14 January 2021
("Lamprell" and with its subsidiaries the "Group")
STRATEGIC REORGANISATION AND TRADING UPDATE
· Improving financial performance and trading continues to be in line with the Board's expectations
· 2020 revenue expected to be USD 340 million (2019: USD 260.4 million)¹
· Net cash increased to USD 112 million from USD 71.4 million at 30 June 2020
· Bid pipeline increased to USD 6 billion (30 June 2020: 5.5 billion)
· Strategic reorganisation into three new business units: Renewables, Digital and Oil & Gas
¹ All financials remain subject to audit.
Lamprell today announces a strategic reorganisation of its business to increase the Group's focus on renewables and the energy transition, increase alignment with customers and enable the Group to take full advantage of the significant opportunities in its core markets. Lamprell also provides an update on its trading performance ahead of the publication of its audited financial results for the year ended 31 December 2020 on 25 March 2021.
Improving trading performance in-line with the Board's expectations
Lamprell has managed the challenges of the COVID-19 pandemic effectively and delivered a very strong operational performance in 2020. Furthermore, despite the multitude of challenges posed by the global pandemic, all of our ongoing projects have made good progress throughout the year. Our positive operational performance, alongside committed cost control and high quality bid pipeline, allowed us to deliver a strong set of financial results in a challenging market environment. We expect to demonstrate another year of good revenue growth, with 2020 revenue expected to be USD 340 million (2019: USD 260.4 million). As a result the Company continues to trade in line with the Board's expectations. The Board believes the trading performance provides a solid basis for further progress in 2021.
The Group's key operational highlights are as follows:
· Moray East offshore windfarm project operationally completed in September and all jackets have now been installed offshore Scotland.
· An expansion of our Hamriyah facility, allowing us to further improve our efficiencies and capacity in renewables fabrication as we progress with Seagreen, our next major renewables project.
· The two IMI jack up rigs are progressing with fabrication of hull, cantilever and leg sections well under way. The Mahani gas field in Sharjah is nearing completion with first gas introduced on time, marking a key milestone for one of our key regional clients, Sharjah National Oil Company.
· Rig refurbishment has had a strong year, with a number of large scope projects arriving in our yard. A total of 16 rig refurbishment projects were completed in 2020 with other refurbishment projects under way.
Net cash has increased to USD 112 million from USD 71.4 million at 30 June 2020. Net cash will trend downwards through 2021 as projects progress and draw working capital as part of the normal project cycle. Backlog has increased year-on-year to USD 520 million (31 December 2019: 470 million) with USD 455 million scheduled to run off in 2021. Following the rapid development of global offshore wind opportunities, our bid pipeline has increased to USD 6 billion (30 June 2020: 5.5 billion).
Strategic reorganisation - positioning Lamprell for the energy transition
In recent years, Lamprell has established a track record as one of the leading providers of fabrication services to the renewables industry. Since 2017, the Group has fabricated over 100 foundations for the UK's flagship offshore wind farms, with serial production for renewables projects becoming a core area of expertise for Lamprell.
At the same time, the Group has accelerated its focus on digital innovation and continued to advance its traditional business of providing jack-up rigs and related energy infrastructure to the oil & gas industry, with a strong competitive position in the Arabian Gulf.
Reflecting the Group's evolution and to ensure a lean and agile organisation to maximise opportunities across these markets, Lamprell today announces a strategic reorganisation of the Group into three distinct business units: Renewables, Digital and Oil & Gas.
The Renewables business comprises the Group's existing projects providing wind turbine generator foundation fabrication services to offshore wind. Renewables opportunities currently make up USD 2.5 billion (c. 40%) of the Group's bid pipeline with the increase attributable to US renewables entering the pipeline. We expect to see continued strong growth in renewables opportunities in the coming years, driven by rapid expansion in core markets and by the commercialisation of floating wind which is expected to provide significant opportunities mid-decade onwards. Lamprell's experience, expertise and central geographic location provide the Group with a strong position to access the expansion of offshore wind globally, an industry forecast to require over USD300 billion of capex in the next five years alone.
Lamprell Renewables will accelerate the Group's focus on renewables projects, building on its track record in foundations and expanding Lamprell's addressable market to product and market adjacencies where the Group's skills have high relevance, such as base structures for floating offshore wind, HVDC & HVAC platforms and floating/offshore hydrogen production facilities. Lamprell Renewables will also explore opportunities for the Group to collaborate with others so as to increase our execution capacity and support the local content objectives of our clients, as well as to move up the renewables value chain over time, consistent with the Group's strategic focus on EPC(I).
The Digital business encompasses the technology and IP development teams that have successfully implemented a range of technologies in the Group's yards, such as the deployment of adaptive robotic welding, facial recognition technology and a proprietary digital quality management system. It also comprises Lamprell's partnerships with Injazat/G42, which is considered to be the region's leading digital developer backed by Mubadala Investment Company, and Akselos, a leading developer of simulation technologies.
Lamprell Digital will continue to advance proprietary technologies for industrial application, in areas such as asset integrity, engineering design, smart non-destructive testing, predictive maintenance and robotics. By combining the Group's in-depth knowledge of engineering and construction processes with cutting edge technology development, Lamprell Digital aims to provide a differentiated digital offer applicable to clients in its core markets and beyond.
Lamprell Oil & Gas
The Oil & Gas business comprises the Group's traditional activities in rig fabrication, rig refurbishment, onshore EPC and other services, as well as our planned expansion into Offshore EPCI under the Saudi Aramco LTA. Central to the Group's Oil & Gas strategy is Lamprell's differentiated positions in the UAE and Saudi Arabia. Lamprell is committed to the IMI joint venture, which provided the Group with a contract for two newbuild jackup rigs in 2020 as well as an engineering design contract for further rigs, supporting its commitment to fleet expansion over the next decade.
Lamprell Oil & Gas recognises the continuing role of hydrocarbon development during the energy transition. Oil & Gas remains a significant part of the Group's bidding pipeline in 2021 and demand is expected to increase in the medium-term as markets recover, with these projects continuing to support the development of Lamprell's Renewables and Digital business units which have strong, structural long-term growth prospects.
The three business units have different priorities and needs, from their distinct customer bases, bidding processes, yard requirements and capital requirements. This strategic reorganisation will enable the Group to place greater focus on maximising the significant opportunities for each of the three business units. In the context of this strategic re-organisation, the Group continues to explore how best to finance these business units going forward.
Further information on the strategic reorganisation will be provided with the Group's 2020 Full Year Results. While the Group's reporting lines for this announcement are not affected, Lamprell's intention is to align the Group's reporting to the new business unit structure at a future date. The Group remains focused on costs and the strategic reorganisation is expected to be cost neutral.
Christopher McDonald, CEO, Lamprell, said:
"In the four years since I joined Lamprell we have been reimagining the business for the future. Today we set out the shape of Lamprell as it looks forward, taking its long and proud history of providing services to the energy industry and accelerating its focus on renewables and digital technologies. This evolved structure will provide the business with greater focus as we seek to take full advantage of the many opportunities we see across our end markets.
As the Group emerges from what we hope is the worst of the COVID-19 pandemic in good shape, the time is right for us to be positioning the Group for the next phase of its growth. I am very proud of the way our people have managed the challenges of 2020, and the Group's improving financial performance is thanks to their discipline, dedication and hard work. Lamprell has an exciting future and we have a great platform on which to build."
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Notes to editors
Lamprell, based in the United Arab Emirates ("UAE") and with over 40 years' experience, is a leading provider of fabrication, engineering and contracting services to the offshore and onshore oil & gas and renewable energy industries. The Group has established leading market positions in the fabrication of shallow-water drilling jackup rigs, liftboats, land rigs, and rig refurbishment projects, and it also has an international reputation for building complex offshore and onshore process modules and fixed platforms.
Lamprell employs more than 4,000 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").