LAM.L Regulatory News (LAM)

26 March 2014

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

2013 FINANCIAL RESULTS

Lamprell (ticker: LAM), a leading provider of diversified engineering and contracting services to the onshore and offshore oil & gas and renewable energy industries, announces its Financial Results for the year ended 31 December 2013.

2013 FINANCIAL RESULTS

*For the years 2013 and 2012, the financial results shown above are from the Group's continuing operations.

Note, exceptional items during 2013 relate to the costs of the debt refinancing (US$ 8.4 million).

Financial highlights

· Positive financial results demonstrates the Group's on-going recovery

· Revenue performance slightly ahead of 2012, driven primarily by strong jackup rig activity

· Returned to profitability after challenges of 2012

· Significant reduction in facility and corporate overhead costs by 17%, with further initiatives being implemented

· Net cash position for Group at year-end of US$183.8 million, trending downwards

· Successful refinancing secured with debt facility committed to June 2016

· Disposal of Inspec service business in March 2014, resulting in early repayment of a substantial part of the high cost portion of our debt facility

Operational highlights

· Strong operational performance during the year

· Further successful major project deliveries in 2H 2013 including:

o the Group's first Caspian Sea jackup drilling rig

o the jackup drilling rig to Jindal Group, on schedule and on budget

o a set of process modules completed to high specifications for North Sea client

· Awarded two new build jackups, with an option for a further one, and further refurbishments projects including the largest rig conversion in Lamprell's history

· Board and executive management strengthened with appointments of new Chief Executive Officer and new Chief Financial Officer, as well as more recently a Chief Commercial Officer to drive business development

· As at  31 December 2013, backlog of US$0.9 billion (30 June 2013: US$ 1.1 billion), with a bid pipeline at approximately US$4.7 billion (30 June 2013: US$ 4.6 billion)

· Continued focus on the Group's safety track record and high build quality has resulted in world class standards consistently being achieved

· Completed initial phase of new Oracle ERP system implementation

Our Strategy

· Detailed review of strategy completed and implementation under way

· Medium-term focus on our core markets of new build rigs, offshore construction and fabrication, liftboats, rig refurbishment and land rig services

· Longer-term goal to broaden our offering into new but related markets including modular LNG and onshore plants, and to re-enter the FPSO markets

· Review process for the non-core service businesses continues

Current update and outlook

· Current major projects progressing on schedule and on budget

· Seven major projects being delivered during 2014

· High bidding activity; engaged in a number of active discussions regarding prospective contracts

· Highest priority remains the conversion of the Group's increased bid pipeline into contract wins

· With lower recent order intake, revenues for 2014 and 2015 are expected to be slightly lower than 2013 while the Group rebuilds its order book

John Kennedy, Non-executive Chairman for Lamprell, said:

"Lamprell made great progress during 2013, improving project execution significantly and addressing the legacy issues, and as a result the Company returned to profitability. In 2013 we implemented a series of productivity and process improvements, as well as certain cost efficiencies, which we plan to continue and develop further during 2014. We have strengthened our business development function and are now working on rebuilding the order book to position the Company for future growth. The Board remains focused on ensuring the business has a strong financial platform to deliver its strategy."

A presentation for analysts and investors will be held at the Holborn Bars, 138-142 Holborn, London, EC1N 2NQ. The presentation is at 9.30am on Wednesday 26 March 2014 and a live webcast of the presentation will be available on the investors' section of the website at: http://lamprell.com/investors-centre/reports-and-presentations/2013.aspx

- Ends -

Enquiries:

Notes to editors

Lamprell, based in the United Arab Emirates ("UAE"), and with operations throughout the region, has played a prominent role in the development of the offshore industry in the Arabian Gulf for over 35 years and is the regional market leader in the rig market. Lamprell is a leading provider of diversified engineering and contracting services to the onshore and offshore oil & gas and renewable energy industries.

Lamprell currently employs approximately 10,000 people, including contract labour, across six facilities, with its primary facilities located in Hamriyah, Sharjah and Jebel Ali, all of which are in the UAE. In addition, the Group has facilities in Saudi Arabia (through JV agreements) and Kuwait. Combined, the Group's facilities provide a total area of over 925,000 m² with 2.2 km of quayside.

Chief Executive Officer's Review

2013 marked an important turning point for the Group. At the start of the year, we faced a number of challenges but, through the skills and commitment of all our employees, we were able not only to navigate the path to recovery but to deliver significantly improved financial results. To achieve this, the Group has focused on its key strengths in its traditional business streams and implemented a number of fundamental improvements in its project execution. We anticipate this focus on core markets to continue to form the basis of our business in near term as we look to build on the performance in 2013.

Year in Review

At the time of joining Lamprell in March 2013, I was impressed by the underlying strengths of the franchise but it was clear to me that further actions were required in order to keep the recovery process on track. One of our immediate priorities was to build on the work of the interim management team to improve our operational performance and to complete our existing projects, and in particular the key underperforming projects, as effectively and efficiently as possible.

In order to align the Group's management organisation more closely with its projects, a number of changes were made to strengthen the management team. New appointments included a VP Projects, VP HSE, VP Procurement and VP Finance and Jo Curin joined as CFO in October 2013. More recently, we have recruited a new Chief Commercial Officer and a VP Business Development. This new management team benefits from the combined knowledge within the legacy Lamprell operations and the experience and expertise of the new appointees.

It was also crucial for the growth of the business to develop a strong culture of continuous improvement and we successfully implemented a series of initiatives to enhance project execution and improve efficiencies within the wider business. We instilled a more disciplined and structured approach to our operational performance to drive down our cost base, resulting in a 17% reduction in our facility and corporate overhead costs. As part of this, we developed and regularly monitored key performance indicators. We launched the first phase of a new ERP system which went live in February 2014.

Throughout this same period, it has been my objective to nurture and develop our key differentiators, namely high standards of safety and quality, a commitment to reliability, a keen focus on client satisfaction and a strong management team. It is my strong belief that a safe working environment will deliver significant benefits to the business such as enhanced productivity, client satisfaction and ultimately stronger financial performance. These key strengths form an integral part of the culture of continuous improvement and I am proud to see that we are consistently achieving world class standards on our current projects.

Focused on Delivery

In 2013, the Group maintained its position as one of the leaders in construction of new build jack-up rigs in the sub-350 feet class. We completed three rigs during the year with an additional rig delivered in February 2014. In total, since 2006, the Group has delivered 15 new build jackup drilling rigs, including eight LeTourneau Super 116E rigs.

During 2013, the Group also demonstrated a strong performance in its offshore construction business stream, delivering two major topside structures on schedule. In November, we completed the final set of process modules to another client for use in the North Sea. These structures further strengthened our reputation for building high quality, large-scale complex decks.

In Q1 2013, the Group also delivered the Windcarrier "Bold Tern" windfarm installation vessel to Fred Olsen, the fifth liftboat that Lamprell has delivered in six years. Notwithstanding the challenges that we experienced on this complex project, we are very proud of the high quality of the final product, which is operating successfully in the North Sea region.

While the rig refurbishment and upgrade business experienced a quieter year, the Group nevertheless worked on 22 projects during the period. In the second half of the year we commenced work on a major rig conversion and refurbishment project for Millennium Offshore Services group (MOS). This project demonstrates the Group's ability and willingness to develop innovative solutions to support its clients, particularly in its core markets.

The land rig segment had a steady year. Highlights include the completion of a fast-moving rig upgrade for National Drilling Company and the design and fabrication of coiled tubing towers for a number of oilfield services companies. The Group also completed the process for certification for its proprietary land rig design and will look to market this to clients during 2014.

Market Overview, Order book and Bidding

Overall order intake during 2013 was lower than in previous years. This was primarily due to delays in project awards and our focus on project execution in our core markets as we re-positioned the business for a return to profitability. Despite the challenges facing the business, we retained the support of our clients and secured two major contract awards for the construction of two Super 116E rigs and the contract award from MOS for the largest rig conversion and refurbishment in Lamprell's history.

As we move into 2014, we remain focused on the conversion of our pipeline of opportunities into contract wins. We believe that Lamprell is well placed to win new rig contracts arising from a combination of our key differentiators and the operators' need to replace the aging global rig fleets. In the offshore construction sector, we have noted the projected slowdown in overall capital expenditure but, with our strong track record in modular construction projects, we believe that the opportunities in the market for our high build quality and cost efficiency will yield greater returns in the medium to long term.

As at 31 December 2013, the Group's order book was valued at US$0.9 billion (30 June 2013: US$1.1 billion). As of 31 December 2013, the Group's bid pipeline was valued at approximately US$4.7 billion (30 June 2013: US$ 4.6 billion), representing the broad range of bids across various business divisions. We have strengthened our business development capabilities and we are in active dialogue with a number of prospective clients for new orders, with the goal of rebuilding the order book.

Strategy

We have carried out a detailed review of the Group's strategy and concluded that for the medium term, we will continue to focus on our existing core businesses namely new build rigs, offshore construction, liftboats, rig refurbishments and land rig services. Our long term goal is to broaden our offering into related markets including topsides and modular LNG and onshore plants and re-entering the FPSO markets where we have already been successful.

The key elements of our strategy are as follows:

· Focus on core markets: We will maintain leading market positions in the construction of shallow-water drilling jackup rigs, liftboats, land rigs and rig refurbishment, and develop further our strong and growing reputation for process modules and topsides for use in the energy industry. We will focus on these markets whilst leveraging our proven expertise in project execution to broaden our reach within these sectors.

· Productivity and efficiency: We are improving our productivity, driving down costs and looking to shorten our build schedules to enhance our competitiveness. This will be achieved by optimising yard lay-outs, capturing synergies between major projects and organisational alignment, and by adopting practices from the best European and Asian yards.

· Continuous improvement: We are creating a culture of continuous improvement including the use of and reporting against key performance indicators and the capture and embedding of lessons learned across repeat projects.

· Client satisfaction and business development: Our on-going commitment to customer service and close client relations before, during and after project completion has allowed the Company to benefit from the strong support from our major clients. We are targeting to be the partner of choice for long term clients. We are strengthening our business development capabilities to achieve this.

· Leveraging our key strengths: Lamprell has a long-standing reputation for its strong safety track record, high build quality, reliable delivery and a reputation for working collaboratively with our clients. Our facilities are well-located and well-equipped, and we have an experienced management team and skilled and committed workforce in place. Our objective is to build on these strengths to differentiate ourselves against competitors.

· Value for money: With the combination of our key strengths and competitive cost structure, we believe we present an attractive proposition to clients, delivering superior value for money.

Consistent with the above strategy and as already announced in August 2013, we are reviewing the Group's ownership of certain non-core service businesses. As announced on 3 March 2014, we entered into an agreement to sell the Inspec service business for US$66.2 million.

Outlook

In 2013 the Group made good progress on its path to recovery and we are aiming to build on this in 2014 through the implementation of our strategy. The order intake during 2013 was lower than in previous years and accordingly revenues for 2014 and 2015 are expected to be slightly lower than 2013 while the Group rebuilds its order book. In the meantime, we are focusing on improving productivity and cost efficiency in the business and we expect to start seeing the results from our improvements during the course of 2014, although the full benefit is not anticipated to materialise until 2015.

Jim Moffat

Chief Executive Officer

Lamprell plc

Financial Review

2013 was a year of recovery for Lamprell. Following the completion of a number of underperforming projects and improvements in execution during the year, the Group returned to profitability faster than previous expectations.

Results from operations

In the twelve-month period ended 31 December 2013, the Group's total revenue was slightly up year-on-year at US$ 1,091.8 million (2012: US$ 1,025.9 million). The increase was driven primarily by the new build oil and gas and new build renewables segments, which recorded higher revenue of US$ 580.2 million (2012: US$ 493.6 million) and US$ 95.1 million (2012: US$ 66.4 million) respectively. In total, during 2013 the recognised revenue for the Group included revenue on ten jackup rigs and two liftboats. Of note, we completed the Windcarrier 2 "Bold Tern" liftboat to Fred. Olsen in February and in November, we delivered the first of two Caspian jackup rigs without further deterioration to our profitability for 2013.

The offshore construction segment also performed very well with five projects under construction and three delivered to the clients during the period. The segment reported revenue of US$ 195.6 million (2012: US$ 179.7 million).

These revenue increases were partially offset by lower revenues from the upgrade and refurbishment of US$ 122.5 million (2012: US$ 176.9 million), which was impacted by delays in the timing of clients' maintenance schedules as well as increased competition in the market. Other revenue also decreased to US$ 98.4 million (2012: US$ 109.4 million) due to lower activity in our minor engineering and construction projects.

Cost of sales decreased from US$ 1,053.6 million in 2012 to US$ 976.5 million in 2013, resulting in the recovery of the gross margin to 10.6% (2012: negative gross margin of 2.7%). The overall recovery in the margin was supported by improved project execution and overhead costs savings at the facility level, although 2013 margins were partially suppressed by the three legacy contracts referred to above.

Overhead costs were broadly flat year-on-year excluding exceptional items and a one-off write-off in respect of the Group's legacy ERP system. General and administrative expenses were US$ 62.3 million (2012: US$ 71.4 million).

The operating profit for the year from continuing operations was US$ 52.9 million against a loss of US$ 94.9 million for the previous comparative period. This improved profitability came primarily as a result of the successful completion of underperforming projects (Windcarrier 2 and the first Caspian rig), cost savings in our core businesses and significantly better performance of one of our service businesses, Litwin, which in 2013 recovered from the substantial losses of the previous year.

EBITDA for the period was US$ 86.1 million (2012: negative US$ 63.0 million), which included both continuing operations and the Inspec service business (which are discontinued operations), with the EBITDA margin at 7.7% (2012: negative 6.0%).

Finance costs

Net finance costs in 2013 increased marginally to US$ 22.2 million (2012: US$ 21.5 million). Excluding exceptional items, net finance charges were lower by 36% in 2013 as compared to the previous year due to lower interest costs, which was principally due to a lower level of average debt. The 2013 costs include an exceptional charge of US$ 8.4 million arising from costs related to the refinancing of the Group's debt facilities (see "Borrowing and debt refinancing" below).

Net profit and earnings per share

The Group reported a net profit of US$ 36.4 million after the exceptional financial charge but including US$ 5.7 million from the "Inspec" service business, the disposal of which was completed on 2 March 2014. The Group reported a net loss (after exceptionals) of US$ 111.2 million for the previous year. We see this as a very positive result given the fact that the Group had to overcome many legacy issues from the previous year and make significant changes to the business and operations during 2013.

The fully diluted earnings per share for the twelve-month period ended 31 December 2013 were 13.99 US Cents (2012: negative 42.72 US Cents).

Cash flow and liquidity

The Group's net cash generated from operating activities for the twelve-month period ended 31 December 2013 was a net inflow of US$ 117.7 million (2012: net inflow of US$ 249.9 million). Prior to working capital movements and the payment of employees' end of service benefits, the Group's net cash inflow was US$ 105.3 million (2012: net outflow of US$ 43.0 million).

The Group's liquidity has improved significantly in 2013 with unrestricted cash increasing to US$ 277.1 million (2012: US$ 126.4 million). The positive EBITDA and release of short-term deposits under lien due to completion of a number of large projects, as well as a positive movement in working capital, drive this strong performance.

The Group's net cash as at 31 December 2013 was US$ 183.8 million (2012: US$ 104.1 million).

Borrowing and debt refinancing

On 18 July 2013, the Group concluded negotiations with its lenders by entering into a new Senior Secured Syndicated Facilities Agreement with a syndicate of banks under which such banks made available certain facilities with an aggregate amount of US$ 181.0 million, consisting of: (a) a term facility A of US$ 100.0 million with a final maturity on 30 June 2016, which is subject to an amortisation schedule commencing on 30 June 2014; (b) a term loan facility B of US$ 60.0 million with an original final maturity on 30 June 2016, which is subject to a one-year extension, at the election of the Company; and (c) a revolving facility of US$ 21.0 million maturing on 30 June 2016. Term loans A and B referred to in (a) and (b) above were used to refinance the then outstanding funded financial indebtedness of the Group under the 2011 Facilities Agreement, whilst the Group will use the revolving facility for its general corporate and working capital purposes. These new facilities, which sit alongside the Group's continuing bilateral unfunded facilities, provided a significant simplification of the Group's funded facilities and consolidated the Group's borrowing with a smaller and more cohesive banking syndicate.

The period-end outstanding borrowing was US$ 160.8 million (31 December 2012: US$ 159.3 million).

In view of the substantial pay-down of debt during 2014, the Group is exploring its options for the optimal long-term funding structure.

Post Balance sheet event

Post the year-end, on 3 March 2014, the Group announced the sale of one of its service businesses, Inspec, to Intertek Testing Services Holdings Limited for a total cash consideration of US$ 66.2 million.

Sale of the Inspec service business has triggered a mandatory repayment clause in our debt facility agreement resulting in the Group paying down a substantial part of the term loan facility B which is the high cost portion of the secured debt facility.

Going concern

After reviewing its cash flow forecasts for a period of not less than 12 months, from the date of signing of these financial statements, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its financial statements.

Dividends

Given the restrictions under the Group's debt facility the Group will not be paying a dividend for the twelve-month period ended 31 December 2013. The Board is acutely aware of the importance of dividends to investors and we will review the Group's dividend policy when its financial position improves further and the constraints have been removed.

Joanne Curin

Chief Financial Officer

Lamprell plc

Lamprell plc

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated balance sheet

Consolidated statement of changes in equity

Consolidated cash flow statement

Lamprell plc

Notes to the financial information for the year ended 31 December 2013

1 Legal status and activities

Lamprell plc ("the Company") and its subsidiaries ("the Group") are engaged in the upgrade and refurbishment of offshore jackup rigs; fabrication; assembly and new build construction for the offshore oil and gas sector and renewable sector, including jackup rigs and lift boats; Floating Production, Storage and Offloading ("FPSO") and other offshore and onshore structures; and oilfield engineering services, including the upgrade and refurbishment of land rigs.

2 Basis of preparation

The Group is required to present its annual consolidated financial statements for the year ended 31 December 2013 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 2013. The financial information has been extracted from the consolidated financial statements for the year ended 31 December 2013 approved by the Board of Directors on 25 March 2014 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 2013 and 31 December 2012 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 2013 have been prepared in accordance with the Listing Rules of the London Stock Exchange.

The consolidated financial statements have been prepared on a going concern basis. The Group is currently financed from Shareholders' equity and borrowings. During the year, the Group secured a new set of debt facilities amounting to USD 181 million with revised covenants. This new arrangement significantly simplifies the Company's lending structure and rationalises the covenants to a common basis (Note 24).

After reviewing its cash flow forecasts for a period of not less than 12 months from the date of signing of these financial statements, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future. Therefore, the Group continues to adopt the going concern basis in preparing its financial statements.

The preparation of financial information 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 Group financial information 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 2012 and reviewed interim financial information for the period ended 30 June 2013, which are available on the Company's website, www.lamprell.com.

4 Critical accounting estimates and judgements

Estimates and judgements 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 Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The 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:

Revenue recognition

The Group uses the percentage-of-completion method in accounting for its contract revenue. Use of the percentage-of-completion 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 accounting policy. As a result, the Group is required to estimate the total cost to completion of all outstanding projects at each period end. The application of a 10% sensitivity to management estimates of the total costs to completion of all outstanding projects at the year-end would result in the revenue and profit increasing by USD 28.3 million (2012: USD 24.4 million) if the total costs to complete are decreased by 10% and the revenue and profit decreasing by USD 29.7 million (2012: USD 45.2 million) if the total costs to complete are increased by 10%.

Estimated impairment of goodwill

The Group tests goodwill for impairment annually or more frequently if events or changes in circumstances indicate a potential impairment. Goodwill is monitored by management at the 'cash generating unit relating to upgrade and refurbishment of offshore jackup rigs, fabrication, assembly and new build construction for the offshore oil and gas and renewables sectors, including FPSO and other offshore and onshore structures, oilfield engineering services, including the upgrade and refurbishment of land rigs' (CGU1).

The recoverable amount of CGU1 is determined based on value-in-use calculations. These calculations require the use of estimates. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a three-year period. Cash flows beyond the three-year period are extrapolated using an estimated revenue growth rate of 5% (2012: 5%). A discount rate of 11.48% (2012: 12.96%) is used to discount the pre-tax cash flow projections to the present value. In determining the appropriate discount rate, the Group considers the weighted average cost of capital employed, which takes into consideration the risk free rate of US treasury bonds with the long term maturity period, UAE inflation rate, Equity risk premium on the entities operating from UAE, Group's beta and cost of Group's debt.

A change in the assumptions selected by management used in the cash flow projections could significantly affect the impairment evaluation. If the revenue growth rate used was to differ by 0.5% from management's estimates, there would be a reduction of USD 3 million (2012: USD 1.6 million) in the headroom if the revenue growth rate was lower by 0.5% and the headroom would be higher by USD 3 million (2012: USD 1.6 million) if the revenue growth rate was higher by 0.5%. If the discount rate used was to differ by 0.5% from management's estimates, there would be a reduction in the headroom of USD 27.6 million (2012: USD 23.6 million) if the discount rate was to increase by 0.5% or an increase in the headroom by USD 31.2 million (2012: USD 26.3 million) if the discount rate was to decrease by 0.5%. If the net profit as a percentage of revenue used was to differ by 0.5% from management's estimates, there would be an increase of USD 56.1 million (2012: USD 61.9 million) in the headroom if the net profit as a percentage of revenue was to increase by 0.5% and there would be a decrease of USD 56.1 million (2012: USD 61.9 million) in the headroom if the net profit as a percentage of revenue were to decrease by 0.5%. If the terminal value growth rate used was to differ by 0.5% from management's estimates, there would be a reduction in the headroom of USD 19.9 million (2012: USD 16.7 million) if the terminal value growth rate was lower by 0.5% or an increase in the headroom of USD 22.5 million (2012: USD 18.6 million) if the terminal value growth rate was higher by 0.5%.

Employees' end of service benefits

The rate used for discounting the employees' post-employment defined benefit obligation should be based on market yields on high quality corporate bonds. In countries where there is no deep market for such bonds, the market yields on government bonds should be used. In the UAE, there is no deep market for corporate bonds and no market for government bonds and therefore, the discount rate has been estimated using the US AA-rated corporate bond market as a proxy. On this basis, the discount rate applied was 4.25% (2012: 3 %). If the discount rate used was to differ by 0.5 points from management's estimates, the carrying amount of the employee's end of the service benefits provision at the balance sheet date would be an estimated USD 1.3 million (2012: USD 1.2 million) lower or USD 1.4 million (2012: USD 1.3 million) higher. If the salary growth rate used was to differ by 0.5 points from management's estimates, the carrying amount of the employee's end of the service benefits provision at the balance sheet date would be an estimated USD 1.5 million (2012: USD 1.3 million) higher or USD 1.4 million (2012: USD 1.2 million) lower.

5 Segment information

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Executive Directors who make strategic decisions. The Executive Directors review the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

The Executive Directors consider the business mainly on the basis of the facilities from where the services are rendered. Management considers the performance of the business from Sharjah (SHJ), Hamriyah (HAM) and Jebel Ali (JBA) in addition to the performance of Land Rig Services (LRS), Sunbelt, Engineering and Construction (E&C) and Operations and Management (O&M).

SHJ, HAM, JBA and LRS are reported as a single segment (Segment A). Services provided from Sunbelt, E&C and O&M do not meet the quantitative thresholds required by IFRS 8, and the results of these operations are included in the "all other segments" column.

The reportable operating segments derive their revenue from the upgrade and refurbishment of offshore jackup rigs, fabrication, assembly and new build construction for the offshore oil and gas and renewables sectors, including FPSO and other offshore and onshore structures, oilfield engineering services, including the upgrade and refurbishment of land rigs.

Sunbelt derives its revenue from safety and training services, E&C derives its revenue from site works, compression and chemicals and, O&M derives its revenue from the labour supply and other operations and maintenance services.

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.

The Executive Directors assess the performance of the operating segments based on a measure of gross profit. The staff, equipment and certain subcontract 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 reconciliation of the gross operating profit/(loss) is provided as follows:

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 breakdown of revenue from all services is as follows:

The Group's principal place of business is in the UAE. The revenue recognised in the UAE with respect to services performed to external customers is USD 1,076.3 million (2012: USD 1,011.3 million), and the revenue recognised from the operations in other countries is USD 15.5 million (2012: USD 14.6 million).

Certain customers individually accounted for greater than 10% of the Group's revenue and is shown in the table below:

The revenue from these customers is attributable to Segment A. The above customers in 2013 are not necessarily the same customers in 2012.

6 Cost of sales

7 Selling and distribution expenses

8 General and administrative expenses

During 2012, general and administrative expenses includes exceptional items relating to a regulatory fine amounting to USD 3.7 million and related legal expenses of USD 1 million (Note 25).

9 Staff costs

10 Finance costs - net

During 2013, others in finance costs includes USD 8.4 million relating to expenses incurred during the process of covenant waivers and refinancing negotiations with lenders (Note 24).

Finance income

Finance income comprises interest income on bank deposits of USD 0.98 million (2012: USD 0.87 million).

11 Other gains/(losses) - net

12 Earnings/(loss) per share

(a) Basic

Basic earnings/(loss) per share is calculated by dividing the profit/(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 19).

(b) Diluted

Diluted earnings 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 free share awards, options under the executive share option plan and the 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.

In the previous year, as the Company had incurred a loss from continuing operations, all of the Company's existing potential ordinary shares were not dilutive as they decrease the loss from continuing operations.

13 Property, plant and equipment

14 Intangible assets

Management reviews the business performance based on the type of business. Goodwill is monitored by the management at the operating segment level. Goodwill of USD 180.5 million arising due to the acquisition of MIS has been allocated to the CGU1 within Segment A.

The recoverable amount of CGU1 is determined based on value-in-use calculations. These calculations require the use of estimates. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a three-year period. Cash flows beyond the three-year period are extrapolated using an estimated revenue growth rate of 5% (2012: 5%). A discount rate of 11.48% (2012: 12.96%) is used to discount the pre-tax cash flow projections to the present value. In determining the appropriate discount rate, the Group considers the weighted average cost of capital employed, which takes into consideration the risk free rate of US treasury bonds with the long term maturity period, UAE inflation rate, Equity risk premium on the entities operating from UAE, Group's beta and cost of Group's debt.

15 Trade and other receivables