Half Year Results 2017

Transcription

1 Half Year Results September NDC 9 Rig Al Lulu

2 Disclaimer This presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/ or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words believes, expects, predicts, intends, projects, plans estimates, aims, foresees, anticipates, targets and similar expressions. The forward-looking statements, contained in this document, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are uncertain and subject to risks. A multitude of factors can cause actual events to differ significantly from any anticipated development. Neither the Company nor any of its officers or employees guarantees that the assumptions underlying such forward-looking statements are free from errors nor does any of the foregoing accept any responsibility for the future accuracy of the opinions expressed in this document or the actual occurrence of the forecasted developments. No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, neither the Company nor any of its subsidiary undertakings nor any such person s officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this document. 2

3 Agenda 1 Highlights 2 Operational Review 3 Financial Review 4 Strategy and Outlook 5 Appendices 3

4 Highlights Christopher McDonald, CEO 4 Schlumberger land rig

5 Highlights Challenging market conditions continue to impact business Successful delivery of four large scale projects Backlog impacted by reduced contract awards over the past two years Robust balance sheet to fund future growth and underpin selective bidding in a challenging market Bid activity improving, but awards weighted towards 2H 2018 Good progress with respect to diversifying customer base and markets via renewables, EPC(i), and land rigs Signed transformational JV agreement for the development of a major maritime yard in Saudi Arabia John Malcolm appointed new Chairman from 20 September 2017 * Total Recordable Injury Rate Revenue $159.2m Gross margin 13.0% $305.9m $3.1bn 5 Net Cash Bid Pipeline Safety* 0.41 TRIR *

6 Operational Review Christopher McDonald, CEO 6 EA1 flat pack load out

7 Yard activity levels consistent with market downturn Projects successfully closed out underpinned by strong execution Safety focus unchanged Multiple major projects delivered on time and on budget NDC 8 & 9 Shelf Drilling Krathong Petrofac UZ750 New contract for two land rigs with Schlumberger 11 rigs currently stacked in our yards, 7 rigs under refurbishment Master Marine major upgrade for Haven progressing to schedule Construction commenced on East Anglia 1 offshore windfarm project 90 Backlog ($m) (as at HY 2017) 15 $300m (YE 2016: $393m) Offshore platforms Oil and gas contracting services Manpower supply and Safety services 195 7

8 East Anglia 1: progress update Project overview: Located in southern North sea, MW turbines generating power for 500,000 homes Lamprell to procure, fabricate and supply 60 foundations (jackets and piles) to Scottish Power Renewables 36 foundations fully fabricated in UAE, shipment to Scottish Power Renewables 24 foundations pre-fabricated in UAE, shipped to Harland & Wolff (Belfast) for final fabrication and assembly in line with local content requirements First flatpack left for Belfast mid September 2017 East Anglia 1 flat packs Additional cost associated with equipment and skillset challenges Project considered as a strategic investment in addressing the estimated $3bn per year renewables market 8

9 Bid pipeline Broadening reach whilst positioning for recovery Refocused bid targeting to address: Broader geographical markets Stronger expertise in renewables and EPC(i) Strategic partnerships for broader reach 0.02 Bid pipeline ($bn) (as at 1H 2017) 0.3 Higher levels of bidding activity: Overall bidding on the rise, with awards expected from H Strengthening presence in the renewables sector as demonstrated by increased number of bid requests 1.5 $3.1bn (YE 2016: $2.5bn) 1.3 Increased focus on EPC(i) via strategic partnerships Strengthening land rig business New build jackup rigs Offshore platforms Modules O&G contracting services 9

10 Financial Review Tony Wright, CFO 10 Shelf Rig Krathong

11 HY 2017 financial highlights Robust cash flow despite pressure on revenues Low levels of contract awards affect revenues as major projects reached completion Newbuild jackup rig market particularly affected Scottish Power and Master Marine projects drive increase in the Offshore platforms and O&G services business streams Significant reduction in Modules revenues as Petrofac UZ750 completed $14.5m reduction in overheads as a result of the ongoing cost efficiency measures (USD million, unless stated) HY 2017 HY 2016* Reported results Revenue EBITDA Gross margin 13.0% 6.1% Profit/(loss) from continuing operations after income tax and exceptional items 1.1 (4.4) Reported diluted earnings/(loss) per share 0.30 (1.27) (US cents) Net cash as at 30 June * Includes one off impact from the settlement with Ensco Revenue by segment New build jackup rigs O&G contracting services USD million 11 / HY % % Offshore platforms % Modules % Services %

12 Flat profit levels as revenues reduce Focus on cost control Committed to normalised margins despite pressure in the market Diligent and disciplined cost control H1 benefited from a number of successful close outs Amounts in US$m (4.4) (10) (20) (30) 2016 Net Loss - 1H Impact of Ensco 140 settlement Improvement in margin on completed projects Impact of reduced NBJU revenues Overhead reductions Others 2017 Net Profit - 1H 12

13 Positive net cash position Strong inflow from project completions Cash position fortified by milestone payments on major projects Decreased working capital requirements Capex at $14.5m (1H 2016: $15.4m) largely focused on improving yard efficiency and the new pipe shop Amounts in US$m Net Cash as at 31st December 2016 Operating cash flows Movement in Working Capital Asset additions Payment of End of Service Benefit Others Net Cash as at 30th June

14 Strong balance sheet Solid business fundamentals throughout the downturn Strong net cash position Competitive debt/equity ratio of 8.8% Liquidity positions the business well for recovery Covenants on debt facilities amended to secure financial flexibility Term loan drawn in full ($50m repaid by 30 June 2017) Working capital facility and revolver available in full Debt package 1H17 $m YE16 $m Term loan Working capital facility Revolver Total funded facilities Committed bonding * Gross cash less cash deposits under lien, less cash deposits with maturity >3 months 1H17 YE16 Balance Sheet $m $m Total assets Tangible net assets Gross cash Available cash* Net cash

15 Financial summary and outlook Stable performance positioning for a recovery FY revenue estimate revised to $ m H2 margins to be offset in 2017 by strategic investment in skillset and equipment to address new market sectors 1H capex of $14.5m to remain broadly flat in 2H 2017 Moderate net cash reduction in 2H 2017 due to investment in yard infrastructure, the Saudi Maritime Yard as well as previous investment in equipment for future rig orders Robust balance sheet to support long term growth in a challenging market Master Marine Haven upgrade 15

16 Strategy and Outlook Christopher McDonald, CEO 16 Jindal Discovery rig refurbishment

17 Strategic priorities Diversifying customer base for long term sustainable growth Strengthen position in core markets: Investment in Saudi Maritime Yard strengthens our position in new build jackup market for next decade and beyond Emerging land rig relationship with Schlumberger Continue to invest in existing UAE facilities Implement EPC(i) strategy Focused effort with installation partner to ascend to the LTA JV with select partners to access complex offshore projects Expand into new markets and geographies Renewables North Sea, Baltic Sea 17

18 Strategic priorities: opportunity in Saudi Arabia Transformational joint venture agreement in a challenging market Access to the world s largest oil and gas market - significant step-up in scale of the business Transformational for current business and future prospects - stronger competitive position through efficiencies, diversification, reach Further potential scope for additional work if admitted to LTA bidding Progressing subcontract for the first two rigs at LAM s UAE yards (expected in 2018) Development progressing, with first major construction contracts awarded ZONE D New Build Offshore Rigs Start: 2019 ZONE C New Build Commercial Vessels Start: 2020 ZONE B New Build & MRO OSVs Start: 2021 ZONE A MRO Commercial Vessels & Rigs Start:

19 Maritime Yard: financials and key milestones Maximum Cash Investment Debt Financing JVCo Forecasts 1 Returns Impact on Lamprell $140m funded from current cash and future cash flows over the construction period Forecast 2017 investment of $20m, with 2018 and 2019 c.$38m and $32m Loan secured over fixed assets of JVCo Expected term of the loan of 20 years Lamprell to recognise share of JV losses Losses expected to be largest in 2019 Investment in JVCo expected to yield an equity internal rate of return in excess of Lamprell s weighted average cost of capital Step change in dividend flow expected to commence following repayment of SIDF facility 2022 Construction completion 2019 Yard part-operational 2018 Possible subcontracting for 2 jackup rigs to LAM s UAE facilities Q Fulfilment of conditions/ Construction commences JV signed and approved by shareholders 1. This should not be interpreted to mean that the future earnings per share of Lamprell will match, exceed or be lower than the historical published figures 19

20 Strategic priorities: LTA agreement with Saudi Aramco Access to a market committed to growth Opportunity to bid for a sustainably strong pipeline of non-rig work from LAM s UAE yards: tie-in platforms topsides jackets Enables to expand engineering, procurement and construction capabilities in the offshore platform sector Tie-in platform Partnering with an installation contractor Prequalification ongoing highly competitive process Deep water jacket Outcome expected in Q4 2017/Q No guaranteed awards under the LTA, but contracts awarded under LTA in 2016 amounted approx. $4 billion Topside Agreement on a fixed term basis (historically 6 years) with option to extend Shallow water jacket 20

21 Strategic priorities: Renewables & EPC(i) Leveraging core competency to diversify markets and customer base Renewables (offshore windfarms): Strong sector fundamentals backed by European policy East Anglia project opened new opportunities in the sector Current opportunity set includes foundations, HVAC/DC platforms, and wind installation jack up vessels Addressable market $3 billion plus per annum Have learned many lessons during execution of current EA1 project including additional investment in equipment and resources which we are factoring into current bids Less sensitive to oil price EPC(i) Investing in upgrading capability and competency Well advanced in establishing partnerships that open up additional markets and geographies Strengthen exposure to complex high-margin work Actively pursuing LTA Addressable LTA market of circa $3 billion per annum Addressable EPC(i) market in excess of $3 billion per annum (not incl. LTA) 21

22 Outlook Recovery visible, but activity levels to remain low for next 12 months Near-term Slow project awards expected throughout 2017 Awards for major opportunities from 2H revenue expected to be 10% lower than 2017 Lean overheads, with crucial investment in specialist skill and expertise in line with growth strategy Mid/long-term As we progress our strategic initiatives, bidding pipeline to expand in line with addressable markets Strategic partnership with Saudi Aramco is a key priority Current pipeline ($ bn) 1 $3.1bn 1.3 $10bn Strategic initiatives ($ bn) New build jackup rigs Modules Offshore platforms E&C LTA Renewables EPC(i) Other 3 22

23 Q&A If you are listening to the presentation remotely please log your questions via the webcast or teleconference 23

24 Appendices Hamriyah pipe shop progress 24

25 Financial summary Amounts in $m HY 2017, $m Underlying 1H 2016, $m Underlying Ensco adjustment 1H 2016 As reported Revenue* (25) Cost of sales (138.5) (413.8) (10.0) (423.8) Gross profit* (35.0) 27.5 Gross margin % 13.0% 13.1% (7.0)% 6.1% G&A (18.5) (26.1) - (26.1) Non-cash goodwill impairment Operating profit * (35.0) 1.4 Finance costs - net** (3.0) (5.5) - (5.5) Share of profit in investments accounted using the equity method Profit / (loss) before income tax (35.0) (3.6) Income tax expense (0.1) (0.1) - (0.1) Profit / (loss) for the period (35.0) (3.7) Exceptional items - (0.7) - (0.7) Total profit / (loss) attributable to equity holders (35) (4.4) * Relating to continuing operations ** Represents the net balance of finance costs and finance income 25

26 Revenue split by business streams HY 2017 HY New build jackup rigs O&G contracting services $159.2m Modules Offshore platforms Services $451.3m

27 Safety focus Cornerstone to attract tier 1 clients 27