7 February 2022

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

TRADING UPDATE

Lamprell announces an update on its trading performance ahead of the 31 March publication of its audited financial results for the year ended 31 December 2021*.

·    Revenue of USD 389 million, 15% year on year growth

·    Financial performance affected by additional costs associated with significant impacts of COVID-19 on the supply chain and labour availability

·    Backlog at 31 December stood at USD 343 million, the majority of which is scheduled to run off in 2022

·    Over 30% year on year bid pipeline growth to USD 7.9 billion, with circa 60% of opportunities in renewables and a number of award decisions imminent

·    Further funding of the Lamprell Reimagined strategy expected in H1 2022 following successful completion of working capital funding arrangements in 2021

*All numbers are subject to audit.

Business update

Lamprell has continued to deliver a good operational performance in 2021, while managing the ongoing challenges of the COVID-19 pandemic. Multiple lockdowns and travel restrictions affected our supply chain and labour availability during the year. Lamprell has been successful in managing pandemic-related disruption effectively, although incremental costs due to reduced productivity and rephasing of work have impacted the Group's profitability in 2021. The yards continued to operate throughout the period in spite of the impacts of these issues, albeit less efficiently, and the Group made progress on all of its ongoing projects whilst demonstrating excellent safety performance. Group TRIR for the year was 0.10, the best result in the Group's history.

Renewables

We are currently in the process of completing our third major renewables project, Seagreen.  20 of the 30 jackets have been handed over to client with final deliveries scheduled through Q1 2022. We were pleased to have been selected as a preferred supplier on a major renewables project in January 2022. We are currently finalising the terms of the reservation agreement with a leading offshore wind farm developer ahead of the anticipated full award later in the year. The reservation agreement is an encouraging trend amongst offshore wind developers, flagging limited global engineering and fabrication capacity. With a significant track record in jacket foundations fabrication and an optimised yard set up, Lamprell is a key player in the offshore wind supply chain globally.

Oil & Gas

Our Oil and Gas business unit demonstrated good operational performance in both fabrication and refurbishment of offshore assets for our clients in the Middle East although the projects suffered some impact as a result of the above-mentioned issues arising from COVID-19.  Our services businesses which include operation & maintenance, small projects, and safety services performed well throughout the year and are seeing significant opportunities for growth in the near and medium terms.  The two IMI new build jackup rigs are going through the key equipment installation phase. In 2021, we were successful in winning our first two projects through the Saudi Aramco LTA programme, for the delivery of offshore production deck modules, pipeline and cables in one case and the supply and installation of drilling jackets and well observation platforms in the other. These were our first direct awards from Saudi Aramco and we are pleased to report good progress on both of them. Our rig refurbishment segment benefited from the oil price recovery and has provided a steady flow of work from our long-standing and new customers.  

The IMI facility in Saudi Arabia is progressing despite a period of disruptions during the pandemic. Phased commissioning of certain zones is anticipated to commence in 2022. Lamprell invested USD 85 million in the joint venture to date and will be required to contribute a further USD 55 million over the next two years.

Digital

We also made very good progress with developing our Digital business unit in 2021. We are pleased to have secured crucial partnerships with leading digital investors and developers, Injazat/G42*¹ and Akselos^*2, which now enable us to progress a variety of ventures. Our yards are already benefiting from robotic welding, which we successfully employed on the Seagreen project in 2021.  We are also making progress with bringing digital twin solutions to our clients, and are currently using this technology on a proprietary lifting frame in the Hamriyah yard.

Financial performance

Subject to audit, revenues in 2021 amounted to USD 389 million. The national lockdowns and travel restrictions early in the year affected our productivity and supply chains resulting in both additional costs as well as rephasing of project delivery schedules. This impacted revenue recognition, whereby certain project milestones were moved to 2022, and affected full year EBITDA. COVID-19 impacts eased in Q2 and Q3 2021 but resumed with the emergence of the Omicron variant in late 2021 and early 2022, when around 1,200 of our staff were in quarantine. Productivity was further affected by adverse weather conditions causing a week-long disruption to our operations.   The Group remained focused on fiscal discipline, retaining the majority of the cost-cutting measures introduced at the start of the pandemic, but the above-mentioned disruptions affected Group financial performance in H2 2021.

Net cash at 31 December 2021 was USD 53 million of which USD 26 million is unrestricted.  

Backlog at 31 December stands at USD 343 million, the majority of which is scheduled to run off in 2022.

Bid pipeline

Following a significant step up in bidding activity in 2021, our total pipeline of opportunities across both of our end markets of renewables and oil & gas grew to USD 7.9 billion at 31 December 2021, from USD 6 billion at the end of 2020.  Renewables pipeline grew to USD 4.6 billion at the end of 2021, from USD 2.5 billion at the end of 2020. This reflects our ability to be involved in high scope bids across the globe, with an increasing number of US-based projects entering our pipeline, a region set for a steep increase in offshore wind energy over the coming decade.

The recovery in oil price has also improved bidding dynamics in Oil & Gas, which currently includes USD 3.3 billion of bid pipeline opportunities. In the past few weeks there has been a number of large-scale offshore awards in the Middle East totalling circa USD 10 billion.  We view this development as an indication of significant pressure on capacity in the near and medium term, which improves our position on a number of outstanding bids and we are actively engaging with potential customers on a range of bids. 

Strategic Progress and Outlook

The Lamprell Reimagined strategy has aligned the Group to the energy transition and opened Lamprell to significant future opportunities across our three business units of Renewables, Oil & Gas and Digital. The Group is now in the process of implementing the strategy through its business and operations.

·    Renewables

In Renewables, where to date our experience has been in jacket foundations for UK offshore wind farms, we are broadening our standing both geographically and in the scope of the services we offer to our clients. Current global fabrication capacity in this rapidly growing industry is limited and over the past three years Lamprell has made continuous incremental investments in its yard to optimise throughput, increase its revenue generating capacity and improve margins. In 2021, the Group has completed a comprehensive review of its fabrication capacity and the Board has approved the first stage of an investment programme aimed at increasing its revenue generation whilst improving margin performance.

·    Oil & Gas

Our Oil and Gas Unit continues to have a differentiated standing with our long-standing clients in the Middle East and through the strategic partnership with Saudi Aramco on the IMI joint venture our goal is to move the centre of gravity for this unit to the Kingdom of Saudi Arabia. We continue to evaluate a number of options to progress this strategy. In Q3 of 2021, we applied for Aramco's Industrial Investment Programme aimed at enabling localization of technology and industrial infrastructure in the Kingdom of Saudi Arabia.

·    Digital

Digitisation and automation of products and services in the energy industry are significant long-term trends. Combining our long-standing operating experience with  complementary skills of our partners has the potential to create a market leading offering that benefits our own business and creates additional revenue streams.  In this regard, our digital focus ranges from company-own solutions in our own yards, aimed at improving safety, efficiency and cost to service offerings for our clients across the energy industry, backed by our Joint Venture partners Injazat/G42. 

Financing

In 2021, the Group took a number of steps to improve its liquidity and alleviate the pressure on its working capital commitments. As such, it successfully secured a USD 45 million working capital facility for the delivery of the two IMI rigs with an option for an additional accordion facility of USD 45 million, currently expected to be agreed in H1 2022, in line with project working capital requirements. It also successfully raised USD 30.1 million through an oversubscribed placing of shares.

The Lamprell Reimagined strategy has aligned the Group with the energy transition and has opened a growing opportunity set in markets with significant barriers to entry. The current bid pipeline consists of more complex high value projects in all its addressable markets and to this end, the Group has identified a number of opportunities to deploy capital across each of its three business units.  Given the Group's extensive experience gained in serial fabrication over the last 5 years, there is significant scope for yard investment that can materially improve capacity, efficiencies and margin performance on renewables projects. To this end, allocation of capital will be prioritised on value creation, including a rigorous assessment of return on investment. The Group continues to assess its future financing options to deliver its strategy, improve its fabrication capacity and strengthen the Group balance sheet as it seeks to access higher margin, larger scope projects in both renewables and oil and gas end markets. The funding strategy will be influenced by the timing and quantum of new awards over the coming weeks and months and may include additional equity, project specific financing, including small working capital facilities with Saudi banks, and hybrid facilities with a view to complete in H1 2022. 

Christopher McDonald, CEO of Lamprell said: 

"We are pleased to deliver revenue growth for the third year, albeit with continuing impacts of the COVID-19 restrictions on the bottom line. Lamprell is embracing the energy transition with its Lamprell Reimagined strategy, we are very encouraged by the market outlook and bidding dynamics in both our end markets of renewables and oil and gas and the continuing significant growth of our bid pipeline. We are grateful for the support of our shareholders and lending partners in securing the funding for the delivery of our ongoing major projects and look forward to further strengthening our balance sheet in the months to come as we deliver on our growth-defined strategy."  

- Ends -

Enquiries:

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")."

*¹ Injazat/G42 is a regional leader in digital transformation, cloud and cyber security, part-owned by Mubadala, the UAE sovereign wealth fund and Silverlake Partners.

*² Akselos is the creator of the world's most advanced engineering simulation technology - physics-based, realtime digital twins. Founded in 2012 and with operations in Europe, the USA, and SouthEast Asia, the company's products are designed specifically to help design and protect the world's critical infrastructure.