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Lamprell plcAnnual Report & Accounts 2012


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Lamprell is a leading provider of diversifiedengineering and contracting services tothe onshore and offshore oil & gas andrenewable energy industries.

Lamprell Business

Facilities

UAE Other

TotalHamriyah Sharjah Jebel Ali DubaiSaudi

Arabia* Kuwait

Land (m2) 365,000 210,000 178,849 30,000 131,469 10,000 925,318

Quayside (m) 1,440 760 2,200

* JV

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

New Build Jackup

Drilling RigsEngineering Services

INSPEC (NDT, Mechanical &

Calibration Services)

Sunbelt H2S

Safety Services

Wind Farm

Installation Vessels

Transformer Stations

(AC & HVDC)

Wind Turbine Foundations

Operations & Maintenance

New Build Offshore

Rig Refurbishment

Engineering &

Construction

Land Rig Services

ServicesRenewable EnergyOil & Gas


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01 Lamprell plc Annual Report & Accounts 2012

20124

20113

20101

0 40 80 120(40)(80)(120)

EBITDA before exceptional items USD m

2012

2011

2010

0 40 80 120(40)(80)(120)

Net profit (loss) USD m

20124

20113

20101

0 40 80 120(40)(80)(120)

Net profit (loss) before income tax andexceptional items USD m

2012

2011

20102

0 40 80 120(40)(80)(120)

Earnings per share Diluted cents

> Order book of USD 1.3bn as at28 February 2013

> New contract awards USD 1.1bn fromJanuary 2012 to 28 February 2013

>A year of exceptional challenges andchanges within the organisation

> Delivery of six major projects in the period> Good health and safety track record

Company OverviewHighlights

USD 1,045mRevenue

USD (110.5)mLoss for the year

USD (105.0)mLoss before income tax andexceptional items

Company Overview01 Highlights

02 Lamprell at a Glance

04 Lamprell Businesses

Business Review06 Chairmans Statement

08 Chief Executives Review

12 Operational Highlights

16 Risk Assessment

20 Financial Review

Corporate Governance24 Board of Directors

26 Directors Report

29 Corporate Governance Report

37 Directors Remuneration Report49 Corporate Social Responsibility

Financial Statements50 Independent auditors report to the

members of Lamprell plc

51 Consolidated income statement

52 Consolidated statement of

comprehensive income

53 Consolidated balance sheet

54 Company balance sheet

55 Consolidated statement of changes

in equity

56 Company statement of changes in equity

57 Consolidated cash flow statement

58 Company cash flow statement

59 Notes to the financial statements99 Definitions

Previous years figures have been normalised in line with current year presentation of results to include exceptional

items for all years.

1 Exceptional items during 2010 relate to Lamprell Asia Limited liquidation costs.

2 EPS has been restated for the bonus element of the 2011 rights issue.

3 Exceptional items during 2011 relate to MIS acquisition costs.

4 Exceptional items during 2012 relate to regulatory fine and related charges.

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Company OverviewLamprell at a Glance

Lamprell is a leading provider ofdiversified engineering, constructionand contracting services to theonshore and offshore oil & gas andrenewable energy industries.

Lamprell employs over 11,000 people(including labour personnel) acrossmultiple facilities.

Delivering ourexpertiseLamprell, based in theUnited Arab Emirates(UAE), and withoperations throughoutthe region, has playeda prominent role in thedevelopment of theoffshore industry inthe Arabian Gulf forover 30 years and is theregional market leaderin the rig market.

Lamprell operates across multiplefacilities in the UAE, Saudi Arabia(through a joint venture structure)and Kuwait, with a combined totalarea of over 925,000m and over2km of quayside.


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UAESaudi Arabia

Yemen

Oman

Iraq

Iran

ArabianGulf

Kuwait

5

32

1

4

6

1 Hamriyah Free Zone,Sharjah, UAEPurpose-built for new buildconstruction and refurbishment ofoffshore drilling rigs, land drilling rigs,wind farm installation vessels and oil &gas structures.

2 Port Khalid, Sharjah, UAE

Well suited for Lamprells upgradeand refurbishment projects as well asnew build jackup drilling rigs.

3 Jebel Ali, Dubai, UAEPurpose-built in mid-2002 and ideallysuited to new build offshore structuresand platforms.

4 Dubai Investments Park,Dubai, UAEFocused on the Land Rig Servicesdivision of the Group.

5 Saudi ArabiaMIS Arabias facility in Jubail isdedicated to the manufacture ofprocess vessels, equipment and large

components. Also, a new facility* isbeing built to cater to the refurbishmentand upgrade of land rigs in-country.

6 KuwaitPart of the Land Rig Services divisionand caters to drilling and oilfieldservice contractors in West Shuaiba,Kuwait and other surrounding areas.

* A three-way JV between Lamprell, Shoaibi Group and

AYTB.

Primary facilities

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Company OverviewLamprell Businesses

Oil & GasNew Build Jackup Drilling RigsLamprell is firmly established as oneof the worlds leading facilities for theconstruction of new build jackupdrilling rigs.

With a highly sophisticated engineeringcapability and custom-built constructionand load out facilities, Lamprell hasgained a reputation as a reliable andprofessional builder of state-of-the-artdrilling rigs. The Group has successfully

delivered several LeTourneau 116Eand Friede & Goldman Super M2

jackup rigs to international and regionaldrilling operators.

New Build OffshoreLamprells expertise in the new buildoffshore segment extends beyondjackup drilling rigs and covers awide range of offshore fixed andfloating facilities. This includes theconstruction of process modulesfor floating production, storage andoffloading units (FPSOs) and floating

storage and regasification units(FSRUs), tender assist drillingbarges, mobile offshore productionunits (MOPUs), turrets, process &utility decks, living quarters (LQ),wellhead decks (WH) and otheroffshore fixed structures. LamprellsNew Build Offshore centre ofexcellence is one of the few facilitiesin the MENA region that has both theexpertise and the capability in buildinglarge-scale complex process decks(+10,000 tonnes).

Rig RefurbishmentSince 1990, Lamprell has completedover 300 rig refurbishment projects.The rig refurbishment scope varieswith every project and can rangefrom a simple repair to a majordocking lasting several months forthe upgrade or replacement of olderand sometimes damaged equipmentand machinery.

The Company has successfullycompleted numerous refurbishment

projects for drilling contractors,including Arabian Drilling Company,Ensco, Japan Drilling Company,Nabors, National Drilling Company,Noble Drilling, Rowan, Saipemand Transocean.

Engineering & ConstructionLamprell Engineering & Construction(E&C) offers a full scope of servicefrom wellhead to delivery and beyond,extending to all areas of onshore andoffshore design and construction.

With a strong regional presence,excellent project execution trackrecord, certified systems & processesand strong engineering capabilities(providing engineering services fromconcept design to commissioning),Lamprell E&C delivers fully integratedengineered solutions to the onshoreand offshore oil & gas and renewableenergy sectors.

Land Rig ServicesLand Rig Services covers all projectsand services related to onshoredrilling rigs, oilfield service companiesand drilling equipment refurbishmentfor land and offshore rigs. The LandRig Services group operates fromfacilities in Hamriyah, Jebel Ali, DubaiInvestments Park and Kuwait and alsoprovides field services as required.

Renewable EnergyWind Farm Installation VesselsLamprells strategic goal of becoming

the fabricator of choice in the growingwind farm installation market isendorsed by the experience andexpertise that the Group has gainedwith the new build constructionof wind turbine installation vesselsfor Seajacks and Fred. OlsenWindcarrier; two major companiesin this expanding marketplace.

The offshore wind sector providesLamprell with the opportunityto utilise its engineering skills in asector where there is a recognised

lack of installation capacity. Havingconstructed five high tech, specialisedvessels for the European market andwith one more currently underconstruction, Lamprell has the rightskills and experience in this market.


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INSPEC (NDT, Mechanical &Calibration Services)International Inspection Services Ltd.(INSPEC) provides high qualityinspection services to severalcountries within the Middle East andAfrica. Established in 1993, INSPECis predominantly engaged in thesupply of inspection personnel andequipment for heat treatment andNon-Destructive Testing (NDT)

services to the oil & gas, districtcooling and other infrastructure-intensive industries includingdesalination and energy. Its primarymarkets of operation are the UAE,Oman and Bahrain with projects alsocompleted in other parts of the MiddleEast and Africa.

Sunbelt H2S Safety ServicesLamprells Sunbelt H2S safetyservices division provides completesafety solutions to its clients througha range of specialised products andservices. As an authorised distributorfor a number of safety equipmentmanufacturers, Sunbelt ensures that itoffers products that adhere to British,European and US standards. Sunbelt

also provides technical consultancy,services and support specialised inthe detection and handling of thehighly toxic H2S gas.

Operations & MaintenanceLamprells Operations & Maintenance(O&M) business has a proven recordof excellent performance and servicewith a core workforce of over 500tradesmen and administrative

personnel who are supported by alarger base of skilled field staff fromthe various divisions of the LamprellGroup. O&M provides manpower,equipment and materials servicesto a diverse customer base at oil &gas and petrochemical facilities andplants, drilling rigs, offshore facilities,marine docks and marine vessels.

ServicesEngineering ServicesLamprells Engineering Servicesprovides a range of engineeringsolutions from conceptual engineeringand FEED through to detailed andconstruction engineering includingoffshore drilling rigs, land rigs,onshore and offshore Engineering,Procurement & Constructionprojects, pipelines, pressure

vessels, skids, modules, decks andjackets. This is delivered by a teamof experienced multi-disciplineengineers and designers using thelatest engineering software and 3Dmodelling techniques.

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maintained its competitive positionand support from its customersby winning new contracts with anaggregate value in excess of USD 930million during 2012. Notably in ourrecent statement on 6 February 2013,we were pleased to announce thatthe Jindal Group had awardeda new contract to Lamprell for oneconfirmed, together with one optional,jackup rig.

In another positive development,Lamprell signed a joint venture

agreement for the fabrication,refurbishment and repair of landdrilling rigs in Saudi Arabia, enhancingour strong presence in that market.We plan to leverage on our long-termrelationships with our Saudi partnersand our well-established expertise inthe land rig sector.

Board and management changesIt has been a very busy year withchanges both at the Board and at themanagement levels, some plannedand others required in response to the

events of 2012.

In October, Nigel McCue, Jon Cooperand Chris Hand stood down fromtheir respective positions as ChiefExecutive Officer, Chief FinancialOfficer and Chief Operating Officer.At the same time, Peter Whitbread,who had previously served asLamprells Chief Executive from 1992to 2009, was appointed to the Boardas Interim Chief Executive Officer.In November, Frank Nelson wasappointed as Interim Chief Financial

Officer. Their efforts have ensured asmooth transition of the stabilisedbusiness to the new managementteam led by James (Jim) Moffat,whose appointment as the new ChiefExecutive Officer was announcedin early December. I am absolutelydelighted that someone of Jimsexpertise and calibre has agreedto join our team. He assumed hisresponsibilities on 1 March 2013, andwill bring the highest standards ofleadership, engineering and projectexecution to Lamprell.

Business ReviewChairmans Statement

A challenging year for LamprellAt the time I took over as LamprellsNon-Executive Chairman in themiddle of June 2012, the Companyhad already announced that therewere significant operational difficultiesand delays in delivery of the wind farminstallation vessel Windcarrier 1 BraveTern. Unfortunately, as the Summerprogressed, it became clear that thescale of these issues was far greaterthan previously anticipated, and that itaffected other key contracts, includingnotably the Windcarrier 2 Bold Tern

and the Caspian Sea jackup project.

On 3 October, the Board made thedifficult but necessary decision toreplace the entire senior managementteam and directed the newlyappointed, interim management teamto reassess Lamprells business inlight of the deteriorating financialposition. At the same time the Boardappointed PricewaterhouseCoopersto conduct an independent reviewof the financial performance of theunderperforming projects. The results

of this comprehensive assessmentwere announced on 19 November,revealing total projected losses far inexcess of what had been previouslyanticipated or announced.

Despite the disappointing update, theBoard worked closely with the interimmanagement team to address theproblems facing the business asefficiently and effectively as possible.During the following months, wemade excellent progress in mitigatingthe losses from the underperforming

key projects and stabilising theGroups financial position. Withsupport from Lamprells lenders,we also began the process ofrestructuring the Groups financialarrangements which is expected tobe completed in Q2 2013.

In spite of the setbacks of 2012, thedurability of our industrial franchisecontinues to prove strong andour clients, especially our existingclients, have continued to place theirtrust in our ability to perform to highstandards. As a result, Lamprell has

2012 was unquestionablythe most challenging yearin Lamprells history. Afteryears of sustained growthand profitability, theCompany experienceda number of significantoperational and reportingissues, which resulted

in substantial financiallosses prompting theBoard to make majorchanges to the way inwhich the business isstructured and managed.


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It was also pleasing that, afterstepping down from his interim CEOrole, Peter Whitbread has agreedto stay on as a Director to supportJim and his team in rebuilding thebusiness and positioning it forfuture success.

Other Board changes in 2012included the retirement of RichardRaynaut and resignation of BrianFrederick as Directors, and theappointment of Deena Mattar as aNon-Executive Director with effect

from 1 April 2012. Jonathan Silverstepped down from the positionof Chairman to become DeputyChairman, followed closely bymy appointment on 15 June asNon-Executive Chairman.

Further Board changes will be takingplace during the next few months.As a result of the considerable timecommitment required of the Non-Executive Directors during the pastyear, Colin Goodall and Deena Mattarhave informed the Board that they will

not be standing for re-election at theforthcoming Annual General Meeting.A search is underway for additionalindependent Non-Executive Directors.

As a Board, it is our objective todeliver long-term, sustainable successfor the benefit of all Lamprellsstakeholders. While there have beenmany changes at the most seniorlevels in the Company, I consider thatthe Board has reasserted its positionto provide a clear direction and strongand effective leadership for the future

of the business.

FSA investigationIn November 2012, Lamprellannounced an investigation by theFinancial Services Authority (FSA)into the Companys handling of insideinformation. Having completed theinvestigation, the FSA imposed a fineof approximately USD 3.7 million onLamprell for failing in its obligations asa listed company to keep the marketfully informed of its deterioratingfinancial position during early 2012.

From early in 2012, Lamprellsfinancial performance began todeteriorate due to operational issuesand to delays in completing keyprojects. It became clear that theCompanys systems did not allowmanagement to assess fully theimpact of these operational issues.Lamprell was, therefore, unable toupdate the market in a timely manneras to its financial performance. Whenthe extent of the financial deteriorationwas recognised, the FSA concludedthat Lamprell did not act sufficiently

quickly to update the market or toprevent employees from continuingto deal in its shares once the insideinformation regarding the poorfinancial performance had beenrecognised. The steps that theCompany has taken to improve itssystems and controls are set out inthe Corporate Governance report.

DividendsGiven the post-tax losses in 2012,Lamprell will not pay a dividendfor the year. We look into the future

with optimism, and will review ourdividend policy once the businessreturns to profitability.

OutlookAs a result of the events of 2012,the Company has been forced tore-evaluate its business structureand the projects that it wishes topursue. We have had to make manysignificant changes to the business,to return to our core activities, but itis important to reaffirm the underlyingstrength of the Companys franchise

and its sustainable competitiveadvantages in the marketplace. Aspreviously mentioned, the continuedand ongoing support of our customershas been particularly heartening.On behalf of all the employees andDirectors of Lamprell, I would like toexpress our appreciation.

Despite continued globalmacroeconomic uncertainty, demandfor our products and services remainsstrong in the midst of a robust andexpansive oil and gas industry. Inparticular, we see a steady stream ofnew build and refurbishment projectsin our home market of the MiddleEast as well as increased activity inthe North Sea. In recent years therehave been significant changes in ourcompetitive landscape, in particularthe entry of Asian players who canoffer very competitive financial

incentives to clients. However, weare confident that Lamprells strong,historic track record of delivery andcontinued commitment to qualitypositions the Company well to benefitfrom continued growth in the oiland gas industry. Our current orderbook of USD 1.3 billion and the bidpipeline of USD 4.1 billion collectivelyrepresent a solid foundation for thebusiness to grow in the coming years.

In light of the above, I sincerely believethat Lamprell can look forward to

2013 and beyond with renewedconfidence. During 2013, we will befocusing on our traditional areas ofstrength, namely new build jackuprigs, rig refurbishment and offshoreplatform construction. With the strongbidding activity across the businessin these areas, we expect this year toshow signs of stability returning withthe first shoots of growth appearingtowards the end of the year.

On behalf of the Board, I would liketo thank all of Lamprells stakeholders

and in particular our employees fortheir continued trust and supportduring these challenging times.

John KennedyChairman of the BoardLamprell plc

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Consolidatingour position

Although our yards remained busy throughout 2012and generated revenues for the year of USD 1,045million, the Group suffered a loss before tax andexceptional items of USD 105 million as a resultof a series of operational hurdles, the failure toappreciate certain project risk and project delays.

The challenges that Lamprellexperienced in 2012 led to majorchanges within the Company, including

a complete change of leadershipand a comprehensive review of ourprojects and operations. With a newmanagement team in place and anumber of improvements to ourbusiness processes underway, we arenow confident that Lamprell is wellplaced to overcome these challengesand leverage its leading market positionto return to profitability.

2012 challenges/overviewStarting in mid-2012, Lamprellexperienced significant delays

on several of its largest projects,including the wind farm installationvessels Windcarrier 1 and 2 for FredOlsen, as well as the jackup rig thatwas built in modular form in the UAEand is being assembled at a facilityin Astrakhan, Russia. As the yearprogressed, it became clear thatthese delays would result in materialfinancial losses. However, theprevious management team struggledto quantify the losses or prevent thesituation from deteriorating further.

As a result of the departure of theprevious senior management teamin October 2012, Lamprells Boardasked me to rejoin on an interim basisto assess the full extent of the issues

Business ReviewChief Executives Review


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facing the Company, and to helpstabilise its operations while it recruiteda new, permanent management team.With the Boards support, the interimmanagement team conducted acomprehensive assessment ofLamprells operations, with a primaryfocus on the key underperformingprojects and their effect on theGroups financial position. The resultsof the assessment, published on19 November 2012, revealed a seriesof operational and financial issuescontributing to major losses in 2012.

One of the cornerstones of Lamprellssuccess has always been its rigorousapproach to project execution. Sincemy retirement as Lamprells CEO in2009, the Companys business hasundergone significant change; overthe past several years, the Companysoperations have grown significantlyas the Group has taken on a numberof increasingly large and complexprojects. This has generated higherrevenues but the growth came ata price as the Companys existing

project management systems wereunable to cope with these largerprojects of a prototype nature. Thisleft Lamprell struggling to fulfil itscommitments to its stakeholders.

Having established the scale of theproblems and identified key areasof weakness, my team negotiatedrevised delivery schedules for the keyunderperforming projects still underconstruction, and fully focused itsefforts on their completion under thesenew terms. In spite of the financial

setbacks arising from certain keyprojects, Lamprell continued to delivermajor projects to a consistently highstandard, including the first two newbuild jackup rigs to NDC, as well as theSeajacks Zaratan and the Windcarrier1 Brave Tern liftboats. Most recently,and perhaps most significantly, theGroup fulfilled its promises to deliverthe Windcarrier 2 Bold Tern vessel tothe client in mid-February 2013. Thisonly became possible as a result ofimproved project management andstrict financial controls, as well as thededication and commitment of theproject team who worked tirelesslyon this complex project.

New contract awardsThe recent operating environment hasbeen demanding, both because ofthe Companys internal issues whichwe are now resolving and also dueto the increasingly competitive natureof the sectors in which the Companyoperates. Nevertheless, the Companymanaged to maintain the supportof its clients and was awarded morethan USD 930 million in new contractwins during 2012. This includedvarious, major new build projects inboth the oil and gas industry, such as

two more fully outfitted and equippedLeTourneau rigs for our key client,NDC, and the fabrication of twotopsides and jackets for a new client,and the renewables sector whereSeajacks awarded us a new contractfor a fourth liftboat vessel, of a similardesign as those already deliveredto Seajacks.

The rig refurbishment market for boththe onshore and offshore segmentsremained positive in 2012, whichallowed Lamprell to win multiple

orders for jackup rig upgrade andrefurbishment projects. This hashistorically been a keystone for ourfranchise and we continue to be theregional leader by market share forthis type of business.

Saudi Arabia joint ventureIn another positive development, inSeptember 2012 Lamprell signed a jointventure agreement with Shoaibi Group,a Saudi industry and energy servicesprovider, and Al Yusr Townsend andBottum, a Saudi integrated logistical

services provider, to form LamprellArabia Ltd. The joint venture, whichwill be based in the oil-rich Easternprovince of Saudi Arabia, intends toestablish a presence for fabrication,refurbishment and repair of land drillingrigs. I am excited by the opportunitiespresented by the joint venture whichbuilds on the Groups existing businessin a country where we foresee extensiveneeds for such services, which are acore part of our offering.

Our peopleOur employees are the foundation ofour business. Their hard work overthe past four decades has builtLamprell into the business we areproud of today, and their wellbeing isessential for the continued success ofour Company. Since my return to thebusiness in October 2012, a primaryfocus has been to re-energise theworkforce, with a view to improvingmorale and thereby increasingproductivity. These efforts haveproduced results such as delivery

of the Windcarrier 2 vessel on thepromised revised delivery date.

At the same time, we have beenforced to take some tough decisionsto control costs in the Group at a timewhen it was struggling financially.This put additional pressure on ouroperations and has been a delicatebalance to manage. However, oncewe re-established control over thekey operational issues, we havebeen able to reassure our staff ofthe attractiveness of Lamprell as an

employer. Today, Lamprell employsover 11,000 staff.

Ongoing changes and outlookIn 2012 we encountered numerousoperational and financial problems,which forced us to reassess howwe run our business. The interimmanagement team has introducednew initiatives aimed at strengtheningLamprells project reporting systems,organisational structure, financialcontrols and risk management. Onesuch initiative was the introduction of

a new organisational structure whichprioritised project management andaligned project execution with theGroups reporting structures.

These initiatives will take some timeto bed down into the business but,as I pass the mantle of leadership tothe permanent CEO, James Moffat,I am proud of the genuine progressthat we have made over the last sixmonths and I believe that the outlookfor our business remains strong for2013 and beyond.

Peter WhitbreadInterim Chief Executive OfficerOctober 2012 March 2013

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Business ReviewChief Executives Review

As I join Lamprell as itsnew Chief Executive,I see a business withan attractive regionalfootprint and significantpotential where several,very serious issuesundermined its financialhealth in 2012 and

threatened its ability towin and execute work.Despite this, the Companymanaged to retain thetrust of its clients and itsleading market positionand that is a testament tothe fundamentals of thisbusiness and its historicability to execute projects.

Improvingour performance


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Health, Safety, Environment and

Security (HSES), in particular safety,has always been a core value for me.Hence I was pleased to see that,despite the operational challengesfaced by the Group in 2012 as wellas increasing the total number ofmanhours worked to over 37 million,Lamprell maintained and in factimproved its strong safety track record.

The total recordable incident rate(TRIR) in 2012 declined by nearly 80%over 2011, having already improved by58% in 2011 over the previous year.

This is a significant achievement.

Given the nature of our business thereare inherently significant health, safetyand environment risks and despite ourrecent successes we must continueto improve. To this end, I have alreadytasked the management to implementseveral new HSES strategic objectivesand key initiatives such as personalHSES contracts and hazardidentification, which I expect to deliverresults during 2013. Across the Group,I will be driving a culture where HSESwill be a key consideration in makingeveryday decisions, both at a corporateand at an individual level.

The interim management team has

done a great deal to stabilise Lamprellsoperations and financial position afterthe events of 2012. Our key prioritythis coming year is to implement andcomplete the initiatives introduced bythem, in order to avoid similar issuesin the future, and to position theCompany for the next stage in itsdevelopment. We will continue toimprove operations by increasing focuson risk management, project executionand financial controls.

I would like to thank Peter and

his team for their efforts during thechallenging transition period, andI look forward to working closely withthem to rebuild Lamprells reputationfor operational excellence andprofitable growth.

James MoffatChief Executive OfficerSince 1 March 2013

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Business ReviewOperational Highlights

Despite the significant challengesfaced by the Group in 2012,Lamprells operational capabilitiesand the fundamental processes andprinciples upon which it operatesresulted in the successful completionof several landmark projects, theachievement of key milestonesand the award of significant newcontracts. The Group continuedto focus on growing its reputationfor delivering high quality work andhas consolidated its competitiveadvantage within its core business.The Company continued to developits project controls to enhanceits financial performance andproject execution and to improve theprocesses and systems that will drive

our performance.

Reclaimingour competitiveadvantage

> Renewed focus on core capabilities

> Delivery of eight major projects fromJanuary 2012 through to March 2013

> USD 1.1bn of new contracts fromJanuary 2012 through to 28 February 2013


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Landmark projectsIn 2012 and early into 2013, the Group successfully delivered eight landmark new build projects:

Project Customer Segment Vessel type Delivery date Destination

Two 3000hpland rigs

Weatherford Oil & Gas LandRig Services

3000hp Aker slingshot March 2012 Kuwait

SeajacksZaratan

Seajacks Ltd. Renewable Energy Wind FarmInstallation Vessels

GustoMSC NG-5500Cself-elevating and self-propelled offshore windturbine installation vessel

May 2012 Europe

Haffar 2(Hull 108)

PEMSA Oil & Gas NewBuild Jackup

Drilling Rigs

F&G Super M2 new buildjackup drilling rig

June 2012 Mexico

NDCMakasib

National DrillingCompany

Oil & Gas NewBuild JackupDrilling Rigs

LeTourneau Super 116E(enhanced), self-elevating, 310ft new buildjackup rig

August 2012 Abu Dhabi, UAE

WindcarrierBrave Tern

Fred. OlsenWindcarrier

Renewable Energy Wind FarmInstallation Vessels

GustoMSC NG-9000Cself-elevating andself-propelled offshorewind turbine installationvessel

October 2012 North Sea

NDCMuhaiyimat

National DrillingCompany

Oil & Gas NewBuild Jackup

Drilling Rigs

LeTourneau Super 116E(enhanced), self-

elevating, 310ft new buildjackup rig

December 2012 Abu Dhabi, UAE

GreatdrillChaaya

GreatshipGlobal Energy

Oil & Gas NewBuild JackupDrilling Rigs

LeTourneau Super 116E(enhanced), self-elevating, 310ft new buildjackup rig

January 2013 Offshore India

WindcarrierBold Tern

Fred. OlsenWindcarrier

Renewable Energy Wind FarmInstallation Vessels

GustoMSC NG-9000Cself-elevating andself-propelled offshorewind turbine installationvessel

February 2013 North Sea

Highlights by business sectorsNew Build Jackup Drilling RigsLamprell consolidated its position as aleading international builder of jackupdrilling rigs in the sub-350ft class witha total of 12 new build rigs completedsince the Group entered this segmentfive years ago. Lamprell is currentlyconstructing eight more LeTourneauSuper 116E class design jackup rigs,for a number of its existing customers.

Wind Farm Installation Vessels

Despite the challenges faced on theFred Olsen Windcarrier vessels, theprojects remain worthy of mentiongiven their prototype design and theirscale. Each weighed more than

15,000 tonnes at delivery and theywere the first wind farm installationvessels of their size to be built in theregion, and the largest vessels ever tobe built by the Group. At load out, theBrave Tern and its sister vessel theBold Tern represented the largesttransport moves on wheels ever totake place in the Middle East.

The Groups award of a fourth vessel bySeajacks, the Hydra, further reinforcedits strong position in the wind turbine

installation segment. The Hydra isa repeat design of the first generationof smaller vessels that the Companysuccessfully delivered on time and budget(Seajacks Kraken and Leviathan).

New Build Offshore FacilitiesWith the capability to build large-scalecomplex process decks (more than10,000 tonnes), Lamprells expertisein the new build offshore segmentcovers a wide range of offshore fixedand floating facilities. Progress on theconstruction of an offshore topsidestructure comprising a two level utilitydeck and a five level accommodationmodule for a leading integratedenergy provider continued onschedule as did construction on the

Nexen Petroleum project (wellheadand a Production, Utilities andQuarters (PUQ) deck). Both projectsare currently proceeding on scheduleand on budget.

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Business ReviewOperational Highlights

Upgrade and refurbishment ofoffshore jackup rigsLamprell maintained its reputationas the regions leading rig upgradeand refurbishment facility with thecompletion of over 300 upgrade andrefurbishment projects representing

a regional market share in excessof 60%. Recent notable projectsincluded the Noble George McLeodand the Noble Jimmy Puckett forNoble Drilling; Rig 657 for Naborsand the Rowan Gilbert Rowefor Rowan Drilling along with theHercules 266 among others. Thecombined work scope on theseprojects included, but was not limitedto, living quarter upgrades andrefurbishment, as well as highvolumes of class driven work such

as structural steel renewal, pipingreplacement, machinery upgrades,recertification and painting. In addition,many customers approach Lamprellfor its expertise in the stringent Saudi

Aramco Schedule G compliancewhich allows rigs to operate offshore

Saudi Arabia. In recent months, similarprojects have been awarded toLamprell on a repeat basis by thesesame, existing customers.

Land Rig ServicesIn addition to the two new build landdrilling rigs delivered to Weatherford,the Land Rig Services business unitfocused its activities on land rigupgrade and refurbishment and theinspection and overhaul of mechanicaland rotary equipment. A majormilestone was the successful

completion of NDCs rig ND 32, thewalking rig. The Group has recentlyexpanded its Land Rig Servicesbusiness into Saudi Arabia throughthe establishment of the LamprellArabia joint venture. This will be akey focus for this business unit over

the coming few years because ofthe anticipated levels of land rigrefurbishment work which will berequired in Saudi Arabia.

Service businessesThe Group continued to see demandfor its service business offerings acrossa range of complementary markets.

The Group has a strong regional marketpresence through O&M, INSPECand Sunbelt services, which offera substantially different profile to thecore new build operations.


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Major new contract awards

Project Customer SegmentContract value(USD m) Contract date

New or repeatcustomer

Topsides andjackets

LeightonOffshorePte Ltd.

Oil & Gas New BuildOffshore Facilities

62.0 February 2012 Repeat

NDC5 and 6

NDC Oil & Gas New BuildJackup Drilling Rigs

333.3 April 2012 Repeat (exerciseof options)

Jackup newbuild drilling rig

Internationaldrillingcontractor

Oil & Gas New BuildJackup Drilling Rigs

227.0 May 2012 Repeat

SeajacksHydra

Seajacks Renewable Energy Wind Farm InstallationVessels

120.9 July 2012 Repeat

North Seaproject

Not disclosed Oil & Gas New BuildOffshore Facilities

40.0 December 2012 Repeat

Jackup newbuild drilling rig(one firm, oneoptional)

Jindal Group Oil & Gas New BuildJackup Drilling Rigs

Not disclosed February 2013 Repeat

HSES performance

Lamprell has always held itself tothe highest HSES standards. In 2012,the Group achieved some significantHSES milestones across some of themore complex projects, including theachievement of 1 million manhourswithout lost time incident (LTI) onthe Jindal Star jackup drilling rig, thecompletion of the Greatdrill Chaayawith 3.9 million manhours without asingle LTI, the completion of NDCMakasib and Muhaiyimat with 3.4and 4.1 million manhours without LTIrespectively, among others. Even in

relation to the underperforming keycontracts, Lamprells commitmentto safety was paramount and self-evident as can be seen by the factthat the Windcarrier Brave Ternwindfarm vessel was delivered after4.9 million manhours without a singleLTI. This strong HSES performance isreflected in the Groups overall resultswith the achievement of a combinedLTI Frequency Rate of 0.22.

To build on this safety track recordand to ensure consistency across

all divisions and branches, theGroup further expanded its SafetyObservation Audit Programme(SOAP) by adding the Work Area

Safety Hazard system (WASH) to

assist workers to identify potentialhazards at an early stage. Bothsystems will eventually lead to thelaunch of a new internal HSES identityprogramme entitled Nothing toChance which will encompassall aspects of internal HSESmanagement, training, processesand communication in order to furtherengage the workforce with HSES.

QualityLamprells reputation is foundedupon its ability to deliver high quality

projects to its customers on time andon budget and is focused on ensuringdelivery of its existing contracts.Lamprell aims to achieve maximumcustomer satisfaction and quality ofproduct and service. The Companyachieves this objective throughcompliance with all nationaland international standards andrequirements with respect to qualityassurance and through ensuringcost-effective jobs and services, anddelivery on time. Lamprell achievesthis by understanding customer

requirements, working togetherwith our customers to meet thoserequirements, understanding ourprocesses well and monitoring andmeasuring our activities.

To address some of the challenges

faced in 2012, the Group continued totake measures to improve its systemsand processes. The Group hasreorganised the project managementteam to allow further control by therespective project manager on thelandmark long-term projects. This keychange will make project managersmore accountable for their respectiveprojects while enabling seniormanagement to have greatervisibility of individual projects,thereby improving project controlsand reporting. The Company also

strengthened the systems controllingkey vendor deliveries and, under theleadership of a new Vice Presidentfor Procurement and Supply Chain,is working to ensure that newcontracts and orders are currentlybeing received in accordance withagreed delivery schedules. Therestructuring of the Groups coreengineering function headed by a newVice President for Engineering, hasalso helped to address some of theengineering-related challenges facedin 2012.

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Business ReviewRisk Assessment

Principal risks and uncertaintiesThe Board recognises that Lamprells

business is potentially exposed tomany different risks but believes thatthere are some business risks whichcan be accepted by the Groupprovided that acceptance of suchrisks creates value for the Group andthat the risks are properly managed.On that basis, the Board andmanagement take steps to identifyand evaluate the inherent risks,thereby enabling better managementand mitigation of their impact on thebusiness. Risk management, beingcritical to achieving the Groupsstrategic objectives and stakeholdersexpectations, is coordinated by seniormanagers in the Group with theoverall responsibility residing with theBoard. Outlined below is a descriptionof the principal risks and uncertaintiesfacing the Group, together with themitigating actions or circumstances.

The process for identifying, evaluatingand managing the significant risksfaced by the Group is ongoing and, inlight of the events of 2012, the Board

has tasked the new managementteam to refresh the risk managementprocesses. These risk managementsystems cannot completely eliminaterisks and thus there can never be anabsolute assurance against the Group

failing to achieve its objectives or amaterial loss arising. In the Boards

regular review of the Groups strategicplans, consideration is given to thoserisks which have been identified aspotential impediments to achievingthe Groups strategic objectives. Themanagement will, where practicable,deploy strategies to mitigate ortransfer risks, such as, for example,the purchase of insurance, thedevelopment of contractualmechanisms to limit liabilities, andthe employment of expertise eitherin-house or externally sourced tomanage potential hazards.

The risk factors below are notintended to be presented in anyassumed order of priority. Any of therisks and uncertainties discussed inthis document could have a materialadverse effect on the Companysbusiness. In addition, the risks setout below may not be exhaustive andadditional risks and uncertainties, notpresently known to the Company, orwhich the Company currently deemsimmaterial, may arise in the future.

In particular, the Companysperformance might be affected bychanges in market and/or economicconditions and in legal, regulatory andtax requirements.


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Headline risk Potential impact that we face How we protect the business

Financial andeconomic risks(Detailedanalysis of thefinancial riskscan be found onpages 69 to 72)

Availability offinancing

If the Company is unable to find financingfor its future projects, the business willnot grow.

The Company has the support of its lendergroup and is continuing discussions withthe various lenders for the refinancing of itsdebt, with a view to securing a longer-termfinancial platform to fund future growth andalso, in the short term, to ensure that thereis no impact on operations in the meantime.

Liquidity risk There is a risk that the Company is unableto meet its financial obligations as theyfall due.

Management maintains adequate levels ofliquidity in the form of cash and committedcredit facilities. It also manages the cashflow exposure proactively and very regularly.

The financial assets are spread acrossmultiple, creditworthy financial institutions.

Counterpartycredit risk

The Company will suffer financial orcommercial exposure resulting from thefailure of key institutions, customers,partners or subcontractors.

Before entering into major contracts, theCompany may undertake credit checkswith a view to determining the risk ofcounterparty default. It has also developedclose relationships with key suppliers toensure early identification of problems andto react quickly.

Geopolitical risk,changes to fiscalregime(s)

The Company operates in markets wherelegal systems are still developing and whichdo not offer the certainty or predictability oflegal systems in mature markets. Changes

could adversely impact the financialcondition of the Group.

The majority of the Companys businessand personnel are located in the UAE whichis a very stable fiscal regime with minimaltaxation and with international standards

of living and conducting business.

Equity financingrisks

The Group may, in the longer term, seek toraise further funds through the issue ofadditional shares or other securities. Anyfunds raised in this way may have a dilutiveeffect on existing shareholdings.

The Board considers that it must be ableto avail of all options to fund growth in thebusiness, whichever is determined to be inthe best interests of the business includingequity financing, if required.

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Operationalrisks

Project delivery Failure to deliver on time and/or on budgetmay subject the Company to financial orcommercial risks under the contract withcustomers and/or reputational damage toLamprells franchise.

There are also risks attached to delayscaused by our subcontractors or suppliers,which will have a knock-on impact to ourdelivery schedule with the end client.

Lamprell operates a system of proceduresand project reviews which, combined withmanagement oversight, rigorous contractmanagement and internal audit, aim tomitigate any risk of unsuccessful projectdelivery and to improve efficiencies.

The Company has developed long andstable relationships with customers andsuppliers evidencing the strong trackrecord of successful project execution inour core competencies. The Company willnot compete for prototype projects, butrather will focus on projects which are

well-understood and where the risks canbe managed more effectively.

Human capitalrisks

There are currently significant challengesto attract and retain sufficient numbers ofskilled personnel, on whose performancethe Company depends for success; if itloses any of these key personnel, theoverall business may be impaired.

The Companys ability to perform itscontractual obligations may be adverselyaffected by inflation and rising labour costs,as well as by work stoppages and otherlabour problems.

By using market-based compensationlevels and providing an appealing workenvironment conducive to developmentof individual skills and experience, theCompany seeks to implement a clear HRstrategy designed to align the businessstrategy with the goal of attracting,developing and retaining the best peoplefor Lamprell.

A key differentiator for many staff is that theCompany is based in and principallyoperates out of the UAE which generally

has high living standards.

Businessdisruption

The Company could be subject tosubstantial liability claims due to thehazardous nature of its business, such asfire and flood, and this potentially can delayor disrupt operations. Certain countries inwhich the Companys customers operatehave experienced armed conflict, terrorismor civil disorder.

Hazards are managed through prevention,mitigation, continuity planning and risktransfer through the purchase of insurance.

The Company monitors closely thechanging landscape of political risk,particularly high risk countries.

ContractualcommitmentsWarranty claims

The Company could be exposed to liabilityto customers under contractual provisions(resulting from product defects, faultyworkmanship or errors in design as well as

warranty claims and other liabilities, or froma failure to identify and report possiblecontractual risks) that may materially andadversely affect the Companys earnings.

The Company seeks to mitigate these risksthrough the operation of working practicesand processes designed to deliver highquality products and services, as well

as seeking contractual limits to its liability,and maintaining an appropriate insuranceprogramme. All significant contracts arereviewed internally prior to submission tothe client.

HSES risks The Company conducts its business withinan increasingly strict environmental andhealth and safety framework and may beexposed to potential liabilities andincreased compliance costs.

The Company takes all reasonable stepsto ensure that the right people doing theright job to a high quality. It maintainshigh standards in these important areasthrough effective HSES leadership andorganisational arrangements, together withappropriate policies and planning, whichare all in place to deliver a strong cultureof safety awareness.

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Strategic risks Competitiveenvironment,cyclical market

Demand for the Companys services maybe adversely impacted by a fall in the levelsof expenditure by existing customers, or inthe market in general.

Equally, the Company operates in a highlycompetitive industry, both regionally andfrom international competitors.

We market the Company on the basis of itsability to provide and service high qualityproducts and systems.

The Company has developed long-termand stable relationships with customers.Existing customers have often awardednew contracts to the Company, showingthe underlying strength of the business.

The Company operates in both the oil &gas and the renewables sectors. We arecontinually seeking to differentiate our offeringby reviewing our competitive advantage andtargeting customers accordingly.

Fluctuations inorder bookOver-reliance onlimited number ofcustomers

The Company operates on a project-by-project basis for major contracts and itdoes not have long-term commitments withthe majority of its customers, which maycause its visible order book to fluctuatesignificantly (particularly in relation to rigrefurbishment work).

The Company is dependent on a relativelysmall number of significant contracts at anygiven time, some of which are with thesame customers.

Given the amount of repeat businessfrom many of our existing clients, this istestament to the Companys ability toconsistently deliver high quality productsand systems.

This risk is addressed by seeking toimprove the balance in the businessportfolio between clients, service offeringsand sectors, crossing both the oil & gasand the renewables sectors.

Mergers and

acquisitions

A failure to identify, complete and

successfully integrate target acquisitionsrepresents a brake on growth and can alsoimpact morale among employees.

Lamprell has taken various steps to

integrate MIS (which was acquired in 2011)into its business, including rebranding,alignment of remuneration packagesamong employees and regularcommunication from senior managementto all levels of staff.

Complianceand legal risks

Major shareholder Lamprell Holdings Ltd, the entity holdinga major shareholding in the Company,may have interests which conflict withthe interests of other stakeholders.

Lamprell Holdings Ltd.s shareholdinghas been stable for years and is a statedlong-term strategic shareholder inthe Company.

Breach of ethics A substantive breach of the Lamprell codeof conduct and/or non-compliance withlaws or regulations may potentially lead todamage to the business, reputation andeven to claims for compensation or fines.

Lamprell has implemented a number ofenterprise-wide policies and procedures toprevent and/or mitigate the likelihood of anybreach or non-compliance including by way ofexample updating the anti-bribery policy, internalaudit reviews and ethics training programmes.Further measures are expected to be takenduring 2013 and beyond.

The Board and management will take allappropriate action for any breach of theCompanys ethical standards.

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Business ReviewFinancial Review

Significant operationalissues and delays on anumber of Lamprellslarge projects adverselyaffected the Groupsfinancial performance in2012, resulting in a lossbefore income tax andexceptional items for the

year of USD 105.0 million,as we anticipated in ourannouncement toshareholders inNovember 2012.

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Results from operationsIn 2012, Lamprells Group totalrevenue was down on the previousyear to USD 1,045.5 million (2011:USD 1,147.9 million). Revenue arisesfrom various business streams withthe majority generated from newbuild construction projects, whichincluded 10 new build jackup rigs,four liftboats for the offshore windfarm installation sector and twoland rigs. Revenue from new buildfabrication projects across the Groupdecreased by 29% to USD 560.0

million (2011: USD 789.7 million).

The reduction in new build revenuewas driven primarily by the renewablessegment, which saw a substantialreduction to USD 66.4 million (2011:USD 289.1 million). This segmentsuffered not only from lower levelsof activity but also from the Groupscontractual obligations to pay liquidateddamages for delays in delivery toa number of significant projects,in particular the Windcarrier 1 andWindcarrier 2 wind farm installation

vessels which were deducted fromthe final value of the contract.

The revenues for the Companysnew build oil & gas segment, whichcomprises the fabrication andconstruction of offshore jackup andland rigs, were broadly in line with theprevious year, totalling USD 493.6million compared to USD 500.6 millionin 2011. The small decline in revenuesin this segment was a result of theCaspian Sea jackup rig project where,as announced by the Company in

November 2012, there were delayswhich deferred revenues for thatproject from 2012 to 2013.

The Group has historically performedwell in the field of rig refurbishment(which includes both repair andmaintenance as well as rig upgrades).However the 2012 revenues for thissegment were impacted by lowervolumes following a strongperformance experienced in 2011,resulting in USD 176.9 million in revenuefor the year (2011: USD 191.0 million).

On a more positive note, the Groupsoffshore platform constructionbusiness saw significantly higherlevels of revenue during the yearfollowing the award of two largeprojects. Revenue in this segmentincreased from USD 52.5 million in2011 to USD 179.7 million in 2012.

Other revenue increased toUSD 128.9 million (2011: USD 114.6million) driven by additional revenuestreams from the other businessesthat were acquired in 2011 as part

of the MIS group of companies.

Groups losses for 2012Delays and cost overruns caused byoperational issues on a number ofmajor projects resulted in a gross lossof USD 19.6 million for the year (2011:profit of USD 132.9 million), and acorresponding negative gross marginof 1.9% (2011: positive 11.5%). Themajor components of this loss, whichare in line with the Companysannouncement to shareholders inNovember 2012, relate to the following

key projects:> Windcarrier 1 Brave Tern:

USD 36.3 million;> Windcarrier 2 Bold Tern:

USD 32.5 million;> Seajacks Zaratan: USD 7.1 million;> Caspian Sea jackup project:

USD 25.8 million;> Minor EPC projects: USD 12.0 million.

The operating loss for the year beforeexceptional items and income tax wasUSD 84.5 million (2011: profit ofUSD 90.2 million before exceptional

items) and includes marginally higheroverhead costs resulting primarily fromchanges in the executive managementteam, the consulting fees associatedwith the external review of the businessand an impairment of USD 4.4 million inrelation to the continued implementationof the Groups ERP system togetherwith certain lease-hold rights. Thesecosts are partially offset by the effect ofother income including a one-off gain ofUSD 4.3 million in relation to aninsurance claim.

EBITDA for the year before exceptionalitems was negative USD 62.3 million(2011: positive USD 100.8 million beforeexceptional items). The EBITDA margindeclined from 8.8% in 2011 to anegative 6.0% in 2012, reflecting theoperating performance of the business.

Finance costsNet finance costs in the 2012 periodincreased to USD 21.5 million (2011:USD 16.2 million). This increase islargely the result of the bankingfacilities relating to the acquisition of

MIS, utilisation of new facilities andincreased facility and guaranteecharges related to new contractawards in the year.

TaxationThe tax charge of USD 0.8 million in2012 is in respect of tax on the Groupsservice operations in Kazakhstan andQatar acquired in 2011 as part of theMIS group of companies (2011:USD 0.2 million). The Group is notcurrently subject to income tax inrespect of its operations which are

substantially undertaken in the UAE,and the Company does not anticipateany liability to income tax arising onthese operations in the foreseeablefuture. The Company, which isincorporated in the Isle of Man, had noincome tax liability, or benefit for theyear ended 31 December 2012, as it istaxable at a 0% rate in line with the localtax legislation.

Net loss and loss per shareThe Group recorded a loss beforeincome tax and exceptional items for

the year of USD 105.0 million (2011:profit before exceptional items ofUSD 74.0 million) in line with ourexpectation as announced inNovember and the operating lossesnoted above.

The fully diluted loss per share amountsto 42.45 cents (2011: earnings per sharebefore exceptional items of 26.47 cents)reflecting the operational performanceof the Group for the year.

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Capital expenditureFollowing significant investment in 2011resulting from the completion of ourHamriyah facility, and as a result oflosses made during 2012, the Grouphad reduced capital expenditure in 2012. Expenditure on property,plant and equipment during theyear amounted to USD 16.8 million(2011: USD 55.5 million). The mainareas of expenditure were buildings andrelated infrastructure at Group facilities(including capital work in progresscompletions) amounting to USD 8.2

million (2011: USD 26.0 million) andoperating equipment of USD 6.5 million(2011: USD 9.9 million).

Balance sheetTotal non-current assets at the endof 2012 were USD 390.4 million(2011: USD 417.1 million), whichhave been negatively impacted by aUSD 9.5 million decrease in the netbook value of property, plant andequipment and a USD 11.0 milliondecrease in identified intangibleassets due to higher depreciation

and amortisation charges followingthe completion of the MIS acquisitionand the minor impairment ofintangibles referenced above.

Trade and other receivables decreasedto USD 398.3 million (2011: USD 668.8million) as a result of a number ofsuccessful project completions,namely the disposal of Hull 108and the completion of the SeajacksZaratan project, and the improveddebtor management within thebusiness. The working capital position

improved significantly in the last quarterof 2012 as the Groups collection oftrade debtors and other receivablesimproved and accordingly the Groupended the year with a strong net cashposition of USD 104.1 million (2011: netdebt of USD 101.7 million).

Exceptional items in these financialstatements relates to a regulatoryfine recorded in the relevant yearamounting to GBP 2.43 million(equivalent USD 3.72 million convertedat an exchange rate of USD 1.53 perGBP) and related legal expenses ofUSD 1.0 million. In the prior year,exceptional items related to theacquisition of MIS.

Operating cash flow and liquidityThe Groups net cash flow fromoperating activities for the year

reflected a net inflow of USD 250.7million (2011: net outflow of USD 54.6million) generated by a combinationof successful post-MIS projectcompletions, in particular the saleproceeds of Hull 108 for USD 126.5million in May 2012, and improvedworking capital management. Priorto working capital movements,the Groups net cash outflow wasUSD 50.8 million (2011: inflow ofUSD 101.4 million) due to the lossesdescribed above.

Net cash outflow from investingactivities totalled USD 18.5 million(2011: USD 408.8 million). The changeis a result of lower levels in investmentactivity compared to 2011, whichincluded the acquisition of MIS, aswell as reduced margin deposits ofUSD 22.3 million.

Net cash used in financing activitieswas an outflow of USD 148.9 million(2011: inflow of USD 371.1 million).This largely arose from repaymentof borrowing of USD 173.9 million

including mandatory repaymentof debt under the MIS acquisitionfacilities, which were drawn in July2011, and an increase in finance costsdue to servicing of this debt.

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Of the total cash of USD 263.4 millionat 31 December 2012, USD 115.3million was restricted in the formof margin deposits primarily forguarantees on major projects.

The period end outstandingborrowings was USD 159.3 million(2011: USD 251.1 million), whichhas reduced as a result of the partrepayment of the debt facility usedfor the MIS acquisition.

Shareholders equity decreased from

USD 533.9 million at 31 December2011 to USD 406.1 million at31 December 2012. The movementreflects lower retained earnings ofUSD 192.8 million (2011: USD 322.2million) and a total comprehensiveloss for the year of USD 109.0 million(2011: comprehensive income ofUSD 61.4 million).

Restructuring of debt facilitiesand going concernThe consolidated financial statementshave been prepared on a going

concern basis. The ability of theGroup to continue as a goingconcern is reliant upon the continuedavailability of external debt financingand access to bank guarantees forits major projects. The deteriorationof the Groups performance in2012 arising as a result of theunderperformance of certain keyprojects, the majority of which havenow been completed, caused theGroup to seek waivers for certainof its banking covenants for the yearended 31 December 2012. These

waivers were obtained prior to31 December 2012. The Groupis currently in discussions with itslenders to restructure its debt facilitiesand agree revised covenants ona long-term basis and has agreedfurther covenant waivers to facilitatethe continuation of the negotiations.

The Group expects to concludediscussions with lenders in asatisfactory manner and hascontinued to meet all interest andother payment obligations. Afterreviewing its cash flow forecasts fora period of not less than 12 months,from the date of signing of thesefinancial statements, the Directorshave a reasonable expectationthat the Group will have adequateresources to continue in operationalexistence for the foreseeable future.The Group therefore continues to

adopt the going concern basis inpreparing its financial statements.

DividendsGiven the post-tax losses in 2012,the Board of Directors of Lamprellrecommends that the Group makesno dividend payment for the year. Welook to the future with optimism, andwill review our dividend policy oncethe business returns to profitability.

Financial outlookThe Board anticipates that in the

early part of 2013 revenue levels willdecrease due to reduced activity.However, activity levels are expectedto improve towards the middle ofthe year in line with the solid orderbook which is already USD 1.3 billion.In the longer-term, the Company isencouraged by the strong biddingactivity across the business with thepipeline totalling more than USD 4.1billion. The Company has taken andwill continue to take further action tostabilise the business and prepare thefoundations for growth in the coming

years, by focusing on its traditionalareas of strength.

With all this in mind, the Companyexpects 2013 to be a recovery year,with stable revenues as compared to2012 and a gradual return toprofitability during the year.

Frank NelsonChief Financial Officer

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Corporate GovernanceBoard of Directors

Jonathan Silver (60)Deputy Chairman

AppointmentAppointed to the Board on24 August 2007Appointed as the Chairman of theCompany on 27 March 2009 andremained in that role until June 2012,when he assumed the role ofDeputy Chairman

Committee membershipMember of the Nomination

Committee

Skills and experienceJonathan qualified as a solicitor in1978, working first in London and laterin the United Arab Emirates. In 1981,he started his own practice in the UAEand merged that practice with Clyde& Co in 1989. Since then he hasheaded up Clyde & Cos operations inthe region, creating the largestinternational law firm operating in theMiddle East. Jonathan chairs Clyde& Cos regional management board

and represents the region on thefirms global management board.Jonathan has worked in the areasof international banking and finance,mergers & acquisitions, privateequity, project and constructionwork involving him in most sectorsof commercial activity includinginternational trade, energy,construction, shipping, commoditiesand insurance. Jonathan has, formore than 20 years, been associatedwith the Lamprell Group, providinglegal advice on numerous matters.

Current external appointmentsDirector of Tri-Emirates InvestmentsLimited and its various subsidiarycompaniesDirector of CCIP Limited and itssubsidiary company

James Moffat (59)Chief Executive Officer

AppointmentAppointed as the Chief ExecutiveOfficer on 1 March 2013 andappointed to the Board with effectfrom 19 March 2013

Committee membershipNone

Skills and experienceJames Moffat has over 35 years

of experience in the offshoreengineering, construction and projectmanagement sectors. From 1996 anduntil joining the Lamprell Group, MrMoffat was employed with KBR groupof companies, working in various rolesincluding heading up the KJV onthe Gorgon Project, Australia sinceAugust 2010 and, before that,acting as VP of worldwide OffshoreConstruction and, subsequently VPProject Management (Asia Pacific)from 2008 to 2010. As the GeneralManager of KJV (Gorgon), Mr Moffat

managed a very large integratedproject management team comprisingcontractor and client staff.

Mr Moffat worked for the McDermottgroup from 1977 to 1996 where helatterly managed the Batam facilityin Indonesia. Before his time inIndonesia, Mr Moffat was workingfor the McDermott group in Scotland,concentrating on the structuraland engineering requirements forconstruction and load-out of jackets,decks and modules.

Mr Moffat is a Chartered Engineerand has a BSc (Hons) in CivilEngineering from Edinburgh Universityand is a member of the Institution ofCivil Engineers.

Current external appointmentsNone

John Kennedy (63)Non-Executive Chairman

AppointmentAppointed as a Director and theNon-Executive Chairman on15 June 2012

Committee membershipAppointed as Chairman of theNomination Committee on23 August 2012Member of the Audit andRemuneration Committees

Skills and experienceMr Kennedy is a highly experiencedengineer who spent most of hisexecutive career in the oilfield servicessector. He started his career inSchlumberger and then moved toHalliburton where he ultimately heldthe role of Executive Vice President.From 2003 to 2011 Mr Kennedy heldthe position of Executive Chairmanof Wellstream Holdings Plc, a FTSE250-listed plc, until its successfulacquisition by GE in 2009. Currently

he also serves as an advisor andconsultant to several oilfield servicecompanies. In 1993, Mr Kennedyreceived the Sloan Fellowship,London Business School. He isa Chartered Engineer (CEng) andfellow of the Institution of ElectricalEngineers (FIEE). Mr Kennedyalso holds an MSc in 1993, BE in1972, and CEng from UniversityCollege Dublin.

Current external appointmentsNon-Executive Director of CRH plc

Non-Executive Chairman of MaxwellDrummond International Limited,Hydrasun Holdings Limited, WelltecA/S and BiFold Group Limited.


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Peter Whitbread (68)Executive Director

AppointmentAppointed as an Executive Directorand the Interim Chief Executive Officeron 4 October 2012, before standingdown as the Interim Chief ExecutiveOfficer on 1 March 2013


Skills and experience

A Chartered Quantity Surveyor withover 35 years of experience in the oil& gas services sector, with extensiveexperience in managing marineconstruction companies and in thedirect project management of a widerange of major marine projects, heavymarine equipment and vessels. Peterjoined Lamprell in 1992, holdinga variety of senior positions until hewas appointed as the Chief ExecutiveOfficer of the Group in 2006. He heldthis position until May 2009 and wasalso the Chairman of the Group until

5 February 2008. He was appointedas the Director of InternationalDevelopment in May 2009. During hiscareer he has held a number of othersenior management positions anddirectorships with marine constructioncompanies in the Middle East region.

Current external appointmentsNone

Colin Goodall (68)Senior IndependentNon-Executive Director

AppointmentAppointed to the Board on14 September 2008Appointed as Senior IndependentNon-Executive Director on

19 January 2009

Committee membershipAppointed as Chairman of theRemuneration Committee on23 August 2012Member of the Audit andNomination Committees

Skills and experienceColin was the former Chairman ofDana Petroleum plc and ParkmeadGroup plc. Colin qualified as achartered accountant and is a memberof the Chartered Institute of Taxation.He spent most of his career in theupstream oil & gas industry with BP plc,where he joined the finance team in1975, later becoming the first Chief ofStaff within the BP Group. From 1995to 1999 he served as Chief FinancialOfficer for BP Europe and then as BPssenior representative in Russia. His

career has involved assignments inAfrica, the Middle East, Europe, Russiaand the Americas.

Current external appointmentsNon-Executive Chairman of SindicatumSustainable Resources Ltd.Non-Executive Chairman of GoldenHorde Ltd.Non-Executive Chairman of AustraliaOriental Minerals

Deena Mattar (47)Non-Executive Director

AppointmentAppointed as a Non-ExecutiveDirector on 1 April 2012

Committee membershipAppointed as Chairman of the AuditCommittee on 23 August 2012Member of the Remuneration andNomination Committees

Skills and experienceDeena served as Group FinanceDirector of Kier Group plc, a major

construction, property and servicesgroup, from 2001 to 2010, havingjoined Kier in 1998 as FinanceDirector of Kier National, a majordivision of that group. Prior to this sheheld senior positions at KPMG whereshe was involved in both audit andtransaction services. Deena is aFellow of the Institute of CharteredAccountants in England and Wales.

Current external appointmentsNon-Executive Director of Invensys plcNon-Executive Director of RM plc.Non-Executive Director of WatesGroup Limited, a privately ownedconstruction business

Frank Nelson (61)Chief Financial Officer

AppointmentAppointed as the Interim Chief FinancialOfficer on 12 November 2012

Appointed to the Board and as Chief

Financial Officer on 21 March 2013


Skills and experiencePrior to joining Lamprell, Frank wasFinance Director of constructionand house-building group GallifordTry Plc from 2000 until October 2012.He was previously Finance Directorof Try Group Plc from 1987, leadingthe company through its flotation onthe London Stock Exchange in 1989,

business expansion throughoutthe 1990s, and subsequently thecompanys merger with Gallifordin 2001 to form a leading UK playerin construction. In all, Frank hasover 25 years of experience in theconstruction, contracting and energysectors. He has been a Fellow of theInstitute of Cost and ManagementAccounting since 1975.

Current external appointmentsNon-Executive Director of ThamesValley Housing Association

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Corporate GovernanceDirectors Report

The Directors present their Annual Report on the affairs of theCompany and the Group together with the financial statements

and Auditors Report, for the year ended 31 December 2012.

Lamprell plc is the holding company of the Group, and it was

admitted to listing on the main market of the London Stock

Exchange on 6 November 2008.

Principal activities

The principal activity of the Group is the provision of diversified

engineering and contracting products and services to the

onshore and offshore oil and gas and renewables industries.

The Group operates through a number of subsidiaries which

are set out in Note 1 to the financial statements.

The principal activity of the Company is to act as a holdingcompany for the Group.

Results and dividends

The financial statements of the Group for the year ended

31 December 2012 are set out on pages 51 to 58. The Groups

loss before income tax and exceptional items for the year

amounted to USD 105.0 million (2011: profit before exceptional

items of USD 74.0 million).

The Directors do not recommend the payment of any dividend

for the financial year ended 31 December 2012.

There was a reduction of USD 129.4 million (2011: increase

of USD 35.2 million) in retained earnings for the year ended31 December 2012 representing the loss for the year, the

dividend declared in respect of 2011, adjustments for share-

based payments and the purchase of treasury shares. For details

refer to the Consolidated Statement of Changes in Equity on

page 55.

Business review and future developments

A full review of the Groups activities during the year, recent

events and future developments is contained in the Chairmans

Statement on pages 6 to 7, the Chief Executives Review on

pages 8 to 11, the Operations Highlights on pages 12 to 15,

and the Financial Review on pages 20 to 23.

Principal risks and uncertaintiesThe Board has established a process for identifying, evaluating

and managing the significant risks the Group faces. A detailed

analysis of the principal risks and uncertainties can be found on

pages 16 to 19.

Corporate governance and corporate social responsibility

The Corporate Governance Report on pages 29 to 36 and

the Corporate Social Responsibility Report on page 49 in

combination provide full details on the efforts made by the

Company in these areas.

Directors Remuneration ReportDetails of Directors remuneration for the year ended

31 December 2012 can be found in the Directors Remuneration

Report on pages 37 to 48.

Directors

The Companys Articles of Association provide for a Board of

Directors consisting of not fewer than two but not more than 12

Directors, who manage the business and affairs of the Company.

The Directors may appoint additional or replacement Directors,

who shall serve until the next AGM of the Company at which point

they will be required to stand for re-election by the members.

At each AGM one third or the number nearest to one third of the

Directors are required to retire by rotation and they may stand forre-election. A Director may be removed from office at a general

meeting by the passing of an Ordinary Resolution. At the

Companys 2013 AGM all current Executive and Non-Executive

Directors will retire and seek re-election (in accordance with the

UK Corporate Governance Code), except for Deena Mattar and

Colin Goodall.

The Directors who served in office during the financial year were

as follows:> John Kennedy (appointed on 15 June 2012)> Jonathan Silver> Colin Goodall> Deena Mattar (appointed on 1 April 2012)

> Peter Whitbread (appointed on 4 October 2012)> Richard Raynaut (retired on 7 June 2012)> Brian Fredrick (resigned on 14 June 2012)> Nigel McCue (stood down from the Board on 3 October 2012)> Christopher Hand (stood down from the Board on

3 October 2012)> Jonathan Cooper (stood down from the Board on

3 October 2012)> James Moffat was subsequently appointed to the Board on

19 March 2013.

Directors interests

The Directors interests in the ordinary shares of the Company

are set out in the Directors Remuneration Report on pages 37

to 48.


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Capital structure and significant shareholdersDetails of the authorised and issued share capital together

with details of movements in share capital during the year are

included in Note 26 to the financial statements. The Company

has one class of share in issue, ordinary shares of 5 pence each,

all of which are fully paid. Each ordinary share in issue carries

equal rights including one vote per share on a poll at general

meetings of the Company, subject to the terms of the Companys

Articles of Association and applicable laws. Votes may be

exercised by shareholders attending or otherwise duly

represented at general meetings. Deadlines for the exercise of

voting rights by proxy on a poll at a general meeting are detailed

in the notice of meeting and proxy cards issued in connection

with the relevant meeting. There are no restrictions on the

transfer of shares.

Details of employee share schemes are disclosed on pages 41

to 42 of the Directors Remuneration Report and in Note 8 to the

financial statements. During the year the following awards of

ordinary shares of 5 pence were granted:

Granted Outstanding

2012 2011 2012 2011

Lamprell plc Free

Share Award Plan 287,500 Nil 217,500 Nil

Lamprell plc

Retention Share

Plan Nil Nil Nil Nil

Lamprell plcExecutive Share

Option Plan Nil Nil Nil* 50,531

Lamprell plc

Performance

Share Plan 507,216 377,960 161,918 930,833

* All Directors Outstanding Executive Share Options were exercised during 2012.

Please see the Directors Remuneration Report on pages 37 to 48 for more details.

The awards under the Lamprell plc Free Share Plan, the Lamprell

plc Retention Share Plan and the Lamprell plc Performance

Share Plan are granted at Nil price.

Pursuant to the Companys share schemes, the Employee

Benefit Trust, as at the year-end, held a total of 14,686 (2011:449,734) ordinary shares of 5 pence, representing less than

0.01% (2011: 0.17%) of the issued share capital. The voting rights

attaching to these shares cannot be exercised directly by the

employees, but can be exercised by the Trustees. However,

in line with good practice, the Trustees do not exercise these

voting rights. In the event of another company taking control of

the Company, the employee share schemes operated by the

Company have set change of control provisions. In short, awards

may, in certain circumstances and in approved proportions, be

allowed to vest early or be allowed to be exchanged for awards

of equivalent value in the acquiring company.

The Company was given authority at the 2012 AGM to makemarket purchases of up to 26,000,000 ordinary shares of

5 pence. This authority will expire at the 2013 AGM, where

approval from shareholders will be sought to renew the authority.

Approval from shareholders is also proposed to be sought to

authorise the Directors to allot the Companys unissued shares

up to a maximum nominal amount of 3,900,000, representing

approximately 30% of the Companys current issued ordinary

share capital (excluding treasury shares) and to issue equity

securities of the Company for cash to persons other than existing

shareholders, other than in connection with existing exemptions

contained in the Companys Articles of Association or in

connection with a rights, scrip dividend, or other similar issue,

up to an aggregate nominal value of 650,000, representingapproximately 5% of the current issued ordinary share capital of

the Company. Similar authorities were given by the shareholders

at the AGM in 2012 and the authorities now sought, if granted,

will expire on the earlier of the conclusion of the AGM of the

Company next year and the date which is 15 months after the

granting of the authorities.

As at 20 March 2013, being the latest practicable date prior to

the publication of this Annual Report, the significant interests in

the voting rights of the Companys issued ordinary shares as per

notification received by the Company (at or above the 3%

notification threshold) were as follows:

Voting rights

attaching to

issued total

of ordinary shares

% of

total

voting

rights

Lamprell Holdings Limited 86,234,127 33.12

Schroder plc 31,198,599 11.98

Massachusetts Financial Services Co 13,328,527 5.12

Legg Mason Inc 12,968,030 4.98

Essential contracts

There are no individual contracts or other arrangements which

are deemed essential to the Groups business.

Annual General Meeting

The Companys 2013 Annual General Meeting (AGM) will beheld at Level 15, Rolex Tower, Sheikh Zayed Road, Dubai,

United Arab Emirates on Monday 27 May 2013 at 10:00 AM

(UAE time). The notice of meeting and an explanatory circular to

shareholders setting out the AGM business accompanies this

Annual Report.

Payment policy

The Groups policy in respect of its vendors is to agree and

establish terms of payment when contracting for the goods or

services and to abide by those payment terms. The Company

is the holding company of the Group and has no trade creditors.

Charitable and political donations

During the year the Group made no political donations (2011: Nil),and made charitable donations amounting to USD 62,708

(2011: USD 62,000).

Company

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ess

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Governance

Financial

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AuditorsAs far as each Director is aware, there is no relevant audit

information of which the Companys auditors are unaware. In

addition, each Director has taken all the steps that he ought to

have taken as a Director in order to make himself aware of any

relevant audit information and to establish that the Companys

Auditors are aware of that information.

The auditor for the year ended 31 December 2012 was

PricewaterhouseCoopers. PricewaterhouseCoopers has

expressed its willingness to continue in office as auditor and a

resolution to reappoint it will be proposed at the forthcoming

Annual General Meeting.

Going concernThe consolidated financial statements have 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 of the Groups performance in 2012 arising as a

result of the underperformance of certain key projects, the majority

of which have now been completed, caused the Group to seek

waivers for certain of its banking covenants for the year ended

31 December 2012. These waivers were obtained prior to

31 December 2012. The Group is currently in discussions with its

lenders to restructure its debt facilities and agree revised covenants

on a long-term basis and has agreed further covenant waivers to

facilitate the continuation of the negotiations.

The Group

17803 lamprell ar12 final

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