RNS Number:9562X
Cammell Laird Holdings PLC
29 January 2001
PRESS RELEASE
Date: Embargoed until 7.00am, Monday 29 January 2001
Contact: Brett Martin, Deputy Chief Executive
Jon Schofield, Finance Director
Cammell Laird Holdings PLC Tel: 0151 236 5500
Peter Otero
Financial Dynamics Tel: 020 7831 3113
Cammell Laird Holdings PLC
Interim Results
Cammell Laird Holdings PLC, the international marine services company,
announces interim results for the six months to 31st October 2000.
Operational Highlights
* Costa Classica dispute will have a significant impact on the Group's
financial results for the full year
* Both the Port of Marseille and Portland, Oregon acquisitions have been
fully integrated within the Group and have made a small contribution to
the first half results
* Order book, as at 31 December 2000, totalled #41 million
* Management refocused resulting in changes to organisational structure
Financial Highlights
* Pre-tax loss of #3.5 million (1999 - Profit #7.7 million)
* Operating loss of #1.9 million (1999 - Profit #8.2 million) on turnover
of #52.7 million (1999 - #61.7 million)
* No dividend to be paid at the interim stage
Juan Kelly, Chairman of Cammell Laird, comments:
"The non-delivery of the Costa Classica will have a significant impact on our
financial results for the full year. However, the Group has a highly committed
management team and skilled workforce that we believe will be more effective
and focused under the new management structure. Additionally, the growth of
the markets in which we operate and the requirement for our particular skills,
remain strong. We fully expect to reverse the recent sequence of events with
good profitable work in the near future."
CAMMELL LAIRD HOLDINGS PLC
CHAIRMAN'S STATEMENT
The first half of the financial year has proved a difficult time for the Group
primarily as a result of the contract dispute with Costa Crociere, the owners
of Costa Classica.
Operating loss for the period was #1.9m (1999 - profit #8.2m) on a turnover of
#52.7m (1999: #61.7m) resulting in a pre-tax loss of #3.5m (1999 - profit #
7.7m). Given the disappointing financial performance your Board believes it
would be inappropriate to propose an interim dividend.
Costa Classica
In September 1999 the Group entered into a contract with Costa Crociere to
undertake the lengthening and upgrade of their cruise vessel, Costa Classica.
The majority of the work was to be carried out before the vessel arrived at
our Birkenhead facility, and involved the construction of a mid-body section,
plus additional upper decks and other steelwork for the existing ship.
Costa Classica was due to arrive at the Yard on 23rd November 2000. On 18th
November the vessel left its homeport of Genoa for Birkenhead, with 30 of our
staff on board to carry out preparatory work. On 21st November, following a
meeting between the parties, Costa advised the Company that it wished to amend
the contract involving retentions from the contract price and other more
onerous conditions. In their letter, Costa gave the Board until 27th November
to respond, but in the event they re-called the vessel on 22nd November with
our personnel being put ashore at La Coruna in Northern Spain.
Urgent explanation was sought from Costa Crociere who subsequently informed us
that they were seeking to appoint arbitrators to assess whether they had the
right to 'suspend' or 'terminate' the contract because of alleged delays and
technical issues. These allegations were in contrast with an independent
report received by both parties in October. Further, the allegations were not
consistent with the despatch of the vessel from Genoa.
Over the last two months we have had a series of meetings with Costa in an
attempt to settle our differences and reactivate the contract. Regrettably, an
agreement has not been reached, and your Board has instructed lawyers to file
for dissolution of the contract on the grounds that Costa Crociere are in
breach. Your Board remains fully prepared to meet with Costa to seek an
amicable settlement to this issue. Failing this, however, we will vigorously
pursue a remedy through the arbitration process.
The terms of the Costa Classica contract provide for payment by Costa Crociere
on completion of the ship, and therefore the delay, twelve months into a
sixteen month contract leaves us carrying substantial costs.
It is our legal counsel's opinion that we have a very strong case in law and
consequently, if necessary, we will be seeking to recover costs and damages
from Costa Crociere. However, from an accounting viewpoint, prudence must
apply to any carrying value of work in progress and therefore accrued profits
on the contract to date have been eliminated.
We have been successful in securing replacement work for our Birkenhead yard,
but, inevitably, there are consequential losses beyond the half-year, in
particular in the third quarter when there was very little time to rectify the
shortfall.
The non-delivery of the Costa Classica will have a significant impact on our
financial results for the full year. Unless circumstances change, we will not
recognise any profit on the contract. In addition, the overheads of the Group
were increased to support the contract and substantial yard capacity was
reserved for the project's completion. The costs of disruption and of reducing
these overheads will impact on the second half-year, particularly the third
quarter.
Acquisitions
During the period the Group made two important longer-term investments.
In July 2000 we entered into a 20-year concession with the state-owned Port of
Marseille to operate the three largest dry-docks, two of which are of a much
greater capacity than was previously available to the Group. The concession
provides us with access to an existing local repair market, and the prospect
of developing new markets, in particular within the strong oil and gas
exploration sector where we have hitherto been restricted by the size of
dry-docks available to the Group.
Under the terms of the concession, the Port of Marseille undertook maintenance
work during the summer, resulting in the two larger dry-docks not being
available to the Group until October 2000. Consequently, the new operation has
had little impact on our results.
In August 2000 we acquired a 49% stake in Cascade General, the largest
commercial ship repair company on the west coast of the United States for
$7.7m. Situated in Portland, Oregon, Cascade is ideally situated to service
the Alaskan markets, and operates the largest floating repair dry-dock in the
Americas. Like Marseille, the benefits to the Group of this investment are
medium to long term, as the location and reputation of Cascade are
complemented by the marketing capacity and technical know-how within Cammell
Laird.
Both acquisitions have made a small contribution to our first-half results.
Current and prospective workloads
As the Group's operational capacity has grown, our strategy of providing an
integrated service from design through to outfitting, as opposed to extensive
outsourcing, now demands larger projects to complement the high volume of
repair and smaller conversion projects. These larger projects should provide a
stable level of underlying business facilitating investment and training, and
enable us to generate significant incremental profits from higher volume
repair and conversion business. Much of our sales and marketing effort over
the past twelve months has been aimed at achieving this balance. Whilst we
firmly believe this is the right approach, we have had to accept a time lag
between the cost of developing the capability and the resulting increase in
sales.
The first indications of progress in this policy came late last year with the
agreement with Luxus Holdings to build two '6 star' cruise ships in a deal
worth $500m. The contract is conditional on the Department of Trade and
Industry providing loan guarantees to Luxus similar to those available in most
of mainland Europe, and finalisation of banking arrangements. Provided the
necessary level of support is obtained, the project will commence in February
and will provide bedrock work throughout the Group for three years.
The Group continues to secure a regular flow of repair and conversion projects
and at 31 December 2000, the current order book totalled #41m (1999: #43m
excluding Costa Classica).
Management
The Board has concluded that several significant changes in our organisation
and management are necessary to ensure the optimum development and focus of
our expanded international operations.
John Stafford has indicated that he wishes to stand down from his posts of
Chief Executive and PLC Board director, and the Board has accepted his
resignation with effect from 26 January.
In the short-term, Jon Schofield, our Finance Director has been appointed
Acting Chief Executive, with his deputy, Ged Gurney, fulfilling the role of
Acting Finance Director. Brett Martin will assume the new post of Corporate
Development Director and will take over Mr Stafford's former responsibilities
for strategic development of the Group. The process of recruiting a new Chief
Executive will commence shortly.
In order to support the Acting Chief Executive in his primary task of
consolidating our expanded operations, a number of other structural changes
have been made.
The Public Company Board (Cammell Laird Holdings PLC) is being reduced from
eleven members to six. The revised Board will comprise the three existing
non-executive directors (Juan Kelly as Chairman, Hugh McCoy and Rowan Sumner),
the Chief Executive, Finance Director, and Corporate Development Director. Mr
McCoy has been appointed as Senior Non-Executive Director and Chairman of the
Audit Committee.
Our intermediate holding company, Cammell Laird Group PLC, will provide a
focused operational management team chaired by the Chief Executive who will
report directly to the public company board. A key member of this team will be
David Skentelbery who has been appointed as Group Managing Director. David
recently joined us from Global Crossing and has a wealth of experience in the
marine industry at senior management level.
Paul Ashcroft, Andy Boardman, David Gillam, Chris Millman and John Syvret,
have resigned from the public company board with effect from 26 January, but
remain directors of Cammell Laird Group PLC and will continue to have a
significant role in the management of the Group.
I believe that these changes will bring to bear a better focus of management
resource to suit our enlarged operations.
Impact on financial performance
As was implicit in my earlier comments, the sudden problem of the Costa
Classica, combined with the delay in securing large orders mean that activity
levels for this financial year will be lower than originally forecast. As a
result, we now expect our performance to be significantly below last year.
In addition, we have commenced a major review and rationalisation of our cost
base which will result in additional one-off expenditure in the second half of
the financial year. The benefits of this rationalisation will flow through in
the next financial year.
The disruption caused by Costa Classica will give rise to further losses in
the third quarter results but we expect trading performance to improve from
the fourth quarter onwards.
The dispute with Costa Crociere will also result in higher levels of borrowing
than planned. The Group is operating within the borrowing limits included in
its banking facilities and anticipates continuing to comply with the
requirements of its lenders. At 25 January, the Group had overdrafts totalling
#29.7m.
Prospects
During 2000, Cammell Laird moved from being essentially a UK marine services
company to an international business with shipyards spanning the Western
Hemisphere. Whereas at the start of the year our capacity and capability was
restricted by our concentrated location and limited dry-dock sizes, we enter
2001 with a much expanded, geographically diverse portfolio of facilities, and
some of the largest dry-docks in operation. As a result we are now able to
undertake a much wider range of projects and have the capability to
substantially increase our sales over the medium to long-term.
We have a highly committed management team and skilled workforce that we
believe will be more effective and focused under the new management structure.
Additionally, the growth of the markets in which we operate and the
requirement for our particular skills, remain strong. We fully expect to
reverse the recent sequence of events with good profitable work in the near
future.
J.H. Kelly CBE
Chairman
CAMMELL LAIRD HOLDINGS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Unaudited Audited
Note 6 months 6 months Year to
to to
31 October 31 October 30 April
2000 1999 2000
#'000 #'000 #'000
Turnover
Continuing operations 51,776 61,741 138,511
Acquisitions 938 - -
52,714 61,741 138,511
Cost of Sales (43,511) (43,952) (103,229)
Gross Profit 9,203 17,789 35,282
Amortisation of goodwill (398) (334) (722)
Other administrative expenses (11,228) (9,985) (18,864)
Administrative expenses (11,626) (10,319) (19,586)
Other operating income and charges 540 745 1,033
Operating (loss) / profit
Continuing operations (1,924) 8,215 16,729
Acquisitions 41 - -
(1,883) 8,215 16,729
Share of joint ventures and associates 3 332 - -
Net interest payable (1,921) (476) (804)
(Loss) / profit before taxation (3,472) 7,739 15,925
Tax on (loss) / profit on ordinary 4 908 (2,167) (4,321)
activities
(Loss) / profit after taxation (2,564) 5,572 11,604
Dividends - (678) (2,037)
Retained (loss) / profit (2,564) 4,894 9,567
Dividend per share - 0.25p 0.75p
Basic Earnings per share (pence) 5 (0.9) 2.1 4.3
Diluted earnings per share (pence) 5 (0.9) 1.9 4.1
Basic Earnings per share before 5 (0.8) 2.2 4.6
amortisation
(pence)
There were no recognised gains or losses in any of the above results other
than the consolidated (loss) / profit for the relevant period.
CAMMELL LAIRD HOLDINGS PLC
CONSOLIDATED BALANCE SHEET
Unaudited Audited
31 October 30 April
Note 2000 2000
#'000 #'000
Fixed assets
Intangible 2 16,909 15,203
Tangible 64,565 63,415
Investments 3 11,519 5,112
92,993 83,730
Current assets
Stocks 6 3,587 10,575
Debtors 100,943 56,339
Cash at bank and in hand 30 12
104,560 66,926
Creditors: amounts falling due within one year (46,931) (50,341)
Net current assets 57,629 16,585
Total assets less current liabilities 150,622 100,315
Creditors: amounts falling due after one year 7 (70,550) (31,635)
Provisions for liabilities and charges (544) (544)
79,528 68,136
Capital and reserves
Called up share capital 8 14,357 13,573
Share premium account 18,469 5,297
Revaluation reserve 15,688 15,688
Merger Reserve 14,136 14,136
Profit and loss account 16,878 19,442
Equity Shareholders' funds 9 79,528 68,136
CAMMELL LAIRD HOLDINGS PLC
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months Year to
to to
31 31 30
October October April
2000 1999 2000
#'000 #'000 #'000
Operating (loss) / profit (1,883) 8,215 16,729
Depreciation 951 597 1,405
Amortisation of goodwill 398 334 722
Loss / (profit) on sale of - 65 (17)
tangible fixed assets
Decrease / (increase) in stock 7,060 (20,009) (7,852)
Increase in debtors (40,379) (6,189) (37,747)
(Decrease) / increase in (1,951) 3,047 3,650
creditors
Net cash outflow from continuing (35,804) (13,940) (23,110)
operating activities
Returns on investments and
servicing of finance
Interest received 79 156 414
Interest paid (2,332) (632) (1,218)
Net cash outflow from returns on (2,253) (476) (804)
investments and servicing of
finance
Taxation
Corporation tax paid (600) - (4,012)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (2,017) (3,909) (8,464)
Sales of tangible fixed assets - - 106
Purchase of investments (6,075) - (5,112)
Net cash outflow from capital (8,092) (3,909) (13,470)
expenditure and financial investment
Acquisitions and disposals
Purchase of subsidiary (1,177) (1,051) (3,354)
undertakings
Net cash from purchase of 366 51 137
subsidiary undertakings
Net cash outflow from acquisitions and (811) (1,000) (3,217)
disposals
Equity dividends paid (1,365) (1,081) (1,759)
Financing
Issue of shares 14,249 199 227
Receipts from borrowing 73,875 11,500 21,130
Repayment of hire purchase (26) - (69)
contracts
Loan repayments (35,010) (1,741) (4,087)
Expenses paid in connection with (2,589) (38) (38)
share and bond issues
Net cash inflow from financing 50,499 9,920 17,163
Increase / (decrease) in cash 1,574 (10,486) (29,209)
CAMMELL LAIRD HOLDINGS PLC
reconciliation of net cash flow to movement in net debT
Unaudited Unaudited Audited
6 months 6 months Year to
to to
31 October 31 October 30
April
2000 1999 2000
#'000 #'000 #'000
Increase / (decrease) in cash in the period 1,574 (10,486) (29,209)
Cash inflow from borrowings (net) (36,577) (9,759) (17,043)
Cash outflow from hire purchase contracts 26 - 69
Change in net debt resulting from cash (34,977) (20,245) (46,183)
flows
Non cash movement in net debt 989 - -
Loans and hire purchase contracts acquired (618) (97) (720)
with subsidiaries
Movement in net debt in the period (34,606) (20,342) (46,903)
Opening net debt (46,935) (32) (32)
Closing net debt (81,541) (20,374) (46,935)
NOTES TO THE INTERIM RESULTS
1 ACCOUNTING POLICIES
The interim results have been prepared on the same basis and using the
same accounting policies as those used in the preparation of the full
year's financial statements to 30 April 2000.
2 BASIS OF CONSOLIDATION
The Group interim results consolidate CMR (as part of Cammell Laird
France SAS), acquired on 6 July 2000. The completion accounts for this
acquisition have yet to be finalised and therefore the assets and
liabilities that existed at the date of acquisition have only been
recorded at their provisional fair values.
Goodwill arising on consolidation is capitalised on the balance sheet
and amortised over the useful lives of the assets. Goodwill arising on
consolidation is amortised over 20 years, which, in the opinion of the
directors, reflects the useful lives of the assets purchased.
3 ASSOCIATED COMPANIES AND JOINT VENTURES
Undertakings other than subsidiary undertakings and joint ventures, in
which the Group has an investment of at least 20% of the shares and
over which it exerts significant influence, are treated as associates.
Entities in which the Group holds a long-term interest on a long-term
basis, and which are jointly controlled by the Group and other
parties, are treated as joint ventures. Where arrangements exist with
other parties under which the Group carries on its own business, the
Group's own assets, liabilities and cashflows are included in the
Financial Statements of the Group and of the Group company which is
party to the arrangement
On 30 August 2000 the Group purchased a 49% equity interest in
Shipyard America Inc, the parent company of Cascade General Inc. The
consideration for this investment was a $7.7m equity purchase plus a
$1.3m term loan. This investment has been accounted for as an
associated company. The "Share of joint ventures and associates"
recognised in the Profit and Loss Account relates to the Group's share
of Shipyard America's pre tax earnings post investment.
4 TAXATION
The interim tax credit of 26% has been based on an estimate of the
likely effective tax rate for the full year to 30 April 2000.
5. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on the
earnings attributable to ordinary shareholders divided by the weighted
average number of shares in issue during the period.
The calculation of diluted earnings per share is based on the basic
earnings, adjusted to allow for the issue of shares on the assumed
conversion of dilutive options.
The calculation of the basic earnings per share before amortisation is
based on the earnings attributable to ordinary shareholders adjusted
to add back the amortisation of goodwill, divided by the weighted
average number of shares in issue during the period.
31 31 30
October October April
2000 1999 2000
'000 '000 '000
Weighted average share in issue at the end of each 277,155 270,577 270,782
period
Dilutive effect of share options 11,395 14,323 13,505
Weighted average shares in issue including share 288,550 284,900 284,287
options
6. DEBTORS
Debtors as at 31 October 2000 include #34,322,000 relating to the
contract with Costa Crociere for the lengthening of the cruise ship
Costa Classica. The Group is currently in dispute with Costa Crociere
regarding this contract.
Also included in debtors is #26,266,000 relating to the amount owed by
the associated undertaking Progress Group Ltd.
7. CREDITORS: AMOUNTS FALLING DUE AFTER ONE YEAR
The creditors due after one year take account of the fact that on 17
October 2000 the Company raised 125,000,000 euros (gross) through the
issue of Senior Notes. These notes are due for repayment in 2010 and
accrue interest at 12% per annum, paid semi-annually. The proceeds of this
offering were used to repay existing term and revolving debt.
8. SHARE CAPITAL
Share capital at 31 October 2000 reflects the placing that occurred on
29 August 2000. The Company placed 13,572,900 shares with
institutional investors, raising #13,679,000 net of expenses.
Additional shares have also been issued during the period in respect
of share options exercised by employees under the rules on the
approved scheme. The number of shares in issue at the end of the
period were 287,131,000 (October 1999 271,024,000 and April 2000
271,458,000).
9. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
6 months 6 months Year to
to to
31 October 31 October 30
April
2000 1999 2000
#'000 #'000 #'000
(Loss) / profit for the period (2,564) 5,572 11,604
Dividends and other appropriations - (678) (2,037)
(2,564) 4,894 9,567
Issue of shares 13,956 657 1,063
Net increase in shareholders' funds 11,392 5,551 10,630
Equity Shareholders' funds at the start of the 68,136 57,506 57,506
period
Equity Shareholders' funds at the end of the 79,528 63,057 68,136
period
10. CORPORATE GOVERNANCE
The Board has continued to review the Group's organisation structure
and internal controls in the period, reviewing both its compliance
with the Combined Code and its stated intention of completing a risk
management review process by 31 December 2000; in line with the
guidance "Internal Control: Guidance for Directors on the Combined
Code". The organisational changes announced in the Chairman's
statement with regard to the changes in Board structure and the
appointment of a Group Managing Director are a result of this ongoing
process. Following on from these changes there will be organisational
change and restructuring in the subsidiary companies and divisions. An
update as to these changes will be provided in the Group's 2001 annual
report and accounts.
11. ADDITIONAL INFORMATION
The financial information given does not constitute statutory accounts
within the meaning of Section 240 (5) of the Companies Act 1985. The
figures for the year ended 30 April 2000 are extracted from the
statutory accounts filed with the Registrar of Companies and which
contained an unqualified audit report.
The above figures will be posted to shareholders on or before 9
February 2001. Further copies will be available on request from 8
Princes Parade, Liverpool, L3 1DL.
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