Full Year Results 2017 22 March 2018 1 East Anglia One www.lamprell.com
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Agenda Year in Review 1 2 Operational Review 3 Financial Review 4 Strategy and Outlook Appendices 5 3
Year in Review Christopher McDonald, CEO East Anglia One Load out 4
Year in Review Strategic progress despite temporary challenges ▪ $80m loss on East Anglia One project Revenue $370.4m ▪ 5 large scale projects delivered, 2 ongoing Net loss ▪ Solid net cash position to support strategic growth $(98.1)m ▪ Bid pipeline increasing, with focus on KSA, Renewables and EPC(I) Net Cash ▪ $257.0m Backlog at historical lows ▪ Strategy progress: solidifying position in core rig markets Bid Pipeline $3.6bn ▪ International Maritime Industries JV established, construction of maritime yard in Saudi Arabia commenced Safety 0.30 TRIR * ▪ Organisational changes and strict compliance to newly updated bidding process as a result of East Anglia One shortcomings * Total Recordable Injury Rate 5
Operational Review Christopher McDonald, CEO Master Marine Departure from Hamriyah 6
Yard activity levels at historical low 2H dominated by East Anglia One ▪ Significant improvement in safety performance in 2H Backlog ($m) (FY 2017) ▪ Major projects delivered on time and on budget • NDC 8 & 9 • Shelf Drilling “ Krathong ” • Petrofac UZ750 43.1 • 2 Schlumberger land rigs ▪ Uptick in rig refurbishment segment: • 14 rigs currently stacked in our yards $137.9m • 4 rigs under refurbishment (YE 2016: $393m) ▪ Master Marine major upgrade for “Haven” progressing well and to schedule 94.8 ▪ East Anglia One 73% complete as of today Renewables Oil and gas 7
East Anglia One: progress update Primary focus on delivering to client schedule and expectations Project status: ▪ All 182 piles delivered to the client ▪ 8 jackets delivered to European marshalling yard ▪ 12 pre-fabricated jackets delivered to Harland & Wolff in Belfast ▪ Delivering to client’s expectations but LD exposure remains if delays arise Root cause analysis: ▪ Poor understanding of scope and requirements at bidding stage ▪ Inexperienced project management team (did not East Anglia package 3 set the right price and did not match specific sector movement requirements) ▪ Delays in addressing welding issues due to labour market challenges ▪ Transportation and logistics issues 8
Improving bid pipeline Solidifying position in core expansion markets Bidding approach matches strategic Bid pipeline $3.6bn* goals: (2016: $2.5bn) Renewables ▪ Capture broader energy markets for long-term growth 14% ▪ Address EPC(I) market for higher value projects $1.8bn ▪ Strategic partnerships to expand sector and geographical footprint 86% Oil and gas* 5% Higher levels of bidding activity: Rigs EPCI 15% ▪ Refocused sector targeting resulted in increased levels of bidding $1.8bn ▪ Major focus on KSA, Renewables and EPC(I) 80% ▪ Timing of awards is Q4 2018 at the earliest Rigs EPCI Contracting services *Excluding LTA 9
Financial Review Tony Wright, CFO Schlumberger land rigs 10
Key Financials Significant loss driven by East Anglia One project ▪ East Anglia loss booked in 2017. Zero margin on $98m project revenue in 2018, net cash outflow estimated at $30m ▪ Revenues affected by market-driven backlog pressure ▪ Delivered overhead reduction for sixth consecutive year; $16m YoY reduction ▪ Robust cash position of $257m ▪ $20m strategic investment made into International Maritime Industries JV ▪ Amendments to loan agreement secured with bank syndicate ($m, unless stated otherwise) FY 2017 FY 2016 Revenue by $m FY2016 segment $m Reported results New build jackup 49.4 567.6 370.4 705.0 Revenue rigs EBITDA (70.5) 28.7 O&G contracting 131.3 47.6 EBITDA margin (19.0)% 4.1% services (98.1) (182.2) Loss from continuing operations after Offshore platforms 140.6 12.8 income tax and exceptional items Modules 3.0 40.8 (28.7) (53.9) Reported diluted earnings/(loss) per share (US cents) Services 46.1 36.2 Net cash as at 31 December 2017 257.0 275.2 11
Income statement Loss driven by drop in revenue from core business segment and EA1 costs ▪ Reduction in New build jackup revenue severely impacts profitability ▪ Significant loss on East Anglia One ▪ Project completions and settlements delivered in 1H ▪ Focus on cost control to mitigate losses continues 12
Net cash to underpin future growth Benefit from working capital conversion on 1H project completions ▪ Net cash in line with forecast despite operational issues ▪ $50m of East Anglia losses reflected in net cash, $30m cash funding in 2018 ▪ Well-positioned to fund ongoing business and investment in Saudi Arabia ▪ Investment in IMI reflected in increased tangible assets 13
Balance sheet Tangible asset base remains ▪ Net cash remains strong ▪ Gearing continues to be low ▪ Considerable investment in strategic assets ▪ FY17 FY16 Working capital facility and revolver Balance sheet $m $m available in line with amended debt agreement Strategic investments ▪ Committed bonding line cancelled to reduce Project costs 39.6 28.7 evolution assets FY17 FY16 New pipeshop 19.6 8.3 Debt package $m $m IMI capital 18.9 - Term loan 40 59 Other Assets 368.2 467.4 Working capital facility 50 50 Revolver 100 200 Gross Cash 296.4 334.7 Total funded facilities 190 309 Total Assets 742.7 839.1 Committed bonding 50 150 Tangible Net Assets 429.1 530.4 14
Financial summary and outlook Maintaining liquidity for growth East Anglia One loss taken in 2017 – dilutes ▪ margins in 2018 ▪ Net cash to trend downwards: ▪ Investment in IMI JV $38m ▪ Cameron kits payment $41m ▪ East Anglia One $30m ▪ Further cash pressure will arise from low revenues in 2018 and investment in new resources ▪ Balance sheet strength remains intact Master Marine Haven upgrade 15
Strategy and Outlook Christopher McDonald, CEO East Anglia One 16
Business in transformation Upskilling: building capability to support growth markets Key strategic hires ▪ Continued investment in hiring personnel with EPC(I) and LTA experience ▪ New hires include personnel for key positions across the organization: ▪ Project management ▪ Commercial ▪ Engineering ▪ Procurement ▪ Transportation & installation ▪ Hook up & commissioning ▪ BD, Proposals & Estimating 17
What we are doing differently Transforming the bidding process ▪ Bidding in strict compliance with business strategy Project assessed for strategic fit ▪ Engage and target rather than respond Initial proposal to ExCom ▪ Focused marketing in addressable sectors Comprehensive evaluation ▪ Bidding teams with relevant process: scope & terms, risk, experience capability, financials, win strategy ▪ Over 20 new hires to support ongoing bids ExCom approval for bids above ▪ Increased involvement from $10m operations project managers at Bid team: business development, bidding stage risk, engineering, procurement, HR Weekly progress review by ExCom 18
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