In his report on the accounts for the year ended June 30, 2008, David Moorhouse, Chairman of Lloyd’s Register, has announced that Group income rose by 19.6% to $893m (2006/07: $747.5m) with a marginal increase in surplus before tax generally in line with the budgeted target. The budgeted surplus for the year allowed for a significant increase in spending on projects and personnel in support of the Group’s medium and long term business objectives.
“Following very strong growth in 2007, I am pleased to be able to report another year of strong underlying financial performance in 2008. While the recent global financial chaos had little effect on our results for the year to June 2008, it is clear that next year will pose a significant challenge to the Group. I am confident that if we take appropriate action in the short term the Group will achieve a positive outcome next year.
“Our charitable giving this year was $9.5m, with $9m going to the Lloyd’s Register Education Trust and $.5m being awarded to various community charities.
“The acquisition in the year of ModuSpec represents the largest purchase ever made by Lloyd’s Register and provides the opportunity for us to expand our oil and gas activity significantly in an area that has the potential to utilise other components of our Oil & Gas, Marine and Management Systems businesses. Other acquisitions in the year were Knowledge Based Management Limited (UK), Marine Container Consultants Limited (UK) and Martec Limited (Canada)” Mr Moorhouse said.
Richard Sadler, Chief Executive Officer said: “2007/08 has seen yet more investment in client relationship management and ensuring the alignment of our services with specific client sector needs. The Group recognizes the role that our clients have in complex global supply chains and we aim to be able to support them at a local and global level, dependant on their need, by providing a wide portfolio of services in the energy and transport sectors. This vision drives our service development and acquisition strategy.”
During the year, the UK Government published a further iteration of the new Public Benefit Test as part of the new charities law, which passed in to legislation in November of 2006. The forthcoming enactment of the new legislation has caused Lloyd’s Register to amend yet again its governance structure in order to be compliant and to ensure effective management of its business.
“As a consequence of the restructuring we have had to say goodbye to the majority of our non-executives and I would like to thank Rodney Baker-Bates, Dr Tony Barrell, Peter Chrismas, Chris Knight, The Baroness Scott of Needham Market and Simon Sherrard, all of whom made a significant contribution to the success of the Group. Their collective and individual contributions will be greatly missed. A new board of Trustees has replaced the non-executives: John D Chandris (Senior Trustee), Christine Dandridge, Ron Henderson, Jan Kopernicki, Søren Skou and Lambros Varnavides” said Mr Moorhouse.
“I would like to add a special welcome to Alastair Marsh, our new Chief Financial Officer. Alastair, who until March of 2008 was the Group Financial Controller, brings a wealth of experience to the role and a rapport with his colleagues that makes him particularly well suited to the challenges that lie ahead.”
The Group’s Marine business achieved revenues 14.7% up on the prior year. The marine market, having enjoyed a six year period of exceptional growth, has moved to a period of high volatility and significant decline in the number of new ship orders. While Lloyd’s Register’s new construction order book looks very positive through 2010, it is conscious of the potential for high levels of existing ship order cancellation and of the need to adopt a proactive stance in this challenging market. In the year, the Marine business again achieved great success in attracting quality tonnage to Lloyd’s Register class and continued to put a very strong emphasis on the quality of the vessels in its classed fleet. This resulted in a small overall reduction in fleet size.
A buoyant market together with strategic acquisition created the opportunity to expand the Oil & Gas business and improve the revenue with an increase of 70.8%. The quality of earnings has also improved with a six-fold increase over the prior year.
High market activity, driven by unprecedented hydrocarbon prices, has resulted in high development demand, stretching the available industry resources to their limit and causing a significant pressure on costs. In achieving the results in the year these extreme cost pressures were managed well and new contracts were won. Lloyd’s Register is now experiencing a halving of hydrocarbon prices from the peak of 2008 but remains confident that even in these volatile circumstances, the current market forecast remains positive.
The Chemicals & Power business represents a merging of the Asset Management business with the Group’s industry and nuclear activity, with the intent to have a larger more focused business.
Revenue has increased 34% from the previous year. Operating surplus was ahead of budget but behind prior year as the costs of merging, reorganization and market development were absorbed. The sector has significant future potential and we anticipate further growth through the next financial year.