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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Lamprell Plc | LSE:LAM | London | Ordinary Share | GB00B1CL5249 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 8.88 | 8.78 | 9.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2021 to Apr 2024
TIDMLAM
RNS Number : 4446D
Lamprell plc
29 June 2021
29 June 2021
LAMPRELL PLC
("Lamprell" and with its subsidiaries the "Group")
2020 FINANCIAL RESULTS
Strengthening of the balance sheet planned
Strategic progress despite pandemic headwinds across the energy industry
Improved performance, growing backlog and bid pipeline
Financial results
-- 30% year-on-year revenue growth to USD 338.6 million (2019: USD 260.4 million)
-- EBITDA improved by USD 68.5 million to positive USD 3.9 million (2019: negative USD 64.6 million)
-- Net loss of USD 53.4 million (2019: loss of USD 183.5 million) driven by revenue volumes, impact of ongoing low/zero margin projects and USD 18 million of JV loss
-- Backlog of USD 522.0 million at year-end (2019: USD 470.1 million)
-- Year-end net cash position of USD 112.4 million (31 December 2019: USD 42.5 million) of which unrestricted net cash represents USD 56.8 million (31 December 2019: USD 6.1 million). Unrestricted cash fell to USD 18.6 million in May 2021.
-- As noted in the financial review section and as further detailed below, material uncertainties relating to the going concern assumption have been identified
-- To fulfil its near-term working capital needs and then to meet its medium term strategic objectives, the Group must complete a new funding arrangement of USD 120-150 million by the end of Q3 2021 through debt and/or equity; further details of this critical capital reorganisation are set out below
-- Significant overhead reductions of 25% year on year
Lamprell Reimagined: from regional rig builder to a global energy partner
-- Well-positioned to take advantage of rapid growth in the Renewables market:
o Offshore wind component of bid pipeline is growing and expected to increase significantly, with over USD 6 billion of new, publicly-announced renewables projects anticipated to enter bid pipeline over next 12 months
o Expansion into US renewables space gaining pace, with three US-focussed projects under bidding
o Building on experience in serial renewables fabrication to expand market share and product offerings across fixed and floating wind sector
-- Oil & Gas business unit pivoting towards a stronger presence in Saudi Arabia:
o Total value of contracts received from Saudi Arabia since start of 2020 of circa USD 500 million
o Increased bidding activity in Middle East oil & gas
o Formal contract for two new build jackup rigs signed with the IMI joint venture early in 2020, with a total value of circa USD 350 million
o Third milestone payment of USD 26 million made to IMI joint venture in Q4 2020, with outstanding commitment of USD 55 million to be paid over two years - this investment has strengthened our relationship with the world's largest oil & gas producer
o Continue to pursue stronger presence in Saudi Arabia to better service the regional oil and gas industry requirements, including potentially moving oil and gas fabrication and refurbishment services
-- Digital strategy progressing as demand for digitisation is growing across the energy industry:
o Key partnerships concluded with Injazat/G42 and with Akselos to progress the digital strategy - creating value through on-site efficiency solutions in Lamprell's ongoing operations and via new revenue-generating prospects for clients across the industry
o Goal to create a standalone digital business with ability to offer distinct commercial solutions to the energy and other industries
o Sales and marketing efforts have commenced with target clients
Operational highlights from 2020
-- COVID-19 impacts well managed:
o 83% of our workforce now vaccinated with two doses
o Social distancing measures are still in place, moderate impact on operations and costs
o Disruptions in the supply chain being managed effectively
o Temporary cost reduction measures associated with COVID-19 continue
-- Exemplary safety performance with total recordable incident rate of 0.15 at year-end
-- Moray East offshore wind project successfully completed, all jackets now installed offshore by client
-- Seagreen offshore wind project progressing to schedule and benefiting from multiple recent operational investments
-- Two Saudi Aramco LTA project awards finalised early in 2021, arising from Saudi Aramco's multi-billion dollar annual capex programme
-- Sharjah National Oil Company EPIC project for the Mahani gas field completed in January 2021 -- IMI rigs progressing through fabrication stage -- Strong year for rig refurbishment with 17 rigs going through the yard
Current trading, liquidity and outlook
-- Current trading and financial position as at 31 May 2021:
o trading in line with current expectations, with EBITDA broadly breakeven
o net cash at USD 78.1 million
o restricted cash at USD 59.5 million, available cash therefore USD 18.6 million
o bid pipeline at USD 6.5 billion; current bidding activities now exceed pre-pandemic levels
o backlog currently at USD 454.5 million
-- The Group faces a challenging period of severe liquidity constraints until new funding is identified. Preserving liquidity remains a key focus - and creditor payments are being deferred to maintain liquidity
-- Growing bid pipeline of which USD 1.1 billion across our addressable markets scheduled for award in 2021 but subject to final investment decision (FID) in 2022; renewables step change growth to continue strengthening the pipeline, requiring further investment to realise improved margins
-- 'Lamprell Reimagined' strategy progressing as anticipated, need to move to the next phase is to provide each of the business units with a differentiated footing for growth
-- Existing backlog supports further year on year revenue growth with approximately USD 470 million currently secured in backlog for 2021
Comprehensive balance sheet recapitalisation programme planned
-- Since 2017, Lamprell has undertaken a major strategic transformation which is aligned with the global energy transition. This strategy is focused on building a more diversified business to deliver sustainable, profitable growth and long-term shareholder value.
-- As announced previously, the Group has been assessing its funding options, both in terms of near-term working capital needs and its strategic objectives. As anticipated, the 2020 year-end net cash position of USD 112 million has trended down over the first half of 2021 in line with project milestones. Despite a core focus over the course of this strategic journey on cost control and preserving liquidity, the balance sheet has significant capital requirements to execute current projects and to support future strategic investment.
-- Looking forward, the Group sees a significant opportunity to accelerate its Lamprell Reimagined strategy, and in particular build on its leading position in renewables to capitalise on the significant growth anticipated in this segment in the coming years. With further targeted yard investment, the Group will be able to build on its leading position in renewables fabrication, increasing the Group's capacity for renewables projects and, through efficiency and improved process automation, deliver a step change in the profitability of these projects to Lamprell.
-- To fulfil its near-term working capital needs and to then meet its medium term strategic objectives, the Group must complete a new funding arrangement of USD 120-150 million by the end of Q3, either through a combination of debt and equity, or equity for the full amount. As previously announced, the Group is in negotiations with certain relationship banks (the " Banks ") to secure working capital facilities of up to USD 90 million , backed by export credit agency support. These discussions are in advanced stages of negotiation and are ongoing. While approval is expected, there can be no certainty of the Bank facilities being concluded.
-- To satisfy the remaining funding requirement, the Board plans to initiate a process in the short term to raise equity funding. The timing and quantum of the equity raise is dependent upon market conditions and the outcome of the Group's negotiations with the Banks. If the Group is unsuccessful in concluding the facility with the Banks, the Group will be obliged to raise capital through equity in the amount of USD 120- 150 million in order for it to meet its ongoing liabilities . Until funding is secured, the Group is actively managing its liquidity position by deferring creditor payments.
-- In aggregate, the proceeds of the capital raise would be used to :
o ensure that the Group is able to satisfy its working capital requirements , particularly with respect to the delivery of the two IMI rigs currently under fabrication as they draw their peak working capital requirement in 2H 2021 ;
o fund the outstanding, strategically-important equity investment in the IMI joint venture in Saudi Arabia, a key strategic investment in maintaining the Group's relationships in the Kingdom and which has contributed to the award of nearly USD 500 million of contract awards since the start of 2020;
o following the completion of the IMI rig projects and receipt of the final milestone payments from the client , the net proceeds will be used to make further operational investment in efficiency and capacity growth, in particular for renewables projects - this strategic investment may be accelerated depending on the structure and quantum of the capital raise; and
o provide the Group with an appropriate capital structure to invest in the significant opportunities in developing the Digital business unit .
-- Should the Group be unable to secure the capital raise, either through the project-related debt and/or equity, there is significant risk that the Group will be unable to meet its contractual obligations as they arise/fall due:
o In such circumstances, a material uncertainty exists in respect of the Company's going concern position. The key assumptions made in reaching the going concern conclusion include that refinancing will be secured by the Group by the end of Q3. Should this not crystallise, significant cost cutting and restructuring measures will be required to maintain liquidity.
o Further assumptions and detail regarding the Group's liquidity position and going concern assumption are provided in the financial review section below.
-- Discussed the potential equity raise with the major shareholder and he has expressed his intention to participate at a level to be determined and remains very supportive of the management team and Lamprell reimagined strategy
-- Lamprell will provide updates on the proposed project-related debt and the equity raise in due course.
2020 FINANCIAL RESULTS
Hot Features
Premium
2020 2019
(USD million, unless stated)
Revenue 338.6 260.4
EBITDA* 3.9 (64.6)
EBITDA margin (%) 1.2% (24.8)%
(Loss) from continuing operations after
income tax and exceptional items (53.4) (183.5)
Reported diluted (loss) per share (US cents) (15.63) (53.71)
Net cash as at 31 December 112.4 42.5
Dividend per share (US Cents) Nil Nil
*EBITDA is calculated as profit from continuing operations before tax and exceptional items, net finance costs (finance income and interest on bank borrowings as per note 11 to the financial statements), adjusted to add back share of loss or profit in associates and charges for depreciation and amortisation (as per notes 14, 15 and 16 to the financial statements respectively). Refer to the Additional Information section at the end of the consolidated financial statements for further details.
John Malcolm, Non-Executive Chairman for Lamprell, said:
"Despite the shockwaves of the pandemic crippling industries across the globe, Lamprell looks back on 2020 as a year of solid strategic progress and improved performance, with multiple major project awards, a growing bid pipeline in renewables and a stronger footing in each of our three addressable markets. Over the past four years the Group has undergone a major transformation from a regional rig builder to a global energy partner. We are targeting markets with strong fundamentals and our investment and effort in this process are translating into a growing bid pipeline and backlog. The proposed balance sheet strengthening programme is required to allow us to complete ongoing projects and to enable our future strategic growth plans as we look to access the growing opportunities set in the global energy industry."
Christopher McDonald, Chief Executive Officer for Lamprell, said:
"I am pleased to report very solid delivery against all our strategic goals in 2020 and further into 2021. We continue to demonstrate impressive operational performance and much improved efficiencies on our renewables projects, which helps us to strengthen and broaden our position in this rapidly growing industry. Our effort and investment in Saudi Arabia, including the IMI joint venture, have generated new contract awards of nearly USD 500 million over the past 15 months. In addition, our timely entry into digital initiatives has received backing from a number of key partners in this nascent industry.
Over the past four years Lamprell has worked against major industry and global economic headwinds to establish a new footing for the company in a changing energy landscape. We entered 2021 with a focus on three distinct core growth areas: renewables, oil & gas and digital solutions. 'Lamprell Reimagined' is well-positioned to evolve with the energy transition. Diligent cost control, excellent operational performance and a dedicated team have helped us to deliver improved financial results and gain access to markets with significant growth prospects. We are also greatly encouraged by the levels of ongoing bidding activity. With the right financial backing the Group is ready to start a new phase in its strategic growth.
In order to fulfil our near-term working capital needs and to then provide additional financial flexibility to pursue our plans, we are working with our banks to access working capital facilities which, subject to market conditions, will be complemented by a proposed equity raise. The additional equity is necessary to further strengthen the Group's balance sheet, given current short term liquidity challenges, to allow us to fund the strategic investment in the Saudi joint venture and to enable targeted investment to support our Lamprell Reimagined process as we drive towards sustainable and profitable growth."
Full year results presentation
The management team will hold a presentation on 29 June 2021 at 9.00 am BST time. Due to the ongoing global health crisis and the wide-spread travel restrictions and prevention measures in place, we will be holding the presentation in Dubai and it can be accessed via a live webcast on our company website, at www.lamprell .com or on the following link:
https://webcasting.brrmedia.co.uk/broadcast/6086d5980386285386ccaec8
Phone dial in: +44 (0)330 336 9126
Access code: 9395272
The Company is planning to hold its 2021 annual general meeting on 8 August 2021 in the United Arab Emirates. The Company's 2020 annual report and accounts will be published on 29 June 2021.
This announcement contains information in relation to a potential equity fundraising which is deemed by the Company to constitute inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014 (as amended) as it forms part of the domestic law of the United Kingdom by virtue of the European Union (Withdrawal) Act 2018 (as amended).
- Ends -
Enquiries:
Lamprell plc
Maria Babkina, Investor Relations +44 (0) 7852 618 046
Tulchan Communications, London +44 (0) 207 353 4200
Martin Robinson
Martin Pengelley
Notes to editors
Lamprell is a leading provider of services to the international energy sector. Driving strategy and growth through its Renewables, Oil & Gas and Digital business units, underpinned by almost half a century of expertise, the Group has worked hard to establish its reputation for delivering projects safely, on time and to budget.
The Group has firmly established its international credentials in the renewables sector as well as continuing to build on its traditional oil and gas credentials. We are recognised for building complex offshore and onshore process modules and platforms, fabricating and refurbishing jack-up rigs and liftboats.
Lamprell employs more than 5,000 people across multiple facilities, with its primary facilities located in Hamriyah, in the UAE. Combined, the Group's facilities cover approximately 800,000m2 with over 1.5 km of quayside. In addition, the Group has facilities in Saudi Arabia (through a joint venture agreement).
Lamprell is listed on the London Stock Exchange (symbol "LAM").
Cautionary Statement
This announcement does not constitute or form part of an offer to sell or issue, or a solicitation of an offer to buy, subscribe for or otherwise acquire any securities in any jurisdiction. Nothing in this announcement is intended to be, or intended to be construed as, a profit forecast or a guide as to the performance, financial or otherwise, of the Company or the Group whether in the current or any future financial year. This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "plans", "target", "aim", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. They may appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of the directors, the Company or the Group concerning, amongst other things, the operating results, financial condition, prospects, growth, strategies and dividend policy of the Group or the industries in which it operates. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond the Company's ability to control or predict. Forward-looking statements are not guarantees of future performance. The Group's actual operating results, financial condition, dividend policy or the development of the industry in which it operates may differ materially from the impression created by the forward-looking statements contained in this announcement. In addition, even if the operating results, financial condition and dividend policy of the Group, or the development of the industry in which it operates, are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to, general economic and business conditions, industry trends, competition, changes in government and other regulation, changes in political and economic stability and changes in business strategy or development plans and other risks.
Other than in accordance with its legal or regulatory obligations, the Company does not accept any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.
Chairman's introduction
Evolving with the energy transition
Despite the shockwaves of the pandemic crippling industries across the globe, Lamprell looks back on 2020 as a year of solid strategic progress and improved performance. Our immediate goal is to raise significant capital and strengthen our balance sheet, in order to navigate short term liquidity challenges, complete ongoing projects and convert our growing bid pipeline.
Over the past four years, Lamprell has made remarkable progress in its strategic journey: we successfully broadened our addressable markets geographically and by industry, and now have a strong foothold in both the global renewables sector and the world's most prolific oil & gas region.
We transformed the way we operate to become one of the early movers in serial fabrication for offshore wind farm projects, securing a reputation in an emerging industry as it enters a period of tremendous growth. Using our experience and expertise, we are developing cutting edge digital solutions for our clients. 2020 was a year of reassessment for many. As the world worked through the impacts of COVID-19, we sharpened our focus on near-term cost control, working capital management and on the long-term future of the business. It became clear that our business needed to undergo an operational reorganisation, downsizing our footprint to improve efficiencies and deliver sustainable overhead reductions. These measures translated into an improved financial position by year-end and I would like to thank our employees for their exemplary effort in delivering such positive results despite the tumult across our peer group.
During the year, we listened to our shareholder and client views, and the energy transition is playing out as we expected, meaning that Lamprell is well-positioned to move to the next phase. We reorganised to maximise opportunities across our addressable markets. The decision to create three distinct business units of renewables, oil & gas and digital, aligns our strategy with the evolution of the energy industry. We are a key link in the supply chain and bring our expertise to the developing offshore wind industry to help clients in the green energy market to meet their ambitious growth targets. We will continue to deliver high-quality assets to the hydrocarbon industry, which will remain a major energy source for several decades. We are also rapidly advancing several digital ventures aimed at improving performance in both these end markets.
The way the world produces and consumes energy is transforming, and we look forward to playing an integral part in this. In 2021, the pandemic continues to affect the industry and debt markets. Against this backdrop and with the current liquidity challenges facing the business, a material uncertainty exists in respect of the Company's going concern position. As a result, the Board concluded that the business urgently requires additional capital, through debt and/or equity. This will strengthen the balance sheet as we deliver ongoing major projects for our partners and make further strategic investments to take Lamprell through the next step in its transformation. Until this funding is secured, the Group will need to manage working capital carefully including agreeing extended credit terms with some suppliers.
John Malcolm
Chairman
Chief Executive Officer's review
Lamprell reimagined
Since 2016, against major economic headwinds, Lamprell has established a new footing in a changing energy landscape. We entered 2021 with a focus on three core growth areas and are well-positioned to evolve with the energy transition. Diligent cost control, excellent operational performance and a dedicated team have helped us to deliver improved results and gain access to markets with significant growth outlooks. Following the planned capital reorganisation, we will be able to navigate the near-term liquidity challenges faced by the Group and be ready to enter the next phase in our strategic journey.
Challenge and response were the key modes of operation across the world in 2020 as we navigated the impacts of the COVID-19 pandemic and assessed its long-term effect on the wider industry and on our business. For Lamprell, it has been a year of reimagining itself, a natural step alongside the global energy transition.
Operational excellence
I am pleased to report that in this challenging year we continued to deliver our projects safely, with a world-class TRIR of 0.15 at the end of 2020. This is a testament to our uncompromising commitment to safety and quality. We continued to operate throughout the worst of the pandemic, protecting our employees with timely tests, health checks, vaccinations and increased social distancing measures.
Early in 2020, we commenced work on the two new build jackup rigs contracted through the IMI joint venture. It is a significant award for Lamprell, the first for new rigs in the market over the past five years, and a signal of long-term oil & gas fundamentals in the Middle East region. It is an industry in which we have built unparalleled expertise over decades. Project flow from the region was then boosted by the EPIC contract for the Mahani gas field in Sharjah and we were very pleased to welcome seven rigs for large scope refurbishment from ADNOC later in the year.
Much of the year was also dedicated to delivering our second major renewables project, Moray East, where we demonstrated a strong operational performance, utilising recent upgrades in our yards despite challenges presented by the pandemic, which was spreading rapidly as the project entered the critical delivery phase. With our activities on Moray East further expanding our experience in serial foundation fabrication, we were pleased to secure another 30-jacket offshore wind project, Seagreen. Our credentials in the renewables industry are growing and by the end of 2021, we will have fabricated nearly 150 jacket foundations for three of the UK's biggest offshore wind projects.
Some of the new efficiencies we achieved on Moray East and continue to deploy on the Seagreen project are the result of our focused and timely entry into digital solutions. We have made significant progress in robotic technology and, crucially, in establishing strategic partnerships with Injazat/G42, one of the region's leading digital developers backed by Mubadala Investment Company and Silver Lake Partners; and Akselos, a leading developer of simulation technologies.
Resilience, perseverance, progress
Over the past few years of the oil industry downturn, which spiralled into new lows through the COVID-19 pandemic, Lamprell continued to focus on the delivery of its strategic objectives. Entering new markets in a period of volatility requires discipline and perseverance. I am therefore pleased to report delivery against all our strategic goals and an improved financial performance of positive EBITDA despite the significant headwinds and working through ongoing projects with lower margins. The management team was collectively driven to manage our cashflows and we ended the year in a much stronger cash position than when we started it.
We continued to win and execute new projects both in renewables and oil & gas, where our regional clients continue to see us as a trusted partner. We forged new strategic partnerships in the digital segment that will allow us to remain competitive while also offering innovative solutions to our clients and providing us with additional revenue streams.
Playing a part in the energy transition
The developments in the energy industry over the past few months have reinforced our commitment to offshore wind, where in less than five years, we have gone through a steep learning curve to build a solid global standing. We are now looking at a rapidly growing global opportunity set and potential to broaden our involvement and move up the value chain. The industry is on the verge of explosive growth with multiple large-scale projects in the US and Asia about to join the continuing European offshore wind expansion. The technology and scale of this evolving sector are also changing, and our focus on jacket fabrication has the potential to expand to base structures for floating offshore wind and central platforms.
Our timely entry into digital ventures is providing us with a differentiated offering in this area of vast opportunities. We have already commenced successful deployment of robotic welding technologies on some of our projects and we are developing proprietary technologies in asset integrity, engineering design, smart non-destructive testing, predictive maintenance and robotics, all of which have broad applications across the energy industry.
We are proud of our reputation, expertise and relationships with clients in the oil & gas sector, specifically our growing presence in Saudi Arabia, and we recognise the continuing role of hydrocarbon development during the energy transition. With our oil & gas projects continuing to support the strong, structural long-term growth prospects in our other business units, we look forward to playing a role in hydrocarbon development in the region over the next few decades.
Outlook for 2021 and liquidity
We see significant opportunities in all our addressable markets in 2021. Our bid pipeline is at USD 6 billion, based on strict bidding criteria, and includes approximately USD 2.5 billion of prospective renewables projects. The sector continues to receive focused support from governments around the world and is seeing rapid growth; we anticipate over USD 6 billion of new renewables projects to enter the bid pipeline over the next 12 months. Our backlog at 31 December 2020 was USD 522 million, with approximately USD 470 million scheduled to run off in 2021. However, 2021 is a key year for our major projects with significant, near-term working capital requirements, which have put severe pressure on our balance sheet and require additional funding to complete. A raise of capital in Q3 2021 is required to strengthen the Group's balance sheet. Until this injection of funding is secured, a level of extended credit will continue to be required to maintain liquidity.
We are also focused on creating a lean and agile organisation that enables us to extract maximum value from our expertise and market potential with a strategic reorganisation into three new business units - renewables, oil & gas and digital. Each business unit has different priorities and needs, and the Group must improve its liquidity headroom by raising additional capital now, supporting disciplined execution and investing to maximise returns from its existing capabilities. These steps will provide the Group with improved financial resilience and a more appropriate balance sheet structure to ensure ongoing project deliveries, pursue larger contracts and also ensure that we maintain a suitable capital structure for the markets in which we operate.
While we are optimistic about Lamprell's future and our secured backlog indicates further year-on-year revenue growth, we will make every effort to control costs, manage working capital and demonstrate to investors that an improved liquidity position (through the new debt and equity capital raise) will allow us to access the many attractive opportunities in our chosen markets. We are encouraged by bidding dynamics in our end markets and we are confident of our ability to build on the 2020 results in the coming years.
Christopher McDonald
Chief Executive Officer
Operational review
Despite the dual headwinds of a global pandemic and instability in the oil industry, Lamprell's operations team was kept busy with the consolidation of our facilities into one yard, completion of the Moray East project, and start-up works on several significant new contracts.
Streamlining our operations
In early 2020 we took the decision to consolidate our operations for the time being into Hamriyah, our largest yard. The Jebel Ali facility was mothballed and, following completion of the Moray East project, we closed the Sharjah facility. At Hamriyah, we expanded acreage by adding 127,000m(2) of yard space, an increase of around 25%. These steps allowed us to grow fabrication volumes gradually while significantly improving efficiency and reducing our cost base.
In 2020 we completed the Moray East project, started work on two of the new build jackups destined for Saudi Arabia and commenced work on the Seagreen renewables project. Once again, we saw a steady stream of rig refurbishments throughout the year and offsite, we completed work on the EPIC contract for the Mahani project. Matching our best performance in the Company's history in 2018, we were delighted to achieve a year-end TRIR of 0.15 for the second time. Considering the circumstances surrounding COVID-19 and how busy our yards were in 2020 as we ramped up on new projects, this is an outstanding achievement.
Renewables
In June 2020, we received a contract from Seaway 7, the renewables business unit of Subsea 7, for the procurement, fabrication and delivery of 30 wind turbine generator substructures, which comprised the jackets, transition pieces and suction caissons. Seagreen is the third major European offshore wind project that Lamprell has been awarded in this fast-growing renewables market. In April 2020, we reached a final commercial settlement on the East Anglia ONE project. We also successfully completed the Moray East project. Moray East, which included the delivery of 45 jacket foundations for wind turbine generator substructures and three jackets for offshore substations, was operationally completed in September 2020. The team did extremely well to navigate the various complexities thrown our way by the arrival of the COVID-19 pandemic, including those felt by our global supply chain partners and our yard workers who rose to the challenges, continuing to deliver during very stressful times. With more than 100 jackets in our renewables portfolio today and a new project underway, Lamprell is forging ahead as a market leader in this area.
As the Group has researched ways to improve throughput in our yard, we have invested in a new, bespoke lifting frame with over 2,000 of tonnes of capacity, which is being used to upend our jackets prior to loadout. A lifting frame allows for upending the foundations more efficiently. The frame was commissioned in 1H 2021 for use on the Seagreen project.
Oil & gas
Early 2020 saw Lamprell sign a contract with its joint venture partner IMI for the fabrication and delivery of two jackup drilling units, the first award of this kind to anyone in the industry for over five years. The rigs will be built collaboratively between IMI and Lamprell. Later in the year, IMI awarded an engineering contract to us for the design of future state-of-the-art jackup rigs, demonstrating IMI and Lamprell's commitment to support Aramco's fleet expansion over the next decade. Extending over the next three years, the work will be undertaken in two parts: an initial phase incorporating detailed design engineering, followed by the production design phase. We welcomed the first groups of IMI Saudi apprentices in early 2021 as part of the ongoing Saudisation development programme. One group of engineering apprentices will work alongside our experienced engineers on the rigs, while the second group of technical trainees will be working in our yard learning trades skills.
Our rig refurbishment division had a strong 2020. It started the year with 13 rigs in our yards from the prior year. In the subsequent 12 months, a total of 17 new rig refurbishment contracts were awarded and by the close of 2020, we had successfully redelivered 16 while the remaining rigs either continued undergoing refurbishment work into 2021 or were stacked in our yard. Impressively, seven of our rig refurbishment projects came from our trusted UAE partner and valued repeat client ADNOC.
Our site services business received a contract award from Sharjah National Oil Corporation to undertake a medium-sized EPIC project associated with the newly discovered Mahani gas and condensate field in Sharjah, UAE. Lamprell's scope of work included hook-up and installation at the well, existing systems upgrade, associated tie-ins and a new 23km export pipeline. The project was successfully completed in early 2021 as planned and handed over to a very satisfied client.
Finally, in 1H of 2021, we were delighted to be formally awarded two significant LTA contracts by Saudi Aramco. While these contract wins in our oil & gas business unit cement our reputation in this business, raising additional capital to support operations is key, and without this, we may be faced with significant challenges to ensure that we can deliver on our contractual obligations.
Digital
Research and development is an important evolution for Lamprell given its focus on industrial operations. Our new digital team had a busy 2020, successfully implementing a range of technologies in our operations including the deployment of adaptive robotic welding onto our projects, facial recognition technology and a proprietary digital quality management system. We are looking to develop and embed such opportunities into our business, to improve productivity and also generate new revenue streams.
In 2021, provided that we have access to new capital, we will continue to progress the development of two types of robotic technologies. These will allow us to enhance our operational efficiencies and de-risk potential constraints with labour supply. The first is adaptive robotic welding which had previously been tested and proven on the Moray East project and is now being deployed on our Seagreen project. The second will be used for complex TKY joints and is currently part way through 'proof-of-concept' testing.
Through the joint initiative with our digital partner Injazat/G42, we are developing a platform that uses AI technology, which will help us to gain detailed insights into workforce and equipment movement, which we believe will, in turn, enable us to become safer, more productive and efficient. The platform will be tested in our yards.
Another major digital initiative being explored is the use of Akselos' engineering software which has the potential to significantly improve our constructability input and enhance future designs. It will allow us to build physics-based models for our clients that will serve as a true reflection of their assets' utilisation and reaction in the field. We anticipate that this will generate considerable value for our clients in the renewables market as we transfer our knowledge from fixed foundations into future floating foundations. The technology will help us gain unprecedented insights on cost reduction opportunities for our clients, the ultimate asset owners. We are in the process of testing this software on our new lifting frame which represents an excellent proof of concept for the technology.
Hani El Kurd
Chief Operating Officer
Financial review
Resilient performance in a year of uncertainty
Fiscal discipline was our primary focus in 2020, which, together with growing annual revenues, allowed us to improve financial performance to deliver positive EBITDA. Although we ended the year debt-free and with a solid net cash position, completion of a new capital funding arrangement is the top priority for 2021 and crucial to the ongoing viability of the business, given current liquidity challenges.
We are pleased to report improving financial performance despite significant challenges presented by the COVID-19 pandemic. Our revenues increased for the second consecutive year to USD 338.6 million (2019: 260.4 million) as we worked through three major projects - the IMI rigs, Moray East and Seagreen. Revenues from the rigs segment with contribution from two IMI rigs, the Mahani EPIC projects and rig refurbishment, amounted to USD 128.7 million. Rig refurbishment has had another strong year; we were awarded 17 rigs, seven of which were marked for large scopes from our largest and major UAE client, and a total of 16 rigs were delivered. USD 150.3 million is attributable to the EPC(I) segment, where we completed fabrication on Moray East and progressed Seagreen. Renewables have been a strong revenue contributor over the past four years and are now considered a core offering, which is reflected in the reorganised structure of three business units from 2021.
Our contracting services segment, which focuses on the provision of personnel and other services to the renewables and oil & gas industries, was noticeably impacted by the lockdowns and generated USD 59.6 million in 2020, down from USD 68.5 million in 2019. This segment showed good recovery in the second half of the year, and we look forward to it returning to full performance in due course. Despite improvements in revenues and EBITDA, the Group is facing severe short term liquidity challenges. More information on the Group's plans to mitigate this issue is provided within this section.
Margin performance
Despite the challenges of the global pandemic throughout most of 2020, we report an improved margin performance for the year, with a gross profit of USD 14.6 million for the year (2019: gross loss of USD 27.6 million). The improved performance is attributed to strong project execution, the overhead reduction programme which included the downsizing of our operational footprint, and consolidating our operations into one yard, as well as temporary cost reduction measures to offset the impact of COVID-19. The Group will not see the full benefit of past actions to improve profitability until it completes the ongoing work on the legacy low/zero margin projects.
EBITDA from continuing operations in 2020 was USD 3.9 million, a significant improvement on the prior year (2019: USD (64.6) million), representing an EBITDA margin of 1.2% (2019: (24.8)%).
Finance cost and financing activities
Following the repayment of outstanding debt on 11 March 2020, the Group is currently debt-free. Net finance cost (excluding interest expense on leases) therefore reduced to a neutral position (2019: USD 3.0 million).
We are assessing a number of options for funding to mitigate current liquidity challenges as well as future funding of our strategic objectives as a key priority for the Company in 2021, further details of which are included in the section below titled "Balance sheet recapitalisation plans".
Net loss
Net loss for the year ended 31 December 2020 was USD 53.4 million (2019: loss of USD 183.5 million). The loss is driven by the continued low revenue levels and the minimal margin on the IMI Rigs projects coupled with USD 5.6 million of one-off expenses related to the overhead restructuring programme and non-cash impairments of USD 4.6 million. The diluted loss per share for the year was 15.63 US cents (2019: diluted loss per share - 53.71 US cents).
Capital expenditure
One of our priorities in 2020 was preserving liquidity, particularly given the unknown duration and extent of the impact of the COVID-19 virus. As a result, non-essential capital expenditure was put on hold. Capital expenditure for the year ended 31 December 2020 was USD 14.2 million and largely focused on investments to improve efficiencies in serial renewables fabrication.
During the fourth quarter of 2020, we made a USD 26 million equity contribution to the IMI joint venture. To date, Lamprell has invested USD 85 million of the USD 140 million committed. This followed a review of the Group's near-term cash flow and improved project working capital position on the two IMI jackup rigs. The next equity contribution amounting to around USD 17 million to the IMI, a key strategic investment in maintaining the Group's relationships in the Kingdom, is scheduled for Q3 2021 and will be one of the uses of proceeds of the proposed equity raise.
Cash flow and liquidity
The Group's net cash flow from operating activities for the year ended 31 December 2020 reflected a net inflow of USD 113.3 million which was driven by savings from the reduction in cash overheads, and the final settlement payment from the East Anglia One contract, as well as milestone receipts and effective cash management on major projects. Prior to working capital movements and the payment of employees' end-of-service benefits, the Group's net cash inflow was USD 5.8 million. Cash, together with bank, term and margin deposits, increased by USD 50.7 million to USD 113.3 million.
Balance sheet
Net cash increased from USD 42.5 million at 31 December 2019 to USD 112.4 million at 31 December 2020, of which USD 55.6 million was restricted through project guarantees and bonds. Key drivers for the improved net cash position included the milestone payments on the two IMI rigs and Seagreen major projects in the final quarter. Net cash has trended down in 1H 2021 and will continue to trend downwards through 2021 as projects progress and in particular the IMI rig projects draw working capital as part of the normal project cycle.
The Group's total current assets at 31 December 2020 were USD 286.4 million (31 December 2019: USD 229.7 million). Trade and other receivables increased to USD 73.9 million (31 December 2019: USD 37.4 million). Contract assets increased to USD 85.4 million (31 December 2019: USD 40.4 million). The increase in trade and other receivables and contract assets is attributable to contract work in progress and billing on ongoing projects.
Shareholders' equity reduced to USD 160.4 million (31 December 2019: USD 211.4 million).
Borrowings
Following the repayment of a USD 30 million debt facility in March 2020, the Group holds minimal levels of debt at USD 0.9 million.
Balance sheet recapitalisation programme
We have been successful in securing project financing for the Seagreen project via a green bond from HSBC, and our balance sheet allows us to execute ongoing work and continue bidding for new contracts. As highlighted previously, the Group has been assessing its funding options, in terms of meeting near-term working capital needs and its strategic objectives. Despite a committed programme of overhead reductions aimed at preserving liquidity, in 2021, a number of major projects will have substantial working capital requirements thereby putting significant pressure on the balance sheet in Q2 and Q3 2021. Unrestricted cash available to the Group fell from USD 56.8 million at December 2020 to USD 18.6 million in May 2021. Consequently, to fulfil its near-term working capital needs and to then meet its medium term strategic objectives, the Group will undertake a balance sheet recapitalisation programme for an amount of USD 120-150 million, either through a combination of debt and equity, or equity for the full amount, to be completed by the end of Q3 2021. Further details of the plans are included in the section below titled "Going concern".
Strategic reorganisation
In January 2021, the Group took the decision to reorganise into three business units: renewables, oil & gas and digital. We intend to align Group financial reporting with this structure for the full year 2021.
Going concern
The Group's consolidated financial statements have been prepared on a going concern basis as further discussed in Note 2.1. In performing their assessment of going concern, the Directors have considered the forecast cash flows for the 15 months to 30 September 2022 and reviewed the progress against the key assumptions discussed below:
Planned capital raise
As highlighted previously, the Group has been assessing its funding options, both in terms of meeting near-term working capital challenges and meeting its strategic objectives. Despite a committed programme of overhead reductions aimed at preserving liquidity, in 2H 2021, a number of major projects will have substantial working capital requirements, in particular the IMI rigs, thereby putting significant pressure on the balance sheet in Q3 2021.
To fulfil its near-term working capital needs and to then meet its medium-term strategic objectives, the Group must complete a new funding arrangement of USD 120-150 million by the end of Q3 2021, either through a combination of debt and equity, or via a larger equity raise. At the date of publication, the Group is in advanced stages of negotiation with certain relationship banks to secure project finance facilities, which will be secured by the proceeds of specifically identified projects, of up to USD 90 million, backed by export credit agency support. While approval is expected by the Board, there can be no certainty of the project finance facilities being concluded. If the Group is unsuccessful in concluding the project finance facility which enables the Group to fund the payment of its debts as they fall due, the Group will need to raise capital through equity for the full amount of USD 120-150 million. Should these funding options not be executed successfully, the Group is unlikely to be able to maintain sufficient liquidity in order to continue trading.
In aggregate, the capital proceeds from the funding routes being pursued will then be used to fund initially the working capital requirements of the IMI Rig Projects, which draw their peak working capital requirement in 2H 2021 and the outstanding final committed and contractual equity contributions to the IMI joint venture in Saudi Arabia. Following receipt of the final milestone payments on the IMI rig projects, expected in October 2022, the proceeds will then be used to make further operational investment in efficiency and capacity growth, notably for renewables projects (which may be accelerated depending on the structure and quantum of the equity raise); and invest in the significant opportunities in developing the Digital business unit.
The timing and quantum of the equity raise is critical and dependent upon market conditions and the outcome of the Group's negotiations with the banks for project finance. Should the Group be unable to secure the capital raise, either through the project related debt and/or equity there is significant risk that the Group will be unable to meet its contractual obligations as they fall due.
Deferral of creditor payments
A key part of the Group's strategy to address current liquidity challenges is the extension of credit terms with certain suppliers, and the deferral of payments. This activity must continue until the proceeds of the new funding arrangements are received, and should the timing or quantum be different to forecast, will need to increase to a point that may not be sustainable.
The group's ability to do this is critical and dependent on the reaction of key suppliers, which is outside the Group's control. Should the Group be unable to sustain this, there is a significant risk that the Group will be unable to meet its contractual obligations as they fall due.
Further key assumptions included in the forecast cash flows are summarised as follows and explained in further detail at Note 2.1:
-- conversion of a portion of the bid pipeline to contract awards in line with our strategy;
-- release of restricted cash relating to the Bank Guarantees provided to our client on the EA1 project;
-- execution of existing major projects in accordance with agreed milestones, forecast costs and payment receipts in accordance with the contract;
-- revenues from our Contracting Services segment and Rig Refurbishment business unit continue in line with those achieved in prior periods; and
-- the commercial closeout of the Moray East project in line with current forecasts and resulting final payments.
The COVID-19 pandemic continues to affect our ability to make forecasts and increases uncertainty around all of these assumptions, particularly the timing of new funding arrangements, new major contract awards, our ability to meet project milestones and also vendors' ability to accept extended credit periods. In view of this, the Directors have considered downside sensitivities to the key assumptions which include no new significant contract wins in the going concern period and the inability of the Group to secure new funding arrangements. The Directors have concluded that, in aggregate, such matters beyond management's control represent a significant judgement on the entity's ability to continue as a going concern.
Significant disruption to the timing or realisation of the anticipated cash flows could result in the business being unable to realise its assets and discharge its liabilities in the normal course of business. The Directors have considered the realistic availability and likely effectiveness of drastic and severe mitigating actions that they could take to avoid or reduce the impact or likelihood of a significant deterioration in the cash flows, along with the Group's ability to carry out those actions. These include: continued fiscal discipline and targets for managing working capital particularly with respect to the delivery of the two IMI rigs which draw their peak working capital requirement in 2H 2021. This includes extending credit periods with vendors in the months where our cash requirements are significant; delaying planned contributions to our IMI joint venture; deferring implementation of the 'Lamprell reimagined' strategy until a time the funding can be secured; self-help measures including extending periods of reductions in overheads, fees, salaries and allowances for the Board, senior management and professional staff, use of a deferred salary savings scheme and where operationally feasible, placing staff on reduced working hours or unpaid leave; reduced levels of capital expenditure and digital spend; and sale of non-core businesses or assets.
Following consideration of these actions, the Directors are satisfied they have appropriate available mitigating actions in place to ensure that the Group remains liquid in the short term. However, the Directors highlight that these mitigating actions are severe and will require support from vendors to manage working capital requirements for the business. Assumptions in management's forecasts regarding the Group's plans to raise capital, and its ability to continue to defer payment to certain suppliers as set out above, which are outside their control, represent a material uncertainty that may cast significant doubt on the group's and company's ability to continue as a going concern.
Dividend
The Group made progress in returning to profitability in 2020. However, current revenues remain at insufficient levels to cover existing overheads, and the COVID-19 pandemic continues to cast major uncertainty on markets and industries. As a result, the Directors do not recommend the payment of a dividend for the period in relation to the financial year ended 31 December 2020. The Directors will continue to review this position in light of market conditions and Group performance at the relevant time.
Post balance sheet events
See Note 34 for events that have taken place post the balance sheet date.
Tony Wright
Chief Financial Officer
Consolidated income statement
Year ended 31 December
2020 2019
Notes USD'000 USD'000
Revenue 6 338,623 260,448
Cost of sales 7 (324,073) (288,052)
-------------------- --------------------
Gross profit/(loss) 14,550 (27,604)
Selling and distribution expenses 8 (298) (1,502)
General and administrative expenses* 9 (47,215) (140,324)
Other gains - net 12 1,009 286
-------------------- --------------------
Operating loss (31,954) (169,144)
Finance costs 11 (5,980) (8,327)
Finance income 11 370 1,023
-------------------- --------------------
Finance costs - net (5,610) (7,304)
Share of loss of investments accounted
for using the equity method - net 16 (15,697) (7,934)
-------------------- --------------------
Loss before income tax (53,261) (184,382)
Income tax (expense)/gain (125) 868
-------------------- --------------------
Loss for the year (53,386) (183,514)
========= =========
Loss per share attributable to the
equity holders of the Company during
the period 13
Basic (15.63)c (53.71)c
========== ==========
Diluted (15.63)c (53.71)c
========== ==========
*General and administrative expenses include:
- an impairment charge of USD 4.6 million (31 December 2019: 79.3 million) (Note 35) recognised in respect of property, plant and equipment, intangible assets and an investment accounted for using the equity method; and
- restructuring costs of USD 5.6 million (31 December 2019: nil) (Note 25) relating to staff redundancies and costs of closing down the Sharjah Khalid port yard.
Consolidated statement of comprehensive income
2020 2019
Notes USD'000 USD'000
Loss for the year (53,386) (183,514)
Other comprehensive income:
Items that will not be
reclassified
subsequently to profit or
loss:
Remeasurement of
post-employment (3, 074
benefit obligations 24 (1,676) )
Share of other comprehensive
loss
of equity accounted
investments 16 ( 352 ) (215)
Items that may be
reclassified subsequently
to profit or loss:
Currency translation
differences 23 43 308
-------------------------- -------------------------
Other comprehensive loss for
the (2, 981
year (1, 985 ) )
-------------------------- --------------------------
Total comprehensive loss for
the
year (55,371) (186,495)
========= =========
Consolidated balance sheet
2020 2019
Notes USD'000 USD'000
ASSETS
Non-current assets
Property, plant and equipment 14 162,024 160,077
Intangible assets 15 82 -
Investments accounted for
using the equity method 16 55,888 44,420
Term and margin deposits 20 447 432
------------------------ ------------------------
Total non-current assets 218,441 204,929
------------------------ ------------------------
Current assets
Inventories 17 14,252 89,758
Trade and other receivables 18 73,890 37,431
Contract assets 19 85,426 40,384
Cash and cash equivalents 20 57,625 26,162
Term and margin deposits 20 55,193 35,922
------------------------ ------------------------
Total current assets 286,386 229,657
------------------------ ------------------------
Total assets 504,827 434,586
------------------------ ------------------------
LIABILITIES
Current liabilities
Borrowings 29 (880) (20,058)
Trade and other payables 26 (70,866) (93,469)
Contract liabilities 27 (159,991) (3,826)
Lease liabilities 32 (2,136) (1,985)
Current tax liabilities (253) (177)
Provision for warranty costs 28 (3,555) (11,440)
------------------------ ------------------------
Total current liabilities (237,681) (130,955)
------------------------ ------------------------
Net current assets 48,705 98,702
------------------------ ------------------------
Non-current liabilities
Lease liabilities 32 (68,849) (55,388)
Provision for employees' end
of service benefits 24 (37,848) (36,863)
------------------------ ------------------------
Total non-current liabilities (106,697) (92,251)
------------------------ ------------------------
Total liabilities (344,378) (223,206)
------------------------ ------------------------
Net assets 160,449 211,380
========== ==========
EQUITY
Share capital 22 30,346 30,346
Share premium 22 315,995 315,995
Other reserves 23 (19,292) (19,335)
Retained losses (166,600) (115,626)
------------------------ ------------------------
Total equity attributable
to the equity holders of the
Company 160,449 211,380
========== ==========
Consolidated statement of changes in equity
Retained
Share Share Other earnings
capital premium reserves / (losses) Total
Notes USD'000 USD'000 USD'000 USD'000 USD'000
At 1 January
2019 30,346 315,995 (19,643) 66,255 392,953
------------------ ------------------ ------------------ ------------------ ------------------
Loss for the
year - - - (183,514) (183,514)
Other
comprehensive
income:
Remeasurement of
post-employment
benefit
obligations 24 - - - (3,074) (3,074)
Share of other
comprehensive
loss accounted
for using
the equity
method 23 - - - (215) (215)
Currency
translation
differences 23 - - 308 - 308
------------------ ------------------ ------------------ ------------------ ------------------
Total
comprehensive
loss
for the year - - 308 (186,803) (186,495)
------------------ ------------------ ------------------ ------------------ ------------------
Transactions
with owners:
Share-based
payments:
- value of
services
provided - - - 4,993 4,993
- treasury
shares
purchased - - - (71) (71)
------------------ ------------------ ------------------ ------------------ ------------------
Total
transactions
with
owners - - - 4,922 4,922
------------------ ------------------ ------------------ ------------------ ------------------
At 31 December
2019 30,346 315,995 (19,335) (115,626) 211,380
------------------ ------------------ ------------------ ------------------ ------------------
Loss for the
year - - - (53,386) (53,386)
Other
comprehensive
income:
Remeasurement of
post-employment
benefit
obligations 24 - - - (1,676) (1,676)
Share of other
comprehensive
loss accounted
for using
the equity
method 16 - - - (352) (352)
Currency
translation
differences 23 - - 43 - 43
------------------ ------------------ ------------------ ------------------ ------------------
Total
comprehensive
loss
for the year - - 43 (55,414) (55,371)
------------------ ------------------ ------------------ ------------------ ------------------
Transactions
with owners:
Share-based
payments:
- value of
services
provided - - - 4,440 4,440
----------------- ------------------ ------------------ ------------------ ------------------
Total
transactions
with
owners - - - 4,440 4,440
----------------- ------------------ ------------------ ------------------ ------------------
At 31 December
2020 30,346 315,995 (19,292) (166,600) 160,449
======== ======== ======== ======== ========
Consolidated cash flow statement
2020 2019
Notes USD'000 USD'000
Operating activities
Cash generated from/(used in) operating
activities 33 113,303 (7,739)
Tax paid (49) (69)
------------------------ ------------------------
Net cash generated from/( used
in) operating activities 113,254 (7,808)
------------------------ ------------------------
Investing activities
Purchases of property, plant and
equipment 14 (13,906) (19,817)
Proceeds from sale of property,
plant and equipment 381 82
Additions to intangible assets 15 (288) (1,012)
Increase in investment in an associate 16 (25,814) -
Dividend received from an associate 16 - 901
Finance income 11 370 1,023
Inflows from deposits with original
maturity of more than three months - 10,333
Inflows from margin deposits under
lien (with original maturity more
than three months) 5,285 15,987
Outflows from margin deposits under
lien (with original maturity more
than three months) (24,074) (2,811)
Inflows from margin deposits under
lien (with original maturity less
than three months) - 1,257
Outflows from margin deposits under
lien (with original maturity less
than three months) (497) -
------------------------ ------------------------
Net cash (used in)/generated from
investing activities (58,543) 5,943
------------------------ ------------------------
Financing activities
Repurchase of treasury shares - (71)
Proceeds from borrowings 29 880 40,000
Repayments of borrowings 29 (20,000) (40,000)
Finance costs (1,411) (3,715)
Repayment of interest expense on
leases 32 (2,142) (4,322)
Repayment of lease liabilities 32 ( 618 ) (2,857)
------------------------ ------------------------
(23, 291
Net cash used in financing activities ) (10,965)
------------------------ ------------------------
Net increase/(decrease) in cash
and cash equivalents 31,420 (12,830)
Cash and cash equivalents, beginning
of the year 26,162 38,684
Exchange rate translation 43 308
------------------------ ------------------------
Cash and cash equivalents, end
of the year from
continuing operations 20 57,625 26,162
========== ==========
Notes to the consolidated financial statements for the year ended 31 December 2020
1 Legal status and activities
The principal activities of the Company and its subsidiaries (together referred to as "the Group")
are: assembly and new build construction for the onshore/offshore oil and gas and renewable sectors; fabricating packaged, pre-assembled and modularised units; constructing accommodation and complex process modules for onshore downstream projects; construction of complex living
quarters, wellhead decks, topsides, jackets and other offshore fixed facilities; rig refurbishment;
land rig services; engineering and construction and operations and maintenance.
2 Basis of preparation
The Group is required to present its annual consolidated financial statements for the year ended 31 December 2020 in accordance with EU adopted International Financial Reporting Standards ("IFRS"), International Financial Reporting Interpretations Committee ("IFRIC") interpretations and those parts of the Isle of Man Companies Acts 1931-2004 applicable to companies reporting under IFRS.
This financial information set out in this preliminary announcement does not constitute the Group's statutory accounts for the year ended 31 December 2020. The financial information has been extracted from the consolidated financial statements for the year ended 31 December 2020 approved by the Board of Directors on 28 June 2021 upon which the auditors' opinion is not modified and did not contain a statement under section 15(4) or 15(6) of the Isle of Man Companies Act 1982.
The financial information comprises the Group balance sheets as of 31 December 2020 and 31 December 2019 and related Group income statement, statement of comprehensive income, cash flows, statement of changes in equity and related notes for the twelve months then ended, of Lamprell plc. This financial information has been prepared under the historical cost convention except for the measurement at fair value of share options, financial assets at fair value through profit or loss and derivative financial instruments.
The preliminary results for the year ended 31 December 2020 have been prepared in accordance with the Listing Rules of the London Stock Exchange.
2.1 Going concern
These financial statements have been prepared on a going concern basis which assumes that the Group will continue to have adequate resources to continue in operational existence for the foreseeable future notwithstanding the material uncertainty discussed below.
The Group incurred a loss before tax of USD 53.4 million during the year ended 31 December 2020 (31 December 2019: USD 183.5 million) and was in a Net Cash position of USD 112.4 million at 31 December 2020 (2019: Net Cash position of USD 42.5 million). This improvement in its financial results and resources is mainly attributable to the self-help measures implemented in Q1 2020, negotiating extended payables credit terms and the Net Cash inflows generated from operating activities of USD 113.3 million.
Of the Net Cash position at 31 December 2020, USD 55.6 million was restricted. The level of net unrestricted cash at 31 December 2020 was therefore USD 56.7 million (2019: USD 6.1 million).
As at 31 May 2021, net unrestricted cash has fallen to USD 18.6 million, as our ongoing projects have drawn working capital through the first half of 2021. The Group now faces acute solvency challenges in the coming months.
The Directors have performed a going concern assessment for the 15 months to 30 September 2022 and detailed below are the key assumptions included in the forecast cash flows:
Planned capital raise
As highlighted previously, the Group has been assessing its funding options, both in terms of meeting near-term working capital challenges, funding project related overheads until new projects are secured and meeting its strategic objectives. Despite a committed programme of overhead reductions aimed at preserving liquidity, in 2H 2021, a number of major projects will have substantial working capital requirements, in particular the IMI rigs, thereby putting significant pressure on the balance sheet in Q3 2021.
To fulfil its near-term working capital needs and to then meet its medium-term strategic objectives, the Group must complete a new funding arrangement of USD 120-150 million by the end of Q3 2021, either through a combination of debt and equity, or via a larger equity raise. At the date of publication, the Group is in advanced stages of negotiation with certain relationship banks to secure project finance facilities, which will be secured by the proceeds of specifically identified projects, of up to USD 90 million, backed by export credit agency support. While approval is expected by the Board, there can be no certainty of the project finance facilities being concluded. If the Group is unsuccessful in concluding the project finance facility which enables the Group to fund the payment of its debts as they fall due, the Group will need to raise capital through equity for the full amount of USD 120-150 million. Should these funding options not be executed successfully, the Group is unlikely to be able to maintain sufficient liquidity in order to continue trading.
In aggregate, the capital proceeds from the funding routes being pursued will then be used to fund initially the working capital requirements of the IMI Rig Projects, which draw their peak working capital requirement in 2H 2021, project related overheads and the outstanding final committed and contractual equity contributions to the IMI joint venture in Saudi Arabia. Following receipt of the final milestone payments on the IMI rig projects, expected in October 2022, the proceeds will then be used to make further operational investment in efficiency and capacity growth, notably for renewables projects (which may be accelerated depending on the structure and quantum of the equity raise); and invest in the significant opportunities in developing the Digital business unit.
The timing and quantum of the equity raise is critical and dependent upon market conditions and the outcome of the Group's negotiations with the banks for project finance. Should the Group be unable to secure the capital raise, either through the project related debt and/or equity there is significant risk that the Group will be unable to meet its contractual obligations as they fall due.
Deferral of creditor payments
A key part of the Group's strategy to address current liquidity challenges is the extension of credit terms with certain suppliers, and the deferral of payments. This activity must continue until the proceeds of the new funding arrangements are received, and should the timing or quantum be different to forecast, will need to increase to a point that may not be sustainable.
The group's ability to do this is critical and dependent on the reaction of key suppliers, which is outside the Group's control. Should the Group be unable to sustain this, there is a significant risk that the Group will be unable to meet its contractual obligations as they fall due.
Further key assumptions included in the forecast cash flows are as follows:
- conversion of a portion of the bid pipeline to contract awards in line with our strategy . This includes opportunities from the renewables and oil and gas markets. We have demonstrated strong progress on our strategy through the award of the Seagreen project in June 2020 and two LTA projects in February and April 2021. We continue to bid on selective quality projects in these markets which match our capabilities;
- release of restricted cash relating to the Bank Guarantees provided to our client on the EA1 project: a portion was released in June 2021 with the balance of expected early in Q3 2021;
- execution of existing major projects in accordance with agreed milestones, forecast costs and payment receipts in accordance with the contract: despite the wide-ranging effects of Covid-19, all our on-going projects are tracking in line with their current customer approved schedules which form the basis of the forecast cash flow assumptions. Upon achieving milestones, we do not anticipate delays in receipt of payments, based on historical payment receipts with these customers;
- revenues from our Contracting Services segment and Rig Refurbishment business unit continue in line with those achieved in prior periods: these business units continue to deliver good financial performance, and we have seen a steady flow of work from our clients. The Rig Refurbishment business unit has also benefited from slow rig deployment by our clients, with completed projects going through additional scopes as they await commissioning; and
- the commercial closeout of the Moray East project in line with current forecasts and resulting final payments.
The COVID-19 pandemic continues to affect our ability to make forecasts and increases uncertainty around all of these assumptions, particularly the timing of new funding arrangements, new major contract awards, our ability to meet project milestones and also vendors' ability to accept extended credit periods.
In view of this, the Directors have considered downside sensitivities to the key assumptions which include no new significant contract wins in the going concern period and the inability of the Group to secure new funding arrangements. The Directors have concluded that, in aggregate, such matters beyond management's control represent a significant judgement on the entity's ability to continue as a going concern.
Significant disruption to the timing or realisation of the anticipated cash flows could result in the business being unable to realise its assets and discharge its liabilities in the normal course of business.
The Directors have considered the realistic availability and likely effectiveness of drastic and severe mitigating actions that they could take to avoid or reduce the impact or likelihood of a significant deterioration in the cash flows, along with the Group's ability to carry out those actions. These include:
-- continued fiscal discipline and targets for managing working capital particularly with respect to the delivery of the two IMI rigs which draw their peak working capital requirement in 2H 2021. This includes extending credit periods with vendors in the months where our cash requirements are significant;
-- delaying planned contributions to our IMI joint venture;
-- deferring implementation of the 'Lamprell reimagined' strategy until a time the funding can be secured;
-- self-help measures including extending periods of reductions in overheads, fees, salaries and allowances for the Board, senior management and professional staff, use of a deferred salary savings scheme and where operationally feasible, placing staff on reduced working hours or unpaid leave;
-- reduced levels of capital expenditure and digital spend; and -- sale of non-core businesses or assets.
Following consideration of these actions, the Directors are satisfied they have appropriate available mitigating actions in place to ensure that the Group remains liquid in the short term. However, the Directors highlight that these mitigating actions are severe and will require support from vendors to manage working capital requirements for the business.
Assumptions in management's forecasts regarding the Group's plans to raise capital, and its ability to continue to defer payment to certain suppliers as set out above, which are outside their control, represent a material uncertainty that may cast significant doubt on the group's and company's ability to continue as a going concern.
The financial statements have been prepared under the historical cost convention.
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.
3 Accounting policies
The accounting policies used are consistent with those set out in the audited financial statements for the year ended 31 December 2019 except for the adoption of new standards and interpretations effective 1 January 2020 as stated in the reviewed interim financial information for the period ended 30 June 2020. These financial statements are available on the Company's website, www.lamprell.com.
4 Critical accounting judgements and key sources of estimation uncertainty
The Group makes judgements, estimates and assumptions concerning the future. These are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:
4.1 Critical judgements in applying accounting policies
Apart from those involving estimation (see Note 4.2), the Group has made following critical judgements in applying accounting policies in the process of preparing these consolidated financial statements.
4.1.1 Contract claims
A claim is an amount that the Group seeks to collect from the customer or another party as reimbursements for costs not included in the contract price. A claim may arise from, for example, customer caused delays, prolongation cost, cost of acceleration of project, program errors in specifications or design, and disputed variations in contract work. The measurement of the amounts of revenue arising from claims is subject to a high level of uncertainty and often depends on the outcome of negotiations. Therefore, claims are only included in contract revenue when the amount has been accepted by the customer or the customer's representative, there is a clear contractual entitlement, and / or negotiations have reached a stage that it is highly probable that a significant reversal of revenue will not occur.
As at 31 December 2020, the balance due from customers on construction contracts includes an amount of unapproved contract claims as negotiations continue with our clients on the Moray East and IMI projects.
4.1.2 Liquidated damages (LDs)
The Group recognises liquidated damages where there have been significant delays against defined contractual delivery dates or unfulfilled contractual obligations and it is considered probable that the customer will successfully pursue these penalties. This requires management to estimate the amount of liquidated damages payable under the contract based on a combination of an assessment of the contractual terms, the reasons for any delays and evidence of cause of the delays to assess who is liable under the contract for the delays and consequently whether the Group is liable for the liquidated damages or not.
While certain contracts have been subject to delays and/or unfulfilled contractual obligations in 2020, based on a review of the status of and risk on ongoing projects, the current status of discussions with customers and information at hand, no provision for LDs have been made in the financial statements as at 31 December 2020.
4.2 Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year.
4.2.1 Revenue and margin recognition
The Group uses the input method in accounting for its contract revenue. Use of the input method requires the Group to estimate the stage of completion of the contract to date as a proportion of the total contract work to be performed in accordance with the Group's accounting policy. As a result, the Group is required to estimate the total cost to completion of all outstanding projects at each period end.
If the estimated total costs to completion of all outstanding projects were to decrease by 10% this would either result in contract assets increasing by USD 11.7 million (2019: USD 6.8 million) or contract liabilities decreasing by USD 11.7 million (2019: USD 6.8 million).
If the estimated total costs to completion of all outstanding projects were to increase by 10%, contract assets would either decrease by USD 10.9 million (2019: USD 5.2 million) or contract liabilities would increase by USD 10.9 million (2019: USD 5.2 million). For certain large projects where the margin is lower than average, increasing forecast costs to completion by 10% would result in an onerous contract provision of USD 21.2 million being recorded.
5 Segment information
The Group is organised into business units, which are the Group's operating segments and are reported to the Executive Directors, the chief operating decision-maker. These operating segments are aggregated into three reportable segments - 'Rigs' and 'Engineering, Procurement, Construction & Installation [EPC(I)]' and 'Contracting Services' based on strategic objectives, similar nature of the products and services, type of customer and economic characteristics.
The Rigs segment contains business from New Build Jack Up rigs, land rigs and refurbishment. The EPCI segment contains business from foundations, process modules, offshore platforms, pressure vessels and engineering and construction (excluding site works). The Contracting Services segment comprises of Site works, Operations and Maintenance, manpower supply and safety services.
Subsequent to the year-end, the Group announced a strategic reorganisation of its business into Renewable, Oil & Gas and Digital for which future segment reporting will be based upon - see Note 34.
Rigs EPC(I) Contracting Total
Services
USD'000 USD'000 USD'000 USD'000
Year ended 31 December 2020
Revenue from external customers 128,727 150,311 59,585 338,623
========= ========= ========= =========
Gross operating profit before
absorptions 8,869 21,262 16,461 46,592
========= ========= ========= =========
Year ended 31 December 2019
Revenue from external customers 24,766 167,230 68,452 260,448
========= ========= ========= =========
Gross operating profit/(loss)
before absorptions 3,579 (8,160) 27,702 23,121
========= ========= ========= =========
The Group uses standard costing method for recording labour, project management and equipment cost on project. Standard cost is based on an estimated or predetermined cost rates for performing an operation under normal circumstances. Standard costs are developed from historical data analysis adjusted with expected changes in the future circumstances. The difference between total cost charged to the projects at standard rate and the actual cost incurred are reported as under or over absorption.
The reconciliation of the gross operating profit is provided as follows:
2020 2019
USD'000 USD'000
Gross operating profit for Rigs segment
as reported
to the Executive Directors 8,869 3,579
Gross operating profit/(loss) for the
EPC(I) segments as
reported to the Executive Directors 21,262 (8,160)
Gross operating profit for the Contracting
services segments as reported to the
Executive Directors 16,461 27,702
----------------- -----------------
Gross operating profit before absorptions 46,592 23,121
----------------- -----------------
Under absorbed employee and equipment
costs (2,893) (10,526)
Provision for slow moving and obsolete
inventories (294) (395)
Release/(provision) for impairment
losses shown as part of operating profit
(Note 9) 97 (41)
Project related bank guarantee charges
shown as part of operating profit (1,237) (770)
----------------- -----------------
Gross operating profit 42,265 11,389
----------------- -----------------
Unallocated:
Unallocated operational overheads (10,743) (20,167)
Repairs and maintenance (3,464) (2,947)
Yard rent and depreciation (7,323) (10,574)
Others (7,325) (6,116)
Add back:
Provision/(release) for impairment
losses shown as part of general and
administrative expenses (Note 9) (97) 41
Project related bank guarantee charges
shown as part of finance costs 1,237 770
----------------- -----------------
Gross profit/(loss) 14,550 (27,604)
----------------- -----------------
Selling and distribution expenses (Note
8) (298) (1,502)
General and administrative expenses-
excluding impairment and restructuring
costs (Note 9) (37,070) (61,023)
Other gains - net (Note 12) 1,009 286
Finance costs (Note 11) (5,980) (8,327)
Finance income (Note 11) 370 1,023
Share of loss of investment accounted
for using the equity method (Note 16) (15,697) (7,934)
Impairment (Note 35) (4,548) (79,301)
Restructuring costs (Note 25) (5,597) -
------------------- -------------------
Loss before income tax (53,261) (184,382)
======== =======
The breakdown of revenue from all services is as disclosed in Note 6.
Sales between segments are carried out on agreed terms. The revenue from external parties reported to the Executive Directors is measured in a manner consistent with that in the consolidated income statement.
Information about segment assets and liabilities is not reported to or used by the Executive Directors and, accordingly, no measures of segment assets and liabilities are reported.
The Executive Directors assesses the performance of the operating segments based on a measure of gross profit. The labour, project management and equipment 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 Group's principal place of business is in the UAE. The revenue recognised in the UAE with respect to external customers is USD 336.5 million (2019: USD 258.1 million), and the revenue recognised from other countries is USD 2.1 million (2019: USD 2.3 million).
Certain customers individually accounted for greater than 10% of the Group's revenue and are shown in the table below:
2020 2019
USD'000 USD'000
External customer A 99,156 129,401
External customer B 87,193 41,435
External customer C 51,152 31,584
--------------- ---------------
237,501 202,420
======== ========
The revenue from these customers is attributable to the EPC(I) and Rigs segment. The above customers in 2020 are not necessarily the same customers as in 2019.
6 Disaggregation of revenue
Year ended 31 December 2020 Year ended 31 December 2019
Contracting Contracting
Rigs EPC(I) Services Total Rigs EPC(I) Services Total
Strategic
markets USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
- Renewables - 150,312 - 150,312 - 160,985 - 160,985
- Oil and
gas 128,727 - 59,585 188,312 24,766 6,245 68,452 99,463
128,727 150,312 59,585 338,624 24,766 167,230 68,452 260,448
======== ======== ============ ======== ======== ======== ============ ========
Major value streams
Contracting Contracting
Rigs EPC(I) Services Total Rigs EPC(I) Services Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
New build
jackups, refurbishment
and land rigs 128,727 - - 128,727 24,766 - - 24,766
Platforms - - - - - 6,245 - 6,245
Foundations - 150,312 - 150,312 - 160,985 - 160,985
Operations
and maintenance,
site work
and safety
services - - 59,585 59,585 - - 68,452 68,452
128,727 150,312 59,585 338,624 24,766 167,230 68,452 260,448
======== ======== ============ ======== ======== ======== ============ ========
Timing of revenue recognition
Contracting Contracting
Rigs EPC(I) Services Total Rigs EPC(I) Services Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Recognised
over time 128,727 150,312 59,585 338,624 24,766 167,230 68,452 260,448
======== ======== ============ ======== ======== ======== ============ ========
There was no revenue recognised at a point in time during the years ended 31 December 2020 and 31 December 2019.
The transaction prices allocated to the remaining performance obligations (unsatisfied or partially unsatisfied), to be recognised over time, as at 31 December are, as follows:
Performance Obligations (unsatisfied)
Contracting Contracting
Rigs EPC(I) Services Total Rigs EPC(I) Services Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Within one
year 252,770 142,872 61,562 457,204 103,806 94,395 12,069 210,270
More than
one year 64,760 - - 64,760 259,796 - - 259,796
======== ======== ============ ======== ======== ======== ============ ========
317,530 142,872 61,562 521,964 363,602 94,395 12,069 470,066
======== ======== ============ ======== ======== ======== ============ ========
7 Cost of Sales
2020 2019
USD'000 USD'000
Materials and related costs 131,921 81,633
Staff costs (Note 10) 107,692 96,409
Subcontract costs - including warranty
provisions 30,803 62,187
Depreciation (Note 14) 17,986 21,265
Subcontract labour 16,376 7,795
Equipment hire 9,620 6,284
Write-down of inventory to net realisable
value (Note 17) 6,934 2,500
Utilities 3,439 3,069
Repairs and maintenance 3,464 2,956
Warranty provision released (9,039) (1,525)
Recruitment costs 555 1,657
Others 4,322 3,822
------------------- -------------------
324,073 288,052
======== ========
8 Selling and distribution expenses
2020 2019
USD'000 USD'000
Travel 214 1,312
Advertising and marketing 72 107
Entertainment 11 62
Others 1 21
--------------- ---------------
298 1,502
====== ======
9 General and administrative expenses
2020 2019
USD'000 USD'000
Staff costs (Note 10) 25,574 37,708
Restructuring costs (Note 25) 5,597 -
Impairment of non-financial assets (Note
35) 4,548 79,301
Legal, professional and consultancy fees 3,452 4,958
Depreciation (Note 14) 2,045 2,462
IT support and maintenance 1,543 1,906
Utilities and communication 1,135 1,451
Insurance 916 869
Non-executive director fees 551 613
Digital initiatives 550 2,746
Office maintenance 513 1,535
Bank charges 105 97
Amortisation of intangible assets (Note
15) 9 3,891
(Release)/provision for impairment losses,
net
of amounts recovered (97) 41
Others 774 2,746
_ ----------------------- _ -----------------------
47,215 140,324
========= =========
10 Staff costs
2020 2019
USD'000 USD'000
Wages and salaries 100,209 103,625
Employees' end of service benefits (Note
24) 5,251 4,544
Share-based payments - value of services
provided 4,440 4,993
Other benefits 23,366 20,955
------------------- -------------------
133,266 134,117
======== ========
Staff costs are included in:
Cost of sales (Note 7) 107,692 96,409
General and administrative expenses (Note
9) 25,574 37,708
-------------------- --------------------
133,266 134,117
========= ========
Number of employees at 31 December 5,346 6,029
========= ========
Sub-contracted employees at 31 December 1,275 1,202
========= ========
Total number of employees (staff and subcontracted)
at 31 December 6,621 7,231
========= ========
Staff costs for the year ending 31 December 2020 is net of the COVID-19 savings realised from payroll deductions implemented at the onset of the pandemic amounting to USD 7.7 million (31 December 2019: nil). This contributes USD 5.4 million to cost of sales and USD 2.3 million to general and administrative expenses.
11 Finance costs and income
2020 2019
USD'000 USD'000
Finance costs
Interest expense on leases (Note 32) 4,627 4,322
Bank guarantee charges 1,147 890
Interest on bank borrowings 129 1,607
Commitment fees 42 535
Others 35 973
_ ----------------- _ -----------------
5,980 8,327
======= =======
Finance income
Finance income comprises interest income of USD 0.4 million (2019: USD 1.0 million) from bank deposits.
12 Other gains - net
2020 2019
USD'000 USD'000
Exchange loss - net (454) (1,298)
Profit on disposal of assets 267 83
Others 1,196 906
Loss on derivative financial instruments - (218)
Release of provision related to discontinued
operations - 813
_ --------------- _ --------------
1,009 286
====== ======
13 Loss per share
(a) Basic
Loss per share is calculated by dividing the loss attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the year excluding ordinary shares purchased by the Company and held as treasury shares (Note 22).
(b) Diluted
Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. For the retention 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.
2020 2019
USD'000 USD'000
The calculations of loss per share are
based on the following loss and numbers
of shares:
Loss for the year (53,386) (183,514)
------------------------- -------------------------
Weighted average number of shares for
basic loss per share 341,710,302 341,710,302
Adjustments for:
- -
* Assumed vesting of performance share plan
- -
* Assumed vesting of retention share plan
------------------------- -------------------------
Weighted average number of shares for
diluted loss per share 341,710,302 341,710,302
------------------------- -------------------------
Assumed vesting of performance and retention share plans amounting to 3,199,269 (2019: 6,180,302) shares and 2,880,301 (2019: 2,466,979) shares respectively have been excluded in the current period as these are anti-dilutive.
Loss per share:
Basic (15.63)c (53.71)c
=========== ===========
Diluted (15.63)c (53.71)c
=========== ===========
14 Property, plant and equipment
Fixtures Capital
Buildings Right
& Operating and office Motor of work-in-
infrastructure equipment equipment Vehicles use assets progress Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Cost
At 1 January
2019 154,241 153,099 18,441 3,358 - 26,235 355,374
Adjustment on
transition to
IFRS 16 - - - - 57,477 - 57,477
Additions 5,241 8,657 958 20 401 4,941 20,218
Disposals - (959) (18) (148) - - (1,125)
Remeasurements - - - - (1,120) - (1,120)
Transfers 13,282 12,754 36 - - (26,072) -
------------------- --------------------- ------------------- ------------------- ------------------- ------------------- -------------------
At 31 December
2019 172,764 173,551 19,417 3,230 56,758 5,104 430,824
Additions 337 5,705 173 - 13,569 7,691 27,475
Disposals (95) (6,367) (1) (347) - - (6,810)
Remeasurements - - - - (1,824) - (1,824)
Transfers - 4,825 102 - - (4,927) -
------------------- ---------------------- ------------------- ------------------- ------------------- ------------------- -------------------
At 31 December
2020 173,006 177,714 19,691 2,883 68,503 7,868 449,665
------------------- ---------------------- ------------------- ------------------- ------------------- ------------------- -------------------
Depreciation
At 1 January
2019 (68,498) (107,549) (17,157) (2,708) - - (195,912)
Charge for the
year (7,842) (10,343) (778) (377) (4,386) - (23,726)
Impairment
(Note
35) (46,256) (5,876) (102) - - - (52,234)
Disposals - 959 18 148 - - 1,125
------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
At 31 December
2019 (122,596) (122,809) (18,019) (2,937) (4,386) - (270,747)
Charge for the
year (4,264) (10,648) (872) (149) (4,098) - (20,031)
Impairment
(Note
35) (311) (3,172) (76) - - - (3,559)
Disposals 68 6,281 - 347 - - 6,696
------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
At 31 December
2020 (127,103) (130,348) (18,967) (2,739) (8,484) - (287,641)
------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
Net book value
At 31 December
2020 45,903 47,366 724 144 60,019 7,868 162,024
======== ======== ======== ======= ======= ======== ========
At 31 December
2019 50,168 50,742 1,398 293 52,372 5,104 160,077
======== ======== ======== ======= ======= ======== ========
Buildings have been constructed on land, leased on a renewable basis from various Government Authorities. The remaining lives of the leases range between two to twenty one years.
Property, plant and equipment with a carrying amount of USD 58.4 million (2019: USD 59.2 million) are under lien against the bank facilities (Note 29).
A depreciation expense of USD 18.0 million (2019: USD 21.3 million) has been charged to cost of sales; USD 2.0 million (2019: USD 2.5 million) to general and administrative expenses (Notes 7 and 9). This includes depreciation charge on right-of-use assets of USD 4.1 million (2019: USD 4.4 million). An impairment loss of USD 3.6 million (2019: USD 52.2 million) has been recorded based on the impairment tests performed at year end. Refer to Note 35 for details of the impairment assessments performed at year end and key assumptions.
Capital work-in-progress represents the cost incurred towards construction and upgrade of infrastructure and operating equipment.
15 Intangible assets
Leasehold Development Work-in-
Trade name rights Software and Patents progress Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Cost
At 1 January
2019 22,335 17,032 15,957 - 1,948 57,272
Additions - - 5 3 1,004 1,012
Transfers - - 1, 351 556 (1,907) -
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
At 31 December
2019 22,335 17,032 17,313 559 1,045 58,284
Additions - - 210 78 - 288
Transfers - - - - - -
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
At 31 December
2020 22,335 17,032 17,523 637 1,045 58,572
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Amortisation
At 1 January
2019 (17,751) (4,771) (4,804) - - (27,326)
Charge for the
year (Note 9) (1,804) (1,000) (1,077) (10) - (3,891)
Impairment
(Note
35) (2,780) (11,261) (11,432) (549) (1,045) (27,067)
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
At 31 December
2019 (22,335) (17,032) (17,313) (559) (1,045) (58,284)
Charge for the
year (Note 9) - - - (9) - (9)
Impairment
(Note
35) - - (128) (69) - (197)
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
At 31 December
2020 (22,335) (17,032) (17,441) (637) (1,045) (58,490)
======== ======== ======== ======== ======== ========
Net book value
At 31 December
2020 - - 82 - - 82
======== ======== ======== ======== ======== ========
At 31 December
2019 - - - - - -
======== ======== ======== ======== ======== ========
Trade name represented 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 represented 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 10 to 17 years.
Development cost and patent represented the costs incurred on patent fee and in developing the Group's proprietary designs.
The Group amortises intangible assets with a limited useful life using the straight-line method over the following periods:
Years
Software 15
Development cost and patents 10
The Group carries out an impairment review whenever events or changes in circumstance indicate that the carrying value of intangible assets may not be recoverable. Management performs the review at the cash generating unit ("CGU") relating to an operating segment's assets located in a particular geography.
As at 31 December 2020, the Group has recorded impairment of USD 0.2 million (2019: 27.1 million) based on the impairment tests performed during the year and detailed in Note 35.
16 Investment accounted for using the equity method
Group
2020 2019
USD'000 USD'000
At 1 January 44,420 53,321
Dividend received during the year - (901)
Increase in investment in an associate 25,814 -
Share of loss of investments accounted
for using the
equity method - net (15,697) (7,934)
Impairment (Note 35) (792) -
Excess loss reclassified to other liabilities 2,123 -
(MISA)
Excess loss reclassified to other liabilities
(LSAL) 372 149
Share of other comprehensive loss accounted
for using the equity method (352) (215)
_ ------------- _ -------------
At 31 December 55,888 44,420
======== ========
17 Inventories
2020 2019
USD'000 USD'000
Raw materials, consumables and finished
goods 16,995 22,741
Work in progress - 69,605
Less: Provision for slow moving and obsolete
inventories (2,743) (2,588)
------------------- -------------------
14,252 89,758
======== =========
The cost of inventories recognised as an expense amounts to USD 19.6 million (2019: USD 10.8 million) and this includes USD 6.9 million (2019: 2.5 million) in respect of write-down of inventory to net realisable value due to the current downturn in oil and gas market. The net realisable value was determined by an independent expert based on a fair valuation of the components making up the finished goods.
The work in progress inventories at 31 December 2019, were including two rig kits which have been utilised in newly awarded Rig contracts.
18 Trade and other receivables
2020 2019
USD'000 USD'000
Trade receivables 55,275 22,528
Other receivables and prepayments 13,191 14,268
Advance to suppliers 194 131
Receivables from a related party (Note
21) 8,602 3,973
------------------- -------------------
77,262 40,900
Less: Provision for impairment losses (3,372) (3,469)
_ ------------------- _ -------------------
73,890 37,431
========= =========
19 Contract Assets
2020 2019
USD'000 USD'000
Amounts due from customers on contracts 30,859 26,318
Contract work in progress 54,567 14,066
--------------- ---------------
85,426 40,384
======= =======
Amounts due from customers on contracts
comprise:
2020 2019
USD'000 USD'000
Costs incurred to date 228,178 401,548
Attributable profit/(loss) 30,179 (102,029)
----------------------- -----------------------
258,357 299,519
Less: Progress billings (227,498) (273,201)
----------------------- -----------------------
30,859 26,318
=========== ===========
20 Cash and bank balances
(a) Cash and cash equivalents
Group 2020 2019
USD'000 USD'000
Cash at bank and on hand 57,625 26,162
========= =========
(b) Term and margin deposits
Group 2020 2019
USD'000 USD'000
Margin deposits - under lien (with original
maturity less than three months) 3,040 2,543
Margin deposits - under lien (with original
maturity more than three months) 52,600 33,811
------------------ ------------------
Term and margin deposits 55,640 36,354
========= =========
Non-Current 447 432
Current 55,193 35,922
------------------ ------------------
55,640 36,354
========= =========
21 Related party balances and transactions
Related parties comprise LHL (which owns 33.12% 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 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 arm's length prices:
Group 2020 2019
USD'000 USD'000
Key management compensation 8,002 8,195
======= =======
Sales to associates* 90,351 6,948
======= =======
Purchases from associates 117 225
======= =======
Re-chargeable expenses to associates 2,369 8,398
======= =======
Sponsorship fees and commissions paid to
legal
shareholders of subsidiaries (Note 1) 329 316
======= =======
*Sales to associates includes contract revenue earned from the IMI rigs USD 88.2 million (2019: nil). Contract liabilities on the balance sheet includes an amount of USD 97.3 million related to these rigs in line with IFRS 15 accounting.
Key management compensation comprises:
Group
2020 2019
USD'000 USD'000
Salaries and other short-term benefits 3,912 5,013
Bonus and share-based payments - value of
services provided 3,874 2,971
Post-employment benefits 216 211
------------- ------------
8,002 8,195
=========== ==========
Due from/due to related parties
Due from related parties
Group
2020 2019
USD'000 USD'000
MISA (in respect of sales to associate) 698 1,870
IMI (In respect of expenses on behalf of associate) 6,852 1,681
LSAL (In respect of expenses on behalf of joint
venture) 1,049 354
Mada Al Sharq Company LLC (in respect of investment
in joint venture) 3 68
_______ _______
8,602 3,973
========= =========
Due to a related party
Group
2020 2019
USD'000 USD'000
MISA (in respect of purchases) (associate) 117 649
========== ==========
22 Share capital and share premium
Issued and fully paid ordinary shares
Share capital Share
Equity premium
Number USD'000 USD'000
At 1 January 2019 and 31 December
2019 341,726,570 30,346 315,995
---------------------------- ----------------- -------------------
At 1 January 2020 and 31 December
2020 341,726,570 30,346 315,995
============= ======== =========
The total authorised number of ordinary shares is 500 million shares (2019: 400 million shares) with a par value of 5 pence per share (2019: 5 pence per share).
23 Other reserves
Group
Legal reserve Merger Translation Total
reserve reserve
USD'000 USD'000 USD'000 USD'000
At 1 January 2019 98 (18,572) (1,169) (19,643)
Currency translation
differences - - 308 308
------------------ ------------------ ------------------ -----------------
At 31 December 2019 98 (18,572) (861) (19,335)
Currency translation
differences - - 43 43
------------------ ------------------ ------------------ -----------------
At 31 December 2020 98 (18,572) (818) (19,292)
======== ======== ======== ========
24 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 2020 and 2019, 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
2020 2019
USD'000 USD'000
At 1 January 36,863 32,088
Current service cost 4,308 3,391
Interest cost 943 1,153
Remeasurements 1,676 3,074
Benefits paid (5,942) (2,843)
------------------- -------------------
At 31 December 37,848 36,863
========= =========
25 Restructuring costs
During January 2020, the Group undertook a major review of its current operational footprint against medium term fabrication requirements and decided to consolidate its operations within one yard in order to streamline operations and achieve significant overhead reductions. As a result of this review, the Jebel Ali facility was mothballed in January 2020 and the Sharjah Yard handed over to the landlord in October 2020. These measures have also resulted in headcount reductions which have already been implemented.
The Hamriyah yard, being the largest facility, will continue to operate and gives the opportunity to expand our yard capacity. These actions allow for the Group to gradually grow fabrication volumes whilst significantly improving efficiency and reducing its cost base.
The total one-off charge/exceptional item amounts to USD 5.6 million. These expenses pertain to staff redundancies and costs of closing down Sharjah. Capital commitments related to the restructuring programme amounts to USD 1.3 million (Note 30).
26 Trade and other payables
2020 2019
USD'000 USD'000
Trade payables 26,586 40,127
Accruals and other payables 44,163 52,693
Payables to a related party (Note 21) 117 649
------------------- -----------------
70,866 93,469
========= =========
The Group considers that the carrying amount of trade payables approximates to their fair value.
27 Contract Liabilities
2020 2019
USD'000 USD'000
Amounts due to customers on contracts 159,991 3,826
======= =======
Amounts due to customers on contracts comprise:
Progress billings 343,734 312,310
Less: Cost incurred to date (168,790) (270,947)
Less: Recognised profit (14,953) (37,537)
------------------- -------------------
159,991 3,826
========= =========
28 Provision for warranty costs and other liabilities
Warranty
Costs
USD'000
At 1 January 2019 4,166
Charge during the year 8,799
Released/utilised during the year (1,525)
-------------------
At 31 December 2019 11,440
Charge during the year 1,154
Released/utilised during the year (Note 7) (9,039)
------------------
At 31 December 2020 3,555
========
29 Borrowings
2020 2019
USD'000 USD'000
Trade credit facility 880 -
Term loan - 20,058
========= =========
The bank borrowings are repayable as follows:
Current (less than 1 year) 880 20,058
========== ==========
Repayments of borrowings amounting to USD 20.0 million were made during the year. A new trade credit facility draw-down during the year amounted to USD 0.8 million. As at 31 December 2020, the Group borrowings amount to USD 0.8 million.
30 Commitments (a) International Maritime Industries Commitments
In 2017, the Group entered into commitments associated with the investment in International Maritime Industries. Under the Shareholders' Agreement, the Group will invest up to a maximum of USD 140.0 million in relation to its commitment over the course of construction of the Maritime Yard between 2017 and 2023 with USD 84.8 million already paid to date. The forecast contributions are as follows:
2020 2019
USD'000 USD'000
Within one year 17,000 -
Later that one year but not later than
four years 38,200 80,966
55,200 80,966
====== ======
(b) Other commitments
2020 2019
USD'000 USD'000
Capital commitments for restructuring
programme 1,304 -
========= =========
Capital commitments for construction of
facilities 883 110
========= =========
Capital commitments for purchase of operating
equipment
and computer software 2,433 7,919
========= =========
31 Bank guarantees
2020 2019
USD'000 USD'000
Performance/bid bonds 84,673 88,284
Advance payment, labour visa and payment
guarantees 8,754 13,599
-------------------- -------------------
93,427 101,883
========= =========
32 Lease liabilities
The following is the movement in lease liabilities during the year ended 31 December 2020:
2020 2019
USD'000 USD'000
At 1 January 57,373 60 , 949
Additions during the year 13,569 402
Interest expense on leases 4,627 4,322
Repayment of lease liability (618) (2,857)
Repayment of interest expense on leases (2,142) (4,322)
Remeasurements (1,824) (1,121)
_ -------------- _ --------------
At 31 December 70,985 57,373
======= =======
Non-current 68,849 55,388
Current 2,136 1,985
_ -------------- _ --------------
70,985 57,373
======= =======
During the year, the Group has taken additional space on lease at Hamriyah yard as part of its restructuring program.
The table below provides details regarding the contractual maturities of lease liabilities as at 31 December 2020 on an undiscounted basis:
2020 2019
USD'000 USD'000
Not later than one year 7,085 5,826
Later than one year but not later than
five years 28,827 26,131
Later than five years 83,683 63,868
-------------------- --------------------
119,595 95,825
========= =========
33 Cash generated from/(used in) operating activities
Year ended 31 December
2020 2019
Notes USD'000 USD'000
Operating activities
Loss before income tax (53,261) (184,382)
Adjustments for:
Share-based payments - value of services
provided 4,440 4,993
Depreciation 14 20,031 23,726
Amortisation of intangible assets 15 9 3,891
Impairment of non-financial assets 35 4,548 79,301
Share of loss of investments accounted
for using the equity method - net 16 15,697 7,934
(Release)/provision for warranty costs
and other liabilities - net 28 (7,885) 7,274
Profit on disposal of property, plant
and equipment (267) (83)
Provision/(release) for slow moving
and obsolete inventories 17 155 (128)
(Release)/provision for impairment of
trade receivables, net of amounts recovered (97) 41
Provision for employees' end of service
benefits 24 5,251 4,544
Finance costs 11 5, 980 8,327
Finance income 11 (370) (1,023)
--------------- ---------------
Operating cash flows before payment
of employees' end of service benefits
and changes in working capital (5,769) (45,585)
Payment of employees' end of service
benefits (5,942) (2,843)
Changes in working capital:
Inventories before movement in provision 17 75,351 993
Derivative financial instruments - 218
Trade and other receivables before movement
in Provision for impairment losses 18 (36,362) 30,283
Contract assets 19 (45,042) 14,547
Trade and other payables 26 (25,098) 13,195
Contract liabilities 27 156,165 (18,547)
--------------- ---------------
Cash generated from/(used in) operating
activities 113,303 (7,739)
======= =======
34 Events after the balance sheet date
Strategic reorganisation
In January 2021, the Group took the decision to reorganise into three business units of renewables, oil and gas and digital. We intend to align Group financial reporting with this structure for the full year 2021.
Joint venture agreement with Injazat
During May 2021, the Group has signed a joint venture agreement with Injazat Data Systems LLC "Injazat", the UAE's leader in digital transformation, to create and market innovative digital solutions focusing predominantly on the renewables and oil & gas industries. The initial funding of USD 7 million will be split equally between the partners and invested in 2021.
Balance sheet recapitalisation programme
On 29 June 2021 the Group announced that it will be seeking to raise new funding of USD 120 - 150 million either through a combination of debt and equity or equity. The amount is dependent on the outcome of current negotiations with certain relationship banks in relation to the project financing. For more information see note 2.
35 Impairment of non-financial assets
Group
2020 2019
Impairment comprise of the following: USD'000 USD'000
Impairment of property, plant and equipment
(Note 14) 3,559 52,234
Impairment of intangible assets (Note 15) 197 27,067
Impairment of an investment accounted for using
equity 792 -
method (Note 16)
--------------- ---------------
4,548 79,301
======== ========
The Group determines at the end of the reporting period whether there are indicators of impairment in the carrying amount of its property, plant and equipment, intangible assets and other non-financial assets. Where indicators exist, an impairment test is undertaken for the assets which requires management to estimate the recoverable amount based on the higher of its value in use and its fair value less costs of disposal ("FVLCD").
Management performs the review at the cash generating unit ("CGU") relating to an operating segment's assets located in a particular geography. An indicator of impairment exists at the reporting date that predominantly arose from the ongoing COVID-19 pandemic and low oil prices which continue to impact NOC budgets and spending. This has had an impact on our backlog and utilisation of our assets attributable to the United Arab Emirates cash generating unit ("CGU").
Based on this review, an impairment loss of USD 3.8 million (2019: USD 79.3 million) has been recorded during the year largely as a result of operating equipment valuation reductions. Refer Note 14 and 15. The recoverable amount is based on fair value less costs of disposal except for intangible assets where value in use has been used given the nature of the assets.
In addition, an impairment of USD 0.8 million has been recorded in respect of an investment accounted using equity method based on the decision to dispose of the investment for a nominal value (Note 16).
FVLCD represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date net of costs of disposal e.g. dismantling costs, brokerage and legal fees. The fair value of the Group's property, plant and equipment at 31 December 2020 has been arrived at based on a valuation carried out at that date by Cavendish Maxwell Real Estate Valuation Services LLC "Cavendish Maxwell", independent valuers not connected with the Group. The valuation conforms to International Valuation Standards and was determined as follows:
-- Buildings & infrastructure, right of use assets and leasehold rights - based on the market comparable approach that reflects recent transaction prices for similar properties. Adjustments are made where the sale comparable differ from the subject property. These adjustments are made on a percentage basis and are applied to the price per square metre of the subject. The fair values used have been categorised as Level 2 in the fair value hierarchy as the valuation has been performed based on available market and transactional evidence as well as the valuers' general market knowledge of such assets.
-- Operating equipment, fixtures and office fittings and motor vehicles - The depreciated replacement cost method has been used to derive the market value of the assets adjusted for dismantling costs. This is calculated based on the gross current replacement cost of a new asset, adjusted, where necessary, in respect of technical and functional obsolescence and installation costs determined with reference to historical data for similar assets. This is then depreciated to reflect age, wear and tear and other relevant factors, including any residual value at the end of the assets economic working life. The dismantling costs are based on historical data for similar assets. The fair values used have been categorised as Level 3 in the fair value hierarchy as the valuation has been done based on available market and transactional evidence as well as the valuers' general market knowledge of such assets.
Right of use assets pertain to lease land where buildings and infrastructure are located. Therefore, these have been fair valued as part of the buildings and infrastructure. The fair values is based on IFRS 16 less lease liabilities pertaining to right of use assets which would be transferred to the buyer in the event of a disposal.
The costs of disposal have been determined with reference to transaction fees of the market in which the assets are located as well as the costs to dismantle based on historical data for similar assets.
The carrying amount of property, plant and equipment at 31 December 2020 was USD 162.0 million (31 December 2019: USD 160.1 million). The carrying amount of intangible assets at 31 December 2020 was USD 0.1 million (31 December 2019: nil).
36 Statutory Accounts
This financial information is not the statutory accounts of the Company and the Group, a copy of which is required to be annexed to the Company's annual return to the Companies Registration Office in Isle of Man. A copy of the statutory accounts in respect of the year ended 31 December 2020 will be annexed to the Company's annual return for 2020. Consistent with prior years, the full financial statements for the year ended 31 December 2020 and the audit report thereon will be circulated to shareholders at least 20 working days before the AGM. A copy of the statutory accounts required to be annexed to the Company's annual return to the Companies Registration Office in respect of the year ended 31 December 2019 has been annexed to the Company's annual return for 2019.
37 Directors' responsibilities statement
We confirm that to the best of our knowledge
The financial statements, have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities and financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and, This announcement includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Further information is available on the Company's website, www.lamprell.com.
Additional Information:
EBITDA
In addition to measuring financial performance of the Group based on operating profit, we also measure performance based on EBITDA. EBITDA is defined as the Group profit/(loss) for the year from continuing operation before depreciation, amortisation, impairment, net finance expense, taxation, one off items and share of loss of investments accounted for using the equity method.
We consider EBITDA to be useful measures of our operating performance because it approximates the operating cash flow by eliminating depreciation and amortisation. EBITDA is not a direct measure of our liquidity, which is shown by our cash flow statement, and needs to be considered in the context of our financial commitments.
Reconciliation from Group loss for the year, the most directly comparable IFRS measure, to EBITDA is set out below:
Year ended 31 December
2020 2019
USD'000 USD'000
--------- ----------
Loss for the year (53,386) (183,514)
--------- ----------
Depreciation (Note 14) 20,031 23,726
--------- ----------
Amortisation (Note 15) 9 3,891
--------- ----------
Interest on bank borrowings and
leases (Note 11) 4,756 5,929
--------- ----------
Finance income (Note 11) (370) (1,023)
--------- ----------
Income tax expense/(gain) 125 (868)
--------- ----------
Impairment (Note 35) 4,548 79,301
--------- ----------
One off item - Inventory write 6,934 -
down (Note 17)
--------- ----------
Restructuring costs (Note 25) 5,597 -
--------- ----------
Share of loss of investments accounted
for using the equity method - net
(Note 16) 15,697 7,934
--------- ----------
EBITDA 3,941 (64,624)
--------- ----------
EBITDA margin 1.2% (24.8%)
--------- ----------
Net cash
Net cash measures financial health after deduction of liabilities such as borrowings. A reconciliation from the cash and cash equivalents per the consolidated cash flow statement, the most directly comparable IFRS measure, to reported net cash, is set out below:
2020 2019
USD'000 USD'000
--------------------------------------------
Cash and cash equivalents (Note 20) 57,625 26,162
---------------------------------------------
Margin deposits - under lien (with
original maturity less than three months)
(Note 20) 3,040 2,543
---------------------------------------------
Margin deposits - under lien (with
original maturity more than three months)
(Note 20) 52,600 33,811
---------------------------------------------
Borrowings (Note 29) (880) (20,058)
-------- ---------
Net cash 112,385 42,458
======== =========
Of net cash at 31 December 2020, USD 55.6 million is restricted (31 December 2019: USD 36.4 million).
Overheads
Overheads are costs required to run our business, but which cannot be directly attributed to any specific project or service. A reconciliation from unallocated expenses per the segment note in the consolidated financial statements to reported overheads, is set out below:
2020 2019
USD'000 USD'000
-----------------------------------------------------
General and administrative expenses- excluding
digital initiatives impairment loss, restructuring
costs and Covid-19 related salary reductions
(Note 9) 38,824 58,277
-----------------------------------------------------
Selling and distribution expenses (Note 8) 298 1,502
-----------------------------------------------------
Direct overheads included in cost of sales:
-----------------------------------------------------
Unallocated operational overheads- excluding
Covid-19 related salary reductions (Note 5) 16,175 20,167
-----------------------------------------------------
Yard rent and depreciation (excluding impairment)
(Note 5) 7,323 10,574
Repairs and maintenance (Note 5) 3,464 2,947
Interest expense on leases (Note 11) 4,627 4,322
Other 7,333 6,117
Underlying overheads 78,044 103,906
-----------------------------------------------------
Restructuring costs (Note 25) 5,597 -
-----------------------------------------------------
Impairment (Note 35) 4,548 79,301
-----------------------------------------------------
Covid-19 related salary reductions (7,736) -
-------- --------
Overheads 80,453 183,207
======== ========
An analysis of overheads nature is as follows:
2020 2019
Overhead nature: USD'000 USD'000
---------------------
Fixed 27,169 34,804
----------------------
Semi variable 6,167 5,824
----------------------
Variable 44,708 63,278
----------------------
Underlying overhead 78,044 103,906
======== ========
An analysis of overheads types is as follows:
2020 2019
Overhead type: USD'000 USD'000
---------------------
Cash 53,016 70,606
----------------------
Non-cash 25,028 33,300
----------------------
Underlying overhead 78,044 103,906
======== ========
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END
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