Lloyd’s Register – Group Review 2013
Group Review 2013
2012/13 IN REVIEW
WORKING TOGETHER FOR A SAFER WORLD Consolidated income of Lloyd’s Register up on 2012 figure despite the current subdued global economy.
£920m IsA to QAtAR’s nEw nAtIonAL RAILwAy pRoGRAMME – AuGust 2012 As the independent safety assessor (ISA), we will help to ensure that the safety of passengers, operating staff and members of the public is accounted for during every stage in the development of this ambitious new national network.
EIL REcEIvEs tRIpLE cERtIfIcAtIons fRoM LRQA – octobER 2012 The certifications were ISO 9001 for quality, ISO 14001 for environmental, and OHSAS 18001 for occupational health and safety. EPPCO International Limited (EIL) is a subsidiary of Emirates National Oil Company (ENOC). offshoRE wInD RuLEs sEt nEw stAnDARD foR REnEwAbLEs sEctoR – JunE 2013 Lloyd’s Register released all-new Rules, class notation and guidance notes for wind turbine installation and maintenance vessels and liftboats to reflect industry best practice and novel designs.
bREAkthRouGh In contAInER shIp cApAcIty – JAnuARy 2013 Our research shows a unique method to improve the way containers are handled and carried. Ultra-large container ships using the new method could potentially load up to 19% more cargo weight. The benefits are lower costs, lower emissions and a lower carbon footprint. nEw stRuctuRE – JuLy 2012 At the start of the year, Lloyd’s Register Group Limited became our new operating company, with its shares owned by a new parent, Lloyd’s Register Foundation, a registered charity. The new structure gives us the opportunity to improve our business performance and increase our contribution to society. Our lost time incident frequency rate fell to 0.14 per 200,000 worked hours – over the last three years we have achieved a 71% reduction.
71%
We have over 60,000 clients, from SMEs to Fortune 500 companies.
+60,000
InnovAtIon cEntREs – sEptEMbER 2012 We set up a world-class Global Technology Centre (GTC) in Singapore to deliver innovation and solutions to the energy and maritime sectors. – DEcEMbER 2012 The UK’s largest university/ business collaboration reached a huge milestone with the topping out of the new marine technology and research centre of excellence at the University of Southampton, which incorporates our GTC. See page 11 for more details.
Find out more about Lloyd’s Register online at www.lr.org
WELCOME TO THE LLOYD’S REGISTER GROUP REVIEW 2013
Focused on innovation In the current challenging, complex environment, initiatives that nurture technical innovation can no longer be an afterthought for business or government; they must be central to any organisation’s strategy for sustainable growth and leadership. We have supported the development of new concepts and technologies for more than 250 years and our focus is firmly on innovation – to benefit our future, our clients and for society.
Our mission We secure, for the benefit of the community, high technical standards of design, manufacture, construction, maintenance, operation and performance for the purpose of enhancing the safety of life and property at sea, on land and in the air… because life matters.
CONTENTS 2 Who are we 3 What we do 4 Where we do it 5 How we do it 6 Chairman’s review 8 Chief Executive’s review 10 Innovation 12 Marine 18 Transportation 22 Energy 28 Management Systems 32 Around the world 36 Chief Financial Officer’s report 38 Board of Directors and Executive Leadership Team 40 Public benefit 42 Our employees 44 Glossary
We advance public education in transportation and other engineering and technological disciplines through research, training and related activities.
Lloyd’s Lloyd’s Register Register Group Group Review Review2013 2013 00 1
WHO ARE WE
For Public Benefit The Lloyd’s Register organisation is a global body with a mission to protect life and property and advance transportation and engineering education and research. We offer services to the marine, energy and rail industries, and management systems services across a wide range of sectors – focused on improving safety, quality and performance. Lloyd’s Register Foundation, a charity, is the parent entity in the organisation. Our operating company, Lloyd’s Register Group Limited (Lloyd’s Register), is a professional services business that generates the profits that fund our public benefit activities. Our reputation as an independent body – with safety, integrity and high standards as guiding principles – has been built up over more than 250 years. Set up in 1760 to survey merchant ships, and ‘classify’ them according to their condition, in the 1900s we began to apply our expertise to other sectors. This heritage is an important part of our culture and forward-thinking approach to our business. Lloyd’s Register is a successful, profit-making business which relies on the skills, knowledge and experience of its employees – professionals and experts in their fields.
Our VISION Year by year we will continuously improve in helping our clients ensure supply chains are safe, responsible and sustainable.
2 Lloyd’s Register Group Review 2013
Our values Trustworthy Accountable Courageous Open-minded Spirited
In the 1760s, Lloyd’s Register gave the world its first ever mark of quality. ‘A1’ is still a byword for top quality.
“ Since our foundation we have responded to change and led developments that have made lives safer and helped businesses prosper.”
WHAT WE DO
improving safety, quality and performance
Marine As a marine classification society, we set safety and environmental standards for the design, construction and operation of ships. But we are not just about surveying ships; we are dedicated to supporting the development of new technologies and innovations that will play a vital role in the immediate and long-term future of shipping.
Lloyd’s Register provides independent assurance and expert advice to companies operating high-risk, capital-intensive assets in the energy and transportation sectors. Through our business assurance services we help companies manage their systems and risks across a wide range of areas, from food safety to energy management.
Read more about our Marine activities on page 12
We help our clients to ensure the quality construction and operation of critical infrastructure – ships, oil rigs, industrial plant, railways. We do this by checking assets against internationally agreed rules and standards, some of which we have helped to develop.
Read more about our Transportation activities on page 18
But we recognise there is an increasing need for the provision of risk management services in relation to technical, safety and commercial aspects of our clients’ assets along the full supply chain and throughout the asset lifecycle. Our risk management services lead to a greater understanding and control of risks and their impacts and this supports better decision-making. We go beyond basic compliance to ensure that our clients’ integrity strategies are focused on operational and safety-critical areas – such as blowout preventers in offshore drilling operations. Underpinning our work is our commitment to developing new technologies illustrated by our recent investments in our new global technology centres. By maintaining our innovative leading edge we will continue to develop the services we provide to our clients and help them to innovate safely too. We are proud that our work is instrumental in helping the Lloyd’s Register Foundation to meet one of its charitable objectives – to secure for the benefit of the community high technical standards of design, manufacture, construction, maintenance, operation and performance for the purpose of enhancing the safety of life and property at sea, on land and in the air.
Transportation Our Transportation business is centred on providing assurance and expert advice for the rail sectors in three core areas: Asia; Europe; and the Middle East. Our clients range from some of the world’s largest rail administrations to niche component suppliers.
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. Read more about our Energy activities on page 22
Management systems We are the world’s leading provider of independent assessment services including certification, validation, verification and training across a broad spectrum of standards and schemes. We are recognised by over 50 accreditation bodies and deliver our services to clients worldwide. Our unique assessment methodology – LRQA Business Assurance – helps organisations manage their systems and risks to improve and protect their current and future performance. R ead more about our Management Systems activities on page 28
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WHERE WE DO IT
we adapt to suit business around the world We have a global outlook but a local culture. Our clients benefit from our unique view of the global and local markets and the technical developments shaping today’s industry. Wherever you are we will be able to apply a real understanding of the issues and help you operate more safely and sustainably.
Around the world From our origins in a London coffee house we now have 8,200 employees throughout the world. With a truly global reach we can adapt our service offerings to suit businesses wherever needed. We can offer a joined-up service to companies with international operations and supply chains. Our global operations are divided into three geographical areas: Americas; Asia; and Europe, the Middle East and Africa (EMEA). Read the regions’ reviews on pages 32 to 35.
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MARINE
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ENERGY
1 Operational procedures and technical standards for LNG bunkering in the Port of Singapore. See page 13.
5 Safety review for South Korea’s KORAIL. Read more on page 19.
9 Services from Houston to Malaysia for Gumusut-Kakap Field semi-submersible FPU. Read more on page 23.
LNG fuelled Viking Grace built in Finland. See page 15. 2
Clean Sky – a gas fuelled bulk carrier design project in China. See page 15. 3
Launch of Eva Peron in Argentina. See page 32. 4
00 Lloyd’s 4 Lloyd’sRegister RegisterGroup GroupReview Review 2013 2013
Safety assessment services for the UAE’s Etihad Rail scheme. Read more on page 19. 6
7 UK’s first purpose-built biomass rail freight wagon. Read more on page 19.
Research for UK’s Department for Transport on battery-powered traction. Read more on page 32. 8
10 Classification and certification contract for the offshore Bien Dong 1 project in Vietnam. Read more on page 23. 11
Global quality inspection services for INPEX-operated Ichthys LNG Project in Australia. Read more on page 23. Resolving excessive noise on Statoil’s Åsgard B platform in the Norwegian Sea. Read more on page 27. 12
MANAGEMENT SYSTEMS 13 In Portugal, ISO 14001 certification for majority of facilities of EDP, a leading energy sector company. Read more on page 29. 14 Services to Ballarpur Industries Limited in India. Read more on page 29. 15 ACP receives FSSC 22000 certification in Belgium. Read more on page 29. 16 Top rating for Northrop Grumman Corporation’s greenhouse gas emissions inventory. Read more on page 32.
HOW WE DO IT
technical expertise led by clear strategy Our Strategy
Our strategy is simple: 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 – clients who value independent, global, technical insight.
Drive external focus – to make sure we consistently deliver the best possible value to our clients.
Clear strategic objectives guide us to achieve our goals under four key themes. The success of the strategy results in growing our value to society and fulfils our mission to make the world a safer place.
Lead technology change – developing and delivering on pioneering thinking through collaborative research to keep us at the forefront of the industry.
Step change in efficiency and effectiveness – an emphasis on service quality. Right people, right place, right time – a focus on having good people and strong leaders who all put safety first and enable us to deliver an excellent service.
Applying our technical expertise
Our expertise and deep insight into the interface between assets, systems, people and processes, means we can offer services that clients value and trust. Expertise Our reputation is founded on the deep knowledge and wide experience of the people who make up our teams around the world. Our new global technology centres and research and development network are helping us find new and better ways to improve safety, performance and quality in the industries we serve.
Knowledge Technical knowledge is at the core of our business. We have a profound understanding of the risks associated with the industries we serve. 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.
Advice The quality of our advice and our independence means we can provide long-term confidence to our clients. Through our assurance and verification services we help organisations comply with regulations and industry best practice so they can operate safely and productively.
Relationships Lloyd’s Register’s teams around the world can relate directly to the concerns and issues that affect our clients. And we can communicate across all levels of our clients’ businesses. “ People enjoy working with and for us because we have a clear purpose – working together for a safer world.”
Lloyd’s Lloyd’s Register Register Group Group Review Review2013 2013 00 5
CHAIRMAN’S REVIEW
AS A PUBLIC BENEFIT ORGANISATION, COMPANIES TRUST US TO HELP THEM IMPROVE SAFETY, QUALITY AND PERFORMANCE I am extremely pleased to welcome you to this review in a year that has seen us make significant developments in safety, technology and business growth.
“During the year, as chairman of the Lloyd’s Register foundation and of Lloyd’s Register Group Limited, I have had the opportunity to meet clients, employees and foundation beneficiaries. I have been thoroughly impressed by the enthusiasm and commitment of our employees and have found, all around the world, our clients appreciate our public benefit mandate.” thoMAs thunE AnDERsEn Chairman
We are operating in an increasingly complex and competitive marketplace. To secure a sustainable future we have set ambitious targets for the expansion and future growth of the Lloyd’s Register group, both organically and inorganically. We are listening to our clients’ needs and are aiming to deliver competitive pricing and higher margins in order to invest in technology, invest for growth, and add more value to society. A fundamental understanding of new technology is essential in solving the world’s technical challenges. We are excited by the potential to develop leading-edge technology through our significant investment in the new global technology centres in Singapore and Southampton in the UK. You can find out more about our investment in innovation, including our global technology centres, on page 10. Recently we announced our largest single investment ever, in energy services company Senergy, to expand our range of technical assurance services to the oil and gas sector. Senergy, with a turnover in the last financial year of £121 million, has become a member of our group and together we plan to create an industry-leading offering – from the reservoir to refinery and beyond. Earlier in the year we set up a joint venture – Lloyd’s Register Apave IES Limited – with Apave International in response to client requirements for a single source service provider offering both integrity and inspection management. That we are now able to optimise our commercial operations in this way is due largely to the restructuring made at the start of the financial year. Lloyd’s Register Foundation, a UK registered charity, became the parent of the organisation and Lloyd’s Register Group Limited the operating arm. Importantly, the objectives and mission of the Foundation remain the same as those of Lloyd’s Register previously, to protect life and property and to advance transport and engineering education and research… because life matters. We rely on the expertise, talent and dedication of our global workforce to meet the challenges of today and the future, and we place a high priority on the safety and development our people. This year saw the 25th anniversary of the Piper Alpha disaster, a timely reminder that asset integrity and workplace safety must always remain at the heart of our organisation.
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Lloyd’s Register now has a remit to contribute to the fulfilment of the Lloyd’s Register Foundation’s charitable purposes – by continued funding and through its services to make the world a safer place – so the success of both bodies is closely interconnected. In the year 2013, Lloyd’s Register donated £214 million to the Lloyd’s Register Foundation, including a gift of an investment portfolio with a market value of £206 million.
Group operations
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John Chandris and Ron Henderson joined the Board of Directors of Lloyd’s Register Group Limited. In recent months, we have been pleased to welcome two new members to this Board, Ellis Armstrong and Chris Finlayson; with their long and distinguished careers in the energy sector they will offer a huge amount of insight and value for our strategic growth plans.
Charitable giving
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As a result of the restructure, we saw a change in personnel on our governing bodies. Christine Dandridge, Ron Henderson, Jan Kopernicki, Michael Lykiardopulo and Lambros Varnavides became trustees of Lloyd’s Register Foundation. Sir Brian Bender has recently been appointed as a trustee and the board will be strengthened by his extensive skills and knowledge.
ouR STRUCTURE Lloyd’s Register Foundation, a charity, is the parent entity in the organisation. Our operating company, Lloyd’s Register Group Limited (Lloyd’s Register), is a professional services business which generates the profits that fund our public benefit activities.
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Further details of our financial performance can be found in the Chief Financial Officer’s report on pages 36 to 37.
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I am very pleased to be able to report that, despite the current subdued global economic conditions, the consolidated income of Lloyd’s Register Group Limited (Lloyd’s Register) at £920 million shows encouraging growth on 2012 (£893 million). The operating profit before exceptional items, was £70.8 million (2012: £83.7 million), giving an operating margin of 7.7% (2012: 9.4%).
“ Under our new governance structure there is a clear separation between our charitable and profit-making activities which is proving of benefit to the organisation as a whole.”
L l oy
We have continued to reduce our injury incident rates and again have had a significant reduction in our lost time incident frequency rate, which has fallen to 0.14 per 200,000 worked hours, a 55% reduction on last year’s figure (0.31 per 200,000 worked hours). Over the last three years we have achieved a 71% reduction in lost time injury incidents.
Businesses
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I have enjoyed working with all my fellow board members and I would like to thank them for their significant contributions during the year. I also extend my thanks to our clients and partners for their confidence in our organisation. I also thank my colleagues and employees worldwide, who perform their jobs every day diligently and loyally and are, directly or indirectly, making a real difference to society. Thomas Thune Andersen Chairman, Lloyd’s Register Foundation and Lloyd’s Register Group Limited
Lloyd’s Register Group Review 2013 7
CHIEF EXECUTIVE’S REVIEW
A STRATEGY FOR GROWTH We recognise that to secure a sustainable future in an increasingly competitive and consolidating marketplace we need to grow our existing business and acquire new companies in line with our strategic plan. Our new governance structure is supporting our ambitious agenda for growth and profitability. The Lloyd’s Register Foundation will rely heavily on Lloyd’s Register, as its trading subsidiary, to generate profits which can be gifted to the Foundation and our activities, working for a safer world, also help to fulfil the first of its charitable purposes. The achievements of the Foundation and of Lloyd’s Register are therefore strongly connected.
“while not immune to volatility in financial markets Lloyd’s Register has demonstrated its resilience through tough times and continued growth. with this in mind, I am very pleased to report that we are on track to achieve the objectives set out in our strategic plan.” RIchARD sADLER Chief Executive Officer
£920m We are pleased that our consolidated income, at £920 million, shows reasonable growth on the previous year (2012: £893 million).
+60,000 With over 60,000 clients ranging in size from SMEs to Fortune 500, our business demands that we strive to constantly improve the products and services we provide.
8 Lloyd’s Register Group Review 2013
Last year we set out to align our operating model with our four business streams and this was fully implemented by January 2013. It has involved a significant reorganisation of our people and operations including a redefinition of employees’ roles; the launch of a centralised shared service centre for our EMEA region; and upgrading our operational software. InnovAtIon AnD tEchnoLoGy To achieve our aims we need to invest in new concepts and technologies and this year we have confirmed our commitment to innovation through the establishment of our Singapore Global Technology Centre (GTC). This is major milestone that will create another base for our research and development activities, complimenting those undertaken in the Southampton GTC. The two GTCs will serve as the cornerstones of our global R&D network that, along with the activities of the Lloyd’s Register Foundation, will help to provide society and industry with the advanced technologies, systems and solutions required for this increasingly complex world. Like Southampton, the Singapore GTC is an alliance between Lloyd’s Register, industry, government and academia, a powerful combination that supports sustainable growth by combining the theoretical knowledge of universities with extensive practical experience of our employees and clients. busInEss pERfoRMAncE Bearing in mind the continued tough global economic conditions, we are pleased that our consolidated income, at £920 million, shows reasonable growth on the previous year (2012: £893 million). Marine Our Marine business performance was pleasing as the sector continues to face some very difficult trading conditions. With earnings at low levels ship operators are focused on costs – particularly their fuel expenses. We are able to help our clients meet the drive for more efficient ships and despite the market’s difficulties, our share of newbuilding construction has been robust as we have won some interesting projects. Notable has been our performance in the containership and liquefied natural gas (LNG) sectors. One of the key areas where are taking an innovative lead is fuels of the future. Gas as a fuel for ships has emerged as a major area of work for us and our expertise in this area is built on our leadership in classification in the LNG carrier market and capabilities in understanding the risks involved with gas operations and infrastructure.
I am pleased to report that we have demonstrated continuous improvement in port state control (PSC) results. The annual Paris MOU PSC ratings for 2012 are now showing little statistical significance between the top three societies, ABS, DNV and Lloyd’s Register, on class related detentions. This is an impressive improvement in our record given that the composition and size of our fleet in Europe means our ships are inspected considerably more often. Energy Our Energy business has worked ever more closely with industry to provide the types of services and support that they need for the future. Notable is the success of WEST Engineering Services, acquired in 2012, which showed year-on-year growth of around 30%. We have significantly strengthened our position in the offshore drilling sector in the last five years with a series of acquisitions. We have now combined ModuSpec and WEST Engineering Services to form Lloyd’s Register Energy - Drilling and also brought together the expertise of Scandpower, ODS and Human Engineering to form the new Lloyd’s Register Consulting business. The safe and economic production of natural gas is becoming increasingly more important. Floating LNG facilities are seen as one solution to the issues of transportation, storage and flexible supply of natural gas. Demand for our services has increased considerably with the Asian shipyards building some of the biggest and most complex floating structures ever seen. In addition, our new Rule set for floating offshore installations positions us at the forefront of new energy and maritime technology. Transportation A major focus area for our Transportation business has been effective project delivery and, despite a competitive market place and a challenging economy, we have been able to improve our project margins in all parts of our business. During the year we have continued to see strong sales growth in some of the markets, in particular the UK, Middle East and Korea. That was offset by a slowdown in the growth rate in China, and spending cutbacks in the Netherlands, one of our core markets. Nevertheless, we have achieved some major project wins, including contracts for the UK’s Crossrail and for South Korea’s national operator, KORAIL. Management Systems While we have seen strong performances by our operations, we recognise the global economic downturn of the past five years is continuing to affect purchasing decisions. Over the past financial year, we have continued to invest in innovative new products and service delivery mechanisms for both our mature and emerging markets to retain our competitive advantage. This year we have launched a range of assessment and training services to the maritime security standard, ISO/PAS 28007, and we verified South Asia’s first certified emissions reductions under the UN’s Programme of Activities framework.
“ We add value to society and achieve sustainable growth through independent assurance and expert advice to our clients’ assets and businesses. We primarily focus our services in the sectors critical to the support of society: energy, transportation, water, waste, food, health and security.” REVENUE BY BUsiness 2012/13 1 Marine 2 Energy 3 Management Systems 4 Transportation
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38.4% 37.9% 19.2% 4.5%
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Looking to the future With over 60,000 clients ranging in size from SMEs to Fortune 500, our business demands that we strive to constantly improve the products and services we provide. We have bold plans in place to grow our existing business and acquire new companies to reach our target of at least £1.5 billion revenue by 2015/16. To this end, we are pleased to have just made our largest investment to date, in energy services company Senergy, and look forward to working with this new member of the group to provide a broad service portfolio to the oil and gas sector and wider energy market. To achieve our target organic growth, we need to improve our performance and build on the success of our key account management programme. As a consequence, we have created a new permanent position at director level with the title of Group Customer Strategy Director. I would like to thank the Board and the management team for their continued hard work and dedication. And I personally thank all of our employees around the world for their enthusiasm and commitment and our clients for their support – working together for a safer and sustainable future. Richard Sadler Chief Executive Officer
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INNOVATION
Advancing technical innovation Technical innovation is vital for economic and social prosperity Since the first domestication of animals and plants we have used technological innovation to drive our economies forward, create jobs and benefit society. Innovation – new and improved technologies – will be critical in meeting the needs of our growing, and increasingly urbanised, population and to cope with the environmental challenges in the decades ahead.
Lloyd’s Register has supported the development of new concepts and technologies for more than 250 years. Previously the rate of change of technology allowed time to be taken in the assessment of new products and materials. But technology is moving ahead faster than regulation. At the same time, society and governments are becoming more demanding in their expectations of regulators, and engineering systems have become more complicated and integrated. To maintain our position as a leading global provider of services, we need to keep at the forefront of technology and increasingly understand the fundamental science and academic analysis behind new technologies. Through this we can assess the risk of new technology before it is applied to engineering solutions, helping to ensure that people are safe and that essential assets perform as required. We are building a global capability of collaborative research and development. Through the investment of around £100 million in two global technology centres (GTC), in the UK and Singapore, we are developing and supporting the innovations that will play a vital role in the immediate and long-term future of shipping and energy. We aim to create centres of excellence for technology, innovation and research that will benefit our clients, the local economies, industry and society at large. Through these centres we will be better able to evolve an idea into full deployment of a product in the marketplace. The GTCs are not our only current commitment to innovation. At any time Lloyd’s Register has dozens of joint industry projects (JIP) under way which provide a rapid route to innovation. The best JIPs are ones in which certifier, manufacturer, designer and operator all work together to achieve a mutual goal of developing a ‘market-driven’ design that is future proofed as far as possible. Lloyd’s Register, as the certification or class provider, is able to ensure awareness of rules, regulations and codes that need to be applied to the design at the earliest stage. If all parties work together the owners gain access to a design that meets their expectations and the manufacturers are able to offer a product that suits the market. And a major commitment to innovation is that our profits fund the Lloyd’s Register Foundation which supports research programmes in universities worldwide to fulfil part of its mission – the advancement of engineering education and research.
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The priority we place on research and development means we can lead and work on the latest innovations. “ Promoting innovation through research and development is absolutely fundamental to Lloyd’s Register’s public benefit mandate. Our global technology centres will serve as the cornerstones for our global research and development network, which currently includes over 50 academic and technical institutions sponsored by the Lloyd’s Register Foundation.” Richard Sadler CEO
Singapore Global Technology Centre The Singapore GTC, set up in 2012, is focusing initially on solutions for the many technical and systemic challenges that face the energy sector. It has four current research themes: subsea drilling and well control equipment; risk, including asset performance management and life extension; deepwater and floating offshore installations; and enabling and emerging technologies, including renewables. Central to the success of the centre will be collaboration with the Agency for Science, Technology and Research (A*STAR), business and academia. We have set up a joint lab facility with A*STAR’s Institute for High Performance Computing to develop applications and solutions in the marine and offshore sectors. To encourage the development of technical expertise and young engineers, PhD students will be trained at the GTC during the programme’s initial five-year period. By 2017, up to 150 full-time engineers, researchers and doctoral students will be working together there.
Southampton Global Technology Centre The Southampton GTC will be on the University of Southampton’s campus, with the university’s School of Engineering Sciences and the Southampton Marine and Maritime Institute (SMMI), which was co-founded by Lloyd’s Register and the university. By the time the new facility opens in 2014, around 350 of our marine specialists will have relocated from our London office. Being on a campus with a world-leading establishment will allow us to carry out fundamental research and development, to perform technical investigations on failed components and add huge value to our client base worldwide. Our links with the SMMI are developing in advance of our move to the Boldrewood Campus. Recent collaborative activity includes research in the use of fibre reinforced polymer composite materials in passenger ship accommodation and environmentally friendly antifouling technology to optimise energy-efficient ships.
A history of innovation In 1835, we stipulated the ships we classed must have freeboard (the distance from the waterline to the upper deck) of three inches for every foot depth of hold. This ‘Lloyd’s Rule’ was being used more than 50 years before load lines became compulsory. We played an important part in the design and construction of the world’s first full-scale nuclear power plant, Calder Hall, which opened in 1956 in the UK. In the late 1960s, as the quest for gas and oil turned to the rough conditions of the North Sea, we led the way in the assessment of environmental loading and other factors in relation to deep-sea steel and concrete platforms. Lloyd’s Lloyd’sRegister RegisterGroup GroupReview Review 2013 00 11
BUSINESS REVIEW | MARINE
Delivering solutions
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With our clients facing some very difficult trading conditions, and the continued challenges of new regulatory compliance and high fuel costs, in 2012/13 we worked hard to provide the increasingly sophisticated answers to the questions asked by a more complex world.
helping global understanding of LNG bunkering Lloyd’s Register has won a Maritime and Port Authority of Singapore (MPA) contract to develop operational procedures and technical standards required to develop LNG bunkering capabilities in the Port of Singapore. Singapore is supporting efforts to create a clean fuel future for global shipping by developing LNG bunkering operations and we are helping to realise that ambition. We have assembled a global team, experienced in addressing the requirements and in identifying what needs to be done, to address safety and the operational issues to make safe LNG bunkering possible. Lloyd’s Register will provide detailed guidance to MPA on what is required to ensure that the technical specifications of hardware are identified; the right operational procedures are established; port safety and emergency planning is provided for; and personnel competence can be developed effectively and put in place.
We work with our clients to deliver solutions through every stage of a ship’s life based on unrivalled experience and the latest technical insight.
Containership success The first half of 2013 saw Lloyd’s Register win a market-leading share of new containership orders placed. As world trade grows, so the trade in containers grows. And even with the current oversupply of containerships, demand for new, more fuelefficient ships is driving new orders. Our consulting capability has been providing support for owners in verifying technical and technology decisions, using advanced techniques like computational fluid dynamics, and understanding risk as well as improving operations with our human element capability.
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BUSINESS REVIEW | MARINE
MARINE REVIEW
IntRoDuctIon
Despite the market’s difficulties, our share of newbuilding construction has been robust. We have won some interesting projects and are able to help our clients meet the drive for more efficient ships. Our performance in the container and liquefied natural gas (LNG) sectors has been notable.
“2012/13 has been a transformative year for the Marine business. we are innovating as an organisation as well as supporting the technological innovations that are being developed. we are now supporting our clients with services that help their economic performance as well as supporting safety.” toM boARDLEy Marine Director
We have been reorganising the way that we work and our operations to provide a more effective service. This has meant developing new software, better financial systems and looking at how we organise our service delivery. We have looked hard at our overheads, office locations and how we manage our resources – our network of people, the largest surveyor workforce in global classification. As a result we now have a leaner service model, better able to deploy our people to provide support when it is needed and where it is needed. As well as managing the Marine transformation, I have had a very full year as Chairman of the International Association of Classification Societies (IACS). I hope that I leave IACS better positioned for the future and firmly believe that a strong industry association makes for a stronger shipping industry. We are now getting very close to the completion of our new Global Technology Centre (GTC) in Southampton. The GTC will be the headquarters of our Marine business when it is ready for occupation in July 2014. Already we have nearly 200 people based in Southampton as we make the transition from London and we are seeing the fruits of our closer relationship with the University of Southampton and with the Solent maritime cluster in supporting innovation in shipping.
INDUSTRY OVERVIEW The recovery in global trade growth continues and seaborne trade is rising with it. But earnings remain at very low levels due to the supply of new ships that have entered the market. This is despite robust scrapping. Some ships are being recycled before their third special surveys and the average age of ships sent for demolition is now around 27 years, as against 32–33 five years ago.
16,000
1,400
14,000
1,200
12,000
1,000
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2,000 0
1991 1998 Seaborne cargo World fleet >5k GT
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woRLD sEAboRnE tRADE AnD fLEEt DEvELopMEnt outLook – 2020
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Data source: MSI Ltd Forecasts – 2013Q2
14 Lloyd’s Register Group Review 2013
focus on costs A consequence of low earnings is the focus by ship operators on costs – particularly their fuel expenses. Bunker fuel prices remain high and, combined with environmental regulatory requirements, this has driven an interest in more economical ships. Combined with relentless optimism, the result has been fairly brisk ordering of new ships despite the imbalance between supply and demand.
We have made a significant effort to develop relationships with all stakeholders and now I think that we have much better dialogue with owners’ associations, with charterers and insurers. Our initiative to develop options for measuring the performance of existing ships are with industry for review as are the Harmonised Common Structural Rules. Although we are now in an era of heightened competition between classification societies, the challenge is to ensure that, while competing healthily, we constantly strive for improvements in technical standards. Leading the way in innovation In a busy year, and for a classification society with depth in so many sectors, it is hard to pick just a few highlights. But here we look at three areas where Marine has been leading the way in innovation; future fuels, the future of ship safety and future scenarios for shipping. Future fuels One of the key areas where Lloyd’s Register has been leading in helping shipping innovate is in fuels of the future. Gas as a fuel for ships has emerged as a major area of work for us. Our depth of expertise in this area is built on our leadership in classification in the LNG carrier market and capabilities in understanding the risks involved with gas operations and infrastructure. We have been right at the heart of helping the shipping industry with new LNG-as-fuel projects. The Argonon, the world’s first gas fuelled newbuilding tanker – classed by Lloyd’s Register – is in her second year of operation and Viking Grace, the largest LNG-as-fuel project to date, is now in service. The Viking Grace is a cruiseferry constructed at STX Europe for the Finland-based ferry company Viking Line. Working closely with shipyards, shipowners and technology suppliers is critical. The growing interest in gas-as-fuel is being met by our highly experienced teams of technical experts. LNG provides a lot of benefits but, for many outside the LNG transportation sector, there has been a lot to learn and we have been supporting the industry. We are now seeing the expansion of activity in LNG-as-fuel projects beyond northern Europe with orders for containerships, offshore vessels and ferries being placed by North American operators. It can be expected that this expansion will continue, although focused in niches for now. Take-up in the deep-sea trades will be a longer process but developments like the joint investment project ’Clean Sky’, looking at gas fuelled bulk carrier design, are incredibly exciting and point to the future.
Fuelling innovation Lloyd’s Register’s Marine Director, Tom Boardley, paid a visit to a cold STX Turku where the Lloyd’s Register classed, LNG fuelled Viking Grace had just returned from its first sea trials. Tom (centre) stands with Matti Niskala (left), our Country Manager, Finland and Berndt Lönnberg of STX Turku. The ship was delivered in January this year.
Clean Sky – a gas fuelled bulk carrier design A joint investment project has moved the bulk carrier industry far beyond the concept stage for gas powered ships. The first deep sea dry bulk cargo design powered by LNG is the result of a COSCO Shipyard Group, Golden Union and Lloyd’s Register joint investment project. At the end of 2012 we issued an approval in principle (AIP) for the product of the project – a new design named ‘Clean Sky’. There is uncertainty about the future relative pricing of LNG and the conventional fuel oils that dominate today. The Clean Sky design builds in flexibility by enabling owners to choose dual, or tri-fuel engines able to burn heavy fuel oil or diesel, as well as LNG. This flexibility helps ensure that owners of Clean Sky types have fuel options. Although for many the attraction of clean gas will outweigh the more complex exhaust gas scrubber option to meet ever stricter emissions regulations.
Lloyd’s Register Group Review 2013 15
BUSINESS REVIEW | MARINE
Marine review continued
Focus on safety We have demonstrated continuous improvement in port state control (PSC) results as illustrated by the annual Paris MOU PSC ratings for 2012, published in June 2013. These ratings are a key guide to the PSC-related performance of flag states and class.
Management Programme which enables our client-facing offices and Fleet Services Department to target potential problems and to intervene between survey cycles if they have cause to do so. Previously, our surveyors were only able to look at ships during the annual survey.
Class-related detentions, the category relevant for Lloyd’s Register, is now showing a dramatic improvement with little statistical significance between the top three societies.
Lloyd’s Register promotes safety by working with owners and managers to help them improve compliance with classification and statutory requirements. We recognise the importance of identifying ships, through a robust process, that are at a high risk of falling below the standards required in the classification Rules and statutory requirements and effectively helping these ships towards acceptable and sustainable compliance. However, if there is an inadequate response, despite our best efforts, the withdrawal of class is the final stage in a process that is clearly communicated to owners and managers.
Top three, Paris MOU 2012 Class
ABS DNV LR
Inspections
CR detentions
Score
5,690 11,602 12,636
3 8 9
1.92 1.91 1.91
LR’s improving position in Paris MOU rankings 2008–2012 Year
2008 2009 2010 2011 2012
Inspections
CR detentions
Position
14,748 15,423 15,364 14,112 12,636
51 50 29 18 9
5 7 5 4 3
This is an impressive improvement in our record as with a large classed fleet trading in Europe, and given the composition of the fleet – particularly older bulk carriers and general cargo ships – our ships are inspected considerably more often. Developing a new approach was our key to success. Lloyd’s Register has been highly focused on finding continual improvements in its performance in the class-related criteria. In the last five years we developed an innovative approach known as the Fleet Quality
Actively working with PSC authorities is also important. Using the class-related appeal process with the involvement of area technical performance managers, in combination with our surveyors having a better working relationship with PSC officers, is important to ensure consistency in the interpretation and application of PSC inspection criteria. We are not just helping Lloyd’s Register classed ships; we have also been innovative in the publication of PSC pocket guide checklists, a valuable help to the marine industry as a whole. Lloyd’s Register leads in this field, others are now following. The first smartphone app for ILO MLC (International Labour Organization’s Maritime Labour Convention 2006) is evidence of us setting the pace and has been well received by the industry. This broader approach is characteristic of Lloyd’s Register. It sets us apart in our commitment to global maritime safety.
Fleet Quality Management Programme (FQMP) Lloyd’s Register promotes marine safety and inspects ships at owners’ request at regular intervals on a fixed survey cycle. To further promote fleet safety, in 2009 we amended our classification Rules to permit surveyors to inspect ships between the scheduled surveys – if there may be cause for concern. The FQMP has been instigated to promote continuous improvement in our risk analysis-based approach to assessing our fleet, adding or improving processes and data as appropriate and to engaging clients at an early stage in a highly proactive manner to assist them in maintaining a ‘quality’ ship or fleet. This has helped in streamlining the way we class ships.
16 Lloyd’s Register Group Review 2013
the future of the world’s maritime industries The sea and its industries are vital for our global future. For anyone looking for a future in an important sector, they have to consider the maritime industry: whether for employment, investment or an understanding that without seaborne trade, offshore energy and naval power, the geopolitics of tomorrow will be highly fragile and quality of life precarious. A report, Global Marine Trends 2030 (GMT 2030), released in April by Lloyd’s Register, Qinetiq and Strathclyde University, has provided a significant insight into the future for the maritime industries. It indicates strong growth for the maritime sector in the years up to 2030, as seaborne trade increases from 9 billion tonnes annually to between 19–24 billion tonnes, and an even bigger role for China in the maritime world. GMT 2030 indicates that 2030 could usher in a world where China would own a quarter of the merchant fleet. Almost half of offshore oil is taken from the deepest waters and there are 100 times as many offshore wind platforms. The tanker fleet grows the slowest of all
the major ship types; the number of containerships with a capacity that exceeds 7,600 teu grows three times faster than those below that threshold. These are just some highlights in a vast report with insight into all key areas related to the maritime sector. The GMT 2030 team used three scenarios to model the future. These scenarios, using three key drivers (population growth, economic development and demand for resources) describe what maritime trade, sea power and the offshore energy sectors could look like in 2030. What is striking is that even in the most negative of the scenarios envisaged, maritime growth is strong. The report team also included disruptive factors that could radically alter the likelihood of the scenario results. But, barring cataclysmic change, the China factor will still be the big story in 2030. China, consuming three times as much oil as it does today and 60% of the world’s coal, will be the marketplace for maritime trade. The US will be the biggest consumer of natural gas and the report indicates, in a substantial section on naval power, that American military power on the oceans will remain pre-eminent.
GMT 2030: Three scenarios
Status quo
The world will continue its current growth momentum with some booms and busts over the next 20 years.
Global commons
A shift to concern over resource limitation and environmental degradation will see a desire for a more sustainable world being developed and fairness in wealth distribution. Governments will find common ground and accelerated economic growth, within a framework of sustainable development, will follow.
Looking to the future We are evolving to meet the needs of a fast-moving market. Our consulting business will grow, as we develop the ambitions of Lloyd’s Register and our clients, for better ships with better performance. By listening to operators’ requirements and working hard with designers and innovators we will be working on understanding what is possible, what is practical and what is safe. We are focused on helping clients to improve their business and asset performance – from surveys to hull forms, design and propulsion optimisation. A good example is what we are doing in supporting the evolution of alternative propulsion – whether LNGas-fuel, methanol, wind power or battery solutions, we have an unprecedented number of projects under way and in incubation.
Competing nations
States act in their own national interest. There will be little effort to forge agreement among governments for sustainable development and international norms. This is a self-interest and zero-sum world with a likely rise in protectionism and slower economic growth.
And by the end of this business year – in July 2014 – Lloyd’s Register’s Marine business will have moved into our new Global Technology Centre on the campus of the University of Southampton. The GTC will be the new headquarters for the Marine business. With 400 employees, it will be the cornerstone of the organisation’s global marine research and technology network, drawing together the engineering excellence of Lloyd’s Register, the university, and other industrial collaborators to deliver innovation. This bold step will further develop our technical capabilities to enable new ways of working. Proximity to industrial and academic partners will change the way we work and think. The GTC in Southampton is not a destination but an action in meeting our ambitions.
Lloyd’s Register Group Review 2013 17
BUSINESS REVIEW | TRANSPORTATION
On track for long-term growth
We work for a range of organisations across the rail industry to help improve the safety, quality and performance of the world’s rail systems. These are organisations for whom mistakes or shortfalls in quality can have punishing financial and reputational consequences and significant impacts on surrounding communities. 00 Lloyd’s Register Group 18 Group Review Review2013 2013
Safety review in South Korea We have worked with national operator, KORAIL, to undertake a detailed review of its safety management system. Our team undertook a series of on-site audits throughout autumn 2012 to assess existing safety procedures and have now embarked on the development of a five-year road map to help KORAIL enhance standards across the business.
“ Europe is where railways originated and we know Lloyd’s Register played a leading role in the safety management changes that occurred in the UK following privatisation. So we believed they could perform the review more objectively and competently than any other organisation.” Na Min-Chan Executive Director of KORAIL’s Safety Office New railway in UAE We have been appointed to provide safety assessment services for the new fleet of freight locomotives that have been ordered for the 1,200-kilometre Etihad Rail scheme under development in the United Arab Emirates. This will involve delivering robust evidence against European standards EN50126–EN50129. This builds on the work of our existing involvement on this major new railway for the region; we are also the independent safety assessor (ISA) during the route’s construction.
UK’s first biomass rail freight wagon The UK’s first purpose-built biomass rail freight wagon was unveiled this year by Drax Power Station, which developed the vehicle with the support of our Derby-based rolling stock design team. The wagon is the largest of its kind ever produced and pushes the boundaries of vehicle engineering, with many design innovations to protect the biomass and reduce wastage during loading and discharge. The wagons will transport biomass via the UK’s national rail network to the power station in North Yorkshire, where it will be used to generate low-carbon, cost-effective electricity. Lloyd’s Register Group Review 2013 19
BUSINESS REVIEW | TRANSPORTATION
TRANSPORTATION REVIEW IntRoDuctIon
“we have a prestigious work portfolio that extends across Europe, the Middle East and Asia. the past 18 months alone have seen us secure important roles on major projects such as crossrail, Etihad Rail and the taiwan high speed network. now is the right time to capitalise on that progress.” pAuL sELLER Transportation Director
During 2012/13 we continued to see strong sales growth in some of the markets in which we operate, with the UK, Middle East and South Korea particularly notable. However that is offset by a slowdown in the growth rate we have previously experienced in China, and public spending cutbacks in the Netherlands that are delaying significant infrastructure investments. Nevertheless, we secured some major project wins, and our order books have been further strengthened over the course of the year. Effective project delivery has been a major focus area in 2012/13, and it is encouraging to note that, despite an increasingly competitive marketplace and a challenging economic environment, we have been able to improve our project margins in all parts of our business. Part of this is due to the investment we have continued to make in developing the technical strength of our people, who remain our greatest asset. uk – AssuRAncE contRActs AnD ExpERtIsE This past year has seen our UK business secure a number of assurance contracts across some high-profile projects. In July 2012 we were appointed by Crossrail Limited to provide Notified Body, Designated Body and Assessment Body services. This was followed, in April 2013, with our appointment by Network Rail’s Western and Wales Region to act as their Notified Body and Designated Body for the Great Western Integration programme, a major undertaking that will see the introduction of electrification, European Train Control System signalling and other significant infrastructure improvements along this mainline route over the next six years.
INDUSTRY OVERVIEW Though not immune to the repercussions of the global economic downturn of the past few years, the railway supply industry has, on balance, proven itself to be a notably resilient sector. GRowth fActoRs Following a period of relative stability, growth within this sector over the next five years is expected to average around 2.6% per annum. Both social and economic factors are at play here (demographics; high oil prices; unsustainable road traffic levels; scrutiny of environmental performance) forming a powerful case for placing rail as the centrepiece of transportation policies across the world and contributing to an unprecedented period of investment. 20 Lloyd’s Register Group Review 2013
nEw tEchnoLoGIEs Demand for innovation is also driving this market. Few railways are truly profitable. In return for their access to ever-tighter public funds they must prove themselves adept at identifying efficiencies and being capable of reducing costs. Possible solutions range from advanced traction technologies and in-cab train control to operational improvements such as predictive maintenance, asset management and energy monitoring.
Our UK business has also continued to provide expertise for research and engineering projects. We are proud to be working with Hitachi Rail, for example, providing safety and risk management activities for the development of the prestigious Super Express Train that will replace the country’s ageing Intercity 125 fleet on the electrified west and east coast routes. This year also saw our rolling stock design service team build upon previous award-winning work by completing the design of a new biomass freight wagon for Drax Power Station to support the increased movement of biomass material on the rail network. Earlier this year the team also received their official appointment as a Designated Body from the UK’s Department for Transport, meaning the team can begin supporting clients looking to initiate major changes under the auspices of the UK’s NNTRs (Notified National Technical Rules). EUROPE – EXTENDING PORTFOLIO AND NEW MARKETS Similarly, our Madrid team also received their accreditation as a Designated Body for the assessment and certification of new and modified rolling stock, in compliance with the Spanish Notified National Technical Rules. In April the team subsequently secured their first assignment for the modification of the S-102/112 highspeed train (known outside the Spanish market as the Talgo 350). Elsewhere in Europe, despite the challenges within the Dutch market, our Utrecht-based operation has worked to extend its service portfolio and open new geographic markets. NS (Dutch Railways) assigned our team to lead the refurbishment of the trains that will be fitted with ERTMS signalling technology for testing on the Amsterdam-Utrecht pilot track. This is ahead of the €2 billion project to fully implement ERTMS technology across the Dutch network from 2016. We have been appointed by Dienst Metro to perform technical measurements ahead of the construction of Amsterdam’s proposed north-south metro line, due to open in 2017. These measurements will provide detailed information on the optimal position of the tunnelled route and the implications for stations and tracks. Beyond the Netherlands, we have continued to build our portfolio as a provider of vehicle certification. In its capacity as an approved Notified Body, Lloyd’s Register Nederland is now a leading certifier of freight vehicles in countries such as Poland, Romania and Slovakia and we are making advances into the French and German markets. In Belgium we are providing technical services to clients such as NMBS, Thalys and the Brussels metro operator, MIVB. We have supported Infrabel, the Belgian national railway infrastructure manager, to improve its power supply asset management and maintenance regime for six years.
ASIA – ADVICE AND TECHNICAL INSIGHT This year saw our business in China secure its first operational safety assessment contract, which has been agreed with Guangzhou Metro. This rapidly expanding network has plans to double in length over the next decade. This is a key appointment that reflects an important strategic move on our part. Following the rapid expansion of metros across China’s major cities, operators are now requiring less support during construction and daily operations, but have begun looking for more advice and technical insight on longer-term performance improvements. Our work in Guangzhou will leave us well positioned to make further advances in this emerging market across the region. Other highlights in the region include our work with KORAIL (see page 19) and our appointment to provide ISA services for the extension of Taiwan’s High Speed Railway, covering the construction of three new stations and a 4-kilometre tunnelled extension to Taipei’s Nangang district.
“ There’s no getting away from the fact that sometimes all a client project manager is primarily focused on is getting from A to B – to achieve acceptance, or equivalent, as efficiently as possible. They want people to come in and ease the burden, not add to it. And our approach has always understood that.”
LOOKING TO THE FUTURE The challenge for our business now is to extend revenues from our technical expertise side while continuing to establish our renowned assurance service in new geographical markets. This will require appropriate resourcing and so we have maintained efforts to recruit the necessary skills. In an industry required to provide safe and efficient transportation, and under pressure to operate in an increasingly transparent manner, we enter the coming year from a position of considerable strength and with confidence about the long-term future.
Further afield, the team has also been appointed to provide safety assessment services for the new fleet of freight locomotives that have been ordered ahead of the opening of the 1,200-kilometre Etihad Rail scheme across the United Arab Emirates.
Lloyd’s Register Group Review 2013 21
BUSINESS REVIEW | ENERGY
Your safety: our business
As the leading authority on safety, asset reliability and business performance, the combination of our deep asset knowledge, technical expertise and ability to generate value quickly, helps clients’ asset management and safety assurance across the energy supply chain – from oil fields and pipelines to refineries, power stations and manufacturing – as they tackle some of the largest, most complex engineering challenges in the commercial world.
00 Lloyd’s Register Group 22 Group Review Review2013 2013
From Houston to Malaysia’s Gumusut-KakaP Field We provided classification and certification services to MISC Berhad on the first deepwater semi-submersible floating production unit (FPU) to be built in South East Asia and installed in Asian waters. Our work on the whole project, at several locations worldwide, went from design through to final commissioning and will continue in the first five years of operation. It is the first newbuild semi-submersible FPU to be classed to our floating offshore installation Rules.
“ The software RBMI suits best in fulfilling HMEL’s requirement of static asset management for our Inspection Department, in keeping records of vessels, PSV, pipeline and built-in RBI module. It is user friendly, easy to navigate. LR also has local service support unlike other service providers. It is one of the best software present in the Indian market.” Surinder Pal Chief Manager Asset Integrity, HPCL-Mittal Energy Ltd
Certifying Vietnam’s largest natural gas platforms Bien Dong Petroleum Operating Company has awarded Lloyd’s Register the classification and certification contract for the Bien Dong 1 project involving production of natural gas and condensate from the Hai Thach and Moc Tinh natural gas fields. The work covers the wellhead, production and quarter platforms – the largest of their kind in Vietnam – as well as subsea pipelines. Fuelling Asia’s energy needs Winning the global quality inspection services contract for the INPEX-operated Ichthys LNG Project in Australia is a major milestone on our way to establishing a new worldwide inspection service. We believe our strong reputation, depth of expertise and global reach gave us a competitive advantage to win this contract. Queen’s Award recognises international success ModuSpec UK won the prestigious Queen’s Award for Enterprise in International Trade for achieving overseas growth of 144% over the past three years. Now part of Lloyd’s Register Energy - Drilling, we have grown consistently through managing relationships, effective partnerships and first-class service.
Lloyd’s Register Group Review 2013 23
BUSINESS REVIEW | ENERGY
ENERGY REVIEW
IntRoDuctIon
Our strategic direction is rooted in a set of key beliefs about our business environment. That’s why during 2012/13, based on clear principles of engineering and industry best practice, we worked evermore closely with industry on the types of services and support that they need for the next generation of energy infrastructure.
“there is a degree of uncertainty and complacency about affordable, secure and carbon-light energy supply. Investment is needed now for the long term, supported by transparent policies with ‘joined-up thinking’ between different countries intent on ensuring an interconnected and innovative energy supply. no country is an energy island. no energy source is isolated from the next. Government and industry must be intrinsically linked.”
We implemented a new service delivery model using our technical centres to ensure fast local operational support. We reshaped our global consulting services, bringing together the expertise of Scandpower, ODS and Human Engineering to form Lloyd’s Register Consulting. We also combined ModuSpec and WEST Engineering Services to form Lloyd’s Register Energy - Drilling. This centralises our knowledge of people, systems and equipment used on rigs. To strengthen our position in this sector over the past five years we have made significant acquisitions of offshore drilling and risk-management specialists. Our most recent investment is in Senergy, with its specialist risk management expertise from reservoir to refinery and beyond. This was a year in which, yet again, the dynamics of the gas market changed. Natural gas is a key part of the energy mix and its safe and economic production is becoming increasingly more important. Floating liquefied natural gas (FLNG) facilities are seen as a solution for the transportation, storage and supply of natural gas, allowing operators to unlock the world’s stranded offshore natural gas reserves. Demand for our services has increased considerably with the Asian shipyards building these facilities,
John wIshARt Energy Director
INDUSTRY OVERVIEW The world’s oil markets continue to shape the dynamics of the global energy industry, leading to new discoveries and production developments that are beginning to create new policies, investment and expansion opportunities – from fracking to Arctic drilling, solar and wind power to biofuels, LNG-as-fuel to carbon capture and storage. RELIAbILIty Workforce training and better efficiencies on ‘super critical’ operations are needed to overcome production outages and costly downtime from the effects of blowouts, hydrocarbon leaks and pipeline corrosion.
AffoRDAbILIty Investment to ensure the reliability of the energy supply chain is essential. But if governments do not offer better financial support, companies will hesitate to invest in new plant.
24 Lloyd’s Register Group Review 2013
InnovAtIon We are seeing rapid progress in developing solutions that would otherwise have taken decades. Innovation is critical to producing enough energy to meet customer needs – while at the same time safeguarding the environment for future generations.
some of the biggest and most complex floating structures ever seen. Our work on Shell’s Prelude FLNG involves us in multiple project elements, ranging from classification of the vessel and certification of equipment to validation of the vessel against performance standards. During the year we published a comprehensive Rule set for Floating Offshore Installations at a Fixed Location which includes new sections to guide the design, construction and operation of FLNG facilities. These Rules are based on real-world projects and extensive work with key industry alliances, positioning us at the forefront of new energy and maritime technology. The latest Rule set also covers mobile offshore units (MOU) such as drill ships, self-elevating rigs, accommodation barges and wind turbine installation vessels, increasing Lloyd’s Register’s market leverage for classification work. We have strengthened our presence in America and are successfully growing our activities within the drilling and wider upstream oil and gas sector. Our development of real-time tools and software monitoring systems has helped to drive this sector of the industry forward, with increased performance and less downtime. In India we have provided services to almost 75% of the power projects where critical equipment is being sourced from Chinese manufacturers. Our work on many of these projects begins at the earliest stages, including vendor assessment and site inspection, and continues throughout their development and operational phases. Low-carbon assurance Nuclear power must be a key part of the low-carbon energy mix alongside renewable generation and carbon capture and storage. All of these technologies are important in tackling climate change and diversifying energy supply. Over 35 countries are currently seeking domestic nuclear capabilities, often with little experience in civil nuclear power. They could benefit from our expertise, regulatory knowledge and technologies. With the UK’s National Nuclear Laboratory, we led a workshop in Jordan, where a range of representatives of the country’s nuclear industry discussed the UK Generic Design Assessment process which is used to evaluate all aspects of the safety and environmental performance of nuclear reactor designs. We have participated in many safety studies for specific nuclear plants, including studies led by the International Atomic Energy Agency. We believe in the importance of such international missions, not least for its potential to provide the technical information to inform safety management strategies for the civil nuclear industry. Our teams in China, Germany, South Korea and the UK continued to deliver American Society of Mechanical Engineers (ASME) training courses. In the Netherlands we have been involved in a refurbishment of the nuclear research reactor in Petten, based on our accreditation by the Dutch government for third-party in-service inspections.
As part of our increasingly successful nuclear joint venture with Apave, we are now offering a complete package of high-quality integrity engineering services across the wider energy market, including advanced technology non-destructive testing. Reputational integrity It is no longer enough just to comply with minimum standards. Operators need to identify and meet a defined set of safety solutions, and our human factors expertise can play a crucial role. Projects this year have included Aker Solution’s CAT D project, a newbuild semi-submersible rig; and the design of a new control room for LinkWater, an Australian statutory authority responsible for the management, operation and maintenance of potable bulk water pipelines and related infrastructure in south-east Queensland. Demands for worker safety, operational efficiency and environmental stewardship have helped further our delivery of BSI Publicly Available Specification 55 (PAS 55), the internationally recognised specification that supports best practice asset management. For example, we certified Statnett SF in Norway on their 10,000-kilometre high-voltage transmission network and the UK’s second largest airport, Gatwick, one of the first airports to be certified in the world. We have evolved our through-life asset performance services and have expanded our provision of health, safety and environment (HSE) and process safety services around the world. We are the first foreign company qualified to perform regulatory safety analyses for the Chinese offshore oil and gas industry; in America we were awarded pressure relief analysis work at BP’s Texas City facility; and we have developed an integrated HSE management system for PetroSA in South Africa. Drawing on the pool of expertise throughout our organisation, we are involved in a joint development project with Hyundai Heavy Industries in South Korea on a new generation of drillships designed to accommodate the increasing complexity, pressures and sizes of drilling equipment. Our association and work on a number of integrity and classification, verification and engineering support projects for Maersk Oil Group in Copenhagen, Denmark and the North Sea, is further evidence of our capability where we can make a real difference across a wide portfolio of technical services and multiple geographical locations. Australia’s gas giant Chevron Australia Pty Ltd awarded Lloyd’s Register a five-year contract on one of Australia’s largest-ever gas resources projects, the Greater Gorgon Area, 130 kilometres off the country’s north-west coast. Our team is ensuring that the design, construction and installation of the facilities meet the stringent performance standards required by the Australian government.
Lloyd’s Register Group Review 2013 25
BUSINESS REVIEW | ENERGY
energy review continued
Changing attitudes High-risk, capital-intensive projects present a complex matrix of operations, and it is not always obvious what needs to be done in terms of people, management, standards and procedures in order to deliver them. We are helping clients respond to legislative mandates with a true commitment to training and are launching a further two training facilities in Singapore and Houston. During the year our drilling business included a subsea educational programme and delivered its first rig inspection workshop in Russia – in Russian. Other courses have been provided to support clients on a wide range of topics including knowledge management, management systems, human factors and technical competence.
Helping to make drilling safer We are using our experience of inspecting 5,000 oil rigs – 80% of the world’s total – to raise the bar on training and improve safety and efficiency. A course for 41 young design engineers at Hyundai Heavy Industries in South Korea proved so successful that we have been asked to provide further training. All the Lloyd’s Register Energy - Drilling training includes real examples, covers a variety of equipment and conditions and is regularly updated.
Trusted partner for inspecting critical assets Indian multinational engineering and construction company, Larsen & Toubro (L&T), has played a major role in helping India to become economically and technologically independent. The company has achieved this by investing in domestic heavy engineering, forging and special steel facilities to support India’s power generation and infrastructure. Lloyd’s Register has been behind L&T every step of the way, having provided them with expert advice and certification services for more than 50 years. We provide round-the-clock inspection to ensure compliance with the Indian Boiler Regulations and ASME standards. Our surveyors have helped L&T with critical projects for multinationals including KBR, Mitsubishi, SABIC and Reliance Industries. “We see Lloyd’s Register as a partner in our quality assurance programme,” says Atul Paranjape, GM-Quality at L&T. “The synergy between the two organisations helps us in our continuous efforts to meet and exceed customers’ expectations.” “It has always been an enriching experience whenever we have interacted with Lloyd’s Register personnel on design and engineering aspects of pressure vessels and heat exchangers,” says S Ravishankar, L&T’s Joint GM, FP Design Competency Centre. “Their comments serve as beacons for any pressure vessel engineer.” The relationship with L&T crosses over to our Marine and LRQA services, with our combined business increasing 20% this year.
26 Lloyd’s Register Group Review 2013
New chapters in energy Some European industry experts predict more than a trebling of wind power generation to 100GW by 2030. As the industry matures, we will see a greater number of larger turbines being installed in deeper waters and further from the shore. Developments like these may require offshore wind farm owners and operators to rethink their installation and service operations entirely. To reflect industry best practice and innovative designs, a new chapter in our MOU Rule set covers vessels engaged in installation, maintenance and support services of offshore wind turbines. Also, we have issued class notations and a set of guidance notes to provide summary information on requirements for various types of units used in installing and maintaining offshore wind turbines. Our teams are testing a pilot of our Arivu dynamic software on an offshore wind project. It updates a risk profile based on a turbine’s age, use and operating experience and offers a maintenance and inspection plan for operators. With the increasing focus on marine life sustainability, the offshore industries are seeing a growing need for our underwater acoustic services, and with more than three decades of experience in underwater noise, our team of experts are well equipped to accommodate this need. With the Crown Estate, Department of Energy and Climate Change and the Offshore Wind Structural Lifecycle Industry Collaboration group we are researching the behaviour of wind turbine structures impacted by the offshore environment.
Statoil Øyvind Hagen/Statoil ASA
Leading innovation through R&D To help strengthen our technical leadership we have set up a Global Technology Centre (GTC) in Singapore. The GTC has now launched a joint laboratory with Singapore’s Agency for Science, Technology and Research (A*STAR), to address the challenges faced by the energy and offshore sectors. Our vision and investment to grow technical delivery and capability worldwide has also been the basis for joining ITF, the global technology facilitator for the oil and gas industry. ITF is a not-forprofit organisation and is the only collaborative R&D funding programme operating across continents. Recently, we were awarded the IHS Spectrum Excellence award for risk assessment work and the implementation of real-time recording software IHS PHA Pro8®. The importance of risk assessment work has been substantially raised in recent years and currently we are using it to validate novel technology aspects within ship classification, oil and gas, renewable energy and transportation industries. With projects taking place globally, it is important for risk assessment review meetings to improve on methods of conducting and reviewing designs in a multidiscipline and often multicultural environment. Our well-established methodologies and skills, together with the implementation of the latest software, has enabled expert guidance to be delivered and managed in a single package with obvious benefits for our clients. Our well control centre of excellence is defining ways to assess hydraulic leaks in subsea equipment and has made formal recommendations to the oil and gas industry regarding the precautionary assessment methodologies needed to safeguard operations when leaks occur. Non-productive downtime associated with blowout preventer (BOP) stack problems in the Gulf of Mexico has led to the launch of an innovative software tool called BOP Risk Model. We worked with regulators, operators, drilling companies and original equipment manufacturers to create the risk model that provides a betterdefined way for industry to determine whether to pull a BOP from its operation. Investigations showed that, for one client alone, the estimated costs in lost production time totalled more than US$100 million. Last year we successfully delivered two bespoke models to a client for drilling operations in the Gulf of Mexico. More models are being created, and there is now global interest as we take this technology to commercial application using local regulations, specifications and operational procedures. We are also working to see how the data we have gathered can be used for other equipment in onshore shale and coal-bed methane.
resolving excessive noise When severe noise levels were detected on Statoil’s Åsgard B platform in the Norwegian Sea, Lloyd’s Register Consulting was called in to track down the source and solve the problem. The noise, which exceeded HSE recommendations, was detected near the gas turbine exhaust duct of the recently overhauled main generator train. Our noise measurements traced the problem to certain openings of the gas turbine bleed valve. The next step was to simulate the bleed flow and its interaction with components in the exhaust duct, using computational fluid dynamics. This revealed that the bleed flow turned into a supersonic jet within the duct and as this jet was passing below the tip of a guide vane – a shape similar to a whistle – excessive noise levels were generated. To solve the problem the bleed flow needed to be guided away from the guide vane. We developed a flow distributor concept that would break the flow into thousands of small jet flows with much lower Mach numbers and thus eliminate the noise problem. We have since developed similar concepts, solving severe noise problems for other operators.
While price competition, sluggish growth and quality resources are some of the largest market challenges ever faced, we intend to build on our approach with our new operating model, undertaking changes to help provide better support to our clients operating around the world.
Looking TO THE FUTURE
We look to strengthen our technical edge and the quality of our service delivery. We are planning to further develop our global service platform, invest more in R&D, in organic growth and in hiring the upcoming engineers of tomorrow.
No matter what the technological mix, there will always be a need for technical assurance, reliability and safety. The next year will be no exception as our training, consultancy, asset integrity, compliance and inspection services support the long-term health of technical and operational management in the industry, and continuous improvement in safety.
Our commitment above all is to provide the insight and technical delivery around safety for our clients to help them develop affordable and sustainable energy vital to economic growth. We have the right people with the right expertise, and an unparalleled service portfolio. The Energy business is well positioned for the future.
Lloyd’s Register Group Review 2013 27
BUSINESS REVIEW | MANAGEMENT SYSTEMS | LRQA
World-class assessment services
“ LRQA understands food safety and our business.” Sukhveer Sandhu, Sr. Quality Manager, Gallo Glass
00 Lloyd’s Register Group 28 Group Review Review2013 2013
LRQA provides independent assurance and expert training services to companies operating in all of the major sectors worldwide. From our ‘best-in-class’ second and third-party management systems assessment and certification services through to our sustainability work, we are dedicated to delivering a range of services that combine integrity, technical expertise and innovation to offer our clients tangible business benefits. Through our LRQA Business Assurance assessment methodology we help companies manage their systems and risks to improve and protect the current and future performance of their organisations.
sustainability commitment As one of Europe’s major operators in the energy sector, Energias de Portugal SA (EDP) is also one of the largest companies in wind energy worldwide, through EDP Renewables. As part of the company’s long-standing commitment to sustainability, the majority of EDP’s facilities have now been certified by LRQA to ISO 14001, the global environmental management system (EMS) standard. EDP has set a target of reducing specific CO2 emissions by 70% by 2020 in comparison with 2008. “ One of the main advantages of ISO 14001 certification from LRQA is that it gives confidence to investors that we have control over the environmental aspects of every installation – it shows that we are lowering risks and it demonstrates good business management.” A ntónio Neves de Carvalho Director of Sustainability Energias de Portugal SA
from compliance to performance Ballarpur Industries Limited (BILT) is India’s largest manufacturer of writing and printing paper. BILT’s success is underpinned by their strategic decision to put their management systems at the heart of their organisation in order to drive stakeholder confidence and competitive advantage. Today, their operation is supported by management systems standards spanning quality, environmental, health and safety and energy. “ With each standard we implemented, starting with QMS in 2000, we found ourselves on a journey with increasing levels of performance and results, which drove competitive advantage as well as employee engagement and morale at work.” dilip wadodkar General Manager Engineering & Management Representative of BILT (Bhigwan)
Energy management The worldwide adoption of ISO 50001 continues with some of the world’s leading corporations promoting the business benefits that can be achieved through certification to this international energy management standard. One such client is Agfa Graphics: “ Our SERP programme, with ISO 50001 playing a key part, helps us to better manage our energy usage. It has already resulted in multimillion euro efficiency savings worldwide comparing 2011 with 2012.” Graham Cooper Agfa Graphics’ Global Manager for Sustainability and Energy Reduction Programme (SERP)
Management systems should allow organisations to learn from the past, manage the present and respond to the future. food safety continual improvement ACP is Europe’s leading producer of high-quality carbon dioxide and was one of the first companies in Belgium to receive FSSC 22000 certification from LRQA. FSSC 22000 is a complete certification scheme for food safety management systems and is recognised by the Global Food Safety Initiative (GFSI). “ FSSC 22000 delivers a whole new approach to risk management and quality assurance. One of the advantages of LRQA is that they help ensure continual improvement of our system… and cost reduction throughout the process.” Stefan Speelmans Health and Safety, Environmental and Quality Manager ACP Europe
Lloyd’s Lloyd’sRegister RegisterGroup GroupReview Review 2013 00 29
BUSINESS REVIEW | MANAGEMENT SYSTEMS | LRQA
MANAGEMENT SYSTEMS REVIEW IntRoDuctIon
“what has been fundamental to the continued growth and worldwide adoption of management systems is their applicability and relevance, underpinned with new management thinking. “By relevance, I mean their proven ability to play a key role in driving the strategic decision-making of an organisation. The updates and planned revisions of these standards deliver increased functionality to enable companies to build on the principles set down by the ‘pioneers of quality’. So what we are seeing is that smart organisations recognise that by putting – or applying – management systems at the heart of their business, the results are stakeholder engagement, increased brand reputation, risk mitigation and management best practice.”
Although these continue to be transitional times within the assurance industry, LRQA has delivered a stable performance with key strategic sectors – including food – leading the way. While we have seen key contract wins from all of our regions, we are well aware that the global economic downturn of the past five years is continuing to affect purchasing decisions. Indeed, some of our markets are contracting, with organisations looking to cut costs where they can and seeking increased returns on their investments. However, other markets are growing and the demand for our services is rising – especially in some of the developing markets. woRkInG sMARtER Given these varying economic factors, LRQA continues to add value to the organisations we serve worldwide. We achieve this through a combination of our people and our processes, coupled with being able to tailor our service offering to meet the changing demands of the market at large. Over the past financial year, we have continued to invest in innovative new products and service delivery mechanisms for both our mature and emerging markets to ensure that we retain our competitive advantage. With LRQA Business Assurance underpinning the way in which we deliver our services globally, we are mindful that we maintain our focus of placing the needs of our clients at the heart of all that we do. In parallel, our ongoing investment in new technologies to drive increased business efficiencies across our global network of offices not only supports our brand identity as a technology-enabled organisation but it will also allow us to focus on delivering a more effective service to our clients.
MIkE JAMEs Management Systems Director
INDUSTRY OVERVIEW Consistent global framework .
The revisions to ISO 9001 (quality) and ISO 14001 (environmental) along with other ISO standards and schemes remains at the forefront of much of the discussions within the management systems assessment industry. Given the continued growth in new standards, and knowing more are in the pipeline, LRQA welcomes the move by ISO to begin bringing together and aligning the key common elements of management systems.
30 Lloyd’s Register Group Review 2013
The adoption of the Annex SL last year represents a positive move by ISO as all management systems standards going forward will be based on a common text and structure. This development signifies the historical end of the conflicts, duplication, confusion and misunderstanding from different interpretations of the standards due to the lack of a globally consistent framework. The new ISO 9001 and ISO 14001 standards are currently expected to be formally published in 2015.
Adding value to society In March 2013, LRQA announced the successful verification of South Asia’s first certified emissions reductions under the UN’s Programme of Activities (PoA) framework. The nine-month first phase of the project saw 57,000 new energy-efficient stoves distributed in Bangladesh, prevented more than 28,500 tonnes of CO2 from entering the atmosphere and improved the living environment for the families who received them. We also continue to help to shape the future of the independent assurance market; LRQA is a major contributor to the development and improvement of standards and associated guidance in the fields of management systems and conformity assessment worldwide. We continue as Chair of the Independent International Organisation for Certification – the global certification trade body. As recognised voices in the industry, our experts are actively involved in the international technical committees for all three of the world’s leading management systems standards, specifically ISO 9001 (quality), ISO 14001 (environmental) and OHSAS 18001 (health and safety). Climate change and sustainability The continued lack of progress during the most recent UN climate talks in Doha have led to the ongoing emergence of local, national, regional and voluntary emissions trading schemes. LRQA is working closely with many local governments to help them determine relevant policies and linkages into some of the world’s more recognised schemes, and in the voluntary markets of Gold Standard and the Verified Carbon Standard. Within the sustainability arena, the latest evolution of the Global Reporting Initiative guidelines saw the launch of the new G4 standard. G4 will encourage reporting organisations to provide only disclosures that are material to their business, on the basis of a dialogue with their stakeholders. It is anticipated that this will result in reports that are more strategic, focused and credible, and easier to navigate. Our commitment to forging strategic alliances within the climate change and sustainability arenas has seen us continue as a verification partner of CDP (formerly Carbon Disclosure Project) which is increasingly placing a greater emphasis on water along with carbon emissions. In addition, LRQA – through our work with the International Emissions Trading Association (IETA) – is now one of the World Bank’s Roster of Experts under their Partnership for Market Readiness programme. Food services With thousands of food clients worldwide – including some of the world’s best-known brands – our food services continue as a key area of focus for our organisation. Market demand for the GFSI-recognised FSSC 22000, the complete food safety management system certification scheme, has enjoyed remarkable growth with over 5,000 certificates issued globally, the majority being issued in the last two years.
The globalisation of supply chains and the need for transparency and traceability has triggered changes in the way in which food safety is approached. Over the last decade there has been a collaborative approach across the major stakeholders resulting in best practice being highlighted and shared, mediocrity being more easily identified and excellence more readily rewarded. Thanks to innovation, collaboration and change, our food has never been as safe as it is now. However, there is more to be done. To mitigate risks, organisations across the food supply chain are increasingly recognising the benefits of independent assessment and certification, not only in terms of the costs, but also in terms of the benefits and value it brings. A management systems-based approach to food safety, combining harmonised standards and consistent, robust assessment is leading to increased consumer confidence across the global food supply chain. Second-party assessment and certification services LRQA has seen an increase in demand over the past year for our second-party supply chain services. Organisations – irrespective of their size, sector or geographical location – are increasingly turning to bespoke solutions to further enhance the level of assurance against their global operations with second-party supply chain solutions. LRQA’s management systems experience means that we have an established global network of qualified auditors with sector-specific experience to meet the needs of organisations worldwide. As part of Lloyd’s Register, LRQA has unparalleled access to resources thereby enabling us to undertake any type of inspection, surveillance, verification or audit service to address specific requirements or regulatory codes in most industry areas.
Looking to the future LRQA believes that the challenging conditions are most likely to continue. However we are able to react with industry-changing solutions to suit the needs of mature and emerging markets alike. As an example, our ongoing focus on our cross-stream opportunity is resulting in increased collaboration with the other business streams within Lloyd’s Register – Marine, Transportation and Energy. Standards such as PAS 55 (soon to be replaced with ISO 55001 – asset management) and ISO 28007 (maritime security standard) will continue to deliver opportunities for our organisation and our cross-stream clients and their supply chains alike. In terms of the assessor development needs for the new management system standard structure, Annex SL, we believe that this new structure will enable our global auditor network to focus their own and their clients’ thinking on viewing organisations’ management systems holistically. Our ongoing commitment to the provision of globally responsible assessments and grading, to meet the needs of our thousands of clients worldwide, coupled with our pledge to being an agile and sustainable business, means that as we move towards 2014, we do so with optimism.
Lloyd’s Register Group Review 2013 31
BUSINESS REVIEW | AROUND THE WORLD
AROUND THE WORLD: REGIONAL TRENDS HAVE INCREASING IMPACT AT THE GLOBAL LEVEL With our network of offices we are able to offer the benefits of our local knowledge yet global reach.
In the new operating model the Marine and Management Systems businesses continue to have regional business managers in each region. The Energy business has reorganised around five global service lines and the Transportation business operates in the EMEA and Asia.
Our aim is to provide a consistent level of services to our clients wherever they are around the world with our global operations divided into three geographical areas: Americas; Asia; and Europe, Middle East and Africa (EMEA).
We recognise that as the world economy develops, regional trends have increasing impact at the global level. In the last year, uncertainty across the regions – from the post-election ‘fiscal debate’ question in the US to the Chinese leadership transition and reforms in the euro area – has had continued global impacts in sluggish trade and tepid investment. And as Lloyd’s Register grows these trends have increasing impact on our business. Our regions are key in the identification of such issues and risks – and opportunities.
Last year we recognised that there is now enough scale in the businesses to align our operating model with our four business streams. This change took place at the start of 2013. It has shifted the focus of our regional management from involvement in the day-to-day business operations to supporting the businesses to maximise their growth opportunities, working collaboratively to help them achieve their strategies and business plans.
On the next three pages, the regional directors take a look at some key issues and review Lloyd’s Register’s activity in their regions.
News highlights July 2012 The Astillero Rio Santiago shipyard celebrated the launch of the Lloyd’s Register-classed Eva Peron, a 47,000 dwt double hull oil tanker, the first Common Structural Rules ship built in Argentina, to the owner PDVSA (Petróleos de Venezuela). August 2012 Northrop Grumman Corporation received the rating of Reasonable Assurance from LRQA of its greenhouse gas (GHG) emissions inventory for 2010 and 2011. Reasonable Assurance is the highest assurance level issued by third-party verifiers for GHG data management and reporting accuracy. November 2012 RS Sharma joined the organisation as Chairman of Operations for South West Asia, supporting our ambitious plans in the energy and transport sectors in the area. Sharma is the former Chairman and Managing Director of India’s high-profile Oil and Natural Gas Corporation (ONGC).
January 2013 Statnett SF was certified to the Publicly Available Specification 55 (PAS 55) by Lloyd’s Register. State-owned Statnett is the national transmission system operator responsible for the main electricity transmission grid throughout Norway. February 2013 We participated in research on behalf of the UK’s Department for Transport, which concluded that battery-powered traction on the rail network is technically feasible, provided a suitable battery was paired with a super capacitor or flywheel to provide extra support during ‘peaks’ in energy demand. June 2013 We issued our first Guide to New Construction in South Asia, providing an overview of the shipbuilding and ship design industry in the area. With shipbuilding in South Asia growing, in numbers of ships, capacity and capability, this guide provides factual information from across the countries in the area.
32 Lloyd’s Register Group Review 2013
AMERIcAs
“Growth continues to be a strategic theme for the Americas region.” pAuL hubER President, Lloyd’s Register Americas, Inc.
REvEnuE by busInEss 2012/13
REvEnuE by AREA 2012/13
1
4 5
3
1
3
2 2
1 Energy 2 Marine 3 LRQA
In 2013, headcount across the region reached 995 employees and is expected to surge in 2014. In addition, we achieved 44% revenue growth, due in part to substantial development within the Lloyd’s Register Energy - Drilling service line. Since the acquisition of WEST Engineering Services in 2012, Lloyd’s Register Energy - Drilling (ModuSpec and WEST) has continued to show profitability with year-on-year growth of approximately 30%. Contributing to the success of this Energy service line are innovations such as the BOP Risk Model – the latest technology in deepwater and ultra-deepwater blowout preventers (BOP). The model makes it possible to quickly identify operational risk levels within a BOP which can save lives and reduce downtime. Technical excellence is also a top priority, with plans to invest in creating centres of excellence in well control equipment, systems and controls, and drilling systems. Additionally, investments in training capabilities have resulted in plans for a new Lloyd’s Register Energy - Drilling training centre in Houston. The new 26,000 square-foot facility will open in late 2013 with state-of-the-art classrooms and a hands-on workshop area, expanding training capacity and allowing us to offer more innovative, interactive training to our clients. LRQA has also experienced strong performance in the Americas this year. Investments in people, products and services continue to be of strategic importance as we work to ensure LRQA Business Assurance helps clients improve performance and reduce risk. The food safety business has thrived thanks to the rapid growth of the FSSC 22000 (Food Safety System Certification) scheme, the personalised client-
61% 24% 15%
1 2 3 4 5
USA Canada Brazil Mexico Other Latin America
71% 12% 8% 3% 6%
specific programmes that complement the Global Food Safety Initiative (GFSI) recognised certification, and our technical experts’ contributions to strengthen the food supply chain through the GFSI’s Global Markets Program. LRQA has also significantly expanded its course offerings to meet clients’ needs and introduced methodologies that enable clients to more effectively apply course teachings in the workplace. As a result, LRQA has more than doubled the size of its Americas commercial training business. Within climate change verification, our ISO 14064 business has increased as we continue to add credibility and trust to our clients’ carbon reduction efforts through the CDP (Carbon Disclosure Project). And LRQA is ramping up for significant growth in the medical sector as we support our clients’ compliance with changing regulations and risk management via ISO 14971. In the marine sector, we have been feeling the effects brought to bear on an industry experiencing record low freight indices and limited financial investment against the backdrop of a recovering global economy. Despite this, companies continue to further their technology agendas requiring serious capital expenditure for technical solutions to assure compliance with forthcoming rigorous standards for both safety and environmental protection. Emissions and ballast water dominate this agenda and Lloyd’s Register continues to work with industry to facilitate innovation in hull design and fuel efficiency for all market sectors we serve. More specifically for the Americas, the Great Lakes trade in Canada, the cruise industry in the US, the vibrant offshore vessel (OSV) market, as well as the traditional tanker, bulk, container segments, have all benefited significantly from the broad range of tailored services that have long been Lloyd’s Register’s signature throughout the Americas.
Lloyd’s Register Group Review 2013 33
BUSINESS REVIEW | AROUND THE WORLD
AROUND THE WORLD CONTINUED
AsIA
“It has been a challenging yet successful year. the business has effectively responded to considerable market challenges – from dealing with a market downturn in one business to expanding product portfolios to fuel substantial opportunities in others.” John RowLEy President, Lloyd’s Register Asia
Following a prolonged building frenzy, the shipbuilding industry experienced a significant slowdown. Approximately 90% of the global shipbuilding industry is in the region, predominantly in China and South Korea, so clearly it is the Asia Pacific which bears the upsides and downsides of global shipbuilding cycles. Anticipating this change, our Marine business successfully implemented a well-planned strategy of winning a high percentage of the available shipbuilding business, as well as preparing for the future. As a result we remain in excellent shape, ending the year as the leading newbuild classification society. While the year has been one of consolidation for Marine, Energy continues to deliver the fastest growth in Asia. Large project wins in South Korea’s floating offshore market have underlined our strength in a country whose shipyards have translated their shipbuilding expertise into the high-value floating offshore newbuild market. Driven primarily by Energy’s inspection services, China has also shown particularly strong growth. In addition to organic growth, Energy has also accelerated the regionalisation of its service portfolio, providing clients with a wider range of value-added services. Our drilling integrity services have expanded from Australia and Singapore into China and South Korea. Similarly, our Energy consulting services have spread from Beijing into Shanghai, South Korea, Malaysia and Australia. We have also established a specialised asset integrity services business offering the highly sought-after RBMI (risk based mechanical inspection) software and solutions.
34 Lloyd’s Register Group Review 2013
REvEnuE by busInEss 2012/13
REvEnuE by AREA 2012/13
4 1
5
1
4 3 3
2
2 1 2 3 4
Marine Energy LRQA Transportation
50% 26% 20% 4%
1 2 3 4 5
Greater China North East Asia South East Asia Australasia South West Asia
33% 33% 19% 9% 6%
Our LRQA business has once again delivered solid growth in most markets, balanced against economic headwinds in Japan. The focus has been on supporting the growth markets with product line expansions, beyond the core quality and environmental management standards and into areas such as security, corporate social responsibility, climate change and energy management, as well as making operational changes in Japan. Encouragingly, these changes are already showing signs of success. After several years building its leadership position in Greater China and South Korea, the Transportation business has now begun expanding into India, Japan and South East Asia. It has also started extending its service portfolio from the core ISA (independent safety assessment) signalling work into rolling stock, asset condition-based monitoring as well as rail operation and maintenance. Fuelling the expansion has been strong growth in South Korea and Taiwan, plus continued high demand for our expertise supporting China’s many new subway line projects. As technical innovation remains a key strategic theme, it is a pleasure to report that the Global Technology Centre (GTC) in Singapore is now firmly established. Working closely with the Singapore government’s Agency for Science, Technology and Research (A*STAR), the National University of Singapore and the Nanyang Technological University, the GTC’s 20 staff is expected to almost double within the next year. Focused primarily on research, innovation and technical thought leadership in the energy market, the research projects already under way include offshore energy storage, asset life extension, subsea drilling and flexible risers, next generation quantitative risk assessment and simulation modelling. Having successfully established the GTC and increased our market share across most key businesses and markets, we look forward to further growth and success in 2014 and beyond.
EuRopE MIDDLE EAst AnD AfRIcA
REvEnuE by busInEss 2012/13
“the EMEA region has supported the businesses to maximise their growth opportunities.”
4
REvEnuE by AREA 2012/13
1
1
7 6 5
pAuL GRAAf Director, Lloyds Register EMEA
3
2 4 2
1 2 3 4
The continued global economic crisis has contributed to a difficult business environment across the EMEA region in the past year. Despite this, external income has grown by 4% year on year with both the Marine and Energy businesses largely driving this improvement. Our employee total has risen by 0.5% to 3,753 (2012: 3,735). EMEA is playing a major role in rationalising our office footprint to ensure we remain cost-effective while still delivering quality services to our clients at a local level. This has meant the adoption of new work practices with the aim of retaining our regional reach. Our major project has been the establishment of the EMEA finance shared service centre in Bracknell, UK. This marks a major change in the way we will operate in future and will result in standardisation of processes that will drive continuous improvement, efficiency and cost-effectiveness. Our Marine business had a marked increase in ordering by owners residing in the EMEA region, with Lloyd’s Register selected as the number one classification society for new orders in the first half of 2013. The Netherlands continues to be a strong growth sector for smaller ship type new construction. We are continually looking at ways to support both yards and owners with the regulatory and technical challenges they face. The build-up to the implementation of the Maritime Labour Convention has been challenging but excellent progress has been made. A number of non-traditional owners have entered the market this year and high levels of support have been provided across the region.
Marine Energy LRQA Transportation
3 42% 27% 24% 7%
1 2 3 4 5 6 7
UK & Eire Western Europe Greece & East Med Central Europe Nordic Area Southern Europe ME & Africa
28% 21% 12% 12% 10% 9% 8%
In Energy, the upstream sector demand is strong for all services as relatively high oil prices have driven investment in new facilities and allowed operators to upgrade the condition of older plant and installations. In the European downstream sector, operators have continued to face challenging market conditions and that is reflected in slightly reduced business levels. We have continued to develop our service offering to the renewables sector and were successful in winning new clients and projects in the offshore wind sector. The Middle East and Africa region has been the subject of a specific business growth programme with the creation of new legal entities in a number of countries. This will provide a stronger platform to pursue future opportunities at these locations. The business environment for management systems certification and training within the EMEA remains challenging. In spite of this, the management systems business has continued to achieve a growth in sales year on year. This growth has resulted from sales of new services, client gains from competitors based on higher quality of service delivery, and the development of new non-certification and advisory services using LRQA’s audit/management system expertise. Our Transportation business experienced strong commercial performance across the region as a result of some key business improvement and delivery initiatives. Our UK operations moved to a new flagship office in Derby which has delivered significant benefits in terms of market visibility and team togetherness. Levels of investment in big infrastructure projects in the UK, Netherlands and Middle East have seen us secure Notified Body, testing and measurement and ISA roles on a number of flagship projects and has established Lloyd’s Register as a high-value-added partner in this arena.
Lloyd’s Register Group Review 2013 35
CHIEF FINANCIAL OFFICER’S REPORT
RESILIENT GROWTH AND INVESTING FOR THE FUTURE tuRnovER £M
820
806
855
noRMALIsED opERAtInG pRofIt £M 893
920
96
94
08/09 09/10 10/11 11/12 12/13
“the group’s turnover has continued to grow while the subdued global economic conditions have put pressure on operating margins.”
tuRnovER pER EMpLoyEE £000 111
107
113
113
112
82
75
69
08/09 09/10 10/11 11/12 12/13
hEADcount
7,398
7,549
7,555
7,885
8,192
ALAstAIR s MARsh Chief Financial Officer 08/09 09/10 10/11 11/12 12/13
36 Lloyd’s Register Group Review 2013
08/09 09/10 10/11 11/12 12/13
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 2013. On 2 July 2012, Lloyd’s Register converted its status from an industrial and provident society to a company limited by shares, which has meant a change in the format of the accounts. The most significant change is where certain key measures have been renamed. For example, income is now referred to as turnover and operating surplus as operating profit. Turnover Total group turnover for the year was £920 million, an increase of 3% on the previous year. Given the tough trading conditions, it is pleasing to report that all sectors of the business performed well and in line with expectations. Our Marine business has been impacted by the continuing tough economic conditions in the sector and a decrease in the new building activity. However, the Energy business posted another period of strong turnover growth reflecting not only the full-year contribution of our acquisition of WEST Engineering in 2012 but also increasing demand for our existing services. Energy now accounts for almost 38% of the Lloyd’s Register group turnover compared to only 24% five years ago. The group has continued to benefit from maintaining a diversified portfolio of businesses. While clearly not immune to the difficult trading conditions the Lloyd’s Register business has demonstrated its resilience through these times and has grown at an average of 2% annually over the past five years. Operating profit We have continued our implementation of a new operating model and organisational structure that was started in the previous financial year. This has involved a significant reorganisation of our people and operations including a redefinition of our employees’ roles in both external service delivery and internal support functions. This includes the creation of a centralised shared service centre for our Europe, Middle East and Africa region; and upgrading our existing operational software into new integrated information systems. Together with our work towards creation of global technology centres, we have invested over £30 million in restructuring costs this year (2012: £12 million). Our operating profit excluding these restructuring costs was £71 million, representing a £13 million decrease on the prior year. In the main, this is due to a change in the mix of contribution from our different business streams. The group has seen these fluctuations in operating margin before as the markets we service go through cyclical periods of growth and decline. However, the significant investment we have made to restructure the group during the year means we are well placed to see increased efficiency and cost savings in future years.
This basis most appropriately reflects the underlying profitability of the business. The average annual growth in operating profit on this basis over the last five years was 3%. Again, this has been achieved over a period in which we have experienced high levels of volatility in the global financial markets, and a significant slowing up of growth in the world’s economies. Profit before tax The group has reported profit before tax of £50 million for the year. During September 2012, Lloyd’s Register Group Limited transferred investment assets to its parent, Lloyd’s Register Foundation, with a market value of £206 million. Longer term, this change in structure will increase the amount which the Foundation will have available for charitable purposes. Despite the reduction in investment assets, the group’s profit before tax benefited from another year of good investment returns of £16 million, only £1 million less than the prior year due to the improved performance of global equity and bond markets. Operating cashflow The operating cashflow for the year was £16 million, a decrease of £50 million compared to the prior year, reflecting the increased spend on restructuring activities and an increase in debtors driven by a strong final quarter’s trading. As last year, the most significant of the non-operating cashflows during the year was the group’s payment of deferred consideration in respect of the acquisitions of WEST Engineering and Scandpower in 2012 and 2010 respectively. Headcount The average headcount for 2012/13 was approximately 8,200 employees, 4% higher than the previous year reflecting the continued growth in our business and the full year impact of employees who joined us through the acquisition of WEST Engineering. Despite the challenging economic conditions the group has managed to maintain its turnover per employee at approximately £112,000, while continuing to grow the business. Conclusion The group has continued to achieve top-line growth despite challenging market conditions in many of our key markets. Operating profit and cash flow reflect a change in the contribution from our different business streams and the activities we have undertaken during the year to ready ourselves for the future. I expect the current challenging market conditions faced by our businesses to continue, however, the business is well placed for continued growth, and will begin to benefit next year from the significant restructuring activities being undertaken. Alastair S Marsh Chief Financial Officer
The five-year normalised operating profit trend chart shows operating profit before exceptional restructuring costs, charitable donations, foreign exchange gains and losses and pension costs.
Lloyd’s Register Group Review 2013 37
BOARD OF DIRECTORS AND EXECUTIVE LEADERSHIP TEAM
GOVERNANCE OVERVIEW
The Executive Leadership Team and the Board of Directors of Lloyd’s Register Group Limited work together to govern and direct the activities of the trading element of the group.
board of Directors
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 are elected by the Lloyd’s Register Foundation. ExEcutIvE LEADERshIp tEAM The Chief Executive Officer, Richard Sadler, is responsible to the Board of Lloyd’s Register Group Limited for the overall performance, both financial and non-financial. In this he is supported by the members of the Executive Leadership Team.
thomas thune Andersen Chairman
John D chandris Senior Non-Executive Director
Executive Leadership team
Richard sadler Chief Executive Officer
Alastair Marsh Chief Financial Officer
tom boardley Marine Director
Mike James Management Systems Director
paul seller Transportation Director
chris coupland Group Chief Information Officer
Jim harrison Group Legal Director
keith povey Group Corporate Secretary
Mike Robinson Group Customer Strategy Director
John stansfeld Group HR Director
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Ellis Armstrong Non-Executive Director
chris finlayson Non-Executive Director
Ron henderson Non-Executive Director
Richard sadler Group CEO
Alastair Marsh Group CFO
John wishart Energy Director
paul Graaf Director, Lloyd’s Register EMEA
paul huber President, Lloyd’s Register Americas, Inc.
John Rowley President, Lloyd’s Register Asia
Estelle clark Group Safety & Business Assurance Director
Mark stokes Group Communications Director
John wilford Group Strategy and Corporate Development Director
weijie Gao China Operations Chairman
Rs sharma India Operations Chairman
Lloyd’s Register Group Review 2013 39
PUBLIC BENEFIT
OUR MISSION: PROTECTING LIFE AND PROPERTY Lloyd’s Register’s mission is to enhance the safety of life, property and the environment by helping our clients to ensure the quality construction and operation of critical infrastructure. Our daily work, providing independent assurance and expert advice, helps to ensure that our clients’ assets and processes are safe, responsible and sustainable. We secure high technical standards of design, manufacture, construction, maintenance, operation and performance. We do this by surveying ships, oil platforms and other critical infrastructure against internationally agreed rules and standards – some of which we have helped to develop. Through these services we support a significant part of the Lloyd’s Register Foundation’s charitable objectives. And we also support the Foundation’s second objective, the advancement of public education and research in engineering and technological disciplines, in the main by funding the Lloyd’s Register Foundation, but also by direct activity. Safety through innovation One of our most important public benefit activities is the development and maintenance of our classification Rules and Regulations (the Rules). These set standards for the design, construction and maintenance of critical infrastructure ranging from ships to offshore units and land-based installations. Each year we invest in the Rules to ensure that they are always up to date and to introduce new Rules when new technologies are developed. Our new global technology centres will help us to maintain our technological leadership and help our clients to innovate safely. This year we published a Rule set for floating offshore installations at a fixed location which covers the design, construction and operation of FLNG facilities and also mobile offshore units such as drill ships and wind turbine installation vessels. These Rules position us at the forefront of energy and maritime technology. New products and services In addition to our Rules, we develop new products, services and software packages to help improve the safety and operation of our clients’ assets. Products made freely available this year include a short film to promote safe boat transfers and a guide to assist with the safer management of asbestos in ships. We have continued to develop our innovative software tool called BOP Risk Model to be used in deepwater drilling operations. This provides a better-defined way for industry to determine whether to pull a blowout preventer (BOP) from its operation. We are also working to see how the data we have gathered on this project can be used for other equipment in onshore shale and coal-bed methane.
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Public education 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 Information Centre directly contributes to the charitable objectives of the Lloyd’s Register Foundation by offering library and research resources to the public.
We aim to add value to society: making society safer by advancing rules and standards, protecting the environment and advancing technology through people and research. We now have a remit to contribute to the fulfilment of the Lloyd’s Register Foundation’s charitable purposes – by continued funding and through our services to make the world a safer place – so the success of both bodies is closely interconnected. You can find out more about the work of the Foundation in the Lloyd’s Register Foundation Review 2013.
PUBLIC BENEFIT HIGHLIGHTS 2012/13 nEw DvD to pRoMotE sAfE boAt tRAnsfERs This year we issued a short film, Safe Boat Transfers, to provide comprehensive instructions on how to safely transfer between two vessels at sea. Working over water and, in particular, boat transfers, is a very high-risk activity. sAfER MAnAGEMEnt of AsbEstos In shIps Despite regulations asbestos remains a problem in shipping and there is considerable room for improvement, primarily to reduce the number of deaths. Our new guide sets out how to manage asbestos on ships safely, to help shipowners, operators and all stakeholders understand how to deal with it, and to support compliance with maritime asbestos regulations. EnERGy-EffIcIEnt stovEs to bAnGLADEshI fAMILIEs LRQA has verified South Asia’s first certified emissions reductions under the UN’s Programme of Activities framework. The nine-month first phase of the project, improved cooking stoves in Bangladesh, prevented more than 28,500 tonnes of CO2 from entering the atmosphere and improved the living environment for the 57,000 families who received new energy-efficient stoves. tEchnIcAL bRIEfInGs At InnotRAns 2012 We hosted a series of briefings from our technical experts throughout Innotrans 2012, one of the rail industry’s leading annual events. Topics ranged from the implications of the common safety method through to techniques for reducing noise and vibration. succEssfuL EnERGy confEREncE In us At our second annual energy conference, the theme was safetydriven performance – people, assets and process safety. Over 150 people attended which provided a forum for attendees to network and address best-practice solutions for the changing regulations in the energy industry. bEst pApER AwARD At IcA 2013 At the International Congress on Acoustics (ICA 2013) Stewart Holmes, Lloyd’s Register Consulting, was awarded ‘Best Paper by a Young Presenter’ for his paper on ‘Circular harmonic beamforming with spheroidal baffles’. With 2,300 attendees and more than 1,600 technical papers, ICA 2013 was one of the biggest events in acoustics ever, which underlines Stewart’s achievement. wAtER MAttERs Water matters is our new corporate social responsibility programme. Through this scheme, we are helping to fund projects organised by our employees – from removing rubbish from local waterways in Florida, US; providing clean and safe drinking water for 250 primary school children in Tamil Nadu, India; to raising awareness of water sustainability in schools in Piraeus, Greece.
chAIRInG InDustRy boDIEs Estelle Clark, our Group Safety and Business Assurance Director, has been asked to be the next Chairman of the UK’s Chartered Quality Institute (CQI), in recognition for her work in the quality arena. The global certification trade body Independent International Organisation for Certification (IIOC) has re-elected Mike James, Managing Director of LRQA, as Chairman.
Lloyd’s Register Group Review 2013 41
OUR EMPLOYEES
OUR PEOPLE: AN ESSENTIAL INVESTMENT Our success depends on the success of our employees. We place a high priority on the safety and development our people. HEALTH AND SAFETY MATTERS A safer place to work In 2012/13 we continued to reduce our injury incident rates and again have had a significant reduction in our lost time incident frequency rate, which has fallen to 0.14 per 200,000 worked hours, a 55% reduction on last year’s figure (0.31 per 200,000 worked hours). Over the last three years we have achieved a 71% reduction in lost time injury incidents. Both Lloyd’s Register Asia and Lloyd’s Register Americas have now gone more than a year without a lost time injury incident.
This year’s annual safety plan is structured around the following key safety success factors, which will be our main focus in the coming year: • increase involvement and engagement in health and safety • positive safety and behaviour culture • safety integration into business as usual • management commitment and visibility • safety innovation capability.
We have also continued to encourage near-miss and safety observation reporting as this gives us an insight into the unsafe acts and conditions that could injure our employees. This has resulted in an increase of 253% in the reporting rate of these incidents over the last three years and has, in many cases, given us the opportunity to talk with our clients about how safety can be improved for both their and our employees. In the year, we have been successful in obtaining OHSAS 18001 in Lloyd’s Register Asia, Lloyd’s Register Americas and within most of Lloyd’s Register EMEA; the remaining areas in EMEA will be complete by the end of 2013. Safety leadership Another success was the ongoing global implementation of the safety management system (SMS). We continue to improve the controls within our SMS as we gain a better understanding of the hazards and risks which our employees face on a daily basis. Where there is a lost time incident, the severity of these incidents is much reduced leading to a significant fall in the number of lost days; this indicates that our controls are having a positive effect. To support the SMS, we have rolled out safety training for all our field employees and a training programme for our senior managers. Senior managers are now actively carrying out safety visits and safety tours, demonstrating visible safety leadership and their positive commitment to the safety programme. We carried out our second safety culture survey in January 2013 and achieved an average increase of 5% across all the areas measured, with the most significant improvements in the areas of involvement and communication. The survey reflected that substantial progress has been made. To the question ‘does management encourage openness and transparency on health and safety issues’, 91% of our employees responded positively. Our Safety Council (comprising the CEO and a number of senior directors) continues to meet quarterly and is the guiding body for how we will move from our current safety position to one of true world-class performance. It sets the direction for the future and leads by example in terms of the behaviours and attitudes that Lloyd’s Register expects from its employees worldwide.
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Driving safety We realised that driving on company business was one of the highest risks which our employees faced. In response we implemented strict controls around the vehicle specification, introducing mandatory safety features in all Lloyd’s Register leased and purchased vehicles. This was supported by practical defensive driver training. Since introducing these controls, injury incidents in road traffic accidents have fallen by 39% over the last three years and we know of at least two accidents where our employees’ lives have been saved as a result of the increased safety features within the vehicles.
Policy raises awareness In June 2013, a new drug and alcohol policy was launched, covering all employees and contractors globally. The policy, and the mandatory e-learning programme that accompanies it, reinforces our commitment to providing a safe, healthy and productive workplace in which we never want the performance or behaviour of any of our employees or contractors to be impaired through the misuse of drugs and alcohol. This initiative raises awareness of drug and alcohol abuse issues and makes clear the organisation’s requirements of its workforce on this subject and the consequences of breaching the policy.
HR: SUPPORTING OUR BUSINESS GOALS Energy transformed The Energy business has been preparing for growth by reorganising from a mix of regional structures and acquired companies to five global service lines. To drive this new organisation a new leadership team has been appointed with each of the service leaders supported by HR business partners. The new Global Technology Centre, set up in Singapore, is focused on Energy needs and a recruitment drive to attract post graduate and postdoctoral candidates has proven successful in getting the initiative off to a strong start. Recruiting new talent A new Energy Graduate Scheme started in 2012 and subsequently the UK Marine and Energy graduate teams have merged. Work is under way to look at widening development opportunities around the world and initial research on current graduate activity and interest has been carried out. A global graduate framework is being developed on the way that graduates are recruited and developed around the world to improve consistency, performance and the longer-term retention of former graduate trainees. Graduate recruitment has represented only part of the growth in the number of employees. A dedicated resourcing centre of expertise is now driving recruitment initiatives across the world. Increasing the use of social media channels, dedicated recruitment web sites in multiple languages and job boards has resulted in more costeffective channels to attract new talent, replacing some of the more traditional approaches, including widespread use of expensive search agencies. This has been supported by work to develop a common employee value proposition that will be used across the group and in all media channels. The recruitment team is delivering to the targets set by the businesses. Progressing careers The move of the Marine business from London to temporary accommodation in Southampton, prior to moving to the new Global Technology Centre next year, progressed satisfactorily. The relocation team won an external award for its management of this move. New technical career pathways have been developed illustrating the opportunities for professional staff to progress in their careers without following a management track. Alongside this work there is a continuing initiative to strengthen the knowledge networks especially linking newly acquired businesses in cross-business disciplines to ensure we can make the best use of the increasing pool of technical expertise. Senior level succession has been reinvigorated with the entire top team undergoing assessment, the results of which have been used to drive development of both individuals and the team. This is being extended to cover the ‘top 100’ in the company.
Learning something new every day Whenever I go to a new yard, people ask me “Why are you doing this dangerous, difficult and physically hard job?” And I always answer: “Because it is valuable and I am learning something new every day.” Where I grew up there were big and small shipyards. I was always curious how those big ships can be built. I wanted to know where they are going and why they are traveling all around the world ... I have to confess that on the first day I went to Seoul National University to study naval architecture, I regretted my choice – it was not easy to live and study as the only female student on the course. But because of that experience, I am used to being a woman in this field and I learned important theoretical knowledge about shipbuilding. When I graduated, I joined Samsung Heavy Industries for one year and then moved to Lloyd’s Register as a plan approval surveyor for more than five years. I still had many things to learn but I wanted to take the next step to living at my full potential. As good luck would have it, I found a job opening in the energy group. I always wanted to contribute to society and by participating in the FLNG project, I can not only help towards solving the exhaustion of resources but also participate in the real world of building the world’s biggest FLNG unit. My colleagues and friends were worried about my decision and said being a site surveyor is very dangerous and you get very tired physically. But if you follow the right procedure and stay wide awake, I believe you will be safe. It’s been six months since I started as a site surveyor and I have a fabulous future. I would like to close by saying thank you to my managers for giving me such a wonderful opportunity and showing me that there is no glass ceiling in LR. And also I would like to say thank you to all of my colleagues for helping me and encouraging me every day. So let’s enjoy today and be safe, everyone, because Life Matters! Min Hee Kim Surveyor
Lloyd’s Register Group Review 2013 43
GLOSSARY
A more detailed explanation of some of the acronyms and terms in this review are given here.
A 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. Anti-fouling A specialised coating applied to the hull of a ship or boat in order to slow the growth of organisms that attach to the hull and can affect a vessel’s performance and durability.
B Blowout preventer (BOP) A large, specialised valve or similar mechanical device, used to seal, control and monitor oil and gas wells. BOPs are critical to the safety of crew, rig and environment, and to the monitoring and maintenance of well integrity.
Computational fluid dynamics (CFD) A branch of fluid mechanics that uses numerical methods and algorithms to solve and analyse problems that involve fluid flows.
D Deadweight tonnes (dwt) The maximum weight of cargo and stores that a ship can carry.
E Emissions trading schemes Emissions trading is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. European Rail Traffic Management System (ERTMS) An EU initiative to enhance cross-border interoperability and the procurement of signalling equipment by creating a single Europe-wide standard for train control and command systems.
Bunkering The act or process of supplying a ship with fuel. Bunker fuel is technically any type of fuel oil used aboard ships.
European Train Control System (ETCS) A signalling, control and train protection system designed to replace the many incompatible safety systems currently used by European railways, especially on high-speed lines.
C
F
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.
Flag state A sea-going vessel is subject to the maritime regulations of its country of registration, or flag state, in respect of manning scales, safety standards and consular representation abroad.
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. Common structural rules (CSR) The IACS CSR for tankers and bulk carriers aim to achieve the goals of more robust and safer ships.
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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 direct to market.
Floating offshore installation (FOI) Relates to any kind of floating installation regardless of its capability. FSSC 22000 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). Fundamental research Research carried out to increase understanding of fundamental principles. It is not intended to yield immediate practical benefits.
G 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.
H Human factors Human factors involves the study of all aspects of the way humans relate to the world around them, with the aim of improving operational performance, safety, through-life costs and/or adoption through improvement in the experience of the end user.
I Independent safety assessor (ISA) ISAs objectively assess the safety aspects of a process, system or organisation. From the evidence gathered in the assessment the ISA forms a judgement on whether the safety requirements have been met.
L
International Association of Classification Societies (IACS) A membership organisation that contributes to maritime safety and regulation through technical support, compliance verification and research and development. More than 90% of the world’s cargo-carrying tonnage is covered by the classification rules and standards set by the 13 member societies of IACS.
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.
PAS 55 (BSI Publicly Available Specification 55) An internationally recognised specification that supports best practice asset management. It was developed as a quality benchmark for management practices in asset-intensive industries such as power, oil and gas, and transportation.
M
R
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.
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.
ISO 14000 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 14064 An international standard against which greenhouse gas (GHG) emissions reports are voluntarily verified. In parallel with the emergence of regulated or mandatory schemes relating to monitoring, reporting and verification of GHG, organisations are now increasingly wishing to monitor and report their emissions voluntarily. For this purpose, ISO 14064 has been developed. 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.
N Notified body A third party appointed by EU member states to perform formal audits of products and quality systems for many of the EU’s directives. A Notified Body is appointed to a particular directive.
O 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.
P Paris MOU The Paris Memorandum of Understanding (MOU) on Port State Control (PSC) consists of 27 participating maritime administrations and covers the waters of the European coastal states and the North Atlantic basin from North America to Europe. PSC is a system of harmonised inspection procedures designed to eliminate substandard ships.
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’ assets – ships, oil rigs, industrial plant, railways (including rolling stock and related infrastructure). Risk management supports better decision-making by contributing to a greater understanding and control of risks and their impacts. It is as much about identifying opportunities as it is about avoiding losses. Rules See classification above.
T Twenty-foot equivalent unit (teu) The measure used for container capacity, a teu is a volume measurement equal to one standard 20ft (length 6.1 metre; approximately 39 cubic metres) container.
U Upstream The exploration, production and transport of oil and natural gas prior to refining.
Innovation drawn from our heritage We are changing our logo. In moving forward we have taken inspiration from our heritage. Since 1884 our surveyors have stamped the letters ‘LR’ into steel as proof of approval and we have drawn on this stamp to arrive at our new logo. Lloyd’s Register has undergone significant change and growth. Our new identity reflects our commitment to independence, technical excellence and customer service. And the new logo is a device that can link together all the members in our group, including LRQA.
Lloyd’s Register EMEA
Lloyd’s Register Asia
Lloyd’s Register Americas, Inc.
T +44 (0)20 7709 9166 F +44 (0)20 7488 4796 E emea@lr.org
T +852 2287 9333 F +852 2845 2616 E asia@lr.org
T +1 (1)281 675 3100 F +1 (1)281 675 3139 E americas@lr.org
71 Fenchurch Street London EC3M 4BS UK
22nd Floor Dah Sing Financial Centre 108 Gloucester Road Wanchai Hong Kong SAR of PR China
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. 2013. A member of the Lloyd’s Register group. Produced by Lloyd’s Register Group Communications Designed by C O N R A N D E S I G N G R O U P Printed by Pureprint
Lloyd’s Register – Group Review 2013
Working together for a safer world