Group Review 2015 Innovation and technical excellence
Working together for a safer world
We are placing research and development at the heart of Lloyd’s Register (LR). Our technology leadership is more relevant than ever in today’s increasingly digital world. We are committed to taking the lead in making sure our clients get the most value out of their assets – with safety at the forefront. Working together for a safer world. HIGHLIGHTS Technology and innovation Our dedicated approach to solving industry’s greatest challenges and ensuring that our futures are safe, sustainable and secure. Page 10 Chairman’s review While not immune to current global challenges, Thomas Thune Andersen reports, LR’s strong performance has continued from last year. Page 04 Chief Executive’s review Richard Sadler reflects on LR’s progress in the year and during his time as CEO as he steps down after eight years in the role. Page 08 Public benefit Safety has been at the heart of our work since 1760 and our newly stated values reaffirm our public benefit commitment. Page 30
CONTENTS 02 Lloyd’s Register at a glance 04 Chairman’s review 06 Our year 2014/15 08 Chief Executive’s review 10 Technology and innovation 12 Marine 18 Energy
24 Management Systems (LRQA) 28 Chief Financial Officer’s report 30 Public benefit 32 Our people 34 Governance 36 Glossary
KEY Read more
Find out more online 01
Lloyd’s Register Group Review 2015
LLOYD’S REGISTER AT A GLANCE Our organisation WE ARE LR
PROFESSIONAL SERVICES
ADDING VALUE TO SOCIETY
Lloyd’s Register (LR) is a global engineering, technical and business services organisation owned by the Lloyd’s Register Foundation, a UK charity dedicated to research and education in science and engineering. Founded as a marine classification society in 1760, we now operate across many industry sectors, with some 9,000 employees around the world.
LR provides independent assurance and expert advice to companies operating high-risk, capital-intensive assets in the marine and energy sectors. We help our clients to ensure the quality construction and operation of their assets, going beyond basic compliance to ensure focus on operational and safety-critical areas. And, across a wider range of sectors, LRQA helps companies use management systems to improve performance and reduce risk.
Our strategy is to add value to society and achieve sustainable growth through independent assurance and expert advice for clients operating the critical infrastructure upon which society relies. We aim to achieve our goals by employing four key themes: making sure we consistently deliver the best possible value to our clients; an emphasis on service quality; a focus on having first-rate people and strong leaders who put safety first and enable us to deliver an excellent service; and leading technology change.
LR has a long-standing reputation for integrity, impartiality and technical excellence. These qualities remain central to our success. For many of our clients, we are their trusted independent adviser. Our services give clients confidence that their assets and businesses are safe, sustainable and dependable. The work of LR touches many aspects of people’s daily lives: in the ships supporting global trade; power plants generating energy for homes and businesses; the safety of food production and supply.
£1.04bn turnover 2014/15
With a truly global reach we can adapt our service offerings to suit businesses wherever needed. We offer a joined-up service to companies with international operations and supply chains.
+4.1% growth 2014/15
We develop and deliver pioneering thinking through collaborative research to keep us at the forefront of the industries we serve – to benefit LR, our clients and society. Our success results in the sustainability of the organisation and the realisation of our mission for a safer world.
£11.5m
donation to Lloyd’s Register Foundation
OUR MISSION
Safety has been at the heart of our work since 1760 and we invest our time, money and resources to help achieve the organisation’s public benefit mission.
• To protect life and property through securing high technical standards of design, manufacture, construction, maintenance, operation and performance.
LR’s day-to-day work is directly instrumental in fulfilling the first part of the organisation’s mission: we estimate over two thirds of the services delivered by LR work towards a safer society. And our profits help to promote education, training and engineering-related research through our funding of the Lloyd’s Register Foundation.
• To advance public education in transportation, engineering and technological disciplines.
02
Technical excellence is key to our business. Our surveyors and assessors understand the industries they work in and they can apply this knowledge in a way that can benefit wider aspects of our clients’ businesses.
During the year we launched our newly stated values, ‘we care, we share our expertise, and we do the right thing’. Our values underpin our behaviour and reflect our public benefit commitment.
Read more on page 30
www.lr.org
Lloyd’s Register Group Review 2015
MARINE
ENERGY
MANAGEMENT SYSTEMS (LRQA)
As a leading marine classification society we set standards, called Rules, and survey ships to ensure they are designed, built and can be operated safely and with due care for the environment. We are also a key provider of technical advice to the shipping industry. We support the development of new technologies and innovations that will play a vital role in the future of shipping.
We are an independent provider of risk management services to the energy sector. Our technical experts and risk engineers evaluate the integrity of plant and processes, and focus on delivering practical advice. We give stakeholders confidence that they are addressing today’s economic, legislative and corporate responsibilities effectively.
LRQA is a recognised, world-leading professional assurance services organisation. We specialise in management systems compliance and expert advice across a broad spectrum of standards, schemes and customised assurance programmes. We unlock the power of management systems to improve organisational performance and reduce risk.
8,537
80%
120+
1m
12,000+
45,000+
ships classed by LR, totalling 187.0 million gt
LR class helps ensure the safety of some 1 million cruise passengers each year
Page 12
www.lr.org
of world’s offshore oil rigs inspected by LR, the leading supplier of independent risk management services to the drilling industry
safety-related documents reviewed for Shell Prelude FLNG project
Page 18
we deliver our services in over 120 countries worldwide
clients worldwide
Page 24
03
Lloyd’s Register Group Review 2015
CHAIRMAN’S REVIEW Strong progress in a challenging climate
The year has seen significant political and economic uncertainty. We are not unaffected by this, however I am pleased to report that our strong performance has continued from last year.
With oil prices reaching a low of US$44 a barrel, an economic slowdown in China and heightened uncertainty in the eurozone, the year has seen significant political and economic uncertainty. LR is not unaffected by these challenges, however I am pleased to report that our strong performance has continued from last year into 2014/15.
1 July 2015. Also on 1 July, LR Senergy became wholly owned by LR, concluding the acquisition some 15 months earlier than originally anticipated. This now creates a clear path to maximise the efficiencies and opportunities of LR Senergy by accelerating its integration to being fully part of the LR group.
Using constant currency exchange rates, turnover grew by 4.1%. Due to the strengthening of sterling against other currencies, at actual exchange rates turnover for the year was 0.9% higher at £1.04 billion. The same currency headwinds contributed to a 16.7% fall in operating profit before exceptional items which was £61.3 million compared with last year (2014: £73.7 million).
Our business agenda Six important themes are currently on the agenda in today’s business world: the global economy; opportunities in technology and innovation; cost pressure and competition; geopolitics; shifting power; and leadership and engagement. These all have resonance with the boards of LR and its parent, the Lloyd’s Register Foundation. Our job is to continually review the strategy of our organisation in terms of the market in which we operate, measuring our performance, identifying our risks, and planning for the future. Our organisation is in a good place, however we must continually look at how we position ourselves to add value for our clients, adapt to the changing external environment, identify new business opportunities, adapt to evolving technology, attract and retain the very best talent, and how we drive efficiency to ensure we are more sustainable and competitive.
Our profits help to fund the Lloyd’s Register Foundation, enabling it to continue to make the best possible contribution to help tackle society’s challenges of the future. In 2014/15, our donations to the Lloyd’s Register Foundation were £11.5 million. During the year we took the decision to seek a purchaser for our rail business that would be better placed to prioritise the resources and investment needed to build a worldclass global rail business. We are pleased to have found in Ricardo plc a company that shares the same values of integrity, quality and safety that are expected by our clients, and which have been the foundation of our rail business’s success. The sale of the business to Ricardo plc was completed on
04
Our values As a business, we must always ask ourselves how our actions will help our clients to achieve their goals. It is why, this year, I was incredibly proud to see the newly stated LR values, ‘we care, we share our expertise, and we do the right thing’, come to life across the business. Our values underpin our behaviour to each other, our clients and our stakeholders. They send a clear message about the business we are and, by living by our values every day, show our clients what the LR brand looks like in action. Our values also show that we care about the safety of people, communities and the environment. We not only have a significant impact on safety through our products and services but also through the safe working of our employees, particularly when they are on third-party controlled sites. Over the year our total recordable injury incident rate remained relatively stable, rising slightly to 0.42 per 200,000 worked hours (2014: 0.39). In the last three years, the number of lost time incidents has been reduced by 26%. We should all be very proud of our achievements, however we can always do more. Safety must always remain our number one priority as a business.
We have a particular focus on technology, both in terms of the opportunity that it presents to businesses and the challenges it presents. We cannot underestimate the role of technology and what it means for our clients and us.
www.lr.org
Lloyd’s Register Group Review 2015
OUR VALUES Our newly stated LR values, ‘we care, we share our expertise, and we do the right thing’ underpin our behaviour to each other, our clients and all of our stakeholders.
Safety is not the only demonstration of our values at work. LR recognises that diversity across many areas, not just age, race and gender but also skills, culture, mind-set, and education, benefits us as a global organisation. It helps to encourage creativity and foster innovation. As people working together in a business, we all have an obligation to respect and value each other and a responsibility to ensure that no discrimination takes place. To this end, the year has seen an increased focus on our diversity and inclusion agenda. Our people As always, we could not have achieved our successes without our people and, on behalf of the Board, I thank all our colleagues for their continued efforts to develop and improve our organisation. The directors on our Board are highly experienced and committed people. We are pleased to welcome Caroline Firstbrook, who joined the Board with effect from 1 July 2015. Caroline is currently COO at Clifford Chance LLP, a major law firm, and her experience will add to the Board’s capabilities.
In 2014, Richard indicated that he would like to step down and pursue new challenges. I would like to record the Board’s sincere thanks to Richard for his dedication, vision, drive and passion in leading LR for the last eight years. Alastair Marsh will be taking up the role of CEO on 1 October 2015 and we have every confidence that he will uphold LR’s values and build on Richard’s achievements to ensure the continued success of LR. We have an enormous amount of potential at our fingertips and there is a vast amount of work under way to make sure that we unlock it. If we can realise our full potential we will see a big shift in our business, we will move the needle in terms of revenue, margin and our place in the market and that is important because of the very reasons for our existence; working together for a safer world and maximising our contribution to the Lloyd’s Register Foundation.
2014
OUR YEAR
Follow the timeline overleaf for a selection of news across LR.
Thomas Thune Andersen Chairman, Lloyd’s Register Group Limited and Chairman, Lloyd’s Register Foundation
Since Richard Sadler’s appointment as CEO in 2007, he and the executive team have written a new chapter for LR, focused on stability, diversification and growth. They have tackled the challenges of governance and technology leadership and put in place a group strategy that has seen LR grow.
www.lr.org
05
Lloyd’s Register Group Review 2015
OUR YEAR 2014/15 A selection of news across LR JULY 2014
LR to class three new gas-fuelled Intermediate-Class ferries for BC Ferries to be built by Poland’s Remontowa Shipbuilding under contracts totalling C$165 million. We launched our new Rules for Offshore Units, amalgamating the Rules for Mobile Offshore Units and the Rules for Floating Offshore Installations at a Fixed Location into one document.
NOVEMBER 2014 SEPTEMBER 2014
The Lynceus project, of which LR is one of several industry partners, won the prestigious Innovation Award at the Lloyd’s List Global Awards 2014. Lynceus aims to revolutionise ship emergency management and evacuation.
The Maritime Foundation awards Richard Sadler the Maritime Fellowship Award, the highest honour bestowed by the Foundation to an individual who has made a truly outstanding contribution to stimulating public engagement in maritime issues.
LR approved the 200th cargo-carrying-unit design type for OEG Offshore, marking five years of collaboration between our two global firms.
LRQA played a pivotal role at the Business Continuity Institute World Conference in London with ICT Technical Manager, Rob Acker, delivering a keynote session, Managing risk through management systems.
AUGUST 2014
LR and Lightbridge Corporation won a contract to support the UAE’s Federal Authority for Nuclear Regulation (FANR) internal inspection team, to provide construction oversight and related technical services for a new generation of nuclear power plant.
DECEMBER 2014
Launch of LR’s new wind turbine certification IEC 61400 service to help overcome many of the technical, financial and environmental risks associated with turbine design and manufacturing.
OCTOBER 2014
To support the transitions of many thousands of clients that LRQA serves worldwide to the revised ISO 9001:2015 (quality) and ISO 14001:2015 (environmental) standards, we launched a broader range of training services. Woodside named LR as one of its global inspection providers. The new contract helps to ensure the components and equipment Woodside procures globally meet quality expectations.
06
www.lr.org
Lloyd’s Register Group Review 2015
To find out more visit www.lr.org/gr2015
MARCH 2015
LR to class world’s largest boxships – MOL’s series of four 20,150 teu container ships to be built at Samsung Heavy Industries.
JANUARY 2015
The speed and technical skill of LR’s ship emergency response service, SERS, helped Hoegh, owner of the stricken pure car carrier Hoegh Osaka, to salvage the vessel grounded in Southampton.
LR and UK P&I Club launch three new pocket checklist mobile apps for marine fire safety, marine pollution protection and port state control. LRQA’s Global Head of Food Supply Chain Services, Cor Groenveld, shared centre stage with Cargill and Metro Group at the Global Food Safety Initiative conference on Shared responsibility through collaboration, demonstrating the crucial role that a collective approach plays in delivering safe and sustainable food supply chains.
MAY 2015
LR signed a significant contract with COSCO Zhoushan Shipyard in China for the classification of seven new 3,600 teu container ships for Maersk Line.
FEBRUARY 2015
Delivery of the LR-classed world’s first methanol-powered sea vessel, the converted ropax Stena Germanica, which uses a dual-fuel methanol propulsion system. We unveil a drilling training app that enables oil and gas professionals to register for training classes and view maps of where courses are offered from their mobile devices.
APRIL 2015
RW Holland chooses LR for a major certification contract for heat exchangers made in Oklahoma and bound for India, based on our experience with the Indian Boiler Regulations. Sale of rail business to Ricardo plc announced. LRQA was awarded accreditations from the American National Standards Institute as a Superior Energy Performance (SEP™) verification body and from the American National Accreditation Board to deliver ISO 50001 (energy management) certification.
www.lr.org
2015 JUNE 2015
The leading tramp ship operator Dampskibsselskabet NORDEN, based in Copenhagen, contracted LR to class all 57 of its ships. Statoil awarded LR Energy’s consulting business a contract to perform a risk and emergency preparedness analysis for the Hywind Scotland pilot project, pushing forwards the commercialisation of largescale floating wind farms.
07
Lloyd’s Register Group Review 2015
CHIEF EXECUTIVE’S REVIEW A remarkable year: success and succession
It has been a great honour to serve as CEO of LR – it is a unique organisation... I am very proud to be succeeded by Alastair Marsh – and very proud of what we have achieved together.
When I was appointed in 2007, I made a public commitment that I would serve as CEO for five years. After eight years in the role I believe it is now time to step down to pursue new challenges. It has been a great honour to serve as CEO of LR – it is a unique organisation with a great staff, history, purpose and a set of values of which I am immensely proud.
During my time as CEO we have set up the Lloyd’s Register Foundation, maximising the group’s contribution to society by focusing on education, research and development of early- to late-stage technologies. We have a genuine focus on internal and external safety throughout our global activities and combining this with a brand that is recognised the world over, and in many sectors, is the real incentive for LR to grow. Our governance structure aims to prove that there is more to corporate success than profit distribution. With our structure and our worldwide coverage we can advise any company to help them reach the highest global standard of operation of their assets or their business performance. This is strengthened by our investment in our technology leadership, including the activities in LR’s global technology centres (GTCs) in Southampton and Singapore and our contribution to global regulation and standard setting. I am very proud to be succeeded by Alastair Marsh – and very proud of what we have achieved together during our very effective partnership over the past seven years. Alastair’s deep knowledge and understanding of LR’s business, markets and clients will ensure a smooth transition and success in the next chapter for LR.
08
ANNUAL REVIEW 2014/15 The market in 2014/15 proved to be different to that forecasted. Oil prices plummeted with serious implications for some of our clients, and the UK pound strengthened. As a professional services organisation, providing technical and business services to our clients, we need to be capable of reacting to whatever happens in the world and helping our clients to adapt. Our strategy, with its emphasis on sustainable growth and adding value to society through a portfolio of businesses, enables us to perform well even at times of market uncertainty. An important milestone this year was the opening of our new GTC on the University of Southampton campus. Our Southampton and Singapore GTCs will drive innovation, and commercial and environmental performance, all underpinned by our commitment to safety – for the benefit of LR and our stakeholders. During the year we have reviewed all our technology projects. This is a fast-moving field with swift developments in the areas of data analytics, machine data, autonomy, additive printing, nanotechnology and cognitive computers, to name but a few. As we develop our strategic technology plan to take LR to the next level of maturity, we will also encompass how we should align our work with the Lloyd’s Register Foundation to benefit both bodies, society, stakeholders and our clients.
www.lr.org
Lloyd’s Register Group Review 2015
Sale of rail In April 2015 we announced an agreement to transfer our rail business to Ricardo plc. As highlighted in the Chairman’s review, the sale was completed in July. Over the last 14 years, LR Rail had grown into a highly successful rail consultancy and assurance business and a trusted partner to a wide range of international clients. Ricardo is a good fit for the business and we are pleased that it is committed to supporting the aspirations of the management team to accelerate growth. Through this sale we have not only achieved a good commercial arrangement for both parties but also found a new strategic partner for future co-operation. Marine Overall, this was another strong year but we believe we are starting to see the end of the super cycle for shipbuilding. The business generated income of £400.8 million (2014: £348.8 million), £52 million (14.9%) ahead of 2014 (18.3% ahead on a constant exchange rate basis). This strong performance was driven by continued success in being awarded a high share of newbuildings and service to ships in class. LR’s technology knowledge and expertise in regulation compliance together with its growing consultancy capability is being recognised by a wider variety of clients. Work started on the first newbuildings to comply with LR’s provisional Rules for the classification of stern-first ice-class ships and we have a leading class share of the growing fleet of battery-powered vessels. We are involved in a growing range of projects for gas-fuelled ships, gas carriers and LNG bunkering projects together with all our traditional vessel activity.
Energy Our Energy business generated income of £421.2 million (2014: £463.7 million), a 9.2% decrease on the previous year (7% on a constant exchange rate basis). In a year dominated by the low oil price environment, we have supported our clients by delivering technical solutions that maximise operational efficiency, while never compromising on safety. Combining our expertise in consultancy, compliance, inspection and asset management across the nuclear, upstream, downstream, drilling, subsurface, renewables and power sectors we have continued to grow the brand recognition of LR around the world. Our newly formed international strategic advisory panel has been very influential in achieving these goals. LR Senergy has become increasingly integrated into the Energy business. The input from LR Senergy has included the launch of its improved IRIS offshore project and data management web application, and well intervention projects to maximise returns from existing wells. Our work contributed across the full product development spectrum, from research to industrial application. We have facilitated a dialogue to drive deeper understanding of key issues and solutions among industry stakeholders. Our growing body of research illustrates the important contribution of LR to the advancement of knowledge and skills across all of the sectors of industry we serve. Management Systems The benefits of our Management Systems business (LRQA) restructuring and moving into new areas of activity started to become apparent during the year. The business’s transformation into a global market-led division has resulted in an improved financial performance, with turnover on a constant exchange rate basis increasing by 4.4%. Generated turnover was £168.6 million (2014: £169.8 million), a 0.7% decrease on prior year after currency movements.
FUTURE OUTLOOK As we invest more in research and development, the more we see the tremendous challenges and opportunities ahead. We now better understand the challenges and what we have to do to support our clients and other stakeholders. The next step will be to invest strategically in relevant research and development areas to get ourselves prepared for the next five, 10, and 15 years. LR is also tackling the opportunities and challenges of big data, which we call ‘data‑centric engineering’, for example, the use of nanosensors to transmit live performance data from materials and systems. With significant investment from the Lloyd’s Register Foundation in fundamental research and development into areas such as technology road-mapping, ‘designing for data’, codes and standards, and data analytics, LR is committed to being at the forefront of ensuring clients get the most value out of their asset data. In addition to understanding the technology behind everything we do, there are certain other elements that we have to get right – we have to have an external view on the world, we have to have the right people to deliver our services, we have to be efficient, and we have to give our clients good value. The current uncertainty in the energy and marine sectors certainly has an impact on LR but we are well prepared for the future. We are investing in new internal systems to make us more efficient in our service delivery. We are convinced that LR has a fantastic opportunity ahead and we are an organisation that is well suited to meet unexpected challenges. Richard Sadler Chief Executive Officer
The theme of change continued for the assurance industry during the year, with the major ISO standards being revised including ISO 9001 and ISO 14001. LRQA is at the forefront of communicating the changes to our existing and potential clients.
www.lr.org
09
Lloyd’s Register Group Review 2015
TECHNOLOGY AND INNOVATION Placing research and development at the heart of LR Our strategic technology research and development is a dedicated approach to solving industry’s greatest challenges and ensuring that our futures are safe, sustainable and secure. We believe that technological innovation can drive our economies forward, create jobs and benefit society – but that premature deployment can present serious risk to health, safety and the environment. While our parent entity, the Lloyd’s Register Foundation, invests primarily in basic research, LR focuses on higher technical readiness levels – from research to industrial application. Our GTCs in Southampton and Singapore exemplify the acceleration of learning and growth through collaboration between LR, industry and academia. They are complemented by our capability to apply technology across our organisation. By contributing across the full product development process we support the advancement and safe adoption of new technologies.
TECHNOLOGY RESEARCH THEMES Energy In the energy industry, technology research and innovation takes place in the context of a competitive global environment that is facing a scarcity of qualified staff and challenged technology cycles. It is our ambition to leverage our strengths to transcend the usual three- to five-year planning horizon and look into the future to determine the opportunities it holds. For this purpose, our technology research activities in the energy sector are organised into five themes: next resources – new and safe ways to utilise our future resources; smart supply chain; risk exposure; uptime and efficiency with robust systems; and life extension.
We cannot know exactly what the future holds but we can be sure that our expertise and relentless quest for progress will continue to amplify the success of our clients. John Wishart Energy Director
Marine As a class society, LR is evolving to support the future of shipping. The complexities of globalisation mean the challenges we face are greater, and the decisions that need to be made have significant financial implications. We aim to work more closely with our partners and ensure technology and innovation lead the way In the marine sector. We have set six research priorities: minimum environment impact; zero accident shipping; cleaner and greener ship power; maximum energy efficiency; more secure shipping; and safer ship operating in hostile and abnormal environments. These research priorities link to the eight transformational technologies identified by our newly published Global Marine Technology Trends 2030.
The marine technology of 2030 will integrate developments from multiple scientific disciplines in ways that could transform the quality of design, construction and operation. We envisage that a future marine world will be a connected and digital one, bringing closer integration between people, software and hardware in a way that could transform the way we operate and interact. Tim Kent Technical Director, LR Marine
To find out more visit www.lr.org/researchand-innovation 10
Technology and innovation is fundamental for the continued growth and development of the global economy in which we all operate.
www.lr.org
Lloyd’s Register Group Review 2015
CURRENT INITIATIVES Some examples of our research programmes, joint industry projects and other related work. Battery power on water Advances in battery technology and energy management capability have rightly seen increasing interest in battery and hybrid power in the maritime industry. LR is involved in a wide range of projects which aim to make batteries efficient, stable and commercially viable. Our work in the laboratory, and increasingly on the water, is helping shipowners save fuel and increase efficiency, while reducing emissions. Battery installations also give significant reductions in noise and vibration compared to traditional fuel-based power systems. Protection from extreme hazards Many people work in hazardous regions, where effective protection and shelter from extreme weather conditions or explosions is vitally important. Marine’s Applied Technology Group (ATG) helped Dynamic Air Shelters, a Canadian company, by putting its portable weather and explosion-resistant ‘air beam’ shelters to the test. ATG is now working with the company on other developments, including shelters with a wider span capable of covering a much larger area, even entire work sites.
Global Marine Technology Trends 2030 Published in September 2015, Global Marine Technology Trends 2030 (GMTT 2030) is the culmination of a collaborative project between LR, QinetiQ and the University of Southampton. The report examines the transformative impact of 18 technologies on ship design, on naval power and on the use of ocean space in 2030. In asking ‘what’s next’ GMTT 2030 is an aid to business, policymakers and society in trying to understand the future for the maritime industries and the oceans. AM in the energy sector Additive manufacturing (AM), widely known as 3D printing, has developed rapidly in the last 10 years, but applications in the energy and offshore sectors are still at a relatively nascent stage. Our joint industry project with TWI will bring together research and development efforts alongside real-world AM practices to create new industry product certification guidelines – paving the way for more widespread adoption of AM technology and assisting industry in how best to tap in to its potential. LRQA helps companies lead developments in new technologies During the year, Innovnano, an expert manufacturer of high-performance ceramic powders, was certified by LRQA to ISO 9001. This accreditation demonstrates Innovnano’s commitment to producing the highest quality nanostructured ceramic powders and products and highlights its support for the continuous progress in the development of advanced ceramic materials.
Unmanned aerial systems We are working with industry, academia and vendors to develop a guidance framework on unmanned aerial systems (UAS), commonly called drones, for the energy industry. UAS provide an effective alternative to traditional methods of in-service assessment and survey, especially for structures and assets at significant heights, difficult to access locations and hazardous environments. Like any new technology, these benefits come with additional risks that need to be systematically assessed and controlled to enable safe and sustainable innovation and integration into mission-critical environments, such as energy and marine sectors. Floating offshore wind turbines The offshore wind industry uses a fixed platform design for wind turbines, where the base is embedded in the seabed; so areas where the depth is greater than 100 metres have not been utilised for offshore wind energy. The main challenge in moving to floating units is dealing with the movement of the floating offshore wind turbine (FOWT) generated by the waves and the wind. A group of our researchers at the Singapore GTC, and their partners at the Institute for High Performance Computing, are working on a tool that could help develop a cost‑competitive FOWT design.
For more details see www.lr.org/gr2015
www.lr.org
11
MARINE As a leading marine classification society, we set standards, LR’s Rules, and survey ships to ensure they are designed, built and can be operated safely and with due care for the environment. We are also a key provider of technical advice to the shipping industry. We support the development of new technologies and innovations that will play a vital role in the future of shipping.
LR has to help marry the potential of technology with the practical requirements of owners and operators.
42%
LR’s market-leading share of the LPG order book In this section • Technology leadership • Stern-first ice-class notation • Large container ship capability • LeanShips project
12
13
Lloyd’s Register Group Review 2015
MARINE REVIEW Our balanced approach helps clients in difficult market conditions Lloyd’s Register is probably the most diversified of the marine classification societies. We have a very strong team in place, which is focused on ensuring we maintain our technology leadership while remaining relevant to our clients. Our 2015 results were exceptional, with income up over 18% on the previous year. The strength of this performance was driven by our continued success in being awarded a high share of newbuildings and service to ships in class.
Alongside this our technology expertise in other areas is being increasingly recognised. For example, work has begun on the first newbuildings that comply with LR’s provisional Rules for the classification of stern-first ice-class ships. We have a leading class share of the growing fleet of battery-powered vessels, and we are also involved in an expanding range of projects for gas-fuelled ships, gas carriers and LNG bunkering.
It is important is that we maintain a balance between the needs of the future and the needs of today, particularly as the diversity of the industry means that different people want different things at different times. Some sectors are embracing and driving new fuels and new designs while others are moving at a slower pace.
However, many of our clients are not looking for cutting-edge new technology. In sectors such as bulk carriers and tankers, what they really want us to focus on is service delivery and support with regulatory compliance. And, given market conditions, some owners and yards are just trying to survive so that they can thrive in better times.
Shipowners need to remain competitive: they can only try to make the best commercial decisions based on the best technical advice available at the time. Remaining safe and financially secure while enhancing performance is a constant challenge.
LR has to help marry the potential of technology with the practical requirements of owners and operators, recognising their different needs. Our role is to ensure that we are able to help all players, in all the marine markets.
We have leading positions in the LNG, LPG and passenger ship sectors where the technology, capital at stake and risks faced are perhaps higher than in any other sectors, and where our expertise can add the most value for our clients. And we have a good market share across all the major ship types – especially containerships, bulk carriers and tankers.
14
2015 KEY HIGHLIGHTS • Large containership capability, both newbuilding and in-service activity. LR has won orders for 20,000+ teu containerships in Korea and Japan. • In-service expertise, contracts to class full fleet with NORDEN and more ships for Ultranav. • Leading technology, the first LR stern-first ice-class ships and battery power projects.
Tom Boardley Marine Director
www.lr.org
Lloyd’s Register Group Review 2015
OUR YEAR Technology leadership Class societies such as LR have a key role to play in validating technology and making sure it is fit for purpose. We currently have more than 25 technology research projects with governments, universities and research institutes. This work is helping in the understanding of the application of technology for all of our industry stakeholders. Much of it is being done at Marine’s new home – the GTC in Southampton – and also by our new Applied Technology Group (ATG) based in Halifax, Nova Scotia. We set up ATG during the year, centred around the activities of Martec which has been part of LR since 2008. The ATG team has been working on a range of projects not just in shipping, but across offshore and land-based industries including explosion modelling and underwater autonomous vehicles. One key area we have covered this year is computational fluid dynamics (CFD), where we have some of the best people in the world working on a range of projects that are helping the industry deliver profit, save fuel and reduce environmental impact. With new, clean sources of propulsive energy a real priority for shipping, we have been leading the way in the development of battery power in hybrid marine applications.
Our team, working with experts at universities in the Netherlands, is developing new applications and technologies to use battery power safely.
World’s largest heavy lift crane vessel
LR has the leading class share of the growing fleet of battery/hybrid-powered vessels, and in May we published a guidance document setting out our experience with large battery installations. This was aimed at facilitating a risk-based approach to battery use. The intention is that the process for approving these installations will remain relevant, regardless of the way battery technology evolves. The guidance describes the key hazards to consider when installing battery technology and gives an overview of our non-prescriptive approach to approval. The guidance also covers battery chemistry and industry standards.
LR is to class the world’s largest heavy lift crane vessel for the Netherlands-based Heerema Group. The semi-submersible crane vessel (NSCV) will be built at the newly opened Sembcorp ‘mega yard’ in Singapore. The new vessel will have two cranes each with 10,000 tonnes lifting capacity, able to install and remove offshore facilities, subsea structures, foundations, moorings, and floating structures in deepwater. With a length of 220 metres and width of 102 metres it will be the world’s largest crane vessel.
While most technological development is currently occurring in specialist sectors, we are heavily involved in some of the new concepts that are emerging and which we expect to transfer to mainstream deep-sea operations in time.
The dual-fuel LNG and marine gas oil vessel is due to be delivered in the fourth quarter of 2018 and will be a key asset in the offshore market and a leading player in the installation and decommissioning of offshore facilities. Heerema is committed to the protection of the environment and the NSCV will include an Inventory of Hazardous Materials and boast a full complement of LR’s ECO notations. Compliance with our ECO Rules demonstrates extra commitment to environmental protection.
Gas remains a key area of our activity. Despite the excitement in LNG as a fuel, no deep-sea operator has yet built a gas-fuelled bulker, tanker or container ship. However, our industry-first, gas readiness notations are available for those who might want to incorporate different levels of readiness into a newbuilding – or even retrofit – project.
With the opening of our new GTC in Southampton this complex project is a good fit for LR and is an exciting challenge for the LR team in Singapore who are supported by a large range of global experts. Piet Mast Lloyd’s Register’s Regional Marine Manager for South Asia, Middle East and Africa Some of the members of the ATG team.
www.lr.org
15
Lloyd’s Register Group Review 2015
MARINE REVIEW CONTINUED
In-service expertise Leading tramp ship operator Dampskibsselskabet NORDEN A/S, based in Copenhagen, has contracted LR to class 57 ships, including the full NORDEN fleet and other externally managed NORDEN-owned ships. Some 32 of the vessels in the agreement will be transfer of class (ToC) ships, including nine new ships which will transfer to LR on delivery. Four ships are currently classed by LR and 16 externally managed ships will also be transferred to LR as part of this agreement.
The in-house capability we have here in Copenhagen to consistently support clients was essential in securing the contract. Classing ships like bulkers and tankers and providing day-in, day-out service delivery is our key activity. We make sure NORDEN ships can trade as safely and efficiently as possible, and meet their business goals. Flemming Kjeldsen LR’s Copenhagen-based Marine Client Manager
Stern-first ice-class notation Operating ships in polar regions is of growing interest as the warming waters become increasingly navigable. Although LR has been classing ships that operate in icy waters since our origins in the 18th century, we are now helping regulators to understand what is really involved in polar ship design and how to bring ships capable of navigating the ice into class. Our expertise in this area is being recognised in the construction of three Arc 7 shuttle oil tankers at the Samsung Heavy Industries shipyard in Geoje, South Korea which are contracted to the Russian operator Sovcomflot. These 42,000 dwt ships are being purpose-built for year-round operations exporting oil from the Novoportovskoye oilfield in northern Russia via Ob Bay in the Russian Arctic. They are the first newbuilds to comply with LR’s provisional Rules for the classification of stern-first ice-class ships. Compliance with these Rules and the requirements of the Russian Northern Sea Route Administration (NSRA) will ensure that the tankers reflect best practice for stern-first operation in ice including, for example, appropriate extents of stern shoulder ice strengthening, best practices for navigation bridge watch layout and visibility, and consistent interpretations of international regulations. Large containership capability A key win during the year was a contract to class a series of six ultra-large 20,150 teu containerships for Japan’s Mitsui OSK Lines (MOL). Four of the ships will be built in South Korea and two in Japan. The six vessels will be launched and delivered in 2017. This is a highly significant contract for both LR and MOL, and comes in part as a result of the research, innovation and understanding of large containership hull structures that we have previously demonstrated. LeanShips project LR is a key member in an EU-sponsored four-year low emissions project called LeanShips which officially started in May 2015. The aim of the initiative is to demonstrate how small- and medium-sized commercial and leisure vessels can increase their fuel efficiency by up to 25%, reduce their CO2 emissions by a quarter and cut their NOx (nitrogen oxides), SOx (sulphur oxides) and particulate matter emissions by as much as 100%. The project aims
16
A stronger presence in South America In an agreement between LR and the Ultranav Group, 61 managed ships and ships under construction, will join the 67 ships already classified with LR. The agreement covers a wide range of specialised gas carriers, tankers, dry cargo ships, and tugs.
Together with our colleagues in Humboldt, Chile, Nav. Antares of Argentina and Navitranso of Peru, we established key performance elements such as professionalism, alertness, ability to understand our business and requirements, cost, and not least a strong presence in South America. LR scored highly in all. Kaj Pilemand Chief Technical Officer, Ultranav
10 out of18 award-winning vessels in the World Superyacht Awards were LR classed or built under LR class
22,500+ downloads of ILO MLC and ISM & ISPS pocket checklists apps
www.lr.org
Lloyd’s Register Group Review 2015
INDUSTRY OVERVIEW
to develop demonstrable concepts and technologies for both newbuild and retrofit vessels in different market segments. LR’s main role will be to evaluate the safety and classification aspects of the different low-energy and near-to-zero emissions concepts and technologies so they can be demonstrated on an LNG carrier, a general cargo ship, an ice-going vessel and a leisure passenger ship. Royal Canadian Navy classification Our deep technical understanding of the challenge that naval ships represent continues to be recognised. This year we have been contracted as the sole provider of Naval Material Regulatory services to the Royal Canadian Navy (RCN) for its combatant vessels. Over the course of the contract, LR will provide classification services to all current and future combatants in the naval fleet, including 12 modernised Halifax-class frigates and up to 15 future Canadian surface combatant frigates/destroyers, which are all unique to Canada. LR will support the RCN with these complex vessels from concept design all the way through to 15 years in service.
Shipping is one of the world’s most important industries: more than 90% of the world’s goods are transported by sea.
shipowners will be under greater pressure to invest in new technologies, fuels and approaches.
It is also the lifeblood of many local economies, particularly in Asia where just three countries – South Korea, Japan and China – account for 94% of the world’s shipbuilding in terms of gross tonnage. Shipping accounts for more than 25% of Hong Kong’s GDP; and in the Philippines, the maritime industry employs more than half a million seafarers.
The industry is taking action: from the development of emissions abatement technologies to the adoption of greener fuel options such as LNG and ethanol. But these may not be enough on their own. The full technological revolution facing the industry will not only enable it to reduce its environmental footprint, but will also create overall efficiencies that will benefit shipowners’ bottom lines.
With projections suggesting that global seaborne trade could double by 2030, the role of shipping in driving local, regional and global economic growth can only continue to increase. However, the industry faces a number of key challenges, particularly in the area of environmental performance and greenhouse gas (GHG) emissions. Under a global agreement which came into force in January 2013, the shipping industry has to reduce the amount of GHG emitted per tonne of cargo transported per kilometre (tkm) by 20% by 2020 and 30% by 2025. These measures mean that
LOOKING TO THE FUTURE Our strategy is about quality: quality of capability and quality of delivery. We will continue to balance the different and specific needs of our many clients and keep on top of shifts in technology, fuels, and ever-better best practice, in order to deliver ever-better service wherever our clients want us to be. We will be developing our understanding of how new technology can be best applied to some of the most complex marine projects undertaken, while always supporting our core activities in surveying ships worldwide. Working to make the most of our understanding of data and refining our service delivery systems, we will further enhance our ability to provide the support the shipping and marine industry needs. Many clients have a limited appetite for discussing what is going to happen in 2050. However, many of them are worried about problems they face today: what should they do about ballast water management
www.lr.org
We are already looking to a world where voyage plan information and data from ship structures provided by nanotechnology and acoustic fibres is collected centrally and used to enhance performance. This could, for example, open the way for new propulsion technologies, such as wind power, to be used more effectively. But benefiting from such options is likely to require a change in mind-set and for people to work in less predictable partnerships, using different skills from those that dominate shipping today.
systems? Emissions requirements? Fuel costs? Environmental management and compliance are obviously key areas where LR’s experience and expertise is always available to owners and operators, guiding our clients through the complex mazes of ballast water and emissions requirements. We have to think about both short- and medium-term timeframes, as well as scanning the horizon trying to anticipate and prepare for what is coming next. Marrying safety with performance is vital – meeting regulatory requirements but remaining commercially viable. We will continue, above all else, to provide value: helping our clients and stakeholders make the best decisions based on the best technical insight.
To find out more about our Marine business visit www.lr.org/marine 17
18
ENERGY We are an independent provider of risk management services to the energy sector. Our technical experts and risk engineers evaluate the integrity of plant and processes, and focus on delivering practical advice. We give stakeholders confidence that they are effectively addressing today’s economic, legislative and corporate responsibilities.
Our experts deliver high-quality service, deep technical expertise and advice across the energy spectrum. In this section • Qualifying innovation and technology • Advancing FLNG best practice • Predicting and managing ‘what if?’ • Delivering the next generation of talent • Bridging the late-life gap • Making light work of well intervention • Driving nuclear innovation • Boxing up the container business
19
Lloyd’s Register Group Review 2015
ENERGY REVIEW We apply our world-class expertise to deliver value to clients
The energy landscape is turbulent. Oil prices remain low and unpredictable, operating costs are rising and regulations are increasingly stringent.
Across the world, assets are reaching maturity, access to reservoirs remains challenging and many experienced specialists are nearing retirement. While this creates complex commercial and technical issues, and the risk of a skills and knowledge gap, it also provides an urgent imperative for innovation.
During the year, our GTC in Singapore moved into state-of-the-art new research facilities. The GTC and its close partnerships with the Agency for Science, Technology and Research (A*STAR), National University of Singapore and Nanyang Technological University, is a powerful example of how collaboration accelerates learning and growth. Through our resources and expertise, we contribute across the full product development spectrum, from research to industrial application; supporting the advancement and safe adoption of new solutions.
In a year dominated by the low oil price environment, we have supported our clients by delivering technical solutions that maximise operational efficiency, while never compromising on safety. Orders have been steady and we are pleased to have won contracts for a number of groundbreaking projects, such as floating LNG (FLNG) developments for Shell, Eni and Bumi Armada; the Statoil-led Johan Sverdrup field; and AW-Energy’s innovative wave energy technology, WaveRoller™.
Alongside this, we have facilitated an ongoing dialogue to drive deeper understanding of key issues and solutions among industry stakeholders. The business’s Energy Advisory Committee, involving stakeholders from across industries, continues to provide a valuable insight and a road map to LR Energy’s long-term vision. Last year’s Technology Radar surveyed over 250 energy industry professionals to determine the current state and future outlook for innovation and the 2015 survey is due for publication later this year. In addition, our regular videos, white papers and digests (including the quarterly Technology Insight) stimulate meaningful engagement with the industry. This growing body of research illustrates the important contribution of LR to the advancement of knowledge and skill within the industry.
In response to the challenges faced by clients, we have launched a number of new products including late-life integrity management services, next generation Reliability Based Mechanical Integrity (RBMI) software and Technology Qualification, a systematic methodology for qualifying new technology. Sector-specific new products include wind turbine type certification and the updated Rules for Offshore Units.
20
John Wishart Energy Director
2015 KEY HIGHLIGHTS Milestone wins • Major FLNG projects operated by ENI and Bumi Armada. • AW-Energy, for certification of WaveRoller™ technology – a major innovation in the renewables sector. • Risk management services to Johan Sverdrup project, one of the largest oil discoveries ever made on the Norwegian continental shelf. New products and services • Next generation RBMI software. • Technology Qualification. • Wind turbine type certification. • Updated Rules for Offshore Units. Industry recognition • Special achievement in geographic information system (GIS) technology award at the Esri International User Conference in San Diego (won by our subsidiary SGC). • British Quality Foundation award for employee engagement for our Global Energy Transformation programme. • Best Oil & Gas Services Award at the 2014 African Achievement Awards for LR Senergy’s role in the landmark Ethical Energy Consortium (EEC).
www.lr.org
Lloyd’s Register Group Review 2015
OUR YEAR Qualifying innovation and technology With the launch of our new Technology Qualification for novel technologies and approaches, we spearheaded a drive to improve the safety and efficiency of new technologies and innovations. The method provides evidence that equipment will function within specified operational limits and with an acceptable level of confidence. By providing a goal-based approach to determine risk and enabling technology developers to manage costs and the associated risks, we are supporting the deployment of innovative technology. Advancing FLNG best practice We are helping FLNG owners and operators find the optimum balance between risk and cost: driving international requirements where they need to be driven; challenging others where safety and reliability can be assured; establishing bespoke specifications only when they need to be special; and taking advantage of universal codes and standards where items are a routine nature or fit and compatibility can be guaranteed. The fewer bespoke specifications there are, the greater the opportunity to reduce risk and cost with equipment supply. We will continue to deliver the greatest support in selecting the most appropriate codes and standards and de-risking FLNG. In April, we held the 2015 Offshore Technical Committee in London, to improve transparency and safety in offshore oil and gas. Through consultation with 60 industry stakeholders (including ExxonMobil, BP, Chevron, Eni, Petrobras, Shell, Statoil, Technip and Total and universities in Singapore, Southampton and Strathclyde), we reached industry-wide agreement on LR’s Rules for Offshore Units and best practice guidance on how to maximise safety in the design, construction and lifetime maintenance of floating offshore assets. By July 2015, we were involved in more than five FLNG projects of different scope and size, including Shell’s Prelude FLNG project. Furthermore, Eni chose us for their groundbreaking deepwater Mozambique offshore project, Coral South.
www.lr.org
Predicting and managing ’what if?’ As technology becomes more sophisticated, risk management tools and software are taking on a greater strategic importance. The past year has seen significant investment in this area, in particular our integrated RBMI software, which has been shown to help reduce risk inspection failure rates by more than 80%. RBMI provides industry with the capability to understand risk and predict safe operating parameters – a key factor in today’s cost-sensitive market. Our alliance with MaxGrip has helped to further enhance the RBMI functionality, and leverages our market-leading integrity engineering and risk-based inspection experience with MaxGrip’s expertise in software development. RBMI is being used across the energy industry. Australian energy company AGL, which is currently in the commissioning phase of a new coal-seam gas project in New South Wales, has installed RBMI on fixed equipment and piping including 85 vessels. It will provide a comprehensive approach to its integrity management plan including a detailed corrosion study and inspection regime. In the wind sector, RBMI is being applied to the safety-critical components of a turbine, providing model outcomes which help construct maintenance plans for wind farms around solid intelligence. This is particularly significant in light of the growing trend for larger turbines to be installed further from shore. Another example of predicting and managing ‘what if’ was LR Senergy’s launch of its improved IRIS offshore project and data management web application. This provides maximum visibility to the status and progress of an offshore project at all times and from any location. Delivering the next generation of talent As the industry faces the issues of ageing assets and a maturing workforce, we are committed to advancing knowledge and expertise. Traditionally, on-the-job training has formed a large part of the transfer of knowledge, but as fewer senior experienced crew are available on the rig, and their time is in great demand, opportunities are limited. Because of this, and the highly technical and digital nature of next-generation assets and equipment, offsite training is taking on a far greater importance.
Reducing the risk of inspection failures with RBMI implementation Following a 10-year relationship with Holly Frontier, which began with the implementation of RBMI at the El Dorado Refinery, we were awarded a contract to implement RBMI software at the company’s Navajo Refinery in New Mexico. RBMI is an industryleading risk-based inspection software package that enhances safety, maximises productivity and reduces costly equipment failures. The software has delivered value and increased efficiency to numerous operators across the upstream, downstream and power industries through optimised maintenance and inspection regimes, and it has already demonstrated significant results for Holly Frontier.
Navajo Refinery is our fifth refinery to begin implementing the software. RBMI has proven to be instrumental in helping to reduce the risk of unexpected equipment failures. Jim Stump Senior Vice President, Refining Holly Frontier
150+
Our work on Shell’s Prelude FLNG project has supported the creation of over 150 new patents
300%
increase in oil production as a result of our work for one client
21
Lloyd’s Register Group Review 2015
ENERGY REVIEW CONTINUED
Wave energy technology In August 2014, we won the contract to certify AW-Energy’s world-leading WaveRoller™ wave energy converter. This novel technology is an emissionfree, renewable source of energy and it has a low visual impact. The first grid-connected WaveRoller™ device is operating in Portugal. Our third-party certification helps to advance the safety and performance of the technology, to optimise project financing and facilitate insurance coverage.
The involvement of an institution like Lloyd’s Register Energy to this extent will ensure that the highest quality standards and technical excellence are met. John Liljelund AW-Energy CEO
AW-Energy’s WaveRoller™
Making nuclear power safer Eletrobrás Termonuclear in Brazil selected our RiskSpectrum® software to support the build of the new Angra 3 reactor with AREVA.
RiskSpectrum® provides a complete set of tools for developing, documenting, quality assuring, and monitoring the risk in the operation of our plants. Edmundo Selvatici Training and Safety Manager Eletrobrás Termonuclear S/A
22
We continued to deliver courses from our dedicated training centres in Houston, Singapore and the Netherlands. Our training can be tailored to different sectors within the energy industry or bespoke to suit the requirements of clients. Courses combine classroom learning with workshop-based training and cover a wide array of topics relevant to mechanics, electricians, managers, supervisors, HSE specialists, general management and subsea engineers. Many of the courses are linked to a learning path and most are accredited by the International Association of Drilling Contractors (IADC). We have also seen organisations build our courses into their competency matrix – a clear indication of the value we bring to individuals, organisations and the global industry as a whole. Of course, there is no substitute for on-the-job learning from seasoned and knowledgeable experts as they tackle real-life issues and tasks – and offsite training complements rather than replaces it. Offsite learning is a safe environment in which to test out alternative approaches, apply critical thinking and sharpen technical understanding. Bridging the late-life gap The gap between late-life operations and cessation of production generates challenges for operators. The decision to decommission is far from straightforward and we are now seeing an increased commitment to late-life asset management from operators as part of their risk profiling strategies. In response, our experts have stepped up support to clients in this area during the year. With our expertise, clients can focus on making limited investment to maximise resource recovery from ageing assets, while at the same time reducing risks. Making light work of well intervention While debate on the future of offshore oil exploration continues at length, less has been made of how light well intervention could maximise returns from existing wells in mature basins and play a significant part in the future of subsea wells. LR Senergy has been advising industry on how more cost savings could be made if operators worked together to maximise the kit available to access and work on subsea wells. Thanks to our in-house expertise, we believe there is much more potential to increase the recovery factors of the assets industry already has in play, by providing guidance on new light well intervention technologies.
LR Senergy for example has worked in close co-operation with a client to increase the efficiency of the well planning and construction process for its operations in the Middle East – resulting in significant improvements in enhanced well delivery. Driving nuclear innovation We see our work in the nuclear power sector increasing in the years ahead, given that world demand for electricity is likely to almost double over the next 25 years combined with the international concerns on global warming. Clean, affordable nuclear power options are a vital part of a sustainable energy mix, which is why we are participating in a number of industry collaborations. The UK’s nuclear industry has entered a new era of opportunity, buoyed by a multiparty consensus on the country’s future energy mix. As part of a consortium on nuclear small modular reactors (SMR) we recently released new data to advance the UK’s technology leadership in the development of low-carbon power generation and secure energy supplies through investments in SMR technology. Our investment in this sector includes a partnership with the Swedish Radiation Safety Authority to enhance their prediction software – RASTEP. This will support the decision-making process for emergency response and increase public safety. Boxing up the container business The LR Container Certification Scheme (LRCCS), launched this year, gives a clear and concise set of rules to ensure offshore and onshore containers are safe and certified correctly. Aimed at both manufacturers and operators of equipment in the intermodal industry, the LRCCS gives industry the very latest requirements for the design, inspection and certification for intermodal equipment. These latest scheme updates help manufacturers and operators to measure their container equipment against all appropriate state and local regulations and standards using just one, single scheme rather than multiple schemes. This year, we also made publicly available all our in-service inspection procedures for offshore containers to provide easy-to-reference inspection criteria for the structural integrity of both offshore and onshore containers.
www.lr.org
Lloyd’s Register Group Review 2015
INDUSTRY OVERVIEW The global energy industry has seen dramatic changes in recent years, ranging from the geopolitical and commercial context, technological advancements and social dynamics. In parallel, energy has taken its place among the most topical and vigorously debated talking points in modern society. No longer confined to the business and environment pages, energy industry developments and discussions are now front page regulars, with opinions on the optimal energy mix as divided as they are passionately held. The core issues come down to safety, security of supply, climate change and cost. The responses and potential solutions are varied, complex and subject to a battery of valid challenges ranging from ideological to technical, scientific to emotional. The industry must welcome this debate because now, more than ever, it is vital that we take the time to examine and consider how we can best evolve to serve our changing world in the years ahead. While the solutions are a matter for debate, what is beyond question is that real progress will be made through a continuous process of improvement: doing things more safely; minimising impacts on communities and environments; reducing operating costs; and increasing productivity. Innovation helps at a localised level by finding solutions to specific issues, but it also gradually erodes and eventually overcomes far-reaching problems on a global scale.
LOOKING TO THE FUTURE Undoubtedly, many parts of the global energy industry are facing difficult decisions, or the ramifications of them. At the end of 2015 the Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change, will address the emission game-changers; energy companies are no exception to the issue of emission targets and carbon pricing, and will have an increasing part to play. The economic realities of today, coupled with the uncertainty of the future, elevate the risks associated with planning and investment. LR Energy is well placed to support clients through this period of challenge and change. We will continue to deliver our market-leading training programmes to ensure crews are trained to a level where they can confidently and skilfully operate and maintain the latest generation equipment. We will advance innovative technological solutions to enable clients to extract maximum value from assets for minimum investment – while never compromising on safety – using services such as LR Senergy’s new ‘Wellscope’ process that uses CFD to model wells near wellbores. Identifying production optimisation options and strategies will be an essential need for operators now and in the future. As the industry adapts to current and upcoming energy policy on a rapidly changing and diverse energy mix, we will collaborate with stakeholders within and outside the industry in order to drive the technology that will shape the safe, sustainable and productive global energy industry of tomorrow.
We published our Technology Radar study in September 2014, followed by a global series of briefing events attended by senior executives from across the industry. The research delivered a clear and illustrative overview of the technological climate while looking towards its future and identifying the key barriers to and drivers of innovation in the sector. Based on a survey of technical specialists and senior executives from across the sector, as well as in-depth interviews with a number of industry leaders, the research takes a completely independent and unique perspective on the market in which we all operate. www.lr.org/technologyradar
As part of series of global events, executives from across the sector met in London to discuss the findings of the research.
No1
We are the largest supplier of ASME certificates outside the Americas
90%
Up to 90% fewer inspection points required by our RBMI software compared to a traditional programme; risk of failures reduced by 80–95%
Oil & Gas Technology Radar study
We reported our classification and certification services for Malaysia’s first deepwater floating production system in the Group Review 2013. The platform was built using 676 kilometres of stainless steel tubes. In October 2014, oil production started on the Gumusut-Kakap field.
To find out more about our Energy business visit www.lr.org/energy www.lr.org
23
MANAGEMENT SYSTEMS (LRQA) LRQA is a recognised, world-leading professional assurance services organisation. We specialise in management systems compliance and expert advice across a broad spectrum of standards, schemes and customised assurance programmes. We unlock the power of management systems to improve organisational performance and reduce risk.
Certification supports us to continuously improve our food safety and quality management system. LRQA’s assessors understand Mengniu and our supply chain. The robust and in‑depth audits add real value to our business. Wang Yansong Assistant Vice President, Mengniu Group
60,000+ certificates worldwide
In this section • A wider range of services • New standard transition services • Training for clients • Food safety
24
25
Lloyd’s Register Group Review 2015
MANAGEMENT SYSTEMS (LRQA) REVIEW The changing shape of LRQA
Our 2020 Vision sets out what we plan to achieve over the coming years. It represents our strategic journey towards a successful and sustainable future.
Over the past year, LRQA has been evolving from offering largely compliancebased services to an insightled service portfolio, utilising our exceptional people, their expertise, and technological innovation to better meet the needs of our clients. To deliver this we have put in place a clear plan – the LRQA 2020 Vision – which sets out what we want to achieve over the coming years. It represents our strategic journey towards a successful and sustainable future. It describes how we will apply our expertise, as well as expanding our service portfolio, in order to retain our competitive advantage and accelerate growth. With the structures and people now in place, we have emerged as a market-led and technically enabled business. It is essential we understand, appreciate and meet the needs and expectations of our clients. Through market intelligence, data and innovation, we can offer a broader range of services that our clients want, in the places they want, with good promotional activity. As a result, we can deliver greater value to our client base, ensuring we do it with maximum efficiency and effectiveness.
26
A fundamental enabler to our continued success is our new enterprise resource planning platform. Called the Business Operating System, not only will it deliver greater efficiencies for LRQA, it will also ensure a more positive client experience. I am delighted to report that our transformation into a global market-led organisation has resulted in a strong financial performance, with a 4.4% year-on-year revenue increase and much improved profitability in the 2014/15 financial year. This has been achieved through the hard work and dedication of LRQA employees worldwide who have embraced our new strategic direction, as have our clients who are benefiting from a wider service portfolio that resonates with their changing business requirements. John Rowley Management Systems Director
2015 KEY HIGHLIGHTS Standard revisions LRQA is at the forefront of communicating changes to our existing and potential clients as the theme of change continues for the assurance industry; with the major ISO standards being revised, including ISO 9001 (quality) and ISO 14001 (environmental). Through our membership of the Independent International Organisation for Certification (IIOC), LRQA participates in the major ISO technical committees shaping the future standards. Asset management: cross stream LRQA was awarded accreditation to ISO 55001:2014, the international standard for asset management by UKAS in April, demonstrating our focus on cross-stream collaboration with other members of LR. LRQA is the only certification body to hold a global scope of accreditation for ISO 55001:2014 (which replaces PAS 55) and is one of the first certification bodies to be awarded accreditation against the standard. This achievement demonstrates LRQA’s commitment to leading LR in the provision of non-asset-related assurance services and complements the asset compliance and expert advice delivered globally through the Energy and Marine divisions.
www.lr.org
Lloyd’s Register Group Review 2015
Food sector: customised service for Mengniu As China’s largest supplier of products and services in the agri-food sector, Mengniu’s dairy products reach millions globally every day. Mengniu has pledged to be a consumer-centric and innovation-led company, with an unwavering commitment to food safety and quality management at the heart of its entire supply chain. Since 2013, LRQA has delivered a range of assurance services to Mengniu to support its specific business needs, unique challenges and ongoing expansion plans. In addition to providing a range of services, including training and supply chain audit, LRQA also assesses Mengniu’s operations against ISO 9001 (quality) and FSSC 22000 (food safety) standards.
We very much value LRQA’s strong technical advice, independent counsel, sector-specific expertise, and flexibility to tailor solutions that suit our specific business needs. Wang Yansong Assistant Vice President Mengniu Group
OUR YEAR A wider range of services LRQA specialises in management systems compliance and expert advice. Our core assurance services, including certification and training, remain at the heart of all that we do. And we have widened our customised assurance – to include bespoke solutions, supply chain and second-party services – as well as our business advisory services offering. This approach is enabling us to surround our clients with a range of value-based services to ensure that we are able to meet their changing needs, both today and into the future. New standard transition services With both ISO 9001:2015 and ISO 14001:2015 published in September 2015, the revisions to these and other ISO standards represent
www.lr.org
a significant opportunity for our clients, in terms of improving their businesses, and for LRQA too. This year we developed a range of new standard transition (NST) assessment and training services. Through these, our teams worldwide are helping organisations ensure their seamless transition to the new standards. Training for clients Training continued to contribute a significant level of revenue to our business globally. LRQA provides practical client training courses worldwide in various languages, led by trained and qualified tutors. Many of our courses are endorsed by relevant professional bodies and based on our experience of assessing management systems. We offer both public and in-house training events, including customised training solutions, which sees us delivering our services to some of the world’s best known brands, including Siemens AG.
INDUSTRY OVERVIEW This is clearly a transitional time for the assurance market and the worldwide adopters of management systems standards. With particular reference to ISO 9001, given that this is the most significant revision to the world’s most widely adopted standard in 15 years, it is anticipated that this will bring increased organisational benefits by delivering effective and performancebased management systems. Within the environmental and energy sectors, we are increasingly seeing local legislation to help reduce the environmental impact of organisations. Within the UK, the Energy Savings Opportunity Scheme (ESOS) is one such mandatory initiative and there are similar schemes operating in other regions globally. This is resulting in an increase in demand for our services in many of our key markets.
LRQA’s training offered a very good balance between theory LOOKING TO THE FUTURE and practical application. Maren Stiller Siemens AG Food safety We help to ensure the infrastructure that society relies upon is fit for purpose. We work with organisations in key industries, such as food, telecommunications, and aerospace, to make sure that risks are mitigated. LRQA works with over 5,000 food sector organisations – from the world’s best known brands such as Mars, Incorporated – to the smallest suppliers. This sector has seen the highest demand for our customised assurance services. These bespoke solutions provide an additional layer of assurance to our clients over and above their certified management systems, that their supply chains are both safe and sustainable. We had some significant contract wins during the period with some of our new food services including the Sedex Members Ethical Trade Audit (SMETA), which is designed to reduce duplication of effort in ethical trade auditing, benefiting retailers, consumer brands, and their suppliers.
We have a clear focus on what we want to achieve for LRQA and the thousands of organisations that we serve worldwide. Many of these will need to move to the new revised ISO standards and we are confident that LRQA’s range of NST assessment and training services will ensure a smooth transition for our valued clients. We have started widening our offer and the increase in demand for our customised assurance services, particularly in the food and environmental sectors, is set to increase. Recognising the need for expertise within each of the sectors we serve, we recently strengthened the medical devices team. LRQA is now operating as a global market‑led and technically enabled business. We are confident that a combination of our people, services, global reach and vision will continue to set us apart from the competition and make LRQA the preferred provider of professional assurance services for organisations worldwide.
To find out more about our services visit www.lrqa.com 27
Lloyd’s Register Group Review 2015
CHIEF FINANCIAL OFFICER’S REPORT Revenue and profitability sustained despite global headwinds
We are pleased to deliver continued top-line growth despite challenging global economic environments, however the softer energy market and a weakening euro have impacted our operating profits. I would like to comment on selected key numbers from Lloyd’s Register Group Limited’s annual report and financial statements for the year ended 30 June 2015. Our financial performance is a creditable achievement, particularly given the macroeconomic upheavals that have affected our energy sector clients during the course of the year. The significant reduction and volatility in oil pricing has clearly impacted a number of our clients, creating uncertainty for their investment decisions. Despite the boost of falling oil prices benefiting other businesses, the world economy has continued to struggle to gain momentum. Other challenges in 2015 have included significant uncertainty in the eurozone, with the potential Greek exit, and a slowdown in global growth expectations with concerns over China’s growth rates. Exchange rate movements have impacted the group results, as sterling has strengthened against many of our key currencies, reducing the reported turnover and profitability for the year.
28
On 1 July 2015, LR completed the full acquisition of Senergy Group Limited through acquiring the remaining 45% shareholding, following the initial 55% shareholding acquired on 2 September 2013. Also on 1 July, LR completed the sale of its rail business to Ricardo plc. Turnover Total group turnover for the year was £1.04 billion (2014: £1.03 billion), including the first full year of Senergy and the turnover relating to the discontinued activities of the rail business. Adjusting for exchange rate movements, turnover is 4.1% up on the prior year. The strongest income performance was within the Marine business which has seen strong growth. Together with year-on-year growth from the Management Systems business this has offset the significant market impact of reduced client investment in the energy sector, impacting both the core Energy business and the recent acquisition of Senergy. Operating profit We continue to take the long-term view, investing in our people to achieve sustainable growth for the group. Together with the impact on profits from the decline of volumes in the energy sector and adverse currency movements, these factors have led to a year-on-year reduction in the group operating profit before exceptional items to £61 million (2014: £74 million).
The group continues to invest in restructuring to position itself for the future including the completion of our Southampton GTC and the EMEA shared service centre roll-out. Other key investments during 2015 include information technologyled development projects to enhance LR’s systems and productivity and hence client service. These restructuring costs totalled £26 million in 2015 (2014: £35 million). Our normalised operating profit, adjusted for restructuring costs, foreign exchange gains and losses and defined benefit pension costs, was £77 million for the year (2014: £88 million). The reduction is mainly due to certain trading currencies softening and continued investment in people in the business, with the strong Marine and Management Systems performances outweighed by a reduction in the year-on-year performance of the Energy business in light of market factors. Profit before tax The group has reported profit before tax of £62 million for the year (2014: £51 million) including the benefit of increased investment income, investment gains and other finance income. Our profits are used to support the fulfilment of the Lloyd’s Register Foundation’s charitable activities, by investing back into the operating company for future growth and through direct funding to the Foundation. Regarding the latter, our donations to the Lloyd’s Register Foundation had a value of £11 million for the year to June 2015 (2014: £4 million).
www.lr.org
Lloyd’s Register Group Review 2015
£1,038m
£77m
TURNOVER £M
NORMALISED OPERATING PROFIT £M
09/10 10/11 11/12 12/13
806
09/10
855
10/11
893
94
12/13
13/14
1,028
13/14
14/15
1,038
14/15
96 82 88 77
£61m
8,892
TURNOVER PER EMPLOYEE £000
AVERAGE HEADCOUNT
09/10
09/10
7,549 7,555
10/11
113
10/11
11/12
113
11/12
12/13
112
12/13
Operating cash flow
7,885 8,192
13/14
115
13/14
8,926
14/15
117
14/15
8,892
Operating cash flow The operating cash flow for the year was £61 million (2014: £57 million) with strong focus on the conversion of work in progress to billings and working capital control offset by significantly higher pension contributions. The most significant non-operating cash flows were the group’s investment income together with net gains from the sale and purchase of investments, taxation amounts and the payment of deferred consideration in relation to previous acquisitions. Headcount The average headcount for 2014/15 was 8,892 employees, 0.4% lower than the previous year largely reflecting the organic growth in Marine offset by restructuring in the Energy and Management Systems businesses. With a focus on efficiency and staff utilisation, LR has managed to increase its turnover per employee to approximately £117,000, a 1.7% improvement on the prior year.
www.lr.org
+1.7% Turnover per employee
£117k 107
Turnover
75
11/12
920
+4.1%
Conclusion Our business streams have performed well in the face of challenging market conditions in our key markets given the disruptive impact the oil price has had on our clients’ investment plans. Despite the impact of the oil price volatility we have been able to deliver underlying turnover growth and improved cash flows. However, the market conditions and currency movements have impacted operating profitability. In the face of these market factors we have maintained investment in our people and long-term strategic initiatives including system improvements to maximise our operational productivity and margins. These investments will ensure the future growth and profitability of the LR group and maximise our funding to the Lloyd’s Register Foundation. The impact of uncertainty in the energy sector and global growth concerns are likely to be significant continuing headwinds for the remainder of 2015 and 2016 but with the ability to take the long-term view, the business is well positioned for the future.
Appointment as CEO My appointment as CEO from 1 October has been reported already in this review by the Chairman and Richard Sadler. Thanks to Richard’s leadership over the past eight years, our business is in good shape, despite turbulent market conditions. It is vitally important that our business continues to evolve and I am delighted to have been given the opportunity to lead LR through what promises to be exciting and challenging times ahead. Alastair Marsh Chief Financial Officer
29
Lloyd’s Register Group Review 2015
PUBLIC BENEFIT Newly stated values express our public benefit commitment Safety has been at the heart of our work since 1760 and we invest our time, money and resources to help fulfil the organisation’s mission: to enhance the safety of life at sea, on land and in the air, and to promote public education. Our parent entity is a charity, the Lloyd’s Register Foundation. We are proud that our compliance, risk and technical consultancy services directly discharges the first of the Foundation’s charitable objectives – to enhance the safety of life and property – by helping our clients to ensure the quality construction and operation of critical infrastructure. And as the operating company, LR generates profits that help to fund the whole organisation’s public benefit activities. In the marine industry, our work includes the safety inspection of 8,500 ships each year and the development of Rules for their safe construction, maintenance and disposal. We also help the International Maritime Organization (IMO) to develop conventions such as the Ballast Water Management Convention and have helped the International Labour Organization (ILO) to devise the Maritime Labour Convention (MLC). We also perform design approvals, surveys and audits to verify compliance with internationally recognised safety standards.
About the Lloyd’s Register Foundation The Lloyd’s Register Foundation’s vision is to be known worldwide as a leading supporter of engineeringrelated research, training and education. You can find out more on the Foundation’s web site www.lrfoundation.org.uk.
67%
Our work in the energy sector includes verifying the safe design and operation of rigs, platforms, floating offshore installations and refineries. We also inspect boilers and pressure vessels, and other land-based installations for safety-related purposes together with developing Rules for those assets. Our Energy consultancy business deals with safety case preparation for offshore exploration and nuclear power generation. LR’s Management Systems business, LRQA, includes our medical directive and CE marking activity helping to ensure the safety of a range of consumer products and medical equipment. LRQA devotes significant effort and resources to helping other standards-setting bodies to devise new or improved standards as well as auditing and providing advice relating to the ISO 14001 environmental and OHSAS 18001 health and safety standards. Our activities include considerable investment in furthering the understanding of technology. This directly benefits public knowledge and ensures that when technology is deployed it is sound, suitable and dependable and therefore safe for society in its application. Areas of research include: advanced materials; propulsion and powering; energy production and storage; robotics; marine biotechnology; and autonomous systems. We contribute to public education by making our research publicly available, and our highly qualified experts share their knowledge and experience with academics, students, regulators and professionals through committees, conferences and publications.
OUR YEAR LR’s values During the year we launched our newly stated LR values, ‘we care, we share our expertise, and we do the right thing’. Our values underpin our behaviour to each other, our clients and all of our stakeholders and reflect our public benefit commitment. Maximising the value of late-life oil and gas assets Our free white paper helps evaluate if ageing assets and associated equipment are economic to operate safely and identifies how operators can maximise the value of their assets at late life.
Supporting the offshore engineers of tomorrow We sponsored the 2014 International Association of Ocean Engineers field trip for young professionals held in the USA in September. The event hosted 50 graduate and PhD students in the offshore industry fields. New pressure vessel manufacturers forum in Italy More than 60 professionals attended the first Pressure Vessel Manufacturers Forum in Italy set up to drive collaboration and share knowledge. The forum has been established by LR and the Italian Association of Pressure Equipment to support manufacturers in Italy.
We believe over two thirds of the services delivered by LR support the Foundation in working towards a safer society.
30
www.lr.org
Lloyd’s Register Group Review 2015
Container Certification Scheme 2015 released For manufacturers anywhere in the world, our Container Certification Scheme 2015 gives a clear and concise set of rules to ensure offshore and onshore containers are safe and certified correctly. New guidance notes for calculating explosion loads To maximise safety in offshore operations, the structures and equipment that could be subjected to blast pressures need to be designed for accidental blast loading. Our new guidance notes provide recommended practices to help engineers, operators and designers to define blast and explosion loads to control and mitigate risk measures. Impact of big data We have engaged with the marine and energy sectors on the topic of big data. We held a seminar about the impact of big data on the marine industry in November 2014. In January 2015, we issued a white paper looking at big data’s management and its application in asset management decision-making.
John Rowley appointed to Board of CIWEM As a trustee of the Chartered Institution of Water and Environmental Management, John Rowley, Management Systems Director, is helping to advance the science and practice of water and environmental management for public benefit. ISO standards revisions Since 2013, LRQA has been keeping companies informed about the major ISO standards being revised including ISO 9001 and ISO 14001. Through membership of the IIOC, LRQA participates in the major ISO technical committees shaping the future standards. Offshore collision guidance notes launched Mitigating the risk of collision at sea requires a deep understanding of the causes. Our new industry guidance helps to make offshore operations safer for marine and energy operators.
Marine emissions guidance With key dates looming – 2016 NOx compliance and a 2018 review of fuel availability ahead of a global cap for SOx emissions – our new guidelines and updated technical information support operators’ investment decisions. New guidance on large battery installations on ships Our experience with large battery installations is captured in a new guidance document aimed at facilitating a risk-based approach to battery use. The guidance describes the key hazards to consider when installing battery technology, and gives an overview of our non-prescriptive approach to approval.
Waste water studies help reduce carbon footprint LR has found a novel way to help shipowners and operators lower their carbon footprint and meet the recently introduced 0.1% sulphur limits in emission control areas (ECAs). Using a series of CFD studies and calculations, LR can ensure the washwater discharged into the sea during exhaust gas cleaning operations complies with the acidity limit (or pH) agreed by IMO. LR supports study into lifeboat design for the RNLI The design of all-weather lifeboats is being reviewed as part of a study led by Newcastle University and the UK’s Royal National Lifeboat Institution (RNLI) with support from LR. The four-year project will help to improve the performance of the craft while providing the safest possible environment for the RNLI’s volunteer crews.
OOCL’s greenhouse gas emissions verified LRQA’s confirmation of Orient Overseas Container Line’s (OOCL) emissions data demonstrates the leading operator’s commitment to environmental performance and that its data is prepared with high accuracy, completeness, consistency, relevance and transparency.
Environmental performance is core to OOCL’s operations, and Lloyd’s Register’s independent third-party assurance remains instrumental in helping us achieve this business requirement. Stephen Ng Director of Trades of OOCL
www.lr.org
31
Lloyd’s Register Group Review 2015
OUR PEOPLE Our employees are our strength TAKING CARE OF HEALTH AND SAFETY
Safety leadership
The LR values demonstrate how we care about the safety of people and the communities and environment around us.
Our Safety Council (comprising our Executive Leadership Team) meets quarterly and acts as the guiding body for how LR will move from its current safety position to one of true worldclass performance. It sets the direction for the future and leads by example in terms of the behaviours and attitudes that LR expects from its employees worldwide.
As an organisation, not only do we have a significant impact on safety through our products and services but also through the safe working of our employees, particularly when they are on third party-controlled sites. Our total recordable injury incident rate has remained relatively stable over the last year rising slightly to 0.42 per 200,000 worked hours. In the last three years, the number of lost time incidents has reduced by 26%. We encourage near miss and safety observation reporting as this gives us an insight into the unsafe acts and conditions that could injure our employees as well as providing an opportunity to report positive safety cultures. In many cases, it has also given us the opportunity to talk with our clients about how safety can be improved for both their and our employees. We pay particular attention to any high-potential incidents from which useful lessons can be learned and shared. Progress made In the last year, we have been successful in: • integrating our LR Energy drilling and consulting service lines into our safety management system resulting in the achievement of OHSAS 18001 certification • the development of an occupational health programme • conducting a safety culture assessment which indicated an improving safety culture maturity.
We recognise that if we are to continue reducing the numbers of accidents and incidents, we need to focus on the people, not the systems. By encouraging our people to work and behave safely, we not only improve our safety performance but we also have a positive impact on the safety performance of our clients, the sites on which we work and all of this, in turn, positively impacts wider society. Ultimately by instilling the core safety beliefs in each of our employees, LR’s safety performance will be radically affected. These beliefs are: • We believe that every work accident can be avoided. • Staying injury-free is the most important part of servicing our clients’ needs. • Excellence in health and safety is vital to our long-term business success. • Every one of us is our own safety manager – we all have a part to play in preventing injury and harm. • Our people are ‘safety ambassadors’ sharing our core safety values with others. • Our people consider all the health and safety aspects of every job – before it begins. • Safe behaviour starts on the way to the work site, remains active throughout the day and is carried home with us.
32
Our Safety Review Group (comprising the Safety Leadership Team) meets quarterly. It reviews health and safety performance, considers the effectiveness of our safety management system and reviews the status and effectiveness of formal incident investigations and their corrective and preventive actions.
93%
of employees say that they feel empowered to stop work if they feel it is unsafe
www.lr.org
Lloyd’s Register Group Review 2015
HR: WORKING TOGETHER The year saw the completion of another successful employee opinion survey and progress in other areas to help employees make the best of their working lives. Our employees’ opinions Publication of the group-wide employee opinion survey results took place in June 2015 in time for actions to be included in personal development plans and the annual performance appraisals. The findings built on the 2013 survey to give LR its best-ever snapshot of employee opinion. The survey showed that, despite times of industry and organisational change, safety has come into even sharper focus with four out of the six safety questions seeing a significant improvement since 2013: • 93% of employees said that they feel empowered to stop work if they feel it is unsafe (a 6% increase from 2013) • 89% said that LR provides the appropriate safety training for their job (a 3% increase from 2013). Coupled with our strong safety results, the survey shows how our values are reflecting and helping to put a more clearly defined focus on some important areas of our business: • 86% said they were aware of and understood LR’s newly expressed values and the results indicate that these values are resonating across the organisation • 79% said that LR values the contribution of employees with different backgrounds, cultures and perspectives (an impressive 9% increase from 2013). At group level, systems and processes were once again highlighted as our most significant area of weakness with a 5% decrease in the number of people saying ‘the procedures and processes I work with enable me to do my job effectively.’
These insights provide an invaluable validation for two large investment projects, a new intranet and a major update to the people and finance systems, specifically designed to improve the way we work at LR. In preparation, the global HR team has been working on harmonising people processes through a series of processmapping workshops. Leadership development Across the businesses, performance management and collaboration were identified as areas in need of improvement and action plans have been developed to tackle both of these important issues. Every manager with over six reports has received a personal leadership scorecard and action planning toolkit to assist in prioritising improvement actions. Work to strengthen the senior leadership talent pool has increased over the year and a new executive development programme has been run with 16 delegates, identified from the most senior succession plans, taking part. The programme has five one-week modules over a 12-month period and combines external academic input from a variety of sources and the introduction of a range of new tools and techniques, many of which have been readily adopted by the business. This new programme complements the other leadership development, assessment centres and management programmes run by the global talent development team. In the recruiting team, a series of employee value propositions for use on the various social media channels and the LR careers website have been developed, all with the aim of attracting and retaining the best talent, whatever the level in the organisation and wherever required. A new competency framework for HR has been developed and is being used as a model for other support functions as we strive for professional excellence across the group. The global mobility team has implemented a new suite of policies across LR which provide a more tailored and affordable set of alternatives within a consistent framework in support of the business needs.
Award for employee engagement In 2014, LR won one the British Quality Foundation’s prestigious industry awards for the global employee collaboration and knowledge-sharing programme in the Energy business – called Global Energy Transformation (GET).
We believe that harnessing and sharing the expertise and talent which exists within our business is a fundamental part of how we enhance the service and support we provide to our clients. The awardwinning GET programme has driven positive change inside and outside of our business. John Wishart Energy Director
The year has also seen an increased focus on the diversity and inclusion agenda with six initiatives agreed by the Executive Leadership Team for improving our performance in this area. A notable campaign was ‘Women in LR’ profiling senior women in the organisation in a series of videos that helped improve our gender response on Facebook and explained the great career opportunities that exist in this international organisation.
Find out about careers at LR at www.careers.lr.org www.lr.org
33
Lloyd’s Register Group Review 2015
GOVERNANCE BOARD OF DIRECTORS (As at 1 October 2015) 1
2
3
4
5
6
7
8
EXECUTIVE LEADERSHIP TEAM (As at 1 October 2015) 9
10
11
12
13
14
15
34
www.lr.org
Lloyd’s Register Group Review 2015
The Board of Directors and management leadership team work together to govern and direct the activities of LR.
BOARD OF DIRECTORS The trading entities in the group are owned by Lloyd’s Register Group Limited, which in turn is a 100% owned subsidiary of the Lloyd’s Register Foundation. The Board of Directors of Lloyd’s Register Group Limited is elected by the Lloyd’s Register Foundation. 1 Thomas Thune Andersen Chairman Thomas is the Chairman of the Lloyd’s Register Foundation and Chairman of Lloyd’s Register Group Ltd. Thomas, a former member of the board for the A.P. MollerMaersk Group with almost 32 years in the maritime and energy sectors, was appointed to the board of the former Lloyd’s Register in June 2010. Thomas is Chairman of Dong Energy A/S, Chairman of DeepOcean Group Holdings BV, a board director of Petrofac and a board director of VKR Holdings, the parent group of Velux. 2 John D Chandris Senior Non-Executive Director John is the Senior Non-Executive Director on the Board. He is Chairman of the Chandris Group. 3 Ellis Armstrong Non-Executive Director Ellis has had an extensive career in offshore operational, commercial and planning roles, and leadership functions, ending his career with BP as CFO of Exploration and Production. He has a BSc and PhD in civil engineering and a Masters degree in business administration. 4 Chris Finlayson Non-Executive Director Chris is Chairman of InterOil Corp. Formerly, he was Chief Executive of BG Group and an Executive Vice President and Managing Director with Royal Dutch Shell. Chris is a geologist, physicist and petroleum engineer with nearly 40 years’ technical and commercial experience in the oil and gas industry.
www.lr.org
5 Caroline Firstbrook Non-Executive Director Caroline joined the Board on 1 July 2015. Caroline, a Canadian with a degree in electrical engineering and an MBA from Harvard, has worked for a number of professional services firms, and is currently COO at Clifford Chance LLP, a major law firm. She has a background in consultancy, particularly the development of corporate strategy, including managing 1,000 strategy professionals while at Accenture. 6 Ron Henderson Non-Executive Director, Chairman of Lloyd’s Register Audit Committee Ron is also a trustee of the Lloyd’s Register Foundation. A chartered accountant, he is a former CFO of Network Rail and Balfour Beatty. In addition to other non-executive roles, he also served on the UK Auditing Practices Board. 7 Michael F Lykiardopulo Non-Executive Director Michael is Managing Director of Lykiardopulo and Co Ltd and is responsible for the commercial management of a fleet of oil tankers and bulk carriers. He is a qualified barrister. Michael was part of the Lloyd’s Register Board which helped formulate the plans for the 2012 restructure and he served as a trustee to help oversee the initial development of the Lloyd’s Register Foundation.
EXECUTIVE LEADERSHIP TEAM LR’s Executive Leadership Team (ELT) takes ultimate leadership responsibility for the company. The ELT together with the Senior Leadership Team works to govern and direct the LR activities. 8 Alastair Marsh Chief Executive Officer 9 Tom Boardley Marine Director 10 Chris Coupland Chief Information Officer 11 Paul Huber Group Regional Operations Director 12 Nial McCollam Chief Technology Officer 13 John Rowley Management Systems Director 14 John Stansfeld Group Human Resources Director 15 John Wishart Energy Director
8 Alastair Marsh Chief Executive Officer Alastair was appointed CEO on 1 October 2015. Alastair, who is a qualified chartered accountant, joined LR in April 2007 and became Chief Financial Officer in April 2008. Previously he has held a number of senior financial management positions, including Chief Financial Officer and Company Secretary of Superscape Group plc, and prior to that he held similar roles at Easynet Group plc, Laporte plc, and NCR Corporation.
35
Lloyd’s Register Group Review 2015
GLOSSARY Detailed explanations A more detailed explanation of some of the acronyms and terms in this review American Society of Mechanical Engineers (ASME) The ASME Boiler and Pressure Vessel Code is the leading internationally accepted construction code defining the requirements for the design, manufacture, inspection and testing of many types of pressure vessels and nuclear power plant components. Bulker A bulk carrier, bulk freighter, or bulker is a merchant ship specially designed to transport unpackaged bulk cargo, such as grains, coal, ore, and cement, in its cargo holds. Bunkering The act or process of supplying a ship with fuel. Bunker quality is highly variable across the world and LR provides ship operators and managers with independent verification of fuel quality. Certification The process of evaluation that results in a written statement, usually by a third party, that a system or component complies with its specified requirements and is acceptable for operational use. Classification The development, implementation and maintenance of standards (Rules) for the design, construction and operation of ships and offshore units. Compliance with these standards ensures assignment and maintenance of class. Classification society A classification society is a non-governmental organisation that establishes and maintains technical standards for the construction and operation of ships and offshore structures. Computational fluid dynamics (CFD) A branch of fluid mechanics that uses numerical methods and algorithms to solve and analyse problems that involve liquid or gas fluid flows.
COP21 The 21st Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC) will be held in Paris, France in December 2015. Since the UNFCCC entered into force in 1994, the COP has been held annually to assess progress in dealing with climate change. Successive decisions taken by the COP make up a detailed set of rules for practical and effective implementation of the convention. COP21 will, for the first time in over 20 years of UN negotiations, aim to achieve a legally binding and universal agreement on climate, with the aim of keeping global warming below 2C. The conference is expected to attract close to 50,000 participants including 25,000 official delegates from government, intergovernmental organisations, UN agencies, NGOs and civil society. Deadweight tonnes (dwt) The maximum weight of cargo and stores that a ship can carry. Emission control areas (ECAs) MARPOL Annex VI sets global limits on sulphur oxide (SOx) and nitrogen oxide (NOx) emissions and it allows emission control areas (ECAs) to be established to control both types of emission. An ECA can be designated subject to a proposal from a party to Annex VI. Existing ECAs include: Baltic Sea and North Sea (SOx); North American (NOx and SOx); US Caribbean (NOx and SOx). Floating liquefied natural gas (FLNG) FLNG refers to water-based LNG operations employing technologies designed to enable the development of offshore natural gas resources. Floating above an offshore natural gas field, the FLNG facility will produce, liquefy, store and transfer LNG (and potentially LPG and condensate) at sea before carriers ship it directly to market. Floating offshore installation (FOI) Relates to any kind of floating installation regardless of its capability. FSSC 22000 FSSC 22000 is the first global food safety management certification scheme specifically targeted for the certification of manufacturing and processing of food ingredients and food products. The FSSC scheme is based on ISO 22000 (requirements for food safety management systems) and PAS 220 (requirements for prerequisite programmes for food manufacturing).
36
Global Food Safety Initiative (GFSI) A business-driven initiative launched in 2000 for the continuous improvement of food safety management systems to ensure confidence in the delivery of safe food to consumers worldwide. Gross tons (gt) Gross tonnage is a function of the moulded volume of all enclosed spaces of the ship. It forms the basis on which manning rules and safety regulations are applied, and registration fees determined. IADC (International Association of Drilling Contractors) A membership organisation representing the worldwide oil and gas drilling industry. It operates specially designed accreditation programmes, recognised throughout the world, to ensure that the contents of critical training programmes adhere to recognised industry standards. IEC 6140 An international standard, published by the International Electrotechnical Commission, with a set of design requirements made to ensure that wind turbines are appropriately engineered against damage from hazards within the planned lifetime. International Labour Organization (ILO) A United Nations (UN) agency dealing with labour issues, particularly international labour standards and decent work for all; 185 of the 193 UN member states are members of the ILO. International Maritime Organization (IMO) The specialised agency of the UN with responsibility for safety and security at sea and the prevention of marine pollution from ships. Established in 1948, the IMO first met in 1959 and is the only UN agency with its headquarters in London. International Organization for Standardization (ISO) An independent, non-governmental standard-setting body composed of representatives from 165 national standards organisations. International standards give world-class specifications for products, services and systems to ensure quality, safety and efficiency. They are instrumental in facilitating international trade.
www.lr.org
Lloyd’s Register Group Review 2015
ISO 9001 The international management systems standard concerned with quality management – what an organisation does to ensure customer satisfaction by meeting customer needs and expectations and applicable regulatory requirements, and continually to improve its quality performance. ISO 14001 A family of international management standards concerned with environmental management – what an organisation does to identify and manage significant environmental effects caused by its activities, products and services, comply with relevant legislation and continually to improve its environmental performance. ISO 50001 ISO 50001 specifies requirements for establishing, implementing, maintaining and improving an energy management system, whose purpose is to enable an organisation to follow a systematic approach in achieving continual improvement of energy performance, including energy efficiency, energy use and consumption. ISO 55001 An internationally recognised standard that supports best practice asset management in all organisations. It replaced PAS 55 which was developed as a quality benchmark for management practices in asset-intensive industries such as power, oil and gas, and transportation. Light well intervention See well intervention. Liquefied natural gas (LNG) Natural gas changes to a liquid at -162C, creating LNG. When liquefied, the gas is reduced to 1/600th of its original volume, making it economic to transport in specially designed LNG ships. Liquefied petroleum gas (LPG) Not to be confused with LNG, LPG is often called ‘propane’ as it is made of various mixtures of propane and other similar types of hydrocarbon gases. These hydrocarbons are gases at room temperature, but turn to liquid when they are compressed. LPG is stored in special tanks that keep it under pressure, so it stays a liquid. While the distribution of LNG requires heavy infrastructure investments, LPG is more easily transported.
www.lr.org
Lost time incident (LTI) or event An injury resulting in the injured person being absent from work the day following the incident, or in an absence of more than eight hours after the incident (but not necessarily the day following the incident) and there is a direct causal link between the injury and the lost time. Management system The organisation’s business system that focuses on the achievement of results, in relation to performance improvement and compliance with legislation, that consists of defined organisational responsibilities, practices, procedures, processes and resources for developing, implementing and achieving a company’s policies. Maritime Labour Convention The ILO’s Convention, known as ‘MLC, 2006’ came into force in August 2013, effectively becoming binding in international law. It is currently ratified by 56 ILO member states responsible for regulating conditions for seafarers on more than 80% of the world’s gross tonnage of ships. It establishes minimum working and living standards on those ships. OHSAS 18001 An international occupational health and safety (OH&S) management system specification that gives requirements to enable an organisation to control its OH&S risks, improve its performance and comply with relevant legislation. It has been developed to be compatible with the ISO 9001 and ISO 14001 standards. Port state control The inspection of foreign ships in national ports to verify that the condition of the ship and its equipment complies with the requirements of international conventions and that the ship is manned and operated in compliance with these rules.
Risk management This term is used in many business sectors including finance and insurance. Our concern is with risk management solutions in relation to technical, safety and commercial aspects of our clients’ critical infrastructure assets – ships, oil rigs, industrial plant. Risk management supports better decision‑making by contributing to a greater understanding and control of risks and their impacts. Ropax A roll on/roll off ferry with passenger accommodation. Rules See classification above. Society See classification society. Technology Readiness Levels (TRL) A method of estimating technology maturity. TRL area based on a scale from 1 to 9 with 9 being the most mature technology, that is actual application of the technology in its final form. The use of TRL enable consistent, uniform discussions of technical maturity across different types of technology. teu (twenty-foot equivalent unit) The measure used for container capacity, a teu is a volume measurement equal to one standard 20 ft (length 6.1 metres; approximately 39 cubic metres) container. Tramp ship A ship engaged in the tramp trade is one which does not have a fixed schedule or published ports of call. Well intervention Well intervention, or well work, is any operation carried out on an oil or gas well during or at the end of its productive life, which alters the state of the well and/or well geometry, provides well diagnostics, or manages the production of the well.
Pure car carrier (PCC) New vehicles that are transported by ship are often moved on a large type of roll on/roll off (ro-ro) vessel called a PCC. Risk-based approach A basis for making decisions by identifying the greatest risks and prioritising efforts to eliminate or control them.
37
Lloyd’s Register EMEA T +44 (0)20 7709 9166 F +44 (0)20 7488 4796 E emea@lr.org 71 Fenchurch Street London EC3M 4BS UK Lloyd’s Register Asia T +852 2287 9333 F +852 2845 2616 E asia@lr.org 22nd Floor Dah Sing Financial Centre 108 Gloucester Road Wanchai Hong Kong SAR of PR China Lloyd’s Register Americas, Inc. T +1 (1)281 675 3100 F +1 (1)281 675 3139 E americas@lr.org 1330 Enclave Parkway Suite 200 Houston Texas 77077 USA
www.lr.org Lloyd’s Register and variants of it are trading names of Lloyd’s Register Group Limited, its subsidiaries and affiliates. Care is taken to ensure that all information provided is accurate and up to date. However, Lloyd’s Register accepts no responsibility for inaccuracies in, or changes to, information. Copyright © Lloyd’s Register Group Services Limited, 2015. A member of the Lloyd’s Register group. Produced by Lloyd’s Register Group Communications Design and production Printed by Pureprint