03 August 2021

LAMPRELL PLC
("Lamprell" and with its subsidiaries the "Group")

TRADING UPDATE

Lamprell announces the following update on its performance for the first six months of the year to 30 June 2021*.

·    Against the backdrop of COVID-19 and related supply chain bottlenecks, the Group continues to make solid progress on all projects

·    Revenue of USD 175 million, with USD 295 million secured for H2 2021

·    Full year EBITDA expectations remain at broadly breakeven levels

·    Net cash decreased to USD 81.1 million as projects enter critical working capital phase, with USD 55.0 million restricted on project bonds and guarantees 

·    Bid pipeline increased 15% to USD 6.9 billion, momentum in renewables opportunities continues to improve

·    A number of decisions on current renewables bidding opportunities expected in Q3 and Q4 2021

·    Working capital schedule actively managed to allow additional time for the debt and/or equity funding to be secured    

·    Final discussions with three banks on USD 90 million working capital facilities for the completion of two IMI rigs, expected to be comprised of two equal tranches (first anticipated to be available in August and second in Q4 2021, consistent with working capital requirements)

·    Planned potential equity raise of USD 30-60 million to complete in Q4 2021, instead of Q3 2021, subject to market conditions  

*All numbers are subject to review

Operational update

Although COVID-19 restrictions remain in place in UAE and elsewhere, Lamprell made solid progress on all of its ongoing projects, with our yards operating throughout the pandemic, albeit with additional incremental cost. We currently have four major projects in Hamriyah. Health and safety is a core priority for us and for our clients and during the pandemic we have taken special measures to protect the health and wellbeing of our employees, with 88% of our workforce now vaccinated with two doses.    

Renewables

Seagreen, the Group's third major renewables project, has commenced delivery to client with the first batch of five jackets now handed over at quayside in Hamriyah.  By the end of 2021 Lamprell will have fabricated nearly 150 jacket foundations for three of the UK's biggest renewables projects. The incremental investment made earlier in the year to design and fabricate a lifting frame is now translating into improved efficiencies during the final stages of the project.

Oil & Gas

The IMI new build jackup rigs are entering peak fabrication phase with major equipment packages being delivered to site for installation. Our first contract win on the Saudi Aramco Long-Term Agreement Programme (LTA), the first direct contract from the Saudi oil major in Lamprell's history, is currently in final stages of engineering with first cut of steel scheduled for September. Our second EPCI project for Saudi Aramco LTA, awarded in April 2021, is well underway with engineering and procurement activities. Rig refurbishment continues to perform well, and we are reporting a similarly encouraging level of engagement with our customers in the region, as we also saw in 2020.

Digital

Our Digital business unit has made a number of strategic steps this year. We have secured crucial partnerships with leading digital investors and developers, Injazat/G42 and Akselos, and are progressing a number of ventures - from cost solutions in our own yards, to differentiated digital service offerings for our clients across the energy industry. We commenced the deployment of complex robotic welding on the Seagreen project, delivering noticeable efficiency improvements. We also created a first digital twin for our proprietary lifting frame, another critical asset in renewables fabrication. The digital twin provides us with critical data enabling us to maximise asset performance and reduce maintenance time and cost. It also allows us to better demonstrate the technology, its potential and transferability to offshore energy assets to our clients.

Financial performance

Subject to review, revenues in the first six months of 2021 amounted to USD 175 million. USD 295 million is secured for H2 2021, and EBITDA in H1 was slightly negative. Much of the revenue for the full year will be affected by the minimal margin IMI rig projects as well as additional COVID-19 disruption costs. The Group has delivered sustainable overhead reductions in recent years and remains committed to a programme of fiscal discipline and cost control.  Full year cash overhead for 2021 will remain at similar levels to 2020. This, along with the expected completion of Seagreen as well as progress on the two IMI rigs in the second half of the year, allows the Group to reiterate its expectation of a broadly breakeven EBITDA for the full year.     

Net cash has reduced from USD 112.4 million at 31 December 2020 to USD 81.1 million at 30 June 2021, as expected.

Current backlog stands at USD 433 million.

Balance Sheet recapitalisation update

On 29 June 2021, Lamprell announced its plans to complete new funding arrangements of USD 120-150 million through a combination of debt and/or equity.

The Group has reviewed its working capital schedule to manage the phasing of cashflows. The current funding requirement schedule is as follows:

-     Approximately USD 90 million of working capital for the two IMI rigs, with USD 45 million required by early Q4 2021 and USD 45 million in late Q4 2021

-     IMI equity contribution of USD 17 million required in Q4 2021

-     Targeted investment in renewables fabrication facilities, as well as incremental investment in Digital business unit funding from Q4 2021

The Group currently expects to secure two Export Credit Agency backed working capital facilities for the IMI rigs of USD 45 million each. Final terms negotiations with three potential lending banks are expected to conclude in August 2021 for the first rig and 90 days later for the second rig. Having reviewed the timing of milestone payments on major ongoing projects and taking into account the advanced stage of debt negotiations for the IMI rigs working capital requirements, the Group now expects to raise a minimum of USD 30 million through equity in Q4 2021, later than previously announced. The details of any potential equity raise are subject to market conditions and will be announced in due course.

If the Group is unsuccessful in concluding the working capital facility with the banks, the Group plans to raise capital through equity in the amount of USD 120-150 million in order for it to:

-     meet the working capital requirements of the IMI rig projects.  Once delivered, the final milestone payments will be invested in our facilities to increase efficiency and capacity to grow in particular our renewables business unit;

-     fund the outstanding equity investment in the IMI joint venture in Saudi Arabia; and

-     invest in the significant opportunities in developing our Digital business unit.

Outlook

We continue to see positive dynamics in our end markets of renewables and oil and gas. Thanks to our successful diversification into the renewables industry and access to the oil and gas opportunities in Saudi Arabia and the Middle East, bidding levels are currently at the highest point since the Group commenced its transformative strategic journey five years ago. Our bid pipeline has grown by nearly USD 1 billion to USD 6.9 billion since the beginning of the year, with the majority of added projects from the renewables industry. We continue to see further renewables projects entering the pipeline post period, as expected. Renewables opportunities comprised approximately 50% of the pipeline as at 30^th June. We are expecting decisions on a number of renewables opportunities in Q3 and Q4 2021.

Secured revenue for 2021 is USD 470 million, enabling us to demonstrate another year of revenue growth. A large proportion of the secured revenue for 2021 is attributable to the IMI rigs, which were bid at minimal margins to enable the monetisation of USD 70 million of equipment that had been purchased in 2015. However, we expect to deliver improved margin performance on projects in our current pipeline through a combination of continued cost discipline, improving margins in the renewables industry, as well as strategic yard investment to increase throughput and efficiencies in renewables fabrication.

Christopher McDonald, CEO of Lamprell said: "Our strategy is now fully aligned with the broader energy transition. The Renewables business unit is benefiting from the growth in global opportunities and limited fabrication capacity and we are encouraged by the level and quality of engagement with current and prospective clients. Our credentials in the oil and gas business enable us to access the opportunities available in the Middle East and we are actively seeking to transition our Oil and Gas business unit to Saudi Arabia. Our Digital business unit is developing rapidly with the right financial and technical partnerships in place. The work in recent years to reposition the business, reduce overheads and develop a strong track record in renewables has transformed Lamprell and provides us with an improving outlook."             

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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")."