The Lloyd’s Register Group has reported income of £820 million for its fiscal year ended June 30, 2009, up 38 percent from lat year, which was attributed in large part favorable exchange rate movements year over year, according to David Moorhouse CBE, chairman.
"In Oil & Gas we have seen an exceptionally strong performance both through acquisition and organic growth, supported by a strong market and a strengthening oil price. In contrast, our Transportation business has been greatly affected as governments around the world defer or cancel contracts. This same deferment and cancellation effect has also been encountered in our Marine business, but here the lead-time for new construction has afforded us a twelve to eighteen month period in which we have been preparing ourselves for the hard economic challenges ahead. Our Management Systems business LRQA has achieved strong growth in a difficult market, as indeed has our Chemicals & Power business, but here the impact of the weakening market has been felt more severely,” Moorhouse said in a prepared statement.
"We recognise that our strong financial performance this year should be seen in the context of three significantly more challenging years ahead and the Group-wide cost reduction work already begun. This has added to our performance in the reported period and stands us in good stead for the challenge ahead.
"The Lloyd’s Register Educational Trust, one of the pillars of our constitution, received a further £9.0 million (up from £6.0 million in 2007/08) as a consequence of this quite exceptional year," Moorhouse added.
Richard Sadler, Lloyd’s Register CEO, said: "I have been very pleased with the contribution our businesses have made to society in the last year. They have all developed their services in different ways while working together to ensure that the capability of the Lloyd’s Register Group is made available to each sector’s client base. We have been particularly successful in introducing LRQA services to our key clients and now provide management system support to 60 percent of that group.
"While we have not felt the full effect of the recession yet, there is no doubt that, if nothing else, the scarcity of marine new building orders over the past year is going to have a major effect on our new construction and marine component services in the near future. We are also seeing continued pressures in an increasingly competitive market.
"In the energy sector, there is continuing interest in offshore energy exploration and the reorganisation of our upstream, downstream and power businesses into one Energy group puts us in a very strong position to build market share in this important sector.
"We anticipate that the predicted rise in oil prices over the next few years will mean more investment in land-based public transport systems. The rail business in China and the rest of Asia has huge opportunities for Lloyd’s Register to bring leading technical expertise to major infrastructure projects such as subway, metro and conventional rail developments. We are working closely with partner organisations in China and the rest of Asia to bring our knowledge and expertise in independent assurance to those markets." Sadler added.
Moorehouse concluded : "I would like to thank the chairmen and members of our technical and other committees around the world. Together with all those others who give of their time, without reward, for the betterment of society and to ensure that Lloyd’s Register remains at the forefront in delivering its constitutional objectives. I would also like to thank all our men and women throughout the world, they are the engine of Lloyd’s Register, they have delivered this excellent performance and given us the confidence to take the next step in securing the Group’s long-term future."
After a period of significant growth, the Marine market has seen a slow down in activity in 2008/09, coinciding with effects of the tightening of global credit markets and the recessionary economic conditions being encountered in most of the world’s tier 1 economies. There has been almost no ordering of new ships since September last year. There can now be no doubt that the orderbook for new ships is shrinking through cancellations and deferment, and the peaks of expected deliveries in the next two years is flattening as cancellations and delays in deliveries are negotiated. These negotiations between owners and shipyards have some way to go, however, before the overall scale of the supply side outlook is defined. Additionally, a small but growing percentage of the world’s fleet is laid up or idle. The size of the future market is uncertain in the medium term and we expect a three to five year period to elapse before significant recovery is experienced.
Despite these tougher market conditions, LR’s Marine business posted another year of strong financial growth. However, this is principally due to the delayed impact on the business from the order cancellations and delays. The Marine business has recorded high levels of activity during the year fulfilling orders and commitments placed prior to the tightening of global credit markets in late 2008.
Notwithstanding the downturn in the global economy there remains a number of new opportunities: the offshore energy sector is a dynamic and growing part of LR’s business and the announcement of a new FOI (floating offshore installations) team, drawn from both the new Energy and the Marine business streams, is a first step to develop and better co-ordinate deep water technology expertise in the offshore sector.
Oil & Gas
A combination of favourable exchange rates, strong organic growth, and a full year of results from LR’s acquisition of ModuSpec completed in January 2008, contributed to a 67 percent growth in income in 2008/09.
Market conditions continued to be buoyant in 2008/09 despite volatility in hydrocarbon prices. LR’s focus on Kazakhstan as an area of growth in recent years continues to underpin its strong organic growth. The Caspian is a technically demanding area with large oil and gas reserves, and is one in which Lloyd’s Register has a strong presence. Tight cost control continues to be a feature of operational success in oil and gas. Recruitment and retention of experienced engineering resources remains a critical success factor, however, we have seen some exciting new business developments in 2008/09, with project wins in Australia and the USA. LR’s acquisition of Celerity3, a small Houston based engineering business specialising in design, process and safety solutions, has enabled Lloyd’s Register to increase its service offering in the North American market.
Chemicals & Power
Inspection services remain at the core of the service offering in the chemicals and power sectors, however, LR said it has continued to diversify the business into higher added value in-service activities The sector continues to offer exciting growth prospects in the next financial year, although strong competitive pressures and a slow down in the container market in Asia in recent months has provided a challenging situation that the organization expect to continue in the short term.
The Transportation business has experienced a challenging year, and has been impacted the most by the reduction in public expenditure budgets by various European governments in particular. Key markets remain depressed at the current time, however, Lloyd’s Register has had a number of notable contract wins in the Middle East and Asia, including the independent safety assessment of the Al Sufouh Train project in Dubai.
As a result of the tightening of market conditions in the Transportation business, LR has re-assessed the carrying value of the goodwill associated with a number of acquisitions. The Transportation business further expanded its range of specialist safety and risk services during the year with the acquisition of Human Engineering Ltd (HEL). The addition of human factors technical services offered by HEL complements our existing risk services and is anticipated to provide a good platform for further growth in the future.
The Management Systems business, branded as LRQA (Lloyd’s Register Quality Assurance), grew its revenues by 30 percent during the year, underpinned by strong organic growth, together with favorable foreign exchange movements. Difficult market conditions in Japan and the USA have created some challenges for LRQA’s business, however, it has extended its climate change verification services in the U.S. through the acquisition of Ryerson, Master and Associates in January of this year.
This year, food supply chain safety has been a significant growth area for LRQA, and LR has been playing an instrumental role in the global harmonisation of standards by assisting in the development of the new food safety standard FSSC 22000, which combines both ISO 22000 and PAS 220. LR has also been assisting world class brands to better understand and improve safety. Mars Inc. selected LRQA for certification to FSSC 22000.