Annual Reports & Accounts 2011

5 Segment information

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Executive Directors who make strategic decisions. The Executive Directors review the Group’s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

The Executive Directors consider the business mainly on the basis of the facilities from where the services are rendered. Management considers the performance of the business from Sharjah (“SHJ”), Hamriyah (“HAM”) and Jebel Ali (“JBA”) in addition to the performance of Land Rig Services (“LRS”) and International Inspection Services Limited (“INSPEC”).

SHJ, HAM, JBA and LRS meet all the aggregation criteria required by IFRS 8 and are reported as a single segment (Segment A). Services provided from Inspec do not meet the quantitative thresholds required by IFRS 8, and the results of these operations are included in the “all other segments” column.

The reportable operating segments derive their revenue from the upgrade and refurbishment of offshore jackup rigs, fabrication, assembly and new build construction for the offshore oil and gas and renewables sectors, including FPSO and other offshore and onshore structures, oilfield engineering services, including the upgrade and refurbishment of land rigs.

Inspec derives its revenue from various services such as non-destructive pipeline testing, ultrasonic testing and heat treatment.

During the year, the Company through its wholly-owned subsidiary, LIH, acquired MIS (Note 35). The revenue of MIS is mainly derived from the upgrade and refurbishment of offshore jackup rigs; fabrication, assembly and new build construction for the offshore oil and gas sector, engineering and construction. The Executive Directors consider these services to be similar to the services provided by Lamprell from SHJ, HAM, JBA and LRS and hence been considered under the reporting segment (Segment A). Additionally, MIS also provides safety and training services and other Operating and Maintenance services (“O&M”). As services provided by Sunbelt and O&M do not meet the quantitative thresholds required by IFRS 8, the results of these operations are included in the “all other segments” column.

	Segment A USD’000	All other segments USD’000		Total USD’000
Year ended 31 December 2011
Total segment revenue	1,101,741	53,357		1,155,098
Inter-segment revenue	–	(7,245	)	(7,245	)
Revenue from external customers	1,101,741	46,112		1,147,853
Gross operating profit	138,113	13,959		152,072
Year ended 31 December 2010
Total segment revenue	490,349	15,947		506,296
Inter-segment revenue	–	(2,476	)	(2,476	)
Revenue from external customers	490,349	13,471		503,820
Gross operating profit	93,643	2,176		95,819

Sales between segments are carried out on agreed terms. The revenue from external parties reported to the Executive Directors is measured in a manner consistent with that in the consolidated income statement.

The Executive Directors assess the performance of the operating segments based on a measure of gross profit. The staff, equipment and certain subcontract costs are measured based on standard cost. The measurement basis excludes the effect of the common expenses for yard rent, repairs and maintenance and other miscellaneous expenses. The reconciliation of the gross profit is provided as follows:

	2011 USD’000		2010 USD’000
Gross operating profit for the reportable segment as reported to the Executive Directors	138,113		93,643
Gross operating profit for all other segments as reported to the Executive Directors	13,959		2,176
Unallocated:
Finance costs absorbed in reportable segments	5,968		3,850
Under-absorbed employee and equipment costs	(9,157	)	(5,768	)
Repairs and maintenance	(12,524	)	(7,844	)
Yard rent	(3,357	)	(3,129	)
Others	(62	)	(3,220	)
Gross profit	132,940		79,708

	2011 USD’000		2010 USD’000
Gross profit	132,940		79,708
Other operating income (Note 7)	–		23,925
Selling and distribution expenses (Note 8)	(2,358	)	(1,183	)
General and administrative expenses (Note 10)	(62,863	)	(32,527	)
Other gains/(losses) – net (Note 13)	11,928		(1,801	)
Finance costs (Note 12)	(17,965	)	(5,088	)
Finance income (Note 12)	1,804		2,193
Others	(196	)	–
Profit for the year	63,290		65,227

Information about segment assets and liabilities is not reported to or used by the Executive Directors and accordingly, no measures of segment assets and liabilities are reported.

The breakdown of revenue from all services is as follows:

	2011 USD’000	2010 USD’000
New build activities – oil and gas	500,618	137,436
New build activities – renewables	289,105	69,153
Upgrade and refurbishment activities	191,009	163,598
Offshore construction	52,507	117,120
Others	114,614	16,513
	1,147,853	503,820

The entity is domiciled in the UAE. The total revenue from external customers in respect of services performed in the UAE is USD 1,139.3m (2010: USD 495m), and the total revenue from external customers for work performed in other countries is USD 8.6m (2010: USD 9m).

Certain customers individually accounted for greater than 10% of the Group’s revenue, shown in the table below:

	2011 USD’000	2010 USD’000
External customer A	193,972	110,316
External customer B	158,576	76,627
External customer C	137,374	50,493
External customer D	119,284	–
	609,206	237,436

The revenue from these customers is attributable to Segment A. The above customers in 2011 are not necessarily the same customers in 2010.