LAM.L Regulatory News (LAM)

29 August 2013

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

2013 INTERIM FINANCIAL RESULTS

FOR SIX MONTHS TO 30 JUNE 2013

Return to profitability and positive performance during 1H 2013

1H 2013 FINANCIAL RESULTS

1Financial results for 1H 2012 have been re-stated due to the adoption of IAS 19 and further details are provided in the notes to the Interim Financial Statements.

Note, exceptional items during 1H 2013 relate to the costs of the debt refinancing (US$2.3 million).

Financial highlights

· Financial results for the first half of 2013 ahead of our expectations

· Stable revenue performance broadly in line with 1H 2012

· Return to profitability demonstrates the Group's on-going recovery

· Positive cash flow with net cash of US$151.1 million at 30 June 2013

· Successful refinancing secured with US$181 million debt facility committed to June 2016

Operational highlights

· Continued strong safety record with further projects surpassing key safety milestones

· Robust operational performance during 1H 2013

· Successful delivery of several key projects including Windcarrier "Bold Tern", the Greatships jackup rig and two offshore structures to North Sea exacting standards

· Major contract for one new build jackup, with an option for a further one, secured since 1 January 2013

· As at 30 June 2013, backlog of US$ 1.1 billion (31 December 2012: US$ 1.2 billion), with bid pipeline approximately US$ 4.6 billion (31 December 2012: US$ 4.1 billion)

· Continuing operational improvements; implementation of new ERP system commenced

Strategic focus

· Capitalise on opportunities in the Group's core markets where it has strong established positions: new build rigs, offshore construction and rig refurbishments

· Commenced process to review status of non-core services businesses

· Disciplined approach to capital expenditure

· Sustain and improve on the Group's high standards of safety and quality

Current trading and outlook

· 2013 recovery on track and all major projects proceeding to plan

· Expecting to deliver the first Caspian Sea jackup rig in Q3 2013

· First jackup rig to be delivered to the Jindal group in Q4 2013

· High demand for our core services with a strong pipeline of opportunities

· Focus on the conversion of the Group's increased bid pipeline into contract wins

· Performance for the full year anticipated to be ahead of our expectations

· Expected revenues in 2014 to be slightly down compared to 2013, with measured growth returning in 2015

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

"The new management team led by Jim Moffat has achieved a great deal during the first half of 2013, securing longer term financing for the Group and bringing Lamprell back to profitability after the challenges of 2012. The business has been reinvigorated and Lamprell will be looking to take further steps for a positive and sustainable future as the region's market leader in the buoyant offshore construction market."

James Moffat, Chief Executive Officer for Lamprell, said:

"The business has performed well in the first half of the year. Our execution has been consistently strong and, in addition to the successful delivery of a number of key projects, our existing contract portfolio is progressing as planned. After the challenges of 2012, I am pleased to be able to report a return to profitability for the Group.

"Lamprell is a well-established business with a long-standing reputation for high build quality, close client relationships and a good safety track record. Our objective is to build on these qualities to ensure that Lamprell remains a competitive force in the industry capable of delivering sustainable growth over the long-term. We have made significant changes to the business, allowing Lamprell to emerge strongly from the issues of 2012 and we intend to build on this positive progress over the coming months and years, with the primary focus being on conversion of our good bid pipeline into contract wins."

A presentation for analysts and investors will be held at the Holborn Bars, 138-142 Holborn, London, EC1N 2NQ. The presentation is at 8.00am on Thursday 29 August 2013 and a live webcast of the presentation will be available on the investors' section of the website at: http://www.lamprell.com/investors-centre

- Ends -

Enquiries:

Notes to editors

Lamprell, based in the United Arab Emirates ("UAE"), and with operations throughout the region, has played a prominent role in the development of the offshore industry in the Arabian Gulf for over 30 years and is the regional market leader in the rig market. Lamprell is a leading provider of diversified engineering and contracting services to the onshore and offshore oil & gas and renewable energy industries.

Lamprell currently employs more than 11,000 people, including contract labour, across six facilities, with its primary facilities located in Hamriyah, Sharjah and Jebel Ali, all of which are in the UAE. In addition, the Group has facilities in Saudi Arabia (through JV agreements) and Kuwait. Combined, the Group's facilities provide a total area of over 925,000 m² with 2.2 km of quayside.

Chief Executive Officer's Review

Positive start to 2013

The business has performed well in the first half of the year. After the challenges of 2012, we are pleased to see clear indications of the Group's successful recovery reflected in our financial results. The Group has seen a steady improvement in its operations and a consistent level of activity in its core business streams, namely new build rigs, offshore construction and rig refurbishment, year-on-year. The Group's financial statements for the six months ending 30 June 2013 show a return to profitability, reporting a small net profit for the period which is driven primarily as a result of our improved operating performance.

The Group's established market positions are a result of Lamprell's reputation for high build quality, strong safety record, competitive construction costs, well-located facilities and our reputation for working collaboratively with our clients for success. In the year to date, the new management team continued to take actions to place the business on a firmer footing for the future, not least by successfully refinancing our debt facility. Since I arrived in Lamprell in March of this year, we have made significant progress but have more to do in order to position Lamprell to take full advantage of the opportunities in the Group's core markets.

Market and performance overview

Strong forecast drilling activity internationally is expected to increase rig count and rig refurbishment activities, not least because two-thirds of the global jackup rig fleet are over 25 years old. As a result, attrition rates of older rigs have accelerated in recent years. In general the jackup rig market has continued to see good demand through 2013 as a result of which there has been strong tender activity. Lamprell's market share remains strong in its core markets and we continue to see high levels of enquiries and bid activity with a robust pipeline of opportunities. As at the half-year, the Group's order book was valued at US$ 1.1 billion (31 December 2012: US$1.2 billion), predominantly comprising the on-going construction of eight new build jackup rigs; the bid pipeline remains at a high level of approximately US$ 4.6 billion (31 December 2012: US$ 4.1 billion), with strong representation of the two key segments of new build jackup rigs and new build offshore construction projects. Refurbishment projects typically have a shorter bid to award profile and therefore limited order book or pipeline values.

Since the beginning of the year, the Group has secured a contract win for an additional new build jackup rig project for the Jindal group, which included an option for a further jackup rig that expired in August 2013. The Board believes that the jackup rig market will continue to provide the Group's primary revenue stream in the medium term although, as we have noted in the past, we are facing increased competition from Asia. For this reason, we aim to differentiate ourselves based on our strong track record of quality and safety, together with our strategically well located facilities and the technical and operational capability to deliver complex projects on budget and on time.

In addition, the Group's strong performance in the execution of several offshore construction projects during the last 12 months has further strengthened the Group's reputation in both the local Middle East and North Sea markets. The Board believes that capital expenditure across the E&P sector will remain buoyant and will provide opportunities for the business to grow its offshore construction revenue stream in the coming years.

In the Group's other traditional area of strength, namely rig refurbishment and upgrades, there is increased competition for the small projects but we continue to see strong demand for medium sized refurbishment projects. This is expected to remain a profitable and important activity for the Group.

We have also reviewed the status of certain of our services businesses which do not form part of our core business, and we have commenced a process to dispose of these businesses, but only if acceptable terms can be obtained and subject to Board approval. This process is at an early stage and may not proceed if acceptable terms cannot be agreed.

Board changes

There have been further changes both at the Board and at the senior management levels. In March, Frank Nelson and I joined the Board as Chief Financial Officer and Chief Executive Officer respectively, with Peter Whitbread (the former Interim Chief Executive Officer) staying on the Board and providing the Group with the benefit of his experience. Then, in May, our previous Non-executive Directors (Jonathan Silver, Deena Mattar and Colin Goodall) retired from the Board and were replaced by three, new Non-executive Directors (Michael Press, Ellis Armstrong and John Malcolm). I would personally like to take the opportunity to welcome them to Lamprell and I look forward to working with them. Between them they have significant industry and operational experience and I believe they will contribute much to the ongoing development of the Group.

As announced yesterday, it is with regret that Frank Nelson has informed us of his intention to leave Lamprell to return to the UK for personal reasons. However, I am pleased that Joanne Curin will be joining the Group as Chief Financial Officer effective from 1 October 2013. Joanne is an experienced Finance Director, with broad international business experience and significant listed company expertise. Frank Nelson will work with her until the end of October 2013 to ensure an orderly transition.

Operating review & update

Lamprell has built a reputation for high build quality, a strong safety record, and close client relationships. After the operational difficulties faced in 2012, it was important for us to ensure that our main projects progressed as planned and that we should complete the key underperforming projects as effectively and efficiently as possible. We can see from our record during 1H 2013 that we have taken great strides to achieve this.

In the first half of 2013, we have successfully delivered a number of key projects. In February, Lamprell delivered the Windcarrier's "Bold Tern" windfarm installation vessel to our client, Fred. Olsen, and, notwithstanding the challenges that we experienced on that complex project, we can be proud of the high quality and standards of the final product. Similar accolades have been given to the "Chaaya" jackup drilling rig that was delivered to Greatships in January, as well as the two offshore structures that were delivered to the clients in March and June, all three of which were all delivered on or ahead of schedule. This is testament to the fact that Lamprell is one of the few fabrication yards within the Middle East-North Africa region which has both the expertise and the capability to build large scale complex decks and to North Sea standards, specifications and timelines.

Looking forward, construction on all other major new build projects is on track. Although the first Caspian Sea jackup rig project continues to be a challenging project, we are nearing completion and expect final delivery to the client in the Caspian Sea within the next few weeks.

The rig refurbishment and upgrade business has progressed well during the first six months of the year, with the Group having working on or successfully completing more than 15 rig refurbishment projects. There are three refurbishment projects which are all currently on-going although we are nearing completion of the major refurbishment project relating to the "Rowan California" jackup rig, which is scheduled to depart in the coming days. I am pleased to note that this project achieved a major project milestone of more than one million manhours without lost-time incident (LTI).

During May, the first jackup rig for the Jindal group, the "Jindal Star", was successfully loaded out and the construction process continues as scheduled, with final delivery planned before the end of the year. Of particular note for this project, we recently hit the major milestone of three million manhours without LTI. In a similar vein, I am pleased with the continued improvements in the safety records for many of the Group's large-scale projects: the second Caspian Sea project recently reached two million manhours without LTI and the Group has to date performed a total of seven million manhours without LTIs on the on-going major offshore structure project for Nexen (where the first of two structures was delivered marginally ahead of schedule in June 2013).

Outlook

After the challenges of 2012, the new management team has made significant progress in refocusing the business on its core activities and, in the successful refinancing of the Group's debt facility to June 2016, re-established the Group's medium-term financial stability. 2013 is a recovery year for the Group and we are pleased that the business has returned to profitability earlier than planned. The Board therefore anticipates that our performance for the full year will be ahead of our expectations.

The Group has been reinvigorated and we see high levels of bidding activity in our core markets with an increased pipeline of project opportunities. Contract wins so far this year have been slower than expected partly reflecting the lower number of project awards in the market and the management team is clearly focused on the conversion of its bid pipeline into wins. At the current time, approximately half of the revenues in our 2014 business plan have been secured under our existing order book, which extends to Q1 2015. We expect revenues in 2014 to be slightly down compared to 2013, with measured growth returning in 2015.

James Moffat

Chief Executive Officer

Lamprell plc

Financial Review

Results from operations

In the six-month period ended 30 June 2013, the Group's financial position showed signs of recovery with improved operational performance driving the return to profitability.

The Group's total revenue of US$ 521.0 million for the period was broadly in line with the restated results for the corresponding period in 2012[1] (1H 2012: US$ 528.1 million).

The new build division was the largest contributor to the Group's revenue with nine jack-up rigs and two liftboats which were either delivered or under construction during the period. In February, the Group successfully delivered the challenging Windcarrier 2 "Bold Tern" liftboat project to Fred. Olsen and recognised additional revenue of US$10.8 million for the period. It also continued to make progress on construction of the first and second Caspian Sea jack-up rigs. These projects, which encountered significant difficulties in 2012, are performing in line with the Group's revised expectations. The Group expects to deliver the first Caspian Sea project to the client in the next few weeks.

The offshore platform construction business continued its strong performance with four projects under construction during the period. The Group delivered two offshore structures to clients in the North Sea, further supporting the Group's overall profitability for the period.

The Group's rig refurbishment segment saw a slight decline in margins on reduced volumes as compared to the six-month period ended 30 June 2012.

Improved performance from our ongoing operations and the reduced effect from the Group's problematic projects has translated into a gross profit of US$ 43.0 million for the six-month period ended 30 June 2013 (1H 2012: gross loss of US$ 16.0 million) and a corresponding gross margin of 8.2% (six-month period ended 30 June 2012: negative 3.0%).

EBITDA for the period was US$ 26.8 million (1H 2012: negative US$ 28.3 million). The Group's EBITDA margin increased from a negative 5.4% in 2012 to a positive 5.1% in 2013, reflecting the improved operating performance of the business.

Operating profit for the six-month period ended 30 June 2013 was US$ 14.7 million (1H 2012: loss of US$ 37.8 million) and reflects the Group's significantly improved gross profit performance described above, slightly offset by marginally higher overhead costs.

Finance costs

Net finance costs in the period decreased to US$ 7.7 million (2012: US$ 13.0 million), and include an exceptional item of US$ 2.3 million arising from costs related to the major debt refinancing process which the Group recently completed with its core lenders. For further information on this refinancing, see "Borrowing and debt refinancing" below.

Net profit after exceptional items and earnings per share

The Group recorded a profit for the six-month period ended 30 June 2013 attributable to the equity holders of US$ 7.3 million (1H 2012: loss of US$ 51.1 million). These better results were largely attributable to improved operating performance. The fully diluted earnings per share for the six-month period ended 30 June 2013 were 2.79 cents (1H 2012: loss per share 19.65 cents).

Capital expenditure

As a result of losses made during 2012, the Group reduced capital expenditure during the six-month period ended 30 June 2013 to US$ 7.1 million (1H 2012: US$ 11.9 million). The main area of investment consisted of additions to the buildings and related infrastructure at Group facilities amounting to US$ 5.0 million (1H 2012: US$ 7.8 million), including capital work-in-progress. Expenditure on operating equipment and additions to other fixed assets amounted to an additional US$ 2.1 million (1H 2012: US$ 4.1 million).

Cash flow and liquidity

The Group's net cash flow from operating activities for the six-month period ended 30 June 2013 reflected a net inflow of US$ 62.4 million (1H 2012: net inflow of US$ 92.9 million) generated by a combination of successful project completions and improved working capital management. Prior to working capital movements, the Group's net cash inflow was US$ 33.5 million(2012: outflow of US$ 23.7 million).

Net cash inflow from investing activities during the six-month period ended 30 June 2013 totalled US$ 31.5 million (1H 2012: US$ 0.4 million). The positive year-on-year change came mainly as a result of movement in short-term deposits under lien of US$ 44.8 million due to completion of a number of large projects and release of a number of fixed and margin deposits.

The Group's net cash used in financing activities during the six-month period ended 30 June 2013 was an outflow of US$ 38.5 million (1H 2012: outflow of US$ 135.9 million). This was largely attributable to a decreased repayment of borrowings, excluding bank overdrafts, of US$ 30.3 million during the six-month period ended 30 June 2013, as compared to US$ 173.5 million during the comparative period for 2012. The Group's finance costs also dropped to US$ 8.2 million during the period, as compared to US$ 13.4 million in 1H 2012, due to the reduction in the aggregate amount of funded and non-funded banking facilities from US$ 1,168 million at 30 June 2012 to US$ 728.2 million at 30 June 2013.

Balance sheet

The Group's total non-current assets at 30 June 2013 were US$ 381.8 million (31 December 2012: US$ 390.4 million). This decline is attributable to a US$ 5.2 million decrease in the net book value of property, plant and equipment due to depreciation charges which were only partially offset by new additions, and a US$ 3.9 million decrease in identified intangible assets reflecting amortisation charges which were only partially offset by new additions.

Trade and other receivables increased marginally to US$ 407.8 million (31 December 2012: US$ 398.3 million). The Group's working capital position continued to improve through acceleration of milestone payments from clients and improved relationships with our supply chain leading to more favourable payment terms. At 30 June 2013 the Group had an improved net cash position of US$ 151.1 million (31 December 2012: US$ 104.1 million). Of the total cash of US$ 274.5 million, US$ 76.7 million was restricted in the form of margin deposits primarily for guarantees on major projects.

Shareholders' equity increased from US$ 406.1 million at 31 December 2012 to US$ 413.8 million at 30 June 2013. The movement reflects increased retained earnings of US$ 200.6 million (31 December 2012: US$ 192.8 million).

Borrowing and debt refinancing

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

The period-end outstanding borrowing was US$123.4 million (31 December 2012: US$ 159.3 million).

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 Group therefore continues to adopt the going concern basis in preparing its financial statements.

Dividends

Given the restrictions under the new debt facility and the need for capital to strengthen the business, the Group will not be paying a dividend for the six-month period ended 30 June 2013. The Board appreciates the importance of dividends to investors and will review the Group's dividend policy when its financial position improves further and the constraints have been removed.

Principal risks and uncertainties

For details of the principal risks and uncertainties faced by the Group, please refer to the Notes to Financial Statements as well as the Risk Report in the Company's 2012 Annual Report.

Independent review report to Lamprell plc

Introduction

We have been engaged by Lamprell plc ('the Company') to review the condensed consolidated interim financial information in the interim financial report for the half year ended 30 June 2013, 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 Conduct 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 Conduct 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.

Independent review report to Lamprell plc

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 2013 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 Conduct Authority.

PricewaterhouseCoopers LLCChartered Accountants

Douglas, Isle of Man

28 August 2013

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.

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated balance sheet

Consolidated statement of changes in equity

Consolidated statement of cash flows

Lamprell plc

Notes to the interim financial information

1. Legal status and activities

Lamprell plc ("the Company/the parent company") was incorporated and registered on 4 July 2006 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 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 2013 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 2012, 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 Group is currently financed from Shareholders' equity and borrowings. The Group has secured a new set of debt facilities and revised covenants, for which it has signed binding commitment letters and detailed heads of terms with the lenders on 13 June 2013 and facility letters on 18 July 2013. To facilitate the negotiations for this new facility the Group sought waivers for certain of its banking covenants under the old arrangement, for the period to 30 June 2013. The new debt facility is for an amount of USD 181 million and subsequent to the period end the Group has drawn down USD 160 million from this facility in July 2013.

After reviewing its cash flow forecasts for a period of not less than 12 months, from the date of 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 2012, as described in those financial statements except as described in Note 2.2(c). The annual financial statements for the year ended 31 December 2012 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. 

(a) The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2013, but do not have a material impact to the Group or are not currently relevant for the Group.

· IFRS 1, (Amendments), 'First time adoption, on government loans', (effective 1 January 2013);

· IFRIC 20, 'Stripping Costs in the Production Phase of a Surface Mine', (effective 1 January 2013); and

· IFRS 13, 'Fair Value Measurement', (effective 1 January 2013).

(b) The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2013 and have not been early adopted:

· IAS 36, (Amendments), 'Recoverable Amount Disclosures for Non-Financial Assets', (effective 1 January 2014);

· IAS 39, (Amendments), 'Novation of Derivatives and Continuation of Hedge Accounting', (effective 1 January 2014);

· IFRS 9, 'Financial Instruments', (effective 1 January 2015);

· IFRIC 21, 'Levies', (effective 1 January 2014);

· IFRS 10, 'Consolidated Financial Statements', (effective 1 January 2014);

· IFRS 11, 'Joint Arrangements', (effective 1 January 2014); and

· IFRS 12,'Disclosure of Interests in Other Entities', (effective 1 January 2014).

(c) Adoption of IAS 19 (revised), 'Employee benefits'

IAS 19 (revised) amends the accounting for employment benefits. The Group has applied the standard retrospectively in accordance with the transitional provisions of the standard. The impact of this on the Group has been to restate the income statement and other comprehensive income by recognising all actuarial gains and losses as previously reported at the reporting dates in the income statement in other comprehensive income ("OCI") as they occur.

There was no effect of change in accounting policy on the consolidated balance sheet. The table below shows the effect on the consolidated income statement:

Impact on the consolidated income statement

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 2012. 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 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:

At the balance sheet date, the Group has no net debt and was therefore un-geared.

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:

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 remaining costs to completion of all outstanding projects at the period end would result in an increase in revenue and profit by USD 28 million (H1 2012: increase in revenue and decrease in loss by USD 15 million) if the remaining costs to completion are decreased by 10% and a decrease in revenue and profit by USD 39 million (H1 2012: decrease in revenue and increase in loss by USD 22 million) if the remaining costs to completion are increased by 10%.

Estimated impairment of goodwill

The Group tests goodwill for impairment annually or more frequently if events or changes in circumstances indicate a potential impairment. Testing for impairment was performed on 31 December 2012 and is detailed in the annual financial statements for the year ended 31 December 2012.

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% (2012: 3%). 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 1.2 million (2012: USD 1.2 million) lower or USD 1.3 million (2012: USD 1.3 million) higher.

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), International Inspection Services Limited (Inspec), Sunbelt and Operations and Management (O&M).

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, Sunbelt and O&M do not meet the quantitative thresholds required by IFRS 8, and the results of these operations are included in the "all other segments" column.

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

Inspec derives its revenue from various services such as non-destructive pipeline testing, ultrasonic testing and heat treatment; Sunbelt derives its revenue from safety and training services and; O&M derives its revenue from the labour supply and other operations and maintenance services.

Sales between segments are carried out on agreed terms. The revenue from external parties reported to the Executive Directors is measured in a manner consistent with that in the consolidated income statement.

The Executive Directors assess the performance of the operating segments based on a measure of gross profit. The staff, equipment and certain subcontract costs are measured based on standard cost. The measurement basis excludes the effect of the common expenses for yard rent, repairs and maintenance and other miscellaneous expenses. The reconciliation of the gross profit/(loss) is provided as follows:

The reconciliation of the profit/(loss):

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

7. Earnings per share 

(a) Basic

Basic earnings/(loss) 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 incurred a loss from continuing operations during the six months ended 30 June 2012, all the Company's existing potential ordinary shares were not dilutive as they decreased the loss from continuing operations.

8. Operating profit/(loss)

Operating profit/(loss) is stated after charging:

9. Property, plant and equipment

The additions of USD 7.1 million during the current period comprise USD 3.3 million of additions to capital work-in-progress, USD 1.7 million of additions to buildings and infrastructure, USD 1.3 million of additions to operating equipment, and USD 0.8 million of additions to other fixed assets.

10. Intangible assets

11. Investment in joint ventures

During 2012, the Group entered a joint venture agreement through its subsidiary Lamprell Sharjah WLL with the Saudi Arabia based Shoaibi Group, Al Yusr Townsend and Bottum L.L.C., to form Lamprell Arabia Ltd ("LAR"). LAR based in Al Khobar, Saudi Arabia and engages in the refurbishment of onshore and offshore rigs and building new land drilling rigs. Once in existence, Group will hold 65% interest in LAR. As at the balance sheet date, LAR's formation was in progress and there has been no outflow from the Group in the form of investment.

Details of the Group's joint ventures during the year and at the balance sheet date is as follows:

* Production, manufacturing and erection of heat exchangers, pressure vessels, tanks, structural steel, piping and other related activities.

Summarised financial information in respect of the Group's joint ventures is set out below:

MIS Arabia Co. Ltd.

12. Trade and other receivables

Amounts due from customers on contracts comprise:

13. Cash and bank balances

At 30 June 2013, the cash at bank and term deposits were held with fifteen banks (31 December 2012: eighteen banks). The effective average interest rate earned on term deposits was 0.66% (31 December 2012: 0.88%) per annum. Margin/short term deposits of USD 28.1 million (2012: USD 72.9 million) and deposits with an original maturity of more than 3 months amounting to USD 48.6 million (31 December 2012: 42.3 million) are held under lien against guarantees issued by the banks (Note 22).

14. Related party balances and transactions

Related parties comprise Lamprell Holdings Limited ("LHL") (which owns 33% of the issued share capital of the Company), certain legal shareholders of Group companies, joint ventures, Directors and key management personnel of the Group and entities controlled by Directors and key management personnel. Key management includes directors (executive and non-executive) and members of the executive committee. Other than 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 six to twelve months.

Due from related parties

15. Share capital

Issued and fully paid ordinary shares

The total authorised number of ordinary shares is 400 million shares (2012: 400 million shares) with a par value of 5 pence per share (2012: 5 pence per share).

During 2013, Lamprell plc employee benefit trust ('EBT') did not acquire any shares from the market or issue any shares to employees. As at 30 June 2013, 14,686 shares (2012: 14,686 shares) are held as treasury shares. The Company has the right to reissue these shares at a later date. These shares will be issued on the vesting of the awards granted under free shares/share options/performance share plan to certain employees of the Group.

During 2012, Lamprell plc employee benefit trust ('EBT') acquired 170,000 shares of the Company. The total amount paid to acquire the shares was USD 0.95 million and has been deducted from the consolidated retained earnings. During 2012, 605,048 shares amounting to USD 2.1 million were issued to employees on vesting of the free shares. During 2012, the Company received USD 0.6 million in respect of the exercise price on vesting of share options.

16. Other reserves

17. Provision for employees' end of service benefits

In accordance with the provisions of IAS 19, management has carried out an exercise to assess the present value of its obligations, 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:

The amounts recognised in the consolidated income statement are as follows: