LAM.L Regulatory News (LAM)

28 August 2012

LAMPRELL PLC

("Lamprell", the "Company" or the "Group")

HALF-YEARLY REPORT 2012

Lamprell (ticker: LAM), a leading provider of specialist engineering services to the international oil & gas and renewable industry based in the UAE, announces its Interim Results for the six month period to 30 June 2012.

H1 2012 FINANCIAL RESULTS

·; Revenue: US$ 528.1 million (H1 2011: US$ 383.6 million).

·; Operating loss: US$ 33.8 million (H1 2011: US$ 21.6 million profit).

·; Net loss: US$ 47.1 million (H1 2011: US$ 18.6 million profit).

·; Diluted EPS: negative 18.10 cents (H1 2011: 8.55 cents).

·; No interim dividend proposed (H1 2011: 4.00 cents).

·; Cash and bank balances as at 30 June 2012 US$ 134.0 million, including restricted cash of US$ 101.4 million. (YE 2011: US$ 149.4 million, including restricted cash of US$ 105.5 million).

·; Net debt at 30 June 2012: US$ 35.7 million (YE 2011: US$ 101.7 million).

·; Banking waivers received following certain covenant breaches at 30 June. The Group`s banking covenants will be tested again at 31 December 2012, ahead of which the Group will seek to restructure its covenants on a long term basis to avoid a year end breach.

H1 2012 OPERATIONAL SUMMARY

·; As announced, delays on Windcarrier 1 and 2 have resulted in additional costs and liquidated damages, resulting in US$ 46.2 million of gross contract losses in the period.

·; Supply chain delays relating to major components for new build jackups, delivery dates to Lamprell's customers maintained.

·; Successful delivery of Hull 108, Seajacks "Zaratan", two new build land rigs, NDC "Makasib" and several rig refurbishment projects

·; Increasing demand for the Company's service businesses.

NEW CONTRACT AWARDS

Major new contract awards during 2012 amounting to US$ 743.1 million. These include:

·; the exercise of two options at US$ 166.7 million each, by National Drilling Company, to build a further two LeTourneau S116E jackup drilling rigs;

·; the contract award by Seajacks for the construction of a modified Gusto MSC NG 2500X self-elevating and self-propelled jackup for offshore oil and gas and offshore wind turbine installation valued at US$ 120.9 million;

·; a US$ 227.0 million contract award for an international drilling contractor for the construction of a LeTourneau S116E jackup drilling rig; and

·; an award by Leighton of a contract for the fabrication of two topsides and jackets valued at US$ 62.0 million.

Commenting on the half year results, Nigel McCue, Lamprell CEO, said:

"These results are undoubtedly a disappointment to the Board and our Shareholders. After an extended period of sustained growth and profitability, the performance in the 6 month period to 30 June 2012 comes as a setback to the Group.

Management is addressing the causes which have given rise to the under performance in the first half of the year. Changes are being introduced across the business, which include management re-organisation and the implementation of improved processes, systems and controls.

The Group's order book remains at an historically high level of US$ 1.5 billion and bid activity remains positive across all our main businesses."

There will be an analyst presentation held at M:Communications, 11th Floor, Citypoint, 1 Ropemaker Street, London, EC2Y 9AW at 09:00am.

Enquiries:

CHIEF EXECUTIVE OFFICER'S STATEMENT

The Company reported revenues of US$ 528.1 million for the first half of 2012, with a net loss of US$ 47.1 million. As previously disclosed the results reflect the negative impact of additional costs arising from the delayed deliveries of the Windcarrier 1 and 2 projects (gross contract losses amounting to US$ 46.2 million in the period), delays in key specialised supplier equipment deliveries for new build jackup projects and the slippage in the timing of expected new project awards.

Revenue for 2012 is still anticipated to be approximately US$ 1.1 billion, however, the Company anticipates a loss for the year in the range of US$ 12 million to US$ 17 million.

These results are undoubtedly a disappointment to the Board and our Shareholders. After an extended period of sustained growth and profitability, the performance in the 6 month period to 30 June 2012 comes as a setback to the Group.

Management is addressing the causes which have given rise to the under performance in the first half year. Changes are being introduced across the business, which include management re-organisation and the implementation of improved processes, systems and controls.

Market Overview

The Group's order book remains at an historically high level of US$ 1.5 billion, predominantly representing the new build jackup segment, and bid activity remains positive across all our main businesses.

The Company continues to win significant new build construction contracts. In April, Lamprell announced the exercise of two options at US$ 166.7 million each, by National Drilling Company ("NDC"), Abu Dhabi, to build a further two jackup rigs in addition to the four rigs currently under construction. The Company's bid pipeline continues to reflect its current position as the major yard in the world for building jackup rigs in the

The recent US$ 120.9 million contract award by Seajacks for the construction of a fourth unit, a modified Gusto MSC NG 2500X self-elevating and self-propelled jackup vessel for offshore oil & gas and offshore wind turbine installation and maintenance operations, demonstrates Lamprell's leadership in this sector. The vessel, which is a repeat design of the first generation of smaller vessels that the Company successfully delivered on time and budget (Seajacks "Kraken" and "Leviathan"), will be constructed at the Hamriyah facility.

In February, Lamprell announced the award by Leighton Offshore, a Singapore based company, of a contract for the fabrication of two topsides and jackets at a contract value of US$ 62 million. The works are being undertaken at the Sharjah facility.

The rig refurbishment market for both the onshore and offshore segments remains positive and orders have been secured from multiple clients to undertake a number of jackup rig upgrade and refurbishment projects. These projects highlight the Company's strength in securing repeat business from customers in this sector including Rowan, Noble, Hercules and Nabors.

The outlook for our service businesses, which provide specialised services to customers, remains strong. These businesses include O&M, INSPEC, Sunbelt and Engineering Services. The Engineering & Construction ("E&C") market, offers opportunities for growth in the MENA region. The Group recently signed a US$ 20 million contract with Abu Dhabi Gas Industries ("GASCO"), an existing customer, for the procurement and installation of pipeline pumps at GASCO's Ruwais gas plant.

Board

We are delighted to welcome John Kennedy as Chairman, who was appointed in June. John brings to the Board a wealth of experience drawn from many years in the sector at an important time for the Company. I would like to take this opportunity to thank Jonathan Silver for his contribution as Chairman over the last 3 years, and I am pleased he remains with us on the Board as Deputy Chairman. I would also like to thank Brian Fredrick, who stood down from the Board in June, for his work as a Non-Executive Director over the last three years.

OPERATING REVIEW

Lamprell's reputation is founded upon its ability to deliver high quality projects to its customers on time and on budget and is focused on ensuring delivery of its existing contracts. The successful completion of the Seajacks "Zaratan" wind farm installation vessel, PEMSA's "Hull 108" new build jackup rig, two new build land rigs for Weatherford, several rig refurbishment projects and NDC "Makasib" earlier this month, has reinforced the Company's reputation for delivering high quality work.

We have experienced operational challenges during the period and are very focused on taking the steps needed to ensure we maintain first class standards of execution for all our customers.

During the first half of 2012 the Company experienced significant supply chain delays relating to major components for its new build jackup projects in Hamriyah, resulting in the underutilisation of resources and reduced productivity. As a consequence, we have improved the systems controlling key vendor deliveries and internal resource utilisation. Deliveries of equipment for the jackup drilling rigs that the Company is constructing are currently being received in accordance with the revised delivery schedules.

A key task for management is to continue to improve the management processes and systems that provide timely information within the Group. The Company continues to develop its project controls to enhance its financial performance on projects and to provide greater financial visibility to support the financial management function.

The Company retains its focus on project execution, with a particular emphasis on safety, quality and delivering projects on time and on budget.

We are in the process of reorganising and strengthening the engineering function. A new Vice President Engineering with major Engineering Procurement Construction project experience has been appointed and the department resources and processes are being enhanced.

New Build Offshore Drilling Rigs

Lamprell is currently constructing nine LeTourneau Super 116E class design jackup rigs, eight of which are under construction at the Hamriyah facility. The ninth, built in modular form in the UAE, is currently being assembled at a facility in Astrakhan, Russia. The rigs represent contracts from both regional and international drilling operators including NDC, Eurasia Drilling, Greatship and Jindal.

In addition to these projects, Lamprell has successfully delivered two rigs in 2012. The first was a Friede & Goldman design Super M2 rig that was delivered in June to Perforadora Mexico. The second was a LeTourneau Super 116E class design jackup rig which was delivered to NDC in August 2012.

Wind Farm Installation Vessels

In May, the Company delivered the offshore wind turbine installation vessel Seajacks "Zaratan", a Gusto MSC NG-5500 design.

The first of the two Fred. Olsen Windcarrier self-elevating and self-propelled offshore wind turbine installation vessels, the "Brave Tern", was loaded out at the Company's Jebel Ali Facility in February 2012. The vessel, a Gusto MSC NG-9000 prototype design, suffered engineering delays which in turn caused delays in construction. Following the load out, the Company experienced significant challenges relating primarily to the completion of the vessel's integrated power management, automation and control systems, all of which have resulted in the Company incurring additional costs and liquidated damages. It is expected the vessel will be delivered to Fred. Olsen during Q3 2012.

The second vessel, the "Bold Tern" was successfully loaded out at the Jebel Ali facility in August 2012. The major outstanding work, post load out, comprises the installation of the vessel's 800 tonne main crane and the remaining cylindrical leg sections, the completion and subsequent commissioning of the vessel's integrated power management, automation and control systems. Delivery of the vessel has been delayed and is now expected in Q4 2012. The anticipated additional costs associated with this delay have been provided for in these financial statements.

Fixed offshore platforms

The construction of an offshore topside structure comprising a two level utility deck and a five level accommodation module for 38 personnel for a leading integrated energy provider continues on schedule at the Jebel Ali facility.

Construction is also proceeding, at Jebel Ali, on two contracts for Nexen Petroleum. The first contract comprises a two level wellhead deck weighing approximately 4,000 tonnes and the second is a Production, Utilities and Quarters ("PUQ") deck weighing approximately 10,000 tonnes. Both projects are currently proceeding on schedule and on budget with completion expected in Q2 2013 and Q2 2014 respectively.

At the Sharjah facility work has commenced on the contract with Leighton Offshore to fabricate two topsides and jackets in connection with the Iraq crude export facility reconstruction.

These contracts are remeasurable with the client providing the project engineering and principal procurement services with Lamprell undertaking the fabrication work.

Upgrade and refurbishment of offshore jackup rigs

During the first six months of 2012, Lamprell has executed 15 upgrade and refurbishment projects at our Sharjah and Hamriyah facilities. Notable projects have included rigs "657" for Nabors and the "Gilbert Rowe" for Rowan Drilling. The combined work scopes on these projects include living quarters' extensions, upgrade and refurbishment, as well as high volumes of condition-driven work such as structural steel renewal, piping replacement and painting.

Land Rig Services

The Land Rig Services business unit has focused on the core activities of land rig upgrade & refurbishment and the inspection and overhaul of mechanical and rotary equipment, executing a wide range of projects for clients including NDC and Weatherford. In addition, Lamprell has delivered two 3000HP new build land drilling rigs to Weatherford.

The Group is expanding the reach of the Land Rig Services business into neighbouring territories, with both Saudi Arabia and the Kurdish region of Northern Iraq offering strong future growth prospects.

Service businesses

The Group continues to see increasing demand for its service business offerings across a range of complementary markets. The Group has a strong regional market presence through O&M, INSPEC and Sunbelt services, and has opportunities for growth across the wider MENA region. These businesses offer a substantially different profile in terms of margin, earnings visibility and contracting risk compared to the Group's core new build operations. To further strengthen our focus across these sectors the Group has appointed a new Vice President to lead the strategic development of this division, and we anticipate continued strong growth across these disciplines and a steady increase in the mix of services business within the Group.

FINANCIAL REVIEW

The Group's results for the half year ended 30 June are set out, in summary, below

The period to 30 June 2012 has been a challenging period for Lamprell financially. The deterioration in the Group's performance in relation to certain key fixed price contracts during the first half of 2012 caused the Group to seek waivers for certain of its banking covenants for the period to 30 June 2012. These covenant waivers have now been agreed. The Group's covenants will be tested again at 31 December 2012, ahead of which the Group will seek to restructure its covenants and debt facilities on a long term basis. Based on the existing covenants and the most recent forecasts, it is anticipated that the Group will breach its covenants at 31 December 2012 if they are not amended. However, based on the projected trading for the Group the Directors have no reason to believe that the required amendments will not be agreed.

Group revenue increased by 37.7% to US$ 528.1 million (H1 2011: US$ 383.6 million) reflecting an increase in activity from the prior period. The increase was largely driven by new build activity, attributable to oil and gas activities and offshore construction, and also by the service businesses that were acquired as part of the MIS acquisition.

The Group made a gross loss of US$ 15.1 million in the period (H1 2011: US$ 44.5 million profit) resulting in a negative gross margin of 2.9% (H1 2011: 11.6% positive). The decline in gross margin was primarily due to problems on fixed price contracts. Specifically US$ 46.2 million of additional losses in the period on the Windcarrier 1 and 2 projects, a decline in margin on the LeTourneau Super 116E jackup rig built in modular form in the UAE and being assembled in Astrakhan and issues with delayed deliveries during the period.

Other operating income of US$ 5.7 million (H1 2011: US$ 1.9 million) includes a one off gain of US$ 4.3 million in relation to the KSAM2 insurance claim, where "Hull 107" was declared a total loss.

The operating loss for the period was US$ 33.8 million for the period (H1 2011: US$ 21.6 million profit.

EBITDA, decreased to negative US$ 24.3 million (H1 2011: US$ 25.2 million positive). The EBITDA margin declined to negative 4.6% from positive 6.6% in 2011 reflecting the operating performance of the business.

The net loss for the period was US$ 47.1 million (H1 2011: US$ 18.6 million profit), in line with the operating performance in the period and also reflects increased net finance costs in the current period of US$ 13.0 million (H1 2011: US$ 3.0 million). These largely arise as a result of increased facility and interest charges related to the MIS acquisition facilities and increased facility and guarantee charges related to new contact awards in the year.

Interest income of US$ 0.4 million (H1 2011: US$ 1.0 million) relates mainly to bank interest earned on surplus funds, margin deposits and fixed deposits maintained against guarantees. The decrease reflects a lower level of average cash balances during the year when compared to the prior period.

Taxation

The tax charge of US$ 0.3 million arising in the period is in respect of tax on the Group's service operations in Kazakhstan and Qatar. The Group is not currently subject to income tax in respect of its operations carried out in the United Arab Emirates, and does not anticipate any liability to income tax arising on these operations in the foreseeable future. The Company, which is incorporated in the Isle of Man, has no income tax liability for the year ended 31 December 2011 as it is taxable at 0% in line with local Isle of Man tax legislation.

Loss per share

Fully diluted loss per share, amounts to 18.10 cents for the period (2011: 8.55 cents profit) reflecting the operational performance of the Group during the period.

Operating cash flow and liquidity

The Group's net cash flow from operating activities for the period reflected a net inflow of US$ 92.9 million (H1 2011: US$ 21.7 million net outflow). The net cash inflow was significantly higher than the prior six month period reflecting the final payments that were received on the completion of "Hull 108" and Seajacks "Zaratan". These final receipts were for 80% of the contract price.

Net cash used in financing activities totalled US$ 135.9 million (H1 2011: US$ 193.5 million generated from), primarily comprising mandatory debt repayments under the Group's MIS acquisition facilities of US$ 173.5 million (H1 2011: Nil), proceeds from borrowings of US$ 60.9 million, US$ 20.8 million (H1 2011: US$ 19.0 million) of dividend payments, and US$ 13.4 million (H1 2011: US$ 4.1 million) of finance costs.

Capital expenditure

Capital expenditure on property, plant and equipment during the six month period amounted to US$ 11.9 million (H1 2011: US$ 28.0 million). The main area of expenditure was the investment on buildings and related infrastructure at Group facilities amounting to US$ 5.3 million (H1 2011: US$ 15.8 million), including capital work-in-progress. Further expenditure on operating equipment amounted to US$ 5.4 million (H1 2011: US$ 11.2 million).

Balance sheet

Total non-current assets at the end of the period were US$ 406.2 million (YE 2011: US$ 417.1 million). Trade and other receivables decreased to US$ 637.6 million (YE 2011: US$ 668.8 million), primarily reflecting the deliveries of Hull 108 and Seajacks Zaratan where 80% of the contract price was received on delivery.

At the end of the period the Group had US$ 134.0 million of cash and bank balances (YE 2011: US$ 149.4 million). Of the cash balances a total of US$ 101.4 million (YE 2011: US$ 105.5 million) was restricted in the form of margin deposits primarily for guarantees on major projects. The total contingent liability associated with these bank guarantees at the period end was US$ 735.4 million (YE 2011: US$ 749.0 million). The period end net debt was US$ 35.7 million (YE 2011: net debt US$ 101.7 million). The net debt comprised total outstanding borrowings of US$169.7 million (YE 2011: US$ 251.1 million) less cash and bank balances of US$ 134.0 million (YE 2011: US$ 149.4 million).

Shareholders' equity decreased from US$ 533.9 million at 31 December 2011 to US$ 467.8 million at 30 June 2012. The movement arises primarily as a result of the total comprehensive loss for the period of US$ 45.8 million (H1 2011: US$ 33.7 million profit) and payment of the final dividend for 2011 of US$ 20.8 million.

Dividend

Given the financial performance of the Group the Company will not be paying a dividend for the period ended 30 June 2012.

Going concern

The condensed consolidated interim financial information has been prepared on a going concern basis. The ability of the Group to continue as a going concern is reliant upon the continued availability of external debt financing and access to bank guarantees for its major projects. The deterioration in the Group's performance in relation to certain key projects during the first half of 2012 caused the Group to seek waivers for certain of its banking covenants for the period to 30 June 2012. These covenant waivers were agreed with the lenders by August 2012. The Group's covenants will be tested again at 31 December 2012, ahead of which the Group will seek to restructure its covenants and debt facilities on a long term basis. Based on the existing covenants and the most recent forecasts for the twelve months ending 31 December 2012, it is anticipated that the Group would breach its covenants if they are not amended. If a covenant breach were to occur then the lenders would be able to request early repayment of all outstanding borrowings. If the Group is not able to agree the required covenant amendments, and in the absence of other financing alternatives, the Group would be unable to repay its borrowings and its commitments under its guarantees. As a result, there exists a material uncertainty which may cast doubt over the ability of the Group to continue as a going concern such that the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. Accordingly, assets may be realised at significantly less than book value and additional liabilities may arise.

Based on the projected trading for the Group, the Directors have no reason to believe that the required amendments to covenants and facilities will not be agreed.

The Group has continued to meet all interest and other payment obligations and after reviewing its cash flow forecasts for a period of not less than 12 months, from the date of the signing of this interim financial information, 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 interim financial information.

Principal risks and uncertainties

Those key risks and uncertainties that could lead to a material adverse financial impact or that could prevent the company from executing its strategy and creating shareholder value are set out below. These key risks and uncertainties have not materially changed since the publication of our 2011 Annual Report and the Prospectus dated 20 May 2011 related to the acquisition of MIS. A Risk Assessment describing the principal risks that may affect the Group's business is set out on pages 26 and 27 of the 2011 Annual Report and on pages 8 to 22 of the MIS Acquisition Prospectus. Both documents are available for download at www.lamprell.com.

Independent review report to Lamprell plc

Introduction

We have been engaged by Lamprell plc to review the condensed consolidated interim financial information in the interim financial report for the half year ended 30 June 2012, which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated statement of cash flows and related notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial information.

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2.1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated interim financial information included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed consolidated interim financial information in the interim financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the International Auditing and Assurance Standards Board. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial information in the interim financial report for the half year ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Emphasis of matter

Without qualifying our conclusion, we draw attention to Note 2.1 of the condensed consolidated interim financial information which states that the ability of the Group to continue as a going concern is reliant upon the continued availability of external debt financing and access to bank guarantees for its major projects. The deterioration in the Group's performance in relation to certain key projects during the first half of 2012 caused the Group to seek waivers for certain of its banking covenants for the period to 30 June 2012. These covenant waivers were agreed with the lenders in June and August 2012. The Group's covenants will be tested again at 31 December 2012, ahead of which the Group will seek to restructure its covenants and debt facilities on a long term basis. Based on the existing covenants and the most recent forecasts for the twelve months ending 31 December 2012, it is anticipated that the Group would breach its covenants if they are not amended. If a covenant breach were to occur then the lenders would be able to request early repayment of all outstanding borrowings. If the Group is not able to agree the required covenant amendments, and in the absence of other financing alternatives, the Group would be unable to repay its borrowings and its commitments under its guarantees. As a result, there exists a material uncertainty which may cast doubt over the ability of the Group to continue as a going concern such that the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. Accordingly, assets may be realised at significantly less than book value and additional liabilities may arise. Based on the projected trading for the Group, the Directors have no reason to believe that the required amendments to covenants and facilities will not be agreed.

The Group has continued to meet all interest and other payment obligations and after reviewing its cash flow forecasts for a period of not less than 12 months, from the date of the signing of this interim financial information, 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 interim financial information.

PricewaterhouseCoopers LLC

Chartered Accountants

Douglas, Isle of Man

27 August 2012

a) The maintenance and integrity of Lamprell Plc's website is the responsibility of the directors; the work carried out by the auditor does not involve consideration of these matters and, accordingly, the auditor accepts no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

b) Legislation in the Isle of Man governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

PricewaterhouseCoopers LLC, Sixty Circular Road, Douglas, Isle of Man, IM1 1SA

Telephone +44 (0) 1624 689689 Facsimile +44 (0) 1624 689690 www.pwc.com/im

Lamprell plc

Consolidated income statement

Lamprell plc

Consolidated statement of comprehensive income

Lamprell plc

Consolidated balance sheet

Lamprell plc

Consolidated statement of changes in equity

Lamprell plc

Consolidated statement of changes in equity (continued)

Lamprell plc

Consolidated statement of changes in equity (continued)

Lamprell plc

Consolidated statement of cash flows

Lamprell plc

Notes to the interim financial information

1 Legal status and activities

Lamprell plc ("the Company") is incorporated and registered in the Isle of Man as a public company limited by shares under the Isle of Man Companies Acts with the registered number 117101C and is listed on the London Stock Exchange ("LSE") main market for listed securities. The address of the registered office of the Company is Fort Anne, Douglas, Isle of Man, IM1 5PD and the Company is managed from the United Arab Emirates ("UAE"). The address of the principal place of the business is PO Box 33455, Dubai, UAE.

The principal activities of the Company and its subsidiaries (together referred to as "the Group") are: the upgrade and refurbishment of offshore jackup rigs; fabrication; assembly and new build construction for the offshore oil and gas and renewable sector, including jackup rigs and liftboats; 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 Summary of significant accounting policies 

2.1 Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 June 2012 has been prepared in accordance with the Disclosure and Transparency Rules ("DTR") of the United Kingdom's Financial Services Authority ("FSA") and with International Accounting Standard ("IAS") 34, "Interim Financial Reporting" as adopted by the European Union ("EU"). The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2011, which have been prepared in accordance with IFRSs as adopted by the EU.

The condensed consolidated interim financial information has been prepared on a going concern basis. The ability of the Group to continue as a going concern is reliant upon the continued availability of external debt financing and access to bank guarantees for its major projects. The deterioration in the Group's performance in relation to certain key projects during the first half of 2012 caused the Group to seek waivers for certain of its banking covenants for the period to 30 June 2012. These covenant waivers were agreed with the lenders by August 2012. The Group's covenants will be tested again at 31 December 2012, ahead of which the Group will seek to restructure its covenants and debt facilities on a long term basis. Based on the existing covenants and the most recent forecasts for the twelve months ending 31 December 2012, it is anticipated that the Group would breach its covenants if they are not amended. If a covenant breach were to occur then the lenders would be able to request early repayment of all outstanding borrowings. If the Group is not able to agree the required covenant amendments, and in the absence of other financing alternatives, the Group would be unable to repay its borrowings and its commitments under its guarantees. As a result, there exists a material uncertainty which may cast doubt over the ability of the Group to continue as a going concern such that the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. Accordingly, assets may be realised at significantly less than book value and additional liabilities may arise.

Based on the projected trading for the Group, the Directors have no reason to believe that the required amendments to covenants and facilities will not be agreed.

The Group has continued to meet all interest and other payment obligations and after reviewing its cash flow forecasts for a period of not less than 12 months, from the date of the signing of this interim financial information, 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 interim financial information.

The interim financial information has been prepared under the historical cost convention, except as disclosed in the accounting policies below.

2.2 Accounting policies

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2011, as described in those financial statements. The annual financial statements for the year ended 31 December 2011 are available on the Company's website (www.lamprell.com).

The preparation of condensed consolidated interim financial information 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, are disclosed in Note 4. 

The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2012, but are not currently relevant for the Group.

·; IFRS 1 (Amendments), 'First time adoption of International Financial Reporting Standards: on hyperinflation and fixed dates' (effective 1 July 2011);

·; IFRS 7 (Amendments), 'Financial instruments: Transfers of financial assets' (effective 1 July 2011);

·; IAS 12 (Amendments), 'Income taxes: Deferred tax' (effective 1 January 2012);

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2012 and have not been early adopted:

·; IFRS 9, 'Financial instruments', (effective 1 January 2013);

·; IFRS 10 - 'Consolidated financial statements'. The standard is applicable beginning on or after 1 January 2013. Early application is permitted.

·; IFRS 11 - 'Joint arrangements'. The standard is applicable beginning on or after 1 January 2013. Early application is permitted.

·; IFRS 12 - 'Disclosure of interests in other entities'. The standard is applicable beginning on or after 1 January 2013. Early application is permitted.

·; IFRS 13 - 'Fair value measurement'. This standard is applicable beginning on or after 1 January 2013. Early application is permitted.

3 Financial risk management

3.1 Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange and cash flow interest rate risk), credit risk and liquidity risk. These risks are evaluated by management on an ongoing basis to assess and manage critical exposures.

The condensed interim financial information does not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 31 December 2011. There have been no changes in any risk management policies since the year end.

(a) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. The Group is currently financed from Shareholders' equity and borrowings. The borrowings are subject to meeting certain financial covenants. The deterioration in the Group's performance in relation to certain key projects during the first half of 2012 caused the Group to seek waivers for certain of its banking covenants for the period to 30 June 2012. As a result of the covenant breach, the facilities became technically payable on demand. These covenant waivers were agreed with the lenders by August 2012. The Group's covenants will be tested again at 31 December 2012, ahead of which the Group will seek to restructure its covenants on a long term basis.

The table below analyses the Group's other financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

3.2 Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, or issue new shares to reduce debt.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the balance sheet) less cash and bank balances. Total capital is calculated as "equity" as shown in the balance sheet plus net debt. The net debt to total capital at the balance sheet date was as follows:

The deterioration in the Group's performance in relation to certain key projects during the first half of 2012 caused the Group to seek waivers for certain of its banking covenants for the period to 30 June 2012. As a result of the covenant breach, the facilities became technically payable on demand. These covenant waivers were agreed with the lenders by August 2012. The Group's covenants will be tested again at 31 December 2012, ahead of which the Group will seek to restructure its covenants on a long term basis.

3.3 Fair value estimation

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

a. Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

b. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2); and

c. Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The following table presents the Group's assets that are measured at fair value at 30 June 2012:

There were no liabilities measured at fair value as on 30 June 2012.

The following table presents the Group's assets and liabilities that are measured at fair value at 31 December 2011.

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

Specific valuation techniques used to value financial instruments include:

a. Quoted market prices or dealer quotes for similar instruments; and

b. Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.

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 period are as follows:

4.1 Critical accounting estimates and assumptions

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 Group's 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 period end would result in an increase in revenue and a decrease in loss by USD 15 million (H1 2011: Increase in revenue and profit by USD 13 million) if the total costs to completion are decreased by 10% and the revenue would decrease and the loss would increase by USD 22 million (H1 2011: Decrease in revenue and profit by USD 11.8 million) if the total costs to completion are increased by 10%.

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 in such bonds, the market yields on government bonds should be used. In the UAE there is no deep market either for corporate or 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 3.75% (2011: 4.25%). If the discount rate used were to differ by 0.5 points from management's estimates, the carrying amount of the employees' end of service benefits provision at the balance sheet date would be an estimated USD 1.1 million (2011: USD 1.4 million) lower or USD 1.2 million (2011: USD 1.5 million) higher. If the salary growth rate used were to differ by 0.5 points from management's estimates, the carrying amount of the employees' end of service benefits provision at the balance sheet date would be an estimated USD 1.2 million (2011: USD 1.5 million) higher or USD 1.1 million (2011: USD 1.4 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) and International Inspection Services Limited (Inspec).

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

Inspec derives its revenue from various services such as non-destructive pipeline testing, ultrasonic testing and heat treatment.

During the 2011, the Company through its wholly owned subsidiary, Lamprell Investments Holding Limited ("LIH"), acquired Maritime Industrial Services Co Ltd Inc ("MIS"). The revenue of MIS is mainly derived from the upgrade and refurbishment of offshore jackup rigs, fabrication, assembly and new build construction for the offshore oil and gas sector, engineering and construction. The Executive Directors consider these services to be similar to the services provided by Lamprell from SHJ, HAM, JBA and LRS and hence been considered under the reporting segment (Segment A). Additionally, MIS also provides safety and training services (Sunbelt) and other operating and maintenance services (O&M). As services provided by Sunbelt and O&M do not meet the quantitative thresholds required by IFRS 8, the results of these operations 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.

6 Other gains/(losses) - net

During the period, the Group disposed of a fully owned subsidiary along with its fixed assets (of net book value USD 0.8 million) for USD 1.6 million. The gain of USD 0.8 million is recorded in 'other gains/(losses) - net'.

7 (Loss)/earnings per share 

(a) Basic

Basic (loss)/earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period excluding ordinary shares purchased by EBT and held as treasury shares (Note 15).

(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 executive share option plan and performance share plan, a calculation is done 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. Since the Company has incurred a loss from continuing operations during the six months ended 30 June 2012, all the Company's existing potential ordinary shares are not dilutive as they decrease the loss from continuing operations.

8 Operating (loss)/profit

Operating (loss)/profit is stated after charging:

9 Property, plant and equipment

The additions of USD 11.9 million during the current period comprise USD 7.8 million of additions to capital work-in-progress, USD 3.2 million of additions to operating equipment, and USD 0.9 million of additions to other fixed assets.

10 Intangible assets