22 Jul 2020 07:00
22 July 2020
LAMPRELL PLC("Lamprell" and with its subsidiaries the "Group")
TRADING UPDATE
Lamprell announces the following update on its performance in the year to date.
· Strong operational performance as we continue to safely deliver projects for all of our customers
· EBITDA for H1 broadly breakeven despite headwinds of COVID-19 and low oil prices
· Net cash increased to USD 71.4 million at 30 June 2020 from USD 42.5 million at 31 Dec 2019
· Backlog increased to USD 580 million at 30 June 2020 from USD 470 million at 31 Dec 2019
· Our strategic growth objectives further progressed by:
o securing our third offshore wind project in the fast-growing renewables segment
o advancing our digital aspirations in collaboration with our partner Injazat
o submitting a number of proposals for Saudi Aramco's LTA during the period
Operational update
Despite the wide-ranging effects of COVID-19, we are pleased to report robust operational progress on all our current projects. Both the IMI rigs and Moray East projects are progressing well and in line with our expectations. We have successfully completed the engineering phase on the IMI rigs. We have moved to the next stage of the project and are now setting up the Hamriyah yard for fabrication and construction, and remain on track to deliver in 2022. On the Moray East contract, we have now delivered 32 out of 48 jackets to the client at our quayside in Hamriyah.
Two new and noteworthy projects have been added to our backlog since the beginning of the year, namely the engineering, procurement, installation and commissioning contract for the Mahani gas field in Sharjah and the 30-jacket project for the Seagreen windfarm, our third major project in the renewables market. Both projects commenced with immediate effect and are progressing well and in line with expectation through the early stages with initial steel deliveries already on site.
As previously announced, the Group took swift and decisive action at the onset of the COVID-19 pandemic. These measures were aimed at protecting the health and wellbeing of our employees, de-risking our supply chain, ensuring continued progress of ongoing projects, and achieving a significant reduction of our cost base to protect liquidity.
COVID-19-related cost savings, which are largely associated with a 25% reduction in fees, salaries and allowances for the Board, senior management and professional staff for the initial period of April through to September 2020, are expected to generate a USD 10 million reduction in costs in 2020.
Further to this, we remain on track to deliver a USD 24 million reduction in overheads as a result of our operational restructuring announced earlier this year, with approximately USD 20 million reduction in cash overhead. Group cost base in 2020 is therefore anticipated to be approximately USD 80 million, of which cash costs are USD 50 million.
Following the two new project wins in the first half of 2020, backlog at 30 June 2020 has increased to USD 580 million from USD 470 at 31 December 2019. As a result, secured backlog for 2020 is now USD 325 million. Meanwhile, secured backlog for FY2021 is now USD 400 million.
Subject to review by our auditors, revenue in the first half of 2020 was USD 142 million and, with the cost cutting measures put in place earlier this year, the Group anticipates to be broadly EBITDA break-even in H1 2020.
Balance Sheet update
As the industry and global markets work through the significant impacts of COVID-19, our absolute priority is to protect the health and welfare of our employees, while continuing to deliver our projects, preserve cash and maximise liquidity. As a result of the above mentioned measures and good progress on our contracts, net cash as at 30 June increased to USD 71.4 million from USD 42.5 million as at 31 December 2019, subject to review by our auditors.
The balance sheet retains sufficient headroom to support ongoing projects and we have secured a small project facility for the Seagreen project. We are making progress in securing additional project-specific funding options to improve working capital liquidity over the medium term.
Outlook
Our bid pipeline currently stands at USD 5.5 billion. Movement through the pipeline has slowed down during the global pandemic, nevertheless we are seeing encouraging activity with respect to both Saudi Aramco LTA prospects and in the fast-growing offshore wind segment, with significant long term growth prospects and emerging opportunities in the USA and Asia. Despite the global economic uncertainty and specifically the pressure on the oil & gas industry, our outlook for both these end markets remains positive.
Our investment and presence in Saudi Arabia provide us with a platform to access revenue opportunities in a largely challenged oil industry. The Kingdom remains the world's largest oil producer with highly competitive lifting costs on a per barrel of oil produced basis.
Our expertise and track record in renewables continue to deliver an increasing number of high quality projects for the bid pipeline. Further, our reputation and established operations in the Middle East provide a steady flow of walk-in and rig refurbishment work.
Christopher McDonald, CEO, Lamprell, said:
"This has been a period of significant progress for Lamprell. The response of our people to the COVID-19 crisis has been excellent and we have continued to deliver well for clients on current projects. Winning two new contracts in a period of global economic turmoil is further testimony to the effectiveness of our strategy. There is good momentum in the business and our operational performance. The proactive actions we have taken on costs, and an active bid pipeline with exposure to buoyant regions in both oil & gas and renewables, provide us with confidence that we are successfully navigating the challenges of COVID-19 and the industry downturn."
Lamprell will announce its 2020 interim financial results on 1 October 2020.
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Notes to editors
Lamprell, based in the United Arab Emirates ("UAE") and with over 40 years' experience, is a leading provider of fabrication, engineering and contracting services to the offshore and onshore oil & gas and renewable energy industries. The Group has established leading market positions in the fabrication of shallow-water drilling jackup rigs, liftboats, land rigs, and rig refurbishment projects, and it also has an international reputation for building complex offshore and onshore process modules and fixed platforms.
Lamprell employs more than 4,000 people across multiple facilities, with its primary facilities located in Hamriyah, in the UAE. Combined, the Group's facilities cover approximately 800,000m2 with over 1.5 km of quayside. In addition, the Group has facilities in Saudi Arabia (through a joint venture agreement).
Lamprell is listed on the London Stock Exchange (symbol "LAM").