LAM.L Regulatory News (LAM)

23 March 2016

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

2015 FINANCIAL RESULTS

Financial performance in line with expectations

Margins maintained despite challenging environment

2015 FINANCIAL RESULTS

Financial highlights

· Profit of USD 66.5 million ahead of market expectations on the back of strong operational performance and contribution from efficiency and productivity measures

· Revenues of USD 871.1 million, slightly below earlier guidance due to the impact of the market downturn

· EBITDA margin down from the exceptional level of 12.6% in 2014 to a more normalised level of 10.3%, with pricing pressure partly offset by positive impact of higher productivity and cost efficiencies

· Robust cash position of USD 210.3 million maintained despite spending on Project Evolution and the working capital cycle

Operational highlights

· High levels of activity with our yards close to full capacity in 2H and into 2016

· Strong operational performance with three major projects delivered safely, on time, on budget and to high quality standards

· Option with NDC for a new jackup converted in April; further awards from Petrofac for additional modules, now totalling 45 units for the landmark Upper Zakum project, Abu Dhabi

· Backlog of USD 740 million (31 December 2014: USD 1.2 billion) of which 90% is attributable to 2016, with bid pipeline slightly higher at approximately USD 5.4 billion (31 December 2014: USD 5.2 billion)

· Safety remains a high priority, with an outturn total recordable incident rate of 0.31

· Phase 2 of Project Evolution, our programme of productivity improvements and cost efficiencies, commenced

Strategy in place

· Strategy reviewed and refined during the year in light of the prolonged market downturn

· Prospects pipeline assessed and composition refocused to maximise overall likelihood of awards

· Near-term business development efforts shifted towards more resilient markets such as the Middle East where we have a competitive position

· Strategic alliances targeted to enable involvement in large projects

· Memorandum of Understanding relating to potential participation in a Maritime Yard in Saudi Arabia signed in January 2016

Current trading and outlook

· Four major deliveries expected during the course of 2016, with all projects progressing well

· Bid pipeline of USD 5.4 billion remains extensive, however delays in awards continue to affect conversion rate; 90% of backlog attributable to 2016

· Challenging market environment expected to affect the industry throughout 2016

· Revenues for FY2016 currently expected to be around 5% below 2015 levels

· Maintaining business flexibility with overhead cost reductions and further cost and productivity improvements from additional opportunities identified through Project Evolution

· Continuing efforts to leverage Lamprell's regional expertise and competitive advantage

John Kennedy, Executive Chairman for Lamprell, said:

"2015 was a challenging year for the global energy industry and Lamprell began the year in a position of relative strength, with a high level of backlog and a strengthened balance sheet, which allowed the Group to deliver a robust performance. Although we have been affected by the slow-down in new awards worldwide as companies have delayed project sanctions, Lamprell has shown resilience and has been quick to react and adapt. We have refined our strategy and structured our operations so as to remain competitive and to be well-prepared for another challenging year in 2016. At the same time, we have not lost sight of our strategic objectives by building a foundation for longer-term growth. We continue to diversify our bid pipeline, pursue strategic alliances and have recently announced early stage discussions regarding our potential participation in the Maritime Yard in Saudi Arabia. In the meantime, our cost advantages and strong balance sheet will help us to compete in a very challenging market as the downturn is expected to continue through 2016."

James Moffat, Chief Executive Officer for Lamprell, said:

"Lamprell's operational performance has been consistently strong over the past few years and I am pleased to see that continuing throughout 2015, resulting in financial performance in line with expectations in the face of market headwinds. Having successfully implemented Project Evolution, the benefits from this programme of cost efficiencies and productivity improvements have proven to be key to both our operational and our financial results in 2015 and that will continue in 2016. We have been able to maintain our competitiveness in a market with significant downward pressure on pricing. As a result, not only have we maintained healthy margins, but this also helped us win one of only three rigs awarded globally in 2015. It seems unlikely that the markets will return to full recovery in 2016 and so we currently expect our full year revenues for 2016 to be around 5% below 2015 levels. Our business retains a high degree of flexibility leaving us sufficient room to undertake further measures to adapt to the market environment and preserve our long term future."

The management team will hold a presentation for research analysts at 9.00am at Holborn Bars (138-142 Holborn, London EC1 2NQ). The live webcast will be accessible on Lamprell's website and on the following link:

http://webcasting.brrmedia.co.uk/broadcast/56e1a8234f1d147d54d0fc36.

The Company will hold its 2016 annual general meeting on 15 May 2016 in Dubai, United Arab Emirates.

- Ends -

Enquiries:

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 9,000 people across multiple 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 a joint venture agreement). Combined, the Group's facilities cover approximately 1,000,000 m2 with 2 km of quayside.

Lamprell is listed on the London Stock Exchange (symbol "LAM").

Chairman's statement

Challenging market backdrop

Contrary to the predictions of many market participants, oil prices continued to slide throughout 2015. Oil and gas companies around the world reacted by gradual, and in some cases drastic, cuts to their capital expenditure.

Lamprell is not immune to the oil sector headwinds but we are pleased to report on our demonstrated ability to withstand these challenges. Along with other energy industry contractors, we have seen delays in contract awards but we have taken steps to adapt by changing our approach to new business development.

Maintaining a competitive position

In difficult times, companies often make the mistake of losing focus on their long -term goals. Lamprell's strong position allowed us to withstand the storm without compromising our future growth plans. We managed to remain competitive and continue to implement our strategy.

Similar to most of our peers, our pipeline conversion was affected by project delays and cancellations. Nevertheless our bid-to-win ratio remained healthy by industry standards and this is an important factor indicating Lamprell's strong competitive position. It gives comfort about our ability to recover from the difficult contracting environment.

We also judge our strength by our ability to compete without undermining Lamprell's financial performance or commercial position. In the context of increased pricing pressure, where numerous market players saw gradual margin erosion, we have been able to remain profitable. The gains delivered through Project Evolution allowed us to protect our normalised margins whilst enabling us to offer attractive propositions in a tough market. This business flexibility and our strong client relationships have helped us maintain leadership in the jackup market, with a win of the ninth rig from National Drilling Company ("NDC"), one of only three jackup rig orders placed worldwide in 2015.

Focus on the future

Whilst we are taking steps to ensure we successfully weather the current storm in the sector, we anticipate a recovery in the energy markets, as do most industry experts, and so we are also continuing to focus on our future. We have reviewed our strategy for robustness, redirecting our marketing efforts from slower international regions around the world to the Middle East where we can leverage our position of strength.

As a Board, we have also spent considerable time assessing our medium-term positioning in the market and potential sources of growth for Lamprell. With this in mind, we have identified strategic partnerships as a potential route to a step-change in the scale of projects to target. In line with this plan, in January 2016 we announced a Memorandum of Understanding with Saudi Aramco, Bahri and Hyundai Heavy Industries regarding a potential partnership for collaboration on the Maritime Complex in Saudi Arabia. The discussions are still at an early stage, but this could become a sizeable business opportunity for Lamprell. I took on the responsibility of Executive Chairman to identify opportunities for strategic initiatives and other means to grow the business in an outward facing role. Our work on potential alliances continues, and we will update our shareholders on progress as appropriate.

Strong Board

In this endeavour, I have benefited from the support of a strong Board. Following the departure of Michael Press and the passing of Peter Whitbread during 2015, Lamprell has enhanced the Board's independence and composition with the addition of two Directors with impressive experience and Ellis Armstrong's appointment as Senior Independent Director. Debra Valentine brings significant industry knowledge coupled with expertise in corporate transactions. Mel Fitzgerald is a seasoned executive with 30 years of industry experience. It was also pleasing to promote from within, with the appointment of Tony Wright to the Board in the role of Chief Financial Officer.

Lamprell's Board will be completed with the recruitment of a new CEO following Jim Moffat's announced retirement from the full-time CEO position in 2016. Lamprell will continue to benefit from Jim's expertise for a year following his retirement but I would like to take this opportunity to thank him and the wider senior management team for their dedication and drive to secure a strong future for the Group.

I would also like to thank our shareholders for their support through these challenging times. The Board will continue to work tirelessly to deliver the strategy firm in our belief in Lamprell's future.

John Kennedy

Executive Chairman

Chief Executive Officer's Review

After a year of exceptional financial results in 2014, Lamprell has maintained a strong operational performance and built on the strong business position towards long-term growth. The focus is now on executing our strategy.

2015 will certainly be remembered as a difficult year for the industry, but for Lamprell it was an important turning point. After a year of recovery in 2013 and the exceptional performance in 2014, this year has shown the underlying robustness of Lamprell's business, with its ability to be flexible and adapt to the changing environment. In 2015, we demonstrated that Lamprell is resilient enough to return to normalised performance, even in the context of a challenging market.

Maintaining high activity levels

Overall, our performance across the key metrics was strong. We focused on the elements under our control, which allowed us to manage the impact of the external environment. Operationally, we have done well, delivering three major projects on time, on budget and to high safety and quality standards. We have seen an extension in scope of the project we are fabricating for Petrofac, a testament to our performance. Our yards remained full throughout the second half of the year.

The strength of our client relationships is a key driver of our performance, and we continued to develop these through our collaborative approach. Having awarded Lamprell a contract for the ninth in a series of jackup rigs, NDC subsequently extended its options with Lamprell to a current total of three options. We also offered the service of stacking client rigs in our facilities in the spirit of current and future cooperation.

New build jackup rigs were the largest contributor to our revenue this year, with offshore/onshore construction suffering from a slow-down in the market downturn. The challenging environment has also significantly impacted the contribution from our walk-in business, with rig refurbishment revenue reduced by more than half compared to 2014, which is the reason behind our total revenue being slightly below our earlier guidance. Our land rigs business unit performed broadly in line with our expectations, albeit reflecting the slow-down in the industry, and completed 13 projects in total during 2015.

Maximising operational performance through improvements

During the course of the year we improved significantly our efficiency and productivity in the yards. The implementation of Project Evolution was almost entirely completed by the end of the year, with a new panel line fully operational and significant improvements in automation.

We started to see the benefits in terms of productivity almost immediately upon completion of each component of the project. As you would expect with the introduction of new equipment and training requirements, some of the initiatives took time to ramp up to their full run-rate but we have benefited from the improvements throughout the year. For example welding, which constitutes a major component in fabrication with approximately 30% of total manhours, has seen a dramatic step up as we modernised our processes. The beam-cutting robots cut beams to exact size many times faster and more accurately than a human can.

We have also optimised painting, crane and scaffolding services, as well as our use of yard space and assets. As a result, we have been able to accommodate the construction of seven concurrent jackup rigs in our Hamriyah yard, a record for the Group.

At the time of the start of Project Evolution, we expected full payback within three to four years. While this remains appropriate guidance, we delivered better savings than first anticipated during 2015, whilst also implementing the Project within budget and the timeframe specified originally. The savings and efficiencies generated by Project Evolution allowed us to protect our margins whilst at the same time remaining competitive in a market with increased pricing pressure. With the recent appointment of Niall O'Connell as COO a strong focus will be on driving these operational improvements even further. Phase 2 of Project Evolution has commenced with the approval of a new pipeshop.

Our safety record throughout the year was stable with a total recordable incident rate around 0.3. The Jebel Ali and Dubai facilities also achieved a major milestone, having now operated for three years without a day away from work case, a significant achievement given the nature of our business. We have set new improvement goals and are looking at new ways to strengthen the safety culture further within the workforce and prevent all avoidable incidents.

Focus on remaining competitive in a challenging market environment

As drilling programmes started to be scaled back in response to weak oil prices, the pace of the contract awards has slowed down across the whole supply chain. Along with our peers, we suffered from this and this is reflected in the lack of major awards during the second half of the year. The slow-down in order intake has however had an impact on our backlog, which stood at USD 740 million at period end and provides reasonable revenue coverage for the current year with approximately 90% attributable to 2016.

In the first half of the year, we were successful in converting one of the jackup rig options with NDC and we saw an award of additional modules on the Abu Dhabi project for our client, Petrofac, with the total now standing at 45 preassembled racks, units and modules. We have also seen a number of smaller contract awards across our businesses, including a contract award for suction caps and buoyancy tanks from a new client. In our drive to expand our offering, we also built our first land rig of Lamprell's proprietary design, which we started marketing towards the end of the year. The initial feedback from potential customers has been positive and we believe it will be an attractive product for Middle East clients, having been specifically designed for the region.

Despite a healthy bid-to-win rate being maintained, the conversion rate of our pipeline suffered from a slow-down in awards across the global markets. Whilst bidding activity levels are high and our bidding pipeline is extensive, we continue to be affected by the industry-wide trend of projects drifting to the right. In response to this slow-down we have continued to improve our approach to business development and, specifically, we dynamically adapted the composition of our bid pipeline throughout the year to address the changing circumstances. We regularly reassess the likelihood of sanction or proactively replace the delayed projects with new bids more likely to be awarded in the near future. Our bid pipeline currently stands at USD 5.4 billion, which is at comparable level to last year's, whilst its composition has changed. In practice, this was driven by a conscious shift away from the quieter international markets to more buoyant regional markets such as the Middle East, which maintains higher activity levels in the current environment. The Company, due to its geographic location, believes it is relatively well placed to capitalise on this comparative market strength.

In our effort to minimise the impact of the downturn on our near and medium term performance, we have streamlined the organisational structure with efficiencies and overhead reductions and we expect to generate further efficiencies this year. The high activity levels to date have meant that despite maintaining flexibility, Lamprell did not have to adjust its operations to a quieter market, unlike many other companies in our sector, however we continuously review our ability to react to a significant drop in activity should action be required. We value this additional room for flexibility, particularly this far into the market downturn, as an important competitive advantage for Lamprell.

Outlook

The strong foundations laid over the last 18 months have created a structure for us to be competitive and deliver a strong operational performance consistently. With our ongoing bidding efforts, we expect to be able to persevere through the downturn and then emerge from it in a strong position for growth to deliver our strategy. With this in mind, we believe our ability to win large projects could be enhanced by forming strategic alliances. In early 2016 we signed a Memorandum of Understanding regarding Lamprell's potential participation in the Maritime Complex in eastern Saudi Arabia. We have also agreed to work with Dubai Drydocks to identify opportunities for cooperation on FPSO/FPU projects in the context of Dubai's aspiration to become a strategic location for such projects. We will continue to scrutinise the market for other value-added alliances.

There is a lot of uncertainty in the current markets but Lamprell's focus for 2016 is on demonstrating resilience and its ability to progress towards future growth despite the industry challenges. We remain confident in our ability to deliver on our strategy, which we believe is the right path to long term success. Despite our confidence in the long term future, this does not leave us immune from the market downturn and we expect the challenges to continue impacting our performance in 2016.

The Board currently expects the revenues for 2016 to be around 5% below Lamprell's performance in 2015 as the overall market downturn continues to have an impact on the Company. In the meantime, the management team will continue its focus on protecting margins benefiting from cost efficiencies and productivity improvements. The Group remains firmly focused on influencing the factors under its control by improving performance, streamlining the business and shifting its focus to the Middle East region.

James Moffat

Chief Executive Officer

Lamprell plc

Financial Review

Results from operations

We are pleased to deliver healthy and steady financial performance in 2015 following a year of exceptional financial results in 2014. The combination of strong operational execution and savings achieved as a result of Project Evolution allowed us to deliver good margins despite global headwinds in the sector.

The Group's total revenue for the year was USD 871.1 million, slightly below our earlier guidance due to the impact of the market downturn on our walk-in business. Our other businesses performed in line with expectations. The new build jackup segment remained the main source of revenue for Lamprell, with a record number of seven concurrent rigs under construction in the yard. Our revenues for 2015 were heavily weighted to the second half of the year due to the phasing of construction, as several of our projects were at the early stages in their build schedules in the six months to 30 June 2015.

The additional awards by Petrofac have provided a significant contribution to our module business.

Whilst we are seeing repeat business from our clients, the general weakness across the sector has driven a reduction in revenues from our rig refurbishment business. We delivered 11 refurbishment projects in 2015. We also took on high quality projects, with a number of wins for important clients albeit of fairly modest value, in our E&C business unit.

Margin performance

The Group completed the major part of the investment under Project Evolution, with the realised savings partly utilised to protect Lamprell's margins whilst retaining our competitive position in an environment of increased pricing pressure. This investment programme allowed the Group to maintain its normalised margins despite the industry difficulties which impacted the financial performance of its sector.

The Group's gross margin decreased to USD 123.5 million from USD 182.1 million in the previous year primarily due to lower revenues, project phasing and a return to normalised performance. The drop in rig refurbishment revenue in the current environment had a minor negative impact on margins, whilst our new build jackup business managed to maintain stable margins at normalised levels. The main reason for this was the savings and productivity gains delivered by the Project Evolution initiatives.

EBITDA excluding discontinued operations and exceptional items for the period was USD 90.0 million (2014: USD 137.0 million). The Group's EBITDA margin decreased from 12.6% in 2014 to 10.3% in 2015, reflecting the absence of the 2014 exceptional items, partially offset by certain one off events in 2015 such as bad debt recoveries.

Finance costs and financing activities

Net finance costs in the period decreased to USD 12.0 million (2014: USD 18.4 million). Gross finance costs were USD 5.9 million lower due to reduced interest margins and lower bonding costs, partially offset by increased commitment fees on our facilities following the refinancing in 2014. Finance income has increased by USD 0.5 million as a result of higher cash deposits.

Net profit after exceptional items and earnings per share

The Group recorded a profit for 2015 attributable to the equity holders of USD 64.7 million (2014: USD 118.1 million). The fully diluted earnings per share for the year was 18.84 cents (2014: 37.38 cents), based on strong underlying performance in the absence of the exceptional items reported in 2014.

Capital expenditure

The Group's capital expenditure in 2015 increased to USD 59.5 million (2014: USD 22.5 million). The main area of investment was yard improvement under Project Evolution, which included the purchase of new equipment including the new panel line , beam cutting robots and some yard infrastructure enhancements. The major part of the investment under Project Evolution is now complete, with the second phase of Project Compass live across the Group since 1 October 2015.

Cash flow and liquidity

The Group's net cash flow from operating activities for 2015 reflected a net outflow of USD 0.8 million (2014: net outflow of USD 39.8 million) arising predominantly from the Group's EBITDA and offset by increased working capital requirements due to the natural cycle on major projects.

Cash and bank balances decreased by USD 82.0 million, resulting from a net cash outflow from investing activities attributable to the major capital investment programme and an outflow from financing activities. The Group's net cash position remains strong at USD 210.3 million (2014: USD 272.6 million), a decrease in line with expectations due to capital spend on Project Evolution and the phasing of the construction cycle on our projects.

Balance sheet

The Group maintained a strong balance sheet, providing flexibility and security in a challenging environment for the industry.

The Group's total current assets at the period-end were USD 725.3 million (2014: USD 780.7 million). Trade and other receivables increased to USD 428.3 million (2014: USD 403.6 million) due to unfavourable timing on milestone payments as well as advance payments to suppliers to secure favourable terms for equipment procured.

Shareholders' equity increased from USD 672.2 million to USD 737.6 million at 31 December 2015. The movement mainly reflects increased retained earnings of USD 410.4 million (2014: USD 344.5 million).

The Group's debt/equity ratio of 10.8% at 31 December 2015 (2014: 14.7%) emphasises our low levels of leverage and balance sheet strength.

Borrowings and debt

In 2015, following the major debt refinancing the previous year, the Group's facilities comprised (a) a USD 100 million term loan amortised over five years, of which USD 20 million was repaid over the course of the year; (b) USD 50 million for general working capital purposes which remained undrawn; and (c) USD 200 million of working capital for project financing, which has not been taken up by our clients to date. Lamprell continued to market this facility as part of a number of bids and the aim remains to leverage it in future projects.

In addition, the related USD 250 million committed bonding facility, which is available for use in connection with new contract awards funded by the working capital facility detailed in (c) above, remained undrawn in 2015 and the Group has been able to leverage its bilateral bonding facilities for better commission rates.

The outstanding borrowings were USD 79.3 million as at 31 December 2015 (2014: USD 99.0 million).

Change of auditors

Following a formal tender process in line with market best practice, the Audit & Risk Committee made a recommendation for the appointment of Deloitte LLP as the external auditor for the Company, which the Board approved. Deloitte LLP has expressed its willingness to act as external auditor and a resolution to appoint Deloitte LLP will be proposed at the forthcoming AGM for their services in respect of the 2016 financial year.

Going concern

After reviewing its cash flow forecasts for a period of not less than 12 months from the date of signing 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 Directors have concluded therefore that it is appropriate for the Group to continue to adopt the going concern basis in preparing its financial statements.

Dividends

Given the challenging market environment and the Group's strategy to retain a strong net cash position and balance sheet, the Directors do not recommend the payment of a dividend for the current financial year ending 31 December 2015. In the future the Directors will continue to review this position in light of market conditions at the relevant time.

Antony Wright

Chief Financial Officer

Lamprell plc

Consolidated income statement

Lamprell plc

Consolidated statement of comprehensive income

Lamprell plc

Consolidated cash flow statement

Year ended 31 December

Lamprell plc

Notes to the financial statements

1 Legal status and activities

Lamprell plc ("the Company") and its subsidiaries (together referred to as "the Group") are engaged in the assembly and new build construction for the offshore oil and gas and renewable sectors; fabricating packaged, pre-assembled and modularised units; constructing accommodation and complex process modules for onshore downstream projects; construction of complex living quarters, wellhead decks, topsides, jackets and other offshore fixed facilities; rig refurbishment; land rig services; engineering and construction and operations and maintenance.

The Group is required to present its annual consolidated financial statements for the year ended 31 December 2015 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 2015. The financial information has been extracted from the consolidated financial statements for the year ended 31 December 2015 approved by the Board of Directors on 22 March 2016 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 2015 and 31 December 2014 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 2015 have been prepared in accordance with the Listing Rules of the London Stock Exchange.

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 statements 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 consolidated and parent company financial statements, 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 2014 and reviewed interim financial information for the period ended 30 June 2015, which are available on the Company's website, www.lamprell.com.

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:

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 30.5 million (2014: USD 4.4 million) if the total costs to complete are decreased by 10% and the revenue and profit decreasing by USD 28.5 million (2014: USD 4.4 million) if the total costs to complete are increased by 10%.

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"). This CGU also represents the operating segment UAE for the Group (Note 5).

The recoverable amount of CGU1 is determined based on value-in-use calculations. These calculations require the use of estimates.

The amount of headroom is USD 311.6 million (2014: USD 290.6 million).

If the revenue growth rate used was to differ by 0.5% from management's estimates, in isolation, there would be a reduction of USD 3.9 million (2014: USD 5.7 million) in the headroom if the revenue growth rate was lower or the headroom would be higher by USD 3.9 million (2014: USD 5.7 million) if the revenue growth rate was higher.

If the discount rate used was to differ by 0.5% from management's estimates, in isolation, there would be a reduction in the headroom of USD 48.0 million (2014: USD 55.2 million) if the discount rate was to increase or an increase in the headroom by USD 54.2 million (2014: USD 63.5 million) if the discount rate was to decrease.

If the net profit as a percentage of revenue used was to differ by 0.5% from management's estimates, in isolation, there would be an increase of USD 66.4 million (2014: USD 62.1 million) in the headroom if the net profit was to increase or there would be an reduction in the headroom of USD 66.4 million (2014: USD 62.1 million) in the headroom if the net profit was to decrease.

If the terminal value growth rate used was to differ by 0.5% from management's estimates, in isolation, there would be a reduction in the headroom of USD 35.5 million (2014: USD 43.4 million) if the terminal value growth rate was lower or an increase in the headroom of USD 40.8 million (2014: USD 49.8 million) if the terminal value growth rate was higher.

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 3.5% (2014: 3.5%). If the discount rate used was to differ by 0.5 points from management's estimates, the carrying amount of the employees' end of the service benefits provision at the balance sheet date would be an estimated USD 1.0 million (2014: USD 1.5 million) lower or USD 1.4 million (2014: USD 1.6 million) higher. If the salary growth rate used was to differ by 0.5 points from management's estimates, the carrying amount of the employees' end of the service benefits provision at the balance sheet date would be an estimated USD 1.4 million (2014: USD 1.5 million) higher or USD 1.0 million (2014: USD 1.6 million) lower. 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker at the reporting date. 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.

In prior periods, the business reported on the basis of the facility from where the services were rendered. With effect from 1 January 2015, the business was reorganised into business units on the basis of services rendered. Segment comparatives are restated to reflect the organisational changes that have occurred since the prior reporting period to present a like-for-like view.

The Executive Directors manage the business on the basis of the business units from which the services are rendered. Management considers the performance of the business from New Build Jack up Rigs ("NBJR"), Modules, ("MOD"), Offshore Platforms ("OP") and Oil and Gas Contracting Services ("OGCS").

NBJR derives its revenue from assembly and new build construction for the offshore oil and gas and renewables sectors; MOD derives its revenue from fabricating packaged, pre-assembled and modularised units and constructing accommodation and complex process modules for onshore downstream projects; OP derives its revenue from construction of complex living quarters, wellhead decks, topsides, jackets and other offshore fixed facilities; and OGCS derives its revenue from rig refurbishment, land rig services, engineering and construction and operations and maintenance.

These business units are viewed by the management as three operating segments - United Arab Emirates "UAE", Qatar "QTR" and Kazakhstan "KZK" based on common pool of resources and ability to execute the projects on an interchangeable basis.

UAE is reported as a single segment (Segment A). Services provided from QTR and KZK do not meet the quantitative thresholds required by IFRS 8 and the results of these operating segments are included in the "all other segments" column.

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 profit 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 business units 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 865.8 million (2014: USD 1,077.9 million), and the revenue recognised from the operations in other countries is USD 5.3 million (2014: USD 7.0 million). 

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

The revenue from these customers is attributable to Segment A. The above customers in 2015 are not necessarily the same customers in 2014.

Staff costs capitalised during the year and not included above amount to USD 7.5 million (2014: USD 0.5 million).

Finance income

Finance income comprises interest income of USD 2.7 million (2014: USD 2.2 million) from bank deposits.

Basic earnings per share is calculated by dividing the profit 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 20).

The 340,855 options (2014: 340,855 options) granted on 18 November 2014 are not included in the calculation of diluted earnings per share because they are antidilutive for the year ended 31 December 2014 and 2015. These options could potentially dilute basic earnings per share in future.

During 2015, the Group paid an amount of USD 8.5 million to Sharjah Electricity and Water Authority for construction, installation and maintenance of an electric mainline at its Hamriyah facility. The Group has decided to amortise this amount over the remaining period of the leasehold rights for the facility.

Amounts due from customers on contracts comprise:

As required under our current contracts with Ensco, we note that all related materials and equipment and the vessel itself being constructed under these contracts are the exclusive property of Ensco.

Profit/(loss) from discontinued operations comprises:

The main elements of the cash flows are as follows:

Inspec

During 2013, the Group decided to dispose of Inspec. This transaction was completed on 3 March 2014.

Litwin

During 2014, the Group decided to dispose of Litwin. This transaction was completed on 21 April 2015.

At 31 December 2014, the major classes of assets and liabilities of a disposal group (Litwin) were as follows:

The commitments of disposal group were as follows:

Litwin

Net cash inflow on the subsidiary disposed during the year is as follows:

Related parties comprise LHL (which owns 33% of the issued share capital of the Company), certain legal shareholders of the Group companies, Directors and key management personnel of the Group and entities controlled by Directors and key management personnel. Key management includes the Directors (Executive and Non-Executive) and members of the executive committee. Related parties, for the purpose of the parent company financial statements, also include subsidiaries owned directly or indirectly and joint ventures. Other than those disclosed elsewhere in the financial statements, the Group entered into the following significant transactions during the year with related parties at prices and on terms agreed between the related parties:

Key management compensation comprises:

The terms of the employment contracts of the key management include reciprocal notice periods of between three to twelve months.

Due from/due to related parties

The total authorised number of ordinary shares is 400 million shares (2014: 400 million shares) with a par value of 5 pence per share (2014: 5 pence per share).

During 2014, the Company successfully carried out a fully underwritten rights issue. The rights issue offered five new ordinary shares for every 16 ordinary shares held by each shareholder at an issue price of 88 pence per new ordinary share. The rights issue was fully subscribed and paid up as at 30 June 2014. The Company issued 81,363,469 new ordinary shares through the rights issue and received proceeds amounting to USD 119.6 million.

The paid-in capital from the rights issue is split between the par value of the shares issued (USD 6.8 million) and the share premium at the date of issue (USD 112.8 million) less any directly attributable transaction costs (USD 8.6 million). These new ordinary shares rank pari passu in all respects with the existing ordinary shares, including the right to all future dividends and other distributions declared, made or paid.

During 2015, Lamprell plc employee benefit trust ("EBT") acquired 51 shares (2014: 189,111 shares) of the Company. The total amount paid to acquire the shares was USD Nil (2014: USD 0.5 million) and has been deducted from the consolidated retained earnings. During 2015, no shares (2014: 187,580 shares amounting to USD 0.5 million) were issued to employees and 16,268 shares (31 December 2014: 16,217 shares) were held as treasury shares at 31 December 2015. The Company has the right to reissue these shares at a later date. These shares will be issued on vesting of the free shares/performance shares/share options granted to certain employees of the Group.

Legal reserve

The Legal reserve relates to subsidiaries (other than the subsidiaries incorporated in free zones) in the UAE and the State of Qatar. In accordance with the laws of the respective countries, the Group has established a statutory reserve by appropriating 10% of the profit for the year of such companies. Such transfers are required to be made until the reserve is equal to, at least, 50% (UAE) and 33.3% (State of Qatar) of the issued share capital of such companies. The legal reserve is not available for distribution.

Merger reserve

On 11 September 2006, the Group acquired 100% of the legal and beneficial ownership of Inspec from LHL for a consideration of USD 4 million. This acquisition was accounted for using the uniting of interest method.

On 25 September 2006, the Company entered into a share for share exchange agreement with LEL and LHL under which it acquired 100% of the 49,003 shares of LEL from LHL in consideration for the issue to LHL of 200,000,000 shares of the Company. This acquisition has been accounted for using the uniting of interest method.

In accordance with the provisions of IAS 19, management has carried out an exercise to assess the present value of its obligations at 31 December 2015 and 2014, using the projected unit credit method, in respect of employees' end of service benefits payable under the Labour Laws of the countries in which the Group operates. Under this method, an assessment has been made of an employee's expected service life with the Group and the expected basic salary at the date of leaving the service. The obligation for end of service benefit is not funded.

The movement in the employees' end of service benefit liability over the periods is as follows:

During 2014, the Group entered into an interest rate swap to switch floating interest rates to fixed interest rates on the Group's borrowings. This derivative did not qualify for hedge accounting and is carried at fair value through profit or loss. The notional principal amount at the date of inception of these contracts was USD 100 million. This contract matures in various instalments within fifty seven months from the date of inception. The fair value liability at the 31 December 2015 of this derivative was USD 0.2 million (2014: USD 0.7 million)

Amounts due to customers on contracts comprise:

Warranty costs charged during the year relates to management's assessment of potential claims under contractual warranty provisions.

The bank borrowings are repayable as follows:

The Group leases land and staff accommodation under various operating lease agreements. The remaining lease terms of the majority of the leases are between four to seventeen years and are renewable at mutually agreed terms.

The future minimum lease payments payable under operating leases are as follows:

The various bank guarantees, as above, were issued by the Group's bankers in the ordinary course of business. Certain guarantees are secured by 100% cash margins, assignments of receivables from some customers and in respect of guarantees provided by banks to the Group companies, they have been secured by parent company guarantees. In the opinion of the management, the above bank guarantees are unlikely to result in any liability to the Group.

Year ended 31 December

On 26 January 2016, the Group has signed a Memorandum of Understanding ("MOU") with Saudi Aramco (the National Oil Company of the Kingdom of Saudi Arabia), the National Shipping Company of Saudi Arabia ("Bahri") and Hyundai Heavy Industries in connection with a potential partnership collaboration on establishing a Maritime Complex in Saudi Arabia. The intended Maritime Complex will provide engineering, manufacturing and repair services for offshore rigs, commercial vessels and offshore service vessels. The MOU covers joint participation and due diligence on all activities and work streams required to make a final investment decision by all participating parties. The outcome of the agreement to engage in the potential joint venture partnership will be determined upon finalisation of all activities and required due diligence.

31 Statutory Accounts

This financial information is not the statutory accounts of the Company and the Group, a copy of which is required to be annexed to the Company's annual return to the Companies Registration Office in Isle of Man. A copy of the statutory accounts in respect of the year ended 31 December 2015 will be annexed to the Company's annual return for 2015. Consistent with prior years, the full financial statements for the year ended 31 December 2015 and the audit report thereon will be circulated to shareholders at least 20 working days before the AGM. A copy of the statutory accounts required to be annexed to the Company's annual return to the Companies Registration Office in respect of the year ended 31 December 2014 has been annexed to the Company's annual return for 2014.

32 Directors' responsibilities statement

We confirm that to the best of our knowledge

The financial statements, have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities and financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and, This announcement includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Further information is available on the Company's website, www.lamprell.com.