 $m FY16 $m
Strategic investments Project evolution assets 39.6 28.7 New pipeshop 19.6 8.3 IMI capital 18.9
368.2 467.4 Gross Cash 296.4 334.7 Total Assets 742.7 839.1 Tangible Net Assets 429.1 530.4
▪ Net cash remains strong ▪ Gearing continues to be low ▪ Considerable investment in strategic assets ▪ Working capital facility and revolver available in line with amended debt agreement ▪ Committed bonding line cancelled to reduce costs Debt package FY17 $m FY16 $m
Term loan 40 59 Working capital facility 50 50 Revolver 100 200 Total funded facilities 190 309 Committed bonding 50 150
Tangible asset base remains
▪ East Anglia One loss taken in 2017 – dilutes margins in 2018 ▪ Net cash to trend downwards: ▪ Investment in IMI JV $38m ▪ Cameron kits payment $41m ▪ East Anglia One $30m ▪ Further cash pressure will arise from low revenues in 2018 and investment in new resources ▪ Balance sheet strength remains intact
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Maintaining liquidity for growth
Master Marine Haven upgrade
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East Anglia One
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Upskilling: building capability to support growth markets
▪ Continued investment in hiring personnel with EPC(I) and LTA experience ▪ New hires include personnel for key positions across the organization: ▪ Project management ▪ Commercial ▪ Engineering ▪ Procurement ▪ Transportation & installation ▪ Hook up & commissioning ▪ BD, Proposals & Estimating
Key strategic hires
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▪ Bidding in strict compliance with business strategy ▪ Engage and target rather than respond ▪ Focused marketing in addressable sectors ▪ Bidding teams with relevant experience ▪ Over 20 new hires to support ongoing bids ▪ Increased involvement from
bidding stage
Transforming the bidding process
Project assessed for strategic fit Initial proposal to ExCom ExCom approval for bids above $10m Weekly progress review by ExCom
Comprehensive evaluation process: scope & terms, risk, capability, financials, win strategy
Bid team: business development, risk, engineering, procurement, HR
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Organisational changes, investment in strategic hires & new rig design
▪ Restructured organization to better serve our targeted end markets of Oil & Gas and Renewables via: ▪ Rigs ▪ EPC(I) ▪ Services ▪ Dedicated leadership teams for each core service offering in place ▪ Invest throughout 2018 in hiring the right people with the right skillset and experience, particularly with regards to EPC(I) and/or LTA ▪ Launched the Lamprell Jackup (LJ43),
GustoMSC
Renewables Oil & Gas Rigs EPC(I)
Services
Technology People
Investment Lamprell core services Market sectors
Facilities
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Rigs EPC(I)
Renewables
Track Record
✓
27 NBJU’s and multiple Land Rigs completed
✓
EA1 Foundation Project and 4 Jackup Installation Vessels
✓
Partnered with companies that complement own skillset (i.e., T&I)
Clients
Facilities/ Assets
✓ ✓ ✓
Installation assets via partner
Execution Capability
✓ ✓
✓
Leadership teams in place/ $10m to be invested in new hires and bidding
Technology/ Know how
Launched LJ43
Relationships with HV engineering design firms to access HVDC/AC projects
✓
Relationships with experienced speciality engineering firms
Local Content
✓
Uniquely positioned in core markets of UAE (ICV) and Saudi (IKTVA)
✓
Partner with local yards as required
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Uniquely positioned in core markets of UAE (ICV) and Saudi (IKTVA) for LTA
Maritime Yard ▪ International Maritime Industries JV formed ▪ Progressing subcontract for the first two rigs at Lamprell’s UAE yards (expected in 2018) ▪ Selected rig design LJ43 jointly developed by Lamprell and GustoMSC ▪ First major construction contracts awarded ▪ SIDF loan approved LTA ▪ LTA selection process continues: decision in H2 2018 ▪ Continue regular dialogue and engagement Local content ▪ In-Kingdom Value and similar programmes of increasing importance in the region – Lamprell uniquely positioned to take advantage
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New build jackup rigs
Saudi Aramco 10-year Capex forecast
Lamprell in-Kingdom investment 21
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Renewables (offshore windfarms)
▪ Committed to sector despite significant challenges on first contract ▪ Scope to include foundations, HVAC/DC platforms, and wind installation jackup vessels ▪ Addressable market in excess of $3 billion per annum, gaining pace ▪ 17 new sites commissioned in 2017 in Europe ▪ Average capacity of commissioned farms 5.9MW, average capacity under construction 493MW ▪ Current UK capacity: 5.26GW/ 27 sites, increasing to 24GW by 2025 ▪ €9bn investment in European offshore wind sector expected in 2018 ▪ Knowing what we know today, we are confident the market can generate attractive returns
European project pipeline
Source: Renewables UK: Offshore wind project timelines Wind Europe: Offshore wind in Europe key trends and statistics
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EPC(I) opportunity: ▪ EPC(I) opportunities 50% of bid pipeline ▪ High value and margin work – addressable market of $3 billion per annum ▪ LTA opportunity not included in bid pipeline (approximately $3 billion per annum)
Leveraging core competency to diversify markets and customer base
Delivery through: ▪ Project management team already in place ▪ Partnerships ▪ Earlier and more intensive engagement with clients on major project developments ▪ Investment in people
▪ 2018 revenue range $225-300m ▪ Increase in quantity and quality of bid pipeline is very encouraging ▪ Circa $10m investment in people and bids required in 2018 to position for EPC(I)
▪ Bid pipeline conversion from end 2018 ▪ IMI progress ▪ Extremely well positioned in home markets of UAE and Saudi ▪ Return to revenue growth in 2019
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Sharjah stacking area
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▪ Developed with GustoMSC, highly experienced leader in engineering and design of offshore mobile units ▪ Specifications are based on drilling in Saudi waters meeting schedule G requirements ▪ Provides the added capability to access fields with shallow water gas wells ▪ Rig legs are derived from proven Gusto designs with a custom designed hull and living quarters by Lamprell ▪ The rig will feature efficient technology through Gusto’s proven XY cantilever and a newly designed BOP handling system that allows dual BOP handling without any downtime ▪ Pipe handling technology for efficient process
building capability within the derrick
28 Amounts in $m FY 2017, $m Underlying and as reported FY 2016 $m Underlying One-off charges FY 2016, As reported Revenue* 370.4 730.0 (25) 705.0 Cost of sales (420.6) (630.2) (17.6) (647.8) Gross (loss)/ profit* (50.2) 99.8 (42.6) 57.2 Gross margin % (13.6%) 13.6% (5.5%) 8.1% G&A (40.2) (48.4) (3.4) (51.8) Non-cash goodwill impairment
(180.5) Operating (loss)/ profit* (90.2) 52.5 (226.5) (174.0) Finance costs - net** (5.1) (9.9)
(Loss)/ profit before income tax (97.9) 44.5 (183.9) (181.9) Income tax expense (0.2) (0.3)
(Loss)/ profit for the period (98.1) 42.8 (183.9) (182.2) Loss on disposal of subsidiary
Total profit / (loss) attributable to equity holders (98.1) 40.7 (183.9) (184.3)
* Relating to continuing operations ** Represents the net balance of finance costs and finance income
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2017 2016 2015 2014 New build jackup 49.4 567.6 675.8 748.4 Oil and Gas contracting 131.2 47.6 93.3 210.0 Modules 3.0 40.8 47.1 4.6 Offshore Platforms 140.7 12.8 11.9 78.0 Operations & Maintenance, manpower supply and safety services 46.1 36.2 42.9 43.9 370.4 705.0 871.0 1,084.9 2017 2016 2015 2014 Rigs 160.8 600.5 755.1 926.1 EPC/EPC(I) 154.1 54.4 64.0 87.8 Energy Contracting Services 55.6 50.0 52.0 71.0 370.4 705.0 871.1 1,084.9
The table below illustrates the revenue by business streams based on the revised organisation structure adopted by the Group with effect from Feb 2018
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Cornerstone to attract tier 1 clients